Approval of a new £370 million NHS hospital for west Birmingham and the Black Country has been thrown into more chaos by the Government over the way it is to be financed.
Sandwell and West Birmingham NHS Trust bosses were expecting the final go-ahead on an outline business case for the new Midland Metropolitan Hospital, in Smethwick, before Christmas after a year of delays by Whitehall.
Trust chiefs have now revealed that the Department of Health has told them there will be even more delays that could push approval back to nearly Easter due to a Treasury review of all Private Finance Initiative (PFI) schemes.
A Trust spokeswoman said: “The Outline Business Case also needs to be approved by the Treasury which has just announced a review of PFI, given that the existing model for financing the building of new hospitals has been heavily criticised of late.
“We don’t know the exact timescale for the review, but it is likely to take a few months.
“The Trust has spent the past few months answering technical queries from the Department of Health who have said they are happy with the bulk of the issues and remain supportive of the scheme overall, but they want more detail on our five-year savings plans.
“As a result, we think it will be unlikely the business case will be approved in the next couple of months, although we remain confident in our plans and optimistic that the PFI review may be helpful to us.
“At the moment PFI is the only option to finance a new hospital and we believe our plans are affordable, but if the treasury review comes up with a more cost effective option, that can only be good news for us and our patients.”
PFI schemes for schools and hospitals have attracted criticism as despite providing a way of funding major capital investments, without immediate recourse to the public purse, and, like a mortgage, the total cost paid back is much higher than the initial cost of the building work.
Private consortia are involved in building the projects using contracts that typically last for 30 years, during which time the building is leased by a public authority.
The new hospital, in Smethwick, and a network of community clinics will replace City Hospital, in Winson Green, and Sandwell Hospital, in West Bromwich, which will both close.
Coun Deirdre Alden, chair of Birmingham’s health scrutiny committee, has raised fears that if the Treasury refuse the plans in the current climate of austerity, trust bosses may close one of the hospitals anyway.
Sandwell and West Birmingham Hospitals NHS Trust managers responded to this claim that they had not developed alternative plans as the best option is the one they have put forward. The new hospital will have 666 beds plus 129 community beds outside the main site.
The Treasury is leading a review into reforming the PFI model and looking into whether a similar system, which is cheaper, accesses a wider range of private sector financing sources and strikes a better balance of risk between the private and the public sectors can be created. Outcomes of this review could have major implications for the new hospital proposals.
The Chancellor, George Osborne, said of the PFI review: “We have consistently voiced concerns about the misuse of PFI in the past and we have already taken steps to reduce costs and improve transparency.
“The review will take this a step further with a fundamental reassessment of PFI.
‘‘We want a new delivery model which draws on private sector innovation, but at a lower cost to the taxpayer and with better value for public services,” he said.