The NHS must do more to force private contractors to share financial gains from hospitals funded by private finance initiative (PFI), the government spending watchdog has said.

Today, the National Audit Office published a report called the Performance and Management of Hospital PFI Contracts, which says the National Health Service (NHS) often fails to effectively manage its long-term deals with private contractors.

It says the NHS is losing out as a result, because big contractors managing more than one PFI  hospital are achieving economies of scale, and not sharing their winnings with taxpayers.

The report also casts doubt on the ability of NHS Trusts to make the efficiency savings on hospitals that are demanded by the government.

It says: “It is likely that Trusts will be expected to make efficiency savings over the next few years, but their ability to make savings from their PFI contracts is very limited.

“Because Trusts pay an index-linked fixed sum, it is difficult for them to make savings without cutting back on services. Contractors who secure economies of scale through managing multiple PFI contracts are rarely required to share these efficiency gains with Trusts.”

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