Scotland: time ‘to get infrastructure right’

3 Nov 14

Expanded tax powers for Holyrood will increase the importance of infrastructure spending in Scotland in the wake of the independence referendum, senior figures in the Scottish Government’s project funding body have said.

Speaking to Public Finance ahead of launching the Scottish Future Trust’s second five-year strategic plan, chief executive Barry White said enhanced devolution would make it more important to get infrastructure right.
 
Scotland’s public finances were likely to depend more directly on the performance of the economy, rather than Westminster’s block grant. The trust, founded to develop new sources of investment, would have a vital role in developing the infrastructure needed to support growth.
 
‘For certain, more of Scotland’s public income will come more directly from Scotland’s economy,’ he said. ‘With that more direct link, getting infrastructure investment both right and efficient just got more important.’
 
Veteran merchant banker Sir Angus Grossart, the trust’s chair, said political change and revived private investment meant ‘opportunities for us to be busy are going to be considerable’.
 
‘How the cake is divided is a matter for politicians, but ... the more access and control that the Scottish Government has to the funding, a very large element of that is clearly going to relate to infrastructure,’ he said. ‘Correspondingly, the private sector is much more in the marketplace for infrastructure funding.
 
‘What will change is that the funding world in which we operate – both in the public sector and in the private sector – is going to be very, very interested in what we’re doing. And what is good is that we’re now well set up for that.’
 
SFT’s strategic plan sets out its achievements so far in nurturing innovation, additionality and collaboration in public project finance. In its first five years it secured an extra £4bn of investment and delivered more than £640m in savings and benefits.
 
Milestones include developing the Non-Profit Distribution (NPD) model as an alternative to the Private Finance Initiative for capital projects; the Scottish Housing Trust, which is delivering 1,300 affordable-rent homes; and the Growth Accelerator Model for bringing forward urban development projects.
 
Grossart said: ‘We’re constantly improving, but a lot of time and effort has been invested in building up our team, our intellectual resource and our credibility with all the partners we deal with.’ He believes that SFT has overcome the political suspicions that surrounded its creation by SNP ministers in 2008. ‘I believe there is now a general acknowledgement of the merits of a body like SFT – we’re not seen as a political instrument,’ he said.
 
However, White stressed the need to keep improving. ‘The belief you can develop the model and then roll it out over five or 10 years – it doesn’t work that way any more.
 
‘We’ve simplified the structure of NPD, made it more efficient, made it much more flexible for the public sector. We’ve got better value finance – the European Investment Bank is investing very heavily in these projects. We’ve got pension fund money coming in, we’ve got insurance money. We’re very ecumenical about where we take our money from, but what we’ve done is construct a pipeline that’s very attractive to investors.’
 
A key theme in the plan is the digital strategy. The trust is working with Strathclyde University and Ofcom to extend affordable broadband to more of the population, and wants Scotland to have world-leading digital infrastructure by 2020. ‘It’s the most important piece of economic infrastructure for Scotland, full stop,’ said White. ‘Getting that right is going to be critically important.’
  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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