Revealed: How PFI deal is costing Norfolk and Norwich University Hospital £59m this year
- Credit: � Eastern Counties Newspapers
Millions more pounds out of the stretched NHS budget has been paid to the three shareholders of a company which built the Norfolk and Norwich University Hospital (NNUH).
Last year this newspaper revealed how Octagon Healthcare - the company which built and maintains the hospital under a Private Finance Initiative (PFI) - was making record profits and paying its tiny group of shareholders millions of pounds a year in dividends.
It came as the hospital was faced with the worst financial crisis in its history. It was £25m in the red last year, was placed into financial special measures and had to find £22m of savings.
The N&N has to pay Octagon millions of pounds every year for leasing the hospital at Colney. It also has to pay it to upkeep and service the buildings. The N&N expects the deal will cost it £59m this year.
Yet very little of that money is going on paying off its debt to Octagon for building the hospital.
The vast majority is spent on paying interest on its loan from Octagon - around £17.6m this year - and paying Octagon to service and maintain the site, around £22m this year.
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Octagon contracts this work to Serco, leaving it in the bizarre position of making multi-million-pound profits but not having a single employee.
Octagon will continue to get tens of millions of pounds from the NHS until at least 2037 under the terms of the PFI deal.
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Estimates from 2004 predicted taxpayers, through the N&N, would pay Octagon more than £1bn – nearly five times the £229m cost of building and opening the hospital.
Norwich South MP Clive Lewis said: 'One in every ten pounds the N&N spends goes on PFI and the local health and care system is facing cuts of close to half a billion pounds. So when we see stories like this of profiteers raking in cash that could be spent on services for patients, the injustice of all of this really hits you in the face.'
According to documents at Companies House filed in May, Octagon made a profit after tax last year of almost £6m and paid £3.5m to its shareholders in dividends. That compared to dividends paid the previous year of £7m.
It is also holding £26m in cash in its bank account.
And it turned over £48m in 2016 - up from the previous years, as the busier the hospital gets, the more money Octagon is paid.
North Norfolk MP Norman Lamb wrote to the Secretary of State for Health, Jeremy Hunt, in 2016 asking for him to intervene in the deal. He also wrote to Octagon asking them to sacrifice part of their profit for the benefit of the NHS. But Mr Hunt said he could not intervene as the hospital and Octagon had signed a contract.
Mr Lamb said: 'Every year the declaration of dividends is a reminder of this bad deal for the NHS and how this private consortium has profited at the same time the NHS is facing impossible financial pressures.'
He again urged Octagon to 'voluntarily forego' part of its profit to help the hospital and urged the government to look at renegotiating the contract.
Octagon has previously ruled this out. In a letter to Mr Lamb in November last year, Octagon manager, Kevin Page, said investors in the three shareholders which get the dividends are 'mostly pension funds, insurance companies and financial institutions'.
'These (dividends) are used to meet their financial obligations. Therefore we are not willing to forego these receipts,' he wrote.
Despite paying tens of millions of pounds to Octagon each year since 2001, a spokesman for the N&N said they still had £198.35m left to pay the consortium in capital repayments for building the hospital. That figure is barely decreasing each year.
'We are still at an early stage in the contract and the amount of capital we repay will increase as we progress,' a hospital spokesman said.
The shareholders of Octagon's holding company are three firms called Innisfree M&G PPP LP, Semperian PPP Investment Partners No.2 Ltd and 3i Infrastructure Seed Assets GP Ltd.
Octagon declined to comment when contacted this week.
•Who is getting the money?
There are three companies which own Octagon Healthcare Group Ltd, the holding company of Octagon Healthcare Ltd.
The three shareholders are called Innisfree (which owns 36.84pc), 3i Infrastructure Seeds Assets Ltd (which also holds 36.84pc) and Semperian (which owns 26.32pc).
London-based 3i Infrastructure has investments in groups across the UK and Europe including Anglian Water.
It received £3m from Octagon last year.
Innisfree has made a fortune by investing in PFIs across the UK.
It has investments in 57 projects worth £18.4 billion including hospitals, schools and defence projects.
The third shareholder, Semperian PPP Investment Partners, has also invested in hospitals, schools and roads across the UK through PFI deals.
It has assets valued at £1.4 billion. The N&N is about 3pc of its portfolio.
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