PUBLIC bodies could save billions by using Scotland’s new borrowing powers to buy back debt racked up by costly private finance initiative (PFI) contracts, according to Scottish Labour leadership candidate Neil Findlay.
Scotland’s PFI debt, coupled with the Scottish Government’s capped non-profit distributing (NPD) contracts, stands at £35.3 billion which is being paid back with double-digit interest in some cases, the Lothians MSP said.
Mr Findlay said the deals amount to “buying a house on a credit card”, and has proposed clearing the debt with low interest loans made possible by the unprecedented low rates on the international gilt markets.
This proposal has already been tested in the north of England where two health service PFI debts have been halved through buying back early, he said.
Darlington NHS trust had an outstanding £32 million debt but by borrowing at lower interest rates and paying back the remaining PFI debt, it saved £18 million.
Neighbouring Hexham obtained a cheap loan to pay back £114 million PFI debt that is expected to save the local NHS £3.5 million a year for the next 19 years - a total of £66.5 million.
Mr Findlay said he will bring forward a Bill to buy back the debt as soon as the new borrowing powers are enacted.
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He said: “It would be financial madness to buy a house on a credit card yet that is exactly what we are doing with PFI and NPD.
“In some cases we are paying double-digit interest rates on some existing PFI projects while at the same time interest rates on the money markets are at a record low.
“It would be politically negligent and financially irresponsible if we didn’t use these extremely fixed low interest rates and pay off the current debt.
“We will be saving millions every year in interest repayments, money that will go into services, not offshore bank accounts of hedge funds that now own most of the PFI contracts.
“The evidence is there and we are already seeing this happening south of the border - a determined effort here could probably half Scotland’s remaining PFI and NPD debt, that’s billions of pounds we could use to make Scotland a better place.”
Mr Findlay is standing against Jim Murphy MP and fellow MSP Sarah Boyack to be the next leader of Scottish Labour.
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