Northern Ireland Assembly
Tuesday 7 May 2002 (continued)
The Deputy First Minister: I accept the Member's point that people will want to appraise the package. Any future use of borrowing power by any Executive will be subject to the full scrutiny of the budgetary process, not least because additional borrowing would be resourced through additional revenue raised from rates. Nothing will bring about more transparency in the use of borrowing power than that. For that reason, the Executive want to make it clear that future borrowing power will be used solely for strategic capital investment. Borrowing will not be used to fund running costs, pay wages or cover other expenses; it will be used solely for strategic infrastructure and public service investment. The Executive are conscious that the payments will be spread over time, and we want to ensure solidarity between generations. This Assembly will provide the necessary public service infrastructure for future generations. All the Committees will know how those matters are being handled. The existence of the strategic investment body, and the qualitative difference that it makes to our capital expenditure profile, will enable the public to see the additional benefit of new investment, so that the added value will be obvious. That is part of the transparency that is important for the public and its representatives in the Assembly. The Member also referred to Ebrington. I am aware of, and have been involved in, many discussions about the site, because I too represent the Foyle constituency. Having made the case to the Prime Minister and the Chancellor for the transfer of the sites, the Executive want to ensure that they are put to optimum use in the public interest. We will continue discussions involving a range of sectoral interests to decide the best use of that particular site. Many people urged the Executive and Departments to buy some of the sites that have now been transferred. Members told us to buy Ebrington Barracks and to pay £10 million for it. Instead, through this package, the Executive have acquired the sites free of charge. The Executive can use the money that Members told us to spend on buying the sites to fund £125 million of borrowing power for short-term investment. 11.30 am If Members listened to what they have advocated, they would realise how good this deal is. They wanted the money to be spent on buying those sites, and additional money would then have had to be found to develop them. Instead, the sites have been acquired free of charge, and the money that would have been spent on buying them can now be put towards infrastructure and public service investment. Mr Savage: I welcome the statement and the package that goes with it. This is mature politics in action, which is long overdue in Northern Ireland. Can the First Minister and the Deputy First Minister confirm that the investment needed for water services alone is around £3 billion, or £6 million a week for 10 years? If that investment were not made, what would the consequences be? The Assembly and the public want to know whether the Minister for Regional Development has made any suggestions on how to meet the responsibility and the enormous backlog. I hope that he does not take the same attitude as his Colleague Mr Poots, who sits back and complains and lets other people do the work for him. The First Minister: The information that we have received from the Department for Regional Development is that a substantial investment of around £3 billion is needed for water services. We cannot sit on that issue. It must be dealt with. A point was raised earlier about the charges that would be incurred on the bases that have been transferred: those charges come under the new regime of resource accounting and budgeting and involve a charge of some 6% for held assets. Water services have considerable assets. Under resource accounting and budgeting, we would be charged for those assets. Consequently, there would be significant additional charges. There is also the issue of how the Administration is funded. Funding increases come with per capita equivalents to increases in England in Wales. There are no longer any increases in public expenditure on water in England and Wales. No additional money is available in that way. If we are to deal with the investment that is needed in the water sector, additional sources of finance must be found. That is an important matter. European Union Directives are a source of concern for water services. Those Directives will require expenditure, and if they are not implemented, penalties will be incurred. That is an important issue that must be addressed urgently. We understand that the Minister for Regional Development is considering how to deal with those problems, and he may soon introduce proposals. Those proposals may address the raising of finance, if finance is to be raised at all. I do not know whether that matter is on the Minister's mind. However, we will consider with interest his proposals for water services. The Department for Regional Development has significant problems. Other Departments also have problems with infrastructure. We hope that the package will benefit all Ministers and will enable matters to be dealt with strategically without displacing the interests and responsibilities of individual Ministers. That is why, as the Deputy First Minister said, we will invite other parties to associate with the operation of the strategic investment body. Mrs Courtney: I congratulate the First Minister and the Deputy First Minister on taking the steps that secured the package. Everyone agrees that more resources should be put into public services, and all parties have, in one way or another, called for such investment. The package offers a chance to accelerate investment in vital services. I also welcome the response given to Mr Hay regarding public consultation on Ebrington Barracks. Can the Deputy First Minister confirm that the initial package will be spent on strategic investments such as the new cancer centre, so that people can see that devolution does make a difference, and that we advocate quality public services to meet society's needs? The Deputy First Minister: As I said, the First Minister, the Minister of Finance and Personnel and myself raised issues that would be significant elements in the shorter-term when we negotiated the short-term spending boost as part of the overall package. The cancer centre was the primary significant project that we thought could be funded from a short-term package. All Assembly parties know how important the regional cancer centre is to the regional health strategy. Achieving the regional cancer strategy will make good the work of the important new cancer units. We are determined - and we are sure that our Executive Colleagues are determined - to support the Minister of Health, Social Services and Public Safety in realising the regional cancer strategy. We regret the different things that have prevented progress being made, and it is for such reasons that we believed it important to secure a short-term dividend, and not just to rely on longer-term borrowing power. Decisions and announcements on precisely how the money will be used will follow. I am happy to reiterate the reassurance about public consultation on Ebrington Barracks and other sites. Mr Gibson: Last week, I was tempted to hijack a plane that was supposed to be arriving laden with millions of pounds. However, the roads infrastructure in west Tyrone was so bad that there were no white lines to guide the plane down. First, have Government bonds been ruled out? Is that a good financial manoeuvre in view of the fact that loans would be long-term? Are we talking about a fixed-term contract with an interest rate of 5·25% for 20 or 30 years? Secondly, other means of raising money were mentioned. I welcome that the Deputy First Minister said that he would inflation-proof the business rates. Could there be a tremendous hike in domestic rates to compensate for that? What are the other means of raising money, and will they be put into the public domain for consultation? The First Minister: The prospect of issuing bonds to finance infrastructure investments has some attractions, but all bonds would ultimately have to be guaranteed by the Northern Ireland Executive. The Treasury has made it clear that it would not support a bond-financed approach, nor would it be prepared to act as ultimate guarantor - that would probably be sought from financial institutions and investments if a bond were to be floated. Significantly, the Treasury's rates are better than those that would be gained from the market on floating a bond. It is therefore not simply a matter of the Treasury's difficulties with the concept of bonds. Some of those difficulties are not related to Northern Ireland but rather to other areas. The arrangements offered are better financially, and that is significant. With regard to other sources of finance, we hope to set up public-private partnership (PPP) deals through the strategic investment body. PPP partners could raise finance through bonds, and they would carry the risk. Other ways of raising finance may be available, some of which were referred to earlier. The objective of the strategic investment body is to bring in expertise and to focus the existing expertise in the Administration on examining what is available and what can be done to provide the finance to achieve progress in the best possible way. Business and domestic rates are not connected with this initiative. Rates are already a problem, because of comparisons between local taxation and taxation across the water. The increase in business rates was kept low because there is no significant disparity between business rates here and business rates across the water. There is, however, a disparity in domestic rates, and there have been significant arguments on that issue. We must show that there will be equality with regard to tax, rates and council taxes across the United Kingdom. That has been happening. I hope that the message is getting through that there will be no sudden or dramatic change. Mr Davis: I congratulate the Ministers on securing the free transfer of security sites and prison sites to the Executive. Those named so far are of major strategic and monetary value. There has been much speculation, in the Lagan Valley constituency, for instance, about the possible use of the Maze site. Will the Ministers consult fully with local authorities and responsible community groups in the areas concerned before the use of those sites is determined? The Deputy First Minister: I am aware that in different localities there are different levels of interest in the sites, and there has already been some debate on the issue. Now that we have the sites we must ensure that best use is made of them. In determining the best use for the sites, it is important that they relate directly to the benefits of a transformation to a peaceful situation. They must be symbols of reconciliation, and they must be used for regeneration. If the sites were sold, the money raised would have to be used for similar purposes. That is fair in the context of the normalisation dividend that we started to negotiate before Christmas. All relevant local interests must be involved and consulted. Strategic interests must also be considered. Given that the transfer of particular bases as part of the package has been a matter of luck, circumstance and negotiation, it would be appropriate to involve the strategic investment body. 11.45 am Mr Weir: Members will have a mixed reaction to the news that the First Minister and the Deputy First Minister negotiated the package jointly, and, with their respective records of success at negotiation, we must be glad that the Deputy First Minister had a large input. Given the restraints that have been imposed on borrowing, which are outlined in the statement, do the First Minister and the Deputy First Minister agree that a large percentage, if not all, of the borrowing would be unnecessary if investment were made as a result of reductions in public expenditure? In the light of that, what plans do they have to examine the number and cost of Government Departments, the size and cost of the Assembly and the amount of money that is allocated to the North/South bodies and the Civic Forum? Finally, what comfort can ratepayers take from the fact that the increases over the next four years in domestic rates are anticipated to be only four times the rate of inflation rather than more? The First Minister: It is not our intention to change existing patterns for rates increases over the next couple of years. I have stated the reasons for the above-inflation domestic rates increases several times. I will not speculate as to why Mr Weir has not quite understood the point about comparabilities with other parts of the United Kingdom. Normally, the Member is enthusiastic about bringing us into line with the rest of the United Kingdom, and it is strange that in this case he is not. Perhaps, though, it is not surprising. Is he willing to accept the benefits but not the burden of such matters? There is some substance in the Member's comments. We are keenly interested in reducing expenditure where possible, and that is an element of the review of public administration that will be advanced quickly. We hope that it will be implemented in the course of the next year, and, as is necessary, it will run in parallel with the review of the rating system. We will consider whether significant savings can be made in the management of public bodies outside the central Departments. The Member may not have appreciated that the creation of the strategic investment body to centralise expertise on finance and rating and financing projects through PPPs may itself involve a reduction in expenditure at departmental level. The cost of the Assembly is not a matter for Ministers; it is entirely for the Assembly Commission. However, I am confident that the people of Northern Ireland are glad that they have an Assembly that enables them to influence the decisions that are taken on such matters. The people of Northern Ireland are glad that the Assembly exists, and they can put value on the carping that comes from people who contributed nothing to the creation of the Assembly or to society's progress here in recent years. Sir John Gorman: I join Members who have congratulated the First Minister and the Deputy First Minister on a wonderful achievement. It is a strategy for Northern Ireland that I hope will help to pay for what we need. At times, our attitude is awful. We demand and beg for this, that and the other thing, believing that, somehow, the money will fall from heaven. I do not know from where people get that idea, but the First Minister and the Deputy First Minister have made it clear that heaven will not be so easily persuaded to pay for us. Members may have heard the Confederation of British Industry's economic expectations for UK regions in this morning's news. Northern Ireland was excluded, and I am worried about that. Could this be connected with the serious leak that occurred prior to the Chancellor's announcement last Thursday, particularly as the focus of the leak appeared to be on a doubling of rates, even though that has proven to be wildly inaccurate? Do the First Minister and the Deputy First Minister concur with that viewpoint? The Deputy First Minister: I thank the Member for his observations on the package that we negotiated. It is important to set the matter in context. The First Minister, the Minister of Finance and Personnel and I have listened repeatedly to people saying that more money and more borrowing power were needed to ensure that spending outside the departmental expenditure limit could be made. That is precisely what we have negotiated. Most people encouraged us towards bonds, but we have negotiated a spending power with a better interest rate than we would have been able to achieve by using bonds. I hope that everybody - and many Members asked us to use bonds to secure a borrowing power - would have the same honesty as the Member in congratulating us. We are trying to create, in the strategic investment body, a central driver to improve the quality and rate of investment. The Committee for Finance and Personnel touched on that point in its excellent report on public-private partnerships and alternative sources of financing. The Committee identified such a need precisely, and that need is being made good. I hope that the people who were ready to talk about that need will welcome the fact that we have acted on it. Unfortunately, much public understanding and perception about the initiative was marred by many false conclusions and misinterpretations about the rates. In so far as that information came from leaks, we must try to correct those wrong impressions, while finding out exactly how the leaks occurred. The Executive have already asked the head of the Civil Service to make enquiries about that. It is most important that people are assured that we have a borrowing power that will be used wisely, not wildly. The arrangements in the Chamber mean that there will be no massive hiking of the rates while the rating system remains unreformed and while its anomalies and inequities are in place. People will not vote for significant rate increases without knowing what the significant additional benefits will be. Mr Ford: I welcome this morning's statement and the initiative announced last week. The Deputy First Minister talked about the strategic investment body. The important discussions on the functions of that body will take place not once my Colleague Mr Close has managed to read this morning's statement but when Ministers come to the House with a detailed package and say exactly how the body will operate and what its role and functions will be. Ministers should not use the generalities that we have had so far. The Deputy First Minister said that parties in the Executive would be invited to make nominations to a working group. That seems to be a new constitutional arrangement. Did he mean that Ministers will make nominations, or do the Executive plan to be inclusive and suggest that parties that participate in the Assembly will get such an opportunity? I welcome the fact that the First Minister went some distance in his response to Mr Close's question on the unfairness of the rates. In recognising that that is a legitimate concern, the First Minister went considerably further than his Colleague Sir Reg Empey did in discussions with me last week. Are there plans for the rates review to be extended into a review of the raising of public finance, or will it merely pretend that tinkering with the existing system is all that is required? The First Minister: The consultation paper on the rates review will be published shortly. It will concentrate on a review of rating policy because, in revising the existing system, we must begin by considering that system. The current system contains inequities and anomalies. The big problem with rates is that it is a tax that is not related to people's ability to pay; it is superficially attractive, therefore, to create a system that is. Mr Close mentioned a local income tax. We look forward with interest to the proposals for such a tax. I hope that they will be properly developed and carefully considered. It is not surprising that the Scottish Parliament has not used its power to vary income tax rates. That shows what those who have the capacity to consider the matter think about it. There is the possibility, as I have already said, of replacing the rates with a different form of local taxation. I do not imagine that anyone will suggest that we introduce a poll tax, although someone could, and, under the terms of the rates review, it is theoretically possible that that could happen. If that is what the Member has in mind, we look forward to it. The other possibility is a tax similar to the council tax that exists across the water. Other taxes may be introduced, but all possibilities must be considered within the limits of what the Assembly can do. We may consider the introduction of new local taxes, but income tax is a reserved matter, and the Member's party's suggestion of changing it would have to be dealt with elsewhere. The strategic investment body is intended to centralise expertise and the capacity for managing assets, raising funds and dealing with infrastructure investment matters. The Deputy First Minister said that limited capacity for those matters, and a certain degree of expertise, is currently scattered across 10 or 11 Departments. It is more efficient to centralise and develop the capacity and expertise through a single body that can coherently study the whole range of public sector investment and the management of public assets. That will be done within the Administration, and it will be appropriate, therefore, to bring together people from within it who represent it as a whole. That is why it was an obvious first step to turn to the parties that participate in the Administration. To go beyond that and look to other Assembly parties that do not participate in the Administration would run counter to the thrust of the initiative, which is that the body will operate within the Administration to enable the most efficient asset management. We have taken a decision in principle to establish a strategic investment body, and we will work out the detail as quickly as we can. We will be happy to share our decisions with the Assembly as we go through the process. It is a new concept, although the idea has surfaced in other jurisdictions. Quite a few people in government are moving towards it because of the desirability of ensuring that the public administration's assets and capacity to raise finance are used in an efficient and effective way. 12.00 pm Mr Morrow: I will make my question brief. The Deputy First Minister intimated that there might be other sites, referring to security bases that are going to be closed down, and said that when other sites became available, they would utilise those also. Does he have any particular sites in mind that he would like to tell the Assembly about? The Deputy First Minister: I did not say that as other sites became available, we would utilise them also. What I did say was that as other sites became available, it would fall to the Executive to consider whether we wanted to intervene on the strategic use of those sites. In saying that, I was not implying that additional sites would come free of charge. Many Members anticipated that we were going to have to pay for the Ebrington site, for example. They said that it would be a good site to buy, and a good use of our budget. We have got it free of charge. In relation to other sites, we might have to decide whether to purchase them - that is the arrangement and the understanding that existed prior to this package. We have done well to get these sites free, and we must make the best use of them. We must all consider responsibly what to do in relation to future sites. I would like to think that we could persuade the Treasury to give us future sites free of charge, and our ability to do that might be related to whether we do anything with the rest of this package - that is, the strategic reforms that we are talking about and our approach to revenue issues. Local Government (Miscellaneous Provisions) Bill:
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