The controversial financing scheme to replace the former Scottish Executive’s Public Private Partnerships and Private Finance Initiative (PPP/PFI) is designed to deliver better value for the public purse in the building of new schools, hospitals and transport projects. Details of the trust have been laid out by the Government in the Strategic Business Case for the Scottish Futures Trust (SFT) initiative, published today.

The initiative, to be supported by a new public sector company, is to release up to £150m a year for increased investment in infrastructure according to the plans. By learning the lessons of previous PFI contracts, the Scottish Government claims, it will reduce the cost of funding and result in more effective investment planning, procurement and delivery plus generating opportunities for greater investment in public service infrastructure. The trust will also see a Scotland-wide municipal bond created to fund future public projects.

The business case was launched by First Minister Alex Salmond and Finance Secretary John Swinney at the Infrastructure Investment in Scotland conference at Heriot-Watt University today. Announcing the plans, the First Minister said:

"Scotland has a proud record of delivering new and innovative approaches to public investment. The development of the Scottish Futures Trust is the way forward, offering both better value finance and secure investment.

"It is right for Scotland, right for our public services, and right for our times.

"By releasing up to £150 million each year for increased investment, we can ensure more resources for our public infrastructure compared to wasteful PFI."

Swinney added:

"We will establish a new company in the public sector to provide the schools, hospitals and transport infrastructure that Scotland needs, in a far more cost effective way.

"By putting non-profit distributing principles (NPD) at the core of partnership delivery and funding, we have already removed the element of PFI that delivered the most extreme profits, and a Scotland-wide municipal bond opens up the prospect of further benefits.

"The Scottish Futures Trust company will support public bodies in delivering more cost effective infrastructure for taxpayers. It means we will get more for our money - more bang for the people's bucks.

"With an infrastructure investment programme of some £35 billion over the next 10 years, SFT will be central to this Government's purpose of increasing sustainable, economic growth."

Professor John Kay, a Fellow of St John's College, Oxford, a Visiting Professor of Economics at the London School of Economics, and a member of the Council of Economic Advisers, said:

"PFI is well past its sell by date. The Scottish Futures Trust can achieve its three objectives of cheaper finance, better project management and the operation of infrastructure projects for the benefit of the people of Scotland."

Responding to the announcement, Labour's Local Government spokesman Andy Kerr said: “After a year of promises to kill PPP stone dead, we have a massive u-turn. The SFT is PPP with a lick of cheap paint. Most observers recognise the makeover has only produced uncertainty.

"We have had 12 months of a financial fantasy whilst our school children and our communities need new facilities.

"The Nationalists said that they would match Labour's school building programme brick-for-brick. This proposal will not deliver - it is full of wishful thinking and no extra cash and to describe it as half-baked would be a compliment."

Conservative MSP Derek Brownlee, Shadow Cabinet Secretary for Finance & Sustainable Growth, said:

“This is a much more comprehensive set of proposals than those set out in the Consultation Paper, or the SNP manifesto. As we have consistently said, we will evaluate these proposals on their merits, because getting value for money is more important than ideology.

“Although there is much detail still to be produced, two things are clear: the Scottish Futures Trust will advise on PPP projects, and in 2010 a new private Futures Trust will be established to provide private investment. It will be interesting to see how the left wingers on the SNP backbenches react to this.

“The Scottish Futures Trust has changed more often than Labour's referendum policy. However it is dressed up, the key principle of PFI/PPP is maintained - leveraging in private investment into public infrastructure.

“Put simply, it is not so much the SFT, as the SNP-PP.”