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Last Updated: Wednesday, 3 May 2006, 00:30 GMT 01:30 UK
MPs condemn 'capitalist' NHS deal
Norfolk and Norwich Hospital Entrance
The Norfolk hospital project was one of the first PFI schemes
MPs have branded the private sector consortium contracted to build the Norfolk and Norwich Hospital as "the unacceptable face of capitalism".

MPs said Octagon Healthcare used a re-financing deal on the project to boost returns to its investors.

The Commons Public Accounts Committee said at the same time the NHS trust was left to take "substantial new risks".

These meant it could now be forced to pay up to 257m of taxpayers money if it needed to terminate the contract.

"The risk of this large liability was incurred essentially so that investors could have fatter returns," said committee chairman Edward Leigh.

Through simply borrowing more, the benefits to Octagon's investors have soared
Edward Leigh, Commons Public Accounts Committee
"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."

In 1998, the Norfolk and Norwich became one of the first private finance initiative (PFI) hospital contracts to be awarded.

Two years later Octagon refinanced the project, "dramatically" increasing its rate of return to investors to more than three times the level it predicted in its original bid for the contract.

Of the 116m gained as a result of the financing, 82m went to Octagon while less than a third - 34m - went to the Norfolk and Norwich University Hospital Trust, the committee said.

It added: "Through simply borrowing more, the benefits to Octagon's investors have soared on re-financing to levels which are unacceptable even for an early PFI deal."

Mr Leigh said: "It is hard to escape the conclusion that the staff managing the project were not up to the rough and tumble of negotiating re-financing proposals with the private sector."

Expensive PFI deal

No-one from Octagon Healthcare was available for comment on Wednesday.

However, David Prior, chairman of Norfolk and Norwich University Hospital NHS Trust, has rejected the criticism.

He told BBC Radio 4's Today programme on Wednesday: "I think the report in many respects is flawed."

He claimed the original deal was "extremely generous" to the private equity investors but the re-financing deal benefited the hospital.

"The PFI deal was extremely expensive for the hospital and every penny that went to Octagon and not to us I bitterly regret, frankly, because we need every penny we can get for our hospital.

"The fact is, though, the re-financing deal reduced our costs very significantly, by about 3.6m a year."


SEE ALSO:
Concerns over PFI hospital deal
21 Apr 06 |  Norfolk
Budget crisis hits hospital jobs
27 Mar 06 |  Norfolk


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