The cost of Britain's controversial private finance initiative will continue to soar for another five years and end up costing taxpayers more than £300bn, according to a Guardian analysis of contracts that were sanctioned by the Treasury.
Despite recent coalition criticism suggesting that the government was going cold on the scheme, recently published figures indicate that repayments will continue ballooning until they peak at £10.1bn a year by 2017-18.
The 717 PFI contracts currently under way across the UK are funding new schools, hospitals and other public facilities with a total capital value of £54.7bn, but the overall ultimate cost will reach £301bn by the time they have been paid off over the coming decades.
Much of this difference is due to ongoing running costs built into the contracts, but the schemes have also been criticised for providing poor value for money compared with the interest rates the government would pay if it borrowed money directly to pay for the schemes.
Last week, South London Healthcare Trust, which runs three hospitals in south-east London, was placed in administration by the health secretary as it struggled to meet the cost of its PFI obligations.
Dave Prentis, general secretary of the union Unison, said on Thursday night: "The NHS is just the start of the story.
"We're sitting on a PFI debt time bomb, and the sheer scale of the burden paints a seriously grim picture for the future of our public services."
PFI had left the UK with a "staggering mountain of debt," Prentis said.
The Treasury said on Thursday that it expected to make an announcement soon following a "fundamental review" of PFI and a search for alternatives, initiated by ministers late last year amid concern that too many of the deals represent poor value for money. Ministers recognised the concern felt about PFI and had already acted to make savings, added a spokeswoman.
The Treasury said that future liabilities under PFI total about £242bn (once existing payments are taken into account) and that this figure would shrink to £122bn if it were adjusted for future expected inflation. Nonetheless, details of the contracts compiled by the Treasury make clear that some NHS organisations will end up paying almost 12 times the initial sum over what is usually a 30-year contract.
For example, while the capital cost of rebuilding Calderdale Royal Hospital in Yorkshire is £64.6m, the scheme will end up costing Calderdale and Huddersfield NHS Foundation Trust a total of £773.2m. Similarly, the cost of building the new Walsgrave district general hospital in Coventry will jump from an initial £379m to an eventual £4bn.
Most of the 717 contracts analysed were agreed under Labour, but a number have been signed recently and were agreed by the coalition.
In 2007-08, the total annual repayment cost of all PFI schemes in the UK was £5.78bn. But by 2017-18 that will have almost doubled to £10.1bn in a decade, and repayments will cost at least £9bn a year for the decade after that.
The Treasury document also reveals that 39 further PFI projects were being procured in March this year, with total capital costs of £5.36bn, despite senior ministers including David Cameron and George Osborne having heavily criticised Labour's extensive use of PFI while in office.
These deals will add tens of billions of pounds more to the £301bn price tag.
Before the 2010 election, Liberal Democrat leader Nick Clegg condemned PFI as "a bit of dodgy accounting – a way in which the government can pretend they're not borrowing when they are, and we'll all be picking up the tab in 30 years".
In opposition, Osborne pledged that the Conservatives would stop using PFI and denounced Labour for relying so much on a source of finance that he said was "totally discredited". "We need to find new ways to leverage private-sector investment. Labour's PFI model is flawed and must be replaced," he said in November 2009.
But Margaret Hodge, chair of the powerful Commons public accounts committee, said the coalition had failed to come up with the promised alternative since coming to power. She accused ministers of extending PFI in effect through a recent scheme to encourage housing associations to build new social housing using borrowed money – a move she warned could put the viability of some of them in doubt by overloading them with unwanted debt.
Hodge said that "inevitably" some public services would have to be cut in coming years as sectors such as the NHS struggle to meet rising PFI repayments at a time when budgets are expected to remain tight. The squeeze on public spending is expected to last until 2017 or even beyond.
"£301bn is a hell of a lot of money," Hodge added. "The irony is that we privatised the buildings but nationalised the debts. It's crazy."
The huge sums revealed in the Treasury's list have renewed concerns about the wisdom of using PFI to build a wide range of public , facilities when the eventual costs are so much higher.
For example, Barts Health NHS Trust in London says the construction of new medical facilities at its two main sites will cost £1.1bn, but the document reveals that the eventual cost will be £7.1bn by the time the contract is fully paid off in 2048-49.
That will cost the trust an average of £115m a year at today's prices for the entire duration of the contract, the trust confirmed.
"The full business case clearly demonstrated that the private finance initiative option provided the best solution for the delivery of services and value for money for the NHS, compared with the publicly funded alternative," said a Barts spokeswoman.
"Our new hospitals replace outdated, awkwardly configured buildings with fantastic new facilities that meet the challenge of providing healthcare to a local population with some of the most challenging health needs in the UK."
A Treasury spokeswoman said: "The government has already taken action to drive savings in PFI and as part of its review of PFI aims to deliver a new, cheaper model, which will ensure a fair deal for the taxpayer now and in the longer term.
"The government has for the first time published a clear assessment of PFI liabilities."
An aide to George Osborne said : "Under Labour PFI offered little value for money and was hidden off balance sheet by Ed Balls and Gordon Brown.
"We have already driven savings in existing PFI projects, made the value for money criteria much stricter and for the first time published our PFI liabilities in the whole of government accounts." The Guardian
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