Meeting of the Parliament

Meeting date: Thursday, October 5, 2017

Official Report 854KB pdf

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City Region Deals

The next item of business is a statement by Keith Brown, on Scottish city region deals—next steps. The cabinet secretary will take questions at the end of his statement.

14:31  

Strengthening Scotland’s economy so that it benefits all is the very definition of inclusive growth and is front and centre of what the Government is all about. We are using all the levers at our disposal. Recent data shows that the economy is growing, though we want it to grow at a higher rate. The number of people in employment is at a record high and unemployment is at a joint record low.

Cities and their regions are the engines of our economy. Increasing jobs, investment and employment in our city regions will drive up national economic growth. City region deals are one of our key economic levers. Eighty-three per cent of Scotland’s population—4.5 million people—live in the areas that are covered by existing or planned city region deals. According to the latest figures, which are from 2015, those same areas account for 86 per cent of Scotland’s gross value added and 2.2 million jobs, which is 85 per cent of the total number of Scottish jobs.

The investments that we have made in city region deals can be transformational. They will benefit Scotland as a whole, creating tens of thousands of jobs and upskilling labour markets. However, deals can do much more than that. They galvanise key partners to come together to drive regional economies in ways that go well beyond the investments that they deliver.

So far, the Scottish Government has committed over £1 billion over the next 10 to 20 years for city region deals in Glasgow, Aberdeen, Inverness and Edinburgh. Our investment exceeds the United Kingdom Government investment in the deals. Indeed, the Scottish Government is the biggest funder of city region deals in Scotland.

The deals are based on proposals developed by cities and their partners, harnessing local intelligence to identify what is needed to unlock inclusive growth. City deals are important investments and they can attract significant private sector leverage, but we must see them in context. Over the past five years, local government in Scotland has received more than £3.5 billion capital funding through the local government settlement. This Government has made significant investment to transform Scotland’s infrastructure. In 2017-18 alone, we have committed more than £4 billion for projects such as the Queensferry crossing, the Aberdeen western peripheral route, the A9 dualling programme and rail improvements between Edinburgh and Glasgow. To cap that list, over three years we have seen four deals. That is solid progress.

Today I express our commitment to deals for all our cities and confirm to Parliament that the Scottish Government will support city deals for Stirling and Clackmannanshire and for the Tay cities, which will be the first two-city deal in Scotland. In addition, I want to seek clarity and achieve consensus where possible with other partners on how all Scotland can benefit from the deals that we strike.

The first deal was, of course, Glasgow. That deal is in its delivery stage. Along with the UK Government, we are supporting £1.13 billion of investment in Scotland’s largest city and region, which is levering in about £3.3 billion of private sector investment.

In Aberdeen, we are investing £125 million over the next 10 years, with match funding from the UK Government, to deliver projects including a new oil and gas technology centre and harbour infrastructure. When we struck that deal, we were clear that more was needed for the north-east, so the Scottish Government alone committed to investing an additional £254 million in transport, digital and housing.

In January, I signed the Inverness and Highland city region deal, committing up to £135 million over 10 years as part of a £315 million package. That investment will deliver jobs, drive innovation, attract greater private sector investment and—crucially for the Highlands—help to retain the young people who are the lifeblood of the region’s future.

In Edinburgh, after some hard negotiations with the UK Government to encourage it to match our ambitions, we signed heads of terms in July to invest £300 million over the next 15 years in the Edinburgh and south-east Scotland city region deal as part of a £1.1 billion package.

That is where we are, and we plan to go further.

We have discussed in the chamber on a number of occasions the enterprise and skills review. In our review report, which we published in June, we set out our commitment to support the creation of regional partnerships across the country.

Our national economic development agencies have been challenged to align regionally to support regional partnerships, and they have been proactive in doing that. We are very clear that future city and regional deals will be expected to use our inclusive growth model to prioritise their investments and monitor their progress. We are also clear that private sector involvement in the partnerships is crucial and that the Scottish Government—I think that this is also true for the UK Government—will make its funding contingent on the involvement of the private sector.

In each of the deals that I have talked about, we have leveraged private investment to support regional development. I am delighted with that, and I am sure that we can do even more. The private sector has to be an engaged partner, providing drive and direction to our regional economies. In parallel, and very importantly, the Equality and Human Rights Commission is working with us to maximise equality of opportunity within city region deals.

As I have said, we intend to achieve city region deals for Stirling and Clackmannanshire and for the Tay cities of Dundee and Perth, alongside their partners in Angus and the north of Fife. Officials are working with both sets of regional partners and with the UK Government, so that we can reach agreement on heads of terms as soon as possible. I will continue to press the UK Government to match our commitment to transform those regional economies.

Our policy approach should not just be about cities and their regions, extremely important though they are. For our economy and all our people to flourish, we need inclusive economic growth in all of Scotland, especially outside the traditional growth areas.

As I said at the start of my statement, inclusive growth is about opportunities for everybody. To that end, we have said that we are supportive of a growth deal for the three Ayrshire councils, which would be the first regional deal in Scotland. Ayrshire’s economy has lagged behind national growth for too long and it is time to take decisive action. We are determined to deliver a deal that will bring jobs and investment to the area, reduce unemployment and reinvigorate the local economy.

We are also committed to tackling the economic challenges faced in the south of Scotland, so as well as our commitment to establish a new south of Scotland enterprise agency—we are the first Government to do that—we are looking at a border lands inclusive growth deal. We are entering into detailed discussions with Dumfries and Galloway and Scottish Borders to explore a deal that supports their aspirations.

We have had discussions with Moray, Falkirk and Argyll and Bute. Each has growth proposals, while Orkney, Shetland and the Western Isles seek an islands deal.

I am willing to play my part and to work closely with the UK Government to agree the next phase of deals. We have had good co-operation, to this juncture at least. We had good co-operation with Andrew Dunlop when he was in post, but I call on the UK Government to play its part, match our commitment to support inclusive economic growth for all Scotland and, crucially, develop a coherent and planned programme. By that I mean that it is not clear to me what role the UK Government wants to play in different parts of Scotland and it would be useful for us to know that before we proceed with any further deals.

I have given a clear picture of our plans. Our existing deals are delivering jobs and investment for Scotland. The £1 billion committed so far to city region deals is a clear signal that we respect the knowledge of regional partners, who are best placed to identify what is needed to unlock inclusive growth in their regions. The point is that the cities and their partners produce the proposals. Of necessity, we and the UK Government have to prioritise which of those we accept and support, but the cities come up with them in the first place; the proposals are not made by either of the two Governments.

We are also expanding our regional economic policy to go beyond city deals and we will support the creation of regional partnerships across the country. However, I want a clear commitment from the UK Government that it will work in partnership with us to deliver transformational city region deals for Stirling and Clackmannanshire, the Tay cities and the other areas that I have mentioned.

I have said repeatedly that I am willing to work with the relevant UK ministers to help to achieve the aspirations of the industrial strategy. To achieve that, I call on the UK Government to help to develop a co-ordinated approach to all of Scotland, including working with us in relation to all areas, including the Ayrshire regions, Argyll and Bute, Moray, Falkirk, the border lands and the islands. For my part and on behalf of the Scottish Government, I commit to working collaboratively with all our partners to ensure that we get the best deal for cities, regions and the whole of Scotland.

I thank the cabinet secretary for the advance copy of his statement. We welcome the continuing collaboration between the UK Government and the Scottish Government on the city region deals. Such deals represent an opportunity for transformational change in the regions that they cover. That is to be encouraged, because Scotland’s economy continues to struggle under the Scottish National Party Government, as demonstrated in yesterday’s economic figures, which showed growth of only 0.1 per cent for the second quarter.

Growth of 0.1 per cent might be good news according to the cabinet secretary, but I make it clear that it is not good enough for Scotland. Official forecasts show that such underperformance under the SNP will continue in the years to come. Will the cabinet secretary therefore explain how the Scottish Government plans to use the city region deals to deliver higher levels of economic growth throughout Scotland? Will he clarify when the Government expects the heads of terms for the Stirling and Clackmannanshire and Tay cities deals to be finalised and what the level of investment from the Scottish Government will be in respect of those deals?

It is astonishing that the Tories have crept back to their position of pretending that the UK Government has no role in the Scottish economy. It defies belief that people who are meant to have a level of intelligence about economic debate still cling to that position. Dean Lockhart famously held it when he declared before the previous gross domestic product statistics came out that it was all on the SNP’s shoulders. Afterwards, when we had three times the growth of the UK, suddenly both Governments were involved. We are now back to only one Government being involved. When we have that level of myopia on the part of the Tories, we will not get the joint working that we need. I am thankful that some of their colleagues in the UK Government are a bit more economically savvy and recognise their role, hence the industrial strategy and the shared prosperity fund that have been announced.

I laid out some of the ways in which we hope to achieve economic growth through some of the measures that we have taken on the city deals. Those measures are varied, and it is fair to say that they are more varied in the later city deals. They developed over time.

We want the quantum and the timing of the Stirling and Clackmannanshire deal to be clarified as soon as possible, but both depend on all partners coming together—the councils that are involved, their partners, the UK Government and the Scottish Government. Nothing is agreed until it is all agreed. The UK Government has now introduced the stricture of trying to balance the deal as much as possible between reserved and devolved issues. It had no regard to that when it struck a deal with the Democratic Unionist Party, into which it put more than £1 billion for strictly devolved issues, but for city deals in Scotland, it will fund only reserved issues. Such funding helps to determine the quantum that is eventually agreed on and we are in the process of discussing that with the UK Government, Stirling Council and Clackmannanshire Council.

I thank the cabinet secretary for providing an advance copy of his statement. There is much on which we can agree. Scottish Labour believes that cities and regions are the engine rooms of growth. We welcome all city region deals and area growth deals and believe that regional partnerships are good.

However, I part company with the cabinet secretary on the state of our economy. Growth in the economy was only 0.1 per cent for the last quarter, which is not good news. I contrast that with the situation in the UK as a whole. Over the course of the year, growth in the Scottish economy has been less than 0.5 per cent, whereas the figure across the UK is 1.5 per cent. Although the employment growth that the cabinet secretary mentioned is welcome, it is predominantly in part-time, temporary jobs, many of the holders of which are employed on zero-hours contracts as part of the gig economy.

Because I feel that we can and should do better, I want to ask the cabinet secretary what percentage level of growth he thinks that the city region deals will deliver, how many jobs will be created, what constitutes success and how he will measure it so that we know what it looks like. Does he believe that the city region deals are a positive example of the pooling and sharing of resources across the UK?

In response to Jackie Baillie’s final question, if the money were allocated on an equitable basis, of course it would be a positive example, but given that the Government announced out of the blue that it would put more than £1 billion into one devolved part of the UK for strictly devolved purposes, it is evident that the money is not being allocated on a fair and transparent basis.

Of course it is good that we are working collaboratively. We have sought to do that and we will continue to do that, but different parts of the UK are not being treated in the same way, which is unfortunate.

In the preamble to her question, Jackie Baillie mentioned GDP. The simple fact is that, over the past six months, GDP has increased by 0.7 per cent in Scotland and by 0.5 per cent in the UK, so she was wrong in her general assumption.

Growth in Scotland has increased by 0.5 per cent over the year.

If Jackie Baillie would care to listen to what I am saying, she will find out that she was also wrong in what she said about part-time workers. In Scotland, part-time workers represent a smaller proportion of those in employment than is the case down south. In Scotland, there are more people who want to work on a part-time basis as opposed to people who have to do so than is the case in the rest of the UK. Jackie Baillie did not mention the fact that we have more businesses in Scotland than ever before and that we have the second-highest level in the UK of foreign direct investment.

When the proposals on each of the city deals have come forward, they have included estimates of the amount of growth that they will generate and the number of jobs that they will create. Those figures will have to be aggregated when we get to the end of the process. At that point, we will be able to set out the sum total of the ambition that is encapsulated in all the deals that we do.

However, we are still some way from knowing how many deals there are to be and what the basis of those deals will be. For that reason, we need to get clarity from the UK Government on what its approach will be in Moray and in Argyll and Bute. Will it work with us in those areas? We have said that we are willing to do that; if the UK Government says the same thing, we can proceed.

I very much welcome the cabinet secretary’s statement and the Scottish Government’s clear commitment to ensuring a successful outcome for the Stirling and Clackmannanshire city region deal.

Can the cabinet secretary provide me with an update on how effective the working relationship between Stirling Council, the Scottish Government and the UK Government has been and what the estimated timescale is for successful delivery of a deal that is vital for the future of the fabulous city of Stirling and its fantastic surrounding rural communities in Clackmannanshire?

It is a pity that Dean Shiels concentrated on political point scoring instead of talking up the Stirling city deal.

It might have been a pity, but it was not a surprise.

In relation to the Stirling and Clackmannanshire city region deal, we have constructive relationships with the two councils involved. Some welcome flexibility has been shown. As I mentioned, the UK Government now seeks to concentrate on reserved functions, although it does not focus exclusively on them—there have been one or two exceptions. Given that that is the case, that sometimes creates a dilemma, not just for the Stirling and Clackmannanshire deal but for the Tay cities deal. We have said that we will not be too stringent in applying that to each constituent part of the area involved in the deal. We will not mind if one area has more of a reserved component than a devolved component, as long as the whole thing balances up across the city deal. We have made that suggestion. To his credit, the UK Government’s Lord Duncan—or the blue baron, as he prefers to refer to himself—has said that he is willing to support that approach. If so, a flexible approach can be developed.

As far as the timescale is concerned, we have in place what we need to proceed to a deal. I think that I am right in understanding that the UK Government feels that it has to make a statement before it will proceed further. We are ready to go, but I am not convinced that both councils are ready to go with their proposals, and I am not sure that the UK Government will want to proceed ahead of making that statement. It may well do that at the next opportunity that it has—it calls such things “financial events”. Nothing is holding us back from getting the proposals finalised. The sooner we can get on with this, the better for all concerned.

In his statement, the cabinet secretary mentioned that private investment had been leveraged into the various city deals. Is he able to give us any figures for how much that amounts to?

I can give a couple of examples; if the member wants more detail, I can write to him with that.

The biggest example would be the contribution that is made through the Aberdeen Harbour trust of around £400 million. We and the UK Government have supported that through some of the infrastructure works to maximise the benefit.

Such investment has been more of a feature of the later deals than it was of the earlier deals. We were not hugely involved in the development of the city deal although we committed £0.5 billion to it. It is fair to say that we and the UK Government came under quite a bit of pressure to include private sector partners, and we will continue to include them in future deals.

In the Stirling and Clackmannanshire deal, relationships have developed with private sector partners such as CodeBase, and we welcome that.

I would be happy to give Murdo Fraser the total for all private sector involvement but perhaps the biggest is the Aberdeen city deal, with Aberdeen Harbour trust putting in £400 million.

There are 10 minutes left for 10 questions so I urge the cabinet secretary to be slightly briefer in his answers.

City deals can be a strong driver for investment in low-carbon infrastructure and in the inclusive economic growth opportunities that come alongside that. Under the Edinburgh city deal, however, we saw proposals to support feasibility work on the Fife rail projects dropped. How will the Scottish Government ensure that the feasibility work on the St Andrews and Newburgh rail reopenings is supported through the Tay cities deal, and does the cabinet secretary see opportunities to deliver feasibility work on the Stirling to Dunfermline route through the Stirling and Clackmannanshire deal?

I will try to be brief, but I reiterate the point that we have to look at the deals that are proposed to us and decide which ones we will support. If the council does not put forward the projects that the member is talking about, they cannot be considered.

My colleague Humza Yousaf has already spoken about the different ways in which the Levenmouth rail link could be taken forward and he has addressed the chamber on the issue. As for the other deals that Mark Ruskell mentioned, whether it be St Andrews, or Alloa to Dunfermline, it is down to the councils to bring them forward. Even if they do so, we cannot guarantee to fund them, but we can guarantee to look at all the projects that are submitted.

I thank the cabinet secretary for early sight of his statement and welcome the confirmation of the on-going discussions with the island authorities about a possible islands deal that I hope will address, among other things, the need for improvements to internal ferry services.

Can the cabinet secretary also confirm that the Scottish Futures Trust will continue to engage proactively with the island authorities on the development of the proposals? Will he also ensure that a specific official in his department is assigned responsibility as the primary point of contact for the island authorities within that process?

I can say yes to both of those questions. The SFT engages with all local authorities when they express a need for support in relation to estate and other financial matters, and they will remain so engaged.

If it is not known already, there are two officials here in the chamber who are involved in all the city deals. I will make sure that the council and Liam McArthur are made aware of the named official.

My constituents in Caithness, Sutherland and Ross have a perception that the Inverness city region deal is largely being used in Inverness, as opposed to supporting infrastructure and projects in remote and rural areas. What support does the Scottish Government give the local authority to make sure that the deal benefits the region as well as the city?

I give Gail Ross the same caveat that I have given to other members. We look at the projects that the local authorities and their partners bring forward. We do not seek to go behind them and propose projects.

On the point that Gail Ross has raised, I have two examples. The first is the investment in the Highlands deal for the science skills academy that will provide young people with state of the art teaching hubs for science, technology, engineering and mathematics subject right across the region. There is also the new innovative living project, which will deliver supported homes for people across the region.

Among other things, as Gail Ross knows, connectivity is a huge issue in the Highlands. Helping to realise Highland Council’s ambition to be the best digitally connected rural region in Europe is behind some of the decisions that we have made about the digital projects that we are supporting in that deal.

Will the cabinet secretary confirm that the access link to Glasgow airport will be state of the art and that it will be delivered by 2025? Will he confirm whether he or the Minister for Transport and the Islands has met the new leader of Glasgow City Council to discuss the delivery of that project, which is key to the Glasgow city region?

It might be helpful for Pauline McNeill if I lay out the basis on which the deals are made. They are made with support from the UK and Scottish Governments, but it is for councils and their partners to bring forward projects. We have a role in what is called the assurance framework in making sure that business cases are as robust as they can be.

There have been on-going discussions for many years on that issue that have involved me, both of my predecessors and the new and previous administrations of Glasgow City Council.

I welcome the cabinet secretary’s commitment to Ayrshire in his statement. Will he advise members what progress has been made in discussions with the UK Government regarding the delivery of the Ayrshire growth deal, which has the support of all three Ayrshire local authorities and the SNP Government, but requires £359.8 million from the UK Government to bring it to fruition?

At the request of the three Ayrshire authorities— because they could not get a response—we asked the UK Government whether it wanted to be a co-partner in an Ayrshire growth deal. The response from the UK Government was negative. However, since that time, it has, somewhat out of the blue, supported the HALO Kilmarnock project, although to a lesser extent than the Scottish Government. As things stand, my understanding of the UK Government’s position is that it does not want to be part of the Ayrshire growth deal, although it might be the case that support is forthcoming for different projects through the industrial strategy.

Discussions on the deal between the Scottish Government and regional partners began earlier this year and we are currently working closely with those partners to understand their full ambitions for the deal.

I thank the Scottish Government for following the UK Government lead and matching its £3.5 million investment in the HALO project in Kilmarnock, which was in addition to the £1.8 million from the low-carbon infrastructure transition programme for the geothermal district heating system. Given that other projects in the Ayrshire growth deal are already approaching shovel readiness, and my discussions with the UK Government suggest that it is ready and willing to move to the next phase, it is clear that decisive action and formal commitment to invest from the Scottish Government would accelerate the process and demonstrate a meaningful commitment to the Ayrshire growth deal. Is the cabinet secretary prepared to quantify the financial commitment to the people of Ayrshire?

I notice that there was no quantification of the deal that the UK Government is apparently on the verge of agreeing. If members were to ask the councils that are involved—certainly if they were to ask the Scottish Government—they would hear that the response from the UK Government has been, “No, we will not be part of an Ayrshire growth deal”. It would be interesting if the position of the UK Government is now being revealed by a Conservative back bencher in this Parliament.

I will be clear about the HALO Kilmarnock project: the Scottish Government put in £5.3 million, as opposed to £3 million. The reason that Brian Whittle can say that we “followed” the UK Government is because collaborative working broke down completely. A puerile attempt to get a headline led to the UK Government going ahead and announcing it before the due diligence was done, instead of working with the Scottish Government and giving a conjoined announcement. If the UK Government can stop playing such stupid games, I am sure that Ayrshire will benefit. [Interruption.]

Will members behave, please? Colin Smyth—

On a point of order, Presiding Officer. I am sorry—I thought that we had reached the end of the questions.

Not quite yet. We will be a few more minutes. Colin Smyth, to be followed by Ben Macpherson.

The cabinet secretary will be aware that local councils in the border lands—Dumfries and Galloway and the Scottish Borders in Scotland, and Carlisle, Cumbria and Northumbria in England—have been working together for some time to develop a border lands growth deal. Given the cabinet secretary’s comments in his statement about inclusive growth and his pledge to work closely with the UK Government, will he give a commitment today that the proposals for a border lands growth deal will be considered as part of the Scottish Government’s budget process this December, and will he encourage the UK Government to ensure that the proposals are considered as part of its budget in November, so that there is investment in the economy of the south of Scotland sooner rather than later?

First, we have to see those proposals and have the chance to consider them. That is the only responsible thing that a Government can do.

We have said that we support the idea of a border lands deal but, if that were agreed, there would be the anomaly of the Scottish Borders having had two deals when other parts of Scotland have had no deals. That is what underlies my point about trying to get a bit of coherence.

We have said in good faith that we will look closely and sympathetically at the proposals that are made, but we have to have time to consider them. If we are about to make a financial commitment, people will expect that we do so on the right terms for the taxpayer. Our willingness to work with the border lands proposal is on the record.

How will the Scottish Government’s investment in the Edinburgh and south-east Scotland city region deal benefit the whole area? In particular, how will it increase the housing supply?

Given the shortness of time, I will focus on the last part of Ben Macpherson’s question. The commitments will include providing £50 million of investment and loans to unlock housing in seven strategic sites across the region, guaranteeing, on a risk-sharing basis, up to £150 million of investment to unlock up to 5,000 new homes in Winchburgh and supporting the City of Edinburgh Council to establish a new regional housing vehicle to deliver a minimum of 1,500 homes, with the Scottish Government committing £50 million capital grant and a consent to on-lend up to £240 million real support for housing in Edinburgh.

Will the cabinet secretary update us on the prospects for the decommissioning of North Sea oil and gas infrastructure being part of the Tay cities deal?

Bill Bowman obviously knows the details of that. All I can say is that we are considering those details. There have been a number of proposals from different parts of the country in relation to decommissioning. I remind members that 90 per cent of decommissioning work comes to the UK, a large proportion of which comes to Scotland. Most of that is plugging and abandonment, and not so much the decommissioning of big rigs. However, we want that business too, so we will support initiatives that bring that business to Scotland.

The cabinet secretary referred to areas outwith the city region deals, and I welcome his comments on Moray. Will he update us on his recent meeting with Moray Council and elaborate on what steps have been taken to ensure that the UK Government co-ordinates with the Scottish Government so that there is no undue delay?

Without too much elaboration, please, cabinet secretary.

I met Moray Council—as Richard Lochhead mentioned—on 14 September. There has been a collaborative approach so far, but one thing that is fairly obvious is that when we get a list of things that are largely in the devolved sector, it limits the potential for a deal. If the UK Government wants to come on board, or if it wants to stick with reserved areas, the most balanced proposals are likely to get the greatest support. I have said to Moray Council that we are very happy to work with it and develop the proposals that it is working on. We hope that the UK Government will be a partner in that, too.

I thank members for their contributions and the cabinet secretary for getting through all those points.

On a point of order, Presiding Officer. I would like to put the record straight. I am obviously obsessed with Dunfermline Athletic Football Club. I referred to Dean Shiels earlier when I should have referred to Dean Lockhart. I apologise to Dean Shiels—[Laughter.]—and of course to Dean Lockhart.

The point was noted by the chair. I think that the member was probably flattered to be compared to Dean Shiels.