It was supposed to look neat in the national accounts, keeping the “national debt” off the books while still delivering shiny new infrastructure. That was the story sold to us. And Scotland knows what a load of nonsense it was.
PFIs, or Private Finance Initiatives were an illusion. They were an accountant’s trick to make liabilities disappear from the official numbers, while locking Scotland – and the rest of the UK – into decades of commitments far greater than if the government had simply borrowed and built the infrastructure.
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The promise was opaque funding; the reality is excess cost and Scotland is still paying for it. Take the Royal Infirmary of Edinburgh. When its new site at Little France opened in 2003, ministers praised it as a model for modern healthcare.
What they rarely mentioned was that a build cost of less than £200 million had been turned into decades of payments that will eventually cost around £1.1 billion. And despite all that money, the hospital opened without something as basic as full air conditioning.
The costs were not just financial. Design choices made to suit the contract, rather than patient need, left long-term consequences that Edinburgh residents still live with.
Or think of the schools in Edinburgh. In 2016, nine tonnes of masonry crashed down from a wall at Oxgangs Primary during a storm. Mercifully, it happened at a weekend.
Seventeen schools across the city had to close as investigators found widespread defects in buildings delivered under PPP or PFI contracts.
Children were sent home, parents scrambled for childcare, and the public discovered that the supposed “risk transfer” to the private sector was paper-thin. The local authority was left to pick up the pieces.
Then there is New Craigs psychiatric hospital in Inverness. It was built for £16.5m in 2000 but the contract locks NHS Highland into payments of more than £100m over 25 years – seven times the cost of simply building the hospital directly.
And none of that extra money bought better care, more staff, or improved outcomes for patients.
It simply transferred public funds into private profit streams, a quiet siphoning of resources that might otherwise have gone to services. The Skye Bridge tells a similar tale. Built under a PFI-style arrangement, locals faced years of extortionate tolls.
Protest and non-payment campaigns grew until the government was forced to buy out the private contract in 2004. Only then were the tolls lifted.
The lesson was obvious – when basic infrastructure is left in the hands of rent-seeking private consortiums, the public pays over and over again. These are not isolated examples. They are symptoms of the PFI model. At its heart, PFI was about hiding debt. Governments wanted to claim prudence while boasting about shiny new buildings without ever admitting they had borrowed to pay for them. So the borrowing was hidden inside opaque, long-term contracts with private providers.
The result is that Scotland, according to Audit Scotland, will ultimately pay more than £40bn for PFI assets that cost under £10bn to build, draining money away, largely into returns for banks and investors.
And the supposed transfer of risk? It was a mirage. When schools fall apart, when hospitals require redesign, when demand projections fail – if anything goes wrong, it is always the public purse that bleeds.
This is why I call PFI a curse. It has tied Scottish councils and health boards into contracts that eat up staggering portions of their budgets.
Some local authorities spend more than half of their Council Tax revenue servicing PFI deals. That means less for teachers, fewer social care workers and potholes left unfilled.
A generation of political choices – largely by Labour governments in Scotland before devolution fully bedded in – has left scars that will not heal for decades. And the most insidious cost of all is what economists call the opportunity cost of PFI.
When politicians believe money is limited in supply (even if they are wrong), PFI repayment is a pound not spent on frontline services. It is a nurse not hired, a social worker post left vacant, a library shut. The invisible price of PFI is borne daily in stretched services, long waiting lists, and Council Tax increases.
This is the political economy of PFI. It is not an accounting detail. It is a transfer of wealth from communities to corporations.
It is neoliberalism in quite literal concrete form, granting the private sector a rent-extracting role in every public service, when the state could have delivered more cheaply, more flexibly, and more accountably.
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The lesson for Scotland now could not be clearer. First, we must be honest about the past. The billions lost to PFI are not “sunk costs” in the sense that nothing can be done.
Contracts can be published in full. Terms can be renegotiated. Buyouts, as with the Skye Bridge, can sometimes save money in the long run. But that requires political will –and the courage to admit mistakes.
Second, we must end the charade of off-balance-sheet finance. The Scottish Government’s attempts to move towards non-profit distributing models were a recognition that PFI was toxic. But even those models replicated the basic premise that private capital is needed to build public goods, and that is an error. Scotland has to be given the chance to borrow to fund its own infrastructure.
Third, we need to reframe the debate entirely. The question is not “how do we build without raising debt?” but “how do we invest in ways that deliver the services our people need, at the lowest long-term cost, and with the greatest flexibility?”
That means treating schools and hospitals as social goods, not balance-sheet tricks. It means seeing borrowing not as a moral failing but as a necessary tool of investment.
And it means recognising that the true debt is not what appears on paper, but what we owe to future generations if we fail to provide the infrastructure they require.
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PFI’s defenders will say we cannot turn back the clock. But we can learn. We can recognise that the model failed, that it hollowed out public finances and left buildings unsafe and contracts unaccountable. And we can insist that never again will Scottish governments — of whatever colour — reach for the easy illusion of private finance.
The curse of PFI is still with us in all the contracts that are ongoing, but now Wes Streeting, the English Health Secretary, wants to use it to build 200 new health centres in England. How long before Labour’s branch office suggests the same approach for Scotland?
That means PFI is still on the Scottish political agenda. The only way to break the curse is to confront it head-on with honesty, with reform, and with a renewed commitment to public investment in the public good. Only then might Scotland free itself from the costly illusion that private finance was ever the answer.
