Has the government's flagship funding venture the SFT clarified its role?

Published on Saturday 21 November 2009 14:16

MENTION the Scottish Futures Trust and the reaction tends to be one of confusion or a barrage of criticism for the multi-million-pound venture which has been labelled a "white elephant" and a "fiasco".

A way forward: the Scottish Futures Trust has completed key stage reviews of the proposed Forth replacement crossing and Borders rail projects

In September last year the Scottish Government named high-profile veteran businessman Sir Angus Grossart as chairman of the "independent company" set up to "deliver value for money across all public sector infrastructure investment". Its remit includes schools, hospitals, transport and social housing.

Since its establishment, the overriding question has been "what exactly is the Scottish Futures Trust and what is it doing?" Finally, last Thursday morning – more than a year after Grossart's appointment – the SFT held its inaugural conference and launched its first corporate plan in an attempt to provide some answers.

Grossart took to the stage at the John McIntyre Centre at Edinburgh University to tell 200 delegates from across Scotland's public and private sectors its plans covering the period from 2009 to 2014. A key aim was to convince interested parties that SFT can improve value for money when it comes to investing in Scotland's infrastructure.

SFT's plan says that each year the Scottish Government spends 5 billion on infrastructure and its role is to "achieve the best possible value for money for the people of Scotland". It adds that SFT has been set "challenging savings and benefits targets" by the Scottish Government.

So, has Grossart and his staff managed to convince the doubters about the role of SFT and what it is trying to achieve? Grossart decided to address head-on the issue of what the SFT has being doing since its inception, while being careful to manage expectations. He said there were some who mistakenly thought he was being parachuted in with bags of gold to solve the nation's problems.

"I was seen as a man with a magic wand," he said. "It wasn't magic wand time. Now we're achieving some traction and building up our expertise. We have a strong team on the ground."

Rather than bringing in employees entirely schooled in public sector ways, a team of professionals from mixed backgrounds has been assembled. This has gone down well with some commentators.

Ron Hewitt, chief executive of Edinburgh Chamber of Commerce, said: "The SFT has now got a good team of experienced people. It (the SFT] is absolutely the right thing to do. It will save public money." According to Hewitt, savings will come from SFT acting as an aggregator for public money and being able to negotiate discounts on deals.

Drysdale Graham, partner in the infrastructure team at McGrigors law firm, is supportive of the work of the SFT and its management team. He says: "Broadly speaking, the SFT is a force for good. It has a high-quality team. There's logic in having it there to encourage investment in Scotland."

Among the team running SFT is Barry White, chief executive, who joined in May having spent most of his career in construction and infrastructure investment. Peter Reekie, a civil engineer by training, is on board as director of finance and structures.

However, despite announcing its five-year plan there is still considerable doubt about what SFT can deliver because of its limited remit.

Some believed when SFT was created that it would provide funding for projects and would be an alternative to the Private Finance Initiative (PFI) or Public Private Partnerships (PPP). In reality its role is to ensure money from the Scottish Government, and in some cases local authorities, is spent wisely. It does not generate cash for projects.

Hewitt says that lack of clarity over what SFT was set up to do was partly the fault of the Government, which painted the picture that the body would raise cash.

And it emerged last week that councils do not understand the purpose of the 23 million body. Papers from the Convention of Scottish Local Authorities (Cosla) leaked to the press showed that they were unclear about how the SFT will help them build new schools. It had been thought that it was supposed to lead the 1.25bn school building programme, but it has an advisory rather than fundraising role.

In the past months, others have voiced their concerns about what the SFT will do in practice and whether the SNP will further damage the economy through its commitment to the organisation.

Jeremy Purvis, Liberal Democrat MSP, has said that businesses were right to be concerned about the SNP. He said: "Let's take one of their flagship policies, the Scottish Futures Trust. This is a white elephant which has achieved nothing for Scotland.

"It is the Bermuda Triangle of Scottish politics: everything goes into it but nothing ever comes out. The CBI is absolutely right to call it a fiasco."

With last week's conference and its corporate plan, the SFT will hope it has addressed some of this criticism. On schools, delegates were told how the SFT is supporting an "innovative collaborative procurement" involving East Renfrewshire and Midlothian councils in a pilot for the Scottish Government's building programme. On waste management, SFT is establishing itself as a "centre of expertise" on treatment infrastructure. On transport, SFT has completed key stage reviews of the Forth replacement crossing and Borders rail projects. However, many remain unconvinced. According to one delegate, "they (the SFT] said nothing new today".

A major issue is that the SFT relies on Scottish Government funding for infrastructure if it is to have any projects to manage, but growing constraints on budgets mean there is very limited scope for investment. Experts warn this will get worse next year with public sector cutbacks.

White admitted that the "public sector recession" is still to come.

A source says: "There's no doubt it (SFT] will provide a very slick procurement process, but what we need are some big road and rail network projects and a commitment of capital and revenue funding from the Scottish Government."

Hewitt agrees that big transport infrastructure projects are vital to GDP growth, but they are unlikely to happen because of the SNP's dislike of PPP.

He adds that capital will be tied up in the Forth replacement crossing, but other projects need to be developed.

One way of addressing at least some of the funding issues would be to make users pay tolls on certain parts of the transport network, says Hewitt.

Graham says very few infrastructure projects are coming to the market, although Borders Rail is due to open for bidders before the end of the year.

Andy Kerr, MSP and shadow finance secretary, remains a vocal critic of the SFT. He says it is simply replacing the role of civil servants, but in a more costly way, and any "added value" aspect of the body is missing.

He adds that SFT's chief executive has said he will consider a number of funding models, including PPP.

Speaking at last week's conference, SFT's Reekie presented a number of options for "financing the future". He admitted funding is an issue in the current economic environment and the fact there has been no comprehensive spending review makes planning for the long term difficult. He said this backdrop makes exploring new ways of working "imperative".

"Sources of finance include paying as you build and paying as you use, but pay you must," he said. "The SFT has no magic wand in that direction."

Despite the SNP's commitment to scrapping tolls on transport links, Reekie says that there may be more projects which are financed by user charges.In the housing sector, he said a possible option is to combine public sector borrowing with equity investment from the private sector.

But according to Kerr this has all come too late, as the SNP's opposition to PPP has lost thousands of jobs in Scotland and deterred big construction companies – both in the UK and overseas – from investing in projects.

Kerr says he speaks to employees from the big banks who say they are on flights from Scotland to London every week because all the PPP work has gone south of the Border. "Scotland is the last place construction companies look to bid for projects. Confidence has been eroded. Finite resources are now even smaller," he says.