Monitor has revealed it has “significant concerns over the affordability” of a plan to build a new hospital with a ground-breaking loan from a pension fund.

The foundation trust regulator last week said that it had expressed concern to North Tees and Hartlepool Foundation Trust over the proposals, first reported in HSJ in August (news, page 4, 9 August).

The trust said in September it would proceed with the £298m capital project following the completion of an affordability review by Monitor earlier this year.

No comment was made by Monitor following the trust’s announcement. However, in a letter sent to HSJ, the regulator’s assessment director Miranda Carter revealed that the affordability review had identified concerns about the plan.

“We believe there is considerable work to do to mitigate the risks identified by our affordability review,” she said.

The regulator stressed that the September decision to proceed was made solely by the trust board. It said Monitor would assess the scheme in more detail closer to the appointment business case stage, estimated to be August 2013.

Monitor would then provide “an indicative risk rating” if the proposal proceeded to a full business case - but it would have no power to halt the project until an assessment was made under the prudential borrowing code at a later stage.

The chief executive of North Tees and Hartlepool said the risks identified by the regulator so far were already known to the board.

Alan Foster told HSJ: “The financial risks had already been identified by the board because it is impossible to do a project of this size and scale, especially in the current climate, without recognising there are risks that need to be managed.

“However, the overwhelming feeling of the board and our clinical staff is that to do nothing is a far greater risk than to go ahead with the new hospital.”