TAXPAYERS will spend £199 billion bailing out hundreds of PFI projects across the UK, according to the government’s spending watchdog.

In a new report the National Audit Office says that the glut of new schools and hospitals and other infrastructure projects funded through deals between the government, local authority and private companies, will end up costing between 40 and 70 per cent more than those funded by government cash.

There are currently over 700 operational PFI deals in the UK — with 82 in Scotland. In total the taxpayer hands over £10.3bn a year, and will do so until some point in the 2040s.

The way PFI works is that private companies fund the construction of facilities like hospitals, schools and roads, and the taxpayer then pays it back by handing money for debt repayment, financing costs, maintenance and any other services provided, over a period of 30 or 40 years.

For the government it means new projects are “off the balance sheet”, meaning that they don’t count against public sector borrowing rules.

The government reduced its use of PFI after the 2008 financial crisis, as the cost of private finance soared.

There’s also been increasing public and political scepticism of the model.

In Scotland, they were replaced by the Non-Profit Distributing model (NPD) which, while broadly similar to PFI, caps the return private sector firms can take, and sees any profits made returned to the public purse.

The Treasury followed suit with their version of NPD, PFI2.

But in their report, the NAO says government departments are now “trapped” in schemes that they can’t abandon.

It adds that there is little evidence the projects funded in the manner have ever represented value for money: “We have been unable to identify a robust evaluation of the actual performance of private finance at a project or programme level.”

The report comes after Carillion went into liquidation earlier this week — many of its contracts were governed by PFI.

Introduced by John Major in 1992, the schemes were hugely backed by the Labour government. Of the PFI payments made last year, 85 per cent stem from decisions made more than ten years ago when Gordon Brown was in No 10 and, before that, in the Treasury.

The former prime minister has previously defended the use of private investment, saying new infrastructure projects across Britain would have been impossible without PFI.

Labour MP Meg Hillier, who chairs the Public Accounts Committee in the House of Commons, said the government needed to rethink how major projects were funded: “After 25 years of PFI, there is still little evidence that it delivers enough benefit to offset the additional costs of borrowing money privately.

“Many local bodies are now shackled to inflexible PFI contracts that are exorbitantly expensive to change.”

She added: “We need more investment in our schools and hospitals but if we get the contracts wrong, taxpayers pay the price.”

A government spokesman said: “We have reformed how we manage PFI contracts, and through PF2 have created a model which improves transparency and offers better value for money. Taxpayer money is protected through PFI and PF2 as the risks of construction and long-term maintenance of a project are transferred to the private sector.”