Net Zero, Energy and Transport Committee

Meeting date: Tuesday, February 1, 2022

Official Report 697KB pdf

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Scottish Budget 2022-23

Welcome back. For our next item, we will take evidence from the cabinet secretary in relation to the draft budget, which will be finalised in the days and week ahead. The cabinet secretary is joined by Scottish Government officials Kerry Twyman, Ian Freeman, Simon Fuller and Ross Miller. Thank you for joining us this morning.

Cabinet secretary, I believe that you would like to make a short opening statement.

Thank you for inviting me to give evidence on the net zero, energy and transport portfolio budget for 2022-23.

The portfolio draws together many of the key strands that are required to deliver on the Government’s ambitious and world-leading plans around climate change. The portfolio budget and policy areas will ensure that significant progress is made in delivering the commitments that are embedded in the programme for government and the Bute house agreement, thereby enabling the Scottish Government to successfully meet its statutory climate targets and protect the natural environment, while continuing to support the most vulnerable in society and deliver a safe, accessible and affordable public transport system.

Our ambitious 2022-23 budget requires a sea change in the direction of Government expenditure, with reprioritisation towards programmes that underpin our move to a green agenda and cover all aspects of the portfolio: the natural environment, public transport, active travel, energy and climate change.

In the budget, we are spending more than £3.4 billion on transport, including investment of almost £1.4 billion to maintain, improve and decarbonise Scotland’s rail network, and £414 million to support bus services and their use through concessionary travel schemes, including the extension of free bus travel for young persons aged under 22. We will provide a record level of investment in walking, wheeling and cycling, which is increasing to £150 million—an increase of 30 per cent from the 2021-22 figure.

We are also providing record investment to protect and restore nature, including our peatlands, and to tackle the causes of biodiversity loss. We will continue to support our forestry bodies to deliver on the woodlands creation target, which will see 15,000 hectares of new planting in 2022-23.

We recognise that substantial investment is needed to deliver on our waste and recycling targets, and in this year’s budget we are investing more than £43 million to drive Scotland’s circular economy, which will reduce reliance on scare resources and reduce waste.

We are committed to taking strong action to meet the climate challenge and are investing almost £50 million in climate action, including £20 million for the just transition fund to accelerate the development of a transformed and decarbonised economy in the north-east and Moray.

Finally, we will continue to provide significant budget for energy to support heat decarbonisation in order to make our homes and buildings warmer, greener and more energy efficient. That will include increasing funding to help to support the fuel poor through heat transition.

The portfolio’s budget delivers on an ambitious agenda, but it is not without risks, such as the on-going impact of Covid on the public transport system and the uncertainty around demand-led schemes such as the under-22 concessionary travel scheme. However, I reassure the committee that I will continue to reprioritise within my budget not only to meet our legal, statutory and contractual commitments but to achieve value for money against a backdrop of a challenging fiscal position.

I am more than happy to respond to any questions that committee members might have.

Thank you. I will ask the first question. As you will know, the committee is undertaking a major inquiry into the role of local authorities and cross-sector partners in delivering net zero. Last week, the president of the Convention of Scottish Local Authorities warned that the Scottish Government budget settlement for local authorities will lead to a reduction in core funding of £0.25 billion. COSLA expressed concerns that that will affect its ability to deliver its responsibilities.

A few weeks ago, we heard from the leaders of five councils from across Scotland about the challenges that they face in delivering on net zero targets. I will highlight brief extracts of the evidence that they provided. They agreed that councils

“should drive delivery of net zero”

but said that they

“need finance with which to do that.”

One said,

“We do not have enough funding in place to move forward at the pace that is required.”

The leader of Highland Council said,

“We have had 10 years or more of cuts to local government budgets”,

and that

“What is missing ... is the resource within local government to respond”—[Official Report, Net Zero, Energy and Transport Committee, 11 January 2022; c 7, 43, 54 and 42.]

to net zero targets. Do you recognise those significant capacity, resource and financial constraints at local government level, and do you share the concerns of various council leaders that budget cuts will significantly impact on their ability to deliver national net zero targets?

09:45  

On your last question, the answer is no, not necessarily. However, I recognise the pressures that the public sector is facing, not just at central Government level but at local government level, and the particular challenges that that creates for our colleagues in local government.

As the Cabinet Secretary for Finance and the Economy set out last week, we have delivered as fair a funding package for local government as we are able to do in the challenging financial environment in which we are operating. However, it is also worth keeping in mind that local authorities have faced financial challenges for a number of years and have been making good progress in tackling climate change by committing to significant reductions in emissions over recent years. I recognise and understand that there will be challenges for them, but that does not necessarily mean that they will not be able to make progress in tackling climate change.

I will pick up on a couple of examples of how local authorities will benefit from investment. Active travel will have a significant benefit in local communities. It will help to tackle congestion in towns and cities across the country. The budget line in that area is increasing substantially to support the roll-out of active travel.

Alongside that, the investment that we are putting into the decarbonisation of heating systems and improving energy efficiency will have a marked improvement on social housing stock, some of which local authorities are responsible for managing. Again, that is an area in which budgets are increasing.

I understand and recognise the challenges that local authorities face, but I do not accept that that means that they will be not able to make progress in tackling some of the climate change challenges that we face. Some of the investments that we are making at a national level will have benefits at a local level as well.

Thank you for that, cabinet secretary. You mentioned the decarbonisation of heating. That is another area that local authorities gave evidence on. Let me provide you with some of their feedback. The local authorities told us that there has been a lack of strategic consultation and dialogue with the Scottish Government in that area, and a lack of detailed guidance on what is required of them. We heard concerns over the scale of investment projects that are available within local authority areas, the expertise that is available in order to meet the 2030 target, and the ability to attract the private sector investment that will be required in that area.

Again, do you recognise those concerns, and what urgent steps are being taken to address those issues? Some of the local authorities expressed serious doubts as to whether they could meet the 2030 targets that have been set by the Scottish Government in that area. Briefly, what role will the public energy agency and the green energy task force play in assisting local authorities to meet those targets?

I will just unpack some of those issues. It is not long since we published our heat decarbonisation strategy, which was formed following a public consultation that included our colleagues in local government. They had an opportunity to feed into that process and they are able to continue to feed into our policy development in that area. I therefore do not accept the idea that local authorities have not had the opportunity to feed into national policy direction and our national strategy on that. It was an open consultation for them to participate in and to feed into, which they have been able to do.

Secondly, we commissioned work, which was carried out and which involved housing associations and, if I recall correctly, the chief executive of Inverclyde Council, to look at some of the specific challenges that local authorities faced around the heat decarbonisation agenda. The report from that was submitted to the Scottish Government last year, and it fed into the development of our strategy. Again, therefore, local authorities have been involved in helping to formulate that policy and our thinking around it and some of the challenges that we face.

I realise that the scale and nature of the challenge are extremely significant not only for local authorities but for our social housing providers. There are hundreds of social housing providers throughout the country that all face similar challenges. That is exactly why we committed to setting up the public energy agency to support local authorities and social housing providers.

One of the purposes behind the public energy agency is to bring together the skills and expertise and develop the advice and information that local authorities and social housing providers require to assist them in moving forward with the agenda, so that we do not have 32 local authorities all trying to do it differently and reinventing the wheel over and over. It will co-ordinate that work, provide expertise and provide the necessary guidance and support.

Your final point concerned the green heat finance task force that we are setting up. I hope that, in the next couple of weeks, we will be able to set out the details of its remit and membership. It has been specifically designed to consider how we can lever in external financial support alongside public sector investment in decarbonisation to support colleagues in the public and private housing sectors. They will have an opportunity to feed into that and I expect local authorities to have a role in the task force to ensure that their voices are heard at the heart of developing any recommendations that the Government might implement.

Has additional funding been provided for the public energy agency in the Scottish Government budget?

It is being managed internally within existing budgets. There is no specific ring-fenced budget for it, but it is being managed within my portfolio budget and is taken into account in our budget lines for this financial year.

Right. Is it still at the moment and for the time being a virtual agency? Does it have dedicated staffing and resource?

There will be a dedicated team in the Scottish Government that helps to draw the agency together initially with a view to ramping it up and developing it to be much more stand-alone—not entirely separate from Government but stand-alone—so that it can carry out its work. However, that is a couple of years away from the work that is necessary to get it up and running.

Good morning. We face a twin crisis of climate change and biodiversity loss, so I will focus on the natural resources budget. The allocation is £29.8 million, but that must fund local nature networks, the restoration of Scotland’s rainforests, the commitment to protect 30 per cent of land for nature by 2030—that is a high target—and a nature restoration fund of £13.5 million, which is almost half of that budget. That is in addition to the reform of wildlife management and the development of a new biodiversity strategy.

Those are wide-ranging, multiyear commitments. It would be helpful to the committee if you could provide a breakdown of spend in the natural resources budget in 2022-23. With the importance of the biodiversity crisis, what do you envisage the profile of spend being in that policy area over the next few years?

I agree about the importance of the twin crises that we face—nature loss alongside climate change. Of course, climate change drives a significant part of nature loss.

Our budget line for biodiversity and natural infrastructure has increased significantly over recent years—there has been a 55 per cent increase overall. It includes £55 million of new funding to extend the nature restoration fund to £65 million.

As you rightly said, that is a multiyear fund. It will work across Scotland, and its objective is to help to create green jobs, to reinvigorate local communities, to reinforce Scotland’s green recovery, and to support large-scale multiyear, multipartner projects that can deliver transformative change. Part of the reason for its being a multiyear funding package is to give the sector reassurance of the level of funding that will be available in future years, to allow some of the long-term projects to be taken forward. Many nature-based projects are long-term ones, so we have sought to provide a funding profile that gives assurance about that.

I do not have to hand further breakdowns of how the nature restoration fund will be utilised at a lower level. However, I would be more than happy to take that away, and I will try to provide more detail, if that would be helpful.

If I have picked up the information correctly, the £13.5 million is for the coming year, but there is the commitment of the larger £55 million to give certainty.

There is.

That is helpful.

The second area that I want to look at is peatland restoration. The UK Climate Change Committee stated in its 2021 annual progress report that the pathway requires 50,000 hectares of peatland to be restored per year from 2022. Currently, the commitment is 20,000 hectares per year. How has that advice from the UK Climate Change Committee been factored into this year’s funding allocation for peatland restoration? Can you give some indication of what that might mean in future years?

Our commitment is to deliver 250,000 hectares of peatland restoration between now and 2030. We are committed to taking forward around 20,000 hectares of peatland restoration a year on average. In 2020, we announced a 10-year funding package of £250 million to help to support that and deliver that target. This year, the budget provides £23.7 million for peatland restoration, which is an increase of 8 per cent on last year’s budget. Since 2012, we have invested around £30 million.

The 50,000 hectares figure was not taken into account in this year’s budget, because our target is 250,000 hectares between now and 2030. We have asked NatureScot to carry out some analysis of the Climate Change Committee’s proposed figure and to consider other innovative ways in which we could help to expand our existing target in order to address that committee’s suggested target. That work has just been completed and submitted to the Government. We are considering the recommendations, and we will then consider whether we have to make further investment and whether we have to change our approach to peatland restoration.

This year’s budget is based on our target of 250,000 hectares. Pending NatureScot’s recommendations, we will look at whether we need to take further measures to help to extend our target and how we could go about doing that.

I am sure that the committee would like to hear about that report when it is available and how you intend to fund that. It is clear that your budget meets the targets that you have; the issue is whether those targets are sufficient for what is required. It is about the climate change target as opposed to the budget.

Mark Ruskell has a supplementary question.

It would certainly be good to take some more evidence on the NatureScot report.

I understand that the peatland restoration budget was underspent this year. Is there an issue there? We can keep putting in more money but, if there are reasons why landowners are not signing up to spend it or there is a lack of skilled workforce or equipment or whatever, we will continue to not meet the target for other reasons beyond the budget.

You raise an important point. There is a capacity issue in the peatland restoration sector. It is a fairly new sector, and a limited number of companies or businesses operate in it. There is also a very small window in which peatland restoration can take place each year, which means that businesses that are involved in peatland restoration often do that work as an add-on to other things that they are involved in, because it is not sustainable in its own right. I think that the work has to be carried out in the September to October period. The sector is growing, and there are limitations in the skills that are available in it. Peatland restoration work is not viable on its own, given the very short timeframe in which it can be carried out.

10:00  

There are capacity issues in the industry. I am not sure whether that is to do with people not being willing to take up the opportunity to restore peatland. I am not saying that that is not an issue, but I am not sure that it is one of the main issues. I suspect that a big part of that is access to skills and businesses being able to flex to doing peatland restoration work for a short period of time each year. That means taking their equipment away from the other things that they would normally do for the short window of time in which the work can be carried out.

Good morning, cabinet secretary. I have several quick questions about data and measurement. How do you measure how far towards the 2030 climate goals the spending decisions in the 2022-23 budget will take Scotland?

A carbon assessment is carried out for the budget and published. That is a statutory requirement for each budget. We also measure our progress against our climate change targets through our climate change update plan and the various portfolio envelopes that need to be progressed to make sure that we are on track for 2030 and 2045. We measure using a combination of the carbon assessment that is carried out for the budget and our monitoring and evaluation process for the climate change update plan.

You will be aware of the work that the Fraser of Allander Institute is carrying out to look at how we can get greater transparency on the contribution that budgets make to meeting our climate change targets. It would be extremely helpful if we had a more robust and effective system to be able to monitor the impact of the budget on our climate change targets. I hope that the work that the Fraser of Allander Institute produces will help us to develop a framework that will give more transparency for the committee and accountability to the Parliament, and give us greater insight into the direct impact of the budget.

Broadly, the update plan and the carbon assessment that is carried out for the budget are the two things that we currently rely on.

To go back a stage, you talked about moving funds to support the green agenda. My question is related to the question that my friend Mark Ruskell asked earlier. More generally, how do you measure or project what the prospects of achievement for each project will be and whether the funding will be sufficient to deliver that? Similarly, how do you measure or project the opportunity cost of the reduction in investment elsewhere?

Let us consider the budget assessment of capital spend, for example. I think that around 92 per cent of the capital spend in the budget is viewed as being low impact or neutral in respect of carbon. That is an overall, positive reduction in carbon impact. That comes through in the carbon assessment process for the budget.

For individual projects, let us take peatland restoration as an example. Our commitment to delivering on the 250,000 hectares is part of our sectoral envelope for meeting our 2030 target, and it is part of our climate change plan. In developing the climate change plan, various envelopes went through an assessment, and part of that involved assessing the impact that individual policies would have in order to see whether they would align with getting to our target of 75 per cent by 2030. The 250,000 hectares figure was viewed as being one of the contributors to meeting that particular target.

There is a link between the budget and the policy. The policy is set within the climate change plan, and the budget helps to finance that. The carbon assessment that is carried out for the budget allows us some insight into that.

If we remove funding from policy areas that we know contribute adversely to climate change, for example, and use that for measures that will help to tackle climate change and achieve our targets, it is self-evident that there will be a positive outcome. However, it is always difficult to pin down exactly the net benefit that will come from an individual project. One example is peatland restoration. We know that peatland restoration will have a positive impact and that there has been a level of assessment, but it can be difficult over time to pin down how we should shift money around in a budget and why that money has made a bigger contribution than the money that we have taken away from another area.

In your opening remarks, you mentioned the allocation of £20 million to the just transition fund. What or who precisely is that paying for or going to? What are the measurable year 1 outcomes of that £20 million?

That fund does not sit directly in my portfolio; it sits in the finance portfolio. The £20 million is some of the initial allocation to take forward work on developing the action plan that will deliver the transition plan for the north-east and Moray. We have given a commitment to take that forward on a co-production basis, so local stakeholders will be able to shape how the funding is used. Some of the money will initially help to carry out that work. How the money will then be allocated and utilised will be informed by the co-production work and the input from local stakeholders on how that will be shaped. I expect the details of that to be set out in the next financial year.

I note that £43 million is going into Scotland’s circular economy in this year’s budget, but I have some concerns about funding that is outwith the Scottish Government’s control. The circular economy investment fund and the resource efficiency programmes are set to finish this budget year, and as far as I am aware there is no plan for how that funding will continue post-EU exit. What impact would a drop-off in funding have on the circular economy and what is the Scottish Government doing to avoid it stalling? What asks of the UK Government have been made in relation to the shared prosperity fund?

In the last EU multiyear financial framework, Zero Waste Scotland received £34 million of European regional development funding. Zero Waste Scotland is taking forward work to identify how it could bridge that potential loss of funding in the future and whether there are ways in which it could lever in private sector funding to help to close that gap.

As it stands, there is a lack of clarity around how the shared prosperity fund will operate in Scotland, what its priorities will be and how they will be informed. Will Scottish ministers have a role in setting those priorities? Will it be a lower level of funding than was previously available under EU regional development funding? There is a lot of uncertainty around the issue.

We need to see more progress in the area. We are not in line with the targets that we set, which is why we committed an extra £70 million to invest in our circular economy and recycling in particular, and there needs to be further investment in the public and private sectors.

Until we have clarity around how the shared prosperity fund will operate, there could be a significant loss to the sector if funding is not made available to replace the £34 million that was previously provided under the European Union funding scheme. We still do not know how the UK Government intends to operate the shared prosperity fund and what role Scottish ministers will have in setting its direction in Scotland. A drop-off in funding could have a negative impact on the sector.

That is extremely concerning. You mentioned Zero Waste Scotland. Funding for it has been relatively stable and there is a slight increase on last year. However, we are rapidly approaching the 2025 waste targets across landfill, recycling and food waste. Progress has been slow in some areas—for example, in relation to the 70 per cent recycling target. During the committee’s inquiry, we have heard from local authorities that there are difficulties in relation to recycling and the circular economy. Last week, we discussed the difficulties that there are even in the private and financial sectors, and the need for more central support and a more cohesive approach. What are the top priorities for public and private investment in the coming year to ensure that we have a chance of meeting the 2025 targets?

I recognise that we need to do a significant amount of work to get back on track to meet those targets. They are tough targets—rightly so—and we need to do better to make sure that we achieve them. My colleague Lorna Slater is working hard to ensure that we take forward the right measures to do that. That is why we have made a commitment to develop the waste route map—to ensure that we are clear on the tangible progress that we must make over the next couple of years to get us on track.

You said that the budget for Zero Waste Scotland has been relatively stable. It is 8 per cent higher in this financial year than it was in 2020-21. We have increased our level of expenditure on that area over recent years. Alongside that, we committed £70 million for the recycling improvement fund, of which some £20 million was allocated last year to a number of local authority partners to take forward strategic investments in recycling infrastructure.

It is not just about finance. We also need to see the circular economy as an economic opportunity. We get clear environmental benefits from recycling, but we also need to look at the economic opportunities associated with it. We will do that through the route map that we are looking to develop and our portfolio work on the circular economy. The intended circular economy bill is all about making sure that we seize not just the environmental but the economic benefits that can come from developing and expanding our circular economy overall.

The 2022-23 budget document sets out a commitment to allocate £23.5 million for the green jobs fund. How are green jobs defined for the purpose of the fund and how will the funding be allocated? Last year, the committee had a session with Scottish Enterprise. Further to that session, will the cabinet secretary update the committee on how many applications to the green jobs fund have been received and how many have been successful?

There are two parts to the green jobs fund. Some £50 million has been baselined for our enterprise agencies and some £50 million is held at Government level. We are undertaking work with businesses to set the criteria to ensure that the fund is aligned with needs in the sector. That will allow businesses to start applying for funding in the new financial year.

For the record, convener, that area of policy does not sit in my portfolio; it sits with the Cabinet Secretary for Finance and the Economy. However, the approach that has been taken is to have two tranches of funding—one run by the enterprise agencies and the other at national Government level.

The work to set the application process criteria is being done through engagement with the business sector, to make sure that the fund aligns with the skills that the sector requires, to help us to deliver more green jobs.

I cannot give you the figures for the enterprise agencies but I would be more than happy to take that question away and to respond in writing to Ms Lennon’s point, if the committee would be content with that.

10:15  

There is no clear definition of what a green job is. There are competing views on what should be defined as a green job. The Scottish Government is undertaking some work, through engagement with a variety of stakeholders, to try to arrive at a shared, agreed position on what could be classified as a green job. What we classify as a green job might not necessarily reflect what other countries would consider to be a green job, so we need to make sure that we have an inclusive definition. That piece of work is being done just now so that we have that shared and agreed understanding, which will then allow us to understand the progress that we are making in delivering greater numbers of green jobs.

Thank you, cabinet secretary. I appreciate that it is not all within your portfolio, but it is helpful to know that there is a consistency in approach and to get some clarity on that.

Just last night, the BBC Disclosure documentary “Dirty Business” exposed the harmful impact of waste crime in Scotland on people and the environment. We know that it is costing the public purse more than £50 million a year. SEPA has had a difficult time and the full financial impact of the cyberattack on the environment regulator is still not clear. However, we know that it has experienced serious operational disruption and the loss of internal systems and data.

In that context, and in the context of the climate and nature emergency, is it appropriate for the draft budget to dish out a real-terms cut to SEPA of more than 7 per cent?

I did not see the programme myself; I intend to watch it. I know that SEPA is promoting it to highlight the complexities and the challenges within the sector.

It would be fair to say that the movement in SEPA’s budget is a reflection of the one-off capital uplift that it received last year. That is why there is a realignment within its budget. If you take out that specific capital uplift that it received last year and look at the budget this year, the budget continues to rise. It is also worth keeping in mind that about 50 per cent of SEPA’s income comes from its regulatory function and the charges that it applies for that function. It would be wrong to characterise this as a cut to its budget; it is a movement in the budget, because last year SEPA received a capital uplift specifically for a couple of projects, which sits only within that single financial year.

SEPA continues to make good progress in recovering from the cyberattack. A range of assessments have been carried out on its impact on SEPA’s operations and recovery. We are ensuring that we learn from SEPA’s experience so that other public and private sector organisations can learn the lessons from what was a serious and sustained cyberattack targeted on the organisation. That is being done through our cyber network; the Deputy First Minister is leading on that piece of work to ensure cyberresilience across the public sector in general, as well as working with the private sector. It is a strong partnership and part of that work is about making sure that lessons are learned and that we help to support other public sector agencies and private sector companies to learn the lessons and to put in place measures that can help to minimise the risk of them being exposed to a similar attack.

I reassure you that we are working to try to make sure that we learn the lessons from the SEPA attack across the public estate and the private sector.

That is very important, cabinet secretary. Thank you.

If I may, convener, I will bring the questioning briefly back to the budget. Is there any provision in the budget for assuring the cybersecurity of public bodies?

A lot of the work that is done on cybersecurity is business as usual for public agencies. It is part of their information technology infrastructure funding. However, the Government does not specifically ring fence budget for a public agency to use for cybersecurity. It is for that public agency to determine what it needs to use from its budget for cybersecurity purposes.

Some work is being done on cybersecurity within, I think, the justice portfolio, through the work that it does with the National Cyber Security Centre. We also do some work through the Scottish Business Resilience Centre, which is based at the University of Stirling, to support businesses in cybersecurity in Scotland. I do not know whether the SBRC gets funding from the Government, but we are certainly a partner.

There is no specific budget line for cybersecurity. It would be part of the wider IT budget lines within any public agency.

Before I ask my questions, I have a supplementary question on cybersecurity, cabinet secretary—I apologise if this is not within your remit. You were talking about what public agencies and local authorities need to do with regard to cybersecurity. Does the Scottish Government ask them to report back so that it has assurances that public agencies and local authorities have business continuity and disaster recovery plans in place? I am aware that that is not always the case.

Convener, we are stretching the definition of my portfolio responsibilities here, but I am more than happy to take that question away.

There is a system for agencies to have business continuity and recovery plans in place. I am more than happy to take that question away and come back to the committee with some more detailed written information on that. When I was justice secretary, I was involved in working on the cyberattack on the national health service here in Scotland and across the UK. A number of hospitals and other NHS facilities were targeted, and I remember dealing with the Home Secretary of the time on some of our approaches to tackling those attacks. The role of the NCSC is to identify risks and provide advice and information, and a range of work was carried out off the back of those attacks.

I would be more than happy to come to the committee with more specific details about the internal processes for managing cybersecurity in public agencies.

My questions are about the transport part of your remit. The strategic transport projects review has 45 recommendations, one of which is to achieve a 20 per cent reduction in car kilometres by 2030—I am used to miles, not kilometres. We all recognise that reducing the amount of car travel will require a step change in how we use public transport, and that we will need to increase significantly the number of trips that we take using our bicycles, if we have them, or on foot.

How does this year’s budget compare to previous budgets on that? I am aware that, in the 20 years between 1999 and 2019, the average distance travelled by car increased, so I am interested to hear what the difference is in this year’s budget.

You will be aware that, on 13 January or thereabouts, we set out our plan for reducing car kilometres by 20 per cent. That plan included a range of actions that we will take to achieve that aim. One of the most significant areas of investment that will help us to tackle the issue is the provision of active travel infrastructure. I am a big believer in the view that, if you put in the right active travel infrastructure in the right place, people will use it. Experience in other parts of the world bears that out. That is why there has been a significant increase in our investment in active travel. We have committed to deploying 10 per cent of our transport budget on active travel by the end of the current parliamentary session. That will result in more than £300 million a year being invested in active travel infrastructure and programmes, which represents a massive increase over a relatively short period of time.

Active travel infrastructure will make a significant impact in helping to reduce car miles and, in particular, the use of cars for short journeys. I say that not because I think that everyone will just jump on their bikes but because I think that, if we design and develop active travel infrastructure in the right way, it can deliver better communities and better areas for people to live in.

Some of the big active travel infrastructure that has been built in recent years has had a transformational effect on neighbourhoods. A very good example of that, which I often refer to, is the south city way in Glasgow, which I have used regularly. It has brought about a positive transformation in that area. Similarly, Sauchiehall Street in Glasgow has been transformed into a much better, more pleasant place. As well as tackling car use, the development of active travel infrastructure can create better environments and better communities.

There also needs to be better provision of bus services. About 80 per cent of all public transport journeys are by bus. Bus travel is the most flexible and adaptable form of mass transit there is. That is why we committed to the bus priority partnership programme. We want transport by bus to be seen as much more of a priority by creating rapid corridors for buses to use, in order to improve reliability and shorten journey times.

We need to make bus travel more attractive to people. The average speed of a bus on Hope Street in Glasgow is about 4mph, which is ridiculous. Why is that? It is because of congestion and other problems on the road. That leads to buses being seen as unreliable and slow. I think that bus prioritisation, which has already been taken forward in some local authority areas, can make a big difference in making bus travel a much more attractive option.

You mentioned STPR2, in which we have set out some bold ideas and visions. Projects such as the Clyde metro, the development of rapid bus transport up in the north-east and the Edinburgh mass transit programme could all play a big part in supporting people to make the transition from using their car—for short journeys, in particular—to using active travel or public transport.

In addition, as of yesterday, our under-22s are able to travel free on buses. That will help to embed greater use of public transport in the behaviour of our future generation, thereby supporting us to help people to make better use of public transport instead of travelling by car.

You have already touched on this next issue. We are, we hope, emerging from the coronavirus pandemic. How does the Scottish Government intend to support the rail and bus companies to recover over the next year or so and to increase the number of users?

I hope that we are in the recovery phase, even though we are still in the pandemic. We want our public transport system to recover. The reduction in passenger numbers over the course of the pandemic has had a significant financial impact on the sector, which has resulted in the need for a significant level of financial investment from the Scottish Government to support the sector. Railways are very resource intensive. They are expensive to run. They are fixed assets, and a lot of money had to be provided to sustain and support services even at a reduced level.

10:30  

In the draft budget, therefore, we have continued to take account of some of the potential impacts of Covid on farebox revenue for both bus and rail. There are risks. We are in the realms of the unknown. Although rail leisure journeys are returning pretty much to pre-pandemic levels—they are probably not quite there, but they are similar—commuter journeys are nowhere near that. In bus travel, there is some level of recovery. It is probably recovering more quickly than rail but, again, it is not back up to pre-pandemic levels.

There are still financial pressures on the public transport network as a result of the loss of farebox revenue. During the course of the financial year, therefore, depending on what recovery in the public transport system and farebox revenue looks like, we may have to flex some of our budget to take account of that.

We are literally in the realms of the unknown, because we do not know how quick and to what extent the recovery will be over the course of the next financial year.

I will pick up on those transport themes. You mentioned the roll-out of concessionary travel for under-22s. That is a huge investment; £130 million is allocated for it in the budget. In addition, direct support to the bus companies is up from £54 million to £99 million. A lot of people write to me about the quality of bus services or about services that are going to be closed. I always point out to them the fact that the Government is investing a lot in concessionary travel and in keeping services running during the pandemic. However, a lot of people then get back to me and say, “All the money that is being invested is great, but why don’t you just nationalise it?” What is your response to that view?

The response is that there is no easy answer to what is a complex issue. More than 250 public bus providers in Scotland provide access to public bus services. Nationalising those services would mean nationalising more than 250 businesses and it would come at a significant cost to the taxpayer. People think that taking things into public ownership is the answer to it all, but to make that possible, we would need capital and revenue that we do not have.

That is why, in order to address some of those issues, we made provision through the Transport (Scotland) Act 2019 for a range of measures, such as bus service improvement partnerships. The range of options that are available to local authorities includes local authority-run bus services. However, again, a local authority would have to capitalise a company for the purposes of achieving that, and that comes at a cost to the taxpayer—it is not cost neutral. The money would have to come from somewhere else to buy over the bus company or to buy buses and then run them.

A franchising mechanism is also available, as is a mechanism for joint partnerships between the public and private sectors. A variety of models is available that, deployed in the right way, could address some of the issues that your constituents have raised with you and improve services. At the same time, we must recognise that the idea of nationalising more than 250 companies overnight and then running them as a national bus service comes at a significant cost to the taxpayer, and the finances are not available for that.

We need to see more progress on the powers that are available under the Transport (Scotland) Act 2019 with regard to supporting local authorities to improve bus services. That has already happened in some cities outwith Scotland—Leeds, for example—where they have been able to transform the quality of their bus services by giving the issue greater priority and by having a much closer local bus partnership to ensure that services reflect local need much more.

One of the tools in the budget is the community bus fund, which will start to move services more towards serving and being controlled by the public interest. Will the fund be available in the next year for councils to bid into in order to do that work?

I do not know off the top of my head exactly where we are with local authorities bidding into the fund, but I am more than happy to take the issue away and come back to the committee with more details in writing. It is the sort of thing that local authorities will be able to tap into for local bus service provision but, of course, if one big local authority were to decide to do something significant, it could try to call on all of the fund. We therefore have to ensure that it is accessible to all local authorities and that it is not eaten up by one or two local authorities looking to take big projects and proposals forward.

I have a couple of other questions that are directly related to the budget. There has been some criticism from the rail unions about a decline in capital spend on rail this year. Is the situation similar to that with SEPA, with a one-off spend at a certain point and budgets increasing thereafter, or does it indeed represent a decline?

It reflects where Network Rail sees itself in control period 6 and the projects that it can take forward. As you will be aware, a significant number of capital projects were stalled or had to be stopped during the pandemic. The rail system operates on a system of control periods, and the spend reflects where Network Rail thinks it is with regard to the projects that it had intended to deliver in the current control period. It also reflects the efficiencies that it thinks it can achieve in some of the projects that it will take forward in control period 6.

Overall, though, the budget is very clearly about continuing to invest in our railways to improve them, to decarbonise them and to speed up the network, particularly to our seven cities.

Another issue that colleagues have highlighted is heat in buildings. The domestic renewable heat incentive ends, I think, at the end of March, and I understand from installers that there has been a bit of rush to apply for the RHI and to get installations under way. What will happen after that? Will there be a huge demand for grants or loans through the Energy Saving Trust after March, when there will suddenly be nothing in place?

This is partly tied up with the warm home discount scheme. For some time now—indeed, over the past year—we have been pursuing with the UK Government issues such as the future of the scheme and how it should operate, and we have only started to get a response from it. I hope that in the next couple of weeks we will be able to give a clearer indication to the sector about what will happen post-April, but, as I have said, the issue is partly tied up with some of the work that we have been doing on the UK Government’s warm home discount scheme and the reforms that it is planning to make in England and Wales. We want the system to be much more aligned with Scotland’s needs, but it appears that the UK Government is not prepared to allow that to happen.

That is a concern.

Finally, what we are seeing globally is a massive investment in the green recovery. The European Union has its green new deal package, and similar levels of capital investment are being made in the United States. In this budget, however, we are seeing a real-terms decline in capital investment over time. Does trying to get the most out of what is a declining capital budget simply tie one of our hands behind our back when it comes to meeting climate targets?

Our capital budget reflects the cut that we have experienced in our overall capital spend; it is a cut of more than 9 per cent in our capital expenditure from the UK Government, so there has to be give somewhere and we have to reprioritise. I hope that you can see that we are pivoting our capital investment into the areas that can support the green recovery in a much more significant way. We have sought to protect and invest in those areas; I go back to the capital investment that we are making in the circular economy and the investment of £1.8 billion that we are making in the decarbonisation of properties. We are also investing in active travel infrastructure and decarbonising our rail network.

As well as having to sustain a cut in our capital budget, we are pivoting our capital investment to the areas that will help us to deliver our climate change agenda. It has an impact when capital is restricted, but we are trying to balance it out in a way that helps us to deliver our climate change ambitions. I firmly believe that the priorities that we have set out in the budget demonstrate that very clearly and highlight the Government’s intent to make sure that that is the direction of travel.

Cabinet secretary, we have a bit of spare time because your answers have been so concise, which is always welcome. Members have a couple of follow-up questions and I will ask the first one. While we have you at committee, it would be good to get your response to the UK Climate Change Committee’s updated report that was issued in December 2021. Some of the highlights were concern about lack of detailed policy guidance from the Scottish Government on how zero targets will be implemented and delivered and concern about the credibility of the Scottish Government’s climate change plans. How do you respond to those concerns?

We are carrying out a piece of work to consider how we will respond formally to the Climate Change Committee. I had a meeting with it to discuss the challenges that it has rightly put to us in relation to our targets and policy direction. I will give you an example of where we are setting out more detail: the CCC challenged us on the 20 per cent reduction in car kilometres and since then we have published details on how we want to progress that. We will provide a more detailed response to the points that have been raised by the CCC.

The CCC’s updated assessment highlights that, in relation to climate change, we have gone through a process of deciding what the targets should be and setting targets and we are now much more into the delivery phase; this is when we need to take forward the measures that will deliver on the targets that we have set. That involves making difficult decisions and pivoting away from some of the traditional ways in which we have used capital and into areas that were previously not as high a priority. Ring fencing 10 per cent of the transport budget for active travel infrastructure is a good example of that. It is not long ago that investment in active travel infrastructure was in the tens of millions, not the hundreds of millions.

The challenge from the Committee on Climate Change is that it wants to see much more detail on delivery. We are considering that and are looking at how to respond to the points that it makes about providing more detail on how we will deliver those commitments.

I have a follow-up question on the budget and wider investment in net zero targets. The budget allocated to the Scottish National Investment Bank was £241 million in 2020-21. Next year, that will decline to £215 million. I appreciate that the Scottish National Investment Bank is not entirely within your portfolio, but you have said in previous committee meetings that you have regular dialogue with the Cabinet Secretary for Finance and the Economy about its objectives. Why is there a decline in its budget?

The Scottish National Investment Bank does not sit in my portfolio, so I do not know the rationale behind that, what its investment profile is, and what it requires. However, I am more than happy to take that question away and get further details for you.

You may be aware that the Scottish National Investment Bank is going through quite a detailed regulatory process of considering how it can raise private finance. I hope that, in the next couple of years, we will see more private finance being levered into it.

I am not sighted on the specific reasons for that decline, because the Scottish National Investment Bank does not sit directly in my portfolio, but I would be more than happy to write to the committee about that.

10:45  

That would be great. Thank you very much.

Cabinet secretary, you will be aware that we are conducting an inquiry into the scale, shape and importance of local government in delivering net zero. We have heard evidence from local government about how it is working with the private sector and about local authorities’ concerns about their budgets.

Much of your portfolio budget will end up going to local government, and it will probably be used in three different ways. First, local authorities will distribute money on behalf of the Scottish Government. Secondly, they will bid for funds to carry out net zero projects that are directed by the Scottish Government. Thirdly—I am not sure whether this exists—discretionary funding for net zero projects might be given to local authorities to do what they think is best for their area.

I am not suggesting that you can answer this question off the top of your head—although I would welcome it if you can. Can you give us an indication of how much of your budget sits in those three areas? It would be helpful if your officials worked with the committee to get a sense of how much of the budget is going to local government in those ways. Ideally, we would like to know that for the coming year but, if you cannot say that, perhaps you could tell us about the current year. Is that possible? It would involve some work, but it would be helpful because of the importance of local government in meeting net zero targets.

You are right that I cannot give you that information off the top of my head. Part of the reason for that is that some of that spending will span other portfolios. There will be elements of Shona Robison’s portfolio that will support our net zero objectives and bring investment into local authorities. I am more than happy to take away your points and see whether we can provide you with more detail, if that would assist the committee with its inquiry and would be useful.

Thank you very much. That is very much appreciated.

Community organisations and town centre development trusts have told us that they have had difficulties in accessing funding from local government for their projects, but they have been able to bid for funds from national Government. Can you point to anything that is in the budget for the forthcoming year that community organisations will be able to bid for? I am particularly interested in capacity building and revenue for staffing that would help communities with creative projects that can bring people along with them.

To be clear, are you asking about town centre businesses that are finding it difficult to secure funding to decarbonise their businesses? The heat decarbonisation fund is not only for housing; it is also for non-domestic premises. That might be a route for some businesses in towns and city centres.

No. I am asking about bodies such as community development trusts that are leading projects in their own communities. That might involve housing or working with businesses. Those very localised projects have told us that they struggle to get funding from local authorities, but they have been able to bid for national Government funds, which must be in your portfolio. We would like to know what funds will be available for those community development trusts and others to bid for in future.

That is not just about capital projects. Those people are volunteers, and resources and revenue for staffing can help to deliver projects on the ground. Any project that wants to install heat pumps across a whole town might need town leadership from the community development trust and others. Some projects might be very small, but I know from experience in my own constituency that some could develop into something quite significant.

Another example could relate to district heating systems. Trying to facilitate and bring together a scheme of that nature would require resource support to get all the interested parties together. I will take that away and come back to you with more details on specific funding pots that might be available at the national level which community-based organisations could apply to.

You will be aware of the climate hubs that we are creating to try to help to create a much more sustainable approach to changing local communities to tackle the climate emergency. The first two are already up and running. We also have plans to roll out further climate towns. That might be one route for some towns and communities, but it might not always be the case. I can get further details on that for you and on other funding pots that might be available.

It is also worth thinking about funding pots that might not sit in my portfolio and that can help to deliver programmes that assist us in meeting our net zero targets. The funding will not all come through my portfolio; some of it will sit in other portfolios. I can take that away and ask officials to pull together some of the details for you.

Blackburn, which is in my constituency, is one of the climate towns that you referred to. Thank you.

Great stuff.

I want to pick up on something that the cabinet secretary said earlier when he was asked about the heat in buildings strategy and the figure of £1.8 billion by 2026. The capital spending review states that the Government will invest £1.6 billion to decarbonise heat in buildings. Why is there that difference? In any event, which portfolios will get the money? Can the committee have a detailed breakdown of the proposed spending profile to 2026?

Sure. The figure of £1.6 billion was based on the draft heat in buildings strategy at the time. Following the consultation and engagement on that, the revised figure is £1.8 billion. Some of that sits in my portfolio and some of it may sit in the housing portfolio. Again, I am more than happy to give you more detailed information on how that will be broken down between the portfolios, if that would be useful. I do not have that to hand, unless Kerry Twyman has it.

I do not have the further detail, but we can come back to the committee on that.

The committee would be grateful for that information.

Natalie Don asked good questions about the lack of progress on a circular economy. In your answers, you mentioned an intended circular economy bill. I think that that was first proposed in 2019 and was restated in the 2021 programme for government. Will you give the committee an update on when we can expect to see the circular economy bill?

You will be aware that we withdrew the proposed bill because it was criticised on the basis that it was not ambitious enough and would not drive forward the circular economy sufficiently. We decided to withdraw it and reintroduce a different piece of legislation. That is part of the background to the bill.

I expect that bill to come in the early part of this parliamentary session. I cannot say much more than that, because we have to go through a process in Government of agreeing landing slots for bills coming into Parliament and our future programme for government.

I assure you that the bill is viewed as one of the priority bills in this parliamentary session. Given the importance of making progress on the issue, I am of the view that it needs to be one of the earlier bills in the session. I will not go much further than that, but I hope that I can reassure you that it will be in, I would say, the first half of this parliamentary session.

Thank you.

I have a supplementary question on heat in buildings. Last week, the committee heard from private capital providers. One concern that they expressed and that was also expressed by local authority leaders was about the potential lack of sufficient scale in some local authority areas to attract global private capital. There is also a potential lack of data on what assets exist and where they are. The starting point for local authorities is to identify the housing stock that needs to be retrofitted. There seems to be a lack of progress on both points.

What role can the Scottish Government play in helping local authorities to get that data and the inventory of assets that will need to be converted by 2030? Is there a mechanism or a plan in place that would allow the Scottish Government to look across local authority areas and suggest combinations of assets to attract private capital?

I appreciate that there is quite a bit in those questions but, given that the target is 2030, there is not a huge amount of time.

Was the lack of data an issue for the private sector companies—the potential investors?

Yes, it was.

I would expect local authorities to have a good understanding of their housing stock, as should social housing providers in general. They will have knowledge of which housing has had retrofit energy improvements, whether through the area-based heating schemes or other schemes. Therefore, they should have a certain level of data. The issue might be that there is data that some of the private sector investors are unable to access or get an understanding of, rather than that there are no data there. I will take that point away to check for you, convener.

The second issue is about scale. I have discussed that issue with potential private investors, who have said that they need scale in order to make the capital investment that they believe is necessary to make delivering a programme financially viable.

Alongside the finance task force that I mentioned earlier, we are looking at what we need to put in place in order to lever in some of that private sector investment. That might involve bringing together some of our cities to form alliances or partnerships to put forward joint proposals that would give the sector the scale that it is looking for. In my previous portfolio, when I was the minister who was responsible for cities, we discussed that possibility. For example, we could have an Edinburgh and Dundee partnership or a Glasgow and Aberdeen partnership, which could take a shared prospectus to the private sector to see whether the proposal was of a scale that the sector could deliver on.

That is a reasonable challenge from the private sector. The issue has been raised with us, and the finance task force can consider it. We then need to think about how we can create the right partnerships to assist with that.

My final point is that some social housing providers might have only a couple of hundred houses, so they do not have the scale to get the level of private sector investment that they are looking for. They might get public sector investment, but not necessarily private sector investment. Therefore, we need to bring some of those providers together, so that we can offer proposals on a scale that will attract private sector investment. Given the scale of what we have to achieve, the public energy agency can support us in that role in the years ahead.

I appreciate that response. To clarify, the concern over the data related partly to private sector capital but also to a recognition by local authorities that they still have a bit of work to do in that regard. That goes full circle back to our discussion about a lack of resource and expertise at the local authority level.

Do you see the Scottish Government or the public energy agency getting actively involved to assist local authorities? That goes back to the point about the scale of investment and the amount of resource in the public energy agency, and the fact that, as you have said, it will take a couple of years to get it up and running at full tilt. My concern is that that takes us to 2024 or 2025, and the clock is quickly ticking down to the 2030 target date. Are there any plans to accelerate the public energy agency and make it an urgent priority?

I do not think that we need the agency for the purpose of getting the data—local authorities should be able to draw that data together. However, if there is a lack of data, I will take that away and consider why that is the case, what needs to be put in place in order to improve the quality of that data, and whether resource needs to be provided to allow local authorities and social housing providers to deliver that.

I might be wrong, but I would like to think that social housing providers, such as housing associations, will be in a different situation compared with local authorities, because their housing stock is often at a smaller level. Therefore, they will have a much more detailed understanding of the improvements that they have already carried out.

I will take those points away and try to find out why there is a lack of data and what can be done to improve the situation.

11:00  

I agree with your point. The danger is that we wait for the public energy agency to get up to full tilt so that it can co-ordinate some of that work, and we lose time while investors are looking to make an investment just now, provided that they can get access to the right data. We need to take on that challenge. I am happy to take the point away to get more of a detailed understanding of the issue and consider what we can do to address it.

That would be appreciated, cabinet secretary. That goes back to your point that perhaps the first 50, 60 or 70 per cent has been done but, as you well know, 100 per cent of the assets need to be financed. Therefore, it is not the case that most of the assets require to have data—they all need to be covered.

I get the point that you are making, and it is a reasonable challenge. I will take that point away.

Great. That brings us to the end of questions and our allocated time. We appreciate your time, cabinet secretary, and I thank your officials for attending the meeting. We have covered a lot of ground. I will suspend the meeting before the next agenda item.

11:01 Meeting suspended.  

11:08 On resuming—