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The truths they don't want you to read....

Tuesday, May 20, 2008

Scottish Futures Trust

An enigma, wrapped in a riddle, surrounded in mystery.

Today's announcement has gone some way to explain just how this might work in the future and how the change is better from the existing system.

Here's a diagram from the announcement, to make it all clear.

Clear?

Can you spot all the differences from PFI?

And how it is going to be better/cheaper/more efficient?

Me neither.

It appears to place a new public body (another quango) between the financiers and the ultimate customers, presumably intended to cap the return to the lenders.

However, when you cut through the consultant bullshit and vague statements (sample: Coordinate and promote the development of tax incremental financing and asset backed vehicle models in the regeneration sector), you get a list of aspirations that no-one seems to fully understand.

"Tax incremental financing", for instance, uses increased income from capital investment to pay for the debt to build the capital investment. In other words, the same as "Spend to Save", "Modernising Government Fund" and, er, PFI.

And look at stage 2 of the plan. At that point the public sector moves out and private partners move in, shaking their "conduits" at everyone; speaking fluent consultant; making a large profit from the public sector; and, being the sole approved source for financing new projects.

Just like Partnerships UK, actually, set up by Thatcher to drive PFI forward and now doing a roaring and profitable trade under Labour. As in that case, financiers will try to get on board at stage 1, to be the ones able to feed their snouts at stage 2.

This SBC has set out the case for the establishment of a SFT initiative, whose delivery would be supported by the creation of a new SFT organisation.

No it hasn't. Ignore the prolific use of acronyms - which seem to have some sort of enhanced status in the new Government - which are there to obscure, and you find a series of 'maybes' joined together with lots of words frequently in the right order that ultimately betrays a lack of substance.

Principle behind the plan: 10/10
Substance of the report: 2/10
Strategy for taking it forward: 4/10
Overall: A hollow shell

2 comments:

Anonymous said...

thanks Angus, I was going to ask if there was any perceivable difference

cojock said...

Nice blog, Angus.

I've been working with the Nordic Enterprise Trust (a Scottish charity, backed by a bit of Norwegian government funding) to introduce new partnership-based mechanisms for funding assets in public ownership.

We've made submissions to various Committees and Commissions but never get past the Scottish Government gatekeepers.

Our approach is to use the new (well, 2001 actually) UK Limited Liability Partnership ("LLP") as a framework for development and funding of public assets maintained in public ownership.

Our "Community Land Partnerships" and "Community Energy Partnerships" are essentially new forms of leasing arrangements with indefinite duration. ie for as long as you use the finance you pay a "Capital Rental" which may comprise a production share.

You'll see one of these LLP beasties in the DNA molecule you published - City of Glasgow already uses three municipal LLP's, with a couple more on the stocks. But of course these all aim to raise development finance by conventional borrowing.

The radical part of our approach is that we don't utilise borrowing at all.

We simply create "Units" (eg billionths) in affordable "Capital Rental" streams as a new form of what is essentially Public Equity.

Shares, but "...not as we know them, Jim".

We have so engrained in our minds the notion that "Equity" = Shares in a Company, that it comes as a shock to realise that there are alternatives, but then no-one paid by the hour, rather than the outcome, will usually tell you about these simple alternatives.

We had an hour with John Swinney's political adviser, who appeared to appreciate the benefits of such "Community Partnerships".

(a) affordability - because there is no debt repaid, and the index-linking of rentals means the return is way below arbitrary bank rates.

(b) sustainability - because developers are partners not middlemen, and have an interest in the outcome, and hence in high standards of quality and energy efficiency.

(c) political attraction - because no borrowing is involved, there is no need for Treasury permission, and there is no need for legislation either, no bad thing for a minority government.

Whether it's because Messrs Salmond and Swinney's banking background makes non-borrowing solutions unthinkable, or whether it's the Scottish Government telling them it's all too difficult, we don't know.

So we are just getting out there and looking for pilot schemes in the Highlands and Islands in the fields of affordable housing and renewable energy.

Please get in touch if you know of any....!

Chris Cook

cojock@hotmail.com