More money will be taken out of the NHS in Scotland in the coming two years than ever before under the terms of historic financial agreements made with private providers to help build and run new hospitals and healthcare facilities.

According to the public spending watchdog, despite making payments for more than 25 years, the NHS is less than halfway through paying off the total due under Private Finance Initiative (PFI) – also known as Public Private Partnerships –  contracts, with no certainty that all the buildings concerned will belong to the NHS when the final sums are paid.

In its 2024 annual finance and performance review of the NHS in Scotland, Audit Scotland states that the NHS will have spent £10.6bn on paying for ‘around 50 of these contracts to build healthcare facilities worth £2.2bn’ by 2045.

A total of £4.8bn was paid to Public Private Partnerships in the period from 1998/99 to 2023/24.

Under the contracts, £5.8bn more must be spent between now and 2045/46.

Analysis by Audit Scotland shows payments will peak at just under £400m for the next three financial years before reducing to around £350m in 2028/29.

The Scottish government has revealed in a written parliamentary answer that, across all government capital programmes, it estimates that it still owes over £23bn.

The government says it is helping the NHS to achieve 'the best outcome for the public' as PFI contracts come to an end.

Closing arrangements

Audit Scotland in its report published last month says that, despite paying significant sums as part of Public Private Partnership contracts already, the arrangements will continue to affect NHS board budgets – and says the government must help boards deal with some of the older contracts that do not guarantee that the NHS will own the builds it has paid for.

Six early PFI contracts are due to expire before 2030, with Audit Scotland describing the closing arrangements as ‘complex’ and potentially costly.

The report states:

‘Newer contracts are more standardised, with the assets (maintained to an agreed standard) transferred automatically to public ownership at the end of the contract. For some earlier PFI contracts the transfer does not happen automatically and is subject to negotiated additional payments.

‘Under earlier PFI contracts, the assets can remain with the project company at the end of the contract period, if the NHS board does not pay a negotiated exit fee, be subject to an agreed extension of the contract or be transferred to the NHS board at a fixed cost. In some cases, the board needs to undertake a procurement exercise to provide the service elements of the contract (such as maintenance), even after ownership of the asset has been transferred to the NHS board.’

A Scottish government spokesperson told healthandcare.scot: 

“Costs associated with PFI contracts form part of our financial planning and negotiations are underway between NHS Boards and PFI providers on expiring contracts, with the NHS working to achieve the best outcome for the public.  

“A joint specialist team from NHS Scotland Assure and the Scottish Futures Trust is already assisting health boards in managing their contracts, including end of contract preparation.”

 

Read more: Health and care in the Scottish budget; Watchdog: ‘No overall vision’ for NHS; National Treatment Centres on pause; Government buys free hospital parking extension; Taxpayers pay ‘well over odds’ for new hospitals

Sign up to our bulletin for key health & social care updates straight to your inbox.