Hospital PFI project went ahead despite warnings

Auditors' report reveals how ministers were told that deal for new facility was unsustainable

A hospital now losing £44m a year was allowed to go ahead with a private finance deal to build new premises despite the Government being warned that the project was unsustainable.

A report, commissioned by the hospital regulator, Monitor, and seen by The Independent, reveals that strong concerns were raised that Peterborough Hospital would not have the money for the new buildings.

Despite the warning – to both the Treasury and the Department of Health – the go-ahead was given for the project, which is now costing the hospital trust £22m a year to service.

Last year, Monitor found Peterborough to be in "significant breach" of the terms of its authorisation and warned that work on a turnaround plan for the hospital had "not progressed at the necessary pace". In February, the Government was forced to establish a £1.5bn bailout fund to help pay the debts created by prohibitively expensive PFI schemes, of which Peterborough was one.

Peterborough is judged at high risk of financial failure by Monitor and is likely to have to cut or reconfigure the services it provides and make staff redundant to balance its books.

In the report, from the accountants KPMG, into what went wrong at Peterborough, auditors conclude that while Monitor was aware of the risks of the project it was powerless to stop the Government from giving it approval.

It is embarrassing for Labour because, at the time of the approval, Andy Burnham was a Minister of State in the Department of Health. He is now shadow Health Secretary.

The report reproduces a letter sent by the then head of Monitor, Bill Boyes, to the hospital trust in 2007 and copied to officials in both the Treasury and the Department of Health, warning of the dangers of the project.

But because Monitor had no power to intervene, it went ahead and it was only in 2010, after the hospital had been built, that the true financial picture emerged.

Yesterday it emerged that up to 30 NHS trusts could be forced to merge, devolve services into the community and make jobs cuts as part of a radical restructuring of hospital care – partly as a result of the cost of PFI.

The Department of Health said it considered 21 hospitals to be "clinically and financially unsustainable".

Commenting on the report, a Department of Health source said: "This was a disastrous Labour PFI blunder. Labour was warned repeatedly by their own regulator that this PFI deal could bankrupt Peterborough Hospital but they pressed on regardless."

A spokesman for Mr Burnham said he would not comment until he had seen the full published report.

Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

ES Rentals

    Independent Dating
    and  

    By clicking 'Search' you
    are agreeing to our
    Terms of Use.

    iJobs Job Widget
    iJobs General

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Recruitment Genius: Installation and Service / Security Engineer

    £22000 - £40000 per annum: Recruitment Genius: This company is part of a Group...

    Recruitment Genius: Service Charge Accounts Assistant

    £16000 - £18000 per annum: Recruitment Genius: Are you a a young, dynamic pers...

    Cancer Research UK: Corporate Partnerships Volunteer Events Coordinator – London

    Voluntary: Cancer Research UK: We’re looking for someone to support our award ...

    Day In a Page

    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
    Public relations as 'art'? Surely not

    Confessions of a former PR man

    The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
    Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

    Bill Granger's luxurious sweet treats

    Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
    London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

    The mother of all goodbyes

    Paula Radcliffe's farewell to the London Marathon will be a family affair
    Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

    Steven Naismith: 'We know we must do better'

    The Everton forward explains the reasons behind club's decline this season
    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions