Labour weighs up public private funding for NHS health centres amid doubts and past failures

Labour is preparing to reignite public private partnerships (PPPs) as a solution for delivering new neighbourhood health centres central to its ambitious 10year NHS plan. Ministers are set to make a pivotal decision in the autumn budget regarding whether to deploy the controversial funding model, which has been on ice since the Carillion collapse sent shockwaves through the sector in 2018.

Rachel Reeves brings experience from chairing the business select committee during that crisis, acutely aware of the dangers inherent in PPP structures. Critics assert that the lessons from Carillion and previous PPP contracts remain unheeded, highlighting the vulnerabilities of bundling complex deals with unclear accountability.

While the private finance initiative PFI originated under the Conservatives, it was the Blair Labour government that championed the model to fund schools, hospitals and vital infrastructure. Supporters point to hundreds of modern buildings that would otherwise not exist without private capital. Yet, opponents argue taxpayers remain burdened by inflexible contracts running up to 30 years and heavy interest costs. Treasury figures show 560 PFI contracts remain active in England for community assets, with many approaching expiry and raising thorny questions about the state and legal status of returned assets.

The Association of Infrastructure Investors in Public Private Partnerships has sounded the alarm over potential disruption when decadeslong contracts conclude amid a landscape of mistrust and legal wrangling. Experience with previous funding streams saw state schools and hospitals face payment crises and even closures when projects faltered. Research from the National Institute of Economic and Social Research revealed £13.5 billion spent by local authorities on school PFI repayments, with nearly a third allocated to interest alone.

Current ministers face competing pressures to modernise the UK’s public services while managing a constrained fiscal environment. Darren Jones, Chief Secretary to the Treasury, has indicated that focused use of PPPs might enable rapid progress on Labour’s NHS commitments, particularly neighbourhood health centres designed to improve community care outside overburdened hospitals.

Yet, concern remains over whether new deals will avoid repeating the mistakes of the past. The National Audit Office urges better risk-sharing and clearer contracts. Experts advocate for flexibility in new PPP terms to accommodate surges in inflation and interest rates, conditions that previously undermined large infrastructure deals. Labour’s newly established National Infrastructure and Service Transformation Authority is tasked with injecting expertise into these complex negotiations, hoping to strike the balance between innovation and prudence.

With variants of PPPs developed by Scotland and Wales as points of reference, Labour aims to demonstrate it can harness private capital while protecting public interest. Clarity over deal structures and risk allocation will be essential in determining whether public private collaboration will ultimately revive the fortunes of UK public services or repeat a cycle of disappointment.