This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.theguardian.com/uk-news/2015/jul/31/scotlands-private-finance-infrastructure-programme-turmoil-ons-ruling
The article has changed 3 times. There is an RSS feed of changes available.
| Version 0 | Version 1 |
|---|---|
| Scotland's private finance infrastructure programme in turmoil after ONS ruling | Scotland's private finance infrastructure programme in turmoil after ONS ruling |
| (about 2 hours later) | |
| The Scottish government’s flagship programme to have billions of pounds poured into privately financed roads, schools, colleges and hospitals has suffered a major setback after running foul of EU borrowing rules. | The Scottish government’s flagship programme to have billions of pounds poured into privately financed roads, schools, colleges and hospitals has suffered a major setback after running foul of EU borrowing rules. |
| John Swinney, the Scottish finance secretary, has been forced to launch a major review of his government’s entire private financing strategy after the Office for National Statistics stated on Friday that the biggest scheme – a £1.5bn bypass around Aberdeen – had to be counted as a public asset. | John Swinney, the Scottish finance secretary, has been forced to launch a major review of his government’s entire private financing strategy after the Office for National Statistics stated on Friday that the biggest scheme – a £1.5bn bypass around Aberdeen – had to be counted as a public asset. |
| The Guardian revealed earlier this week that at least 24 prestigious projects in Scotland, which would have lifetime borrowing and maintenance costs of up to £10bn over the next 35 years, were being restructured and delayed as a result of the new tests imposed on privately financed projects by the EU statistics agency, Eurostat. | The Guardian revealed earlier this week that at least 24 prestigious projects in Scotland, which would have lifetime borrowing and maintenance costs of up to £10bn over the next 35 years, were being restructured and delayed as a result of the new tests imposed on privately financed projects by the EU statistics agency, Eurostat. |
| Related: Scottish government turning to more private money for public projects | Related: Scottish government turning to more private money for public projects |
| Based on Eurostat’s new tests, the ONS has now ruled that the Aberdeen western peripheral route (AWPR), a 58km (36-mile) dual carriageway around the city currently under construction, is a publicly owned and controlled project and not, as Scottish ministers had argued, a private scheme. | |
| It stated: “Due to the Scottish government’s share in the economic rewards associated with the asset, it was judged to have economic ownership of the AWPR asset. Consequently, the AWPR asset will be recorded on the central government balance sheet in the national accounts and public sector finances for the duration of the tenure period.” | It stated: “Due to the Scottish government’s share in the economic rewards associated with the asset, it was judged to have economic ownership of the AWPR asset. Consequently, the AWPR asset will be recorded on the central government balance sheet in the national accounts and public sector finances for the duration of the tenure period.” |
| The ONS decision is a blow to the Scottish government because it will have a direct impact on its accounts and will limit its ability to borrow more money in future after Eurostat issued strict new rules on private financing. | The ONS decision is a blow to the Scottish government because it will have a direct impact on its accounts and will limit its ability to borrow more money in future after Eurostat issued strict new rules on private financing. |
| Those rules – which raise similar problems for the UK government’s private financing of major infrastructure projects – prevent member states from using private finance and private contracts to avoid putting major public assets on their national accounts, potentially as a backdoor route to cutting government liabilities. | Those rules – which raise similar problems for the UK government’s private financing of major infrastructure projects – prevent member states from using private finance and private contracts to avoid putting major public assets on their national accounts, potentially as a backdoor route to cutting government liabilities. |
| The ONS raised further problems for the Scottish government by also ruling that special purpose vehicle (SPV) companies set up by its private financing agency, the Scottish Futures Trust (SFT), to run and control the projects, were actually publicly controlled and not private assets or companies. | |
| The ONS stated: “Based on the Scottish government’s influence over the collective corporate policy of the SPVs, including effective vetoes over key aspects and the accrual of surpluses to the Scottish government, it was judged that the AWPR SPVs are subject to public sector control. ONS also concluded that the unit does not have the features of a market producer.” | The ONS stated: “Based on the Scottish government’s influence over the collective corporate policy of the SPVs, including effective vetoes over key aspects and the accrual of surpluses to the Scottish government, it was judged that the AWPR SPVs are subject to public sector control. ONS also concluded that the unit does not have the features of a market producer.” |
| Jackie Baillie, Scottish Labour’s shadow finance secretary, said the ONS decision and Swinney’s admission that the SFT’s programme would now need further review strengthened her request earlier this week for an investigation by Audit Scotland, the public spending watchdog. | |
| “This decision is a hammer blow to the SNP’s entire investment strategy. The fact that this flagship project doesn’t meet EU requirements has huge implications for how we finance the building of roads, schools and hospitals,” Baillie said. | |
| “On the one hand John Swinney says this has no impact on the budget or timetable for the Aberdeen bypass project, yet on the other hand he says there will need to be a renegotiation of the contract. It doesn’t add up. It’s clear there will need to be an increased stake for the private sector, despite previous SNP assurances.” | |
| Earlier this year, Swinney disclosed that he needed to borrow £300m from the Treasury and set aside £150m of Scottish government money as an emergency fund while the ONS review of the AWPR was under way, in case ministers needed to fund or bail out the project in a crisis. | Earlier this year, Swinney disclosed that he needed to borrow £300m from the Treasury and set aside £150m of Scottish government money as an emergency fund while the ONS review of the AWPR was under way, in case ministers needed to fund or bail out the project in a crisis. |
| The cost of the AWPR will now be added to the Scottish government’s national accounts, increasing its liabilities, and potentially forcing ministers to keep that £450m in reserve until the road is built. While the AWPR is said to be costing £745m to build, finance and maintain at current prices, a Guardian investigation found that the lifetime borrowing and maintenance costs would in fact hit £1.45bn by 2048. | The cost of the AWPR will now be added to the Scottish government’s national accounts, increasing its liabilities, and potentially forcing ministers to keep that £450m in reserve until the road is built. While the AWPR is said to be costing £745m to build, finance and maintain at current prices, a Guardian investigation found that the lifetime borrowing and maintenance costs would in fact hit £1.45bn by 2048. |
| As the Guardian disclosed, the ONS is also about to launch a similar review into two major public-private partnership (PPP) projects in Scotland: a new children’s hospital in Edinburgh and a general hospital in Dumfries, which could block ministers from treating them as privately controlled. | As the Guardian disclosed, the ONS is also about to launch a similar review into two major public-private partnership (PPP) projects in Scotland: a new children’s hospital in Edinburgh and a general hospital in Dumfries, which could block ministers from treating them as privately controlled. |
| The SFT already had to delay and restructure the contracts for numerous major schemes for new high schools, colleges, community centres and primary schools in a bid to meet the far stricter Eurostat rules before the ONS ruling on the AWPR came out. | The SFT already had to delay and restructure the contracts for numerous major schemes for new high schools, colleges, community centres and primary schools in a bid to meet the far stricter Eurostat rules before the ONS ruling on the AWPR came out. |
| But Swinney told the Scottish parliament on Friday the ONS decision had forced him to launch a fresh and extended review of all the affected projects with the SFT because its ruling on the AWPR raised further questions about the structure of those contracts. He said the SFT would also see if the AWPR contract could be rewritten to allow it to be reclassified as a private scheme. | But Swinney told the Scottish parliament on Friday the ONS decision had forced him to launch a fresh and extended review of all the affected projects with the SFT because its ruling on the AWPR raised further questions about the structure of those contracts. He said the SFT would also see if the AWPR contract could be rewritten to allow it to be reclassified as a private scheme. |
| Swinney insisted there would be no delay to the AWPR or the two hospital projects as a result of the ONS reviews, but he admitted there would be further delays to the schools, colleges and community centres affected. Those schemes are being managed under the SFT’s Hub programme. | Swinney insisted there would be no delay to the AWPR or the two hospital projects as a result of the ONS reviews, but he admitted there would be further delays to the schools, colleges and community centres affected. Those schemes are being managed under the SFT’s Hub programme. |
| “In light of today’s opinion [I] am considering whether further changes are required to the Hub model,” his statement said. “There is likely to be some further impact on the delivery timetable for Hub projects that are in the current pipeline. The Scottish Futures Trust will engage closely with project partners to discuss the implications for them.” | “In light of today’s opinion [I] am considering whether further changes are required to the Hub model,” his statement said. “There is likely to be some further impact on the delivery timetable for Hub projects that are in the current pipeline. The Scottish Futures Trust will engage closely with project partners to discuss the implications for them.” |