Barry insists he has the White credentials to make trust work

IT IS hard to imagine why the government saving money could ever be considered controversial, but the parsimonious procurement body, the Scottish Futures Trust (SFT), has been the subject of several political brickbats since it started just over two years ago.

It is true that Barry White, the organisation’s chief executive, gets paid some £180,000 a year, which is more than the First Minister. But the criticism that the body responsible for the procurement of schools, hospitals and roads has “built nothing” will come to an end when the Pumpherston and Uphall Primary in Livingston, the first project to be built wholly under SFT’s auspices, is completed later this year.

The body last week claimed it has saved the taxpayer £129 million this year over the lifetime cost of a range of projects, including £19m shaved off the bill for the new Forth bridge by “challenging” the project’s financials.

White, whose background is in the construction industry and PFI commissioning, defends what his group is achieving.

“The £129m is 16 per cent greater than last year and within the range of the £100m to £150m in cost savings we were set to achieve at our establishment,” he says. “It is great progress for the Scottish Futures Trust. We are making really significant progress for an organisation that is just recently formed.”

White adds: “The biggest thing we continue to do is stretch the public pound. Imagine you have one of those red elastic bands the postal service uses on your fingers and you stretch it. You don’t want to take the pressure off, or it reverts to size.

“Keeping the pressure on is the challenge that we face.”

But the SFT’s success is often overshadowed by public procurement disasters like the Edinburgh trams project, which local authority councillors voted last week to press ahead with despite a cost overrun of more than £200m for a truncated service to the city’s St Andrew Square. And while the SFT has nothing to do with the trams, suggestions that it should or it might yet are met with frosty disdain from the body‘s chairman, financier Sir Angus Grossart.

The SFT has also introduced a series of PFI-style funding structures that will allow the Scottish Government to invest in capital projects today and pay later. In all, the SFT will have £3 billion to spend on a variety of infrastructure projects that won’t burden the government’s shrinking capital expenditure balance sheet.

“The capital budget, which the government uses for bricks and mortar, is falling really fast, 35 per cent in real terms [over the next four years],” warns White.

The SFT’s answer is the £2.5bn non-profit distributing (NPD) programme, a revenue financing scheme given the green light by SNP finance minister John Swinney. The cash up front is paid back over 25 years, including interest and the cost of maintenance, and is similar to the sort of lending arrangements associated with PFI, which the SNP scrapped. By arranging these schemes in house at the SFT, it saved £2m on consultants last year.

“It is a way of financing infrastructure today allowing the government’s revenue budget to pay for it rather than the capital budget,” argues White. “What that means practically is that schools, hospitals, colleges and roads will be built that otherwise would have had to wait a long time for capital.”

Also under the body’s management is the tax incremental funding (TIF) scheme, of which SFT expects there to be six pilot projects in Scotland.

The first is a project to build a road and esplanade at the Ocean Terminal shopping centre in Edinburgh.

Further TIFs for Ravenscraig and Glasgow’s Buchanan Galleries centre are in the planning stages. The success of the projects depends on whether or not the improvements actually attract other investment from private developers who then find tenants for shops and commercial property to pay the additional rates. In the current environment, where retailers are drawing in their horns or failing, the TIF programme does present an element of risk for the local authority that undertakes it.

White agrees that local authorities must be careful before going ahead but argues that the benefits outweigh the risks. “The three front runners will use £250m of public sector investment but have the potential to unlock £1.5bn of private sector building and investment activity.” he notes.

The SFT has also pioneered the national housing trust (NHT), another “innovative way” of using central government guarantees that allows local authorities to borrow in partnership with the private sector to build affordable homes.

“NHT represents housing that wouldn’t have happened otherwise – at minimal cost to the government,” says White.

But the projects all amount to a vast amount of borrowing which the Scottish Government and local authorities must eventually pay for. This is in addition to the SNP’s proposed extension of Scottish borrowing powers which are set to include the issuance of government bonds, dubbed “kilts”.

Again White’s chairman Grossart, who is understood to be advising the SNP on how such structures will work, has declined to discuss the potential for kilts or whether the SFT would be involved in the issuance of these.

White says: “It’s all very well having the power to borrow, but you have to be able to pay that borrowing back. However it is procured, the starting point before you decide how you finance it is, are you buying something that you need? Can you do it together and do it better?

These are the simple things you have to get right.