Ministers announce public projects scheme

Scottish Futures Trust promised to be cheaper than PPP/PFI

News, 21 May 2008

The Scottish Government has published its strategic business case for infrastructure investment in Scotland to secure new schools, hospitals and transport projects at what it says will be better value to the public purse.

The Scottish Futures Trust initiative will be supported by a new company established in the public sector, with the object of accessing private finance at competitive rates and reinvesting profits in public services. The government hopes to enter into joint ventures with local authorities, which can issue bonds. However it admits that the details of how investment will be raised have yet to be worked out.

Ministers claim that lessons have been learned from the Private Finance Initiative and Public Private Partnership schemes set up by previous Conservative and Labour administrations, which involve an ongoing financial commitment many times greater in total than the initial capital cost. However it has been questioned whether the scheme outlined would prove sufficiently attractive to investors.

The new company, to be formed this summer, will aim to:

release up to £150m each year for increased investment in infrastructure through greater partnership, improved preparation and handling of projects, and better value finance - including the non-profit distribution model;
bring together the expertise to enable a Scotland-wide municipal bond to fund future infrastructure projects;
provide opportunities for increased investment in public service infrastructure, including schools, hospitals and transport projects.

It will also look at attracting more private sector investment in housing, and reducing the costs of existing PFI contracts.

Finance Secretary John Swinney said: "By putting non-profit distributing principles (NPD) at the core of partnership delivery and funding, we have already removed the element of PFI that delivered the most extreme profits, and a Scotland-wide municipal bond opens up the prospect of further benefits.

"With an infrastructure investment programme of some £35 billion over the next 10 years, SFT will be central to this Government's purpose of increasing sustainable, economic growth."

Labour's Andy Kerr claimed the scheme represented a massive U-turn by the SNP and was simply PPP "with a lick of cheap paint". He questioned whether it would deliver school building projects at the same rate as in the past, as the SNP had promised.