Official Report 294KB pdf
Agenda item 2 is our main business today. I welcome our first panel of witnesses, as we continue our scrutiny of the Scottish Government's draft budget for 2010-11. We will hear first from BAA Scotland and the Scottish Chambers of Commerce. There will then be a panel of witnesses from the regional transport partnerships.
I would like to do so, if that is okay.
I will make a couple of initial remarks on behalf of the Scottish Chambers of Commerce. As members are aware, transport is one of the key issues for businesses throughout the country, particularly for members of chambers of commerce. We have spoken frequently about the importance of transport to our members. It is important that we develop our domestic and international connectivity. Scotland's economic future is largely dependent on our ability to compete not only at Scotland and United Kingdom levels, but on the global stage.
My initial question would have been to ask the witnesses to respond to the cancellation of GARL. Amanda McMillan has expressed extreme disappointment—I think that that was the phrase—with the decision and we have heard a similar response from other organisations. Will the witnesses elaborate on their responses to the decision, why they have taken the views that they take and whether they are able to quantify any impact that cancellation of the GARL project may have on business interests, job creation, Strathclyde or the west of Scotland as an investment location and the environmental case—such as it is—for the link?
It came as something of a surprise and a shock when we heard that the decision to cancel the GARL project was about to be announced. The Scottish Chambers of Commerce and our member chambers have supported the project for some considerable time. I remember giving evidence, on behalf of Glasgow Chamber of Commerce, to the Glasgow Airport Rail Link Bill Committee about three and a half years ago. GARL is an important strategic link in the Scottish transport network. It is vital for encouraging intermodal connectivity as well as for achieving a degree of modal shift in travel to and from the airport.
Can you offer any further information to quantify the impact, aside from the £300 million that you cited, which is not necessarily your figure?
Although it is not our figure, it is a reasonable and understandable projection of the economic benefit to Scotland of the airport rail link. Some 1,300 jobs would have been supported or created in the short term as a result of the project, but the long-term issues are most important to us. The project is about joining up Scotland and making sure that we are seen as a nation that is ready to do business abroad, which can only be good for businesses the length and breadth of Scotland.
I will keep my answer simple. The keys to growing the airport are the success of both the airport operator and the city and country that the airport serves. There is a unique partnership between the airport, the city and the country. For me, the cancellation of the project is a strategic disappointment as much as anything else. We made a commitment to do something that would have improved our standing on the world stage and would unquestionably have improved the product for people arriving in this country.
I echo what Amanda McMillan said. Having worked on the project for some time and having put in a lot of effort, we are extremely disappointed to move away from it. The strategic importance of the project was our main driver.
A couple of members have supplementary questions, specifically on the economic impact, I assume.
I have two questions. Witnesses expressed their disappointment in the decision and made the point—as I have elsewhere—that people coming to Glasgow or the west of Scotland for business or leisure these days expect a straightforward link between the airport and the city centre and the transport links there. What is the business position of Glasgow airport in comparison with Edinburgh and airports elsewhere in the UK? My understanding is that the Glasgow airport link would have provided Glasgow with a competitive advantage—or would at least have alleviated any competitive disadvantage compared with other airports. The link would improve the economic competitiveness of Glasgow airport.
In the short term, the decision has knocked the confidence of the city and, by default, that of the airport. The current pressure that we are under in running the airport is the same as for other businesses. In this time of recession, we are feeling the acute impact of the decline in passengers. Announcements on the scale of the decision not to go ahead with the airport link unquestionably knock the city's confidence, and the airport will not benefit from such a backward step.
Can the witnesses provide further clarification on the economic benefits of the rail link? Do the figures on economic benefit and jobs relate to the branch-line element that has been cancelled, or to the project as a whole?
I do not know whether the figures were for the overall project or for the branch-line element, but I can say that a direct link between the airport and the city centre would provide a number of potential business benefits. Given that one of Glasgow's strengths is in marketing itself as a destination city, the airport rail link would add strength to that bow and help Glasgow to achieve its ambition to be one of the world's leading business tourism and conference venues. All over the world, businesspeople almost expect an airport rail link when they arrive at a city to experience its conference facilities, so the link would be a massive plus.
I appreciate those comments. It might be useful to receive further written evidence to see how the benefits were split between the branch line and the whole project.
That is difficult to quantify. It is easy to look at it in terms of passengers from various areas of Glasgow who would not find the rail link to be the most convenient route, therefore they might use different routes. However, the figures on passenger usage are probably an underestimate, given that in every single example of infrastructure being built, it has been overused rather than underused. The passenger numbers are probably a fairly conservative estimate. The airport rail link is extremely important from a business angle. The link would probably be not so much about getting people from the city centre to the airport but about getting people into Scotland who need to get from Glasgow airport directly into the centre of Glasgow, which is where most people want to go.
I appreciate all that, but I was just trying to get an idea of proportions and percentages. We can debate the principles at length, but I just want to know whether there are figures on the proportion of passengers who would use the airport rail link. Does Amanda McMillan have any figures on that?
I think that we have some figures on that. If it is appropriate to do so, I will provide the actual figures in writing rather than—
That would be helpful.
However, I echo Garry Clark's comments. After arriving at the airport, people can spend 45 minutes travelling the short distance to the town centre. That is not a brand that we need, as an international airport.
I am sure that we will come back to the issue at some point.
I appreciate the offer of a written answer to the specific question.
I am happy to provide that.
There is time for a final supplementary question from Des McNulty, then we will have to move on.
My question is for Garry Clark. You said that you were invited to give evidence to the Glasgow Airport Rail Link Bill Committee, which was looking at the business case for the Glasgow airport rail link at that time. What is interesting about the way in which the decision was made, rather than the decision itself, is that there was apparently no analysis of competing alternatives. In a business context, I would have expected people to consider different options for securing the cost savings that were required and then to select the one that would be least strategically damaging, if I can put it like that. What is the view of the business community in Scotland, not so much on the fact that GARL has been cancelled, but on the way in which GARL was selected as the project to be cancelled because of what the Scottish Government is calling not an immediate but a longer-term problem with budget sustainability? The Confederation of British Industry made comments about that over the weekend, and I am interested in your view.
The announcement came as a surprise to us. We would have appreciated some discussion and debate prior to the decision's being made. Nevertheless, we understand the pressures that the Scottish Government is working under regarding its budget for this year and its budgets for future years. Those pressures will be shared by the United Kingdom Government and local authorities up and down the country. We know that the decisions that the Government has to make are not easy, but our view of this particular decision is that it was a case of, "Do we want this link or not?" A great deal of time, energy and expense had already been invested in developing the link, and businesses that we have been speaking to about it think that it is a great shame that the baby has been thrown out with the bath water.
Given the circumstances in which we find ourselves after several years over which the costs have nearly trebled from the original estimates, that we have passed the Climate Change (Scotland) Bill and are assessing how we work, that there is the credit crunch and a squeeze on our funds, do you think that alternative sources of funding could be found for the GARL project?
We are not in the habit of making that kind of decision—it is for the Government to decide. We would, however, have been happy to participate in any think tank that it established to consider other ways to make the project viable.
You have not thought about the issue, although the costs have trebled in some cases and more than doubled in others, compared with the original estimates. It did not pass through your heads that, if you wanted to go ahead with the project although the Government had less money, you might think about some other places where money could come from.
I do not think that we were afforded an awful lot of notice about the decision, so we did not have time to reflect in that way. In fairness, we were told about the decision and the total costs only through the parliamentary announcement. In our defence, we did not have enough time to think about such things—we were not forewarned in any way that the decision was going to be made.
It is more than a month since the announcement, so all of us have had time to think about these matters. Given that this is the budget process, are you able to suggest another source of money?
Not at this stage. I remind members that we are managing a business in very recessionary times. I have been pretty busy running my airport and trying to look after the connectivity of Scotland. I would not want people to think that I have not been doing anything in the past month.
Of course. We are attempting to preserve the reputation of the Scottish Government in tough financial times—that is why this discussion is taking place.
That is not what the committee is meant for.
That is not the committee's job.
I put the same question to Garry Clark.
The Government has decided to axe the project from its budgetary proposals. If it were to say that it wanted the link to go ahead but that the substantial and understandable financial pressures on Government were preventing that from happening, the business community would be more than happy to sit down with it to explore other means of funding the project, either from elsewhere in the Scottish Government budget or from third-party sources. We must all decide whether or not we want the link. We want it and are happy to discuss ways of making it happen.
Would you support the idea of seeking accelerated capital funding from the Treasury in London to help out?
That is one option that would be worth exploring.
I do not feel able to comment on the appropriateness of that option.
What impact, if any, will the cancellation of GARL have on the accessibility of Glasgow airport—first, to people in Scotland as a whole, and secondly, to people in Glasgow?
Without the airport rail link, Glasgow airport will be in the same position as it is today. I do not want to single out Glasgow airport—all of Scotland's airports have issues, to a greater or lesser extent, with connectivity to the road or rail networks. The decision not to proceed with the Edinburgh airport rail link has already been taken. Edinburgh airport also has issues with road connectivity, especially to the M8. Aberdeen airport has access issues. Inverness and Prestwick—
I agree that there are other issues. However, at the moment I am interested in discussing the GARL project, not the others that you mention, because they are not part of our budget inquiry. Presumably, the GARL project was set up with a view to developing Glasgow airport, which serves the rest of Scotland as well as Glasgow.
Absolutely. We must look to create the kind of transport connectivity that we want to see in a modern, 21st century European city. Most of our competitor cities in Europe have better connectivity than we have. We need to match and to push past them, in order to put ourselves in a competitive international position. We need to ensure that we have the best possible infrastructure to provide our businesses with the best advantages and to enable them to compete on an international stage.
I understand what you are saying. Amanda McMillan may be able to tell us where people go from the airport. Do more people go to Glasgow or do more go to other parts of Scotland, without travelling via Glasgow?
I will have to send the committee those statistics, as I have not brought them with me. Are you asking about people's final destination, after they have arrived at the airport? Without statistics, I would say that most people have to pass through Glasgow or go over the Kingston bridge after they have left Glasgow airport. Some people—tourists and so on—may go to Ayrshire or down to Loch Lomond, but the vast majority want access to the city.
The Clyde fastlink project has been suggested as a possible alternative, although it might not be an alternative in your view. Could it provide an alternative fast link into Glasgow?
We have not been consulted on fastlink; we have just seen some outline indications of what it might look like. That is not a criticism. We were not consulted because fastlink as proposed does not come to the airport. We have been preoccupied with GARL. It is absolutely understandable that we have not been involved with the fastlink project.
Thanks for expanding on that. Does Garry Clark want to add anything about fastlink?
We would welcome fastlink as an additional piece of the transport infrastructure jigsaw that we would like to be built in west central Scotland. It would be as much a part of the jigsaw as the airport rail link, crossrail and, ultimately, high-speed rail that will link us to English cities and the continent. It has an important role to play, but it is debatable whether it could replace the airport rail link.
Has any estimate been made of how teams, supporters and others will travel to Scotland for the Commonwealth games? Have any estimates been made about their points of arrival?
We have had some preliminary discussions with the various agencies involved, but I cannot put any statistics on the table just now to convey the scale.
It is important to know how much of a role Glasgow airport might play in that.
As a reference point, I know that we have played a significant role in most major events in the city to date, and I would not expect the situation to be any different with the Commonwealth games. However, I cannot give you the numbers right now. We can certainly try to give you some figures offline, if that is appropriate. The discussions are in the early stages.
It would be very helpful to get some information on that in writing.
Before I bring in Charlie Gordon to ask a brief supplementary question, I clarify for the record that the committee's objective is to give the Government's decisions a fair degree of scrutiny. The Government's reputation management is a matter for the Government. [Interruption.] I remind everybody that mobile devices should be switched off.
I want to pursue further the issue of access to Glasgow airport in the context of GARL not happening. Ms McMillan, a few moments ago you referred to a 45-minute road journey into the city centre from your airport, and you mentioned congestion on the Kingston bridge. I infer that you regard the M8 motorway as the main surface access to your airport. On congestion on the Kingston bridge, to be fair, the completion of the M74 motorway will relieve some of the pressure of traffic coming from the east, which crosses the Kingston bridge in a south-westerly direction. However, presumably you feel that, with the cancellation of GARL, there will still be major congestion on the section of the M8 between the south side of the Kingston bridge and Glasgow airport.
We very much welcome the M74 extension. We are making a financial contribution to that project, so we are great supporters of the M74. Speaking honestly, the extension will afford outbound domestic and business travellers from certain parts of the surrounding city of Glasgow greater connectivity with Glasgow airport. Their accessibility to the airport will definitely be enhanced by the M74. However, regardless of the M74, there will still be a problem on the M8.
Presumably, the number of passengers that GARL would have accounted for must now be factored into the additional capacity issues for parts of the M8.
Yes. As we see things just now, there is a gaping hole in the surface access strategy without GARL. We look to Government to see what the replacement for GARL is.
Ms McMillan and Mr Clark have already indicated that they were surprised at the GARL decision, and that they had no prior knowledge of it. Can you just confirm that for me and for the record?
Yes. I can confirm that Stuart White, our development director, received a phone call from the project manager of Transport Scotland 20 minutes before the budget announcement to confirm what was about to happen.
Likewise, we received a call a few minutes before the announcement.
Prior to that, when was your last positive meeting with GARL, with your partners? Can you recall? Was it a matter of weeks or months? Was it six months?
From my records, I know that I had a meeting with Bill Reeve at Transport Scotland 10 days or so before the announcement. That was the last contact that I had before the announcement. It is difficult to say whether that was positive or negative—it was not clear. It was explained to me at that point that the review had been completed and recommendations had been submitted to ministers, and that we would receive a decision and would have no more requests. When I pressed the question, "What is the recommendation?" I was told that I could not be told that. It is therefore difficult to say whether the meeting was positive or negative. Obviously, in the light of future discussions—
But there was no attempt at that stage to look at alternative solutions.
No, not at all.
Were you told the nature of the review? Were you given pre-notice that the project was actually under review?
Yes.
What were you told about the review process?
We were told in June that, due to concerns about escalating costs at the airport, ministers could not sanction the go-ahead of the fuel farm and that a review would be conducted. We were subsequently told that that was a standard gateway in any project of that scale.
But the minister in the meantime—
Des, if you have a supplementary question, please wait until the member who is asking questions has finished. Alison McInnes has another question.
My apologies.
Thank you, although I had been about to ask the same question that Mr McNulty asked. If he wants to finish that line of questioning, that is okay.
As I remember it, the minister was explicitly asked in June or July what the position was, following his refusal or unwillingness to sign off the contract that you had already agreed with a contractor. What did he indicate at that time? What was the response from the minister?
Throughout the summer, we were reassured by people that it was a normal process of review. To be honest, with that scale of public money being committed, I saw no reason to dispute that—it seemed appropriate.
The Scottish Government told members of the Scottish Parliament in writing that, at an early stage of the GARL project, BAA opposed a cheaper and simpler routing for the railway within the boundaries of your airport. Will you explain your reasoning for opposing that original alignment?
I reiterate that the opposition is well documented in prior correspondence. I might not represent it absolutely accurately, but at the time we discussed at length the inappropriateness of that routing. To give a simplistic description, it located the railway and the main station right down the centre of our forecourt. For those of you who are familiar with Glasgow airport, the centre of the forecourt, where the terrorist incident happened, is where the station would have been. The location is at the heart of the airport.
Was your master plan approved and endorsed by the transport authorities and the minister?
That was before my time at BAA, so I ask Stuart White to confirm the process.
It was draft at that stage.
But it had general support across—
It had been through the usual consultation process and we were finalising it at that stage.
Okay. Clearly, that was early on in the process. Did the Government accept your reasoning at that point?
Yes, I think so, and we moved on very positively. My point is that it is a wee bit unhelpful to discuss the rerouting now, because to my mind that was put to bed some time ago. I do not think that it could be used—
So it is disingenuous to raise it now, given that all parties clearly agreed that there was another solution.
Yes.
I will allow a brief supplementary question from Shirley-Anne Somerville. However, I remind members that we have another panel of witnesses to get through after this one, so we will have to make slightly more rapid progress.
I have a small question on the timeline. In which year was the draft master plan considered?
It came from the process of the 2003 Government white paper on aviation, which asked us to put in place a master plan by 2006.
The Scottish Government told MSPs that the cost of reproviding the aviation fuel farm at quarter four of 2004 prices was estimated to be £3 million and that BAA had input to the calculation of that figure. What was BAA's involvement in the calculation?
I do not subscribe to that view. The £3 million figure was not put together by BAA. That estimate was created by the undertaker at the time.
Our technical input was on the location, not on cost.
I see. So you do not recognise the £3 million figure at all.
I recognise it from correspondence—it is clearly cited in a lot of the legacy documentation as an estimate—but I do not believe that we worked on that figure. We discussed the location of the fuel farm. Some of the documentation describes that as technical input. My understanding is that the figure is an estimate by the undertaker. Our technical input—if that is how people want to describe it—was working with others on a suitable location for the fuel farm.
So you gave Transport Scotland purely technical information about how to relocate the fuel farm and what the specification would be, but you did not have any idea what the cost might be.
The specification also came later. Our only technical input at that stage was on the location.
I will allow a brief supplementary from Rob Gibson.
You mentioned the undertaker. Was that Strathclyde partnership for transport?
Yes, at that time.
When the Glasgow Airport Rail Link Bill received royal assent, the cost of GARL-related work at Glasgow airport was estimated at £7.8 million. What involvement did BAA have in the calculation of that figure?
Once again, I believe that to be the estimate of the undertaker at the time. In respect of the £3 million that you mentioned earlier, we had the same role, but the rest of the estimates came through the evidence that we gave during consideration of the bill.
By the time that Transport Scotland took over the project, which I think was in March 2008, the estimated cost of the GARL works had increased to £16 million. Can you explain the increase from £7.8 million to £16 million and outline BAA's involvement in the due diligence process that accompanied the handover of the project to Transport Scotland?
On the total cost estimates—as I said in my correspondence, which you have seen—BAA was not the undertaker for the project. I want to make it clear that we did not contribute to creating any total cost estimate for the project, whether it is the one that is on the table now or one that was given earlier. We did not add the figures up and put that cost on the table, so it would be inappropriate for me to say what I thought of the figure of £16 million or how we contributed to it. We participated—as we have done throughout the project—in providing technical guidance on the questions that were asked about moving property A to a separate place in the airport. That is our role. Our role is to work with the undertaker to move anything that is in the way of the railway. I understand that members will feel frustrated by this, but it is not our role to calculate the cost; our role is to say, if the service provided on plot A is moved to plot B, what needs to be reprovided. That is the technical input that we give. We do not sit down and cost that; the undertaker does that. Our involvement in due diligence at all the major junctures, including at the handover point, was in relation to the investigative works. I feel strongly that it is important to explain to the committee that we did not work on the total costs of the project—that was not our role.
I understand that, but the point remains that at the time of the transfer in March 2008, a due diligence exercise was undertaken by Transport Scotland—I presume by people who had responsibility for getting to the bottom of what the project would cost. They would have had full access to the draft master agreement that was in place. I believe that there is also a development agreement—I am not sure of the date on which that was signed, but I think that it was round about that time. I would appreciate it if Stuart White told us when it was signed.
All I can say is that I believe that the initial figures were estimates and that as more work was done, the estimates were revised.
After the Buncefield disaster, people who run fuel farms were required to work to different standards. Was there a requirement on you, as an operator, to change the way in which your fuel farm was run? If so, had you anticipated the costs of doing that? In that context, did you feel that it was reasonable for all the costs of changing the fuel farm to be part of GARL and for the airport not to contribute?
I point out that the documents that have been presented to the committee refer to "an enhanced fuel farm", so I should clarify what we are talking about. The fuel farm services 30 airlines, supplying 1.8 million litres of fuel every day. It is fundamental. It is like a huge filling station. The word "enhanced" refers to putting larger storage tanks into the fuel farm—they have been doubled in size. The documents that have been presented to the committee do not make it clear that that is what is meant by "enhanced". The only thing that has been commercially tendered and referred to as being enhanced is the increased storage capacity for fuel. The papers also do not state that BAA is paying for that—£2 million of the tendered cost of the fuel farm is being supplied by BAA. That represents a cost that was agreed with the undertaker and the parties that are tendering for the project as the cost of enhancement, which is to say, increasing the scale of the tanks. I want that to be clear, because I think that people have been thinking of enhancement in terms of marble floors and chandeliers. This is a practical fuel farm that has to sustain our operation.
When the bill was passed, the estimated cost was £7.8 million. Later, SPT handed over about £16 million, and this summer, in the discussions that you had with Transport Scotland, the estimated cost rose to £37 million.
For the fuel farm?
For the fuel farm and the capital and associated compensation.
I can provide you with a written summary of the fuel farm costs. However, we have no involvement in the compensation claim; that is between Transport Scotland and Pentland Aviation Fuelling Services. I appreciate that that is in the papers before you, so you are quite right to add that figure in.
Thank you for that clarification.
Assuming that the Scottish Government's decision to cancel GARL still stands, will you go ahead with the fuel tank enhancement at the existing fuel farm?
We will review our position and make a decision about how we can deal with increased passenger numbers. However, although we have not yet revised our thinking in that regard, our position is that our fuel farm does not need to be replaced yet.
The decision would be made and the cost would be borne by BAA, regardless of whether the GARL project goes ahead. Is that correct?
Absolutely. We would discuss with Pentland, the fuel farm operator, how we would deal with future growth in the airport and the required increase in fuel farm capacity.
I will ask about the series of escalations of the cost of the fuel farm. I understand that, as you say, BAA was not involved in those calculations. However, you say that when the earliest, lowest cost calculation was made, you expressed concern that the suggested funding was inadequate. You say in your letter to us:
Yes. We had expressed concerns since early in the new year. The concerns that we raised in our discussions with Transport Scotland at the start of the year were about pace, the need for closure on the estimates for the other items and the need to stick to programme. We repeatedly asked whether the fuel farm not going to plan and not going ahead would knock out the whole programme. In informal discussions with ministers outwith Transport Scotland, we kept asking at any opportunity whether the project was still on track. We were led to believe that the review process over the summer was normal and that a decision would be made once the total costs had been accumulated.
So although you were not told of the decision until just before the statement was made, you already had the feeling that the project was in trouble as early as just after the new year. Is that correct?
I am a chartered accountant by trade, so we most definitely asked what it meant for the project that the fuel farm had ended up being quite expensive.
We have discussed the £70 million figure at length, but I will ask about a couple of other points regarding that. When the Glasgow Airport Rail Link Bill went through the Parliament, an amendment was made to afford BAA protection from compulsory purchase. I am keen to get a bit more detail on that so that we can talk through its implications and any impact that it may have had on costs, because we are working on the assumption that everything would have to be passed without objection from BAA.
I am sorry, Shirley-Anne, but I am not entirely sure what you want me to comment on.
A provision in the Glasgow Airport Rail Link Act 2007 ensures that no land can be compulsorily purchased from BAA. That obviously puts the company at an advantage when we talk about any changes to routes, because they have to be agreed without objection. Will you comment on that provision?
I have never been led to believe that we have abused those powers in anything on which we have worked with Transport Scotland, if that is what you are driving at. Are you saying that we were obtuse about where something was to go or that we used the power to our advantage? If so, that has never been raised with us in our work with Transport Scotland. We have worked very collaboratively on appropriate relocations for various businesses within the campus and there has always been a sense that the agency was comfortable with the places that were identified within the campus, so it has never felt like a compromise or as though we were abusing any powers.
I would certainly not accuse you of abusing the power; I am just asking you to detail its implications and discuss whether it limited the options that were considered.
The master agreement did indeed remove compulsory purchase, but it was there as a backstop, in that a test of reasonableness was implied. Compulsory purchase was therefore always available to Transport Scotland as a backstop.
There were reports in the media—of course we always believe everything that we read in the press—that Transport Scotland tried to pass responsibility for GARL to Network Rail early in spring 2009. Can you comment on those reports?
There were many rumours, but that was not one to which we were privy.
As you said, BAA has put much time and effort into the project. Can you give an estimate of how much money BAA has spent to date?
I will let Stuart White comment on the total figure, but first I want to ensure that everyone understands the point of principle about how we structured ourselves. BAA is not a huge employer of people at the airport; we employ about 460 of the 5,000 people who are employed on the campus. I do not have a leadership team that could pick up and run with a project such as GARL. Therefore, any time spent on the project has been spent by a discrete project team that was pretty much created to work on it. With the exception of one or two members of my leadership team, such as Stuart White, who has given a significant amount of his time to the project, the individuals who have worked on the project have been experts who were brought in to do that work.
At the time of the cancellation announcement, the invoices were £1.5 million towards the fuel farm—that involved the design team, so it was already built into the fuel farm figure that Amanda McMillan mentioned—and another £1.5 million, which was the consultant time to run the project.
For clarification, by "invoices" do you mean the money that BAA has spent on the people involved in the project team, which has been invoiced to and paid back by Transport Scotland?
Scrutinised and paid, yes.
I emphasise Stuart White's point. In the summary documentation for the committee the £1.5 million for the fuel farm is potentially double counted, because it is in the £30.9 million to which I referred. Those design costs are included in the cost of the fuel farm, but further down the table there is a higher number, which we believe also includes the figure.
We can get clarification on that.
We will move on to wider issues, if members are ready to do so.
Does Garry Clark think that the current Scottish budget strikes the correct balance between transport capital expenditure and revenue support for transport operations such as concessionary fares?
One thing that the budget does is to bring some areas of expenditure under even greater scrutiny than usual. There is no doubt that the overall transport budget for next year has gone up marginally in cash terms—although perhaps not in real terms—but we need to consider the priorities in the budget.
So you would support stronger investment in capital rather than in revenue.
Yes.
Okay. To continue on that route, do you think that the Scottish Government is investing enough in the upkeep and improvement of trunk road networks? If not, what level of investment would you consider appropriate and how could the budgets be used to provide that investment?
Successive Scottish Executives and the Scottish Government have maintained a fairly healthy level of investment in our road transport network. Currently, we have on-going issues with the completion of the M74 and the M80, which are both vital projects. Previous Executives have invested in areas such as the M77. We have an idea of the areas in which work still needs to be done through the strategic transport projects review, and we should perhaps consider how we prioritise those areas. The M8, A9 and A96 are the obvious priorities, as they join up our cities.
Are you concerned about the lack of prioritisation in the strategic transport projects review? It is a wish list, if you like, but I am interested in how you feel about that list.
When we contributed to the then Scottish Executive's development of the transport strategy for Scotland, we envisaged something that would go beyond the year-to-year budgetary settlements—something that would identify exactly what we wanted in Scotland's transport infrastructure and determine how we would get there item by item, stage by stage. That is the prioritisation that we would like to see over a long timescale. The strategic transport projects review and the transport strategy are a great start in getting there, but the review probably does not contain the level of prioritisation that we would like in an ideal world.
Do you think that there is a need for additional Government support for the freight transport sector? If so, can you explain why and what form that support could take?
One thing that is noticeable in next year's draft budget is a reduction in freight facilities grants from £15 million to £10 million. Our members have not made too much of that this year, but they are concerned about the potential for a low base in future years. We would like that to be reassessed in years to come, as we move onwards and as the economy moves out of the recessionary stage—which we are possibly still in, depending on which figures we read.
Have your members discussed the importance of being able to link up the freight facilities grants? If a grant is available in one area but not in another, the infrastructure and gauge will not be right and there will be no interaction between the two areas.
There is certainly a view among many of our members that freight facilities are unevenly spread throughout the country and require broader investment. Our members flagged up strongly the need for freight facilities grants to be available to joint ventures involving companies that are seeking to develop one site for both their businesses.
I will follow up on a couple of those questions. Do you have any suggestions as to where the additional investment that you have called for should come from? It would come from elsewhere in the Scottish budget, presumably.
That will be the big question for Governments at all levels during the next few years. We do not underestimate the challenges that the Scottish Government faces in relation to the real-terms reduction in the budget for this year. Who knows where that may lead in future years? The question of where the money is to be found is very difficult to answer in the short term. The underspends that might exist in some departments could be reallocated, but I am sure that every department is spending to its absolute limit at the moment.
You mentioned the involvement of the chambers of commerce in the development of the transport strategy that was adopted by the previous Administration and retained by the current Administration. According to that document, one of the key strategic objectives in transport is the reduction of greenhouse gas emissions. Can you identify any aspect of the Government's transport spending that is likely to result in a reduction in greenhouse gas emissions on anything like the scale of the increase in emissions that will result from some of the projects—such as the M74 and other road schemes—that you have supported?
We have to examine specific areas. I have mentioned the Stirling-Alloa-Kincardine rail line, which has doubled its projected level of passenger numbers in the very short time that it has been in operation. The Scottish Government is also investing in projects such as the Airdrie to Bathgate rail line that are vital if we are to achieve the modal shift that we need and if we are to join up Scotland as an integrated transport network. Certainly, from a business point of view, we want Scotland to be joined up internally and externally, and we want as much investment in and encouragement of the use of public transport as possible.
Is it not likely that such public transport schemes will enjoy good levels of use alongside rising road traffic levels?
That is an interesting question. If I asked our members which mode of transport is most important to them, the answer would be road transport every single time. They need road transport to get goods to the market, get people to work and so on. We need to move towards more sustainable methods of transport in the longer term, and we need to ensure that we invest in our railways and public transport services in particular and continue to invest in getting as much freight as possible on to the railways. There have been big improvements on the A9, for example, and Tesco and other organisations are taking a greater amount of freight up north by rail, but we need to keep on pushing on that. There is a lot more that we can do.
We have spent most of the past hour talking about how a particular element of the Glasgow airport rail link project escalated in cost by a factor of 10. I think that we all agree that the best that we can hope for is a real-terms freeze in transport budgets over the next few years, although there might not even be that. Obviously, there is a yawning chasm in the middle of transport expenditure.
We would certainly expect the Government to do all that it can to ensure that the taxpayer gets the best possible value. However, taking the Glasgow airport rail link as an example, that project was agreed by the Parliament as part of the national transport strategy and the national planning framework, and the business community overwhelmingly, or even universally, supported it. If we decide that we want to go ahead with such projects, we need to decide how to do so. We should decide that we want to do something and then decide how to do it. We cannot afford always to stick projects to one side whenever problems arise; rather, we need to consider matters and explore opportunities for new and innovative funding mechanisms in order to make projects happen.
I was going to ask whether you have any suggestions about how Scotland's transport budget could be better spent, but you have touched on that. Could the way in which we raise money for capital projects be improved? Would moving away from wholly Government-funded schemes such as GARL be a way of protecting ourselves from the weaknesses of structural problems in Government expenditure?
Given that, as we all expect, Government will have less and less revenue to spend over the next few years, the unavoidable fact is that we must consider different funding models, and the Government, the public sector and the private sector will have to work more closely in partnership to deliver some of the projects that we absolutely need.
If the witnesses have no final comments to make or points to raise that have not already been touched on, I will simply thank them for taking the time to answer our questions. Their comments and points will assist us in our questioning of the cabinet secretary at next week's meeting.
Meeting suspended.
On resuming—
We will now hear from another panel of witnesses, as part of our budget scrutiny. I welcome Derick Murray, director of the north east of Scotland transport partnership; Eric Guthrie, partnership director of the Tayside and central Scotland transport partnership; and Alex Macaulay, partnership director of the south east of Scotland transport partnership. Thank you for joining us to answer questions. Would you like to make some opening remarks before we begin questions?
Rather than take up the committee's time before questions, I refer members to the note that I have provided on the issues that are of concern to me as director of SEStran.
A number of the issues that we would normally have raised are covered in Alex Macaulay's submission. That is true of all three of us. I apologise for not submitting written evidence; the timescale did not permit that, as I was away. I am happy to proceed to questions.
Many thanks. I turn to some of the background issues. Earlier this afternoon, we spent some time discussing the cancellation of the GARL project. We are also aware of future constraints on spending that may arise either as a result of diminished budgets or as a result of major projects such as the additional Forth road bridge. In that context, what are the challenges for transport policy makers regionally and locally in the next few years?
I will kick off. The committee has heard other witnesses say that in the current climate the Scottish Government does not have an easy task in producing a budget for the Parliament. As regional transport partnerships, we face circumstances that may be unique. Members may recall that my last appearance before the committee two years ago took place immediately after the budget announcement that shifted capital budgets from regional transport partnerships to local authorities. We have also had the concordat, single outcome agreements and the removal of ring fencing from budgets.
Regional transport partnerships are—at least in theory—composed of a collection of local voices, but you say that spending constraints would be more likely to have an impact on strategic regional objectives than on the transport elements of your local authorities' single outcome agreements.
That has been SEStran's experience in the past 18 months or so. Over and above that, I suspect—although I have not done the analysis—that changes are being made in local priorities, which are moving away from transport to social services and other pressures on local government spending.
There are some similarities between us and what Alex Macaulay said about the SEStran area, but you will not be surprised to hear that we are all different. Our equivalent of the statistic that Alex Macaulay quoted is that we receive just under 60 per cent of the RTP capital grant that was allocated to the partnership prior to 2007-08. The money is still coming through into what we define as a joint regional transport strategy programme and is roughly £1.98 million a year.
The situation in the north-east is slightly different in that 100 per cent of the money previously spent is currently spent through Nestrans. The money that was allocated to Nestrans previously by the local authorities is still there. A good reason for that is probably that a lot of work has been done locally by the Aberdeen city and shire economic forum. The forum is a public-private enterprise that was set up to bring together the local authorities and the private sector. It has produced a business and economic manifesto based on achieving the Government's priority of sustainable economic growth. The manifesto sets out seven priorities, the top two of which are an integrated transport strategy and quality of life in the north-east region. The work that has been done to identify those major priorities for the north-east keeps transport high on the agenda for the local authorities.
You have spoken about the impact of the changes in funding. I have said before in this committee that we should review the impact of the withdrawal of the capital funding. If we combine that with the future constraints that we are talking about and the focus on the Forth road bridge and other major projects, there will be a potentially disastrous gap between ambitions for your areas and delivery. Surely it is not only a matter of things slowing down. Do you have a sense that you might have to review your strategies comprehensively in order to be able to take things forward?
I think that you are right. The past is the past and we can live with and deal with it; the challenge for us is the future. On the major projects that were identified in the strategic transport projects review, we all know that there are some big chunky spenders in the first few years. The net effect of that is that there will be virtually nothing left, other than the big four projects, until 2016. In effect, that means that Transport Scotland's ability to work in partnership with regional transport partnerships to move forward on the wide range of other good projects in the STPR is very limited.
I take the view that we have begun to address Alison McInnes's point in the way that we have aligned our strategy. As the committee will be well aware, all RTPs reviewed their strategies during 2007-08 and, in effect, stripped out the interventions, which were placed in separate delivery plans. That is what I referred to earlier—I heard the reaction from members—when I mentioned that we intend to deliver £303 million of the £985 million of projects, given current levels of expenditure. The strategy is subject to the statutory review that Alex Macaulay mentioned. We have also tried to align the strategy with the strategic development plan and with local development plans, so tactran faces many of the same issues as SEStran.
Let me give the north-east view.
I am interested in the discrepancies in funding from local authorities between the three different partnerships. Derick Murray said that 100 per cent of the previous funding for Nestrans still flows through, whereas Eric Guthrie said that tactran receives 60 per cent of previous funding and Alex Macaulay put the figure for SEStran as low as 42 per cent. Those are significant discrepancies, which are perhaps explained by the differences in the partnerships. Mr Macaulay has eight different councils to negotiate with, which means trying to make his organisation's presence felt in eight single outcome agreements. Mr Guthrie has four different authorities to deal with. Can you talk a bit more about the impact of that kind of negotiation on your staffing resources?
I think that it is intrinsic in the establishment that we have. My staff resources have been frozen since 2007—there has been no change. One of the major differences between our partnership and the other partnerships is that, at the outset when the budget change took place, my board and I took the view that we would not transfer all the budget that the local authorities had inherited from the regional transport partnership back into the regional transport partnership. At that time—it is still the case, to a large extent—the projects that we sought to see delivered with that money were projects that the local authorities had been developing for the past 10 years. They had the designs for them and knew the projects inside out, and they would have delivered them anyway. I did not want to pull the money back into SEStran only to give it back to the local authorities to deliver the projects. You could argue that that was naive of me and that, in retrospect, it would probably have been better for me to pull the money into the centre and deal with it in that way, but we did not do that. In the SEStran region, we have trusted our partner authorities to deliver what they have agreed to deliver within the delivery programme of the regional transport strategy. I think that they will deliver those projects, but they will probably not deliver them in the timescale that we all envisaged. I think that they will get there, but it will take a lot longer.
Could the Government implement any policy initiatives or changes to assist you in dealing with some of these risks and threats?
We are probably more in need of a change in priority than a change in policy. There has been a lot of discussion about funding. Like our colleagues in Nestrans, we have aligned our regional transport strategy pretty well with the national transport strategy. There is not much space between them; indeed, I believe that they are very complementary. We have also carried out the downward alignment between our strategy and councils' strategies, and that work is now embedded in the single outcome agreements.
I will do what Eric Guthrie did and answer the two questions at the same time, if I may.
I appreciate the level of detail that the witnesses are going into, but we have a number of issues to get through and, if we get three detailed answers on each question, we will find it hard to make progress.
I am not advocating a return to ring fencing, but I infer from what Mr Murray said about the bus route development grant, which was a three-year revenue facility that was disaggregated to local authorities, that that money has been spent by local authorities on other things—not necessarily transport-related.
I understand that that grant was identified for the projects that had been agreed. The money was used to follow through those contracts, and I am unaware of any new contracts being put into place. The money was in relatively small amounts, and where it currently sits within local authority funding—
It was disaggregated so, in the time-honoured phrase, it is in there somewhere.
It is in there somewhere.
Mr Murray, you said that the Aberdeen western peripheral route was one pre-2012 project that was part of your strategic plan. However, we are now coming to the end of 2009 and we still do not know what the minister's decision will be. In your professional judgment, is there any way in which that road can be built to the 2012 timetable?
I sit here with the same degree of anticipation as you with regard to the minister's announcement. I assume that he will be looking at the timetable.
Can I press you on that? If the minister were to make an announcement next week, bearing in mind the stages that would have to be gone through before construction could start, is it realistic to say that that project could be up and running on the current timescale, which has a target date of 2012?
It would be reasonable to expect a project of that scale to take three years to construct.
So there will be at least a one-year delay, following simple mathematics.
I add a caveat to this answer by saying that it is from Alex Macaulay and not necessarily from the SEStran board, which you will know is made up of delegates and representatives from the local authority partners, who I suspect would not wish to see the re-establishment of the sort of integrated regional body that was described.
I will be a bit more specific. When you talked about where the money is going from and what is not getting done, I think that all three of you talked about specific transport projects. Can you point us in the direction of a service approach? Are we losing out not on big projects but on the development of local bus services, the introduction of demand-responsive transport and the development of local and regional rail services?
I would have answered that question earlier, when responding to Alison McInnes, but the convener hurried us on.
I tried.
We all know that the public sector has difficulty committing to long-term revenue spending, which is a big issue. It is easier for it to commit to capital spending, because it can see an end to paying back the debt. Long-term revenue spending is a different issue, but changing hearts and minds and attitudes towards travel has serious implications for revenue spending. In my view, the focus must be on how we achieve modal shift. That can be done through the smarter choices agenda and the travel planning agenda. It is disappointing that at the end of this financial year the central travel planning budget for regional bodies will dry up to nothing, as it will be initiatives such as it that change people's attitudes.
I understand that it was made clear from the outset that the travel planning budget was for two years, so it can come as no surprise that it is ending at this point, although I understand your disappointment. What moves were made among the partners to try to ensure that funding continued in a different way for something that was such a success? Were attempts made to find alternative sources of funding? Are other authorities continuing that because they have seen that travel planning has been a success and they have had two years' notice that it was coming to an end?
As far as my own authority is concerned, I have reallocated funding from other areas towards the work that the travel plan officer is currently doing and was doing more intensively in previous years using the Scottish Government budget. Other areas of investment have taken a hit within a very limited revenue budget, and I have moved money to sustain investment in travel planning within the SEStran budget. It is a high priority for us, and the best thing that we can do in the circumstances is to reallocate funds to it from within our own budget.
I will turn to the national transport objectives. What are the implications of constrained public spending on the ability of regional transport partnerships and local authorities to contribute to things such as, first, the national strategic target or indicator of achieving modal shift on journeys to work and, secondly, the national transport strategy strategic outcomes—in other words improved journey times and connections, reduced emissions and so on? Can any of you answer in terms other than those that you have put on the record today?
I will respond very briefly, because I know that I have said more than my share today.
My answer will be briefer than Alex Macaulay's brief answer. We have a number of projects, which we think will come off during the next few years. Beyond the major schemes, we have many other projects, which are mainly bus based. Most of Nestrans's budget is aimed at enabling us to lock in benefits from major schemes. We have done the work to learn what opportunities will be created for us when the major schemes are in place, and we have included that in our delivery plan. We have a period of major investment in and around the Aberdeen western peripheral route, followed by much more localised investment in projects such as bus priority measures, to increase opportunities for modal shift.
I will be equally brief. Modal shift is probably the area to which we have given most focus during the past couple of years in our revenue and capital programmes, and we will continue to focus on it next year. I mentioned the importance that we attach to park and ride. We are also developing local rail services, and we have submitted to Transport Scotland the Tay estuary rail study, on which we worked closely with Transport Scotland and Network Rail.
You have touched on issues to do with the climate change targets, about which I was going to ask. We can see where you are coming from in that regard. The contribution to sustainable economic growth was mentioned. Now that we are trying to get out of the crunch, it might be necessary to revisit the priorities in the transport budget. We have talked about a shift from capital to revenue on a small scale; what other approaches stick out as being potentially helpful?
I talked about reprioritising some of the quick-win projects in the STPR. Such opportunities in part take account of the financial constraints that exist. Tactran has said that it would support advancement of such projects as a way forward in the financial circumstances that we face, which would also contribute to the environmental objectives that you referred to.
Some of my questions have been answered, but I want to explore a couple of matters. Alex Macaulay suggested that we need to consider better approaches to concessionary travel. How could the scheme be tightened up in a way that would benefit the people who use it?
The concessionary travel scheme provides an excellent service to passengers. I cannot see how it could be improved for passengers; it is great for them. However, we need to tighten up the scheme's internal management, by considering the levels of remuneration that go back to the bus companies. The provision of free travel to a sector of society generates additional travel—the concept of price elasticity of demand is well known. If we generate more travel, and if that travel is remunerated on the basis of the full undiscounted fare, as I think that it is, it can be argued that the public purse is not getting best value for money.
Alex Macaulay is right. The legislative position in relation to concessionary travel is that the subsidy is provided to the user and not to the operator, who should technically be no better or worse off. However, I think that, at the end of the day, the transport industry considers the concessionary payment to be revenue—bottom-line revenue, as it currently stands. My concern, and my one reservation with regard to what Alex Macaulay said, is that a reduction—if that were to be the consequence of any review of the operator reimbursement—could put at risk the existing operation of the public transport network, which would be a fundamental issue for RTP and RTS strategic objectives.
The transport budget is dominated by a limited number of substantial spending lines. Is there scope for redirecting spending from large capital projects towards a number of smaller-scale projects that might have more impact? For example, a Grangemouth transport hub might make a substantial difference. I refer to projects such as that.
That is a leading question, Cathy. You were looking at me, were you not?
If I hear you correctly, you are talking about projects that have not already started. A number of existing projects would be enhanced if they were to be prioritised; that is what I am interested in. I use Grangemouth as an example, but there are other projects. It seems quite expensive, but in the grand scheme of things—compared with building a Forth bridge, for instance—investing in what is there already would make a substantial difference. I am interested in the prioritising.
I know that you are interested in that, and I am deliberately not responding by saying, "Cut such and such a project and invest in something else."
I am not asking you to do that.
That is not for me to decide; it is for the committee to make a recommendation to the ministers on that.
I am not necessarily arguing against it—I am using it as an example.
At the risk of labouring the point, I return to the strategic transport projects review. Glasgow airport rail link has been cancelled, and there will probably be slippage in the delivery of existing capital infrastructure projects. The prioritisation of the new Forth crossing contributes to the general anticipation of future constraint on the funding of transport spending. I had intended to ask you about the implications for the 29 projects that are set out in the STPR, and your specific local and regional concerns, but I think that you covered that issue in response to earlier questions.
It is an inevitable consequence of constrained budgets that the delivery programme will extend. My perception—others might correct me if I am wrong—is that we do not know what the priorities are in the STPR at present. Those priorities have not been established.
If they are all priorities, there are no priorities.
Aye. We do not have a programme to extend. We have an indication from the minister of how long the STPR is intended to cover, but when we are tight on budgets, it is inevitable that the programme will extend. However, we really need to know what the programme is because at present we do not know what the priorities are in the STPR.
I am sure that we are all working hard at that. I have mentioned some of the projects that we are working on. One of the things that we welcome in the draft budget, on page 38, is an identified increase next year of roughly £2 million assigned against the STPR. If I have read the budget document correctly, that is for bringing forward development of the STPR. Collectively, we hope that that will provide Transport Scotland with the ability to work with us more proactively than it has been able to do on the availability of funding for developing the STPR work programme. We would find that helpful, and it would probably equip us better to answer the member's question about that programme.
We hope that the work that ACSEF has done has set a priority so that when projects that we would like to implement and other things that we would like to do in the north-east are considered, they are considered within that priority. We must also bear in mind that we have a window of opportunity and that we need to build a critical mass while we still have the energy industry in the north-east. We therefore have two things going.
Does it not stand to reason that we cannot put in place a full list of priorities to 2020 or 2032 because we do not know what the political priorities will be? We do not know how quickly oil prices will rise, where economic activity will happen or what the technological changes in electric vehicles will be over such a time period, and we do not know how the price of carbon will be costed into the economy. How can we possibly say now what the priorities will be in 2025?
I take your point as far as 2025 is concerned, but we all know that major transport projects have a long gestation period. If we do not allocate priority to the family of projects in the STPR, we will not start that gestation period and work the projects from the initial concept through the statutory process from design to construction and final delivery.
My point was simply that any such list of priorities would be only an expression of how we cut the deck today. That might change tomorrow, next year or during the next session.
Such a list would be that. The perennial problem with transport and a number of other service areas is that they are subject to changes in Government. However, if you ask the private sector what it wants out of Government, it will say that it wants direction and that it wants to know where we are going and when things will happen. If we are to deliver on a very ambitious STPR programme, some thought needs to be given now to relative priorities so that work programmes can start to deliver schemes. It is a fact of life that nothing that the current Government is doing would preclude a change of priorities by a future Government. However, we need to start thinking a bit longer term, because at the moment we do not know when any of the projects will come on stream, and that is unacceptable.
There was a little element of being devil's advocate in my questioning.
I know that there was.
I will give you an answer after the meeting as well, convener.
You always do, Charlie.
Does the strategic transport projects review require to be reviewed?
Yes or no?
My answer continues from what was being discussed. It is clear that the STPR will require development. I have said that tactran broadly supports the STPR, but we would have liked to see other things in it. I would include in its development the potential opportunity to discuss with Transport Scotland and the Scottish Government the ability to include other projects that we would have liked to see in it—projects relating to multimodal or trimodal access to ports, for example. That was not included in the STPR, but it is in the NPF. We think that that still represents a gap in strategic regional infrastructure. Work might also be done on regionally and nationally important interchanges at Dundee, Perth and Stirling. We hope that that would be a development. Tactran supports the STPR's broad context and content, but we still need to get to priorities.
We are looking for an evolution of the STPR rather than a root-and-branch review. That evolution would take account of changing external circumstances. I agree with Eric Guthrie. We have all signed up to and are relatively supportive of the general direction and thrust of the STPR. We disagree with elements of it, as members would expect, but we agree with many elements of it.
I will be quick: I am happy to go with what Alex Macaulay said.
That is a nice short answer—we like that.
Alex Macaulay is the alternative funding man.
I am the alternative funding man—thank you; that is very kind.
Alex Macaulay was called the alternative funding man because the regional transport partnerships are actively considering the issue alongside the Convention of Scottish Local Authorities. Prudential borrowing is part of that, but that is work in progress.
In the draft budget document, the reference to European funding is net zero because it is investment in projects that are funded by European money. Would it not be nice if the Scottish Government could allocate a sum of money that was ring fenced to enable public sector bodies that were bidding for European funding to provide match funding? If there were a pool of money somewhere that was available for match funding for European structural fund projects, European North Sea projects or whatever, local authorities would not have to root around trying to scrape together match funding from within already stretched budgets. That would be of major benefit and would introduce a degree of comfort and certainty for local authorities in making bids for European projects. It would also introduce a degree of credibility and gravitas to a project, as the local authority would be able to say that the project was supported by the Scottish Government as well as by all the other agencies that may be involved in it.
I thank all our witnesses for the time that they have spent with us. We have overrun significantly and I appreciate the time that you have given us. Your evidence will assist us in questioning the cabinet secretary at our meeting next week and in reporting to the Finance Committee on the draft budget.
Meeting continued in private until 17:39.