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New finance strategy to replace 'flawed' PFI unveiled

A new scheme that could replace “flawed” private finance initiatives has today been unveiled by think tank Reform Scotland.

The body said its new strategy, dubbed Scottish Capital Partnerships, would redefine the role of the Scottish Futures Trust and put momentum back into public sector infrastructure.

Under the plans, set out today in a report entitled Power to Build, major public projects would continue to be financed jointly by the public and private sectors.

However the bulk of the money needed to finance the schemes would come from public borrowing at government interest rates rather than commercial rates, which PFI projects currently use.

Reform said independent management companies would also be invited to submit bids to build and run projects, as well as put up the equity risk capital.

Mr Thomson said: “This is usually around 10 per cent of the total capital required and it will immediately act as an incentive to management companies to ensure projects are delivered on time, within budget and run well for the life of the asset.

“Management companies will bring the skills, innovation and efficiencies which until now has often been lacking in public sector infrastructure projects.

“This is why so many of them end up behind schedule and grossly over budget.”

The think tank – which suggested the SFT’s role should simply be to act as an independent facilitator, adjudicator and regulator of projects – said the government would be able to reduce costs if it was given increased borrowing powers, as recommended by the recent Calman Commission.

It could otherwise establish a “Scottish infrastructure bank” from which money for projects could be borrowed at local level on behalf of the government.

SFT chief executive Barry White welcomed the think tank’s ideas, but said: “From the main thrust of what Reform Scotland proposes, it appear to rely on powers that don’t exist at the moment in terms of borrowing powers for the Scottish Government.

“We have to focus on what’s deliverable today.”

A Scottish Government spokesman said the SFT is this year supporting 13 specific projects, including improving the schools estate.