Common Weal calls for a Scottish National Infrastructure Company to replace Scottish Futures Trust

Ben Wray

The Scottish Parliament will debate Scottish Futures Trust on Tuesday [14 March] afternoon

A NATIONAL INFRASTRUCTURE COMPANY could provide a new model for delivering public infrastructure and replace private-finance with ‘public-public partnerships’, Common Weal has argued ahead of a debate in the Scottish Parliament on the Scottish Government’s approach to financing public infrastructure.

Ahead of the debate [14 March] on Scottish Futures Trust, the body which leads the Scottish Government’s public-private partnerships, Common Weal’s Head of Policy Ben Wray said:

“A debate in the Scottish Parliament on the Scottish Government’s approach to how it builds schools and hospitals is welcome and overdue. The Carillion collapse has shown that the private finance model is both risky and costly, and has to end.

“Common Weal has published detailed proposals on how this could be replaced with a public finance approach, with Scottish Futures Trust being replaced by a Scottish National Infrastructure Company. This public body would replace the Carillion’s of this world and ensure public infrastructure projects are produced to the highest quality while being significantly cheaper for the public purse, with workers’ rights at its heart.”

A grassroots SNP campaign led by former MPs George Kerevan and Anne McLaughlin to get the Scottish National Infrastructure Company (SNIC) onto the SNP June conference agenda launched last week. Several branches are already proposing the motion. Former SNP MP George Kerevan said:

“The SNIC model will provide a public alternative to infrastructure financing and management bringing an end once and for all to exploitative private contracts ripping off taxpayers and ensuring Scotland’s infrastructure is built with the public good at its core.

“The formation of a SNIB is the perfect opportunity to bring an end private financing which will cost the Scottish people almost £ 40 Billion in the coming decades. Under the joint SNIC and SNIB model, Scotland could have saved £26billion.”

“Establishing a SNIB and SNIC will benefit a devolved Scotland and will lay the foundations to build an independent Scotland.”

How would a Scottish National Infrastructure Company work?

When the Scottish Government, its agencies or local authorities decide that an infrastructure project like a new school or bridge is needed, it would commission from the Infrastructure Company.

The Infrastructure Company would employ first-rate project and financial managers, architects, engineers, building experts and policy experts to design and project manage each project. It would become a centre of excellence in design and technology. It would take the public commission and create the detailed design and build plan.

The Infrastructure Company would then arrange the financing of the project. It would do this as a partnership with both the National Investment Bank (which will design specialist borrowing options for public projects) and the commissioning body. It is the commissioning body which will repay the borrowing directly.

The Infrastructure Company will then project manage and oversee the entire build process. Once this is complete it will hand over ownership to the commissioning body. The infrastructure will be owned and financed in the public sector.

Why now?

The collapse of Carillion has exposed just how much risk the public faces because of the way we outsource infrastructure-building and service-delivery. By maximising private profit above the public good, companies like Carillion are putting large public infrastructure projects and many jobs at risk. Huge private companies cannot be trusted to deliver in the public interest.

The rules which allowed PFI projects to be accounted for ‘o the government’s books’ have been changed so all PFI debt will count against public debt, removing the main incentive to use private finance.

The failings of Public-Private Partnerships (PFI/PPP) have been exposed by collapsing school buildings and a huge cost to the taxpayers in repayments to PPP consortiums worth up to five or six times the value of the asset. Payments for privately-financed projects will have cost Scotland about £40 billion by the time the current contracts are completed in 2040. This system has to be stopped before there are more major failures.

The current Scottish model, known as ‘non-profit-distribution’ (NPD), is only slightly less problematic. It still uses private finance but with a cap on profits. However, the maximum private profit from NPD- funded public infrastructure is only 3% less than under PFI – 12%, compared to 15%.

Scotland could have saved £26 billion if a National Investment Bank and Infrastructure Company were created instead of privately-financed projects. A National Investment Bank is finally coming so it’s the perfect time to build Scotland’s Future now.

What are the advantages of a Scottish National Infrastructure Company?

The emphasis would go back onto achieving quality and real value for money, not maximising profits by seeking to extract finance that would otherwise be spent on design and construction.

Public risk is minimised; projects would no longer be in the control of private companies using highly risky financial measures to expand beyond capacity.

The public sector will no longer be so dependent on private sector ‘advice’ or ‘expertise’ when making decisions that could a ect the public purse for many decades.

The project management of major infrastructure projects in Scotland would become open, transparent and democratically accountable. It is not that mistakes will never be made – its that they will not be concealed behind ‘commercial confidentiality’ agreements so we can learn from the mistakes and not simply hide them.

The cost of building public infrastructure will be greatly reduced.

The practice of procurement can be managed in the public interest, seeking to enable domestic enterprises to gain as many contracts as possible thus maximising the positive economic impact on Scotland.

As the Scottish National Infrastructure Company develops it will become a centre of excellence in all aspects of public infrastructure. The improvements in public sector infrastructure-building expertise will leave a legacy of much better infrastructure which will benefit many generations to come