Transport, Infrastructure and Climate Change Committee

Meeting date: Tuesday, November 30, 2010

Official Report 610KB pdf

---

Draft Budget Scrutiny 2011-12

The first substantive item on the agenda is our first evidence session on the Scottish Government’s 2011-12 draft budget, which was published on 17 November and sets out the Government’s spending strategy for the next financial year, including the allocations to transport, infrastructure and climate change projects. The budget was also accompanied by a carbon assessment.

Today, we will hear from academics and experts in the fields of transport and climate change about the draft budget’s impact on transport measures and the Government’s climate change activity. Witnesses should note that they are not necessarily expected to respond to every question that is asked; questions will—if we can get the procedure right—be directed to each witness’s specific area of expertise. It is also likely that there will be some crossover between this item and the next, on the RPP. Obviously, we do not want to discourage responses that consider the congruity or coherence between the two documents, but it is perhaps best to leave any point that relates to the substance of the RPP to the next item.

Professor David Gray from the centre for transport policy at Robert Gordon University was due to appear on both panels, but because of the adverse weather he is unable to join us. Instead, he will provide written evidence. With that, I welcome to the meeting our first panel as it stands: Professor Iain Docherty, professor of public policy and governance at the University of Glasgow; Dr Andy Kerr, director of the Scottish alliance for geoscience, environment and society at the University of Edinburgh; Professor Tom Rye, from the school of engineering and the built environment at Edinburgh Napier University; and Dr Dan Barlow, head of policy for WWF Scotland. Thank you for making it to the meeting—I hope that you had a better journey than some of us had—and for submitting written evidence in advance.

Do any of you wish to make some brief opening remarks before we move to questions?

We need to view the budget in the context of the need to invest in Scotland’s future. Establishing the right kind of budget—of which public spend is a part—will help us not only to tackle carbon emissions but to deal with issues around health and jobs. The budget very much represents an opportunity to support a low-carbon future for Scotland and to deliver not just environmental benefits but health benefits, benefits associated with further active travel measures, benefits from tackling fuel poverty and so on. If we get it right, the budget will be a real investment in our country’s future.

Can you comment on the process by which we have reached this position? Unlike the budget in most years, this budget has been preceded by the independent budget review, which set out a number of observations, comments and suggestions about transport and climate change. Have any positive proposals in the IBR report been included in the budget? Are you concerned about any recommendations that might have been dropped? What is the relationship between the two documents?

If no one wishes to kick off on that, I will ask Iain Docherty to respond.

Thanks, convener. I will be brief.

It is not much of a secret that we are in the run-up to an election. As a result, the Government and perhaps all the political parties are taking more of a partisan stance to their presentation of and opposition to the budget than might have been the case in previous years. That said, it is perhaps not surprising that there has not been as much of a direct read-across from the IBR to the budget as many people in July had either hoped or wished for.

However, the IBR report contains some interesting observations. Perhaps the most interesting from the transport perspective was the floating of road user charging as a potential mechanism to ensure that, in what will be a very difficult public spending environment for a long time, investment in transport continues at the level that we have enjoyed over the past few years. That proposal seems to have slipped in under the radar without the usual howls of protest. Although we would not have expected any Government six months before an election to announce the introduction of additional transport charges or taxes—which we might consider such a proposal to be—we should welcome the more balanced and less hysterical manner in which some of the proposals have entered into the public debate.

Although it was in the IBR report, the road user charging proposal does not feature in the draft budget. However, what about other aspects of the concessionary fares scheme? What is the relationship between the two documents? What has been included and what has been dropped?

The IBR came out at the same time that a series of stakeholder workshops for the RPP were being held and I found it interesting that proposals that two or three years ago would have seemed politically impossible, or at least very difficult, were actually being introduced. We would not necessarily expect a direct read-across from the IBR to the current budget in that respect, but the fact that the proposals have now found a space out there is probably a good thing. The question is how we build on that not just over six or 12 months, but beyond that.

Do you have a sense of how the issue will be taken forward?

Given the political cycle, it is difficult to see it being taken forward in the next few months. The key thing for the IBR recommendations and how they have been framed in the budget will be what happens immediately after the election.

I welcome the priority that the Government has attached to tackling climate change in the budget. Indeed, it is clearly identified as one of the issues that the budget needs to support. The IBR gave inadequate attention to measures supporting the development of a low-carbon economy, and I welcome the Government’s identification of the budget’s key role in that respect. However, it is disappointing that the budget still falls short with regard to many measures that we would like, and that the Government did not follow the IBR’s recommendation to take a more serious look at road user charging. We would have liked a clearer commitment from the Government on looking at implementing such a system.

My point on road user charging relates to the independent budget review and may cross over to the committee’s discussion with the second panel. Much of the review work that the University of Aberdeen and Atkins did on developing measures to mitigate the impact of climate change included road user charging. Indeed, many other measures in the report, which work through in some respects to the RPP, count on road user charging or something like it being in place to lock in the benefits of some of the softer measures in the RPP. If road user charging does not go ahead, we can expect some of the softer measures to perform less effectively than they would if road user charging or some other fiscal-type measure were in place.

I will pick up on the point about concessionary fares. In previous evidence sessions, I and absent colleagues raised the issue of looking again at the concessionary fares budget, including whether it is targeted at the right users. It is understandable that the Government chose not to do that. At the time of the introduction of the concessionary fares initiative and other universal benefits—not only in Scotland but in the other devolved territories—lots of commentators said that, once the benefits were in place, it would be hard for any Administration to take them away. That opinion was correct. That is why we are where we are today. I have no doubt that that will continue to be the case for any devolved Administration, none of which has the substantial tax-varying powers that allow proper and full debate on the benefits of universalism—that cannot happen when spending but not tax-raising powers are devolved. For what it is worth, today’s announcement elsewhere is unlikely to change that substantially for the Scottish Government, and the situation is unlikely to change in the other devolved territories where, of course, free concessionary fares for the over-60s were implemented before they were implemented in Scotland.

There seems to be a variety of opinion on whether road user charging would be environmentally beneficial. Clearly, it would depend on the kind of scheme that was implemented. From 2007 or 2008, the Department for Transport worked up some models for a United Kingdom national scheme. The indication is that we would generate more traffic through diverted trips than we would save through congestion relief and that there may even be a negative carbon impact, depending on the exact definition of the scheme. We should be careful not to assume automatically that road user charging is environmentally beneficial. The devil is in the detail.

The IBR said on road user charging that it could be a source of revenue for on-going maintenance. The IBR also posed a question on the balance between capital spending on new infrastructure and the on-going maintenance of existing infrastructure. Do panel members have any comment on that?

As Professor David Gray has said previously at committee, the past 10 years or so have been something of a golden age for transport investment in Scotland. Since at least the 1950s, we have consistently underspent in Scotland and the UK as a whole. Over the past 10 years, all that we have managed to do is to stop the gap in infrastructure investment between ourselves and our European competitors getting any bigger. There will be a variety of opinions on whether we have spent the infrastructure money on the best projects—for example, on the best roads—but I subscribe to the view that our infrastructure is still weak in comparison with our continental friends, neighbours and competitors. There is something of an economic cost in that, although we are not entirely sure how big it is.

I am also of the view that we probably spend too little on capital and too much on revenue in the transport sector across the UK. That is why, once every 30 or 40 years, we have a crisis in infrastructure maintenance. We have just gone through one on the railways. If we do not keep up maintenance expenditure, we may go through one on the roads network. I guess that that is a rather unsophisticated call for a bit more of everything, but it reflects the fact that, for a long time, we have not prioritised the transport sector in the way that we might have done.

My worry about the pseudo-ring fencing of income from initiatives such as road user charging is twofold. First, the UK Treasury will never allow any Administration to ring fence anything, which means that the money would disappear into a black hole. Secondly, if the public are promised real and immediate infrastructure benefits or improved services on the back of an additional charge and the bargain is broken, it becomes much harder to do the same kind of thing in future.

You said that we need more new infrastructure and more maintenance of existing infrastructure. Moving on from the IBR to the budget, what is your comment on the budget as proposed?

14:15

The budget as proposed looks reasonably sensible. The road maintenance budget, which is always an easy target for Administrations or Oppositions, has taken something of a hit. During this session, the Opposition has also sought to cut the road maintenance budget to try to fund other budget headings. It is an easy target for all sides. As I say, the budget looks reasonably sensible on paper, but the question is whether it is reasonably sensible come February or March at the end of another hard winter. Let us revise matters once we have seen what has happened.

I find it rather curious that the trunk road maintenance budget has apparently been cut in order to finance the pre-works on the replacement Forth crossing. Purely from an equity point of view, it seems strange to move finance for maintenance throughout the country—which as Iain Docherty said is important—to a specific scheme in a specific part of the country. I am sure that we will discuss the pros and cons of that investment later, but robbing from the maintenance budget in order to pay for preparatory work on the Forth crossing seems to be rather curious.

Is there a need to address how specific the Scottish Government is being with local authorities about their road maintenance duties? Away from the trunk road network, many people will rely daily on many of the more local roads if there is another harsh winter.

The average length of a car trip on the Scottish road network is nine miles. That implies that a large proportion of the mileage that we—certainly private car users—drive is local mileage rather than trunk road network mileage. I have always thought that there might be a need to revisit the balance between trunk road maintenance and local road maintenance expenditure. This is an anecdotal impression, but the trunk road contractors appear to have money to spend on schemes that are perhaps not totally necessary while local authority road maintenance departments are strapped for cash. That said, the Government is, of course, in a difficult situation in terms of its ability to tell local authorities what to do with the money that it gives them. Perhaps that is another issue that we will come across when we discuss the RPP. Basically, there is a real-terms reduction in the cash that is going to local authorities for their transport capital and revenue expenditure. Within that, it is difficult for the Government to say, “We’d like you to spend more on maintenance.”

It clearly makes sense to look after our existing assets, and it is right that we should spend money on maintaining our existing infrastructure, which includes roads and rail. However, we need to recognise that our infrastructure locks us into certain development pathways. The infrastructure that we build now will lock us into certain trajectories for decades, so we need to ensure that decisions that are taken now and the commitments that are made in the budget are compatible with our long-term climate change commitments. Compared with the previous year’s allocations, the budget increases the money allocated to motorways and trunk roads and reduces the money allocated to railways. In that sense, it is at odds with the general thrust if we are to deliver our climate targets.

Given that we are in a time of very tight finances, it makes sense to invest in many of the softer behaviour change measures, as they can deliver substantial returns in helping to cut emissions. Many of the measures that are proposed in the RPP can help us to cut emissions from transport significantly, but they are softer behaviour change measures. We believe that by investing more heavily in them and less in infrastructure, we would achieve benefits in carbon emissions and health benefits, through, for example, greater support for active travel.

I agree with Dan Barlow.

On the second Forth crossing, if we compare how its carbon impacts are presented in the carbon account for transport with the way in which the Edinburgh trams carbon impacts are presented in it, we find that the Edinburgh trams appear to increase the amount of carbon that is produced. The reason for that is the much more sophisticated land use and transport interaction model that is used, which models the secondary land use impacts of the trams. I am not sure whether that has been done for the new Forth road bridge and the other trunk road investments that are under consideration or are being funded. I think that that work needs to be revisited to assess the secondary land use and emissions impacts of those major trunk road investments that will, as Dan Barlow said, shape the way that we travel for many years to come.

So we could apply the same methodology to, for example, the Aberdeen western peripheral route and the ribbon development along it.

Yes. The questions are what would the long-term land use impacts of that be, what would happen to people’s travel patterns and what would that do to emissions?

On the big capital infrastructure projects, it is important to remember that the draft budget’s £200 million funding commitment to support the works for the new Forth road bridge is of course only for the first stage of developing that major project. In future years, a greater proportion of the budget’s transport expenditure will be committed to delivering the new Forth road bridge. Given that we are likely to face financial constraints for some years to come, I have major concerns about the implications of that Forth road bridge commitment for the transport budget elsewhere. Will it squeeze investment in public transport and in walking and cycling for years to come? We will have to find significant funds for the Forth road bridge project every year until it is completed.

I support a lot of what colleagues have said, but I want to inject a note of caution about the sheer level of uncertainty about the future and how our response to climate change will play out. The major infrastructure projects to which Dan Barlow referred have a project life of 30 or 60 years, depending on which appraisal frameworks you favour. We have absolutely no idea what our response to climate change will be in anything like that timescale, so while it is true that every infrastructure investment locks us in more strongly to a particular set of behaviours, other events and changes might disrupt those patterns even more.

I also make a plea—which I think amplifies something that Tom Rye just said—about the importance of understanding land use and transport interactions better than we currently do. On the face of it, a lot of our railway investment seems to be very good, and I am certainly not about to argue that we should have less of it. However, as we make it easier for people to commute further and further, particularly to Edinburgh and Glasgow, by train from various places in the central belt, and even the Scottish Borders in the future, we actually encourage those people to live a more dispersed lifestyle and, for every other trip, to use their cars. So while on the face of it railway investment may be justified by its being very environmentally friendly, we might find that, in responding to the choices that are opened up to them, people’s transport behaviours make problems worse rather than better.

Talking about cuts, and following on from the discussion that we have just had, those of us who are optimists might find today some means to deal with the borrowing requirements to even out the costs of the replacement Forth crossing and actually free up money. We do not want to prejudge what will be said, but that is possible. The Scottish Government has lobbied London on that, because of the huge impact on the overall transport budget.

Do you not think that it would be utterly irresponsible of a Government with a failing bridge to have an all-Scotland policy that fails to maintain the route to the north and, indeed, fails to take in more than just the thinking that leaves many academics looking at routes between Glasgow and Edinburgh, when Scotland has been denied expenditure in the past for routes to the north and the south-west? In fact, we can deal with this catch-up situation while applying at the same time many other aspects to the low-carbon elements and so on. It is easy to say that we should cut the Forth bridge, but no responsible Government of any major stamp in this country will do that.

I agree with the importance of maintaining and developing connections to the north of Scotland, and we support and fully recognise the need for a means to travel by road over the Forth. Our concern with the Forth road bridge is that the current decision is premature. Studies are under way at the moment to look at what can be achieved through the current dehumidification work, and there are also studies that suggest that even if that work were to fail—although I understand that the initial indications are positive—it would not be impossible to replace the cables without weekday restrictions on the bridge. At this stage, it is not certain that the current bridge cannot be repaired, so making a commitment to an additional bridge is premature. We could wait until the results of the studies, which I believe are due next year, are clear and conclusive before making the commitment.

I will make one extra point. Many investments on the public transport routes to the north could be made with relatively small sums of money. Significant investments could be made to reduce the journey times, perhaps by 45 minutes, between Edinburgh, Glasgow, Inverness and Aberdeen. We are talking about sums of money of between £40 million and £50 million. A study produced several years ago highlighted how we could substantially cut journey times through the investment of small amounts of money on train travel between the central belt and north of Scotland. We think that those are sensible priorities that it would be right to proceed with at this stage.

You will be aware that there is in hand a move to cut the journey times in the next year and a half by 20 to 25 minutes through retimetabling. Some of that work has been taken into account.

Yes.

Let us address the constitutional question that comes up in the budget all the time. If we were allowed to borrow money, we could spread the cost of the large projects more evenly and have money for other projects as well.

Without getting into any political stance, I would say that, regardless of the decisions that we take, the money has eventually to come from the public purse, unless, for example, we implement a system of road user charging for road projects. It therefore makes sense for all the projects to be compatible with our commitments under the Climate Change (Scotland) Act 2009. As long as the projects factor in what they mean for our delivering on those commitments, we can of course pay back for the infrastructure projects. We will have to find ways to secure major investment on a wide range of infrastructure over the next few decades. Some activities will be more compatible with cutting our emissions than will others, and those should be the priority for us.

Is it permissible for witnesses to ask members a question?

No.

Okay.

You are perfectly entitled to raise a question. If members choose to comment on it, that is their choice.

I will ask a slightly rhetorical question that I ask my students when we look at the economic development impacts of transport investment: what would happen to the economy of Scotland if the Forth road bridge fell down? It would not mean that the north of Scotland was cut off from the central belt. I am not saying that we should let the bridge fall down, but there is an awful lot of academic evidence to suggest that we can overexaggerate the economic development impacts and importance of transport infrastructure. We should not assume that if the link were not there, the north of Scotland would become an economic wasteland.

For clarity, I have never read anything to suggest that the bridge is about to fall down. It might be closed to certain types of vehicles.

Exactly.

I am not sure that I agree completely with Professor Rye. Do we need a transport link across the Forth? Yes, I think that we do.

In the past few months, in a Royal Society of Edinburgh inquiry that looked at how we face up to climate change, we covered the question of how we best meet the modal needs of transport between Lothian and Fife either with the current infrastructure and bridge, repaired or not, or by building a new one. One issue was not so much the building of a new bridge as how it would be used and how the old bridge would be used in the meantime. In other words, how would we maximise the volume of people who move across the bridge, combined with car parking, transport by train across the train bridge and so on?

The issues were not so much about the bridge itself as about how we make most effective use of the existing transport framework across the Forth. We were worried that the framework as it is currently constituted does not seem to make a huge amount of sense. Obviously, there are a lot of different ideas, but the point is that we need to optimise the framework and use it much more effectively than at the moment, so that we both allow for the transport of people to meet their needs and meet a lot of the modal shift requirements to meet the carbon targets.

14:30

I will respond directly to the challenge of giving the view of a central belt academic. Of course it would be irresponsible for any Government to let an essential link perish, and nobody suggests that that should happen, but we need to make absolutely sure, before the Government finally commits on paper to spending around £2 billion of public money, that that is the correct course of action. I and other witnesses on panels over the past few years have said that repeatedly, and Government ministers have said it repeatedly, which is why the contract preparations have been structured in such a way as to ensure that that is the process. It would be equally irresponsible for any Government to ignore the opportunity cost of spending around £2 billion of money on the wrong project. That amplifies my point that we need to be absolutely certain that committing to the construction of the replacement bridge is the correct course of action.

Part of the reason why the infrastructure in the north of Scotland is not as many of us would wish it to be is because of the geography of that part of the world and the fact that we spend lots of money on revenue support for transport services that could otherwise go into infrastructure. We spend that through support for the ScotRail franchise, local bus services, CalMac Ferries and NorthLink Ferries and a variety of other transport subsidies. If you look back at the Scottish Government accounts and, pre-devolution, at the Scottish Office accounts for many years, you will find that, historically, our revenue spend on transport in Scotland has been much higher than it is in most other territories in the UK, precisely for that reason. I am afraid that part of the price that we pay for having about 10 per cent of the UK’s population and a third of its landmass is that our jam is spread thinly. As long as we continue to support through revenue subsidy a variety of lifeline services—rightly, I think—that will inevitably mean that less money is left for infrastructure.

In general, if we look at the data, we find that the implicit accusation that the north and the south-west and other areas of Scotland are underfunded is not true. To be scurrilous for a moment, I could point out that the £18-something cost of my train ticket to come here today is not the market value, as a large proportion of it goes to support services in the north of Scotland that are less economically viable. Another interesting rhetorical question is of course about how much extra economic growth we could generate in the central belt if we reduced rail fares to the market rate.

The point is that we are talking about the cuts in the current budget. I posed the question in the context of the wider one. There are answers to that. There is an economy to be generated in various parts of Scotland, including the north and the north-east, that can lower our carbon content hugely. We might want to take that into account in the equation.

I have a couple of points about trunk road maintenance and the long-term future of the network. Transport projects, by their nature, are long term, as the Forth bridge project shows. The more dual carriageway trunk roads we have, the more maintenance is involved. Also, the harder the winters, the more maintenance is involved. Can you honestly say that, if we reduce funding in one year, it will be possible to increase it in future if it is shown to be needed? How badly were we found out on trunk road maintenance by last year’s winter? How did we get so hugely far behind? I travelled on quite a lot of roads to see what state they were in and, actually, outwith the towns, they were in not too bad condition.

I have two points on that. First, as colleagues have said, partly because the trunk road network is under direct Government control, it has probably been privileged in the past through the expenditure regime. There is a question about whether the local roads, which in some cases carry more traffic than trunk roads, are being adequately sustained.

Secondly, trunk road maintenance is scrutinised carefully every year by Audit Scotland as part of its review of Government accounts. There are good accounting reasons for that, to do with the management of Government assets. If we got to a situation in which core maintenance was not being undertaken to the extent that it should be, Audit Scotland would quickly tell us that.

The third of my two points relates to the motorways and trunk roads table, which is table 7.11 in the budget document. In relation to minor roads, the A9 and elsewhere, one thing that the Scottish Government and Transport Scotland have been very good at in recent years is that, rather than just carrying out routine maintenance, they have bundled up the maintenance into modest but useful improvement projects. If we consider the budget headings, there seems to have been some kind of reallocation between maintenance and improvements, and the two are treated differently in the budget. It is impossible for me and, I guess, for my colleagues here to tell you the extent to which that is happening, because of the broad-brush nature of the level 3 figures in the budget. You may want to ask people who have greater technical command of the niceties of maintenance versus improvement about exactly how much value for money can be extracted through careful management of those two headings.

I want to pick up on a point that Mr Gibson made earlier about maintenance and wear and tear on the current road network. On the Forth road bridge, a not insignificant amount of the wear and tear is caused by heavy goods vehicles. A major concern in the draft budget proposals is the removal of the freight facilities grant. To date, the grant has been very successful in supporting the transfer of HGV movements from road to rail. I believe that 33 million lorry miles have been taken off Scottish roads since the introduction of the grant. Despite that, the draft budget proposes to take away that money. That will aggravate the pressure on roads, including the Forth road bridge, and will therefore increase wear and tear and increase maintenance costs. In addition, there will be a detrimental impact from climate change emissions.

Should there be moves to encourage—or more than encourage—freight operators who use the roads to move to rail? Instead of giving them incentives, should we not have a targeted programme that tells road users that they must move part of their operations on to the railways? Should such a programme replace the current grant-based mechanism? Do we have things the wrong way round?

That is a very sensible suggestion; we should probably consider both mechanisms. Any mechanism that encourages freight to be moved by rail rather than road has to be positive.

Nobody has suggested one.

Are there any other comments on freight or any of the other issues that Rob Gibson has raised?

I have two brief points. If Mr Gibson is arguing for more regulation of certain sectors of the economy that make heavy use of freight—the supermarkets come to mind—I offer no dissent. Indeed, one could argue that they could be better regulated on a number of fronts, given that they generate lots of traffic and clog up the road network with what some would argue are environmentally unsound trips.

My second point relates to the uncertainty that can arise over the lifetime of long projects. There is an argument that shifting freight on to rail may be only a short-term or medium-term solution, depending on how efficient HGVs become in future. We may need the rail network for even more passenger movement in future, if that becomes the more environmentally sustainable thing to do. I would therefore not be quite so negative about the withdrawal of freight grants. Withdrawal may seem negative on the surface, but as yet there is not a huge amount of evidence to back that up.

I want to pick up on your comments on the regulatory approach. Are you satisfied that the Scottish Government has the power to impose such an approach? Has it shown the political will to do so?

I think that my understanding of this is just on the right side of speculation. It would be a regulation of trade, and regulating the operation of companies such as supermarkets would be wholly reserved to the UK Government.

That being the case, would you still argue that the withdrawal of the freight facilities grant should not be seen as a problem?

It might not be a problem. The best target for investment will depend on our assumptions of variations in the future environmental performance of road and rail.

Again, there is a crossover between this point and points that have been made during discussions on the RPP. In surface transport, one of the fastest-growing contributors to CO2 is the freight and light goods vehicle sector. It is therefore extremely worrying that the freight facilities grant has been withdrawn, even although there may be cases in which the grant compromises our ability to increase passenger capacity. The grant was the only financial measure in Scotland that gave an incentive to freight operators to shift from road to other modes of transport. All the other measures in the RPP are either voluntary measures or measures that simply offer encouragement. There is not a lot of evidence to suggest that the freight industry is all that interested in taking them up. Their likely impact is at least questionable.

The written evidence that we have received from Transform Scotland about withdrawal of the freight facilities grant suggests that the vast majority of the modal switch from road to rail in the non-coal market in Scotland in recent decades has been achieved with the assistance of the freight facilities grant. It argues that the budget that was allocated

“seems trifling in comparison with the benefits”.

Is that view supported by the panel?

Yes.

That may well have been true in the past, but of course trying to prove the counterargument that the developments would not have happened—at least to some extent—without the grants is not entirely possible.

One of the issues that has arisen with regard to the differences between the national scale and the local scale is that the national railway’s scale is designed to minimise point-to-point travel times for passengers. If you also want to create a framework that shifts freight on journeys that are not point-to-point journeys between cities or encourages commuters around particular cities, the infrastructure inevitably gets tied up. The evidence from Fife, Dundee and so on shows that it is impossible to have things both ways. You cannot minimise the travel times between Glasgow and Dundee and Edinburgh and Dundee and also ensure that you have effective transport networks around central Fife, because the elements get in each other’s way. There is an issue about the infrastructure that is required to deliver all the aspects on a network that is, essentially, a couple of rail lines.

For the record, I should confirm that I was quoting a submission from Transform Scotland. I am told that it might have sounded like Transport Scotland, which would have been wrong and improbable.

There has not been much of a change in the budget with regard to air services. I would like to ask about a subject that is close to my heart: the air discount scheme. I declare an interest in the scheme, as I use it myself. Could you comment on its economic importance or relevance to the budget?

I am afraid not.

I promise you that it appears in the draft budget. As there are no responses, I suppose that I will have to fill in by telling some jokes or something.

There has been some debate about the relative merits of the air discount scheme versus other means of achieving the same or similar economic ends, for example through public service obligations. Could you comment on that, or is that also too detailed a line of questioning for a discussion about the budget?

I will give a response that will underline my personal ignorance of the issue.

I have not seen any detailed research that would answer your question, although that does not mean that none exists. However, with regard to such subsidy schemes, we must be careful about ensuring that we are not simply subsidising the transfer of economic activity from one place to somewhere else.

One potential problem with the air discount scheme—although, as I said, I have not seen any detailed research on it—is that, although there are economic benefits to enabling people to travel more, there can also be economic disbenefits, as what tends to happen in such cases is that the discretionary spending of disposable income is centralised in a few places. For example, the retail sector in remote communities can suffer because more discretionary spending ends up happening in Inverness, Glasgow or Edinburgh.

I believe that the absence of detailed research on the matter is what underlies the silence of the panel.

The budget document addresses the air discount scheme as it applies to business, rather than to passengers. However, if no one wants to add anything, that is fair enough.

14:45

Tom Rye was about to say something, but—

I want to say only that I do not feel capable of answering the question. I am afraid that I am not qualified to answer it. I concur with Iain Docherty: there is a real need for research to demonstrate that the scheme meets its objectives and to show that the two-way-street effect to which he referred is not happening.

The more general point—it also amplifies the issue—is that there is relatively little research on business travel. My hunch—that is a technical term—is that the two-way street applies less to business travel than to other activities. As far as I am aware, there is insufficient research on the subject at UK—never mind Scotland—level. That is an important gap in our understanding.

In the past, we were critical of the route development fund as a way of subsidising aviation, given the significant role of aviation in climate change, which is a major concern. However, we absolutely understand that, in remote parts of Scotland, aviation is an appropriate means of transport—it offers lifeline routes. We do not oppose it per se.

In subsidising such schemes, we have to be careful to understand the impacts and to ensure that we support and invest in alternatives so that we have, for example, the best possible videoconferencing and teleconferencing facilities, which can cut unnecessary journeys.

I am sure that I can recommend that in the Scottish Parliament. Instead of coming here from the Western Isles every week—

Just your hologram would do.

A hologram may be the best way forward.

Gentlemen, I have a question on buses. The draft budget maintains the level of the bus service operators grant—indeed, to be fair, it was recently the subject of something like a 10 per cent increase. Of course, there is also the capped provision of £180 million per annum for the free bus travel scheme. Is the bus being treated equitably vis-à-vis other travel modes?

As part of my preparation, I looked at spending at national level and compared it with the number of trips that Scottish residents make on different modes of transport. By my very rough calculation, we are looking at a spend of about 15 pence a trip on trunk roads, £7 a trip on rail and 57 pence a trip on the bus. Buses seem to be doing well in comparison with road, but very badly in comparison with rail.

I have a point on the concessionary fare scheme as a form of subsidy—

I did not say “subsidy”.

I know. Strictly speaking, the scheme is intended to be a form of subsidy not to bus operators but to individual passengers. However, there is a lot of evidence to suggest that the scheme is working out as a subsidy to bus operators. Certainly, that is the case on certain routes and in certain areas.

Work that colleagues at the University of Southampton have done demonstrates that the most effective way to maximise welfare benefits from our subsidy to the bus industry is by means of franchising or regulated systems such as that in London. That is better than directing subsidy to the passenger through a concessionary fares scheme. I say that without any expectation that there will be much change in Scotland in the near future. I simply make the point that those other means are more effective ways of directing subsidy than is the current scheme. We should not forget that a significant amount of money goes into the concessionary fares scheme.

That was an interesting aside, Professor Rye, but I would like the panel to stick to the question: are buses being treated equitably vis-à-vis other transport modes? To be fair to Professor Rye, there was a point about rail at the start of his response.

On balance, in terms of our transport policy, buses still do not receive the level of funding that they deserve. In social justice terms, we have to remember that a third of Scottish households do not have access to a car. For many people, the bus is the preferred and default option, but the bus is still the poor cousin—in spending terms—to road building and rail. At the moment, spending on buses is still lower than it should be. We must be serious about investing in public transport; some of the social justice issues are around access to a car.

There are a number of possible answers to the question. The big-picture answer is that we should do the academic thing of taking a step back and asking how we want the world to be. If we want to maximise social welfare and social inclusion, we should then ask whether we are spending the right proportion of our money on each mode.

As colleagues have pointed out, the evidence might suggest that we should spend more on bus transport because that would achieve substantial benefits for relatively little money. I do not think that that is a controversial point of view in the academic literature. In the real world, however, if we ask whether the bus industry does okay in the budget, the answer is that it probably does. After all, compared with other UK territories, our concessionary fares scheme continues to be relatively generously funded on a per-trip basis. I do not know the figures, but I imagine that for some bus companies the majority of their income probably comes from public subsidy or publicly funded or supported services. Are those market companies—which after all are out to make a profit—generously funded under the paradigm of the current deregulated environment? They probably are. Is the bus sector funded in the way that we would wish for wider societal benefits? It is probably not.

The figures in the draft budget are being presented at a time when some local commercial bus services are being withdrawn as a result—the bus operators have suggested or implied—of the level of bus service operators grant or the capped level of compensation for the free travel scheme. The implication is that hard-pressed local authorities might come under additional pressure to step in and salvage—or retender or reprocure—socially necessary local services. Do you have a view on that?

First, we should not blame the bus companies which are, after all, profit-making enterprises in what is currently an unregulated, or deregulated, environment. They will respond as rational economic actors to the situation as they find it. If that response is not what we would wish it to be for a variety of other reasons, the Government or the state should step in and regulate.

Local authorities will face considerable challenges in the coming years. Like the rest of the public sector, they have a duty to contribute to the delivery of the targets that were established in the Climate Change (Scotland) Act 2009. Under the single outcome agreement process, there will be clear commitments to actions that are required to meet that objective, and we urge local authorities to ensure that they allocate funds in ways that are compatible with meeting their share of the commitment to deliver Scotland’s overarching climate change emissions targets as well as, of course, supporting transport systems to that end.

That is absolutely right. Local authorities will come under extreme pressure to fund services that commercial operators have pulled out of. In tendering for services, however, they face the very significant problem of not having that many operators to choose from and, as a result, will not be operating in a competitive market. It is, if you like, a double bind.

That perhaps raises longer-term questions about the regulatory regime, as opposed to this year’s budget.

Yes.

I was too modest to mention that last point.

Heaven forbid.

I have what I hope are three short and quite focused questions on ferry services in Scotland—of which you might or might not have experience. First, why does support for such services continue to increase at a level well above any measure of inflation? I do not ask questions that I do not already know the answer to, but I want to see whether you know the answer.

I will be the first to say that I do not know. My best guess is that a substantial enough proportion of the overall cost is wages and that, in common with many other publicly supported services, there will be wage inflation even at today’s very modest level and so the level is driven by staffing costs.

I, too, am unable to answer the question, but I could refer you to my Napier colleague Professor Alf Baird, who has extensively researched and written on the subject and would probably respond by pointing to the lack of competitiveness in the industry and the way in which services have been tendered.

The answer is that the increase is due to the price of diesel, which links to my next question. Given that the increase is above inflation, is sufficient capital being made available to ensure the upkeep of the fleet and the onshore infrastructure? The short answer is no.

The issue of fuel costs is a good one. There are on-going efforts to seek out alternative fuels and to improve engine efficiencies in the ferry fleet. It is clear that funding for that work must continue at a higher rate, because in the long run it will deliver efficiencies that will benefit everyone. I am not sure what stage those trials are at.

Is that investment being taken forward with state support or by the companies themselves?

My understanding is that it is a bit of both.

CalMac is run by the state anyway.

It is a question of whether the work is funded directly or through the company.

We had better find that out.

The wider economy might be able to deal with the problems with regard to the replacement of ferries and so on. We still have the skills, and if there were more places to build ships here it would be entirely possible to do so. The amount of investment that is needed has crept up on us, and somewhere in the region of 90 vessels will be required in the next four or five years if we want to ensure that vessels in the different island groups are at the optimum age.

That raises several issues. The first is whether funding during the past few years has been appropriate to deliver an effective replacement cycle. We can leave that to one side, because it is done and dusted. The second issue is whether we are expecting higher and more volatile diesel prices—which we are. Even if we do not do anything else, we expect that to be the case. Thirdly, there is an issue for the maritime organisations—if the International Maritime Organization does not get its act together—with regard to shipping coming under the European emission trading scheme from 2013. There is a series of converging issues around the quality and efficiency of maritime engines and the use of fuel.

That suggests that a lot of work is needed—not just in Scotland, but at a broader European Union level—to find effective solutions. We need to tap into some of those networks effectively, because it is not a Scotland-only problem and we should not treat it as such. It goes much wider than that. The pressure on costs will increase, and we need to manage that. One way that we can do so is to engage with a lot of the other companies and organisations around Europe that are also considering the issue.

You learn something new every day, so I thank Rob Gibson for the information about diesel. If that is true—and assuming that we can get the data from someone—it would be interesting to compare the price that the ferry operators pay for diesel with the price that is paid by private bus companies, which engage in sophisticated hedging and other tactics to reduce their exposure to fuel price rises. I guess that data might be quite hard to get for commercial confidentiality reasons, but if it is at all possible to get the information it might be illuminating.

Shipping companies buy the cheapest pile of rubbish that comes out of the bottom of the tank. They still need hedging operations, but there is a quality issue with the fuel, as marine engines will run on anything.

You could argue that it is a brave assumption that a public monopoly would buy the cheapest of anything. It should do, but it might be useful to check whether that is actually true in this case.

I know that other members have been waiting patiently to ask questions, but do you have any views on the continued support for the road equivalent tariff pilot? It is the equivalent on the sea of a public service obligation, in that it allows for inward as well as outward mobility of goods and services.

I will only echo the comments that were made about the air discount scheme. To what extent is the road equivalent tariff meeting its objectives? Is it providing value for money in doing so? If it is, that is okay, and we should perhaps carry on with it, but there is a big danger of a two-way-street effect happening with it, which is not an objective that we are seeking to achieve.

I echo that point, but I also ask whether the tariff is being aligned with broader economic development in the north and west of Scotland. We have a huge opportunity with renewables, but are we aligning the different subsidy rates in a way that supports what we are trying to achieve with our energy infrastructure? I do not know the answer, but the question needs to be asked.

15:00

I want to return to the point that was made about the replacement of the ferry fleet. Do you have any thoughts on the shape of the commitment that will have to be made in future years? The ferry fleet is now dramatically older than it was 10 years ago, and it is continuing to age—

It is 10 years older.

By definition, we are all older than we were 10 years ago, but as a group we are not necessarily older, except in parts of the Highlands and Islands.

My question is whether the panel has a view on the shape of commitment that the Government will have to give to vessel replacement over the coming years.

Again, I think that the Government will have to come back to asking what is fit for purpose for the ferry routes that are necessary to deliver social services to the islands that require them and for the economic benefits that can be derived. That will determine the scale and size of each ship and the replacement of the fleet. In other words, is the fleet as it was designed 20 years ago appropriate for the next 10 to 20 years, given the change in economic development that we are seeing in different parts of Scotland? I am not sure that we can answer your question directly, but the key question that needs to be asked is, are we aligning a future major capital cost with our future economic development plans?

My questions relate to the budget heading “Other Transport Policy, Projects and Agency Administration”, which is broken down in table 7.12. There is no great change in the budget heading; the significant change is a 16.2 per cent real-terms increase in the support for sustainable and active travel budget line. The commentary that supports that budget shift seems to suggest that it will go into the development of infrastructure to support the roll-out of electric cars. What are the panel’s views on the appropriateness of that shift?

As you say, the budget shows an increase in that line and acknowledges that a significant amount of the increase relates to investment in low-carbon vehicles. We fully support the development of low-carbon vehicles. We think that they have a role and that we should be exploring how significant it can be.

Our concern is that the active travel budget remains far too small overall. If we discount the low-carbon vehicle component, we are left with £22 million. As a proportion of the total transport budget, which is somewhere in the region of £1.5 billion or £1.6 billion, the budget line is tiny. We have long argued that spending in the region of 10 per cent of the transport budget on active travel will start to deliver the step change in walking and cycling that we want to see in Scotland, which can help us to cut emissions and become fitter and healthier. Overall, it is still a major concern that the active travel budget is far too small.

There is another concern. There used to be a ring-fenced pot of money to support local authorities through what was called a cycling, walking and safer routes budget. It is not clear, but that does not seem to be in the draft budget. Previously, it was around £9 million. If that is not anywhere in this budget, we will have gone backwards in the total spending that is available to support active travel, walking and cycling. To that extent, we are concerned that we have not got the balance right.

The RPP notes many proposals for changing behaviour, and it lists proposals on walking and cycling that require to be funded in order to deliver emissions cuts from transport. By my reading, they do not seem to be included in the budget. There seems to be a mismatch between the commitments that are required to deliver the RPP on transport and the financial commitments in the draft budget. That is a major concern.

Dr Barlow has anticipated my two follow-up questions, so it is fine if the other panel members want to deal with the three issues together.

It is clear that delivering the radical change from internal combustion engines to electric vehicles will require public sector support of some sort. However, as with many of the big investments that are required in the built environment in Scotland that are of the order of tens of billions of pounds, the public sector cannot pay for it itself, so it needs to use its money as seeding for private investment. It is all about how we use public investment to mobilise private investment. In other words, rather than making a series of small grants, we need to leverage much bigger private investment from, for example, the electricity companies and the supermarkets, which may see a profit margin in having a charging station and building that kind of infrastructure.

We should not assume that the public purse has to deliver it all; it is very much about using public money to leverage other funds. The recognition that budget money cannot deliver the change on its own needs to permeate the budget. However, it is not clear from the budget lines exactly how the change will be delivered through engagement with the private sector to ensure that it brings the money in. What is needed is a combination of seed funding from the public sector and the frameworks around that. However, it is very difficult to pull out information on that sort of package of measures from some of the individual budget lines.

I concur with Dan Barlow on the lack of clarity about how much of the sustainable travel budget will go to walking and cycling and how much will go to cleaner vehicles and electric technology. We need to have more confidence about how many electric vehicles will be purchased and used and how popular they will be with the public in the timescale that we need if we really are to convert a large number of people to using alternatively fuelled vehicles, particularly electric vehicles. That is a bit of a gamble, in a way. Andy Kerr may be able to comment on that, but I do not want to put him on the spot.

Say it again.

What evidence is there of a likely public take-up of electric vehicles? I hope that I am permitted to ask a question.

The studies that have been done show that, if we have a turnover of seven years for the car fleet, and if take-up by 2020 is, say, one in seven or one in six, then by 2023 or 2024 every single car in showrooms will need to be fully electric if we are to have a largely electric transport system by 2030. It will take 20 years from when the electric vehicles roll off the production line in 2013 or 2014.

Just to add some analysis, WWF is looking at the role of electric vehicles. We have identified that, to make a significant contribution to meeting the cuts in the transport sector that are necessary to deliver the Climate Change (Scotland) Act 2009 commitments, we would need to see in the region of 300,000 electric vehicles on Scotland’s roads by 2020.

I accept that there is ambiguity about whether the take-up of electric vehicles will be as rapid as it needs to be and that there is a need to lever in private sector investment and so on. Just coming back to the active travel component of the budget line, the committee agreed in its report on active travel that the increases for which the Government cycling action plan and other policy documents aim will not be achieved without substantial increased investment. If the witnesses are saying that there is ambiguity about how much of the Scottish Government’s sustainable and active travel budget will be spent on active travel, as well as ambiguity about how much local authorities will spend if the cycling, walking and sustainable streets budget is not ring fenced, is it safe to assume that we are just not going to achieve those levels of increase?

I would certainly agree with that at the moment. Certainly, we are not putting in place the levels of investment that would lead to Scotland realising the benefits from the levels of walking and cycling that many European cities already have. For example, the commitment in the draft RPP suggests that cycling and walking infrastructure investment of £207 million is required in 2011. That does not read across to the budget.

We would need a different budget if that was to be credible.

That is correct.

Just to support that point, given what we know about the health benefits of active travel, there is a strong case for some of the investment to come out of the health budget. The committee has made that point in previous budget rounds.

I have a brief point on the certainty of the benefit that we would realise from an investment in walking and cycling and road safety measures. Such small-scale local measures pay for themselves quickly because they have a relatively small cost and a relatively high benefit in comparison to major road and rail infrastructure investment schemes, which we evaluate over a 60-year period. As we know, if, five years ago, we had tried to look 60 years into the future, we would probably have predicted a very different future from the one that we would predict now.

Is the Scottish Government getting the best value that it could from its investment in ScotRail and the rail network?

Currently, Network Rail is being investigated by the Office of Rail Regulation in relation to its cost effectiveness. The rail regulator’s initial report has found that Network Rail is 35 to 40 per cent less efficient than comparator organisations that run rail infrastructure in some continental European countries. There are significant question marks over whether Network Rail is delivering value for money to Transport Scotland and the Scottish Government. That is not to say that Network Rail is not delivering—far from it. It is encouraging that schemes such as the Airdrie to Bathgate railway have opened on time and to budget. The question is whether that budget is reasonable if we compare it to similar schemes in parts of continental Europe.

To give another price comparator—because I enjoy giving them—members may have seen in the press recently that the Swiss have been boring and have finally finished their Gotthard base tunnel. The project, which involves twin tunnels running 35 miles underneath the Alps, will cost about £6,500 million. If I may compare that to the replacement Forth crossing, the Swiss seem to be getting an awful lot of tunnel for maybe three times the cost of our bridge. Perhaps some of the apparent cost ineffectiveness in Network Rail extends to other parts of the civil engineering industry in Scotland. I must say that that is speculation, but I have done some work on the issue over time, as Iain Docherty may know. There is quite a lot of broadly anecdotal evidence that we pay more here for similar schemes than our comparators in continental Europe do.

The railways are roughly 40 to 50 per cent more efficient than they were before privatisation in terms of the numbers of passengers and the amount of freight that they carry, but they cost us roughly four times as much as they did—that does not meet any definition of productivity that I have ever read. The big issue about the paradigm that we work in is that our railways are far too expensive for what they deliver. The 40 per cent inefficiency figure is the one that seems to have gained traction—to use a bad pun—recently. It first appeared in a DFT report about two years ago, after the construction of high speed 1, that looked to moving forward with more rail infrastructure construction at UK level. That 40 per cent figure keeps cropping up in all the work that is done. Even that is probably only the level of efficiency that could be created inside the current rail industry model.

You ask whether I believe that spending roughly £900 million per year is value for money. That is a significant proportion of Scottish public spending and the figure should be a lot less than that, given what we know from our European competitors. What is less clear is how the current system can achieve that.

On that point, Professor Docherty, you will be aware that the UK Government has asked a man called McNulty—not Des McNulty—to consider some of those issues. The scoping report is a pretty good analysis of the byzantine complexity of the UK railway industry, and it touches on some of the issues that you and Professor Rye have just referred to. I have a fear that the study could make things worse in terms of what the UK Government might ultimately do in making changes to the UK railway system. Is that conceivable?

15:15

I would never underestimate the potential for Governments of all colours to make things worse. Yes, of course it is conceivable.

We in the UK are very bad at admitting that we were wrong and turning the clock back. Our usual solution to a very complex problem that we cannot manage is to make it more complex and worse. For us, that seems to be a normal, systemic response.

I cannot remember if it was at this committee or elsewhere, but I have said before that, if devolution had occurred after the 1992 UK election and not the 1997 one, the Scottish Government would have inherited a single, vertically integrated ScotRail with responsibility for everything except cross-border freight and passenger services. There is no reason why we cannot recreate that model if we choose to do so. It is one of a number of competing visions for the future of the rail industry, and we should take the opportunity of the next franchise renewal to consider it.

Could the McNulty inquiry conceivably mean an earlier window of opportunity?

It could, but the focus of the activity of the rail industry at a Great Britain level, which is how it is organised, is on what happens in London and the south-east, and journeys into London on the intercity network, so it would be unusual if the report did not accept that, at least implicitly. Although what you suggest might be true, I am not sure that that window of opportunity will be as great as we would like it to be. Perhaps it is for the committee, the Government or the Parliament to grasp the opportunity to do some thinking and feed the idea into the process.

Coming back to the shorter term for the moment, I note that the UK Government is talking about increasing the proportion of rail costs that the passenger pays through fares and intends to allow an increase of up to 3 per cent. The Scottish Government is talking about maintaining a cap on increases in regulated fares of 1 per cent and keeping the ratio between the public purse and the fare payers about the same. Do the witnesses have any comments about that general approach, whether it stacks up, whether it is the right way to go for the moment, or whether something else is possible?

It is a reasonable holding position. Again, data on these issues seem to appear in dribs and drabs and I am not privy to much of it. Passenger demand in Scotland seems to be holding up reasonably well, and the railway accounts will not have been exposed to the complete collapse in demand and fare revenue that has happened in many areas of London and the south-east, which are particularly exposed to the collapse of first-class ticket and regular commuter income that has hit a lot of the accounts of the south-eastern train operating companies very hard. Given that our picture looks more stable than many others elsewhere in GB, that seems to be a reasonable position to adopt for the short term.

When you call it a reasonable holding position for the short term, do you mean that it cannot be sustained for longer than that, or does it simply fail to address the wider point that you made?

Both, in a sense. It does not address the wider point of the overall financial stability and sustainability of the rail industry. Given what we know will happen to public expenditure in the next few years, that £900 million number needs to get a lot smaller.

As there are no further comments on the question of fares versus public funding, we will move on to talk about the wider climate change aspects of the budget. Obviously, the transport questions include a climate change element and climate change, as a topic, will include some transport aspects. In general, though, are there particular positives or negatives in the budget in relation to climate change? Are there climate change impacts that could be felt in the short, medium or long term as a result of the spending decisions that are outlined in next year’s budget?

As I set out in my submission, the budget has a number of welcome commitments such as continued support for important public transport investments. Although it does not allocate the money, there is also the reiteration of the commitment to the Borders railway. I have a couple of concerns on the balance of transport spend. In my view, it is still too skewed in favour of road building, with £200 million being allocated to the new Forth crossing and a much smaller investment than is needed in active travel.

I have also looked in detail at what we need to spend to make our homes more energy efficient, so that we can cut fuel bills and emissions and eradicate fuel poverty. That area is one of the main contributors to our climate emissions in Scotland, yet the investment in energy efficiency improvements in our homes is still modest. From the way in which the budget is set out, it is hard to be certain what the implications are for the energy assistance package and home insulation scheme. There is a commitment to maintain current levels of investment, although the overall budget line—I think that it is referred to as sustainable homes—is reduced significantly.

If we cross-reference the figures to those in the RPP for the number of homes that will have measures installed to improve their energy efficiency, then, based on our cost per property analysis, we may be seeing a decrease in the funding that is made available this year to support home insulation schemes and the energy assistance package. At this stage, it is not clear but it looks likely that the investment in home insulation will be less than it was last year. This is a major concern. The recent figures for fuel poverty in Scotland show that 700,000 households live in fuel poverty. We know that investment in energy efficiency is a cost effective way of cutting emissions. We also know that, for every pound that we spend on tackling fuel poverty, we save the national health service 42p.

At this stage, I remain concerned that we have not seen the step change in improving the level of investment that is required to make our homes more energy efficient. I am aware that we need to see the next tier of detail before we will be clear on the sums that are being allocated to the home insulation scheme and the energy assistance package. Last year, a commitment of £10 million was made to support a universal home insulation scheme. The draft budget does not allocate any funds to support a similar scheme.

Besides the home insulation scheme and energy efficiency, do panel members wish to pick out other areas as positive or negative?

There is a positive commitment to support the renewables infrastructure plan. There is £17 million for the facilities that will enable us to reap the benefits from the renewables revolution and the job opportunities that will arise. That is to be welcomed, albeit that it is still a relatively modest sum. We are supportive of that. For us, the key areas are those that I have set out where I have identified welcome opportunities and things that we need to strengthen.

It is worth saying that strengthening the budget to make it much more carbon and climate friendly requires only quite modest investment. In a total budget that is in the region of £28 billion, WWF believes that an increase of only tens of millions in the sums that are invested in energy efficiency in our homes and in active travel could achieve and deliver substantial cuts in climate emissions and produce health benefits, including through greater active travel. I press the committee on that. We are looking at quite modest sums that will make a very big difference.

I would counter that by reiterating that, although this looks like a pretty good holding budget for a while, what we need to hit the climate change targets more generally is a complete industrial revolution in energy terms. That will not be funded from the public purse alone; money will have to come from other people, too. We have some but not a lot of enabling funds.

My concern about the budget is more that everything is being pushed down to local authorities, which have restricted budgets and an increasing number of targets. They will struggle to hit many of the targets and they are already starting to say that they cannot deliver on all the targets. I am sure that, if we pushed them, some targets could be met, but the danger is that the problem is simply being shovelled down to somebody else rather than solved.

Overall, I disagree with Dan Barlow, because I do not think that having little bits of money for different grant schemes is the solution. We are talking about a much bigger transformation of the energy sector, which requires private finance, whether that is from individuals who do up their homes or from big pension funds that invest in the Scottish environment. That is the key. Can we use public money as enabling funds to leverage more and bigger funds from elsewhere?

Of course, I agree completely with Andy Kerr that leveraging in private capital will be critical to delivering the long-term transformation that we need. There is no disagreement about that.

Of course, members will be familiar with the discussions that are under way about the implications and opportunities of a UK green infrastructure bank and about what might arise from a green deal to support improvements in our housing stock, but those developments are still a couple of years away, which is why we are concerned. We cannot simply wait until those mechanisms are established, because that time is too far away. We need investment now.

Andy Kerr is right—we need to ensure that investment now catalyses and stimulates investment from home owners in improving energy efficiency and from the private sector. However, that is no excuse for the Government to get its allocation wrong. I count money that is allocated to the new Forth road bridge as allocated incorrectly—it could be much better spent. Even if we just allocated that £200 million next year to supporting active travel and improving energy efficiency, we would make the budget much more climate friendly.

Do the witnesses have anything to add about the climate impacts of measures in the budget or about missed opportunities to make the speeches about the low-carbon economy into a reality?

I will focus on the afterthought that is planning policy. I quote:

“Scottish Planning Policy influences the location, density and form of development to make access by public transport and active travel easier and reduce travel demand.”

I have no doubt that that is true rhetorically, but we do not have to go far outside in the real world to see that our development patterns are still fundamentally unsustainable. It would be good to start by stopping making things worse. Why are we still building out-of-town retail parks? Why are we still building car-dependent housing? Why are we still locating major public investments—which are nonetheless laudable—in the wrong places, as with our major hospitals? I echo the comment that, if we are serious about the issue, we must do something completely different that is at a level of regulatory and policy skill that has not been achieved at the UK or Scottish level.

Planning policy is a slow-burner. Changing people’s travel habits takes a long time. We replace only about 1 per cent of the built environment every year. We know all that but, equally, we could have the same conversation in 20 years’ time, when we might not have replaced 20 per cent of the built environment because we did not start to do so now.

I presume that, if reductions in expenditure on planning nationally or in councils came to pass, that would make inculcating a new approach to planning harder.

My initial response is that I am not convinced. We have known for long enough what the problem is and that we are not very good at applying the planning policies that we have. Perhaps we should start doing something about that.

We used to have the idea that the polluter pays. We have talked about carbon taxes for a long time. I understand and acknowledge that such measures are beyond the Scottish Government’s competence and are for the UK level but, if we are serious about changing the locations of developments and how people access them, we need to start thinking about such interventions, as well as spending relatively small—or even relatively large—amounts of money on initiatives such as active travel. Even if we spent on that, that would address only part of the problem.

We know that various trajectories to reach our emissions targets exist—we could start with a steep downward reduction, with a shallow reduction or possibly even with an increase. My feeling is that, under the budget, we will start with a possible slight increase, if anything, which is not a great way to head downwards to our final target.

15:30

We have looked at some issues that affect the transport, infrastructure and climate change budget and others. Rather than repeat what has been said, I would like to look at the distribution of budget changes. Do you have any specific recommendations—other than those that you have already made—in relation to issues with which the committee deals, such as transport and rural land use? The committee also has responsibility for the climate change aspects of waste. There has been quite a lot of discussion of the issue of homes and communities, which includes planning, but we have not really discussed rural land use and waste. I suspect that we will return to those issues when we look at the RPP. We will get to that before nightfall, if you wish to hold your fire.

The witnesses have no comments to make on those issues at the moment.

How appropriate do you consider the carbon assessment of the draft budget to be? I know that we are breaking new ground, so we should not be too harsh, but there are a number of competing carbon assessment methodologies. It is important that the methodology that the Scottish Government has chosen is fit for purpose and measures the right sort of things. How relevant is the carbon assessment report to budget scrutiny? How clear and credible is it?

I agree that we must recognise that the carbon assessment of the budget, which is a welcome initiative, is a relatively new development, which means that a learning process is involved. The report gives us a top-level assessment of the impact on different areas of spending, so it enables us to identify which portfolios are responsible for the significant components of our climate emissions, under a limited, consumption-type model. However, it is still quite simplistic, because it attributes emission figures to broad portfolios. On transport, for example, it says that the average impact of transport per amount spent is X, so the emissions from the transport budget are Y.

In the long term, the carbon assessment must be used to inform decision making, but it is not being used for that at the moment. My understanding is that, at the very end of the process of developing the draft budget, an assessment is made of what the spending figures mean for carbon emissions. I would like carbon assessment to be used to allow us to include different options early on, so that we can consider spending more money on health and less on something else because health spending would deliver multiple benefits, or cutting part of the health budget because we have spent more on active travel, which will enable us to meet some health targets. The carbon assessment should inform how moneys are allocated, but it does not do that yet.

The second issue is integration with the other mechanisms that are now available. Work is under way to ensure that we understand the carbon impact of big infrastructure projects, but I understand that such individual-level assessments are based on a slightly different methodology. The RPP is based on understanding the policies and proposals that are needed to deliver our commitments under the Climate Change (Scotland) Act 2009, which are based on production emissions.

At the moment, a number of different mechanisms are used. Some are based on consumption, some are based on production and some account for induced impacts, which the carbon assessment of the budget does not do at the moment. It gives figures for the impact of what we spend on transport, for example, but it does not account for what that means—the cars that will go on to the roads that we may build as a result of those spending decisions, and their impact on Scotland’s long-term carbon emissions.

We need a more coherent and joined-up approach that links together RPP work, individual-level assessment work and carbon budget assessment work, so that we understand consumption and production emissions. We also need a report that is used to inform decisions, not one that is produced just as an end-of-pipe assessment.

How difficult would that be to achieve? Is it your assertion that the Government is just paying lip service to this at the moment, or are there genuine barriers to delivering the sort of carbon assessment that you have been speaking about?

The Government has required to take a new approach in order to develop a methodology to apply the carbon assessment to the budget. I understand that there has been a process to engage with various stakeholders to identify what mechanisms and approaches might work. I know that the Government consulted on that. At this stage, I would not criticise the Government for its approach.

I am not an academic expert in this area, but my understanding from those who are—including from the Stockholm Environment Institute—is that it should be possible to come up with mechanisms that show both the production and consumption emissions that are associated with budget spend. My challenge to the Government is for it to keep strengthening and developing the current methodology. The committee is of course welcome to continue to champion this important aspect of ensuring that we are on a low-carbon trajectory, such that our budget and the RPP can join up on a line.

There is no real agreement in the academic literature about the best method of achieving that, so it is indeed difficult to criticise the Government for its approach. I absolutely agree with Dan Barlow that carbon assessment is a consequence of what we are doing and comes at the back end, rather than an informal or decision-making tool, which is what we would like to see in the end. It is an emerging area, and there will be multiple methods by which a carbon assessment can be achieved. There is no agreed perfect way of doing it. We just need to accept that.

I have worked on local transport policy and I draw a slight parallel between carbon assessment and something that I did in that area. It is possible to present where we want to get to by way of scenarios of how to get there. That could be a useful thing for a carbon assessment to do. If we establish where we want to get to, there will be various ways to go there and we can ascertain how much it will cost us. That helps to inform how we get to the route that we want to take to where we want to go.

One of the biggest problems with complex forecasting models is that real-life events will intervene and show just how big the implicit errors in the models have been. The classic example is the traffic model for London, for when Hammersmith bridge was forced to close because of the attempted bomb attack on it. According to the traffic model for London, all kinds of chaos would be let loose upon that city, but that did not happen because people were much more astute and clever at changing their behaviour than we thought they would be. That point is intended to reiterate the importance of having proper empirical research about how people actually change what they do after major interventions. On the transport front, the obvious ones involve the opening of new pieces of infrastructure. We need to understand what actually happens in Scotland and the choices that are made by Scottish people in ways that reflect our environment and our economy. If we can ascertain how they behave once we intervene, the forecast models might be more accurate over the medium term, and they might become more responsive to our particular situation.

I was struck by John Swinney’s introduction to the carbon assessment:

“This assessment provides, for the very first time, an assessment of the overall carbon impact of the Government's proposed expenditure.”

It might as well be the very first such assessment, but carbon assessment has in fact been developing gradually. It is the first one on a statutory footing, but this is not the first time we have looked at a carbon assessment of the budget. This time last year, various people made the criticism that parts of the document did not make sense without individual-level assessments, which also had to be developed. Last year’s assessment was said not to be useful for informing decisions, to give us only a snapshot of what was happening and not to discern between different forms of Government expenditure—referring to a pound spent on road building not being the same as a pound spent on insulation, and so on. Has any progress at all been made since last year? I seem to remember the cabinet secretary acknowledging that the carbon assessment tool had to evolve, and that the next one would not be just a repeat of the same process.

You are asking whether any improvement has been made. Yes, it has. Has enough been made? That is a difficult question to answer.

Could you point out for me the areas where you think the approach has been improved—or changed—since last time?

With the approach that was taken last year, very sweeping assumptions had to be made about some of the metrics—if £X is spent, the CO2 tonnage is a certain amount. Over the past 12 months, there has been an attempt to distinguish things much more clearly, and that has taken us a step forward. However, we do not have agreed, common metrics that different groups can accept, in the same way that there are now common metrics for the national emissions inventories, which we use for where coal or gas are burned. We do not have such agreed metrics for the supply chains or for the use of Government expenditure.

A lot of work is going on in the private sector and at the Intergovernmental Panel on Climate Change to consider more common metrics that could be used in Europe, or in different countries. Those are emerging efforts, emerging tools and emerging metrics, which can be applied in Scotland, but there has not been sufficient agreement over the past 12 months on exactly how those metrics can be applied. Things have moved forward, but they have a long, long way to go.

From my perspective, the approach that has been taken has changed relatively little since last year. I accept Andy Kerr’s comments about some of the details, but some of the issues that were raised previously about how the assessment has been used have not been addressed.

I recognise that a huge amount of work has been undertaken over the past year on producing the RPP to ensure delivery of the Climate Change (Scotland) Act 2009. I understand that the RPP is a very important document for giving us confidence that we are on track to deliver the necessary cuts in emissions. That is not an excuse, however, for not ensuring that we also have a good and robust approach to informing the budget.

The challenge now is to ensure that the interplay between the RPP and the budget works. As we noted when we gave evidence some years ago, it is often through the budget that very significant early expenditure commitments are made, including those for major road or infrastructure projects. After those projects have been committed in a budget, the scope for changing them is often quite limited—it can come down to an environmental impact assessment approach, whereby the funding might be adjusted a little bit with regard to exactly where some spending goes—because the political commitment will have been made. It is important to ensure that decisions are influenced at a very early stage. The budget is a process that influences many decisions at a very early stage. That is why it is important for it to be informed by an understanding of the carbon impact of the commitments that have been made.

There are no further questions for this panel of witnesses. There being no outstanding issues that the witnesses wish to raise about the 2011-12 budget, I thank you all very much for spending this time with us. Some of you are staying with us for the next item on the agenda.

15:43 Meeting suspended.

15:48 On resuming—