The committee also expressed concern at the way the Government misses out on gains made by PFI investors selling their equity interests on to third parties. It warned that consolidation among PFI investors could see a small number of investors dominate the market.

The voluntary code for sharing gains on refinancing was agreed with contractors after anger over huge profits companies made on refinancing early PFI projects once they were up and running. These often took advantage of the cheaper finance available once the higher-risk construction phase has been completed. Ministers faced outrage in 2003 when investors in the Norfolk and Norwich Hospital PFI scheme secured an £80m windfall by renegotiating their borrowing. In a scathing report at the time, MPs accused the consortium involved of "lining investors' pockets".

Under the code, companies originally agreed to share 30 per cent of refinancing gains on early PFI projects with the public sector. More recent projects stipulate that half of any refinancing gains should be paid to public sector clients.

Treasury officials blamed the shortfall on the decline in firms attempting to renegotiate the finance for PFI projects. But yesterday MPs warned that the code might discourage contractors to make savings by renegotiating their debts. Edward Leigh, the chairman of the committee, said: "Local public sector officials taking forward PFI projects are often painfully lacking in commercial experience. Staff negotiating the fine print of refinancing clauses in contracts ... must be trained.

"Proceeds gained by the public sector from PFI debt refinancing under the voluntary code for the sharing of gains are well short of expectations. A sliding scale of sharing of gains might encourage more refinancings with benefits to both public and private sectors."

Officials insist that refinancing PFI projects can cut the cost to the taxpayer. They insist that NHS trusts and local authorities have built up a pool of expertise in negotiating PFI deals and point to the work of the Government-backed consultancy Partnerships UK in advising on PFI contracts.

A Treasury spokesman said: "The taxpayer has derived significant benefits from the Government's introduction of a voluntary code and 50/50 gain sharing for PFI refinancings. The Treasury only supports refinancings where they offer value for money. Although there is no evidence that the secondary equity market is working ineffectively we continue to monitor developments in the market, both with other departments and with key investors."

Deals that are showing the cracks

* NORFOLK & NORWICH HOSPITAL

The modernisation of the hospital has been one of the most high-profile of the controversial PFI projects in the National Health Service. The Government claims the rebuilding of the hospital would not have been possible without PFI money, but the consortium that financed the project was subsequently able to refinance its borrowings in order to take profits ahead of schedule. The Public Accounts Committee, which criticised the deal again today, last year warned that the refinancing had increased investors' rate of return from 16 to 60 per cent.

* BALMORAL HIGH SCHOOL

PFI money has also been used to modernise school buildings and even build new schools. But in Northern Ireland, the newly built Balmoral High School is to close next year because of a fall in pupil numbers, which was predicted before the project began. The Northern Ireland Office is obliged to pay £7.4m to continue leasing the school until 2027.

* LONDON UNDERGROUND

It's not only public sector organisations that have run into huge problems with PFI projects. In November, watchdogs warned that Metronet, the private sector consortium currently modernising London's Tube network under a public private partnership agreement, faced a £750m cost over-run on the first phase of the project. The figure has since risen to at least £1.2bn, and may be even higher. Metronet is responsible for the first £100m, and arguments are now raging over who should fund the rest of the deficit.