This section summarises the public costs of buyouts, bailouts, terminations and major problem PFI/PPP contracts in the UK. The public cost of bailouts is estimated because details are available for only two of the eleven projects. The additional cost of financial support for PFI/PPP projects is based on data of recent payments and the evidence that the £1.5bn support allocated in 2012 will be exhausted by 2027, many years before NHS hospital projects are concluded. The estimate also takes account of the current trend in NHS trust mergers, which usually include financial support for PFI/PPP projects, and the precarious finances of NHS trusts in general.
Table 10: Total public cost of buyouts, bailouts, terminations and major problem contracts
| Public costs | Cost (£m) |
| 1,500.0 | |
| Additional bailout finance likely to be required (estimate) | 1,500.0 |
| Buyout costs (estimate) | 636.0 |
| 1,677.1 | |
| Public cost of major problem contracts (3) | 2,139.8 |
| 114.5 | |
| Total | 7,567.4 |
| Further additional costs | |
| Additional cost of private finance compared to public investment (5) | 12,904.0 |
| 1,631.0 | |
| Interest rate swap liability in 2013-14 (7) | 5,800.0 |
| Total (8) | 20,335.0 |
Sources:
(1) Table 11: Includes only the specific costs related to PFI contracts and excludes hospital deficits.
(2) Table 12: The private sector bears significant costs in contract terminations, but they are not fully known.
(3) Table 13: Most of the public costs of major problem contracts are unknown, and in some cases, SPV shareholders and private contractors private companies suffer financial losses.
(4) Table 7
(5) Based on 4% additional cost "the effective interest rate of all private finance deals (7%-8%) is double that of all government borrowing (3%-4%)" (NAO, 2015a) and total PFI/PPP debt of £222bn plus £88bn already paid (Owen, 2015); plus £6.6bn NDP projects, Scotland; plus £6bn LIFT projects not included in HMT database. (NPD - Non-Profit Distributing PPP model in Scotland, although the SPV equity does not receive dividends and private sector returns are capped in competition, it is nevertheless a commercial for-profit model.
(6) Based on 2% additional cost compared with public investment and capital cost of £57,688m at 31 March, 2015 in HM Treasury database plus 4 projects in procurement and 22 concluded projects 2013-15; projects in Tables 11 and 12; £2,105.5m capital value NPD completed and in construction projects in Scotland, April 2016; £2,144m of LIFT investment not included in HMT database.
(7) Many SPVs have interest rate swaps to obtain long term financing at fixed rates and protection against higher borrowing costs if interest rates increase. "We estimate that these swaps are currently around £6 billion out of the money (if the shareholders wanted to buy-out the contract this payment would be required to exit the swaps). We believe the total swap liability may exceed £6 billion because more than 25% of the sampled SPVs which used swaps and other hedging instruments did not disclose the liability in their accounts" (NAO, 2015a).
(8) Excludes PFI Credits from central government to local authorities and NHS Trusts which are intended to be a contribution towards capital investment and is similar to the grant that would be payable if the project had been funded by public investment.
The public cost of buyouts, bailouts, terminations and major problem contracts, combined with the additional cost of private finance, interest rate swaps and higher PFI transaction costs, is £27,902m.
This sum could have could built 1,520 new secondary schools for 1,975,080 pupils, 64% of 11-17 year old pupils in England (National School Delivery Cost Benchmarking, 2015 and Department of Education and National Statistics, National Tables, 2016).