LABOUR leadership hopeful Richard Leonard has called on the Scottish Government to pay off Scotland’s billion-pound PFI debt – most of which was racked up by Labour.

Leonard was speaking after shadow chancellor John McDonnell used his address at the party’s conference to propose taking PFI contracts back into the public sector.

Under Jeremy Corbyn’s leadership, Labour has already promised not to sign any new PFI deals.

But McDonnell won loud applause when he told delegates: “We will go further. I can tell you today, it’s what you’ve been calling for. We’ll bring existing PFI contracts back in-house.”

The PFI scheme was introduced in 1992 by Tory Prime Minister John Major but was stepped up significantly under Tony Blair’s administration, when it was used to fund the construction and operation of public-sector infrastructure like hospitals and schools.

The scheme was used widely by the Labour/LibDem administration in Holyrood between 1999 and 2007.

The SNP scrapped it when they were elected, established the Scottish Futures Trust and introduced the non-profit distribution (NPD) model.

NPD differs from PFI in that contractors invest solely in the debt of a project, not putting in any equity and not receiving returns on their capital investment.

According to a report in the Sunday Herald last year, the cost of Labour’s PFI legacy in Scotland will be £30 billion.

Before 2010, NHS hospitals worth £1.2bn were built with PFI or Public Private Partnership financing. Health boards will pay back £7.8bn by 2042.

The capital value of NPD projects given the green light under the SNP is £733 million, but they will have cost £1.9bn by the end of their contracts.

Leonard said: “John McDonnell is right it is time to end PFI waste. Scottish Government should lead the way, and under my leadership we will.

“Scotland has a huge liability to PFI and the Scottish Government’s NPD scheme. The Scottish Government could and should set up a debt disposal department dedicated to raising funds to buy out the total outstanding £28.8bn PFI and NPD debt on operational contracts.

“Doing this could save the public purse hundreds of millions of pounds. If I’m Labour leader I’ll be pressing them on this issue, and as a Labour First Minister it will be a priority.”

SNP minister Roseanna Cunningham tweeted: “The hypocrisy of this is breathtaking.”

The director general of the CBI, Carolyn Fairbairn, called McDonnell’s policy “the wrong plan at the wrong time.” She added: “Forced nationalisation of large parts of British industry will send investors running for the hills, and puts misplaced nostalgia ahead of progressive vision.”

Meanwhile, the Scottish Greens have accused Leonard’s rival, Anas Sarwar, of stealing their ideas.

Sarwar, whose campaign has been dogged with questions about working conditions at his family’s wholesale business, and the private education of his children, launched his “Scotland Guarantee” yesterday, proposing a job, training or education for every school-leaver in the country.

Sarwar said it was based on the Glasgow Guarantee, which since 2009 has helped 7,000 young people find something to do after leaving school. The MSP said he would end the situation where 10 per cent of 16- to 19-year-olds, around 26,000 people – are classed as NEETS (not in education, employment or training).

“It is a national scandal that 10 per cent of young people in Scotland are not in education, employment or training,” he said.

“No young person should leave school without plans for their future,” he said. “The Glasgow Guarantee has successfully ensured that thousands of youngsters have the skills to succeed in life. I want that rolled out to become a Scotland Guarantee, eventually providing a job, training or education place to every school-leaver in the country.

“No young person in Scotland should be abandoned by the government, and as First Minister I will end the SNP’s cuts to our colleges and ensure that every school-leaver has the chance to achieve their full potential.”

A spokesman for the Scottish Greens said: “A Scotland Guarantee to give every school-leaver a job, training or further education was a Green manifesto pledge in the 2016 election.

“Labour’s latest leadership vacuum reveals yet again a party struggling for its own ideas, while Greens are busy leading the change by reversing cuts to council services, stopping sanctions on devolved work programmes and winning new funds for young carers.”

Yesterday in his speech to the party faithful, Scottish Labour interim leader Alex Rowley paid tribute to Kezia Dugdale and promised he would get behind whichever of the two men won the race to replace her.

He said: “Friends, Kez stood up for the Scottish Labour Party in the toughest of circumstances, both as deputy leader and leader of our party.

“The work that Kez did, and the result that she and Jeremy delivered alongside our members in June, shows that the Labour Party is once again connecting with communities across Scotland.“

Rowley has promised to remain neutral, though it’s believed he is more Team Leonard than Team Sarwar.

The CBI did not like McDonnell’s speech.

Their director general, Carolyn Fairbairn, called it “the wrong plan at the wrong time.”

“Business and politicians share a determination to create a fairer society in which everyone benefits. But the trickle of stalled investments caused by Brexit uncertainty could become a flood if these plans were to become reality. This would threaten the living standards of the very people that need help, from pensioners to students.

“Forced nationalisation of large parts of British industry will send investors running for the hills, and puts misplaced nostalgia ahead of progressive vision.”