Speaking to MSPs in his capacity as head of the Scottish Government’s Council of Economic Advisers, Mathewson made a vigorous attack on the funding mechanism.
“We think its expensive and actually I think its dishonest,” he told them.
Supporters claim the PPP and its forerunner the Private Finance Initiative have allowed governments to harness private sector money and expertise to deliver quality assets like hospitals for the public.
By structuring projects so that the public sector effectively leased the assets from the private sector consortia that built and funded them, the costs of some projects did not have to be included in the public debt.
However, Mathewson said: “The way they were constructed was not a good idea.”
“We’re left with massive annual payments which if we’d done it with straightforward borrowing, would have been less.”
The contracts may leave public sector bodies committed to making payments for many years. This effectively leaves the public in debt.
Mathewson’s comments will be studied with interest given his long association with Royal Bank, where he was chief executive from 1992 to 2001 and chairman from 2001 to 2006.
He played a key role in the bank’s development from being a Scottish player into a giant of global finance.
The bank developed a significant presence in the market to provide funding for and to advise on PFI and PPP projects.
It has funded a wide range of assets such as prisons and hospitals, including the £180 million Edinburgh Royal Infirmary.
Despite his reservations, Mathewson said there may be no option but to use PPP given the limitations on the Scottish Government’s borrowing powers.
The Scottish Futures Trust established by the SNP Government has spent two years trying to find an alternative to PPP.
Mathewson and other members of the Council of Economic Advisers were appearing before the Economy, Energy and Tourism Committee following publication of the council’s annual review earlier this month.
Commenting on the banking crisis, Mathewson said it was very important that Scotland retain as many headquarters functions as possible.
Asked whether a Scottish business should be able to buy the UK operations that RBS and Lloyds Banking Group will have to sell to satisfy EU regulators he declined to comment.
RBS chose not to comment on Mathewson’s remarks.
mark.williamson@theherald.co.uk
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