MP tells Norfolk and Norwich Hospital PFI firm to give profits back for patients
- Credit: PA
A firm making millions of pounds in profit from the controversial deal under which the Norfolk and Norwich University Hospital (N&N) was built has been urged to give money back to the cash-starved hospital.
An investigation by this newspaper last week revealed Octagon, which built the N&N in 2001 under a Private Finance Initiative (PFI), was paid more than £42m by the hospital in 2015.
It has paid out almost £26m in dividends to its three shareholders since 2009.
Last year it made a record profit, while the hospital is forecast to make a record deficit in 2016/17 of £32m.
Octagon is expected to get £57m from the hospital this year and will be paid at least five times over for the £229m cost of building the hospital.
Now former health minister and North Norfolk MP Norman Lamb has written to Octagon urging them to 'consider the moral case' for returning some of the profit.
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Mr Lamb wrote: 'Standards of care at the hospital are being impacted directly by these unsustainable PFI payments, and my plea to you is not to put shareholder profits before the safety and wellbeing of patients.'
He added: 'Patients are bearing the brunt of the chronic lack of money.
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'The N&N is suffering from a shortage of staff and capacity to cope with rising demand for services, meaning that patients are facing longer waits for treatment and, in some cases, the prospect of not receiving any treatment at all.'
Last year Octagon paid out almost £7m to its three shareholders - Innisfree, 3i Infrastructure Seeds Assets Ltd and Semperian.
The N&N still owes Octagon almost £200m for building the hospital and is paying that debt down at the rate of £3m a year.
In 2003, the N&N's debt to Octagon was refinanced.
Octagon received a windfall from that refinancing and shared around one third of it with the N&N, amounting to £34m.
But the hospital had to agree to take on extra liabilities to get that money from Octagon.
And in 2006 the then chairman of the N&N, David Prior, who is now a health minister, wrote to Octagon urging them to 'ease the sense of injustice' around the deal and donate £7m to hospital charities. Octagon refused. Mr Lamb asked Octagon to share that profit again in his letter.
The letter was also sent to the Department of Health, the Treasury and the hospital's chief executive Mark Davies.
You can read the full text below:
I write in good faith to urge you to consider the moral case for a voluntary concession on the payments owed to you by the Norfolk and Norwich NHS Foundation Trust (N&N) under the terms of the PFI contract.
You will be aware that the N&N, and indeed the wider NHS, is in a dire financial state. It has been placed in special measures and recorded a deficit of £21m in 2015/16, which is expected to be even higher this year.
Patients are bearing the brunt of the chronic lack of money. The N&N is suffering from a shortage of staff and capacity to cope with rising demand for services, meaning that patients are facing longer waits for treatment and, in some cases, the prospect of not receiving any treatment at all.
In contrast, Octagon has recorded growing profits over a period of several years and I understand that dividends payments have also increased substantially, with £7m paid out to shareholders last year.
In this context, it seems morally unjustifiable that Octagon should be receivi ng excessive payments from the N&N amounting to £42.5m last year – at a time when such resources are desperately needed for investment in services to improve patient care.
After the deal was refinanced in 2003, Octagon voluntarily shared approximately a third of its refinancing gains with the N&N despite being under no contractual obligation to do so. My understanding is that this was done in accordance with a voluntary code negotiated with the
Given that Octagon was willing to forego part of its windfall profit at this early stage in the PFI contract, I urge you to accept the moral case for a new voluntary concession in the same spirit.
Standards of care at the hospital are being impacted directly by these unsustainable PFI
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It is accepted that the early PFI contracts in particular represented dreadful value for the taxpayer's money. The National Audit Office concluded that this was an expensive deal.
Payments by N&N will exceed £1bn by the end of the contract, nearly five times the amount it cost to build and open the hospital according to the Eastern Daily Press. It has also been reported that the deal is costing the hospital an extra £20m a year than a non-PFI deal, enough to pay for 800 nurses or 200 GPs.
It does seem very hard to justify how Octagon has benefited massively from this flawed deal, while the repayments have placed an enormous additional burden on the trust which it simply cannot afford when the NHS is in the middle of its tightest ever financial settlement.
I hope that the consortium will give this careful consideration, and I would be very happy to discuss the situation with you or other colleagues in person. I look forward to receiving your response as soon as possible.