Cash-strapped Fife Council is paying millions more for schools built under the controversial private finance initiative (PFI) than originally planned because of rocketing inflation costs, an investigation by JPI Media can reveal.
Two contracts signed off by the local authority with private firms in the late 1990s and early 2000s to replace crumbling buildings across the Kingdom were pegged to the retail price index (RPI), the now discredited inflation measure used to calculate rail fare hikes and student loan interest payments.
The governor of the Bank of England, Mark Carney, has admitted there are “known errors” in the RPI system and last year called for the UK Government to stop issuing bonds linked to it.
But that advice has come too late for many local authorities in Scotland – including Fife Council – which are now shelling out millions more in costs for schools that were built under PFI.
Scottish Labour leader Richard Leonard has pledged to ban any further public-private finance deals if his party took power.
“Scotland’s historical PFI deals have put unnecessary pressure on our NHS, our local government services and right across the public sector,” he said.
“That is why I have been clear that the Scottish Labour government that I lead will introduce a ban on new PFI/PPP/NPD deals.
“We will also take private contracts back in house at the earliest opportunity to save the taxpayer money in the long term.”
In common with other local authorities at the time, Fife Council signed off two deals at the turn of the century to pay for new school buildings, known as public-private-partnerships (PPPs).
The region’s schools built under the initial PPP are Beath and Queen Anne High Schools and Anstruther Primary.
While Strathallan and Fair Isle Primaries in Kirkcaldy; Duloch Campus, Oakley Campus, Inverkeithing Primary, Kennoway Primary, Masterton Primary in Dunfermline and St Columba’s RC Primary in Cupar were built under the second PPP contract.
But the contracts – which last until 2029/30 and 2032/33 respectively – are now estimated to cost £14.4m more than originally estimated.
Asked by JPI Media if, at a time of widespread cut-backs to local authority spending, these deals represented value for money, a council spokeswoman said: “The authority has addressed value for money in relation to PPP / PFI projects.
“The work undertaken in this area demonstrated that value for money was achieved on both PPP schemes in Fife.”
They added: “This work was outlined in committee reports to ensure that elected members were kept fully informed.
“The estimated annual PPP cost is included in the budget at budget setting, and is therefore included in the overall revenue budget for the council.
“The budget set includes the estimated inflation for the year.
“The inflation rate assumed within the Fife’s PPP contracts was 2.5 per cent, and it is considered that this was a realistic rate to apply to the estimated annual cost of the contracts.”
A Scottish Government spokeswoman said: “The annual PFI repayment bill now exceeds £1 billion – nearly five times more than the Non-Profit Distributing (NPD) programme which we introduced and is proving far better value to the public purse.
“The funding of public infrastructure has vastly improved since 2007.
“We are working to ensure PFI contracts which have been inherited provide the best value for money for the taxpayer – and to ensure savings are achieved from existing contracts, wherever possible.”