Future hospitals will need to be built using the controversial private finance initiative method even though it has been blamed for driving trusts to the brink of bankruptcy, Health Secretary Andrew Lansley has admitted.

Speaking to the Birmingham Post, he condemned Labour for using private financing schemes to build hospitals and saddle the NHS with massive debts – but he also predicted that no hospital will be built using public money ever again.

Health trusts in the West Midlands are handing over more than £240 million every year in private finance initiative (PFI) repayments, most of which have more than 20 years still to run.

The Department of Health last week placed an administrator in charge of South London Healthcare NHS Trust, which runs three hospitals, after it ran up deficits of more than £150 million due to an unsustainable PFI deal.

PFI deals were first introduced by the Conservatives in the 1990s, but their use was expanded under Labour which authorised a range of capital projects including hospitals such as the new Queen Elizabeth hospital in Birmingham and University Hospital in Coventry.

Critics warned that the PFI, in which a private developer builds and manages a premises in return for guaranteed annual payments over many years, was saddling public services with debts.

Hospitals are also locked into business relationships with firms supplying essential services such as building management, and cannot change the terms of the contract or change suppliers without paying punitive charges.

However, supporters point out that the projects would not have been affordable otherwise.

Mr Lansley complained that he had inherited debts from the previous government when he became Health Secretary.

“It gets you down a bit when you arrive, and for years you’ve been listening, as we all have, to Labour saying ‘ah, all this additional taxpayers money for the health service has built all these wonderful new hospitals’.

“We have 102 hospitals with £65 billion of PFI debt attached. So all that money we were paying wasn’t going on that. It might have been doing good things elsewhere but it wasn’t building the hospitals, that’s the reality.”

He conceded that every government would need to use the PFI or a similar scheme in the future, but insisted the Coalition government would improve the current system.

“It is perfectly clear that if you want to build a hospital, nobody is going to go back to the days when it was done as a public sector project. It is going to be done by the private sector.