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26 March 2005

Minister defends the £8bn bill for PPP programme - The Scotsman

by PETER MACMAHON, Scottish Government Editor, The Scotsman

SCOTLAND’S controversial Public Private Partnership projects will have cost taxpayers £8 billion by 2018-19, according to the Scottish Executive’s own figures.

Tom McCabe, the finance minister, has released information showing that the burden on the taxpayers of the PPP schemes has risen from just £13.8 million in 1997/98 and will eventually reach a projected £555 million annually by 2018-19.

Last night the Scottish National Party claimed that the real figure will be more than £13 billion and condemned the Executive for allowing the banks to make "excessive" profits out of the projects.

But a spokesman for the Executive said that PPP had delivered a massive programme of modernisation of schools, colleges, hospitals, and water infrastructure for Scotland over a short period of time.

The figures Mr McCabe gave to MSPs show that, from a slow start in the first years of Labour when PPP emerged from the Private Finance Initiative, the amount spent on these programmes - which usually run for 20 or 25 years - increased rapidly.

By 2000-1 it was £108.9 million a year. This financial year, from April, it is projected to be £413.5 million, and it rises steadily over the next 13 years to the projected £555 million.

Stewart Stevenson, the SNP MSP who uncovered the figures in a parliamentary answer from Mr McCabe, last night said there would be a huge burden placed on future generations.

Mr Stevenson claimed last night that the actual sum would be higher. He said: "These figures relate only to projects up to 2004. Since then there have been a number of new schemes begun and, by my calculations, it could end up with a total bill of £13.8 billion, which is a huge burden on the taxpayers of today and tomorrow."

The SNP MSP for Banff and Buchan said that his figures would put the annual burden at £1,257 million by 2018-19.

Mr Stevenson added: "This is a substantial commitment which this Executive has made but which binds the hands of future generations of politicians of whatever political colour.

"This is not about denying private companies profit. The logic that you can get everything built by the state does not wash. But the structure of PFI deals delivers unreasonable profits to people like the banks.

"And whatever the Executive may say, the ultimate risk is still with the state - what happens if a firm running a school or a hospital goes bust? The Executive will not let them close, that is for sure."

Mr Stevenson continued: "Instead of paying silly interest rates, way above what the rate the government itself could get, we could be getting much more for our money.

"We should be making this money work harder for us, helping to build up our infrastructure rather than helping to build up excessive profits."

The MSP said that the SNP’s plan for a Scottish Trust for Public Investment, where the finances would be pooled and so lower interest rates could be negotiated, was a better scheme for the taxpayers.

But last night the Executive hit back emphatically, citing the rebuilding of most schools in Glasgow since 1998 as an example of the scale of work which would not have happened without PPP.

Mr McCabe’s spokesman said that, across Scotland, PPP already had delivered three major new hospitals - including the new £184 million Edinburgh Royal Infirmary - 80 or so new or refurbished schools, three further education colleges, nine water and sewerage schemes and a road.

The spokesman said that one of the main sectors in which PPP is active is in schools where some 300 new or refurbished schools will be provided by 2009.

This represented the largest single investment ever made in school buildings, with long-term maintenance locked in to the contracts and project funding.

He added: "The benefits of PPP are well recognised. They deliver large capital projects of quality and they deliver them quickly with the risk being borne by the private sector, not the public sector.

"The way PPP works is similar to a mortgage - but with the maintenance costs built in.

"Of course, you will pay more than you would with cash but the public also gets a well-maintained building at the end of the period.

"It is a moot point whether it would be maintained as well if it were not under a PPP scheme."
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