A NEW generation of hospitals will overshoot its original budget by at least £3.5 billion because of unrealistic planning and expensive delays, The Times has learnt.

Most hospital projects are running at more than double their projected cost. The spiralling overspending is being blamed on a lack of financial scrutiny by the Government and local health trusts.

The average bill for the 18 largest schemes under development has risen by 117 per cent. All of them started with budgets of at least £75 million.

The Department of Health said initially that all budgets predicted to overrun by more than 10 per cent would be appraised immediately. But action was taken only recently.

The National Audit Office (NAO) will publish a damning critique today of a £1 billion project to build a health “campus” in Paddington, West London.

After six years of planning, arguing and miscalculation, the project was cancelled last May, at a cost of £15 million, leaving the area with the same three rundown hospitals with which it started.

The report says that the failure was a lesson for everyone involved in the NHS’s capital investment programme and illustrated the need for far more rigorous Government monitoring.

Britain is building more large hospitals than all the other G7 nations put together. Economists are concerned that many will come into use just as annual NHS spending increases slow in 2008.

The £300 million Paddington scheme, which involved the redevelopment of St Mary’s, Harefield and the Royal Brompton, fell apart after its budget tripled and a proposed completion date slipped by seven years to 2013.

The partners in the project could not acquire enough land, could not agree whether the scheme was affordable and planning eventually forecast a reduced demand for beds in the area.

Projects of a similar size are under way at the Royal London Hospital, Barts and in Birmingham and Leicester.

Another 14, all worth more than £75 million, are running at more than double their initial budgets.

About £5 billion worth of Private Finance Initiative (PFI) hospitals have been built or are under construction. The cost, which is “off-budget”, is paid back by trusts over several decades. Another £6 billion of projects are out to tender and have had their strategic outline cases approved.

In January, after a government “reappraisal” of PFI costs, Patricia Hewitt, the Health Secretary, said that the future plans would be cut back by between 25 and 40 per cent. It is not yet known how such savings will be made.

In the NAO report on the Paddington fiasco, the Auditor General, Sir John Bourn, highlighted fatal flaws missed by officials at local and national levels.

He said: “A hospital development of this scale and ambition was always going to be a challenge, but the original business case was inadequate, the lack of a single sponsor was a fatal flaw and the final scheme was not deliverable.

“The Department of Health should draw on my report’s conclusions and recommendations when deciding how best to initiate and manage its capital investment programme in order to provide value for money to taxpayers, patients and staff.”

Edward Leigh, chairman of the Public Accounts Committee, added that “almost everything that could go wrong did go wrong”.

Nicholas Bosanquet, an economist and advocate of private finance in the NHS, said that the spiralling bill was evidence of poor planning and the need to design projects to fit budgets, rather than vice versa.

A spokesman for the Department of Health defended the Government’s role and said that the report showed that “no single factor” was to blame for the cancellation of the scheme.

He said that measures were being taken to ensure that the problems were not repeated and that all budgets remained within present projections.

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