Private cash to build six new hospitals

NHS: Tony Blair defends pounds 3bn private finance injection as doctors' leaders claim the initiative will hit patient care

THE BIGGEST hospital building programme in the history of the National Health Service received the personal backing of the Prime Minister yesterday as he launched a further six projects worth pounds 650m.

Tony Blair answered his critics at the British Medical Association by declaring that doctors and patients did not share its ideological opposition to the private finance initiative under which funds for the project have been raised.

Visiting a new hospital under construction in Greenwich, south-east London, he said: "Yes it builds hospitals and modern facilities for the NHS, that is what (doctors) want. So do patients. So do this government and that's what we are delivering."

The six hospitals in Derby, Leeds, Portsmouth, Oxford, Havering in east London and Blackburn bring to 31 the number of major PFI developments, worth pounds 3bn in total, which have been approved in the NHS since the election.

The private finance initiative was introduced by the Tory government and inherited by Labour as a means of raising capital for new developments. Instead of borrowing from the Treasury, NHS Trusts are required to raise the necessary funds from commercial institutions.

However, the high cost of borrowing from the commercial sector mean regular payments by NHS Trusts for existing PFI schemes range from 11.2 per cent to 18.5 per cent of construction costs - more than four times the 3 to 3.5 per cent charge made by the Treasury, according to a review in the British Medical Journal published tomorrow.

To meet the extra costs NHS Trusts have had to reduce the size of schemes. In Hereford a hospital planned with 351 beds had to be reduced to 250 beds and it is expected staff will be cut. The proportion of private beds in the planned institutions is also being increased.

The review, by health economists at University College London, says the pounds 2.7bn cost of the Scottish private finance programme was "pounds 2bn more than if the Treasury had acquired the assets directly". They conclude: "The Government's claim that the PFI represents better value than public procurement is not supported, and clinicians should not allow spurious economic arguments to deflect them from criticising the clinical impact."

Doctors at the British Medical Association conference in Belfast voted overwhelmingly on Monday for a campaign to raise public awareness of the consequences of PFI schemes. Yesterday Dr Ian Bogle, BMA chairman, said: "We think this is not the best way to spend health service money and if you spend more money in this way you are going to have less money for patient care."

In an editorial in the BMJ last week, Dr Richard Smith, the editor, warned that the NHS was in danger of becoming a rump service for the poor as hospitals struggled to meet the PFI payments to private companies. More patients could be forced to go private or pay charges to meet the payments, he warned.

"This is almost certainly not the intention of the Government but it may lead inevitably to that end."

However, government officials say the cost of Treasury and PFI schemes are not comparable. The Treasury imposes only a capital charge on the building while the PFI charge includes heating, maintenance and other running costs of the building over a life of 30 years or more. A government spokesman said: "The BMJ has got its sums wrong."