ALEX Salmond's big idea to boost public infrastructure projects with cheaper funding under the SNP rapidly turned out to be a squib, official papers have revealed.
Then finance secretary John Swinney told the First Minister and his Cabinet the financial advantage of a new Scottish Futures Trust (SFT) "was not likely to be as great as had been previously thought", and the scope for savings and extra investment was "modest".
Mr Swinney also admitted that plans to use oil revenues and let individuals invest in public infrastructure with tax breaks were beyond Holyrood's powers, and there was a fundamental "tension" in the SFT concept that made it difficult to put into practice.
It meant the Scottish Government had yet to establish "precisely what the SFT would do" and how much money it would save, he told the Scottish Cabinet in late 2007. The problems feature in archives released by the National Records of Scotland this week.
The First Minister had promised that a "not-for-profit Scottish Futures Trust" would replace the "costly and flawed PFI/PPP" private financing schemes created by Labour and the Tories to build roads, hospitals and schools. The SNP manifesto said it would "provide lower-cost borrowing opportunities" and be a "more attractive source of funding for both national and local projects which will effectively crowd out PFI/PPP over time".
However, a paper presented to the Scottish Cabinet in October 2007 by Mr Swinney was more downbeat about its prospects given the "reality of the major restraints" it faced.
Based on the findings of a Government working group, he said he now saw SFT as moving "in gradual stages to the realisation of our objectives, rather than a big bang".
He said this was influenced by the Scottish Government's lack of borrowing powers, "early indications of HM Treasury resistance" to more powers, and the "significant constraint" posed by changes to international rules on Government bookkeeping.
"For vires reasons [Holyrood's powers], tax breaks to encourage individual investment and the use of oil revenues could not be introduced without new Westminster legislation. This appears unlikely for the foreseeable future," he added.
Despite describing the SFT as a "major plank" of Government policy for funding and delivery of Scotland's infrastructure, he admitted "further work is required to establish more precisely: 1) what SFT would do; and 2) the impact it would have on reducing funding costs".
He said one of the difficulties was "a tension between securing cheaper funding costs and realising additionality", or extra benefits, from the SFT.
"To secure the best borrowing rates, SFT should have clear government backing, whereas to secure additionality it would need to be in the private sector and demonstrate it was independent of the public sector," he wrote.
In addition, as the spread of borrowing rates for infrastructure available, including PFI, was only around 1 per cent (ranging from UK Government gilts of around 5% interest and bank loans of around 6%), "the scope for savings and additional investment through SFT is modest".
In the Cabinet discussion which followed, SNP ministers noted the "emerging shape" of the SFT and "likely financial implications of the proposals".
It would be another year before the SFT was launched - acting as a centre of expertise on how to get value for money in infrastructure projects, rather than as a funding pot.
Last year, it reported it was involved in £1 billion of public sector projects and claimed £250m of this was made possible through its involvement. It also said it helped to "unlock" £2.4bn of private infrastructure projects which were on site in 2021/22. In 2020, the spending watchdog Audit Scotland said SFT's failure to itemise its "reported benefits" to individual projects meant public sector bodies "often had difficulty understanding how the SFT's savings figures relate to the projects they are delivering".
The FM had promised a not-forprofit Scottish Futures Trust would replace 'costly and flawed PFI/PPP' financing
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