Tom Griffin (London, The Green Ribbon) Scotland's Finance Minister, John Swinney, came in for sustained criticism last week, when he published the responses to the consultation on his proposed Scottish Futures Trust. Several respondents suggested that his plan to replace the Private Finance Initiative left key questions unaddressed:
Audit Scotland, the public sector watchdog, observed the SFT "faces competing challenges and constraints and these create a number of risks". The plan is "at a very early stage and there is much further work to be done", including the question of public accountability. Several highlight that PPP has changed in recent years: the gap between interest on public and private finance has been squeezed, and it is unlikely the SFT can cut it much further. They point out Holyrood has no powers to use bonds to raise capital, as the plan suggests, hinting at potential legal uncertainty that is hardly likely to attract financiers.
In spite of the Scottish Government's difficulties, the PFI model is increasingly being questioned in the other devolved nations as well.
Plaid Cymru's economics advisor, Dr Eurfyl ap Gwilym, has suggested that Wales is facing a £2.3 billion shortfall in capital investment because of the failure to work out an alternative funding mechanism:
Are too many politicians in Wales unwilling to differentiate between polices which might make sense in the case of a government which has taxation and borrowing powers, but which do not in our situation where we have discretion over spending but none over taxation and borrowing? Now that the rapid growth in public expenditure is at an end, it is time for members of the National Assembly to face up to some of the realities of devolution.
The Northern Ireland Executive has been more willing to make use of PFI, which is likely to play a big role in the infrastructure projects targeted by the Emerald Investment Development Fund. Ironically, as Newton Emerson notes, one of the biggest investors in the fund is New York City, which funds its own infrastructure by issuing bonds. At one time, Northern Ireland did the same:
One of the first acts of the old Stormont parliament was the introduction of ‘Ulster Savings Certificates’ to raise money for capital projects.
The certificates were guaranteed by the UK treasury but otherwise the money they raised and the interest they paid were fully devolved. Ulster savings certificates were only withdrawn from public sale in 1991 and reinvestment of their proceeds continued until 1997.
It's a sobering though that the financial powers of today's devolved administrations are still lagging behind the Stormont of 40 years ago.
Comments
Those Stormont Savings Certificates were first issued in 1922, so the current devolved administrations are actually lagging behind the Stormont of 86 years ago.
A local school spent 18 months as a building site because the PFI contractors went bust. Millions were lost. A hospital not too far from me was built within the last five years under PFI, it charges massive amounts for patient parking, windowless offices, has no air conditioning and ventilation so bad that workers went on strike, and within two years of opening was on the "filthy" list.
First you can take anything the Scottish dead tree media says about the SNP with the rider that they are all anti SNP.
Secondly, what's so good about PFI? Nothing, if my personal information is correct. So many flagship PFI scams have been just that, scams, and have lined the pockets of the crooked building trade who have been amazed how easy it is to siphon off the money, go into liquidation and leave unfinished buildings like schools to pick up the pieces.
Those who hung around long enough are still picking up scandalous amounts (£500 million this year from hospitals alone for "rental" arrangements, which is curiously the same figure that has been bandied about for the extra costs of GP funding annually). A recent PAC report was critical that local officials simply did not have the commercial skills to negotiate them!
All this while private firms are refinancing loans and pocketing millions. PFI has been a miserable failure because we will still be paying for it in 30 years time, long after the nasty gerry built hospitals and schools have fallen down.
It's definitely time to look at the alternatives.
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