The private funding scheme behind a flagship Lanarkshire hospital has been branded a "rip-off" after it was revealed investors can make more than 17 times their money back.
Hairmyres Hospital in East Kilbride was the first PFI hospital in Scotland when it opened its doors in 2001. It was financed by a consortium of construction group Kier and finance company Innisfree. And they stand to make more than £145million from an outlay of just £8.4m.
Today two economic experts will present their analysis of the contract to the Scottish Parliament after studying information on major PFI deals released under the Freedom of Information Act. Jim and Margaret Cuthbert looked only at the costs of building the public facilities, not including the lucrative deals to run them afterwards. But even the building costs would have been halved if the work had been paid for directly from public borrowing.
The two companies put in just £100 each in equity and they invested £8.4m as "subordinate debt" charged at an estimated 18.8% a year. This compares to the rate of about 7.2% a year given to later investors who put in a total of £65m. The contract also makes sure the cheaper debt is paid off sooner, while "subordinate" debts continue to earn interest. The companies later sold off part of their debt for £8.1m each, and Kier has now sold the rest of its share to the financiers for another £13.8m.
The experts claimed the total cost of the hospital building will be almost twice, 1.97 times, what it would have been if the money had been raised through a traditional public financing deal.
Source: Evening Times
Date: 29 April 08
Email this Article
| Click to Print
Copyright © Evening Times
