06/12/2011 Newsnight Scotland

at half-a-dozen! As concerns are raised, I am happy to look at them.

Thank you. Good evening. New schools, and

railways, the Government's projects costs lot of money. Is it a Pipe-

trained? Do jet-setting politicians reward Scotland at all? We will ask

the First Minister. The Government have called it a mega-plan, an

infrastructure strategy which includes shorter term projects such

as new college buildings in Inverness and Glasgow, and long

term aspirations such as a high speed rail link to London which

wouldn't be completed until 2030. It will cost �60 billion and the

Government wants the private sector to pay for much of it. In a moment,

we'll talk to the Chief Executive of the Scottish Future's Trust who

will have to deal with that funding. But first Julie Peacock has been

looking at the Government's plans. These are ambitious plans. If it

goes ahead, it is a big spending spree of �60 billion. So what are

we going to get from this? It is a long list. In total, 54 major

infrastructure projects and 33 programmes. It includes investing

in the rail and road network like up grading parts of the canine and

a 96. There are plans of new schools, hospitals and housing. The

government claims each of these projects will support 1,400 jobs

and for every �100 million invested, there will be �160 million of

economic activity. That figure of �60 billion doesn't even include

plans to invest �9 billion on a high-speed rail linking Scotland to

London. That would also depend on investment from Westminster. So far,

so good. But opposition parties say the plans are vague and unrealistic.

Is this a wish-list or a detailed planned to get Scotland out of

recession? Alex Neil visited by a new library being built in Glasgow.

If the plans come to pass, there will be a lot more of this. And it

will not only mean public buildings. Big infrastructure projects are

planned to improve roads and railways. We will connect our

cities which will be a boost to employment and to growth in

Scotland, not just in the cities, but in all the areas serviced by

the cities and what this plant is about is boosting the economic

growth rate in Scotland to try to get us and for position to be in a

competitive economy in the 21st century and to get jobs, jobs, jobs.

Many commuters are on these roads have dreams of getting their own

little bit faster. The SNP promises to make their dreams a reality.

Just not yet. The A nine between Perth and Inverness will become a

dual carriageway by 2025 and the upgrade of the B96 won't happen

until 2030. That sounds like a pipe dream to Labour have. It is not is

serious plan but a wish-list. It is nothing but a letter to Santa. It

amounts to nothing. Many of these planned projects are regeneration

away and who knows what the economic landscape will look like

them. We can only guess what the spending priorities will be of any

future government 19 years from now but businesses have welcomed the

plan. Although the time lines are links the, appeased we have a

commitment to these roads being done and we have a time frame for

them being completed which is important because it takes it

beyond one parliamentary term. The one final positive news is this is

a massive opportunity for the construction sector which has been

badly hit over the last few years. How does the government want to pay

for this? It claims to have it worked out. It is planning to use

some public money and attract the rest from public sector investment.

In something not dissimilar to PFI but most of these plans hinge on

the Scottish Government being given the borrowing powers in the

Scotland Bill. This is the first rock indication the SNP is likely

to support that bill. I'm joined by the Chief Executive

of the Scottish Futures Trust, Barry White, and from Edinburgh by

the former director of Scottish Financial Enterprise, Ray Perman.

This is a wish-list. Some of it might happen, some of it might not.

Do you think, in the financial crisis, this may give you an

opportunity to get financing for some of this? First of all, there

is undoubtedly, in the near term, there is greater certainty in the

early part of the plant and it does say the spending reviews and

borrowing powers, the rest of the plan may move and shift in time

which is red. There is a great opportunity at the moment, you know,

the construction sector had a huge price inflation in the last 10

years and part of that has actually now come back down so the public

pound buys a lot more than it did several years ago. From that point

of view, projects at Glasgow college would have been taken to

the market in procurement, we are confident of getting a bet a deal.

So, building companies cannot get any work so if you want to spend �1

million of public money, you will get a lot more houses and schools

than you would have got. construction industry are delighted

we will bring these projects forward. Scotland is stealing a

march on the rest of the UK. Things like the NPD programme with �2.5

million investment is one of the biggest in Europe so it is a very

significant programme of work, one that is welcomed by the industry

because it will have people working on site building a college that

would not have been built otherwise which is good for employment and

teaching and learning in Glasgow. notice that while obviously some of

the �60 billion is fully speculative, the high-speed rail

link wasn't even included in that. Is that because it is piped in this

guy or Pike on rails? We would love to see it built but the coalition

have their own problems getting that through the Home Counties so

when it gets to Scotland is anybody's guests. Is there an

opportunity perhaps, we are living in a world of zero interest rates.

If you are an investment trust or pension fund, it is difficult to

get returns on money. So is there an opportunity it Government say,

we guarantee a reasonably rate of return and they might be more

interested? Let's leave PFI for the moment because that is a slightly

different issue, but that is right. The reasons that Barry White was

saying that construction costs are low at the moment, so it is good to

build things now. But interest rates are rock-bottom so now is the

time to borrow and invest in new infrastructure which will give you

a return later on. When investment trusts and pension funds and other

institutions invest in these things, what they are looking for a low

risk, so they want the project to come in on time and on budget, but

they also want a steady return over a long period because sometimes

they invest for 25 years, so those are the issues they will need to be

satisfied on before they put their money do. Barry White, let's not

get involved in whether this non- profit does -- distributive think

is PFI under another name, but the idea of all these products is to

bring in private money to help get public infrastructure built. Is

there an opportunity because of the low interest rates and the

difficulty investment companies are having on making returns to do

that? Interesting on the first point, the UK Government has lodged

a review of the PFI, so we are swimming with the tide on that

particular point. The opportunity that exists is to harness to make

things. Banks have done diligence on risk management in the early

stages and we can take that and harness it with the pension funds

desire for long-term stable cash flows which we have just talked

about. And to we finance the projects once they are built and up

and running... Let's say you have a hospital. He borrowed the money

from the banks. Yes. You build the hospital. You then get a pension

fund to take over the hospital, pay off the bank loans, and they get a

return from running the hospital, which allows them to pay off the

loans and make a proper. They would refinements over 25 years at a

steady rate and what they get out is something that matches their

liabilities, which is what they are looking for, and what we would get

in the public sector is the natural holder of long-term debt in these

type of projects at a competitive price. From our point of view, it

is good value for money. Do you have people knocking on your door

at the moment saying, it is a tough world and we have lots of money, we

don't think it is worth investing in factories because we are not

sure about the economy and that is risky, but we would like to get

involved with you? What we have is projects coming to the market and

what we would like to do destructive those to bring in

pension funds at the right times so from that point of view, the have

dialogue with the pension funds and we know what they are looking for

in terms of structure and to get that structure right to get them in.

But that isn't all new because pension funds have been investing

in bonds and the water industry for many years. What is new you provide

them a new attractive returns than sticking them in government bonds.

They are looking for a steady cash flow from the water industry and

what we can offer is a steady cash flow from government accommodation

and road projects. What are the letters we put in front of its name,

is there... Is this a good way for the government, perhaps, to be able

to turn the financial crisis to its advantage? Well, there are a two

quiz for paying for infrastructure, out of current spending, which is

what Scottish Government have been forced to do since devolution,

since the Scottish Government doesn't have borrowing powers, or

you borrow the money. Whether it is PFI or something else, those are

the two quiz you will do it. The thing about PFI was there was a

transfer of risk and now everybody assumes that everything is built on

time and to budget but we have seen some very big publicly promoted

schemes in Edinburgh, the tram and the Scottish Parliament, which were

well over budget, with hundreds of millions of Pounds over budget.

Pension funds and other institutions want to be sure the

risk of getting the thing built on time and to budget is low. Thank

Who is best placed to sell Scotland to the world? Is it Alex Salmond

and his Holyrood team, or First Minister -- all the Scot and

secretary, Michael Moore and his Westminster colleagues?

Scot land has always made plenty of noise around the world, but our

ambassadors in the Tartan Army are probably better at winning friends

than winning business. That is the job of Scottish Development

International, promoting trade and investment in 20 different

countries. For the next 90 minutes, I will introduce you to the Co of

Scotland's developing body,. They are capturing interest in fine

Scottish seafood and whisky which sell well, and trying to open new

markets. But no big deals are landed here without Communist Party

approval, which is why the First Minister held talks with Chinese

vice-premier. Business is a political backing can make a

difference. I think it opens doors for us, it enables relationships to

be started which were not there before. It is very important to

show that all businesses have the businesses of the wider government.

It is not just Alex Salmond who has been clocking up air miles for his

country. This is his third official visit to China. The education

secretary Mike Russell is not long back from promoting Scotland in

India, and climate change minister Stewart Stevenson is in South

Africa at the carbon conference. Foreign affairs is not devolved. It

is principally the job of the UK government to fly the flag for

Scotland right round the world. But since before the SNP was elected,

the Scottish government has supplemented that effort with its

own office in Brussels, and its own officials inside the British

embassies in Washington, and here in Beijing. In Rio last week, the

Scottish secretary was doing his bit for trade as well, and he

reckons UK backing gives Scottish firm's international cloud. This is

the 7th ministerial visit to Brazil in the course of the last 18 months,

showing how important we treat it as a government. Four Scottish

business, using the international network of the Foreign Office and

UK t i, we are able to create the conditions which can allow visits

like this where we expect at least �3 million worth of businesses for

business here as well as more doors opened. So with Alex Salmond's

influence on the world stage, would it be diminished if he led Scotland

out of the UK or would it -- would independence allow Scotland and its

pitch for business to be heard just as loudly and at least as clearly?

I am joined live from Beijing would -- by Alex Salmond. Can you hear

me? Yes, I can. There is a very long delay on the line which I will

have to warn you about. No doubt he will ask short questions! Extremely

short. We have been discussing the Scottish government's new

infrastructure plans. I am curious as to whether that is something

where you have been exploring the possibilities in China of getting a

Chinese money involved in the private part of it? Yes, in fact we

had a meeting with the Chinese Investment Fund yesterday, which

included the government officials and also some of Scotland's

greatest asset managers, like Abedin -- Aberdeen Asset Management

and Standard Life. They were at the meeting. We were talking, among

other things, not just about getting some business managing some

aspects of the Chinese infrastructure, but also about

infrastructure possibilities in Scotland. Would you be entirely

comfortable if, for example, a Scotland hospital should end up

being owned by a government entity which was owned by the Chinese

government? Well, I think you'd better have a look at the structure.

Deep structure does not transfer ownership of assets, but is one of

the interesting differences between a non profit distribution model we

are using and other models of investment. Ownership is not really

what investors are looking for. They are looking for a return over

a substantial period of time, to an investment, which is reliable and

guaranteed. That is the attraction of investors. The Chinese

Investment Corporation has been quite adamant, and publicly adamant,

in discussing possibilities of investments including in Britain.

He said -- it said it was industry -- interested in a high-speed rail

project. It said it would in this day and age want some control over

the destiny of these projects, not just putting money in expecting to

get a return. Indeed, but I were -- I thought you were talking about

the infrastructure plan that we launched today in Scotland. For

example, I am not suggesting for a second, this is not a commercial

insight I am giving you, but let's take you for example, Edinburgh

airport is up for sale at the present moment. That is privately

owned infrastructure, it is still infrastructure that would be very

attractive to people. Or when they bid for that, they will be owned

that part of infrastructure. If there was a port for sale, they

would be owned by the company bidding for it. If we are talking

about roads, hospitals and schools, they would be owned by public

authorities in Scotland. What about foreign direct investment from

China to Scotland? Is that something you have discussed, the

possibility that Chinese companies, which are increasingly moving

abroad, but partly half of the direct investment by China in

Europe is in Germany. Have you discussed coming and setting up

factories here? Of course, that is part of the discussions we are

having not just here in Beijing but in the four other centres that this

trade and investment mission is moving to. We have had some fairly

substantial success already in that, for example, petrol china

Investment in Grange Routh, which has secured the future of

Scotland's largest petrochemical process for the foreseeable future.

There is a number of other examples in the industries of energy and

textiles. It is not just Scotland but every other country from Europe

is coming from a long way back. Germany has had along standard --

long-standing business relationship with China which has been much

greater than any other European country. Scotland for the first

time over the last two years, particularly this year, is getting

very substantial visibility and profile in China, and that is the

first step to getting very substantial investment in business

relationships. What would you say, there will be some people, I am

sure you would be so shocked to learn this, who would say in times

of extreme financial crisis, there must be a better use of public

money than Alex Salmond jetting across the world so China? What

would you say to those people? would talk about the jobs and

investment. Just take one example, this is just one example out of

money. Last year, we negotiated in China, and then vice-premier -- the

vice-premier when he came to Scotland announced, that Scottish

salmon would be allowed to enter the Chinese market place. OK.

the 30th, from nothing, it is now worth �20 million, and it is only