7 May 2002
FAST FORWARD: THE REINVESTMENT AND REFORM INITIATIVE
STATEMENT BY THE FIRST MINISTER AND DEPUTY FIRST MINISTER TO THE NORTHERN IRELAND ASSEMBLYFirst Minister, Rt Hon David Trimble, MP MLA
With permission Mr Speaker, the Deputy First Minister and I would like to make a Statement.
As Members will be aware, last Thursday the Prime Minister and the Chancellor of the Exchequer visited Belfast. The Deputy First Minister and I would like this morning to provide the Assembly with the details of the major new reinvestment and reform initiative which we negotiated on behalf of the Executive with the Prime Minister and Chancellor, and to explain its purpose.
These negotiations have been undertaken over recent months; but were only concluded last week. Members will appreciate that it has not been possible to consult earlier. I wish however to assure the Assembly that as we take this work forward we will be consulting widely.
This wider consultation is essential because I believe this initiative opens a significant new stage in the development of our administration. It opens for us new means to make a real difference to the people of Northern Ireland, in particular to turn around the major deficit in infrastructure that we face and at the same time to modernise some of our key services.
Devolution hands the responsibility for providing good government to Northern Ireland’s politicians and people. People want good services fairly and efficiently administered. And they look to the Assembly to provide them.
We all will work together to deliver reform and re-investment in public services. The Executive has placed this at the centre of its Programme.
We need a new debate in Northern Ireland. A debate about services. A debate about the necessary hard choices. We must all accept that good services have to be paid for, and have to be planned and managed expertly.
Resources and reform must go together.
The last time locally elected representatives were able to debate and take decisions was 30 years ago. Then there was a strategy for public investment. Since then, temporary arrangements and decisions by those with no organic connection with society, saw years of under investment leaving huge infrastructure problems – in water, in health, in transport and education.
Now we must prioritise; we must decide how best we close the gap; we must decide what can be done now and what must wait. We have to look strategically at our asset base, take stock, and set a new direction. We must be open about those choices, and explain to the Assembly, and to the people, what those choices are.
The Initiative has five core elements, which are:-
£200 million available for investment over the next two years;
a new borrowing power for the longer term;
the transfer of some strategic military and security assets to the Executive;
the creation of a new strategic investment body; and
a major programme of public service reform to secure greater expertise and effectiveness.
The State of Our Infrastructure
Mr Speaker, it is very clear that reinvestment and reform in our public services are essential. For decades, investment in public sector infrastructure has fallen well short of that required to meet the needs of our community. Under Direct Rule priority was given to the allocation of resources to security. That inevitably meant that over time, capital investment for our services was neglected. We can see evidence of this plainly today. We can see the scale of this problem clearly when one visits our hospitals and our schools, and when one examines the state of many of our roads and our transport systems. What many of us do not realise however is that our water and sewerage infrastructure, hidden from view, is also in a poor state and in urgent need of major work. It is calculated that £6 billion extra will be needed over the next two decades to address the deficit which the Executive and the Assembly inherited.
With devolution, we now have the opportunity to do something about it.
The Executive has been exploring determinedly possible ways of addressing this problem. In our first year we established the Infrastructure and Capital Renewal Executive Programme Fund to support strategic projects including road, rail, energy and telecommunications using, where appropriate, Public Private Partnerships. We have so far allocated £79 million from that Fund, topping up the resources which have been allocated from mainstream budgets.
Last year, we also launched a major review of the opportunities for public private partnerships, or PPPs, and indeed other sources of funding. Our aim has been to identify if and how we might make progress in improving our public services by drawing in other sources of capital and – equally importantly – other sources of managerial expertise. The PPP Working Group, established by the Executive, has completed its work and the Executive will shortly be seeking views on its report.
Whilst we have made some progress, it has also become clear that we needed more radical ideas to address the backlog of investment given the other pressing demands for resources. It was in this context that the Deputy First Minister and I set out to negotiate for additional forms of support and finance.
Many in the Assembly and outside have urged us to explore alternative sources of funding, and this we have done. With the assistance of the Prime Minister and the Chancellor, we now have a package which will accelerate the work that is so badly needed. Using it in conjunction with other sources of finance we should be able to replace old assets with new. Indeed we can now start to consider new opportunities for investment across our public services, that previously we would not have had the resources to contemplate.
A New Borrowing Power
Key to this initiative is that we have been able to gain the Prime Minister’s and the Chancellor’s agreement to the Executive being able to avail of a new borrowing power. This will enable us, if the Executive and the Assembly so decide, to launch a multi-billion pound programme to improve our assets. The Executive will be able to borrow from the Treasury at highly advantageous interest rates, going directly to the gilt markets. Interestingly, access to such borrowing has been an issue which many, including the Committee of Finance and Personnel, have pressed on us, as we have examined the use of PPPs. I am therefore pleased that we have achieved this breakthrough. This provides the opportunity to significantly increase the pace of investment in Northern Ireland.
We do not want to depend solely on the borrowing power. We will also wish to – and need to – look at how other sources of funding may be used to enhance the borrowing power. The scale of the task means that we must also look at how we can lever in resources through public private partnerships. But we will ensure that, where that approach is taken, they represent the best way to serve the public interest. PPPs if used properly could be of real benefit. This is especially so because it can bring to bear expert management of contracts and of assets to which the public sector has not previously had access. This theme of expertise is one to which I wish to return.
The new borrowing power could be used to finance projects in all the public services for which we are responsible. In parallel with the changes proposed in relation to local government finance in England and Wales, we will have to satisfy the requirements of the new Chartered Institute of Public Finance and Accountancy Code. The borrowing will also be subject to a limit set by the Treasury.
As legislation at Westminster is required, the new borrowing regime cannot be available until 2004-05 at the earliest and will only proceed on the basis of funding priorities established by the Executive and this Assembly. However, as the Deputy First Minister will explain, we have also been able to negotiate a short-term borrowing arrangement which can be put into effect now, without a change in legislation, to set in train a major programme of investment.
It is a fact of life for all of us who have mortgages or take out loans that borrowing must be repaid. Since last week we have seen and heard ill-informed stories about huge hikes in people’s rates to pay back the borrowing. There are several key points I must emphasise very clearly.
The Executive has made it very clear already that it will not be proposing increases above the pattern of recent years unless and until the present rating system has been reviewed and we have an acceptable local revenue system.
Also, any changes that would arise from the Review of Rating Policy will need to be phased in over a number of years, so that we can avoid any very sudden changes in the bills required of any sector, business or individual;
What we have agreed with the Treasury is a borrowing power. It will be up to the Executive and this Assembly to decide whether to borrow to pay for new assets and, if so, by how much. This provides a real opportunity to invest in our infrastructure and the Executive has agreed that we should pursue with Treasury the proposed new arrangements.
We have to work within the Treasury’s strict rules on the control of public spending, which preclude the use of efficiency savings or asset sales to service debt. We can and will make fresh efforts to secure efficiency gains as part of the "Reform" dimension of the initiative. We will also be requiring a radical look at the assets held by our Departments to free up any spare resources.
Finally, it has to be said that the issue of the revenues we raise from the domestic sector was inevitably going to arise in the Spending Review. It has been said many times that it is impossible to expect the Treasury to accept our arguments for money to sustain the same standard of public services as in England if our revenue levels are much lower. Without this initiative, we might have had to increase rates in the longer term just to make ends meet for basic services. With the Reinvestment and Reform Initiative, we have been given a much better opportunity, that is to use additional revenue to lever in major investment in infrastructure.
Public Service Reform
This initiative, as the title implies, is also about public service reform. We have to increase resources. But our focus must not just be on the quantity of projects and the number of staff supporting them, but the quality of project implementation and of subsequent service delivery.
As an Executive we are committed to improve delivery and value for money. In the Programme For Government we underline the importance of modernising government, and of improving the efficiency and effectiveness. With the introduction of Resource Budgeting, and of Public Service Agreements and Service Delivery Agreements, we have laid much of the information basis for this change. That should enable us to get better information about the true costs of services and in particular what outputs and outcomes are being achieved. We have also added to this by commissioning Needs and Effectiveness Evaluations of major policy areas – covering around three quarters of the expenditure we control – to help us get a better understanding of needs and effectiveness in these areas.
With the work on a new procurement system across departments we should also see improvements. The major review of our public administration over the coming months, looking at all aspects of administration including the quality of service, should provide a major opportunity for improvement. Likewise, the new investment body should be an important vehicle for helping to deliver public service reform. But reform must go wider. We need to focus more on delivering services, on placing customer service and the needs of front line staff first. In this, the use of technology can play a valuable role, improving services and information, increasingly allowing the public to use services when it is convenient to them. This must become a much more significant theme in our Programme For Government, and integral to the work of all departments.
We have already seen signs of significant development. The creation of Invest Northern Ireland and the joint development of our welfare and employment systems are only two examples where new approaches have been developed, aimed at better meeting the needs of the public. However, we have to go further and I do not wish to see public sector budgets being increased in the future without applying reform as a key condition. The public deserves that. It needs to know that the best management techniques are being used, to provide a service, and that the minimum resource is being used in internal administration.
We all want improved delivery of public services with the resources we have to deploy and the expertise available to help us. We need to change the way we do things, to not simply continue with previous practices. We believe that we have a better opportunity than ever before of furthering that objective.
Mr Speaker, this is the largest reform package that we have had. In its scope, in the strategic investment body, in its use of borrowing, it has wide ramifications for our public services. It will change the style, change the mindset, put new thinking and energy into government. We are eager; we are determined to have real change. We are taking our responsibility to the public very seriously. We are determined to transform the quality of services. We want our new democracy to deliver real benefits to the public.
The Deputy First Minister will now detail other elements of the Initiative.
Deputy First Minister, Mark Durkan MLA
This Initiative presents a challenge to us all. We need to consider our priorities, in particular what should be addressed in the short term. We need to consider whether there are new ways of working for delivering services. Much should now be possible for us that was impossible before. The First Minister and myself will work with the Minister of Finance and Personnel and with all our Ministerial colleagues to develop a programme that brings substantial benefits to our community.
I stress this, because it must be remembered that while we will be setting up a new strategic investment body, and while we have to draw in the best quality of expertise to assist implementation of this work, choosing the direction of the programme rests on the Executive, working with the Assembly. Through our Programme for Government we will agree which areas of the deficit are first addressed. These are political decisions which must be ultimately settled on the floor of this Chamber.
Strategic Investment Body
The First Minister has explained the opportunities which will be available to increase resources through longer term borrowing and to re-vitalise our public services. I wish now to explain the other threads of this initiative, namely to take a much more strategic approach to investment through a new body, the use of former military and security assets and the use of borrowing in the short term.
A key element of the initiative is the wish to adopt a more strategic approach to our infrastructure and public service investment and so deliver the best possible investment programme for the region. Before the launch of the new institutions infrastructure investment in public services and utilities, such as hospitals, schools, roads, transport, water and sewerage, was characterised by a piecemeal, departmentalised, non-strategic and largely reactive approach. Expertise and resources are currently spread across eleven departments with each responsible for delivering on their own programmes.
The Programme for Government emphasises the importance of improving the way that we work together across our departments. We have already consulted widely on how we will improve public sector procurement generally. A new central body, drawing in the best private sector expertise is already planned.
There is also, in the need to improve our infrastructure, a real potential for improving co-ordination and for ensuring that expertise which we have available and which we can call on ensures better delivery of services. We are therefore proposing that a new organisation should be created to work with and on behalf of the Executive and all departments to deliver infrastructure programmes in a more strategic way.
The new body which we are proposing would be able to take and use the mix of sources of financing – be it from the new borrowing power, from traditional public sector finance or from PPPs. It would link this to the best procurement methods, whether involving the public or private sectors or a combination. From this it would produce solutions which should be much better than would be possible if resources are spread across the full range of departments’ services, with each left to develop their own expertise and deliver the projects themselves. Thus, for example, it should be possible to have a much more strategic approach to Public Private Partnerships than if it was left to individual departments. Many of our departments are relatively small. They would have real difficulty in developing and maintaining the expertise and drive required to make the projects happen.
Decisions on what is required in terms of projects, buildings will be a matter for Ministers so that there is a clear political responsibility for prioritisation and planning. But delivery and financing will now be overseen on a strategic basis.
The strategic investment body is a new and highly innovative approach. There are examples elsewhere which we will want to examine closely, drawing on the best expertise.
Military and Security Assets
This initiative is about reinvestment and reform but it is also about a major step in the normalisation of Northern Ireland society. Over the years of the Troubles, the Ministry of Defence and the Northern Ireland Office made use of extensive assets. With a process of normalisation should come a reduction in security requirements. Normally the NIO and MoD would put their surplus assets up for sale and the Executive’s departments would have the opportunity to purchase them. For several years however we have been arguing that the Government should take a more positive approach, and should accept that these resources should be transferred to more positive use, to strengthen the social and economic fabric. We gained agreement in 2000 that we would be consulted on these sites as they became available for disposal. I am therefore delighted that a significant part of this new initiative is that the Government has agreed to transfer to the Executive, without any charge, some of the exceptionally significant assets which are already, or will be shortly, surplus to requirements.
The Chancellor mentioned these sites at the Odyssey last Thursday. They are Ebrington Barracks, the Maze prison and the base adjacent to the prison, the bases at Magherafelt and Malone Road and Crumlin Road Gaol.
These are significant assets. They should help support a major programme of economic and social renewal for the whole community; a community which has been through a long period of conflict. We need to take the opportunities of a stable and peaceful society. The sites present tremendous opportunities and it is particularly important that sites and assets which up to now have been associated with militarisation and conflict should be transformed into engines of peaceful economic and social regeneration. We are now considering how best their potential is developed to fulfil the needs of the community.
The Government has also agreed that as further sites become available, it will be for the Executive to address on a strategic basis how such sites could be used to promote economic and social regeneration though we cannot necessarily infer further transfers without charge.
Immediate Action and Short Term Borrowing
The major programme of infrastructure investment will take some time to develop. The new borrowing power on which this will depend will be subject to the passing of new legislation through Parliament. More importantly , as the First Minister has stressed, we need to review radically the nature of the system for local revenue, and establish, as a first condition before increases could be considered, a system that is fair and acceptable.
However, we wish to, indeed need to, make an early start with the implementation of the initiative. We have therefore negotiated with the Chancellor that the Executive will be able to borrow £125 million in the next two years. The Executive wishes to maximize the impact of this new money. We will be adding to it £75 million of resources which have become available from departments and so enable a more strategic use of these resources than would otherwise have been possible. In negotiating the short timer boost to investment, the new regional cancer centre was among the sufficient projects we had in mind. We will also consider how the £200 million available should be used in conjunction with the Executive Programme Funds, to maximise the investment impact. We will be looking at renewal and purchasing of important new equipment, improving our roads, and other investments which we can pursue in the short term.
The £125 million borrowed from the Treasury will have to be repaid through the existing revenue income which will be available from the regional rate. There have been reports about major increases in the rates. The First Minister has explained the position in relation to the longer term borrowing power. Let us also be clear about the short term borrowing arrangement. The £125 million loan would be repaid from revenue income currently planned and would not require increases in rates.
A great deal of work now needs to be done to implement the initiative. The First Minister, the Minister of Finance and Personnel and I will be working with our Ministerial Colleagues in the coming weeks and months to realize the full potential of this important package. We will of course keep Members informed of developments and I am sure that Members will wish to offer views and ideas on how the community could benefit most from the changes.
The establishment of the strategic investment body will be a major task and we wish to start work on this right away. The parties in the Executive will be invited to nominate representatives to a project board which will be chaired by OFMDFM nominees to develop the proposals for the new body. An Executive sub-Committee is also to be established to oversee the work. We will also wish to call on expertise from Treasury, Number 10, the South and from further afield to help develop our ideas. We also propose to involve fully the Assembly through the Committee of the Centre and the Committee for Finance and Personnel.
We have given details today of the Initiative, an initiative which promises substantial additional resources to Northern Ireland from short and longer term borrowing and from the transfer of exceptional security and military assets to the Executive. We believe this initiative should help provide a very welcome boost for our economy and improved services for our community for this and future generations.
The Spending Review
We have also other work to do. The Treasury Spending Review is now well underway and is due to be completed in the summer. Our agreement with Treasury on the Reinvestment and Reform Initiative is, I would stress, entirely separate from our negotiation on the Spending Review. The two are not connected, a point on which both Treasury and we are clear.
The recent Budget announcement of large increases for Health brought home to us the real difficulties of matching expenditure increases in comparable Programmes in England whilst the Barnett formula continues to be applied. We will continue to press for a fairer system of allocations across the UK which makes better recognition of Northern Ireland’s higher needs.
But the Treasury will no doubt continue to focus on the level of local revenues in Northern Ireland relative to England. This is an issue which the Executive and the Assembly will need to consider further including in the context of the Rating Policy Review. As the First Minister has already said to the Executive would not be proposing to the Assembly increases in rates above the patterns of recent years until we have had the opportunity to consider the outcome of the review.
The reality is that irrespective of the outcome of the UK Spending Review this year we will not have all the resources we would need. Later this year the Executive will need to consider its priorities for spending across programmes, taking account of needs and effectiveness, in the context of the Programme for Government. To initiate this process, the Executive intends to bring forward to the Assembly early next month its Position Report for developing the PFG and Budget this year.
When the Executive presented its Programme for Government to the Assembly we said it was about "making a difference". It is of course a difference in terms of process - a local administration responsible for decisions on local issues, addressing local needs. But what we also want is a difference in terms of outcome – a difference in the quality of services and quality of life for all people in Northern Ireland. That difference is the key justification of all our work, of the Executive, of the Assembly. The First Minister and I believe that the Reinvestment and Reform Initiative which we have just described provides us all with an additional opportunity to make a real difference. It is of course no magic solution. There are no soft options. Our political life is about hard choices – choices which the public look to us to make. Our new initiative however opens to us new ways of dealing with those choices, and new ways of drawing in expertise and better management. If we make the right choices it can help us invest for the future, improve our public services and provide real benefits for people here. All of us should work to realise fully its potential, and I commend this approach to the Assembly.
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