The launch of our report
Last month at the Scottish Parliament we launched our report ‘Rethinking Private Financing’, the culmination of work from Jubilee Scotland over the past year researching PPP & PFI schemes. You can download and read it here. The launch was hosted by Neil Findlay MSP, who spoke to us about how passionate he was about this issue affecting Scottish people. In late January Neil Findlay had questioned Holyrood’s approach to many of the key issues the government have been quiet or unclear about when it comes to financing projects with private money, and what they plan to do in future.
Scandal at Holyrood
Derek Mackay MSP as the Finance Secretary of Scotland was the person answering these questions put forward to parliament, a mere fortnight before he was hit with a scandal that has put his career as a politican into disrepute. Mackay has been suspended from the SNP for sending inappropriate messages to a 16 year old, breaching a duty and care expected as a member of government, failing to uphold a responsibility not to act in a way that puts young people at risk. In that context, these may be some of the last questions Mackay ever answers at Holyrood, but they still offer a snapshot of the Government’s current approach to these schemes that Jubilee Scotland are campaigning against.
Questions asked of the Scottish Government
Question S5W-27047: Neil Findlay, Lothian, Scottish Labour, Date Lodged: 21/01/2020 To ask the Scottish Government what its position is on whether local authorities could benefit from direct borrowing for public projects, rather than financing them through public private partnerships.
Answered by Derek Mackay (29/01/2020):Local authorities are entitled to use all resources available to them including their existing borrowing powers and support from the Scottish Government. It is however up to local authorities to decide how they wish to borrow and any commitments made by them are based on what they deem to be prudent and affordable.
The government’s approach to this is relatively Laisse-Faire as they have limited borrowing capacity themselves. Of course local authorities have to make financial decisions that are responsible, but the commitments that a PPP binds a council by are never prudent. They are at such high rates of interest that nobody can honestly say with what we know now, that they are affordable. They only seem that way in the short term. So by saying this, you are effectively shifting the blame onto councils for the debt they’ve accumulated, taking no moral responsibility while still introducing NPDs, a replacement model for the PFI. What is forgotten here is while councils are allowed to use all resources available to them, there is no real alternative to PPPs supported on a national level in Scotland – there needs to be other options.
Question S5W-27048: Neil Findlay, Lothian, Scottish Labour, Date Lodged: 21/01/2020 To ask the Scottish Government what the implications are of using the mutual investment model for public projects, rather than direct borrowing.
Answered by Derek Mackay (29/01/2020): The use of the Mutual Investment Model (MIM) will be kept within our self-imposed limit that revenue-financed investments will not exceed 5% of the Scottish Government resource budget (excluding social security). The model increases the range of financing tools available to the Scottish Government to enable it to deliver a steadily increasing level of overall capital investment in Scottish infrastructure. MIM will be used alongside a range of financing approaches reserved for central government and Non-departmental Public Bodies where access to borrowing is more restricted.
No matter what you say about using MIM and how it’s going to be different this time, it’s the same old model with a new lick of paint. Scottish Futures Trust’s (SFT) analysis of the model “did indeed show that the MIM approach was likely to be more expensive than funding capital through public borrowing.” Nevertheless, the model was adopted – with no proper consultation – to give the Scottish Government the extra capacity it needed to achieve its National Infrastructure Mission targets. So this answer does nothing to answer the concerns of the question.
Question S5W-27049: Neil Findlay, Lothian, Scottish Labour, Date Lodged: 21/01/2020 To ask the Scottish Government, in light of the reported criticism of this model of financing from stakeholders, reports that other European nations no longer favour such an approach and issues such as the delay to the opening of the Royal Hospital for Children and Young People in Edinburgh, for what reason the various forms of public private partnerships continue to be favoured, and what plans it has to end their use.Answered by Derek Mackay (29/01/2020):The constraints and tight limits on Scottish Government capital borrowing under the Fiscal Framework make revenue finance a necessity to build the infrastructure we need. Were broader borrowing powers available to the Scottish Government, as with the comparator sovereign nations identified in the question, we could revisit consideration of the best tools and approaches to deploy.The Scottish Government are continually seeking ways to deliver the best value for the public purse, which is why we introduced Growth Accelerators, and together with Cosla, a new mechanism to finance new schools. We are always open to engaging with relevant stakeholders on improving investment models that would deliver best value.
Question S5W-27051: Neil Findlay, Lothian, Scottish Labour, Date Lodged: 21/01/2020 To ask the Scottish Government what action it will take to assess the debt incurred by local authorities from public private partnerships.
Answered by Derek Mackay (29/01/2020):The Scottish Government together with the Scottish Futures Trust have been encouraging procuring authorities to assess whether they can realise savings from existing public private partnership contracts. This includes re-scoping services and optimising risk transfer.The Scottish Government commission a review each year from public bodies including local authorities, on the latest estimated unitary payment charges relating to their public private partnerships contracts. The repayment of these charges and the management of the contracts however, is the responsibility of those public bodies that awarded the contracts.
Question S5W-27052: Neil Findlay, Lothian, Scottish Labour, Date Lodged: 21/01/2020 To ask the Scottish Government what plans it has to assess alternatives to public private partnerships to finance its future infrastructure projects.
Answered by Derek Mackay (29/01/2020):I refer the member to the Scottish Futures Trust’s published ‘Options Appraisal’, which can be found at www.scottishfuturestrust.org.uk
By referring to the ‘Options Appraisal’ Derek Mackay is bringing attention to an interesting issue which is “We’re not looking at anything other than MIM models right now.” At Jubilee Scotland we believe this is a huge mistake, Scotland deserves a model that has the public’s interest at heart. We have come up with a model that we believe gives power to both the people and the public sector in a Local-National Partnership. It’s true that the country is limited by it’s powers as a devolved state but by only having 20% of a stake in it’s infrastructure, is that really enough to stop private investments from taking advantage of the contract? It feels like this model is more of the same, only with big promises tagged on that say “Forget last time, this one will work for sure.” Watch our video on an alternative option to this kind of model here.
So it seems to be the case that the government are moving ahead with the recommendations of the SFT report that an MIM model is the way forward for building infrastructure. But the differences between this model and the previous model is minimal and if a recent report has shown to be true, they have not been transparent about the cost that will soon be tranferred to the taxpayer. Hopefully, with Audit’s Scotland’s report on the hidden costs of NPD and with our own report coming out in complete opposition to private financing models, people will be able to keep in mind that this is an important issue that demands more than just a flippant and vague response from the government. Because this doesn’t just affect us right now, this is going to affect many Scottish people for their entire lives.