Plan to rebuild London teaching hospitals finally gets go-ahead

Doctors yesterday welcomed the long-awaited approval of the scheme to rebuild two teaching hospitals in London in the biggest private finance initiative within the National Health Service.

Patricia Hewitt, the health secretary, approved the redevelopment of St Bartholomew's hospital and the Royal London after delays which patient groups and the hospital trust claimed had added £35m to the £1.1bn cost.

The decision to go ahead with the redevelopment of Barts will saddle the local healthcare trust with a 30-year financial commitment.

Across the NHS, PFI schemes, which form the backbone of new hospital projects, are being re-examined over growing fears about the ability of trusts to repay the private companies over 25 to 40 years. Ms Hewitt yesterday defended her decision to put the scheme out for review, in a delay which the trust said added £600,000 a day to costs. The project includes new cancer and cardiac facilities, and when complete in 2016 will provide up to 1,248 beds.

Ms Hewitt argued that the delays had been essential to ensure large amounts of public money were properly spent. "I made the decision that I had to be absolutely certain that we were getting the right facilities for this part of London and that we were getting the best possible value for money for patients before we committed over £1 bn in capital for the next 35 years," she said.

The health secretary said savings of £650m had been found through a cut in interest rates and the annual mortgage bill to the private partner, Skanska Innisfree, from £116m to £96m. Savings have also been found by mothballing three new floors.

Doctors and trust managers will have to make a case for the refitting of the floors if and when an extra 300,000 patients move into the catchment area.

Duncan Dymond, a consultant cardiologist at Barts, said: "We came very, very close to losing the whole PFI scheme, so thank goodness we have got there in the end." But he criticised the changes which would leave three floors empty, saying they would still cost money in heating, cleaning and maintaining. "It will mean the hospital has fewer beds to earn money."

In January some 1,000 doctors at the hospitals sent an open letter to Tony Blair urging him to give the go-ahead to the project, which they said was vital to the health of people in east London.

The shadow chancellor, George Osborne, also urged the government to approve the scheme, warning that halting it would waste £100m in fees and compensation for broken projects.

Paul White, chief executive of Barts and the London NHS Trust, said the PFI scheme ensured the future of the hospitals.