This article analyses the cost of using private finance to build hospitals under the UK government's Private Finance Initiative (PFI). Hospital trusts' annual payments to their private sector partners are higher than expected and are taking 11% of their budget. The additional cost of private over public finance for the first 12 hospitals is about £60M a year, which is 20-25% of the trusts' income. PFI charges create budget inflexibilities and are increasing the pressure on the NHS to cut their largest cost: the jobs, working conditions and pay of their staff. © 2008 CIPFA.