ERI private finance: 'Is this the worst deal of the century?'

Published on Tuesday 20 July 2010 11:27

THE use of private finance to build major public buildings like schools and hospitals has been controversial from the start.

Introduced by John Major's government, private finance initiatives (PFI) became public-private partnerships and the main means of delivering big capital projects under New Labour.

Critics rightly pointed out that - like a mortgage - they traded quick access to new facilities for a bill that would be much larger than paying cash up front.

That means generations have to share the cost of better public buildings today. MSP Margo MacDonald recently called for PFI deals to be renegotiated because the annual bill for Edinburgh alone was set to hit 85.6 million.

But PFI did bring results - more than 1000 new buildings across the UK, including 38 schools and 29 hospitals in Scotland.

Here in Edinburgh, pupils now learn in modern classrooms that would never have been built under the old funding model - indeed more would be in place but for the SNP's resistance to PFI.

But by far the biggest single private finance project in the Capital is Edinburgh Royal Infirmary. It was also one of the earliest, which may explain the shortcomings in the deal which we reveal today.

Amazingly, unlike a mortgage, the ERI at Little France is not due to become public property - ever. It will instead remain owned by private firm Consort.

The hospital can walk away from the building in 2028 but this will never happen. Instead, thanks to the terms of a deal signed by the the former ERI trust, NHS Lothian will be a tenant for another 40 years.

At current lease costs, by then the total paid for a hospital which cost 190m to open in 2003 will have topped a staggering 2.4 billion - though that includes the price of running the building and some non-clinical services.

From what the News can determine, few people understood that the building would never be handed to the NHS as part of the deal - not PFI experts, hospital staff, politicians, patients or unions.

It took even NHS Lothian two days to respond to our query. In comparison, the NHS in Glasgow told us in 45 minutes that its PFI buildings WILL be handed over at the end of their 30-year deals.

In short, the terms for the new ERI looks like a hospital pass from the former ERI trust to NHS Lothian, who may well ask if this is the worst deal of the century.

PFI has much going for it, but this looks like a mistake we'll be paying for for decades.