Credit warning for new hospitals

Most new hospitals are being funded through PFI

The NHS hospital building programme could be badly disrupted by the recession, a health service memo seen by the BBC suggests.

A document leaked to the Conservatives raises concerns over projects funded through private finance initiatives.

In a meeting with Health Secretary Alan Johnson, senior NHS managers were told there is no "plan B" for when the banks cannot provide capital, the memo says.

But a government source said work was going ahead as planned.

The document summarises discussions on the impact of the credit crunch on the NHS in a meeting between Mr Johnson and Strategic Health Authority bosses which took place earlier this month.

There are liquidity and lending problems, which are particularly affecting people at the earlier stage Nigel Edwards, NHS Confederation

It suggests the hospital building programme - funded by billions of pounds raised under PFI - is particularly vulnerable.

According to the memo, PFI schemes were always plan A, and that now none of the banks have any money the absence of a plan B is going to cause a real problem.

It also predicts that NHS funds will be hit hard by the credit crunch and that 2010/11 "is going to get really tight".

Private sector

The government has had a 10-year programme to build new hospitals, the vast majority of which have been funded through PFI.

Under the agreements, the private sector designs, builds and finances, while the NHS repays the costs plus interest over the following decades.

It has been suggested that the NHS could end up paying back more than