Richard Branson's Virgin Care said the procurement process for the NHS in Surrey was flawed and began legal action against the public health provider

Virgin Care won £1billion of NHS contracts in 2016/17 as services were privatised

Sir Richard’s company has more than 400 NHS contracts including GP practices

After an £82m contract for children’s medical services in Surrey was lost he sued

Richard Branson’s healthcare firm has pocketed £2million of public money by suing the NHS.

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Virgin Care took High Court action after losing out on an £82million contract to provide children’s medical services in Surrey.

The work was handed to a rival group of in-house NHS providers and a social enterprise firm last year. Virgin Care claimed there were ‘serious flaws in the procurement process’ and secured an out-of-court settlement in November.

Newly-released accounts show that six clinical commissioning groups and NHS England paid Virgin Care £1.565million. Surrey County Council handed over another £440,000 and at least £243,000 more was diverted from frontline NHS services to cover legal fees.

Virgin Care won £1billion of NHS contracts in 2016/17 as £3.1billion of health services were privatised.

Sir Richard’s company has more than 400 NHS contracts, including GP practices and sexual health clinics. Jon Ashworth, Labour Party health spokesman, said: ‘Constant tendering, procuring and contracting out of services wastes taxpayers’ cash. By taking this legal action, the NHS is forced to pay out again instead of putting that money into patient care.’

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Business entrepreneur Richard Branson's company has settled out of court with the NHS after it lost an £82m contract. The dispute affects the constituents of several Cabinet ministers, including Health Secretary Jeremy Hunt (pictured)

Guildford and Waverley clinical commissioning group, which represented all eight commissioning bodies, initially denied any wrongdoing and said it was confident procurement protocols had been followed.

The payout to Virgin Care has led to calls for all parties to reveal how the sum was settled upon. This information is being withheld for legal reasons and to ‘protect commercial interests’.

The dispute affects the constituents of several Cabinet ministers, including Health Secretary Jeremy Hunt, Chancellor Philip Hammond and Environment Secretary Michael Gove.

Responding at the time to the news that Virgin had secured a payout, Mr Hunt, who is MP for South West Surrey, said: ‘No one comes out of this episode well – neither the NHS for getting itself into a position where it loses a legal case, or Virgin for taking a case to court that means money is diverted from frontline services.’

East Surrey commissioning group, which handed over £198,800 of the overall settlement, has been placed in special measures because of its financial position.

Annual accounts reveal it ended the financial year with a deficit of £24.9million which was based on a ‘difficult 12 months for the NHS nationally and for our CCG in particular’.

Jacky Davis, a consultant radiologist and co-author of NHS for Sale, said: ‘The NHS is already starved of cash, and it is a scandal that Virgin Care is prepared to take scarce money away from frontline care. This exposes Virgin Care for what they really are – a predatory company that cares more about profits than patients.’

Sir Richard¿s company has more than 400 NHS contracts including GP practices. Virgin Health Care won public money after a dispute

A Department of Health spokesman said: ‘We are clear on how we expect every penny of British taxpayers’ money to be spent – on providing world-class care to patients – and we expect NHS England to ensure commissioning groups across the country are doing just that whilst abiding by the competition rules.’

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A Guildford and Waverley spokesman said: ‘The parties are pleased to confirm that an agreed resolution on the litigation concerning the Surrey children’s procurement has been reached to a satisfactory conclusion for all parties with detailed terms confidential to the parties.’

A Virgin Care spokesman said: ‘Our stated preference throughout remained not to be paid damages but that the process be re-run properly in the interests of local families and the frontline staff.

‘Contrary to reports, no money has been pocketed by Virgin Group or Sir Richard Branson and we continue to invest funds in the frontline NHS services we deliver.

‘We took this action because we were concerned that there may have been serious flaws in the procurement process.’

Sir Richard is worth around £3.8billion thanks to his transport, media and holiday businesses.