THE devolution settlement is “forcing” Scotland into “worrying” new private finance initiative (PFI) style deals, the former chief statistician to the Scotland Office has said.

Economist Jim Cuthbert, who has worked for the UK Treasury and the Australian Government, says the “flawed” fiscal arrangements linked to devolution are forcing the Scottish Government to take decisions within a “straitjacket”.

He claims this will cost the public and has urged the Scottish Government to press for a “thorough review” of the fiscal settlement after December’s General Election – when “probable” SNP successes could give it more bargaining power.

Cuthbert makes the claims in an article for The National today, in response to a newly published paper for the Common Weal think tank on the PFI-style Mutual Investment Model (MIM) now being pursued for big projects in Scotland.

Developed in Wales, the funding method is a form of public-private partnership which Cuthbert says “has the worst features of old PFI”, allowing for-profit investors to make “excess” amounts while providing “poor value for money” for the public.

READ MORE: Devolution is about to force Scotland into a new PFI

He said: “It is extraordinarily worrying that Scotland and Wales are being forced, by the limitation on their capital budgets and borrowing powers within the devolution settlement, down a PFI-type path which has been abandoned by England – and by most other countries operating under more rational financial regimes.”

Cuthbert says this is due to changes in the way the Office of National Statistics classifies capital spending in Scotland, moving projects carried out under the non-profit distributing model (NPD) back “on-book” and so restricting Holyrood decision-making.

The Common Weal paper, authored by Cuthbert, describes PFI as “ruinously expensive and prone to failure”.

It recommends that the Scottish Government lobby for Treasury a rule change to aid the use of other investment and procurement models, potentially under the forthcoming Scottish National Investment Bank, and be “open and clear” with the public about potential MIM fall-out.

It goes on: “The adoption of MIM appears to be a classic example of the sub-optimal decisions which result when the Scottish Government pursues what it sees as a local optimum within the devolution settlement.”

A Scottish Government spokesperson said: “The current fiscal framework’s constraints on Scottish Government make revenue finance a necessity. The Scottish Government continually seeks ways to deliver best value for the public purse, which is why we introduced growth accelerators and, together with Cosla, a new mechanism to finance new schools. We are always open to engaging with relevant stakeholders on improving investment models which would deliver best value.”