Skip to main content

Non-Profit Distribution: The Scottish Approach to Private Finance in Public Services

  • Mark Hellowell (a1) and Allyson M Pollock (a2)

This article provides an analysis of the Scottish Government's approach to the use of private finance in public services. It examines the budgetary drivers behind the policy in Scotland and assesses its cost-efficiency. In doing so, it considers first the standard private finance initiative (PFI) model, and then turns to the ‘non-profit distributing’ (NPD) model – a variant of PFI developed in Scotland and one that is, at the time of writing, unique to the country. It concludes that, while NPD provides the Government with an important political benefit, in being seen to safeguard the ‘public interest’ while working within UK-wide budgetary constraints, the decision to continue with private finance carries a high economic cost.

Hide All
Argyll and Bute Council (2004), ‘Schools PPP/NPDO: final business case’, 9 September, (10/12/08).
Audit Scotland (2002), Taking the Initiative – Using PFI Contracts to Renew School Buildings, Edinburgh: Audit Scotland.
Australian Government (2008), National Public−Private Partnership Guidelines: Volume 5: Discount Rate Methodology Guidance, December, Commonwealth of Australia, (02/02/09).
Ball, R., Heafey, M. and King, D. (2000), ‘Private finance initiative – a good deal for the public purse or a drain on future generations?’, Policy and Politics, 29, 1, 95108.
Brealey, R. and Myers, S. (2008), Principles of Corporate Finance, 9th edn, New York: McGraw-Hill.
Cuthbert, J. and Cuthbert, M. (2008a), ‘The implications of evidence released through freedom of information on the projected returns from the new Royal Infirmary of Edinburgh and certain other PFI schemes’, Memorandum to the Scottish Parliament Finance Committee, (10/12/2008).
Cuthbert, J. and Cuthbert, M. (2008b), ‘Analysis of the financial projections for two non-profit distributing PFI schemes: and implications’, Memorandum to the Scottish Parliament Finance Committee, (10/12/2008).
Dudkin, G. and Välilä, T. (2005), ‘Transaction costs in public–private partnerships: a first look at the evidence’, EIB Economic and Financial Report 2005/03, European Investment Bank, Luxemburg.
Ewijk, C. and Tang, P. (2003), ‘How to price the risk of public investment?’, De Economist, 151, 317–28.
Falkirk Council (2007), ‘Falkirk Community Schools Project Non-Profit Distributing Organisation (NPDO): final business case’, April, (10/12/08).
Finance Committee of the Scottish Parliament (2008), ‘Inquiry into methods of funding capital investment’, 8th report, Session 3, (20/12/08).
Flemming, J. and Mayer, C. (1997), ‘The assessment: public-sector investment’, Oxford Review of Economic Policy, 13, 4, 111.
Froud, J. and Shaoul, J. (2001), ‘Appraising and evaluating PFI for NHS hospitals’, Financial Accountability and Management, 17, 3, 247–70.
Gaffney, D., Pollock, A., Dunnigan, M., Price, D. and Shaoul, J. (1999), ‘PFI in the NHS: is there an economic case’, British Medical Journal, 319, 10 July, 116–19.
Grant Thornton (2007), ‘Finance committee inquiry into methods of funding capital investment projects’, submission from Grant Thornton, (10/12/08).
Grout, P. (1997), ‘The economics of the private finance initiative’, Oxford Review of Economic Policy, 13, 4, 5366.
Heald, D. (2008), ‘The implications of the delays switch to IFRS’, memorandum to the House of Commons Treasury Select Committee, (10/12/08).
Treasury, HM (2003), PFI: Meeting the Investment Challenge, London: The Stationery Office.
Treasury, HM (2008), Pre-Budget Report, London: The Stationery Office.
Jenkinson, T. (2003), ‘Private finance’, Oxford Review of Economic Policy, 19, 2, 323–34.
Kerr, A. (2005), ‘Parliamentary answer’, (10/12/08).
Klein, M. (1997), ‘The risk premium for evaluating public projects’, Oxford Review of Economic Policy, 13, 4, 2942.
KPMG (2008), ‘Written submission to the Finance Committee’, (10/12/2008).
NAO (1999), The PFI Contract for the New Dartford and Gravesham Hospital, London: The Stationery Office.
NAO (2002), The PFI Contract for the Redevelopment of West Middlesex University Hospital, London: The Stationery Office.
NAO (2007), Improving the PFI Tendering Process, London: The Stationery Office.
NHS Tayside (2008), Freedom of Information response. Unpublished.
Palmer, K. (2000), ‘Contract Issues and Financing in PPP/PFI. (Do we need the ‘F’ in DBFO projects?)’, Cambridge Economic Policy Associates Ltd, Report prepared for the IPPR Commission on Public–Private Partnerships.
Pollock, A., Shaoul, J. and Vickers, N. (2002), ‘Private finance and “value for money” in NHS hospitals: a policy in search of a rationale?’, British Medical Journal, 324,18 May, 1205–9.
PricewaterhouseCoopers (2002), Study into Rates of Return Bid on PFI Projects, The Office of Government Commerce, London: The Stationery Office.
Quiggin, J. (2004), ‘Risk, PPPs and the Public Sector Comparator’, Australian Accounting Review, 14, 2, 5161.
Scottish Government (2007), ‘Consultation on the role of a Scottish Futures Trust in infrastructure investment in Scotland’, (15/09/08).
Scottish Government. (2008a), ‘Draft Budget 2009–10’, (10/09/08).
Scottish Government (2008b), ‘Taking forward the Scottish Futures Trust’, (10/12/08).
Scottish Government (2008c), ‘Project milestone analysis (schools and hospitals)’, (10/12/08).
Scottish Government (2008d), ‘NPD explanatory note’, November, (10/12/08).
Scottish Parliament (2008), ‘Official report’, 28 May 2008, Col 9016, (10/12/08).
Shaoul, J., Stafford, A. and Stapleton, P. (2008), ‘The cost of using private finance to build, finance and operate hospitals’, Public Money and Management, April, 101–8.
Spackman, M. (2002), ‘Public–private partnerships: lessons from the British approach’, Economic Systems, 26, 3, 283301.
Standard and Poors (2004), ‘PFI projects reshape the credit profile of Europe's construction companies’, Infrastructure Finance, February 2004.
Sussex, J. (2001), The Economics of the Private Finance Initiative in the NHS, London: Office of Health Economics.
Swinney, J. (2008), Speech to Infrastructure Investment in Scotland Conference, 20 May, Edinburgh.
Williamson, O. (1985), The Economic Institutions of Capitalism, New York: The Free Press.
Yescombe, E. R. (2007), Public–Private Partnerships: Principles of Policy and Finance, London: Elsevier Finance.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Social Policy and Society
  • ISSN: 1474-7464
  • EISSN: 1475-3073
  • URL: /core/journals/social-policy-and-society
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed