Response to the Scottish Government's Consultation on the Scottish Futures Trust - from Solidarity: Scotland’s Socialist Movement


Solidarity Opposes PFI/PPP and believes public services should be democratically controlled


In our Manifesto for the 2007 Scottish Parliament elections, Solidarity pledged:

“a vote for Solidarity is a vote for democratic public services properly funded and resourced. It is a vote against privatisation of public services and for an end to PFI/PPP.”

We proposed to “introduce a Public Sector Financing Bill to enable health and education authorities to choose cheaper public sector borrowing to finance capital projects rather than expensive PFIs, and enable those bodies to disengage from extortionate PFI contracts at the earliest opportunity. This would:


. Give public bodies the power of general competence to borrow at market rates of interest and invest directly in capital spending and investment without the PFI middleman

. Revitalise the role of the public sector works boards in financing capital projects directly.

. Require the Scottish Executive to provide equivalent financing in all cases where public bodies choose to reject PFI in favour of direct borrowing

. Require public bodies to have an independent review of existing projects every six years, with a requirement to cancel the contract if it does not show value for money, with minimum compensation

. End commercial confidentiality for all private bidders.

We also need legislation which will stop and roll back privatisation in service provision. This would include the following principles and policies:

. Services should be directed by professional and democratic principles, not managerial or commercial principles.

. Service to the community, patients and learners should be the core value.

. Services should be well integrated with all other community and social services.

. Public ownership and control should be re-established, with increased democratic participation.”

Solidarity demands that the SNP Government approaches the funding of new and existing public works and service contracts on the basis of the above principles. Our assessment and criticism of the proposed Scottish Futures Trust is guided by them.

The Evolution of the Scottish Futures Trust Proposal

In his initial proposal in August 2006, Alex Salmond wrote:

“Our proposal for a Scottish Futures Trust, will see greater use of public bond issues so that our public services can have access to lower cost borrowing, our public assets can be held in trust for the nation all without the unnecessary private profit that is an integral part of PFI”. The August 2006 paper predicted a “fairly conservative estimate of savings from a move from PFI to bond issue of 4% per annum”.

The SNP 2007 manifesto states:

“We propose a new system of infrastructure funding as an alternative to the costly and flawed PFI/PPP. Over the first term of an SNP government we will introduce a not-for-profit Scottish Futures Trust, which will provide lower cost borrowing opportunities.”

The Manifesto goes on: “Current PFI/PPP contracts will be unaffected and it will be open to local authorities and other public bodies to choose between PFI/PPP and Scottish Futures Bonds for planned and future projects.“

In the foreword to the consultation on the “Role of a Scottish Futures Trust in infrastructure investment in Scotland” John Swinney talks of “reform of PFI”; of as a start “removing the element of PFI that delivered the most extreme and unwarranted profits”, then “building the potential of the public sector in Scotland to secure both the best deals and the best financing”.

The consultation document itself starts by accepting

“the cap set by Treasury on what the Scottish Government … can spend on capital projects”. It notes that “PFI projects have counted as funding and assets of the private sector, rather than of the public sector.” and that as a result “the level of capital investment per year has increased by upwards of £300m.”



Furthermore “the Scottish Government welcomes the involvement of the private sector in infrastructure investment.” “it recognises... the due diligence it provides through having private capital at risk (!!) as well as the additionality their investment brings on top of public sector investment”



The document goes on to note “the Scottish Government has no borrowing powers under the terms of the Scotland Act” and that the UK is moving to “accounting under the International Financial Reporting Standards” which count PFI/PPP schemes as public sector borrowing and “make it more difficult the task of designing an SFT which would continue to provide the additionality of investment in public service facilities which has been secured through private sector investment over the past 15 years”.



The paper then notes that for new projects “where the use of private sector finance and delivery expertise combined with risk transfer, would be beneficial, the Non-Profit Distributing (NPD) model will be used.” Solidarity notes that this means new PFI schemes are being contemplated.



Finally taking account of the above, constraints, the Government proposes that the Scottish Futures Trust, rather than being a public sector body should be “private sector classified but which has a public interest ethos”.



Solidarity’s response to the Scottish Futures Trust proposal



Solidarity is appalled at the timidity and lack of vision of the SNP Government.



Having started from a reasonable proposal in August 2006 to “hold public assets in trust for the nation without unnecessary private profit” by issuing bonds, and effectively promising the end of PFI, the SNP Government is now proposing future new PFI/PPP schemes using the NPD model.



Solidarity is opposed to any new PFI/PPP schemes and demands a renegotiation of existing schemes to ensure removal of excess profit prior to their termination.



Rather than simply allowing Local Authorities and Health boards full prudential borrowing powers, and allowing them to issue bonds, a new Private Sector Investment Bank (with added public sector ethos) is to be set up.



Solidarity demands legislation to extend the powers of local authorities and health boards so that they can fund new projects through borrowing or bonds.

Rather than facing up to the massive investment required to turn Scotland into a fully renewable energy powered country, both for electricity and transport, the SNP Government is accepting the limits on borrowing imposed by the Treasury and even worse the harsher limits on borrowing indicated by IFRS and the EU. No matter how it is structured, public sector projects financed through the Scottish Futures Trust are liable to count as public sector borrowing under IFRS.

Solidarity demands that the Scottish Government face up to the scale of the investment and redirection of resources required to combat Global Warming and accept that this investment will not happen through the private sector but only through a massive program of public works which will be opposed by existing energy and transport providers.

As a first step, Solidarity believes the Scottish Government should demand borrowing powers from Westminster and mount a public campaign to show how the lack of such powers is hampering the fight against Global Warming.

Solidarity believes as part of this campaign, the Scottish Government should point out there is no shortage of resources to carry out the required investments and point out the misuse by the Westminster Government of untold Billions on Iraq and Afghan Wars , on Nuclear weapons and on propping up commercial banks.

Solidarity demands that the Scottish Government stop pretending that Big Business and Finance are its allies rather than a leach on public finances.

Solidarity will be happy to work with the SNP and others to prepare plans for an Independent Scottish Government to renationalise under democratic control the Energy and Transport sectors and to prepare regulations to ensure Financial sector investments meet the needs of the Scottish people.