Research reveals ending Norwich hospital contract could save £217 million on rent.
A report by a Norfolk based economist today revealed new evidence showing the staggering true cost, to the NHS and taxpayers, of a Norwich hospital financed under the Private Finance Initiative (PFI).
Dr Chris Edwards, an economist and a Senior Fellow at the University of East Anglia, today called for the PFI contract of the Norfolk and Norwich University Hospital (NNUH) to be bought out by the government to save taxpayers £217 million pounds. The hospital is currently due to cost more than £800 million in rent to the first break point in the PFI contract in 2037.
Dr Edwards today published the final report of his research, conducted over the last five years, into the funding of PFI financed hospitals, with particular reference to the Norfolk and Norwich University Hospital (NNUH), one of the earliest and biggest of the PFI hospitals.
Dr Edwards's research revealed:
Dr Edwards challenged Prime Minister Gordon Brown to buy out the NNUH PFI, and called on health secretary Alan Johnson MP to back him. He also challenged Tory leader David Cameron to promise to abandon support for PFI.
Dr Edwards said:
'Taxpayers could save £217 million if the PFI at the Norfolk and Norwich University Hospital (NNUH) is bought out. It has been an incredibly profligate way of funding an undersized hospital at great cost to the public, providing massive, excessive profit to the private sector.
'Buying a hospital on PFI is like buying a house on your credit card.
'There is every reason to suppose that the NNUH is not unique, given that the private sector's cost of capital is double that of the public sector.
An estimate, based on rent paid by other PFI hospitals in England, suggests as much as £2.4 billions rent could be saved if all English hospital PFIs were bought out.
'The PFI is an initiative often justified by the objective of keeping the ratio of public sector debt-to-GNP below 40%. It is ironic this is an objective now rendered irrelevant by the current economic crisis, brought about by the same incompetent government which promoted PFI. In fact, of course, in the longer term such PFIs will have contributed to increasing public debt.'
'PFI is this great financial scandal of our times and it makes the expense abuses of some MPs look like peanuts. '
A report by a Norfolk based economist today revealed new evidence showing the staggering true cost, to the NHS and taxpayers, of a Norwich hospital financed under the Private Finance Initiative (PFI).
Dr Chris Edwards, an economist and a Senior Fellow at the University of East Anglia, today called for the PFI contract of the Norfolk and Norwich University Hospital (NNUH) to be bought out by the government to save taxpayers £217 million pounds. The hospital is currently due to cost more than £800 million in rent to the first break point in the PFI contract in 2037.
Dr Edwards today published the final report of his research, conducted over the last five years, into the funding of PFI financed hospitals, with particular reference to the Norfolk and Norwich University Hospital (NNUH), one of the earliest and biggest of the PFI hospitals.
Dr Edwards's research revealed:
- How the NNUH PFI contract should still be bought out, despite a £300 million penalty clause, as this would anyway save £217 million.
- The £1 million a year extra payments which NHS Norfolk, the local primary care trust, is making for private beds in private hospitals, because the NNUH is too small to cope with demand. The NNUH was designed with lower capacity than the two hospitals it replaced so that the PFI deal appeared to be more 'affordable '.
- How inflated figures for possible construction overrun costs - if the hospital had been publicly financed - helped to create a false case for PFI funding.
- The cost of the rent of the Norfolk and Norwich University Hospital (NNUH) to the NHS and UK taxpayers is currently £18 million a year more than it would have been if the project had been publicly, instead of privately, funded.
- Around £823 million (at 2007 prices) is still to be paid in rent up to the end of the contract in 2037; this is for a hospital, the basic construction cost of which, in the 1990s, was £159 million.
- Shareholders in the company financing the NNUH, Octagon Healthcare, invested just over a million pounds (£1.3 million) up to December 1998 but within five years had made more than £100 million in profits and had received £11 million in dividends.
Dr Edwards challenged Prime Minister Gordon Brown to buy out the NNUH PFI, and called on health secretary Alan Johnson MP to back him. He also challenged Tory leader David Cameron to promise to abandon support for PFI.
Dr Edwards said:
'Taxpayers could save £217 million if the PFI at the Norfolk and Norwich University Hospital (NNUH) is bought out. It has been an incredibly profligate way of funding an undersized hospital at great cost to the public, providing massive, excessive profit to the private sector.
'Buying a hospital on PFI is like buying a house on your credit card.
'There is every reason to suppose that the NNUH is not unique, given that the private sector's cost of capital is double that of the public sector.
An estimate, based on rent paid by other PFI hospitals in England, suggests as much as £2.4 billions rent could be saved if all English hospital PFIs were bought out.
'The PFI is an initiative often justified by the objective of keeping the ratio of public sector debt-to-GNP below 40%. It is ironic this is an objective now rendered irrelevant by the current economic crisis, brought about by the same incompetent government which promoted PFI. In fact, of course, in the longer term such PFIs will have contributed to increasing public debt.'
'PFI is this great financial scandal of our times and it makes the expense abuses of some MPs look like peanuts. '
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