Uncovering the cost of private sector involvement in the National Health Service

Summary 

University researchers’ insight into the relationship between the NHS and Private Finance Initiatives has influenced UK government policy and approaches to health in the developing world

What was the problem? 

The ability of the NHS to keep expenditure down, while still serving the needs of the UK population, is a source of much political dispute.

This project examined the relationship between the NHS and Private Finance Initiatives (PFIs). It used approaches from economic and healthcare research to provide new insight into healthcare finance and delivery.

Dr Hellowell’s work also extends to private-public sector engagement in health providers in developing countries. Private healthcare in the developing world can be unsafe and ineffective, so making improvements in this area can be extremely valuable.

What did we do? 

Dr Hellowell and Professor Pollock’s work showed that NHS organisations that have PFI contracts have higher capital costs than those that do not. This has led to money being taken away from clinical services to cover the shortfall.

Hellowell and Pollock’s 2007 research used the example of Bromley and Queen Elizabeth hospital trusts in south-east London. They found that these trusts ran at a deficit of £151m, with these “cash flow deficits” blamed on the PFI contracts. The result was further pressure on NHS trusts in deprived areas to cut clinical services.

Further research by Hellowell from 2008 to 2013 looked into how profitable PFI contracts are for their private-sector investors. He found that profits for these investors are high compared to other investments which have a similar level of risk. PFI contracts are often justified on the grounds of greater efficiency in operating costs. Findings show that PFI and non-PFI projects pay roughly the same amount in operating costs. This means that no major financial benefit to the NHS offsets the extra cost of raising capital via PFIs, at least in the way these contracts are currently put together.

I have found Mark Hellowell’s papers on PPPs in the health sector rigorous and policy-relevant ... I will certainly integrate the output from Mark Hellowell’s research on this topic.
April Harding, Lead Public-Private Partnership Specialist at the World Bank Institute
What happened next? 

This research has influenced government policy directly. Hellowell and Pollock have jointly or separately presented summaries of their work to parliamentary committees including the House of Commons Public Accounts and Treasury Committees, the House of Lords Economic Affairs Committee, and the Scottish Parliament’s Finance Committee.

Hellowell’s “expert advice” was credited in the House of Commons Treasury Committee report ‘Private Finance Initiative’ in 2011. Hellowell’s role as special adviser to this House of Commons Committee informed the government’s introduction of PF2, the new scheme replacing the old PFI system, in 2012. Many features of PF2 are designed to address problems identified by Hellowell’s research.

This research has also had impact in the media, helping it to reach a much wider audience. Interviews have appeared in a BBC Panorama program on PFI, a BBC Radio 4 programme called PFI Profits, and in the Financial Times and the Guardian. Hellowell was also cited in a Channel 4 economics article by Faisal Islam called ‘The economic argument for PFI has never been worse’.

This research also has applications far beyond the borders of the UK.

The World Bank’s capacity-building programmes for the governments of countries in the developing world have included findings from this project. This will have an impact on World Bank investment in public-private healthcare schemes in developing countries. Medical provision in developing countries is often dominated by the private sector, in potentially unsafe ways. Hellowell has collaborated with the World Bank on examining ways in which the public sector can intervene in the market to improve healthcare services, and has been involved in monitoring public-private healthcare projects in countries such as Lesotho.

About the researcher(s)

Professor Alysson Pollock
Dr Mark Hellowell
Lecturer in Global Health Policy

Research unit

School:
Social and Political Science
Subject area:
  • Social Policy

Funder(s)

  • The University of Edinburgh

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