Cash and skills but at what cost?

The Private Finance Initiative is being used to help the government rebuild the country's public sector infrastructure. Supporters claim it brings private sector cash, skills and responsibility into the construction and onward management of schools, prisons and hospitals.

But there has been endless - and heated - debate about whether PFI and its sister scheme, public-private partnerships, involve higher or lower costs. The short-term price seems lower but there are worries that in the longer term, PFI saddles hospitals and other institutions with high levels of ongoing debt.

The report by the House of Commons public accounts committee highlights one area of concern that has received relatively little publicity so far and threatens to give new ammunition to the critics.

This is the increasingly common practice of letting private sector firms refinance these projects.

Refinancing allows companies to take money out of a scheme and replace it with borrowed cash. This brings the PFI players some quick profits but leaves the public body with potentially heavier penalty payments and a longer period of debt repayment.

The fact that the committee has highlighted this issue at a hospital project - especially one which is threatening to make 450 job cuts to balance its books - makes it politically dangerous for the government.

Patricia Hewitt, the health secretary, has demanded that the NHS in England must eliminate the deficits that have plagued her period in office.

Provisional accounts for 2005-06 that are due for publication later this month are expected to show a net deficit of more than £600m.

The companies at the heart of the Norfolk and Norwich hospital row, highlighted in the committee's report, say the money they took out was relatively high because this was one of the first PFI schemes, with very high risk attached.

They doubt there are others like this, because more recent projects are considered to carry relatively little political risk.

Despite all the arguments, PFI is accepted in government.