Report calls for 'formidable institution'

Investment Bank ‘could have saved billions’

scottish-national-investment-bankThe Scottish government could have saved £26 billion if it had funded a series of PFI projects through a state-owned Scottish National Investment Bank, it has been claimed.

It is one of the assertions in new research which puts the case for setting up a national investment bank to resolve Scotland’s chronic history of under-investment and help stimulate the economy.

The New Economics Foundation says its proposed SNIB model would be more cost-effective for the taxpayer and create up to 50,000 jobs.

It uses its modelling to claim that PFI-funded schools and hospitals could have been funded for a fraction of the cost.
On current forecasts they will cost the taxpayer £40 billion in total by the time the loans are repaid in 2047-48.

The Foundation claims that if these projects had been funded via its SNIB model they would have cost £13bn and the bill would be repaid 20 years sooner.

The SNIB would be funded by an initial £225 million of public money, with a further government-backed guarantee of £1.35 billion. If this was leveraged by issuing bonds at 2.5 times this figure – consistent with the European Investment Bank and Nordic Investment Bank – it would raise £3.37bn in loan funds. Interest would be earned on retained funds and profits.

The Foundation’s 43-page report says the SNIB would be a “formidable financial institution” in the context of the Scottish economy and comparable in scale to other national investment banks.

“There is no reason why the SNIB could not in time become largely self-financing,” it says.

An SNIB would also add to employment levels, it claims. Using Scottish government figures that £100m of capital investment supports 1,400 jobs, it says the proposed investment from the SNIB would create 50,000 jobs.

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