Thursday, 15 May 2014

Notorious PPP Project highlighted in Parliament

The now notorious North Ayrshire Schools PPP Project was flagged-up last week in the Scottish Parliament as an example of how local authorities are being forced to pay way over the odds for schools built using the Public Private Partnership (PPP) method of funding.

Cunninghame North MSP Kenneth Gibson raised the issue during Question Time, contrasting the cost of public buildings constructed under PPP (and its predecessor, the Private Finance Initiative – PFI) with the SNP Government’s current preferred method of funding, which places a cap on the profits that can be made by private contractors.

Responding to Mr Gibson’s question, Nicola Sturgeon, the Deputy First Minister and Cabinet Secretary for Infrastructure, said the SNP Government’s method “ensures that private sector returns are capped and that there is no dividend-bearing equity, which avoids the excessive returns and poor taxpayer value for money that were associated with past Private Finance Initiative projects.”

In 2006 the then Labour administration of North Ayrshire Council embarked on a PPP project to build and maintain four new schools - St Matthew’s Academy in Saltcoats, Stanley Primary in Ardrossan, Dreghorn’s Greenwood Academy and Arran High School. Despite the actual value of the four new campuses being just £80m, Labour councillors committed the taxpayers of North Ayrshire to a 30 year PPP contract projected to cost around £380m.

Kenneth Gibson told the Scottish Parliament, “In North Ayrshire, annual PFI payments will increase from £11.1 million in 2007 to £16.1 million in 2037, meaning that, ultimately, £400 million will be paid over 30 years for schools with a capital cost of only £81 million.”

The SNP MSP then asked, “Does the Cabinet Secretary agree that the profligacy of Labour...means that local authorities are stuck paying increased charges year-on-year and that rising payments are limiting North Ayrshire’s ability to invest in jobs and services?”

Nicola Sturgeon replied, “Yes, I agree. The fact of the matter is that the PFI approach used in the past has not delivered best value for the taxpayer.”

The previous Labour administration of North Ayrshire Council was voted out of office at the 2012 local government elections. However, the contract signed by Labour councillors in 2006 means the current SNP administration of the Council has been left to manage the multi-million pound debt stemming from the Schools PPP Project.

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