The Scottish Futures Trust

The Scottish Futures Trust is an independent company established by the last government to reinvigorate capital spending and procurement in Scotland. Scottish Policy Now recently spoke with Barry White, the Chief Executive of SFT ………

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SPN: When and why was the SFT set up?

Barry White: “The Scottish Futures Trust (SFT) was established by the Scottish Government in 2008 with the aim of increasing the efficiency and effectiveness of investment in public sector infrastructure across Scotland. Importantly, SFT also looks to source and develop innovative funding models to attract additional finance to support the construction of public sector facilities and buildings now, rather than have them wait for many years to be built.

We work in partnership with the public and private sectors to deliver the best possible value where money is spent on public buildings and infrastructure. Improving value-for-money is very much at the heart of SFT and this is looked at in a wide sense, including the delivery of high-quality sustainable design and helping protect jobs in the construction sector in Scotland is just as important.”

SPN: What’s the role of SFT

Barry White: “SFT is a strong commercial task force supporting the delivery of vital infrastructure, including new hospitals and motorways, schools and community facilities as well as new homes and waste treatment plants. In addition, we have recently been given a new remit of improving asset management across the whole of the Scottish public sector, which will deliver savings of over £500m in the next five years.

We work in partnership with the public and private sectors to deliver the best possible value where money is spent on public buildings and infrastructure.

Helping Scotland achieve the very best value for money and squeeze the most out of every pound spent on public infrastructure, has led us to focus on efficiency and we are working with every single Scottish council as well as many other public sector bodies to concentrate all our minds on what is really needed, rather than just what might be wanted.

Such has been the success of our work in this area that, for example, we have managed to increase the number of schools to be built through the Scotland’s Schools for the Future programme from 55 to 67, all from within the existing £1.25bn budget – in other words, an additional 12 brand new schools are to be built which wouldn’t have happened otherwise without our intervention.”

SPN: How is this helping economic recovery in Scotland ?

Barry White: “With the rapid decline in capital budgets across the UK, it is clear that delivering ‘additionality’ of investment is important for economic recovery and to help sustain jobs in the construction and related sectors. We are leading a £3bn programme of additional infrastructure investment over and above traditional capital budgets, one of the largest of its kind across Europe, which is being delivered through three very unique initiatives which SFT looks after – Non-Profit Distributing (NPD), Tax Incremental Financing (TIF) and the National Housing Trust (NHT).”

The NPD model

“Quite unique to Scotland is the NPD programme which is a form of project finance that limits the return to the private sector, appropriately reflecting the risks undertaken. This approach, taken together with a simplification of contract terms, delivers improved value-for-money. Currently, Scotland has over £400m of NPD contracts in procurement with that figure set to rise to £1.2bn over the coming year. And over the next couple of years this will increase further to around £2.5bn, comprising c.£1 billion on roads (which will cover the M8 upgrade and the Aberdeen Western Peripheral Route), £750 million on health (including Edinburgh’s Royal Hospital for Sick Children) and £750m on education projects (including City of Glasgow College).

The first project, Aberdeen Health Village has now started on site with many other projects in procurement. With smaller capital budgets available, the advantage of having NPD is that projects can be progressed now instead of being deferred for a number of years, thereby helping the economy.”

With the rapid decline in capital budgets across the UK, it is clear that delivering ‘additionality’ of investment is important for economic recovery and to help sustain jobs in the construction and related sectors

Tax Incremental Finance

“Another innovative way Scotland is keeping ahead of the game is through the introduction of the TIF programme. Based on an American model, we are ahead of the rest of the UK in utilising TIF to help support long-term economic growth. Through TIF we seek to indentify opportunities where a little public sector investment in infrastructure can help unlock a much greater investment from the private sector.

Following the approval in 2010 of three TIF pilot projects last year on behalf of the Scottish Government, we invited local authorities to apply for the next phase of TIF. Such was the level of interest that 16 applications were received for additional pilot projects, with the Scottish Government approving applications from Argyll & Bute, Aberdeen, Falkirk and Fife Councils to progress to full Business Case.

At a time when traditional sources of funding are under immense pressure, the appeal of TIF to attract extra funds is such that for every £1 invested, an additional £5 or more can be released from the private sector. With the public sector set to invest approximately £500m into seven TIF pilot projects across Scotland, it is projected that this will leverage an additional £2.5bn of long-term private sector investment in Scotland.”

The National Housing Trust

“From its new beginning little over two years ago, we have driven the NHT initiative forward and have in the process, helped protect hundreds of construction jobs across Scotland. NHT uses an innovative financing structure with no government subsidy and is designed to increase the supply of affordable homes for rent in areas where they are needed most. Under NHT, developers are appointed to build a specified number of affordable homes on land they already own.

Since the launch, tenants have moved into the first completed NHT development and we have signed contracts with developers to build over 600 homes across 12 sites. Building on the success of the past 12 months, procurement of phase 2 of the initiative was launched in late 2011 and the coming year should see the number of NHT homes to be built increase to over 1,000 – homes that would not otherwise have been built.”

 

SPN: What benefits do the NPD/TIF/NHT programmes bring to the economy?

Barry White: “Crucially, construction can happen sooner, delivering vital public infrastructure which otherwise would have to wait for years to be built. Vital jobs in the construction sector are protected and essential investment is made which in turn helps support social and economic regeneration.”

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