• Lord Prior’s comments come amid growing concern over facilities and lack of capital
  • Says chancellor Philip Hammond has not backed the scheme and appeals for “a very innovative” chancellor
  • Worried a future government will return to expensive private borrowing schemes

The chair of NHS England has called on politicians to back a £50bn government “bond” for infrastructure spending, saying the service is “capital starved”.

Lord Prior said the current chancellor, Philip Hammond, had not backed the scheme, but he hoped it would get support from government in future and that “it requires a very innovative, creative chancellor”.

There is a high level of concern in the NHS about the poor state of many buildings and facilities, and a lack of capital is thought to be holding up numerous service change proposals, and IT improvements.

NHS England and other NHS leaders have been calling for a capital settlement in the spending review, due to take place later this year, as well as more funding for education and training, and public health – areas which were not covered by the government’s five-year NHS England revenue settlement last year.

Lord Prior, who has held several NHS chair roles as well as serving as a Conservative minister, is now a backbench peer. He was speaking at a Cambridge Health Network event in London yesterday.

He said NHS capital spend had fallen in recent years and that “if we were to come up to the OECD average – the average, not a demanding place to be – we would need between £3bn and 5bn per year extra on capital”.

He said the NHS spent “half the share of [gross national product] on [healthcare] capital that other European countries do – the result is we have far too few MRI and far too few CT scanners”.

“Forty-three per cent of NHS buildings are over 30 years old and 18 per cent pre-date the founding of the NHS in 1948,” he said. “We are a capital starved industry that’s still getting reasonably high levels of productivity.”

He said: “There’s a worry in my mind that that government – whoever is in government – will say we can go back and do these rinky dinky PFI [private finance initiative] type schemes.

“By my reckoning PFI type schemes cost on average 12 per cent. We’ve invested about £14bn in the NHS through PFI and we’re spending about £1.5bn on annual financing costs. When the government can borrow at 2 per cent, to let the NHS go through deals like this at nearly 10 or 12 per cent is just absurd.

“We could borrow £50bn at an annual cost of not much more than £1bn. The argument we need to put to government is for a one-off £50bn health bond with a long date of maturity… is almost unarguable if we are going to transform the NHS into a really modern healthcare system.” He said the life science industry would benefit as well as healthcare and society.

Asked if Mr Hammond had backed the idea, he said no, and added: “The problem is the Treasury [doesn’t] distinguish between revenue and capital… I think it requires a very innovative, creative chancellor. It needs a new look.”

Lord Prior continued: “It requires a new approach. You need to be brave, but in the context of Brexit and all the uncertainty, I think to have a substantial capital programme would be popular, it would be money well spent, I think the returns on it would be very strong – human returns and financial returns.”

He also joked, “I’m sure that Matt Hancock will be up for this”. Health and social care secretary Mr Hancock is running to be Conservative leader – and therefore prime minister – in the current contest, but there is speculation he could become chancellor under whoever wins the race.

NHS leaders last publicly made the case for a large capital borrowing scheme in 2016. In July 2016, NHS England chief Simon Stevens wrote: “UK government borrowing costs are now the lowest they’ve been since the Napoleonic wars. Instead of inflexibly expensive PFI, how about a substantial NHS 70th birthday public fund for infrastructure?”

The Naylor Review of NHS estates in 2017 called for an “additional” £10bn to be invested in transformation projects and maintenance backlogs. The government accepted this, and suggested a third would come from public spending, a third from private investment, and a third from sales of existing estate.

However, there has so far been no significant uplift to the Department of Health and Social Care capital spending limit, and no significant rise in land sale receipts. The government has also abolished PFI and launched a wide-ranging review of private finance.

The DHSC has said government will consider proposals from the NHS for a multiyear capital plan in the spending review.