Q31 Mr Bacon: I was asking about competitions and Mr Glicksman had agreed that the Treasury building had a competition for its financing, although it was the first one, he said, and Mr Finlay agreed that Octagon had had a competition for its financing. When most people go out into the market place looking for a mortgage to buy a house they do not necessarily go to the first building society that gives them the price, do they?
Mrs Dugdale: No, but I think that you have to appreciate that we were the groundbreaker for the market for PFI financing, and at the time when the original deal was struck there was not such a thing as a funding competition.
Q32 Mr Bacon: There was not such a thing as a PFI bond market. You say that there was not such a thing as a funding competition and I find that is not possible to believe. For PFI per se maybe, because PFI was new, but 20 years ago when I left university and started working in an investment bank we did what were commonly known as "beauty parades"; they are a standard feature of the City, a standard feature of how things work. You go along with three or four other banks, you tout your stuff, you strut your stuff, you tout you wares and then the client chooses. Is that not obvious, and why was that not done?
Mr Coates: Can I come in there?
Q33 Mr Bacon: Actually I was asking Mrs Dugdale. Was that not an obvious thing to do?
Mrs Dugdale: In the PFI market at the time, funding competitions did not take place in the market, they were not something that were done ordinarily in the market. Also, PFI at the time was very much the concept of a package, so that the private sector brought a package deal to the public sector, which included the finance as part of that overall package.
Q34 Mr Bacon: I will not pursue that any further. Can I ask you to turn to page 12? The hospital, I think I am right in saying, is now paying £1.7 million per year less in the annual unitary charge than would otherwise have been the case before the refinancing; is that right? That is basically how you are taking your gains?
Mr Forden: It is paying a total of £3.6 million a year less-
Q35 Mr Bacon: Is it?
Mr Forden: Of which £1.8 million was due to the refinancing gain and £1.8 million was as a result of extending the contract period.
Q36 Mr Bacon: I am talking specifically in relation to the refinancing gain, it was £1.7 million?
Mr Forden: Yes
Q37 Mr Bacon: And it is true that, as the Chairman said at the beginning, you have taken on additional potential termination liabilities because of the refinancing?
Mr Forden: We have not taken on additional termination liability unless we terminate the contract ourselves, sorry.
Q38 Mr Bacon: Termination liability will only kick in if there was termination, I would have thought that was self-evident. The point I am referring to is maximum increase in termination liabilities in figure 12, £257 million. Obviously it is a contingent liability, if you like, a contingent situation, but it seems to me that in return for getting this extra refinancing gain that you shared, which means you pay £1.7 million per year less, you have taken on the risk-the risk, mark you-of £257 million extra should, for any reason, Octagon fail. That is correct, is it not?
Mr Forden: Should we wish to withdraw from the contract-
Q39 Mr Bacon: If Octagon fail-
Mr Forden: No, if Octagon fail actually we have not taken on that liability, no, because what happens then is we become responsible for servicing the debt, which is true.
Q40 Mr Bacon: And you will have the money with which to do it. Basically you have increased the risk to the hospital; you have taken on this extra. Am I right in thinking that the contract that you have with Octagon says that your termination liabilities are equal to total borrowings?
Mr Forden: To the maximum of the total borrowings, no.