Healthcare International: Clydebank Hospital (Hansard, 22 November 1994)

§ The Minister of State, Scottish Office (Lord Fraser of Carmyllie)
My Lords, Healthcare 146 International achieved a slower than anticipated build-up of business from its target markets overseas and that impacted on its cash flows. The company's backers called for a restructuring of its finances to see the company through the difficult start-up period and discussions on that had not been concluded when, on 9th November, the company ran out of cash and a receiver was appointed. I naturally hope that the receiver will be successful in finding for the facility a purchaser who will be able to secure the future of the project.

§ Lord Dean of Beswick
My Lords, I am grateful to the Minister for that detailed Answer. We are talking about £30 million, which is a large sum of money. What were the criteria upon which the Secretary of State for Scotland advanced £30 million to something that must have had a dubious future, as against putting the same £30 million into the NHS in Scotland where it could have been well used?

§ Lord Fraser of Carmyllie
My Lords, perhaps I may make it clear that the financial support offered to HCI came from inward investment and not the health budget for Scotland. While the original financial support package amounted to some £30 million, its main component part was regional selective assistance, the offer of which was made originally in April 1988 when the Scottish Office acted upon the independent advice of the Scottish Industrial Development Advisory Board. Subsequently, a further sum was advanced with the approval of the Treasury and of the Department of Health and Social Security when there was a European Court of Justice ruling on VAT which resulted in an unbudgeted increase in cost.

§ Lord Wigoder
My Lords, was not the private sector unanimous in its opinion at the time that the project to use foreign capital to build a hospital of up to 500 beds to cater primarily for foreigners who might wish to fly into Glasgow airport and have medical treatment was non-viable right from the very beginning? That proved to be correct—did it not?—because the average occupancy has turned out, I believe, to be about 20 since the hospital was built. Before any public money was invested in that project, were any steps taken to find out what informed opinion was saying about it, and, if not, why not?

§ Lord Fraser of Carmyllie
My Lords, as I said, independent advice was offered to the Secretary of State. That is a technique that would be applied to any type of inward investment project attracting regional selective assistance. While it is unfortunate that the hospital has not proved, at the present time at any rate, to be viable, it is worth recording that when it was first established the concern in Scotland was not that it would not be viable but that its viability was such that it would attract too many nurses and clinicians from the NHS, and that the resources of the Scottish Blood Transfusion Service would be stretched unhappily. It was against that background that a series of stringent conditions was attached by the department.

§ The Countess of Mar
My Lords, is it not the case that Healthcare International applied to the Government of the Republic of Ireland before it applied to Scotland, 147 and that the Republic of Ireland had obviously sensibly done its costings and said no? Will he explain why the Scottish Office decided that the Republic of Ireland was being foolish?

§ Lord Fraser of Carmyllie
My Lords, I do not believe that the Irish Government were being foolish, because in 1983 they said that they were very much in favour of the concept and offered HCI significantly more substantial equity investment if it were to go to Ireland. However, despite that express support for the project in Ireland, the company decided to come to Clydebank in Scotland because it considered that greater advantages were to be secured there, not least the quality of the staff that might be obtained there and its proximity to Glasgow Airport.

§ Baroness Masham of Ilton
My Lords, does not the hospital's failure to attract patients illustrate the fact that it takes years to build up an international reputation of excellence enjoyed by famous hospitals such as Stoke Mandeville, the Hospital for Nervous Diseases, with its institute, in Queen Square, Great Ormond Street and St. Bartholomew's? Is that not a reason why we should keep our specialising units?

§ Lord Fraser of Carmyllie
My Lords, the hospital was established to attract patients from overseas. The circumstances in which any patient coming from the NHS might have finished up there were limited. It is unfortunate that thus far HCI has not managed to secure a viable basis upon which to proceed, but the company's receiver is taking active steps to secure a new purchaser. The quality of the provision there is probably as good as any to be found in the UK. It is a state of the art hospital with a hotel attached to it. It is to be hoped that the receiver will be successful in his task.

§ Lord Avebury
My Lords, as the advice given by the Scottish Industrial Development Advisory Board turned out in the event to have been disastrously wrong, what steps has the Secretary of State for Scotland taken to replace its members with people who will give him better advice in future? What sensitivity analysis was applied to that investment decision to find out what changes might occur which would render it non-viable?

§ Lord Fraser of Carmyllie
My Lords, a clear difficulty for the company has been that while it anticipated that there would be a slow build up before it achieved full occupation of the hospital, the work did not build up as quickly as was expected. Although it has been put about widely in Scotland and elsewhere that some £30 million of taxpayers' money was lost, it needs to be understood that my right honourable friend the Secretary of State for Scotland has written today to the Shadow Secretary of State for Scotland spelling out exactly what was offered originally and what was the import of the VAT changes, and reaching the conclusion that at the end of the day any loss to the public purse—it may not even be that —would be something less than 148 £15 million. That was to secure no fewer than 600 jobs in Clydebank over a period of some three to four years during the construction phase.

§ Lord Carmichael of Kelvingrove
My Lords, the Minister said that HCI's target was not met. Originally we were promised 7,000 operations per year. That figure was reduced suddenly to 1,000 operations per year. The discrepancy was serious. We were given no reason for it. We were told also by HCI that the World Health Organisation was supporting its endeavours in Clydebank. The WHO, speaking from Geneva, officially repudiated that suggestion, and said that it wanted such facilities built in developing countries and not in countries already well provided with hospital facilities. How many patients were promised by HCI, from what I understand to be opulent offices in Milan, Boston, London and Athens? What is the hospital's future likely to be, because it is a wonderful complex? It has a wonderful 168-bed four-star hotel within a few miles of Glasgow Airport. It would be a tragedy, and unacceptable to the Scottish public, if any more public money went into it. The only possibility is that by writing off debts the hospital may be able to be used by people from abroad.

§ Lord Fraser of Carmyllie
My Lords, the backers of the hospital carried out a number of inquiries using market researchers and they were confident that they would be able to make a success of it. While the total financial support package was some £30 million, the backers put in no less than £150 million of their own money. They calculated that the exercise would be successful. The hospital was not built up fast enough to allow that to proceed and I understand that the receiver is actively pursuing the matter in order to find a purchaser.
I emphasise that, at the time, people in the west of Scotland were worried not that the exercise would not be viable but that it would take too many people from the National Health Service. That certainly has not happened.