Scots taxpayers pay "Wonga rates" on SFT schemes

Jackie Baillie is calling for a review of the SFT
Jackie Baillie is calling for a review of the SFT
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Scots taxpayers are being hit with "Wonga rates of interest" on the cost of multi-billion pound schemes to build schools and hospitals, new research indicates.

The cost of Scottish Future's Trust (SFT) programmes could even be as bad as the old PFI (Private Finance Initiative) schemes they were brought in to replace.

The SNP introduced the SFT in 2008 in an effort to ensure a better deal for taxpayers, but the report by economists Jim and Margaret Cuthbert today, entitled Scottish Future's Trust and Hub Activities, raises questions over the "long term financial sustainability."

They hit out at the lack of transparency surrounding the cost of the projects, with ministers refusing to reveal the true extent of public debt which has been racked up.

But about £7 billion has been spent on these projects over the past decade and "senior debt" from banks fund the lion's share of the finance. Mr Cuthbert said an interest rate of about 5% can be inferred.

"That looks relatively high compared with what the rate used to be on projects in the old PFI deals before the financial crash," he said

In addition, bank inter-lending rates have dropped below 1% since this time.

"So there's worries about whether the deal we're getting on senior debt is actually value for money. But the important thing is we should jolly well know what we're getting."

It is also "critical" to know the phasing of the payments being made as this will affect the overall cost to taxpayers, but this remains a mystery.

Labour is now calling for a review of the way SFT projects operate in Scotland.

Today's report was commissioned by Labour but the Cuthberts insist it is politically independent and "could have been done for any party."

Under SFT projects, private funding from banks and private equity firms provides the upfront costs of building the schemes like schools, hospitals and libraries. Taxpayers then repay this through a "unitary cost" which covers the debt repayment and service charges on the building itself. But the precise level of debt is not identified within this.

Labour economy spokeswoman Jackie Baillie said the estimated 5% bank bank debt which accounts for about 90% of the debt on these projects "isn't good value for money."

She said: "It's a bit like if you're going for a mortgage, you're going with Wonga rates of interest rather than going to the bank, which would have much cheaper lending.

"That can't be right and that's not what any of us from any political stripe want to see from this."