The Starmer administration, eager to control public borrowing, appears to be revisiting a controversial financial strategy that some critics describe as a “betrayal of the public.”
In mid-November, the Confederation of British Industry (CBI), a major business advocacy group, announced its intention to provide guidance to the UK government on leveraging private investment for new schools, hospitals, prisons, and transportation projects.
Just a week later, UK Health Secretary Wes Streeting disclosed plans to fund a new generation of local NHS clinics in England through private financing. The Financial Times reported that this move mirrors the contentious Private Finance Initiative (PFI) policy, which was abandoned in 2018 after being deemed inefficient by public spending auditors.
Buy Now, Pay Later
Originally initiated by John Major’s Conservative government in the mid-1990s and further expanded by Tony Blair’s administration, PFI—and its successor, PF2—essentially functioned as a public sector “buy now, pay later” scheme, allowing for the removal of certain liabilities from the government’s balance sheet.
Under the PFI framework, instead of directly borrowing funds for construction, the government partnered with private firms to finance, design, build, and maintain public assets such as hospitals, schools, roads, prisons, streetlights, and military equipment. These contracts generally have a lifespan of 25–30 years, many of which are approaching their expiration.
The PFI scheme was crafted by executives from major banks, financial institutions, and construction companies who were often on secondment to the government’s PFI Taskforce. The debt incurred through PFI came with exorbitant interest rates and fees, as I outlined for WOLF STREET in 2018:
Interest rates on PFI projects can be as much as 2 to 3.75 percentage points higher than government borrowing costs. In some cases, investors can earn returns exceeding 25% annually.
Even without entering new PFI agreements, the government has already disbursed £110 billion in fees and interest, and is projected to pay an additional £199 billion between April 2017 and the 2040s for existing contracts, which Chancellor Hammond stated would be honored. This equates to a total expenditure of approximately £310 billion for 700 projects estimated to be worth only £60 billion.
According to a 2022 report by The New Statesman, NHS trusts still had roughly £50 billion in PFI debt, though this figure has reportedly decreased to £44 billion today. Some NHS trusts are allocating more funds to service their PFI debts than to purchasing medications for patients:
Sherwood Forest Hospitals NHS Foundation Trust spent more than double on PFI repayments (£45.8 million) compared to drug costs (£22.6 million). This accounts for over £1 in every £8 of the income received from patient care and other activities.
Other trusts, such as St Helens and Knowsley Teaching Hospitals NHS Trust and University Hospitals Coventry and Warwickshire NHS Trust, similarly spent significant portions of their income on PFI debt, often outpacing their drug expenditures.
Additionally, 21 other trusts also dedicated more resources to their PFI repayments compared to drug costs, according to accounting data.
Government figures from 2018 reveal that the NHS’s initial PFI investments amounted to just £12.8 billion. However, the Department for Health and Social Care will ultimately expend £80.7 billion by the time all contracts are settled, including services such as facilities management provided by the PFI contractors.
So, who stands to gain from these financing arrangements? One thing is certain: it is not the UK taxpayers. An investigation by NHS advocacy group Every Doctor uncovered the complex ownership structures behind these opaque deals:
To identify the actual owners of each PFI project, we had to trace through a series of holding companies that reflect the intricate financing arrangements established among construction firms, facilities managers, and banks.
This convoluted ownership structure complicates identifying who benefits from these projects. Additionally, stakes in PFI contracts are often sold, meaning the firms currently operating them may differ from the original builders.
For instance, consider the Norfolk and Norwich University Hospital—one of the largest in the UK and among the earliest PFI projects, which opened in 2001 and was subsequently expanded in 2004 under PFI. The NHS Foundation Trust is still remitting millions annually to Octagon Healthcare Holdings for operations.
However, Octagon does not ultimately hold ownership of the contract; that belongs to Semperian and Innisfree Group, with one based in Jersey, a tax haven, and the other owned by South African-born property investor David Metter.
By the time this contract ends in 2037, the NHS expects to have paid Octagon £1.2 billion, far exceeding the £229 million it initially cost to build the hospital.
The most astonishing aspect of the PFI saga is that it may not have been necessary at all. Richard Murphy pointed out in a recent podcast that “the government can issue its own currency, allowing for cheaper financing opportunities than the private sector.”
The private sector always incurs a premium for the risks associated with borrowing, while the government does not. Thus, the assertion that there was no funding available was merely political rhetoric. The government can generate the necessary funds for any worthwhile project.
Moreover, the claim that funding through the private sector is more cost-effective than through the state has proven to be fundamentally incorrect. PFI was driven by ideology, misleading accounting practices, and political maneuvering, not necessity.
“A Fraud on the People”
Even Sir Howard Davies, the former chairman of the Royal Bank of Scotland (RBS) and a significant beneficiary of PFI, acknowledged this reality on BBC1’s Question Time in 2018, characterizing PFI as “a fraud on the people” that the Starmer administration now seems poised to repeat:
The government can borrow money more affordably than any private entity. Therefore, transferring hospital provisions to a party with higher borrowing costs is inherently disadvantageous unless one is confident in their efficiency. If efficiency is indeed expected, why not offer them a fixed-price contract instead?
In my view, PFI has been a fraud, evidenced by a recent report from the National Audit Office detailing our excessive payments for the Private Finance Initiative.
It’s no surprise the UK has anemic growth, low productivity, declining real wages, and massive debt. We have a “cuckoo in the nest” banking sector that admits to actively defrauding the public with the connivance of the government.
— Ian Fraser (@Ian_Fraser) January 19, 2018
These comments came in the wake of the collapse of Carillion, a longstanding UK infrastructure firm whose prominent role in public service delivery branded it “the company that runs Britain.” Its abrupt failure exposed PFI as a form of oversized Ponzi scheme, revealing severe deficiencies in auditing among the compromised Big Four accounting firms.
Concerns have also emerged regarding the quality of construction work conducted by firms involved in PFI projects, as well as uncertainty about the future of these buildings once the contracts expire.
A report from the Association of Infrastructure Investors in Public Private Partnerships (AIIP), chaired by Labour peer John Hutton, highlighted the risk of “serious disruption” as existing deals conclude, mentioning “distrust among parties to some PFI agreements.”
Much of this distrust pertains to who bears the responsibility for expensive repairs and replacements as contracts draw to a close. A report by the National Audit Office in 2020 cautioned that unscrupulous private sector entities may minimize maintenance efforts to amplify their profits, which could lead to significant ramifications.
John Hutton, previously in favor of PFI, has continued his advocacy for the private sector, even after signing off on 13 NHS PFI projects as a Labour health minister in 2002. Following his political career, he has engaged with various private sector roles, including at Pearson Engineering, a subsidiary of the state-owned Israeli weapons manufacturer Rafael.
Too Toxic to Touch
By 2018, PFI had become too controversial to continue. Labour, in opposition under Jeremy Corbyn’s leadership, pledged not to enter any further PFI contracts. Ironically, the Conservative government adopted this stance.
“I have never approved a PFI contract as Chancellor and can commit today that I never will,” stated Chancellor of the Exchequer Philip Hammond during his 2018 budget speech. “I announce that the government will discontinue PFI and PF2 for future projects.”
Simultaneously, the Conservative government rebuffed Labour’s dangerous proposal to scrutinize existing PFI contracts and reinstate the most problematic ones to public management. That reassessment never took place. Now, Starmer’s government is reinstating PFI.
As NC contributor Froghole noted, Streeting, Hutton, and current healthcare advisor Alan Milburn are aware that PFI is flawed (albeit they are compensated to endorse otherwise), and they have now introduced a scheme referred to as “hybrid PFI,” essentially the same concept with a new label.
According to some, “Reeves needs to shift spending off the balance sheet to mitigate potential tax hikes and spending cuts in the near term, which is vital for maintaining Labour’s unstable coalition. This is partly due to fears of another strike on gilts.”
The new PFI agreements, while reportedly more narrowly focused than previous models, will increase the NHS’s debt burden, further diverting resources away from patient care. This will, in turn, create additional opportunities for the government to outsource more NHS services to the private sector.
This, as highlighted at the outset of Starmer’s administration, aligns with the longstanding ambitions of this government and all preceding administrations since the 1980s. As campaigner Dr. Bob Gill articulated in John Pilger’s 2019 documentary The Dirty War on the NHS, the NHS has been transformed from a public service into a tool for profit extraction:
The modifications we’ve observed were solely aimed at unlocking these potential assets for corporate entities.
Healthcare lobbyists and executives were deeply involved in crafting the government’s recently released ten-year NHS plan. Among them was Michael Macdonnell, a vice president at UnitedHealth and a former Blair advisor tasked with “expanding new growth areas, including new markets” for the American healthcare giant.
After decades of detrimental influence, the perilous model of American corporate healthcare is increasingly infiltrating the UK. As a US doctor working for the NHS stated, “They want to take away your healthcare and sell it back to you.”
🚨”They want to take away your healthcare and sell it back to you”
American doctor in the NHS raises alarm about underfunding and privatization of the NHS.
Share if you support our NHS. https://t.co/vQfliuAkDk pic.twitter.com/h9mj2qJb1l
— We Own It (@We_OwnIt) December 4, 2025
Around 40 of the 403 Labour MPs have signed a letter warning the government that proceeding with PFI to fund NHS facilities would betray their manifesto commitments; that number should be much larger.
The Labour Party, which originated the NHS, is once again accelerating its decline, as it has done since Blair took office on May Day 1997—an ironic date. This serves as one of its most significant betrayals, as the exorbitant cost of healthcare remains a primary factor in bankrupting American households.
Finally, here’s a clip of former Tory MP Rory Stewart claiming in an interview with Chancellor Rachel Reeves that the Global Financial Crisis was due to Gordon Brown’s public borrowing to support the NHS. Disconcertingly, Reeves provides scant opposition, neglecting to mention the actual causes, which are well-known to the readers of this site.
Rory Stewart casually attributing the GLOBAL financial crisis to Gordon Brown’s public borrowing for the NHS.
The state of macro punditry in this country.— Daniela Gabor (@DanielaGabor) June 6, 2024
