Scottish ministers urged to leverage private finance to fund infrastructure

Scottish ministers have been urged to leverage private finance to fund infrastructure projects and boost growth.

Sandy Begbie, the chief executive of Scottish Financial Enterprise, said projects are currently progressing at a “glacial pace”.

He said delays, redesign and escalating costs have become the norm, and called for a “serious reassessment” of alternative funding models.

Sandy Begbie, left, pictured with First Minister John Swinney at Scotland's Global Investment Summit last year | PA

“The recent confirmation that dualling the A9 will now cost close to £4 billion, after private financing was ruled out as ‘poor value for money’, is only the most visible example,” he writes in The Scotsman today.

“Taking a decade to build 70 miles of dual carriageway would not be tolerated in most comparable countries. The deeper issue is structural.

“The Scottish government is attempting to meet 21st century needs using 20th century funding models, in an era of intense global competition.”

A “mutual investment model” (MIM) of private financing was due to have paid for more than 50 miles of the remaining 70 miles of the A9 to be upgraded, but Transport Secretary Fiona Hyslop told MSPs last month this would have provided “relatively poorer commercial value for money”.

READ MORE: A9 dualling: Cost rises to nearly £4bn as private financing ditched as poor value for money

Mr Begbie said the recent Scottish Budget, published last month, went off “not with a bang, but a whimper”, and argued economic growth is too often treated as an afterthought.

His comments echo those of other business leaders who have voiced disappointment with the SNP’s tax and spending plans.

Michelle Ferguson, director of CBI Scotland, previously described the Budget as a “missed opportunity for the Scottish government to focus on relentlessly pro-growth policies“.

Mr Begbie compared the situation in Scotland to Hong Kong, a city which “shows what happens when public ambition and private capital work together at scale”.

He said: “By contrast, Edinburgh and Glasgow — both ranked among the world’s top 35 financial centres — too often feel like large towns rather than global hubs. This gap is not inevitable; it is the product of political choices.”

He said Scotland had “effectively shut down serious exploration of alternative ways of delivering infrastructure”, adding: “The default assumption appears to be that if the public purse cannot stretch further, projects must simply wait. That is a false choice.

“Yet debate on alternative models too often collapses into shorthand arguments about ‘privatisation’. Ruling out options before they are properly examined only entrenches delay.

“We are, of course, in the midst of an election cycle. But the recent budget underlined that once May has passed, the next Scottish government — whatever its make-up — must urgently revisit this issue.

“That should include a serious reassessment of private finance, alongside use of devolved bond-issuing powers, the so-called ‘kilts’, to accelerate delivery.”

Mr Begbie said: “If we fail to move beyond the status quo, it will not only be projects like the A9 that remain stalled, but Scotland’s broader prospects for economic growth as well. But if we get this right, the rewards — for communities, growth and future public revenues — will be substantial.”

A Scottish Government spokesperson said: “The Scottish Government strives to make public funding for infrastructure projects go further and we are receptive to innovative ideas where the private sector can help create public value.

“Our Infrastructure Delivery Pipeline highlights a range of areas, such as housing and colleges, where we are looking to leverage private finance. We have already used private capital to finance transport projects including the Aberdeen Western Peripheral Route/Balmedie to Tipperty and the M8, M73 and M74 Motorway Improvement, which are delivering tangible benefits to lives across the country daily.

“We are active exploring a mixed Mutual Investment Model and CDEL approach for the Primary Health Investment Programme. Our expectation is that, through a Mutual Investment Model, for example, a significant programme of community health centres can be delivered over the coming decade.”