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Profits won’t ease hospital’s woes

PUBLISHED: 13:00 03 June 2006 | UPDATED: 10:57 22 October 2010

SHAUN LOWTHORPE

Together they make a combined profit of more than £6bn. But the companies funding the building of the new Norfolk and Norwich Hospital rebuffed a request for a £7m donation to help health finances. Public affairs correspondent SHAUN LOWTHORPE looks at some of the figures behind Octagon Healthcare and asks if they can afford to be so mean.

SHAUN LOWTHORPE

One is a former advisor to John Major, another is the highest paid banker in the country, reportedly set to earn £15m in bonus related pay, and a third is a director of Ipswich Town Football Club.

Collectively they work for five shareholder firms which make up Octagon Healthcare - Serco, Barclays, 3i, John Laing and Innisfree Group - the consortium which built the new hospital at Colney.

This week Octagon said a firm 'no' to a request by Norfolk and Norwich University Hospitals Trust chairman David Prior to share some of the £75m windfall profit it made in a refinancing deal of the hospital.

Funnily enough, none of the shareholder companies wanted to talk publicly about the issue this week.

All inquiries were initially referred to Octagon's outgoing chairman Richard Jewson - also chairman of the EDP's publisher Archant - who has now stepped down, with Mr Prior confirming Mr Jewson had not made any personal gain from the refinancing deal.

But in their company reports, many of the directors have plenty to say about the healthy state of their businesses.

Serco's most recent financial report shows that the N&N refinancing netted the firm more than £4m in profit.

In his annual report Serco's executive director, Kevin Beeston, also a non-executive director of Ipswich Town - which is likely to make him even more popular around these parts - outlined the firm's corporate vision.

“We are responsible for providing services that are essential to everyday life,” he stated. “For those working at the heart of society, corporate responsibility has to be second nature. At Serco it is. It underpins the culture and values that help distinguish us in our markets and is an explicit part of the Serco Management System that shapes the way we run our business.”

In her statement to shareholders, Baroness Hogg, chairman of venture capital group 3i said: “Another year of strong cashflow enables us to make further substantial returns of capital to shareholders.

“So, in summary, this has been a good year for 3i shareholders, with the Group taking advantage of favourable market conditions, delivering a high level of return on shareholders' funds, growing investment levels and improving the strategic position of the business. In developing our strategy we will continue to combine ambition with rigour in pursuit of value for our investors.”

In its section labelled corporate responsibility, 3i's blurb says: “In everything 3i does, it aims to be commercial and fair, to maintain its integrity and professionalism and to respect the needs of shareholders, staff suppliers, the local community and the businesses in which it invests.”

The shareholders are pretty chuffed at the deal and well they should be.

A Barclays Private Equity report boasts: “The (N&N) deal was outstanding in several respects at the time of financial close.”

Self-congratulations all around - after all it was the private sector that took all the risks.

Meanwhile, Hospital Trust chairman David Prior got his begging bowl out - calling on Octagon to “ease the sense of injustice” felt by many and handover around £7m of the windfall.

That money would help upgrade the angioplasty suite used by heart patients, redecorate facilities for children and bring a cancer screener to the hospital.

His plea has so far fallen on deaf ears.

The N&N is in a woeful financial situation of its own - looking to shed up to 500 jobs because of a £22m funding shortfall.

Cynics might argue that the Octagon row is proving a welcome distraction from that problem.

Others, notably Conservative MP Richard Bacon, says the government must shoulder the blame for tying the NHS to such a bad deal.

Last November, the House of Commons Public Accounts Committee branded the refinancing deal as the “unacceptable face of capitalism”.

And Norfolk MPs this week slammed Octagon's snub to the N&N and said the company which built the £229m facility could not escape its “moral responsibilities so easily”.

The consensus is that the quicker wits of the private sector saw the NHS coming from a very long way off indeed when drawing up the deal.

Octagon awarded itself an extra £116m by renegotiating, got its slice up front and drip fed £34m to the N&N over 35 years.

Take a walk around the hospital and you will see the odd sign such as the poster in Buxton Ward asking for fundraising help to buy a new printer.

It's almost pitiful to look at when you think of all the cash slushing around. But why shouldn't Octagon make its money?

Businesses are not run as charities. But Octagon apart, there is virtually no-one standing who is not aghast at the amount of money it has made.

PROFITS AND SALARIES: OCTAGON HEALTHCARE SHAREHOLDERS

Serco

t profit £73.9m

t Christopher Hyman, chief executive, £569,018

t Kevin Beeston, executive chairman, £566,754

John Laing

t profit £35.8m

t Andrew Friend, chief executive, £600,942

t WW Forrrester, chairman, £100,000

3i

t profit £852m

t Philip Yea, chief executive, £1,989,000

t Baroness Hogg, chairman, £260,000

Innisfree

t Profit £7.5m

t David Metter, chief executive - salary not listed. Company accounts show that the highest paid director received £1,043,000.

Barclays

t profit £5.28bn

t Matthew Barrett, chairman, £2,827,000

t Bob Diamond, president and chief executive of investment banking and investment management, £2,074,000 (from appointment in June 2005. Bonuses could take sum to £15m)


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