Norfolk and Norwich Hospital under more pressure to explain how it overpaid PFI company £2.9m

The Norfolk and Norwich University Hospital. (Image: Archant)

MPs and campaigners are demanding answers from managers of the Norfolk and Norwich University Hospital (N&N) over money paid to Octagon Healthcare as part of the Private Finance Initiative (PFI) contract under which the hospital was built.

Figures seen by this newspaper break down the overspend per year - dating all the way back to 2001, when the hospital opened at Colney Lane.

The figures have been shared with both the N&N and Octagon, but both parties have refused to comment - with the N&N saying it would 'prejudice our commercial interests'.

Every year the N&N pays money to Octagon to repay it for building the hospital in 2001 and to maintain the site. This year it expects to pay Octagon a total of around £57m.

The figures, which are part of a report by an external company, appear to show annual overspends ranging from £160,000-£280,000 between 2001 and 2015.

They show the amount the N&N paid to Octagon against the amount it should have paid.

The payments relate to maintenance and other costs. The overspend has occurred because of a small error in Octagon's invoices to the N&N, according to the report.

It has prompted Norfolk MPs Clive Lewis (Labour), Norman Lamb (Liberal Democrat), and Richard Bacon (Conservative) to write to N&N chief executive Mark Davies asking him to investigate immediately.

Mr Bacon has previously said he would raise the matter with Health Secretary Jeremy Hunt 'if it should prove helpful or necessary'.

And today Sue Vaughan, of the NHS Norfolk Action Group, said the figures exemplified the problems which have been caused by the PFI contract.

'It's a small percentage of money compared to the overall spending of the hospital, but nevertheless it is money which could be spent on other things,' she said.

'It's indicative of the nature of the contract.'

She called on the board to show more transparency and said the repayments should be postponed.

How did it happen?

The annual fee paid by the hospital to Octagon is adjusted every six months in line with a measure of inflation.

But there is a disparity in the contract's reference date and the date used by Octagon in its invoices to the N&N.

The measure of inflation called the Retail Price Index (RPI) is set from a reference date of April 1, 1995 in the PFI contract.

But Octagon has consistently used the RPI for March 1995 instead in all its invoices, which gives a higher rate of inflation than the April measure.

This suggests the N&N has paid at least £2.9m more than it needed to between 2001 and 2015.

The N&N cannot get out of the contract until 2037 at the earliest.

It is estimated the NHS will pay Octagon more than £1 billion over the course of the Private Finance Initiative (PFI) – nearly five times the cost of building and opening the hospital.