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NHS England has started work on a new model to draw in private finance to pay for health infrastructure, following calls from the sector to upgrade dilapidated estates by ending a ban on the contentious funding schemes.
Chief executive Sir Jim Mackey said the health service operator, which the UK government is abolishing, would “introduce an off-balance sheet capital investment mechanism” by the summer.
In a note to NHS leaders, Mackey on Wednesday said the new model was one of 12 priorities for his first “100-day plan” since taking the helm of the arm’s-length body in April, amid signs of tighter Whitehall control over the struggling health service.
The Financial Times previously reported that NHS England was developing alternative funding models that did not increase borrowing pressures for the Treasury, as health secretary Wes Streeting prepares to put forward his long-awaited 10-year plan.
Ministers across the Treasury and Department of Health and Social Care are exploring models that could be used to allow private finance to fund new NHS infrastructure, according to three people briefed on their discussions.
Streeting told the NHS Confed/Expo conference on Thursday he was “sympathetic” to the arguments but taking a “cautious” approach given disputes over private finance initiative schemes under Sir Tony Blair’s government.
“We know that public funding only gets us so far,” he told delegates in Manchester. “I just want to reassure people that I am treading cautiously in this area, because I always want to learn from what we got right when we were last in government, but also with the humility of the things that we got wrong.”
Highly controversial PFI schemes were dropped by the Conservative government in 2018 after hospitals, schools and local authorities struggled to cope with large debt repayments and the UK public spending watchdog warned they were poor value for money for taxpayers.
However, several local authorities have continued to launch PFI schemes, while a handful of public-private partnerships in Wales are being delivered under a Mutual Investment Model.
In the spending review on Wednesday, chancellor Rachel Reeves set out a 2.8 per cent increase in day-to-day spending for the Department of Health and Social Care, which funds the NHS, through to 2028-29.
But DHSC capital investment from the Treasury will remain flat for the next three years, after a 3.2 per cent rise in 2025-26 was announced last year.
A shortfall in capital funding in recent years has forced health bosses to raid capital budgets in order to manage day-to-day spending, leaving the NHS with an accumulated maintenance backlog of £13.8bn.
Daniel Elkeles, chief executive of NHS Providers, which represents health organisations across England, said “major capital investment for the NHS estate was noticeable by its absence” in the spending review.
“Capital investment, including from the private sector, would transform our ageing NHS buildings, boost productivity and make services safer for patients and staff,” he added, calling for action in the government’s upcoming 10-year infrastructure strategy.
Prime Minister Sir Keir Starmer in March announced the abolition of NHS England with its functions centralised into the DHSC, which he said would slash bureaucracy, save money and bring management of the health system “back into democratic control”.
In February, Amanda Pritchard, then NHS England chief, called for a more “radical” approach and the use of private capital to fix the NHS’s crumbling infrastructure as it grapples with the highest maintenance backlog on record.
Matthew Taylor, a former adviser to Blair and now chief executive of the NHS Confederation, which represents health managers, told the Manchester conference on Wednesday that government capital funding alone would make it hard to “reform at pace”.
Mackey in his note to staff said his other 11 priorities included plans to improve productivity and prepare the NHS ahead of the winter.
He added: “At the heart of our 100-day plan is a reset in how we work together — across systems, regions, and the centre.”
