Taxpayers will cough up millions more than Lancashire fire stations cost to build - but service says they were needed

Taxpayers will cough up tens of millions more than several Lancashire fire stations cost to build.

Monday, 14th October 2019, 11:57 am
Chorley Fire Station, in West Way, Euxton

Stations were in Morecambe and Hyndburn, which were built in 2003, have a combined capital value of £5.6 million, with repayments set to cost taxpayers £21.9 million by 2033/34, an investigation into controversial Private Finance Initiatives (PFIs) has shown.

And the service was also involved in a second PFI project alongside the Merseyside Fire and Rescue Authority and Cumbria County Council to build 16 fire stations, four of which are in Lancashire: Blackburn, Burnley, Chorley, and Fleetwood.

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Fleetwood Fire Station, in Radcliffe Road, was built in 2012, while Chorley Fire Station, in West Way, Euxton, was built the year after and is the service’s southern headquarters.

The overall project had a capital value of £47.9 million (£12.16m for Lancashire) but will cost the taxpayer £196.6m by 2038/39.

The Lancashire Fire and Rescue Service (LFRS) stressed that the figures include ongoing maintenance and management fees over the lifetime of the contracts.

It said: “The PFI scheme for Hyndburn and Morecambe was agreed at a time when the Government set the Service’s borrowing limit and hence we couldn’t finance the new build of stations in any other way.

"The joint PFI scheme with Merseyside Fire and Rescue Authority and Cumbria County Council was agreed at a time when the Service could borrow to fund capital but at a cost on repayments and interest.

"The decision was made to utilise the PFI route as the Government grant made this the most economical solution for Lancashire.

“The old stations were no longer fit for purpose, they were inefficient and had significant maintenance requirements.

"The new stations provide a suitable facility for the modern fire service incorporating community rooms, improved training facilities and appropriate welfare facilities.”

Under PFIs, private companies handle up-front costs on public building projects such as prisons, hospitals, schools, and infrastructure, in exchange for yearly payments from the state.

Contracts often last decades and the deals, which were introduced by the Conservative government in the ‘90s and increasingly used by Tony Blair’s Labour government, cost the taxpayer much more than if the projects had been funded from the public purse.

A report from the National Audit Office said there are over 700 current PFI deals with a capital value of £60bn. “Annual charges for these deals amounted to £10.3 billion in 2016/17,” it said. “Even if no new deals are entered into, future charges which continue until the 2040s amount to £199 billion.”

The former Chancellor Philip Hammond last year said no new PFI deals would be signed, saying the government was “putting another legacy of Labour behind us” and would “abolish” their use.

He said: “I remain committed to the use of public-private partnership where it delivers value for the taxpayer, but there is compelling evidence that the private finance initiative does neither … I have never signed off a PFI contract as chancellor, and I can confirm today that I never will.”

'We need to put a story to this outrageous waste of public money'

Controversial ‘private finance’ deals have left some public bodies stuck with costly buildings they are no longer using but cannot sell, we can reveal.

In one case, an NHS maternity unit built and run through a Private Finance Initiative (PFI) scheme was closed after just 16 years but is still costing the taxpayer millions of pounds, JPIMedia Investigations has found.

The Cresswell unit in Dumfries is now undergoing a multi-million pound conversion after the local health board abandoned an attempt to extricate itself from the deal.

The Scottish Government said it had “concerns around the flexibility and the value for money offered by historic PFI contracts”.

Meanwhile, Sussex Police is trying to find a new use for a custody suite which has not been used since November, due to a shortage of demand.

The facility is one of six custody suites the force pays a private company millions of pounds to run each year.

Police and Crime Commissioner Katy Bourne has said that “with the benefit of hindsight”, it would not agree to a similar deal today.

Restrictive contracts are also leaving many authorities facing eye-watering costs for basic maintenance jobs, we can reveal.

This includes a school charged £25,471 for three parasols, a hospital billed £5,334 for a new sink and a police force which paid £884 for a chair.

The Private Finance Initiative sees private companies build and run key infrastructure, leasing it to the public sector through deals usually lasting 25 to 30 years.

The agreements often include services such as maintenance and cleaning, but critics say this can leave public bodies paying high prices for basic changes to their buildings.

Unite the union’s assistant general secretary Gail Cartmail said: “Using PFI contracts are like an individual using a credit card, but, in the case of PFIs, it takes 20 to 30 years to pay off the debt – this is not an effective use of taxpayers’ money.

“We have all heard similar stories to the one of a police force being billed £884 for one chair - we really need to put a stop to this outrageous waste of public money.”

Megan Waugh, a researcher at the University of Leeds who is studying PFI, said: “These ‘extra charges’ are incredibly common and a complete rip-off.

“Public authorities trapped in PFI contracts are forced to use the PFI contractor who can and do charge over the odds for basic maintenance and repairs such as £24,000 to adapt a disabled toilet.”

The Treasury said it was supporting health authorities to manage the costs of old PFI deals.

Council leaders in the early 2000s had little choice but to sign PFI contracts if they wanted to secure investment for their areas, according to one former chief.

Mick Young was instrumental in forming deals to build dozens of new schools and care homes during his time as Labour leader of Northamptonshire County Council from 1998 to 2004, but years later these decisions came under intense scrutiny when the authority went effectively bankrupt last year.

He said: “If the county had have been allowed to raise the money in a more traditional capital borrowing way, I would have preferred to have done that.

“But the Government would have said ‘no chance’.”

However, a national campaign group believes the public has every right to point the finger of blame at those who signed off on the PFI deals in the early 2000s.

Joel Benjamin, co-founder of The People Versus PFI, said: “Somewhere along the line the consultants that provided the advice on these deals, suggesting they represented value for money need to be held up to the spotlight - and to some extent, the councillors and commissioners that signed off on PFI deals need to be held to account also.”

The Private Finance Initiative: A timeline

1992: The Private Finance Initiative is born under John Major’s Conservatives.

1995: Britain’s first PFI project, Scotland’s Skye Bridge, opens. Within a decade, a public outcry over its high toll charges had forced the Scottish Executive to buy the bridge off its private owners at a cost of £27m.

1997: Two months after New Labour sweeps to power, Health Secretary Alan Milburn announces it is “PFI or bust” for the funding of infrastructure. Use of the model soars through the Blair and Brown years.

2007: The value of PFI deals peaks, with private companies investing £8.6bn in public infrastructure that year.

2008: Use of PFI falls in the wake of the financial crisis.

2011: The year after the Coalition government comes to power, two Parliamentary committees heavily criticise PFI. The Public Accounts Committee suspects companies are making excessive profits from the schemes, with chair Margaret Hodge MP warning that “tax revenue is being lost through the use of off-shore arrangements by PFI investors”. Meanwhile, the Treasury Committee finds the full cost of a hospital built under PFI is set to be 70 per cent higher than a publicly funded one. Committee chair Andrew Tyrie MP says they “can’t carry on as we are, expecting the next generation of taxpayers to pick up the tab”.

2012: Chancellor George Osborne relaunches the model as PF2, run in a similar way but with more details of the deals to be made public.

2018: Howard Davies, the chairman of Royal Bank of Scotland - itself a PFI investor - calls the model a “fraud on the people”. The National Audit Office publishes a report finding little evidence of its benefits. Later that year, Chancellor Philip Hammond abolishes PFI but old schemes remain in place.