News: Challenges to PFI in Scotland and Northern Ireland

Whilst outright opposition to the Private Finance Initiative and Public Private Partnerships is fairly muted amongst the Labour hierarchy in England and Wales, left of centre groupings in Scotland and Northern Ireland are more vocal in their criticism.

The Scottish National Party has proposed a Scottish Trust for Public Investment (STPI) to address the central criticism that PFI/PPP is an expensive way to procure and manage public infrastructure.

Andrew Wilson, the SNP's shadow minister of finance in the Scottish parliament, says that PFI finance is expensive when compared with the interest rates that the government pays on bonds.
The STPI would invest in the country's infrastructure and hold the assets in trust for Scotland. It would still operate outside the public sector, so all borrowing would be off the public sector balance sheet.

The essential difference is that the STPI would compete against other capital providers, but on a not-for-profit basis. Its funding could come from bond issues; partnership funding from the European Investment Bank; term loans from banks; and income from accumulated reserves.

The trick to reducing the cost of capital would be for the government to secure all or part of STPI's borrowing through 'contingent liability' – essentially reserve funds. The SNP believes the Scottish parliament could approve contingent liabilities without seeking Treasury approval.

In Northern Ireland, the left wing umbrella organisation, Federation of Labour Groups, has called for a straightforward return to public financing. Its formal submission to the Northern Ireland Executive, entitled 'Wasting the People's Money', questions the logic of PFI and PPI as the best means of funding public works, getting them completed on time and addressing social need.

According to a recent report in the Belfast Telegraph the submission described the schemes as 'privatisation by other means' and said their use (in NI) has accelerated under the Labour Government: "The Northern Ireland Executive has a chance to rectify matters. It can act as a guarantor for the people's money and return to proper public financing of public capital and infrastructure schemes."

Richard Byatt

Click here to download details of the SNP's proposal (112 k)

News on 1 February 2001
Challenges to PFI in Scotland and Northern Ireland
Whilst outright opposition to the Private Finance Initiative and Public Private Partnerships is fairly muted amongst the Labour hierarchy in England and Wales, left of centre groupings in Scotland and Northern Ireland are more vocal in their criticism. The Scottish National Party has proposed a Scottish Trust for Public Investment (STPI) to address the central criticism that PFI/PPP is an expensive way to procure and manage public infrastructure. Andrew Wilson, the SNP's shadow minister of finance in the Scottish parliament, says that PFI finance is expensive when compared with the interest rates that the government pays on bonds. The STPI would invest in the country's infrastructure and hold the assets in trust for Scotland. It would still operate outside the public sector, so all borrowing would be off the public sector balance sheet. The essential difference is that the STPI would compete against other capital providers, but on a not-for-profit basis. Its funding could come from bond issues; partnership funding from the European Investment Bank; term loans from banks; and income from accumulated reserves. The trick to reducing the cost of capital would be for the government to secure all or part of STPI's borrowing through 'contingent liability' – essentially reserve funds. The SNP believes the Scottish parliament could approve contingent liabilities without seeking Treasury approval. In Northern Ireland, the left wing umbrella organisation, Federation of Labour Groups, has called for a straightforward return to public financing. Its formal submission to the Northern Ireland Executive, entitled 'Wasting the People's Money', questions the logic of PFI and PPI as the best means of funding public works, getting them completed on time and addressing social need. According to a recent report in the Belfast Telegraph the submission described the schemes as 'privatisation by other means' and said their use (in NI) has accelerated under the Labour Government: "The Northern Ireland Executive has a chance to rectify matters. It can act as a guarantor for the people's money and return to proper public financing of public capital and infrastructure schemes." Richard Byatt Click here to download details of the SNP's proposal (112 k)