Nicola Sturgeon has insisted that the SNP’s private finance schemes are not “a rip-off” following questions raised in a joint investigation by The Ferret and The Guardian.
The First Minister has defended her government’s non-profit distributing (NPD) schemes as “much more cost effective” for taxpayers than previous governments’ private finance initiative (PFI) projects. But she said the interest rates paid to private companies under NPD schemes weren’t yet known.
In December we reported that NPD projects had blasted a £932 million hole in the Scottish Government’s budget and were to be investigated by public spending watchdogs. One of the projects highlighted was the new Dumfries and Galloway Royal Infirmary.
Figures released under freedom of information law revealed that the hospital would earn its private sector backers – including the insurance group Aviva and the building firm Laing O’Rourke – £160m in interest and fees on a capital cost of £213m.
The National Health Service is paying interest rates on different loans of 5.12 per cent and 11.29 per cent for the hospital. Although this is lower than the interest rates charged under PFI schemes, it is higher than the 1.6 per cent cost of borrowing from the state-run national loans fund.
The hospital, which is expected to open in Dumfries in December 2017, received an official visit from Sturgeon on 9 January. Afterwards she was interviewed by ITV Border’s political editor, Peter MacMahon, and asked about the hospital’s funding.
“This is a much more cost effective method from the taxpayers’ point of view of constructing new hospitals – and in some areas new schools – than the old-style PFI was,” she said.
“The cost to the taxpayer over the life of these projects will be much less than under PFI projects. So it gets us the ability to deliver these state-of-the-art, modern health facilities, and in a much more cost effective way than was done under previous governments.”
When questioned about the interest rates that private companies were getting, she said: “In terms of these contracts we don’t know the interest rates until a couple of years after completion.”
But she suggested that the annual payments for NPD projects would peak at less than PFI projects. “The public generally want to see new hospitals and new schools but they don’t want to be ripped off in the way that was the case under old-style PFI projects,” she said.
“That’s why non-profit distributing model, non-profit, means that profits are capped in a way that wasn’t the case under these old-style schemes.”
Sturgeon denied that NPD schemes were based on the same principle as PFI schemes. “We want to build new hospitals and new schools. But we want to do it in a way that where there is not the rip-off of the taxpayer that was the case under the old-style PFI schemes.”
The building of a modern 300-bed hospital in Dumfries would deliver better care for patients and had provided more than 200 jobs, she stressed. “It’s a good news story.”
ITV Border’s programme ‘Representing Border’ can be viewed here, with the section about Dumfries hospital starting at 2:32 minutes.
The Ferret story on private finance schemes can be read here.