Local improvement finance trust
The system-wide, public-private approach to regeneration that works
m2 of floor space
Picture this problem: A public sector authority is responsible for a substantial group of assets, many of which are now decades old and becoming run-down and in dire need of repair, but insufficient funds are available to reverse their decline. Private investment is considered a solution, but that too is problematic because each site is too small and the risks too high to attract investors offering finance on affordable terms.
This scenario would appear applicable to numerous different sectors of local and national government, in any number of countries worldwide.
And so it was for the National Health Service (NHS) in England – an organisation which in some cases provides health services from buildings over 100 years old.
The NHS was suffering from having a vast estate of aged health facilities. In many cases, new buildings were needed, particularly so where old facilities were no longer fit for purpose, often in the most deprived areas of the country. But a solution was developed. LIFT – Local Improvement Finance Trust – was launched in 2001, as a vehicle for procuring public private partnerships, predominantly aimed at regenerating and improving facilities of primary and community healthcare in England, which it has done with remarkable success.
Independent analysis of the first 10 years of LIFT was published in 2014 (the first LIFT partnership was formed in 2004) by economic and financial consultant Amion for NHS. Its report(1) found that the initiative had injected over £2.2bn into developing health estates, opening 314 new facilities with 872,000 square metres of floor space for health services and other partners.
LIFT has now reached a maturity that allows inspection of the reasons behind this success. Fundamentally, it’s a system-wide portfolio approach. LIFT partnerships have been developed to finance, deliver, manage and maintain health estates across whole regions or defined areas of England – creating the greater scope and scale needed to attract private investment.
The initiative was not mandatory. Primary Care Trusts – now replaced by regional Clinical Commissioning Groups (CCG) – were given the option of using LIFT. Where it was taken up, public-private LIFT companies were formed, with the UK Government’s Community Health Partnerships (CHP) as the public sector partner, allied to private sector asset delivery and management partners. Each partnership is different in detail, but generally, CHP takes a 40% equity stake in the LIFT company and the private sector partner 60%.
To date 49 LIFT companies have been formed, according to latest figures from CHP, generating over £2.5bn of investment and delivering 330 new health facilities that serve 60% of the population of England. In six LIFT companies, the private sector delivery partner is the Meridiam owned Fulcrum Infrastructure Group. Fulcrum’s portfolio includes 41 community healthcare facilities, representing close to £450m of investment, across areas of West, South West and South London, as well as Oxford, Bristol and Merseyside.
“The fact that CHP as the public sector partner has always been a 40% stakeholder and the lead tenant in LIFT developments has been crucial to the initiative’s overall success,” says Fulcrum’s Chief Operating Officer Darrell Boyd.
“It’s a true partnership. The public partner has seats on the board of each LIFT Co and so has a tremendous influence on what’s done. It also helps transparency and trust. Public and private sector partners are aligned and work together in the interests of the health service’s clinical and estates strategies in each local area.”
The LIFT regime also has the advantage of projects being driven by the developer rather than a contractor.
“This ensures the design and build is focused on the long-term view – on best whole-life value and what the facilities will ultimately have to do to serve the public,” Darrell says.
The greater value of LIFT developments to the public purse – in comparison to conventional third-party developments – has been independently verified. In 2005, a report(2) by the National Audit Office confirmed LIFT as demonstrating value for money. The then head of the NAO, Sir John Bourn, said: “I welcome LIFT as an attractive new way of improving primary health and social care facilities. This is an excellent example of a government department doing something different and new to come up with an effective solution to an established problem.”
The 2014 Amion report studied the social and economic impacts of LIFT; finding that nearly a third of the investment – £790m – had been spent in the top 10% most deprived areas. Around 30,000 people were employed in construction and maintenance of the new facilities, £1.31bn of the work was carried out by SMEs and 80% of it by companies local to the new developments. Perhaps most importantly, the report found LIFT has helped the NHS towards its aim of delivering better health services by improving the quality of its facilities.