Unison report claims that £96m Durham hospital is poor value for money.
The government has rejected the findings of a report compiled by public sector union Unison that the private finance initiative deal for a hospital in Durham does not offer good value for money.

Responding to a confidential report for the union by University College London, the Department of Health said: “The main findings of the report are not substantiated.”

The Department of Health said the report’s economic appraisal was not credible and that there were no reductions in the level and quality of service, as claimed.

The report on the £96m North Durham Acute Hospitals’ PFI scheme, being built by Balfour Beatty-led consortium Consort, is the latest tactic by unions to stop the PFI.

In the past year, Unison has successfully lobbied government to change three key PFI issues:

  • At the end of 1998, Unison won the power to vet PFI contractors and make recommendations to trusts.

  • In May, the government changed its view on “residual value” (who owns the hospital at the end of the PFI period), saying that it was up to the NHS trust.

  • Last week, the government moved the goalposts on automatic transfers of ancillary workers. Central Manchester NHS Trust is now asking bidders for two options: one where ancillary staff transfer to the PFI consortium, and one where ancillary staff stay on the public payroll.

The hospital report, first circulated to health officials earlier this year, said that North Durham NHS Trust will make an annual payment of £12m for 30 years to the PFI consortium but that £7m of this will pay off interest on the debt and go to shareholders. It says PFI investors will receive a rate of return of 18.5%.

The report said that the trust looked at building a hospital in 1994 for £60m, based on standard NHS costings. The Unison report said the construction costs, fees and insurance for building the PFI hospital come to £86.6m.

The report also said that the hospital will have too few beds. It claims the 454 proposed will not satisfy local demand because assumptions about patient throughput and consultants’ daily caseloads are unrealistic.

“These are deeply embarrassing figures for the trust, the Department of Health and the Treasury,” it concluded. “The scheme did not represent a good deal and should not have been proceeded with.”

The Department of Health agreed that there are fewer beds than are currently available, but claimed that there are enough to meet future requirements. It denied that the quality of service will fall.

The Department of Health rejected the report’s economic arguments, saying the department’s method for assessing value was “an approach that is universally accepted as being the right way of determining the best value-for-money route when making decisions. The report uses emotive language and was written with one purpose in mind.”

In May, the National Audit Office published a report saying that the £177m Dartford & Gravesend hospital being built by Carillion might cost more than if it had used traditional financing methods.