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Salmond's futures trust plan 'is a watered-down version of derided PPP'



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Published Date: 09 May 2008
By David Maddox
ALEX Salmond, the First Minister, was yesterday forced to admit his proposal for paying for major projects would be similar to the public-private partnerships (PPP) he has derided.
During First Minister's Questions, he was challenged over the SNP's controversial plan to create a 'Scottish futures trust' to replace PPPs.

The concept was originally to sell bonds to raise cheap loans, but this has been ruled illegal becaus
e it goes beyond the powers devolved to Holyrood.

Instead, a consultation document has proposed that the futures trust will be an arms' length organisation. The document was heavily criticised for lacking detail.

Mr Salmond was asked by Derek Brownlee, the Tories' finance spokesman: "Can the First Minister confirm the Scottish futures trust is a private company?"

Mr Salmond said it was, but "a not-for-profit model."

Mr Brownlee said later: "This is a watered-down version of PPPs and you have to wonder what Mr Salmond's anti-private sector backbenchers think of his big idea now.

"You also have to ask why he has delayed projects by stopping PPPs when all he intends to do is replace it with something similar."

Labour MSPs also pressed Mr Salmond on what was happening with the futures trust as his government has stopped any new PPPs.

Andy Kerr, Labour's local government spokesman, asked: "Will (the futures trust] initiate any new schools? Will it build the 100 new schools by 2009 and a further 150 by 2011 as promised by Labour, matching us brick by brick? Or is it, as ever, that talk is cheap, but the lives and futures of our children are cheaper still?"

Mr Salmond hit back, claiming that Labour-led East Renfrewshire Council had offered to pilot the futures trust in the consultation.





The full article contains 304 words and appears in The Scotsman newspaper.
Page 1 of 1

  • Last Updated: 08 May 2008 9:40 PM
  • Source: The Scotsman
  • Location: Edinburgh
 
1

a proud doonhamer,

Dumfries 09/05/2008 02:01:14
You forgot the simple distinction.

PPP .. PRIVATE PUBLIC PARTNERSHIP means the public pays the profit to the private sector

The Trusts are non-profit and benefit the public not the private sector.

I hope you now understand.. I tried to use small words.

2

A Better Way,

Edinburgh 09/05/2008 03:06:09
What utter keek from this Journalist. The SNP Scottish Government has given out contracts for roadbuilding that stipulate that any cost over runs are the resonsability of the Contractor.

That means we get the best prices and end the fiasco of lets say the Parliament Building. We know what we would pay and thats it.

As for the interest on the futures trust. Its a lot cheaper than giving a company 30 years of interest, plus servicing charges. Then at the end of the thirty years having to give up ownership of the building which is technically still the property of the Financier. The Edinburgh Infirmary is worth 4 million to build, but at the end of the day we are going to be paying upwards of 30/40 million. No thanks, I would do what anyother Government in the world does and raise capitol for each project.
3

AM2,

Scotland,UK 09/05/2008 06:24:22
#1 Doonhamer

Non-profit means less motivation to properly control costs.

For profit is usually cheaper in the long run.
4

cataibh,

Bo'ness 09/05/2008 09:06:26
AM2. Give me three examples of your statement.
5

The Tin Man,

Over the Rainbow 09/05/2008 09:16:05
#2 Better Way

The Edin Infirmary cost GBP 4MM to build? That's the funniest thing I have heard this morning!!!

Please make some more stuff up...
6

Toast,

09/05/2008 09:22:36
£50 million a day in oil revenue would make a difference.
7

Fairfax,

09/05/2008 09:34:09
a proud doonhamer (1): "The Trusts are non-profit and benefit the public not the private sector."

In practice, this distinction is less clear. Many non-profit private companies really do rather well. For example, most English public schools are non-profit charities, including Eton (current fees some £18000 per year with scholarships). The key observation is Cicero's: "Who benefits?": why would the private sector invest without the prospect of financial return?
8

Doh,

09/05/2008 09:34:20
1 doonhammer

Why would private investors buy bonds unless it was for profit?

There is very little difference between the SNP proposals and PFI.


Please dont let you enthusiasm for independence rob you of all critical facilties.
9

Jackie Priest,

09/05/2008 09:55:52
The important part of this article is:

"this has been ruled illegal because it goes beyond the powers devolved to Holyrood."


Yip, that's right. Scotland isn't a free country that can act according to the wishes of its own government in accordance to the wishes of the people who voted for them.

That a government's intention to introduce policies that are a benefit to the nation it represents can be termed "illegal" is unbelievable.

No other country in the free world would tolerate this.
10

Fraudulent and corrupt EU,

09/05/2008 11:09:11
Don't you think it's strange that Neo Labour formed the Ministry of Justice in 2007? It sounds like something from George Orwell's 1984. Furthermore, the Nazis had their Reich Ministry of Justice during the war.

Funny how a socialist like Herr Brown calls for Britishness etc. Surely this makes him a national socialist (Nazi)!
11

AM2,

Scotland,UK 09/05/2008 12:05:45
#4 cataibh

To provide the direct comparisons which you requested, I would need to discuss sectors in which both public and private financing are used and where there is an inspectorate which has drawn comparisons empirically and reported on them.

I'm not sure that three such sectors exist. But prisons spring to mind.

Adam Smith Institute primer on contracting-out prisons:
http://www.adamsmith.org/80ideas/idea/36.htm

Two excerpts:

“In the UK it used to take ten to twelve years to build a prison: private companies have demonstrated their ability to build jails in less than 9 months.”

“The average cost of public-sector jails in the UK was 15 per cent higher than private jails.”

Also, note this in relation to quality control:
http://www.hmprisonservice.gov.uk/prisoninformation/privateprison/

“HM Chief Inspectorate of Prisons inspects private prisons in the same way as public sector prisons.”

And finally, from this Politics.co.uk article: http://tinyurl.com/2z2urj

“Many of the private prisons are among the best run in the system, according to reports from the Chief Inspector of Prisons.”

Hope that helps.
12

AM2,

Scotland,UK 09/05/2008 12:10:20
#9 Jackie Priest

Tell me: are you similarly outraged that we're obliged to follow EU and international law? Are you anti-Europe as well as anti-UK?

How would any of that change with the SNP's "independence in Europe" policy?

There's no such thing these days as total sovereignty. And a good thing too.
13

Vincent-W,

09/05/2008 12:56:59
What is this antediluvian knee jerk anti profit cr@p from Doonhammer and that ilk?

Profitable companies are good for everyone. Firstly they generate jobs, directly and indirectly, secondly they make or supply things that people need or want, thirdly the greater the profit the greater the tax revenue, fourthly the greater the economic activity the better it is for everyone.

When will you get out of your moronic outdated view that profit is a bad thing? That idiotic attitude nearly ruined this country.

Back on topic now - there is a concern that the Scottish Government are not moving quickly enough to put in place alternative funding for public works, especially schools. They plan to reduce class sizes from the current average of 24 to less than 18, that will require 30% - 40% more schools, more teachers, more classroom assistants, more janitors, more secretaries, more support staff. And yet those who work in the business of providing new builds know that there will be a significant gap.

My view is that instead of dumping PPP on possibly unsound ideological grounds they should look at the many instances where it has worked and try applying these models to those councils who do not have those skills. I think they may be throwing the baby out with the bathwater.
14

,

09/05/2008 12:58:33
Comment Removed By Administrator
Reason:
15

Ameretto,

09/05/2008 13:49:48
#2 'The SNP Scottish Government has given out contracts for roadbuilding that stipulate that any cost over runs are the resonsability of the Contractor.'

Thats all well and good, but a fixed price contract is only fixed to the original contract, any contractor worth his salt can argue over variations to contract and these are not fixed!
16

Samoyed,

09/05/2008 14:38:47
Allow me to try to make things a wee more clear. Sorry AM2, I couldn't make it for your level.

Statistics released from the Scottish Executive (Labour) have revealed that the legacy debt inherited from those PFI/PPP projects that are now up and running, or to which commitments have been made, is around £4,500 for every tax payer in Scotland.

This is a debt that is likely to remain, as extracting a public body from a PFI/PPP contract can be as costly as allowing it to continue for the 25 or 30-year concession period originally envisaged.

So while there is little the SNP or any future administration can do about the debt already created by the use of PFI/PPP, the SNP is committed to not increasing that debt.

As part of its election manifesto, the SNP set out its proposal for the Scottish Futures Trust as an alternative to PPP/PFI. This encourages greater use of public bond issues, thus giving access to lower-cost borrowing with public assets being held in trust for the Scottish people.

This "not-for-profit" vehicle is aimed at reducing the high levels of public debt associated with PFI/PPP. It is not the involvement of the private sector per se that the Scottish Futures Trust is seeking to remove - rather the traditionally high costs associated with PFI/PPP procurement.

The beauty about bonds is to allow the issuer to borrow money at prices lower than what the lending market has to offer, but higher than the investment market, making it cheaper than taking a loan, while attracting investors because goods returns can be made.

17

Doh,

09/05/2008 14:45:20
16

Is a "good return" not just another way of saying profit. I dont why the SNP are flanneling over this
issue. They have just another form of private investment in public works - the private inverstors will want to make a profit - just like in PFI.

18

AM2,

Scotland,UK 09/05/2008 17:16:04
#16 Samoyed

You didn't "make it" at any level. If you're going to brassneck an unwarranted superiority complex at least don't get caught! You copy-pasted all but your last paragraph from a November 2007 Scotsman article, which continued thus:

“Unfortunately the SNP have not provided any further detail of how they intend to implement the proposed trusts. In their paper they refer to similar trusts which are set up in the United States where investors can invest in public infrastructure project bonds. In the United States such bonds are exempt from income tax thus increasing the attraction for investors. At present there is no legislative framework in the UK which would allow a similar exemption. Fiscal changes are not devolved to the Scottish Parliament under the Scotland Act 1998. If the SNP are proposing a similar regime for the Scottish Futures Trust investors in order to attract investment, this will raise some thorny devolution issues.

“The SNP's manifesto made it clear that adoption of the Scottish Futures Trust model will not be mandatory and that public bodies can still chose the PFI/PPP route. However it is clear from statements made and actions taken since coming to power that the SNP intend that Scotland will move away from the traditional PFI/PPP model for public procurement, at least insofar as that model relies on private sector funding.

“Of course this idea of public institutions being in trust for the Scottish people and therefore retained within the ownership of the Scottish people is a nationalist dream. The reality of a public funded and owned project is that the public then have to maintain and service the asset. Traditionally this has not been something that the public services have been very good at and indeed was one of the main thrusts behind the introduction of PFI/PPP.

“If the SNP's Scottish Futures Trusts is to be a viable alternative vehicle for the delivery of public assets it will have to encapsulate incen
19

AM2,

Scotland,UK 09/05/2008 17:16:29
spillover...

...encapsulate incentives for investors which still provide the public sector with value for money while not excluding the involvement of the private sector from the process in order to take advantage of their experience and expertise in the delivery of large assets.”
20

AM2,

Scotland,UK 09/05/2008 17:22:17
Incidentally, I feel compelled to set the record straight about the ridiculous figures in post #2.

The construction of Edinburgh Royal Infirmary cost about £200m.

The £1bn total cost includes 30 years of:

* Building controls
* CAD operations
* Condition based monitoring
* Consultancy services
* Health & Safety
* Help desk
* HVAC applications
* Infrastructure solutions
* International capability
* IT & communications
* Legislation advice
* Life cycle planning & management
* Performance monitoring
* Project Management
* Risk management
* Small works
* Training
* TUPE
* Utilities & support services
* Ventilation
* Water treatment
* etc
21

AM2,

Scotland,UK 09/05/2008 17:23:39
And finally, that headline figure of £4500 "debt", much touted by the SNP.

That’s for 102 schools, prisons and hospitals over 40 years. So they each cost about £1 per person per year, including operation and maintenance. What would they have cost without PPP? Would they even have been built?
22

cataibh,

Bo'ness 09/05/2008 17:33:59
#11 AM2 You have looked but you are short of examples. Try Northern Rock and try to prove that profit is better than non-profit As a building society Northern Rock was a very successful organisation with profits distibuted to the savers and those buying a home.
When Northern Rock became a bank all the profits went to shareholders, need I tell you what happened to Northern Rock.
23

John Blackley,

Florida 09/05/2008 17:49:12
For me the only issue here is that the SNP failed to understand that its concept of the 'Scottish futures trust' was not in its power to create, under the terms of the devolution settlement. An oversight, to be sure, and the kind of oversight to which the SNP seems to be prone.

I believe that, given their lack of knowledge of the terms of the devolution settlement at the time the promise was made, the promise was made in good faith.

Many more of these 'oversights', however, and my credulity will be strained.
24

Jwil,

09/05/2008 20:18:51
"ALEX Salmond, the First Minister, was yesterday forced to admit his proposal for paying for major projects would be similar to the public-private partnerships (PPP) he has derided."


The Scotchman is playing with words here. Salmond did not say this or even imply it!
25

BIG EYE,

Paisley 10/05/2008 01:14:04
Have I missed something here?

Has someone offered a massive prize for the newspaper in Scotland that can lost lose leaders at the fastest rate?

The antics of the Scotsman with manufactured stories to try and damage our very credible Government is only equalled by the Herald who have spent the week developing a Pravda style in terms of their online comment pages.

I hope taxpayers money is not involved in this somewhere!
26

BIG EYE,

Paisley 10/05/2008 01:15:45
how right I was the Herald have just pulled the Wendy must go story

Dos Vadanjah

 

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