Parliament - Health: Row over privately built NHS hospital

BRITAIN'S FIRST privately built National Health Service hospital may not save the public purse any money, the Government's spending watchdog warned Parliament yesterday.

A National Audit Office report on the new Dartford and Gravesham Hospital is bound to inflame political protest over the Private Finance Initiative (PFI), under which ministers hope to build many hospitals and schools.

In Scotland, opposition to the scheme has become so strong that the Government has promised to seek ways of keeping the new buildings in public ownership once the 30-year contracts with the private sector are complete.

Sir John Bourn, the Comptroller and Auditor General, found that the Dartford and Gravesham NHS Trust had overestimated the benefits of a private project by pounds 12m. The estimated savings had to be reduced to pounds 5m.

"There is a greater possibility than the trust estimated that the PFI solution could prove more expensive than traditional procurement," Sir John concluded.

The West Kent Health Authority had also overestimated the benefits of the scheme. It believed the new hospital would cost no more to run than existing facilities on three sites, but in fact it needed additional support of pounds 4m a year.

There were non-financial benefits, though, with the new hospital expected to be open by September next year, considerably sooner than would have been expected of a public sector project. The trust's miscalculation did not affect the reasonableness of the NHS's decision to go ahead with the project, Sir John said.

However, the trust received only one full bid for the project, from the Pentland consortium headed by Tarmac. The group increased its final bid by pounds 26m to pounds 177m, though this was partly due to extra demands from the trust.

Fees paid to advisers were also much higher than originally estimated. The trust thought it would have to pay pounds 330,000 to two firms, Nabarro Nathanson and KPMG, but ended up paying pounds 2.1m.