PFI – a new era?

The Private Finance Initiative, more commonly known as PFI, was first introduced in the mid 1990s, coming to a height in the early 2000s. PFI schemes involved private companies designing, constructing and financing public assets, and providing them to public bodies on a long term basis, typically 25 years or more as part of a performance related services contract. Maintenance was usually included within the package of services provided.

These schemes have been the subject of much debate often in respect of whether they provide value for taxpayer money.

NHS England’s potential new model

On 11 June 2025, NHS England’s Chief Executive, Jim Mackey, announced that it will be introducing an “off-balance sheet capital investment mechanism” this summer.

It is unclear exactly what shape this new model will take, however commentators have speculated that that the new initiative may:

• use digital, data and technology programmes to maximise return on investment.
• focus on decarbonisation and reducing emissions to meet the NHS target of becoming net zero by 2040.

It has also been suggested that the NHS England model could incorporate many of the elements included in Welsh Mutual Investment Model.

Welsh Mutual Investment Model

This was launched in 2017, and works similarly to the PFI model, with a private company designing, constructing, financing and maintaining a public asset.

There are some key differences to PFI, which include:

• A public sector representative being a shareholder – this allows the public body to have greater input into decision making, and receive a share of any profits made by the private company.
• Exclusion of soft services and capital equipment.
• Whole life costing – this assists with transparency and certainty in cost.
• Progress reporting obligations – this also assists with transparency.
• Focusing on public interest benefits.

The Treasury’s position

On 20 June The Treasury announced that private finance will only be used for public infrastructure projects in very limited circumstances.

What does this mean?

This need for investment, combined with limited availability of public capital for such purposes, makes it inevitable that private funding will need to be relied upon by Government. Lessons have been learnt from the existing cohort of PFI schemes and it seems that some care will be adopted in shaping, introducing and utilising new private investment models. We await further detail from NHS England on how private finance will be accessed and the terms on which schemes will be based.

Melanie Pears is a Partner and Head of Public Sector at Ward Hadaway.