MPs' anger at pounds 37m lost on private hospital

One of the most embarrassing Whitehall debacles in recent years, the financing and subsequent receivership of a private hospital near Glasgow, has attracted fierce criticism from an influential group of MPs.

In 1994, Healthcare International built the hospital at a cost of pounds 181m. Intended for private patients mainly from southern Europe and the Middle East, the hospital nevertheless received pounds 37m of British taxpayers' money.

The project was a disaster. Hardly any wealthy overseas patients made the trip to Glasgow and within months, in November 1994, after treating just 761 people - many of whom were referred from the National Health Service - it went into receivership. In February this year, the hospital was sold to a company from Abu Dhabi.

MPs on the Commons Public Accounts Committee said in a report published yesterday that they were "disturbed that so much public money was spent" on the project.

Not enough assessment was made on its likely viability. "It is clear the expectation there would be a throughput of 5,000 patients a year from the private sector was wildly optimistic."

What official studies were made did not address market demand - something the committee found baffling.

Scottish Office excuses that the hospital has not lost public money because Strathclyde has been left with a well-equipped modern centre providing health jobs, did not wash with MPs. They pointed out the hospital was in an area where the NHS would not necessarily have wanted a new hospital built.

Neither did the department's claim that any project of this kind, which entailed a grant of regional aid, was bound to involve risk, cut much ice. In this case, MPs said, the risks were serious: "Healthcare International as a company had no experience of running a hospital . . . We consider the department's evaluation of the risks was insufficiently thorough."

Government funding went ahead despite receiving positive votes from just 3 out of the 12 members of the Scottish Industry Development Advisory Board.

The catalogue of woe, highlighted by the MPs, does not stop there:

t pounds 10.4m regional aid was given to the company to help it meet its VAT bills on its building costs, but so far Healthcare International has avoided paying a penny of it;

t pounds 9.4m went on providing a site on land known to be heavily contaminated. The committee said it was "disturbed that it is not yet entirely clear of gas seepage". Scottish Enterprise is pursuing a claim against the contractor responsible for clearing the site.

t Healthcare International, for all its financial problems, held board meetings only every three or four months. The board member appointed by Scottish Enterprise to look after the taxpayers' interests did not attend all these meetings and failed to alert the department about the worsening financial position even though he had known about it for some time.

t And problems with marketing in southern Europe, a crucial aspect of the hospital's success, were not made known to officials. "All concerned," said the committee, which has a Tory majority, "should have taken a tighter grip."

While the Scottish Office has accepted the need to deal better with such projects in future, the committee stressed the department should have ensured its director on the hospital board did his job effectively.

George Kynoch, Scottish Office minister, pointed to the Government's success in attracting inward investment to Scotland. "With success you have to have risk," he said. Strathclyde, Mr Kynoch said, now had a modern hospital which had just signed a contract to treat patients from Algeria.