On some mornings, as she walked into work at her local hospital, Cat Eccles would look up at the peeling paint and leaking roofs and wonder how much it all really cost. Years later, the former NHS worker, now a Labour MP, discovered the answer was counted not just in buckets catching rainwater but in billions of pounds owed to private consortia.
This week Eccles is among a group of nearly 40 Labour MPs demanding that the government draw a line under that history. In a private letter to the chancellor, Rachel Reeves, they urge her to abandon emerging plans to use private finance to fund a new wave of NHS buildings, warning that ministers risk repeating costly New Labour‑era mistakes and breaching a flagship election promise.
“We are asking you to learn from the mistakes of the past,” the MPs write. “We ask you to please drop any plans for new private finance in the NHS from the autumn budget and any future policy.” Using private capital to build health facilities, they argue, “does not bring in new money to the NHS – it is simply an expensive way of borrowing money which future generations of taxpayers will be required to pay back.”
Their intervention, days before Reeves delivers her first Budget on 26 November, exposes the first significant internal dispute of the new Labour government: how to rebuild a crumbling NHS estate while binding itself to strict borrowing rules and maintaining a pledge that the health service will “always be publicly owned and publicly funded”.
At the heart of the row is the government’s flagship 10‑year health plan, which promises to shift care “from hospital to neighbourhood” by creating a network of Neighbourhood Health Centres across England. Ministers have spoken of 250 to 300 centres by 2035, with 40 to 50 delivered this parliament. Some will be refurbishments costing a few million pounds; others will be entirely new buildings with price tags of up to £20m a time.
In an era of tight public finances and an NHS maintenance backlog put at more than £11bn, the Treasury and Department of Health and Social Care have been exploring whether private investors could help pay for those centres. Officials have sounded out the market about funding as many as 200 clinics at between £10m and £40m each, on contracts that could run for 25 to 30 years. Consultancy contracts worth £6m have already been awarded to Deloitte and law firm Addleshaw Goddard to advise on possible models.
Although ministers avoid the label, many MPs and campaigners see in all this the outline of a new generation of private finance initiative (PFI)‑style deals: private companies designing, building and maintaining NHS facilities, in return for long‑term annual payments from the public sector.
For Eccles, who has also tabled a Commons early day motion warning against “new private capital in the NHS”, the warning signs are all too familiar. She describes having seen “firsthand the damaging effects of PFI on NHS trusts” – poor‑quality buildings, leaking roofs and spiralling debts that in some cases “cost 10 times the cost of the original projects”.
Around 80 NHS trusts remain locked into PFI contracts signed between 1999 and 2018, collectively owing an estimated £44bn in future payments. Campaigners highlight examples where individual trusts face paying back up to 27 times the original construction cost, and where annual PFI charges exceed spending on medicines. Nationally, the National Audit Office (NAO) has calculated that the government still faces nearly £200bn in future PFI and PF2 payments across about 700 active contracts, stretching into the 2040s.
When the spending watchdog examined the programme in 2018, it found little evidence that privately financed schemes delivered better value than conventional public borrowing. It estimated that PFI‑funded schools were around 40% more expensive to build than if the government had paid for them directly, and hospitals up to 70% more costly. That same year, then Conservative chancellor Philip Hammond announced that no new PFI contracts would be signed for central government projects, citing concerns about inflexibility and high long‑term costs.
Those figures are now being deployed against Labour by academics and anti‑privatisation campaigners as well as by its own backbenchers. In an open letter organised by the campaign group We Own It, 53 accounting and finance academics have urged Reeves to “abandon this dangerous and damaging proposal and fund public services through direct taxation or borrowing”. One of their arguments is simple: the British state can borrow more cheaply than private companies, yet ends up paying investors a premium for decades.
The academics also cite criticism from the Office for Budget Responsibility, which in 2017 warned that using off‑balance‑sheet schemes to get infrastructure built without formally adding to public debt amounted to a “fiscal illusion”, and should only be used when there was clear evidence of value for money. “Using private capital in the NHS is no different from a family buying their home using a payday loan,” campaigners have claimed.
For the Treasury and Department of Health, the charge of conjuring up a “PFI 2.0” is one they are keen to rebut. Officials stress that they are only “exploring the feasibility” of new public‑private partnership models “in very limited circumstances” for taxpayer‑funded projects such as primary and community health infrastructure or decarbonising public buildings. Any future schemes, they insist, would be subject to “robust value for money” tests and structured differently from the most notorious PFI deals, with the NHS retaining ownership of land and clinical services.
Health Secretary Wes Streeting, architect of the 10‑year plan, has been reassuring colleagues that any use of private finance would be tightly targeted and designed to avoid the pitfalls of the past. He also argues that failing to tackle the backlog of outdated, unsafe and energy‑inefficient NHS buildings would itself undermine patient care.
That view has support among some senior health leaders. Amanda Pritchard, chief executive of NHS England, has previously pointed to the “worst estate backlog in the service’s history” and suggested that, while new PFIs were halted in 2018, other forms of partnership have continued in devolved nations, such as the Welsh government’s Mutual Investment Model. Matthew Taylor, head of the NHS Confederation, which represents health organisations, has warned that given “the strain on public finances, private investment is one of the only ways” to secure the capital needed for modern facilities, provided lessons are learned from earlier schemes.
Inside the parliamentary Labour party the picture is more mixed. Alongside Eccles, signatories to the letter to Reeves include prominent left and soft‑left figures such as Clive Lewis and Rebecca Long‑Bailey. They frame the issue not only as one of economics but of political trust, warning it would be “very damaging for the government to renege” on its manifesto commitment that the NHS will “always be publicly owned and publicly funded”.
Other MPs are more pragmatic. One backbencher, Josh Fenton‑Glynn, suggested he was “more worried about the deal than the mechanism”, signalling that some in the party could accept private finance if contracts were tightly drawn, transparent and demonstrably cheaper or faster than the alternatives. For them, the choice is between imperfect options: leave patients and staff in crumbling premises, or strike carefully designed partnerships that keep clinical control in public hands.
Behind the immediate skirmish lies a broader argument about Labour’s economic strategy. Reeves has staked her reputation on strict fiscal rules, limiting day‑to‑day borrowing and pledging not to raise the main rates of income tax, national insurance or VAT. Those self‑imposed constraints, combined with weak growth and high existing debt, leave limited room for large increases in public capital spending without trade‑offs elsewhere.
Pro‑PFI campaigners argue that this is precisely why private capital is tempting: it allows governments to build now and spread repayments over decades. Critics respond that what looks like fiscal prudence on today’s balance sheet becomes a long‑term drain on future NHS budgets, locking in high fixed costs that squeeze spending on staff and services.
There is also disagreement over what counts as a breach of Labour’s health promise. Ministers say that “publicly funded” refers to how clinical care is paid for – free at the point of use, based on need not ability to pay – and that hiring private builders or landlords does not alter that. Opponents counter that if revenue from general taxation ends up servicing shareholder returns rather than paying for nurses, doctors and treatments, the spirit of the pledge has been broken.
Outside Westminster the debate has already spilled onto the streets. Earlier this month, protesters organised by We Own It gathered outside the Department of Health and Social Care holding placards against “PFI 2.0”, as speakers denounced private finance as “bogus” and accused both main parties of failing to learn from the past. For many involved in NHS campaigns over the last two decades, the acronym PFI has become shorthand for opaque deals, inflexible contracts and profits extracted from overstretched hospitals.
Yet for patients waiting months for appointments or operations in parts of the country where clinics are literally falling apart, the promise of new, multi‑disciplinary neighbourhood centres is hard to dismiss. The vision set out by Streeting is of hubs open six days a week, bringing together GPs, diagnostic services, mental health support and social care teams under one roof to relieve pressure on hospitals’ accident and emergency departments and outpatient clinics.
Reconciling that ambition with the Treasury’s caution, and with a party membership still scarred by rows over privatisation in the Blair and Brown years, may prove one of the earliest tests of Keir Starmer’s authority as prime minister. For now Downing Street has left the detailed funding question to Reeves, whose Budget will set the tone not only for NHS infrastructure but for the government’s wider approach to harnessing private money in public services.
As the chancellor weighs her options, the numbers facing her are stark. England is estimated to have spent around £37bn less on health infrastructure between 2010 and 2020 than comparable countries, contributing to the current repair backlog. At the same time, existing PFI schemes continue to drain roughly £10bn a year from public coffers across sectors. Whether new variants of public‑private partnership can thread the needle between speed, cost and political acceptability remains uncertain.
In the letter she received this week, Reeves’ colleagues offered their own prescription: renegotiate or buy out existing PFI contracts where possible, raise funds through conventional government borrowing or taxation, and keep ownership and control of new NHS buildings squarely in public hands. Supporters of partnership working counter that without some form of private investment, the pace of rebuilding will fall far short of what patients and staff need.
Between those positions lies the decision that will emerge, if not fully spelt out, in the chancellor’s red box on 26 November. For MPs like Cat Eccles, the measure of success will be whether the next generation of NHS staff walk into dry, safe, modern buildings without signing away decades of future budgets. For the Treasury, success may look like brand‑new neighbourhood clinics delivered on time without breaching fiscal rules. For millions of patients, it may simply be whether the doors of those centres open at all.