AFAIK - the back button will continue to work even with Private browsing turned on. It works for me when I use it. That is for your advantage as the user if you need to move back to another previously visited web site. While private browsing is turned on - no history is retained for that session.
So as afar as I know - that is the expected behavior for Safari with private browsing turned on.
Your history while using private browsing will not appear if you quit Safari and then launch it again. You can even check as you go along while using private browsing. Look at the history - it is not remembered while private browsing is turned on.