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Local authorities will be able to keep the full value of their receipts from property transferred as part of a PFI ...
Local authorities will be able to keep the full value of their receipts from property transferred as part of a PFI deal, Scottish local government minister George Kynoch announced today.

Mr Kynoch also promised to consult on an imbalance in capping arrangements between conventional loan charges and PFI charges, and on existing grant to meet conventional loan charges and the financing element of future PFI operating costs.

Speaking at the conference of the Scottish branch of CIPFA at Gleneagles, Mr Kynoch said:

'I have decided to introduce arrangements for Scottish local authority PFI deals which will have broadly similar effect to those already in place for English and Welsh authorities. In general terms, these arrangements will allow authorities to transfer property for a consideration as part of a PFI deal and take account of the full value of the receipt involved, although of course there must be a proper appraisal of such transfers.

'I am very conscious of the concerns which many authorities have about meeting the future revenue costs of PFI deals. If there is no new external income arising from a PFI arrangement, then its future revenue costs have to be met wholly by the authority concerned. That need not necessarily be a matter for concern: a good PFI project should yield significant actual revenue savings by comparison with the costs of conventional public procurement and operation.

'I do recognise however that there is an imbalance in the current arrangements in two respects. First, the government automatically provides local authorities with grant to meet conventional loan charges but, under PFI arrangements, would not provide any additional grant to meet the financing element of future PFI operating costs. Second, conventional loan charges are disregarded for capping purposes, but PFI charges are not. I think it will be right to level the playing field and I propose to explore ways of doing so in consultation with COSLA.

'One approach which we will consider seriously is the possibility of making an estimate of a notional capital charge for PFI projects which would be used as a basis for providing grant in the same way as for conventional loan charges. An option for dealing with the second point would be to include this notional capital charge for PFI projects within the capping disregard. Our objective here is to ensure that there is no disincentive to local authorities to use the PFI for deals which give you value for money.

'With the new councils nearly two weeks in to the hands-on business of service delivery, I hope that all concerned are settling in to he new regime with the minimum of teething problems. We must look forward rather than back. There are challenges to face and there are rewards to be found. The challenges include learning to recognise and abolish past bad practice.

'The philosophy of local government which lies behind the expenditure study, the PFI and all the other measures introduced by this government - including reorganisation into unitary authorities - is based on a simple principle. It is that ultimately there is one priority - and only one priority - in local government: the taxpayer.

'The rewards, I believe, will come as the challenges are overcome. They lie in the attainment of demanding new targets, in the achievement of higher standards of service delivery and in the optimum use of resources.

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