Dorrell backs private cash for NHS hospitals

The go-ahead is to be given for four privately financed NHS hospitals by the Secretary of State for Health, Stephen Dorrell, in a move that is certain to cause a fresh controversy over the future of the health service.

Stonehaven in Scotland will be followed by a new pounds 100m hospital for the NHS covering Norwich and Norfolk. Private sector building firms will also put up the money for hospital units costing millions of pounds in Bishop Auckland, Swindon and Marlborough, and North Durham.

Under the plans, the NHS will run the hospitals for NHS patients, but the buildings will be owned by the private construction companies on NHS land. Nick Brown, shadow health minister, said he had evidence in leaked papers that the private contracts could be limited to nine years, raising doubts about the NHS retaining use of the buildings in the long term.

Ministerial sources were anxious to deny that it was a step towards the privatisation of the NHS. But Labour is hostile to the plans. The Treasury has relaxed its rules to allow the hospitals to be built, providing that the private sector accepts the risk for the building.

The NHS will increasingly rely on the private finance initiative for capital spending, as the Treasury imposes a moratorium on capital projects to cut public expenditure. Over the last 10 years, there were 10 contracts for NHS hospitals for over pounds 25m, but there are 25 schemes for that amount by the private sector in the pipeline.

Mr Dorrell will challenge Labour to accept privately financed projects in a series of speeches, which will seek to exploit alleged differences of view between Mr Blair and Margaret Beckett, his shadow Secretary of State for Health, over whether Labour should allow private finance in the NHS.

Whitehall sources say Mr Dorrell is also considering relaxing the guidelines on the internal market in the NHS to allow more freedom of competition between hospitals for business from GP fundholders. His strategy is likely to alarm Tory grass-roots supporters who have tabled motions for the party conference next month calling for the closure of Bart's and other hospitals to be halted. There are also calls for a slowdown to the changes. Vauxhall Tories urged the Government to recognise "there needs to be a time of adjustment for all".

The moves risk raising fears that the Government is embarking on a privatisation programme for the NHS, which ministers deny. Mr Dorrell will tell the conference in a debate on health that the private finance initiative will boost the NHS and could double the building of hospitals costing over pounds 25m for NHS patients.

He has rejected the advice to the Prime Minister by a former deputy chairman of the party, John Maples, in a leaked memorandum, that the Government should aim to keep health out of the headlines. He is determined to take a high profile, but to do more to reassure the voters that the Government is improving the health service.