Letters: The cost of PFIs

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The Independent Culture
Sir: Michael Ball (letter, 20 July) points out that the Private Finance Initiative was made to appear cheaper than the public sector scheme, for Pimlico School, because it intended to build more houses on part of the land acquired.

In Coventry, PFI funding for our new hospital appeared cheaper only because the publicly-funded alternative had to add a "pretend" interest rate of six per cent.

The Government has been role-playing the private financier since 1990, and charging hospitals six per cent per annum of the value of their buildings and contents. However, this six per cent circulates back to the hospitals from general health revenue, paid by the Government to health authorities.

Under PFI the six per cent leaves the health system as real interest on real debts. What's more, the hospitals so far using PFI have seen this rise in practice to between 12 and 18 per cent.

We pay for this additional cost of financing PFI through our taxes. However, as the health trust does the borrowing, the Government can claim it has reduced its own debts.

The increased costs are now part of what the Government gives the health authorities for all health costs - it becomes part of the Government's "increased spending on health care" - ie, a good thing.

MAEVE RILEY

Earlsdon, Coventry

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