Companies will make £3.3bn from PFI

Companies stand to reap profits of £3.3bn from the government's controversial private finance initiative (PFI), a healthcare pressure group said today.

The claim by London Health Emergency comes after the Commons public accounts committee criticised private firms involved in one of the first NHS PFI deals for awarding themselves an early windfall of £115m.

The pressure group said private consortium Octagon's refinancing of the PFI deal for Norfolk and Norwich hospital to boost its profits was a "scandal".

It estimates that recently approved PFI schemes in London, Birmingham and St Helens will produce windfall profits of £440m for the companies involved. And, it reckons, the private sector stands to make £2bn worth of bonus payouts from £10bn worth of PFI schemes in the pipeline.

Under the private finance initiative, private firms raise the money to design and build a hospital, which NHS trusts must then pay back with interest over 20-30 years.

Geoff Martin, head of campaigns at London Health Emergency, called for a national inquiry into PFI and its impact on NHS finances.

He said: "If taxpayers want to know why the NHS is in financial crisis, despite the government's extra funding, they should look at the sums that the private consortia and their shareholders are bleeding out of the private finance initiative. The scandal at the Norwich and Norfolk NHS Trust is the tip of the iceberg."

A Department of Health spokesman said the pressure group's estimates of the cost of PFI schemes were "fundamentally wrong" because they assumed all schemes would have the same terms and conditions as Norfolk and Norwich.

He said: "Their back-of-the-envelope calculations assume that interest rates and cost of borrowing are still at 1998 rates, which they are not."

Since 1997, about £50bn worth of public-private deals have been signed. The chancellor, Gordon Brown, announced a £26bn expansion of PFI contracts across 20 public sector projects in the 2006 budget.

The Commons public accounts committee branded the refinancing of Norfolk and Norwich hospital PFI scheme as "the unacceptable face of capitalism" after it emerged that the move had increased the investors' rate of return from 16% to 60%.