Debate

15.12.11: Infrastructure investment plan

The Cabinet Secretary for Infrastructure and Capital Investment Alex Neil noted that it was generally accepted that spending on capital investment had a significantly higher multiplier impact on the economy than resource spending. Every additional £100m of capital invested per year is estimated to generate £160m-worth of economic activity and support 1,400 jobs: “In the climate that we are living in, both nationally and internationally, that is a major consideration.”

Neil said that contrary to some claims he had read about the Government’s plans for capital investment in the three years from April, “it is not true to say that we will be reducing the Scottish Government’s overall capital investment, in terms of both our direct investment and the capital investment that that leverages from the private sector and others.”

The Cabinet Secretary outlined the sources of capital investment: “The first and most obvious one is the capital grant that we get from the Treasury every year. That was cut by Alistair Darling – a cut that was confirmed by the current Chancellor of the Exchequer, George Osborne, when he came into office.

“That cut represents a real-terms cut to the Scottish Parliament of 38 per cent every year. As a result of last week’s autumn statement, the cut has been reduced to 32 per cent. However, that is still, basically, a one-third reduction in the level of capital investment that can be funded from the capital grant from Westminster and means that, instead of having about £3.5bn a year to invest, we have something like £2.5bn a year, over the period of the current spending review.

“Therefore, as announced, the Scottish Government will transfer over the next three-year period a total of more than £700m from the resource budget to the capital budget. Over the piece, taking the £2.5bn as the base, we will increase the level of capital spending despite the cut in the capital grant from Westminster.”

Neil detailed the other sources; the £2.5bn nonprofit- distributing investment programme in health and education; the regulatory asset base, which will invest more than £1bn in rail infrastructure; and new models of funding, for housing and the public realm.

“The fifth source from which we can raise money for capital investment is the borrowing powers that we do not currently have but will get, I hope, in the not-toodistant future. We will put those powers to good use to invest in the future: in our infrastructure, in capital investment and in sustainable economic growth for the benefit of the people of Scotland,” he said.

Lewis Macdonald (Lab) asked: “Will he confirm that he has told us that capital spending by the Scottish Government at its own hand is down from around £3.5bn to, according to his numbers—and including the resource-to-capital transfer—something in the order of £3.25bn?”

Neil responded: “Mr Macdonald misses the point, which is that, despite the cuts from his chancellor, the repeated cuts from the Tory chancellor and the cuts that he has just enunciated, over the next three years we will invest between £11bn and £12bn in the Scottish economy because we are taking an innovative and dynamic approach that is unprecedented in the history of the Parliament.”

The Parliament passed the motion noting the importance of infrastructure investment and the significant investment under way in a wide range of projects, supported the Scottish Government’s use of a broad range of funding methods for investment “to help offset the 32 per cent real-terms cut to Scotland’s capital budget inflicted by the UK Government, and welcomes the publication of the Scottish Government’s Infrastructure Investment Plan 2011, setting out the Scottish Government’s intentions through to 2030.”

 

Committee

14.12.11: Broadband

Brendan Dick, Director, BT Scotland gave evidence to the Infrastructure and Capital Investment Committee as part of its inquiry into broadband.

As well as covering general issues with other witnesses, Dick also touched on implications for business. He cited work which Ericsson did in conjunction with the Chalmers University of Technology in Sweden. The researchers looked at 33 Organisation for Economic Co-operation and Development countries and suggested that there was a 0.3 per cent uplift in GDP for every doubling of broadband speed.

“A 0.3 per cent uplift might not have been a lot a couple of years ago, but in the current economic climate it is potentially quite significant,” said Dick.

SQW, an economic consultancy, did some work for the Scottish Government which said that employee productivity would potentially increase in the manufacturing sector by about 5 per cent and in the services sector by 10 per cent.

“There is growing evidence, but the challenge is that the deployment of high-speed broadband services, as compared with broadband itself, which was deployed in Scotland around 2004 and 2005, is relatively embryonic.” He said that no single technology is the answer, particularly in rural areas: “If we consider Cornwall, where we are doing the pilot, although the contract between Cornwall Council and BT was signed some time ago, it is clear that there will be a mixture of technologies as we move towards 100 per cent coverage. Fibre will be at the heart – I think that that is right, because it will be at the heart of what we have in the UK in the future – but there will be other technologies as well.

“In such areas, frankly, we will get to a point where it is uneconomic for the private sector and indeed the Government to invest in fibre to everybody. I appreciate that some people say that we need a gigabit to every home. That would be lovely if we could afford it, but life is as life is, and it is not going to happen, certainly in the short to medium term. A mixture of technologies is the way ahead.”

Dick said that at the moment, encouragement in digital participation is aimed more at consumers who do not participate: “We know about the challenge in Glasgow, so I will not labour that point,” he told MSPs. “However, the key thing from an economic perspective is how we re-engage with the 25 per cent of SMEs in Scotland that do not see value in using ICT. That figure has been static for at least two or three years. Some years ago, the remits of Scottish Enterprise and Highlands and Islands Enterprise were changed and their role in interacting with the mass market of SMEs changed, which means that our getting to the SME base is now quite challenging—it is not something that the industry can do on its own. That part of digital participation needs to be thought through more; programmes need to be put in place.”

 

FMQs

12.01.12: Harte Group

Michael McMahon (Lab) asked about the collapse of the Bothwell-based civil engineering firm, which employs 720 people across Scotland, the role of venture capitalists in the company and payments to directors.

The First Minister said he was aware of the situation and its serious nature. He said that ministers had been in touch with the administrators handling the company’s affairs. He noted that the member had more information to bring to the issue and would welcome his contribution.

According to the BBC, WJ Harte and RJT Pennant had been placed in administration and all staff sent home, although more than 200 of them will be recalled to complete work on the order book. The firm blamed the downturn in the building trade which cut its turnover by more than half and bad debts from financially-troubled client firms. Business advisers PKF were appointed joint interim managers of both companies. The Harte Group has been in operation since 1974. Turnover peaked in 2007/08 at £102m but fell back to £40m over the past two financial years.

Events diary

31 January – 1 February

Scottish Offshore Wind & Supply Chain Conference Aberdeen

2 February

Global Customs and Trade Compliance Forum Glasgow

5 – 9 February SCDI trade visit to Dubai and Doha

6 March CBI Scotland Westminster Reception

15 – 16 March

41st SCDI Annual Forum Fairmont St Andrews Hotel