Northern Ireland news

£5bn additional bill for PFIs in the north

Gareth McKeown

A TOTAL of 33 government private finance loans to build hospitals, roads and schools are to cost the Northern Ireland taxpayer £5 billion more than their value by 2043.

At a time when the health service is in 'crisis' and department budgets are stretched to their limits, payments to Private Finance Initiative contracts are set to total £6.6 billion.

This is almost four times the capital value of the projects, with a portion of the extra cost coming through interest payments.

The private finance initiative (PFI) was designed as a way of creating "public–private partnerships" (PPPs) by funding public infrastructure projects with private capital. Essentially they are loans to the government which must be paid back.

The 33 PFI contracts in the north were struck within the 15 year period between 1995 and 2010 and range from five-year agreements to contracts that run over 15, 20, 25 and 30 years.

In all the projects have a capital value of almost £1.7 billion, but by 2043 more than £6.6 billion will have been spent on 'unitary charge payments', which include interest.

The Roads Service accounts for the single largest contract, which has a capital value of £224m.

This project works include an upgrade to the A1 between Sprucefield and Cloghogue including a 12.1km dual carriageway and improvement works on the 20.5km stretch of the A4 between Dungannon and Ballygawley. In total, including maintenance, this will cost over £1bn by 2038.

A spokesman for the Department for Infrastructure said the two Roads Service PFI contracts, which have a final estimated cost of £1.62bn "were awarded to the most economically advantageous bid in line with the criteria set out in the tender invitation documents".

One of the last major contracts awarded was to the South West Acute Hospital in Enniskillen, which opened in June 2012. The £224m hospital is set to cost the tax payer just shy of £700m over 30 years with additional payments factored in.

Donal O'Cofaigh, who contested the election for Labour alternative, said the "huge difference" between the figures was a concern.

“Even allowing for maintenance payments, it's hard to reconcile these figures," he said.

"Repayments in the current tax year from the Western Trust to the consortium, including the AIB and Interserve, amount to £17.5 million. That means before a penny is spent on nurses, medicines, wards or care £17.5m has to be found to pay the private sector. What's more these repayments are set to rise dramatically reaching a peak of £32.5 million a year by 2041."

Within the figures payments to two new builds for South West College in Dungannon and Omagh are among the most lucrative to the private sector. The two projects, which each have a capital value of £16m are set to cost almost £245m over the thirty year contract agreed under the former Department for Employment and Learning.

A spokesman for Department for Economy, which now covers DEL said: "Each project had a business case proving value for money and signed off by the then Department of Finance & Personnel."

"The agreements reached were determined by the financial climate at the time of signing, initial capital outlay, the cost of maintaining the building and of replacing major items at defined periods throughout the contract and the extent of the additional services to be included. The level of services can differ from contract to contract therefore comparison of contracts cannot be made without assessing all of the relevant information," he added.

Invest NI entered into a PFI arrangement with the Bedford Street Developments Limited (BSDL) Group in 2004 to construct and manage its Belfast city centre headquarters building for a 25 year period ending October 2030. The £19m capital value project at Bedford Street is set to cost £120m over 25 years, according to the figures - more than six times the initial outlay.

Invest NI told the Irish News however that in July 2013 it acquired the BSDL group, owned by McAleer & Rushe and Dunloe Ewart. 'Unitary charge payments' are listed until 2030.

"Since acquisition the property is now part of the Invest NI Group. As at the most recent valuation in March 2016 the property is valued at £19m," a spokesman said.

SDLP finance spokesperson Claire Hanna said the party has had "consistent concerns" about PFIs since they were introduced.

"It is wrong that we will be paying for infrastructure for much longer than we should be and spending millions more than necessary," she said.

"Consistently those negotiating on behalf of the public interest seem to have been outmanoeuvred by the PFI providers whose primary goal is achieving profit and not representing the public interest," the south Belfast MLA added.

Former Ulster Unionist finance spokesperson, Philip Smith said the PFI cost was "shocking".

"At a time of unprecedented pressure on Executive funds, as well as crisis engulfing our local health service, it is shocking that Stormont is committed to paying back so much and for such a long period.

"Unfortunately projects were committed to in the past without full value for money being demonstrated so it is essential that lessons are learned from the mistakes that were made," he said

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Private Finance Initiative (PFI) contract Capital value (£m) Contract length (years) Unitary charge payments (£m)

Cancer Centre (equipment) 36.7 25 152

Managed Equipment Service (MES) / ATICS 52 15 133.1

RVH Car Park 4.5 20

Belfast Metropolitan College - Millfield Campus 20 25 106.4

Belfast Metropolitan College - Titanic Quarter 44 25 158.5

North West Regional College - Northland Building 10 25 74.6

SERC - Downpatrick/Newcastle/Ballynahinch Campuses 24 25 129.9

SERC - Lisburn Campus 20 25 95.1

South West College - Dungannon Campus 16 30 116.2

South West College - Omagh Campus 16 30 128.6

Roads Service DBFO - Package 1 118.2 30 523.3

Roads Service DBFO - Package 2 224.1 30 1,052.8

Lisburn City Library 3.7 25 11.9

Invest NI HQ Accommodation Project 19 25 120.5

Bangor Academy / Nendrum College PPP Project 41.4 30 156.6

Belfast Strategic Partnering PPP Project 123.2 30 476.4

Derry Diocese St Cecilia's College / St Mary's College 45 25 180.5

Down & Connor / De la Salle Schools 54.6 25 255.5

Drumglass High School PFI Project 6.4 25 28.9

Eschools Data Warehouse 4.6 5 2.5

Holy Cross College PPP Project 31.3 25 143.6

St Genevieve's High School PFI Project 11.5 25 72.5

Wellington College/Balmoral High School PFI Project 17.7 25 29.6

LANDWEB 21 15 94.4

Kinnegar WwTW 12 25 52.7

Project Alpha (NI Water) 110 23 495.9

Project Omega (NI Water) 122 24 640

New Renal Dialysis facilities 2.9 15 16

Services Centre (Altnagelvin Hospital) 15.5 25 56.8

Enniskillen Hospital 223.9 30 699.9

Lagan College/Tor Bank Special School PPP Project 43.82 25 167.1

Classroom 2000 Local Area Network services 170 5 166.7

Laganside Courthouse 24.4 25 111.1

TOTAL 1689.5 6649.6

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