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SFT: An expensive quango to promote PPP Briefing No 190 September 2008
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Scottish Futures Trust: A quango promoting PPP

SFT: An expensive quango to promote PPP

Briefing No.190 September 2008

Introduction

This briefing is on the Scottish Government's Scottish Futures Trust (SFT), established as a limited company in September 2008, and UNISON's response.

Background

Finance Secretary John Swinney announced on 10 September that the first stage of the SFT had been set up as an arms length limited company, wholly owned by Scottish ministers. This followed the publication of a Strategic Business Case (SBC) in May 2008, outlining the proposals for the new body. Merchant banker Sir Angus Grossart, a former vice-chairman of the Royal Bank of Scotland, will chair the company. Mr Swinney said it will "bring together a wide range of partners, expertise and resources to provide the high quality schools, hospitals and transport infrastructure that Scotland needs, in a far more cost effective way than PFI has done in the past".

Scottish Futures Trust

The SFT, as first proposed by the SNP, was going to use Scottish Government bonds to finance investment in public infrastructure. The aim was to secure funds at cheaper rates than through Public Private Partnerships (PPPs), and particularly the Private Finance Initiative (PFI). However, the Scottish Government does not have borrowing powers and the SFT concept has changed considerably. It is now to be a two-headed organisation, charged with ensuring greater partnership, improved preparation and handling of projects, and better value finance, based mainly on the so-called Non-Profit Distributing (NPD) PPP Model.

SFT Development and Delivery, the public sector quango that is now operational, will work with a second company, SFT Finance and Investment, due to be established by 2010-2011. This is likely to be a Limited Liability Partnership and will be a separate private sector classed body in which SFT D & D has a minority share.

Mr Swinney said that the SFT will aim to:

  • Release up to £150 million each year for increased investment in infrastructure
  • Bring together the expertise to enable a Scotland-wide municipal bond to fund future infrastructure projects
  • Provide opportunities for more effective investment in Scotland's vital public service infrastructure
  • Learn the lessons from previous PFI contracts to reduce the cost of financing and deliver more effective investment planning, procurement and delivery

The early focus of SFT will be on securing PPP hub developments and a new schools investment programme. The SBC sets out running costs for the first five years of £23 million, with payroll costs for 6/7 employees of £1 million in 2008-9 and of £4.3 million for 20 staff in 2012-13.

UNISON response

UNISON argued in its response to the Scottish Government consultation on the SFT that the emerging proposals looked like PFI-lite. However, since publication of the SBC, it is clear that the SFT will in fact be promoting full blown PPP in a number of ways, including the hub initiative, based on English Local Improvement Finance Trust PPPs to build new local health centre premises and other community facilities. This, despite the fact that the SNP said on its website in April 2008, when announcing welcome conventional public funding for the new South Glasgow Hospitals complex:

"The SNP oppose the use of private sector funding - through private finance initiative (PFI) or public-private partnership (PPP) schemes - to build schools, hospitals and other projects."

Mr Swinney has conceded that his favoured NPD model is part of the PPP "family". However, while NPD may initially seem attractive because of the 'non-profit' aspect, it still maintains most of the flaws of PFI/PPP. It retains the higher borrowing costs, private profit at the contractor level and elements of the risk transfer costs all leading to the same profiteering and inflexibility inherent in PFI. It also retains the secrecy and accountability deficit.

The SFT F&I seems certain to itself be a PPP and is set to promote the expansion of PPPs into housing for the first time in Scotland. The SFT F&I will supposedly have a 'public sector ethos', but it is difficult to see it as anything other than a way for the private sector to develop new PPP markets in Scotland and to influence policy along these lines. Indeed, the SBC specifically states it will need to ensure "sufficient private sector influence over decision making". No doubt this was a factor in the appointment of Sir Angus Grossart. Given that merchant bankers have played such a major role in the crisis in the world financial system, it seems strange the Scottish Government is handing over public capital projects in this way. And, at a time when low paid local government workers are being offered a pay cut, it is unacceptable that six figure salaries can be found for SFT staff. UNISON believes that SFT plans to share expertise can be achieved without setting up this expensive new quango.

Issues of governance and of accountability are extremely important, but neither these, nor employment issues are addressed properly in the SBC. Overall, it is very light on detail with key areas of work still unclear and little evidence to support many of its claims and costs and savings estimates.

A real alternative to PPP/PFI

UNISON has argued to the Scottish Government and to the Scottish Parliament Finance Committee's inquiry into the funding of capital investment projects that there are five simple steps which would provide an immediate alternative to PPP/PFI.

The five steps include:

a review of existing contracts, with 'buyouts' where that benefits the taxpayer; Scottish government grants for new capital projects, irrespective of the method of procurement; health boards should be given Prudential Borrowing powers; staff should be excluded from transfer and the PPP staffing protocol should be strengthened.

Action for Branches Further Information

Monitor employers' dealings with the new SFT, including comments on the body, approaches for funding/advice and any proposed projects in your area, including hub initiatives.

Keep the P&I team informed of any local developments and any campaigning by your branch on PPP/PFI/SFT.

UNISON Scotland Resource Page for campaigning against PFI
www.unison-scotland.org.uk/comms/pfi.html

Scottish Government: SFT SBC
www.scotland.gov.uk/Resource/Doc/223438/0060176.pdf

Finance Committee Inquiry into funding capital investment projects
www.scottish.parliament.uk/s3/committees/
finance/inquiries/capitalInvestment.htm

Contacts list:

Dave Watson
d.watson@unison.co.uk

Fiona Montgomery
f.montgomery@unison.co.uk

@ the P&I Team
14 West Campbell St
Glasgow G26RX
Tel 0845 355 0845
Fax 0141 307 2572

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Further Information

Monitor employers' dealings with the new SFT, including comments on the body, approaches for funding/advice and any proposed projects in your area, including hub initiatives.

Keep the P&I team informed of any local developments and any campaigning by your branch on PPP/PFI/SFT.

UNISON Scotland Resource Page for campaigning against PFI
www.unison-scotland.org.uk/comms/pfi.html

Scottish Government: SFT SBC
www.scotland.gov.uk/Resource/Doc/
223438/0060176.pdf

Finance Committee Inquiry into funding capital investment projects
www.scottish.parliament.uk/s3/committees/
finance/inquiries/capitalInvestment.htm

Contacts list:

Dave Watson
d.watson@unison.co.uk

Fiona Montgomery
f.montgomery@unison.co.uk

@ the P&I Team
14 West Campbell St
Glasgow G26RX
Tel 0845 355 0845
Fax 0141 307 2572