Private sector presses for hospital cash deal

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The Independent Online

Public Policy Editor

None of the Government's flagship private finance deals for new NHS hospitals has been formally signed, it has emerged. The private sector is demanding statutory guarantees that the multi-million-pound contracts, which run for decades, will be honoured.

Stephen Dorrell, the Secretary of State for Health, is attempting to rush through legislation to provide the commitment required because other big schemes - including a pounds 140m 700-bed greenfield-site hospital in Norwich and a pounds 90m development at Swindon - are piling up on the stocks.

Without a change in the law, the new privately run and financed hospitals could face delay or even be cancelled.

Mr Dorrell has admitted that he is attempting to fill "a hole" in NHS legislation. But Labour has accused him of committing "a gaffe" by unintentionally providing a blanket guarantee that the taxpayer will underwrite any borrowing by an NHS Trust when he lacks statutory powers to control that borrowing.

Under existing legislation, it is a matter of pure discretion whether the Secretary of State takes on the liabilities of a trust or any other NHS body when it is dissolved.

Bankers and others involved in the private finance deals are demanding that the Government should have a duty to do that if they are to sign up to deals on the lines of the pounds 50m 150-bed redevelopment of St James's in Leeds and the pounds 35m redevelopment at Amersham and Wycombe Hospitals. Both have already been announced.

In anticipation of such private finance arrangements becoming common, the Government has cut NHS capital spending sharply for this and future years. But without the guarantee, Labour claimed, Mr Dorrell cannot deliver and "the promises of new hospitals that he has made to local people are set to be broken".

The need is sufficiently acute for Mr Dorrell to have sought Labour assistance in putting through a four-clause NHS Residual Liabilities Bill to that effect, faxing Harriet Harman, his Labour opposite number, the night before its publication and seeking Labour's co- operation over what the department describes as a "technical" change.

Labour, however, will now oppose the Bill at its second reading tomorrow, and Ms Harman claimed that Mr Dorrell had "blundered" and "failed to think this through".

"This Bill creates an impossible problem for the public sector," she said. While the NHS has management controls over how much trusts can borrow, there is no statutory control save an overall ceiling of pounds 5bn on their joint borrowing.

"It is clear from our reading of the law that trusts can borrow without the Secretary of State's specific approval and yet this Bill would make the taxpayer liable. But why should the public sector meet these liabilities if it has not agreed to them in the first place?" Ms Harman added.

Despite being a former Treasury minister, Mr Dorrell appeared to be taking "serious risks" with public finances, Ms Harman said.

And while he could add powers to the Bill to control trusts' borrowing, that would remove a key element of the independence which ministers gave as a reason for creating them in the first place.