Official Report 542KB pdf
Good afternoon and welcome to the 22nd meeting in 2015 of the Local Government and Regeneration Committee. I ask everyone present to switch off mobile phones and other electronic equipment as they affect the broadcasting system. Some committee members might consult tablets during the meeting because we provide meeting papers in digital format.
We have received apologies from committee members Cameron Buchanan, Jayne Baxter, Willie Coffey and Clare Adamson. I welcome Stuart McMillan MSP as a visitor to the committee.
Before we move on to committee business, I express my thanks to Inverclyde Council and its staff for assisting with the organisation of this meeting and pulling together the programme for our visit. Their efforts are much appreciated. I also thank the provost for his welcome.
The first item on our agenda is to take evidence from a panel of witnesses on local authority pension fund investment in capital infrastructure projects, which is part of our scrutiny of the draft budget for 2016-17. We will also take evidence from the panel on matters relating to the Glasgow and Clyde valley city deal, and particularly how it impacts on Inverclyde.
I welcome to the meeting our witnesses from Inverclyde Council: Jim Clocherty, depute leader; John Mundell, chief executive; and Aubrey Fawcett, corporate director for environment, regeneration and resources. I also welcome Alan Vesey, director of city deal, Glasgow City Council; Richard McIndoe, head of pensions, Strathclyde Pension Fund; Alastair Dickie, development director, Ediston Real Estate; and David Robertson, chief financial officer, Scottish Borders Council.
Would any of you like to make an opening statement?
Yes please, convener. Good afternoon. I thank the committee for visiting Inverclyde to see at first hand the extensive regeneration that has taken place here, and which continues.
Inverclyde’s town centres have been improved and enhanced, new business premises have been built, investment has been made in new public realm space, new retail opportunities have been created and the regional transport network has been improved. All of that has attracted new businesses to the area and created employment opportunities for local people.
I am also immensely proud of what we have achieved in Inverclyde over the past few years through regeneration in other key areas, such as in transforming positive destination outcomes for our young people when they leave school, whether they go into further education, training or employment.
Nevertheless, our partners in the Inverclyde alliance, which is our community planning partnership, remain focused on tackling the significant challenges that we still face in our communities. We need to build on what we have already achieved by stimulating economic growth—for the benefit of both residents and businesses—through major investment programmes such as the Glasgow and Clyde valley city deal. That initiative provides a unique opportunity to accelerate growth and create jobs for the Glasgow city region through programmes of work in areas including infrastructure, skills and enterprise activity.
The partner councils recognise that the city deal is a step change in the approach to regional economic development and changes are required in ways of working to ensure that the positive outcomes that will arise from this groundbreaking opportunity are maximised. The city deal agreement, in effect, unlocks £1.13 billion of investment, which will enable the delivery of 20 major infrastructure schemes across the city region and provide a catalyst for economic growth and investment for the whole region.
In addition to the infrastructure projects, the city deal includes £75 million to support further growth in life sciences through world-class research and development facilities, £10 million of investment to provide incubator and grow-on space for entrepreneurs, and a £25 million labour market programme to tackle the problems that are caused by unemployment and low wages.
The councils have already established the strong governance and support arrangements that are necessary to successfully co-ordinate their activities and fulfil the requirements of the agreement that was reached with the United Kingdom and Scottish Governments.
That is all that I want to say. Thank you.
Thank you, Mr Mundell.
As no one else wants to say anything at this point, I will ask the first question. We will look first at pension fund investments. Recently, the committee visited Manchester City Council to look at its pension fund investments and Manchester’s city deal. Greater Manchester Pension Fund has invested locally in both commercial property development and housing over a number of years, and it recently increased its investment to about 5 per cent of its fund value, or £800 million.
I ask Mr McIndoe to explain the extent to which Strathclyde Pension Fund invests in infrastructure projects. Is there scope for it to make further investments in such projects?
Strathclyde Pension Fund created a new opportunities portfolio in 2009, which is available to make a wide range of investments, including in infrastructure. It is particularly keen on impact investment. The first priority has to be investment return but, beyond that, it welcomes anything that can have an environmental or social impact, and it welcomes anything that can have a local impact.
The portfolio was instrumental in the construction of houses in Glasgow as part of the athletes village for the Commonwealth games and in a property development deal much closer to here. In addition, we recently increased the limit on the portfolio’s capacity to 5 per cent of the total fund, which is slightly less than £800 million and slightly smaller than Greater Manchester’s figure.
There are quite broad parallels between what we and Greater Manchester Pension Fund are doing. I, too, visited Manchester quite recently and we are sharing ideas.
How many houses were built for the athletes village?
Seven hundred units.
You said that you visited Manchester recently. Did you learn any lessons from its pension fund about local investment? Do you think that its knowledge is being exported widely enough in Scotland to allow other funds to do the kind of thing that it is doing?
It was certainly a very interesting visit. Greater Manchester Pension Fund has had a local investment portfolio for much longer than we have, so it has more experience than we do and it has built up a bit more resource. I guess that there is a lesson for us about how we might want to resource the thing going forward.
On other, specific learning, Greater Manchester’s housing model is interesting—it is very different from the one that we use. We will probably look further at that and at one or two other things that it has done, but what struck us most was the parallel between what it is doing and what we are doing. Even outwith infrastructure, we are doing quite similar things with local small-company investment and finance.
Has Greater Manchester Pension Fund exported what it is doing? It is certainly very willing to talk about what it does with anyone in the local government community. I do not know how many conversations it has had with others in Scotland, but I am aware that it has spoken to one or two other Scottish funds.
You said that it has been doing infrastructure investment for a long time. Why have we not been doing it here? Have we been far too risk averse in using the resource in pension funds to invest in local infrastructure?
I do not think so. For us, its time came in 2009—that is when we started doing it. That was to do with the withdrawal of traditional lenders from the marketplace during the financial crisis. That created big problems for many people, but it created an opportunity for us that we felt able and willing to exploit. It served as the foundation of what we have done in the new opportunities portfolio. In the various areas that it has invested in, a common theme has been that the projects are ones for which the banks or others would traditionally have provided the funding. In effect, we are stepping in to take that role. The same opportunity was not really there prior to our initiating the portfolio in 2009.
Does any other member of the panel wish to come in on the subject? We are interested in the fact that Manchester seems to have a get-up-and-go attitude when it comes to the use of its pension fund to fund infrastructure projects in the local area. The same cannot really be said of local authority pension funds here in Scotland, other than Falkirk Council pension fund, which seems to have made some advances of late.
Mr Mundell, would you like to comment?
We very much welcome the development. Specifically, within Inverclyde, we are benefiting from a £30 million development at Port Glasgow. I am aware that the Manchester city deal has been in existence—or at least in development—for much longer than the Glasgow and Clyde valley city deal. I understand from speaking to colleagues that it has taken Manchester nigh on 30 years to develop its city deal to the extent that it has been developed through a range of shared working. However, colleagues are on the front foot and I believe that the innovative work that is emerging just now will help us and other people not just in Glasgow and the Clyde valley but elsewhere, bearing in mind that the pension fund will require a return as well.
The primary aim of the pension fund is to provide retirement benefits to its members. In doing that, we seek investments that allow us to ensure that our future cash flows will be there when we need them to be and that we keep our employer contributions for councils stable.
We will examine any investment that provides a sound rate of return to the fund, and we are not predisposed to any particular type of investment. The Scottish Borders Council pension fund sets a strategic allocation for its assets, and we have a strategic allocation of 5 per cent of the fund to be invested in property, which we invest through a third-party fund manager. At 31 March 2015, the fund was sitting slightly ahead of that target, at 5.3 per cent.
Is that 5 per cent of the fund invested in property in Scotland?
It is invested in property throughout the UK.
It is invested nowhere else in the world—just in the UK.
It is UK property.
Councillor Clocherty, can you give us an elected member’s view on the use of pension funds for infrastructural investment?
I look at the bigger picture. I know what we are developing up at Port Glasgow through the Clydebuilt fund. However, as elected members, we have to look at how that affects the whole of Inverclyde. Although it is fantastic to see the infrastructural work that is being done at Port Glasgow and the investment that is going into that, I am acutely aware of the impact that it could have—and has already had—in the town centres of Greenock, Port Glasgow and Gourock. It is great to have the investment put in, but we must also be aware of the strains that that puts on other areas of our communities.
Mr McIndoe, have funds been divested from any investments due to social, environmental or ethical issues? That subject is currently in the news to a huge degree.
Yes—the fossil fuels aspect has been a particular focus in recent months and I suspect that that will continue for some time.
To the best of my knowledge, the answer is no. I do not know of a local government fund that has divested as a responsible investment strategy. At Strathclyde Pension Fund, we reviewed the issue over the summer with specific reference to fossil fuels, and the council agreed to a motion to investigate the possibility of divestment from fossil fuels. Ultimately, however, it agreed that that was not a particularly appropriate form of action.
Our history is in active engagement with companies in all sorts of industries to get them to improve their performance on financial, environmental and social governance issues. Divesting removes that option, in effect—if we come out of the fossil fuels market, it will go its own way. The likelihood of our divesting having any impact on that market was close to nil, so we preferred to continue to take an activist and an active approach that focuses on investments in renewable energy infrastructure, of which we have made—
What about the arms industry? Is Strathclyde Pension Fund still investing in the arms industry? Are other pension funds in Scotland still doing likewise?
Or the defence industry, as we prefer to call it.
Well, I prefer to call it the arms industry, Mr McIndoe. Are you still investing in the arms industry?
We invest in all industries. No market, sector or industry is excluded from any of our portfolios.
14:45
I note from the paper that was provided to members that Strathclyde Pension Fund has signed up to the United Nations principles on responsible investment. It seems a bit bizarre that investing in the arms industry, and possibly in the oil industry, is seen as responsible. Would you like to comment on that?
Those industries would be less responsible if we and a huge number of other global investors had not signed up to the UN principles. In effect, we are pushing participants in those industries to behave more responsibly. We are trying to improve companies’ behaviour on environmental, social and governance issues.
Mr Robertson, can you give us the Scottish Borders point of view?
Scottish Borders Council does not pursue a policy of investing directly in arms. We accept, however, that we are invested in companies that have some connection with the arms industry. We invest in firms with a multinational presence such as BAE Systems and Rolls-Royce, which may be connected to the arms industry via jet engines, for example.
Do members have any other questions on that point before we move on?
Mr McIndoe, can you give the committee an example of where concerns that have been pushed by your pension fund have made an investor think about where they are investing their money and the returns that they are looking at?
You gave an example relating to fossil fuels, and you have just mentioned the defence industry, which the convener referred to as the arms industry. You said that you would like to influence the companies in which you invest. Can you give an example of where Strathclyde Pension Fund has influenced a company to consider its investment portfolio to such a degree that there has been a change in attitude with regard to the investments that are made?
I think that there are two aspects to the question. I may have misunderstood it, but my response will still apply.
We try to exert an influence over the investment managers who manage the portfolio of investments, and we also try to influence, through those managers and another agency that we use for the purpose, the end investment and the companies. We have been doing that since 2000. Back then, few of the investment managers that we used would have had any research capability in environmental, social or governance issues, but now they all have some sort of research capability and some of them have very sophisticated capabilities in those areas. For example, Baillie Gifford in Edinburgh has a very good internal team that is looking closely at the fossil fuels argument. I am confident that that would not have happened without us and other investors pushing those investment managers.
Influencing the end companies is more difficult, and cause and effect can be hard to link. We primarily invest in big companies that are subject to all sorts of lobbying forces, so it is hard for us to say, “We asked for this and it happened.” Since the very early days of our engagement, we have pushed the big fossil fuel producers to invest more in renewable energy, and that has happened, but there have been a host of other forces pushing for that, too. We are only one voice.
Disclosure has been the biggest area of success. Engagement will often start with disclosure. We ask a company questions, and it says that it does not know, to which we say, “Well, find out and publish the answer, please.” That is still happening. This year, BP and Shell agreed to produce much greater disclosures on the risks that are posed in relation to the fossil fuel and trapped asset arguments. That was entirely in response to shareholder pressure. They will produce those disclosures in their annual reports next year.
We publish a quarterly report on engagement activity that lists hosts of instances of engagement. There has been a lot of success, but we cannot claim the credit for all of it.
You mentioned shareholder pressure. Do you know how great a percentage of shares the Strathclyde pension fund has in BP or any other company that it might invest in?
You said that you could influence one part but that, in relation to another part, you could not be sure how great your influence is, and that there might be other pressures on companies in terms of their investment strategies and other shareholders.
We are interested in what kind of pressure the pensions funds collectively in Scotland could have with regard to environmental, social and—in the convener’s case—armaments issues. For example, Lockheed Martin continues to develop weapons of mass destruction. How could the Scottish pension funds influence such companies to go for more environmentally and socially sound investments rather than investments in weapons that kill, maim and injure people?
We own a tiny amount of BP, so it is unlikely that our voice in isolation will ever be effective. Of course, there are instances when one voice saying the right thing at the right time can make a difference but, mostly, such action works best through coalitions of investors.
UNPRI is quite a good example of what I am talking about. Effectively, it works as a global coalition of investors who are all pushing for the same thing. In the United Kingdom and the local authority world, there is a similar coalition that is called the local authority pension fund forum, which numbers 80 of the local government funds in the UK, including most of the Scottish funds. If you add up all the assets of the local government scheme in the UK, it comes to £200 billion. That becomes quite a loud voice, particularly in relation to UK companies.
Mr Robertson, you said earlier that you look at the investments to ensure that you get a return for the pensions that you are there to protect so that you can ensure that employees can receive a pension. How do you weigh up the returns that you could make through environmentally and socially useful investments, compared to, say, the international portfolio that Scottish Borders Council’s pension fund might be engaged in? When we talk about pension funds’ contribution to the market in the UK, we are hit with this figure of 5 per cent, which seems to be a ceiling. Basically, if you invest 5 per cent in the UK, you are doing well, but you find that 95 per cent of the pension funds are invested elsewhere.
What would be the substantial change that would be required to enable the pension funds to start making a greater investment in socially and environmentally useful projects in the UK?
I do not believe that there is a ceiling in terms of property and infrastructure investment across pension funds. We regularly review our strategic asset allocation to different asset classes, and we will do so again in the near future.
We invest in a broad range of assets, including in the United Kingdom and overseas. For me, the key issue is balancing off the returns that the pension fund is seeking to make to the public sector. For example, last year, my own pension fund delivered a return of just north of 11 per cent from a broad range of investments across a range of asset classes. In turn, the council was able to borrow to fund capital investment at between 3 and 4 per cent. As the chief financial officer, I think that the key question is: why would I want to sacrifice pension fund returns and make the council spend more than it needed to in order to invest in assets funded by the pension fund?
Certainly as far as the Borders is concerned, I am not aware that the availability of finance is a restricting factor in investing in assets; for me, the key restricting factor is the affordability of the council’s revenue budget to meet the principal and interest repayments on the borrowing that it undertakes and ensuring that that remains affordable for future generations of taxpayers.
This will have to be your final question, Mr Wilson.
Is the 11 per cent that you have mentioned a target return for the pension fund? You said that the local authority was able to borrow at 3 to 4 per cent, but what about the amount of money that is available through the pension funds for environmentally and socially responsible projects in the UK? We have heard from Mr McIndoe about the investment made by the Strathclyde pension fund in the athletes village in Glasgow for the Commonwealth games. I might be wrong, but I am sure that that investment is not delivering an 11 per cent return. Can we make socially justifiable investments in housing and other such projects that not only provide a financial return to the pension fund but bring much wider benefits, or is it a case of protecting the pension fund above everything else?
We need to make a distinction between the pension fund and the council’s money. As I have explained, the pension fund, as a separate legal entity, has the duty to maximise returns. That said, we want to invest in a broad range of asset classes, and the pension fund certainly finds infrastructure interesting. I would not say that we were targeting an 11 per cent return; that is our average return across a range of investments. If we could get a stable but lower return from, say, investing in property, we would be very keen to look at that in managing our overall risk portfolio.
At the moment, we are looking at our whole approach to ethical investment. Although we have not yet finalised that policy, I am quite sure that when we do so later this year we will be interested in looking at wider social considerations than perhaps we have in the past.
I should point out first of all that I am not a member of the committee.
I find the issue really interesting. In operating the pension funds, do you tend to have parameters with regard to areas of investment? For example, do you decide that up to 10 per cent will be invested in defence, 7 per cent in some other sector and so on, or do you take a more flexible approach?
As a rule, we take a top-down approach to strategy. The first distinction that we make is between equities and bonds, and after that we make decisions on the basis of geography. Having decided on that, we will for, say, UK equity investment tend to award a manager a UK equity portfolio that covers the whole market. If it is a passive portfolio, we will own a slice of the whole market; if it is active, the investment manager will actively make decisions about the sectors that he wants to favour, although he will typically stay in all of the sectors but adjust the weighting according to his judgment of their prospects at any point in time.
We would adopt a similar approach in the Borders. The committee sets the strategic allocation of costs to asset classes and then determines the allocation to fund managers. We do not set an allocation based on individual sectors such as defence.
15:00
Are you able to provide a breakdown of the different classes of the funds that you have at the moment? How might that have changed over the course of the past 12 months or maybe even over the past three years?
It would be helpful if you could give us a brief overview. I know that it is a complex question.
Briefly, our asset allocation to UK equities is 19 per cent of the fund; it is 46 per cent for global equities; and it is 13 per cent for bonds. We have a multi-asset fund—which is largely to do with private equity investment—of 17 per cent and property at 5 per cent.
That is the strategic benchmark that we have set; the actual levels may vary depending on current market sentiment. For example, the strategic benchmark for bonds that I quoted was 13 per cent, but in the past year we have been running the portfolio underweight on bonds because of the poor investment returns, so it is sitting at around 10.7 per cent of the overall fund. Levels may vary within a tolerance around the strategic asset allocation.
Our situation is not terribly dissimilar. We have a little more in UK equities—I think that we have 22.5 per cent in that. We have 72.5 per cent in total in equity and 15 per cent in property, which is predominantly in UK property but we also do some global property—about 2.5 per cent of the fund is in global property. We are also underweight on bonds right now and we have a substantial private equity portfolio, which is currently about 9 per cent of the fund.
Thank you. We would be grateful if you could send details of those breakdowns so that we can have a look at them.
I will give you some quick-fire questions, gentlemen, so that we can cover all the bases. Are there any barriers that could be overcome to allow you to invest more in infrastructure projects locally?
We could answer that question only in the context of looking at our overall strategy for the fund: is it delivering the right returns to meet pensioners’ needs in the future?
But there are no barriers or anything like that.
Not as far as I am aware of.
Mr McIndoe, do you see any barriers?
My written evidence described some impediments—none of them are absolute. It is a question of finding the right opportunities. It is about the right deals being there and being doable. It is about our ability to diligence them and get them. There is no absolute impediment to any of that, but it all takes a lot of time. The deals have to be forthcoming for us to put in the money.
Would pension funds in Scotland benefit from working together on investing in infrastructure projects?
There are certainly opportunities from working together; there always are.
We are working with a group of UK pension funds on infrastructure opportunities under the umbrella of the pensions infrastructure platform. That is working well for us.
Mr McIndoe, you mentioned the issue of time. It seems that Manchester has been doing certain things for quite a long time compared with us in Scotland. Are we too risk averse here?
I think that we have caught up very quickly with Greater Manchester in that we both have similar allocations now for the niche new opportunities portfolios.
Why did we need to catch up? Why was Manchester so far ahead of us and why did it take us so long to get to the same level of investment?
From a standing start in 2009, we have been very quick to get to the same level of investment that Manchester has reached over 20 years.
Mr Robertson—are we too risk averse?
No, I do not think that we are. I think that we take a balanced approach to risk, and I think that we offset that risk with the return that pension funds expect to deliver.
Okay. The committee will be keeping a close eye on that aspect.
Mr Vesey, can you give us an overview of what progress there has been with the Glasgow and Clyde Valley city deal?
Progress at this point in time over infrastructure, innovation and the labour market remains on programme. In terms of the innovation projects, the support group for innovation has been established and will meet next week; MediCity and supporting growing businesses are due to complete this month; labour market went live on 24 August; and Renfrewshire Council is taking the lead on youth gateway, which has elements of labour market.
In terms of the infrastructure programme, 14 business cases have been approved to progress to the next stage and another three are coming forward this week that I hope will go to the Glasgow and Clyde Valley cabinet at the end of this month.
Can you give us some detail on the 14 business cases that have been approved? In particular, as we are in Inverclyde today, it would be interesting to know how many have been signed off for Inverclyde.
The three projects in Inverclyde—Inchgreen, Inverkip and ocean terminal—are currently at what is called a pre-implementation phase, which is where their strategic business case is being developed. It is those three business cases that we will put forward to the chief executive group on Wednesday for consideration. If they progress, they will go forward to the cabinet on 20 October.
So far, out of the 14 business cases, none in Inverclyde has been completely signed off yet.
None has been signed off as yet.
So there are three to come later.
Yes.
Let us look at the project for ocean terminal, which we visited earlier today. I understand that the investment that is being asked for the project is £14 million or thereby. That investment also involves the private company Peel Ports. We have had an indication that things can be worked out so that there are no state-aid implications. How do we claw back any profitability from Peel Ports if the £14 million gets the go-ahead? Do you want to go first on that, Mr Vesey? We will take Mr Fawcett after you.
Unfortunately, I do not have the detail on that particular project, which will come forward in the strategic and then the outline business case. In terms of the programme, perhaps I should have said in my introduction that I have been in post for only about eight weeks, so I am sure that my colleagues will be able to give a bit more advice on the programme than I can.
We might give you a little bit of leeway in that regard.
Thank you.
Only a little, though.
Mr Fawcett, can you comment?
Any profitability would be clawed back through a joint venture agreement that we would have with Peel Ports. For example, if each party—the public sector and Peel Ports—puts in 50 per cent of the money, the residue income and the net income would be split on a 50:50 basis; that is how it would be clawed back.
Okay. Can you give us an indication of how much value to the local economy there is from operations at ocean terminal?
During our visit to ocean terminal earlier, we got an indication from Andrew Hemphill, the operations director, that about £10 million a year in terms of spend locally emanates from ocean terminal.
I always play devil’s advocate, as you are well aware from previous visits to the committee, Mr Fawcett. How would you respond to folk who might be a bit cynical about city deal money going to help a private concern?
We are under very strict rules, convener, and you are right to play the devil’s advocate role in that regard. However, we have been very clear with Peel Ports, as we are with any other private sector body, that when we put in public money it must be done in a proper manner that does not breach the state-aid rules. We have had meetings with the Scottish Government’s state-aid unit to ensure that Peel Ports is very much aware of what is permitted in terms of grant and equity investment.
We are very clear of our obligations to ensure that there is an equitable split in the joint venture arrangements and that any income is fed back to the respective partners appropriately. We are very clear that, when we put in money, we require that return to come back on an equal basis, as Peel would expect.
Mr Fawcett and his team have been immersed in working with the state-aid office to ensure that any deal that is structured is appropriate, as described. It is important to note that the council would not recommend progressing, through the city deal, a project that did not comply with statute. You must bear in mind the fact that we will not go forward unless we are guaranteed to get an appropriate share of the structured deal.
I return to an earlier question on the number of projects that have been approved so far. About £900 million-odd—just under £1 billion—has been invested in the 14 projects that have been approved. Ours are not behind; they are progressing as per schedule. We are working to an agreed timetable for the whole of the Glasgow and Clyde valley city deal, and our projects are coming forward on time. One of the three infrastructure projects that we are involved in, through the city deal, is not scheduled to take place for quite some time, so it will come forward later for approval of its strategic and outline business cases.
Elected members are clear on the structure and in what order the projects will come. Inchgreen comes at the end; Inverkip comes at the beginning; ocean terminal comes in between. You mentioned ocean terminal, convener. Elected members want to see Inverclyde being a centre of tourism for Scotland because of the advantage that that brings to the whole of the west coast, so increasing the tourist traffic through Inverclyde via the port of Greenock and along to the greater Clyde area and the west of Scotland seems a good use of public money. We are delighted that God has given Greenock a deep-water port.
Some cynics have said that many of the projects on the list of those that have been put forward in Glasgow and the Clyde valley have been on the shelf for some time and that there has been no real analysis of the benefits that those projects will bring. What analysis is going on to determine the benefits of the projects that you are signing off?
I understand that, initially, more than 80 projects were considered as part of the infrastructure programme, and they were modelled together to identify what would give the city deal programme the best economic benefit for the investment. That was how the 20 projects that are set out in the city deal assurance framework were chosen. The projects work together in a regional context, which means that some individual projects that might have had better economic benefits probably did not go ahead in the programme because of the adverse effect that they might have had on other local authorities. The projects that have been chosen are the ones that work best together as a programme, and that is how the programme has been established.
So some projects have fallen by the wayside because there was no agreement between all the local authorities about their going ahead.
No. I am sorry—I should be clear. The 20 projects work best as a programme. There were others that, on paper, would have returned slightly better gross value added as single projects, but they worked negatively in parallel with other projects. Cumulatively, the 20 projects going forward deliver the best GVA output as a programme.
In layman’s language, they deliver the biggest bang for your buck.
Yes.
From a private sector point of view, Mr Dickie, what do you think of the Glasgow and Clyde valley city deal?
We did not seek state aid in any way for any of the projects that we have been involved with, so the city deal is not something that I have really followed to a great extent. We look at projects on a stand-up basis from a commercial property sector point of view and because we do not have anything that requires aid, we have not applied for anything on a Scotland or UK-wide basis.
Thank you.
15:15
Prior to the formal meeting, committee members had a community participation event downstairs. In the group that I was involved in, there was a feeling that the city deal seemed quite detached from local communities. How can communities and members of the public make their views known on the allocation of city deal funds? Is there genuine consultation? People often feel that it is a tick-box exercise and that they have not really been involved in its development. As it is obviously something that we want everyone to be engaged in, I would welcome views on the matter.
The priority for the council in looking at its overarching aims for the area has to be repopulation. There has been a decrease in Inverclyde’s population over the past 20 or 30 years—in fact, it has been decreasing forever, so let us say over the past 100 years—and we have tried to reverse that particular oil tanker. Unlocking that piece of land in Inverkip, say, might not benefit a lot of people. Those who have jobs in the construction industry or who get community benefits will see the benefit, but people from Port Glasgow, the Broomhill area that I represent or Greenock will not see anything. Even the extension of the port is not just an Inverclyde but a west of Scotland benefit.
I understand where my constituents are coming from, but when we look at our overarching responsibility as a local authority, our first and foremost responsibility is to try to reverse that population decline. I believe that the infrastructure around Inverkip does that; it will create a hub to allow us to construct new houses down there. As I have said, I understand the argument that has been made, but there will be aspects of this that people will not get involved with. It would be different if we were talking about one of our more traditional housing schemes in Greenock.
As I have the opportunity to do so, I will use the example of my own area, Broomhill, where we are seeing a lot of regeneration. The people in that area are very much involved in that regeneration, but there is nobody in the Inverkip area at the moment, and it is extremely hard to involve people who are not there.
I hope that that answers your question in some way.
Yes. That is grand.
I would like to follow up on that before I bring in John Mundell.
There was a great deal of talk downstairs about a lack of consultation in a number of areas. Mr Clocherty has explained that a major part of the project is about repopulating the area. How have you actually been telling folk that that is what the main plan is all about? Have you been doing that?
That is the council’s number 1 corporate priority—
Do you tell people that it is your number 1 priority?
It is in all our corporate plans. Everything would—
Councillor Clocherty, I am going to stop you there, because we all know that corporate plans, grand strategies and all the rest of it sit on council shelves, largely unread by the populace at large. Let us be honest about that. How have you been communicating to the population of Greenock, Port Glasgow, Inverkip and other communities in Inverclyde that your number 1 priority in all of this is to repopulate the area?
I will let John Mundell answer—
I want to hear from you first, Councillor Clocherty, and then from Mr Mundell.
We are talking about the city deals here, and people are interested in their own area. People in Gourock are interested in the regeneration of Gourock; people in Broomhill are interested in the regeneration of Broomhill; and people in Port Glasgow are interested in what is happening in Coronation park.
We are heavily involved with local people in the areas where each of the regeneration projects is happening, because that is what they want to hear about; they want to hear about what is happening in their area. People from Gourock have no interest in what is happening up in Port Glasgow; all they want to hear about is what is happening in Gourock centre. We might talk about the council’s overarching brief in increasing the population, but people think about that only when they read the local paper, the Greenock Telegraph, and say, “Oh no, there’s the population of Inverclyde decreasing again.” That is when they will look at and think about what it means for them. What it means for us is less funding from the Scottish Government, because our population is continuing to decline. However, people will not micromanage or consider the microeconomics of what exactly that means to communities such as Greenock, Gourock and Port Glasgow.
As for the idea of going out and consulting on the overarching aim of repopulating Inverclyde, I must point out that the overarching impact on the population is at the heart of everything that we do. We want to create active communities—an active Broomhill and an active Gourock—but people are not interested and stay quite silent. I might sound quite blasé, but what I am saying is that people from Gourock are interested in Gourock, people from Port Glasgow are interested in Port Glasgow and they will not look at the overarching idea of Inverclyde as a community.
I heard many folk at the event downstairs talking about Inverclyde, rather than just the individual places where they live. In any case, I did not mention consultation—I talked about communication. If your primary aim as a local authority is to ensure repopulation—and I understand completely why you want to do that—you should be communicating the message of that primary goal to the people across Inverclyde and beyond.
I take your point about a plethora of plans, convener. In Inverclyde, through our community planning partnership Inverclyde alliance, we have distilled our plans down to a single outcome agreement that all our community planning partners are signed up to. It is not a document that is just kept on a shelf. It was evidence based through a significant amount of community engagement—not just consultation, but communication.
For example, one of the most recent Inverclyde alliance community engagement processes was a series of workshops held in 2014 in which elected members, community representatives, the third sector, the voluntary sector, council officers and a large number of members of the public engaged and told us what they believed to be the priorities. That is the basis on which we have developed our plans and the interventions that we are currently working on. The workshops covered current engagement structures, and we asked how well we are doing in that respect and how they want us to engage. We also discussed standards of community engagement, developing asset-based approaches, prevention and early intervention, handling complaints and concerns and the identification of improvement actions.
We are also acutely aware of the Community Empowerment (Scotland) Act 2015, which the Local Government and Regeneration Committee has been heavily involved in. As far as the city deal is concerned, our communications managers from across the councils have been working together on a communications plan. From my point of view down in Inverclyde, I accept that people do not have enough awareness, despite the local work that we have done and the wider work that has been done in Glasgow and the Clyde valley, and that we need to do more. Our professionals in those areas are working on that just now. We need to promote the projects more.
As the committee knows, we have the three infrastructure projects at the moment, but this is not just about such projects but about developing skills and employability programmes and, most important, creating jobs, which is a huge focus. I am heartened by the work that is going on collegiately across Glasgow and the Clyde valley, where we are comparing and weighing up the pros and cons, as outlined by Mr Vesey earlier, to ensure that one project does not compete against another.
It is the sum of the parts that will give us—to use your words, convener—the biggest bang for the buck. That is what this is about. We need to do more on communication. We have done our own bit through the infrastructure projects, but we will need to do more once we develop the employment programmes in greater detail.
On the issue of Inverclyde alliance and community engagement, we had, as Cara Hilton has said, an engagement session with some community representatives earlier, and in the group that I was in, a number of the community representatives felt that there was little interest in engaging and actively involving communities.
Mr Mundell, given all the consultation that you have done through the community planning partnership and other voluntary sector organisations, can you tell us how much that influenced the final strategic plan that is being taken forward? Was the final plan put to the individuals and organisations that you engaged with in the stakeholder events to find out whether it met their intentions? Was it explained to them why their suggestions for the way forward had not been included in the proposals?
As far as the Inverclyde alliance community planning partnership engagement process is concerned, it is quite difficult to go back to every person; however, we have endeavoured to do so through our budget consultation process, which has been extensive in different locations. We did that last year, and it influenced the budget process. We went back to all the people who came to the events; they left their contact details so that they could get feedback on what we had decided, based on the consultation process. We do give feedback to people. I will put my hands up and say that there is probably not a single council area in the country that could not do more and could not do better, but I believe that we go the extra distance. In fact, we have received commendations for the lengths that we have gone to in our consultation.
You mentioned the third sector. At our third sector forum conference, which was held last week, I gave the opening address and, in workshops and so on, fed back to the community and shared with it the work that we are doing. More important, we are getting the third sector’s views on how we can do better. This is all about continuous improvement, but I think that we do an extensive amount on this matter.
Obviously, when we invite people to community consultation events, the turnout varies, depending on the competing priorities or interests in the community. For example, some events that we organise months in advance might coincide with football games, which might be more important to people, and we end up with two people turning up after I have made all the officers available for people to ask questions of. Planning in advance is quite difficult, but we have to plan those things in advance, and we do that as much as we possibly can.
Councillor Clocherty gave the impression that Inverclyde Council’s current main objective is to repopulate the area. In the document entitled “Glasgow and Clyde Valley City Deal”, the first bullet point in the executive summary is one of those things that leap out at you. It says:
“Support an overall increase in the economy of around 29,000 jobs in the city region.”
How many of those 29,000 jobs will Inverclyde see? It is fine to say that you are repopulating an area, developing houses in it and so on, but you need to create economic jobs that give people work and allow them to make a living. Surely your aim to get people to move into the local authority area will be hindered if there are no jobs in it that they can make a living from.
I suppose that you have raised a couple of issues. With regard to the city deal, one of the biggest GVAs—or one of the biggest bangs for the buck, as they have been called—is the Inchgreen depot. My officers will tell me if I am wrong, but I believe that that is one of the big ones that, it is said, will create the most jobs. However, I think that that will not come online until 2021.
In Inverclyde, we try not to look at things in isolation. As I have said, we are lucky; five years ago, we would have said that shipbuilding on the lower Clyde was dead, but now we are looking forward to a future in which ships will be built again on the lower Clyde. No one would have thought that that could happen.
15:30When we look at the whole river, we can see the tourism opportunities that will no doubt come as a result of the expansion of the pier, and we can see that the building of around 550 new houses in Inverclyde will not only bring in construction jobs but create a new community. I cannot put a number on the jobs—perhaps my officers can—but I think that the future is bright for Inverclyde in relation to not just the city deal but all the industries on the lower Clyde. Aubrey Fawcett might have figures for the jobs that will be created.
The number that we have put on the Inchgreen site is around 750. This morning, the committee heard colleagues at Ferguson Marine talking about high figures in their patch.
People were talking about 400 jobs, and the current workforce is 137, if I remember rightly.
I think that the company will move from having 157 employees to having up to 400—it had 60 to 70 when it was taken over.
We have identified outputs in relation to the increasing number of vessels coming into Greenock ocean terminal and the number of new houses and commercial spaces at Inverkip. As part of the modelling exercise that KPMG did for the overall city deal, KPMG identified a GVA output, which ultimately came up with a figure for the wider city deal area—and from what I recall, that figure was 29,000.
We also expect indirect provision. In other words, people will benefit from investment in the Paisley area as a result of access to jobs from here, and we expect people in North Ayrshire to have access to jobs in the city deal area. The model that KPMG used informed the city deal process and the figures that Mr Wilson referred to.
We heard that about 550 houses will be built in Inverkip. The building industry says that it is in decline, but we heard today that 12,000 social rented houses have to be built every year to meet demand in Scotland. Nevertheless, house building is a short-term fix for any area. Is that what the city deal is predicated on? In the area where I live, a city deal application has been made for an access road, but it seems to depend on developers building up to 1,040 houses in a particular village. The city deal document talks about investment in life sciences, for example, but am I right in assuming that most of the 29,000 jobs will come from house building? The situation at Ferguson developed after the city deal document was produced, so that is a bonus in many respects—it was not included in the advantages that were set out in the city deal proposal.
You have made a couple of important points. You are absolutely correct to say that some projects are infrastructure projects for road access, allowing us to open up sites across the Glasgow and Clyde valley city region to private developers and making land more accessible and more marketable.
On the 29,000 jobs, I cannot give you the percentages, although I am sure that one of my colleagues will. I would argue that the construction industry is absolutely not in decline. It might well have gone through a tough patch, for obvious reasons, but posters that are up right now in our jobcentres say that 28,500 jobs—which are not part of the 29,000 jobs, by the way—will be required in the construction industry by 2019.
My concern is that the education that we provide through the colleges, our employability programmes and so on should be aligned to meet that demand. Construction is not the only industry that has issues; we hear or read in the press all the time about the logistics industry, for example, which is 40,000 to 50,000 professional drivers short. The average age of the workforce in the sector is probably in the mid to late 50s; the sector is desperately short of people and cannot get enough of them. The trick is to align all our interventions so that we meet the known demand that we have—and that is on top of the 29,000 jobs that we are talking about across the Glasgow and Clyde valley city deal area.
A number of support groups underpin the city deal work that is going on. One group is looking at the economy and working with the eight local authorities as a region to link individual local authorities’ plans and stimulate growth in the area. There is also the Glasgow and Clyde valley economic leadership board, which is chaired by the private sector and is doing work that we hope will bring in investment of £3.3 billion. I should also mention the work to address business growth.
Does the panel think that Inverclyde is getting a fair deal from the city deal?
Let us start with Councillor Clocherty.
The answer is easy: yes, we are getting a good deal, when we consider the size of Inverclyde and the bang for our buck, as the convener put it. We are talking about a £1.13 billion infrastructure programme, with £0.5 billion coming from the UK Government, £0.5 billion coming from the Scottish Government and the local authorities coming up with the rest. Given the scarce resources that Inverclyde Council has for regeneration, our contribution, for three major projects, represents a very good deal for Inverclyde.
It is an excellent deal for Inverclyde. My focus is not necessarily on infrastructure projects but on all the work, skills, expertise and knowledge that we can tap into through the private sector, other councils and so on. The collegiate approach to the project will give us a much greater return than we could ever have imagined.
We talked about population being a big issue. The issue is not just jobs in this area. A large percentage of our population—do not ask me to give the percentage, because I cannot do so off the cuff—commutes to Glasgow, Paisley and so on. We have focused on trying to make journey times better. Mr Fawcett and his team have been involved in increasing the number of express services on the rail network in the mornings, which has been successful—we hope that that will continue. We are trying every approach that we can.
On the population decline. Mr Fawcett told us on our tour this morning that the population was about 130,000 in the mid-1950s, was down to about 90,000 by 1991, and is now around 80,000. The projection, based on the census, is that by 2031 it will have gone down to 66,000. We have slowed the rate of decline, and I am sure that some of our interventions have had an effect. We still have a lot to do to achieve an upward trend, as we hope to do, and I am sure that it will be two or three years before we start to see the benefits.
There is a raft of work in that regard. We are building new houses, as we saw this morning, and we need to build more. We also need to ensure that we train and develop people, so that they have the right skills for the future. It is not just about jobs here, although it is good to have them; it is about developing skills so that people can commute but live here and spend their money here.
I think that it is a once-in-a-lifetime opportunity. I have never been involved with public money of the order of 86p in the pound coming in to support projects. I have been involved in European funding and other forms of external funding, but we are now in a unique position. I hope that, as a society, we see the benefits of the deal and that it moves into other areas of Scotland.
I will play devil’s advocate again. Mr Fawcett, we heard previously from you in your other capacity with Riverside Inverclyde, when GVA bang for the buck was a major topic of discussion. The return for public money from Riverside Inverclyde was not as good as had been expected. How can we be sure that the GVA in this case will be any different from what has happened previously in regeneration?
In terms of the input that is required from us, we must satisfy the programme management office and go through a very strict assessment. I understand that Scottish Government officials and Treasury officials will be involved in assessing that. As part of the overall assessment, we will have to give sufficient information to demonstrate that we are getting the required GVA outputs.
This afternoon, we have heard about the proposal for the roundabout at Inverkip and the unlocking and opening up of the land down at the old power station site to allow 550 homes to be built, and Mr Mundell and his colleagues mentioned a moment ago the commute offering and the fact that it is not just about bringing jobs here but about having good accommodation for people who are going to travel. When the site is fully developed and has 550 properties on it, the number of people commuting from there through Inverclyde up to Paisley, Glasgow or elsewhere will put a huge strain on the current infrastructure. I accept that some of the infrastructure is the responsibility of Transport Scotland rather than Inverclyde Council. However, looking ahead at other potential infrastructure developments that could assist with commuting, do you think that there are other opportunities to assist with that element of the infrastructure? Certainly, huge amounts of money would have to be invested.
To answer Mr McMillan’s query about the pressure on the roads infrastructure, we would hope that people would use public transport from the Inverkip area, because there are quite good rail links. Notwithstanding that, though, we recognise that there is an issue with the roads. We are currently looking at the pinchpoints in the roads infrastructure, particularly where people come along from Inverkip into the town via Drumfrochar Road and down Bakers Brae. We have a £3 million scheme before council members for them to consider allocating reserves and Riverside Inverclyde funding to, with a view to bringing about a major improvement by aligning Bakers Brae to allow heavy goods vehicles and buses to go around it without causing safety issues. We see that as the first of the various infrastructure improvements that we would want to proceed with in terms of addressing the issues.
But all those improvements will be outwith any city deal funding.
They will be outside the city deal.
Can we concentrate on the city deal, please?
Sure. I think that people generally welcome the investment that will come into Inverclyde through the city deal and will certainly welcome any improvement of Inverclyde’s infrastructure. It is important to put that point on the record. Nonetheless, I do not know of anyone who thinks that the roundabout will be a panacea for the transport situation in the western part of Inverclyde.
I remember that the issue of that section of trunk road was important to you not long after you became a member of the Scottish Parliament.
It still is.
One of the big advantages of the project is to alleviate the pressures and the risks for road users. As you know, that is an accident blackspot and I am delighted that we will be able to resolve a lot of those vehicle conflicts.
15:45
I have one final question.
Please be brief, Mr McMillan.
My question is on the investment in the waterfront down to Clydeport, which we heard about in relation to the city deal. Councillor Clocherty mentioned tourism and one of the huge opportunities for Inverclyde to benefit from that investment is its marine tourism offering—not just the current offering, with the cruise liners bringing people in to spend money locally or go elsewhere, but other elements of marine tourism that could be developed further. Do you think that the city deal is an opportunity to improve the marine tourism offering of Inverclyde?
One of the problems that I recognise—as I am sure Stuart McMillan does—is that when the cruise liners come in, there are buses and more buses that take people all over the west and east of Scotland. We understand that the expansion of the container terminal at the port of Greenock is key for the west of Scotland and will not just benefit Greenock and Inverclyde. We recognise that regional importance, as do the city deal people.
We have got a fantastic waterfront down here—it is one of the beauties of the area. We are still looking at bringing the QE2 to the area, so we are ambitious on that front, too. We are always looking to make the most of our waterfront, but it is difficult for us to do that with the council’s meagre resources, so we are willing to work in partnership with third sector and other organisations, such as Inverclyde tourism group, Discover Inverclyde, which is extremely successful.
In terms of infrastructure, the Glasgow and Clyde valley city deal will help the whole of Scotland, not just Inverclyde, but we have the deep water. I hope that you will come next June to see the power boat grand prix. There is a wee invitation for you. I am sure that when you see the power boats at the esplanade it will add to your view of Inverclyde as a fantastic place to live and work.
You have got your advert in, Councillor Clocherty.
I know that Mr McMillan is very active at a national level in relation to marine tourism. Every part of Scotland should be exploring every opportunity to maximise the possibilities out on the water. In Inverclyde, we have developed the 130-berth marina at James Watt dock and we are providing a visiting dock in East India harbour to allow people who come down the river to call in for the day, stay overnight and maybe have something to eat in the town.
We see enormous benefit in maximising the use of the river for various bits of marine tourism. We will take every opportunity that we can. The national boat show regularly takes place in Inverkip. Overall, we are up for the idea of trying to maximise that opportunity.
You have got your advert in for the boat show, too. It is in the very near future, is it not?
It is this weekend.
Mr Dickie, what do you think the Glasgow and Clyde valley city deal will do for Ediston Real Estate? Will it affect you in any way?
It does not affect us directly. We have a number of projects throughout the central belt and some of the areas that are affected by the deal. We are not monitoring projects specifically, because as I said earlier, we look at our projects on a stand-alone basis. I encourage economic development anywhere because it benefits Scotland and the greater good. As a developer, I like change, although a lot of people do not, and I encourage it. It is good and helpful to have people coming into an area.
So the city deal gets a tick from you.
Where we can help and open up things that might be stuck in the past, I positively encourage it. The committee saw the site that we looked at today, which had been stuck for maybe 10 years. An economic downturn allowed that site to come forward, thanks to the foresight of getting funding through the Clydebuilt fund.
Can you say which site that is?
Yes, it is the Port Glasgow shopping park on the waterfront, which is currently a big bit of grass beside the big Tesco and the B&Q.
Are you hoping for another £50 million of development there?
We start on site in about three weeks’ time and the value should be somewhere between £40 million and £50 million, depending on where the world lies at that time.
I have two quick questions for Mr Vesey. Can you tell us where we are in terms of the community benefit clauses in the city deal document and the commission on urban economic growth?
The commission for urban economic growth has been established. We have also set up a national panel to complement that and we are working to bring that relationship together so that there is a reporting mechanism between them. What was the first part of your question?
It was on the community benefit clauses.
Yes. We have a legacy manager who has started recently and we are establishing a community benefits support group. We are taking all the benefits from the programme business case and modelling them over the 20 years. Those three elements—the national panel, the commission on urban economic growth and the community benefits—are all linked. A number of tier 1 contracts will be advertised through Procurement Scotland, which will attract tier 1 contractors, so there will be benefits from each of the construction projects, and those community benefits will also be logged.
The committee will take further evidence on the investment in infrastructure by local authority pension funds and the potential for investment through city deals when it takes evidence from the Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy at our next meeting on 28 October.
Thank you, gentlemen, for your evidence today.
15:52 Meeting suspended.15:59 On resuming—
Previous
Attendance