Money down the drain – Time to pull plug on Labour’s PFI legacy says Union leader


By Martin Kelly
A leading Union official has called for an end to PFI contracts after a blunder at Edinburgh Royal Infirmary led to an operation having to be performed under torchlight.
Writing in the Daily Record, Dave Watson of Unison has argued that PFIs are nothing more than a scheme that allows private companies to make money out of schools and hospitals.

The article was prompted after the PFI provider at Edinburgh Royal Infirmary switched off power when surgeons were in the middle of an operation.  Quick thinking doctors grabbed a torch in order to finish the operation.

Mr Watson claimed that taxpayers are powerless to do anything about the £60 million contract, which was put in place by the last Labour/Lib Dem administration.

According to Mr Watson, the cost in terms of interest to local authorities and health boards is more than double that had the contracts been paid for using more traditional means.

Audit Scotland, says the Unison Official, have calculated these costs as adding £200,000 to £300,000 each year for every £10million invested.  Adding in other payments, Unison Scotland’s At What Cost report calculated the additional cost of PFI schemes at £2.1billion.

PFI, or PPP as it was known under the Conservatives, was introduced by Gordon Brown’s Labour Government as a means of keeping borrowing off the UK books and mask the true level of the UK’s debt. 

However many contracts were so badly drafted that private companies were able to make lucrative returns on their investments.  One of the highest local authority PFI bills in Scotland belongs to Glasgow City Council – there the Labour run authority pays out £46 million each year for contracts negotiated using the last Labour/Lib Dem Executive’s PFI model.

Mr Watson pointed out that even after paying these companies for 25 or even 30 years, local authorities still do not own the assets which remain the property of the PFI outfit.

Official figures put the cost of PFI contracts in Scotland at almost £1 billion a year, some of which is eating into health service budgets.

In June 2010, Newsnet Scotland revealed that the NHS in Scotland would have to pay over £1 billion in the next five years for Labour’s PFI legacy.

We revealed that the cost of PFI contracts for the Edinburgh Royal Infirmary, Wishaw General and Hairmyres Hospital amounted to more than the capital cost of the projects themselves – with more payments in years after that, as a result of Labour’s PFI and PPP deals.

Between 2010-11 and 2014-15:

NHS Lothian would pay £228 million for Edinburgh’s Royal Infirmary – despite the capital cost of the hospital being only £206 million overall.

NHS Lanarkshire would pay £136 million for Wishaw General – a project worth £121 million and £106 million for Hairmyres, worth only £68 million.

In May 2010, we also reported that in 2008-09 PFI contracts took a £244 million chunk out of Scottish education, this was an increase of £62 million on the 2007-08 figure.

PFI contracts are linked to the retail price index and costs rise accordingly.  With the last Labour administration having negotiated contracts that cannot be altered to reduce payments, then austerity cuts mean that the proportion of public cash going to private companies is steadily increasing – meaning even less cash for public services.

The Scottish Government has vehemently opposed the use of PFI contracts in order to finance the building of schools and hospitals and since coming to power in 2007, no new PFI contracts have been negotiated.

The Scottish Futures Trust was introduced as a replacement and contracts since have been more efficiently negotiated and provide better value for taxpayer’s cash.

However Labour continued with the practice in England and in 2009 the Treasury had to step in and underwrite PFI contracts South of the border that were in danger of collapsing as the UK banking crisis hit hard.