Carillion costs contained but risks remain
A report into the efforts to rescue the two hospitals – Royal Liverpool University Hospital and Midland Metropolitan Hospital – found that the new hospitals will open much later than planned and with higher costs.
Both were being built by Carillion under private finance schemes when the constructor went into liquidation in January 2018.
The Royal Liverpool, which was being built under the private finance initiative, was originally due to open in July 2017, but is now to be completed in 2022. The Midland Metropolitan, which was being built under the PF2 initiative (in which the government took an equity stake), is also due to open in 2022 – just under four years later than planned.
After several failed attempts to rescue the projects, the contracts were terminated in September 2018. The Royal Liverpool was expected to cost £746m to build and run, including maintenance and facilities management costs, as well as construction costs. It is now predicted to cost more than £1bn. It is expected the taxpayer will pay £739m of this £1bn – £7m or 1% less than originally planned.
The Midland Met is now expected to cost £988m to build and run – around £300m more than planned. The taxpayer is currently expected to pay £709m of this – an increase of 3% (£23m) on the original plans. However, the NAO believed there was significant risk of further delays and additional costs.
The NAO estimated the private sector’s total losses on the projects stands at more than £600m. However, it added that the government paid £42m in compensation to private lenders on the Royal Liverpool scheme soon after the contract was terminated. Although the compensation was based largely on the estimated cost of completing the hospital, the government would have paid nothing once a fuller picture of the actual cost emerged.
The Unite union assistant general secretary Gail Cartmail called the report ‘grim reading’.
‘Two desperately needed hospitals are going to be years late and in the meantime local communities are left with facilities that are no longer fit for purpose,’ she said. ‘While the report notes the financial cost of the projects, the human cost of the delays of completing the hospitals has not been recognised.’New audit code
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