Is the jury still out on PFI contracts?

Which, in the 1990s, greatly expanded a public/private funding partnership originally introduced by the Tories a decade earlier. Two key factors critics claim have put such Trusts ‘at risk’ are the ‘inflexibility’ of some PFI contracts, which makes varying terms difficult mid-contract, and the fact that many of the earlier deals were inexpertly negotiated by the ‘public sector side’. HEJ editor Jonathan Baillie sought the views of Malcolm Austwick, a partner at top commercial law firm, DAC Beachcroft (see panel below), with extensive experience in the legal complexities of PFI, on whether or not the initiative’s ‘pros’ do indeed outweigh the ‘cons’.

Whether, as some political observers remarked when the Health Secretary made his comments last September, Andrew Lansley was indeed partly seeking to deflect attention from the radical proposals for change set out in the Health and Social Care Bill by highlighting the ‘failings’ of the previous government, or whether, indeed, the current administration genuinely believes some Trusts’ future existence could be jeopardised by the size of their PFI ‘mortgage’ (or a combination of the two) is largely conjecture. What is not in doubt, however, is that, since they first appeared, PFI contracts, whether for the building of new hospitals, schools, roads, or other important infrastructure schemes, have polarised opinion. In confirming, last September, that it had identified 22 NHS Trusts in England where it believed large PFI ‘debts’ could jeopardise the organisations’ future stability, the Department of Health (DH) said it had based its conclusions on returns from those Trusts, which set out the main issues they felt needed to be addressed for them to achieve financial stability. The returns were analysed, and the list of those Trusts with a ‘serious potential PFI issue’ agreed with Strategic Health Authorities, before details were subsequently released publicly. The DH said at the time: “Concern about the PFI issues facing these Trusts is not an attack upon the hospitals, but recognition, based on what they themselves have told us, that a review of their case should be done so those cases where solutions may need to be found could be identified.” The next 3-5 years are likely to be extremely tough financially for many NHS Trusts, particularly as the healthcare sector has been told it must find some £20 bn in savings. This may partly explain the sudden focus on, and renewed media interest in, the ‘onerous nature’ of many existing PFI contracts.

What was the alternative?