EAST Lothian Council will have paid a whopping 89 per cent interest on a loan repayment to a private partnership when it is finally cleared.

The interest rates charged as part of the council’s Private Finance Initiative contract were described as high enough “to embarrass Wonga”.

It was revealed the repayment, which covers a 30-year deal to refurbish the county’s secondary schools and build community facilities, struck in 2002, would eventually see £43.5million handed over as reimbursement of the loan, with almost the same again – £38.768m – paid in interest.

This year alone, the loan will cost the council £1.13m in annual repayments, with two and a half times that amount, £2.871m, handed over in interest.

On top of the costs, the council will pay more than £3.4m to the private partnership for maintaining services at the buildings.

Councillor Stuart Currie, leader of the opposition SNP Group, said the rates were “eye-watering”.

He said: “When you see the amount being paid in interest, the rates are so high they would embarrass Wonga.

“It’s eye-watering to see.

“This year we are paying nearly £3m in interest on a loan which was taken out over a decade ago. And that money comes out of the education budget.” East Lothian Council, like most local authorities at the start of the Noughties, took advantaged of private partnerships, which provided public buildings such as schools, swimming pools and community centres, which the council would then lease and pay costs on.

Most of the deals had a 30-year lifespan, with the local authorities expecting to inherit the buildings at the end of the deal.

In December 2002, East Lothian Council went into partnership with Innovate East Lothian Ltd to refurbish the schools and build a new community centre and swimming pool.

Mr Currie said that when the SNP were part of the administration of East Lothian Council in 2008, they had tried to find a way to buy out the contract, but were unsuccessful.

He said: “We looked at ways of buying the contract out as it would have been cheaper, but, unsurprisingly, the holders were not keen.

“The contract offered no negotiation. It is a debt which has been inherited and taxpayers continue to pay for.” At a meeting of the council’s Audit and Governance Committee last Tuesday, Jim Lamond, head of council resources, said at the time of PPP initiatives there had been many grants and incentives which made them appealing to local authorities.

However, Mr Lamond added that he would “have to go away and think” before he considered such a deal in the future.

Private funding for public services was part of New Labour’s policy in their second term in Government in 2002.

PFIs had already been introduced by the Conservatives in the 90s, but were still in the early stages of being used for services such as hospitals and schools.

Some commentators and unions raised concerns about the long-term impact and the costs of allowing the private sector to take over what had traditionally been publicly owned facilities.