When Storm Gertrude hit Scotland in January it didn’t only blow apart a wall at a privately built school in Edinburgh. It also blew the lid off the public private partnership models used to fund infrastructure projects.
Edinburgh council has closed 17 schools due to serious structural defects. Around 8,000 pupils and 655 teachers are having to cope with temporary classrooms.
The deals to build the schools, known as Private Finance Initiative (PFI) contracts, have faced increasing scrutiny.
The cost of Scotland’s PFI deals tops £30 billion. The companies that built them checked and signed off on the buildings themselves, rather than being assessed by the local authority.
And it was legal—a change to legislation in the Scottish parliament that no politician seemed to think was worthy of opposition at the time.
In Edinburgh, had the Treasury’s Public Works Loan Board been used to fund building the schools, it could have cost £104 million less. But combined with a second contract Edinburgh’s PFI schools are to cost over £1.2 billion.
Edinburgh Schools Partnership (ESP) is the consortium in charge of building the schools. It was put together by construction firms and banks to bid for the contract.
But it has now emerged that ESP is wholly owned offshore. It may pay some tax—but not on the profit on the council’s £1.5 million monthly payment.
The Scottish National Party (SNP) is now trying to use the PFI scandal as a stick to beat Labour with. It’s true that New Labour’s love affair with PFI has saddled public bodies with huge debts.
But the SNP’s version of PFI, known as Non Profit Distributed (NPD) contracts, has contributed a further £6 billion to public sector balance sheets. And the same firms are benefiting.