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Building a Better Scotland - Infrastructure Investment Plan: Investing in the Future of Scotland

Chapter 1: Introduction

The need for future investment

1.1 Our approach to infrastructure investment fits a pattern in the United Kingdom of needing to remedy long-standing problems in how investment is handled. The strategy is intended to ensure that the nation's infrastructure is improved; that public services are modernised; that investment planning takes a long-term view; that the allocation of resources is linked to the achievement of objectives and targets; and that the public sector disposes of surplus assets.

1.2 The background to this strategy was a perception that over the previous 30 years long-term investment has been neglected. From 1963-64 to 1997-98, public sector net investment fell from 5% of Gross Domestic Product (GDP) to 0.5% of GDP. This decline was partly due to the reduction in the size of the public sector during the 1970s and 1980s, but it also reflected the fact that infrastructure investment was not sufficiently prioritised when government spending was allocated.

1.3 This underinvestment resulted in a deterioration in the fabric of our roads, hospitals, schools and local authority houses. We are determined to reverse this trend, by investing effectively in our infrastructure to benefit all of Scotland's population.

1.4 Since devolution in 1999 we have substantially increased our investment in infrastructure including:

• the largest hospital building programme in the history of NHS Scotland, including £0.5 billion in 3 major new hospitals across the Central Belt, to enable our hospitals to improve the health of Scotland and reduce waiting times;
• unparalleled investment in school infrastructure to provide an environment suitable for learning to give our youth the best start in life;
• housing stock transfers such as that in Glasgow that will enable the delivery of investment in the quality of Scottish homes and therefore people's lives;
• increased investment in our transport infrastructure to promote an accessible Scotland while growing public transport to reduce the environmental impacts of road traffic.

1.5 This Infrastructure Investment Plan shows how we will secure our decision to commit to a 5% real terms annual increase in net investment over the Spending Review period (2005/6 - 2007/08) that we announced in June 2004. A target that will lock in for the longer term the improvement in infrastructure we need to secure the growing economy and the first class public services Scotland deserves.

1.6 This Infrastructure Investment Plan sets out our intentions to improve Scotland's infrastructure and explains how our record levels of investment will help to improve people's lives across Scotland. By investing:

• in our transport infrastructure with £3 billion over a 10-year programme to improve and open new routes for commuters and business;
• over £3 billion to secure our target of renewing and modernising 300 schools by 2009, as well as significant other improvements to school buildings;
• in the health estate to ensure patients have access to the best facilities;
• in one of the largest ever investment programmes in our water industry to meet EU and regulator standards;
• more than £500 million in our Strategic Waste Fund to finance local authorities recycling and waste treatment facilities up to 2008;
• a substantial increase in capital investment for Scotland's colleges and universities. This investment of £420 million over the three years of the spending review will support the achievement of modern, high quality, flexible accommodation which will meet the needs of employers and the expectations of students in the 21st Century;
• in a tripling of the funding for local authorities to invest in flood prevention and coastal protection to safeguard Scotland's homes and businesses;
• in our sports infrastructure to increase participation among all age groups and to assist talented Scottish sports people to develop their potential to the full;
• in infrastructure for businesses to bring and sustain jobs in Scotland; and
• in the regeneration of our communities through affordable housing, tackling fuel poverty, and building to higher sustainable design principles and design standards.

Planning our infrastructure investment

1.7 Maintaining and further investing in Scotland's infrastructure and asset base is essential to grow the economy and provide better public services. The Scottish Budget recognises the need to build on the substantial capital investment over the last five years to further improve Scotland's physical infrastructure and public services to meet the needs of the public.

1.8 The objectives for this Infrastructure Investment Plan are to:

• improve the efficiency of how services are being delivered;
• improve the standard of our infrastructure, such as our transport network and school building estate;
• improve the business environment, promoting research and development and enabling employment and training opportunities for Scotland's workforce;
• improve the co-ordination of our infrastructure investment by geographical area and between portfolios in order to secure extra value from our existing investment and infrastructure programmes; and
• improve the co-ordination with the private sector and secure a mixed economy and mixed tenure of investment.

The policy context

1.9 A Partnership for a Better Scotland: Partnership Agreement sets the principles underpinning this government and identifies our priorities for the future. The Scottish Executive currently includes £13.3 billion of capital assets in its consolidated accounts and these, combined with our health and local government infrastructure, provide the infrastructure for delivering effective public services to the Scottish population. These assets need to be maintained and updated to enable them to be sustainable for future generations.

1.10 Our investments are designed to achieve the priorities of the Partnership Agreement and the Framework for Economic Development in Scotland (FEDS), which is the foundation for government policy across a range of areas that are important for promoting the competitiveness of the Scottish economy, including education and skills, enterprise support, and improving Scotland's transport and electronic infrastructure. FEDS identifies four outcomes central to our vision for a better Scotland: Economic Growth; Regional Development; Closing The Opportunity Gap so all in society can enjoy the same economic opportunities; and Sustainable Development in economic, social and environmental terms.

1.11 To raise productivity and achieve these outcomes, five economic development priorities for action have been identified:

1.12 The main objective of the Infrastructure Investment Plan is to outline the future planned expenditure to improve the physical infrastructure that underpins the achievement of our outcomes. High quality infrastructure is a pre-requisite for thriving and successful enterprise in Scotland as well as delivering an adequate supply of housing. FEDS focuses on six elements of the national economic infrastructure which play a crucial role in facilitating and stimulating economic development:

Planning and development structures are key to the delivery of infrastructure. The National Planning Framework for Scotland, issued in April 2004, will help to ensure the contribution of the planning system to economic development is explicitly recognised and taken into account. The framework outlines the potential developments in Scotland's infrastructure up to 2025 to meet the needs of our communities and to grow our economy. It considers key themes such as economic development and community regeneration, transport, waste management, water infrastructure and affordable housing.

1.13 This Infrastructure Investment Plan highlights how the above elements, as well as investments in the Justice, Education, Lifelong Learning, Health and other portfolios, will be delivered over the next ten years and beyond. The FEDS and National Planning Framework priorities are taken into account when considering future policy and spending decisions and therefore have a significant effect on investment plans for each Ministerial portfolio.

Achieving our objectives

1.14 The Scottish Executive undertakes a review of the needs of each Ministerial portfolio on a biennial basis. The most recent Spending Review, announced in September 2004, outlined spending plans for the years from 2005-06 to 2007-08. Building a Better Scotland: Spending Proposals 2005-2008 - Enterprise, Opportunity, Fairness, has the main themes of growing the economy; delivering excellent public services; supporting stronger, safer communities; and developing a confident, democratic Scotland. It sets out the resources, including the level of planned net investment, available for the three years and prioritises the competing needs of Scotland's delivery of public sector services. This Infrastructure Investment Plan updates the outcome of the Spending Review (see table below, which takes account of re-classifications as between current and capital spending) and outlines the strategies for improving the capital infrastructure going forward to 2015.

Spending Review 04 - Net investment plans by portfolio

¹ The purpose of the Capital Modernisation Fund is to promote projects related to supporting information and communications technology infrastructure.

1.15 The level and growth of investment by portfolio is indicated in the diagram opposite. This illustrates the increase in net investment in cash terms by the following amounts:

• 9.2% from 2004-05 to 2005-06;
• 13.0% from 2005-06 to 2006-07; and
• 6.7% from 2006-07 to 2007-08.

The corresponding real terms increases, as calculated using the GDP deflator of 2.1% in 2004-05, 2.5% in 2005-06, 2.7% in 2006-07 and 2.7% in 2007-08, are as follows:

• 6.5% from 2004-05 to 2005-06;
• 10.0% from 2005-06 to 2006-07; and
• 3.9% from 2006-07 to 2007-08.

1.16 This capital investment represents the majority of the significant improvements to the infrastructure using Scottish Block funding. Over and above these investments, we also intend to improve Scotland's infrastructure further through the use of private sector investments and funding where this is identified as providing the best delivery route and value for money. Public Private Partnerships (PPP) combine and focus public and private sector expertise in the delivery of infrastructure through a variety of delivery vehicles, and may be supported by either public or private funding.

1.17 We will continue our mixed and open approach to funding investment in Scotland to ensure value for money, effective risk management and efficiency in the delivery of infrastructure investment.

1.18 We are reviewing the procurement methods used in each portfolio, and will do so for each project thereafter, to ensure that best value is obtained and resources are used effectively. Public sector bodies are accountable for choosing the most appropriate means of investment for each individual case whether through PPP, direct investment, or supporting others to invest and implement infrastructure schemes on our behalf. We remain determined to further improve the efficiency of delivery and will expect best practice across the public sector.

Following chapters of this Plan

1.19 Chapter 2 highlights the planned infrastructure investment within each Ministerial portfolio over the next ten years, highlighting how this has been prioritised to meet the needs of the people of Scotland and objectives of the Scottish Executive as endorsed by the Scottish Parliament. It also describes the activities across portfolios to regenerate communities.

1.20 Chapter 3 explains how we intend to improve and achieve delivery of this significant increase in infrastructure investment and build on our existing asset base. Effective investment requires arrangements for consultation with consumers, trade unions, professional and voluntary bodies, and other stakeholders. It commits to improved co-ordination between the public and private sectors to ensure we deliver effectively in terms of design and project delivery, funding methods and development throughout all of Scotland.

1.21 We are also committed to further improving our record on project delivery and therefore outline in chapter 3 how we intend to improve:

• our long-term planning approach to build a solid base for the future of our public services;
• community planning and co-ordinated approaches to public sector investment;
• procurement and project management skills and procedures throughout Scotland;
• the quality and sustainability of our designs and construction; and
• the skills and sustainability of our workforce.

Defining what we are investing in

So far this document has used the words capital, assets, net investment and infrastructure in reference to the building blocks from which services can be improved. For clarity this plan outlines the investment in infrastructure, which is defined as the fixed capital equipment in Scotland, including factories, roads, schools, hospitals, telecoms, water and energy grids etc, considered as a determinant of economic growth or of benefit to the public. Infrastructure investment incorporates the Scottish Executive's definition of "net investment" as well as support to public sector bodies for PPP projects that add to Scotland's infrastructure but are not classified as fixed assets on the public sector organisation's balance sheet. Further details on the definitions are included in Appendix A.

All of the remaining text in this document will refer to cash rather than real terms figures unless otherwise stated.

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