Stormont departments still have to pay back nearly £ 3 billion in outstanding loan payments to finance infrastructure projects, with some loans not due in full until 2039.
The Private Finance Initiative (PFI) was designed to create “public-private partnerships” (PPPs) by financing infrastructure projects such as roads and schools with private equity.
There are currently 19 outstanding PFI loans in Stormont departments, with a total of £ 2.8 billion still outstanding, according to Belfast Telegraph.
The largest of these loans was a £ 1.04 billion loan to finance DBFO II, a key project in Northern Ireland’s £ 18 billion investment strategy to improve road connections between Belfast and Dublin, and between Belfast and Balligoli.
This loan still has an outstanding amount of £ 828 million, which will be finalized in March 2038.
The second most lucrative loan is Project Omega, a 25-year PPP contract to modernize, operate and maintain existing WWTW and WWPS pumping stations throughout Northern Ireland. The final maturity date is June 2031.
Other PFI projects include a £ 92.9 million loan to build the Laganside Court complex and a £ 11.6 million loan to build the Lisburn City Library and several schools.
Finance Alliance spokesman Andrew Muir said: “The colossal amount spent on PFI projects is a stark reminder of the scale of taxpayer money being poured into the now discredited funding model, and of the need for newly created tax councils and commissions to explore more efficient ways to fund such funding. necessary investments in public services that cost less and bring much greater benefits to the population. “
The Department of Finance (DoF) has stated that PFIs should only be used where they offer better value for money than other procurement vehicles.
“Like all expenditures, the Finance Department approves expenditures on UFO projects in excess of the delegated limits,” the department said.
“This approval comes before the costs are incurred, and in the case of UFO projects, before the contracts are signed, and is based on the information available at that time. The individual departments are responsible for their respective PFI contracts, including ongoing monitoring and evaluation. ”
PFI loans are controversial as they come with very high interest rates. For example, in 2018, the Belfast Telegraph reported that a total of 28 PFI loans taken to build schools, hospitals and roads in Northern Ireland would cost the taxpayer £ 4.4 billion more than their cost over the next 25 years.
Until 2012, the main PPP model was the PFI. The government undertook a review of PFI to respond to criticism of this form of contracting, and PF2, the successor to PFI, was launched in December 2012.
One of the key differences between PFI and PF2 is that the government now acts as a minority co-investor to provide greater visibility into the inner workings of projects. Measures were also taken to reduce procurement time, and services in the first place were excluded from the standard contract.
The transparency of the process has also increased, including the publication of private investor income.
According to the Treasury Department: “For each project, an initial economic assessment should be carried out in accordance with the NIGEAE (Northern Ireland Expenditure Evaluation and Evaluation Guidelines) guidelines to determine the preferred option in terms of public service delivery.
“This should be followed by a separate assessment of all relevant procurement alternatives available to implement the preferred option, including traditional methods and others where appropriate.”