28/06/2011 Newsnight Scotland

Tonight on Newsnight Scotland, while the Edinburgh trams are mired

in crisis, the M74 extension opened. The government said it is ahead of

time and under budget, as is the work on the M80. Do they tell us

something about how public projects should be managed?

There is a new road in town, you can just about see and 74 extension

from the BBC headquarters in Glasgow. -- see and 74 extension.

This project was eight months ahead of schedule and under budget. Where

did this have projects succeed where others have failed?

happened with a really good partnership between the public

bodies. Principe transport Scotland and Glasgow City Council, and the

private sector -- principally transport Scotland. There has been

an open book Accounting. The private sector opened up the books

and said, there is our costs, have a look. No stone is unturned, so

that the costs are the actual costs and they will share in the profit.

The public and private sector have shared in the profits. A good idea.

This type of partnership is a relatively new but has been tried

in other parts of the UK and the world. Proponents say it works.

Raising funding is still an issue, when governments and councils are

seeing budgets cut. There is an argument that this is money well

spent. This has been an expensive project. It cost around �8,000 for

every metre of this road. But many people point to the economic

benefits. It has created jobs and Boyd's the construction industry

during the recession. -- buoyed up the construction industry. Many

others point to the benefits. might take 45 minutes to get to a

sight. With this new road, it would take it down to about 10 or 15

minutes. A substantial saving. economic benefit is something the

government wants to replicate across the country. The transport

review is a wish-list of products it wants to tackle. There are 29 of

them. Only a few are likely to be started, like the Forth Road

replacement building. Others could be years away. The problem is

finding the money. Accountants have come up with one solution. It is

called tax increment or funding. You borrow money, you build on a

new site, you put some business units, some housing. That the

tracks new business into your area, and they pay more rates. Your rate

has got to pay for it -- your rate goes up to pay for it. You are

borrowing on the base of the investment and growth you're going

to have. It makes sense for those wanting to grow the economy and

drivers are not likely to object to new roads being built. But few

people want them in their backyard. And 74 development is no different.

-- the M74 development is no different. What is it going to be

during the night? We have had disturbances or long time, what is

it going to be like when it is up and running? I don't know, we have

to wait and see, but we have been put up with an awful lot, it has

been a living hell. Then there is the wider environmental impact. The

Greens say that all this road will increase is congestion and carbon

emissions. As for Glasgow's economy, we will have to see if it has been

money well spent. The Transport Minister, Keith Brown,

came into the studio earlier. I asked him if he expected the new

road to have a real effect on the economy in the area. We already

have 700 jobs announced for the Clyde gateway. Many businesses are

telling us they have much more reliability for the deliveries,

getting goods to the right people, people getting to work. You can

imagine it is difficult to guarantee getting a delivery on

time through Glasgow. Yes, it will have a real impact on the economy.

What would you say to people who are already complaining

vociferously, who live within earshot of this and it doesn't look

very attractive to them, and it is noisy, and they don't see any

benefits. I heard the vox pops this morning on BBC radio. Many people

locally thought it would be a great benefit because it would take

traffic away from the surrounding streets. Down sides are inevitable

in a modern economy where you are building large structures, but

there will be major benefits from people seeing less traffic on their

streets. We know the environmental arguments, but leaving that to one

side, but has a feeling of being one of these gigantic projects from

the past. If we were starting from here, is it something you would

actively want to build? It comes down to the design of the M8 back

in the 1960s. When this was first proposed. That is when it should

Would in the 60s, it was a It would have been easier to do at

that time, but it would have to be done to make the connection between

the M74, right through to the heart of Glasgow. The way this was

financed, this is a standard contract? That's right. Whereas the

M80 upgrade is a PPP project. an MPD project, run by a contractor.

The funding is the Scottish Government. The Glasgow M74 was

managed by the council but the Scottish Government along with

Glasgow City Council, Renfrewshire and South Lanarkshire paid for the

project. Ultimately the Government would pay for anything, but the M80

is a different project, a PPP style deal and the ownership of it has

been sold while it has been constructed, at least part of it.

They will not only build the road but will look after it for many

years to come under that contract. If you are right, that both of

these projects are coming in ahead of schedule, and under budget,

doesn't it rather show that these arguments about PPP versus doing it

in the way that the M74 has been done are actually pretty artificial,

as long as the project is managed properly, it it doesn't matter how

it is done. Our argument against PPP wasn't that it couldn't be done

efficiently, it was that it was the level of profit going to the

companies involved. That is why we have gone... For example, on the

M80, are you saying there will be excessive profits going to the

company about to complete that? is a well-managed projects are it

is possible to do that. It is possible to have good PPP for it is

possible to limit the profit if you can strike a good bargain. That has

not been the history of PPP contracts. That is why we have

developed to the MPD model, to restrict the model. How many

projects have been completed using the MPD model? We are in the

process of doing that. The Borders rail project will proceed according

to that. The M8 will proceed according to that. This is the

first of the transport projects which will go according to M p D.

When is that due to start? It has all been agreed, the road orders

have do be laid, it would take some months. You have been going on

about... The SNP have been going on about this idea for years. You set

up the Scottish booters Trust. You have been in power since 2007 --

Scottish futures trust. It has got nowhere so far. It is well

developed and accepted. It will be the basis of the Borders railway,

the M8 interchanges. It is well developed. It was piloted a long

time ago by the previous administration in relation to some

It is PPP by any other name, there is isn't any other fundamental

difference. I think there is. If you look at the hair Myers hospital,

the level of profit going to private companies was excessive.

You have said you have already managed to do it on the M80. It can

be done. So you don't need your model, it really needs PPP projects

that are negotiated properly and sensibly from the start. It is

still possibly do have a well- organised, efficiently run PPP

project which has profits evenly distributed. Some people in the SNP

say there is a principal difference but they are the same thing with

CAB profits. It is not that you don't have private companies making

All public projects in the past had private profit. When councils built

in as private profit. We know that, the point I am getting is there is

no real difference between NPD and a well done PPP. In that sense, you

seem to agree with organisations like the IPR, who have always

argued it is not PPP. It is whether it is managed properly. I disagree.

B M P D model has been developed to stop that happening. We will have

to leave it there. I am joined now by Ben Thompson and

Ross Martin. Are we, Ross Martin, to take these assurances that these

projects are under budget and ahead of Schedule entirely? I think with

their little pinch of salt, the argument isn't really about the

intricacies of whether it is her PPP or any of the other things are.

It is a dramatic contrast. We have been talking about the Trans

project in Edinburgh. This could not be more of a contrast. They

want to make that linked to the finance structure because in

Edinburgh that they had the opportunity with the congestion

charge to pay for the tram project and with the road building projects,

what they have done is pay for the projects within part of the

contracts. So I the you pay for it through user charging in some

formal mechanism, or you pay for the cost of the construction

through the contract itself. Right. Ben Thompson, D take entirely

seriously this on time or ahead of time and under budget claimed?

think it will depend on where you stop the calculation. Whether you

look at it when the project first came on the drawing board or

whether you look at it when the project began to take shape again.

I think different people will argue differently. It is undoubtedly a

greater success in project management then the trams or

perhaps the Holyrood parliament building. What about this point

about the financing. What would your answer be to the question I

asked the minister, which is that if the M80, which is a PPP project,

and the M74 extension can both coming successfully compared with

things like the trams, yet they are financed in different ways, are not

all these arguments about PPP verses none PPP artificial? I agree

with a lot of what you said in that it comes down a lot to the

management of the project and that can be in the public sector or the

third sector owl the private sector. I think there are some real flaws

with PPP and there have also been some good things about PPP. The

major flaws were that you were borrowing money from the private

sector and paying private sector cost of funds when the government

was taking the risk on a lot of the debt. So you were vastly overpaying

on the financing costs. Isn't that the case also with MPD -- N P D.

The money there is borrowed from the private sector as well, or

isn't it? A I agree with you. I think that for these sorts of

projects, the funding is much better done through the public

because I do not think the risk is transferred to the banks. But what

I am asking you, am I right in thinking that the non distributive

model, the money is raised from the private sector and therefore

private sector interest rates are not from their public sector?

the course of the 30 years of the project, the costs are

significantly higher because you pay higher amounts on private

sector borrowing than you do on public sector borrowing. In that

sense do you see any advantage in this end DP model over the PPP

model or is it just the same thing? It is the same thing. The important

thing is that the people who use these pieces of infrastructure do

not care about the financing model as long as the infrastructure is

putting place, there is a fair funding mechanism and that people

pay a fair share. What about deals whether charges were punitive?

People did care on the Skye Bridge when they were being asked to pay

huge tolls. But they did not care on the original M74 when the Tory

government put in a six-lane link to England. That was done with a

similar model. People did not care about that because it was a

properly managed project. There is a difference between fair and

unfair funding. The general public, as long as they see good quality

infrastructure, paid for either through the public purse or other

mechanisms, as long as it is there, they are not concerned about the

financing mechanism. The obvious elephant in the room is the Forth

Bridge. Powell is that going to be financed? The government took a

step on removing tolls from bridges and remove that funding mechanism.

At some point in the future, a road user charging, whether it is a

motorway tolling, congestion charging, will be back on the table

because it is one way of bringing in external funding for these

projects. The Forth Bridge, at some point, charges will be there again.

This is because you could do a PPP styled deal where tolls will be the

Revenue's? That can attract finance at a decent rate and that will

enable you to build it economic league. What do you think about the

Forth Road Bridge? How is it likely to be finance? Just stepping back,

I question that we have a proper transport policy. You said earlier

that we just have a list of transport projects, we do not have

a transport policy that looks forward and says what transport

infrastructure do we need for the next generation, the next 25 years,

and how we are going to do that. That means linking together our

cities with faster road and rail than we have at the moment. I think

we should look at these projects rather than individually... But in

practical terms, what would that mean? Are you saying that you do

not think building there have also bridge would be a priority? I do

not think it fits and I do not think people are clear on their

overall vision in terms of a transport policy going forward for

Scotland. How do we plan to link our main cities. One of the most

important links is to have between... OK. We are running out

of time. I wonder if you agree with that? It is a laugh that it is

called the replacement crossing because it is not a replacement, it

is an additional Bridge. It would not even be a low priority because

we do not need it. We will have to leave it there. A quick look at the

front pages tomorrow. The Scotsman about the Christie Commission

report tomorrow. Ministers will be urged to shake-up Caerphilly

outdated public services reforms. The Independent is about the

strikes should vote for Thursday. The Daily Telegraph - strike

threatens holiday chaos because of passport control staff being on

strike. That is all we have time for tonight. I will be back again

Good evening. The hot weather finally left our shores. A drier

start to Wen stay. A little on the call side for most of the eve.

Shell was will brew up into the Big gaps between the showers

further south. Temperatures near- normal for the time of year around

21 or 22 degrees. We have seen this shower clouds break early in the

morning here. Decent dry and sunny weather between the shell was.

Northern Ireland will see the showers heaviest in the morning. If

you like to showers expected. The 17 or 18 degrees. A scatter of

showers in Scotland into the afternoon.

The differences between Wednesday and Thursday, not a huge amount.

Temperatures roughly the same values. A few showers will continue,

but they will become lighter. Dry weather across the country on