Thank you, convener. This is a complex subject, but I will keep my introduction brief.
The Scottish Government invests in infrastructure assets including schools, roads and hospitals to support delivery of high-quality public services and economic growth. Privately financed contracts allow the Government to make additional investment beyond that which is supported by capital funding in the block grant. The Government recognises that such contracts are more expensive than traditional public financing, and it accepts the extra costs to enable the additional investment to go ahead. However, it is important that the additional costs are understood.
Most investment is still financed through traditional means, but the amount of privately financed investment is substantial. Since 2005, the Scottish Government, working with councils and other public bodies, has used NPD and hub contracts to build assets worth £3.3 billion. That is on top of the £5.7 billion-worth of assets that were built under earlier private finance initiative contracts. Payments on those contracts totalled £13.1 billion up to the end of 2018-19, and the public sector is committed to further payments of £27 billion through to 2048.
PFI, NPD and hub contracts have been used across the public sector. The Scottish Government decides when they will be used by determining its capital allocations and offering to meet all, or a substantial proportion of, the on-going payments. It is not currently clear enough how the Government decides which projects should be privately financed and which will use traditional public financing, which means that it is difficult to assess whether the combination of projects and use of private finance is delivering value for money overall.
NPD and hub contracts are no longer used for new projects, and the Government is introducing two new funding mechanisms in their place. The first of those—the mutual investment model—aims to allow continued use of private finance to provide additional investment following changes to the national accounts rules.
The second model—the learning estate investment programme—will remove the need to directly access private finance for schools projects by linking on-going Scottish Government contributions to the achievement of specific outcomes.
The models are being developed and introduced alongside the recent report by the Infrastructure Commission for Scotland, with a new infrastructure investment plan being due for publication later this year. The Scottish Government needs, alongside those developments, to develop its reporting to Parliament and to the public to show how use of private finance is contributing to its wider policy aims.
As always, the team and I will do our best to answer the committee’s questions.