BACK in 2006, Scottish Borders Council signed up for its first Private Finance Initiative (PFI), writes Andrew Keddie.
With consent from the Scottish Government, the local authority awarded a contract to a consortium known as the Scottish Borders Education Partnership (SBEP) to construct three secondary schools, replacing facilities which were not fit for purpose in Earlston, Eyemouth and Duns.
PFIs or Public Private Partnerships (PPPs) were a controversial route as a means of funding major capital projects beyond the borrowing capabilities of local authorities and were opposed by the SNP, then in opposition at Holyrood, as a bad deal for taxpayers.
Nevertheless, the Labour/Lib Dem coalition of the time gave the go-ahead for the new schools and construction work began in 2008.
Under the arrangement, one of the SBEP’s partners, Graham Construction, would design and build the schools while another, Amey, would be responsible for building and grounds maintenance, security, caretaking and cleaning for the 30-year period of the contract.
It cost the partnership £60million to fulfil its part of the arrangement, with the council committed to repay that investment, plus interest and the consortium’s profit, by way of an annual unitary charge.
In the current financial year that payment is £7.4million and by the end of 30 years, SBC will, according to its annual statement of accounts, have repaid £289million for the three schools.
This week Alec Neil MSP, minister for infrastructure and capital investment, said his government was committed to a new financing model – a non-profit distributing (NPD) model to replace the “discredited PFI”.
“For years, Scottish taxpayers have been fleeced by the PFI deals that deliver massive profits for private companies,” said Mr Neil. “Those days are gone forever because this government has set the country free from the shackles of PFI: a decision that will benefit Scotland for years to come.”
He said the new model would play a pivotal role in improving Scotland’s infrastructure and economy, and would see a £2.5million pipleline of projects taken forward by the Scottish Futures Trust.
“Capital spending is vital ... which is why we are committed to sustained investment in our infrastructure despite draconian cuts in our capital budget imposed by Westminster.”
But despite Mr Neil’s condemnation of PFI and the ongoing cost repayments, SBC leader David Parker said he remained of the view his council had made the right decision at the time.
“When we took the decision to build the three high schools we carefully considered all the financing options available to us at that time and a PPP scheme was the only game in town,” he told us.
He went on: “Had we not gone down that route, then we would not have been able to build the schools – and let us be clear here: the new model being proposed by the Scottish Government is actually a form of PPP.
“It simply has in place rules on how much profit private organisations can take from the contract and, of course, it was not available to us in 2006.
“It is also ironic that the NPD model, extolled by Mr Neil, is precisely the same one used by the SNG Government in 2008 to deliver the Borders railway and, as we all know now, that process failed miserably.”
Private firms snub railway – page 5