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 Ulster savings certificates were only withdrawn from public sale in 1991 and reinvestment of their proceeds continued until 1997.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.
