New Scheme could replace flawed PFI- The Press and Journal

Stephen Christie, Press and Journal, 16 October 2009

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An independent Scottish think-tank revealed a scheme today that it claims could replace the private finance initiative for funding major public projects.

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Reform Scotland says its new finance strategy – Scottish Capital Partnerships (SCP) – could replace the “flawed” system of PFI.

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The organisation also says SCP would redefine the role of the Scottish Futures Trust – established by the Scottish Government to improve public infrastructure investment.

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Reform Scotland claims projects would continue to be financed jointly by the public and private sectors under SCP but with major changes that would avoid the “pitfalls” of PFI.

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It says the bulk of the money needed to finance SCP projects would come from public borrowing at government interest rates.

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Under PFI, money to fund projects is borrowed at much higher commercial rates but, the think-tank says, the risk remains with the taxpayer.

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Under its blueprint, independent management companies would be invited to submit bids to build and run projects, as well as putting up the equity risk capital – usually about 10% of the total capital required.

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Reform Scotland chairman Ben Thomson said this would act as an incentive to companies to ensure projects were delivered on time, within budget and were run well.

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“Management companies will bring the skills, innovation and efficiencies which until now have often been lacking in public-sector infrastructure projects,” he added.

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“This is why so many of them end up behind schedule and grossly over budget.”

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Mr Thomson said: “We desperately need a new vehicle to get momentum back into public-sector infrastructure projects and, after two years of achieving nothing under the Scottish Futures Trust, our proposals provide that vital mechanism.”

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A Scottish Government spokesman said: “We have always believed that there are better ways of funding major infrastructure projects than costly PFI. That’s why we have tasked the Scottish Futures Trust with achieving greater value for the public purse in delivering new projects.

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“Of course, if Scotland had borrowing powers – as recommended by the Calman Commission – the Scottish Government would have the option of borrowing for further capital schemes.

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“We will always look for ways of adding value to infrastructure investment to protect the interests of taxpayers and help us build facilities fit for 21st-century Scotland.”