The Scottish government has been challenged to explain which new infrastructure projects have been hit after it ran foul of strict EU rules on public spending.
MSPs on Holyrood’s finance committee have asked Scotland’s finance secretary, Derek Mackay, for a full and comprehensive analysis of the impact of the error, which has lost the Scottish government at least £915m in spending for public sector construction projects.
Their demand follows an investigation by the Guardian that revealed the Scottish government would lose up to £932m of the money it had for new schools, roads and hospitals because it had wrongly believed a major new privately financed building programme it had championed would not affect its spending powers.
The full scale of the losses emerged after the Office for National Statistics ruled the Scottish government and the Scottish Futures Trust – a government agency, which designed the private financing schemes, had broken EU rules on public spending introduced in 2014.
The ONS investigated four major privately financed building projects – the Aberdeen western peripheral route, a new bypass round the city; a children’s hospital in Edinburgh; a general hospital in Dumfries; and a new blood transfusion service headquarters.
The ONS said they had to be counted as public projects and assets, and not as privately owned. Scottish ministers have since admitted a fifth project, for a new hospital on Orkney, is affected by the ruling.
The full capital costs, estimated by the spending watchdog Audit Scotland to be in the region of £932m, had to be included in the Scottish government’s accounts. This forced ministers in Edinburgh to set aside that sum from £3bn in new public borrowing powers, preventing that money from being used for other building projects. The public borrowing would have been financed at lower interest rates than that charged for private finance projects.
In a report on this year’s draft budget released on Friday, the committee said government accounts showed the total lost to cover those five projects so far has reached £915m over the three financial years from 2015-16 to 2017-18.
Mackay said the EU rules had changed while the projects were being set up. He said: “Had the rules not been changed and the budget cover not then been required for these projects, the cover would have been available to support the overall capital programme.”
Scottish Labour’s James Kelly, who is on the finance committee, said: “The key issue at the heart of this is that nearly £1bn in finance for capital projects has now been lost. That must have an impact on other projects in the pipeline. This is fairly serious for the Scottish government’s building programme.”
