A much-vaunted scheme to use private investment for NHS capital projects has been officially scrapped, HSJ has learned.

Regional Health Infrastructure Companies — originally conceived under “Project Phoenix” — were proposed by Community Health Partnerships, a government subsidiary, as a way of raising private capital for infrastructure projects in a new form of public-private partnership.

But a CHP spokeswoman confirmed RHICs have been “permanently cancelled” after a change in policy from the government.

The scheme was designed to leverage private investment in a similar way to local investment finance trusts, which have been commonly used for primary care facilities. It was expected to finance projects larger in scale than LIFT schemes, but smaller than those typically funded through the private finance initiative.

One of the intended benefits to the NHS was an “off balance sheet” accounting structure, so the projects would not score against constrained capital spending limits.

RHICs were initially supposed to be launched from 2018, but were thrown into doubt when former chancellor Philip Hammond abolished the use of the PFI and launched a government review of infrastructure finance.

A consultation document published in March 2019 said future projects using private finance would need to be more transparent, and suggested the government would no longer procure off-balance sheet schemes. Instead, it said the government would be “open to exploring new ideas for using private capital in government projects, including through on-balance sheet structures”.

Under former prime minister Theresa May, the government had previously committed to providing £10bn of “additional” capital funding over five years, with around a third of that due to come from private investment.

NHS trusts had been hoping to use a next generation of PFI schemes (known as PF2), or RHICs, to generate significant capital funding to invest in their estates, after a sustained squeeze on publicly-funded capital budgets and a growing backlog of maintenance problems.

Under Boris Johnson, the government has instead announced public funding for several large capital projects, while promising to set out a multiyear capital budget. The Conservative party may outline its overall capital spending plans in its general election manifesto, after Labour pledged an additional £15bn over five years.

Princess Alexandra Hospital Trust was among those seeking to use RHICs, but has now been named among six organisations to receive public funding for major rebuilding projects.

CHP said it would still continue with its LIFT programme to upgrade GP and community facilities. It referred questions about what, if anything, might replace RHICs to the Department of Health and Social Care. The DHSC declined to comment during the purdah period before the general election.

The government has yet to publish the outcomes of its consultation on infrastructure finance.