The chief executive of health sector regulator Monitor has said he wants to examine the possibility of a public sector buyout of the huge private finance initiative contract encumbering Peterborough and Stamford Hospitals Foundation Trust.

David Bennett made the comment after Monitor announced it was going to send a hit squad of consultants into the financially challenged FT to find a “long-term solution” for its financial viability.

The trust’s forecast deficit for 2012-13 is £54.3m. Last year it recorded a deficit of £45.8m, after paying out £41.6m in PFI costs, according to the National Audit Office.

Monitor’s decision to appoint a “contingency planning team” for Peterborough anticipates the new “failure regime” powers the regulator will take on in 2013-14, under the 2012 Health Act. 

Peterborough will be only the second case in which the regulator has appointed such a team – the first was Mid Staffordshire Foundation Trust.

After Monitor announced the Peterborough move on Monday, the Commons public accounts committee questioned why it was necessary. Committee chair Margaret Hodge told Mr Bennett the health service had already spent “a fortune” on consultants to “try and sort out” the “mess” at Peterborough, adding: “And your answer today is yet another set of consultants”.

Mr Bennett replied that the team would examine options including cutting PFI costs. “There are some things that might reduce the day-to-day costs of the PFI,” he explained, “but I think there are some bigger opportunities that we need to at least look at.”

He added: “For example, some of these PFIs are funded by publicly traded bonds – can you buy the bonds, and actually take hold of the contract in that way?”

He told the committee he accepted that Peterborough would need continued public subsidy to remain open. “I think it’s unavoidable,” he said. “The decision to sign the contract for the PFI has led us to where we are.”

His comments came at the end of a fractious PAC hearing, in which committee members repeatedly berated witnesses – in particular NHS Midlands and East chief executive Neil McKay – for backing the Peterborough PFI deal and the franchising of the nearby Hinchingbrooke Health Care Trust to private sector operator Circle.

Ms Hodge told Sir Neil: “You took these decisions in 2007-08 to go out and find someone to do a franchise at the same time as you were building a massive great hospital in Peterborough, and it’s completely clear to anybody with an ounce of common sense… that there wasn’t the business and there wasn’t the money to sustain two separate hospitals.”

But Sir Neil contended it would be “probably impossible” to close Hinchingbrooke and have that hospital’s services relocated to “somewhere such as Peterborough”.

Separately this week, Monitor revealed that the contingency planning team it sent into Mid Staffordshire three months ago was likely to conclude that the FT was “unable to achieve long term financial or clinical sustainability in its current form”.

In a letter to Mid Staffs chairman John Caldwell, Mr Bennett said the Department of Health had needed to provide £20m last year to prop up the trust’s finances. He wrote: “This level of additional funding cannot go on indefinitely, and the CPT is likely to conclude that significant financial support – over and above that already agreed – would be needed over a five year period to enable the trust to keep operating.”