Controversial private finance schemes costing Scotland £1 billion a year

Camley's Cartoon: PFI schemes to cost £1bn annually.

This is more than four times the capital value of the schools, hospitals, roads and other assets built under these contracts.

Audit Scotland said the public sector has already paid £13.1bn in annual payments for a total of 136 projects under three private finance models – Private Finance Imitative (PFI), Non-Profit Distributing (NPD) and hub contracts – and will pay a further £27bn between now and 2047/48.

Critics called for an end to such funding models and urged ministers to reform the Scottish Futures Trust, Scotland's infrastructure quango.

Scottish Labour's infrastructure spokesman Colin Smyth said: “There is an urgent need for reform of the Scottish Futures Trust and an end to the current approach which is shrouded in mystery and benefits only private investors.

“The SNP has accepted that the use of private finance in infrastructure projects is costly but continues to use the system, creating more and more debt for future generations.

“The current system is creating unsustainable levels of debt and is forcing our hard-pressed local authorities into using costly private finance models for investment."

Scottish Greens co-leader Patrick Harvie said the figures laid bare “the contradiction at the heart of SNP policy on private finance”.

He said: “The Scottish Government claims to have ditched PFI but still relies on extortionate private finance contracts to hide its debt. Here we see that cost will be at least a billion pounds a year for 27 years."

He added: “After 25 years of rip-offs and scandal, it’s time for other parties to look at the evidence and ditch private finance for good.”

Scottish Conservative finance spokesman Murdo Fraser accused the SNP of “incredible” double-standards on private financing.

Audit Scotland said NPD and hub contracts, which replaced PFI, have supported £3.3bn of additional investment in public buildings and new roads.

However, these models cost more than traditional forms of financing.

Models for investing in public infrastructure, such as roads, schools and hospitals, using private finance have been in place since the 1990s.

These have enabled the Scottish Government to fund extra infrastructure development as construction costs are not charged up-front, or met from capital borrowing. The schemes transfer some risk and responsibility to the private sector, while the public sector makes annual payments to cover the cost of financing, building and maintaining the assets.

But Scotland's Auditor General, Caroline Gardner, warned of the "significant" impact on future budgets.

The new report, prepared by Audit Scotland for the Auditor General and the Accounts Commission, said more transparency is needed.

With the NPD projects, auditors heard of difficulty identifying savings for individual projects, and that additional costs may have been underestimated.

They questioned if "the implications of entering into these contracts have been fully considered" by local authorities.

For hub projects, auditors were told of the potential for conflicts of interest since private sector consortiums can include companies which are part of the approved supply chain.

The report also warned of the possibility of private companies profiting from the contracts, despite moves to limit this.

The Scottish Government said it no longer uses the private finance mechanisms covered by Audit Scotland’s report. Instead, it is developing a Mutual Investment Model (MIM) of private financing. This contains many features of both the NPD and PFI models.

A Government spokesman said: “As the report recognises, NPD and private financing through hub companies has enabled £3.3bn of additional investment in Scotland’s infrastructure that would not otherwise have been possible, given budgetary constraints placed on the Scottish Government by the UK Government."