Scottish Futures Trust urged to ramp up public sector spending

BUSINESS leaders are today expected to call on the Scottish Futures Trust (SFT) to "expand rapidly" and help the struggling construction sector after half of building firms reported a drop in new orders.

Of those working on public-sector contracts, three-quarters said new orders had fallen during the first three months of the year.

The call from the Scottish Chambers of Commerce (SCC) for greater public-sector support for industry coincides with a call today for the proceeds of banking sales to be used to fund a 500 billion investment in infrastructure over ten years.

The Institute of Directors (IoD) wants funding for energy, transport, water treatment and information technology.

The Scottish Chambers' report will urge the SFT to speed up the delivery of capital infrastructure projects to provide work for struggling firms. The SFT was set up by the SNP administration at Holyrood in 2008 to replace public private partnerships (PPPs). However, the SFT has faced criticism for the speed at which infrastructure projects – such building new schools and hospitals – has progressed.

SCC head of policy Garry Clark said: "Of particular concern is the apparent fall in the volume of public-sector contracts. It underlines the need for the SFT to rapidly expand its delivery of capital infrastructure projects throughout Scotland."

Michael Levack, chief executive of the Scottish Building Federation, said the SCC's findings chimed with what he was being told by his members. He said: "These continue to be tough times for Scottish construction and the forecast for 2010 remains challenging.

"Longer-term sustainable growth of Scotland's economy relies on continued investment in major capital projects such as the new Forth crossing, but also in schools, hospitals and housing."

Levack said the SFT could play a "crucial" role in setting up a national infrastructure investment bank to bring private funding into public projects and added that restructuring Scottish Water would also save public money.

However, SFT chief executive Barry White defended the trust's record: "Scottish Futures Trust is rapidly expanding the portfolio of projects it is leading or supporting, doubling in value in less than a year to 5.5 billion.

"In the coming year, this will increase to 7.3bn, more than 1bn of which is additional investment, over and above traditional capital budgets, on major transport, regeneration and affordable housing projects across Scotland."

The IoD wants future proceeds from privatising the banks to be used as part of a 500bn investment in the UK's infrastructure until 2020.

Instead of cutting infrastructure spending by half over the next four years, as the government proposes, the IoD argues in a report published today that public spending on infrastructure should be ring-fenced because of the positive effects it has on economic growth.

IoD director-general Miles Templeman said: "Cutting infrastructure spending may be politically easier than reducing other areas of public expenditure, but the consequences for the UK's already creaking infrastructure will be with us for years to come.

"For the sake of the UK's long-term growth prospects, I urge the government to reconsider its decision to halve infrastructure spending over the next four years, and to use the proceeds from bank privatisation to invest in our roads, railways and energy networks."