Budget delivers ‘significant’ further investment in infrastructure

Derek Mackay
Derek Mackay

The Scottish Government delivered a budget yesterday which it said will add significant further investment into the core drivers of economic growth such as transport, energy, housing and digital infrastructure.

Unveiling his first Draft Budget for 2017-18 to Parliament yesterday, Finance Secretary Derek Mackay said 2017 will see the completion of the Queensferry Crossing and progress made on the M8/M73/M74, AWPR and the A9 and A96 projects.

Mr Mackay also announced over £470 million of direct capital investment to begin the delivery of the 50,000 new affordable homes and over £140m to support energy efficiency programmes.

Budget at a glance

  • Funding to bring the Queensferry Crossing to completion, progress on the M8/M73/M74 Motorway Improvements project, Aberdeen Western Peripheral Route, the A9 and A96 projects, the A737 Dalry Bypass, and commencement of procurement on projects such as the A90/A96 Haudagain junction and improvements on the A9 at Berriedale Braes (subject to the completion of statutory procedures)
  • £460 million expenditure on rail network enhancements, such as the Edinburgh Glasgow Improvements Programme (EGIP) and enhancements to the Aberdeen to Inverness route

  • Over £100 million investment in digital and mobile infrastructure, to improve digital connectivity, grow Scotland’s digital economy and increase digital participation, including support for our commitment to deliver 100 per cent broadband access by 2021. The budget also confirms that the Scottish Government will consider matching the business rates reliefs for fibre infrastructure announced in the UK Chancellor’s Autumn Statement of 23 November 2016
  • Substantial investment in social infrastructure, underpinning a modern and effective NHS, providing high quality education facilities that support our attainment objectives, and initial investment in the most significant infrastructure project of this Parliamentary session: the expansion in the provision of early learning and childcare.
  • Over £470 million of direct capital investment to begin delivery of 50,000 affordable homes,
  • Over £140 million for Energy Efficiency programmes to help deliver climate change targets

  • Freeze on rates and bands for residential and non-residential LBTT
  • Continued funding for City Deals in Glasgow, Aberdeen and Inverness and work to promote the case for City Deals for Edinburgh, Stirling and Dundee/Perth
  • Work to explore and make progress on the development of a potential Ayrshire Growth Deal and invite proposals for two further Tax Incremental Financing projects
  • Establish a flexible workforce development fund as part of a uniquely Scottish response to the introduction of the UK government’s Apprenticeship Levy

  • support the continued expansion of Modern Apprenticeships as a step towards providing 30,000 starts by 2020
  • Trade body Homes for Scotland said the Budget fails to unblock the barriers that are preventing the delivery of the homes the country needs.

    Chief executive Nicola Barclay said: “The Scottish Government recognises the need to increase the delivery of new homes for the benefit of Scotland’s communities and economic growth but there is little in (yesterday’s) statement to make this happen.

    “Whilst there is generous capital spend on the delivery of affordable homes, which is welcomed, our members tell us that it is harder than ever to commence new sites and get much needed homes of all tenures out of the ground.

    “This is borne out by key indicators published this week which showed a flatlining of housing completions at a level still some 40 per cent below that before the recession, as well as a worrying fall in the total number of homes being started, but there are, unfortunately, no new announcements to help unblock the system.

    “In particular, we are disappointed that none of the £800m of capital budget consequentials from the Autumn Statement will be used to unlock development in Scotland, especially in relation to the provision of education infrastructure which is now one of the biggest blockers to housing delivery.

    “We had requested the Scottish Government extend the five per cent banding of the Land & Buildings Transaction Tax given the impact this is having on house purchases above the current £325k ceiling. Whilst we fully support the Scottish Government’s aim of helping First Time Buyers, we must ensure that the property ladder functions at all levels. When aspirational buyers choose not to move, this prevents others further down the ladder from being able to do so.

    “We note with interest the proposal to ‘modernise compulsory purchase orders to ensure vacant and derelict land can be brought into use for communities’.It is right that positive opportunities to intervene are fully explored for sites where landowners would struggle to bring development forward without support. This echoes Homes for Scotland’s views on the need to prioritise positive interventions over financial penalties which would be unlikely to help unviable sites.

    “We also look forward to seeing the detail of the SME Holding Fund as we recognise that the SME sector of the housing industry has been disproportionately impacted by the downturn and requires support if it is going to grow and help deliver the many thousands of homes this country needs.”

    Gail Hunter, director RICS in Scotland, added: “The £470m capital investment in housing is a welcome move as a means for the Government to meet its 50,000 affordable homes target by the end of the parliament, however, there is a lack of detail on any future funding or investment for the development of other housing tenures, which are also in very limited supply.

    “The current LBTT bands and thresholds has caused a slowing of house sales in the middle and upper price brackets, and the Cabinet Secretary announced no changes to the current regime. This is a missed opportunity to provide exemptions for older people downsizing or exempting new build homes from the additional dwelling supplement for buy-to-let investors after a set period of time that would boost activity, and start to shift the static market that currently exists in the middle and higher market areas.”

    Liz Cameron, chief executive of Scottish Chambers of Commerce, said: “We are pleased that key infrastructure budgets such as roads and digital infrastructure are set to rise substantially over the coming year. It is essential that Scotland is 100 per cent connected to superfast fixed line and mobile communications and that our major road bottlenecks, such as the A9 Berriedale Braes in Caithness and the A77 Maybole Bypass in Ayrshire, are addressed with urgency.”

    On the Apprenticeship Levy, Liz added: “Whilst the detail of the Scottish Government’s plans for Apprenticeship Levy funding is still to be announced, it seems strange that at a time when Scotland’s employers are paying a new tax to help fund skills provision, funding for skills and training is actually forecast to fall by over £7m next year. Clearly the devil will be in the detail and we await the Skills Minister’s formal plans with great interest.”

    For the Existing Homes Alliance, the Budget failed to provide the “bold investment required” to tackle cold, draughty homes and fuel poverty.

    The campaign group said the Scottish Government’s announcement that the total spend on fuel poverty and home energy efficiency for the financial year 2017-18 will be set at £114m, is a small increase on the 2016-17 figure of £103.3m, but a cut in comparison to the £119m spent in 2015-16.

    It falls well below the £190m figure the Existing Homes Alliance believes is necessary to begin the transition to a programme capable of eradicating fuel poverty in Scotland and meeting our climate change targets. The additional £75m the Alliance believes is required represents just under a quarter of 1 per cent of the Scottish Government’s total expenditure.

    Lori McElroy, chair of the Existing Homes Alliance, said: “While yesterday’s proposals do show a small increase in funding for fuel poverty and home energy efficiency work, it doesn’t even restore funding to the level it was at before last year’s cuts to this vital budget. Boosting home energy efficiency budgets to the level required is perhaps the most effective way to deploy capital investment, given the wide range of social and economic benefits this work brings.

    “After decades of missed opportunities, we had hoped the commitment to energy efficiency as a National Infrastructure Priority would come with the transformative level of funding required to help people currently living in cold and draughty homes that are expensive to heat.

    “Action to insulate cold homes will need to ramp up significantly in the coming years to tackle fuel poverty and climate change, and the supply chain stands ready to deliver. This is a missed opportunity to capture the massive benefits that a bigger investment would bring. We understand the public finances remain under significant pressure, but the extra money needed here represents less than a quarter of 1 per cent of the Scottish Government’s overall spending.

    “It’s also important to remember that this is just a draft Budget. There is still time for Ministers to improve their proposals and for opposition parties to make home energy efficiency a priority before a final Budget comes to Parliament in January next year. Bold investment is required as a matter of urgency: the Alliance estimates the spend required for next year should be closer to £190m rather than £114m. We know that the recent UK Budget means substantial additional capital funds will be available to the Scottish Government, more than enough to ensure the improved commitment we need to see here. The broad benefits of investing in improving cold and draughty homes - from more jobs and better health to lower fuel bills - mean there can be no more obvious choice when Parliament is considering how to allocate those funds.”

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