Nicola Sturgeon has been accused of covering up the true cost to the taxpayer of buying Prestwick Airport after she kept secret the existence of a new estimate predicting it would almost double to £40 million.
An Audit Scotland investigation into the controversial purchase found that a revised business plan produced in May last year forecast that public loans to the loss-making airport would reach £39.6 million by 2021/22.
But Ms Sturgeon failed to tell MSPs that the predicted cost had increased from the original estimate of £21.3 million when she gave evidence to a Holyrood inquiry the following month.
Speaking at the Scottish Parliament’s infrastructure and investment committee in June, she told MSPs there was an updated business plan but claimed she was unable to provide “precise projections” for the cost.
Appearing before the same committee in November, the First Minister said she had no update on the cost and “there is not a figure” for the maximum that could be spent on the airport.
When James Kelly, a Labour MSP, referred to the old £21.3 million estimate and challenged her to give taxpayers more information about the cost, Ms Sturgeon again failed to disclose the substantial increase.
Neither did she reveal that passenger number forecasts for the first five years had been dramatically cut, even before Ryanair announced it was culling its winter flights from the airport.
Transport Scotland, a Scottish Government quango, last night argued that no budget has been set beyond 2015/16 and it would have been “inappropriate” for ministers to speculate on the future cost.
But Jim Hume, a Liberal Democrat MSP, said: “The cost of investing in Prestwick Airport to the taxpayer more than doubled but the SNP kept that a secret. People will want to know why this long-term cost to the taxpayer of £40 million was covered up.”
Mary Fee, Scottish Labour infrastructure spokesman, said: “The SNP’s handling of Prestwick Airport has been a farce since day one. As the Minister in charge Nicola Sturgeon was repeatedly unable to answer the most basic financial questions about the airport and its future.”
The struggling airport, which was losing £800,000 per month, was on the market for 18 months but no private buyer emerged. Passenger numbers more than halved to 1.1 million between 2007/08 and 2012/13, while freight business fell by more than two-thirds over the same period.
Scottish ministers feared it would close unless they stepped in and paid owners Infratil just £1 in November 2013, arguing the move was necessary to protect 3,200 jobs and safeguard a “strategic” asset.
Their long-term plan is to return the airport to profitability before returning it to the private sector. So far they have handed over £9 million and have committed to provide a further £16.2 million by the end of March 2016
Audit Scotland found the Scottish Government’s “purchase process was reasonable”, given the tight timescale of six weeks, and it can eventually expect a “positive return” on the public money being lent.
But its report concluded that its purchase business plan, which estimated that £21.3 million of loans would be required until 2022/23, was too optimistic about passenger numbers. It predicted annual growth of 10.2 per cent in the first five years and 1.8 per cent thereafter.
After the purchase, the Scottish Government commissioned Romain Py, an aviation expert, to prepare a revised business plan that re-examined the assumptions made when it was bought.
The Audit Scotland report disclosed for the first time that this document, published last May, forecast total loans from the taxpayer totalling £39.6 million until 2021/22.
The revised plan downgraded growth in passenger numbers for the first five years to 6.5 per cent, before levelling out at 2.6 per cent after that.
It also took into account £11.6 million needed to cover losses from “core trading activities” and an extra £10.7 million of spending to clear a maintenance backlog and fund several development projects.
Mr Py predicted the airport would report its first operating profit in 2018/19 but taxpayer loans would be required to support its losses and capital spending until April 2021.
But two months after his revised report was produced, Ryanair – Prestwick’s only passenger airline – announced it was cutting its winter schedule from the airport from 42 flights per week to 13. Passenger numbers influence around half the airport’s income.
Transport Scotland said the figures disclosed in the Audit Scotland report were a projection of “potential loan facilities that may be required” to 2021/22 but these were subject to revision “as and when commercial activities become realised”.
“It would therefore have been inappropriate for ministers to speculate on how much Glasgow Prestwick Airport may or may not need to borrow in future years,” a spokesman said, arguing this would depend on a “robust” business case and the necessary funds being available.
“Ministers have made it clear throughout this process that additional loan funding, beyond the £25 million already set out, may be required.”