Official Report 602KB pdf
The next item on our agenda is an evidence session on the Scottish Government’s “Infrastructure Delivery Pipeline” for 2026 to 2030, which was published last month. We are joined by Ian Hughes, the engagement director for Scotland from the Construction Industry Training Board, and Peter Reekie, the chief executive of the Scottish Futures Trust. I welcome you both to the meeting; we are grateful to you for participating. We invited some other bodies, which declined to participate, so your presence is particularly welcome. We will move straight to questions.
The first thing that I will ask is taken from the magnificent 143-page tome, known as “Long-term infrastructure Scotland: supporting a sustainable and thriving future”, which the SFT published in January of this year. You touch on the 30-year infrastructure needs assessment and the Infrastructure Commission for Scotland and you also talk about how the
“Needs Assessment aligns with Scotland’s revised infrastructure investment framework to inform Scottish Government’s draft 10-year Infrastructure Strategy (2026/27–2036/37).”
To kick off, can you touch on where we are with this? It seems that an awful lot of work has gone on and it seems to be quite a crowded space. Where are we in terms of the delivery of Scottish infrastructure?
First, thank you very much for the invitation; it is always good to come and speak to the committee.
It has been far too long, Peter—it has been years.
It has been a while. You are right that there is a lot going on but all these documents and publications sit together to show a path of trying to get to a longer-term approach to our infrastructure planning for Scotland. Sometimes we say that this is a long-term game played in a short-term environment. With projects that take many years to deliver and very many years to plan, we need to begin to look further ahead and try to build a consensus about what Scotland needs going into the future.
We were asked by the Government to look independently at that very long-term plan—to look at it generationally. We talk about infrastructure being a generational asset and we are trying to take a generational look at it. There is, therefore, a lot of uncertainty. We cannot say which hospitals, which roads, or which schools we need to build over the next 30 years but we can build up a picture of what the drivers will be across the infrastructure systems, which have to work together, not as a series of silos. What are the things that will impact across those infrastructure systems, which would allow us to base our decisions on them over that longer-term period?
We have identified key drivers, including the economic shape of Scotland, how that is changing and what we need for the economy. We also need to look at our public services and public service reform, because we have economic infrastructure and we have the social infrastructure that provides the roof over public services, so to speak. Those are internal drivers that we make our own choices on.
Demographics, which Graeme Roy talked about, are also a big driver in all our decision making. More specifically, there are infrastructural drivers such as climate change, which you mentioned, and global security, which I would not have been talking about as much even three or four years ago but which is now having an impact on all infrastructure systems, not just on our defence systems but on cybersecurity for all of our infrastructure.
There are also themes that will allow infrastructure systems to work better together. I am thinking, for example, of energy transition, which you have already talked about this morning, and which is a matter not just for the energy system alone. It affects how we heat all our buildings, our mobility and so on, and it is a cross-system issue that needs to be planned for.
There is also the nature positivity of our infrastructure systems. In that respect, we are thinking not just about our natural infrastructure itself but about nature-positive solutions for all of our infrastructure, the availability of nature and, for our social infrastructure in particular, access to nature. We are also prioritising place, because all our places across Scotland have different needs, and we must look at what we are doing about that at national, regional and local level.
Another issue that you have talked about is how we use data and technology, and there is much that we can do to improve our use of data. For example, there are what we call digital twins—that is, the sensors that you put on your assets to provide you with the data that will help you maintain and use the infrastructure better.
There is also the issue of asset and climate resilience, which is all about how much we are spending on maintaining and enhancing our existing assets instead of building new things. I hope that we will come back to that, because that is a really important subject.
Come back to that? We have just started the session.
Come on to that, then.
The final issue, for me, is managing demand. As infrastructure folk, we are in many ways predictors and providers, but there are lots of tools available in policy areas that help us think about how we can influence behaviour and to think differently about demand. We cannot, in many cases, direct things to happen, but we can, as well as providing what is needed, use our influence to help change demand dynamics.
Those are some of the common themes that we think will pertain over the 30-year period and which will help us think longer term about our infrastructure systems. It is all about helping the big silos that have to operate individually to think better together; it feeds into the Government’s infrastructure strategy, which sets out the prioritisation framework and what will be important over the next 10 years, and that, in turn, feeds into the delivery pipeline and what will happen over the next four-year spending review period.
In other words, we are trying to build the long-term picture that links to the mid-term and short-term pictures. Indeed, part of the consultation on the Government’s infrastructure strategy, which is live at the minute, is about how those elements should fit together and what the sector sees as the important elements of our long-term view that should be brought into more immediate prioritisation decisions.
I think that, from a layperson’s perspective, what people see when it comes to infrastructure projects is an awful lot going into planning and a lot less going into delivery than perhaps should be the case. I do not think that you will be desperately keen to talk about specific projects—and that is not necessarily what we want to do—but I remember the now Lord Cameron, when he was an MSP, asking about the consultancy fees with regard to the Rest and Be Thankful project, and the amount being something like £18 million. A lot of people, like me, were shocked by that and thought, “Was some guy getting paid £1,000 a day or something?”
That might sound simplistic, but it seems like a huge amount of money is going into planning, and projects are not being delivered as fast as they should be. You touched, rightly, on the issue of maintenance and delivery of projects, but in the previous session—which I know that you sat through—we talked about the fact that there always seem to be cost overruns and delays in delivering infrastructure in Scotland. Given that Scotland is going to have at least a 5 per cent real-terms reduction in capital available over the next five years, we will need more, not less, bang for our buck.
Moreover—and I am probably asking too many questions at the same time, but this is a bee in my bonnet—why is procurement so much more expensive in Scotland and the United Kingdom than it is in comparable European countries? I see you smiling, Peter, but you know that it is true.
That is one of those, “Can you solve the world in one answer?” questions.
Peter, we have so much confidence in you.
11:00
You talk about the time that is spent up front, but there is a saying in major project delivery: “Think slow, act fast.” I would not decry anyone who spends a lot of time on project preparation, because that is usually the right thing to do. There is a lot of discussion around our planning system—
I understand that, but to interject, I have an A737 road safety project that has been on the planning board since 2004. It is supposed to be in development. It is not vast; it is not the A9, but that is 22 years. Whenever you contact Transport Scotland you get, “This matter has to go through Government procedures.” When you try to find out what those procedures are, you are up against a brick wall, so there is a level of frustration there. I know that you think slow, but I am sure that you will agree that there is a difference between slow and comatose. I am not trying to be amusing—I am actually deadly serious about this. The lead time seems to sometimes be disproportionate to the work that requires to be done.
There is an important point there about how we prioritise. I always see the project pipeline as a bit like a funnel. It is not a long pipeline, and it has the two elements—the wide, hopper-shaped bit at the top, where many people have ideas and priorities that they would like to see happen, and then the narrow, tube-like pipeline bit, where once we have made a decision, a business case has been approved and funding has been allocated, we move into delivery. It is important that that delivery element is efficient and effective and moves quickly.
The projects that sit in the hopper bit at the top are still subject to prioritisation within a limited budget across the different sectors. We could say that it would be better if nobody talked about any of the projects until we were certain that we knew that they were coming, the funding had been allocated and they were in the pipeline element, but then folks would, very rightly, say, “We want more information about projects at an earlier stage.”
We should want more information about projects at an earlier stage, but we have to accept that there is uncertainty with that information at an earlier stage. Some projects will move through the hopper element quickly because they are prioritised due to an asset failure or particular policy objectives, but some projects will sit in that wide element of the pipeline for a long time because, although they may be particularly important to some people and some stakeholders, they never make it through the overall prioritisation. They may be taking a long time to get through a statutory or other part of the process. It is not necessarily the case that because a project is being talked about, there is a linear process to get to delivery and that that linear process is taking, as you say, a long time.
But when you have gone out to a full consultation and there are no statutory objectors and so on, and people are encouraged to think that something is going to happen but it does not happen year on year, the public, who ultimately pay for it, feel let down and disappointed. I would not be surprised if the cost of all that for the A737 project, since 2004, is more than the cost of the project itself, which was £12 million, which is pretty modest, I would suggest.
There seems to be much more bureaucracy, for want of a better word, in relation to the preparation of projects, which ultimately increases the cost and the delay to the delivery that everyone wants to see, whether it is housing, a school, a hospital, a road or whatever it happens to be. That is what is frustrating. You will have seen how many umpteen times the A9 or whatever has been raised in the Parliament, and that is because members genuinely want to see things happen on the ground.
How can we expedite that process? I am not talking about doing it in a week, but 10 or 20 years is a bit frustrating. There is a huge cost to that, so how can we make procurement more efficient and effective?
You talk about acceleration, but you could look at it the other way round and say, “We spend all our budget every year, so it is not possible to do more things sooner, because we spend all the money.” The question you are asking is, “Why do we start so soon on a project that is not prioritised to be delivered soon?”
That is only right if you accept that procurement costs are reasonable. I do not think they are reasonable, because—
You are saying that we could do more with the budget that is available.
Yes. How do we get more bang for the buck? Procurement costs are disproportionately higher in the UK, including Scotland, than they are in other countries—clearly they are. I went to the Faroe Islands and looked at the cost of their tunnels. They built a 22km tunnel for €600 million. How much would it cost to build that here—how many billions?
A lot of material is available on that, as you well know. Some of that is about the planning process. Some of it is about environmental mitigations, which are the right thing to do for the long term.
In the SFT, we are particularly keen on delivering things as programmes, because doing so gets us efficiencies. To use the language of the sector, if we do individual projects, it is like building a prototype in a muddy field every time. It is quite an inefficient way to deliver. That is why we are keen on things such as housing.
One of the reasons why we have thought about the very long term is that, if you are able to start something and keep going—some of the programmes in rail are perhaps a good example of this—you carry out a process repetitively and that delivers the efficiency. The elements of standardisation of design and moving into off-site manufacturing come into it, so that assets can be created in an industrial environment rather than on a construction site. However, that approach is only possible if you can aggregate demand over a longer term and create a programme of activities.
There are ways to improve construction productivity overall. Skills is a big part of that, as we will no doubt come on to. However, we think that we need to create programmes for the long term for activities—whether those be building new schools or local care centres or whatever—that we will be doing one, two, or three of each year for the next 10 years. We can think about how to drive efficiency through that process: through procurement and through design and delivery. In my view, that is one of the big things that we could do better to improve productivity, which would be driven by that long-term planning and how we prioritise. It would deliver some of the outcomes that you are looking for in terms of improving pace and lowering the individual cost of assets.
I will come back to one or two of those things, but first it is important that Ian Hughes has an opportunity to say a few things. Ian, we can talk about building this or that, but without the workforce we cannot really build anything. The role of the Construction Industry Training Board and, indeed, the whole sector in producing a skilled workforce is absolutely critical. In your submission, you said:
“In 2024/25 over 6,500 people started a Construction related Modern Apprenticeship, more than a quarter of all new starts. Over 13,000 apprentices were in training, and the industry achieved a 78% completion rate.”
That is all very positive news. Scotland is experiencing a record-low birth rate, which will feed through to the workforce soon. Are you confident that we will be able to provide the number of people to the construction sector—either young people or folk who are a bit older who are switching careers—to enable it to have a workforce with the range of skills that are required in the years ahead?
Thanks for inviting me to the meeting.
That is not an unreasonable question, but there is a misconception that there is a lack of supply of young people who are interested in entering construction; in reality, there is a large oversupply of young people who want to enter the sector. Where there is a mismatch, it is between what those young people can do and what employers require in order to invest in people and grow their business.
Going back to the point that was made earlier, the private sector will not wait for the process or for procurement. It will react when the opportunity arises, and it will invest in its people when the opportunity arises. Therefore, you will see a lack of investment if the pipeline is not working efficiently and effectively.
If it is erratic.
Yes. You have talked about the modern apprenticeship programme. More than 25 per cent of the young people applying for that, in particular those aged 16 to 19, want to come into construction. We estimate that, for every one modern apprentice, there are 100 applications. Over and above the modern apprenticeship programme, last year and this year there were between 45,000 and 50,000 learners in Scotland’s further education sector studying engineering or construction. That is 50,000 young people over and above the modern apprenticeship programme who are entering college for a full or part-time course to study in the two biggest sectors that will deliver the infrastructure programme for Scotland.
That is a vast talent pool, but our research indicates that as little as 25 per cent of that pool is employed in the sector to deliver things such as infrastructure programmes in Scotland. We call it a leaky pipeline. Too many people are entering at the beginning and not going through the pipeline to be gainfully employed in the very powerful career opportunities in construction in the built environment.
Are there skills gaps? When I speak to people from businesses, they say that there are specific skill shortages, such as in welding. A steel fabricator in my constituency is taking people who have been long-term unemployed and putting them through a 15-week advanced welding course with qualifications. They tend to be people in their late 20s and 30s, or even older people. Although there might be a number of people in construction, are there gaps where there are particular difficulties?
Geographically, do we have the people where we need them? Obviously, there is not a huge workforce in rural Perthshire, for example, to work on the A9. They all have to move there, at least temporarily. How do we deal with those issues in the pipeline of provision?
On skills gaps, the biggest request from industry is to get more new entrants but, when I say to employers, “Okay, I can give you a 16 or 17-year-old with no qualifications or experience,” nine out of 10 say, “No. I need a level of competency from that young person before I will employ them.” They do not have to be fully competent or have done three or four years of training, but they need a level of competency from the education system or the FE sector. That is what industry is telling us is lacking. The industry needs more competent new entrants.
I like to flip the point about the skills gap. A skills gap is basically a supply and demand model and, if you have a skills gap, you have job opportunities. If you need 1,000 plumbers and you are training only 800, there are still 1,000 jobs, but 200 vacancies will go unfilled. It is important that the research or evidence that is produced identifies occupations and geographies where the biggest pinch points will be. Our research shows that the biggest pinch points in Scotland will be in the Highlands and Islands and the south-east, in Edinburgh and Lothian. That is based on our five-year modelling. Sixty per cent of industry contracts will be through procurements in Scotland, although it might be slightly higher than that. We are pretty accurate in determining, over a five-year period, where the investment will go, what the demographics are in those areas and what occupational shortfalls will occur in those areas.
It is interesting to look at the make-up of the sector in Scotland. The three big sectors, which account for roughly 33 per cent each, are infrastructure, which we are here to discuss; house building, both social and private; and repairs and maintenance.
I would consider them all to be infrastructure, to be honest. Maintenance is a really important issue, as is house building, and record investment is going in there. What you are doing in construction is also vital—they are all vital, obviously.
When you look at who delivers those particular aspects of the sector, you find that the make-up is very different. About 96 or 97 per cent of all companies in Scotland are small and medium-sized enterprises and micro companies, so they will not be delivering roads, hospitals or big infrastructure projects. They will be predominantly in repairs and maintenance or perhaps part of a supply chain. It is kind of like a comet: you have the lead contractor and the big supply chain, right down to one individual specialist who does something that no one else does.
That breakdown in Scotland, with the predominant SME and micro company size, begs the question, which we are asking more and more when we have discussions such as this, of whether the sector has the capability to respond to the investment that is coming through the pipeline in Scotland, or whether we should rely on the tier 1s and the medium-sized companies, which can suck in some of the SMEs and micros to deliver in specific areas.
11:15
A big assumption is made about capability. It is a big assumption that the private sector is capable of delivering projects to the timescales and costs that are laid out through a procurement. A longer discussion needs to be had about how we engage more with the SME and micro sectors in particular, with a view to getting them into the delivery pipeline.
In paragraph 13 of your submission, you said,
“Scotland’s SME network requires a longer-term pipeline of work beyond four financial years”,
but how realistic is that, given the global and financial uncertainties that we face? For example, in the current financial year, we had a 14 per cent increase in capital, but capital funding is set to decline for the next five years. In effect, capital spending will be at the same level, in real terms, in 2030 as it was in 2023-24. In other words, we have not advanced that much, so how can we deliver the level of certainty that you have said is needed?
There is probably only one area in which we can give people confidence, and that is the procurement process itself. If there is a framework agreement in place, contractors will need to be tied down for a five or 10-year period in order to give confidence that stuff can be delivered. If SMEs and microbusinesses are tied into that pipeline and given the confidence of knowing that they will be subcontracted as part of the longer-term journey, that will give them the confidence to invest in their people and their infrastructure. I think that that is the only way that we can look at things in the longer term.
We all know, because we have all worked with them, that small contractors have an average workflow period of six months. They will know that they have six months’ worth of work, but they will probably not know that they have 12 months’ worth of work. They probably cannot see that far ahead. That is an issue for microbusinesses and small businesses in all sectors, not just construction. Therefore, we need to bring them into the tent, as it were. We need to ensure that the lead contractors and the medium-sized contractors bring in the SMEs and microbusinesses for a longer-term period. In my opinion, we can make that happen only through public sector spending. We cannot make it happen through the private sector, because what happens there relates to what individuals in Scotland spend on their windows, their roofs and repairs and maintenance. That is ad hoc work.
What is the balance between the work that SMEs do in the private sector and the work that they do in the public sector?
They do more in the private sector. That will include domestic repairs and maintenance. First and foremost, they work in their communities. If they are part of a supply chain, they will work within a reasonable travel distance of their community. Gone are the days of small contractors jumping in a minibus and going down to London. That does not happen any more. They have a maximum travel distance of 30 miles.
We have a good roofer fae Cumnock.
It is a lifestyle choice. Why should people not make lifestyle choices? If the work is further than 30 miles away, it becomes less economically viable. Fundamentally, most of the SMEs and microcompanies in Scotland will work in their communities; they will not venture further afield than that.
In your submission, you said that investment in modern apprenticeships
“will be insufficient to meet industry’s skills demand”.
You talk about new pathways. Could you be specific about what those new pathways are? There are things such as graduate apprenticeships, but what new pathways did you have in mind?
I think that we are at a bit of a tipping point. On one hand, there is the high cost of delivering modern apprenticeships, which are delivered mainly over a four-year period. For an SME or a microbusiness, that is a lengthy period. We have had an increasing number of requests from industry to look at additional routes into the sector, over and above apprenticeships. We need to think about what level of training, upskilling or competency we can provide within an established environment, such as the FE sector, in order to provide additional routes into the construction sector.
As a training body, it is not our job to take an individual through a career path, although we can assist at certain pinch points. It is the employer who will take their staff on that career journey. An individual can leave or set up their own business—they can do what they want.
When it comes to where we should provide those pathways, Scotland has a hugely impressive FE sector, and I think that we need to utilise it as much as possible to provide additional routes into the construction sector. It is a question of competency, and training and qualifications can play a significant role in that regard. There needs to be a stronger link between the skills and training landscape and economic and social outputs. At present, I do not think that we have got that right.
I go back to the statistic that I gave: we are training 45,000 engineers and construction people at college, but they are not getting jobs in those sectors, so they are not producing the economic and social output that is required to meet the needs of the policies that the Scottish Government is designing and implementing in respect of house building, net zero and the big infrastructure plans.
The regional planning model, whereby there is a stronger alignment between what people are being trained, taught and educated in and the pipeline of work that is coming through in the region, needs to be better, as it is not very good at present.
Thank you for that—it is very helpful.
Peter, you are not a big fan of the mutual investment model, are you? In 2019, the Scottish Futures Trust, in its options appraisal paper, found that the mutual investment model was significantly more expensive, at
“2.6 to 3.3 times the construction cost over the 25 years of the asset.”
I know that that model has been rejected for the A9. The SFT said that
“This compares with 1.9 to 2.6 times the construction cost if financed using public borrowing”,
and noted that an
“asset funded using capital grant, and … maintained to the same standard over 25 years is estimated to be 1.5 times the construction cost.”
Would you reject the mutual investment model, or are there any specific circumstances in which you feel that it is the only game in town? To be honest, for me, there are shades of public-private partnerships and private finance initiatives.
It is a form of public-private partnership—
Indeed—of course it is.
The paper that we produced in 2019 was not intended to say that we are for or against that model; it was intended to increase transparency around the approaches that can be taken and the costs associated with those approaches.
The approach that we used previously was the non-profit-distributing model—we can go back a few years to when the committee last talked about that—but it was found to be classified as the public sector by Eurostat at the time; classification is now the responsibility of the Office for National Statistics. It therefore did not provide what is critical in Scotland, which is additionality to the ability to invest in capital infrastructure and pay for that with long-term resource budgets when there are limited capital budgets now.
In our 2019 paper, we tried to show that if you want to build infrastructure now and pay for it out of long-term resource budgets—I always say, “Pay as you build or pay as you use, but pay you must”—the mutual investment model route is available and it meets the classification requirements, and there is a cost implication of doing it.
That is a decision for Government and politicians to make. We can help to implement those projects and programmes—we know the commercial mechanisms; we know how to go about the procurement; and we know the criteria for project selection and what makes a project suitable to be delivered in that way. However, I am not going to say that I am a fan or not a fan of that model—I just want to make it clear that it can be done, and what the implications of doing it are.
I have two more questions—well, I actually have loads, but colleagues want to come in. How do you decide on the balance between maintenance and new project delivery? For example, after the 2008 crash, the then Chancellor of the Exchequer, Alistair Darling, cut Scotland’s capital allocation by 40 per cent; that was subsequently reduced to 20 per cent, as you will recall. However, the Scottish Government did actually put resource of some £500 million into capital to try to restore that. At that time, it was said that half of all the money that was available for capital spend went on care and maintenance, so it meant that the number of new projects that were going to be delivered was massively down.
However, as you will know if you drive along the roads in Scotland, for example, or look at other pieces of public infrastructure, such as bridges or whatever it happens to be, there are real concerns that they are not really up to scratch in many areas. We can argue about the size of the whole cake, but how do we decide to say, “Look—we really need to spend X per cent on maintenance before we even think about new projects?” How do we strike that balance? I know that it is a difficult one.
That is something that we could be better at, if I am honest. I would say that you have to maintain what you have first. That does not necessarily mean that everything should last forever because, in some cases, an asset might not be suitable for future need, so there is no point in continuing to maintain it. There is a balance to be struck, but there is a commitment in the 2021 infrastructure investment plan to double the spend on maintenance in some sectors. That is important.
It is very difficult to draw out the data on what has been spent on maintenance, because these are small individual projects that are not covered individually in the pipeline information that is published. Data is definitely an issue. For all our key infrastructure assets, we should have asset management plans that show the condition of the asset and its long-term future—whether we plan to keep it or to change its use—and the cost of maintaining it.
You will hear the phrase “backlog maintenance” used a lot. Backlog maintenance is an important characteristic, but we need to understand the long-term future of an asset and whether the backlog maintenance includes, for example, painting the walls in a building, which we can choose to do or choose not to do; or replacing a boiler, which, if not replaced, will start to fail regularly, affecting service delivery. We should be thinking more across the sectors, which is what we are trying to help bodies to do—to think about their asset strategies and asset management plans and to build those out over a longer time, so that, collectively, we can understand the maintenance need of our asset base.
Because of the stages of development of society and its assets, we are now in a phase in which we have a lot of ageing infrastructure assets, which we are still using to provide important services for people.
The Tories built them well, to be fair.
Yes, but the failure rate is not linear. With regard to failure, there is a thing called a bathtub curve: things fail when they are brand-new, because you do not yet have them quite right and they are settling in; then they are really steady for a long time, everything is fine and you do not need to do much to them; but the failure rate suddenly increases at the end of their life—the curve is shaped like a bathtub. Many of our assets are just approaching the phase when they will start to fail.
We need to start thinking about spending more on maintaining ageing infrastructure—on preventative maintenance. That goes back to one of my earlier points about how we use sensor technology—lots of sectors are thinking about that—so that we can get better at predictive maintenance. If you imagine the capital budget overall, you can think about that being built up from nothing to what we need to maintain that we already have, to what we could be using for new assets or extending the life of existing ones, and then what we need to leave at the top because things occur and you need to leave a bit of space. As I said, we need to allow for the fact that things occur and there are fluctuations. It is really important to build up budgets in that way, within and across organisations.
The demand for capital exceeds supply, so you must find it frustrating when, each year, there seem to be projects that are delayed to the extent that the capital budget is not fully spent. Should there not be more emphasis on shovel-ready projects, such as resurfacing roads, that could be done in the relatively short term, to avoid that situation?
I go back to my initial question, which is on an issue that the SFC also highlighted. How do we reduce the likelihood of cost overruns in procurement and delays, which sometimes last for years? It is not just a Scottish issue. We have a friend who is a quartermaster on HS2 who says that when it comes to getting things done, they have been told, “Just do things. Money is no limit,” and all that kind of stuff. Whether that is true, I cannot say, but there are real concerns about delivering things on time and on budget. We are not talking about delays of three to six months—sometimes, we are talking about years and huge cost overruns—so how do we keep that under control and ensure that we optimise the capital budget to put it to best effect?
There are a couple of answers to that. One is about the handling of uncertainty, because these are big lumpy elements of spend that are more difficult to predict, and the impacts of delay on those is more across year ends than it is in service delivery, where spend is a lot more linear.
On your point about bringing forward smaller projects—they are often maintenance projects—that relies on budget management and people knowing when and where the excess budget is likely to occur. It also depends on how we manage contingency, which is all about managing uncertainty and, in a way, about communicating uncertainty, because if you want a project not to overrun its budget, you ensure that you have a big budget that contains a lot of contingency. In the event that that contingency is not needed, it is really difficult for someone else to use it, because it is held in one budget line. Being able to show that things have been done on time and on budget is good management practice that mitigates those issues across the piece.
11:30
If contingency is held at the level of an overall portfolio of projects, we have to accept that some projects within the portfolio will spend a little more than was originally intended and some might spend a little less. However, within the overall portfolio contingency, that can be managed.
I do not pretend that this is easy; it is really difficult to get right what is held at a local level or at a higher level in the system. It is about handling, managing and communicating uncertainty at different levels between different budget holders. You do not need to hold a contingency on every individual project, because projects will perform differently according to their budget. That is critical.
Sorry, I said that those were my last questions, but the answer has stimulated a teensy-weensy one more. What proportion of projects are delivered on time and on budget?
I do not know. I will not try to answer that for you just now.
Is it most of them, or is it a teensy-weensy number? We do not want a situation whereby it is almost accepted that projects will overrun and be over budget. If something has a budget and a delivery date, it should be completed by that date. I remember that some projects in the private sector, at least—and, I imagine, in the public sector, although I am not an expert on procurement—would have penalty clauses if they were not delivered on time.
I agree. However, there has been 25 per cent inflation in construction costs over the five-year period from 2021 to the first quarter of 2026. Projects last for such a length of time, so it is not a surprise that projects that were budgeted before that period began now cost more than was budgeted. We have not been able to predict that level of inflation. Some of it is a feature of the current circumstances. I do not want to use that as an excuse, because the generality of your point is still good. However, at the minute, it is particularly difficult to get cost certainty.
I call John Mason, then Liz Smith.
:I am amazed—after 41 minutes, I get to ask a question.
:Not that you were counting. [Laughter.]
:I am completely surprised.
Is there enough detail on the current infrastructure delivery pipeline and on the development and future pipelines for either of your sectors to move forward?
For many purposes, the document does not give enough detail, although it provides a very understandable level of detail for where we are at the minute. For example, one line in that infrastructure delivery pipeline is the £4 billion budget for affordable housing. Every construction contractor will want to know when the projects that they are interested in will be coming up, in what part of the country those projects will be delivered, and what skills will be required. Ian Hughes will, no doubt, talk about that.
We have responded to the industry’s demand for more detail on that with a pipeline database, which currently contains 1,192 projects. However, more than 50 per cent of those projects are worth less than £2 million, whereas the threshold for the delivery pipeline is £5 million. Individual companies in industry are interested in lots of little projects, so there is not a complete overlap in the scope of those two sources of information. We go out to all public bodies, most of which respond, so we have a lot of local authority projects in the database. It is really useful for locally based companies to know exactly what project is in their area.
In addition, our database is more searchable. If a contractor is interested in providing a particular piece of equipment that is useful in schools, it can filter our database by when all the schools projects are coming, across Scotland. There are ways of having increased granularity. However, that changes more frequently and involves less certainty. I think that industry is very comfortable with that. It understands that things change. However, that level of granularity is not a good way to deliver the level of accountability that you guys look for in your scrutiny. More information would be useful.
:I will come to Mr Hughes in just a second, but I think that the committee had expected or was hoping for a bit more detail. There is a split between—I keep getting the titles mixed up—the delivery pipeline and the development and futures pipelines. The latter appears to just be things that we hope to do one day. It is not much more detailed than that, is it?
The diagrams in the document show what stage those projects are at. They are the wider part at the top of the funnel. The place of a project in the prioritisation queue is not clear before a business case has been approved and funding has been allocated, because it will not be known when it will happen, and time is money. Therefore, we cannot tell exactly how much a project will cost. There is a substantially increased level of uncertainty for projects prior to the business case stage, so less information is being provided about them. However, you would need to ask others about the details that might be available.
:Okay. Mr Hughes, is the infrastructure delivery pipeline enough for you?
It is certainly not enough for industry partners. To provide some context, in Scotland, there are only about 75 tier 1 companies—those are public limited companies or big family-owned businesses—and about 75 medium-sized companies. That is all. Those are the companies that will deliver the infrastructure plan—excluding companies that are based in England, which may come up and procure or be part of a bigger agreement. That small pool of delivery companies in Scotland needs detail and clarity on where and when they come in to the process.
It is the process that drives the reaction. It is a process when a company says, “There is a lot happening in the Highlands and Islands and that is mainly going to be roads”—I am using that as an example. The company will say, “We are a civil engineering company. We are going to invest and to go after these contracts with one or two partners or with the supply chain.”
Not all of those 150 companies in Scotland will tender, and not all of them are in framework agreements—so the number will actually be lower. The smaller the number of delivery companies that are based in Scotland to provide the economic and social benefits that we are talking about, the more difficult it will be for them to react—and react quickly—if things are switched on.
:We know that the total capital expenditure is going up a bit at the moment, but it will then be fairly steady for the next few years. That is not enough detail, because the companies are more specialised than that. Is that correct?
The detail will probably suffice for the companies to make investment decisions, because it gives them confidence that these things will be procured over a 10-year period. That does not necessarily mean that they will quickly invest in their businesses, but it will give them the confidence that they need to establish bases in, for example, Edinburgh or the Highlands and Inverness, and to continue working in those areas or to gear up at a certain point to move into those areas to deliver some of the big infrastructure projects.
If you were to get two or three chief executive officers of the big companies in Scotland in the room and ask them what the trigger point is that will give them the confidence to locate and deliver projects in a certain geography in Scotland, you would get a much stronger response about their business model and how they will respond to opportunities.
:Your specialism is more in modern apprenticeships and things like that. I am not sure how many modern apprenticeships there are at the moment. Do you have a target for there to be more of them, or is that too simplistic a question?
No, it is not a simplistic question. We would all like there to be more modern apprenticeships, but there is a big issue with the funding model. It is a funded model, so the numbers are stipulated by the level of the funding. At the present time, Skills Development Scotland holds the modern apprenticeship funding programme, but, as you know, that is moving to the Scottish Funding Council over the next 12 months via the reform legislation.
The budget drives the numbers, so it is not really a demand-led model. It is basically saying, “We have a budget, we can provide funding for 6,000 construction and engineering apprenticeships and we want them to be based in north, south, east and west Scotland.” That is the direction that we are given—it is not necessarily any more specific than that.
:If the number were to be 6,000, for example, are you saying that it should be 9,000 or 12,000? Do you have a number in mind?
To go back to a point I made earlier, that should be more strongly aligned to the economic output that the Government is trying to achieve, such as infrastructure investment or social investment within schools and hospitals. At present, we can provide you with occupational shortfall figures, but those tend to be for more specialist occupations and not to be for craft or trade apprentices. If I said that we wanted 10 per cent more modern apprentices, I think that the college system would struggle to deliver that. The message we are getting is that they are maxed out and that delivering apprentices is unsustainable because it uses a lot of real estate and investment. If we were to increase that by 10 per cent, the Government budget would have to be increased accordingly or a bit more.
:Can you put a figure on the size of that increase?
We are working closely with the Scottish Funding Council to find out how much it costs to deliver an apprenticeship in Scotland, because we do not know. It is a messy landscape because there are three investors in craft apprenticeships in Scotland: Skills Development Scotland invests through the management agency and also invests in colleges to deliver apprenticeships; the Scottish Funding Council provides colleges with credits over and above what they get from Skills Development Scotland; and if you are in the scope of the CITB, you get substantial grant support from it. We estimate that that comes to about £40,000 to £50,000 per apprentice, depending where the apprenticeship is delivered.
:I presume that varies a lot, depending what the skill is.
The payments are more or less the same for any sector, although there are geographical nuances.
:I do not want to go too far off the subject, but do you think the Tertiary Education and Training (Funding and Governance) (Scotland) Act will help to simplify that by putting the SFC and SDS together?
I hope so. Industry frankly does not care about all that stuff and just wants a simple system. We need to put the learner journey front and centre in the skills landscape and to think about the 16 to 17-year-old who enters into a professional career. If that journey is not as smooth as it should be, we will lose them, and we do. We lose them in big numbers, particularly in the first year. Having a simpler landscape and a better learner journey would mean retaining more people and having greater economic output at the end of the day.
:I will touch on an area that the convener already asked about, the mutual investment model. I confess to being a bit sceptical about that. You said earlier that it meets the classification requirements, and it might do that today, but who knows what will happen tomorrow? The ONS might change it. I am an accountant and the danger with accountants is that they look for loopholes. They might decide that the MIM is a loophole and then change the rules again to squeeze that out. It is effectively a debt, whether we are paying for it today or over 20 years.
Because you are an accountant, you will know that the MIM creates a future repayment obligation, but whether that is classified as debt is another issue.
You are right that we rely on the stability of the rulebooks, and of the fiscal framework overall, to design the way that the budgets are used. The classification of what is resource spending and what is capital spending is tricky and depends on particular rulebooks. You might say the same about whether maintenance spend should be capitalised or should be taken from resource spend. There is a whole series of rules and regulations and, at a certain point, you can be close to the edge of a rule because that is how the rules operate.
You are right to say that there are many different ways to see that. All we can do is to say how that would operate under the current rulebook as we understand it, and we have been to the ONS and tested that.
:All the models are more expensive than either taking it straight out of taxation or using the slightly more expensive traditional borrowing.
Delivering the additionality comes with an associated cost. That is why the schools programme originally used private finance models and the PPP approach. We have changed that to an outcomes-based funding model that can use those local authorities’ financial capacity. Whether they choose to borrow is a matter for the individual local authority, but the Government contributes long-term resource budgets for those schools.
That resource comes with an obligation to keep the building well-maintained and, for the more recently built schools, there is a need for the building to be energy efficient, which has led to a step change in the energy efficiency of new schools buildings under that funding model.
There are different funding models that use either private finance or public finance, which can allow the Scottish Government to pay for the assets out of long-term resource budgets, rather than capital budgets. The question is how much additionality ministers want to deliver and how they prioritise long-term resource spending versus capital spending now.
11:45
:Is it your figures that say that, if you use traditional borrowing or a capital grant, the total cost, including maintenance, is
“1.5 times the construction cost”?
Yes.
:In other cases, it can go up to
“2.6 to 3.3 times the construction cost”.
In the order, yes.
The finance is a significant proportion of the overall life-cycle cost, but we should not forget the maintenance element. If we build an asset and then fail to maintain it properly, and if it therefore has a shortened life, that has a cost and a service delivery implication. There is an actual benefit in locking in the maintenance spend as we construct the assets. You could argue that we should be able to do that ourselves by allocating budget to maintenance, but you will know from across the public sector that that is not necessarily done as well as it could be. It is an advantage to lock in the maintenance but, as you say, there is a cost associated with that.
:That means that that money is ring fenced.
Exactly—yes.
:The school might be maintained, but the council might not be able to afford to maintain the road outside.
Absolutely. That takes it out of the general prioritisation pot and makes it asset specific, so as to say, if we are going to build this thing, we really ought to allow the budget to maintain it.
:Okay, thank you.
I clocked that at 57 minutes, John.
:Before I come to my main question, Mr Hughes, I want to ask you about something that you said about the college sector, when you were replying to the convener. You made the very interesting comment that there is a vast pool of considerable talent and that the sector is doing a really good job of trying to harness that talent. I entirely agree with that.
You also mentioned, however, that you did not feel that the responses, in different regions, to the demand for the skills that are required were as good as they used to be. I would certainly agree with that, too. When I came into the Parliament 20 years ago, the local colleges were extremely good at picking up the local demand in a very small local community. Why do you think that they are not as good as they should be in picking up local demand?
To start with, it is variable. I would not like to generalise. Some colleges have a tremendous relationship with employers in their local setting; others have a more distant relationship, I would suggest. It is fundamentally about that relationship with employers.
If a young person is doing an apprenticeship, they will be spending 26 or 28 weeks in a college environment, full time. That means that they are not working with their employer. They are being taught the theory and some practical aspects of the job, but they are not being productive with the employer. The employer needs to trust the college environment to do the right thing at the right time, so that the young person can be brought back into the workplace with more skills and more capability.
That works pretty well, but it seems to be lacking, in my opinion, in that most employers do not see the FE sector as a recruitment portal. They do not utilise it as a recruitment pool as much as they could or should do. There is a piece of work in that space for a number of parties to do, including us. Some employers will do that but, with tens of thousands of learners studying construction but not entering a job, we need to scratch the surface and find out why that is happening.
:Is that because of a lack of knowledge about what is happening in the college sector, or is there a deliberate policy of using other pools of talent before coming to the college sector?
I will give a response from an employer’s viewpoint. In many cases, employers do not see learners coming through school or the FE sector as having the competency levels that they require. In some cases, that could involve attitude or aptitude. The biggest reason for apprentices in Scotland leaving the construction sector in year 1 is discipline: not turning up, missing their transport or wanting to leave early. There are lots of different reasons.
That brings us back to the process of recruiting young people. The recruitment process in construction is informal—it is a tap on the shoulder of people who want to be an apprentice. Parents will never stop asking their son or daughter to join the family business—we are not saying that they should—but there is a high percentage of informal recruitment. That involves bringing a young person into the construction sector with no prior experience, no educational experience or knowledge; they just think that it is a good thing to do. Then, suddenly, it is November and it is not a good thing any more. It is getting up at six in the morning and being on a roof and they decide that they are out of there or that they are not going to turn up again.
The short-life working group that the Scottish Government set up, which we are part of, is looking at two areas of the pipeline. We are looking at how to retain more apprentices and at pre-apprenticeship programmes, and at how to get more FE learners through the pipeline into employment. The group is looking at solutions and will bring them back to the Government in May.
:What do we have to do to ensure that more young people have the self-discipline and soft skills that you are talking about?
Every indication from our experience with learners and employers suggests that they need to be involved in their sector of choice at an earlier point in their career pathway. That goes back to vocational training at school—it should start in secondary school, but it should continue through the FE sector if that is where they go. That huge pool that we are talking about is coming straight from school—there are 50,000 of them and one minute they are in school and the next minute they are in college. The tasters, work experience and introduction to construction are not happening at the right level.
It sounds obvious, but construction is an incredibly technical, highly skilled profession, irrespective of where you are in the sector. The career opportunities are aligned to that, so the young people must have knowledge or experience of it. That works both ways: I would rather that a young person had some experience and then decided that it was not for them. If learners enter the system and then drop out after 18 months, there is an emotional charge and a financial charge. If we could, we should prevent that. It is a question of how quickly we can give young people a taste of the work experience. I think that employers will step up to the mark to provide that, within in a controlled environment. For me, that is part of the solution.
:What you are really saying is that it is an issue in schools and that the younger that we can ensure that people have those aspects of self-discipline and understanding about what the workplace is like, the better.
Just look at the numbers of people who are applying for apprenticeships and who go to college—there are tens of thousands of them who want a job in construction. There is a mismatch in there somewhere.
:That is helpful.
There is a point to make about the overall structure of the industry, which links to the pipeline point. Ian has talked about a lot of the employment being in SMEs. For domestic-scale business, that is definitely the structure of the industry. For larger-scale construction, however, a lot of the employment still happens in SMEs which, by their nature, take on one apprentice every so often and do not have the organisational capacity to do the good recruitment that Ian talked about. If we have a longer-term pipeline and clarity of work, some of the larger contractors will be able to hold more labour and have the good systems and processes needed to be able to do that. We have some fabulous contractors—not the main contractors, which are principally integrators, but the big trade subcontractors—that hold a lot of labour: they employ people in their organisations and they are probably the best at running these schemes. However, they need a long-term pipeline of work in order to be able to grow and scale, otherwise they will employ SMEs that provide labour-only into the system. The link to the pipeline is about not only visibility but allowing the overall structure of the industry to change.
:Thank you, both, for those helpful, if quite worrying, comments.
My other question relates to a comment made last summer by the Deputy First Minister Kate Forbes. She said—rightly so, in my opinion—that to have really good-quality infrastructure development in Scotland in future, we needed very good collaboration between the public and private sectors and that they needed to work together. The implication, I think, was that they are perhaps not working together as well as they should be. Can you outline the challenges with regard to that collaboration? Are there things that we should be doing to improve it?
I can give you a quick response to that.
In my experience, the best examples are those aspects of work that are co-designed by the private and public sectors. You do have to draw a line in the sand when you introduce a co-design process, but co-designing systems and processes that will ultimately be built by one of your partners is, for me, a tried and trusted way of aligning private sector knowledge, experience and skills with public sector skills. At present, it is seen as a public sector process that is delivered by the private sector. Some of the framework agreements in the hub model might be better evolved—Peter Reekie can comment on that—but from what I know of large and medium-sized companies, the sooner you can bring them into the system through that co-design process, the better.
I know that that is difficult in a commercial and competitive world, but we have established framework agreements and systems that allow us to speak to six big companies. It is also worth remembering that a big construction company in Scotland might have 1,000 staff on its payroll, but perhaps 10,000 staff in the pipeline. That is where co-design becomes interesting, because vast economic and social benefits can arise from it. It is not just the company itself that we should be looking at but its pipeline and what it is doing to deliver infrastructure projects.
I think that there are a number of levels to what is a really good point. I would highlight, first, the private sector as a supplier of construction and design services and, yes, the applicability of co-designing things. We have the Construction Leadership Forum, which tries to bring the public sector and industry into those areas of improvement. I think that Ian is a member of one of these groups, but, in terms of transforming the industry, we are looking at skills; at procurement from the perspective of both the procured and the procurer; at fair work; at modern methods of construction; and at net zero. We have groups that are looking at those kinds of supply issues, because we can be better at that sort of thing.
The next level, for me, is private infrastructure operators such as the electricity and communications companies that are private buyers and clients for the infrastructure sector. In that respect, much of the interaction relates to regulation, quite a lot of which comes from the UK Government, and in the previous evidence session, Graeme Roy mentioned the importance of joint working between the various levels of government on how such regulation affects the pipeline of projects and what those companies do in Scotland. We also need to increase the transparency of private sector pipelines alongside our public sector pipelines to understand whether we are doing things in a coherent way or whether there are hotspots of investment, because a private infrastructure provider is putting in something at the same time and in the same place as a public infrastructure provider.
The final level is what I would call private sector development activity. Sometimes there are infrastructure blockers that stop private sector investment and development, and it is important that we understand, through the national planning framework and an infrastructure-first approach, where the capacity is in the infrastructure system to support development or where there might be an infrastructure blocker, so that we can invest in that infrastructure in order to facilitate development.
What you are asking about happens at all of those levels. We have private financing of public infrastructure and, increasingly—through, for example, the Scottish National Investment Bank—the public financing of private infrastructure. There are links at not only financial but practical levels.
:Thank you.
:Good morning, and thank you for joining us. How many of the sectors referenced in the IDP, whether it be transport, economy, culture or any of the many others, do you think will have this plan on their noticeboards and will be referring to it frequently?
Ian, you looked at me, so you can answer the question. Peter was wise enough to look down.
Eye contact—what can you do?
The built environment is an obvious sector for which the plan will have interest written all over it, given the not insignificant investment that is coming through for it.
12:00
The business model of many companies in Scotland is about procuring from the public sector. Some are totally the opposite—it is private sector only. However, most big companies have got big procurement departments when it comes to the public sector pipeline. Bearing in mind that that sector will touch on all the sub-sectors—delivering the hospitals, the bridges, the roads and the schools—they will look at it holistically rather than as a sector.
A lot is to do with experience. For example, some companies in Scotland specialise in schools, so they will be all over a schools programme because, in their opinion, they have a competitive edge because of their track record, experience and delivery milestones.
My sector—most sectors—will be interested in the infrastructure plan and, more important, will contribute to its delivery.
:Peter Reekie, since you looked down, we will play a wee game that I used to play with my kids. It is called the yes/no game. I anticipate that you will find it particularly difficult, but bear with me. My colleague John Mason picked up a question about sufficient detail. The point of this evidence session, as explained in the committee’s meeting papers, is that it
“is intended to provide a snapshot of how the IDP has been received amongst key sectors”.
I will ask about a few of the points mentioned in the paper. Just give me a yes or a no; I just want to get a flavour. The first bullet point is about whether
“the IDP provides certainty for project planning, private sector investment, innovation and skills development, to support economic growth”.
Does it do that—yes or no? The idea of certainty is a key point.
You cannot expect me to give a yes or no answer to that question.
:I can—on balance and all things considered. Seriously, I am just trying to get a flavour.
As we have talked about, the IDP gives some people the certainty that they need but quite a lot of people not enough certainty and not enough granularity for the planning that they need to do.
:That was a very good point and I thank you for making it. My next question is whether
“the cost ranges and timescales provided in the accompanying excel spreadsheet are credible and deliverable”.
They can be. They will all have been put together by experts. However, when it comes to things such as inflation, we cannot tell what will happen in the future. The costs and timescales cited are the best that are available at the minute.
:We have all done enough projects to know that a project plan is accurate only after the completion of the project. The spreadsheet that accompanies the IDP is pretty high level. The higher the level, the bigger the variance against any initial estimates will be.
Agreed.
:Could the variance be extremely high because the level is very high?
I would expect that, in a number of those projects, there will be significant variances by the time that we get to the outturn, yes.
:Does the draft strategy reflect
“a sufficiently long-term approach to infrastructure planning”?
Taken as a whole, yes, because we have a 30-year view of what is out there, where we are going and what the key drivers are—the things that we need to think about across the system. We have a 10-year plan and one for what we will spend money on in the next four years. For obvious reasons, you cannot really look at spending over a much longer period than that. Maybe there is more work to do on how to prioritise what comes next as we move out from the four years, to give a longer-term view while respecting the democratic processes that also have to happen.
:Yes. Were you surprised that, for example, the prioritisation is asserted rather than demonstrated—that there is no interdependency assessment and no look at integration, prioritisation, sequencing, capacity assessment, risk management, metrics, spatial strategies, supply chain considerations, governance and so on? Might you have expected to see any of that in the plan?
That is an area for development, yes. Overall, we said in our needs assessment that we can use some of the principles that we set out to get better at long-term prioritisation. You asked earlier how we decide on prioritisation to deliver the outcomes that we have said that we want. Development work is needed in that area.
For example, I would say that an individual business case for a project should sit within an asset strategy for that sector that looks at how the service delivery model is going to develop in the future. Colleges are an example: rather than just asking for a business case for one new building, we need to ask what the long-term service delivery model is, what asset base is needed to support that delivery model, and then what investment is needed to get from where we are now to where we are going to be.
All that work is going on, but a development path is needed to get there. You have seen that there is an infrastructure improvement plan, and we are working with the portfolios on those asset strategies. There is more work to be done on that.
:I asked that because I am trying to flesh something out a bit. On the face of it, this document—the IDP—has lots of things missing, and I would contend that most people will not stick it on their notice board. They will check to see what the thematics are—for example, for construction and housing generally there is a very clear thread.
However, I am trying to explore what would be the right balance, which pulls in a lot of good work that is clearly under way against the considerable uncertainty. We talked about the mutual investment model earlier. That has come on to the table and the issue goes right back to personal protective equipment, Meg Hillier and the Public Accounts Committee—get it off the balance sheet of a UK plc that is trading broke. That is where that has come from. It is probably a necessary reaction to a fundamental lack of capital, which the convener talked about.
I am trying to flesh out what you think could be added to the IDP that would make it more weighty, while fully recognising that we have a short-term environment with a year-on-year budget and that we will not be able to deliver the grand thematics that we need to deliver.
I am a member of the Institution of Civil Engineers; it is my professional body. It has a programme called enabling better infrastructure that works with Governments around the world on how to do better long-term infrastructure planning. Scotland is not in a unique situation on this by any means. We have worked with places around the world on the long-term pipeline and the prioritisation process, and we launched an update to that programme recently. I was drawn to comments made by Chris Bishop, the minister for infrastructure and housing in New Zealand, about his having campaigned for an independently developed long-term infrastructure plan and the development of a parliamentary cross-party consensus on that plan.
We have to strike a balance between what the right things are for you to decide—through the political process, your manifestos and so on—and what the role of long-term independent advice is that says, “If you want these outcomes, these are the sorts of things that you should be prioritising”. I fully recognise that there is a place for both of those elements in long-term infrastructure planning, but maybe future work for this committee and others is to think about how you can balance those two elements to do effectively what Professor Roy was saying this morning, which is to look at the outcomes that we want and at what sorts of things we should be spending on to deliver those outcomes, and then to look at the evidence on the impacts that that has had. We are very big on collecting that evidence, which is why, in our needs assessment, we set out some of the themes that we think will be driving infrastructure investment over that longer period of time. Those key themes can be taken forward and used in a process to help us prioritise the things that are making the most difference on those themes.
:You can have the final word, Ian.
Interdependencies are quite important, from our viewpoint. For example, we have been working closely with the UK Government in relation to its announcements 18 months ago about the number of new houses to be built. It asked us whether the UK has the workforce to deliver that housing programme, and we said no, because it wants to deliver that at the same time as nuclear, rail and other big infrastructure projects.
We have been working with the Government on that issue of workforce interdependency and on how it can address that to ensure that everything can get delivered in the time that the Government wants it to be delivered. For example, we are establishing construction centres of excellence with the Government, which will be introduced on a demand-led model. When Manchester gets the green light on the investment to build 150,000 housing units, the construction centre of excellence will be stood up and there is a whole workforce intervention to ensure that people are being trained and going through that pipeline to do the jobs that are required to deliver that housing programme.
That is different from the present approach and it remains to be seen whether it will be effective, but it is an attempt to take away the red flags around interdependency. You might want to build infrastructure in the Highlands at the same time as doing things with green ports or other big infrastructure projects without quite having worked out whether you can deliver that. In many cases, it will be delivered, but if you do not get the workforce planning right, wage inflation, productivity and timescales can all shift in a negative direction, so the sooner you can have that conversation as part of detailed planning, the better.
It is about systems, not silos.
:Indeed. I could not agree more.
:I would like to ask the witnesses to reflect on a slightly different perspective. I think that you were here during the earlier part of the meeting and may have heard my questions to the Scottish Fiscal Commission about the economic and security risks that come from ecosystem collapse and biodiversity loss. The kind of infrastructure that people have been building for many generations—what we have been building, how we have been building it and how we have been using it—is one of the fundamental reasons why we are living in an era of ecosystem collapse and biodiversity loss.
The Government produced a consultation on its infrastructure strategy at the same time as it published the pipeline document. The consultation says:
“Infrastructure is the set of long-term assets that enable countries, cities, and communities to function effectively. Infrastructure is all around us and can be private or public; economic, social or natural.”
I would suggest that the role of natural infrastructure has been slightly lost. I do not want to take away from the importance and value of the stuff that we build, but that can come at a cost to the natural infrastructure that we also depend on. If I look at the projects in the pipeline, the only elements that appear to have any relationship at all to natural infrastructure are also things that we are doing, such as peatland restoration, creating woodlands and what have you. There is no space for, or reflection on, the infrastructure that nature provides for us and is already here, and that we too often destroy or degrade. We too often undermine nature’s ability to regenerate itself because of the way that we build infrastructure.
Why is the dynamic relationship between natural and artificial infrastructure not in some way reflected in the document that you have produced?
There is a lot in there, as you well know.
First, there is the question of how we define infrastructure. I do not think that we would classify all of the natural environment as infrastructure, but I do think that both natural infrastructure and built infrastructure have an impact on the natural environment that we must be cautious of and must think more about. That is why our long-term needs assessment has being nature positive as one of the key cross-cutting themes that all infrastructure sectors should think more about.
The term “nature positive” was deliberately chosen and I try to think of it on three levels. The first is what I would call natural infrastructure itself, which means the managed environments that provide landscape services, rather than all of nature. You might disagree about whether that is the right classification. How we invest in and strengthen that to provide what, if I may use the term, “ecosystem services” is really important.
Secondly, when we are doing what has traditionally been thought of as built infrastructure, we must consider how we can make more use of nature-based solutions within that built infrastructure. To give just a few examples, that could include making more natural flood defences by using the run of a river or permeable surfaces. We can get better at using natural elements and even natural materials in our built infrastructure.
The third element is providing access to nature in our built environment, and particularly in our social infrastructure. For example, are we giving young people proper access to the outdoors in our schools so that they will value nature into the future?
We can discuss the definition of natural infrastructure but, for me, nature positivity is important at all those levels. We need to consider what we are prioritising, how we are bringing nature-based solutions into our built environment and how we are providing access to nature, and I hope that we will do more of that in the future. I will not say whether we are doing enough of that or not, but we can definitely focus on it and do more of it.
12:15
:We will not get into a philosophical debate now about the definition of or what counts as infrastructure, but I suggest that, around the world, we are continuing to effectively wipe out the pollinators that we depend on for our food system. If a tech bro came along saying, “I can do that artificially,” they would quickly get Governments to accept that the machinery that they were developing should be classed as infrastructure, and it would be an infrastructure priority, even though it was only needed because we had wiped out something that was doing the same thing much more effectively in the first place.
I suggest that the problem is not just what is in the infrastructure delivery pipeline but the model of a pipeline. The metaphor of a pipeline is the wrong way to think about this. It makes absolute sense from the perspective of someone who makes their living from building stuff, which is important, but we should be considering it from the other end of the telescope and the perspective of the set of assets that our society needs. We have a hierarchy of needs. Most fundamentally, we need clean air to breathe, clean water and shelter. Moving on, we want to have a functional society with sewerage systems, healthcare systems, an element of transport infrastructure and a modern economy. At the least fundamental but more aspirational end, we might want to replace fast internet with superfast internet, but that is a “nice to have” rather than a fundamental need.
Ultimately, we need to ensure that we never degrade something that meets fundamental needs in order to achieve something at the lower end of that hierarchy. Should we not conceive of it in those terms rather than just focusing on a pipeline of what we are going to build?
I see those as two different things, and both are important. The people who deal with delivery need to know what is coming and when, for all the reasons that we have just talked about. I think that you are talking about how we go about prioritising things and moving them from being just ideas or things that people want in that top bit of the funnel into the pipeline. What is our prioritisation methodology? You are arguing, very reasonably, for a set of criteria that we might apply to ideas in order to prioritise them for investment. Other people will have different ideas about which things to prioritise, but yours sounded a great list.
We could look at all the different projects and investment options across all the different sectors and run them through a prioritisation methodology such that, if a project would have a negative effect on one of the things that we really want to deliver for our country, it would either not get funded at all or be moved right down the list. If it would have a highly positive effect on something that we really value, we would prioritise it. We cannot just have criteria; we need to have weightings and all those sorts of things. I would agree that it is important to have an overall prioritisation methodology, with transparency around it, that links what we invest in to the outcomes that we want for the country.
:Does that happen before a project moves from annex B into annex A in the pipeline document?
There are individual business cases for individual projects, but I think that we can get better at using our needs assessment and other things to ask what overall outcomes we want for the country and, therefore, what we should prioritise against any given set of criteria to get there. I think that everybody wants to see improvement on that.
:Okay—thank you.
That concludes our questions. Would either of you like to make any other points that we have not touched on? Do you wish to say any final words?
No. I am happy. Thank you.
Ian?
I am happy, convener. Thank you.
You are both taking the fifth. That is fine. Thank you very much. I found your evidence really effective and extremely helpful. No doubt a number of the issues that we have discussed with you will come up when we take evidence from the Cabinet Secretary for Finance and Local Government.
12:20
Meeting continued in private until 12:34.