Private finance to build NHS hospitals

BMJ 1996; 312 doi: (Published 13 April 1996) Cite this as: BMJ 1996;312:929
  1. John Warden

    Britain's first major NHS hospital to be built from scratch as a private finance venture—a pounds sterling170m ($255m) project at Norwich—was sanctioned last week by health secretary Stephen Dorrell. A pounds sterling90m ($135m) rebuilding scheme at Swindon was announced at the same time. They were among projects worth pounds sterling4.8bn ($7.2bn) in a Treasury package relaunching the government's private finance initiative, under which the private sector contracts to design, build, and manage public projects.

    The new, 701 bed hospital at Norwich, to be built on a 63 acre greenfield site close to the University of East Anglia, will be built by the consortium Octagon Healthcare. This comprises John Laing Construction and General Healthcare Group, with the merchant bank BZW as adviser. Work will start this summer, and completion is expected by the year 2000.

    During the 60 year contract the private consortium will provide support services such as cleaning and catering and building maintenance. The Norfolk and Norwich Health Care NHS Trust will remain the employer of all clinical staff and will control key operational policies for the delivery of patient care. The new development will replace two existing hospitals, the Norfolk and Norwich in the city centre and the West Norwich 5 km away.

    Mr Dorrell said that the new hospital was an excellent demonstration of the system at work. The risks were transferred from the public to the private sector, where they were likely to be better managed, he said. In the past the NHS has been criticised by Commons watchdogs on spending for huge overruns in costs and long delays on new hospitals.

    The second NHS project, to rebuild Swindon's Princess Margaret Hospital for pounds sterling90m ($135m), will take only four years instead of nine and will deliver facilities without having to joint the queue for public sector capital schemes. It will provide 520 beds. The building consortium is the Hospital Company, led by Tarmac (for construction), with United Medical Enterprises (for management) and Tarmac Servicemaster (for non-core services). The consortium will own the building and lease it back to the Swindon and Marlborough NHS Trust on an initial 25 year contract. The trust will employ all clinical staff and retain responsibility for patient care.

    The government's National Health Service (Residual Liabilities) Bill, now going through parliament, will help to underpin the private finance initiative by safeguarding creditors when NHS trusts are dissolved. It will transfer debt to the government. A loophole in the present law gives the government discretion not to honour such debts. This was suspected of being a deterrent to multimillion pound contracts under the private finance initiative.

    The BMA has produced a discussion document on the initiative and will debate it at its annual meeting in June. A spokesman said: “The BMA is concerned about back door privatisation of the NHS and would be firmly opposed to any attempts to privatise clinical services. But we nevertheless recognise that many of our members in those areas affected by the private finance initiative are in favour of new hospitals being built, so we cannot oppose the privatisation of bricks and mortar.”—JOHN WARDEN, parliamentary correspondent, BMJ

    View Abstract

    Log in

    Log in through your institution


    * For online subscription