PRIVATE INVESTORS accepted last week that profits for initial projects may have been high, but insisted they were lower now.

"There were good profits to be made," said Jo Elliot, the deputy chief executive of the Edinburgh investment bank, Quayle Munro. "These deals were put together with complete integrity when the world was very different. The returns reflected the risk that we and others assessed."

On-Yee Tai, a spokeswoman for the Public Private Partnership Forum representing over 100 companies, said: "Whilst the industry would accept that there have been a handful of projects where significant profits have been made, the genuine risks inherent in these early schemes cannot be underestimated."

Other evidence uncovered by Jim and Margaret Cuthbert, however, undermines companies' claims they they were taking a substantial risk. In 1998, Donald Dewar, then the secretary of state for Scotland, gave a written guarantee that if any health trust defaulted on payments, the government would step in to make sure that liabilities were met "on time and in full".

Serious flaws in the PFI business case for the Edinburgh Royal Infirmary were also discovered in a 1998 report by Moores Rowland Health Consulting for the Dutch bank Rabobank. There was some "double counting" of risks by Edinburgh NHS Trust, the report said.

A crucial £42 million interest-rate risk transferred to the private sector had been wrongly included, the report pointed out. Overall, the analysis was "incomplete" and "poor", it said.

The case for embarking on a PFI project had not been made by the health trust, the report contended. "It is impossible to rely on the trust's analysis of risk," it concluded. "Evidence of substantial risk transfer is weak."

The implication was that the financial risk taken on by investors was significantly less than the trust realised. "There have been major failings in the value for money, risk transfer, and affordability tests for PFI schemes," said Margaret Cuthbert.

"In the case of the new Royal Infirmary in Edinburgh, we now know that many of the problems were actually identified by the consultants acting for the lenders to the PFI scheme. Why was the public sector, which was acting on our behalf, not able to identify and act on these problems at the time?"