Audit Scotland must Investigate

Wednesday July 29th 2015

Audit Scotland must urgently investigate the SNP government’s mismanagement of capital project funding in Scotland.

An investigation by the Guardian has uncovered proposals from the Scottish Futures Trust (SFT) to increase private sector involvement in capital projects, which could lead to spiralling costs and billions of pounds worth of extra debt for future generations.

Before the SNP took office Nicola Sturgeon claimed the SNP’s changes would save the taxpayer money and see an increase in public sector involvement.

“In government the SNP will act to end the crippling costs of PFI borrowing.

“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 part and parcel of PFI.”

But in fact, the complete opposite has happened.

The SNP Government has proposed a new funding model for ‘hub’ capital projects, which involves greater private control, in order to be able to classify these as “off balance sheet”. Capital projects include the building of schools, hospitals and roads.

Public sector involvement in these ‘hub’ projects has been reduced to just a 20% stake, with private firms making up 60% and the remaining 20% in the hands of private charities. Changes have also been made to the model used for other key capital projects like the Aberdeen Western Peripheral Route and the Dumfries and Galloway Infirmary.

The Guardian’s investigation reports that the first 24 projects in the SFT’s ‘hub’ programme will cost the taxpayer £10 billion in borrowing and running costs between now and 2048.

Our Shadow Finance Secretary Jackie Baillie has written to the Auditor General for Scotland, Caroline Gardiner, calling for an urgent investigation. Jackie has also tabled a series of Parliamentary questions to the Scottish Government.

The SNP’s plans could cost Scottish taxpayers £10 billion. Scotland’s families deserve to know what might happen to the funding for building of vital public services – their schools, hospitals and roads.

Here you can read the letter Jackie Baillie has written to the Auditor General for Scotland:

Dear Caroline

I write to request that Audit Scotland carry out an urgent investigation into the reclassification of capital projects undertaken by the Scottish Futures Trust (SFT) and the overall impact on the level of indebtedness of public sector organisations.

You will be aware that concerns were raised by Eurostat and the Office for National Statistics (ONS) about the classification of capital projects and whether they were to be considered on or off balance sheet. This affected a number of capital projects taken forward by the Scottish Futures Trust, principally those funded using the Non-Profit Distributing (NPD) model, a form of Private Public Partnership. In essence these projects have to demonstrate significant levels of private sector involvement to be considered off balance sheet.

It is unclear whether advice was sought by the Scottish Government in 2007/08 as to the classification of their preferred funding model and what subsequent advice has been commissioned.

The practical consequence is that essential capital projects have been delayed, only some of which were reported to the Scottish Parliament, whilst SFT sought a new model of funding.

I understand that the proposed new model of funding deliberately diminishes the public sector stake in projects and requires all capital contributions to be made by the private sector with a consequent rise in the revenue repayments made by the public sector. The increasing and direct influence of the private sector is clearly required for the Scottish Government to be able to continue to count projects as being off balance sheet.

I have enclosed a copy of the proposed new delivery model for your information.

There are a number of concerns that arise from this:

  • What advice was sought and received by the Scottish Government about the classification of capital projects from the start of the programme?
  • What has been the extent and the cost of the delay?
  • What will the additional cost be for the public sector of adopting the new model that increases the share and influence of the private sector?
  • What is the level of indebtedness that will be faced by the public sector overall? This is perhaps the most significant issue of all, given your recent report about the levels of local government indebtedness. I am concerned that we are mortgaging the future of the public sector without considering how all of this will be paid for by future generations.

Whilst I acknowledge the value of the private sector as a delivery partner, the change to the funding model for capital projects is driven by the Scottish Government’s desire to have projects classified as off the books. There does not appear to have been any assessment of cost or whether this represents value for money.

I strongly believe the public interest would be well served if Audit Scotland agreed to conduct an investigation.

Yours sincerely

Jackie Baillie
Shadow Cabinet Secretary for Finance, Constitution & Economy

Speaking about today’s revelations Shadow Finance Secretary Jackie Baillie said:

“The utter hypocrisy of the SNP has been exposed. Having scrapped the old system because they claimed it handed too much to the private sector the SNP have replaced it with something that means even more money and influence is given to the private sector.

“The SNP Government tell anybody who will listen that only they can protect our public services from the hands of private companies yet here we find they are handing over an increasing share of our public estate to the private sector. Yet again with the SNP they say one thing in public and another in private.

“Audit Scotland must urgently investigate just what has gone wrong on the SNP Government’s watch. Of course there should be private sector involvement so we can build schools and hospitals, but with the SNP’s approach future generations will be saddled with crippling debts. Under the SNP Scotland will be facing Wonga levels of debt for years to come.”

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