Good afternoon and welcome to the 15th meeting of the Finance Committee in 2008 in this third session of the Scottish Parliament. I ask all committee members, witnesses and members of the general public to turn off any mobile phones and pagers. Although he is not a member of the committee, Jeremy Purvis will be with us today for our evidence session.
Yes. Thank you for the invitation to discuss capital investment with the committee. Last week, I published the Government's latest document on the Scottish futures trust for the committee to reflect on as part of its inquiry. Obviously, I will refer to the Scottish futures trust in my opening remarks.
I will clear up a specific point. I regret that Yvette Cooper, the Chief Secretary to the Treasury, has declined to meet the committee, which is concerned about any potential effect of the international financial reporting standards—IFRS—on the Scottish futures trust proposal. I note that the minister says in his letter to me of 20 May:
It means that, on the basis of the information that is available to me at this stage, the Scottish futures trust will be able to operate within the context of IFRS, which we expect to be incorporated into the Treasury's approach to the management of public finances in 2009-10. The committee will be aware that it was originally intended that the new accounting rules would commence during this financial year, 2008-09. Commencement has been delayed until the next financial year but, obviously, the Scottish Government will be obliged to comply fully with the rules when they are introduced. Therefore, the remark that you quoted means that the Government has taken full account of the issues as part of the preparation of the Scottish futures trust and is taking the initiative forward on the basis that it could operate within that context.
You mentioned the PFI repayment legacy in your opening remarks. I think that you said that it will go up by nearly 14 per cent this year alone, when the money that is available to the Government is going up by substantially less than that. Can you project beyond this year and look at the profile of those PFI payments and their impact on Government spending over, say, the parliamentary session? How potentially damaging will that be to the other aspects of the Government's budget?
The information is presented in the document that we published last week, "Taking forward the Scottish Futures Trust", in which we set out the unitary payments for signed public-private partnership/private finance initiative contracts for the lifetime of those contracts as they sit before us. Those figures demonstrate that, when the Government came to office last May, we had a liability to make PFI unitary payments to the tune of £500 million in 2007-08. That liability will increase to £581 million in 2008-09, £672 million in 2009-10 and £787 million in the final year of this session. The increases in those three years are, respectively, 13.9 per cent, 15.6 per cent and 17.1 per cent. That will be set against growth in the Scottish block grant for those years of 0.5 per cent, 1.6 per cent and 2.3 per cent, respectively. Therefore, it is clear that the contracts are squeezing the public spending that is available for other projects. The investment that has been made in a variety of projects has taken its course over the past few years, but we are now beginning to see the full extent of the scale of payments that will have to be made to repay that investment.
That is an horrendous level of PFI debt to pass on to future generations. It is clear that it will skew public spending for the next 30 years. Have we paid off or paid up—whatever the right phraseology is—any school building that has been funded under PFI? Or is this just continuing debt that we are passing on to future generations?
To my knowledge, we have not completed the payments of any PFI school project that has been undertaken.
None at all?
To my knowledge, not one. The repayment pattern is as I set out in the document. That constraint will therefore apply to all Administrations for a formidable period of time.
I have a couple of questions on private sector finance. On page 10 of the document, you state that a six-month delay in a £100 million project would cost the public purse £3 million. It is therefore somewhat disappointing that, on page 39, the document notes:
There is no cost to the public sector and no loss of opportunity as a consequence of the approach that the Government is taking to the Scottish futures trust. The premise of Mr Kelly's question is that somehow no investment is under way in the public infrastructure of Scotland, which is far from the case. In the infrastructure investment plan, we marshal an investment of the order of £1 billion in schools projects alone, which will be undertaken by the local authorities of Scotland with borrowing supported by the Scottish Government. That is precisely why I increased the capital budget for local authorities by 13 per cent in the first financial year in which I had control of those budgets to ensure that there was a significant upsurge in public investment in those projects. The local authorities of Scotland are planning to spend of the order of £1 billion on schools developments.
I have just one follow-up question. On this year's capital expenditure outlay of £3.26 billion, how many projects have been initiated since the start of the financial year?
This will probably come down to a definition of what one means by initiation of projects. For the benefit of the committee, I can run through a variety of projects for which contracts have been signed since May 2007. Those include the NHS Forth Valley Clackmannanshire community health services project; the NHS Forth Valley acute hospital project; the NHS Fife St Andrews community hospital and resource centre; PPP projects in East Dunbartonshire for schools; and schools in West Lothian, Aberdeen, Falkirk, Perth and Kinross, Dumfries and Galloway, and West Dunbartonshire. There have been improvements to the A7 at Auchenrivoch—I am sure that Dr Murray will correct my pronunciation if it was wrong.
That is right.
Thankfully, I have passed that test.
I have many questions about the Scottish futures trust, but I will start by asking about the difference between PPP and the non-profit-distributing model that the Government favours. I will refer to evidence that has been given to the committee during our inquiry.
I cannot be alone in saying that not all the propositions that Dr Murray read out can be correct at the same time. They reflect a variety of views. I understand that some people are frustrated by the fact that the model for which we have opted does not generate higher equity returns. I am not here to deliver higher equity returns from investment in the public purse—my objective as Scotland's finance minister is to deliver value for the taxpayer. I did not come into politics to preside over a system that delivers higher equity returns so that people can invest small amounts of money and make a fantastic profit.
On whether NPD is better value to the public purse, studies have indicated that NPD is perhaps more expensive to the public purse because the profit is built in at the beginning of the project. Because investors will not be able to get the equity return, they build that into the cost of the project, which means that NPD does not save money.
That view is not supported by the evidence that I have in front of me. We will test all aspects of capital investment against the value-for-money criteria and the value to the taxpayer. That is the essential test that will be applied. By stripping out the approach of uncapped dividends and the ability to generate significant equity returns, the Government is presenting a model that delivers much better value for the taxpayers of Scotland.
The equity returns in more recent PFIs and PPPs have been considerably lower. As others have said to us, the model has been developed and is now fairly efficient. In fact, it is such an efficient model that it has been rolled out throughout the world. If we do not have a good model here, investors will have plenty of other places to invest their money. They do not need to invest their money in Scotland—there are many other countries that are running PPP-type models of investment.
That ignores everything that I have said to the committee this afternoon on the scale of the Government's capital investment programme. We are sitting on a capital investment programme of £14 billion over the next three years. I fail to see where there is any absence of opportunity in what the market can support. Of course, we operate in a free market and people are free to choose where they do business. However, the Government is trying to put in place a strong pipeline of projects to guarantee that we capture market interest, and that is precisely what we are doing at present.
The minister is absolutely correct. My inclination is always towards short questions and short answers, although this subject can sometimes lead us elsewhere.
You have spoken about the returns that are to be gained from conventional PFI and your strategic objective of delivering the best value for the taxpayer. Are those principles always in conflict?
That is a hypothetical question, the answer to which would be predicated on an assessment of every project with which we proceed. Ministers and local authorities have to arrive at a judgment in testing, project by project, where the value for the taxpayer rests. That process must be undertaken to guarantee that we operate according to the correct value-for-money criteria.
But the key aim is value for money for the taxpayer, as opposed to minimisation of the return—whatever it may be—to whoever is contracting or is involved in a project.
Of course, yes.
In that case—I accept that this is a hypothetical question, but it turns around the decision-making process—if a conventional PPP model could be shown to represent better value for the taxpayer than an NPD model, would you go down the conventional PPP route?
Well, that is a hypothetical question based on the fact that my preference is the non-profit-distributing model.
That might be your preference, but if you were confronted with a decision between the two and the best value for the taxpayer lay down a route that was different from your preference, would your personal political preference get in the way of delivering the best value for taxpayers' money?
I am confident that my personal political preference is aligned with the value-for-money interest, because I cannot see how one could ever justify some of the financial returns that have been delivered under PFI.
Wherever we are politically, and whichever side we take in the debate, the key is the comparability of different procurement options. In your opening remarks, you mentioned the increase in the unitary charge payments. We all understand the issue that you raised about higher contractual payments relative to slower growth in the overall amount of money that is available to the Scottish Government and local government, but most of the unitary payments are for pre-existing services. If we consider a new schools project, the children are still being educated in school buildings elsewhere.
I will ask Sandy Rosie to talk about the data that the Government holds on the projects. I am not familiar with the amount of data that we hold on all the projects and their development since 1997-98, but I am sure that we can furnish the committee with a sense of the proportion of the unitary payments that are attributable to repayment of the capital asset value, the payments that have been made in relation to services, and what we might loosely call appreciation of the costs.
It might help the committee to know that in the value-for-money exercise that is carried out before a PFI project proceeds, an attempt is made to assess what would have happened under the conventional approach, so that a comparison and a value-for-money judgment can be made. That is probably where we would find the information that Derek Brownlee requested. It is not easily found in normal records and accounts because of the normal separation, under conventional arrangements, between the procurement of an asset and its long-term maintenance through separate and different measures under annual budgeting.
All sorts of discussions about accounting are going on among the anoraks, so to speak, but what members of the public want is a system that delivers the maximum bang for the public buck. The paper mentions savings of £150 million. That is a substantial saving, which will be welcomed by the overwhelming majority of the public. You explained how it will be achieved.
When the statement was made to Parliament about the replacement Forth crossing—I suppose that I can start calling it the Forth bridge now that there is no debate about its nature—we said that we would bring the procurement options to Parliament in 2008. That is exactly what the Government will do.
The more one examines the issue, the clearer it is that all is not what it seems. In a letter to the convener of 20 May, you suggested that the consultation "was welcomed by respondents". Even a cursory glance at the responses to the consultation indicates that that is not strictly true.
Let me pursue some of those points. To some extent—although not uniformly—the evidence that has been advanced to the committee, which Mr McArthur has just marshalled, is that when it comes to tendering, somehow PFI equals lots of competition and NPD equals not very much competition. That was the inference of part of the question and of some of the evidence that has been advanced, which I have read.
I was not suggesting for a second that lack of competition was a hallmark of the NPD model; I was suggesting that different projects require different approaches. The evidence that we have heard in that regard does not conflict but suggests that risk has a bearing on the issue.
No. It is about making sure of the Government's intention to deliver the maximum value for public expenditure at a time when our public expenditure is rising at a much slower rate than our PPP repayments. Undoubtedly, that is squeezing our ability to invest in Scotland. Delivery of maximum value for the taxpayers of Scotland drives the Government's agenda.
I apologise for coming late to committee, convener.
I will address those points in turn, convener.
I am sorry to interrupt, cabinet secretary, but surely that makes my point. If "excessive profits" were to be made on completion of that project, there would have been more bidders in the first place.
No—the market decides how it deploys its resources and interest. The Government is in no position to second-guess that. Governments can try—I am sure that the previous Administration tried to wrestle with these issues—to encourage greater market participation. As a consequence, there are plenty of players and plenty of developments are being undertaken. We are now paying for them, so they must have been undertaken.
Is there a danger that we simplify the quantification of risk? I mean no disrespect, but many risks exist and it is simplistic to say that if somebody has built one school, they have built 100 because schools are all the same. Surely there are labour market risks. We might win the Commonwealth games, and all of a sudden the supply of skilled labour might be diverted. That is a risk, and a company would have to ask whether it could finish the contract it was on. There can also be unforeseen risks in the money market. A company can sign a contract but then find that people have been a bit free and easy with lending money in America, the problem then crosses the Atlantic and, the next thing they know, people are queuing up outside branches of one bank to withdraw their deposits and other people's banks start pulling in letters of credit guarantees.
It is, of course, legitimate to mention all those risk factors, but my points related to the evaluation and quantification of risk. Information that I have studied suggests that the justification for proceeding with many projects hinges on the scale and the quantification of risk. Getting the number correct—understanding it and putting it in its proper context—is key.
You said that it was not the Government's role to interfere with the market and that the market will move along as it wills. However, do you accept that Governments can kill a market, even with well-intentioned actions?
What I can accept is that the Government is putting in place a formidable capital investment programme of £14 billion over the next three years, which contains significant and attractive opportunities for many in the marketplace.
Some excellent points have been raised and there have been some excellent answers, but there is a danger of running into debate and philosophy as opposed to questions of fact. I have a queue of people wishing to contribute so I appeal for greater succinctness in questioning.
With that warning, I will be specific. Joe FitzPatrick spoke earlier about savings in the region of £100 million to £150 million being generated. Page 41 of the document notes that it is difficult to try to quantify the added value of those savings. You have used a figure of between 3 per cent and 5 per cent of the average capital expenditure of £3.5 billion. How was the figure arrived at?
The figure was built up by the different components that are set out on page 42 of the document, which are the project-level drivers of value for money, and the programme-level drivers of value for money and the cost of finance. That work was done by the Government's Scottish futures trust working group, but was very much informed by the contribution of PricewaterhouseCoopers and Partnerships UK, which worked with the Government on development of the proposition.
I note what you say about the explanation on page 42. Is it possible to provide the committee with more detail on those three areas? How will each of them contribute towards £150 million savings a year?
The proposition is based on the three pillars of the Scottish futures trust. First, there is our determination to secure cheaper finance: we have talked about differing costs of finance. Secondly, there is the point that I made in my comments to Mr McCabe on retention of the skills base, which will provide for effective expertise, negotiation skills and understanding of the challenges that we face in Scottish futures trust projects, which will ensure that projects are undertaken on a basis that is more securely founded financially than may have been the case in the past.
On aggregation of projects, aligned to the use of local authority bonds, would you envisage job losses at local authority level, which will contribute to the savings?
I do not see that connection.
Thank you for allowing me to attend this afternoon. With regard to risk, the cabinet secretary said that he had considered the mechanics of the differences between not-for-profit schemes and PPP schemes. Was the Falkirk schools scheme one of those that were considered?
It is not one that I have considered personally.
You might care to look at the business case for the Falkirk schools scheme. In accepting the non-profit-distributing model, page 29 of the business case states:
Essentially, that is a different point from the one that I am making. My point is that the judgment on many projects will turn on the assessment and evaluation of risk as quantified in the project. That is where we need to be extremely careful that we properly consider and evaluate the degree of risk transfer. If it is possible for significant gains to be made in the secondary market by selling off assets once the period of highest risk has been overcome, we are not properly assessing risk in terms of value for money. That has been one of the drivers of significant financial benefits to some of the contractors who have played a part in such schemes.
My point was that, in developing its NPD scheme, Falkirk Council kept the same risk allocation as a PPP scheme. Perhaps you will look at the business case.
Obviously, I will. However, my point is that the assessment and evaluation of risk lies at the heart of such judgments. That is where, in my opinion, we need to be extremely adept at assessing the degree of risk that is transferred. If the secondary market can operate in as buoyant a fashion as it has operated, the natural conclusion must be that we have come to the wrong conclusions on the actual risk transfer involved.
You cited the unitary payments in table 1 of "Taking forward the Scottish Futures Trust". Does that table include the payments under NPD contracts?
Yes.
If the unitary payments for the NPD contracts—which you have cited as a better alternative to PPP—are included in that table, the level of debt that Mr Neil called "horrendous" and that you described as putting "a squeeze" on public spending budgets includes NPD debt.
Table 1 includes NPD debt and PFI debt. It is a statement of fact that, if the costs of unitary payments are increasing by 13.9 per cent this year, 15.6 per cent next year and 17.8 per cent the following year when our budget is increasing by 0.5 per cent this year, 1.6 per cent next year and 2.3 per cent the following year, the payments are clearly putting a squeeze on the manoeuvrability that any Administration has over its budget.
I understand that. It is helpful that you have confirmed that part of the increase in that squeeze is from NPD debt, of which you approve. That gets to the nub of the issue.
Yes.
On 21 May, I received a written answer to the following parliamentary question:
The issue comes down to terminology. The position has been clear in all the briefing material that I have seen on the subject. PPP is a generic term that has various subsets, one of which is PFI, which delivers excessive profits. The NPD models are part of the family of public-private partnerships, but PPP is a generic family term for all such approaches.
My question was whether the Falkirk scheme is a PPP or is different. You said that there was a difference, but now you say that all the schemes are part of the same family.
I am saying that a fundamental difference exists between the NPD model, which protects the public interest, and PFI, which generates the excessive profits about which I am concerned.
When we hear the Scottish Government describing schemes as PPP/PFI, does that represent a separate arrangement that is subtly different from PPP/NPDO? When the Government talks about PPP schemes, are they all members of the same family? The issue is important.
I agree. The Government talks about PFI because that is the problem.
We have gone from general philosophy to highly specific projects. Perhaps Jeremy Purvis might write to the minister about the detail.
I appreciate the convener's forbearance. I have questions about the Borders railway, but the description of projects is fundamentally important to clarity. The Scottish futures trust consultation paper refers to PPP schemes as well as NPD schemes. The cabinet secretary says simply that NPD schemes are a subset of the same family, but he has also said that how the schemes are structured and their value to the public purse are considerably different. He has said that one difference concerns excess profits. I notice that the interest rate for the Falkirk schools scheme is 6.5 per cent per annum and that its subordinate debt interest rate is 12 per cent. That means considerable interest for the lender to an NPD scheme, so clarity is important.
I could not have been clearer. I make a distinction between NPD and PFI. I appreciate that the terminology is important, but of equal importance is what the initiatives deliver. My point is that PFI projects deliver excessive profits and create the secondary market that I talked about. I could rehearse all the arguments that I have used in answers to other committee members. Those are the distinctions between and the distinctive characteristics of the two project types. The position could not be clearer.
I have a point of information. In the cabinet secretary's answer to my parliamentary question S3W-12806, he described the 10 schools that have been funded under the NPD model as PFI projects.
The point about the looseness of the definition and terminology has been made, but if the minister wishes to respond, he may.
I will examine the point that Dr Murray raises. If a project is NPD, it is NPD; if it is PFI, it is PFI.
I will stop dancing on the eye of a needle and ask substantive questions. I return to the Scottish futures trust. Will the cabinet secretary amplify on the role of local authority bonds in funding projects?
Under schedule 3 to the Local Government (Scotland) Act 1975, local authorities can raise money through bonds, and public corporations have that ability into the bargain, but the Government does not at present. One fundamental element of the Scottish futures trust is about ensuring that we draw together interests in the public sector to reach a common point at which there is a shared interest in progressing with different elements of projects. The concept of a local authority bond fits comfortably into that model, because the Scottish futures trust would have the ability to broker an arrangement between local authorities to raise funds in that fashion. It would be for individual authorities to decide whether to go down that route, but the Scottish futures trust would assist.
So it would not be accurate to say that it is illegal to use local authority bonds.
It is far from illegal. As I said, it is provided for in schedule 3 to the Local Government (Scotland) Act 1975, so it is a perfectly acceptable way in which to proceed.
I, too, am interested in finding out more about the perceived advantages of using bonds compared with other forms of raising capital. The strategic business case document did not enlighten me at all on that issue, so I resorted to Googling. I found out that bonds are popular in the United States as they deliver lower-than-average interest rates because the interest is tax free. However, under the Government's powers, it could not offer that sort of incentive for local authority bonds in Scotland.
You have been thrown a Google, if not a googly, minister.
I now understand how members of the Finance Committee spend their spare time.
Some members of the Finance Committee.
It is reassuring, because it is no better than how I spend mine.
It has a cabinet, though.
That just goes to show—most living-rooms have a cabinet as well.
Transport for London is a large organisation, as you say, but it has a common purpose: it delivers transport in London. I know that you would like Scotland to have a common purpose and that that is part of your economic strategy, but Transport for London has specific income streams and is a corporate entity. You might want to bundle together all the bonds from local government in Scotland, but the 32 local authorities might not have the same aspirations: Dumfries and Galloway Council might want to use its borrowing powers for particular projects in its area while other councils might wish to use them in other ways. Local government is a much more disparate group of organisations that have different aspirations, and I do not understand how they would be bundled together in a way that was commensurate with the concordat. At one level, with the concordat, you are giving local government the money and letting it make local decisions, but now you are talking about bundling together the authorities' borrowing powers and using them for some sort of nationally directed purpose. I do not see how those aspirations fit together.
Crucially, the bonds would not be for nationally directed purposes; that is the key point. Dr Murray referred to the fact that local authorities are disparate organisations. I have a list in front of me of £974.5 million-worth of investment that Scottish local authorities intend to make in the schools estate in the course of this parliamentary session. That is nothing to do with PFI and everything to do with traditional use of their capital interests. Because they are all involved in building schools, it would be straightforward to provide those local authorities with a vehicle through which we can finance that building programme at a more affordable level.
The proposal's attractiveness is in getting over the disadvantages of modern finance—for example, the inability to use tax incentives—but its only advantage is the economy of scale.
That is a formidable advantage, because we get into the aggregation of contracts, which is a significant factor for the efficiencies that we think can be achieved.
A concern was raised with us that, under the previous PFI and PPP initiatives, the bundling of contracts disadvantaged smaller Scottish businesses, because they were unable to compete for the work. If you make the bundle even bigger, will you not disadvantage those companies even further?
There is every opportunity in the procurement approach to ensure that individual companies can participate in the process. The Government has to deal with strict rules and regulations under the procurement agenda, and they would have to be followed in every respect.
Is it not right to say that, although you would bundle the raising of the funding through the bond, it would not be necessary to bundle the contracts for building the schools?
That is right, and it is easy to envisage individual construction companies the length and breadth of Scotland participating in some of the contracts.
I wish to call to speak every member who has asked to do so, but I remind the committee that we have major items later on the agenda. I call Derek Brownlee, who has been patient.
It appears that the Treasury is somewhat more reluctant to speak to us than it is to The Sunday Times.
This is an interesting area. Like Mr Brownlee, I was fascinated by the comments from the Treasury to The Sunday Times at the weekend.
What are you looking at me for? I do not know either. [Laughter.]
Essentially, the proposition advanced in The Sunday Times article was that, if local authority bonds take their course, the Treasury will say that there is too much borrowing and will stop it. That is not my understanding of how the Treasury acts. The Treasury certainly has a view of the total borrowing capacity that is appropriate for the UK and its public sector, but it does not give me a number or limit that I have to stay within. If it became concerned—for wider macroeconomic reasons or perhaps for some of the reasons linked to the international financial situation that Mr McCabe mentioned—and decided that borrowing had gone too far and had to be reined in, that would be a general, macro UK judgment. The powers in the law are clear: if an authority can afford its borrowing, it may proceed with it.
You have reiterated the point that is made near the beginning of "Taking forward the Scottish Futures Trust" about the fact that you do not have borrowing powers. However, you did not have borrowing powers when you came up with the idea of a Scottish futures trust. I would be interested to know who you think is responsible for that oversight.
I am sure that the committee has heard Mr McArthur's remarks in relation to the OFT inquiry. In relation to the Scottish futures trust—
Excuse me. You have heard my remarks, but I would like confirmation on the matter from you or your officials.
I am not in a position of great knowledge on the matter—I am also looking to my two colleagues—but I will certainly write to the committee, if that would be helpful, and furnish you with some information on it.
Can we get back to finance?
An act from 1975 is quite an old piece of legislation.
I voted for it.
Did you really? I must still have been at school then.
The approach that I take is to look—as I am constantly lectured to do—for opportunities to act within the competence of the Scottish Parliament. I had not quite made the connection that the 1975 act was a piece of legislation that Mr Welsh, in his younger days, had voted for; I imagine that he would have been an enthusiastic participant in the work on it in 1975. If the powers exist, we should aspire to use them.
You are on record as having a very high regard for Scottish local government, and we are talking about Scottish local government. Are you not even slightly dispirited that, after 33 years of having that power available, councils have been a bit shy about using it?
Mr McCabe knows that I am indeed a great fan of Scottish local government. I know that he shares my aspiration, and that he shared it during his distinguished leadership of various authorities around the country. However, the decisions are for local authorities to make a judgment on. Essentially, we are offering a realistic and tangible opportunity to use the powers.
I appreciate that, but given the wealth of knowledge that exists in Scottish local authorities, does it not surprise you that during the past 33 years they never came together to try to capitalise on the opportunity?
Mr McCabe will know that there is nothing pejorative in what I am about to say, although it might sound pejorative. I do not think that there has been much appetite among Scottish local authorities to work together, because, for the best part of 20 years, they have been pushed from pillar to post as a result of local government reorganisation, boundary changes and the threat of amalgamation. We have decided to park all that and say that we are having none of it. We will focus on encouraging good, collaborative working between local authorities and other players in the public sector in Scotland. From where I am sitting, it looks as if we are beginning to see formidable returns and rewards for that degree of co-operation.
I am tempted to ask what afflicted them in the 13 previous years, but I do not think that we will get anywhere with that.
You should always resist temptation.
On NPD, the document states that, above a predetermined level, returns could be reinvested. What will that predetermined level be and how will it be calculated?
That is obviously a material consideration in the financing of any projects that are undertaken. The key point is that the returns over that threshold will be reinvested in the public estate and public infrastructure, which is a significant advance on where we are just now.
Will the returns vary across projects?
They might well do, but we will obviously try to secure the maximum opportunity for any returns to flow into other infrastructure projects.
Do committee members want to ask any more questions before I call Jeremy Purvis?
I just want to follow up Tom McCabe's question. Between 1976 and 1995, Strathclyde Regional Council must have covered something like half the population of Scotland, but it did not use its borrowing powers to issue bonds. What makes you think that that option will work better across the whole of Scotland, with a population of twice that size? If the option was so attractive, you would think that a council the size of Strathclyde Regional Council would have used it.
I remind Dr Murray that we had the two-tier system of local government then. Yes, Strathclyde Regional Council covered about half of Scotland, but there was a multiplicity of local authorities under it. I cannot remember how many district councils there were under Strathclyde Regional Council. There might have been 10, or even 15. It is difficult to corral interests. There may have been no appetite to go down the bond route or to encourage the process in the Labour Government of 1974 to 1979, the Conservative Government of 1979 to 1997 and the Labour Government thereafter. However, I am not here to answer for the sins, mistakes and omissions of previous Government; I am here to explain why this Government wants to take forward that agenda.
As a fan of local government, I point out that for a long time local government called itself local administration, rather than local government, because that is the role that it was forced into.
Of course, Labour Governments legislated to give local authorities powers.
I have a quick question for the minister. Does not all that we have heard underline the need for the Scottish Government itself to have borrowing powers? We have heard evidence from people from the national health service about what the benefits would be to them if they had been able to fund some of the new hospital projects through the use of prudential borrowing. The constraint in the Scotland Act 1998 means that the Scottish Government does not have any borrowing powers, unlike local authorities. Would such powers not be a major bonus to the Scottish Government in terms of efficiency and efficacy in raising capital for public sector projects in Scotland?
Undoubtedly they would. I hope that my frivolous reference earlier did not lead the committee in any way to question the importance that I attach to the matter. There are legitimate areas in which it would make good sense for the Parliament's powers to be enhanced in a fashion that allowed the Parliament and the Government to be more effective in their attempts to secure greater opportunities for taxpayers in Scotland, of which the ability to borrow is an example.
We will have a quick final question from Jeremy Purvis, who is making a guest appearance.
Thank you, convener. I am grateful.
I would say that it is being taken forward as a non-profit-distributing procurement model.
Is that within the family of PPP?
It is a non-profit-distributing procurement model.
You are refusing to say that it is within the family of PPP.
I am just telling you what it is, so that people cannot be confused and think somehow that it is going to be a PFI project that will result in a loss of value to the taxpayer.
The Government has decided to borrow all the capital costs of the construction of the Borders railway. That approach is unique among all rail schemes in Scotland. What assessment was carried out to prove that that approach will be better value for the public purse than straight procurement?
I want to check whether the premise of your question is accurate, because I do not think that it is.
Do you mean the premise that all the capital costs will be borrowed?
No—the premise that the project is the only one that has been taken forward in that way.
I do not have the information to hand, but I am sure that the clerks would be able to—
Mr Purvis, I suggest that you write to the minister and get your question answered in that way.
Before I venture further into the issue, I want to be absolutely clear about what I am saying on the record on that particular point. However, we are taking forward significant investment in establishing a much-needed rail connection for the communities of the Borders, and we are doing so as part of a non-profit-distributing procurement model.
Convener, the question that I asked was whether an assessment has been carried out.
As I said, if you write to the minister, you can get an answer to that question—unless we can get one now.
That is the approach that we are taking to the project. I am happy to fill in further detail if Mr Purvis wants additional detail on the various tests that have been undertaken to make a judgment about the point. I am happy to share that detail with the committee.
That is a reasonable offer.
Meeting suspended.
On resuming—