In 2019, the Scottish Government quietly replaced its favoured public investment model Non-Profit Distributing (NPD) funds, itself a replacement of the discredited PFI or Public Finance Initiative model, with a new “Mutual Investment Model” (MIM). Former Scottish Chief Economist Jim Cuthbert analyses MIM and finds that it maintains all of the risks of PFI and in some respects is a step back from the meagre improvement found in NPD.Credits—
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Seeking a new way of getting capital spending “off the books”, the Scottish Government have replaced the old Public Finance Initiative (PFI) and Non-Profit Distributing (NPD) schemes with a newly developed “Mutual Investment Model”.
In this policy paper, former chief statistician Jim Cuthbert examines this new model and finds that it represents a “retrograde step” compared to NPD and looks to copy many of the same risks and expenses of PFI. Cuthbert also critiques the manner in which this scheme has come to be with almost no public scrutiny or consultation.
― Either because of strict limits on spending and/or an ideological aversion to public sector deficits, successive governments in the UK have made efforts to move capital expenditure “off the books” through various “public private partnerships”.
― The most notorious attempt at this has been PFI which has proved ruinously expensive and prone to failure.
― The Scottish Government recently replaced PFI with a newer NPD model – which Common Weal has shown carries many of the same costs and risks.
― New accounting rules have moved NPD back “on book” and so the Scottish Futures Trust has adopted a new “off book” system called the “Mutual Investment Model” or MIM (originally developed in Wales). In May 2019, the Scottish Government – with little fanfare – announced that it would be adopting MIM for some future capital projects.
― In this paper, Common Weal shows that MIM carries many of the same risks and costs of PFI and actually represents a retrograde step compared to the NPD system which was itself flawed.
― The paper also raises concerns about the lack of consultation carried out during the development of the model and the lack of proper scrutiny prior to its adoption.
― The Scottish Government should explore more sustainable finance models for capital projects such as those offered by the upcoming Scottish National Investment Bank and should do more to challenge the strict financial constraints which tether Scotland’s devolved government.