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Northern Ireland Assembly

Tuesday 21 May 2002


Public-Private Partnerships

Fur Farming (Prohibition) Bill: Second Stage

Limited Liability Partnerships Bill: Second Stage

Ad Hoc Committee on the Proposal for a
Draft Access to Justice (Northern Ireland) Order 2002



Future Planning Development in Downpatrick

The Assembly met at 10.30 am (Mr Speaker in the Chair).

Members observed two minutes’ silence.

Public-Private Partnerships


Mr Speaker:

I have received notice from the Minister of Finance and Personnel that he wishes to make a statement on the review of opportunities for public-private partnerships in Northern Ireland.

The Minister of Finance and Personnel (Dr Farren):

The Executive are today launching a consultation exercise, "Financing Our Future", based on the report of the working group on opportunities for public-private partnerships (PPPs) in Northern Ireland, which is published today. This represents a major opportunity to accelerate investment in our essential infrastructure and, hence, to meet some of the most pressing needs and opportunities for our public services. It is a very clear demonstration of the difference that we can make by taking responsibility for our own affairs and joining together through the institutions set up under the Good Friday Agreement. Without the joint efforts of the Executive in facing up to the issues on financing our future, we would face the continuing erosion of our infrastructure. We now have a major opportunity to make a difference.

The reinvestment and reform initiative launched on 2 May provides a new context for this consultation. As I shall explain more fully, we now have the opportunity to consider how best to address the infrastructure deficit with a variety of means at our disposal.

The key issue in this consultation is that we need to consider carefully what forms of finance we can and should use and what place PPPs should have in our strategy to address the deficit.

As stated in our Programme for Government, a central aim of the Executive is to secure the basis for a balanced, competitive, innovative and sustainable economy through renewed infrastructure and innovative policies. It is widely recognised that our public infrastructure has steadily deteriorated, and that has become more apparent in recent years. For decades, investment in public service infrastructure has fallen well short of meeting the needs of our community.

Good infrastructure is fundamental to the economy. Transport links, in particular, are essential to our trade and communications with the rest of the world. There are also major deficiencies in the provision of basic public services. We need to invest in hospitals, schools and colleges if we are to fulfil our fundamental responsibilities to the public. Most basically, there are major costs in providing water and sewerage services that cannot be neglected any longer. The level of resources that is routinely available to us would not be sufficient to achieve the necessary outcome. In particular, dependence alone on routine public expenditure to fund infrastructure would make it much less likely that we could secure either the range or the quality of public services that the people of Northern Ireland deserve.

The urgency of the need for a major infrastructure programme led the Executive to take three major steps. We knew that, faced with a probable investment deficit in public services infrastructure of around £6 billion over the next 10 years, it was essential to explore vigorously all the options for bridging the gap.

The Executive seek to secure the best possible outcome from the current spending review, and the detailed work on the needs and effectiveness of our programmes is central to that task. Committees will have an opportunity to contribute to the needs and effectiveness evaluation that impacts most directly on their corresponding Departments.

The First Minister, the Deputy First Minister and I pressed the Prime Minister and the Chancellor to agree an innovative approach to address the infrastructure problem. That led to the reinvestment and reform initiative, in which we secured access to new means, through the agreed borrowing power, and to the short-term package that will enable us to improve infrastructure immediately.

Last spring the Executive launched the working group on public-private partnerships, which is one means of addressing the deficit. However, we needed to assess experience with PPPs here and further afield, and to examine the options and their implications critically and thoughtfully before agreeing an Executive policy. The working group’s analysis of those issues is shown in the report.

The Executive thank the working group for producing a detailed and comprehensive report on a complex but important subject. In the main, the findings and recommendations of the review are broadly consistent with the Committee for Finance and Personnel’s earlier review, which helpfully informed the deliberations of the working group. The Committee stressed the need for an investment strategy, a central investment board, and value for money. The working group concurred with those recommendations.

There is a clear need for inclusive policy-making, and we considered that it was important to ensure that the PPP working group included representation from the public, private and voluntary sectors and trade unions. The Executive welcome and value the contributions that the representatives of those sectors made to the deliberations of the working group.

(Madam Deputy Speaker [Ms Morrice] in the Chair)

We are especially pleased that the Confederation of British Industry (CBI), the trade unions and the Northern Ireland Council for Voluntary Action (NICVA) have taken the opportunity to set out in the report clear statements of their positions on the issues that it covers. Given the complexity of the issue, input was necessary from people in the public and private sectors who had expertise in, and experience of, various forms of PPP. We are grateful for the time and thought that many people have given to the project.

Although the report is the product of intensive work over several months, its publication marks the commencement of a wider consultation process. We hope that the report’s comprehensive nature will help to ensure that that consultation process is well informed. The Executive are committed to a social partnership approach to this important area of policy development, which should be consolidated. We want to ensure that the social partners, including the representatives of business, trade unions, and the voluntary and community sectors, can make an effective contribution to the forthcoming consultation.

The working group comprised a PPP forum that operated as a steering group for the review, and four focus groups considered specific aspects. Three generic focus groups considered the accommodation, infrastructure and technology sectors. They strategically assessed the scope for PPP in a range of types of projects. A fourth group — policy and organisation — considered a range of wider economic and social policy issues, as well as organisational and structural issues.

The working group’s format was such as to ensure that as wide a spectrum of views as possible was drawn on. We are pleased that the report reflects the deliberations of a group with a wide spectrum of local and international perspectives.

The key findings of the report include a helpful analysis of the scale and nature of the investment deficit and its causes, but I shall not dwell on that. We must ask how we can best address that deficit.

The working group developed a definition of PPPs to suit our circumstances, reflecting our unique social, economic and political characteristics. The definition is:

"A Public Private Partnership is generally a medium to long term relationship between the public and private sectors (including the voluntary and community sector), involving the sharing of risks and rewards and the utilisation of multi-sectoral skills, expertise and finance to deliver desired policy outcomes that are in the public interest."

The Executive welcome that definition of the concept. It embraces a wide range of possible forms of PPP, not merely those that have been used here so far. However, it specifically excludes privatisation. It is intended to be wider than the concepts of the private finance initiative (PFI) and to underline that it can include new, untried models as well as those for which there is evidence. It is sufficiently flexible to include approaches such as not-for-profit bodies, which will be considered further. The Executive support the working group’s approach, which was that policy development in that area must be done in a way that suits Northern Ireland and reflects its unique social, economic and political characteristics.

The working group also surveyed the experience to date of PPPs in Northern Ireland. The survey involved 24 projects to a total capital value of £167 million. That primarily involved the design, build, finance and operate model of project, otherwise known as DBFO. That is the model that is typically used for private finance initiatives.

10.45 am

Projects have been largely accommodation- or technology-based. However, the group concluded that there are significant possibilities for PPP in the infrastructure sector, with the DBFO model having the greatest potential in that sector. The working group also looked at experience of PPPs throughout the world and cited several relevant examples in the report, showing that there are lessons to be learnt from a wide variety of contexts.

The working group viewed the infrastructure and accommodation sectors as having the greatest possibilities for PPPs, with the DBFO and concession contracts having the highest potential. More generally, the working group reviewed the potential of a variety of PPP forms. Those, such as non-profit distributing bodies, which have attracted considerable interest in certain quarters, have been included and recommended for further consideration.

A further key issue considered by the working group was the crucial distinction between the financing and the funding of public services. The central point is that no model produces free infrastructure: a funding source is always needed. The issue for the consultation is to establish how best to channel public and private sector capital finance into projects to get the best value for the money that has to be paid — by one means or another.

The working group defined the word "funding" as the source of public revenue to pay for a service and "financing" as the mechanism used to raise the capital needed for investment. The main issue in considering various forms of PPPs is that they represent alternative options for financing and delivering public services. The matter of how to fund the services — how to pay for them over the period of the partnership — must also be considered.

It is important to point out that every type of infrastructure financing leads to an ongoing funding requirement. Conventional procurement means that the public sector carries the risks and rewards of ownership and must have capital tied up in asset ownership. The initial capital investment must be found from our capital departmental expenditure limit. In addition, under resource budgeting, there will be charges for depreciation and the opportunity cost of capital for most public sector assets, which will be a call on our resource departmental expenditure limit.

Similarly, the borrowing power that the Executive agreed recently with the Treasury gives us a potential means of financing investment. However, we will be required to fund the repayments from resources that we raise, above existing revenue. On that basis, for the first time, we will be able to finance assets above the departmental expenditure limit, although the cost of the depreciation of assets acquired through borrowing will still be a cost to the departmental expenditure limit.

Some forms of PPP transfer the risks and rewards of ownership to the supplier, and the public sector pays for the use of the facility through a unitary charge. In such cases the capital investment would not be a call on the departmental expenditure limit. It would be outside the public sector borrowing requirement. Furthermore, those cases would not have to be covered by additional local revenues because no public sector borrowing would be required. The key issue would be budgeting for the unitary payments from the departmental expenditure limit.

The working group emphasised that, given the scale of our deficit, funding will have to increase significantly to provide the required level of public services. The group recognised that this would present us, and our constituents, with stark choices. This means looking hard at all the possible sources of ongoing funding for essential infrastructure. Various aspects might be included.

First, there is the better use of our departmental expenditure limit, which we are seeking to maximise in the spending review process. We need a strong and clear policy of pressing for the best outcome from the Treasury and ensuring that what we have is used to best effect — driving out unnecessary costs by improving efficiency and effectiveness.

Secondly, there is access to new borrowing, supported by increased local revenue under a reformed rating system — hence the very important links between this consultation and the review of rating policy, which is ongoing and for which a public consultation will be launched in the near future.

Thirdly, there are user charges — where it is fair and appropriate that costs should fall on those using a particular service. This has been suggested, for example, as a way of funding road improvements as part of the regional transport strategy. Fourthly, there is the matter of asset disposals — so that we hold only assets that are needed for services to the public. To maximise the financing methods at our disposal, a clear funding strategy must also be determined, and that will be at the heart of our Budget planning for the years ahead.

The working group emphasised that PPPs are not the panacea to our financing and funding problems but that through them there is potential to improve efficiency, to provide value for money in service delivery and to deliver services sooner than would otherwise be possible. It is important to note that PPPs offer one route under which earlier delivery can be achieved without necessarily requiring extra revenue to be raised, as existing capital budgets could be converted to provide a stream of funding for the PPP projects.

The working group concluded that a variety of benefits could be realised from PPPs. The report shows that there is potential for better value for money and efficiency savings to be secured. Some types of PPP involve giving a supplier responsibility for lifetime asset maintenance. There is potential for service delivery to be achieved sooner than is possible under traditional procurement. Those are some of the benefits that can be achieved from the utilisation of the private sector in the finance and delivery of public services.

The working group emphasised that PPPs should be chosen only where they are deemed to provide value for money in comparison with conventional public sector procurement. Indeed, it is important to note that the Treasury allows PPP projects to proceed only where they pass the test of offering better value for money than conventional procurement, and I can assure the Assembly that my Department will continue to apply that principle here.

The working group also recognised that a range of concerns exists about PPPs, especially in relation to equality and public sector employees, and it considered those in depth. As I have said on previous occasions, such concerns are genuinely held. My own political instinct is to share such concerns, especially on employment-related issues. I will look for them to be addressed fully and carefully in any PPP approaches that we take. No one should be disadvantaged in employment conditions because a project is taken forward through the PPP route.

On equality, the working group has made some key recommendations aimed at ensuring the stringent application of section 75 of the Northern Ireland Act 1998 and strengthening the protection afforded to employees. The working group has also highlighted that the current investment deficit, and its impact on the quality of public service provision, results in various potential inequalities. The deficit has resulted in accessibility difficulties in public transport; difficulties in ensuring that water standards meet the required European Directives; health problems associated with failure to keep up to date with advances in technology; and inequalities in standards of accommodation in some areas of our public services.

The working group noted that failure to consider or adopt alternative investment methods might exacerbate existing inequalities and service inadequacies. PPPs could provide the potential to facilitate early additional investment in public infrastructure, facilities and services in an innovative and efficient way.

The working group calculated that, if the current investment deficit were addressed, around 7,400 jobs could be created over a 10-year period in the construction industry, thus providing both economic and social benefits. Those benefits would arise under any form of procurement, but it serves to emphasise the direct economic impact of investing in our public service infrastructure, as well as the wider social and economic benefits of high-quality public services.

The working group noted that a benefit of PPPs over conventional procurement is that the contract mechanism ensures that the service is maintained to a specified standard over the lifetime of the contract. This is guaranteed by penalty mechanisms should the private sector operator fail to deliver. Under conventional procurement, an asset immediately becomes the responsibility of the public sector, and previous Administrations under direct rule found maintenance budgets an easy target for cuts in times of financial constraint. The impact of this was not immediately apparent, but it is certainly apparent now.

The Executive recognise that the issues of equality and public sector employees, addressed in the course of the review, have been particularly complex and difficult. Furthermore, while there has been a wide consensus among the social partners participating in the review on many of the recommendations in the report, clear differences of opinion remain on some matters. Thus, certain recommendations for further research and investigation into specific issues have been made, with the ultimate aim of finding resolutions to those differences.

We are determined that all necessary steps will be taken to ensure that the development of our policy on the use of PPPs is fully in accordance with all legislative requirements, especially those concerned with equality, and that the widest possible consensus on the implementation of our policy will be secured. In that context, the proposals relating to equality set out in the review of procurement have equal application to the use of PPPs.

As I mentioned earlier, the reinvestment and reform initiative changes significantly the context in which we will consider the report of the PPP working group. The Executive have considered carefully the arrangements for publishing the report and have formulated an initial response, which we are publishing to accompany the report. I have reflected this in the terms of my statement, and the full response is attached to the copies of the statement provided to Members.

At the heart of the reinvestment and reform initiative is the decision to create a new organisation in the form of a strategic investment body. We are determined to ensure that strategic infrastructure is planned and delivered in a way that makes the most of all the means and resources available. It is intended that the strategic investment body should have the necessary expertise and resources to serve the Executive’s programme of strategic capital investment. By using the new body, the Executive hope to provide the best possible opportunities to promote the effective use of the various means available. One of the key tasks that may fall to the strategic investment body will be to advise on the appropriate funding route for particular projects.

In particular, I wish to emphasise that in the major consultation on the report, which we are launching today, we will want to include consideration of, and to hear views and comments on, the full range of possible sources of funding, and how they can best be used to address the needs of the region.

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We made it clear on 2 May that to make vital improvements in infrastructure, we must examine all possible means and rally the best possible contributions from all sectors. We are convinced that no single solution – be it borrowing, PPPs or more traditional public expenditure – is likely to meet our need. Rather, different funding and procurement approaches will provide solutions in different circumstances.

Further debate and discussion on the use of public-private partnerships in our public services is necessary to ensure that the policy framework finally developed is one that attracts the maximum possible support and acceptance throughout the community and across all sectors. Accordingly, the Executive will initiate a detailed consultation process called Financing Our Future prior to taking policy decisions. That process will focus primarily on the working group’s report and recommendations.

We intend that the consultation process should be proactive and constructive, encompassing debate in the Assembly, discussions with Assembly Committees and public meetings and detailed consideration and evaluation of written submissions.

The report will be distributed to a wide range of bodies to facilitate the consultation. That will include Assembly Members, a variety of public, private and voluntary sector bodies and trade unions and those listed on all departmental equality schemes. To further the social partnership approach adopted by the working group, we want to take account of as broad a cross-section of opinion as possible.

The consultation will last for almost 18 weeks — until 20 September. That will provide the Assembly and the general public with a lengthy period in which to submit responses. It will afford representative organisations adequate time to conclude consideration on the report’s key issues, after the summer holiday period if necessary.

We intend to hold three public meetings in the middle of June at locations around Northern Ireland, so that the details and key recommendations of the report may be explained to the public. The dates and venues for those meetings will be advertised in the press in the next week or so. A panel drawn from the four sectors of the working group will help explain and examine this complex and intricate subject.

We also propose to hold a debate in the Assembly in September — towards the end of the consultation period — so that Members may comment on the report and deliberate on its key issues. We will also engage with the Committee for Finance and Personnel and the Committee of the Centre. Officials of the Office of the First Minister and the Deputy First Minister and the Department of Finance and Personnel are ready to support other Departments in giving evidence to other Committees, should they so wish it.

The new arrangements announced on 2 May have the potential to transform our prospects for dealing with the infrastructure challenge. We encourage an informed debate on how best to address those urgent matters and consider the implications of PPPs, borrowing and conventional public spending and options garnered from local or international experience.

I want the Assembly to join with me, and with the Office of the First Minister and the Deputy First Minister in thanking the working group for its vital contribution to tackling the issue of financing our future and for playing a full role in the consultation.

The Chairperson of the Committee for Finance and Personnel (Mr Molloy):

Go raibh maith agat, a LeasCheann Comhairle. I thank the Minister for his statement and the working group for its report. It is an important document, and I hope that consultation will follow. We also welcome the opportunity for public consultation. It is important that we engage as wide a range of people as possible. However, I am concerned about the structure of the consultation and how we ensure that we get the required response. The location of the consultation meetings is also important.

I am also concerned about the transfer from capital funding to public-private partnerships, which is dealt with in paragraph 24 of the report. How will that be achieved? Will it be authorised by the relevant Department, by the Executive or by the strategic investment body? It is important to locate the finances for projects and determine how they are going to be repaid.

Dr Farren:

I wish to record my appreciation of the work of the Committee for Finance and Personnel, which prepared its own report on public-private partnerships. The valuable contribution of the Committee is acknowledged in my statement and in the working group’s report.

Final decisions on the location of the consultation seminars have not yet been taken. I welcome the advice of the Committee on the most suitable locations. The structure of the consultation has all the normal characteristics. All those with an interest are invited to make submissions. We trust that the 18-week period will be sufficient to prepare detailed and considered submissions.

The consultation seminars are intended to bring the issue as close to the general public’s attention as possible and to involve the relevant sectors represented on the working group. I hope that the general public will find time to participate in it. In the near future I shall be taking advantage of speaking opportunities to advance the debate from my Department’s point of view. I trust that Members will also contribute to that wider debate.

With regard to the decision-making mechanisms of the consultation, it is important to note that I have placed considerable emphasis on the changed context that the announcement of a new borrowing facility on 2 May has created and on the Executive’s decision to establish a strategic investment body.

The Committee for Finance and Personnel recommended that we pool the expertise in the Administration, given that 20 public-private partnership projects have been completed and several more are in the pipeline. The reinvestment and reform initiative compels us even more to pool that expertise and to take the best possible advice from the public sector and elsewhere on the most appropriate financing route to follow when we address the needs of particular projects.

Ministerial Colleagues are responsible for determining their departmental priorities. It is the responsibility of the Executive, following the advice, in this case, of the new strategic investment body, to make decisions on how finance can be raised to enable projects to proceed. Much remains to be worked out. If I detected a concern in the question, I hope that it has been allayed by my assurance that Ministers will still retain responsibility for their own priorities.

Mr McClarty:

To what extent can we aim to save money from the existing departmental expenditure limit and use those savings to service borrowings?

Dr Farren:

If the Member’s question relates to the new borrowing facility that the Chancellor and the Prime Minister announced on 2 May 2002, there are two elements. Initially, we have a borrowing facility of £125 million, and we will add a further £75 million from our end-year flexibility. Additional finance of £70 million will also be available from the Executive programme funds.

With regard to possible expenditure on infrastructure and other major investment projects, over the next two years a facility that could extend to some £270 million to service the borrowing that may be made against the £125 million will come from existing revenue. No additional revenue, therefore, will need to be raised. If we move beyond the two-year period and begin to draw down from the National Loans Fund, the new and more permanent long-term facility will have to be serviced directly from the revenue streams that we control. The extent to which we determine the amount that we should borrow will be balanced by the extent to which we follow a public-private partnership route. Public-private partnership projects will be serviced by the departmental expenditure limit, so we will not need to use additional revenue from those revenue streams that we control. Therefore, judgements will be made.

It would be foolhardy to accumulate a great deal of debt through the borrowing facility and thereby impose pressures on those revenue streams that we control. The Treasury will monitor carefully the extent to which we attempt to borrow so that it can put the break on if we are foolhardy, but I do not anticipate that we will be. There must be a balance between the new borrowing facility and our access to public-private partnerships and whether we draw down from the capital stream in our departmental expenditure limit to provide the necessary funding for those projects that we decide to proceed with.

Mrs Courtney:

I welcome the publication of the report and the start of the consultation process. The Minister stated that he shared people’s concerns about the transfer of workers and their rights. Will he address that matter further, and will he assure us that a two-tier workforce will not emerge?

Dr Farren:

I trust that Members will appreciate that I went to some lengths in my statement to acknowledge the fact that concerns exist. To a certain extent I share those concerns as does the trade union movement.

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The experience of public-private partnership projects in Northern Ireland has shown that 113 employees transferred to the private sector under 25 projects at a total value of £193 million. None of those workers has subsequently been made redundant, so there is no hard evidence in Northern Ireland to demonstrate that a two-tier workforce is emerging. However, we have made the point that it is necessary to monitor carefully this aspect of PPPs to ensure that workers’ rights are fully protected when contracts are being prepared. I stated earlier that no one should be disadvantaged and, to put it more positively, their rights must be upheld fully within the framework of public-private partnerships. Legislation is in place to ensure that those rights are upheld. However, if there were a need to review the legislative protection, I am sure that the Assembly would support me in doing that.

Mr Close:

I welcome the Minister’s statement on this complex issue, which will have an impact on society for decades to come. His statement gave a definition of public-private partnerships. Does the Minister agree that the history of PPPs suggests a different definition, one in which the public sector carries the risks while the private sector gets the rewards? Public-private partnerships are like any borrowing — a way of getting additional capital investment at the expense of resource budgets. For those reasons they are expensive per se. They are financially expensive, and they have the potential to be expensive with regard to conditions for employees.

In his previous answer, the Minister referred to 113 employees. That is a small number, given the potential for 7,400 jobs, as mentioned in his statement. If we cast our net wider and look at the impact of public-private partnerships where they have more history — across the water, for example — we see that the impact is anything but satisfactory for employees. Does the Minister not agree that value-for-money considerations are invariably and inevitably blurred owing to the length of time these projects take? Will he give his opinion on whether the recent investment package represents better value for money than any of the current public-private partnerships of which he is aware?

The Minister challenged Members to advise him of suitable locations for public consultation. I suggest the Island complex in the new city of Lisburn as the ideal location for such public consultation.

Dr Farren:

Is the Member suggesting that workers in the private sector in Northern Ireland are suffering a form of Victorian working conditions and that they are not protected? The public sector engages daily with the private sector in the provision of a wide range of contracts. Our roads, schools and hospitals have been built by engaging, and signing contracts with the private sector. Is the Member suggesting that workers employed under all those contracts have not been protected adequately; that they are subject to improper conditions of employment; and that their rights are not being upheld? That seems to be the implication of his question.

In the history of the Labour movement many public sector workers took umbrage and opposed the conditions under which they had to work. It is not simply a matter of looking to the private sector to see where workers’ rights have been protected. We have to ensure that there is adequate protection for workers in the contracts — it would be totally improper for any Government Department to enter into a PPP project that did not make adequate provision for workers’ conditions of employment. If the Member has concerns, he should submit them to me and quote the evidence. I will certainly consider any hard evidence, but he makes a sweeping statement about evidence existing outside Northern Ireland. I have not seen such evidence, but if it is there, let us see it and examine it in relation to our situation.

If I understand him correctly, the Member is also criticising PPPs by implying that they store up considerable debts for future generations. We have to look at what we have stored up as a result of our failure to invest in our infrastructure: the inadequacy of some of our transport services and roads; the inadequacy of some of our schools — Members complain frequently about the failure to invest in schools and colleges; and the inadequacy of the technological equipment in our public services.

We are seeking to provide the Executive with the means of acquiring the finance necessary to fund the projects that will give us a modern infrastructure and the services associated with it. That is what people are asking us to do. I think that they will compliment us on providing them with the legacy of a modern working infrastructure, and we will be careful not to impose a burden of debt that cannot be shouldered by this or future generations.

Mr Ervine:

I thank the Minister for his statement and the delivery of the other half of Thatcherism — the first part was the disinvestment that creates the circumstances in which you do the rest, or at least the Executive seem determined to do the rest.

It is interesting that the Minister is keen to suggest that those in the public sector will be looked after and protected. They will probably belong to companies that have to be leaner and meaner. Companies will want to offer good conditions, but will they offer the same number of jobs; will those jobs be under a 12-month contract; will those jobs be without holiday pay or a pension; or will those jobs be like those in the public sector today? Of course not.

When the Minister is taking care of workers’ interests and conditions, will the same number of jobs be provided under public-private partnerships as there are now? The Minister has put forward a "frightener". Anybody who works in the public services will be deeply frightened today.

Dr Farren:

I remind Members that I am not launching a definitive policy document, but a consultation document. Those concerns are far off the mark in many respects. However, if the concerns that are suggested by Mr Ervine exist, they should be heard, documented, and addressed. I have made that abundantly clear. I belong to a political party that is concerned about social justice. It is concerned about ensuring that workers’ rights are upheld — [Interruption].

If the Member has something to say, perhaps he could stand up and say it so that I can hear him.

Mr Close:

Are you going to put the rates up?

Madam Deputy Speaker:


Dr Farren:

We are not discussing the rates. There is no proposal for the rates to be increased.

Mr Ervine has raised serious issues, so let us be clear about them. I have indicated the estimated scale of jobs that could be created in the construction industry over the next 10 years. It is a sizeable number. Every one of those jobs — just like every other job in Northern Ireland’s labour market — is subject to current legislation on working conditions, payment, pension rights and all other rights to benefit. There is no suggestion or implication in anything that I have said or in the report that there will be any diminution of those rights.

I have said in response to earlier questions and in my statement, and I repeat it, that my responsibility — and I imagine that this goes for my Executive Colleagues — for contracts relating to public-private partnerships, if the Executive decide that they should advance along that particular route, is to the effect that those contracts will enshrine the full protection of workers’ rights and will satisfy not only Ministers, but also the House. That is a commitment on which I stand today, and on which I will continue to stand for the rest of my political life.

Ms McWilliams:

I welcome the statement. However, I share some of the concerns that have already been raised on the Floor that it may lead to short-term gain and long-term pain.

To date, my experience of public-private partnerships has not been healthy. I want to give an example of something that occurred in my constituency, South Belfast. There were rugby and hockey pitches on the site of Wellington College. Northwin Ltd moved in to develop the site. I understand that the school was built on a much smaller scale than was initially thought to be required, leaving no room for expansion. The development benefited from public land. I attended a public inquiry at which those responsible for planning control were in dispute with the Department of Education over what should have happened to that public land. As we all know, developers win such disputes. What was a piece of green land and open space is now gone.

There are several concerns. Will the Minister take this opportunity to elaborate on the differences he mentioned that require further research and investigation?

Can the Minister confirm that health board finance officers have not had a happy experience of PPPs and that they may not offer value for money?

11.30 am

Dr Farren:

I have stressed from the outset that the consultation is based on a report that reflects experience in Northern Ireland and elsewhere on this island, in Britain and further afield to see how we might adapt PPPs, if that is what we agree to do.

There have been mistakes, including delays and inadequate standards, in public sector projects financed by traditional procurement, which is how most developments have been funded. I cannot comment on the situation that the Member mentioned, but if she wishes to write to me I will give her further information on the matter.

We are trying to learn from experiences here and elsewhere to see how we should progress; that is the nature of the consultation exercise. I do not present a definitive policy to the Assembly, and I understand why all of the Members’ issues and concerns have been raised. They should be drawn to our attention, and evidence must be documented where it is available so that the consultation process can benefit from all views, positive and negative, on PPPs. In that way, when the matter is discussed by the Committees and then debated by the Assembly in September, Ministers can be as fully informed as possible about how Members wish us to proceed.

Mr McCartney:

The statement sets out ways to borrow money to rectify the enormous deficit in infrastructure. Were the Minister and his Colleagues in both major parties unaware of that enormous deficit when they negotiated the Belfast Agreement? Did they take any steps then to require the Treasury to make good the deficit? The Minister now says that there was a failure to address infrastructure in the past. Were he or his Colleagues unaware of that? That is the nature of the problem, and perhaps the Minister can elaborate on that point.

When the matter was raised in the debate on the spring Supplementary Estimates, the Minister did not deign to respond to the deficit or the methods to be adopted to deal with it. Is the method offered today not simply to borrow on the basis of screwing the people of Northern Ireland for additional money?

The Minister hesitated to use the words "rates" or "water charges". He talked euphemistically about revenue streams that we control and revenue sources. He never once mentioned the ugly fact that "revenue streams that we control" means increasing rates and imposing water charges. Why not? What is so nasty about those words that they cannot be utilised? Perhaps the Minister will explain why, however it is done, we will be involved in expensive borrowing when we are spending £1·2 billion annually on administrative costs that have never been pruned.

If £300 million to £350 million a year were saved on those costs for the next three years, the Minister would be able to commence some of those infrastructure projects with a lump sum of more than £1 billion, without increasing rates and water charges for the people of Northern Ireland, and without burdening them with debt and interest to private financiers in future. Those private —

Madam Deputy Speaker:

Order. The Member has put three questions. I ask him to draw to a conclusion.

Mr McCartney:

With respect, I might have had a little more time if the answers to earlier questions had not been so prolonged. However, why do the Minister and his Colleagues in the Executive not raise money from savings on administration instead of imposing - or threatening to impose - further taxes?

Dr Farren:

The Office of the First Minister and the Deputy First Minister is launching a review of public administration. In that context, if the Member has proposals on administrative efficiencies and cost savings that he believes should be addressed, he should perhaps make his views known. A general injunction is observed across all areas of public expenditure to ensure best value and to address efficiency and cost savings in every aspect of our public administration. I therefore assure Members that this Minister of Finance and Personnel takes very seriously the whole question of public expenditure.

I shall not address the issue of negotiations during the course of the Good Friday Agreement. I launch today a consultation process on the report of the working group on public-private partnerships. If the Member has suggestions on whether or how those should be used, I trust that he will use the opportunity afforded by the consultation to make us aware of his erudite views.

Mr O'Connor:

I welcome some of what the Minister has said. However, I am unashamedly a socialist, and the idea of public-private partnerships rests somewhat uneasily with me. We have heard today from people who sat in the House of Commons and who did nothing when this place was starved of infrastructural investment. We have now been given powers under the reform and reinvestment initiative. Given the crisis in public services that the Executive must address, where does the Minister see those powers fitting in alongside any previous use of PPPs?

Dr Farren:

I doubt whether there is a democratic Administration in any part of the world without an available borrowing facility. It is important that Members appreciate that. The report indicates, and perhaps Members already know, that the use of public-private partnerships is widespread across the globe. I invite Members who have not already read the report to examine it and to follow up with detailed evidence, which I am sure our library services can provide, regarding PPPs in Australia, the United States and Canada, as well as those across the EU and closer to home. Public-private partnerships are frequently used to provide infrastructure needs.

As I have already emphasised, we have three main sources from which we can provide the necessary funding for infrastructure projects: a borrowing facility; PPPs - which, if further adapted, can reflect Member's views more accurately - and the public expenditure allocation in the departmental expenditure limit, which was the traditional means through which we funded projects. The disposal of public assets is also outlined in the report.

With the best available advice and through appropriate and judicious use of those means, we can ensure that we provide the necessary infrastructure and make good the deficit. We must choose the most cost-effective route.

Mr Hussey:

The consultation process will address how we finance our future. Does the Minister agree that if we were financing our future, we would not start from here? Reference has been made to the decades of failure to invest in public infrastructure. Who failed to invest in our infrastructure?

The Treasury has shown intransigency by failing to allocate additional funds from Europe to Northern Ireland. Security is being downgraded because we have yet to receive the much promised peace bonus. The reinvestment and reform package is piecemeal compared to the Province's needs. Does the Minister agree with those observations?

Further, is it not the case that the cost of borrowing would be lowest if the money were borrowed from the Treasury, whereas the cost of borrowing for public-private partnerships would be dictated by private sector partnerships? Given current financing and resource budgeting methods, the cost of depreciation will impact on the departmental expenditure limits. Therefore, we might pay for assets two or three times over. We will pay for the cost of depreciation and for the money that we borrowed. Will the Minister assure the House that the depreciation from the departmental expenditure limits is used for the future replacement of assets?


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