OFFICIALS have firmly rejected claims that a £300m hospital modernisation scheme in the North-East could be shelved.

The private finance initiative (PFI) project in question is the ambitious plan to overhaul hospitals on Tyneside.

As part of the proposal, the flagship Royal Victoria Infirmary would be completely redeveloped along with the Freeman Hospital, which is famous for its transplant unit.

Yesterday, a national newspaper claimed that the Newcastle PFI scheme was in danger of being scaled down or cancelled, along with similar projects in Liverpool and Bristol.

The report followed the publication of an open letter by 1,000 doctors, including 450 consultants, protesting at reports that the Government could be about to pull out of a £1.1bn redevelopment scheme for St Bartholomew's and the Royal London hospitals in the capital.

The Government is said to be concerned at the spiralling costs of many PFI schemes, which involve the private sector building NHS hospitals and then leasing them back to the Health Service for an annual fee.

A spokeswoman for the Newcastle Hospitals NHS Trust, which runs the RVI, Freeman and Newcastle General Hospitals, insisted the PFI project, which was clinched last May, is going ahead as planned.

Liz Twist, regional head of health for Unison in the North-East, said: "We have been going on about the cost of PFI for ages.

"It is about time somebody listened to us. This is going to be overloading our health budget for years to come."

She said it was important the Newcastle scheme should continue, but suggested it should be funded by the Treasury rather than through the expensive PFI option.

Yesterday, Health Secretary Patricia Hewitt confirmed that she has commissioned an urgent review to ensure that the NHS gets value for money from the scheme.