MPs condemn PFI hospital deal
Public accounts committee condemns PFI deal at Norwich hospital
Wednesday, 03, May 2006 12:00
MPs have today condemned the way a private sector consortium benefited from an NHS hospital building scheme as the "unacceptable face of capitalism".
The public accounts committee said Octagon Healthcare's decision to refinance the Norfolk and Norwich hospital project only two years after it was built brought "fatter returns" for its investors but increased risks for the NHS trust.
It criticised the private sector consortium for its dealings with the NHS, but also warned the trust itself had been ill-equipped to deal with the "rough and tumble of negotiating refinancing proposals with the private sector".
"The refinancing of the Norfolk and Norwich PFI hospital project lined the pockets of the investors in Octagon…Given the substantially greater risks it incurred, the public sector didn’t fare so well," said committee chairman Edward Leigh.
He added: "My committee would not expect to see appearing before it another accounting officer defending what we believe to be the unacceptable face of capitalism. Such a face was shown by this private sector consortium in its dealings with the public sector."
The new hospital was built in 2001, but only two years later Octagon decided to refinance the project. This brought about £116 million of gains, but of this, the local trust only received £34 million, with Octagon securing the remaining £84 million.
In securing the right to this proportion, the NHS trust agreed to pay an extra £257 million if it wanted to end the contract early. But today the committee warned that this decision, combined with an agreement to extend the contract by five years, was highly risky.
"This is taxpayers’ money and the risk of this large liability was incurred essentially so that investors could have fatter returns," said Mr Leigh, a Conservative MP.
A spokesman for the Department of Health defended the use of PFI, however, saying the trust and Octagon had "clearly" followed the national code of practice on refinancing gains, and insisting all PFI schemes had demonstrated value for money.
"By extending the contract, Norfolk & Norwich university hospitals NHS trust has ensured it has got the use of a state-of-the-art hospital, now treating 23,000 more patients a year, at a fixed cost for an extra five years," he said.
Octagon was unavailable for comment, but Paul Forden, chief executive of the NHS trust, said he was "confident" that patients in Norfolk were benefiting from the PFI scheme.
He accepted that the trust was "paying a premium" for being one of the first to take part in a PFI scheme in the NHS, but said the refinancing deal would benefit the NHS in Norfolk by £3.6 million a year over the next 35 years.
However, Liberal Democrat Norfolk MP Norman Lamb said today's report showed a "scandalous case of private profit at the expense of patient care".
He added: "Local people relying on the Norfolk and Norwich hospital are paying the price for being guinea pigs in the government’s flagship PFI programme."