Taxpayers’ costs quadruple to £40bn for private finance deals in Scotland

The cost to taxpayers of private finance funding schemes to build schools and hospitals in Scotland has come under fire after it emerged £9 million of projects will cost four times that amount to pay off.

There are now fears over “unsustainable levels of debt” being created for future generations over the use of private finance initiatives (PFI) and non-profit distribution (NPD) models.

A stark report by the public spending watchdog today sets out the massive costs to the public purse of the schemes and warns that more clarity is needed to ensure value for money.

Audit Scotland said £13.1 billion in annual payments have been made by councils, the NHS and Government for a total of 136 projects under contract under three private finance models since 1998/99, with further £27bn between now and 2047/48 – more than £40bn in total. But the capital value of these schemes is less than £9bn.

Taxpayers' costs quadruple to £40bn for private finance deals in Scotland. Picture: TSPL

The government says it no longer uses the private finance system criticised in the report.

But Labour infrastructure spokesman Colin Smyth said: “The SNP has accepted that the use of private finance in infrastructure projects is costly, but continues to use the system, creating more and more debt for future generations.

“The current system is creating unsustainable levels of debt and is forcing our hard-pressed local authorities into using costly private finance models for investment.”

Scotland’s auditor general Caroline Gardner warned of the “significant” impact on future budgets.

The report said more transparency was needed on the rationale for choosing which projects are financed in 
this way and how the mix delivers a balance of cost and benefits.

It calls for the Scottish Government to learn lessons from the use of NPD and hub schemes when introducing future models by increasing public reporting and using clear criteria to better demonstrate how value for money is achieved.

With the NPD projects, auditors heard of difficulty identifying savings for individual projects, and that additional costs may have been underestimated. The report highlights the finance schemes mean councils focus on affordability, rather than value for money, and questions if “the implications of entering into these contracts have been fully considered” by local authorities.

A Scottish Government spokesman said it no longer used PFI or NPD to fund new projects.

He added: “NPD and private financing through hub companies has enabled £3.3bn of additional investment in Scotland’s infrastructure that would not otherwise have been possible.”