Private sector set to increase stake in Scotland’s infrastructure after ONS ruling

The Scottish Government has announced it will rely more on private money to fund infrastructure projects, after the Office of National Statistics (ONS) ruled construction of the Aberdeen Western Peripheral Route (AWPR) was a public project. 

The Government insists the decision will not affect the timescale or cost of the project, as revealed by Holyrood this week.

Most of Scotland’s building projects are funded by Public Private Partnerships (PPP) through a Non-Profit Distributing (NPD) model managed by the Scottish Futures Trust, which the Scottish Government set up to limit the control and profits of the private sector, and to channel profits back into government coffers.

At the same time, because much of the upfront money comes from the private sector, the spending can be kept off the balance sheet so it is not recorded as government borrowing.

It was billed as a ‘fairer’ system than the PFI projects which preceded it.

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However the ONS, as part of an investigation into projects across the UK, has ruled the AWPR should be put on the Central Government balance sheet because the Scottish Government was “judged to have economic ownership of the asset”.

Deputy First Minister John Swinney said the project will still run on time and on budget, but the Government would need to change arrangements to bring it under private sector classification.

“This decision published by ONS today, means we need to give further consideration to the contractual arrangements that apply to the AWPR, with a view to securing a private sector classification.

“I have instructed Scottish Futures Trust to engage with ONS and other parties to clarify the detailed points of interpretation that have underpinned the decision and their potential implications,” he said.

Recent EU guidance has been issued which further limits public sector investment in projects through its deficit and debt targets.

Labour’s finance spokeswoman Jackie Baillie said the news was a “hammer blow” to the SNP’s 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.”

The ONS is also reviewing two other projects in Scotland - the Dumfries and Galloway Royal Infirmary (DGRI) and the new Edinburgh Royal Hospital for Sick Children.

The Scottish Government confirmed it was reviewing the details of its NPD model of funding infrastructure for future projects.