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3. Infrastructure investment - the Scottish context
3.1 The Scottish Government is committed to creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth. As highlighted in the Government Economic Strategy, the Government recognises the key role of efficient investment in Scotland's physical and electronic infrastructure toward achieving this aim.
3.2 All levels of government in Scotland have a duty to create and maintain the assets which underpin public services and economic activity, and they have a duty to ensure value for money through the most efficient forms of delivery and to provide for the long-term protection of these assets. While a significant start has been made since devolution to improve the fabric of Scotland, there is still a substantial task facing the Government to redress the decades of underinvestment in Scotland's infrastructure in the pre-devolution years.
3.3. Around 10% ( upwards of £3 billion ) of the Scottish Budget each year is currently devoted to 'capital' expenditure - most of which relates to the creation, replacement, or renewal of infrastructure across the range of Government responsibilities. This figure includes funding for the health service, Scottish Government support for local government, and Scottish Water borrowings.
3.4. The bulk of investment is through conventional 'capital' procurement, but some 2% (£0.5 billion) of the Scottish Budget is also committed to annual 'revenue' payments (the "unitary charge") required to meet existing contractual PFI repayments.
3.5 Under UK fiscal policies, there is a cap set by Treasury on what the Scottish Government, other devolved administrations and Whitehall Departments can spend on capital projects. This is designed to meet the UK's judgement and obligations as to what level of borrowing and investment can be sustained by the UK Government as a whole, and is in practice managed through the setting of public expenditure baselines in periodic Spending Reviews. However, PFI projects have counted as funding and assets of the private sector contracted partner, rather than of the public sector. This has meant a significant addition to the provision of public service facilities over the last 15 years - in Scotland projects with a capital value of some £5.3 billion contractually committed or in operation - on average the level of capital investment per year has increased by upwards of £300m.
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