Scotland trials sector-friendly public building model

Profits once pocketed by big construction companies could go to charities under plans to replace a long-standing funding model for public building in Scotland.

Many schools, hospitals and civic buildings throughout the UK are currently built using the Private Finance Initiative model, which involves a private consortium paying of all a project’s maintenance and construction costs in exchange for repayment over a 30-year period – often at a large premium.

Now three new ways have been proposed that would allow the premium to go to the third sector instead.

One model, known as public community partnership, would involve local housing associations or councils forming charitable or not-for-profit companies to carry out construction and returning any excess revenue to the community.

“This could get projects built much more effectively than traditional PFI because there’s no conflict between making money and the good of the community,” said Alan Eccles, a lawyer specialising in Scottish construction law. “It’s also possible that a charitable company might have tax advantages.”

Another idea is a non-profit distributing model, whereby councils would sign a deals with construction companies as normal, but agree that any profits over a set level would be ploughed back into the community through local charities.

Both models are already being trialled on school and hospital projects in Scotland.

“This idea is at the experimentation stage,” said Eccles. “But once a working model is developed, it can be used again and again.”

Andrew Gordon, chief executive of PFI consultants, the Canmore Partnership, said that he believed public community partnership was the more profound development for the third sector. He said that under the NPD model, any charity created could well prove “a wheeze” created to return cash to the public sector.

“But PCP is not a wheeze,” he said. “It’s a completely new idea, and possibly quite a good idea. Housing associations are often charities themselves, but they have a lot of expertise in building things. They may be able to obtain funding and carry out work as cheaply as construction companies, and create more public benefit.”

The Scottish Government is also currently working on a Scottish Futures Trust, a not-for-profit company that will issue long-term bonds and use the money to pay up front for building contracts – again returning any profits to the community.

“The company could well prove to be a charity,” said a spokesman for the Scottish Government. “Certainly its purpose would be to make sure that there is maximum public benefit.

“Various methods are being tried at the moment to achieve that aim.”

He said a number of questions remained unanswered, including which charities would be involved in any new model, how much money they could receive and how it would be distributed.

A consultation on the Scottish Futures Trust was announced in December. Results will be published this week.

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