In the years since the financial crash, successive UK Governments have dramatically reduced public spending, particularly capital budgets which fund the construction of infrastructure projects, such as schools, houses, roads, bridges and hospitals.
It is a well-established principle that investment can kick-start an economy, creating jobs and making the country a more attractive place for people to live, visit and do business. Quite why the UK Government chose to smother economic growth by slashing capital spending in this way is a mystery – especially when the USA and Germany chose to stimulate their economies with increased capital investment spending to drive recovery.
Scotland has very limited borrowing powers and in the last year the SNP Government borrowed the maximum allowed for capital spending, some £304million. As you might imagine, £304million does not stretch far across Scotland. To put it in context, the A737 Dalry Bypass will cost £28million and the new Garnock Academy campus £43million. Government must therefore work to secure investment in infrastructure from other sources.
Previous governments attempted to build public infrastructure without using public money. Many will be familiar with John Major’s Private Finance Initiative (PFI) or Tony Blair’s rebranded model re-named the Public Private Partnership (PPP) and the unmitigated disasters they proved to be. With no cap on private sector profits in delivering these projects, costs soared, burdening future generations with overinflated debts.
In North Ayrshire alone, the profligacy of the previous Labour controlled council means that annual PFI/PPP payments on school projects will increase from £11.1 million in 2007 to £16.1 million in 2037, meaning that ultimately, £400 million will be paid over 30 years for schools valued at only £81 million and which NAC will not even own. UK Treasury data shows that Scottish PFI repayments will peak in nine years’ time, at £1,010 million per year by 2025.
Upon its election in 2007, the SNP Government brought an end to wasteful PFI/PPP schemes and established the Scottish Futures Trust (SFT) – an independent company, established with a responsibility to deliver value for money across public sector infrastructure investment. SFT operates at arm's length from Government but works closely with the public sector.
The SFT uses the Non Profit Distribution model, which caps the profits made by private companies seeking to win infrastructure projects. Not only does SFT seek to secure the best deal for the taxpayer, it ensures the smooth running of projects which often allows budgets to be revised downwards, instead of spiralling out of control as often happened previously. Recently the work of the SFT resulted in the cost of the new Forth Road Bridge falling by some £50 million. In December, the SFT reported the delivery of £135 million of net future benefits and savings during 2014-15, bringing a total of £777 million of savings and benefits to the people of Scotland as audited by the London School of Economics.
The Civil Engineering Contractors Association said that without doubt SFT’s role was “instrumental in keeping many Civil Engineering companies in business and preventing far worse job losses during the recession” Homes for Scotland added that “SFT clearly demonstrated its ability to foster innovation, encourage collaboration and deliver value for money to the public purse” whilst the Scottish Ambulance Service commented that “The SFT in its short history has proven to be a leading agent for collaborative working between public sector bodies and has taken an innovative approach to securing additional public sector investment, better value for money and improving public services.”
With many more projects in the pipeline, it is evident that the Scottish Futures Trust will continue to deliver high quality infrastructure in a manner which is affordable and creates maximum benefit for the economy and people of Scotland.