PFI anger as cost of maintaining A19 in North East rises by almost £280m

Costs to maintain a 66-mile stretch of the A19 have soared by almost £280m, prompting calls for an urgent Government inquiry.

Wednesday, 16th October 2019, 6:00 am

Highways England has come under fire for a 30-year deal with a private firm to manage the A19 Dishforth to Tyne Tunnel route, after the scheme saw the biggest rise in costs of any English roads private finance project.

Originally agreed in 1997, the contract was predicted to cost £669m.

But now the bill is expected to hit a staggering £946m, JPIMedia Investigations can exclusively reveal.

Concerns have been raised over PFI costs for A19 maintenance in the North East.

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In total, the costs of 11 roads maintenance deals signed off by Highways England under controversial private finance initiative (PFI) deals are now expected to be £786m more expensive than originally predicted.

The revelation has stunned politicians, who are now demanding answers.

Coun Matthew Storey, leader of Middlesbrough Council, said the A19 was a “critical route” but was worried by its soaring costs.

He said: “I am very concerned. This has to be value for money and a good deal for the taxpayer - in this case it clearly isn’t.

JPIMedia investigations has been looking at the cost of PFI schemes

“It needs to be investigated how and why this has happened. To be running at that level of expenditure, over and above what it was expected to be, is huge.”

Of the 11 projects agreed, all but three will cost the taxpayer more than anticipated.

Among the most costly included work to overhaul the M25 around Greater London, which has surged by £255m from £9.96bn to £10.2bn.

The A1 Darrington to Dishforth, in West and North Yorkshire, recorded an increase of £132m -– a 14 per cent rise from its original £921m budget.

The nearby M1-A1 link from Lofthouse to Bramham in West Yorkshire has seen costs rise by £114m.

Concerns have now been raised that the escalating costs of old PFI deals are drawing cash away from future infrastructure projects.

Highways England insisted it was not facing a PFI scandal.

A spokeswoman said: “Highways England commonly works with long term contracts, and it’s normal for them to vary. These contracts include operating the roads, such as resurfacing and winter maintenance.”

RISING COST OF PFI SCHEMES

Across the country, taxpayers are shelling out billions of pounds more than planned for schools, hospitals and other infrastructure projects under controversial private finance deals, an investigation by JPIMedia can reveal.

Rocketing inflation and extra costs are set to add at least £4bn to the overall price tag of Private Finance Initiative (PFI) schemes, according to figures obtained from hundreds of public bodies.

Penny Mordaunt, the former Defence Secretary, is among those who have warned that PFI schemes have “crippled hospital finances” as it can be revealed hospital bosses in her Portsmouth North constituency will pay out an extra £700m for a hospital expansion scheme signed under the Labour government in 2005.

It can also be revealed that:

An NHS maternity unit built and run by a private company was closed after just 16 years but is still costing the taxpayer millions of pounds;

A police force in the South East is trying to think up new uses for a mothballed custody suite it is still paying for;

Expensive maintenance contracts have seen one police force billed £884 for an extra chair.

PFI, which peaked during the New Labour years, saw private companies build and run new schools, hospitals and other facilities, leasing them to the public sector on contracts which were usually set to run for 25 to 30 years.

The model was abolished last year but about 700 active schemes remain.

With some deals set to continue into the 2040s, trade union leaders have called for urgent action.

Unite assistant general secretary Gail Cartmail said the escalating costs of PFI were a “national scandal”.

She said: “The money that has poured into the pockets of profit-hungry financial institutions and private companies could have been much better spent directly on public service projects and infrastructure. PFIs are a rip-roaring example of out-of-control ‘bandit capitalism’.”

Shadow Chancellor John McDonnell has said a new Labour government would bring existing schemes “in house”. Labour said the cost of schools and hospitals has “ballooned” under PFI.

The Treasury said it was supporting health authorities to manage the costs of old PFI deals. A spokeswoman said: “As announced in last year’s Budget, we will no longer be using PFI and PF2 funding for new government projects.”

WHAT IS PFI?

While they may look like any other hospital, school or police station, many public-sector buildings across the country are in fact owned and run by private companies.The Private Finance Initiative (PFI) works in a similar way to a phone contract - authorities get their hands on shiny new buildings upfront and will usually get to own them outright at the end of their contracts.The deals often last for 25 or 30 years, with payments also covering services such as cleaning and maintenance.PFI began under John Major’s Conservatives in the early 1990s but proliferated during the New Labour years. It continued under the Tories before then-Chancellor Philip Hammond put a stop to it last year.But when contracts were signed the cost of annual bills was often linked to the now-discredited Retail Price Index measure of inflation, meaning many annual payments have been rising steeply while public-sector budgets were being squeezed.