Brian Wilson: Schools show PFIs still going strong

Nicola Sturgeon signed a memorandum with Zhang Yu, left, of SinoFortone and Sir Richard Heygate, right. Picture: China Daily

Sometimes random conversations are more informative than meetings or briefings. I recall a captain of the construction industry recounting how a subordinate asked whether he should specify a certain brand of lift in a hospital they were building under PFI.

“Don’t be stupid,” the captain replied. “That’s what we installed when someone else was maintaining it. Under this set-up, we’re the ones that would have to fix it!” It’s an anecdote which reminds us that tying contractors into long-term responsibility is not an inherently bad idea.

There are good PFI/PPP/NPDs and bad ones. It should be counter-intuitive to assume that a consortium which has to maintain a building for 30 or 40 years is more likely to jerry-build it in the first place than a contractor, under conventional procurement, whose responsibility pretty much ends when the keys are handed over (and who may well go bust soon after).

If there was a golden age when public property was built to last, it was over by the 1960s. Thereafter, Scotland was littered with disaster stories in schools, hospitals and housing with the taxpayer, locally and nationally, picking up the tab. Nobody talked then of “lifetime costs” – the public purse just stumped and patched up – and we have no idea how favourably or otherwise they would compare.

We will find out in due course what caused the Edinburgh schools debacle – was it the method of procurement, failure of design, incompetence of construction, inadequacy of inspection or perhaps all of the above? Lessons will be learned but we do not have to wait for an inquiry to consider wider issues that have come to the fore.

The one useful by-product of Edinburgh’s difficulties has been to highlight the extent to which PFI-type schemes are still being deployed in Scotland. No category of infrastructure – schools, colleges, hospitals, roads – is now outwith the template of private finance linked to long-term maintenance “concessions”.

Prior to the 2007 election, the SNP promised a “not-for-profit” scheme to replace PFI/PPP. According to Alex Salmond, this would be based on “patriotic bonds” which, it quickly transpired, would have been about as much use in replenishing Scotland’s infrastructure as vouchers in Rice Krispies packets. So “not-for-profit” was subtly transformed into “Non Profit Distributing” (NPD) which is a very different kettle of fish. Basically, it means that the profits on private investment come through interest rather than dividends. It may be no better or worse than other PPP/PFI models but it certainly isn’t “not for profit”! Indeed, the Scottish Government promotes it abroad as “one of Europe’s biggest PPP programmes” and it is currently used to fund at least £3.5 billlion of Scotland’s schools, hospitals, roads, etc, etc.

In 1997, there were very good reasons for using additional approaches to investment, particularly to accelerate the rebuilding of Scotland’s run-down schools. Whether the same arguments apply after nearly 20 years of generous capital allocations is a question worth asking.

Given all the hand-wringing in evidence this week about the evils of PFI/PPP, why is the same thing being engaged in on a bigger scale than ever? That is the more fundamental question which merits a serious response. How much debt is being accumulated, for how long and on what terms?

That leads directly into the Scottish Government’s courting of Qatar and China. The shopping list proffered to the Qataris was all about infrastructure projects on which, of course, they would expect a handsome rate of return if they were interested, which they appear not to be. The Chinese, through the mysterious £10 billion Memorandum of Understanding, will be invited to dine from the same menu.

That story took a very interesting turn yesterday with the revelation that, far from being in its infancy, the Scottish Government’s relationship with the Chinese consortium is at such an advanced stage that officials intervened with Falkirk Council, asking them to reconsider a decision not to do a deal on housing with SinoFortone, one of the signatories to the Bute House agreement. And that was last December.

It is difficult to reconcile this with First Minister Nicola Sturgeon’s claim that there are “no actual proposals on the table at this stage” while discussions with the Chinese are so vague as to be not worth mentioning. According to the representative of the Chinese, Sir Richard Heygate, they have been talking to the Scottish Government for a year, a clearly defined list of projects is on the table and Ms Sturgeon has been “an enthusiastic backer of the plans from the start”. Someone is not telling the truth.

I am not a natural conspiracy theorist and my initial interest was one of curiosity on learning that something of this massive scale was being reported in the Chinese media but had gone unannounced by the Scottish Government. However, the more that is squeezed out about the factual inconsistencies, the degree of concealment and the cast list involved, the grubbier it all seems.

The candid Sir Richard Heygate is a 76-year-old hereditary baronet with a colourful business history who, since last year, has billed himself as an adviser to two companies who were “largely responsible for constructing the modern China”. Clearly, Sir Richard is not a man given to under-statement.

In 2012, in partnership with Sir Paul Judge, former director general of the Conservative Party, he established a business called the 88 Initiative with all sorts of claims about promoting UK-Chinese business links. The last intimations on its web-site were in November 2014. I wonder if anyone in the Scottish Government has asked why?

Sir Richard’s other most obvious claim to fame is as the co-author of The Book of English Magic. It seems unlikely, however, that even he can conjure up a policy which involves bringing vast amounts of foreign money into every aspect of Scottish public infrastructure without, at the same time, accumulating a huge amount of long-term debt.

I think we should discuss. In the meantime, there is nothing to stop Ms Sturgeon clarifying her story which at present appears to be that she was propelled into a room at Bute House to meet three  Chinamen and an English magician, to sign a document which meant nothing and which she knew nothing about. All that was missing was the puff of smoke.