Projects ‘on the back burner’ as capital cuts bite

Auditor General for Scotland Robert Black gave a “sobering and frightening” summary of the state of Scotland’s finances to Holyrood’s public audit committee yesterday.

Mr Black told the committee that public spending on capital projects such as new hospitals, roads and prisons will fall by £1.2 billion (36 per cent) in 2014-15.

He said: “Given the scale in the reduction in capital spending that is going to be required, there must be every prospect that the government is going to have to think very seriously about its priorities, and which projects are going to go ahead and which 8 should be put on the back burner.”

Committee convener Hugh Henry described Mr Black’s evidence as “sobering and frightening”.

He suggested that all the projects currently on the books might not be affordable.

In response, Mr Black said: “I think that is highly likely.”

In the face of such a large downturn in capital spending, the Scottish Government has reaffirmed its commitment to use private finance through the non-profit distributing (NPD) method to fund £2.5bn of capital projects.

Some of the projects to be funded through NPD include the Scottish Schools for the Future programme (£800 million), the Royal Hospital for Sick Children/Department of Neurosciences in Edinburgh (£148m) and the Borders Railway (£230-£290m).

However, Audit Scotland has warned of the dangers of this model. It stated: “Using private finance may be attractive during periods of reduced capital budgets as public bodies avoid paying up-front construction costs.

“However, this is offset by longer-term public spending commitments in the form of annual payments to the private-sector provider to cover up-front construction costs, lifecycle maintenance and facilities management.”

A Scottish Government spokesman said: “The public purse is under huge financial strain because of Westminster cuts, which is why we need creative, innovative approaches to deliver maximum value for taxpayers’ money.”