Warning over 'shameful' PFI leases lasting generations
- 21 September 2011
- From the section Scotland
Ministers are warning generations of Scots will have to pay for past school and hospital building projects which were funded by the controversial private finance initiative (PFI).
An investigation by BBC Alba's Eorpa programme has revealed that some contracts included leases lasting more than a century.
Infrastructure Secretary Alex Neil described these deals as "shameful".
PFI was favoured by Labour for funding big building projects.
It was scrapped by the SNP when they came to power and the alternative Scottish Futures Trust was set-up.
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, critics thought it was an expensive way of mortgaging public services.
Hairmyres Hospital in South Lanarkshire cost £68m but the contractor will get 10 times that over the next 30 years.
Eorpa's investigation has now revealed that the private firms also hold leases on the land surrounding many PFI projects.
The contract for the new Edinburgh Royal Infirmary building lasts 25 years but the lease of on the land is for 130 years.
Mr Neil 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."
The Eorpa programme has identified seven projects across Scotland with lengthy leases.
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.
Malcolm Iredale, finance director for NHS Highland, said: "At the time the deal was the best deal that we could get.
"I think it is very easy to look back and say we could do things differently.
"I think it is difficult to say would we do the same deal again."
Labour, who were responsible for many of the PFI projects in Scotland when they were in coalition with the Lib Dems in the Scottish Executive, now suggest they had no choice but to accept these contracts to keep public borrowing down.
Lewis MacDonald, the party's Holyrood spokesperson on infrastructure, said: "One of the things we said in the run-up to the 1997 UK general election was that we would keep in place for the first two years the spending plans we inherited from the Tory government.
"Not because we thought they were good spending plans but because we knew that it was critical that the money markets had confidence that an incoming Labour government would maintain economic stability."
You can see the Eorpa investigation on BBC Alba at 20:30 on Wednesday.