Scottish Government seeks cut-price alternative to PFI
New homes are among the Scottish Government's hoped-for fruits from a proposed new funding mechanism to attract more private money into public infrastructure projects.
The government has identified housing as an 'early focus' area for its proposed Scottish Futures Trust model, which it describes as a cheaper alternative to the private finance initiative.
Under the proposal, the government would set up a company to give public sector providers, such as local authorities and housing associations, access to private funding and expertise.
Scottish finance secretary John Swinney claimed that the private finance initiative was too expensive and produced excessive profits for the private sector. He argued that his alternative regime would direct profits back into communities, rather than bulging the coffers of private companies. The model would also bring other benefits to the public sector, including cut-priced borrowing, he added.
Housing providers said more details were needed on how the trust model could help them meet the Scottish Government's vision of a renaissance in council house building, set out in its recent housing green paper. The paper said a radical change was needed in the funding and delivery of new social housing, to avoid placing an 'unreasonable burden' on public expenditure.
Andrew Field, deputy chief executive of the Scottish Federation of Housing Associations, said the model could be significant for members. 'Housing association grant already provides good value for money and levers in significant amounts of private money, so we await the details of this with interest,' he said.
Jim Strang, chief executive of Parkhead Housing Association, said the model would be attractive if it helped it access low-cost loans. 'We would fail to see how this would benefit us at all, unless it will give us access to cheaper loans,' he said.
Dave Watson, head of policy at Unison in Scotland, condemned the vision as 'PFI with a bit of window dressing'. He argued that it would not be feasible for housing in Scotland, which had made very little use of PFI to date.
'PFI costs between one quarter and one third more than traditional finance,' he said. 'The reason why it has been possible for education and health is because there has been subsidy available.
'The government is not going to subsidise PFI and certainly not for housing. If you're a housing director, you'll ask yourself: "Am I going to saddle myself with a huge amount of debt for a PFI scheme, when I can fund housing under prudential borrowing?"'