Back in the 1990s politicians dreamt up a way of funding new hospitals, prisons, and schools and keeping the borrowing away from national debt. It was John Major’s government that began the private finance initiative (PFI) scheme, which was much loved by Gordon Brown who expanded on it, and which we still see being used now. The highly respected academic Allyson Pollock was a lone voice for many years highlighting the folly of PFI—many have since caught up with her and now condemn such projects.

Under the scheme, private companies would borrow the funds to build the hospital, prison, or school and then be guaranteed payments from the government (the tax payer) for the next 30 years, bringing about huge profits and a guaranteed income. So solid was the investment that private financiers sold their PFI schemes on international markets to make even larger profits. Government backed debt repayment schemes are seen as rock solid investments by City financiers.

It is PFI debt repayments that now hang around the necks of many hospitals across the country, and which lead to huge holes in their finances that shift funds away from patients and into the boardrooms of City financiers. We hear politicians saying that our country is broke, but they don’t tell us that billions of pounds of our taxes are going to private companies profiting from our NHS, education, and penal system.

There are many PFI schemes around the country and it’s been estimated that we will pay more than £300bn to private companies for these PFI deals—more than five times the assets are worth at £57bn. Shockingly, that means that over £250bn of tax payers’ money has been handed over to the private sector, when it could have been spent on struggling public services.

One example of this is the Norfolk and Norwich Hospital, where a new hospital was built at a cost to the private financier of £229m. Over the whole term of the deal the total cost to the taxpayer is estimated to be an eye watering £1.16bn—yes, that does say billion. The hospital must make payments each year—last year they paid £57m—and cannot get out of this deal until at least 2037. The hospital currently has a deficit of approximately £32m per year.

We now have the possibility of PFI version 2 heading towards us. It has been announced that the NHS is looking to borrow £10bn from “hedge funds” to shore up the NHS’s ailing finances. It is PFI on steroids going to the City—who we all know are benevolent types with no ulterior motives.

It is now accepted by many (including the influential and independent King’s Fund) that the NHS is underfunded to the tune of billions, with the government’s requirement that the NHS make efficiency savings of around £22bn by 2020 widely judged to be undeliverable. Healthcare’s funding gap is only going to grow given the lower than inflation increases to the NHS budget over the past 10 years. More worryingly, things are set to worsen in the coming three years with even more paltry increases to the NHS budget. The NHS has always needed—and usually received—around 3-4% annual increases to keep up with advancing technology and the increased costs of healthcare for our population. On average, the increase has been 0.9% a year since 2009, leading to a huge hole in the NHS’s finances.

We are not a poor country, as many economists will state, and it is a political decision to underfund the NHS on such a grand scale. Large sums of money are wasted on time consuming competitive tendering. We recently saw the collapse of a procurement process to award a contract worth £687m in Staffordshire at a cost of over £800 000. This is just one example of many where millions of pounds are spent on management consultants, lawyers’ fees, and accountancy and PR executives. Some have estimated that the money wasted on tendering exercises across the country runs into the billions each year.

The decision by the government to look at borrowing £10bn from City based hedge funds for the NHS sends a shiver down the spine of NHS staff and NHS campaigners across the country. They know that the hedge funds will maximise their profits from the borrowing and ensure that they can extract as much money as possible from lengthy deals, which are likely to be very expensive to the tax payer. Any interest payment or profit made by the hedge funds is money lost to the NHS and to direct patient care.

The government could, if it wished, borrow the required funds for the NHS at lower interest rates and enable the NHS to receive the injection of cash that it has been deliberately starved of over the past 10 years. It would be even better if the government just funded the NHS adequately from progressively implemented general taxation—this is fair to society and fair to the tax payer. It will also go some way to defuse the claim by some that the NHS cannot continue as it is and that charging must be brought in or insurance policies introduced. Many feel that this is actually what the government is hoping comes about from their deliberate neglect of the NHS.

Serious questions need to be asked of our politicians and they must be held to account for any deal they sign with City based hedge funds. We must all ask questions of our MP about this deal as it will saddle the NHS with mountains of debt payments for many years to come.

PFI has been a disaster for NHS finances since the 1990s and this latest idea must not be allowed to add to that and makes things even worse.

David Wrigley is a GP in Carnforth, Lancashire. He is also deputy chair of BMA Council, and the co-author of the books NHS for Sale and NHS SOS. You can find him on Twitter @davidgwrigley. The views in this article are his own and don’t represent any organisation he’s affiliated to.

Competing interests: I am a member of the BMA Council and the BMA General Practitioners Committee. I am chair of Doctors in Unite (Medical Practitioners Union). I am co-author of the books NHS for Sale and NHS SOS.