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In the market

Brian Taylor | 16:04 UK time, Tuesday, 20 May 2008

If it works, it'll be fine and dandy. But will it work?

Ministers are confident but the accompanying documentation still appears a mite tentative.

I'm talking about the Scottish Futures Trust (SFT) which is designed to supplement the Public Private Partnership (PPP) which itself redeveloped the Private Finance Initiative (PFI) and which has now extended into the Non-profit Distributing mechanism (NPD.)

So the acronym market appears to be thriving. How about the market for generating investment in Scotland's schools and hospitals?

Ministers say the Trust will "ramp up its activities over time". Again, notably cautious. But that's perhaps understandable when we're talking about £40bn investment over 10 years.

It'll start this summer, co-ordinating capital projects across Scotland. Broadly, at first, it'll be like a posh quango, advising on sundry schemes in councils, health boards and the like.

But, from 2009, it'll move from the public sector to develop a private finance and investment arm.

Private finance

Again, ministers say it'll work in a range of ways: developing central financial expertise; grouping together capital projects to drive down the cost of borrowing; and encouraging councils to work together to offer joint bonds to the market, attracting private finance.

To be frank once more, today's document relies more upon conceptualisation than detail. Indeed, we are told that "the details of how investment will be raised from the private sector has not been explored in any detail at this stage."

That is listed as an early task for the trust itself.

Sceptics say today's document is "fluff" and a "cheap make-over" for PPP. They're also demanding early parliamentary scrutiny. (John Swinney is appearing before the finance committee next Tuesday.)

Questions? If NPD is already driving down costs by strictly capping profit through removing the equity element of PFI, why do we need a futures trust?

Because, say ministers, it adds the other elements: expertise, bonds and a search for other investment vehicles.

Attractive method

If the SFT was roundly criticised by many who responded to the consultation (and it was), how can we have confidence in it? Because, say ministers, they have listened to the consultation (which also included several positive responses) and acted.

Why would councils act together to offer bonds for a project which they might not control directly? Because, say ministers, this will be an attractive funding method and will benefit the wider community.

Why doesn't the Scottish Government borrow money itself or issue its own bonds? Because it doesn't have that power under the Scotland Act.

In itself, an issue, perhaps, for another day.


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