Here I am writing only about PFI in the NHS, and since about two-thirds of expenditure in the NHS is on hospitals (see Pollock et al 2004, 81), I focus on the use of PFI in the provision of hospitals.
But how can we make an assessment of PFI? There are three approaches and I look at all three in this report.
• Firstly I look at a financial model of a general hospital used by Andersen, the consultancy company, in a study produced for the Treasury in 2000. Using this model, I examine whether there is a presumption or likelihood that the PFI will offer a better or worse deal, given the higher cost of capital that the private sector has to pay compared to that paid by the public sector. This 'a priori' analysis is done in chapter 4.
• Secondly I look at the value for money approach used for the health sector by the National Audit Office. They compare the PFI with a Public Service Comparator (or PSC) for a number of major projects. This approach is discussed in chapters 5 and 6. Chapter 7 then summarises the arguments to that point.
• I then move on to the third way of assessing value for money (VFM) which consists of comparing the situation before PFI with that after PFI. This is done by looking at the Norfolk and Norwich University Hospital (NNUH), one of the earliest of the major PFI schemes in the health sector. The planning and setting up of the hospital are looked at in chapter 8 and then chapter 9 looks at the before-and-after situation. In doing this I have had to modify the before-and-after approach to allow for changes in expenditure which are not the result of the PFI contract.
Following these three approaches, chapter 10 looks at the profits from this and other PFI contracts. Finally chapter 11 looks at the broader picture and asks; what can be done now?
Before looking at the three approaches, I look at the origins of PFI (in the next chapter) and then (in chapter 3) at the general arguments for and against PFI.