28 March 2008
Leading public finance officials have told the Scottish government that it has failed to provide any information showing that its plans to replace Private Finance Initiative funding will be less costly or provide value for money.
CIPFA in Scotland's response to the government consultation paper on a Scottish Futures Trust says the document lacks details, contains significant gaps and does not provide enough information for a proper judgement to be made. 'There is insufficient detail on both the costs and benefits of the SFT to allow us to judge whether this procurement methodology represents value for money,' CIPFA states.
The response, prepared jointly by CIPFA in Scotland and the institute's local government directors of finance section, follows the publication last year of plans for the setting up of an SFT, a limited company to channel public and private capital into major public projects using non-profit distributing principles.
Angela Scott, the head of CIPFA in Scotland, said: 'The proposals for what is a significant reform of capital investment warrant far more development than that included in the consultation document and the strong recommendation of CIPFA is that further consultation is undertaken once the Scottish government is able to be clearer on its proposals.'
The consultation paper argues that the scheme will provide a better deal for taxpayers than that currently being provided by the PFI.
However, the CIPFA in Scotland response says the institute fails to see how an SFT that is positioned in the private sector could provide additional funding that is cheaper. 'On the narrow aspect of “cost of borrowing”, our view is that the SFT will cost more. We fail to see how, as claimed… the SFT will provide opportunities for securing cheaper funding costs.'
It also warns that there are costs and risks associated with the issuing of bonds – one of the methods proposed for funding public projects – and says more information is needed on how this would be managed by the SFT.
According to CIPFA, it is not clear what benefits the SFT would offer that are not otherwise capable of being achieved through a combination of the prudential code, effective management and good procurement practices.
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