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27 March 2008

S3M-1529 Elgin Bypass

Scottish Parliament

Thursday 27 March 2008

[THE PRESIDING OFFICER opened the meeting at 09:15]
... ... ...
Elgin Bypass

The Deputy Presiding Officer (Trish Godman): The final item of business is a members' business debate on motion S3M-1529, in the name of Mary Scanlon, on an Elgin bypass. The debate will be concluded without any question being put.

Motion debated,

That the Parliament supports the need for a bypass for the city of Elgin; recognises the efforts of Moray Council, Elgin Community Council, the Elgin Bypass Steering Group and many other individuals and groups who have campaigned for this bypass for many years; notes that 26,000 vehicles pass through Elgin on a daily basis; further notes that four successive ministers with responsibility for transport have visited Elgin since the formation of the Parliament, all of whom have been supportive of the proposal; notes that Moray is the base of many world-renowned companies that distribute their produce globally but feel restricted in Elgin where traffic slows considerably; also notes that the Moray 2020 strategy recognised that local transport links needed to be transformed in order to enhance the area and to attract inward investment, government dispersals and growing businesses, and notes the need for bypasses for other towns along the A96 corridor.

17:05
... ... ...
17:27

The Minister for Transport, Infrastructure and Climate Change (Stewart Stevenson): I add my thanks to Mary Scanlon for lodging the motion and giving members a fourth opportunity since 2002 to engage in a debate about a bypass for Elgin. I thank all members for their contributions to the debate. I have at my elbow Richard Lochhead, the Cabinet Secretary for Rural Affairs and the Environment, who lives in Elgin and is the local member. Members can be sure that although protocols prevent his direct participation in the debate, his regular attendance at the Elgin bypass steering group and his engagement on the issue show that he shares their concerns.

It is opportune to debate this subject in the year in which I look forward to receiving the results of the strategic transport projects review, which, as all members must know by now, will shape our transport investment plans for 2012 to 2022. The review will produce a plan that is not determined by geographical fairness but which addresses the needs of different parts of Scotland. Each part of Scotland has needs and future investment will be needs-driven, which is the correct way to proceed.

As other members have mentioned, I recently visited Moray, where I benefited from a presentation by Moray Council on the traffic problems affecting Elgin. I had the opportunity to meet and have discussions with the Elgin bypass action group. In a private capacity, I am a regular visitor to Elgin, as I live within a short distance of the city.

On the subject of Nairn, members can be confident that the local member, Fergus Ewing, is in regular contact with me and that I am entirely aware of the issues there.

The local member with Inveramsay bridge in his constituency occasionally draws to my attention the need to address that issue. I am well aware of the issues that affect people right along the A96 corridor and of the need to respond to them.

No transport minister could be ignorant of the local aspirations to solve the problems in Elgin town centre. Such steadfast, cross-party campaigning over a significant period deserves a response. I acknowledge Peter Peacock's extremely well made point that it is not simply about the bypass. The council needs to work with any upgrading in the trunk road network to ensure that local roads make their contribution. I engaged with the council on that important point during my visit. I know that a study by Moray Council in 2003 concluded that a bypass for strategic traffic would not be the appropriate short-term solution for Elgin because much of the traffic was local. Mr Peacock developed that point. However, events have moved forward. Moray Council commissioned consulting engineers to develop a transport model for Elgin that would inform a fresh STAG appraisal. That new STAG report identified three potential route options but, unfortunately, shows that all three routes offer relatively poor value. I have just been made aware that the cost benefit outcomes are in the range of 0.50 to 0.53, which would mean that we would not get our money back for the investment.

I understand that Moray Council has taken the position that the bypass options should be allocated to the council's medium-term delivery programme, as they are not the whole answer. Nonetheless, and despite the disappointing benefit cost ratios for the options in the council's report, my officials in Transport Scotland have been in touch with Moray Council to request a copy of the new STAG report so that we can consider it alongside other information and evidence that will help us to identify the future investment priorities for the A96 corridor. One of the things that encouraged me when I spoke to the council and campaigners was that there is considerable interest in developers who want to develop in Elgin contributing. That gives us some insight into the ways in which we can close the gap that there appears to be in the current STAG appraisal.

Peter Peacock: I understand the technical points that the minister is making about the STAG appraisal. Earlier in his speech, he mentioned that the future investment priorities for Scotland will be based on need, and I understand that point too. However, do opportunities as well as needs feature in his considerations? There is an area of Scotland in which there are huge economic opportunities, but we require investment to exploit them.

Stewart Stevenson: I absolutely accept what Peter Peacock says. That is precisely the point. The economic hot spot of Scotland is in Inverness and extends east along the Moray Firth to Elgin. We have to capture and make the best of the potential there. It is not just about roads. Reference has been made to rail, and we want to get an hourly service on the route. As a Government, we have increased the money that is available for improving cycling and supporting walking.

All those are issues that we wish to consider in relation to Elgin and the A96 corridor. We will resolve the tension between longer-distance traffic and local traffic by the STPR process, and will identify how we can improve journey times and increase the reliability of public and private transport. There is great access to the area, but we need to discover the right way to proceed. We are fortunate in having considerable resources ready that help us to understand how we might proceed. The work that has been done over a considerable period has been worth while.

Many communities would benefit from improvements in Elgin; it is not simply a local issue. We are looking at a 10-year programme, and I expect that that will include projects that relate to the A96, although we have not as yet finalised which ones to take forward.

We are looking to have a significant number of projects in that period, and we also have a planned programme of 40 major projects in the period to 2012, so we are not simply standing still. I hope that Mr McGrigor will have noticed that we have included the Newtongary to Adamston climbing lane in 2004—which was under the previous Administration—and the Coachford climbing lane in 2005. There has been some investment, which has made some contribution. However, the major project is the Fochabers to Mosstodloch bypass during 2010-11. We have to deliver the projects that are in the queue. One aspect of transport is that we need a portfolio of projects to ensure that we do not lose a sense of pace.

Mr Peacock said that he would not be surprised if I did not announce a start on the Elgin bypass today, and I do not want to disappoint him. The right time for that work is in the context of the STPR. We expect to start engaging with stakeholders in local communities over the summer. I have given many answers in response to parliamentary questions and correspondence: the STPR is the best way of making progress and building our new investment programme for the 10-year period.

We are deploying Scotland's resources for the benefit of people throughout Scotland and we are committed to doing that in a way that is equitable for the whole of Scotland. That means recognising the needs in every part of Scotland.

Meeting closed at 17:36

13 March 2008

S3M-1549 Borders Railway [Closing Speech]

Scottish Parliament

Thursday 13 March 2008

[THE PRESIDING OFFICER opened the meeting at 09:15]

Borders Railway

The Presiding Officer (Alex Fergusson): Good morning. The first item of business this morning is a debate on motion S3M-1549, in the name of Jeremy Purvis, on transport.

09:15
... ... ...
10:13

Stewart Stevenson:





The debate has been slightly more interesting than I thought it might be when I read the amendments. Although it has covered a reasonable range of topics in relation to the Borders rail link, it has brought little light to the subject and it has certainly brought some confusion and uncertainty. That came in particular from the previous speaker, who is being unhelpful by introducing a synthetic uncertainty that need not be present.

I will respond to one or two matters that arose during the debate. There is no stall in the decision-making process, whatever Mr Purvis asserts on the subject. The non-profit distributing vehicle is, of course, established as part of the bid process when the project is put together, and members should realise that that is when it takes.

The special-purpose vehicle is a model with which we are entirely familiar. The point of the model is that it reduces dramatically the interest rates at which Government can borrow. Any benefit from the resulting profits is delivered back to the public sector. The core interest rate over the life of a Scottish Water PFI project in the late 1990s was set at 8.5 per cent; the mezzanine finance rate for the project was set at 13.75 per cent. It is absolutely clear from the interest that has already been expressed that the interest rates via which we will be able to fund the Borders rail project are of an entirely different character. The high level of interest rates has always been the central objection to the way in which things were done in the past.

Jeremy Purvis: Last week, the minister announced costs of £235 million to £295 million. How much of that sum is budgeted for interest payments?

Stewart Stevenson: The member must put on his financial thinking hat. The figure that we announced refers to borrowing, which must be repaid over a period of time. The important point is that we have given certainty to the councils that are involved—certainty on the future of the railway, on the financial structure of the project and on the price. The financial model that we have chosen over the life of the project will deliver a cost-effective solution for the people of the Borders.

Des McNulty: If the figure of between £235 million and £295 million refers to the capital cost of the Borders rail project, what is the total cost—capital cost plus interest repayments—over the 60 years of the project?

Stewart Stevenson: The member knows perfectly well that it is important for us to have a negotiation that delivers appropriate value for the public purse. We will, and we will be accountable to Parliament and the people of Scotland for that. No one will respect the concerns that Opposition members raise if they continue to introduce a synthetic uncertainty into the project; that is in no one's interest. Opposition members failed to address the issue during the recent debates on the budget.

Mr Johnstone raised the issue of journey times, which we have managed to reduce. I would also like to see freight on the railway. In the near future, I will speak at a major rail freight conference in London; I will also speak to the all-party parliamentary rail group at Westminster. I will not hesitate to take those key opportunities to raise the issue.

Reference was made to those who have supported the project since it began to be debated. I welcome the fact that Donald Dewar, Sarah Boyack and many others of different political persuasions accepted that the project was vital for the Borders. That is why some of the remarks that have been made today are distinctly unhelpful.

This year we have spent £14 million on land, site investigation and topical surveying. We started the outline design in 2007, without even waiting for the due diligence to be completed. The financial issue that has been raised is synthetic. I direct members to page 60 of the Liberal Democrat election manifesto, which states:

"I want to involve the private sector in financing and delivering priority transport facilities".

As we are into websites, I point out that the statement is available at www.nicolstephen.org.uk. Ms Grahame put her very substantial political finger on the nub of the issue. Under the Liberal Democrats, the Borders have been in the economic doldrums for years.

Charlie Gordon suggested that the minister had something to hide. He is correct—it is my humility.

10:19

S3M-1549 Borders Railway [Opening Speech]

Scottish Parliament

Thursday 13 March 2008

[THE PRESIDING OFFICER opened the meeting at 09:15]

Borders Railway

The Presiding Officer (Alex Fergusson): Good morning. The first item of business this morning is a debate on motion S3M-1549, in the name of Jeremy Purvis, on transport.

09:15
... ... ...
09:23

The Minister for Transport, Infrastructure and Climate Change (Stewart Stevenson):





Thank you, Presiding Officer, for the opportunity to remind the previous Administration that it had eight years to decide what to do with the project. We are reiterating this Government's commitment to deliver the railway.

The leader of the Scottish Borders Council has welcomed my positive announcement and is delighted that the council has had confirmation that the project's construction will begin in this session of the Scottish Parliament.

Jeremy Purvis: Just for the record, during the passage of the bill through Parliament, did the minister vote to sack the Waverley railway partnership as promoter?

Stewart Stevenson: Mr Purvis is unable to recognise that we have an effective partnership with all the councils involved. I very much congratulate the Waverley railway partnership on its very valuable contribution to getting us where we are. We do, of course, have to move on to deliver. I am delighted that the relationship between the members of the Waverley railway partnership and this Government are so good and will be effective in ensuring that the project is delivered—on time and on budget.

Much has been made of finance. As I advised last week, we intend to deliver the scheme using a non-profit distributing model. That means that we will use expertise and innovation in the private sector to deliver this public infrastructure project. The NPD route will provide an opportunity to use a competitive process that is geared towards obtaining the best solutions from the construction and finance markets, while ensuring that any excessive profits will be reinvested for the good of the community.

Contrary to the views of certain members, NPD is not new. Three projects in Scotland have been developed using the NPD model already. Those projects are in the schools sector in the areas of Argyll and Bute Council, Aberdeen City Council and Falkirk Council. All three projects have reached financial close.

Elaine Murray (Dumfries) (Lab): Does the minister agree that the NPD model is a form of public-private partnership?

Stewart Stevenson: The model is a method of ensuring that we do not pay the excess interest rates that too many projects with which Dr Murray's party has been associated have paid. The NPD model is a way of ensuring that the profits that are derived from financing the project are delivered for public benefit. I would have thought that Labour members would welcome that approach.

A project for NHS Tayside is currently being procured using an NPD model contract. Furthermore, Network Rail—which is owned by the Government on our behalf—is, in effect, an NPD structure delivering at UK level across the rail infrastructure. In short, NPD is a tried and tested approach that was used for years by the previous Administration, starting in 2005.

As I announced in my statement to Parliament last week, the capital costs are indicated to be in the range of £235 million to £295 million, with a contribution of £30 million from the councils—those are 2012 figures. The councils welcome the stability in relation to their funding contribution. We anticipate that the money will be paid back over 30 years. The final timescale will be agreed with the successful bidder.

Jeremy Purvis: Can the minister clarify how much of the capital costs he intends to borrow? Last week, on "Scotland at Ten", Derek Bateman said to Christine Grahame that Borderers will want to know where the money is coming from. Christine Grahame replied that the amount that the Government has said it will commit to the scheme is the same as the previous Government said it would commit, and that the additional costs will be met by the NPD mechanism, spread over a number of years. Will the NPD mechanism be used to cover the additional costs or all of the costs?

Stewart Stevenson: The people of the Borders are not the slightest bit interested in where the money is coming from; they are interested in the money being spent to deliver a railway for their benefit. Our plans will ensure that the railway is built on time and on budget.

In the current testing financial times, investors will move to high-quality investments—a flight to quality, as it were. People are already expressing considerable interest in providing funding via this excellent investment opportunity. We welcome that interest whole-heartedly. It will ensure that the Scottish taxpayer gets good value for money.

I take this opportunity to reiterate our support for the project. The Government will have spent at least £40 million on the project before procurement commences, using the funding that I am talking about. There has been no cancellation of Government funding; in fact, we will be putting more money into the project. When one borrows money and repays money, one puts more money in.

When the railway opens, it will connect the Borders to the national rail network for the first time in more than 30 years and will reduce CO2 emissions by nearly half a million tonnes.

This Government takes a pragmatic approach to procuring projects because we are focused on project delivery.

I move amendment S3M-1549.1.1, to insert after "inception":

"commends the 450,000 tonnes of CO2 saved by the project".

09:29

5 March 2008

Statement: Borders Rail Link

Scottish Parliament

Wednesday 5 March 2008

[THE PRESIDING OFFICER opened the meeting at 14:00]

... ... ...
Borders Rail Link

The Presiding Officer (Alex Fergusson): The next item of business is a statement by Stewart Stevenson on the Borders—

Des McNulty (Clydebank and Milngavie) (Lab): On a point of order, Presiding Officer. Yesterday, The Scotsman published what appeared to be an early version of the minister's statement. It might not have been the final version, but this practice of partial and inaccurate advance briefing on ministerial statements devalues the Parliament's authority, even if it provides some comfort to Scottish National Party back benchers. Presiding Officer, will you again remind ministers that providing advance information is not in line with the Parliament's rules?

The Presiding Officer: Thank you for giving me notice of your point of order, Mr McNulty. I have had the opportunity to read the press coverage, which, on reflection, I consider to be of a somewhat speculative nature. However, I would always take the opportunity to remind ministers that it is important that matters come, in the first instance, to the Parliament.

We come to the statement by Stewart Stevenson on the Borders rail link. As always, the minister will take questions after a 15-minute statement, so there should be no interventions.

14:05

The Minister for Transport, Infrastructure and Climate Change (Stewart Stevenson): Today I am able to advise that construction work on the Borders rail project will start within the life of this Parliament. That will be a cause for celebration for all who live and work south of Edinburgh and it delivers on a promise that was made by the Parliament during its second session, when all but two MSPs voted to support the Waverley Railway (Scotland) Bill.

Transport Scotland has completed the due diligence process that was put in train by my predecessor in March 2007, and I am satisfied that we meet the tests that he established for the project. The benefit cost ratio for the project has risen—yes, risen—from 1.21 to 1.32, despite our having had to restate the budget to account for the additional station that was requested by Parliament and to respond to the rise in land values in the Borders.

We will deliver a railway that strengthens some of Scotland's poorest communities, spreads wealth to the regions and provides a sustainable, integrated and cost-effective public transport alternative to the car. Before I go into detail, it will be helpful to give an update on how the project has progressed since the Waverley Railway (Scotland) Act was passed by Parliament in June 2006.

In June 2007, I reaffirmed the commitment of the Scottish Government to provide £115 million—at 2002 prices—towards the scheme and maintained that our continuing support depended on the project meeting the three remaining funding conditions that were set by the previous Administration.

The first of those conditions is that the assumptions underlying the business case must hold, including the achievement of patronage levels, containment of costs, active management of risks, and housing growth projections that are achievable and based on identified market demand. Secondly, a clear and comprehensive risk management strategy must be developed and delivered. Thirdly, the railway must be integrated with local bus services, to ensure that it has the widest possible impact in the Borders and Midlothian.

Since the 2006 act was passed, a number of key items of work have been progressed by the Waverley railway partnership, including ground investigation works, topographical survey works and land acquisition. In addition, work on the outline design commenced in October last year.

In March 2007, it was announced by the previous Administration that Transport Scotland would take over the role of authorised undertaker from the Waverley railway partnership, because the Waverley railway partnership was formed to promote the project through the parliamentary bill process but was not sufficiently well equipped to take it through to completion. Thus, it made sense to transfer powers to Transport Scotland, which is an organisation with proven transport delivery skills, as it has demonstrated in the upgrading of Waverley station and its work on the upper Forth crossing.

Work is under way to transfer the powers to Transport Scotland, and we anticipate that the process will be completed shortly, subject to legal agreements being reached between the parties.

We are committed to a programme of investment that is founded on sound justification and which can demonstrate positive economic and social benefits to the community as a whole. The due diligence exercise examined the full extent of available project information and looked at its robustness to ensure that Transport Scotland has a full understanding of all areas of the project before the official handover from the Waverley railway partnership.

I turn to the main findings of the exercise. Today we cost projects with a clear eye on appropriate optimism bias to cover currently unknown factors.

Incorporating that into our new costings is a key part of our now establishing a robust and deliverable plan that, like other Transport Scotland-led projects, can come in on time and on cost. We have also accounted for land and property inflation, which has been higher than was previously expected. I will return to the numbers later.

The business case was examined more closely, because it did not reflect current and updated information that was available, for example on appropriate patronage levels, train timetabling and expected housing development. Transport Scotland economists undertook a full review of the business case and the underlying information and refreshed and updated the business case accordingly. Thus, the BCR has risen to 1.32.

The funding requirement of a robust risk management process has been met by the Waverley railway partnership as it took the scheme forward. The process will be taken on and developed by Transport Scotland in its new role as authorised undertaker.

The previously stated completion date of December 2011 was never achievable, given the previous Administration's decisions and its requirement to ensure that the project met key tests. The due diligence process has been completed timeously by Transport Scotland, to ensure that we have developed a robust proposal that is based on the preliminary work on the project that the partnership undertook. Today, we know that we start construction during the life of this Parliament, with a two and a half year project to completion.

I am pleased to note that tenders will shortly be awarded for the construction of two road overbridges, as part of the development of Shawfair, which demonstrates the Government's commitment that the railway will not only serve the people who live in the Borders but form part of the transport links for the new development to the south-east of Edinburgh.

Work is continuing on pre-procurement preparations such as outline design, land and property purchase and preparation of contract documents for the whole of the project.

I highlight that the Waverley railway partnership—Scottish Borders Council, the City of Edinburgh Council and Midlothian Council—has worked hard with Transport Scotland on all aspects of the project. Members of the partnership are in the Parliament and their efforts should be applauded.

Members: Hear, hear.

Stewart Stevenson: Procurement for the project is based on the findings of the due diligence process and a reconsideration of the previous Administration's original proposals. As part of the project development and strategy, several procurement routes were reviewed and a decision has been made to take forward procurement using a non-profit distributing vehicle.

The use of NPD models for railways is well established, for example in the financial structure of Network Rail. The details of our final approach will be developed by Transport Scotland, in conjunction with the financial partnerships unit and Partnerships UK, full account having been taken of market soundings and the need for a competitive procurement process. The approach offers a reliable route to achieving delivery to the time and cost targets that we have set.

Transport Scotland will take on the role of authorised undertaker, but that can happen and the project can be successfully delivered only with the continued involvement and commitment of Scottish Borders Council, Midlothian Council and the City of Edinburgh Council, whose representatives I met before I made this statement. The councils are keen to work in partnership with the Scottish Government and Transport Scotland to deliver the project, primarily by delivering their financial commitments but also as significant project stakeholders. We welcome their on-going input into the project and we look forward to working with them in the coming years.

I will not give an exact cost for the railway, because to announce a headline number would prejudice commercial negotiations. However, I can indicate that, at this stage in the project's development, capital costs are indicated to be in the range of £235 million to £295 million. The actual price will of course be negotiated during procurement.

The estimate is higher than previous cost estimates. The previous Administration announced an estimate of £130 million at 2002 prices, which is equivalent to approximately £185 million to £195 million at 2012 prices. The project specification has increased, raising the costs as a result of the commitments that were made during the passage of the bill; some other, necessary technical requirements have been identified subsequently.

Under the NPD partnerships approach that I described earlier, the project capital will be borrowed from the financial markets and repaid over part of the asset life by annual service charges that will be met from Transport Scotland budgets and with contributions from the councils, as before. NPD funding models are a cost-effective borrowing mechanism that avoid the high interest rates of private finance initiative funding and leave ownership of the asset in public hands throughout.

At the heart of the project is the need to build a dynamic and growing economy—one that provides prosperity and opportunities for all. The railway will help to provide those social inclusion benefits, which in turn will strengthen some of Scotland's poorest communities and spread Scotland's wealth to the regions, in line with the Government's economic strategy. The potential to grow the local economy will be enhanced by the ability to offer a full range of housing, including affordable options, in both the Borders and surrounding regions. Indeed, a number of major developers have already shown a clear interest in the scheme. We will continue to engage interested parties as the scheme develops.

The railway will provide a sustainable, integrated and cost-effective public transport alternative to the car, connecting people, places and workplaces across the Scottish Borders and Midlothian and into Edinburgh. By moving people from their cars on to safe, fast, clean and reliable train services, the railway has the potential to reduce the number of accidents on the A7 and A68. It will create a sustainable mode of transport that will reduce carbon emissions in the regions. Indeed, by introducing the railway, we estimate that some 450,000 tonnes of carbon will be saved, with a monetarised value of about £4 million over a 60-year period.

Journey times from the Borders to Edinburgh, and vice versa, will be greatly improved. At peak times, people will have to travel for less than one hour from Galashiels to the centre of Edinburgh. That is a major improvement on current bus and car journey times. The due diligence report states, and we firmly believe, that

"the Waverley railway project is in line with national, regional and local policies which seek to encourage more sustainable and integrated forms of transport, reduce the impact of traffic on the environment and encourage walking, cycling and the use of public transport".

From the discussions that I have held, and particularly from correspondence that I have received, I am aware of the considerable support for the project. I am also aware that some remain concerned about the proposal. I hope that today's announcement helps to allay those concerns. By reinstating the Government's commitment to the construction of a railway to the Scottish Borders, we will bring real benefits to communities by attracting businesses and increasing access to jobs, education and health services.

Further major benefits that the rail link will bring include improved access to the Borders, the opening up of employment and housing opportunities, the creation of potential economic development, the reduction of road congestion and accidents, the provision of opportunities for tourism and the removal of the perceived isolation of some of the areas that the railway will go to, especially in the Borders.

I have set out for the chamber today the plans for the successful delivery of a railway to the Scottish Borders region. By selecting the most appropriate method of procurement, we can now move forward and deliver a railway that will successfully reconnect the Borders region to the rest of Scotland.

The Presiding Officer: As I indicated earlier, the minister will take questions on the issues that were raised in the statement. We have around 30 minutes for questions.

Des McNulty (Clydebank and Milngavie) (Lab): Following the short transport review in May and June last year, ministers have taken nine months to come up with an announcement of further delay. Instead of completion in 2011, we have the commencement of construction in 2011. Because ministers have taken nine months to reinstate—their word—the project, costs are up and people in the Borders are still waiting. They will have to wait longer because, we are told, the project is to be procured through a non-profit distributing vehicle, which is not, to use the minister's words again

"an organisation with proven transport delivery skills".

How long must we wait for market soundings, for clarification over borrowing powers and for a competitive procurement process to be put in place? Ministers have repriced the £115 million at 2002 prices to £175 million to £185 million at 2012 prices. Who pays for the increased specification that has been referred to? Ministers have identified the indicative costs as £235 million to £285 million. The previous amount to be paid by the councils was £15 million—[Interruption.]

The Presiding Officer: Order. Excuse me, Mr McNulty. I look to the members on the front benches to set an example in terms of sedentary interventions.

Des McNulty: They have no class.

Who is to pay the £60 million to £110 million gap between the minister's contribution and the contribution from elsewhere? What is the impact on the Transport Scotland budget? When will the first train run on the Borders railway?

Finally, you are not just the transport minister—

The Presiding Officer: Indeed I am not, Mr McNulty.

Des McNulty: Mr Stevenson is not just the transport minister; he is also the planning minister. Housing organisations in Scotland are saying that Scottish Borders Council is not giving sufficient planning consents to meet the requirements that it set out when it proposed the scheme. What are you going to do about that gap in the business case?

The Presiding Officer: Nothing personally, but perhaps the minister would like to give his answer.

Stewart Stevenson: I would very much welcome your assistance, Presiding Officer, if you would care to give it.

Not a single day's delay has been derived from any action of this Government. In March 2007, the then Minister for Transport put into play the process—Transport Scotland's due diligence process—which we have now completed. We have—to the letter, to the spirit and to the timetable—pursued what was put in place by the previous Administration. Once again, in seeking to aim at the Government, Mr McNulty has shot off not one foot but both feet.

However, Mr McNulty asks some important questions, to which I have the answers. He asks about the financial contribution of the councils. The councils have agreed that they will provide £30 million for the project. Not only is that amount capped, but by funding the project through the NPD approach, that money will be paid over the lifetime of the loan and not in a lump sum. I think that that will be substantially welcomed by the councils.

Yes, I am the planning minister and, yes, there are concerns throughout Scotland about planning decisions. I ask members please to accept that Scottish Borders Council is absolutely aware of its responsibility in that regard. I am confident that it is moving forward. Its various plans reflect the housing that has to be built to make the project BCR work. I am confident that in Scottish Borders Council and in the other councils that are party to the project, we have partners with whom we can work—partners who, with us, will deliver a long-term and critical benefit for the development of the Borders.

Derek Brownlee (South of Scotland) (Con): There will be disappointment but probably not much surprise in the Borders at today's announcement of further delay and cost increases. I will leave members of the former Government and of the current one to squabble about who is to blame for that.

I ask the minister for more clarification on the funding, which goes to the heart of the question whether the Borders railway will ever actually happen or whether it will simply be put in election manifestos year after year.

The costs that the minister is projecting today are a conservative estimate of £235 million or an upper estimate of £295 million. He has not announced an increase in Government support—I would be grateful if he would confirm that—and, by my calculation, Government support stands at about £155 million. On top of the £30 million contribution from the councils that he mentioned, there is a funding gap that I estimate to be between £50 million and £110 million. Who will fill that funding gap and how will he be able to attract investment into the non-profit distributing vehicle until there is certainty about the funding of the railway?

Stewart Stevenson: Let me start by stating the obvious: the funding will be reflected in the Government's figures in the next comprehensive spending review. The capital expenditure will come from outside Government. It may come from the regulated asset base that Network Rail provides or by other means but, in any event, the interest rates will be substantially less than those that we have seen under the PFI models that Derek Brownlee's colleagues introduced at Westminster when they were in government. The interest rates for those are often in excess of twice the base rate.

The interest rates that we are talking about in the NPD model—or, for that matter, in the regulated asset base model—are a few basis points above the base rate. That is because the distribution and management of risk are tackled differently. Therefore, I assure Derek Brownlee that there is real enthusiasm in the financial community to provide capital against a secure asset with a long-term future and minimised risk. When risk is minimised, risk pricing—which is reflected in the interest rates—is correspondingly less. [Interruption.]

The Presiding Officer: Order. Members will have lots more opportunity to ask questions and, if they stop me interrupting, they will have even more time in which to ask them.

Stewart Stevenson: I assure Derek Brownlee that, in the meeting that I have just had with the Waverley railway partnership, there was real enthusiasm for the announcement that I have made today and significant support for joining us in taking the project forward. I am afraid that he is a lonely man if he is disappointed.

Jeremy Purvis (Tweeddale, Ettrick and Lauderdale) (LD): I thank the minister for advance notice of his statement, which, regrettably, raises more questions than it provides answers. People in the Borders will be aghast that, after reviewing the scheme for a year, the Scottish National Party Government will commit only to starting the project sometime before 2011. They will also be deeply concerned that the way in which the Government intends to fund it has not even been written yet.

What is the start date for construction? I do not want to hear just that it will be some time within the next three years. When will the Government publish a document that states and guarantees that funding is in place for the project?

When was the due diligence process actually completed? I understand that it was completed before December, so the Government has caused three months' further delay because of uncertainty over the funding method. The minister stated that the due diligence process was carried out to a timetable from the previous Government. Will he publish the timetable that he claims exists?

How much money will be borrowed to fund the railway? The minister stated that any sign of Government investment in the project will be published in the next spending review period, which starts in 2011.

There now needs to be a full debate in the Parliament on the issues that have been raised. If the minister can answer all those questions, of course we will support him; unfortunately, they are fundamental questions to which he needs to respond.

Stewart Stevenson: I confess to my colleagues that I was wrong: there are two people who are disappointed. However, they come from pretty predictable sources and the rest of the Borders will be celebrating substantially.

I simply must explain that the process that we have gone through is the one that Jeremy Purvis's Liberal colleague put in place as Minister for Transport, with the three conditions to which we signed up and which we have implemented. Had a different political figure been standing here, the timetable would have been no different. There is no delay.

On how much money the Government is required to put in, I have told members that the overall cost of the project is in the range of £235 million to £295 million. I realise that members may have limited business experience, but I have told them that the moment that I state a specific figure, I compromise Transport Scotland's ability to get the best possible price for the project. Whatever else we might disagree on, we should surely agree that, when we spend public money, we must seek value for money. That means not tying our hands.

There is a clear set of parameters that shows the money that the Government will need to put in place. We will start the construction in the life of this Parliament.

Members: When?

Stewart Stevenson: That is when we will do it: in the life of this Parliament—in the life of this Parliament. [Interruption.] I can say it as often as members like; I realise that some people simply do not want to hear good news. We will start the project in the life of this Parliament.

On when the Government must start to make budgetary provision, to some extent, that is to do with our negotiations with whomever provides the project. Clearly, it will be at a stage when we are moving through the project, in the next comprehensive spending review period. Beyond what is already in the budget, no significant amount of money is required for something that the Parliament agreed to so recently—and so decisively, with only a single vote against the project.

The Presiding Officer: We move to questions from back benchers. As always, a large number of members wish to ask questions, but there is a limited amount of time available. Brevity, in both question and answer, is to be encouraged.

Christine Grahame (South of Scotland) (SNP): I remind the minister and the Presiding Officer that I led the first debate on the reinstatement of the Borders line as far back as November 1999. In 2000, having debated a motion from Alex Johnstone's Rural Affairs Committee, the Parliament voted unanimously for the line's reinstatement. It is a bit rich to hear Jeremy Purvis and Des McNulty asking us when we will start building the line when their parties had eight years in which to lay track. I welcome the end to the speculation.

At least security has now been brought to the local councils. There was wild speculation from Opposition parties represented here that—

The Presiding Officer: A question, please, Ms Grahame.

Christine Grahame: There was speculation that the railway line would not proceed. I welcome the ending of uncertainty for those whose homes have been blighted over the past eight years, when not one bit of track was laid.

Stewart Stevenson: I know that the councils will move forward with the project in partnership, and that they welcome the announcement. I am sure that Christine Grahame is absolutely correct to say that people living on the route will welcome the ending of the uncertainty that was created by the dithering and delay of the previous Administration.

Rhona Brankin (Midlothian) (Lab): I thank the minister for his statement—or should I say his non-statement?

The Parliament is aware that four of the seven proposed stations are in my constituency of Midlothian, which is a growing county; 5,000 new homes are planned for the Shawfair development alone. Together with the Borders, Midlothian remains the only mainland area that has no access to rail services. Why, after nearly a year, have we gone from having a completion date of 2011, as promised by the previous Labour and Liberal Democrat Executive, to not even having a definite start date, let alone a definite completion date? Will the minister explain that to my constituents?

The minister said that there would not be a single extra day's delay. By my calculation, there is now a delay of 912 days. Will the minister promise the people of Midlothian and the Borders that the funding will be put in place to complete the project? Will he undertake to return to the Parliament with a further statement, including a definite start date, a definite completion date and real detail about the funding mechanism and other funding details? Will he end the uncertainty that has been caused by this delay and his tardy statement?

Stewart Stevenson: I am pleased that Rhona Brankin welcomes the new stations in her constituency. She is wrong, however, in saying that it is the only mainland area without stations. My constituency has none, and I am not yet planning any. At least I am being fair to Rhona Brankin. I hope that she will be fair to me if I propose a plan for stations in Peterhead or Fraserburgh, for instance.

With the details that were contained in my statement, the Government seeks to be straightforward and unambiguous and to give certainty. Those people who have come to this place and to whom I have spoken before on the matter accept that I am doing that.

No part of the critical path for this project is related to the work that we have to do on funding—that is well off the critical path. We are using NPD, a model that is well established with Network Rail. That is exactly how the regulated asset base works. I realise that there might have been no intensive study of railway funding by members to my left or by some members to my right—I suggest that they go and see how railway funding works. The model is well established and we will proceed with it, whether with a regulated asset base or by another means.

Shirley-Anne Somerville (Lothians) (SNP): I welcome the minister's announcement, which is good news for not only the Borders and Midlothian but the city of Edinburgh. As the minister said, the project will have implications for the city in relation to transport infrastructure, for example. Is the minister confident that Waverley station will have the additional capacity to provide a regular commuter service that will meet the needs of residents and employers in Edinburgh, the Borders and Midlothian?

Stewart Stevenson: I am able absolutely to assure Shirley-Anne Somerville that we will have the necessary capacity at Waverley station. We are looking to run a half-hourly service. In undertaking the due diligence process, we have been able to identify a three-minute saving in the journey time, which will improve the quality of the service available to all the people who use the route.

Sarah Boyack (Edinburgh Central) (Lab): Will the minister still make a direct contribution to the project up front? In June 2007, he set a figure of £115 million. Is he capping his contribution at that level and leaving the rest to be paid over time by way of the business model that he suggested? Alternatively, is he taking the capping approach that he took with the City of Edinburgh Council on the tram project, whereby he set a cap up front and left all the rest of the money to be delivered by somebody else?

The statement did not clarify exactly how the funding regime will operate. What will the minister spend up front? Did he not let the cat out of the bag by using 2012 costings? Is he not admitting that the project will not be completed in his term of office and that there is a question mark over whether it will even start in his term of office, given the complex, novel approach that he is taking, which we have not seen before in relation to Scottish railways?

Stewart Stevenson: The only cap in the funding is on the councils' £30 million, which is one of the reasons why the councils welcome the approach that the Government is taking.

Sarah Boyack might have misunderstood totally the £500 million for trams. We have offered the City of Edinburgh Council a better deal than the previous Administration. We have not said that the £500 million, and no more, is for phase 1a; we have said that if the council can bring in phase 1a under £500 million—and the signs are that it can—it can keep the change for phase 1b. We have taken the message from Parliament on trams and we are providing the kind of support that the City of Edinburgh Council only dreamed of before, but which this Government is now delivering.

The Presiding Officer: I am keen that questions and answers should stick to the Borders rail link.

John Lamont (Roxburgh and Berwickshire) (Con): I thank the minister for his statement. I express my frustration that the project is not ambitious enough for the 21st century, in which we live. Why is there no freight capacity on the new railway? Why will the Government not give a commitment to connect the railway to Hawick, Carlisle and on to the west coast main line? Can the minister answer the questions from my constituents in the eastern Borders who will not use the railway to Galashiels? Will he give a commitment that he will consider reopening the Reston railway station on the east coast main line?

Stewart Stevenson: I will confine myself to matters of the Borders rail link in my response.

Mr John Lamont need not be frustrated. We would be delighted to have freight on this line, as on others. There are issues relating to timetabling for freight. However, we have provided generously that a third of the distance will be dualled, providing dynamic passing loops. That should provide the capacity to support freight traffic.

Taking the line to Carlisle would extend it by more than the distance of the line that we are building at the moment. I am a railway enthusiast and I would be interested to hear John Lamont's business case for extending the line to Carlisle. If it makes sense, I am entirely happy to incorporate it in a control period 5 submission, which this Government expects to make in its second period of office.

Alison McInnes (North East Scotland) (LD): If the minister wants to open a railway line to Ellon and Peterhead, I will stand beside him on that.

I echo the disappointment that members have expressed this afternoon. It seems to have taken a very long time to tell us very little. I do not detect a great deal of certainty in the minister's statement—as has been said, the key issue is that there is no clear start date. There are also questions around the proposed funding mechanism. I welcome the confirmation that the councils are making a fixed contribution, but I would be grateful if the minister would state unequivocally that he will fully meet the added costs. The support from the other partners is perhaps not enthusiastic, but pragmatic. When will the Government publish an agreement on the funding process? How can we hold it to account, on time and on cost, if the minister has not given us those details yet?

Stewart Stevenson: I say, once again, that we will start building the link in the life of this Parliament. People beyond the Parliament, as well as parliamentarians, will call the Government to account on that matter. Yes—of course, there are lots of people supporting it, pragmatically and enthusiastically. I am somewhat amazed at the synthetic alarm, concern and uncertainty that have been whipped up today by too many members in the chamber. We in Government have ended the uncertainty, given the certainty of funding, shown the way forward and ended the dithering; we will deliver on this vital project.

Robin Harper (Lothians) (Green): Despite the reservations that have been expressed, I am happy to broadly welcome today's announcement. The minister did not answer John Lamont's question on Hawick. Is there any good reason why the line should not eventually be extended to Hawick, given the needs of the town and that part of the Borders?

Stewart Stevenson: I sought to say—and I say once again to Mr Harper—that I am entirely happy to receive outline business cases for extending the railway network anywhere in Scotland. The railway network is a vital part of our transport infrastructure and will increasingly be so in the future. Members will recall that the national planning framework includes the aspiration that, by 2030, we will have electrified all Scotland's railways. If that is not a clear signal of the importance that we place on railway networks present and future, I cannot imagine what is.

Ian McKee (Lothians) (SNP): I congratulate the minister on his announcement, which he delivered with his characteristic degree of understatement. He told us about the benefit of the Borders rail project in getting people out of their cars and on to public transport. Does he have any information concerning any effect of this railway development on local bus services?

Stewart Stevenson: Ian McKee is right to raise the subject of bus services. Members will recall that the third of the conditions for moving forward on the project is that the new railways should be integrated with local bus services. We, as a Government, are working on through-ticketing proposals that will be of assistance in improving the co-ordination of various modes of travel throughout Scotland, so that people can get off one mode and on to another with minimum delay. As we progress the plans in the Borders—we have to work with the regional transport partnerships and with the local councils to deliver on this—we will ensure that that third condition is met and that bus services are an important part of taking the project forward.

Charlie Gordon (Glasgow Cathcart) (Lab): The minister announced that procurement of the project will take place via an NPD vehicle, which will be similar in its financial structure to Network Rail, but will not be Network Rail. Can we expect Network Rail to be supplanted, not only in the procurement of other rail projects, but in the operation of the infrastructure of the Borders rail link after its completion? In other words, is there a chance of the vertical reintegration of railway operations in Scotland?

Stewart Stevenson: Wow—that is a crackerjack question from Mr Gordon. At the current stage of the procurement process, I hope that Network Rail will come forward with proposals that make sense for the development. Of course, under the European procurement rules, we will have to consider proposals from elsewhere.

Reintegrating the rail network in the way in which Mr Gordon suggests might not be wholly within the gift of the powers of the Scottish Parliament, but it is perhaps worthy of note that there is considerable interest from people south of the border in how we are developing and supporting our rail network. That stands in contrast to the way in which they manage the rail network, which is on the basis of trying to minimise cost rather than delivering value.

Alex Johnstone (North East Scotland) (Con): I note with some satisfaction that the minister said that the Borders railway will move people

"from their cars on to ... fast, clean and reliable train services".

Will he give an undertaking that that hurdle will not preclude ScotRail from becoming the service operator? [Laughter.]

Stewart Stevenson: There are occasions when members allow humour, perhaps, to be deployed at the expense of appropriate descriptions of services.

ScotRail has made huge strides in the period for which it has been a franchise operator and it is looking forward to operating services on the Borders link. I am sure that we will continue to have a fruitful and productive relationship with ScotRail during the period of the franchise.

As a minister, I have now made more than 230 journeys by rail, almost all of which were by ScotRail, so I know from experience that when it is bad, it is no very good, but most of the time it is damn good.

Jim Hume (South of Scotland) (LD): Like my fellow Liberal Democrats, I will continue to campaign for the line to go through Hawick to Carlisle.

The minister mentioned accidents on the A7. Does he agree that the number of accidents on the A7 between Galashiels and Edinburgh would be reduced if the road was retrunked? Will he agree to retrunk that short piece of road?

Stewart Stevenson: I am cautious because of the reminder that you gave earlier, Presiding Officer, but I am even more cautious of making commitments on the hoof. Opening the Borders rail link will play an important part in relation to the issue of accidents on the A7, but it will not relieve us of the obligation to examine our road infrastructure as well.

Tricia Marwick (Central Fife) (SNP): As convener of the Waverley Railway (Scotland) Bill Committee, I welcome the SNP's commitment to ensuring that the project is built. I remind members that it was Tavish Scott who lodged the amendment at stage 3 that extended the period to develop the land by up to 10 years—in other words, until 2016. That amendment was supported by the Labour Party and the Liberal Democrats. Tavish Scott said:

"large-scale construction projects can be subject to delay."—[Official Report, 14 June 2006; c 26667.]

At that time, he was already anticipating that it could take until 2016 to build the project, so it ill behoves the Liberal Democrats and the Labour Party to whinge and complain about any delays in the project. [Interruption.]

The Presiding Officer: Order.

Tricia Marwick: My question to the minister is about developer contributions. Under the Waverley Railway (Scotland) Act 2006, developers of housing near the line of the Borders railway were to contribute to the cost of the project, but I did not hear the minister mention that. Will he elaborate?

Stewart Stevenson: We are indeed on track, as Ms Marwick says. I am grateful for her prodigious memory. I find it difficult to remember anything that Tavish Scott has said, but she clearly remembers everything. I congratulate her on that.

The £30 million that we envisage will come from the councils is predominantly developer contributions. That is why it is heartening to see Scottish Borders Council firmly engaged in delivering on the housing programme, which will be the source of such developer contributions.

Karen Gillon (Clydesdale) (Lab): For the avoidance of doubt, will the minister clarify why, if funding is not an issue, construction cannot begin before the end of the life of this Parliament? When will construction begin?

Stewart Stevenson: Construction will begin before the end of the life of this Parliament.

Peter Peacock (Highlands and Islands) (Lab): The minister seems to have announced that Government grant is now changing to somebody else's borrowing. Will he have to give borrowing powers to anybody for that purpose and, if so, to whom will he give them? Does he have the power to give those powers, and will the capital cost that will be borrowed count against the Scottish block?

Stewart Stevenson: It will not count against the Scottish block. The member is aware of the changes in international accounting rules, which will affect all public borrowing and how assets and borrowings are carried on Government balance sheets throughout the United Kingdom. That subject will affect us and, more fundamentally, the Westminster Administration; we will continue to engage in discussion on it to protect the Scottish interest.

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