A SERIES of projects to build new schools and health centres across Scotland using private sector cash are set to be delayed, after it emerged that contracts to deliver the buildings may have to be rewritten.
Almost half a billion pounds of public money has been set aside as a contingency measure after confusion emerged over how infrastructure projects built under the Scottish Government's non-profit distributing (NPD) model, a replacement for Private Finance Initiatives, are classified after European rules were overhauled last September.
While previously the schemes, delivered through the Scottish Futures Trust (SFT), were classed as private sector projects, the rule-change means they may now fall into the public sector category. Under UK Treasury rules, Government cash has to be set aside to cover the cost of public schemes and would only be released after they are completed, potentially having a knock-on impact on cash available to fund front-line services.
Finance Secretary John Swinney has set aside £150m from a budget underspend, while the UK Treasury has stepped in to boost the Scottish Government's coffers by a further £300m to cover two major new hospital projects, the already delayed £155m Royal Hospital for Sick Children in Edinburgh and the £203m Dumfries and Galloway Royal Infirmary, to ensure they can be signed off.
But eight further projects built through public-private partnerships, including new high schools in Kelso, Dundee, Forfar, Dalkeith and Angus that were due to be given the final go-ahead this financial year are now likely to be delayed after the Deputy First Minister warned that changes to complex contracts would now be considered, which may "take some time" to agree.
The Office for National Statistics (ONS) is currently reviewing classification issues around the £472m Aberdeen Western Peripheral Route road project, a process expected to take several months. While that project will go ahead as planned, issues with the eight others, which also include health centres in Lothian and Inverclyde, are not likely to be resolved until the review is complete. The development could affect future schemes worth £1.7 billion.
Mr Swinney said: "I have considered it appropriate to to put in place a number of steps to refine the NPD programme while seeking confirmation and further advice on the appropriate classification. The Scottish Government and SFT believe that current project arrangements demonstrate consistency with the relevant guidelines. However, until the process of engagement with the ONS has concluded, I believe it is appropriate to put in place contingency measures... All of the government's efforts will be focused on ensuring there is no need to call on the contingency."
A senior Scottish Government source admitted the eight projects that had been due to be approved by April may experience "small" delays while contractual issues are resolved, but insisted that the schemes were not at risk. Any "tweaks" to contracts would ensure there was no doubt that they remained private schemes, meaning changes could hand more power to the non-public bodies involved.
Peter Reekie, SFT's deputy chief executive and director of investments, said: "In common with the rest of the EU, the Scottish and UK Governments are working to ensure consistency with these updated guidelines.
"SFT and the Scottish Government are working with the ONS to obtain definitive clarification of the interpretation of the new classification rules. We expect this process to take a number of months. The delivery of all NPD and hub projects which are already signed and under construction - worth £1.45 billion - will be unaffected by this work.
"We are working to ensure that there is minimal delay to eight schools and health projects, being delivered via hub, that had been expected to reach financial close this financial year."
A Scottish Government spokesman said: "We have, in consultation with partners, made some appropriate contractual adjustments to the Royal Hospital for Sick Children in Edinburgh and Dumfries and Galloway Royal Infirmary projects, and will sign contracts for these by April. We are working to ensure eight schools and health projects being delivered, that had been expected to reach financial close this financial year, are delivered as soon as possible."
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