Three Borders PFI schools to cost £360 million, data shows

EXCLUSIVE by EWAN LAMB

Taxpayers are facing a total bill of £361 million to cover the costs associated with three Scottish Borders secondary schools built fifteen years ago via the highly controversial and expensive PFI arrangements, according to newly released statistics.

On Friday the Scottish Government published 'transparency data' showing the annual unitary charge payments of all PFI schemes since the system which financed public infrastructure investment was introduced around a quarter of a century ago.

Scottish Borders Council opted for a PFI deal to build schools in Eyemouth, Duns and Earlston with a 31 year contract to run from 2008/09 to 2038/39. 

Between them, the three educational establishments have a capital value of £89.6 million. The contract is in the hands of Luxembourg-based Bilfinger Berger Project Investments and its UK subsidiary Scottish Borders Education Partnership Ltd. [SBEP] with a registered office in Maidenhead, Berkshire.

The Scottish Government publication outlines the annual payments made by the Borders procurers so far, and forecasts the amounts to be paid during the remaining 17 years of the contract.

In the 14 financial years to March 2022 unity charge payments totalled £107.8 million with a gradual yearly increase from £0.5 million in 2008/09 to £9.7 million in 2021/22.

The unitary charge payments made under the terms of a PFI (Private Finance Initiative) provide a revenue stream for capital investors, repaying principal and interest and the costs of production for service providers.

According to the new data, the annual charges to be met in the Borders case will continue to increase from £10.4 million in 2022/23 up to £19.2 million in 2037/38 before a final demand for £12.5 million in 2038/39. The overall predicted total in the remaining 17 years of the contract adds up to £253.2 million.

The Scottish Borders School PFI project has proved to be a money spinner for SBEP. 

Accounts for 2020, filed by the Partnership's directors at Companies House showed a profit of £1.425 million was made despite the presence of Covid 19. It meant that since the initiative was launched SBEP had racked up total surpluses of £10.576 million. according to figures contained in successive annual reports.

Then, last year, the PFI Borders project recorded an operating profit of £1.121 million. Dividends paid to the Bilfinger Berger shareholders amounted to £460,000 in 2021, up from £197,000 the previous year.

In recent years, two major school building projects have been completed for the council in Kelso and Jedburgh under a different financial regime overseen by the Scottish Government.

Kelso High School, with a capital value of £24.3 million, and Jedburgh Campus (£34.8 million) were completed as so-called Design, Build, Finance, Maintain projects.

A government publication issued in 2019 showed total unitary charge payments in the Kelso school project would be £54.2 million with payments totalling £76 million in Jedburgh's case.

Members of Scottish Borders Council were told in 2014 - before work on a replacement Kelso High School started - that "revenue support to cover the unitary charge will be provided to the council from the Scottish Government up to a set level based on the project scope which has been agreed to be funded through Scotland’s Schools for the Future Programme.

"This revenue support will be calculated from the financial model established from the project parameters. The council will be required to meet the unitary charge component covering hard facilities management and lifecycle replacement over the 25-year concessionary period."