NHS private funding rule 'caused pounds 95m underspend'

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Health Services Correspondent

Regional health authorities underspent pounds 95m in one year after the Government insisted they must seek funding from the private sector to finance new projects.

The delays caused in seeking private finance before NHS trusts are allowed to use their capital allocation from the Department of Health is to blame for the vast underspend, according to Alan Milburn, a Labour member of the Commons Public Accounts Committee.

He predicts the Government will use the underspend in order to reduce future spending allocations.

Mr Milburn, MP for Darlington, obtained the underspend figures in answers to Parliamentary Questions. They show that in 1993/94, when there were 14 regional health authorities, 12 of them underspent by pounds 95,479,000.

The smallest spenders were West Midlands, which left more than pounds 36m unused; Northern, with almost pounds 15m unspent, North East and South West Thames with pounds 11m and pounds 12m respectively and North Western with a pounds 10m stockpile.

Mr Milburn claims the Treasury-driven Private Finance Initiative, which was announced in the 1992 budget, is holding up important developments in the National Health Service.

"Forcing hospitals through time-consuming PFI red tape is causing huge capital underspending in the NHS," Mr Milburn said.

"The Government's dogmatic approach to private funding has produced a crazy situation where money cannot be spent on improving hospital buildings. In the process ministers have conveniently engineered the perfect justification for further cuts in NHS capital funding. The privatisation of the NHS is moving full steam ahead."

Mr Milburn also warns that all new projects to design, build, finance and operate hospital services will be subjected to long delays since the Department of Health issued new guidelines in February extending the PFI to running services as well as capital developments because they must pursue private finance options before using state funds.

Last week the Independent revealed that the Government is urging NHS trusts, behind the scenes, to allow private companies to run entire hospital, even employing doctors and nurses.

The agenda for a private conference in September, at which a Treasury adviser is the keynote speaker, shows the Government is determined to extend the PFI throughout the health service, including core and clinical services.

The conference at a central London hotel is billed as the first to deal exclusively with the acquisition of private finance in clinical services. The Treasury and the NHS Executive's Private Finance Unit has identified 800 projects worth pounds 1.8bn as being suitable for private finance.

The leaflet explains the PFI "involves a complete culture change, creating entirely new markets and moving on from the idea that people providing public sector services must be directly employed by the public sector".

Margaret Beckett, shadow Secretary of State for Health, said: "Labour is completely opposed to the privatisation of clinical services. The forthcoming conference is evidence of privatisation."