by René Lavanchy
THE Government was this week forced to deny that its hospital building programme will grind to a halt, after a leaked memo suggested that the Private Finance Initiative – ministers’ preferred method of delivering major projects – is threatened by the recession.
Health Secretary Alan Johnson has warned the heads of the NHS’ strategic health authorities that the collapse in bank lending, normally used to raise money for PFI projects, means they face a “capital desert” from next April, the memo suggests.
It adds that PFI has always been the Government’s preferred option, and that there was “never a plan B” to build hospitals any other way.
The Department of Health insisted that its capital funding of health authorities would not be affected, but did not comment on the funding from banks.
The Financial Times recently reported that only seven PFI contracts for new hospitals were signed in 2008, compared with 20 the year before.
The memo, written earlier this month by Graham Eccles, chairman of the South East Coast Strategic Health Authority, says: “Capital expenditure for 2009-10 is likely to be slightly enhanced to what we have been used to, but is specifically for schemes that can be implemented quickly within a year. Expect a capital desert in 2010-11.
“The bad news is around capital schemes that would have been PFIs. PFIs have always been the NHS’s ‘Plan A’ for building new hospitals, especially as they used to be off-balance sheet. There was never a ‘Plan B’.
“Now none of the banks have any money or a likely to have any for a few years, the absence of a ‘Plan B’ is going to cause a real problem in taking new hospitals to conclusion.”
Mr Eccles concludes that “the situation won’t be too dire” this year, owing to the Government bringing forward public spending projects to help fight the recession, but adds: “However, in AJ’s words ‘2010-11 and forward is going to get really tight’. Expect the worse and plan for it during the coming year”.
Unison, which has long campaigned against the use of PFIs in public sector projects, complained that the memo showed the Government’s opposition to any alternative.
A spokesperson said: “There was supposed to be a plan B, which was that these projects were supposed to be publicly funded. There was supposed to be a choice. What this shows is the idea that there was supposed to be a choice was pretty spurious. A lot of hospitals didn’t want to go down that route but were forced.”
A Department of Health spokesperson responded: “There is a fall in the capital budget for 2010/11 from £5.6 billion to £4.8 billion – but these figures obviously do not represent a sudden ‘capital desert’.
“The £4.8 billion announced for 2010-11 is still higher in real terms than every single year up to 2007-8. All that will happen is that the more normal underlying capital expenditure will continue in 2010-11.”
l Unison has this week announced it will take the Government to court over the number of private patients treated in NHS foundation hospitals. The union says that Monitor, the foundation trust watchdog, is not implementing clear enough guidelines, and seeks a judicial review.
