Found inside – Page 20For example, in the case of Norfolk and Norwich University Hospital, ... 2.1 1 There is a possible risk to the competitiveness of future PFI market tests if ... The contract with the NNUH was extended and the first break point for the contract was moved by five years to 2037 from 2032. Links will take you to documents on The National Archive website. The bigger picture – what can be done about it? The latter is called optimism bias. Found inside – Page 109We criticised one of the early refinancings , the Norfolk and Norwich PFI Hospital , for only securing the NHS Trust 29 % of the £ 116 million refinancing ... This has also been true of other PFI hospitals. 4. The first rental payments by the Trust to Octagon Healthcare were made in August 2001. Octagon, the company behind the PFI deal, reported record profits. In 2004/05 such treatments were estimated to have cost £800,000 more than if the NNUH had carried out the work. The contract between the Norfolk and Norwich University Hospital NHS Trust and Octagon was made in 1998 and was one of the first PFI projects negotiated. But other factors may affect price comparisons over time and further analysis of price movements would be valuable.”. 15. A private sector consortium of banks and property developers, Octagon Healthcare, was contracted to build the hospital, maintain it, and manage the facilities for a minimum of 30 years. Octagon Healthcare Ltd has today completed the refinancing of the Norfolk and Norwich University Hospital. The … Alternative financing solutions were not seriously explored to ensure the financing terms remained competitive during a two year deal closure, the Trust considering that it did not wish to further delay the project and that it was not convinced that the overall terms of the deal could be improved bearing in mind the relatively undeveloped state of the PFI financing market at that time. The development of a PFI hospital in Norwich took place when Malcolm Stamp was Chief Executive of the Norfolk and Norwich Health Care NHS Trust (NNHCT). Many hospitals struggle to pay their PFI. The total rent payable up to the first break point of the contract (in 2036/37) will be £859 million (still in 2000 prices). Norfolk Education ... Winter Room Director at Norfolk and Norwich University Hospitals NHS Foundation Trust Greater Norwich Area, United Kingdom. The development of a PFI hospital in Norwich took place when Malcolm Stamp was Chief Executive of the Norfolk and Norwich Health Care NHS Trust (NNHCT). She described the figures as “very frustrating”. Norfolk. Healthcare in Norfolk is paying a high price for building its key hospital through a pioneering Private Finance Initiative (PFI), a report says. Picture: Mike Page, Norwich South MP Clive Lewis said PFIs should be reviewed. The cost of government building work has, on average, increased by 49 per cent since 1998. It is clear that the NNUH has not provided the taxpayer with value for money. Concerns about public spending and conduct, Dr Foster Intelligence: A joint venture between the Information Centre and Dr Foster LLP, Department of Health – The Paddington Health Campus scheme, Department of Health – Innovation in the NHS: Local Improvement Finance Trusts, Modern slavery Act transparency statement. This newspaper has been a central part of community life for many years. Furthermore the PFI hospitals have been built on time and within budget. He said: “Surely Covid-19 has shown beyond doubt our NHS should focus wholly on keeping us well. And what did the NNUH gain in exchange for all this? Found inside – Page 231University of East Anglia academic Dr Chris Edwards had argued for a buy-out of the costly Norfolk & Norwich Hospital PFI contract, which he initially ... “Tony Blair announced the building of the new Norfolk & Norwich Hospital on 11/1/1998 from a press conference in Tokyo – they started work the very next day !!! The Trust was formed in 1994 with Malcolm Stamp heading it. It is also true that wherever possible the Blair and Brown governments wanted to get the private sector to finance investments in hospitals, schools and other infrastructure. In this case, the Trust continues to pay a premium on its financing costs for being an early entrant into the PFI market whilst benefiting from the early use of the new hospital and lower construction costs. However this has not happened. The early proposals were for a large hospital with many more than 1207 beds, but in order, it seems, to make the hospitals appear affordable if financed by the private sector, the planned number of beds declined. Quite simply because the cost of capital of the private sector is at least twice that of the public sector. According to its website, Innisfree has invested in 58 projects with a capital value of £18.9 billion, £11.3 billion of which is in the health sector. Found inside – Page 313... 159–61 Norfolk and Norwich University Hospital PFI scheme 79–80 Norfolk ... Suffolk and Cambridgeshire Strategic Health Authority community hospitals 42 ... In Norwich, the move from two old hospitals to a brand new one was completed in January 2003. The hospital was reportedly the biggest built using a PFI contract at the time. The consortium which financed NNUH is called Octagon Healthcare. Norwich and Norfolk University Hospitals Foundation Trust pays Octagon for use of the hospital and some maintenance fees. Found inside – Page 68PFI is still in its relative infancy, leaving many questions unanswered. ... The large acute facility at Norfolk and Norwich Hospital by Anshen Dyer and ... The founder and Chief Executive of Innisfree is David Metter who is also chairman of the Public-Private Partnerships Forum, the main private sector lobby for PFI. The PFI contract between the NHS Norfolk and Norwich University Hospital Trust (NNUHT) and the private consortia Octagon was signed in January 1998. The company which built the Norfolk and Norwich Hospital reported record profits last year, as it was paid more than £62m by the NHS. Update to NNUH case study, by Chris Edwards, December 2014: Massive Private Gains and Large Public Losses; the Private Finance Initiative and the Norfolk and Norwich University Hospital (NNUH) Chris Edwards, 11 December 2014. PFI Contract Manager at Norfolk and Norwich University NHS Trust / Owner at John Duckett Photography Greater Norwich Area, United Kingdom 91 connections. The PDFs on this page have been archived. The NAO found that the terms of the bank finance for the original deal appear competitive for a bank financed deal at that time. Did the PFI deal provide value for money for the taxpayer? Norwich South MP Clive Lewis said: 'One in every ten pounds the N&N spends goes on PFI and the local health and care system is facing cuts of … Found inside – Page 336UK Select Committee on Public Accounts, 'The Refinancing of the Norfolk and Norwich PFI Hospital: How the Deal can be Viewed in the Light of the ... Norfolk and Norwich University Hospital was built as a replacement for the incumbent Norfolk and Norwich and West Norwich Hospitals as part of a £229 million PFI hospital scheme designed to provide a 953 bed, state of the art NHS academic teaching hospital. Found inside – Page 5Norfolk and Norwich from sharing the refinancing Peter Coates : Yes , there's always a public - sector gain , which , as you know , took the internal rate ... Create a free website or blog at WordPress.com. Octagonâs refinancing in 2003, nearly six years after the letting of the contract and two years after the opening of the new hospital, generated large gains for Octagon mainly because they were able to significantly increase their external borrowings (from £200 million to £306 million). The vast majority of Octagon Healthcare’s financing came from fixed interest capital first in the form of bank capital. The cut in beds has meant that invariably the NNUH has been full and has even had to turn away patients or treat them in ambulances. Sir John Bourn, head of the NAO, today reported that, following improvements in PFI financing terms, the Norfolk and Norwich University Hospital NHS Trust has shared in the gains from a refinancing of its early PFI hospital contract, but it continues to pay a premium in respect of the financing costs compared to current deals. In 2003 Octagon Healthcare carried out a refinancing operation with the bank capital being switched to cheaper and longer-term bond capital. … The Conservative MP for Hereford, Jesse Norman, has called on PFI companies to make a voluntary rebate on their profits, threatening to name and shame them if they refuse. The Department has demonstrated that, if todayâs financing rates were applied to Octagonâs original financing, then the additional building costs arising from construction cost inflation probably offset the benefit of the lower financing costs which are now available, assuming no other savings are priced into a current bid. 5. On April 8, 2009, the Eastern Daily Press disclosed that tens of thousands of pounds were being wasted on the booking of private hospital beds that have sat empty. 3. It is somewhat ironic that the micro-economic disaster of PFI was introduced to meet a target which has itself been smashed by an incompetent macro-economic policy and poor regulation of the financial sector. Then a second fiddle was used, namely the assumption of a longer construction period for the PSC – twice as long in the case of the NNUH. Our industry faces testing times, which is why we're asking for your support. The Norfolk and Norwich University Hospital was a PFI … Relatively little. Found inside – Page 160Buyers such as life assurance and pension companies find PFI shares attractive, ... the Norfolk and Norwich PFI Hospital, (35th Report, Session 2005–2006). The deal with Octagon runs until at least 2037 and it still owes it £187m. Sir John Bourn, head of the NAO, today reported that, following improvements in PFI financing terms, the Norfolk and Norwich University Hospital NHS Trust has shared in the gains from a refinancing of its early PFI hospital contract, but it continues to pay a premium in respect of the financing costs compared to current deals. Unfortunately PFI contracts have generally been drawn up with the inclusion of such high cancellation payments that it is uneconomical for the government to buy back the contracts. … The ideology is driven by powerful vested interests…. They previously said that much of the dividend is paid to pension funds and they had worked with the hospital to reduce costs. Norfolk and Norwich Hospital. This tender covers the provision of Hard and Soft FM services for 5 sites which are not part of the main PFI project at NNUH. The trust’s website says that it carries out approximately 300,000 diagnostic examinations every year. Not 35%. This means that if hospitals or schools have to be closed as patterns of treatment or population distributions change, the ones most likely to be closed will be the state financed ones since the rent of the PFI projects will have to be paid whether or not they continue to be used. The private sector has to borrow at a higher rate of interest than the public sector and its equity shareholders expect to make a rate of profit which is well above the rate at which the public sector can borrow. Found inside – Page 3Three hospital deals (Norfolk and Norwich, Bromley and Darent Valley), where the lead investors were Barclays and Innisfree, accounted for £60 million of ... Partly it’s an ideological conviction that still grips all the main party leaderships, regardless of multiple failures or alternative models. Found inside – Page 142On the now notorious Norfolk and Norwich Hospital Trust PFI it has been asserted that the average rate of interest over 37 years is 10 per cent (Edwards, ... By George Monbiot. But the NAO considered that it might have been possible to improve the original deal. In response to criticisms of PFI projects, the defenders generally make two arguments. All of this is the result of the hospital being built with too few beds. IPiN … For example if we look at the construction period of the NNUH – that is between 1998 and 2001 – the government’s cost of capital was 5.2% per year, compared to an average cost of capital for the NNUH of more than 10% per year. The £95 million that private companies extracted from a hospital project was not a mistake, but a deliberate gift from the government. It was possible for two reasons. Found insideThe Norfolk and Norwich University Hospital, for example, is a PFI project designed to be energy efficient with a combined heat and power plant that reduces ... Spent 20 years with Laing including 2 years on Sizewell B, 7 years with John Laing International in Turkey and Egypt, and latterly 5 years working on Norfolk and Norwich PFI Hospital. Malcolm Stamp left the NNUH Trust in 2002. Richard Jewson was chair of Savills (the estate agents) when it was appointed by the Consultants’ Committee to show that the Colney option was the best option (Edwards June 2009, 81). By contrast the rent actually paid by the Trust year by year (and all in the same 2000 prices) has been £16.8 million in 2001/02 (less than a full year), £26.0 million in 2002/03 and then £24.0 million per year in all succeeding years. Picture: Mike Page, Norwich North Conservative MP Chloe Smith. The combination of these two factors makes the private cost of capital about twice that of the public sector. Note that this higher private sector cost excludes the extra costs paid for private treatment as a result of the hospital being built with too few beds. The first fiddle has been to assume an overrun on the construction cost. In July 2011, Michael Gove, the Education Secretary announced that “up to 300 schools will be rebuilt under private finance schemes with an ‘upfront cost’ of around £2 bn” (Guardian, July 29, 2011). The increased rate following the refinancing reflects the high value of receiving large returns early in the contract period. The 1996 Full Business Case was, quite simply, a shambles. Why was this? More than 250 staff work in the department and in a satellite department at the Cromer District Hospital. Found inside – Page 205For example , the Norfolk and Norwich Hospitals PFI was refinanced in 2003 , bringing a gain of some £ 115.5 million to the contractor.23 In fact ... The culture and ethos of the FM team is truly aligned with the Trust and it was evident during our visit that they are all focused on delivering optimum services. The Trust currently pays £37.8 million a year to Octagon. PFI schemes under fire. There are two reasons for the deal being very poor. Found inside – Page 133A jewel in the PFI crown from the design perspective is the Anshen Dyer-designed Norfolk and Norwich Hospital, which opened in 2002 to critical acclaim ... We have seen above that this has probably been at least £1 million per year. 9 It included the provision of the hospital buildings as well as their maintenance and facilities management over a period of 30 years. Osborne’s alternative model turns out to be more, rather than less expensive. There are now more than 700 PFI projects in operation with a capital value of £54 billion of which projects in the health sector account for £11.8 billion (Treasury, December 2013). Found inside – Page 87By the same token, if spending needs to be contained non-PFI expenditure ... consortium responsible for the Norfolk and Norwich hospital contract made a ... Found inside – Page 80HM Treasury (2006)House ofCommons, Committee ofPublic Accounts, Refinancing of the Norfolk and Norwich PFI Hospital, Thirty-fifth Report of Session 2005–06. The context for this was the political decision that hospitals would be financed through the PFI. Jesse Norman is looking for a taxpayer rebate of about £500 million and £1 billion but a one-off rebate of as much as £1 billion would be less than a half a percentage point of the total PFI payments over the next 35 or so years. In the case of the NNUH, the optimism bias in the Full Business Case was estimated as 34.22%. II.2.4) Description of the procurement The PFI contract was entered into on 8.1.1998 for a duration of 60 years at an estimated value … Note that these are the rental payments only and exclude maintenance which is paid for separately. The first phase of the move into the new hospital took place in November 2001 with the move being completed in January 2003. Secondly between 1998 and 2003 interest rates in the UK had dropped. It is clear that, as the Public Accounts Committee has pointed out; “some public service comparators have been manipulated to get the desired result” (see Edwards June 2009, 46). In reply, Mr Norman stated that he was looking for an industry-wide voluntary rebate not a haircut imposed by the government. The sites covered are Cromer Hospital, Cotman Centre, Central Norwich Eye Clinic (Grove Road), Health Records Library (Francis Centre) and an administration hub in Rouen Road, Norwich. Join to Connect Norfolk and Norwich University Hospitals NHS Foundation Trust ... Norfolk and Norwich University Hospitals NHS Foundation Trust 13 years 8 months a large National Health Service academic teaching hospital in the Norwich Research Park on the western outskirts of Norwich, England. 6. The university hos pital replaced the former, Norfolk and Norwich Hospital, which was founded in 1771, and the West Norwich Hospital. Found insideTwo years after completion of the Norfolk and Norwich PFI hospitals, four finance corporations – Barclays Bank, Stereo, Innisfree and John Laing – decided ... Published in the Guardian 9th May 2006 Whenever a new scandal about the private finance initiative (PFI) emerges, the government and its friends in the financial press blame it on… Of this, the base construction cost was 159 million, only about 69% of the total. Norfolk and Norwich University Hospital paid Octagon £62m last year. How a lie about Tony Blair and the NNUH went viral. Octagon was able to increase its borrowings from £200 million to £306 million. Corporate capture goes much further than lobbying”. Why was refinancing possible? The annual charge increased by a fifth in a non-competitive situation due to specification changes. This is why the value for money comparison was so cynically false since the government had no intention of financing the projects from public sources. The Norfolk and Norwich University Hospital NHS Trust currently pays £38.7 million a year to a private sector consortium, Octagon, for the building and maintaining of a new hospital. We’ve 1,200 beds and state-of-the art facilities, work closely with the University of East Anglia to train health professionals, and have a strong focus on research. Picture: Yui Mok/PA Images As we have seen, this was the case with the NNUH. Milne went on to point out that the revolving door in the health sector saw Tony Blair’s former health adviser, Simon Stevens become President of the US company United Health; Patricia Hewitt (one-time Secretary of State for Health) become a consultant for Alliance Boots and Cinven (a private equity group that bought 25 private hospitals from Bupa); Patricia Hewitt’s predecessor, Alan Milburn, worked for Bridgepoint Capital, and more recently boasted a striking portfolio of jobs with private health companies (Milne, Guardian, July 2, 2009). He has had the support of about 70 Conservative and Liberal Democrat MPs but David Metter (the head of Innisfree) has said that investors would not ‘take a haircut’ on returns that were agreed in good faith when the contracts were signed. Norwich North Conservative MP Chloe Smith said she was raising the case with the Health Secretary and Chancellor. The capital costs of the PFI hospital as given in the 1996 Full Business Case totalled £213.6 million but this was for 809 beds. In 1998, the Norfolk & Norwich University Hospital NHS Trust (the Trust) let one of the first PFI hospital contracts to a private sector consortium Octagon. The company financing the hospital was Octagon Healthcare Limited which had been formed in October 1995. The Norfolk and Norwich hospital is facing hundreds of job cuts as it seeks to balance its books, and there are concerns about the way the refinancing of other PFI hospitals may add to … Norman Lamb: To ask the Secretary of State for Health, if he will make a statement on the PFI contract in respect of the Norfolk and Norwich hospital. The refinancing of the Norfolk and Norwich PFI Hospital 1. Deborah McGurran | 20:50 UK time, Tuesday, 18 January 2011. After gaining this initial approval, the planned size of the hospital was increased and in early 1996, a Full Business Case was submitted, this time for a hospital with 809 beds. Octagon is owned by two investment companies called Innisfree and Semperian PPP. £34 million of the gains were shared with the Trust. Public losses, private profits. In December 2012, the Coalition Government replaced PFI projects with what are called Private Finance 2 projects. The £115 million refinancing gain, based on the increased borrowings, was a reflection of the better financing terms Octagon were able to secure, not available in 1998 when the contract was entered into, as a result of: the maturing PFI market (there is more competition in the funding market and funders see PFI as less risky than in its early years); the successful delivery of the hospital and demonstration that the operational phase of the hospital is going to plan; and the general reduction in borrowing rates. Making room for a PFI hospital ….. This was because the Blair/Brown governments wanted to keep the public sector debt-to-GNP percentage below 40. Because these additional funds were not immediately needed to operate the project, this created cash resources which could be used to enable Octagonâs shareholders to draw immediate benefits from the project, with the increased borrowings to be repaid out of planned profits later in the contract period. As noted earlier, the NNUH is a very good hospital and I have had superb treatment from the staff there in recent years. Norwich South Labour MP Clive Lewis previously compared the deal to the worst credit card on a comparison site. Octagon Healthcare's PFI Refinancing. As the summary of the Public Accounts Committee report of 2006 put it; “we would not expect to see another Accounting Officer appearing before this Committee defending what we believe to be the unacceptable face of capitalism in the consortium’s dealings with the public sector” (PAC, 2006). The hospital was built under a Private Finance Initiative (PFI) in 2001, meaning a private company, Octagon Healthcare, funded the costs. In 1998 the Norfolk and Norwich University Hospital NHS Trust (the Trust) let one of the first PFI hospital contracts to a private sector consortium, Octagon. Found inside... June 2005 HC 78 National Health Service Innovation in the NHS : Local Improvement Finance Trusts The Refinancing of the Norfolk and Norwich PFI Hospital ... At that time, the new Norfolk and Norwich University (NNUH) hospital was one of the biggest hospitals to be financed and built in the UK under the Private Finance Initiative (PFI). In 2015 the Independent reported that “crippling PFI deals leave Britain in £222Billion in debt. Picture: Mike Page The NAO also concluded that it might have been possible for the Trust to have improved the original deal with greater competition and better defined requirements in the closing stages but the Trust is not convinced it could have obtained any added benefits in what was then an immature market as it sought to close a pathfinder deal which had already been assessed as value for money. In 2003, two years after the new hospital opened, Octagon refinanced the project, increasing The Norfolk and Norwich Hospital opened in late 2001, having been built under the private finance initiative (PFI). The Hospital Arts Project is part of the Facilities Department at the Norfolk and Norwich University Hospital. - Credit: Mike Page. Note the precision. The total costs of the hospital with 953 beds was £229.2 million. In the year ending 31 December 2003, Octagon Healthcare paid out £11 million of this £95 windfall in the form of dividends. PFI is, truly, an unacceptable face of capitalism making loads of money for a few and burdening the National Health Service with expensive commitments. The NNUH, meanwhile, fell £60m into the red in the last financial year and warned that the costs of dealing with the coronavirus crisis would add another £8m to its deficit. Picture: Yui Mok/PA Images, Norfolk and Norwich University Hospital was opened in 2001 but the repayments for building it will continue until at least 2037. Found inside... Centre I bdubood Community Hospital i Cumberland Infirmary □ Carlisle 17 Support Services □ Wycombe Hospital 41 Norfolk i Norwich Hospital 114 DawusJl ... When the NNHCT was formed in 1994, the assets were passed over to the NHS and the newly-created Trust paid the NHS a rent. By April 1999 the number of beds proposed had risen to 953 and planning permission for this was given in September 1999. In January 2001 it was renamed the Norfolk and Norwich University Hospital NHS Trust (NNUHT). PFM - Partnership in Healthcare 2014 Award Winner (Norfolk & Norwich University Hospital) Judge’s comments: This is an outstanding example of PFI and FM service provision in healthcare. A major shareholder in Octagon Healthcare has been and still is Innisfree. Found insideTwo years after completion of the Norfolk and Norwich PFI hospitals, four finance corporations – Barclays Bank, Stereo, Innisfree and John Laing – decided ... In addition to paying for these through the rent, it is worth noting that the NNUH had itself directly paid about £13 million for ‘PFI set-up costs’ between 1995 and 2001. After a public outcry, the hospital received some of the profits, but the private owners still kept £80m. Site work was started in January 1998. This would be morally justified. The NNUH Trust faced a small drop in the annual rent and its share of the refinancing windfall was only about 26% of the total. - Credit: PA Wire/PA Images. This is an updated and brief version. This was truly obscene and capitalism at its worst. Found inside – Page 283... The Wider Markets Initiative (799 HC 2005–06) –, The Refinancing of the Norfolk and Norwich PFI Hospital – How the Deal Can Be Viewed in the Light of ... But as Seamus Milne has put it; “…the passion for all things private goes far beyond that. Found inside... 456 Innovation in the NHS : Local Improvement Finance Trusts The Refinancing of the Norfolk and Norwich PFI Hospital : how the deal can be viewed in the ... Given this much higher cost of capital, the figures have to be manipulated or fiddled to show that PFI projects provide value for money. Secondly it would have to pay for the future profits of Octagon Healthcare. Found inside – Page 73... for example: the refinancing of the Norfolk and Norwich Hospital PFI scheme; clinical governance; the management of suspensions of clinical staff in the ... In addition, the Primary Care Trust in Norfolk was forced to pay for the treatment of patients at private hospitals (particularly the Spire hospital, conveniently near the NNUH hospital) at greater cost. Basically because the Blair/Brown governments realised that the NHS needed substantial investment after its neglect by the Thatcher/Major governments but at the same time they wanted to avoid the investment appearing as public sector debt. The latest published information for the overall cost projections for all private finance initiative (PFI) schemes over the lifetime of their contracts, including that for the new District General Hospital project procured by Norfolk and Norwich University Hospitals NHS Foundation Trust, is available on the Treasury’s website, via:
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