ࡱ> Root EntryHP DeskJet 870C Se Fo곉lWordDocument>5CompObj,,U|E<@jSummaryInformation@ (  !134Root EntryHP DeskJet 870C Se Fo곉lWordDocument6CompObj,,U|E<@jSummaryInformation@ (   )"#$%&'(*+,-./0256ܥhc deC">5((((((()))))) ) )@41))")))))),,,,=-.M0q4X4uk0()))))k0$*(())$*$*$*)@()(),@ph(("((((),$*$*The Scottish Futures Trust: What we should be looking out for. One of the major initiatives of the Scottish Government is the proposal for a Scottish Futures Trust: this is intended to address the problems which have become increasingly apparent with the er10Microsoft Word for Windows 95@ @5k@@P\lV՜.+,0HPt|  Dell Computer Corporationl4 >The Scottish Futures Trust: What we should be looking out forhat the formal value for money and affordability tests which PFI schemes have to go through are badly flawed. Will the Futures Trust arrangements involve a radical shake-up of these value for money and affordability tests? If not, there is real risk that the new approach will not outperform PFI. And since much of the problem appears to relate to inadequate central guidance on the public sector side, will the existence of the Futures Trust address these issues? The consultation document was clear that the Futures Trust should be firmly located in the private sector. The rationale for this presumably relates to the rather arcane rules of government accounting. Major capital projects are classified as being either off the governments books or on the books. If they are on the books, the cost of the project counts as government capital expenditure when the scheme is being built: this would mean that the capital expenditure would count against the government departments capital expenditure limits, and also that the government department would have to pay an annual capital charge out of its revenue budget based on the value of the capital asset. One of the major drivers behind PFI was precisely to get round these problems and get as much expenditure as possible off the books. Unfortunately for the government at Westminster, this attempt largely failed: about half of traditional PFI schemes by value currently fall on the books and almost all PFI schemes are likely to come on the books when accounting changes which are currently being developed are implemented. This raises a key question for the Futures Trust: namely, how robust is the rationale for locating the Futures Trust in the private sector, in the face of the prospect that most of the schemes it will handle are likely to be on the books in any event. In certain important respects, other aspects of government fiscal policy bias the choice between PFI and traditional public sector procurement in favour of PFI. This arises with VAT. VAT is not recoverable on new build construction work on hospitals undertaken in the public sector: nor is VAT recoverable on refurbishment: but VAT is recoverable on PFI arrangements. Further, as already noted, the government capital charge rules imply an additional cost if assets are built and owned by the public sector. So a key question is in setting up the Futures Trust, will the Scottish Government raise these points with Whitehall and Westminster? One of the big problems with PFI has been the size and complexity of the schemes. One effect of this has been to reduce competition, and so increase costs. But there has also been a particularly adverse effect on the Scottish economy since many small to medium sized firms have been too small to compete, or have even been bought out by large firms seeking PFI contracts in Scotland. Will the Futures Trust take active steps to unbundle large contracts, so both increasing competition and benefiting the Scottish economy? The consultation document specifically makes the point that no attempt will be made to re-open past PFI deals. Given what is now known about the excess profits in certain past PFI schemes, this appears to be a mistake. It would be perfectly feasible for the Scottish Government to ascertain the projected profitability of all past schemes: and the Scottish Government also has plenty of negotiating muscle should it decide to re-open any past deals. So a key question is, in setting up the Futures Trust, will the Scottish Government carry out a review of all past PFI deals in Scotland, and then renegotiate past deals where appropriate? Finally, there is a real issue with the existing PFI concerning what happens at the end of the initial period of the PFI contract. It is clear that in some existing schemes, even though the public sector may have paid for the asset, perhaps several times over by that point, the PFI consortium may still be left with very valuable residual rights. These are the specific questions against which, we suggest, the final Futures Trust proposals shoul FMicrosoft Word Document MSWordDocWord.Document.69qOh+'0(8 T`    >The Scottish Futures Trust: What we should be looking out forPreferred CustomerNormalPreferred Customܥhc teC"6(())))))\))))) * ) 51**"2*2*2*2*2*2*-!-!-!-=^-.0:5X5u0Y)2*2*2*2*2*0r*))2**Private Finance Initiative (PFI) route of providing the services of schools, hospitals, roads, etc. The consultation period for the Scottish Governments Futures Trust closed on 14th March: and it is now a matter of great interest as we await the details of what the Scottish Government will now propose in the light of the consultation. One of the basic intentions behind the Futures Trust is that capital assets, such as hospitals, roads and schools, should be procured by some form or other of not for profit mechanism. As John Swinney said in his introduction to the consultation document, by doing this we can remove the element of PFI that delivered the most extreme and unwarranted profits. We noted in our article on the private finance initiative, (PFI), in the October 2007 Scots Independent, that the detailed information on PFI schemes which is now emerging does indeed indicate that PFI can be extremely profitable for the PFI contractors. In fact, since the previous article was written, much more information has emerged, through Freedom of Information. This not only confirms the high cost of traditional PFI, (one hospital for the price of two), but also tells us a good deal about what has gone wrong with PFI procedures, which enabled this to happen. It is against the background of this information that we set out in this note some of the key questions against which the final Futures Trust proposals should be judged, when they emerge after the consultation process. The consultation document seemed to envisage that the Trust would operate in one or both of two possible modes: either as a financial intermediary, passing out funds to individual consortia, that is groups of private sector companies, who would themselves be responsible for building and operating the hospitals or schools: or alternatively, acting as a body which would itself build and operate the capital assets. In either mode, however, the bodies involved are expected to operate on a not for profit basis. The first key question which then arises is: will sufficient safeguards be put in to prevent concealed profits being taken out of these bodies by the back door? This question is particularly relevant when the Trust is acting as a funding mechanism for consortia which are separate from the Trust itself: in this case there would be considerable scope for concealed profits to be taken out by, for example, padding the prices at which work was subcontracted out. If detailed information had been collected centrally on the way past PFI schemes were projected to perform, and even better if this information had been published, then it would have become clear long ago that things had been going badly wrong with PFI. So a second key question for the proposed Trust is: will the new arrangements involve the central collection and publication of detailed financial projections and performance indicators for all new schemes? It is also clear from past experience, and from the documentation now being released under Freedom of Information for some PFI schemes, td be judged when they are unveiled. But in general, the overall criterion should surely be - Will the Futures Trust achieve a step change improvement over existing PFI? There is a great danger that the Futures Trust will be hailed as a great success even if all it achieves are marginal improvements over PFI. This should not be the test that is used: one hospital for the price of one and three quarters may be better than one hospital for the price of two, but is not enough. What is required is a demonstrable and radical improvement on PFI. PAGE  PAGE 3  .AWill the Scottish Government ensure that the residual rights attaching to any Futures Trust schemes are in the publics interest? 3 3Jim Cuthbert Margaret Cuthbert March 2008 s.done of s roles be toThe consortia would be Unless adequate safeguards are in place therethese thisIw 3 .Obut tisshould be. instead 3 .A 1 1>)"*"0"1"2"4"5";"<"=">"?"B"C"\""""""""""""""# # # # ######$#;#M#U#h#n#r#s#t#u#v#w#x#y#}#~#############uPaP uDPh^EDocumentSummaryInformation8 $?@S v5@&"'"(")"2"3"4"?"@"A"B"C""""# #u#w####z z z z  z  z z z z z z z z z z z z z z z z z h`%7#K@Normala c"A@"Default Paragraph Font@TOC 1a  @ Footer 9r )@ Page Number9#   f 9c?@M_jkg 4 9z z z z z z z  z z z z z z  ## !!:Preferred Customer;C:\My Documents\PFI\SI Scottish Futures Trust 18 3 2008.docPreferred Customer!A:\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.docPreferred Customer2C:\My Documents\PFI\The Scottish Futures Trust.doc@HP DeskJet 870C SeriesLPT1:HPRDJC03HP DeskJet 870C SeriesHP DeskJet 870C Series7 d,,HP DeskJet 870C SeriesLPT1 ,,HP DeskJet 870C Series7 d,,HP DeskJet 870C SeriesLPT1r*r*r*2*@)2*)2*-l&):)"))))2*-r*r*The Scottish Futures Trust: What we should be looking out for. One of the major initiatives of the Scottish Government is the proposal for a Scottish Futures Trust: this is intended to address the problems which have become increasingly apparent with the Private Finance Initiative (PFI) route of providing the services of schools, hospitals, roads, etc. The consultation period for the Scottish Governments Futures Trust closed on 14th March: and it is now a matter of great interest as we await the details of what the Scottish Government will now propose in the light of the consultation. One of the basic intentions behind the Futures Trust is that capital assets, such as hospitals, roads and schools, should be procured by some form or other of not for profit mechanism. As John Swinney said in his introduction to the consultation document, by doing this we can remove the element of PFI that delivered the most extreme and unwarranted profits. We noted in our article on the private finance initiative, (PFI), in the October 2007 Scots Independent, that the detailed information on PFI schemes which is now emerging does indeed indicate that PFI can be extremely profitable for the PFI contractors. In fact, since the previous article was written, much more information has emerged, through Freedom of Information. This not only confirms the high cost of traditional PFI, (one hospital for the price of two), but also tells us a good deal about what has gone wrong with PFI procedures, which enabled this to happen. It is against the background of this information that we set out in this note some of the key questions against which the final Futures Trust proposals should be judged, when they emerge after the consultation process. The consultation document seemed to envisage that the Trust would operate in one or both of two possible modes: either as a financial intermediary, passing out funds to individual consortia, that is groups of private sector companies, who would themselves be responsible for building and operating the hospitals or schools: or alternatively, acting as a body which would itself build and operate the capital assets. In either mode, however, the bodies involved are expected to operate on a not for profit basis. The first key question which then arises is: will sufficient safeguards be put in to prevent concealed profits being taken out of these bodies by the back door? This question is particularly relevant when the Trust is acting as a funding mechanism for consortia which are separate from the Trust itself: in this case there would be considerable scope for concealed profits to be taken out by, for example, padding the prices at which work was subcontracted out. If detailed information had been collected centrally on the way past PFI schemes were projected to perform, and even better if this information had been published, then it would have become clear long ago that things had been going badly wrong with PFI. So a second key question for the proposed Trust is: will the new arrangements involve the central collection and publication of detailed financial projections and performance indicators for all new schemes? It is also clear from past experience, and from the documentation now being released under Freedom of Information for some PFI schemes, td be judged when they are unveiled. But in general, the overall criterion should surely be - Will the Futures Trust achieve a step change improvement over existing PFI? There is a great danger that the Futures Trust will be hailed as a great success even if all it achieves are marginal improvements over PFI. This should not be the test that is used: one hospital for the price of one and three quarters may be better than one hospital for the price of two, but is not enough. What is required is a demonstrable and radical improvement on PFI. PAGE  PAGE 3  .AWill the Scottish Government ensure that the residual rights attaching to any Futures Trust schemes are in the publics interest? 3 3Jim Cuthbert Margaret Cuthbert March 2008 s.done of s roles be toThe consortia would be Unless adequate safeguards are in place therethese thisIw 3 .Obut tisshould be. instead 3 .A 1 1will the new arrangements involve a firm watchdog role from the centre,>)"*"0"1"2"4"5";"<"=">"?"B"C"\""""""""""""""# # # # ######$#;#M#U#h#n#r#s#t#u#v#w#x#y#}#~####################(((((((()uPaP uDPh^U?@S v5@&"'"(")"2"3"4"?"@"A"B"C""""# #u#w####(z z z z  z  z z z z z z z z z z z z z z z z z h`%7$K@Normala c"A@"Default Paragraph Font@TOC 1a  @ Footer 9r )@ Page Number to ensure the tests are indeed operating properly? 1 .A(!  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