New Tunbridge Wells Hospital Project Hit by Labour's Funding Scheme

8.43.00pm UTC (GMT +0000) Mon 3rd Mar 2008

Maidstone and Tunbridge Wells NHS Trust in Kent has been forced to abandon its plans to issue insured bonds to fund the project

The eagerly awaited new Tunbridge Wells Hospital has met with a new obstacle.

Today, the Financial Times reported "A private finance initiative (PFI) project to build a new hospital for Maidstone and Tunbridge Wells NHS Trust in Kent has been forced to abandon its plans to issue insured bonds to fund the project."

Bond insurers have recently been hurt by the credit crunch in the United States and investor appetite for insured or "wrapped" bonds has declined. Consequently, this funding avenue has become less viable to the NHS Trust.

This type of funding scheme has been favoured by the Labour government over recent years but is clearly not as efficient as originally thought and now other PFI projects seem in doubt.

The Financial Times continues "Under pressure to close the deal before delays caused mounting costs" the consortium and Maidstone and Tunbridge Wells NHS Trust has decided to fund the project through bank loans.

However, this route may well result in potentially higher funding costs as banks have recently been unwilling to lend as cheaply as before at a time of tightening credit conditions.