Scotland prepares to ditch PPPs for bonds

2 Aug 07
First Minister Alex Salmond appears set for a clash with Whitehall over the Scottish National Party's plans to issue bonds as an alternative to public-private partnerships.

03 August 2007

First Minister Alex Salmond appears set for a clash with Whitehall over the Scottish National Party's plans to issue bonds as an alternative to public-private partnerships.

A source close to Salmond said this week that the SNP would continue to pursue the use of bonds to finance public investment, despite the Treasury's insistence that the Executive has no powers to borrow. A Treasury spokesman said there were no plans to change its position.

Salmond took the chance to discuss bonds during a meeting with London Mayor Ken Livingstone. Livingstone had tried to use bonds to fund improvements to the London Underground but was blocked by Gordon Brown when he was chancellor.

'London has considerable experience of looking at bond investments. We are looking at a similar mechanism to boost investment in Scotland,' Salmond said.

The SNP government is opposed to the Private Finance Initiative and other PPP schemes, describing these in its election manifesto this year as 'costly and flawed'.

It plans to overcome the problem of the Executive's lack of borrowing powers by setting up a not-for-profit trust, the Scottish Futures Trust. The SNP argues this would be a more attractive source of funding than the PFI or PPPs for both national and local projects.

Current schemes would not be affected and it would be up to councils and other public bodies to choose between using the PFI/PPPs or bonds administered by the trust.

The source in Salmond's department said: 'As stated in the manifesto, we would look to the setting up of a Scottish Futures Trust. It would be an arm's-length body and there would be no need for ministers to borrow.'

Salmond has announced that the Scottish government intends to publish its plans for a referendum on independence within the next two weeks.

Opposition MSPs have warned that it will be a waste of civil servants' time and taxpayers' money as the party does not have an overall majority in the Parliament.

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