Private Finance Initiative/Public-private Partnership Inquiry
I apologise to our guests for the delay in speaking to them. We are delighted to welcome our colleagues from Northern Ireland to the Scottish Parliament and to the Finance Committee. I am pleased to welcome Francie Molloy, the chairman of the Finance and Personnel Committee of the Northern Ireland Assembly, along with his colleagues Sheila McClelland, Roy Beggs Jnr and Alan Patterson. I hope that this heralds the start of productive and mutually beneficial contact between our two committees and our two institutions. Because of similarities in our founding legislation, we have much in common. Clearly, there are also many differences. I hope that we can assist each other as we continue to find our feet.
The Finance and Personnel Committee of the Northern Ireland Assembly kindly offered to assist us in our inquiry into the private finance initiative. We are pleased to accept its kind offer. I invite Mr Molloy to address the committee.
Francie Molloy MLA (Finance and Personnel Committee, Northern Ireland Assembly):
Thank you very much for the opportunity to present our report of the public-private partnership inquiry. On behalf of the Finance and Personnel Committee, I welcome the opportunity to address members of the Finance Committee.
We undertook such an inquiry because there were obvious signs in Northern Ireland of underinvestment in capital projects. Many hospitals and schools are in poor condition. Our regional transport system—including the key transportation corridors—requires major investment. We were told that limited resources were available for capital spend and that, although the various departments had many projects, they did not have the resources to fulfil the need.
Recent figures suggest that, at present, the Northern Ireland departments require funding for capital projects in the region of £4.5 billion to £6 billion. There are question marks over whether that is the total requirement at this stage. The figure depends on the range of requirements and projects that are proposed.
The Finance and Personnel Committee began its inquiry into PPP in March 2001. At the time, our overall aims were: to examine ways of financing investment to address the public sector infrastructure deficit, including conventional public finance, bonds, tolls, not-for-profit bodies and public-private partnerships; to examine the performance of PPP projects to date and their effect on the users; to consider the value for money that has been achieved through PPP and the effects of committing money to PPP projects on a long-term basis; and to establish from emerging patterns and trends the areas and types of projects that would be suitable for PPP.
The methodology behind our inquiry was to consult all the key stakeholders. We identified the relevant stakeholders as being the sponsors, users and partners involved in the public services in which PPPs could be used or promoted. We placed public notices inviting submissions and wrote to local and central Government in Britain and the Republic of Ireland. We wrote to trade unions, academics, major building contractors and legal and management consultants. We also engaged with as wide a group of people as would offer us views about PPPs, because there had been a lot of concern about PPPs and the various different forms of financing.
As part of our examination of ways of financing the infrastructure deficit, the committee sought the views of stakeholders such as the European Investment Bank. Academics, trade unions and transportation strategy groups were also available to provide comment to the committee on alternative forms of financing—for example, concessions, tolls, joint ventures and non-profit distributing bodies.
The Northern Ireland department of finance and personnel is responsible for distribution and overall co-ordination of resources based on decisions made by the Executive Committee. The department liaises and negotiates with the Treasury and interfaces with other Government departments. It sets the rules for types of investment and spending by departments. Those rules are based on Treasury guidelines. Because our inquiry considered the rules, the Minister of Finance and Personnel and the department were key to our examination of the ways in which capital investment could be addressed.
In examining the performance of PPP projects currently in operation, the committee considered examples of PPP in Northern Ireland. Most of the projects that we have are young and so it was difficult to evaluate anything other than, for example, the evidence of new buildings. Nevertheless, we took evidence from the project sponsors—the departments—the users, including education authorities, health authorities and trade unions, and private sector partners.
The committee went further afield and visited Dublin and Leeds to hear views about on-going projects. It was difficult to find any project that had been in operation for a significant period of time. The absence of long-term examples of projects posed problems for the committee in evaluating how successful PPP has been in achieving value for money and the long-term effect that ring-fencing resources would have on public service provision.
The committee learned about different types of PPP, including design, build, finance and operate, or DBFO, and its variation—design, build and operate, or DBO, where private finance is not included. In contracts for the provision of schools, hospitals and other health authority premises, we were told that, other than capital provision, the main changes involved provision of support services by the private partners.
In Northern Ireland, large-scale PPP contracts have been used in the education sector. We heard from the Belfast Institute of Further and Higher Education about campuses in Millfield and Springvale. I am also familiar with the contract for Drumglass High School in my constituency. Those contracts are mostly for new-build large schools and colleges, but PPP contracts have been proposed for smaller schools where a process of bunching or packaging a number of schools will be used.
Such an arrangement will make the proposal more attractive to the private sector and ensure that smaller schools with more pressing needs are included in rebuilding programmes. However, such packaging of smaller projects has often not been successful—that came out in evidence that we heard. The geographic dispersal of rural schools in Northern Ireland and difficulties with collaboration between the maintained and controlled education sectors present their own problems, but the arrangement goes some way towards addressing cherry-picking by the private sector.
When my committee began its inquiry, there was uncertainty about the difference between PPPs and PFIs—I think that there was a public relations problem with how things were presented. We found that PPPs had become a generic term that encompassed PFIs and that the term PPP had evolved with the change of Government.
Social, economic and political issues surround PPPs. For example, the contracts for building some of our new schools involved the transfer of excess land to private sector partners who then used that land for property development. Some were successful, but some were not. We were told that the developers had received planning permission despite objections from local residents—that was one of the main concerns raised in the consultation. In addition, the arrangements were not available to the Northern Ireland departments under the conventional procurement methods. Obviously, that raised questions about the drive by Government departments for PPPs without public debate.
A working group set up by the Northern Ireland Executive Committee noted that various definitions of PPP are used throughout the world. We understand that the working group is likely to recommend in its report to the Executive that there should be a definition that is suitable to the needs and circumstances in Northern Ireland. The Scottish Parliament may want to consider that issue, too.
The committee's report formed the principal part of the evidence for consideration by the working group and the committee will consider carefully how the working group responds to the report when it produces its consultation document.
I would like to turn to the committee's recommendations in the report and try to explain the rationale behind them, using examples of evidence presented to us. I will also refer to developments in Northern Ireland since we presented our report.
We recommended that the Northern Ireland Executive Committee should establish a unified, service-wide investment strategy to ensure that historical underspending on health, education, housing and the infrastructure deficit is financed and managed. We also recommended that a co-ordinated programme of strategic projects should be drawn up and a social partnership established—that is one of the main areas on which we picked up, in particular in the Republic.
Social partnership is important in the development of PPP plans. Our 10 Government departments have their own budgets and there are 10 separate investment plans and strategies—I understand that the system in Scotland is different. The growth in the number of departments potentially worked against a corporate Executive strategy. We saw that as the silo approach to resource allocation and expenditure—each department would look at itself and not at the broader aspects. We flagged that up as needing to change and thought that other departments and the wider community should be involved.
The social partnership that the committee recommended was addressed by the Northern Ireland Executive's working group when it examined PPPs. The working group includes representatives from the community and the voluntary sector. The trade unions initially declined to participate, but their representatives have now joined. The working group will highlight to the Executive Committee any areas in its report where consensus has not been reached. It is important to distinguish between the social partnership in the south and what is happening in the working group. The trade unions are participating in the working group, but the social partnership in the south is more about developing PPPs at an early stage; the input is not simply at the report stage.
As part of its terms of reference, the working group has considered the scope and scale of the infrastructure deficit. It has also been examining a range of strategies and different forms of investment that could be employed to address that deficit. The group will present its report to the Northern Ireland Executive in April 2002. A period of public consultation will follow.
It is envisaged that, following the consultation, the Northern Ireland Executive will present its PPP policy to the Northern Ireland Assembly in September. That could have an influence on the draft budget and the programme for government, which are due to be presented at around the same time. My committee will monitor developments as it approaches its scrutiny of the budget process for 2002.
The issue of PPP has moved into the public arena. We recommended that a specific minister be appointed with responsibility for driving the strategy forward. As I said before, the silo approach exists in the different departments of the Northern Ireland Executive, and such a minister would have to achieve partnership between departments to ensure a commonality of approach. Although the Northern Ireland Executive working group has not adopted that recommendation, it has been considered.
We recommended that a time-bounded working group under the minister should be set up immediately to help the minister to drive the strategy forward. One of the issues on which it would advise the minister would be the most appropriate investment and procurement methods to be used in the short and long terms. It could also begin the development of a strategy and processes. That concept appears not to have been adopted. My committee recognises that the PPP working group has been set up and is reporting to the Northern Ireland Executive, but there appears to be a problem with the evolving proposals for investment in capital projects. We have seen evidence of projects being considered without referral to the working group.
In our recommendations on the establishment of the working group, we anticipated that the working group's role would extend to ensuring a sustainable and manageable flow of projects. We had concerns that, if a full-blown investment strategy was not developed and managed in a co-ordinated fashion, there could be a danger that the construction industry and its subcontractors would not be able to cope with the demand, for example. We were also concerned that if there was a gap after a flow of contracts, some contractors could go to the wall. The working group could target social issues by ensuring conformity with the new targeting social need policy set out in the Northern Ireland Executive's "Programme for Government". We have impressed upon the Minister of Finance and Personnel the need to pursue and target social need in areas of deprivation proactively and positively through the investment strategy and procurement policies.
Another key role that we identified for the working group was that of identifying an appropriate skill base in the public sector in Northern Ireland. We believed that that was necessary so that there ultimately would be cross-fertilisation and utilisation of information, knowledge and skills in the public sector to help us to achieve our goals. We recommended that, before the investment strategy was agreed, departments should consult the minister responsible and the Executive before committing significant resources to PPP projects. Overall accountability for committing resources lies with the departmental minister—who is also accountable to the public for the way in which public services have been delivered through his or her department—not with the investment strategy minister. The departmental minister must be satisfied that each project is suitable.
Our recommendation to establish a longer-term central investment or procurement body was built into our findings so that, as there was a scarcity of expertise in the public sector, expertise, best practice and appropriate knowledge and skills could be brought together and dispersed throughout the various departments. During our inquiry, we met the Department of Health's PPP team. That team had developed a centre of excellence within its department. The team provided advice, expertise and standardisation to health boards and national health service trusts, which reduced the duplication of effort in the health service and substantially reduced the consultancy fees associated with each project. A significant point is that the Department of Health employs external consultants full time as part of its PPP team.
Finally, the Finance and Personnel Committee recommended that a review should be conducted of the powers and responsibilities of the Northern Ireland Executive to establish whether those powers are compatible with the committee's recommendations.
I conclude by stating categorically that the Northern Ireland Assembly's Finance and Personnel Committee did not view PPP as the only game in town. We stated clearly that public finance was our preferred source of finance, because generally, public finance can be provided at lower interest rates and its use ensures that accountability for public services remains in the public sector.
We took the pragmatic view that, because public sector finance is unlikely to cover the extensive need and infrastructure deficit in Northern Ireland, PPP had a part to play and could be a valuable tool and means of investment, when used in the right circumstances. However, we emphasised that care needs to be taken in how, where and when PPP is used. Departments in Northern Ireland will be expected to use a mixture of conventional capital investment, PPP and other innovative ways of financing public service infrastructure. If PPP is to be used, full consideration must be given to the impact of committing significant amounts of resources to what is, essentially, a 20 to 30-year mortgage. There is a fear that committing more and more money in that way will eat into the Executive's room for manoeuvre if a reprioritisation of resources or a review of administration are required, for example.
The Finance and Personnel Committee would need to take another serious look at the situation if it were proposed to extend PPP arrangements to service provision in clinical health services or education, for example. The committee had serious concerns—and serious concerns were expressed to us—about that issue.
That concludes my formal presentation. I will provide members with a copy of my speaking notes and they should not hesitate if they wish to raise questions. In the meantime, I thank members for listening to me.
I thank you for your comprehensive overview of what was obviously a detailed inquiry. We have been engaged in an almost parallel process of considering PPP over the past four months. Some members of the Finance Committee are looking at three specific types of project in Scotland, in the areas of education, health and infrastructure, so many of the points that you raised were familiar to us. We are interested in the recommendations and suggestions that arose from your committee's findings. I invite members to indicate whether they wish to ask questions.
I have two brief questions.
I appreciate Mr Molloy's point that it is too early for the public to make an objective assessment of the level of public services that are delivered. However, in general terms, were the public less concerned about the method of procurement, and more delighted, if you like, that the facilities had been provided?
I think that Mr Molloy said that his departmental minister had ultimate authority and accountability for projects. He also mentioned an investment strategy minister. Can the investment strategy minister overrule the departmental minister, or does the investment strategy minister have no say?
I will deal with the second question first. In our report, we proposed that a minister should be appointed to spearhead PPP projects and to make decisions in a co-ordinated way with other departments, but the working group has not taken that line. However, we thought that that approach would be beneficial in the future.
At present, each department in the Executive has its own budget and each minister is responsible for their own budget. The Minister for Finance and Personnel, in conjunction with the rest of the Executive, makes the budget allocations. As members know, the block grant that we receive under the Barnett formula is guaranteed and the block grant has an effect on budgets.
On the provision of services, there were no long-term projects in place, so we could not assess projects' viability in the long term or whether they provided value for money.
We talked to users of services and to people in Leeds who were running a new mental health unit. They found that the services, maintenance and back-up that were being provided were important to how the unit was developed. Having come from the dingy buildings that had been used in the past, they had a good new building. They found that they had a good service agreement with the developer for the maintenance of the buildings. If there were defects in the building, they had a manager within the area to deal with that and to deal directly with the developer's personnel manager. There was a direct line of communication, which took matters out of the hands of the nurses and doctors and let the management deal with them. The quality of services there was very good.
We also looked at a schools project. The key person who was tied in originally with the contract on behalf of the developer stayed on as a manager after the project got up and running. That person was in direct contact with the principal of the school. The principal gave the developer a list of defects. If a room was not available, the developer did not get paid for it. If the room was not clean or if there were faults, it was not paid for.
What came across clearly in Leeds and Dublin was that the maintenance of the contract was a key factor in whether to go for PPP or the traditional procurement method. The people from the department in Dublin told us that they had the money to use the normal procurement method, but they went for PPP because they and the users found the maintenance contract more beneficial.
The convener killed off my first question. My second question perhaps reflects the situation in the six counties in comparison with that on this side of the water. The method of service delivery and the structure—from local authorities right up to health and social work departments—are different in Northern Ireland from how they are here. I am asking you to surmise, but do you think that the structure in Northern Ireland has made PPP easier or more difficult than we have experienced it to be here, bearing in mind the fact that local authorities have more power here? Perhaps you would also comment on whether co-ordination and cross-cutting is a plus or a minus.
One of the things that we found in Leeds was that the local council, various departments of which were dealing with health and education, could put together a project team to deal with all the PPP projects. We talked to people who were dealing with a project on a hospital and on a school. Working on those projects had enabled them to build up expertise.
We picked up clear evidence that a centre of excellence had to be put together so that expertise would not be lost from one contract to another. If there was co-ordination from an Assembly point of view, so much the better, because that would bring in expertise. The key point is that the contract is the essential part of the project. If a developer who was working on a school knew exactly what was wanted, could clearly set out what was needed and could price and maintain the contract accordingly, that expertise in putting together the contract could be transferred for use in building a hospital or any other type of public building. The same issues arose in most of the situations that we saw.
The difficulty in Northern Ireland is that we do not have a remit for education and health at local council level; that goes to the Assembly. There is the opportunity for the Assembly to do what local councils do here. That is why our report proposes that we should put together a centre of excellence and expertise from all the different departments, instead of the education department, for example, having all the expertise in building and contracts and putting that together.
That should happen in all the departments to ensure that there is expertise for putting together an overall Executive Committee strategy for dealing with PPPs and that each department does not reinvent the wheel. Otherwise, there is a danger that the health department, for example, will duplicate what the education department does, with each department employing consultants in different ways. That would cause duplication all over.
Roy Beggs Jnr MLA (Finance and Personnel Committee, Northern Ireland Assembly):
In Northern Ireland, boards and quangos, which have little public representation and involvement, make investment decisions on new buildings in schools and hospitals. The boards and quangos are more remote than local authorities and much less accountable. In that situation, it is much easier to decide on PPP than it is in Scotland, where local government and elected politicians take such decisions. There might be some resistance to PPP, but it is important to focus on the quality of service that the public ends up getting.
I have a quick supplementary question, to ensure that I understand the matter. My wife comes from Armagh. When you talked about centres of excellence, was your point that Armagh City and District Council, for example, could build up expertise, not just to build such a place as the Navan Centre, but to distribute expertise to other agencies, such as those that deal with health and schools?
No. We cannot operate in that way, because our council system is different from yours; our council system does not have the remit for education and health.
I know that.
The Northern Ireland Executive Committee, however, could have an overall expertise and centres of excellence.
An issue that we noted in most of the schools projects, particularly the one in Leeds, was the community use of such a project. The community was involved in the design and in putting together the uses that it would need. For example, a community can use a gym from five o'clock in the evening, and the community can use a theatre space, or its equivalent. Community access was not to the school, but to the buildings, which meant that they were used more. For example, the buildings could be used in the summer months, when school was out. That was a beneficial aspect of the projects.
The Chancellor of the Exchequer has indicated that he will have a more relaxed approach to capital consents. Local government structure is a little different in Northern Ireland. Changes are coming in Westminster that will give more authority to English local authorities and we anticipate that something similar will happen in Scotland. If Northern Ireland also gets a little more freedom in capital consents and a genuine choice becomes available between public and private finance, is the popularity of PPP likely to decrease?
I went into our inquiry totally opposed to PPP and PFIs. However, the inquiry indicated clearly that contracts, and terms and conditions, could be put together for a school or a hospital project that would benefit the community and the developer. However, the size and scale of the project was a important factor in deciding whether to use PPP or traditional methods. For example, it might not be as suitable to use PPP for primary schools as for secondary schools, in which the project has greater size.
In another example in the south, where there were resources to undertake a project by the normal procurement method, it was decided to use PPP, because of the maintenance aspect. Again, the key issue was the contract. Throughout our report, we emphasised that if one set up the right terms within a rigid contract, one could then decide on the best method of resourcing a project.
In our situation, because of the neglect of infrastructure and the lack of spend, particularly over the past 30 years of direct rule, there is still a need to use PPP. Enough capital money will not be available to do otherwise. There are alternatives that some departments would like to look at, such as not-for-profit companies and bonds, which would provide more flexibility in terms of how projects are brought together, would not be tied to a long-term mortgage arrangement, and would provide more flexibility with resources.
Another issue that arose in our report was land. When it was written into projects, land was a difficulty, because it became a bargaining chip for developers. The land was devalued, because the developers said, "We have to deal with the land and the old buildings that are on it." The information from Dublin was that land and old buildings should be taken out of the equation completely and set aside, and that only the contract and the maintenance of the contract, not the liabilities that are attached to old buildings, should be dealt with. Leeds found the same situation.
The 2002 spending review may throw a different light on that issue, but the indications are that the Exchequer is more likely to cut back on the amount of money that is available for capital projects and for the legislative Assemblies, and that it will switch on to how the Assemblies can raise their own resources. The issue is the availability of money and the ability of Assemblies to borrow in their own names, rather than having to go through the chancellor on every occasion.
You mentioned a number of other potential vehicles, including not-for-profit trusts and bonds. In terms of the procurement board, where you were trying to concentrate expertise, did you think of aggregating a number of projects in order to get better private finance terms? Rather than giving your procurement board powers to investigate the financial support for bids, did you consider using it as a not-for-profit vehicle that would allow an overall sum of money to be borrowed, for example, for two primary schools in one area and two in another, thereby saving money?
Our proposal was not just that there should be investigations into how budgets could be put together. We also investigated how the Executive Committee, which is minister-led, could put together an overall budget—for hospitals, schools, and other facilities—to maximise the total package to bring on board the number of contractors that would be required to deliver the projects, and to get better value for money. It was envisaged that the centre of excellence would not just put together individual contracts; the total number of contracts and the expertise that would be available would bring on board other important issues.
One of the problems that was raised, in particular in Leeds, was that the total amount of money had to be substantial to make such arrangements viable. The amount of consultation and development that is required to do one primary school on its own means that the project is not worth while, but for 10 primary schools, it is feasible. In that situation, a similar design could be used, or a similar contract could be used.
The question was also asked, if there are too many projects at one time, could the contractors cope with the amount of building? One of the points that was made was that European investment would come in. The fact that all contracts have to be advertised Europe-wide would mean that the big contractors would be prepared to come in. That would also help the sub-contractors. The local sub-contractor would still be subbing a lot of the work from the main contractor, which might be a European contractor. There would be benefits in pooling everything together and an opportunity for small contractors to start developing or building one school, while different local contractors might have been working on a different school. The arrangement would present opportunities.
Just in case there is a wee danger that we seem to be saying that PPP is the be-all and end-all, I should talk about a number of other points that we picked up in the course of the inquiry. Care had to be taken on how the contracts were put together, whether they involved one project or 10, and expertise had to be held together. In many cases where a council had done just one project, there were major drawbacks and problems in the project's development. In cases where councils had put together a number of projects and had developed expertise, the same contract work could often be built into the next project. There was benefit in that process.
There are obviously differences between our political systems, in that we go for a much more decentralised system under which local authorities and health boards make decisions. You have given us a number of reasons why you have gone down the route of central control, and you have highlighted the fact that the public sector skills base is not wide. There may be pockets of excellence, and you are trying to set up a form of national institute.
All that links back to your budget process, to which you in the Assembly have an eye. But why do you want to have another minister in place? You seem at the moment to be heading for a situation where everything will drop into the lap of your Minister of Finance and Personnel, with whom other ministers negotiate to get a budget. Is it the long-term view that you will stick with that central control, or are you looking instead to have a central unit that will be able to give expertise, while allowing people to make bids from their respective localities using the central system and thereby helping them get their contracts right?
Our proposal was for this to be minister led. We did not wish to bring in a new or additional minister, and the Finance and Personnel Committee suggested that the Minister of Finance and Personnel should be the driving force. That minister would not necessarily take the lead in the majority of education and health projects, for example, but the general view was that the Executive Committee had to appoint one minister as the lead minister.
The purpose of putting together the expertise in a centre of excellence was to advise other departments, instead of having each department having to put together its own pool of expertise and getting all its answers there. The centre of excellence was to advise the various departments, and also to give advice at a local council for any relevant projects. That would ensure that contracts were not being duplicated, that we were not reinventing the wheel every time there was a new contract and that the expertise, including that in actually drawing up contracts, would be there for others to use across the board.
You mentioned earlier that, because of a shortage of contractors, PPPs were of interest. I am not sure what the difference is. I am not certain whether there was a problem in buying something via the normal procurement route. You also spoke about better control of lifetime costs and maintenance when using a PPP. Did that come about because you have proved that the public sector failed to deliver on those aspects, as opposed to the way in which you are approaching PPP? Is that a local Northern Ireland problem?
There has been underinvestment over the past 30 years, and it has been clearly indicated that there is a major need for investment because of the poor state of school buildings, hospital buildings—and poor maintenance within those buildings—and the road infrastructure. Not only has there been a limited capital building programme over the past 30 years, but the maintenance that public departments provided in those buildings was poor. The buildings have got into a very bad state. If that had been under PPP, there would have been a contract to ensure that maintenance over a period. Also—and this has come up in a number of different areas—if the building were no longer required within that area at the end of the PPP contract, we would not be tied to that building.
Government agencies have sometimes adopted unsuitable buildings for a particular project—for example, hospitals in buildings that are unsuitable for modern needs. However, if a hospital or a school were no longer required in an area, a new PPP contract in a different area could provide that service where it was required and the original developer could use the building for some other purpose. In Leeds, the mental health building that we visited was designed and could be used for other purposes, such as an ordinary hostel. If needs within the area changed, the building could easily be transformed.
I was not saying that the package could not be achieved through normal procurement, but that to make PPP contracts worth while and viable projects must have scale. When we put that scale together, the main problem would be the number of contractors available to do that. The response that we received from the people we consulted was that the European contractors that were bidding for the larger-scale projects were in a position to deal with the scale of those projects and to take on board the smaller contractors, which may not be able to bid even for one project, such as one school, on its own.
I accept that, Mr Molloy. To take you back to how you decide whether a project should be traditionally procured or whether it should be PPP, what are the three key parameters around which you base that decision?
The key areas that we as a committee reported on were value for money, the risk transfer—how we transfer that risk on to the developer—and the quality of services. We highlighted throughout the report that the quality of service had to be better than that which could be achieved through public procurement. If that were not possible, we would not go for PPP. It was key in putting together the contracts that the risk had to be transferred from the public purse to the contractor.
In the south, road toll contracts had "Review every five years" written into them to ensure that, if the Government were not getting returns from the road, it could review the situation and try to take a larger share. For the first five years of one project the contractor broke even, which meant that for the next five years the contractor would be into good profit. The Government had written a five-year review into the contract, which meant that it was able to take 50 per cent of the profits. The Government is probably now able to take double or treble that amount because of the increase in the predicted volume of traffic on that stretch of road. That was a method of ensuring that not only was the contractor repaid but the Government received resources that it could use for other projects.
The traditional method of funding allocation, certainly in Scotland, is based on need. The maintenance quality of buildings and population requirements are considered, and the various public agencies have to choose which schools or hospitals are funded for refurbishment or rebuilding. Refurbishment is generally chosen, because the cost of rebuilding schools and hospitals is so high. It occurs to me, from the evidence that we have taken, that new projects are not necessarily matched to needs in every case throughout the system. Decisions are more or less based on whether a project appears to be a good proposition. Has Northern Ireland considered how projects are chosen and the matching between the choice of projects and the actual level of need for public investment?
The committee's advice was that the working group should set up PPP projects only after examining whether social need was being targeted. Both communities have concerns. The unionist community is concerned that, for instance, the new schools programme does not include enough schools in traditionally unionist areas. Nationalists are concerned at the number of mobile classrooms outside schools and argue that, as such areas had no school in the first place, their needs should be targeted.
The working group must establish a structure that promotes equality and is based on the assessed need of each area. For example, the working group would need to decide whether a mobile classroom is sufficient for the modern teaching methods that schools use. It would also need to decide whether to replace an existing crumbling school building instead of building a new school in an area whose population has increased.
We envisaged that the working group would deal with such situations by using a cross-departmental approach to decide how the budgets are spent. The Assembly's three priorities are health, education and infrastructure. From our inquiry, I learned that those targets need to be prioritised by one centre of excellence with a cross-departmental overview. That would mean that decisions would not be made only from the point of view of education or health or infrastructure. An overarching view is needed so that the budget money is distributed to follow area needs.
Is there a need to reconcile educational priorities, financial criteria, such as the requirement that projects be good value for money, and traditional political considerations about the balance of advantage? Is your difficulty that you have to meet needs in so many different contexts?
The big problem is how to assess need. That is where the difficult decisions need to be taken. There also needs to be equality across the board. The services that are provided must be of good quality and must be accessible to the community. As was said earlier, our inquiry learned that better value resulted when the buildings could be used all year round by the local community as well as by the school-going community.
If there are no further questions, I thank the witnesses for giving us the opportunity for today's exchange and for providing us with a copy of their completed report, which will help us with our work. Once we have completed our inquiry, we will be happy to pass on our findings. I hope that we will find issues of mutual interest that will help us develop our inquiries in the future. I thank you on behalf of all committee members.
Thank you.
I remind members that there is a lunch with the members of the Finance and Personnel Committee in room F1 in Cannonball House.
Meeting closed at 12:48.