New accounting rules threaten more than £1bn of PFI hospital deals

More than £1bn of PFI hospital schemes face the axe under new accounting rules, which take effect in April.

Major health schemes including the £200m Papworth PFI Hospital, the £80m Southampton Oncology unit, the £400m Royal Liverpool Hospital scheme and the £370m Alder Hey Hospital project in Liverpool, could be ditched.

The new rules will see up to £16bn of debt added to NHS balance sheets as PFI liabilities are made transparent. The move could make many PFI schemes unaffordable.

The rules were due to be introduced last April but the Department of Health (DH) asked for a 12-month extension to find ways to put its PFI schemes on balance sheet without making them unaffordable.

Andrew Dumbleton, corporate finance partner at BDO Stoy Hayward, said: "There are a number of new schemes on hold while the DH assesses whether these schemes are affordable as PFIs under the new rules."

Contractors confirmed the health PFI moratorium. One commented: "Papworth and Southampton are ready to go, but the Trusts have told us until the DH has sorted out how it can get its PFI hospitals on balance sheet, nothing is going out." The Royal Liverpool and Alder Hey schemes, due to be let later this year, are also expected to be delayed.

Ken Brewer, project director at Papworth Hospital NHS Foundation Trust, said: "We still don't have a date for the OJEU. The DH is working out how to apply the new accounting rules to PFI schemes already under construction and then to those schemes in procurement, so we are in a queue."

An accounting expert commented: "Under the current financial climate, the Treasury has bigger things on its mind and is unlikely to bail the DH out with extra funding for this."

Referring to the Papworth and Southampton schemes, a DH spokesman said the DH "is still finalising with Treasury the resource cover required for an on-balance sheet treatment of both these schemes under the new accounting rules".