'Shameful' cost of Borders PFI schools

by DOUGLAS SHEPHERD

Scottish Borders Council has come under fire from SNP politicians after Not Just Sheep & Rugby revealed the local authority has already paid £153 million for three secondary schools which only cost £72 million when they were built using the controversial Private Finance Initiative [PFI] system.

The drain on council resources via annual payments - currently running at over £16 million per year - is set to continue until 2038 when the deal with Luxembourg-controlled Scottish Borders Education Partnership is due to end.

In a media release issued today, SNP MSP Christine Grahame, who represents the  Midlothian South, Tweeddale and Lauderdale constituency in the Scottish Parliament declared: "It is shameful that at a time when Scottish Borders Council is cutting services to save money, it continues to be obligated to pay millions of taxpayers money to unanswerable, offshore equity firms who make huge profits. 

“Imagine the difference this money could have made if it was spent on local services. As we continue to deal with this horrendous legacy we must ensure it is never, ever allowed to happen again.”

As we reported, it is exactly 20 years since Borders councillors decided by 27 votes to two to use a PFI project to deliver replacement schools for Eyemouth, Earlston and Duns.

As Ms Grahame's statement explains PFI was heralded as a way for local government to fund public construction projects by partnering with private companies. Instead of the Council paying upfront, a private company builds the project, and the Council pays them back over time, meaning the cost can be spread. 

"However, many of the PFI contracts have astronomical charges and interest built into the contracts which leave the final cost often being multiple times more expensive than the original project."

Our analysis of council accounts and papers issued by the Partnership showed, among other things, the owners of the PFI contract made its highest annual profit of £851,000 in 2023 at the expense of the Council by providing operational and maintenance services, including related financial arrangements for the three schools.

SBC's unaudited accounts for 2023/24 reveal the Tory-led council will have to find a total of £16.694 million (including £3.468 million in interest) to meet its PFI commitments this financial year. The payment also includes £8.6 million for maintenance services and £4.623 million for reimbursement of capital expenditure.

Ms Grahame said: “The pursuit and promotion of PFI by successive Tory and Labour governments, until the SNP abolished the practice upon entering government in 2007, continues to be a blight on the public purse.

Meanwhile, Councillor Fay Sinclair [SNP] a Galashiels & District member of the Borders local  authority has submitted a question on PFI spending for consideration at a full council meeting next week.

Councillor Sinclair, who works part-time as a case manager for Ms Grahame, asks: "It is now 20 years since SBC voted to proceed with a PFI scheme to replace three secondary schools.

1. What was the cost of building these three schools?

2. How much has been paid by SBC for the scheme to date?

3. How much will be paid over the remaining 14 years of the deal?

4. What will be the overall cost to SBC of these three schools?