Audit private money in capital projects, Labour urges

Scottish Labour’s finance spokeswoman Jackie Baillie has asked Audit Scotland to investigate the SNP’s new funding model for the Scottish Futures Trust (SFT) which may increase the reliance on private investment to fund new hospitals and schools.

Baillie has called the changes “utter hypocrisy” from the SNP after the party castigated Labour’s use of private finance in government.

“Having scrapped the old system because they claimed it handed too much to the private sector the SNP have replaced it with something that means even more money and influence is given to the private sector,” she said.

The move follows an investigation by the Guardian newspaper which revealed the SFT has been forced to limit public funding by a new EU ruling on state spending. This has led to delays and increased private investment in projects such as the new Sick Children’s Hospital in Edinburgh and the Aberdeen western bypass.

Public sector involvement in these projects has been reduced to just a 20 per cent stake, with private firms making up 60 per cent and the remaining 20 per cent in the hands of private charities.

Instead of providing some of the upfront building costs, now councils, health boards and transport Scotland will see higher debt costs. 

The SFT was set up to distribute private finance in a ‘non-profit’ way to replace the controversial Private Finance Initiatives (PFI) which were introduced under the last Labour government to keep projects ‘off the balance sheet’. The EU ruling means the SFT model will more closely resemble PFI.

PFI allows building without initial outlay from the public purse, but banks and construction companies then lease the constructions back for a period of up to 30 years.

Treasury figures this year revealed the UK owes £222bn in ‘unitary charges’ to banks and businesses as a result of PFIs, while the UK National Audit Office has warned the deals do not represent value for money.

‘Inflationary charges’ are built into the contracts signed by councils and health boards, the cost of which is thought to have increased considerably since the financial crash.

Baillie defended the use of private finance. “Of course there should be private sector involvement so we can build schools and hospitals, but with the SNP’s approach future generations will be saddled with crippling debts,” she said.