05 May 2006
Norfolk and Norwich University Hospital Trust has hit back at MPs' criticism of its role in the refinancing of its Private Finance Initiative scheme.
The Commons' Public Accounts Committee this week attacked the private sector consortium Octagon as 'the unacceptable face of capitalism' over its 2003 refinancing deal. The deal, which took place two years after the £158m hospital opened, netted £82m.
The cash was paid to its investors, who received their returns quicker and at a higher rate – 60% compared with the 19% Octagon predicted when it bid for the contract in the late 1990s.
As part of the deal, the trust secured £34m from the refinancing gain but the MPs said it also accepted greater risks. As well as extending the minimum contract period from 34 to 39 years, the trust agreed to pay up to an extra £257m if it chose to terminate the contract early.
Norfolk and Norwich chief executive Paul Forden defended the deal. 'The NHS in Norfolk is benefiting by £3.6m a year, over a 35-year period, as a direct result of Octagon's refinancing in 2003,' he said.
'The PFI has since its inception been a controversial initiative that clearly brings benefits as well as risks to the public sector. We are confident the people of Norfolk are receiving the benefits of excellent new hospital facilities as a result of this PFI scheme.'
On the advice of the Department of Health, the trust opted to receive its share of the refinancing gain in the form of reductions in its annual payments to the consortium – it now pays £37.8m a year.
PAC chair Edward Leigh insisted the trust had taken 'a step in the dark' by extending the minimum period to 2037. NHS staff were not up to negotiating refinancing with the private sector, he said.
'It is surely impossible to predict so far in advance the nature and extent of the services that might be needed,' he said. 'The risk of this large liability was incurred essentially so that investors could have fatter returns.'
He added that the trust could not be sure it would receive any outstanding amount if the consortium went bust.
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