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Probably a robbery

Posted on November 12, 2012 by

Alert readers will perhaps recall our story on the shocking PFI scandal that saw Labour-run North Lanarkshire Council needlessly throw away almost £600m of public money, because it was only about four hours ago that we published it. But some excellent sleuthing by a keen-eyed reader in the comments has thrown up some startling new information that makes the £729m cost of a £150m school-building programme look an even more appalling piece of financial mismanagement.

The contract was signed in 2006/07, the last year of the Labour-led “Scottish Executive”. Over its two Holyrood administrations from 1999, Labour had managed to under-spend the Scottish block grant to the collective tune of £1.5bn – money which was returned to the Treasury at Westminster because, incredibly, Donald Dewar, Henry McLeish and Jack McConnell just couldn’t think of anything to spend it on.

(£1.5bn would have been enough in 2006 to build the Glasgow [£210m] and Edinburgh [£500m] Airport Rail Links and upgrade the entire A9 to dual-carriageway [£600m], spreading the benefits around the country and with £190m still left over.)

On taking control of the Parliament in 2007, the SNP minority government was able to reach an agreement to recover the money for Scotland over the four years of its first term (see paragraph 19 on page 9 here), so at least this huge sum wasn’t completely lost – although of course, a third of it has in essence been uselessly swallowed up in paying off the PFI debt for this one project alone. But nevertheless, the information leads to a mind-boggling and horrifying conclusion:

A Labour council, operating under a Labour Scottish Executive and a Labour government at Westminster, needed to spend £150m on its schools, but rather than use a small fraction of the effectively free money that was sitting around unspent in the Executive’s coffers, signed off on a PFI contract that would cost Scottish taxpayers £729m to do the exact same job.

Bumbling incompetence is one thing. But if we were the current Scottish Government we’d have police crawling all over North Lanarkshire trying to find out how anything so self-evidently insane, and such an utterly criminal waste of taxpayers’ money, was ever allowed to happen. And when we found out, we’d want to see some bodies hanging from Motherwell lamp-posts before the sun went down.

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    1. MajorBloodnok says:

      Sotto voce (regarding the Mussolini option): Steady the Buffs, Rev. Stu!

    2. Arbroath 1320 says:

      The whole problem of the PFI scandal, YES in my view PFI IS a scandal, is that it was initiated from the very top of Labour, a.k.a. Brown/Blair.  These “individuals” and their corrupt entourages should not be able to continue to enjoy the trappings of power while others scramble to find their next meal. This crowd of alleged intellectuals have behaved in the most sickening manner. They have lied, conned and cheated their way through the 19990’s up till now and now they should be made to pay, dearly, for their crimes!
      As we currently seem to be in the middle of a media witch hunt, specifically around the BBC etc, perhaps we should widen the witch hunt to include the Labour party and everyone involved in scamming the British public into believing that these ridiculous PFI contracts were a good deal. Any one who had a hand in the creation, awarding and signing of any of these contracts should be brought to book and, in my view, never see the light of day again for at least 30 years. Furthermore the proceeds of crime act should be used against these criminally corrupt individuals to recoup at least a proportion of the taxpayers money spent, necessarily, on these corrupt contracts.

    3. mogabee says:

      Not only are these eejits having to pay out huge amounts to private co’s and impoverish the tax payers, but they are in the process of “slimming” down the workforce to save money!

        And you know what really riles me about these thieving bandits? Many of them I once voted into place. My father even helped to have some elected.  Didn’t take many of them long though to hot-foot to Westminster to rake in even more tax payers dosh.
      I moved away and saw the light, but some of my family are still in denial.Crazy!!

    4. Tamson says:

      The most damning indictment of PFI that I know of, was when I read about how government organisations in Texas had started looking at British PFI deals, to see if they could copy the idea.
      Yup, PFI is such a barkingly insane right-wing accountancy con-trick, even the Texans hadn’t touched it before the British Labour Party did.

    5. Appleby says:

      PFI was blatantly all about the old boys club raking it in and enriching their pals’ bank accounts, right from the start. Every pound gained ends up costing us many more down the road. Terrible business altogether, so many impovrished or deprived of needed services or forced into debt just to line some scumbag’s pockets.

    6. Davy says:

      This may be the reason Labour’s Johann Lamont wants to get rid of universal benefits in Scotland, she and her cronies have found out they will need all the spare cash in the future to pay off their PFI debts.

      Anyone wondering how much PFI debt their is in Scotland ??? and who’s responsible for it ? and how long Scotland will have to pay it ? It may make uncomfortable reading for a certain party and would be very hard to avoid or justify if publicly published, ‘repeatedly’. 

    7. mato21 says:

      Found this for South Ayrshie 5 schools contract 32,5years
      GMB submitted a Freedom of Information request and it was revealed that the total cost will be£367.97 millions, excluding VAT.
      This financial year (2011 – 12), it was revealed that South Ayrshire Council will pay one company approximately £10m this year (£9.148 millions, excluding VAT).
      Paul Arkison, GMB Organiser said, “GMB members have always had a deep suspicion of these PFI contracts and these figures vindicate their fears. The high level of these repayment costs must cause concern for those in high office at South Ayrshire Council”.
      What is also concerning is that it would seem the Council have left themselves little room to re-negotiate this contact to reflect the current economic circumstances.
      What needs to happen here is that all the political parties need to galvanise support and formally call this contract in for proper scrutiny to ensure that no private companies are making massive profits for a Local Authority contact.
      The workers who operate on this contract are all GMB members and are to be commended as they are providing an excellent level of service, the majority are paid less than the Living Wage of £7.20 which the GMB is also campaigning for


    8. Aplinal says:

      Interesting report by “Public Finance”  from January 2011.  I have no idea who they are, by the way

    9. Aplinal says:

      Also from their web site a paper from May this year.  They have a search engine – input “PFI”
      The Public Accounts Committee today called for an end to the routine use of the Private Finance Initiative to pay for public infrastructure, saying some of the private sector profits were ‘difficult to justify’.
      Does one have to wonder why the Government has done nothing about this recommendation?

    10. turnbull drier says:


      with regard to the above site, can i ask a question..

      here is a random pfi contract

       capital value 33
       contract term 30

       is it simply 30*33 for the total cost over the life if the contract? 
       if not, and i hope to hell it isn’t, how would you calculate it?

    11. Aplinal says:

      From the NAO
      “The public sector should make better use of the hard won lessons from the extensive and substantial PFI programme. This means acting as a more demanding and intelligent customer, by harnessing government buying power through concerted tactics and tougher negotiation”
      Amyas Morse, head of the National Audit Office, 28 April 2011
      Actual information – facts/figures, are rather more hard to find.  A paper here has some data from 2006/2007 which is startling enough!

      “Prior to the May 2007 election, the Scottish Executive maintained that its acute services eview across the Scottish NHS would not be distorted by PFI expenditure and affordability problems, but would be motivated by the health care needs of local communities. But it is clear that the high cost of PFI, and the huge increase
      in its scale that is envisaged, will place a burden on the non-PFI parts of the NHS estate, and provide pressure for closure of services within them.”

      Chickens, Home, and Roost come to mind.  Labour should be being pilloried for this, but they aren’t.  Why?

    12. Aplinal says:

      I am no expert, and the contract for services can be quite variable, but on average it seems that they account for approximately 20-25% of the capital value!  So you’re not far out.  A 30mill capital expenditure with a 20 year service contract would likely be in the region of a further 120 – 150 mill.  There is also a built in inflation multiplier and so the actual final cost would be far higher.  Also the building does not even belong to the ‘purchaser’.
      A scandal indeed.  (Caveat – this is my guestimate, others more numerate may well find fault with the figures)

    13. Cuphook says:

      This article supplies links but Scotland currently owes about £37B – £30B for spending in Scotland itself and £7B for UK spending which ‘benefits’ Scotland.

      It’s difficult to grasp what a billion is but if you measure it in time a million seconds is 12 days time and a billion seconds 31 years – though how long we will have to pay for this Tory/Labour legacy is anyone’s guess. Maybe Gordon Brown could enlighten us.

      PFI/PPP – brought to you by the same people who claim that Scotland would be an economic wasteland without Westminster’s expertise. 

    14. Alex McI says:

      @mato21 just checked out your link there, and nearly had heart failure looking at how much Lanarkshire are owing, it’s horrific. I’m in South Lanarkshire and it looks like just about everything they have built is on the never never.totally outrageous.

    15. mato21 says:


      J.M Curthberf are well known and respected  


      As Alpinal has explained these contracts  vary in length inflation costs will also vary over the lifespan of these contracts so I think if you think of a number and multiply it by whatever you will be as near as damn it. I think this is how they did the sums in the first place and when you had people like Labour it did not take a genius to run rings round them and tie them into watertight contracts 

      The cost for the S Ayrshire schools given above still had to have VAT added I do not know if they have a reduced rate or if it is the full 20% So between 5% and 20% will add 18:4—72:6million

      These contracts are so lucrative I believe they are traded so it is almost impossible to find out who holds the deeds     

    16. turnbull drier says:

      @ Aplinal
      @ mato21
       thanks, I think… I’m now going for a lie down.. #stunnedandbewildered

    17. Barontorc says:

      We do have  a National Controller of Expenditure – do we not? What is that office’s take on PFI? Who is responsible for this duty? Name and shame, if the cap fits.

      In the meantime:- 

      Quantify the cost of each PFI project.
      Detail capital cost at time of build.
      List interest repayment programs over the  agreed PFI period.
      Assess  the cumulative cost of each PFI project till repayment ends.
      Compare the net finance cost against the actual build cost.
      Investigate the procurement process.
      Inquire into the approval system. 

      Jail the buggers who screwed the public! 

    18. Ronald Henderson says:

      I would like to see Mr. Salmond telling this story at the top of his voice and in kick arse mode next time ‘the wee fat wummin next door’ opens her hen’s backside of a  mooth to crack another of her ‘jokes’.

    19. mato21 says:

      Alex Mcl

      You do realise that the figures given are only the capital costs not what will eventually have to be paid by yourself your children and probably your grandchildren

      I heard a programme about this albeit from England some time back, and they were discussing a hospital When the staff checked, the cupboards had no shelves it was stated that each shelf with fitting came in at £300 I have no reason not to believe this as it was a serious programme Certainly not a call Kay with an E type  By the way she’s managed to get onto the press review at the moment      

    20. Simon says:

      As well as looking who the politicians are who signed the contracts, I think it might also be interesting to look from the other end and see who the people are who are receiving such large amounts of public money.

    21. Alex McI says:

      @mato21 yes I have now come to that realisation , it was bad enough when I thought that was the full cost, but the true figures are Monopoly money , it’s sickening . Just out of curiosity  is there any councils who have not used them.

    22. Aplinal says:

      As mato says, these contracts, or at least the financial backing, is traded.  I read somewhere (Private eye?) that these crooks (sorry businessmen) had the inept Labour led Whitehall staff so bewildered that they secured idiotically generous repayment deals which they then took to their bankers and renegotiated significant interest rate reductions in their borrowing, thus securing yet more profit off the backs of the tax payer.  In any other walk of life these contracts would be challenged and/or simply renegotiated without compensation by a Government, and the inept officials “allowed to find alternative work more suited to their ability”. 
      Too many vested interests I imagine.  Where is the REAL investigative journalism when you need it?  Knee deep in the pig swill with their political friends and businessmen (there they are again).

    23. Scott Minto (Aka Sneekyboy) says:

      An interesting point in the article that was linked to by Aplinal

      “Five authorities planned council tax increases to meet PFI costs. One authority planned an extra 1% on council tax each year between 2006/07 and 2017/18, followed by a further 0.7% in 2018/19, so that by 2018/19, council tax was expected to be 13.5% higher than it would otherwise have been without the PFI project: this higher level would then continue. Given that the Scottish government is now operating a freeze in council tax rises, these councils will have to find other means to meet their PFI funding obligations.”

      Although it doesnt name the local authorities it does beg the following questions…

      Does Johan Lamont want to force the Scottish Government to end the Council tax freeze so that they can fund a PFI shortfall?

      Is the “something for nothing” speech actually a way of deflecting blame away from labour about these increases should they happen?   

      Why was it “planned to continue” at the higher rate once paid off?

    24. douglas clark says:

      It seems to me that we should simply walk away from these contracts on the grounds that they were signed by idiots. As far as I remember, idiots are not seen as capable of signing contracts. Signing such a contract makes you an idiot, so quod erat demonstrandum.

    25. cuphook says:

      The financial scandal aside, if Labour had used this money on the projects suggested by Rev (and include the Inveramsey bridge on the A96) it might have increased their popularity enough to stop the SNP winning in 2007. As it is the SNP used the money to make them popular and increase their vote in 2011 thereby ensuring that the referendum would take place.
      It goes to show that Labour in Scotland not only put the interests of the UK government before those of Scotland but also of themselves.

    26. mato21 says:

      Alex McL

      I very much doubt that there are any councils without these debts hanging round their necks

      Brown as Chancellor was very fond of this scam (along with many others) that any council undertaking  public building would have no option. He was able to keep the Capital spending off the books while claiming all these schools hospitals ect were being built under labour The contracts were so convulated that few could understand the implications and the public who wanted a new school or hospital were not concerned so long as what was needed was being build.

      The Skye bridge contract was bought out at great expense after the SNP came to power  This is why you still have to pay for hospital parking at the Edinburgh hospital and I think Ninewells The rest of the hospitals whose parking was not under PPP/PFI had the charging stopped after the SNP came to power as they saw it as a charge on the sick (somethink else for Johann to re-introduce among those something for nothing scroungers)         

    27. Morag says:

      I remember being extremely clear at the time that the whole idea was madness, not because I had any unique understanding of it, but because several decent articles I read explained it quite well.
      It wasn’t exactly a state secret, or arcane knowledge.

    28. Arbroath 1320 says:

      Just thinking outside the box Scott. I reckon Glasgow must be at the top of the list to implement these scandalous Council tax rises. I reckon it is as a direct result of these proposed tax increases that Gray did not. initially, back the council tax freeze at the last Holyrood elections. It was only because the SNP proposed doing it that he fell for the two year freeze, only to be trumped by the SNP and their five year freeze.
      I think there is a problem with regards to “escaping” these nauseous PFI contracts and that is how they are all tied up, legally. It is because of the legalities involved that I believe the SNP are currently having such a hard time disentangling the government, and by extension the councils, from these insidious contracts. 
      I agree with every one on here, those responsible for the PFI contracts must be named and shamed. Unfortunately I am at a loss as to how we can achieve this other than protesting outside Holyrood and constantly contacting our M.S.P.’s about our concerns about the ridiculously over priced PFI contracts aimed pure and simply at the directors of the PFI contract holders. As others have suggested I too suspect that there must have been a level of “passing of the brown envelopes” going on at some stage between contractors and Labour personnel.
      When you look into the costs of these PFI contracts you really have to wonder about the level of intelligence of everyone involved in signing off these contracts. Every one from Blair and Brown right down to the lowest contract signatory MUST be called before an appropriate committee in Holyrood and given serious questioning. They must also, in my view, face criminal charges. In my view this whole PFI malarkey was dreamt up by Brown because he couldn’t be bothered doing the appropriate economics every year, after all while he was Chancellor/P.M. he had a number of books to write. Let’s face it we can not have expected Brown to run the country AND write his books as well.

    29. muttley79 says:

      The £190 million remaining from the £1.5 billion, from Rev Stu’s article, could have gone a long way to financing the Galashiels to Edinburgh railway.  Scottish government would have been left with around £110m, plus adds ons, to spend on it.

    30. Tinyzeitgeist says:

      What was Audit Scotland doing when this nonsense was taking place? And the same Audit Scotland is currently telling councils throughout the land how to conduct their business!!

    31. Arbroath 1320 says:

      Well I’ve started the ball rolling, I think.
      I’ve just contacted Gordon Macdonald via Kilter and e-mailed my own M.S.P. Joan McAlpine asking if they are in a position to start initiating weekly questions at F.M.Q.’s about the preposterous PFI contracts.
      Not sure if it will do any good but at least I feel better for asking the question. 😀

    32. Dal Riata says:

      This from the Dunoon Observer and Argyllshire Standard, 13 August 2010 (with thanks to  Tinyzeitgeist from WOS’s “The something for nothing country” article)

      “Nearly £20m will leave cash-strapped Argyll and Bute this financial year in PFI repayments, with over £8m of that in INTEREST alone.Argyll and Bute Council will, over the 30-year life of the agreement to build five new schools (including Dunoon Grammar School), pay £370.885m – for buildings worth £87.573m.

      Jim Mather MSP is not impressed. The Scottish government’s Minister for Enterprise, talking about the Scotland-wide situation, said: “The irony here is that in the current recessionary scenario with the UK government imposing restrictions on the annual settlement, the Scottish government is also facing increasing repayments to pay off the folly of PFI. This will total £820 million in the current year, will peak at £1,097 million in 2024 and will not finish until 2042.”
      ABC Schools Ltd, which operates out of a business centre in Edinburgh’s Lauriston Place, is the council’s PFI partner company. It did not return our calls, which is unfortunate as we had hoped to ask how many investors it had in our schools and what they hoped their returns would be on their initial investment.”

      Argyll and Bute Council’s repayments for schools this year (2010/11) are: Repayment of capital cost, £1,412,000. Interest, £8,461,000. Service charges, £3,438,000.”

      It’s absolutely bloody disgraceful! 


    33. douglas clark says:

      If I am right in saying that Gordon Brown’s concern was merely to keep the costs of these projects off the balance sheet for public expenditure, and therefor tie us to these usurous costs running to 2045 or so, then I am astonished that he didn’t just re-write the rules. We really do need to look at ourselves.

    34. Holebender says:

      I don’t think he could rewrite the rules; I believe they are set at an international level.

    35. velofello says:

      A successful Yes vote would enable the incoming independent Scottish government to call for a renegotiation as these PFI contracts? New broom etc.
      What was the outcome of discussions with the PFI  provider (Serco?) over the power outage fiasco at the Edinburgh Royal hospital.It did seem from information at the time that the client had grounds to cite the provider as failing in contract obligations?
      Funny how Serco keeps popping up? Hospitals, defense establishments,ferry services. 
      Who owns Serco? 

    36. Fiona says:

      I wonder how much we are paying for this and should failure to do the job properly not allow the contract to be torn up

    37. alan says:

      Post Independence: Rip the contracts up and tell the clowns involved tae fuck off!

    38. Tom McAlister says:

      Nothing surprises  or astonishes me when it comes PFI scams and Labour party gross incompetence. Absolutely nothing.  The Walsgrave hospital in Coventry was a prime example of PF bluidy  Aye and a New Labour’s “sheds for us” scenario. I remember being outside that hospital in the company of a well known investigative journalist and author.  I said to him, “George, Labour has broken many a promise but what they are doing to places like this is something else.” *
      …..and it’s not the only PFI scam  That I was involved in exposing and campaigning against. Skye bridge anyone.    *Captive State by George Monbiot.

    39. Les Wilson says:

      I agree the people who signed these agreements should be held to account.
      What about a SG PFI query committee, and give them a public grilling, then if poss bring in the fraud squad, as there is a public notion that I heard that some big political names either have connections to these PFI companies, or their family or friends do. Hmmmmmmmmmmmmmm
      Do it a few months before Sept 2014
      Of course Brown and Darling would need to be called to explain their actions too!

    40. Inbhir Anainn says:

      On the subject of PFI readers will recall a good while back Alex Salmond’s plea on Question Time to I think a Liverpool audience, “Don’t let these three parties destroy your NHS” (clip is about 2mins in).
      Peter Hain’s (Lab) face was a picture and a joy to behold.

    41. mato21 says:

      It was interesting reading the back posts on these scams I had forgotten, with all the recent shinanigans, just how bad they were 

    42. Inbhir Anainn says:

      Apologies for going off topic but for anyone who missed the Scottish National Party Spring Conference 2013 from the Eden Court Theatre, Inverness running time just shy off 2hrs (1.59.12).

    43. gerry parker says:

      alan says:
      13 November, 2012 at 8:17 pm

      Post Independence: Rip the contracts up and tell the clowns involved tae f*** off!
      Pay them in time expiring coupons (say 2 Years) that can only be spent in projects that generate manufacturing  jobs in Scotland.

    44. Frazer Allan Whyte says:

      This whole PFI looks more like prima facie evidence for a highly organized kickback conspiracy than a simple cooking of the books – how do people get away with it? Why does no one really call these snouts to account? Can’t at least their lives be made at least a little less comfortable?

    45. Chic Thomson says:

      Just tlistened to the six o clock news on Radio 4. The Bank of England has reported itself to the regulator, and the regulator is now being investigated by the Serious Fraud Office for market fixing shenanigins during the financial meltdown 2007/2008.
      Surely the mismanagement outlined above re PFI also qualifies as Serious Fraud. Don’t tell me that there aren’t documents somewhere wherein someone says “this is the only/best/cheapest* way to build this infrastructure”.
      How does one raise a case with the SFO?

      * delete as appropriate

    46. BrianW says:

      I’m still playing catch up..

      It is amazing what stories can surface from time to time – makes for fascinating reading and makes you realise Labour have been rotten tot he core for a LONG LONG time.

      1.5bn handed back to Westminster.. Were Labour in Scotland paying Labour Minister Jack Straw for Parliamentary privileges.. Access to Labour PFI contracts no doubt.

    47. marion adamson says:

      I am pleased people now taking notice of PFI and PPP contracts which were a carry on from tendering facilities in public sector services. Started by Tories in the 80s and carried on by Labour through the 90s and into the 2000s. My old union COHSE and UNISON campaigned against this waste of money to no avail. The attraction for governments was that the costs did not show up as current borrowings and so the deficit looked better than it was. Debt was deferred into future expenditure. PFI/PPP projects costs run for 25 to 50years and increase in line with inflation. At the end of the contract the private sector owns the facility. So the public sector pay for the build and then rent back the facilities and some of the staff to service and maintain the buildings. ( the private sector cannot lose and if registered in Jersey and the Caymans then they doubly win as the public sector has to pay VAT on the costs but the company may pay no tax.
      SNP stopped this after they came to power and as each previously contracted PFI/PPP finished they were not repeated. Debacles like Lanarkshire/ Ayrshire/ Forth Valley/Glasgow/Fife/Trams etc….list is endless and costly.

    48. Dougie says:

      From the Academic report PFI in Schools: value or not. Glasgow City council signed of agreement without seeing the full business plan no due diligence that it self is huge story for it shows the council put political aims before the citizens

    49. Dcanmore says:

      Scottish Labour only wanted two things since 1997, to stay in power and to keep Scotland in the union. The rest as they say is in the details.

      If you want to keep Scotland dependent on UK, you keep their money and saddle them with debt making sure they always keep coming back asking for more, and pointing out how Scotland can’t go it alone because of the engineered situation Scotland faces and will continue to face each year.

      It’s a loaded dice and always has been. These Labour politicians have acted in a criminal fashion against the Scottish people. Needlessly piling the country with debt while surplus monies is given away. The unionist media know if this was publicised widely it would finish the Labour Party in Scotland for the next 30 years. It’s time the SNP, Greens and others shoved this down their throats for months by any means necessary.

      It can start with a very public and critical enquiry of public expenditure from 1999 to 2007.

    50. Christine Kabashi says:

      Government by provvy checks.

    51. Ian Sanderson says:

      Arbroath 1320..
      Private Finance Initiative (PFI) schemes were introduced to the UK under the John Major Government in the 1990s, with the first PFI project [Skye Bridge] tested in Scotland. also has a fair bit of the deail..

    52. Amos says:

      Post independence we should refuse to pay these debts. And even try to recover some of the cost as reparations.

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