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PFI healthcare spending stalls

Contractors fear Government hospital programme on hold n Skanska left in lurch

CONTRACTORS fear that the Government's PFI hospital building programme has been put on hold.

Their concerns come in the wake of an 11th-hour review of Skanska's £4.6 billion deal to build the country's biggest hospital.

Barts and The London NHS Trust was waiting for Department of Health approval for the deal to redevelop the two hospitals in the capital.

But the contract, worth £1.3 billion in construction, is in jeopardy after Patricia Hewitt's Department of Health suggested Barts should be dropped from the scheme just days before Skanska was due to sign on the dotted line.

One contractor said: 'The entire PFI health programme has now completely stalled.

The Government's problem is that it has been overtaken by its own policy.

'It embarked on the Private Finance Initiative with good intentions but the introduction of different funding regimes and community-focused health means large, expensive hospitals are now out of favour.

'There are many hospital trusts that are struggling to make their business cases work with a PFI contract but it won't be a case of a clear watershed where everything can start up again. Some will eventually become viable and others won't. Only a very few are in a position where they could sign a PFI contract.' The cost of Barts is believed to be the sticking point, with costs per square metre estimated at around £4,000, compared to the usual £2,000.

The Government's request for a review follows the demise of other mega-deals last year, including projects at Paddington, Derriford and Whipps Cross.

A Department of Health spokesman said: 'This does not mean there is a freeze on hospital PFI projects. We have asked the trust to reconsider its plans to ensure that the Barts and Royal London scheme is both affordable and meets local needs.

'The trust has been asked to consider further the inclusion of the Barts element within the scheme as part of this process.' A spokesman for Barts and The London NHS Trust claimed that the two hospital developments were inseparable and said: 'Preliminary building work is already under way.

'This Government has consistently said that Barts Hospital must remain open.

'The existing facilities, some of which date back to the 19th century, need to be replaced. This project is affordable. It will also deliver value for money.' A highly placed industry source said: 'Contractors have seen this change in tide coming and there's no point in kicking against it.

'The Government does not want large hospitals any more; it would rather have several smaller ones.

'It's a matter of rolling with it.' A Department of Health spokesman said: 'Where new hospital PFI schemes are affordable to the NHS, meet patient needs and provide value for money, they will be built as we continue to rectify under-investment in NHS facilities.' Skanska was unavailable for comment.