LABOUR’S use of Private Finance Initiatives (PFI) to fund the building of new schools has come at a huge cost for taxpayers in Scotland.
PFIs are a way of financing big public sector projects through the private sector, such as schools, which are designed, built and operated by a private company and then transferred to the public sector after a contractual period of around 25 to 30 years.
Used prolifically by the last Labour government, it meant that vital services which the government otherwise couldn’t have afforded were able to be built and in operation quickly - although this came at a cost.
The impact of using PFIs to build schools in Scotland can still be felt today. This is because they were sold to the Scottish Government for much more than they were actually worth, meaning that Scottish taxpayers can expect to bear the brunt of these costs for years to come.
How exactly have PFIs been used for schools in Scotland?
PFI contracts were brought in to build new schools quickly and replace the growing number of schools reaching capacity and in poor condition.
Between 1998 and 2007, a total of 34 schools in Scotland were built using PFIs, with a capital value of £3.04 billion.
But the total value of these contracts – which range from 25 to 33 years – is a staggering £13.85bn, or 355% more than the buildings are actually worth.
Part of the reason the Scottish Government is paying more than these schools are valued at is because they were measured against the retail price index (RPI), an inflation measure which has since been discredited by the Office for National Statistics.
In addition to building these schools, the private companies who own them can then charge exorbitant amounts for maintenance such as changing a lightbulb or painting over a wall – something that will need to be done all too often in a school environment.
As of March, £9.23bn in payments is still outstanding from the first wave of new schools.
Which schools in Scotland were built using PFI?
The biggest PFI contract was given to the Glasgow Schools project. It is the largest education PFI in Europe, believed to be worth £1.2bn.
Signed off in January 1998, 12 new schools were built from scratch and 17 existing schools were “modernised”.
It came at the cost of £1.6bn, with £429m still outstanding in payments.
The second biggest contract was with South Lanarkshire Schools, worth £1.3bn in payments with £745m still outstanding.
It was signed off in January 2003 and saw 17 new secondary schools built and two existing schools refurbished.
See the full list of PFI education projects in Scotland by using the table below.
Was it worth it?
The benefits of using PFI to build new schools are unclear, according to Audit Scotland.
The independent public body found that many of the benefits of building PFI schools were not unique to PFI and could have been achieved through other methods of financing.
The body was also unable to reach a conclusion as to whether using PFIs to build schools was “value for money”.
Although there have been no new PFI contracts for schools in Scotland since 2007, the Scottish Government – and taxpayers in Scotland – will continue to pay off existing outstanding payments until at least 2042.
This means that children who attended PFI schools when they were first built in the noughties will now be contributing to payments for those same schools today through the tax that they pay.
