The cost to the taxpayer of paying for rigged interest rates which resulted in fines of £940m for the Swiss bank UBS was not addressed by the chancellor in his relaunch of the controversial private finance initiative (PFI) to PF2 in this year's autumn statement.

PFI is the way government raises money from the private sector to build public projects such as schools and hospitals. But it has been criticised for providing a lousy deal for taxpayers by being too generous to the private contractors. Under PF2, the taxpayer will take a share of up to 49% in new projects, which the coalition claims will give the taxpayer a better deal.

But how many existing PFI deals were signed on the basis of manipulated interest rates and indexation, causing the repayments to rise annually, and why has the Serious Fraud Office not moved to open all PFI contracts to forensic examination? Unless it does, banks such as UBS and Barclays may continue to profit from deals at the expense of the NHS budget for patient care.

The NHS is generating huge profits and bonuses for the financial services industry under PFI contracts, while repayment terms for the debts are crippling the NHS. In the South London Hospital Trust, for example, debt payments in one of its PFI hospitals, Bromley, are increasing at about £1m a year partly because of complex financial instruments known as derivatives that are based on the Libor rate. Meanwhile, total trust income has fallen by £20m over the last three years. A special administrator appointed by the government is recommending that nearby Lewisham hospital be downgraded to bail out the PFI.

Scores of other hospitals are wrestling with the same problem of a steadily rising cost of PFI repayments linked to inflation. In Peterborough hospital's £411m PFI deal, debts are predicted to reach £54.3m this year. The National Audit Office (NAO) concluded in November that it was not affordable from the word go and should never have been signed. The health union Unison estimates that by the time the trust has paid off the 33-year contract in 2043 it will have cost it a total of £1.96bn. So, the Duke and Duchess of Cambridge presided last month over the opening of a near-bankrupt new PFI hospital.

Meanwhile in Portugal, the International Monetary Fund has described PFI deals there as poor value and called for publication of the contracts to allow public scrutiny . In the US, councils and hospitals are considering legal action for fraudulent manipulation of the same financial instruments used in Peterborough and South London. Here, all the PFI deals remain secret and we begin to look increasingly like a banana republic by comparison. The Treasury's new PF2, which allows the public sector to appoint directors to the boards of individual projects, as well as requiring the projects to publish financial performance figures every year, does nothing to address secrecy or the obscene profiteering because the contracts and the financial models, including interest rates, indexation and cash flows, will not be published. It is a fig leaf to hide the mutilation of public services.

Which brings us to the policy on hospital closure. The Health and Social Care Act 2012, which effectively ends the NHS in April, strengthens provisions for making NHS hospitals bankrupt. The system is profoundly undemocratic. Under the new rules the consultative checks and balances usually associated with hospital closures are waived and, according to the Commons' public accounts committee, the Department of Health cannot or will not explain when trusts will be put into the bankruptcy process or how it will work. Leading law firm Bevan Brittan estimates that a trust can be dissolved within 22 weeks of insolvency proceedings starting. That speed is unparalleled.

The NAO has published evidence that 41 NHS trusts and 32 foundation trusts might be in deficit. As a result, hospital closures and bed cuts are planned across the country, triggered by government-inspired deficits which are in no small part due to PFI. However, the NAO has also pointed out that last year there was a surplus of £2.1bn across the NHS as a whole. So we have a tax-financed service generating, from the patient care budget, a surplus for the exchequer as well as profits from PFI for the banks.

If the government put transparency and public accountability before the banks then the policy of shutting down the NHS and hollowing it out, using the smoke and mirrors of financial deficits and PFI, could become a thing of the past.