Blogging from the Highlands of Scotland
'From fanaticism to barbarism is only one step' - Diderot

Saturday 21 January 2006

Get private finance, build the facility, then change the rules to get it back ...

... it's how modern Scotland works, folks!

Not so very long ago we had the spectacle of the financial package which had created the Skye Road Bridge being unwound by the Scottish Executive to bring it back into public ownership and abolish the toll on its use, designed to service the financing used to build it. Would it have been built by 'the state' had not the outside finance been available? Probably not.

Now we have the spectacle of the same thing happening with my local airport, Inverness Airport. The level of financial understanding which can have the following statements juxtaposed just about sums up the Scotland that we now live in:

(The background to the deal)

The private finance initiative (PFI) contract for the Inverness Airport passenger terminal has been bought out by the Scottish Executive for £27.5m.
The deal requires operators Highlands and Islands Airports Ltd (HIAL) to cover a tax liability of £8.4m.

This takes the full bill to more than £36m. It is understood the terminal cost £9.6m to build.

An interested party opines

Inglis Lyon, managing director of HIAL, a state-owned company which operates nine other airports in the north and west of Scotland, said the buy-out meant it would no longer be financially penalised for increasing passenger numbers.

"It also unlocks the potential for us to bring Inverness Airport into profitability, thus eliminating the need for revenue subsidy from the Scottish Executive in the future.

"By funding this buy-out, the Scottish Executive has shown great commitment to the long-term development of a major driver in the regional economy."

- all this is well and good (perhaps), but it is not clear to me how the whole operation is to become self-financing in the future if the projected increase in passenger traffic, therefore aircraft movements, is to be achieved by a likely reliance in the further growth of low-cost airlines which have so far been attracted to our region because of the relatively low landing charges imposed on them.

I don't quarrel with the convenience of having greater flexibility in travelling options locally (why would I?), but it seems to me that this is yet another recipe for future public subsidies being required to keep the thing afloat because of the social good it brings (which I don't for a moment dispute), but it seems perverse to burden the state with yet more debt when a suitable model (PFI) exists to make such subsidies largely unnecessary. It's politics, do you see?

As with the Skye Road Bridge I have to ask the question: could the new terminal at Inverness Airport have been built without recourse to outside private finance? It undoubtedly could, but I very much doubt that it would, have happened at all - and certainly not so quickly.

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