Rural Economy and Connectivity Committee

Meeting date: Wednesday, February 19, 2020

Official Report 729KB pdf

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Budget Scrutiny 2020-21

We move to item 3, which is scrutiny of the Scottish Government’s budget for 2020-21. We have two sessions on the budget today. The first is with the Cabinet Secretary for Transport, Infrastructure and Connectivity on the issues relating to the budget that fall within his responsibilities. I welcome again the cabinet secretary, Michael Matheson, along with Lee Shedden, who is director of finance; Donald Morrison, who is head of asset management and procurement; Chris Wilcock, who is head of the ferries unit; and Lawrence Shackman, who is head of major rail projects and technical services, all from the Scottish Government. Cabinet secretary, do you want to make a brief opening statement?

I thank you for inviting me to give evidence on the budget as it relates to my portfolio. The overarching aim of my portfolio is to promote sustainable inclusive economic growth by providing the transport, energy and digital infrastructure and connectivity that communities need to deliver real economic and social benefits while protecting our climate and environment and improving the lives of people across urban, rural and island communities.

We recently published a new national transport strategy—NTS 2—which sets out the role of transport in reducing inequalities and taking climate action while helping to deliver inclusive economic growth and improving health and wellbeing. The strategy, along with the recommendations from the Infrastructure Commission for Scotland, will help to shape our future plans for transport infrastructure through our work on the second strategic transport projects review—STPR 2.

In addition to transport infrastructure, we are focusing on extending superfast broadband access; investing in mobile infrastructure; investing in low-carbon transport and promoting active travel; supporting economic development in cities and the regions; modernising Scotland’s energy system; tackling fuel poverty and improving energy efficiency; and supporting low-carbon energy transition. That is reflected in an additional £579 million of funding, which represents an increase of 20 per cent in the transport, infrastructure and connectivity budget from 2019-20.

Road maintenance to enable the safe operation of the motorway and trunk road network, on which the committee focused its pre-budget scrutiny, is an important priority for us. Additional funding has been allocated for routine and winter maintenance, network strengthening, structural repairs and the Forth and Tay bridges.

I highlight that 2020 will be a milestone year for digital connectivity in Scotland. We will continue to deploy digital infrastructure across the country through the digital Scotland superfast broadband programme, and we will also make progress with the reaching 100 per cent programme. We have increased our commitment to invest £85 million in active travel infrastructure and support, and we will begin to deliver on our commitment to invest £500 million in improved bus priority infrastructure to improve bus journey times while supporting greater investment in green buses. We will continue to invest in Scotland’s electric vehicle charging network and introduce low-emission zones in our four big cities. We will continue to provide concessionary travel for older and disabled people while supporting bus services with lower emissions and smart ticketing.

Our focus on making the best use of our existing infrastructure is reflected in the funding for capital maintenance and renewal of the trunk road and rail networks, and for Scottish Canals and Highlands and Islands Airports Ltd. We continue to invest in existing projects to improve our trunk road network and to increase resilience in response to unplanned events such as flooding and high winds. We will further enhance Scotland’s railways through the rolling programme of electrification, the redeployment of Glasgow Queen Street station and improvements to the routes between Aberdeen and Inverness and Inverness and Perth.

The 2020-21 budget for transport, infrastructure and connectivity provides significant additional funding for achieving a more inclusive and sustainable economy for Scotland. I look forward to responding to questions from the committee.

Thank you, cabinet secretary. The first question is from Colin Smyth.

I start with a question about the significant increase in rail payments to Abellio, Serco and Network Rail for the operation of the Scottish rail network. The explanation in the Scottish Parliament information centre’s level 4 budget spreadsheet states:

“Reflects profile of Caledonian Sleeper and Scotrail franchise payments following no rebasing announcement.”

How has the rebasing process increased the amount of funding that is going towards rail services?

We need to give the committee some more detail on the level 4 figures. The increases in funding for the ScotRail franchise and for the Caledonian sleeper franchise are both in line with the commitments that are set out in the respective franchise agreements. If revenue growth does not increase to the expected levels that were set out in the franchise agreements, we are required to provide further funding to the franchise provider. That is one of the challenges that the increase in funding has to address. Both those increases are in line with the contractual requirements that are set out in the franchise agreements. Lee Shedden might want to say a bit more about the specific nature of those requirements.

I can advise the committee that if rebasing had gone ahead, the numbers would be significantly greater than they are now. That was part of the reason why the no-rebasing decision was taken. The contract for the ScotRail franchise, which is the much larger of the two contracts, requires us to share in the revenue shortfall. That is limited as a result of the no-rebasing notice, so the contract will now end in 2022.

So there is nothing that is caused specifically by the rebasing notice; the situation would have been different had the rebasing gone ahead. How much more has gone to Abellio ScotRail, and to Serco and the Caledonian sleeper, as a result of the franchise commitments on revenue growth that you have just described?

I cannot give you the specific numbers as they are commercially confidential, but I can say that the bulk of the funding goes to Abellio because that is far and away the largest contract of the two.

There is an increase from somewhere in the region of £989 million to £1.25 billion. How much of that is to do with the franchise? Is there any other part?

Yes—if you look at the level 4 budget line, you will see that rail franchise is specified there. The Abellio ScotRail franchise is the significantly larger of the two franchises. The sleeper franchise works in a slightly different way, in that we are required to take a share of profit support rather than revenue support.

Can you clarify something? The funding is provided because the revenue for those companies was not as high as was projected. That is why you are making those additional payments to the companies—that is part of the franchise agreements.

That is correct.

And that is somewhere in the region of—I do not know—£300 million.

On the franchise line at level 4, you will see that the amount has increased overall from £416 million to £520 million.

With regard to the other payments that are required to make up the £1.25 billion, where does the increase come from?

If you look at the further level 4 line on rail infrastructure, you will see that there is an increase from £362 million to £529 million. That budget is for the operation, maintenance and renewal of the railway in Scotland as undertaken by Network Rail and as specified by the Office of Rail and Road.

Sorry—my question was not clear. I just want to know specifically what that money is being used for. The additional funding is going to Network Rail, but what is the breakdown?

It covers a variety of things such as maintenance and renewal programmes, infrastructure improvement programmes—

Sorry—I am not making myself clear. I know what the overall funding goes towards. I am trying to get my head around why it has suddenly gone up by X hundred million. What has changed?

That figure is part of the programme of work that Network Rail intends to take forward through control period 6. It reflects the ORR’s assessment of what should be allocated specifically to Network Rail for taking forward the work in the forthcoming financial year as part of what it has outlined for its control period 6. We do not specify that figure—the ORR does that.

The budget includes no new funding for Prestwick airport. When do you believe Prestwick will be in private sector ownership, which will mean that it will require no more funding from the taxpayer this year?

There are a couple of reasons for there being no new funding. Before I move on to the sale issue, I note that the management team at Prestwick airport has been making good progress in growing the business. We saw growth in several areas including cargo and fuel, and in returns from the use of assets around the site, which has reduced the losses that the airport has been making. The projection into the next financial year indicates that the airport does not require direct support from the Scottish Government to assist it. It has made good progress on generating income and sustaining the business, and that is reflected in the budget for next year.

With regard to the sale, we are happy with the progress that has been made in that area. The process is currently at a sensitive stage, so I am very limited in what I can say to the committee but, as things stand, good progress is being made. As I have said previously, I will keep Parliament up to date as soon as any decisions about the sale of the airport are finalised.

The budget line reflects the progress that the business has made over the past year and the projections into the next financial year.

10:15  

As I understand it, around £40 million of taxpayers’ money has been loaned to Prestwick. Is the loan part of the sale? Will any new purchaser in the private sector—whoever pitches successfully, as we hope will happen—take on that responsibility? Can you confirm that the £40 million will not be written off and that it is expected to come back to the taxpayer? When do you expect that to happen?

The amount outstanding is just under £40 million—it is around £39 million. Mr Rumbles is tempting me to get into a discussion of the sales process and where negotiations are with the preferred bidder for the airport. I can assure the committee that we will work to get the best deal for the taxpayer. That is the current approach of the Prestwick airport management team. I will not get drawn into a discussion about what the specific outcomes will be, because a deal has not yet been finalised.

We would all expect you to work on behalf of the taxpayer to get back the £40 million that the taxpayer has loaned—it is a loan, not a grant—to Prestwick airport. The Government will surely expect any new purchaser to honour the loan agreement and repay the money within a specified time. I understand that you do not want to go into the commercially confidential details, but it is clearly a matter of principle. Do you agree?

I will not get drawn into a discussion on where we are with the negotiations and the position that we are taking on any loans that are associated with Prestwick airport. I simply reiterate my earlier point: we will seek to get the best deal for the taxpayer in the circumstances as part of ensuring that Prestwick airport, given its importance to Scotland’s regional and national economy, is maintained as an aviation facility.

I can see that I am not going to get any further—

I can see that you are not going to get any further.

Mr Rumbles is tempting me, but he is not getting any more information.

I will bring in Jamie Greene.

I have a brief supplementary on a point of clarification. When we originally saw the draft budget, there was no line in there for Prestwick, so an assumption was made that perhaps a sale was pending—

That it had been sold? No.

For clarification, you are saying that there will be no public subsidy for the airport in the next financial year because it might remain in public ownership but it will not require a subsidy because it will be self-sustaining.

Yes, because of the progress that the business team has made in taking business forward.

Can you clarify that point? The figures that the committee has looked at in the past suggest that Prestwick airport costs about £8 million a year to run, which is about £650,000 a month. You are telling me that the team has clawed back all that money—£8 million in running costs—through increased fuel sales and increased use of the airport, so there will be no subsidy. I want to understand the situation, because £8 million seems to be an awful lot of money for a business to turn around in one year.

You will be aware that the airport has been reducing the overall level of subsidy that it requires from the taxpayer over the past couple of years as a result of the way in which it has been turning the business around. It has been able to drive up income in other areas—

So the airport does not need the £650,000 a month that it used last year—it has cut that out this year.

I would like to finish the point that I am trying to make. Give the trajectory that the business is on and where it is currently at, it believes that it does not require funding from the Scottish Government in the form of a loan to sustain it into the next financial year.

So the airport will break even or make a profit.

Whether it makes a profit will be determined, but at present the management team does not believe that the airport requires funding in the form of a loan for the next financial year.

That is a huge turnaround. The next question is from Angus MacDonald.

In the ferry services budget, there is an increase of £22 million, with increases in the contractual payments to CalMac and Serco. The largest single change—an increase of £19.6 million—concerns the voted loans for Caledonian Maritime Assets Ltd. There is also an £18.64 million reduction in piers and harbours grants due to the profile of grant investment. Voted loans to CMAL have increased effectively by 138 per cent between 2019-20 and 2020-21. Can you explain why that is?

The increase of £33.8 million in voted loans reflects the voted loan requirement for CMAL’s activities around the procurement and construction of the vessels that are currently with Ferguson Marine Engineering Ltd, and the plans for a new vessel for Islay. The voted loans reflect the required funding that it is anticipated that CMAL will need in the next financial year to meet the instalments that are associated with the existing contracts and with the plans to develop a new vessel for Islay. The principal money from the voted loans in respect of Ferguson Marine will be largely for vessel hulls 802 and 801.

It will be for any remaining payments that are due under the CMAL contract if particular milestones are reached. That is the purpose of the voted loans, and the increase reflects where it expects to get to in the forthcoming financial year in respect of both those elements.

There is a new Ferguson Marine budget line of £49.6 million for 2020-21. How much of that is to support the general running of the yard, and how much is to fund the completion of the MV Glen Sannox and hull 802? How do you expect that budget to develop over the coming years?

That budget line reflects the Government’s decision to provide additional finance for the purpose of completing the existing vessels at the Ferguson Marine yard, over and above what was provided for in the contract, which is paid for through the voted loans mechanism. The £49.6 million is the anticipated figure that is required as additional money to enable the continuation of the on-going work on both the vessels.

I cannot specify how much of that will be for the running of the yard and how much will be for the work that is undertaken on the vessels. That is largely because quite a bit of the costs associated with the work on the vessels is money that will also have to be used for the purpose of sustaining the yard. I cannot separate out those figures for you at this stage, but that is the additional funding that the Scottish Government is making available for the completion of the vessels, and part of it will help to sustain Ferguson Marine as a business to generate the income that it requires for the purpose of maintaining the yard.

Does Jamie Greene want to come in on that?

Yes—I would like to have those numbers clarified. There is a £50 million line in the budget for Ferguson Marine, and there is a £56 million line for vessels and piers, which is relatively flat in comparison with this year’s budget. There is a monthly running cost for keeping the yard under public ownership, but it is still unclear.

The committee has heard that the two vessels that the yard is building for CalMac—vessels 801 and 802—might cost around another £100 million to finish. With regard to the £50 million that you have allocated to Ferguson Marine, does what is left once we take away the annual operating costs and staffing costs contribute to the completion of vessels 801 and 802, or is there another line for that in the budget somewhere?

We know that the yard is also being funded directly through other Government directorates. How will the completion of the vessels will be funded? Is the funding in the budget line that I have described or in other lines?

There are two parts to that. The voted loans element is part of the contract that CMAL had with Ferguson Marine for the construction of both those vessels. We have agreed that the cost of those vessels will exceed what was set out in the contract. The additional £49 million that has been made available as a new funding stream this year reflects the additional costs that will be associated with the completion of that work.

There will be costs associated with that which are wrapped up in the running of the yard, such as paying staff and buying materials. It is not possible to say that X amount is purely for staff and materials and Y amount is for work on the ships, because the costs are all interlinked.

The committee will be aware that, as part of the governance arrangements that have to be put in place at the yard, work has already been undertaken to look at how that can be improved and how we can ensure that the governance arrangements give us greater insight into, and oversight of, what some of the costs may be going forward.

The figure in the budget that Jamie Greene highlights reflects the expected cost for the on-going work on the vessels, over and above the contract that CMAL has with Ferguson Marine, which includes a voted loans provision—

I guess the premise of my question is whether the Government is putting the money directly into the yard to finish the job or giving the money to CMAL to give to the yard to complete the contract that it has with Ferguson Marine.

No—the money will be paid directly from the Scottish Government to the yard itself. The money that is paid from CMAL is paid purely on the basis of the original contract and goes through the voted loans mechanism.

The committee carried out an extensive pre-budget inquiry into roads maintenance and made several recommendations. What changes to the budget for 2020-21 did you make in response to that scrutiny?

I was grateful for the committee’s scrutiny on roads maintenance, and we made several changes to our budget as a result of that. We have increased the funding for structural repairs and network strengthening on trunk roads and bridges by £7.5 million to £123 million for the forthcoming financial year. We have made additional provision for routine winter maintenance on trunk roads—the budget has increased by £2.6 million, which takes it up to £94.4 million. We have also increased by £15.8 million the funding for works to be undertaken on the Forth and Tay bridges, taking the figure to £37.3 million. That funding is to ensure that the essential repair and maintenance works that are required to be undertaken on the bridges are taken forward in the forthcoming financial year.

What impact will your budget plans for 2020-21 have on the condition of Scotland’s trunk roads and local roads? Some people say that local roads are deteriorating. Will the state of our roads, especially local roads, improve?

My budget provision is for the trunk road network rather than the local road network, which is managed through the local government settlement by local authorities. The budget should allow us to maintain a stable approach to the essential maintenance of the trunk road network and to continue our programme to enhance road safety at key points in the network for which Transport Scotland is responsible.

I have one last question. Given the priority that is attached to maintaining existing infrastructure in the Infrastructure Commission for Scotland’s report, “Phase 1: Key findings report—A blueprint for Scotland”, and in the new national transport strategy, can you explain how you arrived at the balance between investment in roads maintenance and investment in new roads as set out in the budget? John Finnie will love that question.

As the committee will be aware, the Infrastructure Commission said that our priority should be to maintain and improve existing trunk road assets and bridge assets, which are critical to transport connectivity. We have provided an increase in funding to do exactly that.

With regard to future investment priorities, the sustainable transport and sustainable investment hierarchies that we set out in the new national transport strategy will be used to shape the investment priorities that we set out in STPR 2, which is at an advanced stage and will be published next year, for transport investment over the next 10 to 20 years. That work will be informed by the various transport modes that STPR 2 covers and the sustainable transport and investment hierarchies that have been set out—

10:30  

Can politicians feed into that process?

The process for STPR 2?

Yes.

Yes—it is very much an open process. It has previously been taken forward at a national level, but this time round we are doing the work at a regional level—although it will reach a national stage at some point—to enable us to capture as much information as we can and engage with communities as much as possible. For example, the south-west Scotland strategic transport study, the results of which were published recently, involved an extensive public consultation exercise. There was an initial public consultation followed by a further consultation exercise; several thousand people—including politicians around this table, such as Emma Harper and Colin Smyth—participated in that process. There will be an opportunity, when the pre-appraisal process has been undertaken, for politicians at a local and national level to participate in the process.

I have the next group of questions. I thank you for your letter in response to the committee’s pre-budget scrutiny. In it, you say that future governance structures for the delivery of road maintenance will be considered by the national transport strategy roles and responsibilities group. Who is in that group?

The group is co-chaired by Transport Scotland and the Society of Local Authority Chief Executives and Senior Managers. It includes representatives from a range of organisations including the regional transport partnerships, the Society of Chief Officers of Transportation in Scotland and the Convention of Scottish Local Authorities. There is a range of stakeholders involved in considering any potential structural changes that may take place.

Perhaps you could flesh that out a wee bit in a written response to the committee. Are there other members of the group, or is that it?

I am not sure—perhaps Lee Shedden can tell me whether I have missed out any members.

No, you have covered the main members.

In the committee’s pre-budget scrutiny, we identified from the evidence that we took that there is a huge maintenance backlog on trunk roads and local roads. I listened carefully to your response to Richard Lyle in which you described all the work that would be scheduled for trunk roads, which was interesting. However, you did not mention the £1.8 billion backlog in local roads maintenance. How will you help local authorities with that? How do you respond to the question that the committee raised in its report?

As you will have seen from my response to the committee, the democratic process for deciding on what priorities should be at a local level for local roads is through local authorities and elected members. It is for them to determine the proportion of their budget that they wish to allocate for road maintenance and improvements.

You will be aware that in the draft budget for 2020-21, there is a 4.9 per cent cash increase for local government in local revenue day to day, which amounts to approximately £494 million. It is for local authorities, through the local government settlement, to determine how they wish to set their budgets for road maintenance and road improvements.

The evidence that we heard in our inquiry suggested that there was no increase in any budget for road maintenance. The Infrastructure Commission made it clear in its report that we have to look after the assets that we have before we start to expand on future assets. The work has to be done in conjunction—we cannot focus on one and ignore the other. Are you comfortable that the provision in the budget allows for the £1.8 billion backlog in local roads maintenance to be rectified? I have not yet heard from any council that it does so.

In my budget or in the local government budget?

Well—the transport budget. Do you feel that the repair of local roads is covered in the budget?

My budget does not cover local roads.

Okay, so you are not interested in local roads and the maintenance of them.

No, that is not what I said. What I said is that my budget does not cover the local government settlement for local roads. The way in which—

Okay. Let me try one—

No, because you characterise what I am saying as if I do not care, when I do care. Funding for local government comes through the local government portfolio and is allocated to local authorities to determine how they choose to use it for their priorities through democratically elected local members. It does not come through my portfolio.

Let me phrase the question differently. The committee made it clear that we had heard that there was a £1.8 billion backlog in local roads maintenance. Did you make representations to the Cabinet Secretary for Finance that that money should be made available so that local roads can be maintained?

Responsibility for local roads rests with local authorities. If representation on that matter was made, I would expect it to come from local authorities, given that local roads are their responsibility.

So the answer is that, as you expect local authorities to do that, you did not do it.

No, hold on—do not put inaccurate words in my mouth, convener. Let us be clear about what the process is. The process for deciding what maintenance and improvement work is carried out on local authorities’ roads rests with local authorities. Several committee members have previously been members of local authorities. That is the responsibility of local authority members: they decide what the allocation should be. My budget does not provide for local roads—historically, it never has done.

Do we all wish to see improvements to local roads or indeed to any roads? Of course we do. However, we have to manage in very difficult financial circumstances as a result of the reductions to our block grant by the UK Government. In addition, we have experienced challenges since 2010 due to austerity being imposed by the UK Government, which has had an impact on the Scottish Government’s budget and on local authorities’ budgets.

We seek to give local authorities as fair a settlement as we can. That has historically been our approach, and the current budget settlement reflects that. If you think that additional funding should be provided for local roads, it would have to be provided through the local government settlement. As a member of the party that has been systematically cutting our budget since 2010, convener—

Now, Mr Matheson—

You would have to identify exactly which budget you wanted to see cut in order to put more money into budgets for local roads.

Michael, I was making a point. There is no point in smiling at me—

Well—

Mr Matheson, you listen to me—I have listened carefully to you. In fairness, I point out that I asked you a question about the committee’s report, in which we identified from the evidence that we were given that there was a shortfall of £1.8 billion. I was trying to identify where that money was going to come from, given the fact that the call for it to be made available was supported by the Infrastructure Commission—

No, that is a mischaracterisation of what was said.

I am sorry, but I think we have got as far as we can on that. I would like to ask one further question. In your written response to the committee, you made it clear that the sustainability, inspection and repair duties that are placed on trunk road operating companies will be made more stringent in the next round of contracts. Can you indicate briefly how you intend to do that?

Of course. One of my officials is probably best placed to give you an idea. There are going to be some changes to the key performance indicator process, to ensure that there is a greater focus on the quality of work.

I ask you to be brief, if possible.

We have introduced a number of improvements to our trunk road operating company contracts. The first round of those contracts will start in August this year and will cover the south of Scotland. A new performance management regime has been introduced, and we will monitor throughout the duration of the contracts a number of indicators that relate to repair timescales; repairs being completed on time; inspections being completed on time; various cyclical maintenance duties; the efficiency of winter treatments; responses to customer correspondence and complaints, and the response process being completed on time; and new targets on carbon emissions and waste management.

Those indicators have been written into the contracts, and performance will be monitored over time. When operators fall short of any of the targets, payment adjustment factors will apply under the contract. In effect, the new requirements are incentivised through the contracts in respect of a number of those factors, of which there are 32 in total—I have given you just a flavour of the ones that have been introduced.

I will highlight one significant programme of work that we have taken forward. We have been converting all our lighting stock on the trunk road network from traditional lighting to LED lighting, and the conversion programme has produced significant financial benefits for us. Three or four years ago, we were spending about £5 million on the electricity bill for trunk road lighting, whereas, in the current year, the bill has dropped to £3.5 million. The drop in cost is down to the fact that we are using far less electricity, which has also had an impact on our emissions. The programme has been quite successful, and it will continue with the budget that has been made available in the coming year until it has been completed.

The next group of questions will come from Emma Harper.

I am interested in a couple of areas. I thank the cabinet secretary for mentioning south-west Scotland, as it saves my doing so. I know that he is aware of how important those roads are for all of us in the south-west. Perhaps he can explain how the balance of expenditure in the transport budget and the capital investment plans, in particular, support the policies that are set out in the new national transport strategy and the Infrastructure Commission’s recommendation—which we heard about last week—that we should maintain and improve existing assets.

The Infrastructure Commission’s report recommended that, prior to thinking about building or creating new assets, we should look to make the best use of our existing assets. That was reflected in my earlier comments on the increased funding that we are making available for trunk road maintenance, in addition to funding for the winter maintenance programme and the major structures programme in respect of the Forth and Tay crossings. All those decisions are about maintaining and protecting existing assets and ensuring that they continue to serve their intended purpose.

With regard to future investment decisions and major capital priorities for transport, those will—as we set out in the new national transport strategy—be informed by the investment hierarchy that the strategy sets out, which will be reflected in STPR 2 when it is published. We are undertaking a major piece of work to look at all modes of transport across Scotland, which will be covered by STPR 2. All those elements will be picked up in the investment hierarchy that has been set out in the national transport strategy when STPR 2 is published, next year.

The budget highlights that £500 million will be invested in bus priority measures

“over the next few years”.

What do you mean by “the next few years”? Can you define the timescale a bit more accurately and give examples of projects that will be funded through that budget line?

Sure. The £500 million bus partnership scheme is about ensuring that we give greater prioritisation to public transport in urban areas, in particular, where we know that there is an opportunity to make a real difference through bus prioritisation. That will also benefit rural communities, as we will see growth in bus usage overall.

You asked me to define “the next few years”. Part of the challenge in taking this policy forward is that local authorities need to develop proposals and programmes to make use of the capital investment. It will take some local authorities a couple of years to develop a programme to the point at which they will start, quite literally, to put spades in the ground. That might take place at any time over the next five or six years, given the time that will be needed to develop, plan and execute each programme, and the funding will be gradually ramped up as those proposals are approved and begin to be developed.

There is £10 million in the budget line this year that reflects some of the initial work that has been done by local authorities in developing their ideas, which also aims to support their development work around bus prioritisation and what that will look like. It is about not simply digging up roads or replacing existing car road space with public transport, but ensuring that the programmes align with active travel investment. We will look at how bus prioritisation measures can be aligned with active travel provision and at the wider bus service improvement partnership arrangements plan for the area where the investment will be made.

As I have said to local authorities, I am clear that the funding will be available not purely to make bus journeys faster and more reliable, thereby increasing passenger numbers, which we want to do, but to improve bus services across an area. Part of the work will involve taking forward bus service improvement partnerships with local bus service providers alongside infrastructure investment to ensure that each programme delivers a much wider benefit to the area that is served by the bus services rather than only a corridor or the areas where bus prioritisation measures will be put in place.

Colin Smyth wants to come in on that.

10:45  

I want to be clear on one point. Of the £500 million that you mentioned, there is £10 million in this year’s budget for bus prioritisation measures—that is obviously capital funding. The Transport (Scotland) Act 2019 gives local authorities powers to establish their own bus companies. Is there any provision in the budget to support that aspect of the 2019 act?

Crucially, how does the budget that has been set tackle the fundamental issue of the loss of bus services in rural areas? That is to do with not a lack of capital projects—there are only so many places in a rural village where you can build a bus lane—but revenue pressures on bus services, and it will not go away simply as a result of bus prioritisation measures.

I recognise the challenges to the provision of local bus services in rural areas, in particular, given the reduction in services that we have seen. We have maintained our commitment to support the bus industry through the bus service operators grant and the funding that we are providing to support companies to move to low-carbon buses.

You are right about the revenue element, but part of the idea behind using the capital element for bus prioritisation arrangements is that bus improvement plans will be implemented in areas where that type of capital investment is being made. We do not expect the taxpayer to provide half a billion pounds for bus prioritisation without also placing an expectation on the bus industry to come to the table to demonstrate how it will improve bus services in the area as a result of that investment. I have been very clear with the bus industry and local authorities about that. They welcome that approach and are prepared to work with us in that regard.

On your initial point about whether there is provision in the budget to give local authorities funding to set up their own bus services, there is no provision for that purpose.

The next question is from John Finnie.

I will pick up on the comments of my colleague Colin Smyth. The bus priority measures that most of my constituents want involve having a bus service at all, never mind infrastructure support.

I want to ask about the active travel budget. It is fair to record that it has increased by 2.25 per cent—a relatively modest sum—since 2018-19. However, as a proportion of the total transport budget, the amount has decreased in successive years. Do you consider that to be an appropriate response from a Government that has declared a climate emergency?

The budget doubled in 2018-19, and we have sustained that provision and increased it by a further £5 million in this financial year. Since 2018-19, there has been a very significant increase in funding for active travel.

I acknowledged that there has been a 2.5 per cent increase, but, as a proportion of the overall budget, the funding in that area has decreased in successive years.

Are you—

I am happy to dig out the figures that I have if it helps, cabinet secretary. I am just summarising the situation—

All that I am saying is that the budget has increased—it doubled in 2018-19 and it is increasing again. We sustained that funding in the 2019-20 budget, and we are increasing it again in the 2020-21 budget.

I presume that you thought that it was a very good idea to double the amount from an extremely modest sum to a relatively modest sum. Notwithstanding that, the funding has, as a proportion of the overall transport budget, decreased in successive years. That is not the response that I would expect from a Government that has declared a climate emergency.

Given that we have, in effect, doubled the budget over the past couple of years, it would be wrong to say that we do not recognise the value and importance of active travel. With regard to how that funding compares with other parts of the budget, most of the capital investment, which is currently going into road projects, is focused on maintenance and existing improvement programmes such as the works on the A9 and the A96.

I can perhaps help John Finnie on the question of the increase. Has the budget—all the money that has been allocated—been spent each year? That might help Mr Finnie to understand whether the increase is bigger or maybe not so big.

Again, some of the projects involve local authorities working up proposals and taking them forward. Over the past year, more than £70 million of projects were in delivery. An element of the budget is used for behavioural change programmes and for cycling and other active travel programmes. My understanding is that, over the past year, most of it has been used for the programmes for which it was intended. Perhaps Lee Shedden can confirm that.

That is correct. To answer the convener’s specific question, most of the money has been spent, although, when the budget was first doubled, from £40 million to £80 million, there was a considerable challenge in ramping up the activity that was required.

Cabinet secretary, do you think that people will, in the future, reflect on the fact that, although the Government has declared a climate emergency, it has committed to an extensive road building programme of £6 million and a decreasing proportion of its budget is directed to active travel? That is completely inconsistent with the declaration of a climate emergency.

No, I do not accept that. I have made it clear that we are taking forward a range of measures, not just in my portfolio but across Government, to meet our net zero obligations. More such measures will be taken forward, as members will see when the climate change plan is published. The investment hierarchy and the sustainable transport hierarchy that are set out in the new national transport strategy will inform our decisions for new projects and policies around transport provision. That, in itself, is a clear indication of where the Government’s priorities will lie in years to come.

Having said that, issues such as the need to ensure that we continue to improve our road connectivity will not disappear as a result of the climate change challenge that we face. An example is the safety issues on the A9. We know that dualling that road will assist us considerably in dealing with those issues.

Can you describe those safety issues? I understand that they have all been designed out: there is an increased speed limit for heavy goods vehicles, and safety cameras are in place. It is my understanding, and I accept, that the current position is that any collision is the result of irresponsible driver behaviour. Are you saying that that is not the case?

In the long term, the road will be safer as a result of the dualling programme that is being taken forward. There are also safety issues and concerns around the A96, which are often raised with me as an example of the challenges on the existing road network.

There will still be a need to improve our road connectivity, but, at the same time, we are looking to increase the use of public transport, to encourage people to use active travel and to encourage those who use vehicles to move to ultra-low-emission vehicles to reduce their impact on the environment. A whole suite of measures has to be taken to address those issues, and we have sought to achieve a balance in that regard. For example, we are providing a significant increase in funding to improve rail infrastructure in order to make rail travel a more attractive proposition. All of that contributes to supporting people to use public transport and assist us in meeting our climate change challenge.

John Finnie does not seem to be persuaded.

Any investment in rail is to be welcomed. I will give you the opportunity to outline to the committee a breakdown of the programmes that are being funded through the future transport fund.

The future transport fund covers a range of different areas. It is currently at a record level of £83 million, which is planned for investment in the 2020-21 budget. Some of the figures are not finalised, but I will give you the broad figures for the various areas that it will cover.

There is £40 million for fleet transformation, for the switched on towns and cities programme to increase electric vehicle charging provision, and for sector transition. There is £10 million for zero-emission bus investment and infrastructure to support that, and there is £6 million for the Scottish ultra-low-emission bus scheme, which was announced just last week, on 13 February. Do you want me to continue with the rest of the detail?

It is a lengthy list, and I am sure that we can all access the information. I have a specific question on the Scottish ultra-low-emission bus scheme, for which you gave a figure of £6 million. How many electric buses will that buy next year?

The scheme has been opened up to enable bus operators to apply for funding from it. The numbers will depend on the number of bus operators who apply to the scheme and the number of buses that they seek to purchase through it.

What is your impact assessment of that proposal? What numbers do you suggest will be delivered?

It is difficult to give a specific figure, because it depends on—

How did you arrive at the figure for the funding of low-emission buses if you did not know how many would be delivered?

Part of the funding is to help with the transition to low-emission zones—it can be used to support bus companies to move towards ultra-low-emission vehicles. The number of buses is likely to be in the 20s or 30s rather than the hundreds, but the actual figure will depend on how many bus companies apply to and secure funding from the fund, as well as on how many buses they are looking to purchase at any given time. The funding does not buy all the buses for those companies—it covers a proportion of the cost, to meet the cost differential in buying an Arriva electric bus rather than a Euro 6 diesel engine bus.

Members have some brief follow-up questions. We will start with Richard Lyle.

Given all the questions that the cabinet secretary has been asked in the past hour or so, and all the criticism that he has faced, this has to be asked. Cabinet secretary, do you intend to inform the Scottish public about exactly what the Government subsidises and how much it costs to subsidise our roads, buses, rail network and ferries? People do not know what the Government pays for. They know what they are paying for, but perhaps we can tell the public how much we subsidise their travel in this country.

I am more than happy to take your suggestion away and look at how we can maybe explain more fully how the budget is used for—

Then people will know that you are supporting them.

We can look at setting out more clearly how we are helping to support rail and bus travel, and road and rail infrastructure. By and large, however, the budget, which amounts to £3 billion of revenue and capital funding over the next year, is all about addressing the issues that I highlighted at the start—

The Government is really subsiding transport by £3 billion.

We will park that there, Mr Lyle. Two members still want to come in and we have about three minutes left—that is the timeframe.

I am sure that people are over the moon that the cabinet secretary is subsidising all their public transport needs.

I have a couple of specific questions, cabinet secretary. You can respond to them in writing if you do not have time to answer them today. Two matters of concern jumped out at me from the transport budget. One is the reduction in the budget for regional transport partnerships, which has gone down significantly. Will you explain the reason for that and comment on the effect that it might have?

Secondly, given that we are trying to get people out of their cars and increase modal shift, why has the budget line for support for bus services gone down? I accept that the concessionary travel budget has gone up, but perhaps you can explain that to the committee at some point.

I am more than happy to come back with specific details on those points if it would be helpful.

Thank you—a written response would be helpful. The final question is from Peter Chapman.

I want to follow on from what John Finnie said and ask about the hydrogen bus scheme in Aberdeen, which is under financial pressure. Are there any thoughts on how the Scottish Government can help to keep that scheme running?

That sounds like a constituency question, so you may wish to—

It is a fairly general question. We have discussed electric buses, and hydrogen buses are part of the same issue.

The ultra-low-emission bus scheme, which is for the purchasing of new buses, aims to support the industry to move towards ultra-low-emission vehicles. Given the cost differential between those buses and standard Euro 6 diesel buses, the fund aims to meet some of the costs in order to support companies in that transition.

In fairness, if Peter Chapman wants to give me more details about the specific issue in Aberdeen—I do not know whether it is a Scottish Government issue or a local government issue—I will be happy to give him as helpful a response as I can.

Mr Chapman, I suggest that you take up that constituency point with the cabinet secretary after the meeting.

I will do so, convener.

I have one last question. The low-carbon transport loan fund increases by £35 million in the budget. Have you conducted an analysis of who benefits from that fund? There is an assumption that, in effect, it subsidises those who are already well off to buy relatively expensive electric vehicles.

It is an important scheme to support people to move towards low-emission vehicles given that they are more costly than normal combustion-engine vehicles. I share some of the concern that those on lower incomes might not be able to afford an ultra-low-emission vehicle, even by securing a loan. I changed the terms of the scheme last year so it can now be used for second-hand vehicles. I believe that it is the only scheme of its type in the UK that allows second-hand vehicles to be purchased in order to help people on lower incomes who may want to secure a loan to buy such a vehicle.

I am clear about the need to ensure that we do not leave people behind as the transition takes place. We have also provided about £1 million to social housing providers to allow them to develop electric car clubs so that their tenants can make use of a hub of electric cars at a very low cost. That scheme, which I launched last year in Bridgeton with the local housing association, helps to support people who are on lower incomes who wish to have access to a low-emission vehicle.

Peter Chapman is right to make the point that we need to be careful that we do not allow people to be locked out of the process because of their income group and that we must ensure that we arrange the schemes in such a way that we help to accommodate people and meet their needs. I have given a couple of examples of actions that we have taken in the past year alone to make sure that we do that.

We have come to the end of our questions. I thank the cabinet secretary and the other panel members for their attendance.

11:03 Meeting suspended.  

11:10 On resuming—