Magazine article Public Finance

Scottish Government May Drop Bond Plan for Non-Profit PPPs

Magazine article Public Finance

Scottish Government May Drop Bond Plan for Non-Profit PPPs

Article excerpt

The Scottish government is examining an alternative method of funding public sector projects such as schools and hospitals after being told by the Treasury that it has no powers to replace public-private partnerships with a bonds issue scheme.

The Scottish National Party, before it took power last May, aimed to use a tax-exempt bonds issue as the central feature of its Scottish Futures Trust, which it promoted as a more efficient funding method than the costly and flawed' PFI/PPP schemes.

However, a Scottish government group of officials and advisers established to work on the design of the planned SFT is now concentrating on the development of what is known as the non-profit distributing model of PPP. This system has already been successfully piloted in one Scottish council.

The plan to introduce US-style bonds, which would be tax exempt for investors, was first mooted in an SNP consultation document in 2006, when the party was in opposition. It claimed that a bond issue paying a 4% coupon could result in savings of £116m being made from PPP projects being planned at that time. …

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