Calls for Labour to apologise for PFI legacy as bill tops £13bn


  By Bob Duncan
Scottish Labour has been called on to apologise for the legacy of PFI after it emerged the cost to Scotland’s local authorities of the controversial funding model has reached over £13 billion.
The call follows an answer to a Parliamentary question which revealed Scotland’s local authorities alone are facing a repayment bill of £13.4 billion for projects procured under PPP/PFI.

The figure is more than the entire annual budget for Local Government in Scotland, which in the current year is expected to be around £11.478 billion.   PFI was favoured by Scottish Labour for funding big public building projects.  It was scrapped by the SNP when they came to power in 2007 and the alternative Scottish Futures Trust was set-up.

In July this year the Scottish Futures Trust announced that it had made savings of over £131 million last year.  Savings made cut costs on the Scottish school building budget so much that funding was found for a further 12 schools.

Under PFI, instead of government paying upfront for a new building, it agreed to pay a private firm an annual fee to take on the entire construction and management.  The idea was the private firm would make a profit on the fee and the government avoided upfront expenditure and administrative hassle.

However, many critics thought it was an expensive way of mortgaging public services.

As an example, Hairmyres Hospital in South Lanarkshire cost £68m to build but the contractor will be paid 10 times amount that over the next 30 years. 

It was revealed last year that some of the current PFI contracts could continue to suck funds from the Scottish budget for generations.  The contract for the new Edinburgh Royal Infirmary building lasts 25 years but the lease of on the land is for 130 years.

Another example is the New Craigs Psychiatric Hospital on the outskirts of Inverness. The building contract lasts 25 years but the land will be held by the private finance company for 99 years.

When this came to light, Infrastructure Secretary Alex Neil described the deals as “shameful”.

He said:  “It could go on for generations because some of these leases last up to 100 years, even where the PFI contract only lasts up to 25 years. So that means another 75 years of a potential liability.

“It is outrageous and the people who signed these contracts on behalf of the Scottish Executive before 2000, and indeed the UK government, should be utterly ashamed of themselves.”

In England, PFI deals negotiated under the last Labour government were partly blamed after at least one NHS Trust was forced into administration.

South London Healthcare NHS Trust which runs Queen Mary’s in Sidcup, the Queen Elizabeth in Woolwich and the Princess Royal University Hospital in Bromley was placed in administration after two PFI deals led to an annual interest bill of £68 million.

During his Autumn Statement George Osborne slammed PFI schemes as ‘discredited’, and the SNP are now calling on Labour to follow suit, and apologise for saddling councils across Scotland with similar colossal debts.

SNP MSP Gil Paterson said:

“These are truly shocking figures and make crystal clear just how great a burden the Labour party has hung around the necks of our local authorities thanks to their costly obsession with PFI.

“With money as tight as it is, the last thing that local councils need is to be forced to divert millions upon millions of pounds into paying for Labour’s toxic private finance debt legacy.

“Despite the public sector in Scotland still being saddled with bills for billions of pounds, Labour have still completely failed to admit that they got it wrong and that PFI has been totally discredited.

“That failure worryingly suggests that given the chance, Labour wouldn’t think twice before inflicting another round of the failed scheme onto taxpayers in Scotland.

“If Labour want to try and regain any hint of credibility, they need to come clean on whether they now understand how badly they got it wrong on PFI or whether they plan a return to the scheme if given the chance.

“In light of these figures, this is clearly an issue they can no longer duck.”