Project delays continue as ONS questions Eurostat over funding classification

John Swinney
Deputy First Minister John Swinney

A number of capital projects under the Hub programme run by the Scottish Futures Trust (SFT) cannot reach financial close until EU statisticians complete a review into the classification of the Aberdeen Western Peripheral Route (AWPR).

The Office of National Statistics (ONS), which is reviewing the classification of the AWPR as well as the Dumfries and Galloway Royal Infirmary (DGRI) and the Edinburgh Royal Hospital for Sick Children, has asked Eurostat to look at a number of issues raised by their investigation.

A revision of European rules in September 2014 has sparked ongoing confusion over how projects financed under the Scottish Government’s non-profit distributing (NPD) model are to be classified.

Previously, schemes processed through the SFT were treated as private sector projects, but the new rules mean they may now come under the public sector heading.

Factors in determining the correct classification can include the relative degree of public and private sector control over the governance of a project, and the balance of risk and reward shared between public and private sector partners.

It is believed that SFT will need to more closely resemble the former Private Finance Initiative (PFI) system to achieve the desired private sector classification.

Deputy First Minister John Swinney said: “I have previously advised Parliament that, while ONS was undertaking its review, there would be some delays in reaching financial close on a number of projects within the Hub programme, because of the need to reflect on ONS’ findings.

“In April, I authorised SFT to take forward initial changes to the hub model aimed at reinforcing a private sector classification, while recognising that further changes might be needed after ONS had reported. This work is proceeding well.

“SFT has submitted proposals to ONS and it is likely that they will be in a position to respond by late October or November.

“I have given careful consideration to whether, in the interim, Hub projects that are currently in the pipeline should be advised that they can reach financial close in advance of the ONS responding. In doing so, I recognise and share the concerns of project partners and other stakeholders.

“The Government remains committed to the Hub programme. However, I must also take into account the risks that could arise as a result of taking projects to financial close in advance of ONS reaching a conclusion.

“As a result, I do not expect it to be possible for these projects to reach financial close over the coming weeks. SFT will engage closely with project partners to consider the implications for them and I will of course keep the position under close review.”

He added: “I reiterate to Parliament that the Office for National Statistics’ conclusions will have no impact on the timetable or cost of the AWPR project itself.”

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