The NHS has been the big loser with the shock closure of a historic private hospital, according to an MP.

Chichester MP Andrew Tyrie told a House of Commons debate the loss of King Edward VII Hospital had put NHS organisations elsewhere under a lot more pressure.

The Midhurst-based hospital closed last month and almost 300 staff were made redundant after a rescue deal fell through.

Developers Lincoln Holdings and healthcare company Capio could not agree on plans to redevelop the site.

The hospital went into provisional liquidation at the end of 2001 after debts spiralled to more than £8 million.

The hospital, which has been open for more than 100 years, treated 20,000 patients a year from Sussex, Hampshire and Surrey. About 60 to 65 per cent of those were from the NHS.

Mr Tyrie said: "It was genuinely independent and provided very high standards of care at a reasonable cost. The first big loser of the closure has been the NHS itself.

"The other big losers are my constituents and the thousands of people from miles around who have used, or might have used, the hospital's excellent services."

Mr Tyrie said the closure came at a time of unprecedented stress in the regional health care economy.

He said: "The NHS is closing capacity at a significant rate while demand is rising sharply.

"Budgets are being cut to deal with the burgeoning deficits both at my local hospital of St Richard's in Chichester and throughout the Surrey and Sussex Strategic Health Authority (SHA), which has a deficit of £140 million."

East Worthing and Shoreham MP Tim Loughton said a jewel in the crown of the local health economy had been lost.

He said: "The only implication of its closure must be longer waiting times and longer distances to travel to less popular hospitals."

Arundel and South Downs MP Nick Herbert said: "Public confidence in the NHS locally has been seriously undermined by what is happening."

Health minister Caroline Flint agreed there was a very good question to ask about why the NHS in some parts of the country were experiencing deficits and others were not.

She said the SHA was responsible for delivering overall financial balance for local health communities and work was continuing in the area.

She said St Richard's Hospital had agreed to take on extra work to cope with demand and would get funding to pay for it.