Bridge row may scupper schools and new hospitals

MAJOR government projects, including schools, hospitals and transport schemes could be delayed or cancelled because of a dispute over the funding of the new Forth road bridge, ministers warned last night.

The Scottish Government wanted to spread the payments for the new £2 billion bridge over the next 20 years, minimising the impact on its existing budgets. But yesterday the UK Treasury rejected this plan, telling Scottish ministers it was impossible to take that sort of decision on budgets so many years in the future.

That leaves the Scottish Government will little option but to pay for the new bridge as it is built, taking about £700 million a year out of its main capital budget for 2013, 2014 and 2015.

A spokesman for the First Minister, Alex Salmond, said it was impossible to say which other projects would suffer but all other major spending plans would have to "take their place in the queue" behind the new Forth crossing.

Labour agreed that other projects would be delayed or cancelled, but blamed the SNP for the problems, arguing that it was only the Nationalists' ideological opposition to a Public Private Partnership (PPP) funding model which was forcing the project to be paid for out of existing budgets.

The new Forth bridge was expected to cost up to £4 billion, and the SNP government wanted to use its new Scottish Futures Trust (SFT) to pay for it. SFT is a modification on Labour's PPP model, generating less profit for private contractors and using economies of scale to drive down the price.

But the SFT option has run into problems and the Scottish Government is not able to pursue it for this project. That left ministers with the option of Labour's PPP model – to which they are firmly opposed – or paying for the bridge out of existing budgets.

Stewart Stevenson, the transport minister, managed to get the cost of the new bridge down to about £2 billion which brought it within the reach of existing budgets. However, aware that this would squeeze other projects, Scottish ministers asked the Treasury for permission to spread the cost of the bridge over the next 20 years.

Yesterday, Alistair Darling, the Chancellor, delivered his answer. He said the Scottish Government had been "asking to borrow money from budgets that had yet to be allocated over an extremely long period". He added: "That's something that we just don't do."

He said the Treasury was "happy to work with the Scottish Government, to co-operate and find a solution". However, he stressed: "What you can't do is bring forward spending 15 or 20 years out, in budgets that haven't been allocated.

"If you want to spend a large sum of money on a particular project, it does have consequences."

Asked if other projects might be affected, Mr Salmond said: "I'm not putting anything on hold – I think the Chancellor might be guilty of that if he continues in his present attitude, but I'm not taking no for an answer."

But a spokesman for the First Minister said later: "Obviously, the implication of refusing this commonsense request is that other projects must take their place in the queue."


Q & A

Why do we need a new Forth road bridge?

According to all the major parties (except the Greens) the current road bridge is suffering from wear and tear and may have to stop taking traffic in about ten years.

What is going to be done?

Scottish ministers decided the current bridge can actually survive and be used, indefinitely, but only for public transport. They will build a new bridge to take all lorries and cars.

What will it cost?

About £2 billion.

Where will the money come from?

Ministers had three options: using existing budgets (pay as you build); using the Private Public Partnership model (effectively a long-term mortgage); or the Scottish Futures Trust (a long-term mortgage which costs less than the PPP scheme).

Which option was chosen?

The Scottish Government is opposed to the PPP model, so that was ruled out. There are ongoing and unresolved problems with the SFT model, so that didn't work, either. This left ministers with just existing budgets, which means about £700 million a year from the Scottish Government budget every year for three years (2013-2015).

Did they try to soften this blow?

John Swinney asked the Treasury for permission to spread the payments for the new bridge. That way, other budgets and projects would not suffer from the massive investment in the new bridge.

What did the Treasury say?

It rejected the idea, claiming it was impossible to take spending decisions on budgets so far in advance. It told Scottish ministers to save in advance of the bridge or to use a PPP model.

What happens now?

Scottish ministers want a meeting with Treasury ministers, believing they could still win the argument.