Scottish Futures Trust

I decided that of all the things that I would do this weekend, looking into the detail of the Scottish Futures Trust vs PFI/PPP debate would be one of them.

Well, what with a beautifully sunny Saturday and Sunday to also contend with, it's no wonder that it's late Sunday night that I get around to looking into the fascinating topic of public sector finance. I should say, of all the texts I read, I found this page particularly useful.

Thankfully, it didn't take long for me to work out which of the two options are better. The Scottish Futures Trust possesses significantly better value and less complexity compared to PFI.

I know there's been a lot of fuss over SFT recently but that seems to have focussed more on a lack of detail rather than anything being inherently wrong with the plan. Given that SFT will last for decades and we have to stick with PFI in the short-term future anyway, I think it's best that time is taken to do the planning properly rather than quickly so of course there are gaps given the SNP have only been in the door a year. But as a general theory, I personally feel SFT is best by far.


Scottish Futures Trust involves the Scottish public investing their savings in guaranteed Scottish bonds held by the Government and a rate of interest (expected to be 4%) set tax-free. This is basically the equivalent of an ISA with RBS or HBOS. The money raised will then be used to fund public sector building.

PFI involves the private sector building schools and hospitals in the short term with capital and interest payments due to them from the public purse over x number of years. This is the equivalent of buying a new car and paying it off, with interest, over the next 5 years or so in installments but on a much, much grander scale. It's safe to say interest has been, and will be, a lot higher than 4%.


Let's bullet point here to drive home just how much better SFT is:

• The wastage of PFI contracts is estimated to be 10% of the total PFI cost. This is the equivalent to £2.1bn pounds. In other words, with SFT, we would have an extra £2.1bn to build schools and hospitals. Let me be clear. Of all the PFI contracts that have been signed off, £2.1bn goes from the public sector/taxpayer to the private sector EXCLUDING builders/suppliers costs etc.


• The incentive to save within the Scottish population with this tax-free scheme would help in reducing inflationary pressures and ensure a more stable Scottish economy.


• With PFI, the risks are held by the public sector with the rewards mostly held by the private sector. With SFT, both risk and reward is held by the taxpayer.


• £3.5bn pounds is paid to the private sector to insure against any risks. With SFT, no such insurance is required.


• SFT could match PFI's advantage of immediate finance if the public understood the rationale and backed it with their savings. The unmistakable socialist aspect of SFT would consequently create a stronger sense of community if we were all in it together. PFI is business-friendly and not a socialist option.

The main opposition I have seen to the Scottish Futures Trust involves two main areas:

(1) Is Scotland allowed to raise finance in this way?

(2) Would current/looming PFI contracts be scrapped?

For (1), quite simply, the Government should be able to do what it likes. It's the Government for goodness sake. The only impediment of course is Westminster and the only justification they would have for blocking the Scottish Government's plans would be partisan and based on petty politics. Ultimately, they would be unable to get away with it.

For (2). Of course it would be nice to save some of that £2.1bn but this is why the SNP has accepted that some PFI will have to continue in the short term. I don't think anyone is proposing that schools are left half-built for a few years while SFT gets sorted out.

We can grudgingly absorb the costs of PFI in the short term and move towards SFT in the medium to long term.

This moves us fairly quickly to a position which is best value for the taxpayer while also providing the best facilities for the education and health services in the short, medium and long-term.

Piece of cake really.