Pathfinders to the Parliament

CONSTRUCTION SECTOR PATHFINDER
Introduction
The Group was chaired by Sir Fraser Morrison, Chairman of Morrison Construction. The members of the Group were:
Geoff Ball,	Executive Chairman, CALA
Ewan Brown,	Director, Noble Grossart
Dr Joyce Deans,	Chairman, Scottish Construction
	Industry Group
Keith Miller,	Chief Executive, The Miller Group
Alistair Wivell,	Managing Director, Balfour Beatty Construction
Our consultation was principally through the Scottish Construction Industry Group (SCIG) which has formal links with most sectors of the industry, the professions and the unions. Less formally, we consulted with a number of officials of representative groups in the industry. Since the existence of the Pathfinder Group was covered in our trade press, representations were also made by a number of smaller bodies within the industry. We fully considered all of this input.
Construction: a major contributor to the Scottish economy
The Scottish Construction Industry's activities range from major new infrastructure projects to property repair and maintenance; from commercial and urban redevelopment to house building; and from professional design to materials production. Its organisations range from businesses with more than 2,000 employees to one man concerns. In total, there are approximately 14,500 construction firms registered as operating in Scotland, and approximately 3,500 professional practices.
At around £3.25 billion, the industry contributes 6.5% of the Scottish GDP and, sustaining some 116,000 jobs, accounts for 6% of Scottish employment. In comparative context, this is twice the size of the agriculture sector.
Construction's contribution to the physical and economic development of Scotland is a significant and high profile one. It has, we believe, been vital to the transformation of so much in Scotland over the past 20 years. Examples are to be found in the regeneration of Glasgow; in construction support to Scotland's inward investment record; and in Scotland's leading the UK in the development of PFI infrastructure projects. The industry has very strong links with the education sector; it plays a proactive and constructive part in helping industry and business to function; and is responsible for the creation of quality, private and social housing which enhances the quality of life for Scotland's people.
An industry opportunity presented by the advent of the Scottish Parliament
The Scottish Parliament's working in partnership with the construction industry will bring very significant benefits to the Scottish economy. These will include our developing exportable skills, and encouraging the growth of Scottish construction companies and professional firms in markets beyond Scotland; deriving greater economic and social value from Scotland's stock of under-utilised physical assets; meeting new housing requirements; and developing a more efficient infrastructure which will help business to operate more efficiently, and enhance Scotland's appeal to residents and visitors alike.
Construction has traditionally been a very cyclical industry, with boom and bust cycles caused both by fluctuation in the economy and the annualised budgetary process of its largest client - Government. Whilst general economic conditions will be influenced by UK and global factors, much can be done within Scotland to plan construction work on a structured basis. The impact of a stop/start culture on contractors and clients (including Government) could thus be minimised.
Recent years have seen the construction industry make real progress in improving its own standards. Much, however, remains to be achieved, and improving standards of safety must be one focus for the future. Initiatives are currently being pursued in addressing problems caused by 'cowboy' builders and in raising quality standards. Working in consultation with the industry, the Scottish Parliament is presented with a real opportunity to assist this process of improvement. Examples could be in requiring registration and/or licensing to eliminate the cowboy element which damages the industry's reputation; and, in consultation with the higher and further education sectors, increasing the emphasis on education and training. Education of the consumer would also be helpful, but some in the industry are of the view that legislation to deal with the cowboy problem will be necessary. The Scottish Parliament should support the initiative, currently being discussed by UK Government, to reduce VAT on repair and maintenance to 5%.
As a major client as well as legislator, Government should take action to ensure that all its departments lead by example - abiding by the spirit as well as the letter of good practice codes ( such as 'Best Value') established by them.
Strategic planning
Although Scotland is a sufficiently compact country in which to develop a comprehensive, high level vision for infrastructure development and land use, we currently lack any such long term 'masterplan'.
There is, for example, no planning figure to indicate Scotland's housing needs in the foreseeable future: based on an assessment carried out south of the border, we anticipate that around 250,000 more houses will be required over the next 10 years. Since present completions number only 15,000 a year, it is clear that a huge shortfall is accumulating. Designating appropriate brown and greenfield sites to fulfil such anticipated requirements is key to creating a stable housing market and to meeting vital social needs.
The Scottish Parliament should take a far-sighted initiative in establishing a Scottish Strategic Plan as the future basis for an economy working at world class levels of efficiency. As well as residential requirements, the development of such a plan should include consideration of future infrastructural and industrial requirements.
The plan should address integrated transport solutions - with efficient airport, motorway and rail networking - and a clear and decisive policy on the use of cars in our inner cities.
Whilst respecting that local issues should properly be dealt with by local authorities, the Scottish Strategic Plan should be a radical long term masterplan with target dates for each element. The full benefits of such planning will not be realised for many years, but it is important to include clear measures against which Parliament can assess progress being achieved.
Working in partnership with Government, local authorities and NDPBs, the Scottish construction industry has the necessary skills, people and capability to deliver huge progress within such a framework.
Planning process and regulations
Current regulatory and bureaucratic restraints impact adversely on the efficiency of the Scottish economy. As an example of the competitive disadvantage caused by the planning process in this country, the recent McKinsey report 'Driving productivity and growth in the UK economy' uses hotel development as an example:
"Strict building codes have prevented the development of a productive hotel industry. Regulations governing land use, planning and building mean that the cost of building or refurbishing an hotel in the UK is up to 40% higher than in the USA."
More generally, the current planning process fails to deliver decisions within the statutory eight week period in 40% of cases. Planning appeals sometimes take years to determine.
We conclude that the Scottish Parliament should carry out a fundamental review of planning and building regulations and processes. For example, the introduction of a more integrated approach to planning - with a single department within each authority able to resolve issues relating to the development process without having to approach different departments separately - may significantly improve the process. The introduction of 'league tables' could show how efficiently (or otherwise) planning applications are being dealt with in individual areas. Such an approach might also be applied to the development of local structure plans. To ensure that matters are dealt with efficiently and within statutory periods, there should be a presumption that, where a decision is not intimated within the statutory time, permission would be deemed granted if the land in question is so designated in the structure plan. The appeals procedure requires streamlining and shortening.
Partnership to develop under-utilised public assets
A recent NAO report identified £3 billion of under-utilised assets within the National Health Service in Scotland. While no definitive analysis exists of the total value of publicly owned and under-utilised assets in Scotland, it is safe to assume that this total is many times the NHS figure. Working with the public sector, the construction industry has the skills and experience to create innovative and commercially viable redevelopment proposals.
The Scottish Parliament should prioritise the creation of a framework for future Private Public Partnerships, thus swiftly engaging both public and private sectors in developing creative solutions for the return of under-used public assets to productive use. Considerable advantages will derive from such partnership, with each sector bringing its own expertise to a process which has already delivered demonstrably successful results in Scotland.
The Scottish construction industry has a key role to play in delivering successful Public Private Partnerships.
Infrastructure development
The policy of successive governments in recent years has been to reduce expenditure on the country's infrastructure - and on roads in particular. Even a reversal of this policy would now offer little prospect of sufficient funds being made available to ensure the provision of the infrastructure necessary to sustain a world class economy. Meantime, our present road network is recognised as deteriorating from lack of maintenance and investment, and urgent steps are needed to address this problem.
Since it is unlikely that taxation or public funds can finance this work, we suggest the introduction of a 'user pay' system with the hypothecation of revenues so generated for investment specifically in infrastructure improvements. Real tolling of the M8, for example, could not only provide the finance for the necessary improvement plans recently shelved but, longer term, could produce a flow of revenue which could be targeted to improving the rail infrastructure between Edinburgh and Glasgow. Such revenues could also fund research for - and pump priming of - infrastructure solutions to the traffic problems of both cities.
Meeting housing needs
Scotland has more than £4 billion of local authority housing debt. The position of local authorities, where annual loan charges amount to around 50% of rental income and where debt is twice the value of the underlying assets, limits the new Parliament's scope in addressing housing problems. Meantime, thousands of Scots continue to contend with damp and other housing miseries - and rightly demand early initiatives to improve their living conditions. The corollary is that, if solving housing problems were prioritised, there would be highly desirably knock-on benefits in other areas, including reductions in ill-health and juvenile crime statistics.
Parliament should therefore ensure the availability of funds to re-shape the existing local authority housing stock into manageable packages. This would facilitate a desirable transfer of housing to community and housing associations.
Construction's significance
As we set out to demonstrate earlier in this report, construction is one of Scotland's major industrial sectors. The industry has proved itself capable of delivering fundamental change and has demonstrated this on projects which have changed the face of Scotland. Despite this, construction is not generally recognised as one of the key sectors in economic development planning - and its size is perhaps a surprise to many.
We sincerely hope that the Scottish Parliament will heighten the priority given to the industry by ensuring that it is involved at the earliest possible stage in strategic initiatives, and does not continue to be restricted to responding to initiatives from others. Perhaps allocation of responsibility for construction to the Industry Minister in the Scottish Parliament will, among other measures, be considered?
The re-positioning of construction as one of Scotland's key, primary industries will reap considerable economic benefits.
The Scottish Construction Sector Pathfinder Group respectfully invites the Scottish Parliament to give the earliest possible consideration to these vital issues and to the initiatives commended in addressing them.