Official Report 514KB pdf
The second item of business is scrutiny of the draft budget for 2015-16. I welcome Nicola Sturgeon, the Cabinet Secretary for Infrastructure, Investment and Cities; Sharon Fairweather, director of finance, Transport Scotland; Dominic Munro, deputy director, housing sustainability and innovative finance, Scottish Government; and Scott Mackay, infrastructure investment unit, Scottish Government.
Cabinet secretary, would you like to make an opening statement?
Yes. Thanks, convener, and thanks for the invitation to be here.
As we see private sector investment start to recover and economic growth strengthen, the role of the Scottish Government moves very firmly towards supporting strategic investments that underpin improvements in productivity, growth and wellbeing over the long term. That includes investments in transport, schools and digital infrastructure. We are also investing in affordable housing, energy efficiency and health facilities to help to address the challenge of poverty and inequality in order to improve wellbeing for some of the most disadvantaged people and places in the country. Those objectives underpin the spending plans that I am about to quickly run through.
First, looking at our capital investment programme, I note that the objectives are very focused on sustaining the economic recovery. We will deliver more than £8 billion of investment over 2014-15 and 2015-16 that will support around 40,000 full-time equivalent jobs. That is, of course, despite some significant cuts to our capital budgets. To help to address and compensate for those cuts, we are extending our revenue-funded investment through the non-profit-distributing programme by £1 billion, taking that programme to £3.5 billion in total.
Out of that additional £1 billion, we are investing more than £300 million in schools for the future and £400 million in additional health investment. We are also investing in two new college campus developments. We continue to directly support infrastructure spending through switching funding from resource to capital, utilising capital receipts, and the regulatory asset base rail enhancements. We do all that while continuing to maintain our commitment to allocate no more than 5 per cent of our future departmental expenditure limit budget on the costs of revenue-funded investment.
Our annual progress report on the infrastructure investment plan shows that 24 infrastructure projects worth £625 million completed construction in 2013, and we are making good progress in delivering the NPD investment programme, with almost £650 million-worth of projects beginning construction in 2013-14 alone.
We continue to make excellent progress in taking forward our key investments. The Queensferry crossing is on course to be delivered in 2016. We have secured a further £50 million of savings, taking the total reduction to the cost estimate to £195 million. Work progresses towards completion—again, on time and on budget—of the new south Glasgow hospitals project. The schools for the future programme—further expanded, as I said, through the NPD extension—will now deliver more than 100 newer, refurbished schools by 2019-20; 17 of those schools are already complete and operational. Lastly, construction is under way to deliver significant improvements to the M8, the M73 and the M74.
Turning briefly to housing, I note that the budget enables us to deliver on our commitment to provide at least 30,000 new affordable homes in the current session of Parliament. Since the publication of the draft budget for 2014-15, the budget for housing, regeneration and welfare has been augmented to reflect the deployment of additional funding of £200 million, which includes additional loans and equity funding of £160 million to support the housing sector and additional resources for regeneration and affordable housing. We have also included in the draft budget £35 million for discretionary housing payments in order that local authorities can mitigate the impact of the bedroom tax in 2015-16.
Turning quickly to transport, I note that on-going investment in transport connects regions and people to economic opportunities, so it is vital in contributing to national social cohesion and reducing inequality between different parts of Scotland. Our investment in transport infrastructure, such as the Queensferry crossing and the dualling of the A9 between Perth and Inverness, plays a key role in creating the best possible conditions for business success. As I said, a cumulative total of £195 million-worth of savings has been released from the Forth replacement crossing project since construction started, which means that the 5-mile stretch of carriageway between Kincraig and Dalraddy on the A9 will be the first of the 12 dualling schemes to be brought forward; it is due to be completed in 2017, six months earlier than anticipated.
We have increased our planned expenditure for air and ferry services, recognising their importance and reflecting the acquisition of Prestwick airport, which we will come on to talk about later. We are also increasing our expenditure on support for sustainable and active travel by a further £10 million, to £25 million. We have now invested over £84 million in active travel since 2011 as well as publishing our plan to replace petrol and diesel vehicles with electric vehicles by 2050, backed by over £14 million of investment until March 2016. In contrast with that, we have been able to reduce the budgets for rail franchise and rail infrastructure to reflect the efficiencies that have been secured through the new franchises, which have of course also secured improvements to services.
Finally—you will be happy to know, convener—I will touch briefly on Scottish Water. At the end of September, I wrote to the committee to inform it that I had agreed Scottish Water’s investment priorities for the next regulatory period, which as the committee will be aware runs from 2015 to 2021, and I agreed the principles that should underpin customer charges. The investment programme, which is worth £3.5 billion, is a massive programme of investment that will support growth by allowing new customers to connect to public services, and it will enable mandatory standards in relation to drinking water and the environment to be met. In addition, the scale of investment will support some 5,000 construction jobs across every part of the country.
The Government’s contribution to that investment programme is £720 million of new loans, and in 2015-16 we will lend £80 million in support of the first year of the new investment programme. Charges for the next period are due to be confirmed by the end of this month by the Water Industry Commission for Scotland, which indicated in its draft determination in March that household charges will be capped at 1.6 per cent and business charges will be frozen in nominal terms.
That is a quick run-through of the key headlines of the budget. I am happy to take questions from the committee.
Thank you for that quick run-through. I will start off the questions.
To a large extent, both the committee and the witnesses whom we have heard from on the budget have welcomed the increased expenditure on investment in the budget. However, it is estimated that most of the increased expenditure is on projects and programmes that will, in the short to medium term, increase Scotland’s greenhouse gas emissions, and there has been a small reduction in expenditure on projects and programmes that have potential to reduce emissions in the medium to long term. As we all know, Scotland missed the annual climate change targets for 2010, 2011 and 2012.
Given that your portfolio contains many of the policy levers, in what ways will the spending plans that are set out in the draft budget for the portfolio help Scotland to get back on track to meet the forthcoming annual climate targets?
I will try to answer that with some key points. If it is okay, I will touch on transport and housing separately because they are both important areas of Government responsibility for meeting our climate change targets.
As a preface to my more detailed remarks, I point out that meeting those targets remains a key objective and priority of the Government, and that objective runs through all our budgetary decision making. I will take some key points from my portfolio that are pertinent and important to reducing greenhouse gas emissions and achieving our targets.
We are doing a number of things on transport, many of which were manifesto commitments. For example, we are developing the infrastructure to support electric cars and increasing the proportion of transport spend that goes on low-carbon, active and sustainable transport. Those are key current priorities that will result in emissions savings flowing from investments that we are making now.
We have committed substantial funding to sustainable and active travel over the current spending review period. Between 2012-13 and 2014-15, £200 million will have been invested to reduce the carbon impact of transport, and on current plans the figure will be more than £300 million for 2013-14 to 2015-16.
We are also doing a lot to develop different networks and some strategic partnerships to reduce transport emissions. For example—this has a long title, so forgive me in advance—“Switched On Scotland: A Roadmap to Widespread Adoption of Plug-in Vehicles” was developed in conjunction with a wide range of partners and launched just over a year ago. We have also instigated an annual cycling summit with local authority leaders to lead on our cycling action plan and monitor progress on it.
It is also worth mentioning that our future transport fund supports a range of sustainable transport infrastructure improvements: low-carbon vehicle fuelling and charging infrastructure; green buses; shifting freight from road to rail and sea; and cycling and walking infrastructure. The budget for that fund in 2015-16 will be up from that in 2014-15—it will go up from £18.75 million to £20.25 million.
The energy efficiency of our housing plays a significant role in meeting our climate change targets. We are making good progress on improving the energy efficiency of our housing stock, which has improved steadily since 2007. We still have a lot of work to do, but we are making progress. The Scottish house condition survey indicates that, in 2012, 44 per cent of homes had a good rating in their energy performance certificates, which compares with only 16 per cent in 2007. That gives some idea of the scale of progress.
Scotland is outperforming the rest of the United Kingdom on the delivery of energy efficiency measures through the energy company obligation—ECO. Nearly 12 per cent of the total measures have been installed in Scotland although we have just over 9 per cent of the households. We estimate that investment under ECO in 2013-14 was about £170 million and we have a continuing commitment to just under £80 million of Government funding for household energy efficiency.
I could go on—and am happy to go on for as long as you want me to—but those are some examples that will help to give a flavour of the approaches that we are taking to ensure that we deliver spend and design interventions across transport and housing that ensure that we have the right transport infrastructure and housing provision, but that we achieve that with a view to the environment and reducing greenhouse gas emissions.
Thanks. I am sure that my colleagues will drill more deeply into that.
10:15
Good morning, cabinet secretary and colleagues. The committee has been considering the budget’s impact on reducing our greenhouse gas emissions and whether the Government is in a good place to achieve our ambitious climate change targets. In its report on the 2011-12 draft budget, our predecessor committee said:
“any future carbon assessment brought forward by the Scottish Government should adopt a methodology that would enable comparisons to be made from one year to the next, to aid an understanding of how emissions from the budget are changing over time.”
However, in evidence to us, a number of witnesses said that it is difficult to tell from the budget document what impact the spending plans will have on Scotland’s climate change emissions targets.
I am aware that there is a related document, which sets out how the spending plans will support delivery of the Climate Change (Scotland) Act 2009 implementation plan, but there was quite a gap between the publication of the budget and the publication of the more detailed analysis.
Have we got it right yet? Has Government enabled the Parliament and external observers to assess whether it is on track to meet its targets?
I do not think that we should sit here assuming that we have got everything right and there is nothing that we could do better in the substance of what we are doing to reduce greenhouse gas emissions and what we do to report and monitor progress. We will continue to listen to what the committee and expert stakeholders have to say about how to improve how we do all of that.
I think that you referred to the document that is related to the budget, which sets out how our spending plans support delivery of Climate Change (Scotland) Act 2009 implementation. The document was published last week. I read comments in evidence to the committee about a delay in the document’s publication. There has been no delay at all; the information has been published and the Minister for Environment and Climate Change is currently writing to committee conveners about it. The document is published as soon as is practically possible after we publish the level 4 budget data on which the information is based—that allows time for additional parliamentary analysis. The information is available now and it gives the committee the opportunity to look in more detail at how our spending plans relate to our obligations under the 2009 act. I ran through some of the headlines in that regard.
Can we do better? We should always try to do better and to improve and refine our approach. Some organisations have pointed to the use of carbon accounting methodologies to monitor trends over time. The Government is keen to do work in that regard, not just to enable us to monitor trends better but to ensure that that kind of exercise is consistent across the public sector.
On the question of a delay, I am content with your explanation, and our witnesses will have heard what you said, although I will just observe that we and our witnesses have not been able to factor that document into our budget scrutiny. However, our witnesses are intelligent people and they will find ways of communicating with the committee if they want to raise issues.
The wider point is that investment in infrastructure, such as active travel infrastructure, can reduce our greenhouse gas emissions and have other beneficial impacts. Active travel has an impact on health spending, and improving the energy efficiency of existing homes can reduce fuel poverty. When you prioritise and allocate spend, how do you ensure that you take such issues into account?
We do that partly by common sense and partly through a systematic process. The Government has a policy appraisal toolkit that requires that the financial, economic, welfare and distributional benefits of any potential intervention be considered. The Scottish transport appraisal guidance contains a section on policy integration impacts, which involves looking at not just the financial or climate change impacts but impacts on disability, health, rural affairs and social inclusion. Right across the areas in the budget, we try to assess and factor into our decisions the various impacts that a particular policy intervention will have.
I absolutely agree with the premise underlying your question. If we improve levels of cycling and walking and the use of sustainable transport in general, we will have a positive impact not only on the environment but on people’s health and wellbeing.
Housing is another such area. Investing in the energy efficiency of housing will have a positive impact on greenhouse gas emissions over time, and it will also improve people’s health and wellbeing as the cost-effectiveness of heating will enable them to live in warm and watertight homes.
As an illustration, our analysis suggests that for every £100 million that we spend on energy efficiency measures, we create more than 1,000 jobs throughout the country, so there is an economic impact, too. Those interrelated policy impacts feed into our decision making on all budgetary issues.
You mentioned carbon accounting methodologies. In developing those methodologies to monitor trends, is the Scottish Government undertaking any work to help to standardise them so that all the work can be appropriately cross-referenced?
Through the duties on public bodies under the Climate Change (Scotland) Act 2009, the Government is working with local authorities and the wider public sector, including health boards, education services, higher education institutions, non-departmental public bodies and Government agencies, to look at how we standardise and make consistent the monitoring and reporting of operational emissions from the public sector estate. I will not attempt to go into detail on all the complexities to which I will refer. Carbon accounting is a complex topic, and the methodology that is adopted can depend on the purpose and nature of the monitoring that is undertaken.
UK and international guidance is available for organisations to use when they are measuring and reporting on environmental impacts. All organisations should use approaches that are appropriate and proportionate to their activities. Our work involves ensuring, as far as possible, that the use of methodologies, reporting and monitoring are consistent across the public sector. In years to come, that will be useful to a committee such as this one and will help to ensure that we meet our targets.
My final question is on active travel. In their evidence to the committee, Spokes and Transform Scotland pointed to the need for greater clarity on how the funds are to be spent on active travel, because that is not always clear. I readily concede that that question is perhaps more for officials than for you, cabinet secretary but, nonetheless, the issue causes those organisations concern.
The organisations have given an example. There are two funds—the sustainable and active travel fund and the future transport fund—but how much of the money in those allocated expenditures is spent on active travel is obscure. It strikes me that, if the Government is increasing investment—as it says it is and as I believe it is—it is not necessarily getting the credit for that, as it is not clear in the budget headings how much of the money is being spent on active travel.
The organisations have suggested that, to support greater transparency, the Government could replace those two budget lines with one for active travel and another for other future/green transport. Would the Government be willing to consider that?
I am happy to take that point away and consider it. I recognise the issue that is being raised. As you indicated, it is not in the Government’s interest for the money that we are spending to be obscured in the mists of a complicated budget document. If there is a way in which we can make that more transparent and make it easier for people to see and understand exactly where the money is going, I am happy to go away and consider it.
The one caveat that I have inserted into such discussions in the past is that we have an obligation to ensure that the committee and the Parliament can look at the budget year to year and differentiate between the lines to see what the trends are. If we change the way in which budget lines are presented, we can run into criticism from the other end that we are making it difficult to compare year on year. That stated, I am more than happy to consider the issue.
There is an even deeper issue than the one that you have outlined. Other parts of the budget and other activity include support for sustainable and active travel that is not shown in either of the budget lines that you named. I will give one example. There is a lot in the new rail franchise about supporting infrastructure for cycling at stations and on trains, which will not show up in either budget line that you mentioned but is nevertheless support for active travel that is supported by Government investment. Perhaps, in addition to what you have asked me to consider, we need to consider how we draw out all the support for that area from the different parts of the budget to make it easier to see the totality.
It is time to move on to transport issues in general.
The consensus among the witnesses was that the Government has a strong record of support for sustainable and active travel, that there are a lot of good pilot projects and that strong work is being done by local authorities and universities in developing those projects. That work could make a difference to whether the Government achieves its greenhouse gas emission targets. However, the consensus was also that there is a concern that those projects are not being rolled out across the country quickly enough, that more funding is needed and that the Government should look at benchmarking with other northern European countries and move towards allocating 10 per cent of the transport budget to sustainable and active travel, particularly given the additional social and health benefits. Does the cabinet secretary agree with the witnesses who have called for more funding in the budget line?
I sympathise with the sentiment behind those comments and your question. I can say categorically that the Government is anxious to maximise the support that we give to sustainable and active travel, not just because of its impact on the environment but because of all the other benefits that Jim Eadie referred to. That is why we have been increasing the budget line. Members will see in next year’s budget a substantial increase in sustainable and active travel funding and the future transport fund, although I have said that I will look at how that is presented.
We are doing what we can within a fixed budget. We have to make choices and, every time we increase spending on one thing, we have to reduce investment elsewhere. We have put forward a draft budget that gives proper priority to the issues, but we have a willingness and an appetite to go further in the future, if we can find the resources.
The first part of your comment was about the speed at which pilot projects are scaled up and rolled out and about benchmarking ourselves against experience from other countries—you mentioned Nordic countries in particular. I have a lot of sympathy with that and I would apply that principle not just to sustainable and active travel but across the Government. From my responsibilities as health secretary, I can think of many examples, particularly around e-health—although the issues are very different—when we have not always been as quick as we could have been to scale up experience from small trials. We can do more and we should challenge ourselves all the way along.
10:30Another issue that I picked up as I read through the evidence to the committee was a commentary about long-term certainty of funding. I understand exactly where that point comes from. We have been keen to set out a long-term strategic commitment to sustainable and active travel, not just through the recent track record on funding that I spoke about but through the “Cycling Action Plan for Scotland 2013” and the commitments in the second report on proposals and policies—RPP2. What we run into is a UK spending review timetable that means that we cannot commit to more than a one-year budget at this time. We have a constraint but, within it, we want to give as much certainty through long-term strategic plans as we can. As I started out by saying, we want to give as much support to sustainable and active travel as we can within the constraints of our overall budgets.
One criticism that has been made is about the lack of long-term certainty, particularly when it comes to match funding. Such certainty would be beneficial. The Sustrans Scotland submission referred to Transport Scotland allocating £19 million that required to be match funded. That was well outbid—match funding for £23 million of applications was provided. The appetite is there among local authorities, so long-term certainty would be beneficial, although I recognise the constraints because of the UK spending review.
Another concern—it was raised particularly by Sustrans and Stop Climate Chaos Scotland and it goes back to your point about the balance of spend in the budget—was about the focus on spending on roads. Does the current spending on the road-building programme represent the best use of Government funds in the long term to tackle greenhouse gas emissions and congestion?
A certain Conservative member was nodding vigorously as you posed that question to me. Our road-building programme fulfils a number of our objectives within the overall purpose that we set ourselves as a Government, which is to make the country more successful through increasing sustainable economic growth. Our on-going motorway and trunk road programme will return significant benefits to the country. It will deliver substantial and direct economic savings to businesses and individuals from better transport links. We will also see benefits through greater road safety and better accessibility. The benefits of our current transport investment programme are there for all to see.
The crux of your question is whether that runs counter to our objectives to reduce emissions and meet our climate change targets. It is fair to say that, all other things being equal, if road kilometres travelled increase for whatever reason, that will lead to an increase in road emissions. The thing is that not all other things are equal; the other side of the equation is not in equilibrium. The RPP sets out the various ways in which we are intervening to cut emissions per road kilometre travelled and the other important measures that we are taking to encourage mode switching, so that we can bear down on the number of road kilometres driven and cut down congestion and, in turn, emissions per kilometre. It is not the case that all other things are equal and that, if we invest in roads, emissions will go up.
I will give an example of the effect of what I am talking about that might help the committee. Average emissions from new cars have reduced year on year by more than 20 per cent in the past decade. In 2012, which I think is the most recent year for which we have figures, 55 per cent of new cars registered in Scotland fell into the category of emitting less than 130g of CO2 per kilometre. Ten years ago, that figure was 3 per cent. We are improving on that side of things so that we are not in the situation where other things are equal.
I accept readily that an on-going tension runs through this area. I also know that the country needs a modern and fit-for-purpose transport infrastructure to keep our economy strong and competitive. We must balance that with the measures that we are taking to cut emissions through the fuel efficiency of cars on the road and encouraging people where possible not to use cars and to switch modes, which I spoke about earlier. Those are two sides of an equation that we must keep in balance, and we try to do that through all the decisions that we take.
We will move on to housing.
Good morning, cabinet secretary. You mentioned in your opening remarks a significant increase of about 37 per cent in the housing and regeneration budget. You will be pleased to know that the witnesses whom we have had before us have warmly welcomed that and that they agree with the Government’s general direction on the policy. However, there were concerns about whether the increased budget would be targeted at the appropriate housing mix to meet housing demand and targeted at optimal greenhouse gas reductions across Scotland’s housing stock. How do you respond to those concerns?
Before I address the housing mix and how we ensure investment in houses that meet energy efficiency standards, I will say that it is important to reflect on the substantial increase in investment in the overall housing and regeneration budget and particularly on the affordable housing supply programme budget for next year of £390 million, which is an increase of about 21 per cent on the average of the previous three-year period. I hope that that is a strong signal of the importance that the Government attaches to housing for not only social purposes but economic recovery purposes.
On the appropriate housing mix, we take a resource-planning approach that puts councils in the driving seat to decide their strategic approach and the appropriate mix of housing in their area. That enables councils to be flexible and to look strategically across their area to determine what is required. They then make proposals to the Scottish Government for social and affordable housing developments, and all that should be based on their local housing strategy. Our approach is not for the Government to look across Scotland and decide what housing developments are needed, where they are needed and with what mix of house types and tenures. Local authorities are in the best position to assess, on the basis of their local housing strategies, what their areas’ needs are.
As for how we contribute to building homes that are more sustainable and energy efficient, we are strongly encouraging developments to be built to a higher level of sustainability than the current minimum requirements demand. We offer an additional £4,000 subsidy per house through the affordable housing supply programme, so additional money can be accessed for houses that meet a higher standard of energy efficiency and sustainability.
All new homes that are built under the affordable housing supply programme will help to make a significant contribution to reducing greenhouse gas emissions, because they emit about 70 per cent less CO2 than an equivalent house built in, say, 1990. That helps not only to reduce emissions but to reduce fuel bills for people who live in those houses. From October next year, the improvement to new-build energy standards will reduce carbon dioxide emissions by about 21 per cent for new dwellings in comparison with current levels, and the standards will be slightly more demanding than the standards set across the rest of the UK.
I hope that that gives some sense of what we are doing. Our affordable housing budget is trying to get as many houses built as possible, but how we allocate the budget is intended to ensure that we get investment to where it is needed and in the way that is needed and that we build houses in a way that contributes to the climate change target requirements.
I will stick to energy efficiency. What investment does the Scottish Government believe is necessary to cut emissions while helping to eradicate fuel poverty? You mentioned that just under £80 million is dedicated to energy efficiency measures in the budget. Some witnesses have indicated that, although that investment is welcome, it is short of what is needed. Existing Homes Alliance Scotland referred to a figure of £125 million, and that was before we heard about the loss of funds for ECO measures to improve existing housing stock, which you also mentioned. We understand that some £50 million per annum has been taken off that ECO funding. There is an issue in relation to sustaining, maintaining and improving funding for energy efficiency measures in current housing stock. What is your response?
There have been changes to ECO and there are changes under way to ECO that, in a variety of ways, have complicated things and made them more difficult. Some changes have been welcome, but one of our frustrations is that we do not control the overall design of those energy efficiency schemes. I am on record as saying and I will continue to say that it would be far better if we were able to be responsible for and design those schemes ourselves. That would allow us to integrate and align them with our own activity much more easily and much better.
On the scale of funding, as I said, we are committed to spending £79 million a year through our home energy efficiency programmes. The key thing is that that investment is intended to lever in additional investment from ECO and other sources. We intend to create a combined fund of about £200 million a year. Exactly what that will be will depend on our success at leveraging in the extra money, but we have a good track record on that.
I have mentioned the recent statistics from the Department of Energy and Climate Change that show that Scotland is outperforming the rest of Great Britain on the delivery of measures through ECO. I will not go into all the stats again but, as I said, we have about 12 per cent of the measures although we have just 9 per cent of the households.
Investment under ECO, taken with our budget allocations for our energy efficiency programmes, the warm homes fund and the green homes cashback scheme, would indicate a total investment of about £260 million, which is in excess of the £200 million that I spoke about. That is what we have to spend and I think that we can do an awful lot with that.
As with any other part of the budget, we would like to allocate more if we had more. However, I think that I am correct in saying—if I am not, I am sure that somebody will correct me, if not today then in the future—that we are the only jurisdiction in the UK that is still providing such investment. Certainly England no longer has Government-funded energy efficiency programmes. Our commitment to £79 million of Government investment every year sets us apart from some other jurisdictions in the UK.
I hope that I am not talking out of turn in saying that the consensus on the committee is that energy efficiency in our homes should be a national infrastructure priority. I imagine that that will form part of our report on the budget.
I would welcome that, because I agree that it should be a national priority. In fact, it is a national priority, and some of the facts, figures and information that I have given suggest that we are doing reasonably well on it, if I can put it as modestly as that. However, if we had more responsibility for the design of a scheme such as ECO and were able to align it better with Government funding, we could do even better than we are doing. I hope that, in the not-too-distant future, we might have that responsibility.
10:45With that responsibility, we could also do something that I spoke about during the referendum campaign: we could decide to fund the main part of our energy efficiency programme not through energy bills but through central Government funding. That would take some pressure off energy bills and allow the funding to be secured more progressively than it is when the cost of it is put on everybody’s energy bill regardless of their income or circumstances. There would be many benefits to the Parliament having more responsibility in the policy area.
I have a supplementary question that follows on from the previous question on energy efficiency. It has been suggested in evidence that the green innovation funds could be used to greater effect to incentivise builders to go beyond minimum standards and provide financial support for smaller building companies. My question partly concerns the chicken-and-egg principle. For companies to energy proof the homes that they build by putting all the measures into them—which need to be reflected in the price—house buyers have to understand the benefits of buying such houses. The demand needs to exist, people need to understand the benefits and we need to use the funds better. How can we use funding not only to incentivise and encourage the building of greener homes but to educate people about the value of buying them?
That is a good question. Through our various funding streams, including the affordable housing supply programme, we are trying to incentivise house builders to go beyond minimum standards, although that was not the central premise of your question. In spring next year, we will consult on draft minimum energy efficiency standards for owner-occupied and private rented sector homes. Minimum energy standards can help to drive and stimulate demand for low-carbon homes.
We are engaging actively with stakeholders on the opportunities to increase demand to help to drive the market. That involves work with consumers to identify what matters to them when they buy a home and to raise awareness and understanding among home buyers of the benefits of buying low-carbon, energy-efficient homes, not only for the environment but in terms of the cost of heating their homes.
If the committee is interested in some of the work that is being done on demand stimulation and consumer awareness, we can provide some information on that. It is an important aspect of the work on energy efficiency.
I will develop the theme of the need to stimulate the demand for energy-efficient housing. Some of our witnesses have suggested that the Scottish Government should consider using its tax-raising powers to stimulate such demand by, for example, using the land and buildings transaction tax bands to incentivise energy-efficient housing, or using energy ratings as conditions in any help-to-buy schemes.
I am very open to considering how we design our schemes and use the powers that we have to improve energy efficiency and stimulate demand. The issue was discussed during the passage of the Land and Buildings Transaction Tax (Scotland) Bill. There were amendments to the effect that the tax should be used to try to stimulate the take-up of energy efficiency measures. The Parliament chose not to go down that road for a variety of reasons but, in general, we should consider how we do that. There are often good reasons why a proposal will not have the desired effect. That was our judgment on the proposals on the Land and Buildings Transaction Tax (Scotland) Bill.
Tax aside, we should be open minded about how we design energy efficiency schemes, fund house building and direct the resource that we have to stimulate demand and people’s appetite for taking up energy efficiency measures.
We move on to digital infrastructure.
We have spoken to expert witnesses over the past couple of weeks. Although there is a certain satisfaction with the level of investment in digital infrastructure, people clearly think that that is a field in which a little more could go a very long way. Cabinet secretary, are you convinced that there is sufficient investment in digital infrastructure?
I am satisfied that there is significant—and necessary—investment in digital infrastructure. You are well aware, because we have spoken about this before in the committee, that the vast majority of the investment that we are currently making is in the delivery of the two next-generation fibre-optic broadband projects that are being delivered by BT. Total public sector investment in the two projects over five years is almost £300 million—it is a significant investment—and, of course, there is investment by BT on top of that.
Further investment has been announced. Through community broadband Scotland, we are investing in community schemes in areas where next-generation broadband will probably not go. Those figures do not appear in my portfolio, for reasons to do with budget history. Although the responsibility for digital infrastructure lies with my portfolio, the funding lines are shown in the rural affairs portfolio.
There is significant investment in providing infrastructure. That investment is absolutely necessary, not least because of what it is doing to bring a backhaul network to many of our island and remote communities for the first time, but on its own it is not sufficient to deliver our 2020 vision of world-class digital infrastructure. Ahead of the current investment, we recently charged the Scottish Futures Trust with identifying technical options for delivering connectivity—any time, anywhere, using any device—and with exploring financial models that might be appropriate for future investment. Initial work is under way on that and an analysis of options will probably be available in spring, which will provide us with the basis for future investment plans.
As well as investing in the provision of infrastructure, there is a whole other issue, which is integrally connected, about how we increase and improve the uptake of digital infrastructure.
I do not want to dwell on my personal grief, which I have maybe mentioned to you—
Once or twice.
I live in the centre of a town that got high-speed broadband in a blaze of publicity two years ago, but I cannot get it, apparently because I live too near the exchange—
As I told you, we have deliberately excluded you. [Laughter.]
I suspect that that is the case.
My problem highlights the fact that people across the country have encountered a range of difficulties. What steps are being taken to improve access to the superfast fibre network for individuals and businesses, so that Scotland’s digital infrastructure potential can be realised in short order?
For the record, I should make it clear that we did not deliberately exclude Alex Johnstone—just in case in years to come people look back at the Official Report and think that we were a cruel Government. Did I write to you about your particular issue? I might be thinking of someone else.
I do not think that I have seen a letter from you on that.
I might be thinking of another letter. I will be happy to address the particular issue in your locality, in the fullness of time.
More generally, infrastructure investment is vital, because we cannot give people access if the infrastructure does not exist. Also vital is investment in looking at how we go beyond where the current investment will take us, to the parts of the country that are particularly hard to reach. In addition to our main investment there is top-up investment, which will help us do that.
We have increased funding for community broadband Scotland from £5 million to £7.5 million and are working with communities to look at bespoke solutions that will help them in their localities. We are also investing in demand stimulation, because there is no point in having the infrastructure if we are not equipping and enabling individuals and businesses to take full advantage of it. There is an on-going programme of work, from the provision of the infrastructure through to looking at the skills and ability of businesses in particular to take advantage of it.
My very strong view is that broadband infrastructure is as vital in the modern age as good transport infrastructure. Despite the investment that we are putting in, the geography and topography of Scotland inevitably mean that there will still be people who struggle to get the quality of access that those of us who live in urban areas take for granted. However, through our investment we are making a step change in terms of who and how many people will be able to access next-generation broadband, and that work is significantly ahead in parts of the country where the market itself would never have taken us.
My final question on this issue relates to some of our discussions on the idea that further regulation might be needed to open up infrastructure to competition. Is the regulatory environment in Scotland today adequate to take forward what we need to do, or in the longer term do we need to look at regulation to open up competition?
Are you talking specifically about digital infrastructure?
Yes.
Undoubtedly, improvements could be made. I do not want immediately to start banging a more-powers drum, but there is an issue here about the split of responsibilities: we have responsibility around fixed broadband, but mobile telephony is still largely the responsibility of the UK Government. On mobile telephony, for example, we should be able to pick up any signal anywhere. Lots of discussions are going on, not only with the Scottish Government but more generally, about how regulation in this area should develop. Undoubtedly, there will be different—and arguably better—ways to regulate in order to get people the best services.
I will follow up Alex Johnstone’s point. BT and the Government are saying that various communities are now connected to superfast broadband, but there is a disconnect between that infrastructure and people realising that they have to take a step themselves to get superfast broadband into their home. Is enough being done by the providers to encourage people to take that step and access the infrastructure that is being put in?
I hope so, but I am certainly very happy to look at that on an on-going basis. As I keep saying, having the infrastructure is one thing, but ensuring that people are accessing and using it is another. Of course, the infrastructure that BT is providing is open source, which means that people do not have to have BT as their provider and can use any provider.
As I said, I am more than happy to look at the issue. We are trying to be as open and as transparent as possible around the development of the infrastructure. For example, there is a website where people can look at progress. However, we must be very careful that we do not raise expectations in a particular community before the proper surveys and technical work are done to ensure that that community will be a beneficiary of the project. Our approach is cautious but open and transparent.
I am happy to look at whether people are getting enough information to be sufficiently aware of how to access the infrastructure, to see whether there is more that we can do, or encourage our partners to do, to increase awareness.
I have a question about future opportunities and innovative ideas. Can you highlight any innovative practice or programmes that the Scottish Government is considering for future investment or infrastructure plans that could contribute to meeting its greenhouse gas emission targets, tackle traffic congestion and support sustainable and active travel?
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There is a whole range of innovative approaches that we are trying to take across Government and in this portfolio in particular. I could run through a range of different innovative funding methods that we are using on house construction, which are not solely about reducing greenhouse gas emissions, but about how we get more houses built for the resources that we have available. In relation to greenhouse gas emissions, as the policies in RPP2 are rolled out and evaluated, findings emerge as to which are the more successful measures, which allows us to look at how we can be more innovative.
Technology does not stand still, so we need to keep abreast of it. The smarter choices, smarter places pilot study identified that mode share changes are achievable in targeted populations, so there is a further round of funding for that next year. That will highlight what we think are the most appropriate and effective approaches to take.
We are doing work on alternative fuels and are actively supporting the development of hydrogen as a fuel source. Aberdeen will soon see the first operational hydrogen-fuelled bus, and I understand that Aberdeen City Council already has two hydrogen-fuelled vans in its fleet. Mobile technology and the ability to use apps to plan journeys better, make use of smart ticketing and pay for services are other examples of how we are trying to be innovative, both in the way services are delivered to make them easier to access and in the way we encourage people to shift from cars to public transport and to use more fuel-efficient means of transport.
Those are just a few examples. I could send the committee information in much more detail about how we are trying to be innovative while ensuring that we are not left standing as technology moves on.
Thank you.
What are the Scottish Government’s likely spending priorities for the next two years in order to meet the GHG emissions reduction target of at least 42 per cent by 2020?
Our spending priorities for next year are set out in the budget that we are discussing. As I said in response to Mark Griffin’s question, at the moment, because of the UK spending review cycle, we cannot set out spending plans beyond one year.
Much of what I have been talking about today will form our spending priorities: making sure that the country has the right infrastructure to support sustainable economic growth; meeting our emissions reduction targets; ensuring that we are providing the houses that people need, where they need them, with the right mix of tenure; and making sure that we have a transport infrastructure that is both servicing our economy and supporting the shift in how people travel, which will further support our climate change obligations. Those are our broad priorities in this portfolio. How they will be supported by specific spending plans will need to wait until the other side of the UK spending review, so that we can set them out in the context of that knowledge.
You have mentioned the Government’s new borrowing powers, the 10 per cent allocation and the £304 million that the Government intends to borrow in 2015-16. How much of that will be—or has already been—allocated to infrastructure, and what projects will figure in that spend? I am not clear whether part of that is included under the level 2 financial transactions.
The borrowing capacity that we will have will support our overall capital programme, so it is not allocated to individual projects. Members will not be able to look at the budget and see that some of that borrowing is going to a particular hospital, road or school. That capacity is taken into account in the overall assessment of what we are able to invest across our capital programme.
The simplest way of putting it is to say that looking ahead to the borrowing powers has enabled us to increase the total level of investment that we estimate we can undertake during the period that we are talking about. That increased level of investment is reflected in the draft budget that the committee is scrutinising today.
It is important to stress that the borrowing powers are not limited to individual project finance. We will draw down the £304 million that will be available in 2015-16 as we require it. That resource will then sit with all our other available resources to support the overall investment programme that is reflected across the budget.
I have an additional question on housing, with regard to the increase in the level 4 figure for housing supply. The resource is expected to provide 6,000 affordable homes, of which 4,000 will be social rented homes, and it will allow the Government to continue to support innovative finance methods in the housing sector.
Do you have any more detail on the exact mix of the 6,000 homes that will be built? Help to buy has been very successful. Can you give some detail on the other types of innovative finance methods that you intend to use?
My response to the first part of your question is that the majority of the homes that will be supported through the affordable housing supply budget—which, as I have already said, is £390 million—will be social rented homes. There will also be homes for mid-market rent, and some opportunities for shared equity provision. The homes will be delivered mostly through grant funding but there will also be some loan funding, for our open-market shared equity scheme, for example. We also give guarantees through loan funding for the national housing trust.
An outturn report from the affordable housing supply programme will be available in due course to enable you to look back and see the exact mix. I cannot tell you now, looking forward, what the mix will be, but I have the breakdown of the figures for 2013-14, which shows that there were 7,012 affordable housing completions and, within that number, 4,368 social housing completions. That gives you a sense of the numbers, and in due course that very precise information will become available for future years.
The second part of your question was on innovative financing. You mentioned help to buy, which has been hugely successful. We will continue to support the scheme into next year, although we have made some changes to the eligibility criteria. I make no apology for that, as we have a finite resource and we want the money that we allocate to the scheme—it will be approximately £100 million next year—to help as many people as possible to access the housing ladder.
On other innovative methods, a substantial chunk of our funding for housing now comes from financial transactions via the UK Government. I would not choose to receive funding in that form, because it severely restricts what we can do with it—effectively, it is loan funding that must be repaid, and there are limits to how we can invest it. It is welcome in the sense that it is resource that we would not otherwise have, but I would rather just have straight funding that gives us proper flexibility.
Much of the financial transaction funding is being used for what can be described as innovative ways of funding housing. One example is the option of open-market shared equity, which we are seeking to extend. We have housing infrastructure loan schemes that are aimed at unlocking housing developments by offering funding for some of the related infrastructure development.
The national housing trust has been very successful, and we are developing, and will continue to look at, variants of that scheme that will be appropriate in different circumstances.
We have also invested in charitable bonds, which is ground breaking in many respects, to support construction of social housing and to finance some community projects. In addition, the warm homes fund tackles fuel poverty.
Those are all innovative ways of investing in things that we all want to invest in, and they help us to use the particular form of funding that is available through the financial transactions route, which is not as easy to use as straight grant funding is.
The financial charges for NPD and public-private partnerships are not stated specifically in the budget. Can you say how much of the infrastructure, investment and cities funding line is being spent on payments for NPD and PPP projects?
There may be more information that I can send to the committee about that after the meeting. There are no NPD payments in 2015-16, because none of those projects has got to the stage at which we have to make the revenue payments for them.
However, PPP contract payments are included in the 2015-16 budget line. For the IIC portfolio, those payments will amount to about £89 million in 2015-16. They relate to three transport private finance initiative projects: the M6 project, the M77 project and the M80 Stepps to Haggs project. That is the extent of PPP revenue payments. Also in relation to transport, the first payments from the current NPD investment programme will probably kick in in 2016-17 and will flow from the M8, M73 and M74 motorway improvements.
If the committee wants more information, I would be happy to provide it, but those are the headline figures.
I suppose that it is an on-going operation to try to find ways to reduce the PPP charges.
They are legacy charges that we have to live with. NPD is a far better way of financing infrastructure projects than the old PPP method was.
In my opening remarks, I referred to a very important point that comes into play here. We set a 5 per cent ceiling on any scheme—whether it is an NPD scheme, a legacy PPP scheme or a scheme that involves borrowing capacity—in which we are in effect borrowing to pay for it through our revenue budgets over a longer period of time. Therefore, no more than 5 per cent of our DEL revenue budget will be taken up by on-going revenue payments. That is an important discipline for us. We want to invest as much as we can in infrastructure, but we have to be mindful of the obligations that that puts on revenue budgets, perhaps for many years into the future.
Members have no further questions. Do you have any final comments, cabinet secretary?
No. I offered to send more information on a couple of items; we will follow those up. If there is any further information that the committee wants before concluding its report, we will be happy to provide it.
Thank you very much.
We are slightly ahead of time and will be joined by other members for the next session, so I suspend the meeting for a few minutes.
11:13 Meeting suspended.Next
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