Published: 28/09/2011 00:01 - Updated: 27/09/2011 09:12

Controversial finance scheme back in spotlight

Written byVal Sweeney

New Craigs Hospital, Inverness.
New Craigs Hospital, Inverness.

WHEN the New Craigs Psychiatric Hospital opened its doors 11 years ago, it was hailed as a model for the future.

The then Labour health minister Susan Deacon, who officially opened the £14 million centre, said it would offer the kind of care people should expect of a 21st century health service.

But not only will the taxpayer end up paying an estimated £106 million for the building, the lease on the land could be held by a private company into the 22nd century — unless NHS Highland pays a further £3 million to take over the building and the site in 2025.

New Craigs is among the many school and hospital building projects which were funded by the controversial private finance initiative (PFI).

Instead of the government paying upfront for a new building, PFI agreements saw private firms being paid an annual fee for the construction and management costs.

Amid increasingly tight financial times, accusations are resurfacing that the PFI deals continue to be a licence to print money for private companies, leaving future generations to pick up the bill.

Concerns over New Craigs hit the headlines five years ago when The Inverness Courier revealed the estimated cost of the hospital had already spiralled to £106 million.

The project is once again in the spotlight after the hospital is one of several PFI projects across Scotland where private firms hold long leases on the land.

The contract to build New Craigs — a replacement for the former Craig Dunain Hospital — was first announced in 1999.

The then Highland Primary Care NHS Trust estimated the total bill for construction and provision of non-medical services would be £75 million over the 25-year life of the contract agreed with the Robertson Group.

But in July 2006, the Courier revealed the estimated costs had spiralled to £106 million.

It has also emerged that under the terms of the contract, Robertson has a 99-year lease on the New Craigs land — although NHS Highland remains the owner.

NHS Highland’s head of area accounting, Iain Addison, explained this week the 25-year lease-back agreement involves Robertson building, running and maintaining the New Craigs building with NHS Highland repaying the cost of the building, maintenance and hotel services.

"At the end of the 25 years, NHS Highland can decide that it no longer requires the site and therefore it has two options — to allow Robertson’s to use it for 74 years and then the land would revert to the health board, or to sell the land to Robertson, or an alternative purchaser," he said.

"If NHS Highland wants to continue to use it as a hospital, we would have to pay them £3 million. At that point in time, Robertsons would hand back the site and building in its entirety."

He maintains that the 25-year agreement gives NHS Highland more flexibility in that it has the option to retain the site and building, if it is still required — but also the opportunity to dispose of it, if the health authority no longer wants to use it.

Dave Thompson, SNP MSP for Skye, Lochaber and Badenoch, has been a constant critic of the PFI deals. He is scathing about the prospect of NHS Highland having to pay a further £3 million to Robertson to take ownership of New Craigs and the site.

"They [NHS Highland] have the privilege of getting back their own building for which they have already paid a huge amount of money by taking another £3 million out of the public purse," Mr Thompson said.

"That is £3 million which could be used for frontline services.

"The whole thing is an indication of what poor value PFI contracts were for the public purse.

"Everything seems to have been loaded in favour of private contractors.

"It confirms PFI projects were a licence to print money for private financiers."

Three years ago, the SNP Government announced it was scrapping the "wasteful PFI" with a new scheme to provide new schools, hospitals and transport projects at better value for the public purse.

It introduced the Scottish Futures Trust — an independent company which operates at arm’s length from the government but works closely with the public sector.

But that, too, is not without its detractors. Although a report revealed it had saved the taxpayer £111 million on the costs of new schools, roads and hospitals in its first year of operation, critics say it is an expensive quango.


Other Private Finance Initiative/Public Private Partnership projects

Inverness Airport

The £9.6 million project saw a new terminal being built without any public money being spent upfront but the project attracted widespread criticism.

Under the deal agreed in 1998, operator Highlands and Islands Airports had to pay finance company Inverness Air Terminal £3.50 for every passenger flying from the airport.

After only six years, the PFI repayments had almost equalled the cost of the building. In 2005, Scottish Ministers approved a deal to end the leaseback agreement which had been due to run until 2024.

It is thought the PFI owners received a total of £36 million — four times the cost of the original project.

Inverness Gaelic School

The purpose-built primary school for Gaelic pupils in Inverness was among 11 schools built across the Highlands in a PPP scheme valued at £134 million.

Other Inverness schools in the programme — the second education PPP scheme for Highland Council — were Millburn Academy, Inshes Primary School, Drummond School for pupils with additional support needs plus Cawdor Primary School.

They were built by Alpha Schools (Highland) Ltd, a consortium of Morrison PLC and Noble Fund Managers.

The Skye Bridge

The project, Britain’s first PFI venture, cost the public an estimated £93 million — for a bridge which should have cost £15 million.

It was built by a commercial group led by the Bank of America.

But from it first opening in 1995, it aroused controversy with tolls for the five-minute crossing reputedly being the highest levied in the world — £5.70 for one mile. More than 100 people were convicted for refusing to pay the tolls and some even ended up in prison.

At the end of 2004, the Scottish Executive struck a deal to buy back the bridge for £27 million from Skye Bridge Limited and consequently abolished the tolls.

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