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LIFT/PFI: will the NHS survive with further deals?

1 January 2007

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Alison Wall

Alison works as a child protection lead for Watford and Three Rivers PCT and has been one of the nurses on the Professional Executive Committee since 2001. She has retained a generic caseload as a health visitor, to avoid losing sight of the day-to-day issues. Alison is interested in medical history and is completing an MSc in public health

Recent news stories have highlighted the increasing problems facing our NHS. It seems that both acute and primary care face mounting debts.

The media highlights the plight of endless job losses across the country, principally in the hospital setting but now increasingly in the community. Primary care trusts (PCTs) are being aligned within new, much larger strategic health authorities (SHAs), the 10 new accountable bodies covering vast areas of the country. Their deficits have to be met, and budgets balanced.

If PCTs do not act, then the SHAs will act for them. Balancing the books is a “must do” like never before, and the government is becoming increasingly frustrated that things are not moving more quickly.

Tony Blair recently met with chief executives from 15 foundation trusts and executives from the private sector. He is urging experimentation and innovation, and wants to see closer working with business. Industry is understandably cautious and wants to know what’s in it for them if collaboration and partnerships emerge through the present morass.

However, private initiatives have been in existence for some time and continue to eat into the NHS coffers. We keep hearing about private finance initiatives (PFI), but not so much about the primary care equivalent – the Local Improvement Finance Trust (LIFT).

What I want to know is – how will the NHS be able to survive if there are further private–public sector deals?

Private finance initiatives
PFIs started in the early 1990s as a way of involving private sector firms in the operation of large-scale public projects. They are an example of outsourcing, where the private sector is signed up to work with a public organisation for its entire life. The private sector’s investment return is linked to the delivery of quality services and premises. It can be a good partnership for both, but could there be huge profits too at the public’s expense?

This was certainly the case with some of the earlier initiatives. However, it is not so likely with more recent agreements, as there have been clear decisions made on refinancing arrangements.

One example of an early arrangement is that of Norfolk and Norwich University Hospital Trust.(1) They signed one of the first PFI hospital agreements in 1998, with a consortium called Octagon. In 2003, Octagon refinanced and gained £116 m. The trust now faces the prospect of having to pay up to £257m more if it wishes to end the contract early. The refinancing deal also extended the contract another five years, until 2037.

The trust is facing a huge problem because of the increasing focus of services being moved out of hospital and into the community.

When the contract was initially agreed, the directors were not in a position to know that, a few years down the line, the goalposts would have changed so radically. Fortunately, things are changing for the better with present arrangements.
In September 2002, private firms accepted a voluntary code that meant that, where there were no contractual terms about sharing, the public sector would get 30% of any refinancing gain. In fact, new PFIs signed after July 2002 now include a contractual term that means public bodies get 50% of any refinancing gain.

Large projects continue to be agreed as new NHS hospitals are planned around the country. A new PFI hospital in Birmingham was agreed in April, alongside St Helens and Whiston hospitals. The biggest-ever PFI scheme in London was agreed in March for Bartholomew’s and the Royal London hospitals.

Large schemes will be planned in primary care as practice-based commissioning (PbC) gets off the ground and if doctors develop cluster and locality arrangements. This is where LIFT will develop, and where hopefully lessons learned with PFI will not be forgotten.

Local Improvement Finance Trusts
LIFT was launched in 2001, and there are now 51 schemes in operation. There have been four “waves”, with the last one taking place in November 2004. The NHS Improvement Plan of 2004 envisaged that half the population would be accessing LIFT facilities by 2008.(2) LIFT is superseding a mix of arrangements, such as GP-owned accommodation and private landlords.

Unison is cautious, and its report is quite alarming.(1) Unison believes PCTs and LIFT companies should be held to account for their use of public funds. It lists six reasons why LIFT may be a sorry deal for the NHS, staff and users, and the general taxpayer.

  • Bureaucracy – the LIFT structure is highly bureaucratic, operating as a top-down approach, with no public involvement in strategic decision-making. This is hardly in the spirit of the government’s “Your health, your care, your say” public consultation.
  • Profit – schemes have to be profitable to gain sign-up from private industry. This may threaten provision in needier areas where it is difficult to charge high rents. This approach is counter to the aims of the government’s 2004 Choosing Health white paper and the public health agenda of reducing inequalities.
  • Inflexibility – private companies want long-term secure cash flows, which can block the development of primary care facilities as care pathways develop. This is hardly in line with the Modernisation Agenda and the Health Improvement Plan.
  • Conflicts of interest – LIFT institutionalises conflict of interest. The programme is run nationally by Partnerships for Health, which is a new body linking both private and public organisations. It is both a regulator and an investor.
  •  Value for money – The National Audit Office (NAO) has failed to show that LIFT schemes are value for money.(3) Local building schemes may well be much cheaper and more efficient than the LIFT equivalent.
  • Staff – LIFT will lead to outsourcing of jobs, threatening job security for NHS staff, and may also incur huge sums in redundancy and early retirement payments. Terms and conditions will no doubt be redefined, and initiatives such as Improving Working Lives and Agenda for Change will be ignored.

So, what of the future?
We know that GP premises are bursting at the seams, and extra space will be required in order for services to develop. LIFT schemes are being encouraged by the Department of Health (DH), but structures and contracts are complex.

Primary care is continuously changing. Needs and designs will also alter over time as the local demography changes.

Unison urges us to be interested and involved.(1) We can ask questions at PCT board meetings and can attend overview and scrutiny meetings run by the local authority. PCTs have to apply for planning permission for LIFT schemes, so contact with the councils and local councillors could be helpful.

New health centres can still be built and owned publicly. Proper evaluation needs to take place, as only one evaluation has been completed by the NAO.(3) The Public Accounts Committee criticised the evaluation as it failed to provide comparative data and statistical analysis.(4)

We need to know exactly how much LIFT is costing, and to compare this with any viable alternatives. Following the criticisms, the auditor general has agreed to return with a supplementary report detailing statistics and comparing public funding directly with LIFT.

Information from the DH indicates that the net deficit for the NHS amounts to just over £500m.(5) All 10 new SHAs have inherited deficits, ranging from the lowest at East Midlands SHA, with a deficit of £11m, to the largest at the East of England SHA of £214m (3.3% turnover).

Mr Blair believes we “need to break the notion that public and private sectors have contradictory value systems”. But we know that the NHS holds a specific set of values and beliefs. We believe the system needs to work in order to meet patient need and reduce inequity. Profit is not its main interest, and certainly not at the expense of high-quality patient care.


  1. Aldred R. In the interests of profit: at the expense of patients. An examination of the NHS LIFT model. London: UNISON; 2006.
  2. Department of Health. The NHS Improvement Plan: putting people at the heart of public services. London: The Stationery Office; 2004.
  3. National Audit Office. Innovation in the NHS: Local Improvement Finance Trusts. London: The Stationery Office; 2005.
  4. House of Commons – Committee of Public Accounts. NHS Local Improvement Finance Trusts. HC 562. Forty-seventh Report of Session 2005–06. London: The Stationery Office; 2006.
  5. Department of Health. NHS Delivering on Care and Costs. June 2006. Available from:…