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After the budget: Private cash for 12 NHS hospitals

The Government has given the go-ahead for 12 hospitals to be built and run by the private sector with private finance for use by NHS patients.

The hospitals, costing pounds 1.3bn, will be staffed by NHS doctors and nurses, but the buildings will be owned by the private sector and leased back to the NHS.

Ministers could not say how much the leasing would cost, but insisted that it was the best deal for the taxpayer. Alan Milburn, the Health Minister, made it clear that future hospital building will depend on similar private finance initiatives. He said the projects announced yesterday are ushering in a new era for the NHS.

"Now it is PFI or bust," he said.

The 12 schemes are the biggest capital programme in the history of the NHS and the money comes on top of an extra pounds 1.3bn for the NHS for next year announced in the Budget by the Chancellor.

Ministers are resisting demands for more money for the current financial year, in spite of discovering that their deficits now total more than pounds 300m, but officials said the allocation of the additional money would be made earlier than usual, around October, to enable hospitals to plan ahead to avoid the threatened winter crisis.

The approved PFI schemes include three new hospitals near Tony Blair's Sedgefield constituency, in North Durham, Bishop Auckland and South Tees. Denying there was any connection, Frank Dobson, the Health Secretary, said only two hospitals had been built in the North-East in the past 20 years under the Tories

A second wave of schemes, which failed to meet the Government criteria, will be launched next Spring.

In all, 23 were rejected, including projects at the famous "Jimmy's" in Leeds - St James's University Hospital NHS Trust, and a new hospital costing pounds 29m at Stone Grove for the Central Sheffield NHS Trust. They will be told to stop work on their contracts, although they will be reconsidered for the second wave in the New Year.

The 12 projects approved are: North Durham, South Buckinghamshire, Calderdale, Carlisle, Hereford, Wellhouse, Worcester, Bishop Auckland, South Manchester, South Tees, Swindon and Bromley.

Two other private schemes, for Norwich and Norfolk and at Dartford and Gravesham, were approved earlier by the Government.