Examination of Witnesses (Questions 180
- 184)
WEDNESDAY 16 NOVEMBER 2005
DEPARTMENT OF
HEALTH AND
NORFOLK AND
NORWICH UNIVERSITY
HOSPITAL
Q180 Jon Trickett: The other index
which you used which you said was broadly comparable was 41%?
Mr Coates: That is right.
Q181 Jon Trickett: That includes
the 49% does it not and therefore the 41% would not be so high
if it did not include government contracts, would it not?
Mr Coates: Yes.
Q182 Jon Trickett:—which suggests
a wider division or disparity between the two rates of inflation.
Now I know that the NAO said they were going to give us a note
on this, but I would expect really that given the fact that the
consultants had drawn the attention of the NAO to this that some
answer might be provided to us today. The fact is that for some
reason or another the private sector builders are charging much
more to public sector contracts than they are to private sector
contracts in terms of the rate of inflation. That is what is happening,
is it not?
Mr Coates: I cannot positively
answer that question because I do not know what makes up the 41%
and what makes up the 49%.
Q183 Jon Trickett: Except you introduced
the figures to the Committee. You brought the evidence to us.
I am no mathematician but even I understand that the logic of
what you said was that private sector inflation in terms of the
building costs is running at less than the public sector but probably
we will look at that when the figures come back to us.
Mr Glicksman: Chairman, would
it help if I commented on this. There are quite a lot of different
statistics on tender prices for different sectors of the economy,
public sector, private sector, and different bits within the public
sector such as road construction and other sorts of construction.
There are quite wide divergences. It is not the case that all
public sector comes in at a high level and private sector comes
in at a low level. There is a quite wide divergence of indices.
Jon Trickett: It is precisely for this
reason, Chairman, that we wanted a value-for-money Report because
all we have got in front of us is information that appears to
indicate two rates of inflation in the construction sector, never
mind refinancing, and what was required was an objective analysis
on value for money terms on what was in front of us, and that
is precisely what we have not got.
Chairman: You want to ask for a note,
Mr Bacon?
Q184 Mr Bacon: Very quickly, yes,
if I could Chairman, if the hospital could provide a note on the
average occupancy of the hospital, in your experience, compared
with what the occupancy was designed to be, because I am interested
in understanding more about the stresses and strains on the hospital
and on the Norfolk health economy more widely.
Mr Forden: I can answer that question
now if it would help. Both were 90%. We are averaging around 90.5%
and the business case set out for 90%, so it is very close.
Chairman: Thank you very much. That concludes
our questioning. To sum up, Octagon have achieved a refinancing
gain of £116 million in present value terms. It did that
mainly by just increasing its borrowings by 53% which provided
cash to the shareholders to give a rate of return of 60%. I know
this was an early PFI project but I never want to see an Accounting
Officer appearing before this Committee defending what I believe
to be the unacceptable face of capitalism in relation to the public
sector.
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