Government rejects fears of a 'capital desert' for PFI

The Department of Health has strongly rejected claims that the Government’s PFI hospital building programme is facing a “capital desert” next year.

The claims were revealed in a memo leaked to the Conservative party. The memo, from a senior health official Graham Eccles, referred to a meeting between NHS health chiefs and health minister Alan Johnson on 13 January.

Eccles, chairman of the South East Coast Strategic Health Authority, wrote: “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 are 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.”

Responding to the claims the Department admitted that spending for 2010/11 was facing a 15% drop from £5.6bn to £4.8bn but a spokesman said this cut was planned 18 months previously and was a result of bringing work forward to 2009/10.

He went on: “Spending is still higher than every single year upto 2007/8. All that will happen is that the more normal underlying capital expenditure will continue in 2010-11."

The spokesman also refuted claims that PFI schemes will be hardest hit by the fall off in capital spend. He said DH was committed to PFI/PPP. “We don’t recognize a Plan A or Plan B,” he said, adding, that, apart from the North Bristol PFI scheme, PFI health schemes were  not affected by the credit crisis as they were at least 18 months away from financial close.