The effect of high interest rates and excess returns can be seen in levels of debt repayment. Cuthbert and Cuthbert calculated annual debt repayment to PFI consortiums between 1.49 and 2.04 times higher than the amount that would have been charged to the UK government if it had borrowed directly for the construction (table 3).
Table 3
Ratio of what the public sector could have borrowed at same cost relative to capital actually raised through private finance13
| PFI project | Ratio of possible:actual borrowing for same cost * |
| New Royal Infirmary Edinburgh Hairmyres Hospital James Watt College Highland PPP2 schools Perth and Kinross office and car park Hereford Hospital | 2.04 1.97 1.97 1.49 1.82 1.68 |
* The ratio is calculated as the net present value of the stream of unitary charge payments (net of lifecycle, operations, and maintenance charges) to the net present value of the capital raised for the project. Net present values have been calculated at the appropriate interest rate at which the public sector could have borrowed.
In 2011, Hellowell, who analysed a single hospital scheme for the House of Commons Treasury Committee, reported "the government could have secured 71% more investment by borrowing on its own account."14
In 2010, the National Audit Office estimated that between £500 million and £1 billion higher repayment costs had been locked into PFI deals as a result of high financing costs.15 In Portugal, the IMF, which is advising the country on its sovereign debt crisis, has called for contract renegotiations to address high and unjustifiable repayment levels.16
However, instead of renegotiation, in 2009, the UK Treasury opted to create a new fund to provide government loans to projects for which bank finance proved insufficient. The UK government's willingness to support high returns to banks that the taxpayer has bailed out reflects its commitment to PFI policy.
PFI is a one hospital for the price of two policy.17 For every PFI hospital up and running the public sector is in fact paying the price of two. The new Government is sceptical about the PFI policy and the chairman of a parliamentary select committee (Public Accounts Committee) went as far as to call the scale of profits generated for the private sector "the unacceptable face of capitalism".18 However it has not opened the contracts and so there has been no proper public scrutiny.
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13 Cuthbert, J. and M. Cuthbert (2008) 'The Implications of Evidence Released Through Freedom of Information on the Projected Returns from the New Royal Infirmary of Edinburgh and Certain Other PFI Schemes'. Available at www.cuthbert1.pwp.blueyonder.co.uk.
14 House of Commons Treasury Committee. The Private Finance Initiative. 18 July 2011.
15 National Audit Office. Financing PFI projects in the credit crisis and the Treasury's response. London: NAO, 2010.
16 Allyson M Pollock and David Price. PFI hospitals bear the cost of Libor manipulation. BMJ 2012;345:e5095 doi: 10.1136/bmj.e5095 (Published 30 July 2012)
17 Cuthbert J, Cuthbert M. Response to Scottish Futures Trust: consultation paper. http://www.cuthbert1.pwp.blueyonder.co.uk/ (accessed 01 September 2010)
18 House of Commons Committee of Public Accounts. The refinancing of the Norfolk and Norwich PFI Hospital. HC 694. London: The Stationery Office Limited, 2006.