Schools and health centres to be put on hold as new European rules cause contractual issues

John Swinney
John Swinney

A number of projects to construct new health centres and schools with money from the private sector are to be put on hold amid contractual problems.

About £500 million of public cash has been put aside as a contingency plan after confusion arose over how projects under the Scottish Government’s non-profit distributing (NPD) model, which replaced private finance initiatives, are to be classified following a revision of European rules in September.

Previously, schemes processed through the Scottish Futures Trust (SFT) were treated as private sector projects but the new rules mean they may now come under the public sector heading.

UK Treasury rules provide that government money has to be put aside to deal with the cost of public schemes and may only be released upon completion, which could have an impact on funds available to deal with front-line services.

The finance secretary John Swinney has put aside £150m from a budget underspend and the Treasury has added a further £300m to cover two projects – the Dumfries and Galloway Royal Infirmary and the Royal Hospital for Sick Children in Edinburgh.

However, eight more projects constructed through public-private partnerships due to begin this financial year will now likely be postponed following warnings from Mr Swinney that the changes to contracts must now be considered and that his could “take some time” to agree.

Mr Swinney said: “I have considered it appropriate to put in place a number of steps to refine the NPD programme while seeking confirmation and further advice on the appropriate classification.

“The Scottish Government and SFT believe that current project arrangements demonstrate consistency with the relevant guidelines. However, until the process of engagement with the ONS has concluded, I believe it is appropriate to put in place contingency measures.”

Peter Reekie, deputy chief executive and director of investments at SFT, said: “In common with the rest of the EU, the Scottish and UK Governments are working to ensure consistency with these updated guidelines.

“SFT and the Scottish Government are working with the ONS to obtain clarification of the new rules. The delivery of all NPD and hub projects already under construction will be unaffected.”

A Scottish Government spokesman said: “We are working to ensure eight schools and health projects expected to reach financial close this financial year are delivered as soon as possible.”

Among the delayed projects is the new Kelso High School. The £21.4m school will replace the existing building, which dates from the 1930s.

A Scottish Borders Council said the Scottish Futures Trust and the Scottish Government are aware of the problem and are working to ensure a solution is found “as soon as possible”.

He added that council officials will continue to complete preparatory work.

The school at Nethershot on Angraflat Road will include new grass and synthetic sports pitches as well as community facilities.

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