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N&N £7m payback plea snubbed

PUBLISHED: 08:59 01 June 2006 | UPDATED: 10:56 22 October 2010

The private backers behind the Norfolk and Norwich University Hospital have refused to bow to mounting political pressure and accept they have a “moral obligation” to share more of their multi-million- pound windfall profits with the NHS.

The private backers behind the Norfolk and Norwich University Hospital have refused to bow to mounting political pressure and accept they have a “moral obligation” to share more of their multi-million- pound windfall profits with the NHS.

Last night, the consortium Octagon, which built the £229m hospital at Colney, was accused of treating patients and medical staff “with contempt” after deciding it would be “inappropriate” to make a £7m-plus charitable donation to health service coffers.

Norfolk MPs said Octagon could not escape its “moral responsibilities so easily” and criticised the government for asking the N&N to sign the original private finance (PFI) contract on “unfavourable terms” in the late 1990s.

They also pledged to voice their concerns to health secretary Patricia Hewitt when she visits Norwich and the N&N this summer.

The initial call for Octagon to “ease the sense of injustice” about its windfall profits by making a donation to the hospital came from David Prior, chairman of the N&N trust, last week.

It followed stinging criticism of the consortium by a select committee of MPs for making an additional £75m profit on the N&N project by renegotiating its loans in 2003 once construction of the hospital was complete.

Although Octagon was not obliged legally to give the NHS any of its refinancing gain, an agreement was reached at the time which saw the consortium give the N&N a 30pc share - £34m - in return for extending the original 30-year contract by five more years and increasing the penalty the N&N would have to pay to terminate the deal.

As reported in Saturday's EDP, Mr Prior had asked its shareholders - Barclays, Innisfree, 3i, Serco and John Laing - to donate a further 10pc of their windfall profits to the hospital.

If paid, the money would have been used to upgrade the angioplasty suite used by heart patients, redecorate facilities for children and bring a state-of-the-art cancer scanner to the N&N.

Mr Prior told the EDP last night : “In the long-run the most successful and best companies tend to have conscience and want to work with the communities in which they do business.

“If they just take a contractual-legalistic view of their obligations, then in the long-run those companies will not be successful.

“So I believe that the shareholders in the consortium are wrong. I think to hide behind a legal entity like Octagon and not to accept any moral obligation shows big corporations in their worst light. But apparently that's the world we're living it. It's very disappointing.”

Octagon declined to comment.

Harry Seddon, Unison branch secretary at the N&N, pointed out that the private finance deal was costing Norfolk taxpayers £5million more than it should to run a hospital each year - and that the financial plight of the N&N and the threat to staff jobs was a direct result.

“The court of public opinion is what's important in this case,” Mr Seddon said.

“By turning down a modest request for help, we think that Octagon has shown contempt for the hospital's patients, staff and the people of Norfolk.

“We don't think either staff or the people of Norfolk will accept a flat refusal from Octagon to help bear some of the financial pain the hospital is facing.”

Norman Lamb, Liberal Democrat MP for North Norfolk, added: “I don't think they should be able to escape from their moral responsibilities quite so easily.”

As a first step, Mr Lamb said that he planned to write to each of the shareholding companies to ask how their response to the N&N complied with their policies on “corporate social responsibility”.

But Richard Bacon, Conservative MP for South Norfolk, added: “I can quite understand why the hospital would like more, and I think it would have been good if Octagon had made a gift of that kind.

“But it's not surprising that they have said no, because they have already given money that they were under no legal obligation to give.

“The fault for all this lies with the government itself for requiring to hospital to sign a contract on such unfavourable terms. It's the government's fault for forcing the hospital into a corner.”

The calls for Octagon to make a financial donation to the N&N come as the hospital faces a £15m budget deficit this year - and amid fears there will be job cuts and that as many as 450 posts might be lost.

Ian Gibson, Labour MP for Norwich North, said he wanted to see the original contract.

“I want to see the contract that we've never been allowed to see to see what is possible and impossible.

“We've been told that it would cost millions to come out of the contract - I want to see if that's true.

“I'm not surprised that Octagon has said no. I'm not sure what the acceptable face of capitalism is, but that doesn't register with them.

“They have made huge sums of money and if they cared about the hospital and those who work in it, they would help them through the current situation.”


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