First private hospitals for NHS

Clarke to make landmark announcement in his Budget speech

NICHOLAS TIMMINS

and DONALD MACINTYRE

The first scheme in which the private sector will design, finance, build and operate a hospital directly for the National Health Service is due to be announced by Kenneth Clarke, the Chancellor of the Exchequer, in tomorrow's Budget. The proposal would mean that Granada, more commonly associated with television and motorway service stations, would run a 150-bed section of a hospital.

Mr Clarke is expected to give the go-ahead to the pounds 35m project to rebuild large parts of Wycombe and Amersham General Hospitals, which are part of the South Buckinghamshire NHS Trust.

The privately-financed project has been put together by the Health Care Group, a consortium of the builders Taylor Woodrow, Granada, which will run the building, and the finance house, Nexus.

The scheme will be announced to off-set capital cuts in the Budget which are expected to hit not only NHS hospitals but the roads programme, housing, schools and other parts of Government spending.

The South Bucks development will be followed shortly with approval for a pounds 26m 166-bed new paediatric wing at St James's University Hospital, in Leeds, and a flagship pounds 100m project to rebuild the whole of the Norfolk and Norwich NHS Trust. That will provide a 700-bed privately financed and run facility leased to the NHS on a green field site in the city.

The private consortium will finance and run the buildings, but, as with the other projects, medical care will continue to be provided by directly employed NHS staff.

Thereafter, Stephen Dorrell, the Secretary of State for Health, expects about one scheme a month to go through over the next year.

Other projects nearing fruition include a pounds 26m redevelopment at Bishop Auckland, a pounds 50m rebuild at Swindon and Marlborough, a pounds 45m project in Carlisle and a pounds 50m new district general hospital in North Durham. Further down the line are massive private sector projects intended for London, including the redevelopment of the Royal London, following the closure of Barts.

Mr Dorrell said last week that in the "overwhelming majority" of cases, NHS Trusts will continue to be the direct employer of clinical staff - a claim which is aimed at heading off Labour's charges that the schemes will lead to the privatisation of the NHS.

The projects are at the core of a big boost to the Government's Private Finance Initiative across departments, which Mr Clarke will unveil in a budget speech that Tory MPs firmly hope will provide the basis for a political recovery between now and the general election.

In a tough spending round, which has seen cuts of around 5 per cent in the costs of all spending departments, ministers have been told that many pet capital projects will have to be privately financed if they are to go ahead.

In his Guildhall speech last week, Mr Major foreshadowed four privately financed trunk road projects, and made it clear there were more in the pipeline.

Ian Lang, President of the Board of Trade, said yesterday on BBC television that ministers were planning to "raise the profile of the private finance initiative", and added: "We've already got about pounds 2bn worth of contracts left under the PFI and we expect to have about pounds 5bn by the end of this financial year."

Although there have been consistent attempts in Whitehall to dampen the hopes of some backbenchers of tax cuts of significantly more than pounds 3bn, there was a widespread view in senior Tory circles that the Chancellor would want to reduce the standard rate by at least 1p, or widen the 20p starting band, as a gesture towards ministers' professed target of a 20p-in-the-pound standard rate. MPs also hope Mr Clarke's relative prudence will be rewarded by a favourable market reaction, allowing him to reduce interest rates before Christmas.

Mr Lang, echoing private comments made by other senior ministers, said he had "no idea" whether the Chancellor would attempt to shoot Labour's fox by introducing a multi-billion-pound windfall tax on the privatised utilities.

While Sir Marcus Fox, chairman of the influential 1922 committee, has suggested that such a tax might be a good idea, other Tory right-wingers are opposed to the idea.

Some other senior Tories are also still hoping that Mr Clarke will confound expectations, and probably his own instincts, by giving tax help to homeowners, whether by increasing mortgage interest relief for first-time buyers, or by cancelling stamp duty.

However, if he chooses to resist such pressure he will have been given strong support yesterday by a Social Market Foundation pamphlet that says lower prices and a stable housing market are part and parcel of a low-inflation economy.

The pamphlet's authors, Andrew Cooper and Roderick Nye, argue that the number of people said to be suffering negative equity has been greatly exaggerated.