Friday, April 13, 2007

Northwin and PFI in Northern Ireland

On examining the impact of the Private Finance Initiative in Northern Ireland, it becomes clear that one consortium towers above all others: Northwin.

The Northwin Consortium comprises some of Northern Ireland's leading construction companies, including Farrans Limited, Braidwater Enterprises Limited and John Graham (Dromore) Limited. It has been involved in the construction of a number of educational facilities in Northern Ireland.

In Belfast, Northwin was involved in the construction and operation of Wellington College and Balmoral High School. These projects cost around £18m.

Wellington College was originally to be a thirty-six acre site but ended up with only eleven acres. The rest of the land was used by Northwin to build 350 houses, which they then sold at a large profit.

Speaking at the launch of the Wellington Square housing development in June 2002, Sir Reg Empey, representing Belfast City Council, said:

"The Council have been encouraging redevelopment of existing land within Belfast, which helps to reduce traffic difficulties on approach roads and continues the reinvigoration of the city.”

However, once the tenants took possession of their new properties, they discovered that their bedrooms were not as big as they should have been. An advertising brochure noted the rooms should have measured 10' 2" x 8' 7", instead of the existing 8' 8" x 8' 7" - a difference in excess of 12 square feet.

Northwin was fined under the Property Misdescriptions Act 1991, after admitting falsely describing the size of the bedrooms.

On 21 May 2002, a month prior to Sir Reg’s ringing endorsement of the Northwin’s scheme, Monica McWilliams MLA, addressed the Northern Ireland Assembly:

“To date, my experience of public-private partnerships has not been healthy. I want to give an example of something that occurred in my constituency, South Belfast. There were rugby and hockey pitches on the site of Wellington College. Northwin Ltd moved in to develop the site. I understand that the school was built on a much smaller scale than was initially thought to be required, leaving no room for expansion. The development benefited from public land. I attended a public inquiry at which those responsible for planning control were in dispute with the Department of Education over what should have happened to that public land. As we all know, developers win such disputes. What was a piece of green land and open space is now gone.”

Yet the warning signs had been flagged up years before, in the Northern Ireland Forum for Political Dialogue report: ‘The Implications of Public/Private Partnerships for Education Services in Northern Ireland’ (5 December 1997). It noted:

“Third party revenue proposals could involve conflicts of interest over incompatible alternative uses of spare school lands or facilities. Both Wellington College, Belfast and the North West Institute, Londonderry have valuable surplus lands which could be developed for non-educational purposes. The public sector needs to be sure that the true value of surplus assets is reflected in the level of repayments so that a fair share of the benefits goes to the public purse. Commercial attractiveness will lead to “cherry picking” of school projects and the danger of skewing development away from education priorities and running foul of the government’s own policies on equity.”

The Belfast Education and Library Board (BELB) should have paid heed to that report. It might have avoided the PFI disaster associated with Balmoral High School.

In 2000, the BELB signed a PFI agreement with Northwin to construct a new building for Balmoral High School.

However, the completed building was twice the size than that which was required. The school began to witness dwindling enrolment figures and ended up only 40% full.

Yet under the PFI deal, the BELB is contractually obliged to keep making payments to Northwin for the next twenty years. The consortium has already been paid between £800,000 and £850,000 per year for the provision of Balmoral High School and has received land worth £3.28m as part of the PFI deal.

The BELB has decided that closing the school in August 2007 is its best option.

In 2004, the Audit Office examined five early PFI projects for schools and colleges in Northern Ireland and noted that almost all of them were of a lower design quality than schools built through the traditional public funding route.

On 24 April 2001, Price Waterhouse Coopers (PWC) presented a written analysis of the use of public/private partnerships to the Committee for Finance and Personnel. The report notes:

“There are also many misconceptions associated with Public Private Partnerships. It is important that misconceptions are identified, defined and overcome so that Public Private Partnerships become an accepted and standard form of public procurement… There has been very little use of the Private Finance Initiative in the water and sewerage, roads and public transport sectors. However, there is a need for substantial capital investment in these sectors, and international experience suggests that projects in these sectors are suited to the Public Private Partnership approach.”

With the restoration of the Northern Ireland Assembly, one anticipates that the new Committee for Finance and Personnel may well reach for PPP/PFI as a solution to the postponed water rates. Doubtless, Northwin will be waiting in the wings.

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