£500m PFI hospital projects put on hold

The Treasury has ordered the NHS to put its flagship private finance hospital projects worth £500m on hold, over fears that they will not meet a manifesto pledge on keeping health workers in the public sector.

Five companies in the running on the Private Finance Initiative (PFI) schemes at Roehampton, Aylesbury and Havering were told last month that the preferred bidders would not be selected until the issue was ironed out.

Before the general election, the Government pledged to allow NHS support staff to remain as public sector workers in hospitals managed by the private sector. But the private sector has flagged up legal issues linked to the pledge, forcing the Government to rethink its promise.

The biggest issue is dual management, because PFI hospitals would have support staff working for both public and private bodies.

The three schemes on hold were to be the trailblazers for rolling out 21 new PFI hospital projects in the country.

Mike Davis, chief executive of Bovis-backed Catalyst, a bidder selected on all three schemes, said: "We are very disappointed that the projects have been delayed. This is very painful for us, because it ties up staff and resources."

He added: "Overlapping responsibilities and dual management are not ideal and introduce complications and new risks." But he said retaining NHS staff contracts is "good for industrial relations and fosters real partnership".

The other private bidders are McAlpine-backed Enterprise, Skanska, Innisfree and Bouygues Construction.

Sources close to the Government said officials are examining whether NHS contracts in private hospitals meet three criteria: are they legal, practical and good value for money?

A well-placed source said: "There is a question as to whether they meet all – or even some – of the criteria."