The medium secure unit, to be built on the Littlemore Hospital site, Oxfordshire, will have 40 new mental health beds and a new accommodation block for staff.

Junior health minister Paul Boateng announced on Friday that the government had approved the private finance deal, hammered out over two years between Oxfordshire Mental Healthcare Trust and a consortium of building, property management and banking firms.

Private investment

He said the unit was "part of the biggest hospital building programme in the history of the NHS". The government has announced a £2.5 billion PFI programme to build 30 new hospitals over the next few years. The Oxfordshire unit should be open by autumn 1999.

Mental health strategy

Approval comes just before the government launches its much-awaited mental health strategy.

Old style image of mental asylums

This is expected to go back on previous mental health policies, aimed at cutting the number of big institutions and releasing patients into the community.

The government is concerned about reports of community care patients being released into the community when they are not ready or able to cope.