'More bang for people's bucks'

23rd May 2008 at 01:00
The credit crunch will boost investment in Scotland's schools, claims Alex Salmond. Henry Hepburn reports
The credit crunch will boost investment in Scotland's schools, claims Alex Salmond. Henry Hepburn reports

Anxiety about the global economy will drive the private sector towards "safe and secure" schemes such as the Scottish Government's much-vaunted Scottish Futures Trust, says the First Minister.

"I think, perversely, the credit crunch makes aspects of this extremely attractive as investment opportunities," says Alex Salmond.

Lack of confidence in asset value was at the heart of uncertainty in the financial system, he argued. "Therefore, if you are offering infrastructure investment opportunities through these mechanisms which have a certainty, they become even more attractive investments than they would be in normal times."

Mr Salmond and Finance Secretary John Swinney were announcing the business case for the trust, which will be formed in the summer, at Heriot-Watt University in Edinburgh on Tuesday. Its purpose is to reduce the "extreme profits" generated by public-private partnerships (PPP) and it would, they predicted, make annual savings of pound;100-150 million, with the first school or hospital under the new scheme being signed off by 2009-10.

"In terms of the leveraging of private capital," Mr Swinney said, "we are satisfied that there is market appetite to invest because of the reliability of investments that we're undertaking. It's not as if a finance minister is going to say, 'I don't think we'll spend any money on schools any more.'"

The Government envisaged local authorities joining forces to raise bonds on the open market, overseen by the trust, they said. Under the terms of the Scotland Act, the Government could not raise its own income through bonds.

"The Scottish Futures Trust company will support public bodies in delivering more cost-effective infrastructure for taxpayers," Mr Swinney said. "It means we will get more for our money - more bang for the people's bucks."

While political opponents dismissed the trust as PPP under another name, the education sector expressed cautious optimism about its prospects.

Moray Council PPP project manager Andy Oliver agreed that the current financial climate could make it an opportune time to set up the trust. "It's certainly the case that, in general terms, these infrastructure investment projects are fairly solid and I think that makes them attractive," he said. "Post-credit crunch, anything that's safer becomes more attractive than it might be otherwise tend to be."

John Stodter, general secretary of the Association of Directors of Education in Scotland, also expressed cautious optimism: "We welcome the longer-term approach to investment and infrastructure."

He believes the scheme is "potentially quite different from standard PPP", with no shares available and profits being put into a trust for the public good.

"However, it's still not clear to me how the borrowing is going to be any cheaper," he stressed.

Andy Kerr, Labour local government spokesman, said: "This proposal will not deliver. It is full of wishful thinking and no extra cash, and to describe it as half-baked would be a compliment.

"The only schools being opened by Alex Salmond are Labour-delivered. That is a cheek, but the fact that he is happy to open PPP schools like St Matthews Academy in Saltcoats, while publicly criticising private finance, is simply hypocritical."

Conservative finance spokesman Derek Brownlee said: "However it is dressed up, the key principle of PFIPPP is maintained - leveraging of private investment into public infrastructure."

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