New quango to run public-private projects

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THE Scottish Government's plans to replace the controversial private-finance initiative (PFI) were last night condemned as "window-dressing".

John Swinney, the finance secretary, yesterday published details of the new Scottish Futures Trust (SFT), which the SNP promised during the election would replace the PFI schemes which have generated large profits for private contractors.

Last night, however, opponents of the new method of paying for large infrastructure projects – which could be used to fund the new Forth bridge – rounded on the SNP's plans.

The SFT would be a private limited company which operates a "public-interest ethos", according to the consultation document published by Mr Swinney yesterday.

This would provide "greater flexibility" and harness "commercial know-how" as the new company built projects such as hospitals, schools, roads and social housing.

Mr Swinney said: "By making non-profit distributing organisations the core of the public-private partnerships, we can remove the element of PFI that delivered the most extreme and unwarranted profits."

The SNP made ending the PFI a key element of its May manifesto, highlighting projects like the Edinburgh Royal Infirmary.

According to recently published figures, the ERI is expected to see more than 1 billion repaid, despite costing less than 200 million to build.

As well as construction, PPP (public-private partnership) costs also cover maintenance over the period of the contract – often about 25-30 years.

According to the details published yesterday, the SFT's holding company would represent a range of Scottish public-sector interest and be responsible for appointing the SFT management board.

Its key functions will be providing finance to those who provide public services as well as other related financial services at a cheaper cost through bulk of demand.

The aim of the new trust will be to provide a better deal for taxpayers, but will still involve the use of private-finance markets to help fund large projects.

Mr Swinney added: "The Scottish Government believes there is a more effective way of funding vital public infrastructure than traditional, costly PFI."

Last night, however, the Unison union, which has led a long-running campaign against PFI and public-private partnerships, said the proposals would just create a "huge private company to run Scottish PFI schemes".

Dave Watson, the union's organiser in charge of policy said: "UNISON is obviously in favour of any improvement on PFI/PPP, but an initial glance suggests that what is being proposed is mainly window-dressing, and looks nothing like what the SNP promised in their Scottish Futures Trust policy document.

"Non-profit distribution models retain higher borrowing costs, private profit is still taken out of public services at the contractor level and the so-called risk-transfer costs still apply, all leading to the profiteering and inflexibility inherent in PFI.

"We are sceptical that a private company such as the proposed Scottish Futures Trust can have a genuine public-interest ethos. It may not take a profit, but the banks and the private firms it contracts to run our services certainly will. "

The plans won only a lukewarm welcome from business. Iain McMillan, CBI Scotland's director, said: "We welcome the apparent change of heart in funding model from the SNP, and the acceptance that the private sector will remain involved in developing infrastructure and providing services throughout the whole lifetime of projects.

"However, it remains to be seen whether the proposed non-profit distributing model, and creation of a new quango, will actually add value, let alone provide real incentives for delivering higher-quality services and better value for money."

Current PFI schemes will not be scrapped by the Scottish Government, with the SFT aiming to be a more attractive alternative.