Official Report 503KB pdf
Agenda item 2 is evidence from witnesses on the Scottish Government’s draft budget 2014-15, as part of the committee’s scrutiny process. Today there will be two panels: one on transport, followed by one on housing.
Transport is a significant contributor to the Scottish Government’s purpose and purpose targets, and to a range of national outcomes and indicators, which are contained in the national performance framework. What is your general view of the framework ? How well does transport do in impacting on and influencing the measures and targets?
I am happy to kick off. SCOTS is very familiar with the target-based approach across all the member authorities, so the manner in which this session is to be conducted is entirely appropriate.
I think that it is correct to use the performance indicators in the national performance framework to manage and measure the various areas that are set out in the framework. In general, the bus industry is trying to contribute across the different areas, but there is a challenge in that a target for traffic congestion that is set at the national level might not always find its way down to the local areas that bus operators have to operate within. However, in general, without having indicators and measures, they manage the issue as well as they can. It is a good system and progress is being made, but the connectivity to local policies is sometimes questionable.
The overall purpose of the Scottish Government is defined as being to raise the level of sustainable economic growth. Do you think that the way in which the purpose targets are set out, with all the various measures, is appropriate for the transport sector? Do you see the transport sector being given an appropriate role to play within the overall purpose? That is what I am driving at in my questions. Does Phil Flanders or John Lauder want to comment on that?
I agree with Ewan Wallace’s and George Mair’s general comments. Some areas of economic growth have popped up since the indicators were written and agreed. In my area, which is walking and cycling, we know more about the income that is being generated for Scotland from those leisure activities and from people commuting to work by bike than we knew when the indicators were written. If it were possible, that might need to be woven in a bit more.
We are very happy with the way in which the targets have been set, and we are happy to contribute to meeting them. We could always do with more money, but we know the constraints that exist. Because the targets are measurable, we can hold people to account if they do not deliver. It is a case of so far, so good.
Let us move on to capital projects. The Scottish Government has an infrastructure investment plan that sets out the medium to long-term capital investment projects across all Scottish Government budgets as well as a national transport strategy and a strategic transport projects review. What is your view of the prioritisation of capital projects in general, and transport projects in particular, within that strategic framework?
We have been very supportive of the Government’s plans for the new Forth crossing, the dualling of the A9 and A96 and the Aberdeen ring road. Certain other roads are not up to the high standard that they should be at, but the Government has prioritised the roads that it feels need to be addressed. There are a lot of concerns about the roads to the Western Isles. After an incident last week, the main route was closed again. Perhaps some money should be set aside to ensure that it can be kept open and to upgrade it a bit sooner than is planned. It is the sort of thing that we do not know about until it happens, but the A83 and A82 are very important routes and it is important that we keep them in the best possible condition.
For our part, there is too great an emphasis on investment in roads, which is counterproductive as far as the aim of reducing carbon emissions and tackling congestion is concerned. The budget for tackling congestion, particularly in the urban realm—a lot of which is controlled by local authorities—is constrained. The budget that we manage on behalf of Transport Scotland is extremely small, but the benefit to cost ratios of enabling people to live more active lives and to make short trips by walking or cycling rather than by taking the motor car are extremely high. In our view, there is an imbalance in the budget. I do not think that it provides enough investment in walking and cycling infrastructure. Hardly any money is spent on soft measures, which are interactions that explain to people how to use infrastructure and what the benefits are of walking and cycling more. A tiny amount of money is invested in that.
Some of my colleagues will explore the active travel agenda later on.
I agree with the points that Phil Flanders and John Lauder made, particularly the comments about the Forth crossing. There is also the fastlink project in Glasgow. However, having read through the document, I am not quite sure that I can see other investment being channelled towards bus projects. I see plenty of investment in rail. You might expect someone from the bus industry to say that, but it is difficult to see where bus projects might come through.
I agree with the comments of all my colleagues.
I have a concern that “strategic” can sometimes just mean “new”, as opposed to what is genuinely nationally strategic. Maintenance, for example, is strategic, and it is really important. Ewan Wallace is right—things move on, and new things come along. It might be time to review, although I do not know about that—I do not wish to drag us all into a major review.
Is there something in the system that requires to be altered? Are you suggesting that there is a lack of flexibility or of lightness on the feet that needs to be addressed?
There could be. A good example is the national planning framework 3, which is now going through. It has been out for consultation. A view has been taken that, in our field, the national cycle network, the canal network and the long-distance walking networks should be national planning priorities. That has happened since we set up the strategic transport projects review. It would be good to have a quick look at the strategic transport projects review and add it in with what is happening with the national planning framework. The two are leapfrogging each other, but it would be better if they were brought together.
It has been some years now since the NTS was published. I seem to recall that there was an intention at one point to do a refresh, although that was deferred. It might be time to have a look at it again and to take on board some of the things that have changed in the intervening time, as well as considering the stuff that is coming through.
On your question whether there is something in the system that requires to be changed, Mr Ingram, I emphasise that the STPR was a first. Such a review had not really been done before on the scale on which it was undertaken. A lot of time and effort was put in. Ultimately, it was welcomed by everybody, but we always knew that it was the start, as opposed to saying, “That’s it,” putting it to one side and moving on to doing only the implementation.
As you know, all major transport projects should have a Scottish transport appraisal guidance study completed pre-project, plus a strategic environmental assessment. What is your opinion on STAG and SEA analyses as a means of prioritising expenditure within the transport budget?
Everyone is looking at me to answer that.
I am too, Ewan.
I declare an interest at this point. In the day job, I was involved in using STAG for the first time. I would not say that it was used as a tool for prioritisation of expenditure, but it certainly identified the best options for solving particular transport problems, which is very much what it has been utilised for.
I agree with Ewan Wallace from the technical point of view, given how technicians such as Ewan lead their teams through assessment of projects. I am just not convinced that the outcome of the appraisal makes much difference. It seems that big projects take on a life of their own and that once it has been decided that something will be built, it is built. I am not aware of projects being dropped because the outcome of the appraisal was so poor. I am not sure that the STAG process is used strategically to assess which projects are the best and which should not be pursued.
Can you give an example of a project that you thought should not go ahead because the appraisals showed that it was poor?
The benefit to cost ratios are quite low on most major schemes, so I wonder whether other factors are brought to bear. However, I cannot give an absolute example.
When I did the background work on this, I wondered whether developer contributions are a significant aspect in some projects. Do they skew the process?
In my experience, they do not. We need to consider the point at which such financial aspects kick in and how the appraisal guidance deals with the economics of schemes. I have not seen many projects come through the process that have such things built in from the start. That is unusual. Such projects would be predicated on the idea that they will go through the statutory processes and would be linked to things that might not even be in a local development plan yet. Developer contributions tend to be a windfall at a later point in projects.
When we had a housing or property development boom, developer gain was a really good way for local authorities to bring in extra funding for the small schemes—of £0.5 million and less—that we help to fund. That funding seems to have almost dried up, but funding has been found from other places. As Ewan Wallace said, developer gain is a kind of bonus or added extra, but it is not something that authorities can depend on.
I agree with Ewan Wallace that we need to look at the wider benefits that transport projects can deliver. For example, there is a growing realisation that the concessionary bus travel scheme, which allows people to make journeys to meet people and to socialise, provides wider economic benefits. Even if people travel up to Ullapool and have a cup of tea there, that provides an economic benefit. In refreshing the models, those issues need to be considered as part of the mix.
Following on from John Lauder’s point, is there evidence that post-project appraisal of the economic, social and environmental impacts, particularly of major road projects, is routinely carried out so as to inform future decision making?
I have not been involved in that, but one would hope that, if large sums of money are being spent on big projects, an evaluation is done to check whether the benefits have been delivered in the widest possible context. If that is not happening, it certainly should be.
I am not aware of that, but that is not to say that it does not happen.
There is a requirement within STAG to go back and do those evaluations, although I would need to check with colleagues how many have been done. I am certainly aware that in smaller schemes a road safety evaluation is routinely carried out, whereby people go back in to determine what the impact and benefit to cost ratio of the intervention was. That kind of loop is routinely utilised within the road safety sphere, but I would need to check how many other evaluations have been done elsewhere on some of the bigger schemes.
Mary Fee has a question about some specific national indicators.
Transport has a major role in both climate change targets—to reduce emissions and to reduce our carbon footprint—but is only one of a number of policy areas that contribute to them. A future transport fund has been created to help to reduce environmental impacts. To what extent are those environmental objectives being strategically managed across all policies? Is the transport budget being deployed in the most appropriate strategic manner in order to deliver them?
As I have already said, the budget has too great an emphasis on road building, which I think compromises the carbon reduction aim.
I agree with a number of points that John Lauder made. The bus industry welcomes the Government’s investment to assist with the purchase of new greener vehicles, and we hope that such investment will continue. However, as well as money to help to finance the purchase of the vehicle, there is the on-going running cost, part of which comes through the bus service operators grant, which is paid to the operator. A low-carbon vehicle qualifies for double the prevailing rate. The danger is that a flat budget line is, in effect, a budget cut, so the attractiveness of investing in new technology diminishes. There is a dichotomy; we welcome the money that the Government puts into buying vehicles, but in terms of on-going running costs, the budget is reducing in real terms.
It is interesting that the allocation for the future transport fund is for things such as electric low-carbon vehicles and green buses, freight modal shift and cycling and walking initiatives. Operators and individual local authorities are probably trying to bring forward elements of all those things, with a view to reducing operating costs, benefiting their town and city centres and so on. The increase in the fund from £7 million to more than £18 million is significant, but we need to get a handle on how much operators and local authorities in the wider sector are investing off their own bats, if we are to get a sense of how much money is going into the area.
We do not get any Government funding because of state-aid regulations, but we work closely with the Scottish Government on the freight best practice programme. Going back about 10 years, there was Scottish Government investment in driver training—we managed to achieve a 10 per cent reduction in fuel consumption. That has now been rolled out across the industry and it is part of the driver’s CPC. Funding to help encourage people to do more safe and fuel-efficient driving would be very welcome. Overall, the hauliers know that there is an issue. They do not want to run around empty; they want to keep everything as tight as possible. Fuel accounts for about 40 per cent of their costs and when you get to about—
What is the driver’s CPC?
It is the driver’s certificate of professional competence. New European legislation sets out that all drivers must have training within a five-year period.
In September, the Scottish Government announced its road map, which sets out its vision for 2050, when town centres, cities and communities will be free from the damaging effects of petrol and diesel. Is that an achievable target, given how the budgets are set out, or does there need to be a separate budget allocation to enable hauliers, bus companies and transport people to purchase the vehicles that would achieve that?
I think that a separate budget allocation would be helpful. If you take the airline industry as an example, the new Dreamliner is the most fuel-efficient airliner—and the quietest. That technology may eventually feed down into road vehicles. New technologies are coming along all the time. They say that a week is a long time in politics—36 years is a long time as far as technology for vehicles is concerned. I hope that by 2050, technology will have advanced enough to allow lorries—even the great big ones—to be either hybrids or electric. It is important that we try our best for the city centres and I know that no haulier wants to come into a city centre unless they really have to.
Is there appetite among the hauliers to make what is almost a sea change in switching to those types of vehicles?
The big problem is that the first haulier that makes the change will not be able to command extra revenue for the job. If it costs £200 to do a load, that is all the haulier will get because if he puts his price up, the customer will give the job to somebody else. No matter how green the customers are, they are finding it tight as well and always have done, and they tend to go for the lowest price.
Fuel is a major element of the costs that operators face in the bus industry. Operators are already adopting different technologies to improve the bus fleet’s performance, and some of that has been done with help from the Scottish Government. If we aspire to meet the target that has been mentioned, it will be achieved only if we as an industry work together with the Government and local authorities.
On alternative fuel technology, whether we are looking at rolling out electric vehicles, hydrogen vehicles, gas power or whatever, there is a lot of best practice in a number of projects throughout Scotland, the UK, Europe and beyond. It is clear that local authorities have tapped into that, and the Scottish Government has done some work. There is a crucial co-ordination role to ensure that we do not land up in a VHS and Betamax-type situation with the technology. Public money is involved, and a lot could be invested in backing the wrong horse. There is a bit of work for all the constituent authorities that are involved to move forward.
There cannot be a one-off cost; costs have to be sustained over the years.
Absolutely.
I will ask a bit more about journeys to work by public or active transport. The national indicator that reflects them has a flat trend. Additional funding has been allocated to cycling in the next two years—that was touched on in previous answers. Are the wrong interventions being pursued? Is the investment in the right place? Are the public, private and third sectors all engaged?
How long have you got? [Laughter.] As you do not have long, I will try to be as concise as I can be.
Does behaviour change have a drip-drip effect on targets? The effect of behaviour change on the achievement of a target is not immediate. Is the fact that it brings about long-term change one reason why not enough focus is put on it?
That is an issue. I have spoken to elected members who have said, “It’s all very well, John, for you to talk about a benefit to cost ratio for health, but that is years down the line. We are in a tight spot. The issue is where we are financially.” I take that argument on board. However, I can only think that investment in cycling makes a great deal of sense as preventative spend, particularly given the modest amount that requires to be put in compared with the really good benefits that can be generated.
I agree with that. About a year ago, Transport Scotland did a piece of work that looked at projects in different areas of Scotland that informed people about the choices that they had on how they could travel. The clear answer was that such projects work. They can have a slow build-up, but they work.
It is skewed in the wrong direction.
Yes.
Does anyone else want to add anything?
I will add a comment on the private sector’s role in encouraging a shift to more efficient and active forms of travel—or even travelling less. A critical aspect is making the case to businesses on what they can achieve for their employees through making them healthier by giving them more time for their journey to and from the workplace in a less stressful environment. Work has been done on that, although it has been constrained by the budgets that local authorities have allocated to it. Regional transport partnerships are strong on the issue and want to do more on it. I would support more being done to target the effective interventions that the private sector can provide through support in kind and in cash.
Ewan Wallace mentioned that road safety improvements have been good over many years, which might be partly down to the cost benefit analysis that takes place for every project. Could we use that model for other national indicators on which performance is flatlining or worsening? Are there other distinguishing features of those interventions that could apply to other national indicators?
The model is transferable and a similar approach is used in other areas. For road safety interventions, cause and effect tend to be closely aligned, so the evaluation process is more straightforward. We can show what the issue was, what was done and what impact that had. Across most of the other elements that we are talking about, the decisions that an individual makes about the mode of transport that they will use, when they will make their journey and whether they will travel at all are more complex than the decisions that are made about road safety.
Such an approach could and should be taken in other areas. We recently commissioned work on what we term generalised time, which is the time that it takes someone to complete a journey. If we have the car journey time, the bus journey time, the time that it takes to walk and so on, we can build up a generalised model and look at the parts of that model that need to be addressed to make the bus journey more attractive than the car. That approach seems hugely sensible if we want to look at the balance of walking, car use and bus use or, if the car or bus has to be taken, to find out how to make the bus journey more attractive.
I am not sure whether this will answer Mr MacDonald’s question but, to follow on from George Mair’s comment, I think that there are a lot of things in transport that we do not know enough about. We are beginning to learn things about behaviour change, but we simply do not know enough. If I were to make a plea for anything, it would be for more investment in research into the softer side of the issues, to look at, as George Mair suggested, why people make journeys, how to entice them into considering the appropriate mechanism for making the journey, what time they make the journey at and so on.
On behaviour change in the haulage industry, the Road Haulage Association and a number of hauliers support the use of rail freight. It is not the easiest option, but we will not give up on it.
We have also talked about reducing traffic congestion. The Government has indicated that it wants to connect regions and people to increasing economic opportunity. However, given that one in 10 journeys is affected by congestion, might the improvements that are being made to the road system to improve connectivity have an adverse impact on congestion and emissions? I know that the Aberdeen ring road will bring great improvements to that city, but what about the situation in the west of Edinburgh? I note in the housing budget that the target is to build 107,000 homes by 2024 across six council areas around Edinburgh. West Lothian, for example, is to build 20,000 units. Much of that development will create commuter traffic through the four main arteries from the west of the city. How do we get the balance right? Is the national indicator to reduce traffic congestion coupled with that budget the right strategic approach, bearing in mind the housing and transport situation?
Ewan Wallace is probably more of an expert than I am on the Aberdeen western peripheral route. It strikes me that, with that type of project, we need to ensure that any road space benefits that are gained in the city are used to best effect for public transport and for people who have to use the bus. If we simply just let things flow, it is inevitable that traffic will fill up that space. The western peripheral route will be good, but we must consider how we deal with the road space that is freed up in the city. In my view, public transport should be prioritised.
Would that involve, for example, introducing bus lanes in the cities?
Yes, there are huge benefits. Of course, you would expect somebody who is for buses to say that, but we have to think of the people on the bus. If we want to convince the people who are sitting in cars, it is hugely effective for those in the queue to see the bus getting to the head of the queue. That helps not only in keeping existing customers but in growing the user base, and it also links in with the park-and-ride issue.
It is a big concern if we are predicating housing development on people driving for every trip. There is nothing wrong with having a car, and we do not need to look very far to find other countries in which there is a higher level of car ownership but also a greater take-up of public transport and higher levels of walking and cycling.
There are perhaps two levels to the question. The first concerns the impact on the strategic network and how that is built into the planning of major projects, such as the Aberdeen western peripheral route, the M74, the M80, the A9 and the A96. It also concerns how that is allowed for in strategic park-and-ride or park-and-choose approaches to give an opportunity to interchange with bus and cycle networks. Then we get down to the more detailed role of councils as planning and roads/transport authorities and how we design in the best practice that we have.
We should have park and rides further out of towns, such as somewhere in the Bathgate area. A lot of the queues start coming in from Livingston and that is where everybody gets held up. It would be beneficial if we had more Ferrytoll-type park and rides, where three different bus routes come together. Over towards Glasgow, where Eurocentral has been developed, there are huge areas where that would work. If we get more cars off the road, it will leave more space for the road users who have to be there—those who do not have a choice. People would relish that. Developments that the bus and train operators have been talking about, such as the introduction of wi-fi, will help to encourage people out of their cars. It is not really possible to text when driving, but it is when on a bus.
Most of the capital expenditure on transport projects will have an impact on the revenue budget in future years for maintenance costs. Has enough consideration been given to the future maintenance costs of a lot of the projects that are in the Government’s infrastructure investment plan?
I am happy to answer that question in relation to the built infrastructure element. We, as representatives of the local authorities, have done a significant amount of work with Transport Scotland around road maintenance, improving best practice, and looking at backlog calculations to see how much work is outstanding and how we can get the best possible bang for our buck. More money has clearly been allocated to the trunk road network over the next two or three years, and looking back over the past couple of years there has also been more going into maintaining the road network.
I have two short points about maintenance. First, the great thing about maintenance is that it involves people working all across Scotland, so an emphasis on maintaining roads is a good thing because it is low-level activity and because, rather than concentrating on one or two big projects, it applies to all roads and therefore affects all areas, including remote and rural areas. The second thing may be outwith the scope of the committee’s discussions, but it is worth noting. Not enough emphasis is given to maintaining footways and pavements for people who are walking in the urban realm. In most local authority areas, claims against the local authority for trips and spills on footways are far higher than those for damage to vehicles on the road network. That is worth reflecting on.
I return to the specific projects in the infrastructure investment plan. The cabinet secretary has introduced a 5 per cent cap on revenue costs associated with borrowing, and that will apply to transport projects that are being funded through the non-profit-distributing model and regulatory asset base borrowing. Should a measure similar to the 5 per cent cap on borrowing costs be considered for the maintenance costs of those projects?
That would make it very difficult for some of the larger-scale projects. It would be like putting off the fateful day. If we are building a brand new road, for example, we would look to build in costs between about year 15 and year 20 for substantial resurfacing. That would not be cheap and could certainly breach the type of cap described. Without going into the detailed figures, it would be difficult to say whether such a cap would be possible.
I am less qualified to comment on some of the things that Ewan Wallace has touched on. Given the constraints that the Scottish Government has on its finances, we can understand that there will have to be give and take in some areas. However, the underlying impact of less revenue being available could see some of the more rural areas losing bus services and so on because money has to go on other areas, so there are big risks. Given the major constraints on the Government, managing wider issues is not a task that I would envy.
I defer to Ewan Wallace’s expertise on the area. This goes back to a point that I was trying to make earlier: strategic is not necessarily the same as new; strategic is also about things such as maintenance. I am a little concerned that, when we look at strategic projects, we think about big new things as opposed to genuinely strategic things that would elevate the condition of the existing network. Maintenance is a big concern.
Maintenance is concerning for the haulage industry, too. It would be good if there was a way of having more preventative maintenance rather than letting a road deteriorate to the point where it will cost three times as much to fix it next year than if it was fixed this year. I am told that there are lots of examples of that throughout Scotland. It is important to keep the network up to a reasonable standard to allow the free movement of people and goods. Lots of places have a small pothole that develops into a big pothole, which then affects cyclists and trucks. A broken spring on a lorry costs a few hundred quid, a new tyre on a car or a bus costs anything from £100 to £500 and for cyclists it could be a matter of life or death. It is important that we bear that in mind.
Many of the national indicators and all the purpose targets require Scottish Government agencies to align their budgets and activity through joint working, which often extends to private sector and third sector delivery partners. To what extent do the witnesses feel that cross and joint working within the public sector happens? Are non-public sector partners fully engaged in the process of target setting and strategic planning?
In our experience, the process seems to work quite well. We have been on various groups with Transport Scotland and BEAR Scotland or Amey. Our opinion is that, in the main, it works quite well.
That may come up when we consider the procurement bill.
From a bus point of view, we have relatively good engagement with Transport Scotland, in respect of both policy and operational issues. We participate in a number of working parties and groups and we have good, healthy dialogue. We might not always agree—it is like a good marriage, I suppose. That engagement has been extremely helpful in dealing with issues throughout these difficult and challenging times.
I echo that. Engagement with Transport Scotland is really good. The minister, Keith Brown, held a summit two weeks ago on the cycling action plan. It was a really good meeting. He brought together all the important players in transport in local authorities and some statutory agencies. I was really pleased to see that summit, which I hope will be an annual event.
The minister set up a bus stakeholder group, so there is a range of bodies that participate in regular meetings and look at bus issues. That will undoubtedly drive policy change, improvements in quality and so on. Across the spectrum, we work with Government and Transport Scotland.
Engagement is all very well, but influence is the main factor when engagement takes place. In your experience, does that engagement allow you to influence? You mentioned local authorities. Is there anything that you can bring to the table to encourage them to see that there is a benefit in engagement? I wonder whether, if you are able to influence, there is a reverse process, too.
There are some good examples around Scotland. Aberdeen and Aberdeenshire work closely with the operators in their part of the world outwith formal partnership arrangements. In other areas, we have formal partnership arrangements. I would like to see a lot more joint working on how bus services are delivered, the quality aspects, service frequency and a whole range of factors. The more of that work that we can deliver on, the better the chances are that things will improve, and improve more quickly than they would under normal circumstances.
I am conscious that we are slightly over time, convener, so apart from thanking George Mair for his kind comments about my home team, I wanted to say that there are two levels to that issue from the SCOTS perspective. Engagement with the Scottish Government, agencies such as Transport Scotland and numerous others is generally very strong. There has been some excellent work around the road maintenance review over the past 18 months. It is now pretty much embedded, and excellent direct contacts have been made between different parts of local authorities and the Scottish Government.
That is a good point on which to end. Gentlemen, I thank you all very much for your contributions, which will certainly inform our report.
I welcome our second panel of witnesses: David Bookbinder, the head of policy and public affairs at the Chartered Institute of Housing in Scotland; Professor Kenneth Gibb, professor in housing economics in the urban studies department at the University of Glasgow; Jim Hayton, policy manager at the Association of Local Authority Chief Housing Officers; and Susan Torrance, policy manager at the Scottish Federation of Housing Associations.
Thank you, convener.
The national performance framework is not terribly useful, if I am honest. I have read through the framework and the indicators that are directly relevant to housing. The indicator for improving access to suitable housing options for those in housing need is, I think, measured by looking at homelessness statistics. In themselves, they are one indicator, but that misses out on the huge amount of need among older people and people with disabilities—people who do not get anywhere near the homelessness figures as such—that is met through the social housing work of associations and councils. All that benefit is missed by that crude indicator. There is another indicator for increasing the number of new homes. Although I hope that there is a net increase every year, that misses out the proportion of social houses that are built.
I speak from the local authority housing side, where I think that the view would be pretty similar. I doubt that people regularly dig out the framework and check it.
Should we pay more attention to the impact that housing has on the things that you have mentioned? Housing can kick-start the economy, but it also has an effect on health, wellbeing, employment and so many other things that it should be given a more important role in the budget.
Yes. I would certainly make that argument, and I think that my colleagues would too.
Absolutely.
I would like to turn the discussion on its head a bit. For me, the issue is the extent to which the housing sector as a whole contributes to the long-term growth of the economy. It is not necessarily so much a question of individual budget items as one of the contribution that housing makes to investment more generally.
Does David Bookbinder have any comments on that?
I echo my colleagues’ comments on the performance framework. It is a very general framework, and housing is not outlined in great detail. Therefore, we tend to measure the Scottish Government’s housing supply performance against its housing supply pledges rather than the national performance framework per se.
If you could influence how the national performance framework is set out, what changes that would be beneficial to you would you like to see?
As alluded to a minute ago, I would like to be better able to measure the impact that housing has on other areas. There are lots of models for measuring. For every pound that is spent on housing there are economic and employment multipliers. Health and education outcomes are more difficult to measure in absolute terms. I would like to see better ways to measure those other outcomes.
I echo David Bookbinder’s point. I would like to see the framework make the relationships more explicit. If things in general appear to be heading in the right direction, if the economy is growing, if educational attainment is going well and if crime is coming down, we tend to assume that we are doing something right. Maybe a step in the right direction would be to make the relationships between housing expenditure, investment and those other important indicators just a bit more explicit, transparent and easier for ourselves and others to get a handle on.
I do not sit on the housing policy advisory group but a colleague passed on some good work that that group has done on drilling down into the national performance framework and specifically linking housing outcomes to policy and the framework. I was quite interested to see how that would eventually be translated into the framework. Some good work has been done on specific outcomes and targets, but at a much lower level than the committee would want to consider in the context of the budget.
The Scotland performs web pages do not carry many comments about the need for quality housing to promote participation, enhance cohesion or solidarity, and boost productivity. Could and should those web pages be more explicit in linking housing, and in particular capital expenditure on housing, to specific purpose targets?
Absolutely. That is part of what the previous question was about. Whether being more explicit and making it easier for people to understand will result in more comments I am not sure, but we should at least make it easy for people to see the links and to form their opinions about that.
Given that the overriding purpose relates to the economy, we understand that how much economic activity housing generates is probably top of the list. However, it is right and appropriate that the role of good housing provision and management in relation to issues such as health, education and reduction of crime and antisocial behaviour is kept in mind. The approach that Gil Paterson suggested would encourage that.
There is sometimes a disconnect between the work of development agencies and housing. I speak from experience in the Highlands, where linking Highlands and Islands Enterprise’s activities on investment in the economy with housing provision, which is obviously attractive to inward investors, was a difficult task, which was sometimes not helped by a kind of silo effect, whereby people said, “Housing has really nothing much to do with us; we are just focusing on industry.” I make a plea for more joined-up thinking and a more holistic approach, so that we do not just get business in but ensure that there is housing for the workforce, particularly in areas in which significant inward investment is required, but housing is not there to accommodate demand.
Should the money be allocated differently? Should money for houses follow the economic activity, instead of being allocated across local authorities?
That could be another strand of the budget. I am not necessarily saying that the delivery of affordable or social housing should not remain the remit of local authorities and their housing association partners. However, we could be more imaginative about other financial models in the context of housing development and the economy.
To some extent the issue is a function of how resources are allocated at sub-national level and the weighting and other criteria that are used. If affordability is an element of that, it is implicit that there is something to do with pressure in the market, which might, again, be a function of the levels of economic activity. I guess that needs-based allocations will reflect where demand is, to some extent.
That is true to some extent, but I agree that a case could and probably should be made for housing investment being used, at some level, to help to support the economy. If there are areas of the country where there are jobs but there is a severe lack of affordable housing provision, it should be part of the national strategy to ensure that economic growth in such areas is not inhibited by a lack of funding, particularly for affordable housing.
Can we look at the issue the other way round? If the provision is there in the first place, the industry might follow. For example, people are attracted to set up businesses in areas that have colleges and universities. If the infrastructure is there, is it likely that industry and commerce will follow?
There is a bit of debate in the housing economics literature about which comes first. Does the location by business follow housing, or does housing follow business? I have seen work at UK regional level that suggests that good new housing in suburban areas can attract investment into a region. Housing can be a source of growth.
If you build it, they will come.
Perhaps our national policy should be able to accommodate a bit of both.
Housing provision and advice on housing around the impacts of changes in welfare benefits are part of the Scottish Government’s strategy to mitigate any detrimental effects of welfare reform on vulnerable groups. What are your views on how the Scottish Government’s budget proposals address that?
I will comment from the housing point of view. The Scottish Government has gone a long way in looking at how it can support both tenants and social landlords to do what they can to mitigate some of the worst impacts of the reforms. Only some of the reforms are in place at the moment. There is some money for advice services that are provided by independent voluntary organisations and a tranche was announced recently for social landlords. A number of national housing bodies are receiving some money to provide, for example, guidance and training to help social landlords to cope with the existing changes and prepare for those that are yet to come.
From the local authority housing side, the first thing for me to do is to emphasise how vital the provision of good advice and information is, particularly for people with council tenancies who are affected by the underoccupancy penalty.
I endorse what Jim Hayton said about flexibility and a continued willingness to monitor the situation. We have parallel issues to do with rent arrears, and we are increasingly concerned about the role of housing staff in providing support to try to keep people in tenancies and to keep the arrears from the so-called bedroom tax under control. The situation is fluid, and we want to work continually with Government to mitigate the effects.
I have done some work on the impact of the bedroom tax and it is fair to say that a great deal of case-study evidence is already building up on how different organisations are coping. They are involved in intense management of the problem and in finding out a lot about the tenants who are exposed to the issues.
There is a debate among our members at present about whether they should consider changing some of their house-building programmes to build one-bedroom flats. However, that would just skew the future provision. Over the past 10 or 15 years, the Scottish Government has actively encouraged housing associations to build two-bedroom rather than one-bedroom flats, so there is a severe lack of appropriate accommodation for single young adults. The question whether our response should be to turn our programmes wholesale towards building one-bedroom flats is under discussion.
The question that remains unanswered is how we use a finite budget to maintain things that are likely to come over the horizon and that are outwith our control. Mr Hayton said that we have not seen it all yet. If there is more to come, how do we gather people together to have a dialogue? How do we explain that we do not have enough tools in the box, and that we do not have enough money?
There has to be a limit to how far the Scottish Government can pay for or bail people out of UK Government changes, whether those are welfare reforms or other changes. One very cost-effective way in which the Scottish Government has chosen to spend some of its mitigation funding is to enable the sharing of information about how to deal with the worst impacts.
I take part in a whole range of groups related to welfare reform and think that there is a fair degree of consensus in civic Scotland—if I can call it that—about the nature of the problem. Of course we are still at a fairly early stage. The changes were introduced in April and councils all over the land and their housing association counterparts will be trying to make sense of them and work out their medium and long-term impact. Councils will know what has happened to their revenue since April and will be asking how much of the rent that might have been lost is likely to be recoverable and what they need to do to get tenants ready for the next stage, which will be universal credit, such as ensuring that they have bank accounts of some kind, making them aware of the importance of budgeting and, as I said earlier, perhaps providing advice on employment. They will be doing all that and the Scottish Government is constructing a wider framework to enable us all to see the impacts on services as a result of the potential revenue reductions.
We have all learned a lot from the Department for Work and Pensions Dunedin Canmore pilot, which gave us an early heads-up about some of the issues that we expected to emerge with regard to tenant profile and the almost automatic increases in arrears. The sector and local authorities need to gird themselves to complement the direct cash that can be applied for under the discretionary payments system with what might be seen as the other side of their activity, which will include providing support to tenants and preventing things from happening early on. As I have said, that sort of contribution cannot necessarily be measured in financial terms but must be a huge part of the mitigation of the welfare reform measures.
The intensive management that housing associations and councils have been carrying out for the past 18 months or so might have a huge opportunity cost—after all, it means that they are less able to do other things—but it has also made the bedroom tax a kind of pilot for the next round of welfare reforms. There is much more information about which tenants are vulnerable, what things will have to be done for them, what options they face and how their behaviour might change as a result of these measures, and that will be tremendously valuable as we move forward.
The 2014-15 housing supply budget contains an apparent uplift between 2013-14 and 2014-15. There are many pressures on the Scottish Government and calls for capital and revenue expenditure to be used to address specific issues. Is the resource allocation correct, targeted in the right way and sufficient to achieve its purposes?
The spending round funding covers a three-year period, so we have tended to analyse the budget on a three-year basis, rather than necessarily scrutinising individual years. The way in which the Government funds house building lends itself to examination over a longer period. A house can be approved and builders can go on site, but it may not be finished for a year or more thereafter.
Mary Fee asked three questions: is the allocation correct, is it targeted, and will it achieve its purposes? It will probably not surprise the committee to hear me say that, as a housing professional, I would like much more money to be invested in housing. We still have a big housing shortage in Scotland, and we really need to address it. We were extremely disheartened a few years ago, when we thought that housing had suffered a disproportionate cut of 40 per cent. We are equally gladdened that a lot of that funding has been restored, and that the amount has gone from some £638 million to about £970 million. Ken Gibb makes the point in his written submission that housing has had the biggest real-terms increase of any budget heading. We greatly welcome that.
The budget, together with the changes to the subsidy levels that were announced in July, have put confidence back into the sector. We are finding that people who were laying off development staff and whose entire build programmes were grinding to a halt are now moving forward with more confidence. They are considering feasibilities, and they are more able to engage with the private sector, for example in following through on section 75 commitments on mixed-tenure projects. Rather than saying, “I’m sorry, but we can’t partner or collaborate, because the funding isn’t there,” as was the situation about a year ago, we are finding many more opportunities to work with our local authority and private sector partners and to begin to deliver the housing supply that we need. The budget has made a huge difference.
Last year, one of the issues that the committee identified was financial capacity and the problem of the relationship between housing associations and private finance. Several of the submissions to the committee identified continuing market-failure capacity issues for private finance. Turning the grant levels around and reinforcing the position by increasing the overall programme to accommodate that increase in grant is an extremely effective way of overcoming at the margins some of the issues with private finance. Everyone says that that has made an important difference to the willingness and ability of social providers to build.
One of the criticisms that Audit Scotland, in particular, has made is about how complicated housing budgets are and how difficult they are to track and properly scrutinise. As Audit Scotland rightly pointed out, and as the witnesses have said, housing took a disproportionate cut initially, although money has been injected to level off the playing field.
On that last point, there will be periods when we will be grateful for a three-year programme. We are looking at 2015-16 as a single year, for reasons for which the Scottish Government cannot be held responsible, after which, we hope, we will enter another longer period. However, I am sure that Jim Hayton and other colleagues would agree that it would be terrific for long-term planning if programmes of the length that you have suggested—which would, of course, extend beyond the period in office of one or more Governments—could be provided.
Does anyone else want to come in on that?
I was just going to mention the split between grant and loan and equity. During the course of the budget debate, we kept hearing that additional loan and equity is being made available, which will not necessarily support social housing building but which may be used for shared equity, the national housing trust and so on. The application of that has always been confusing, so I make a plea for more clarity in that regard.
Okay. Let us move on.
I will try to rattle quickly through the more specific questions. Housing has a major role to play in achieving climate change targets. To what extent does the housing budget support the provision of sustainable, greener homes?
Within the grants system, there is a premium grant that can be applied for when housing associations put in additional renewables features. The majority of housing associations take advantage of that because they are working not only to the Scottish housing quality standard but to the new environmental standards for public housing that are about to be introduced. Housing associations have been a flagship, along with our local authority colleagues, in building new housing that addresses the carbon agenda. There are two strands to that, one of which is fuel poverty. If housing associations are able to make houses energy efficient, their tenants will find them more comfortable and cheaper to live in, so it is in our interests to build to those standards. At every level, we have embraced that agenda; even when grants were tighter we fought to build good-quality, sustainable homes.
That answer almost gives the impression that housing associations and local authorities have been taking the lead. Has the Government been giving you enough encouragement?
There are two things to consider, the first of which is the setting of the standards that we are to be measured by. They are things that we want to achieve anyway, but there are standards that we must meet. Regulation, standards and guidance are one thing to aim for. Secondly, the fact that the grant levels encourage additional features—indeed, more grant is paid for those additional features—is hugely helpful and supportive.
Obviously, the biggest challenge in relation to the energy efficiency of our housing stock is in existing houses. Each year, only a small percentage of stock will be new but we are getting pretty good at identifying how to build new houses to the appropriate standard.
The longer-term challenge for central Government funding for energy efficiency will probably come from the expected introduction of minimum standards of energy efficiency for private owners. We expect to see that ball starting to roll in around 2015, with full implementation a few years later. There is a question over the extent to which the Government will provide carrots or incentives for home owners perhaps in a way that will not necessarily involve throwing grants at them. It is very hard in the current economic climate to justify throwing grants at home owners, who will ultimately benefit from that through property values. There is a challenge for the Government. For example, it could reinvigorate the exploration that it embarked on a few years ago, before the credit crunch, of having a national lending unit to support local authorities with their schemes of assistance to help owners to get equity loans that have to be paid back on the sale of the property but which do not involve interest payments. That would really make a difference to home owners who have an asset in their property but who do not necessarily have a lot of income. A big question for the Government is how far it can go to fund support for home owners in the future. Even if there is some kind of recycling loan fund, it will need funding in the first instance.
I will add a final point about EU structural funds and using the European regional development fund to make renewables improvements to existing housing. Wales and France have been able to use those funds to great effect on specific projects in particular areas. In our submission to the committee, we asked the Government to consider whether a similar proportion of funds could be used in Scotland as part of the use of structural funds. I think that that is being looked at from 2014 onwards. There is precedent, so it is certainly allowable under EU rules, and it could boost the existing homes argument that Jim Hayton and David Bookbinder have referred to.
I would like to make a final point that is akin to the point that was made about the different elements of the affordable housing budget. I hear a lot of colleagues in councils and elsewhere saying that we could simplify the language—and perhaps remove some of the acronyms—around that agenda. It is quite complicated, and I have probably succeeded in muddying the waters further by using acronyms. It is perhaps quite difficult for consumers to see their way clearly through the maze of available funding and how to access it. I accept that that is not an issue only for the Government. We need to work together to simplify things and to let people know precisely what carrots as well as, ultimately, sticks might be coming in the future. That is part of the on-going work of some of the working groups that I mentioned. Clarity is needed.
On a different subject, the national indicator for improving access to suitable housing options for those in housing need is very specific and is measured by the
It seems to be very narrow. I think that we talked about it earlier. I think that a broader general measure of housing need in total would be more effective—a measure that tries to take account of all the elements, including affordability-based need and the specific needs of vulnerable people, rather than just one element. It seems odd to have one partial dimension when we all recognise that the problem is much broader. The indicator should measure the extent to which we are addressing that broader problem. As I said in my written evidence, we have not really had a national measure of that kind since 2005. A national estimate that breaks down into those different elements is long overdue.
I tend to agree. We have probably been preoccupied—perhaps quite legitimately over the past few years—with homelessness in particular as we moved towards implementing the fairly challenging legislation that said that everyone who was homeless should be entitled to settled accommodation by the end of last year.
In a sense, the numbers do not really say anything about whether there is improved access to suitable housing for individuals. The indicator just says that homelessness figures have gone down. I endorse the need for the indicator to be much more informative than it is.
Would it be fair to say that the previous indicator has done its job and that it is time to look for something that tells us more about what is going on now?
Yes, I would say so.
Professor Gibb already alluded to concerns about the financial capacity of the social housing sector to invest in new homes. That is against a backdrop of welfare reform and its impact on increased costs in relation to covering rent arrears and lost income. Anecdotally, I have heard—as have other colleagues, I think—from housing associations that have had difficulties with banking institutions as regards their ability to borrow money to fund investment and the reprofiling of existing debts. Against the backdrop of that financial capacity, do you think that the housing sector will be able to meet the targets for new homes that the Government has set down?
I think that Professor Gibb said that the increase in grant has proved to be a way of saying to banks that more than 50 per cent of the capital cost is now covered so that banks can be a bit more comfortable about some of the changes ahead.
Councils are funded differently from registered social landlords, so they do not have the same complex problems.
I have two points. First, as has been suggested, because there is a problem with traditional banking finances for housing associations, people look for alternatives. They spring up and competition appears—for example, there are opportunities in the bond markets and capital markets. That is okay for a big housing association that can access bond finance, and a smaller housing association may be able to do something on a syndicated basis with other small associations seeking smaller amounts of funds. However, I think that bond markets and capital markets are, in different ways, quite immature market developments. There are clearly still big gaps for associations that cannot access either route into the capital market and which, as was indicated earlier, do not want to take on bank finance with the terms and conditions that are being offered.
I have a point on something that Ms Torrance said. All the panel members have welcomed the £16,000 increase and said that it will go some way towards there being positive discussions with banks. Are there any housing associations for which the £16,000 increase simply will not be enough to get them around the discussions that they are having on their existing commitments?
I do not think that the £16,000 will be the issue; I think that, as far as the bank’s credit committee is concerned, it will be the particular circumstances of an association’s level of cover or exposure. The level of grant will not necessarily be the block.
I will add something to Susan Torrance’s comments. For reasons of parity, the £16,000 increase was across the board, both in terms of councils and housing associations and in terms of location. However, the costs of building are bound to be much greater in some parts of Scotland than they are in others. Although we have all warmly welcomed the grant increase, that does not mean to say that the whole problem has been solved for housing associations in Edinburgh or other hotspots. The increase obviously helps a lot, but it may well be that it does not completely solve the issue for housing associations in higher-cost areas.
I will move on to the privately owned sector and the help-to-buy scheme. Do panel members think that it will have a positive impact overall on house building in Scotland? Is a potential knock-on effect that, because incentives are being offered to first-time buyers and people who are moving up the property ladder, those people will become so focused on new builds that there is a negative impact on the price of existing houses?
In general, there seems to be a lot of support for the notion that, if the policy exists, it ought to be focused on new builds rather than on the existing market as it is in England. A lot of people are worried about speculative activity that might flow from the policy in England. We have historically low levels of house building in Scotland and they have been going down for quite a long period of time. The scheme therefore helps the industry in an important way.
I tend to agree with Ken Gibb on that. I agree, too, that it is helpful that in Scotland the scheme is focused on the new-build sector, which means that it should give our construction sector the boost that I think we all agree it really needs.
There is a monitoring board. The Council of Mortgage Lenders and Homes for Scotland are overseeing and reporting on issues such as whether the scheme is increasing supply or increasing prices. The concern is that the effect of the scheme might be to increase prices rather than necessarily to give a huge boost to house building.
The budget document states that efficiency savings of 3 per cent per annum are expected across the board from 2013-14 to 2015-16. In your opinion, how feasible is it for Scottish Government agencies, local authorities and other public bodies in housing to continue to achieve on-going and cumulative savings of 3 per cent per annum?
The short answer is that it is very difficult indeed.
We have talked about how housing association resources are being diverted towards the welfare reform agenda, with increasing support to tenants and, potentially, increasing rent arrears and more cost. Remaining neutral would therefore be a good outcome in the current climate.
What do you think the long-term effect will be if the 3 per cent saving is maintained?
From a local authority perspective, it depends on whether that 3 per cent is communicated to housing departments. The way local authorities are structured, funding tends to be in two big pots—the general fund for education and social work, and the housing revenue account. Not all local authorities will have to impose that 3 per cent saving, and it is more likely to affect the general fund, but the general fund also does some important things relating to housing, such as paying for aids and adaptations and making a contribution to tackling homelessness.
I will move on to the budget process itself. The delivery of the national indicators specifically linked to housing and the contribution of housing to the purpose targets are happening through a mix of national and local government and private and third sector organisations. How involved do you feel in the strategy setting, the budget allocations, and the planning and delivery of the budget?
That is an interesting question.
We are not hugely involved. It might happen in other areas and it might be much more a function of directors of finance via COSLA, but speaking as someone who works in housing, and from what I recall in my previous role as a director of housing at one of Scotland’s larger councils, I can say that we are not involved to a great extent.
Earlier we discussed preventative spend. There has been an increase in the budget from £4 million to £10 million for adaptations, which is an example of potential preventative spending that will result in possible lower health and social care expenditure. Do you have views on the analysis of preventative spend in the housing sector and on the amount allocated in the budget?
The £10 million budget is welcome, but I look forward to the work of the adaptations group that has been set up to implement the report that came out last December about making more sense of the adaptation system. We have different procedures for housing associations and local authorities, and there is also the issue of the private sector, its access to adaptations funding and what differences that might make in terms of preventative spend.
My understanding is that preventative spending is specifically identified in the Scottish Government budget only in respect of the change funds. Do you have views on whether and how other types of spend with preventative outcomes might be labelled, and how any resulting savings in revenue expenditure might be identified and assigned?
There was a time when there were certain strands of funding for which, because they were separately identified and ring fenced, there was a chance of tracking expenditure. The former supporting people funding was one example of that, although it was by no means the whole picture because the strand of care funding was layered on top for people with greater care needs.
It is a complex area and it is very difficult to establish cause and effect, such that, if you invest £1 in housing, it might save you a multiple of that in some other area by reducing acute hospital costs or emergency admissions. We need to get better at it.
In promoting the useful things that housing expenditure does, we need to label them proactively. In the context of the private rented strategy that was recently developed, a large number of local authority officers and others are working hard on how to police and regulate dispute resolution and other things at the bottom end of the private rented sector. If it is done effectively, that will save a lot of money further down the line. How does one capture that? It is quite tricky to do.
I will come back to something that David Bookbinder said. You said that climate change measures and insulation help to increase the value of a house. In fact, they do not, because, as we know from the Royal Institution of Chartered Surveyors and lawyers, behaviour change is not far enough along the road for that to happen.
There has been a lag on the 2015 target. The problems that colleagues have mentioned about the period before the grant rate increase and when there was uncertainty about the overall funding pot have certainly led to a delay in getting the programme moving. There is a possibility that there will be a dip and completions in 2014-15 might fall below target.
You are making me nervous, convener, because you are asking whether the target will be achieved and the clerk advised us beforehand that everything is recorded verbatim.
The Minister for Housing and Welfare is determined that it will be achieved.
As are we.
As is everybody, I think.
I have certainly had evidence of approvals for projects that were stuck before but are now proceeding because of the new grant rates. It is good to capture that.
That is a good, optimistic note on which to end.