Trusts with large private finance initiative projects are facing continued pressure to cut services and jobs to meet payments, two leading researchers have claimed.

A funding gap means trusts have no choice but to make the cutbacks, a study by Professor Allyson Pollock and Mark Hellowell of Edinburgh University has found.

Existing PFI schemes are an 'albatross around the neck' and future schemes should be funded out of the public purse, Professor Pollock told HSJ.

'The way out is not to sign another PFI deal, and go back to conventional funding,' she said.

The report, Private Finance, Public Deficits, says trusts with a PFI scheme worth more than£50m face paying capital charges worth 10.2 per cent of their income.

But only 5.8 per cent is available through payment by results, it reveals.

On average, trusts with PFI projects face capital charges of 8.3 per cent - still 2.5 per cent more than they are funded for.

Capital charges - introduced in 1992 in a bid to cut down on inefficient use of estates - were cheaper for directly funded schemes, the report argues.

All PFI business cases have begun by promising to sell assets and cut service capacity to make the schemes affordable, it says.

But 'these cuts have been insufficient to bridge the funding shortfall', except in foundation trusts.

The average annual NHS repayment will also increase by over four times, they predict, from£470m in 2005-06 to£2.3bn in 2013-14.

The cost of total repayments will also rise from£52bn to£90bn - although the capital value of the projects will only be£15bn.

PFI schemes can also have negative effects on the local health economy, the report says. It cites south east London, where two projects have big debts but non-PFI hospitals could see service and jobs cuts.

'While PFI appears to be a major cause of deficits and associated service cuts among trusts, its inflexible nature means that plans for reductions to service capacity are likely to affect health economies more widely,' the reports states.

But supporters of PFI say it is the only option for funding large hospital developments. New well-equipped hospitals can attract more patients, helping bridge the shortfall in funding, they argue.

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