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Building a Better Scotland - Infrastructure Investment Plan: Investing in the Future of Scotland
Appendix A: Technical Definitions of Infrastructure Investment
The public expenditure system uses different definitions of capital for budgeting purposes than for accounting purposes - both of which exclude elements of infrastructure investment in the wider sense used elsewhere in this publication.
For accounting purposes, capital spending is those resources used to create a fixed asset which goes on a Government Department's balance sheet. Assets are classified as fixed if they are owned by an organisation and have an ongoing benefit (generally over more than one year). If spending is not classified as being on fixed assets then it is treated as revenue expenditure.
For budgeting purposes, what scores within Capital Delegated Expenditure Limits (capital DEL) is everything that scores as capital for accounting purposes, as well as capital grants to and supported borrowing by local authorities and spending by Non-Departmental Public Bodies that will be included as capital in their accounts. For public corporations such as Scottish Water, capital DEL is the net lending to the relevant public corporation by the department and not the public corporation's own self-financed capital spending.
Net Investment - The Scottish Executive's definition of net investment for purposes such as the net investment rule incorporates spending within capital DEL as well as grants made to support capital spending (asset creation or enhancement) by private sector organisations such as Higher and Further Education Institutions. It does not include the capital element of PPP deals.
Public Private Partnership - In 2000, the UK Government published "Public Private Partnerships - the Government's Approach" which defined public private partnerships (PPPs) into three categories:
- the introduction of private sector ownership into state-owned businesses using the full range of possible structures (whether by flotation or the introduction of a strategic partner) with sales of either a majority or a minority stake;
- arrangements where the public sector contracts to purchase quality services on a long-term basis so as to take advantage of private sector management skills incentivised by having private finance at risk. This approach, derived from the UK-wide Private Finance Initiative, can be implemented via a number of frameworks which reflect the optimum balance of the public / private sector interests. It embraces concessions and franchises, where a private sector partner takes on the responsibility for providing a public service, including maintaining, enhancing or constructing the necessary infrastructure. This approach usually relates to projects of significant value (typically over £20m); a long-term commitment on both sides; and a special purpose vehicle (SPV) to focus on each party's contractual commitment to funding, quality specification, and long-term service; and
- selling Government services into wider markets and other partnership arrangements where private sector expertise and finance are used to exploit the commercial potential of Government assets for the taxpayers' benefit.
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