`Astonishing' errors led to private hospital crash

The mistakes which led to the collapse of a private hospital in Scotland, backed by pounds 28m of public money, were condemned by MPs of all parties yesterday.

It was revealed that the project, described by Mike Watson, Labour MP for Glasgow Central, as a "deep, dark hole" down which taxpayers' money had disappeared, was approved by just one vote at an ill-attended advisory board in 1988. Of the 12 members of the Scottish Industrial Development Advisory Board, six attended, one of whom withdrew because his firm was advising the project, and the others divided three to two in favour of the scheme.

The HCI hospital, designed to cater for 5,000 foreign private patients a year and create 2,000 jobs, was opened by Ian Lang, Secretary of State for Scotland, in June last year. It went into receivership in November. The hospital treated 761 patients, two-thirds of them British.

Tim Smith, Tory MP for Beaconsfield, criticised the Scottish Office for relying on private investors' studies of the likely market. "It's incumbent on government departments to obtain their independent assessment of likely sales," he said.

Peter Mackay, a senior Scottish Office civil servant, was subjected to a bruising interrogation by the Commons Public Accounts Committee, taking evidence on a report published yesterday by the public spending watchdog, the National Audit Office. Mr Mackay described the HCI hospital as "not a success but not yet a failure".

Sir Kenneth Carlisle, Tory MP for Lincoln, described it as a "dodgy venture", but accepted Mr Mackay's argument that the taxpayer had only "lost" pounds 8.4m of equity, as the remainder was grant-aid to secure jobs, and the hospital was still operating under new owners, employing nearly 400 people.

Mr Mackay accepted the project was risky, as public money was only available to "marginal" projects which would not go ahead without it. Alan Williams, Labour MP for Carmarthen, described the mistakes made as "astonishing".