Public-private Partnerships

– in the Scottish Parliament at 2:34 pm on 4th December 2002.

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Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 2:34 pm, 4th December 2002

The next item of business is the debate on motion S1M-3640, in the name of Des McNulty, on public-private partnerships. Des McNulty has moved on to pastures new, so I welcome Tom McCabe to speak to and move the motion on behalf of the Finance Committee.

Photo of Tom McCabe Tom McCabe Labour 3:05 pm, 4th December 2002

As members are aware, we are dealing with an important subject that has exercised the minds of every politician in the chamber. My colleagues on the Finance Committee found the work informative and rewarding and I have no doubt that their support will play a useful part in the development of processes and procedures to be used in PPP contracts and indeed in more traditional methods of procurement.

Although I enjoyed the work, I expected someone else to present the report to the chamber. As members know, the committee was chaired by Des McNulty during the inquiry and I am sure that his colleagues would want me to record our thanks for his contribution during that time and to wish him well in his new duties. [Applause.]

The inquiry took over a year to complete. That reflects the extensive range of views that exists on the subject of PPPs and the considerable number of individuals and organisations that wanted to make their views known. To view the report in its proper context, we should remind ourselves of the remit set by the committee.

We sought to establish the arguments that support or contradict the belief that significant improvements in value for money are to be achieved from entering into PPP arrangements. Secondly, we sought to establish whether evidence exists to support that belief. We wanted to understand the budgetary implications of entering into long-term commitments for PPP contracts and their consequences for the management and control of public expenditure and, specifically, the long-term implications for revenue funding for the Scottish Executive. Last, but perhaps most important, we sought to establish the impact of PPP projects on employment relations and conditions.

We received both written and oral evidence from a wide range of individuals and organisations, including councils, universities, the finance sector, the Confederation of British Industry, trade unions, colleges, the construction industry and a number of bodies concerned with public policy development. I place on record our sincere thanks to all those who contributed. We asked a lot in terms of time and effort and they were graceful in their responses.

The committee examined a number of existing projects in an attempt to test the evidence that we received. Those included the Edinburgh royal infirmary, the Glasgow schools project, the Balfron High School project and the Almond valley waste-water treatment works.

Members are aware that the Executive responded to the report on 27 November and I am pleased to say that it agreed with many of the report's recommendations. I will highlight three important areas that have been addressed in that response. First, there should be major advances in the protection of terms and conditions for workers who are affected by transfers. Secondly, there should be a willingness to ensure that procurement processes and the general experience gained from the PPP process are transferred to public bodies to achieve best value in procurement, irrespective of the financing method. Thirdly, there should be a commitment to the continuing pursuit of greater transparency in PPP decision making. I will return to those points later.

The purpose of the report is not to say definitively that PPPs are a good or a bad thing. In any event, it is far too early in the life of those projects to make a fully informed judgment. Rather, we have sought to identify the areas that can be improved and to make recommendations on areas that have generated significant public debate. Such areas include the impact on future public finance flexibility, service levels, employment issues and proper contract monitoring. The committee specifically recommended that the Executive should take steps to satisfy itself that proper and sustainable contract monitoring is in place.

PPP contracts are largely still in their infancy. If a failure to monitor results in the same failings in operation and maintenance that led to criticism of the public sector, the public will judge the concept to be little more than an exercise in futility. The Executive has said that it regards the monitoring of results as a task for Audit Scotland, although it has spoken about a single review. Some clarification on that matter would be welcome as the committee was more concerned with a consistent, longer-term approach.

The committee also recommended that the Executive outline the cumulative impact of PPPs on future revenue funding and how much it intends to commit in revenue terms to fund the revenue costs of future PPPs. The response tells us that the future revenue commitment will be less than 2 per cent of annually managed expenditure over the period of the 2000 spending review. Of course, that is an average figure and further information on which departments will have the highest revenue commitment would provide us with a better understanding.

I said earlier that the committee was concerned to ensure that the public sector has the opportunity to expand its knowledge base and therefore its ability to procure successfully major public projects. We recommended that a central procurement unit be established, but the Executive feels that the existing PPP unit currently carries out that work. A greater explanation of the mix of skills contained in the unit might ease our concerns. The committee's intention was that there should be a range of skills that is far wider than simply PPP expertise.

The committee was concerned to improve the transparency of decision-making processes and have that verified independently. Although the Executive is committed to the principle of openness, it is not convinced of the need for another body to be created. The thinking behind the recommendation was that Audit Scotland is well placed to carry out such a role, and I hope that the Executive will consider that further.

We expressed further concerns about the transparency and usefulness of the public sector comparator. We received evidence to suggest that far more robust methods could be used to effect comparisons with more traditional procurement methods. The Executive has highlighted HM Treasury's green book review as evidence of a change and cited the unbundling of the 6 per cent discount rate as a move that will assist transparency and comparability. If that means that contracts will be assessed independently with regard to the discount rate, it will be interesting to see whether that will affect the use of standardised contracts. Standardised contracts are a vital part of simplifying the process and reducing up-front costs. The minister might want to refer to that in his response.

The committee was also concerned that smaller, more rural communities could be disadvantaged if an increasing tendency to bundle projects for the purpose of viability led to a greater concentration of projects in larger areas or councils. Issues of scale or geographic dispersal should not prejudice communities when non-traditional procurement methods are being employed. The Executive believes that evidence that is emerging provides reassurance on that point, but the committee wishes the matter to be kept under review.

A great debate has raged over the financing of public-private partnerships. Some claim that it is an extremely wasteful financing method, with private profit gaining more than public service. Others disagree strongly, suggesting that the true costs of traditional procurement have never been revealed fully either in cash or in opportunity terms. Whichever view one takes, it is irrefutable that there was and is a huge legacy of underinvestment in health, education and a variety of other public services and that innovative methods of bridging the gap need to be found.

Against that background, the committee recommended that the Executive examine alternative capital procurement methodologies in order to create maximum choice and comparability. It is therefore encouraging that the Executive is supporting and funding the non-profit distributing model that is being developed in Argyll and Bute.

Photo of Phil Gallie Phil Gallie Conservative

Does the member agree that individuals who take a mortgage go for a capital investment and acknowledge that although it will cost them more, it will balance out over time? Does the member think that that is similar to PPP?

Photo of Tom McCabe Tom McCabe Labour

I have alluded to some of the reasons why the Government has decided to take up this procurement route. One was that there was a significant gap in vital public services, which had to be bridged. Mr Gallie's party can look to its conscience for the reasons for that investment gap.

We took evidence from a range of bodies on the financing model. Some people took the view that Mr Gallie has just outlined, while others took a wider view of the usefulness of PPP and wished to add other aspects into the overall calculation, such as the fact that people are being educated or cared for in establishments that are greatly enhanced through that method. I will refer to that issue later.

Financing methods may have generated debate, but the impact on existing and potential employees has generated even more debate, which is only right. Money matters, but people matter more. The right to manage and the pursuit of the most efficient work practices are entirely different from cuts in basic wages or the dilution of terms and conditions. The protection of pension rights is critical. An increasing number of private sector companies are displaying a tendency in that area to take what good market conditions have to offer and then pass the buck to employees when conditions are not so good.

Those sentiments lie behind the committee's first recommendation, which was made first because we regarded it to be of the utmost importance. I am pleased to say that recent announcements by the Executive lead me to believe that it agrees with that.

The recently announced protocol with the Scottish Trades Union Congress is designed to transform the employment conditions aspect of PPPs and is most welcome. The protocol covers terms and conditions—including pensions—although some people continue to express concerns over the long-term protection of pension rights. Any clarification that the minister can give on the specifics of pension protection would be welcome.

Photo of Tommy Sheridan Tommy Sheridan SSP

Does the member agree that it is regrettable that up to 10,000 workers have already been transferred from the public sector to the private sector and that it would be better if the Executive came forward with retrospective protection for those workers?

Photo of Tom McCabe Tom McCabe Labour

In the announcement of the recent protocol and in its response to the report, the Executive has clearly demonstrated that it has considerable and on-going concern for the terms and conditions—including pensions—of workers who are affected. I have no doubt that the development of the Executive's thinking on the matter will continue. I certainly hope that it will continue.

In conclusion, the report acknowledges and welcomes the improvements in public provision through the use of PPPs. We gathered evidence that suggested that public bodies and the public at large are less concerned about who owns public buildings and more concerned about the provision of good-quality public services. Many more people are being educated and cared for in clean, modern and user-friendly environments than was the case just a few years ago. Balance sheets do not show the value of that, but that value undoubtedly exists.

The evaluation of the procurement method is only just beginning. If the report has helped to illuminate some of the critical areas that must be subject to much longer-term evaluation, it has done its job.

I move,

That the Parliament notes the 5th report 2002 of the Finance Committee, Public Private Partnerships (SP Paper 653), and commends the report's recommendations to the Scottish Executive.

Photo of Andy Kerr Andy Kerr Labour 3:18 pm, 4th December 2002

I congratulate the Finance Committee and its previous convener, Des McNulty, and welcome and thank Tom McCabe, who is the committee's new convener. I congratulate him on his new role and on presenting the report so effectively.

The report recognises and reflects the importance of PPPs in the delivery of public services. Mr McCabe mentioned the real differences that the new facilities make to real people in our communities.

The report is timely and welcome. It is a comprehensive and thorough review of PPP and is based on a year-long investigation involving a wide range of evidence and witnesses. I was pleased to have been invited to contribute to the committee's work on behalf of the Executive.

Scotland has 10 years' experience of developing and using PPPs. The report fits into a pattern of taking stock of what is happening in respect of PPPs. I have always said that things are developing, moving and changing. The report follows the narrower report by the Accounts Commission on the early PPP projects for schools. I am pleased that the committee shares our conclusion that PPP is an essential tool for delivering improved public services. It is a tool that we remain committed to and will continue to use.

Like the committee, the Executive has been taking stock of PPP to make it more open and more accountable. We have reviewed practice to introduce changes that will improve the efficiency and effectiveness of PPPs in Scotland. The changes reflect many of the views of the committee.

I will give some good examples of progress. On staffing issues, the committee clearly shares my belief that improving public services includes ensuring fair employment practice and not damaging staff interests. Last month I signed a protocol between the Executive and the STUC to provide protection on those matters.

The protocol includes the principles that we regard as important for valuing staff and ensuring they are treated properly, and requires that fair employment practices are followed by all public authorities and contractors involved in PPP projects. The protocol ends the scope for a two-tier work force in future PPPs, ensures that affected staff continue to be protected in transfers—including in relation to pension rights—and ensures full consultation with staff and their recognised trade unions from the start of the process.

Photo of Tommy Sheridan Tommy Sheridan SSP

We know from questions that the minister has answered that approximately 10,000 staff have already been transferred. What does he estimate will be the number of staff who will be transferred in the future and will therefore be protected?

Photo of Andy Kerr Andy Kerr Labour

The size and scope of projects locally is determined by the local public sector organisation concerned, which might be a local authority or a health trust. It is hard for me to predict the situation, because the local public sector organisation may make different decisions on, for example, the split between hard and soft services—issues such as whether the contract includes cleaners and caterers. It would be remiss of me to make a speculative guess about the numbers.

On the point that the member makes about the terms and conditions of work forces, I worked with the STUC on the matter over the summer and the issue was raised at the Finance Committee. When people were asked to provide evidence of the two-tier work force, that evidence proved to be fairly scant on the ground. There are some examples where there are differences. However, the Amicus-AEEU report on its experience of PPP, which reflects on some of the work force issues, states:

"In the majority of sites visited there had been no changes made, by the new employer, to the terms and conditions of the staff. In general the only agreements which altered was the disciplinary agreement to incorporate the details of the new employer."

The report also states:

"61% of transferred staff felt protected in their employment with the new private sector employment ... 63 % of transferred staff felt at least as valued with the new employer" and

"57% of staff felt at least as effective if not more so with the new employer".

The statistics go on.

I fully understand the concern that workers have on the issue. That is why we have addressed the matter. Let us not forget the real impact of the two-tier work force. As I say, some of the research and advice that the committee and I requested has not been forthcoming.

Photo of Christine Grahame Christine Grahame Scottish National Party

When the Justice 1 Committee undertook an inquiry into the prison estates review and considered privately built and privately run prisons, we found that the Executive explained that running costs are a significant element in the differences in costs between public-public and private-private projects. The Executive stated:

"terms and conditions offered by private prisons are 'less generous' than the public sector."

Was that evidence not given to the Finance Committee? Does the minister agree that that is how the savings are made? They are made on the pensions and the pay and conditions of workers.

Photo of Andy Kerr Andy Kerr Labour

Christine Grahame is comparing apples with oranges. The proposal to which she refers was for the privatisation of the prison service, not for a public-private partnership. The protocol for any future public-private partnership that the Executive signs up to will protect all the terms and conditions of employment of staff. That is the fact of the matter.

I have quoted from Amicus-AEEU's survey of its members about involvement in PPP projects.

We have heard wild and unfounded rumours—we have just heard an example of that—about what PPP means for staff. We are talking about PPP—let us get the terminology right. Our protocol ends all the speculation. The Scottish Executive is putting fair employment first and building the foundation for new public services for the people of Scotland.

Of course, we are also talking to business interests. Good employers also want to endorse the protocol, because they recognise the link between good employment practices, quality services and retaining employees. They do not want to see their good practice undermined by private sector cowboys. The protocol also has a positive effect for them.

Although we are discussing PPP, I point out that I have announced that local authority staff will be protected in other forms of contracted service delivery that local authorities enter into. Discussions on how best to achieve that—and on many other matters to which the convener of the Finance Committee referred—are continuing with the STUC and with our colleagues in Whitehall. We are seeking to continue the momentum that we have built up to ensure that employees are looked after in transfers and in the local authority contracting environment. We have dealt with some, but not all, of the issues and dialogue with the trade unions is continuing.

Another concern of the committee was about efficiency. The PPP process has become more efficient: procurement periods have reduced, negotiation periods have shortened and work has been done to standardise processes. As has been mentioned, the Executive commissioned work that led to the standard Scottish schools PPP contract, which will reduce costs and speed up procurement. However, there is room for further improvement. The Executive is working with clients, advisory organisations and industry interests to further streamline and make more efficient the PPP process. We want to ensure that every pound of taxpayers' money is used wisely to secure the investment that Scotland needs.

The Executive's work to ensure that clients and the industry have a full understanding of PPP is improving the process. For the public sector, that means having clear infrastructure plans and policies. The Executive has run a series of seminars for members of project boards and has held a schools PPP industry day and a workshop on the standard contract. We are beginning to address the issues and further seminars are planned. Those measures will result in more openness, understanding, value for money and support for those who use the procurement mechanism of PPP, which is a key investment tool—although not the only one—for delivering public services in Scotland, such as new schools, transport projects and hospitals.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

Given that the minister says that PPP will have an important role in public investment in the future, will he commit himself and give an average figure that he expects PPP to take from new capital spend in local authorities and the health service?

Photo of Andy Kerr Andy Kerr Labour

We are considering that matter and we will come back to Parliament on it. The question fits nicely with our previous discussion on the prudential regime because clearly we want to have a rigorous prudential regime in the Executive. I will come back to the member on that matter.

PPP provides another tool in the toolkit to address our communities' needs. Many of the recommendations in the committee's report are welcome. I accept that the PPP process needs to be more open and accountable. As Tom McCabe said eloquently, the public sector comparator has attracted criticism, but we should be clear that the Accounts Commission's review and other reviews show that PPPs deliver good outcomes and value for money.

The Executive will not throw out the baby with the bath water. We will continue to address many of the issues that the Finance Committee raised. For example, we will consider the committee's recommendation of using existing PPP projects as a comparator. The technical reviews show the benefits of PPP and the public see the changes, such as new schools and hospitals being built on time and to high specifications. The Scottish Executive continues to deliver for the Scottish people.

Photo of Brian Adam Brian Adam Scottish National Party

The minister refers to the report's recommendation that existing PPP projects should be used as a comparator because they are more valid than theoretical public sector comparators. I am glad that in his written response he appears to have rejected that recommendation. Will he clarify the Executive's view? The issue was one on which the committee disagreed. I see no valid reason for using existing PPPs as a measure.

Photo of Andy Kerr Andy Kerr Labour

We want a mixed bag of ways in which to compare and contrast projects. Brian Adam refers to a fairly narrow comparison of projects, but I think that the committee wanted to reflect how PPP and other forms of procurement make a difference. I believe that the public sector comparator assists in that process, as does the standard contract for schools, which will develop further. High-level reviews have been done, such as those of the Accounts Commission and the Finance Committee, and the subject is over-examined. As the Finance Committee suggests, we should learn some of the lessons from public sector procurement and take them into the PPP experience to ensure that, in dealing with PPPs, clients and industry are informed.

Photo of Andy Kerr Andy Kerr Labour

I really need to make progress. I apologise.

The Executive has a private finance unit, which has co-ordinated PPP interest across the Executive. I have decided to strengthen that unit, which will now be called the financial partnerships unit, to take on board the comments that have been made by the committee. It will have a wider remit, covering PPP methodology and financing, including appraisal issues; the development of partnership and new funding models; outreach to develop awareness and exchange best practice with regard to funding methodology; the provision of advisers in selected PPP project boards; and the development of improved procurement methodology and other such measures. The unit will address the many aspects of the committee's report, and my mind is not closed to other matters that will arise. We have responded effectively to the concerns that have been expressed by the committee.

The motion asks us to note the committee's report. I would go further and say that public-private partnerships are making a real difference in Scotland. They are developing and delivering the sorts of services that the people of Scotland want and, as Tom McCabe said, they are making a real difference. Some differences are not measured easily, such as school pupils in Glasgow being able to go to a safe, warm, clean learning environment with infrastructure and technology around them to support modern learning and with access to sports facilities that are second to none. That is the sort of change that PPP can make. In Hairmyres, in my constituency, the local hospital where I used to go had 43 different locations. When people wanted an X-ray, they had to get in the back of a Ford Transit, in wheelchairs with blankets over them, to go to that facility. Hairmyres is now a modern hospital, which has received £67.5 million of investment including £10 million of new equipment. That is providing real change in the nature of health provision in my constituency.

The Executive is combining the opportunities. Yes, PPP funding is only 13 per cent of our capital spend in Scotland and only 2 per cent of our revenue spend. PPP is not the only show in town. My previous announcement about the prudential regime shows that it is not the only show in town. However, PPP is an important tool. It is a tool that delivers and it is a tool that the Executive will continue to use.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party 3:32 pm, 4th December 2002

I thank the clerks, the witnesses and the advisers to the Finance Committee for their contributions during a fairly arduous and long inquiry. I also welcome the new convener of the committee to his first chamber debate in that office. I recall that about a year ago—I forget whether it was in committee or in the chamber—I congratulated the new convener of the committee at that time, Des McNulty, on his appointment to the post. I said then that if the precedent of his predecessor, Mike Watson, was anything to go by, he would shortly be receiving the seals of office. So it has come to pass. Whether I should be so rash as to offer the same prediction in respect of the new convener, in the few months that remain of the parliamentary session, is more open to question, given that he already has experience of high office. However, if the first session of the Scottish Parliament has shown us anything, it has shown us that nothing is beyond the bounds of possibility.

As time is short, I had better press on with the meat of the report. My colleague Brian Adam and I are disappointed that we could not support the Finance Committee's report in its entirety and achieve unanimity on what is an important subject. The reasons for that will become obvious during the debate.

I shall start by concentrating on some of the areas in which there was agreement among committee members. There was certainly a meeting of minds about the conditions that are applicable to staff who work in the various sectors that have been exposed to private finance initiative or PPP contracts. A specific concern was that we are ending up with two-tier work forces—although the minister suggested that there is little evidence of that—whereby the conditions of service of people who have been transferred along with the PPP vehicle are markedly different from those of people who are recruited later to work for the same vehicle, be it in a local authority or a local health board. The committee felt—genuinely and rightly—that it would be wrong for that to be the general rule.

We note that, in its response to the committee and in press coverage last month, the Executive said that it had reached an agreement following discussions with the trade unions and had arrived at a staffing protocol that would

"end the scope for the two-tier work force in all new PPPs across every public services sector".

That is a good intention and if it is delivered in practice it will be a real achievement. However, as with so many aspects of PPP contracts, because of the long-term nature of the PFI beast we will have to await the passage of time to see whether that is delivered.

I would say that the prize is worth achieving. I am conscious of the issue because of a situation in my constituency. The West Freugh Ministry of Defence base in Wigtownshire is being run down almost to the point of closure, with around 150 job losses. The process of outsourcing and transferring work from the Ministry of Defence has been on-going for many years. Although the process is not a PFI as defined within the scope of the report—and we must be careful with our definitions, as the minister reminded us—the rationale behind the transfer and the contracting out of work is much the same in that case as in PFI projects. That has a particular result on staff conditions. For example, a couple of weekends ago, workers came to my surgery complaining that not only were they to be made redundant, but at least four different sets of redundancy conditions were on offer depending on the history of the various companies to which they had been farmed out over a few years. That is not how to manage staff relations in the 21st century.

The second Finance Committee recommendation that I want to highlight is the one in paragraph 118, in which we say:

"It would concern the Committee if any tendency to bundle projects"— which is done to achieve the sort of critical mass that is often necessary for a successful PFI project— "led to a geographic centralisation of facilities to the detriment of smaller communities, especially in rural areas."

That is a particular concern in relation to school PFIs and the health services in the more rural authorities.

The Executive's response is that it is satisfied that local authorities are taking account of the needs of their rural communities when scoping their projects. My experience in Dumfries and Galloway—like other members' experiences, I suspect—is that the inevitable result of PFI projects will be the closure of a significant number of rural schools.

Photo of Andy Kerr Andy Kerr Labour

Does Mr Morgan agree that decisions about whether to close schools are matters for local councils, not for the Executive? Indeed, I think that Mr Morgan is against local investment in schools.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

The minister cannot have it both ways. He cannot run a system that, shall we say, encourages—and that is putting it mildly— local authorities to go down the PFI route and then wash his hands when the inevitable consequence is school closures, saying, "Oh, but that is all the fault of the local authorities." I turn now to areas where the committee was not united. The first area was confidentiality. We allegedly live in an era of freedom of information, in which the right of the citizen to know what is being done in his or her name is an essential democratic feature and a vital factor in making politicians at all levels accountable. However, there is considerable concern about PFI not being open enough, particularly given the scale and importance of some of the schemes. We heard evidence from Dave Watson of Unison about his union's attempt to analyse every PFI in Scotland. He said:

"The obsessive secrecy that surrounds PFI schemes did not make that easy."—[Official Report, Finance Committee, 11 December 2001; c 1686.]

As the report says, we heard how in the United States—which is, after all, the world capital of private enterprise—agreements are published as soon as they are signed. If companies in the United States can prosper under such an open regime, we must ask ourselves who benefits in Scotland from the secrecy that seems to prevail.

Photo of Phil Gallie Phil Gallie Conservative

I was not involved in the Finance Committee's inquiry and I might have got something wrong here, but my reading of paragraph 122 of the report is that, once concluded, business arrangements would be made public. Have I got that wrong?

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I am sorry, but the committee could only recommend that there was a "strong presumption" for publishing contracts after they had been finalised, rather than accepting my suggestion that signed contracts should be published full stop. Surely it is in the interests of all parties that contracts should be published so that the public can be informed and any criticism can be based on fact rather than on innuendo.

Presiding Officer, may I just check how much time I have been allocated for my speech?

Photo of George Reid George Reid Scottish National Party

You have eight minutes but, taking into account the interventions, I will give you a maximum of nine and a half minutes.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

In that case, I had better skip what I was going to say about the public sector comparator, which is interesting but slightly anorakish, and deal instead with the alternatives to PFI.

I agree with what the report says about community trusts, municipal companies and public interest companies. Paragraph 104 reads:

"There is little empirical evidence currently available to show whether these projects are able to deliver similar outcomes to PPP."

It is hardly surprising that there is little evidence, as most local authorities and health boards have been given every encouragement, to say the least, to go down the PFI route but the opposite message if they want to go in the other direction. It is therefore to the credit of councils such as Argyll and Bute and Falkirk that they want to explore other ways of working and put public service before private profit.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I am sorry, but I am in my last minute.

In its response, the Executive makes much of the fact that it is giving assistance to Argyll and Bute Council as the council prepares its case, but it is a pity that the Executive did not put a fraction of the effort that it puts into PFIs into the alternatives. If it had, we might have delivered more for the people of Scotland for the same amount of money.

Photo of Keith Harding Keith Harding Conservative 3:41 pm, 4th December 2002

I declare my registered interest as a member of Stirling Council.

I start on the somewhat unusual note of congratulating the Labour party on warmly embracing the Tory policy of PFI. I also congratulate the Finance Committee on its comprehensive report and thank the clerks for their work.

There are three grades of support for PFI on the Labour benches: old Labour, which is ideologically opposed to PFI because that is what the unions say; modernising Labour—there are a few of them—which is happy as long as it gets credit for what it does; and junior Labour, which currently trades under the misnomer of the Scottish Liberal Democrats. This week, the Scottish Liberal Democrats declared to the nation that they were more than happy to be absorbed into the ranks of Labour by tagging their name to Labour's governmental plans for after next May. How insulting to the Liberal Democrat voters that the party will trade any principles that it had for the dizzy heights of two ministerial posts and another four years as Labour's lackey. The Liberal Democrats' 1999 manifesto was called "Raising the Standard". Perhaps their 2003 manifesto will be called "Raising the White Flag".

We need not look too far to find examples of PFI hypocrisy from those masters of hypocrisy, the Liberal Democrats. Just down the road, in Edinburgh's city chambers, the Labour-run administration got the go-ahead to use PFI to build 14 new schools and refurbish four others. As the Liberal Democrats in government support the Finance Committee's report and PFI, one would imagine that they would be in favour of the council's plans. However, they are not, as they oppose the privatisation of city schools.

In Inverclyde, the Labour-led council proposed to build six new schools and refurbish all the others over 30 years using PFI. Again, there was no support from the Liberal Democrats there, as they want to avoid the dreadful turmoil of PPP and would ditch the proposal if they won the council elections in May.

It is hypocrisy of the worst kind and an insult to Liberal Democrat voters across the nation that the Liberal Democrats toe the Labour line in exchange for power in the Government while their councillors and back benchers take a totally different attitude outside this chamber.

Photo of Keith Harding Keith Harding Conservative

I am sorry, but now it is the SNP's turn. The nationalists are no strangers to hypocrisy either. In fact, they have it down to a fine art—that is the only compliment that I will give them. However, I will not dwell on that just now, as I will leave my colleague Alex Johnstone, if he is called, with the gleeful task of talking about the not-for-profit SNP with its not-for-profit trusts in a not-for-profit Scotland.

Photo of Keith Harding Keith Harding Conservative

He is writing his speech.

It is depressing that the SNP, a self-proclaimed party of enterprise, holds such hostile views towards the private sector.

Photo of Keith Harding Keith Harding Conservative


Let us be clear: PFI is not the only game in town and, in some cases, not-for-profit trust models can be appropriate. However, if the SNP is as in favour of not-for-profit trusts as it says it is, why does it stand steadfastly against the involvement of the independent sector in the provision of health services? After all, BUPA, which finds no favour with the SNP, is a not-for-profit organisation. The simple truth is that the politics of the SNP do not allow those ideas to flourish, which is precisely why the SNP's policies would impoverish Scotland.

The Scottish Socialist Party—and possibly Mr Canavan—will back the SNP to the hilt on this issue, as it is mired in the same ideological dogma that prevents understanding of the benefits of partnership between the public, private and independent sectors.

The Conservatives fully support the use of PFI. What higher authority could we have on the issue than the First Minister, Jack McConnell? He stated last week:

"I think the rising cost of the Scottish Parliament building has probably been the single biggest disappointment in devolution ... and one thing I would say is that every public-private partnership in Scotland has delivered new hospitals or new schools in Scotland on time and within budget and that's the sort of success I want to see in every building."

What better example of the benefits of PFI is there than the Follyrood fiasco? The building is now nine times over budget and three years late. It is a national scandal and if it had been built using PFI—as the Conservatives suggested, before we were promptly ignored—we would not be where we are now. I support the motion.

Photo of Donald Gorrie Donald Gorrie Liberal Democrat 3:48 pm, 4th December 2002

Before I get on to the intelligent part of the debate, I will utter one word to Mr Harding: democracy. Why does he think that groups of any party in different organisations—whether councils, the UK Parliament or this Parliament—must all sing from exactly the same hymn sheet? Each organisation takes its local considerations into account and makes its decision accordingly. If Mr Harding's party does not favour democracy, that is up to him. Obviously, its view on the electoral system shows that it does not favour democracy, despite the fact that the Parliament's electoral system is his party's only reason for existence.

Photo of Donald Gorrie Donald Gorrie Liberal Democrat

No, I will not give way. It is all a load of rubbish. I am surprised that Mr Harding did not advance the argument that the ultimate way of saving money on the Holyrood building would be to have no Scottish Parliament at all. That, of course, is his position.

To get on to the more sensible part of the discussion, I welcome the report. The Finance Committee has not, as I feared, suffered from my departure from it. In fact, it has done extremely well. The committee members, the witnesses and the committee staff have produced a balanced report, which is difficult in such a controversial area.

The Liberal Democrats' concern about PPP is that it is the only game in town. We are against monopolies of any sort. A monopoly system of procurement is harmful. We have therefore opposed the way in which PPPs and PFIs have been applied on a United Kingdom basis. Alternatives must be on offer. Any organisation must be able to weigh up fairly the alternatives so that it gets the best value for money in the procurement of whatever capital asset it is considering. Competition must be fair, not rigged under the Treasury rules. Each PFI or PPP should be examined on its merits. There is no one-size-fits-all argument.

To show that I am in line with my party—as ever—I will quote Matthew Taylor, our shadow chancellor in London:

"In truth PFI is no miracle cure for public services—nor is it a killer disease. It is simply one option amongst many for public procurement."

That is our view. There must be alternatives. Alasdair Morgan mentioned the Argyll and Bute alternative, which the Liberal Democrats strongly support—the scheme originated in the views of an intelligent Liberal Democrat councillor.

We have also argued that we should change the Treasury rules, which prevent sensible, prudent borrowing. Those rules are harmful and lead to distortion. The fact that the Scottish Parliament cannot borrow money is ludicrous. We are in the process of giving councils better powers for prudent borrowing. That should be developed. Borrowing for capital is helpful, provided that there is proper auditing. We should also issue bonds. Why not appeal to people's patriotism with Scottish bonds? We could have local patriotism in the form of Glasgow bonds, Edinburgh bonds or Auchtermuchty bonds, for example. That would create investment in local services, which would help people.

Treasury rules also distort things because they do not count privately financed public investment in their assessment of sustainability, which results in expenditure further down the line. The Finance Committee has recognised that by calling for an assessment of the cumulative impact of PPP. The other evening, I had a long conversation with the principal of a further education college that has recently obtained a new building through PPP. The principal said that the amount of money involved in that process is such that the council's ability to pay enough staff to do its job properly would be seriously impaired. We must consider the cumulative effect of PPP.

We must develop other forms of partnership. The report mentioned some examples in Edinburgh, which I happen to know about, and in other places. There are other ways of developing partnerships and of working up capital.

Audit Scotland's report on the use of PFI contracts to renew council schools includes a good sentence:

"The benefits available from PFI are not necessarily unique to PFI."

We can take the best parts of PFI, we can learn from them and we can get good advice on procurement. The Parliament needs such advice as much as other organisations. We are not in a good position to advise other people on procurement, as our skills are rather like those of the first two pigs in the story of the three little pigs that tried to build a house. We need a national client advisory service. The committee has proposed something along those lines.

Overall, the Finance Committee has done a good job. Its report contains many good, practical proposals and I am glad that the minister accepts some of them. We must keep pushing to have an efficient system that achieves best value in the acquisition of assets in this country. Although PFI on its own is not such a system at the moment, it can be developed. It is okay to use PFI, as long as there is proper competition and it is the best method available. The use of PFI is not acceptable when it becomes a straitjacket.

Photo of George Reid George Reid Scottish National Party

We move to open debate. We can have speeches of about four and a half minutes, plus time for interventions.

Photo of Tommy Sheridan Tommy Sheridan SSP 3:52 pm, 4th December 2002

Last week, the GMB union placed an advert in The Mirror as part of its campaign to keep public services public. The advert referred to Jarvis, which is the private company that has so far secured £100 billion of taxpayers' money to supply goods and services to the public sector. Jarvis has been awarded 21 Government PFI contracts, which have a value of £565 million. The advert provided a nice picture of Jarvis's chief executive, who received a 65 per cent wage increase, which took his pay to £595,000 a year. In the advert, the union made the point that every pound of taxpayers' money that goes into Jarvis's profits and the obscene wage increases of its chief executive could be diverted into public expenditure and public services. That is the root of the debate.

Photo of Andy Kerr Andy Kerr Labour

We have always used the private sector in public services—for example, to buy vehicles for refuse collection or to build roads, schools and hospitals. We have always done things in that way. Is the member against any use of the private sector?

Photo of Tommy Sheridan Tommy Sheridan SSP

I find it difficult to believe that a finance minister does not know the difference between using the private sector for public sector investment and using the private sector to take over public services. There is a clear difference, as I am sure the minister is aware.

It is about time that public services stopped being ripped off by private provision. I have made that point before in relation to a public health service issue—if we developed public pharmaceutical provision, we would no longer be ripped off by private pharmaceutical companies.

The Executive and the Finance Committee's report present an artificial debate. They argue that, in supporting PFI and PPP, they are supporting new schools and hospitals, whereas people who are against PFI and PPP are somehow against new schools and hospitals. That is infantile nonsense. The opponents of PFI and PPP argue that, yes, we should have new investment in public services, such as schools and hospitals, but that investment must present best value for the citizens of this country. PFI and PPP prevent best value from being realised while presenting for big business a milch-cow of profits. Unfortunately, those profits are paid for by the many low-paid workers in former public services.

Let me give just one example, which is the Edinburgh royal infirmary, to which the minister could perhaps refer in his summation. The major PFI deal that is under way for the Edinburgh royal infirmary will result in a reduction in the number of full-time equivalent staff of some 23 per cent and a reduction in bed capacity of some 33 per cent. We have a situation in which, because a new hospital is being developed, everybody says that they support the scheme, but should we support a new hospital if that necessarily slashes the number of staff and bed capacity? The problem is that such reductions are required in order to pay for the PFI.

Photo of Rhona Brankin Rhona Brankin Labour

I do not know whether Tommy Sheridan has had the benefit of experiencing the new Edinburgh royal infirmary, but my daughter recently had to have an operation there. The new infirmary is a wonderful hospital with a caring staff. I tell Tommy Sheridan that my daughter does not give a toss where the money comes from to build that hospital or the way in which it was procured. That hospital is a great resource for Edinburgh.

Photo of Tommy Sheridan Tommy Sheridan SSP

That is the type of infantile discussion to which I referred. Perhaps Rhona Brankin's daughter does not give a toss about where the money for the hospital came from, but Rhona Brankin is an elected politician who is supposed to look after public funds, so Rhona Brankin should give a toss about where the money comes from.

Photo of Tommy Sheridan Tommy Sheridan SSP

I am sorry, Presiding Officer, but I never started it.

In July, the House of Commons Public Accounts Committee pointed out that the Government had taken its eye off the ball after it had signed deals with private companies to deliver public services. A review of the performance of 400 PFI contracts worth more than £100 billion found that those contracts did not represent best value for the taxpayer.

It is a pity that the most recent report of the Association of Chartered Certified Accountants was not available when the Finance Committee wrote its report. The association's report reveals that PFI represents poor value for money because public procurement would be cheaper and more democratic and individual staff would not have to suffer in the provision of new facilities.

In conclusion, those who oppose the Finance Committee's report because it does not criticise PFI and PPP argue for new schools and hospitals that are funded properly and democratically rather than through cutting the wages and conditions of the already low-paid workers in order to pay for the profits of the Jarvises of this world.

Photo of Johann Lamont Johann Lamont Labour 3:58 pm, 4th December 2002

I welcome the opportunity to contribute to today's important debate. I share the desire that has been expressed by members throughout the chamber to provide improved school and hospital buildings and investment opportunities in our local communities. I do not recognise the rather false and lazy dichotomy that was posed by Tommy Sheridan, but I acknowledge that there is a serious debate and that there are a number of models for investment. We need to balance one thing against the other, but I concur that there is a need to develop a best-value model.

I declare an interest, in that I am a member of the Co-operative Party and am supported by the broader co-operative movement. I remind members that the co-operative movement has a long and honourable, radical and challenging history. There is an important role for the co-operative and mutual sector. I am sorry that Keith Harding has left the chamber; I found his comments about what he described as the not-for-profit sector insulting. Social enterprises can be successful and offer interesting opportunities through businesses that can be effective without necessarily distributing profits. We should not allow the proud history of the co-operative movement to be truncated into the description that we sometimes hear from the SNP of a not-for-profit trust. I will come back to that point in a minute.

We are all aware of the important and difficult issues on which we are focused. I am disappointed that Tommy Sheridan did not welcome the important dialogue between the STUC and the Scottish Executive on the question of staffing, because it is an issue that has troubled people. I welcome the movement that there has been. Another issue is the implications of long- term funding and whether it represents value in the long term.

Photo of Tommy Sheridan Tommy Sheridan SSP

I ask Johann Lamont the same question that I asked her colleague Tom McCabe: 10,000 workers have already been transferred from the public to the private sector. Does she believe that protection should be retrospective?

Photo of Johann Lamont Johann Lamont Labour

We have to continue the dialogue. I am committed, whether somebody works in the private sector or in the public sector, to them having a decent wage with the right to be represented by a trade union. There is a continuing dialogue.

When we consider value for money in the long term, we have to factor in more than the straight financial deal. In my constituency there are a number of excellent examples of new schools and refurbished secondary schools. They are excellent resources, not just for young pupils to learn in, but for regenerating and sustaining local communities. The head teachers report the enthusiasm of interested young people. Indeed, the young people whom I spoke to mentioned that. We cannot ignore the importance of the message that is being given to young people. The fact that the schools exist now, two years after they were first planned, shows how the pupils are valued. When I was young, a new secondary school started to be built beside me when I was in primary 4. It took until I was in fourth year at secondary school before it was finished. We have to recognise the significance of the speedy movement and the message that that gives to young people.

How can we quantify what has been done in marking the capacity of young people to achieve? How can we quantify the fact that, instead of people voting with their feet and going away from them, schools are becoming magnets? I taught in Springburn Academy. When I left—I hope that it was not my fault—the school had 300 pupils, and the number was falling. The number is now 800 and rising, partly because we are putting money into the buildings and valuing the young people. When I met youngsters at Ross Hall Academy, I was struck by their enthusiasm, their courtesy and the fact that they were bubbling over with pride in themselves and their school. It is clear that those existed before the buildings existed, but the children now have surroundings that match their talents and the talents of their teachers and parents. With regard to best value, we cannot underestimate the importance of the fact that that school exists now rather than in five or 10 years' time. The dynamic is important to our communities.

On other options, I welcome the openness to new ideas of the Minister for Finance and Public Services. Indeed, the minister was willing to come to a meeting with the Scottish Co-operative and Mutual Forum and Mutuo to discuss the co-operative and mutual sector's capacity to contribute to this work. There is a challenge for that sector to produce ideas that the Minister for Finance and Public Services can work on. I hope that people look for credible responses on that.

The Scottish Executive needs to draw on that expertise. We have to recognise the distinctive issues of social enterprise and the social economy and—I say to the SNP—not just the not-for-profit element, but the democratic accountability and transparency elements. The co-operative movement is good in those areas, because it links issues to local communities. We do not hear about that from the SNP.

If models are presented as community models, they have to be developed as serious community models. I end with a challenge to the Scottish Executive to harness the expertise that exists in the co-operative and mutual sector in particular. I know that the social economy is being reviewed, but I ask the minister to seriously consider establishing a task force charged with developing a strategy for social enterprise, because social enterprise has a role in this debate and a broader role in our local communities. Social enterprise is much more successful at employing local people than other enterprises can be. I hope that the minister will consider seriously the broader issue that has been highlighted in this debate, so as to see that model as significant not just in procurement, but more broadly in terms of local community and economic regeneration.

Photo of Tricia Marwick Tricia Marwick Scottish National Party 4:04 pm, 4th December 2002

PFI contracts cover schools, hospitals and water and sewerage projects. Scotland is PFI-land, thanks to the Executive and the Conservatives before it. For too long, the Executive has claimed that PFI is the only game in town, and local authorities have come to believe that.

Photo of Andy Kerr Andy Kerr Labour

If PPP is the only show in town, why have we just introduced the prudential regime, which can increase local government's borrowing capacity by an average of 66 per cent, or up to 97 per cent for City of Edinburgh Council? Why has local authority capital increased by 34 per cent in the past three years under the Executive? That is real evidence of real choice in local authorities.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

I know that the minister prepared for an interruption, but if he had listened, he would know that I said that for too long, the Executive and the Tories before it claimed that PFI was the only game in town.

The Finance Committee's report examines PFIs in Scotland, whether they deliver value for money and their budgetary implications now and in the future. Scotland's public services are in hock for the next 30 years because of PFI.

Ronnie Hinds of Audit Scotland said on 12 June:

"many of the benefits of PFI could potentially be secured by other means and the scope for this should be considered for future schools projects."

With PFIs, the Scottish taxpayer pays way over the odds for new schools and hospitals, then pays again, because such buildings have fewer beds and fewer facilities.

PFI projects have an impact on the facilities management function and the delivery of services. I welcome the protocol to which the minister referred, but as other members have said, that does not go far enough. Ten thousand people have already been transferred out of the public sector.

The committee's report does not go far enough, but I will highlight a few of its recommendations. The committee recommended

"that the Executive sets out what it sees as the cumulative impact of the use of"


"to fund capital investment on current and future revenue funding and indicates how much additional revenue funding it intends to commit in respect of capital projects under"


"in the budgetary period."

The committee also recommended that the full long-term spending implications for the Scottish Executive and the public body commissioning the project should be made public and considered before any project goes ahead. The decision-making process that relates to PFIs requires far greater openness, transparency and accountability than it has. The system must be made much more accountable.

I will deal briefly with the public sector comparator that Alasdair Morgan referred to and which he suggested only us anoraks knew anything about.

Photo of Tricia Marwick Tricia Marwick Scottish National Party


The public sector has been handicapped to allow PFI projects to compete. The National Audit Office described the PSC as "pseudo-scientific mumbo jumbo". Audit Scotland recommended that the PSC should take into account the true cost of borrowing for councils and that councils should have a choice between PFIs and non-PFI projects. It is clear that many criticisms of PFI/PPP have been made by Audit Scotland and the National Audit Office.

At the heart of the Executive's problem with PFI/PPP is the lack of openness and transparency and the inability of the Parliament and others to see what is happening in PFI/PPP projects. As Alasdair Morgan said, it will take a long time to see what is being done in our name. Openness and transparency are bywords in the Parliament. It is time for the Executive to be more open and transparent about the processes for PFIs.

Photo of Phil Gallie Phil Gallie Conservative 4:08 pm, 4th December 2002

If PFIs or PPPs were the only game in town, the Conservatives would have reservations, because we believe in a balanced approach. Tricia Marwick suggests that such projects were the only game in town in Tory times. I give examples of a few capital projects—the A77, the M74 and Ayr hospital—that the Tory Government introduced and which have proved to be of great benefit to Scotland.

One PFI with which the Tory Government did not push ahead—I very much regret that—should perhaps have been undertaken in 1997 for the Prestwick air traffic control centre. Almost six years later, what has happened to that project? It has stopped at the construction stage. If the project had been a PFI, I believe that it would be at the commissioning stage. Air travellers, the aviation industry and everyone in Scotland would have benefited from that. If that project does not go ahead immediately, a major threat will arise.

I congratulate Tom McCabe, because he was dragooned into presenting the report. I also congratulate him on his grasp of the subject. However, I must criticise him on the point that he made about pensions and the attitude of private sector companies to pensions. I remind Mr McCabe that it was his chancellor who raided pension funds shortly after he came into power and whose decision has had a major effect on private sector pensions.

The minister mentioned Hairmyres hospital. I agree with the praise that he heaped on the project, but must remind him that it was a Tory project, which was initiated by the Tory Government.

When I look at the Liberal-Labour proposal for the way ahead in the next Parliament, I recognise why the minister said that PFI was essential to the Government's intentions for the future. It is because projects in areas such as health, justice and waste management will be heavily dependent on the PFI approach. If I am wrong on that, no doubt the minister will correct me.

There is one project that was introduced by the Tory Government that the Finance Committee could have investigated. The project seems to have gone wrong and we do not seem to be getting value for money on it. I am referring to the Skye bridge. We all make mistakes, but if the Skye bridge was a mistake the committee should have investigated it, because difficulties with the project would have been exposed.

When I learned that the Finance Committee was undertaking an investigation into PFI, I felt some trepidation. However, I found the report to be supportive and constructive overall. If the ministers of whatever complexion in the next Parliament follow the guidelines and recommendations in the report, they will not go far wrong. I suspect that even if—God forbid—the SNP found itself to be the majority party, the reality of government would encourage the SNP to re-examine the report and pick up on and develop PFI issues.

As other members have said, PFI was a Tory idea, which has blossomed under a Labour Administration. I suspect that one or two Labour members who were at Westminster, as I was, and heard the pre-1997 criticisms of PFI projects, might feel that things have now moved on too far. I say to them that some of their colleagues have seen the light. That is evident in the report and I will gladly support the motion.

Photo of Duncan McNeil Duncan McNeil Labour 4:13 pm, 4th December 2002

I am glad to have the opportunity to say a few words in the debate today. Tom McCabe, as the Finance Committee's convener, highlighted some of the sensible recommendations that are to be found in the report, out of which I have selected two that appear to me to be headline recommendations.

The first of those recommendations is that PPPs have made a valuable contribution to bringing about major public sector capital projects such as schools and hospitals. The second is that public bodies should consider the impact of PPP on employees so that workers' core employment conditions are protected. I will concentrate my remarks today on the latter point.

We can understand that employees in the private and public sectors become insecure when they hear talk about their transfer to another employer. Public sector workers, particularly blue-collar workers, have a right to be cynical about that process, as their experiences have been more than difficult. Compulsory competitive tendering equalled longer hours, less pay, and the loss of holidays and trade union rights. It is therefore essential for all those concerned in PPP projects that the work force is reassured that its interests will be protected.

A new building can be shiny and high tech but, without the commitment of skilled staff, service improvements are unlikely to be sustained. People really matter in the process.

I am glad that the committee believes, as it sets out in paragraph 25 of its report, that

"the improvements in service delivery that can be attributed at least in part to PPP should be secured in a way that does not impinge on the core employment conditions of workers employed in those projects."

I am also glad that the committee recognises and commends the Executive's commitment to getting rid of the two-tier work force, and I join it in that.

The announcement by the Minister for Finance and Public Services of 26 November, that workers on a local authority contract will have statutory protection of their terms and conditions, is welcome. It builds on the protocol that has been agreed between the Executive and the trade unions to end the scope for a two-tier work force in all future PPP projects in Scotland. Now, anyone who works for the council and is transferred to a private company will have their terms and conditions and pension protected, based on and better than the regulations on transfer of undertakings and protection of employment—TUPE.

As well as recommending the protection of workers' terms and conditions, the report argues that employees and their trade unions should be consulted at an early stage, given PPP's potential impact on staff. If we agree with the Minister for Finance and Public Services that we need to work with people at the front line and that their support and hard work is crucial, constructive consultation with the unions is essential. It is especially essential if we want to have in-house teams to bid against private companies, particularly in sectors such as catering and cleaning. I am confident that the trade unions will use the influence to the benefit of their members and to ensure the effective delivery of public services.

We need to recognise that good customer service and good terms and conditions for staff are not mutually exclusive. Local authority employees do not only deliver essential services. They live in their communities, and I am confident that they would want to bring about not only secure employment, but improved public services for themselves and their families.

Photo of Christine Grahame Christine Grahame Scottish National Party 4:17 pm, 4th December 2002

Keith Harding and others have hit the nail on the head. This is Tory policy, whole-heartedly adopted by the Labour party, and no amount of renaming it as PPP instead of PFI will conceal the truth—just as Labour members call themselves new Labour when they are just old Tories.

Photo of Christine Grahame Christine Grahame Scottish National Party

After 20 seconds? The minister is getting quicker.

How much do we recall Tony Blair, son of Thatcher, opposing private finance for prisons? "There will be no more new private prisons", he said. As soon as he was in power, that worm turned, and has turned and turned again. The politics are dogma driven, not pragmatic.

Before I move on to the pragmatic, I want to congratulate the Liberal Democrat Donald Gorrie on telling us Liberal Democrat policy, courtesy of the party's 2002 conference. I love the Liberal Democrat website. It is very informative and says that the party will campaign

"to change Treasury rules to allow public authorities to borrow money and issue bonds".

We are considering PFI/PPP from the Labour party because of Treasury rules to keep down public sector borrowing. Local authorities are hidebound in borrowing. That does not mean that they may not commission private-build public-operate schools, but that is not the way that we are going. The cost, of course, is in the running.

I will not waste my time on anecdotal evidence, but pray in aid an Audit Scotland report:

"The analysis for PFI School projects most often resulted in a set of costings which indicated that the PFI solution was more economic but without any good analysis of why. In fact, Audit Scotland's analysis is that in most cases the main elements of costs underlying the PFI option are higher than the equivalent forecasts under the PSC. Thus in five cases out of six the PFI construction costs were higher than the PSC, in all six cases the operating costs of the PFI were higher than the PSC."

Photo of Iain Smith Iain Smith Liberal Democrat

The member is being slightly selective. Does she recognise these quotations from the Audit Scotland report? The report also said:

"There are real benefits and to date PFI providers are delivering the new schools and associated service reliably and without significant cost changes for councils".

It also said that

"The PFI competition process is promoting best value not just lowest price" and that the

"evidence to date on key deliverables is positive".

Finally, it said:

"There are substantial benefits from schools PFI compared to traditional procurement".

Does the member recognise those quotations from Audit Scotland?

Photo of Christine Grahame Christine Grahame Scottish National Party

The member should not throw quotations across the chamber and distort the issue.

This time, I pray in aid an independent report. According to Scotland on Sunday, Maurice Fitzpatrick, who is the head of economics at Tenon Group, has produced a "detailed independent study" that shows

"that the private financing of public projects will cost Scots £33m a year more in interest payments than if the Treasury had picked up the tab. Scots will be paying the extra sum for the next three decades."

Mr Fitzpatrick

"has used official Executive figures which disclose that £2.7bn of PFI projects are underway or in the pipeline in Scotland" and

"that Scots are losing out to the tune of £1bn because PFI contractors are likely to require a rate of return from local authorities and NHS boards of 7.5% on their investments".

Photo of Christine Grahame Christine Grahame Scottish National Party

No, I have only another minute.

As for the minister's flexibility, I should point out that I have been dealing with Scottish Borders Council. Unfortunately, the council thinks that PPP is the only game in town, despite Liberal Democrat policy and the fact that that party is in power. However, the council is beginning to see the light. The leader of the council told me in a letter:

"I would agree that the 'Not for Profit Trust' principle appears interesting, and may be the way for the future."

However, he goes on to say:

"In the absence of any official advice from the Scottish Executive we have concluded that the Council should pursue our Outline Business Case on a conventional PFI basis."

In other words, the council has received no advice from the Liberal-Labour coalition Executive about other routes that would save the taxpayer money. I am glad to see that Andy Kerr has returned to the chamber, because I want to tell him that he is not open minded. The policy is dogma driven. Indeed, it is simply old Toryism, and the Executive is pretending that it is something else.

Photo of Murray Tosh Murray Tosh Conservative

Before I call the next speaker, I want to emphasise that members really should make a brief point when they intervene. Otherwise, they are taking time from the member who has been allocated the opportunity to speak.

Photo of George Lyon George Lyon Liberal Democrat 4:21 pm, 4th December 2002

The debate has been interesting so far. We have heard much from members who oppose the use of PPPs. We can trade quotations across the chamber until the cows come home, but the fundamental question that Tommy Sheridan and the SNP must answer, if they are so opposed to PPP, is how they propose to fund the new schools and hospitals that are being provided by that vehicle. Where is the £2.7 billion of up-front capital supposed to come from?

Photo of Tommy Sheridan Tommy Sheridan SSP

The money will come from the same source that the Chancellor of the Exchequer has just announced he will use. He is going to borrow an extra £20 billion. That is the way to pay for public services. After all, we can more than afford to borrow that money.

Photo of George Lyon George Lyon Liberal Democrat

Tommy Sheridan wants to keep borrowing—of course, taxpayers will never have to pay back the money. Moreover, we will have to pay the interest. Who will get that money? Mr Sheridan's answer is higher taxes. The SNP has not answered my question, and we have certainly heard nothing about how its trusts might work.

I want to concentrate on a new model—the Argyll and Bute model—that has been developed. Several members, including Alasdair Morgan, have mentioned the model, which provides an innovative way of financing capital projects and will fund £80 million-worth of new schools and renovation in my constituency. The approach has been widely welcomed throughout the area; after all, the schools that are in the worst state were built 30 years ago under the current public procurement rules. Some of those schools are in such a poor state that they are close to being demolished.

The innovative aspect of Argyll and Bute Council's model is the creation of a non-profit-making distribution body to finance the renewal and upgrading of all 92 schools in the local authority area. The original idea was developed by Liberal Democrat councillor Paul Coleshill when he was chairman of policy and finance under the Liberal-led coalition that ran the council. The model establishes a community-owned body along the lines of a housing association to redevelop and renew the school estate over the next 25 years. Any profit that the community body makes will be reinvested in the school estate. In other words, the vehicle that manages the school estate does not take any profits, which means that the estate will make big gains over that period.

That non-profit-making body delivers a number of benefits. It guarantees that any profit that is generated is reinvested in our schools. That includes any profit from refinancing the borrowing over the 25-year period—that is where much of the profit has been made by some of the current PFI projects. The model delivers an estimated 5 per cent better value for money than current PPP-type projects. Most important, it ensures community involvement and control over the future of the school estate in Argyll and Bute. One of the criticisms levelled at the Glasgow model is that it does not do that.

The construction of the new non-profit-making model has been backed fully by Partnership UK. It is not a model that has merely been talked about but has no heavyweight backing. Partnership UK helped to develop the body and it represents an innovative step forward in public sector financing. The development of the new model has attracted widespread interest from other councils and public sector organisations because it addresses many of the current criticisms of PPP.

The Liberal Democrats will argue strongly that that new model of procurement should be backed by the Scottish Executive. Indeed, it has been backed by the Scottish Executive to the tune of £80 million. We believe that it is a better model and one that should be used in future as an alternative to PPP.

The Finance Committee's report is excellent. It underpins the arguments for improving current models. I suggest to the Executive and to members in the chamber that the Argyll and Bute model is a good one to imitate.

Photo of Dennis Canavan Dennis Canavan Independent 4:26 pm, 4th December 2002

I am opposed to PFI because it does not give best value for taxpayers' money. The valuation of PFI projects has been questioned by reputable bodies such as Audit Scotland and the National Audit Office. According to Jeremy Colman, the deputy Comptroller and Auditor General, much of the financial analysis that has been done on PFI projects ranges from the "spurious" to "pseudo-scientific mumbo jumbo" to "utter rubbish". Therefore, I welcome the Finance Committee's call for transparency and accountability and I welcome particularly the recommendation that business cases and contracts must be made public after agreements are finalised.

One of the first PFI school projects in Scotland was in the Falkirk area and involved the construction of five new schools. When I wrote to the council to request a copy of the business case, I was told—more or less—that it was none of my business. More recently, I was informed by the council that all documentation relating to the contract between the council and the PFI company is confidential. For example, we simply do not know how much the company is charging the council for community use of sports and leisure facilities. It must be an exorbitant amount because even with the council subsidy, the charges to the users seem to be excessive.

I have a letter from the coach of Stenhousemuir Football Club youth team, who states:

"I am appalled at the charges being levied towards groups wishing to use these PFI facilities. We in the youth section of the football club do not have a lot of money, in fact we rely on the boys and their parents to raise money to buy equipment, to pay for transport, etc. The charges for us to use the facilities at Larbert High School are as follows: To use the astroturf is £45 per hour plus VAT. Therefore a game can cost us nearly £120. This forces our club to play our games in other areas of the country where we can get facilities much cheaper."

That is not a unique case: I know of other local sports clubs that are in similar predicaments.

I heard our First Minister Jack McConnell wax eloquent on BBC Radio Scotland on Saturday morning about the need to encourage more participation in sport and physical activity. Community access to school sports facilities is therefore essential, but the prohibitive charges that are levied by PFI companies makes access impossible in many cases. Therefore, I urge the Executive to investigate the problem and seriously to consider alternatives to PFI.

Some councillors have told me that they voted for PFI with great reluctance because they thought that it was the only game in town and that the Government or Scottish Executive had virtually blackmailed them into supporting it by indicating that PFI was the only way to get their new schools. However, there are alternative forms of procurement, such as giving councils more capital borrowing consent, and the not-for-profit trust model, which forms the basis of a current bid by Falkirk Council to the Scottish Executive for new school buildings, which I urge the Scottish Executive to consider positively.

I support the Finance Committee's recommendations that the Executive should examine alternative capital procurement methodologies on an on-going basis, to ensure that the whole range of procurement methods is available to public bodies. PFI is not and should not be the only game in town; indeed, it could turn out to be a millstone of debt around future generations' necks. That is why alternatives must be found to build new schools and hospitals while building a more secure financial basis for future generations.

Photo of John McAllion John McAllion Labour 4:30 pm, 4th December 2002

Tom McCabe in his introduction described PPPs as controversial; he did so not, I have to say, without an element of dark humour. I refer to the £43 million waste-to-energy plant in Dundee, which is listed in the committee's report and which has not been without its problems since it was commissioned about a year ago. There have been problems with obnoxious smells getting out into the community, furnaces have not worked and machinery has broken down. There have even been explosions and fires, which led to the memorable headline in the Dundee Evening Telegraph:

"Fire Brigade Called to Fight Fire at Incinerator."

There is an absurdity and illogicality about that headline that sits very well with the concept of PPP/PFI. History will show that to be the case and those who defend it in today's context might, five or six years from now say, "You know, I never really supported that; we only did it because it was the only game in town." I want to talk chiefly about the fact that I was appointed by the Health and Community Care Committee to act as a reporter on the inquiry and to join the Finance Committee on its visit to the new Edinburgh royal infirmary. I speak personally, rather than as a representative of the Health and Community Care Committee. I have no problem with the account of the visit that is included in the Finance Committee's report, which I found to be clear and accurate as it covers all the main issues that were discussed that day, but for two exceptions.

First, I found the new royal infirmary to be a very difficult place to get to from central Edinburgh and I suspect that many people, if not most of the population in Edinburgh and the Lothians, would find that to be the case. I took a very long taxi ride, with a very high fare that most ordinary people would not be able to afford. I suspect that using the buses to get there would be even more difficult. Of course, if we use a car to get there, we find that there is a PPP car park and a charge of £10 a day to park there. The debate has not touched on that important issue.

I remember that when Susan Deacon was the Minister for Health and Community Care she brought out a code of conduct relating to car parks in hospitals. She said that they must not be operated for profit and that any money that was generated by car park charges had to cover the costs of providing the car parks or had to be reinvested in green transport strategies to allow people to get to and from hospitals. In addition, she said that people who were chronically ill, their relatives who had to go to hospitals continually, national health service workers and so on should have subsidised charges.

The problem with that code of conduct is that it came out too late for Dundee, because the Ninewells hospital trust had already entered a 25-year PPP contract, which means that all those recommendations were totally ignored in Dundee. Will the minister say in his summing up exactly what the contract for the car park at the new Edinburgh royal infirmary is and whether it follows the code of conduct that the previous Minister for Health and Community Care set out?

The other exception from the report, which I found to be striking in my visit to the new Edinburgh royal infirmary, was that beside every bed was a kind of all-singing, all-dancing console. It is not just a radio, but a television and a computer through which patients can get on to the internet and telephone from their beds. It was the kind of thing that springs into my mind when governments boast about modernisation. The trouble with everything around capitalist modernisation is that it comes at a cost. Each patient was required to pay more than £3 a day to access the all-singing, all-dancing console. When I asked about the patients who cannot afford to pay the £3 plus for using the console, I was told that they would be means tested. The Unison representative who was walking around with us on the visit told us that Unison's nurses would not be carrying out any means test on the patients of the ward. We asked the representative of the company, "Who will do the means testing?" We were told, "We don't know that—we will work it out in the future." That company has the contract for providing the consoles in every new hospital in England and Wales. I ask the minister whether such a contract exists for new hospitals here in Scotland, because the matter is important.

The final point that I want to make concerns transparency. I remember that Sam Galbraith used to argue that the only reason for going ahead with the new Edinburgh royal infirmary under PPP was that it gave value for money. From the report, we now know that the comparison between the PPP bid and the public sector comparator was not valid. Different criteria were applied to each bid, which ensured that the process was loaded against the public sector and that the private sector would inevitably win. There was no level playing field and we should not support such processes.

Photo of Murray Tosh Murray Tosh Conservative

I apologise to members who hoped to take part in the open part of the debate, but we must proceed to closing speeches. Although Iain Smith has given most of his speech already, he will speak first.

Photo of Iain Smith Iain Smith Liberal Democrat 4:35 pm, 4th December 2002

I have not made any of my speech already, Presiding Officer.

The minister referred to PPP as being a tool in the toolkit. I have nothing against that principle and I do not want to put a spanner in the works, but the problem was that the toolkit of traditional public procurement was empty—there was nothing in it any more. The Conservative Government and then the Labour Government came along with a shiny new tool, but the problem was that that one tool was meant to fit all—the spanner was not adjustable; it was simply a tool for every conceivable opportunity. Local authorities and health boards had to use that tool—it was as if they were trying to undo a Phillips screw with a flathead screwdriver. They had no choice—they had only one tool. That was not appropriate and it is not the situation today. We have moved on and will move on further. I will return later to that important issue.

Paragraph 78 of the report refers to Professor Andrew Bain's evidence. He told the committee that "Financing is relatively unimportant". "In his view", the committee said,

"The basis of the decision should be more related to whether or not the proposed project offers value for money in terms of service delivery."

That is vital. All members in the chamber seem to be keen on Liberal Democrat policy, which is clear about that. We have seven key tests for public services: value for money; quality; democratic accountability and transparency; flexibility; fair treatment of employees, including full consultation; development of public service ethos and values; and accessibility. All those tests are encompassed in the Finance Committee's report.

Perhaps best value is the key, but is best value obtained through a traditional procurement method or through the private partnership method? One must consider examples. The committee rightly highlighted problems of routine maintenance with traditional procurement methods. One of the main reasons why we have such a backlog of capital investment is that our existing infrastructure was not properly maintained over many years: there, but for a lick of paint, goes the ship.

On new investments, I was interested to read in paragraph 53 of the report that, under traditional procurement,

"large projects were often broken up into a number of phases to enable them to obtain capital consents".

The paragraph continues:

"the total project costs tend to increase as a project is broken down into phases".

I thought of Bell Baxter High School in Cupar. A project that should have been completed 20 years ago in a single phase might eventually be completed in a couple of years after about 16 or 17 phases. The project's total cost is now much higher. Where is the best value in that for the children, generations of whom have gone through that school and been taught in substandard accommodation? The same could happen again in north Fife, where we desperately need a new school to serve the area and stop hundreds of children having to be bussed to St Andrews where there is on two separate sites a secondary school that is desperately in need of refurbishment. The school should be on a single site with new facilities. PPP might or might not be the answer to that problem.

It is important that we do not so much consider the method of financing as ensure that all options are available. We are entering a new phase—George Lyon rightly highlighted the Argyll and Bute model and the Executive's support for that. There is another option for schemes, which is the not-for-profit trust option. We must also consider that, because from 2004-05, we will move to a new system of local government finance. Prudential borrowing for local government will give it more flexibility to examine more options. That will open the toolbox and put tools into it that are not currently there. That must be welcomed.

Liberal Democrats may have different policies in different areas; we look at best value and value for money on each project on its own basis; one tool does not fit all. The Liberal Democrats will ensure that the toolbox is full and open and that every public body, local authority and health board will be able to choose the right tool for the right job.

Photo of David Mundell David Mundell Conservative 4:40 pm, 4th December 2002

I do not want to fall into the same trap as Rhona Brankin and get told off for using bad language if I move directly to make some comparisons in relation to Mr Smith's speech. However, I will say that there have been some interesting speeches from Liberal Democrat members today, not least from Mr Gorrie. He told us that Liberal Democrats were against monopolies, yet earlier in the week we heard that they want a monopoly Government for time hereafter. As Iain Smith told us, Liberal Democrats can have different policies in different parts of the country and they do not have to sing from the same hymn sheet. However, at least two Liberal Democrats should sing from the same hymn sheet on the same day if they are going to have a coherent policy.

The debate cannot pass without marking not the passing, but the elevation, of Des McNulty. Des said to me earlier that the chamber has been deprived of half an hour of his speeches by his not speaking today and not speaking in the finance debate immediately before Christmas. Although we wish him well, I am sure that we all lose because of that. However, I am sure that Mr McCabe will more than suffice.

I thought that Andy Kerr made some interesting comments. It is important that other members of the Labour party and Labour politicians throughout Scotland say such things. Day in and day out I hear Labour party members and activists make comments similar to those that were made by Mr McAllion, Mr Canavan and Mr Sheridan, but they are not faced down by other Labour party people.

In my area—Dumfries and Galloway—we are undergoing a PPP process for schools, which I have welcomed because I welcome the investment in the schools. However, PPP is maligned day in and day out. Do Labour councillors, such as Mr Scobie from Stranraer, stand up and robustly defend PPP? Of course they do not. They stand up and say, "The Scottish Executive is making us do it. It is the only game in town." That is where all the wild rumour and misinformation comes from. Mr Kerr must, not only in the chamber but throughout Scotland, champion the cause of PPP so that we do not get the rumour and misinformation that was used previously by the Labour party against the Conservatives and which continues to be used to detract from what the Finance Committee has clearly identified overall as a successful process.

The situation in Dumfries and Galloway is a good example of how the SNP operates. Despite all the criticisms of PPP, when it comes to the bit there is no alternative process to be put in place. The SNP says that it is against PPP, but it does not suggest a meaningful alternative that would provide the same facilities. Indeed, SNP councillors have gone on to the PPP sub-committee and do not even join Conservatives in speaking out against rural school closures, which the report has identified as an issue. There is a problem in the geographic dispersal of projects, which leaves the impression that large projects are going ahead at the expense of small ones.

It is clear that the report has not resolved the political dimension of the issue. What is quite clear from the report is that the silver bullet that the nationalists and others were looking for to shoot down PFI/PPP has not been found. The committee report showed that, although there are other bases, PFI/PPP is a successful basis for funding. The Conservatives introduced it and we remain proud of it.

Photo of Brian Adam Brian Adam Scottish National Party 4:44 pm, 4th December 2002

I am delighted to see that the Tories are making a bid to be the new coalition partners of new Labour. They are clearly cosy with new Labour on the idea of PPP and the Lib Dems are doing everything that they can to distance themselves from it. Perhaps new Labour will be more comfortable with their Conservative colleagues than they are with the Liberal Democrats. Was that a nod of agreement from the back row?

The PFI/PPP report highlights many of the weaknesses of PFI/PPP. The reason why there was no unanimity in the committee on many issues is that the members of the coalition parties failed to recognise what other members realised independently, which is that there are major weaknesses in the PPP methodology.

The minister told us that 13 per cent of the capital expenditure that is available to the Scottish Executive is being expended through PPP. It is not long since he told us that the figure was 10 per cent. However, the minister has not told us the real figure. He has given the percentage of the total capital budget, but not all of the total capital budget is suitable for PFI/PPP. In spite of the many questions that have been put to successive ministers, we have not received an answer on what proportion of projects that could be done by PPP are done by PPP. Had we received an answer, we would know for certain that PPP is the only game in town or, at least, that it was until the recent announcement about prudential borrowing, which is extremely welcome.

I am delighted that all the Liberal Democrat speakers in the debate distanced themselves as far as they could from the principle behind PFI/PPP. Donald Gorrie mentioned a variety of techniques that are available, such as bonds. I am delighted that the Liberal Democrat members are into bondage and that we can trust them with their not-for-profit trusts. Where is the distinction between that and the SNP's suggestion—which we have been making for a considerable time—that public service not-for-profit trusts are an alternative vehicle for delivering new buildings, even within the previous constraints on capital borrowing? I am delighted that the Liberal Democrats have converted to that idea.

It has taken a long time for Executive ministers to offer help and support for alternatives to PPP.

Photo of Brian Adam Brian Adam Scottish National Party

I will let the minister in if he will tell us what measures he intends to take. Will he do something about the situation in Falkirk?

Photo of Andy Kerr Andy Kerr Labour

For more than a year, we have funded, in conjunction with Partnerships UK, the proposal that Argyll and Bute Council is developing. To allow that development work to take place, we have funded it to the tune of thousands of pounds. I am happy to entertain new ideas. In return, I ask Mr Adam whether the SNP now signs up to a variant model PPP.

Photo of Brian Adam Brian Adam Scottish National Party

As usual, the minister, when given another opportunity to say that he will actively support alternatives to PPP, does not answer. He tells us that he has given a little belated help on one occasion, but he ignored the opportunity to answer Mr Canavan's question about the PPP project in Falkirk and I have given him another chance, which he has also ignored.

Mr Kerr talked about bundling services. As a consequence of bundling, a succession of local authorities in rural areas have proposed closures of local schools. The Finance Committee unanimously asked the minister to address that issue, but he has not addressed it.

Photo of Brian Adam Brian Adam Scottish National Party

No thank you.

I welcome Aberdeenshire Council's decision to turn down the funds for bundling—in spite of the fact that it applied for the funds and received them—because people did not want schools such as Old Rayne School to be closed simply to satisfy the Executive's wishes.

Mr Kerr said that the trade unions support the idea that there is no significant deterioration in the conditions of service under PPP. In support of that, he quoted from a report by Amicus. I was an officer in Amicus and its predecessor organisations for 25 years and, as far as I can recollect, it does not represent low-paid public sector workers. The union that does that is Unison and its evidence shows that, across a range of measures, employees' conditions deteriorate under PPP.

Phil Gallie mentioned the Skye bridge. The committee considered whether to include that matter in the report and I regret that it did not.

I welcome the fact that we will have an opportunity to vote on the report today, and I look forward to getting the support of SNP members in rejecting the report on the grounds that Alasdair Morgan and I have cited both in the report and in the debate.

Photo of David Davidson David Davidson Conservative 4:50 pm, 4th December 2002

I find it strange to be fettered to behave in a dignified manner on behalf of the committee. I hope that members will forgive me if I transgress on occasions.

I am sorry that our deputy convener is absent today through illness. I congratulate Tom McCabe on his accession to the throne of the Finance Committee. The report has been in production for more than a year, and I congratulate everybody who has managed to struggle through and remain sane. It is a good piece of work. The members have worked hard—various members have passed through the committee in that time—as have the clerks, who have put up with us, amended things, changed drafts and so on all the way through. They have always been there to be helpful, which has been extremely useful to committee members.

As Tom McCabe said, a lot of witnesses came before us. We took evidence from all over the world. That has made the report tolerably balanced; it is just a fact of life that there was never unanimity among committee members. The nature of the report and the way in which it was produced were such that members pushed and tested ideas all the way through. I congratulate those who convened the meetings at which that was going on and those who stood up for a specific principle for which they felt they had to argue.

As has been said, it is too early for us to be fully informed to make a judgment on PPP. When the Conservatives introduced PFI—this is history, not politics—it was made clear that there would have to be refinement through experience. That is exactly what has happened, and the Labour party has taken up PPP in a new form and is rolling on with the same principles. It is about refinement and making a tool that operates to the benefit of the people.

Over the weeks and months, and in today's debate, there has been a lot of talk about who the stakeholders are. Ultimately, the stakeholders are the people of Scotland. Some of them may be employees in the system; others may be self-employed contractors, such as plumbers and joiners; others may be those who receive the benefit of having a new, modern service delivered and made available to them. The taxpayers are also shareholders in all the projects because, ultimately, somebody has to pay for them. If we can harness the partnership strength of the private and independent sectors, along with the public sector, and if we can get a better deal for Scotland, that is surely where we should go.

Photo of Elaine Smith Elaine Smith Labour

Will the member clarify the final recommendation of the committee? It reads:

"We recommend that the Executive continues to utilise all appropriate sources and mechanisms to secure capital investment"— from the private sector—

"in public services".

Does that mean that the committee is indicating its support for PFI/PPP projects?

Photo of David Davidson David Davidson Conservative

If the question is whether we are saying that PPP is the only game in town, the answer is no. That is not the case. No previous Government has said that either, as far as I am aware. There are various funding models around.

Despite what has been said by one or two members this afternoon, there is a requirement to have a critical mass if large-scale developments are to be introduced. I even hope that neighbouring councils—perhaps led by the same Labour party—will work together. In 1995, when unitary authorities were introduced, local people were given better contact with their councils. It was expected that councils would operate together to the greater good. Unfortunately, that did not happen.

I hope that the establishment of the Scottish Parliament has allowed us to move on so that partnerships will evolve—between the public and private sectors, between public sector bodies and so on—to give us real efficiency and focus. Ultimately, if we do not get access to quality public services, people will not work in them or use them and we will eventually have to pay more.

I am a bit disturbed by the fact that a couple of the political parties are still holding back from even giving the benefit of the doubt to the possibility of having different kinds of partnership. The fact that we can get the SNP to agree to consider such partnerships as an option bears out what the report was trying to achieve.

Mr Sheridan and other members made comments about employees' quality of life. Yes, in the modern day and age we must have reasonable employment practices, but they must be affordable, because when we spend public money and invest in public services, whether in public health or elsewhere, we want to use the best means available.

Photo of Tommy Sheridan Tommy Sheridan SSP

I will ask Mr Davidson the same question that I asked other members. Ten thousand public sector workers have been transferred to the private sector and have lost some of their former employment conditions. Does Mr Davidson believe that they should be given the same protection retrospectively as is proposed for future PPPs?

Photo of David Davidson David Davidson Conservative

Several members dealt with that fully during the debate. The person who must deliver that is the minister, who is present. I thought that he answered Mr Sheridan directly during the debate.

The report is a wide-ranging document that lays out recommendations about refinement, accountability and audit, the critical mass and value for money for all projects. The report also proposes a central advice facility for the public sector. The reason why that proposal is in the report and why it got cross-party support is simple. We know from the history of previous procurement exercises that many organisations tend to take on projects that they do not have the skills to deal with. In the interests of efficiency, value for money and effectiveness, we must ensure that if a public sector body gets involved with any kind of funding—PPP or whatever—it knows how to go about that and has the tools to choose consultants, architects and so on. Too often, public projects have had cost overruns and have started to crumble shortly after their delivery time. We must move beyond such bad project design.

I will not delve into the example of Holyrood, because I think that someone else mentioned that, but the issue of transparency seemed to catch several members' attention. We cannot afford to get involved in breaches of commercial confidentiality. Such confidentiality has nothing to do with transparency after contracts have been signed and deposited somewhere as part of the audit process. We cannot risk giving the impression that a public contract will not maintain commercial confidentiality. If that were the case, people would not come forward, competition would be lost and so would value for money on contract bids.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

Is Mr Davidson saying that he does not agree that contracts should be made public after they have been signed? If he is, how does he explain the fact that such transparency works in the United States?

Photo of David Davidson David Davidson Conservative

I did not say that. I said that there should be commercial confidentiality during the contract process because we do not want the tendering process and the evaluation of tenders to be disturbed. A couple of members seemed to suggest that they would like such transparency.

Alasdair Morgan made a valid comment about the bundling of contracts possibly disadvantaging disparate and sparse communities. [Interruption.]

Perhaps I could have a little hush in the chamber, Sir David. I have a sore throat and I am struggling against the tide of noise.

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament

You are struggling well. [ Interruption. ] Order. Let us have quiet. On you go, Mr Davidson.

Photo of David Davidson David Davidson Conservative

Alasdair Morgan made points about access in rural communities. The issue is valid, but I think that the minister and Tom McCabe responded earlier when they said that access was a matter for local decision-making processes. I am delighted that Aberdeenshire Council has listened to the many of us who argued against a blanket PPP and the closing of schools—or the risk of closing schools—against the wishes of their local communities. I have to give Aberdeenshire Council credit: it had to be encouraged to do so, but it listened to communities and decided to use PPPs only for larger projects, and has left schools alone. That is how the tool should be used across Scotland, particularly in rural areas.

Donald Gorrie said that there is good and bad in the system and that the cumulative effect must be considered. I think that that has been dealt with quite admirably in the committee's report. However, I would like the minister to tell us how the 6 per cent discount rate of the public sector comparator could be unbundled. The committee wrote directly to the Executive asking for that information. Perhaps the minister could agree to write back to the committee urgently, because the matter is a piece of unfinished business in the report. For the record, I note that the minister has indicated that he will do that.

Many committees work hard in this Parliament—that is one of its strengths. All committees have to take evidence and do not know what they will get into when they start inquiries. I commend those involved in the Finance Committee for what they have managed to do with the report and I thank other members of the Parliament who are not on the committee but who took time to give evidence and put that into the melting pot.

I support the convener in urging the Parliament to adopt the report.