UK should use private capital to rebuild NHS

A discussion paper produced by the NHS Confederation concludes that the UK’s health service will need several options to raise capital, including shared investment models to secure funding on a project-by-project basis from private capital.

Key points

The UK has historically underinvested in capital compared to other OECD countries. Lord Darzi’s review of the NHS identified a £37 billion shortfall. This has been exacerbated by in-year transfers to revenue budgets to prop up day-to-day spending. Lack of capital investment is identified by Lord Darzi and independent think tanks as an impediment to further productivity growth.

To plug this gap, NHS leaders estimate that the NHS needs an additional £6.4 billion per year in capital investment over the next three-year Spending Review (a total additional £19.2 billion investment). This is essential to efforts to boost NHS productivity growth to 2 per cent per year – a key requirement of the NHS Long Term Workforce plan.
There is consensus on the need for more capital investment in the NHS, but less agreement on how this extra funding should be raised. This discussion paper sets out four approaches and the different models available to raise this funding:
Government borrowing (including Treasury borrowing and the Public Works Loan Board)
Leveraging existing assets (including cash reserves and existing estate)
Private investment (including private finance initiatives/PF2, third-party development and buy-back, mutual investment models, infrastructure and investment partnerships and others that learn from previous experience)
Third-party ownership (classic third-party development, shared ownership and pay per use).
The paper proposes that government could raise additional funding through further government borrowing, making efficiencies in NHS estate and shared investment with patient capital on a project-by-project basis, informed by integrated care board (ICB) infrastructure plans.
It suggests that government should learn from international and domestic models to consider innovative approaches to use private capital to invest in NHS estate.
The discussion paper was developed through engagement with ICB, trust and primary care leaders as well as government and investors.