Revealed: How Norfolk and Norwich Hospital overpaid £3m to firm which built it

The MPs have written to Mark Davies, the chief executive of the Norfolk & Norwich University Hospita

The MPs have written to Mark Davies, the chief executive of the Norfolk & Norwich University Hospital, asking for him to investigate the apparent overspend. Photo: NNUH - Credit: Archant

It is a sum of money which could be spent on hundreds of operations for patients, extra medical staff, or even an entire rehabilitation unit.

Norfolk and Norwich University Hospital. Picture: MIKE PAGE

Norfolk and Norwich University Hospital. Picture: MIKE PAGE - Credit: Mike Page

But instead the region's cash-strapped Norfolk and Norwich Hospital (N&N) has handed over £2.9m more than necessary to the private company that built and maintains it, according to financial documents.

The hospital is refusing to reveal whether it has reclaimed the money - having been alerted to the overpayments to Octagon in 2014.

Now three Norfolk MPs are demanding answers about what has happened to the seven-figure sum.

It raises questions about the N&N's Private Finance Initiative (PFI) contract, which sees the hospital paying tens of millions of pounds each year to the business consortium Octagon, which leases the facility back to the hospital's trust.


You may also want to watch:


The N&N estimates it is paying Octagon £57m this year and it cannot get out of the deal until 2037 at the earliest.

It is estimated the NHS will pay Octagon more than £1 billion over the course of the Private Finance Initiative (PFI) – nearly five times the cost of building and opening the hospital.

The hospital was built after a contract was agreed between the N&N and Octagon Healthcare. Picture:

The hospital was built after a contract was agreed between the N&N and Octagon Healthcare. Picture: Archant

Most Read

But documents obtained by this newspaper suggest the N&N has been overpaying Octagon by hundreds of thousands of pounds each year since it opened in 2001 - amounting to at least £2.9m – and has known about it since 2014.

It is because of an anomaly relating to how inflation is measured, buried deep in the PFI contract.

The trust has twice refused to say if it was aware of the overspend or had reclaimed the money it could be entitled to.

A spokesman for the N&N said: 'It would be inappropriate to comment on matters that would prejudice the trust's commercial interests.'

Octagon Healthcare also refused to comment.

But several of the region's MPs are now demanding answers.

The hospital will have cost more than �1bn to build when the PFI contract is completed. Picture: Arc

The hospital will have cost more than �1bn to build when the PFI contract is completed. Picture: Archant.

Norwich South MP Clive Lewis (Labour), North Norfolk MP Norman Lamb (Liberal Democrat) and South Norfolk MP Richard Bacon (Conservative) have all written to N&N chief executive Mark Davies asking him to investigate.

Mr Bacon has offered to raise the matter with health secretary Jeremy Hunt if 'it should prove helpful or necessary'.

He said: 'It is plainly something which needs investigating. Patients and the taxpayer have a right to understand what's going on. There is no sense in trying to hide the facts. This is public money and should be spent to benefit patients.'

Mr Lamb said: 'Clearly we need to get to the bottom of this. If the allegation is right that Octagon has used the wrong basis for calculating payments from the N&N then the key question is: who knew?

'And once concerns were brought to the attention of the N&N, what steps did they take to regularise the situation and are the payments still continuing in the same basis today?

'This is a substantial sum which appears to be due to the N&N. I have repeatedly called for Octagon to hand back some of the excess profit they have been making, as exposed by the EDP. We now need a full independent investigation.'

L-R: Norfolk MPs Clive Lewis (Labour), Norman Lamb (Liberal Democrat), and Richard Bacon (South Norf

L-R: Norfolk MPs Clive Lewis (Labour), Norman Lamb (Liberal Democrat), and Richard Bacon (South Norfolk) have all asked for an immediate investigation following information obtained by this newspaper. Pictures: Archant. - Credit: Archant

Mr Lewis said: 'In circumstances where our local health service is being forced to make so-called savings of around 20pc while demand soars, every single penny counts and could potentially be the difference between life or death for someone.

'£3m could employ tens of medical staff for several years and would have kept the Henderson Unit open or the admiral nurses working.'

The annual fee paid by the hospital to Octagon is adjusted every six months in line with a measure of inflation. But there is a disparity in the contract's reference date and the date used by Octagon in its invoices to the N&N.

The measure of inflation called the Retail Price Index (RPI) is set from a reference date of April 1, 1995 in the PFI contract.

But Octagon has consistently used the RPI for March 1995 instead in all its invoices, which gives a higher rate of inflation than the April measure.

This suggests the N&N has paid at least £2.9m more than it needed to between 2001 and 2014.

The N&N has struggled to control its worsening finances in the last three years and is set to record a £25m deficit this financial year.

Last month it was taken out of financial special measures.

Become a Supporter

This newspaper has been a central part of community life for many years. Our industry faces testing times, which is why we're asking for your support. Every contribution will help us continue to produce local journalism that makes a measurable difference to our community.

Become a Supporter
Comments powered by Disqus