By Bill Heaney
Where does all the money go? Why are the finances of West Dunbartonshire Council and local government in general in such a parlous state?
The former Labour Party member, whose brother, Cllr Andy White, was once a notorious leader of the Labour administration, dropped into a lengthy debate about the negative impacts that the PPP and PFI burden has inflicted on the public sector.
SNP’s Marie McNair MSP and Labour Finance spokesperson Michael Marra.
She said: “It is yet another real example of Labour’s desire to replicate Tory party policy, and the debate serves as a stark reminder of why the Labour Party cannot be trusted to manage Scotland’s finances.
“PFI and PPP contracts have left a harmful and lasting legacy in Scotland. They were first introduced under the Tory Westminster Government in 1990 and fully embraced by successive Labour Governments in Westminster and Holyrood.
“However, although they were posed as effective solutions, they have instead burdened Scotland’s public services and taxpayers with unsustainable financial sums for decades.
“According to Professor Ciaran Connolly, ‘they produced projects with assets worth approximately £60 billion, which are costing the taxpayer £170 billion—that’s a gap of £110 billion between what the assets are worth and what the taxpayer is paying for them’.”
She added: “Costs end up getting passed on to the taxpayer, which, as Professor Connolly has said, can constrain “what authorities such as the NHS can spend on essential services, forcing them to reduce budgets accordingly. It has also created pressure to reduce project costs, leading to poorer infrastructure.”
Ms McNair added: “That impacts on local council budgets, too. In my constituency, 37.9 per cent of council tax in East Dunbartonshire and 41.2 per cent of council tax in West Dunbartonshire goes on PPP payments.
“Labour’s financial mismanagement has had severe consequences, and its wasteful PFI deals have foisted a £30 billion repayments bill on Scottish taxpayers, forcing us all to pay many times more than the original cost of the projects.
“The funds that are used to pay for those agreements would have been much better spent on our public services to support education or tackle child poverty.
Instead, it was left to the SNP to fix Labour’s mess. Under the SNP Scottish Government, we moved away from that model to a model under which, importantly, surpluses do not go into the pockets of big investors, as Labour allowed. One perfect example is hospital car parking charges, which are a terrible legacy of PFI; the Scottish Government scrapped the charges that were in place as a result of Labour PFI deals.
Scotland continues to pay extortionate amounts for Labour’s incompetence. The 2023 figures show that the amount still owed under PPP for hospitals and schools is £15.4 billion, which is not even half of Labour’s eye-watering total PPP bill.
The contracts are not just an enormously expensive way to borrow—they are often inflexible. A 2019 report by the JPI Media investigations team found that schools, hospitals and police forces have been locked “in the iron grip of contractors”, and are paying extortionate extra charges.
Examples in that report included a school being charged £25,000 for three parasols and a hospital trust paying £5,500 for a new sink. The contracts are extremely profitable for the private sector, but not for the taxpayer.
Nearly 18 years after Labour was kicked out of office in Scotland, we are still paying a heavy price for the disastrous PPP contracts.
The Scottish taxpayers have had to shell out enormous sums of money above the actual cost of projects, while PPP contractors hoard huge profits.
It is clear that PPP contracts have been disastrous for Scotland’s public finances, so it is welcome that the Scottish Government recognises those options for what they are—extremely poor value for money and certainly not in the best interests of the Scottish people.
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Labour’s Michel Marra replied: “it is essential that we learn the lessons that members are already setting out about the value in those contracts over time. It is particularly important to set out the context around historical examples and why some of those decisions were taken. However, there is no doubt that those contracts still place a heavy burden on council tax payers in parts of Scotland, even as many constituents continue to use the facilities that are in place.
“The UK Chancellor of the Exchequer has unequivocally confirmed that there will be no return to PFI during her tenure. I have seen the reports that are referenced in the motion, but the chancellor has been quite clear about that.
“The Treasury is dealing with a time of constrained public finances, for different reasons than those that pertained at the time of the advent of the UK Labour Government in 1997. We have to make sure that we can get public finance off the ground in order to get key projects working and get the economy growing. Again, that is an agenda that many people would agree with.
“It is right, however, that we draw a distinction between the original early PFI arrangements from a generation ago and the subsequent arrangements between public and private sectors to bring capital investment to the table.
“The non-profit-distributing model is a variation on that core principle, and it has to be said that the SNP Government’s involvement in those public-private arrangements dwarfs that of the previous Scottish Executive on the basis of longevity alone.”
The cost of PFI is simply staggering. The debt payback over the long term concession period are quite enormous.
I once saw a caption of a super tanker being cast as a grapgh of PFI.
The accomodation block at the stern of the ship was stated to be the capital build cost whilst the huge forward length of the boat, much of it hidden below the waterline, was stated to represent the future service payments. It summarised PFI to a tee.
As a fiscal black magic wheeze on an industrial scale Joe Public are to a llarge extent responsible for this huge confidence trick.
Like privatisation of all of our key assets like water, gas, electricity, ports and much more a hapless public stood by whilst the cupboard was industrially stripped bare. They let it happen. And now we cannot afford anything
And there’s another sting in the tail waiting in the wings that no one talks about. And that issue is build quality.
Freed to design, build, self certify, selfquality check, much of what has been delivered under PFI is actually of very poor quality.
Already there have been issues with school walls falling down, buildings with defective windows and cladding, hospitals with major defects making the press.
But these are only the tip of an iceberg..Quality as these instances show was not built in and the future of course is that post the end of the PFI concession periods the public will be saddled with third rate crumbling
But again, why was this allowed to happen. Or like Grenfell was it simply part of the grim free for all to be allowed to build cheap for big profit.
Yes, we may blame the politicians and their corporate chums but it is we, the hapless public who stood by and let it happen. And now the chickens have come home to roost for all to see.
Maybe next the Democrat would like to do a piece about securitisation. That I am afraid is another bit of Voodoo black magic in the wings.
PFI was introduced by Labour on WDC. When SNP took over running the Council, led by Cllr Ian Roberston, George Black and I moved that we withdraw and refuse to sign off on the Contract. The SNP voted against our move and it fell. We are still paying £14m a year to BAM who built the schools, before we spend a penny on Education.
Cllrs Bolan and Black had absolutely the right idea. Unfortunately the greater firmament of politicians either did not know what PFI actually was,or alternatively, and more accurately, just sought to ignore what PFI was.
Of course, in defence, the Scottish Government, via Westminster borrowing rules either accepted PFI or no schools.
The policy of PFI came straight from the top. It was a particular Blair and Brown policy and faced with that, PFI became the only show in town.
Again it all comes back to political will. There was no political to stop PFI. Westminster set the scene. They let the finance industry run wild, and it is the finance industry who were the biggest winners.
And the builders. Well they’ll build for whoever pays them to build. But of course with builder self design, self quality checking, the option to push the design envelope to its cheapest edges, and to take a less than rigid approach to quality was all there.
But to maybe out a little bit of previously unknown fact into the open, how many people know that in the weeks before the brand new VoL academy opened the heating system failed when being tested to full working load.
Seems that there was an inadequate gas supply to the new building thereby causing the five boilers to trip. And so, in the days before opening a mad scramble to try and increase gas volumes without having to dig up the new school.
And wonder upon wonder the school opened some weeks later in a fanfare. But as one gas engineer opened- just wait until the first really cold winter snap!
And guess what happened the next winter very cold snap. Yes, the heating went down, children had to be sent home mid morning, parents contacted, many at work. Connected to the original design deficiency. Who knows it’s a secret, commercial in confidence, but one can guess.
Scratch the surface though and there’s more, much more. But as the old song goes…..we don’t want to talk about it.
Time there was a PFI task force. Right from the top to look at ways to unravel one of the biggest fiddles ever visited on the hapless paying public.