Taxpayers paying for the most expensive office space ever in Belfast

A BBC Spotlight programme broadcast last night set out how taxpayers will pay £260 million this year alone for Public Finance Initiative (PFI) deals, one of which even a supporter of PFI accepted was “unusual”.

The schemes allow the Government to defer payment for new infrastructure such as schools or hospitals – but the total bill is then far higher and mean that in some cases generations unborn at the point when the contract was signed will be paying for it.

Last night’s programme focused on one deal which saw plush new offices built for Invest NI in Bedford Street, just behind Belfast City Hall.

The deal was signed off by the then Labour direct rule minister Barry Gardiner in 2005. Last night he said that he accepted ministerial responsibility for the decision and that he would now be asking the Audit Office to investigate the contract.

Under the deal originally struck with the developer, Invest NI would have paid £120 million over 25 years for the office as well as its maintenance and services such as catering and cleaning.

However, unlike most PFI contracts, at the end of that period the taxpayer would still not have owned a single brick of the building – despite having paid the £120 million.

The former head of the CBI in Northern Ireland, Nigel Smith, who defended the principle of PFI as a way in which Government could pay for vital infrastructure, said that was an “unusual” situation.

The programme said that Invest NI’s chief executive Alastair Hamilton - who would not be interviewed by Spotlight - had told them in a statement that it was understood when the contract was approved that the developer would keep the building at the end of the deal and that this would be the cheaper option.

However, Spotlight said that by 2012 taxpayers were paying at least £25 per square foot – double the market rent of £12.50 a square foot and higher than anyone has ever paid for offices in Belfast.

Professor Paul Hare, an expert in PFI, said that it “sounds like a disastrous deal”.

Mr Hamilton claimed that Spotlight was “manipulating figures to create a sensationalised story”.

In 2013, the then DUP Finance Minister Sammy Wilson told the Assembly that Invest NI could stop paying rent and buy the building, telling MLAs: “We are estimating that we will save nearly £3 million per year compared with what we have been paying on rent”.

However, Mr Wilson did not inform MLAs that the developer had taken on huge debts at high interest rates – which at that point were part of Nama, the Republic’s ‘bad bank’ – in order to build the structure and still owed £22 million which would then be taken on by taxpayers.

That debt was sold to US vulture fund Cerberus the following year. Spotlight said that since then Invest NI has been paying Cerberus £1m in interest alone.

The programme reported that in 2013 Mr Hamilton indicated to his board that he hoped to settle the high interest debt and Invest NI emailed its minister – Arlene Foster – to the same effect.

However, for reasons which remain unclear and which Invest NI has not clarified four years later the loan has still not been settled. Mr Hamilton told the programme that it was continuing to be assessed and was “commercially sensitive”.

The programme also revealed that the new South West Acute Hospital in Enniskillen involved Stormont borrowing £130 million – but it will end up paying back £390 million in interest over 30 years, with that money coming from the budget normally used to pay doctors, nurses and other health staff.

Many of the PFI deals were struck by direct rule ministers. However, under a decade of devolution Stormont’s debt has soared. In 2015 the News Letter revealed that the then Finance Minister believed that Stormont’s debate was “reaching unsustainable levels because of the cost of funding the RRI [debt] repayments” – but just days later Stormont agreed to a loan of more than a billion pounds.