Reinvestment and Reform Initiative

– in the Northern Ireland Assembly at 12:00 am on 7th May 2002.

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Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party 12:00 am, 7th May 2002

I have received notice from the First Minister and the Deputy First Minister that they wish to make a statement regarding the reinvestment and reform initiative announced on 2 May 2002.

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

On a point of order, Mr Deputy Speaker. The statement is not available outside the Chamber. Is it not normal practice for copies of a statement to be made available beforehand?

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party

The Member is quite right to point that out. Standing Order 18(1) states:

"A Member of the Executive Committee shall make statements to the Assembly on matters for which the Executive Committee is responsible. He/she shall where possible make a written copy available to Members as early as possible before delivering the statement in the Assembly. Where this has not been possible he/she should state to the Assembly the reason or reasons."

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

With permission, the Deputy First Minister and I will make a statement. Regarding the point of order — [Interruption].

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

It is my understanding that the text is being made available as I speak. The delay arose simply because the text was not finalised until about 10 minutes ago.

Last Thursday, the Prime Minister and the Chancellor of the Exchequer visited Belfast. The Deputy First Minister and I will this morning provide the Assembly with details of the major new reinvestment and reform initiative that we negotiated on behalf of the Executive with the Prime Minister and the Chancellor, and explain its purpose.

Those negotiations have been undertaken over recent months but were only concluded last week. Members will appreciate that it was not possible to consult earlier. However, I assure the Assembly that as we take this work forward we will consult widely. That is essential, because this initiative opens a significant new stage in the development of our Administration, a new means to make a real difference to the people of Northern Ireland and, in particular, to turn around the major deficit in our infrastructure and modernise some of our key services.

Devolution hands responsibility for providing good government to Northern Ireland’s politicians and people. People want good services, fairly and efficiently administered, and they look to the Assembly to provide them. We will work together to deliver reform and reinvestment in public services. The Executive have placed that at the centre of their programme. We need a new debate about services and the necessary hard choices. We must all accept that good services must be paid for, planned and expertly managed. Resources and reform must go together.

The last time locally-elected representatives were able to debate and take decisions was some 30 years ago. Then there was a strategy for public investment. Since then, temporary arrangements and decisions by those with no organic connection with society here saw years of underinvestment, leaving huge infrastructure problems in water, health, transport and education. Now we must prioritise. We must decide how best to close the gap, what can be done now and what must wait. We must look strategically at our asset base, take stock and set a new direction. We must be open and explain those choices to the Assembly and to the people.

The five core elements of the initiative are £200 million available for investment over the next two years; a new borrowing power for the longer term; the transfer of some strategic military and security assets to the Executive; the creation of a new strategic investment body; and a major programme of public service reform to secure greater expertise and effectiveness.

It is clear that reinvestment and reform in our public services are essential. For decades investment in public service infrastructure fell well short of what was required to meet the needs of our community. Under direct rule, priority was given to allocating resources to security. That inevitably meant that, over time, capital investment for services was neglected. We see evidence of that plainly today. The scale of the problem can be seen in hospitals and schools and in the state of our roads and transport systems. Many, however, do not realise that our water and sewerage infrastructure, hidden from view, is also in a poor state and needs major work urgently.

It is calculated that £6 billion extra will be needed over the next two decades to address the deficit inherited by the Executive and the Assembly. With devolution we have the opportunity to do something about it. The Executive have explored possible ways of addressing the problem. In our first year, we established the infrastructure and capital renewal Executive programme fund to support strategic projects, such as rail, road, energy and telecommunications projects. That includes the use, where appropriate, of public-private partnerships (PPPs). We have so far allocated £79 million from that fund, topping up the resources allocated from mainstream Budgets.

Last year we also launched a major review of the opportunities for PPPs and other sources of funding. Our aim has been to identify whether, and how, we might make progress in improving our public services by drawing on other sources of capital and, equally importantly, other sources of managerial expertise. The PPP working group established by the Executive has completed its work, and the Executive will shortly seek views on its report.

Although we have made some progress, it is also clear that more radical ideas are needed to address the backlog of investment, given the pressing demands for resources. It was in that context that the Deputy First Minister and I set out to negotiate additional forms of support and finance. Many in the Assembly and outside have urged us to explore alternative sources of funding, and that we have done.

With assistance from the Prime Minister and the Chancellor, we now have a package that will accelerate the work that is so badly needed. Using it in conjunction with other sources of finance, we should be able to replace old assets with new. Indeed, we can now start to consider other opportunities for investment across our public services that previously we would not have had the resources to contemplate.

The key to the initiative is that we have been able to gain the Prime Minister’s and the Chancellor’s agreement to the Executive’s being able to avail of a new borrowing power. That will enable us, if the Executive and the Assembly so decide, to launch a multibillion pound programme to improve our assets. The Executive will be able to borrow from the Treasury at highly advantageous interest rates, going directly to the gilt market. Interestingly, access to such borrowing has been an issue that many, including the Committee for Finance and Personnel, have pressed on us. Therefore, I am pleased that we have achieved this breakthrough. It provides the opportunity to significantly increase the pace of investment in Northern Ireland.

We do not want to depend solely on the borrowing power. We must consider also how other sources of funding may be used to enhance it. The scale of the task means that we must consider too how we can lever in resources through public-private partnerships. However, we will ensure that, where that approach is taken, it represents the best way to serve the public interest. If used properly, public-private partnerships could be of real benefit. That is especially so because they can bring to bear expert management of contracts and assets to which the public sector has not previously had access, and the theme of expertise is one to which we will return.

The new borrowing power could be used to finance projects in all the public services for which we are responsible. In parallel with the proposed changes for local government finance in England and Wales, we must satisfy the requirements of the new Chartered Institute of Public Finance and Accountancy code. The borrowing will also be subject to a limit set by the Treasury.

As legislation at Westminster is required, the new borrowing regime will not be available until 2004-05 at the earliest. It will only proceed on the basis of funding priorities established by the Executive and the Assembly. However, as the Deputy First Minister will explain, we have also negotiated a short-term borrowing arrangement that can be put into effect now, without a change in legislation, to set in train a major programme of investment.

It is a fact of life for all of us who have mortgages or who take out loans that borrowing must be repaid. Since last week we have seen and heard ill-informed stories about huge hikes in rates to pay back the borrowing. There are several points that must be emphasised. The Executive have made it clear that they will not propose increases above the pattern of recent years unless the present rating system has been reviewed and we have an acceptable local revenue system. Any changes that arise from the review of rating policy must be phased in over several years so that we can avoid any sudden changes in the bills required of any sector, business or individual.

We have agreed a borrowing power with the Treasury. It will be up to the Executive and the Assembly to decide whether to borrow to pay for new assets and, if so, by how much. That provides a real opportunity to invest in our infrastructure, and the Executive have agreed that we should pursue the proposed new arrangements with the Treasury.

We must work within the Treasury’s strict rules on the control of public spending, which preclude the use of efficiency savings or asset sales to service debt. We will make fresh efforts to secure efficiency gains as part of the reform dimension of the initiative. We will also require a radical look at the assets held by Departments to free up any spare resources.

The issue of the revenues that we raise from the domestic sector was inevitably going to arise in the spending review. It has been said many times that it is impossible to expect the Treasury to accept our arguments for money to sustain the same standards of public services as in England if our revenue levels are much lower.

Without this initiative, we might have had to increase rates in the longer term to make ends meet for basic services. The reinvestment and reform initiative has given us an opportunity, and we can use additional revenue to lever in major investment in infrastructure.

As the title implies, the initiative is also about public service reform. We must increase resources, but we must not focus solely on the quantity of projects and the number of supporting staff. We must focus also on the quality of project implementation and subsequent service delivery. As an Executive, we are committed to improving delivery and value for money. We underlined the importance of modernising Government and of improving its efficiency and effectiveness in the Programme for Government. The introduction of resource budgeting, public service agreements and service delivery agreements means that much of the information necessary for that change is available. That should enable us to get better information about the true costs of services and about what is being achieved, and we have added to that by commissioning evaluations of the needs and effectiveness of major policy areas. Those cover approximately three quarters of the expenditure that we control.

With the work on a new procurement system that is taking place across Departments we should also see improvements. The major review of public administration in the coming months will examine all aspects of administration, including the quality of service, and it should provide a good opportunity for improvement. Likewise, the new investment body should be an important vehicle for helping to deliver public service reform. However, reform must go wider. We must focus more on delivering services and on placing customer service and the needs of front-line staff first. Technology can play a vital role in improving services and information, increasingly allowing the public to use services when it is convenient for them. Technology must become more significant in the Programme for Government, and integral to the work of all Departments.

We have already seen signs of significant development. The creation of Invest Northern Ireland and the joint development of our welfare and employment systems are examples of where new approaches that are aimed at better meeting the needs of the public have been developed. However, we must go further. I do not wish to see public service budgets increasing in future unless reform is a key condition. The public deserve that and need to know that the best management techniques are being used to provide a service, and that internal administration is using minimum resources. We all want improvement in the delivery of public services with the resources and the expertise that are available to help us. We must change how we do things rather than continue with previous practice. We believe that we have a better opportunity than ever to further that objective.

This reform package is the largest that we have had. With the strategic investment body and our ability to borrow, it has wide ramifications for the public services. It will change style and mindset and put new thinking and energy into the Government. We are eager and determined to have real change. We are taking seriously our responsibility to the public, and we are determined to transform the quality of services. We want our new democracy to deliver real benefits to the public.

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland 10:45 am, 7th May 2002

I join with the First Minister in apologising to the House that the continuing work on the statement meant that it was unavailable for Members before its delivery.

The initiative presents a challenge to us all. We must consider our priorities and, in particular, what should be addressed in the short term. We must consider whether there are new ways of delivering services. Much that was previously impossible should now be possible. The First Minister and I will work with the Minister of Finance and Personnel, and with all our ministerial Colleagues, to develop a programme that brings substantial benefits to the people.

I stress that because, although we will be setting up a new strategic investment body and must use the best quality expertise to assist with the implementation of that work, choosing the direction of the programme rests with the Executive working with the Assembly.

Through the Programme for Government, we will agree which areas of deficit will be addressed first. Those political decisions must be settled on the Floor of the Chamber.

The First Minister explained the opportunities to increase resources through longer-term borrowing and to revitalise public services. The other threads of the initiative are to take a more strategic approach to investment through a new body; to use former military and security assets; and to use the facility to borrow money in the short term.

The adoption of a more strategic approach to the infrastructure and public service investment is a key element of the initiative. In that way we will deliver the best investment programme for the region. Before the launch of the new institutions, infrastructure investment in public services and utilities, such as hospitals, schools, roads, transport, water and sewerage, was characterised by a piecemeal, departmentalised, non-strategic and largely reactive approach. Expertise and resources are currently spread across 11 Departments, each of which is responsible for delivering its own programme. The Programme for Government emphasises the importance of improving the way in which we work together across the Departments.

We have already consulted widely on how to improve public sector procurement generally. A new central body that will draw in the best private sector expertise is already planned. In responding to the need to improve the infrastructure, there is potential to improve co-ordination and to ensure that the available expertise will result in better service delivery. Therefore, we propose that a new organisation be created to work with, and on behalf of, the Executive and all Departments to deliver infrastructure programmes in a more strategic way.

The proposed new body would be able to use a mixture of sources of finance, including the new borrowing power, traditional public sector finance and public-private partnerships. The body would link the finance to the best procurement methods, whether those involve the public or private sectors, or a combination of both. Using those, it would produce much better solutions than would be possible if the resources were spread across all the services, with each Department left to develop its own expertise and deliver its own projects. Therefore, it should be possible to take a more strategic approach to public-private partnerships.

Many of our Departments are relatively small and would experience difficulties in developing and maintaining the expertise and drive required to make the projects work. Ministers will decide what projects, buildings, and so on, will be required, so there will be a clear political responsibility for prioritising and planning. However, delivery and financing will now be overseen on a strategic basis.

The strategic investment body represents a new and highly innovative approach. We wish to examine closely examples elsewhere, drawing on the best expertise. The initiative is about reinvestment and reform, but it is also a major step towards the normalisation of our society. During the troubles, the Ministry of Defence (MoD) and the Northern Ireland Office (NIO) made use of extensive assets. A process of normalisation should bring about a reduction in security requirements. Normally, the NIO and the MoD would sell their surplus assets, and the Departments would have the opportunity to purchase them. However, for several years, we have been arguing that the Government should take a more positive approach and accept that the resources should be used to strengthen the social and economic fabric.

In 2000, it was agreed that we would be consulted on the use of the sites as they became available for disposal. I am delighted that a significant part of the new initiative is the Government’s agreement to transfer to the Executive, at no charge, some of the exceptionally significant assets that are, or will shortly become, surplus to requirements. The sites, which the Chancellor mentioned at the Odyssey last Thursday, are: Ebrington Barracks; the Maze Prison, including the base adjacent to the prison; the bases at Magherafelt and Malone Road; and Crumlin Road Prison.

Those are significant assets, and should help support a major programme of economic and social renewal for the whole community — a community that has been through a long period of conflict.

We need to take the opportunities of a stable and peaceful society, and those sites present tremendous opportunities. It is particularly important that sites and assets that, up to now, have been associated with militarisation and conflict should be transformed into engines of peaceful economic and social regeneration. We are now considering how best their potential can be developed to fulfil the needs of the community.

The Government have also agreed that as further sites become available, it will be for the Executive to address how they may be used to promote economic and social regeneration on a strategic basis, although we cannot necessarily infer further transfers without charge.

The major programme of infrastructure investment will take some time to develop. The new borrowing power, on which that depends, will be subject to the passing of new legislation through Parliament. More importantly, as the First Minister has just stressed, we need to radically review the system of local revenue, and establish, as a first condition before increases can be considered, a system that is fair and acceptable.

However, we need to make an early start with the implementation of the initiative, and we have agreed with the Chancellor that the Executive will be able to borrow £125 million in the next two years. The Executive wish to maximise the impact of this new money, and they will be adding £75 million of resources that have become available from Departments, enabling a more strategic use of those resources than would otherwise have been possible.

When we were negotiating this shorter-term boost to investment, the new regional cancer centre was among the significant projects that we had in mind. We will also consider how the £200 million should be used in conjunction with the Executive programme funds to maximise the investment impact. We will be looking at renewal and purchasing of important new equipment, improving our roads, and other investments that we can pursue in the short term.

The £125 million borrowed from the Treasury will have to be repaid through existing revenue income, which will be available from the regional rate. There have been reports about major increases in the rates. The First Minister has explained the position in relation to the longer-term borrowing power. However, we should also be clear about the short-term borrowing arrangement. The £125 million loan will be repaid from revenue income currently planned, and will not require increases in the rates.

Much work now needs to be done to implement the initiative, and the First Minister, the Minister of Finance and Personnel and I will be working with our ministerial Colleagues in the coming weeks and months to realise the full potential of this important package. We will keep Members informed of developments, and I am sure that Members will wish to offer views and ideas on how the community could most benefit from the changes.

The establishment of the strategic investment body will be a major task, and we wish to start work on it right away. The parties on the Executive will be invited to nominate members to a project board, chaired by OFMDFM nominees, to develop the proposals for the new body. An Executive subcommittee is to be established to oversee the work. We wish to call on expertise from the Treasury, 10 Downing Street, the South and further afield to help develop our ideas. We also propose to fully involve the Assembly through the Committee of the Centre and the Committee for Finance and Personnel.

We have given details today of the initiative — an initiative that promises substantial additional resources for Northern Ireland through short- and longer-term borrowing, and from the transfer of exceptional security and military assets to the Executive. We believe that this initiative should help provide a welcome boost for our economy, and improved services for our community, for this and for future generations.

We also have other work to do. The Treasury spending review is under way and is due to be completed in the summer. Our agreement with the Treasury on the reinvestment and reform initiative is separate from our negotiation on the spending review. We and the Treasury are agreed; the two are not connected.

The recent Budget announcement of large increases for health funding brought home the difficulties of matching expenditure increases to comparable programmes in England while the Barnett formula continues to be applied. We will continue to press for a fairer system of allocations across the UK, which better recognises Northern Ireland’s higher needs. However, the Treasury will undoubtedly continue to focus on the level of local revenues in Northern Ireland relative to England. The Executive and the Assembly will need to consider this issue further, particularly in the context of the rating policy review. The Executive will not propose increases in rates above the patterns of recent years to the Assembly until we have had the opportunity to consider the outcome of the review.

Irrespective of the outcome of the UK spending review this year, we will not have all the resources we will need. Later this year, the Executive will need to consider priorities for spending across programmes, taking account of needs and effectiveness in the context of the Programme for Government. To initiate this process, the Executive intend to present their position report for this year’s development of the Programme for Government and Budget to the Assembly early next month.

When presenting their Programme for Government to the Assembly, the Executive said that it was about making a difference. The process is different: a local Administration is responsible for making decisions on local issues and for addressing local needs. We also want a different outcome: quality of services and quality of life for all people in Northern Ireland. That difference justifies all the work of the Executive and the Assembly. The reinvestment and reform initiative, which the First Minister and I have described, provides everyone with an additional opportunity to make a real difference.

The initiative is not a magic solution: there are no soft options. Political life is about hard choices — the ones that the public look to us to make. However, the initiative opens up new ways of dealing with those choices and new ways of drawing in expertise and better management. If we make the right choices, we will be helping to invest for the future, improve our public services and provide real benefits for local people. Everyone should work to realise the potential of the initiative. I commend it to the Assembly.

Photo of Edwin Poots Edwin Poots DUP 11:00 am, 7th May 2002

I doubt that the wordsmiths of the First Minister and the Deputy First Minister had any opportunity to get away over the bank holiday, but given the amount of spin that has been put on the statement, they did not need to take their families to any waltzers.

I wish to comment on several matters that were raised. The First Minister said that rates will not rise more than they have over the past two years. The public must be aware that that is already four times the rate of inflation.

When will the current rating review be completed? Given that we cannot use the borrowing powers until 2004-05, the review should be completed by then, and the outcome should be put in place. Today’s promises that rates are not going to rise significantly seem to be somewhat hollow.

Can we be assured about the local government Exchequer grant? Will it be reduced over the next few years, or will it be done away with? Will the derating of industry, particularly manufacturing industry, cease? Are we going to stop derating charity shops?

With regard to the sites that are being allocated back to the devolved Administration —

Photo of Edwin Poots Edwin Poots DUP

— will the First Minister and the Deputy First Minister consult with local communities and public representatives in those areas and take full account of the proposals made by local people?

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

I thank Mr Poots for emphasising that over the next couple of years the existing pattern of rates increases will continue without dramatic change. The existing pattern involves increases, but we do not intend to move sharply away from that pattern over the next two years.

The review of rating will be launched very soon, and we hope that it will be completed within a year. However, it could take longer than we would like, for we intend to consult fully. A whole range of local interest groups is keen to be involved in the rating review. We realise how sensitive the issue is, so there will be full consultation. Decisions will then have to be made. The review opens up the possibility of considering other ways of financing local government. While there is a focus on the rates, the door is not closed to people coming forward with fresh ideas about structures of local government finance.

Mr Poots raised several detailed questions about derating for charities, industry, and so on. All aspects of the rating system will be re-examined. When the review of rating is published, Members will see that those issues have been raised. We will see what views are put to us before coming back to the Executive and to the Assembly to find out how we should proceed.

Ideally, the review will be complete and implemented in time for the new arrangements that will kick in in 2004. Whether that ideal is realised is a matter for ourselves and for society as we proceed over the next two years.

Photo of David McClarty David McClarty UUP

I congratulate the First Minister and the Deputy First Minister on securing this package for the benefit of the people of Northern Ireland. Can the Ministers confirm that the short-term package of £200 million will be available to the Executive without any additional burden being placed on the ratepayer?

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland

I am happy to give the Member that assurance. The £200 million package comprises a loan of £125 million from the Treasury, and that borrowing can be covered from existing rate revenues. We do not have to add to the patterns of increase that we have projected to fund that short-term borrowing power. The other element of the package is £75 million of our own resources, using money available from Departments’ underspends and end-year flexibility. Applying the money in that way to create the £200 million spending boost represents the best value for money and the best strategic use of the money. The £200 million will be spent in a way that combines and complements the further spending that we have to undertake with regard to the Executive programme funds.

Photo of Tommy Gallagher Tommy Gallagher Social Democratic and Labour Party

I welcome the statement and congratulate the First Minister and the Deputy First Minister on the negotiations that brought about the package. Members, myself included, have frequently and urgently called for additional resources for schools, colleges, hospitals and roads. The initiative gives us the opportunity to make positive choices for better quality services.

There has been a good deal of speculation about rates. Will the First Minister assure the House that decisions about rates, whether in the light of the package or as part of the rating review, will not be taken without fully consulting the Assembly?

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

Full consultation with the Assembly will take place. Any decisions to be made will come through the Executive to the House. However, even before decisions are taken, there will be a full consultation on the question of local government revenue and forms of finance.

Choices must be made. It is an uncomfortable fact that revenue from rates in Northern Ireland runs below the level of revenue collected through council tax and other analogous methods across the water. It is difficult to draw exact comparisons. Some of the figures bandied about in the local press are unrecognisable. However, there is a difference. When arguing for additional money from the Treasury, the issues of equality and the taxpayer’s interest must be addressed. That matter arises irrespective of this exercise. The question of the comparability of local revenue will have to be addressed.

As long as we can show the Treasury that the Assembly can conduct its business in a responsible fashion, we shall be able to manage changes without making sudden increases. That is a general principle, regardless of the new initiative. The initiative presents the prospect of significant borrowing power, which will give us greater flexibility in the planning stages. In the course of life, people regularly borrow in order to handle major investments in a more convenient way. We can look at that issue over the next year or two before decisions have to be taken.

Photo of Seamus Close Seamus Close Alliance

I thank the Ministers for their statement. However, the Deputy First Minister said that

"The initiative presents a challenge to us all."

It certainly does when one has not had the opportunity to read it and to do it justice by asking the Ministers probing questions. I would have preferred that the statement be delayed until this afternoon to give us the chance to read it.

Will the assets — in the form of military establishments — that have been transferred to the Northern Ireland Executive attract an annual 6% charge under the resource accounting regime? If so, what impact will that have on our block grant and departmental expenditure limit?

I am delighted to have the categorical assurance of the First Minister and the Deputy First Minister that rates will not be doubled in the next four to five years. However, I welcome even more the fact that minds are now open to other ways of raising finance. I assume, therefore, that the First Minister and the Deputy First Minister now have an open mind on the concept of local income tax. Do they share with me the idea that that is a much fairer way to raise revenue than the current iniquitous rates system?

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland 11:15 am, 7th May 2002

I accept that Mr Close has not had time to read the statement. However, in my experience, regardless of what I say in a statement, or of how much time the Member has to read it, he pays little attention to it, and does not rely on it anyway. Perhaps the Member is making a new departure in that regard.

The assets will be transferred to the Executive; therefore, they must be accounted for in the same way as are other assets. When I was the Minister of Finance and Personnel, I emphasised that resource accounting and budgeting would involve a significant change in how assets are treated. In addition to controlling the flow of spending, the Assembly now controls the stock of assets, which we must account for and treat in the manner that Mr Close described. That is why it is imperative that we put the sites to best use, enable others to do so, and make the best decisions about those assets. We will be working to that end.

A review of rating policy began some time ago, and the first stage is now complete. The Minister of Finance and Personnel will soon issue a public consultation document based on the work that was carried out during the first stage of the review. That document will set out all the issues on rates. We do not need Members’ scare stories about the removal of relief from charity shops or a massive increase in business rates. I was criticised — [Interruption].

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland

When I was the Minister of Finance and Personnel, I was criticised by several councils because I would not withdraw relief for charity shops. The matter will be included in the rating policy review for Members and the public to see, so that a fairer system of generating local revenue can be achieved. All the necessary facts will be included in the review; we do not need scare stories. We will examine the issues, make decisions on them and move forward. Anyone is free to argue that a local income tax would be better; however, that is not on the agenda of the rating policy review. There is no ulterior agenda; we need to consider honestly and hard-headedly the need to raise local revenue, and we must ensure that we do so fairly.

As regards scare stories about business rates, the Executive have increased business rates by 3·3% in the past few years, which was as close as possible to the rate of inflation. They did not increase it further, nor did they increase it at the same rate as domestic charges, because they recognised and emphasised that businesses in Northern Ireland already pay rates equivalent to those paid by businesses across the water. Neither the Treasury nor anyone else could argue that we have a gap to close in business rates — [Interruption].

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

I welcome the new strategic approach. The ability to overcome the departmental bottlenecks that have blocked progress for so long is important and long overdue. However, the package from the Chancellor should bear a large bright label that reads "handle with care", because much small print must be read, and clarification is needed.

How much will it cost to borrow the £125 million that we have already agreed to accept? I do not want to know where it is coming from; I want to know how much it will cost. Secondly, how much will it cost us to borrow £1 billion, or other larger amounts? Has an interest rate been fixed?

Thirdly, the Chancellor and the Prime Minister made an announcement containing much spin about investing in future generations. Is it not rather the case that we are asking future generations to pay for our debt?

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

I agree that we need to handle these things with care, and I wish that commentators would do so also. We see remarkable stories in the media about what this will mean. As was stated openly and clearly, this is a matter of taking on power, and the question arises of how and when it is to be used. In our lives we purchase major capital items such as cars and houses, and rather than save the cost from income, we usually borrow. The costs involved will depend on the rates available and how they are drawn down. Crucially, we can cover the cost of borrowing £125 million initially with existing departmental budgets.

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

How much will it cost?

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

The cost will depend on when it is drawn down. For example, if £1 billion is borrowed, the cost depends on the interest rates at the time. The rates available at the moment are around 5·25%, so that would mean expenditure of around £75 million, which is a competitive rate.

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

Yes. The current rate is 5·25%, and it is better than floating a bond. The Member will note that we intend to create a strategic investment body. The body will maximise available public finance expertise and explore a range of possible sources of finance, which includes borrowing from the Treasury, using assets more effectively and raising funds through public-private partnerships.

One must not assume that the cost of all the investment infrastructure will be met by borrowing. There is the possibility of exploring public-private partnerships and using them to lever in more finance. Borrowing can provide funds, which can be used to bring in similar or greater funds. While we cannot use the proceeds of the disposal of assets to fund borrowing, we can use them to fund investment, so infrastructure investment can come from a number of sources. Those who see a need for several billion pounds to be spent on infrastructure and assume that it will all come from borrowing are wrong. Some of the figures that I have given are within our resources, even if we borrow. Our Budget is in excess of £5 billion, and it should be possible to find £30 million, £40 million, £50 million or maybe £75 million a year to fund substantial borrowing. However, that would be on the basis of our agreeing the detail with the Treasury, and we are still in discussion on how we should handle longer-term borrowing.

I did not give the Member a specific answer about the cost of borrowing £125 million in the short term. I understand that the loan is likely to cost less than £10 million a year, based on repayment over 25 years.

Photo of William Hay William Hay DUP

I suppose we will know soon enough whether Santa Claus has come early to Northern Ireland.

We must find out the finer details of the financial package, and how it stacks up economically. Will the Committees have opportunities to fully discuss the package and its financial implications?

I welcome the recent developments concerning Ebrington Barracks, which is in my constituency. High-level discussions have been taking place for some time to try to secure public ownership of the site. Will there be wide consultation in the Foyle constituency — particularly in the Waterside area — on the future use of the site? Many useful discussions have been held with various bodies in the city about that. However, now that the Executive have control of the site, many people in the community are worried about whether such consultation will continue.

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland

I accept the Member’s point that people will want to appraise the package. Any future use of borrowing power by any Executive will be subject to the full scrutiny of the budgetary process, not least because additional borrowing would be resourced through additional revenue raised from rates. Nothing will bring about more transparency in the use of borrowing power than that.

For that reason, the Executive want to make it clear that future borrowing power will be used solely for strategic capital investment. Borrowing will not be used to fund running costs, pay wages or cover other expenses; it will be used solely for strategic infrastructure and public service investment. The Executive are conscious that the payments will be spread over time, and we want to ensure solidarity between generations. This Assembly will provide the necessary public service infrastructure for future generations. All the Committees will know how those matters are being handled.

The existence of the strategic investment body, and the qualitative difference that it makes to our capital expenditure profile, will enable the public to see the additional benefit of new investment, so that the added value will be obvious. That is part of the transparency that is important for the public and its representatives in the Assembly.

The Member also referred to Ebrington. I am aware of, and have been involved in, many discussions about the site, because I too represent the Foyle constituency. Having made the case to the Prime Minister and the Chancellor for the transfer of the sites, the Executive want to ensure that they are put to optimum use in the public interest. We will continue discussions involving a range of sectoral interests to decide the best use of that particular site.

Many people urged the Executive and Departments to buy some of the sites that have now been transferred.

Members told us to buy Ebrington Barracks and to pay £10 million for it. Instead, through this package, the Executive have acquired the sites free of charge. The Executive can use the money that Members told us to spend on buying the sites to fund £125 million of borrowing power for short-term investment.

If Members listened to what they have advocated, they would realise how good this deal is. They wanted the money to be spent on buying those sites, and additional money would then have had to be found to develop them. Instead, the sites have been acquired free of charge, and the money that would have been spent on buying them can now be put towards infrastructure and public service investment.

Photo of George Savage George Savage UUP 11:30 am, 7th May 2002

I welcome the statement and the package that goes with it. This is mature politics in action, which is long overdue in Northern Ireland.

Can the First Minister and the Deputy First Minister confirm that the investment needed for water services alone is around £3 billion, or £6 million a week for 10 years? If that investment were not made, what would the consequences be? The Assembly and the public want to know whether the Minister for Regional Development has made any suggestions on how to meet the responsibility and the enormous backlog. I hope that he does not take the same attitude as his Colleague Mr Poots, who sits back and complains and lets other people do the work for him.

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

The information that we have received from the Department for Regional Development is that a substantial investment of around £3 billion is needed for water services. We cannot sit on that issue. It must be dealt with.

A point was raised earlier about the charges that would be incurred on the bases that have been transferred: those charges come under the new regime of resource accounting and budgeting and involve a charge of some 6% for held assets. Water services have considerable assets. Under resource accounting and budgeting, we would be charged for those assets. Consequently, there would be significant additional charges.

There is also the issue of how the Administration is funded. Funding increases come with per capita equivalents to increases in England in Wales. There are no longer any increases in public expenditure on water in England and Wales. No additional money is available in that way. If we are to deal with the investment that is needed in the water sector, additional sources of finance must be found. That is an important matter.

European Union Directives are a source of concern for water services. Those Directives will require expenditure, and if they are not implemented, penalties will be incurred. That is an important issue that must be addressed urgently. We understand that the Minister for Regional Development is considering how to deal with those problems, and he may soon introduce proposals. Those proposals may address the raising of finance, if finance is to be raised at all. I do not know whether that matter is on the Minister’s mind. However, we will consider with interest his proposals for water services.

The Department for Regional Development has significant problems. Other Departments also have problems with infrastructure. We hope that the package will benefit all Ministers and will enable matters to be dealt with strategically without displacing the interests and responsibilities of individual Ministers. That is why, as the Deputy First Minister said, we will invite other parties to associate with the operation of the strategic investment body.

Photo of Mrs Annie Courtney Mrs Annie Courtney Social Democratic and Labour Party

I congratulate the First Minister and the Deputy First Minister on taking the steps that secured the package. Everyone agrees that more resources should be put into public services, and all parties have, in one way or another, called for such investment. The package offers a chance to accelerate investment in vital services. I also welcome the response given to Mr Hay regarding public consultation on Ebrington Barracks.

Can the Deputy First Minister confirm that the initial package will be spent on strategic investments such as the new cancer centre, so that people can see that devolution does make a difference, and that we advocate quality public services to meet society’s needs?

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland

As I said, the First Minister, the Minister of Finance and Personnel and myself raised issues that would be significant elements in the shorter-term when we negotiated the short-term spending boost as part of the overall package. The cancer centre was the primary significant project that we thought could be funded from a short-term package. All Assembly parties know how important the regional cancer centre is to the regional health strategy. Achieving the regional cancer strategy will make good the work of the important new cancer units.

We are determined — and we are sure that our Executive Colleagues are determined — to support the Minister of Health, Social Services and Public Safety in realising the regional cancer strategy. We regret the different things that have prevented progress being made, and it is for such reasons that we believed it important to secure a short-term dividend, and not just to rely on longer-term borrowing power. Decisions and announcements on precisely how the money will be used will follow.

I am happy to reiterate the reassurance about public consultation on Ebrington Barracks and other sites.

Photo of Mr Oliver Gibson Mr Oliver Gibson DUP

Last week, I was tempted to hijack a plane that was supposed to be arriving laden with millions of pounds. However, the roads infrastructure in west Tyrone was so bad that there were no white lines to guide the plane down.

First, have Government bonds been ruled out? Is that a good financial manoeuvre in view of the fact that loans would be long-term? Are we talking about a fixed-term contract with an interest rate of 5·25% for 20 or 30 years?

Secondly, other means of raising money were mentioned. I welcome that the Deputy First Minister said that he would inflation-proof the business rates. Could there be a tremendous hike in domestic rates to compensate for that? What are the other means of raising money, and will they be put into the public domain for consultation?

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

The prospect of issuing bonds to finance infrastructure investments has some attractions, but all bonds would ultimately have to be guaranteed by the Northern Ireland Executive. The Treasury has made it clear that it would not support a bond-financed approach, nor would it be prepared to act as ultimate guarantor — that would probably be sought from financial institutions and investments if a bond were to be floated.

Significantly, the Treasury’s rates are better than those that would be gained from the market on floating a bond. It is therefore not simply a matter of the Treasury’s difficulties with the concept of bonds. Some of those difficulties are not related to Northern Ireland but rather to other areas. The arrangements offered are better financially, and that is significant.

With regard to other sources of finance, we hope to set up public-private partnership (PPP) deals through the strategic investment body. PPP partners could raise finance through bonds, and they would carry the risk. Other ways of raising finance may be available, some of which were referred to earlier. The objective of the strategic investment body is to bring in expertise and to focus the existing expertise in the Administration on examining what is available and what can be done to provide the finance to achieve progress in the best possible way.

Business and domestic rates are not connected with this initiative. Rates are already a problem, because of comparisons between local taxation and taxation across the water. The increase in business rates was kept low because there is no significant disparity between business rates here and business rates across the water. There is, however, a disparity in domestic rates, and there have been significant arguments on that issue. We must show that there will be equality with regard to tax, rates and council taxes across the United Kingdom. That has been happening. I hope that the message is getting through that there will be no sudden or dramatic change.

Photo of Mr Ivan Davis Mr Ivan Davis UUP

I congratulate the Ministers on securing the free transfer of security sites and prison sites to the Executive. Those named so far are of major strategic and monetary value. There has been much speculation, in the Lagan Valley constituency, for instance, about the possible use of the Maze site. Will the Ministers consult fully with local authorities and responsible community groups in the areas concerned before the use of those sites is determined?

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland

I am aware that in different localities there are different levels of interest in the sites, and there has already been some debate on the issue. Now that we have the sites we must ensure that best use is made of them. In determining the best use for the sites, it is important that they relate directly to the benefits of a transformation to a peaceful situation. They must be symbols of reconciliation, and they must be used for regeneration. If the sites were sold, the money raised would have to be used for similar purposes. That is fair in the context of the normalisation dividend that we started to negotiate before Christmas.

All relevant local interests must be involved and consulted. Strategic interests must also be considered. Given that the transfer of particular bases as part of the package has been a matter of luck, circumstance and negotiation, it would be appropriate to involve the strategic investment body.

Photo of Peter Weir Peter Weir DUP 11:45 am, 7th May 2002

Members will have a mixed reaction to the news that the First Minister and the Deputy First Minister negotiated the package jointly, and, with their respective records of success at negotiation, we must be glad that the Deputy First Minister had a large input.

Given the restraints that have been imposed on borrowing, which are outlined in the statement, do the First Minister and the Deputy First Minister agree that a large percentage, if not all, of the borrowing would be unnecessary if investment were made as a result of reductions in public expenditure? In the light of that, what plans do they have to examine the number and cost of Government Departments, the size and cost of the Assembly and the amount of money that is allocated to the North/South bodies and the Civic Forum?

Finally, what comfort can ratepayers take from the fact that the increases over the next four years in domestic rates are anticipated to be only four times the rate of inflation rather than more?

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

It is not our intention to change existing patterns for rates increases over the next couple of years. I have stated the reasons for the above-inflation domestic rates increases several times. I will not speculate as to why Mr Weir has not quite understood the point about comparabilities with other parts of the United Kingdom. Normally, the Member is enthusiastic about bringing us into line with the rest of the United Kingdom, and it is strange that in this case he is not. Perhaps, though, it is not surprising. Is he willing to accept the benefits but not the burden of such matters?

There is some substance in the Member’s comments. We are keenly interested in reducing expenditure where possible, and that is an element of the review of public administration that will be advanced quickly. We hope that it will be implemented in the course of the next year, and, as is necessary, it will run in parallel with the review of the rating system. We will consider whether significant savings can be made in the management of public bodies outside the central Departments. The Member may not have appreciated that the creation of the strategic investment body to centralise expertise on finance and rating and financing projects through PPPs may itself involve a reduction in expenditure at departmental level.

The cost of the Assembly is not a matter for Ministers; it is entirely for the Assembly Commission. However, I am confident that the people of Northern Ireland are glad that they have an Assembly that enables them to influence the decisions that are taken on such matters. The people of Northern Ireland are glad that the Assembly exists, and they can put value on the carping that comes from people who contributed nothing to the creation of the Assembly or to society’s progress here in recent years.

Photo of Sir John Gorman Sir John Gorman UUP

I join Members who have congratulated the First Minister and the Deputy First Minister on a wonderful achievement. It is a strategy for Northern Ireland that I hope will help to pay for what we need. At times, our attitude is awful. We demand and beg for this, that and the other thing, believing that, somehow, the money will fall from heaven. I do not know from where people get that idea, but the First Minister and the Deputy First Minister have made it clear that heaven will not be so easily persuaded to pay for us.

Members may have heard the Confederation of British Industry’s economic expectations for UK regions in this morning’s news. Northern Ireland was excluded, and I am worried about that. Could this be connected with the serious leak that occurred prior to the Chancellor’s announcement last Thursday, particularly as the focus of the leak appeared to be on a doubling of rates, even though that has proven to be wildly inaccurate? Do the First Minister and the Deputy First Minister concur with that viewpoint?

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland

I thank the Member for his observations on the package that we negotiated. It is important to set the matter in context. The First Minister, the Minister of Finance and Personnel and I have listened repeatedly to people saying that more money and more borrowing power were needed to ensure that spending outside the departmental expenditure limit could be made. That is precisely what we have negotiated. Most people encouraged us towards bonds, but we have negotiated a spending power with a better interest rate than we would have been able to achieve by using bonds. I hope that everybody — and many Members asked us to use bonds to secure a borrowing power — would have the same honesty as the Member in congratulating us.

We are trying to create, in the strategic investment body, a central driver to improve the quality and rate of investment. The Committee for Finance and Personnel touched on that point in its excellent report on public-private partnerships and alternative sources of financing. The Committee identified such a need precisely, and that need is being made good. I hope that the people who were ready to talk about that need will welcome the fact that we have acted on it.

Unfortunately, much public understanding and perception about the initiative was marred by many false conclusions and misinterpretations about the rates. In so far as that information came from leaks, we must try to correct those wrong impressions, while finding out exactly how the leaks occurred. The Executive have already asked the head of the Civil Service to make enquiries about that. It is most important that people are assured that we have a borrowing power that will be used wisely, not wildly. The arrangements in the Chamber mean that there will be no massive hiking of the rates while the rating system remains unreformed and while its anomalies and inequities are in place. People will not vote for significant rate increases without knowing what the significant additional benefits will be.

Photo of David Ford David Ford Alliance

I welcome this morning’s statement and the initiative announced last week. The Deputy First Minister talked about the strategic investment body. The important discussions on the functions of that body will take place not once my Colleague Mr Close has managed to read this morning’s statement but when Ministers come to the House with a detailed package and say exactly how the body will operate and what its role and functions will be. Ministers should not use the generalities that we have had so far. The Deputy First Minister said that parties in the Executive would be invited to make nominations to a working group. That seems to be a new constitutional arrangement. Did he mean that Ministers will make nominations, or do the Executive plan to be inclusive and suggest that parties that participate in the Assembly will get such an opportunity?

I welcome the fact that the First Minister went some distance in his response to Mr Close’s question on the unfairness of the rates. In recognising that that is a legitimate concern, the First Minister went considerably further than his Colleague Sir Reg Empey did in discussions with me last week. Are there plans for the rates review to be extended into a review of the raising of public finance, or will it merely pretend that tinkering with the existing system is all that is required?

Photo of Rt Hon David Trimble Rt Hon David Trimble First Minister of Northern Ireland, Leader of the Ulster Unionist Party

The consultation paper on the rates review will be published shortly. It will concentrate on a review of rating policy because, in revising the existing system, we must begin by considering that system. The current system contains inequities and anomalies. The big problem with rates is that it is a tax that is not related to people’s ability to pay; it is superficially attractive, therefore, to create a system that is. Mr Close mentioned a local income tax. We look forward with interest to the proposals for such a tax. I hope that they will be properly developed and carefully considered.

It is not surprising that the Scottish Parliament has not used its power to vary income tax rates. That shows what those who have the capacity to consider the matter think about it. There is the possibility, as I have already said, of replacing the rates with a different form of local taxation. I do not imagine that anyone will suggest that we introduce a poll tax, although someone could, and, under the terms of the rates review, it is theoretically possible that that could happen. If that is what the Member has in mind, we look forward to it. The other possibility is a tax similar to the council tax that exists across the water. Other taxes may be introduced, but all possibilities must be considered within the limits of what the Assembly can do. We may consider the introduction of new local taxes, but income tax is a reserved matter, and the Member’s party’s suggestion of changing it would have to be dealt with elsewhere.

The strategic investment body is intended to centralise expertise and the capacity for managing assets, raising funds and dealing with infrastructure investment matters. The Deputy First Minister said that limited capacity for those matters, and a certain degree of expertise, is currently scattered across 10 or 11 Departments. It is more efficient to centralise and develop the capacity and expertise through a single body that can coherently study the whole range of public sector investment and the management of public assets. That will be done within the Administration, and it will be appropriate, therefore, to bring together people from within it who represent it as a whole.

That is why it was an obvious first step to turn to the parties that participate in the Administration. To go beyond that and look to other Assembly parties that do not participate in the Administration would run counter to the thrust of the initiative, which is that the body will operate within the Administration to enable the most efficient asset management.

We have taken a decision in principle to establish a strategic investment body, and we will work out the detail as quickly as we can. We will be happy to share our decisions with the Assembly as we go through the process. It is a new concept, although the idea has surfaced in other jurisdictions. Quite a few people in government are moving towards it because of the desirability of ensuring that the public administration’s assets and capacity to raise finance are used in an efficient and effective way.

Photo of Mr Maurice Morrow Mr Maurice Morrow DUP 12:00 pm, 7th May 2002

I will make my question brief. The Deputy First Minister intimated that there might be other sites, referring to security bases that are going to be closed down, and said that when other sites became available, they would utilise those also. Does he have any particular sites in mind that he would like to tell the Assembly about?

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party, Deputy First Minister of Northern Ireland

I did not say that as other sites became available, we would utilise them also. What I did say was that as other sites became available, it would fall to the Executive to consider whether we wanted to intervene on the strategic use of those sites. In saying that, I was not implying that additional sites would come free of charge. Many Members anticipated that we were going to have to pay for the Ebrington site, for example. They said that it would be a good site to buy, and a good use of our budget. We have got it free of charge. In relation to other sites, we might have to decide whether to purchase them — that is the arrangement and the understanding that existed prior to this package.

We have done well to get these sites free, and we must make the best use of them. We must all consider responsibly what to do in relation to future sites. I would like to think that we could persuade the Treasury to give us future sites free of charge, and our ability to do that might be related to whether we do anything with the rest of this package — that is, the strategic reforms that we are talking about and our approach to revenue issues.