Page last updated at 07:10 GMT, Sunday, 25 January 2009

Credit warning for new hospitals

Building site
Most new hospitals are being funded through PFI

The NHS hospital building programme in England could be badly disrupted by the recession, a health service memo seen by the BBC suggests.

A document leaked to the Conservatives raises concerns over projects funded through private finance initiatives.

In a meeting with Health Secretary Alan Johnson, senior NHS managers were told there is no "plan B" for when the banks cannot provide capital, the memo says.

But a government source said work was going ahead as planned.

The document summarises discussions on the impact of the credit crunch on the NHS in a meeting between Mr Johnson and Strategic Health Authority bosses which took place earlier this month.

There are liquidity and lending problems, which are particularly affecting people at the earlier stage
Nigel Edwards, NHS Confederation

It suggests the hospital building programme - funded by billions of pounds raised under PFI - is particularly vulnerable.

According to the memo, PFI schemes were always plan A, and that now none of the banks have any money the absence of a plan B is going to cause a real problem.

It also predicts that NHS funds will be hit hard by the credit crunch and that 2010/11 "is going to get really tight".

Private sector

The government has had a 10-year programme to build new hospitals, the vast majority of which have been funded through PFI.

Under the agreements, the private sector designs, builds and finances, while the NHS repays the costs plus interest over the following decades.

It has been suggested that the NHS could end up paying back more than 50bn over the next 30 years for hospitals worth a fifth of that amount.

The Tories say a lot of hospital schemes are now at risk.

Shadow health secretary Andrew Lansley said the credit crunch means that many new hospitals - meant to be built through PFI - will not be able to raise the necessary cash from the private sector.

"Even worse, Gordon Brown's cuts to funds for new NHS buildings means that there is no extra money if local health boards are unable to raise funds through PFI."

Chris Ham, professor of health policy and management at the University of Birmingham, agreed there will be difficulties ahead, particularly for hospitals which have not yet signed contracts.

"There'll be lots of uncertainty about whether they'll be able to raise the money to allow those schemes to go ahead," he said.

But the Department of Health said it was absolutely not the case that the recession is putting the brakes on the PFI programme.

A source said there are 25 big schemes under construction and they were going to be important in terms of keeping the economy going.

"There's no question of a go slow in the hospital building programme."

Nigel Edwards, director of policy at the NHS Confederation, agreed that the recession had brought problems to PFI schemes.

"There are liquidity and lending problems, which are particularly affecting people at the earlier stage," he said.

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