Investigation On The Economic Efficiency Of £9 Billion Private Financing Scheme

Audit Scotland and the Accounts Commission, Scotland’s public spending watchdogs are planning to scrutinize a multibillion pound scheme that will build privately funded roads, schools and hospitals after some serious doubts were raised regarding value for money. The inquiry on Scottish privately financed NPD (non-profit distribution) programme after it breached EU rules on government spending will commence in 2018.

Scotland’s equivalent of private finance initiative which is a method of funding used for public projects became widespread during Blair and Brown governments. The inquiry will determine whether the funding is economically efficient.

The error over the interpretation of EU rules is expected to cost Nicola Sturgeon’s government about £932 million in lost expenditure since it will now match the private spending of NPD programme with money that was borrowed from the Treasury. The struggle for matching funds is expected to have a domino effect on Scotland’s public expenditures.

The NPD programme that was introduced by former first minister Alex Salmond is a reflection of PFI structure that allows private companies to built roads, hospitals and schools using debt finance that will be paid off by the taxpayer over a period of decades. According to critics, the process will cost the government more over the long run and it will fail to hold private operators to account.

Last year, the Office for National Statistics has raised the pressure on the NPD programme when it decided that the £865 million in the construction costs of the 4 major private finance projects that include the Aberdeen bypass, 2 hospitals and a blood transfusion service headquarters must be added to governments accounts under the spending rules of the European Union particularly since the schemes are heavily controlled by the public sector. If projects like the £67 million hospital in Orkney were to be added to the Scottish government’s balance sheet, there will be less room for ministers to finance other infrastructure schemes.

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