Infrastructure Investment Plan 2015

Chapter 1: The Strategic Vision for Scotland's Infrastructure

1.1 INTRODUCTION

This Infrastructure Investment Plan sets out priorities for investment and a long term strategy for the development of public infrastructure in Scotland. It sets out why the Scottish Government invests, how it invests and what it intends to invest in over the 2015 spending review period and beyond.

The last Infrastructure Investment Plan for Scotland was published in 2011. Much has changed since then and this new plan reflects a shift in focus and priorities in some areas, whilst recognising the significant progress that has been made in Scotland in recent years, for example we are progressing the Forth Replacement Crossing project on time and budget; we have delivered the New South Glasgow Hospitals project (the Queen Elizabeth University Hospital and Royal Hospital for Children), one of the largest healthcare facilities in Europe; completed 607 schools projects during this administration; since 2008 our policy framework has helped enable the installation of more than 900,000 energy efficiency measures in over 700,000 homes across Scotland; we have delivered 30,000 new affordable homes and have raised fibre broadband coverage from 66 per cent to 85 per cent of homes and businesses across Scotland.

This plan is intended to complement the Draft Budget 2016-17 and support the objectives set out in Scotland's Economic Strategy ( SES) and the Programme for Government ( PfG).

This plan supports SES through a focus on strategic long term infrastructure priorities since it is well known that well planned investment in new or existing infrastructure can play a central role in improving competitiveness and driving inclusive economic growth. Over the period of the global recession, the Scottish Government has sought to deliver additionality in its infrastructure investment programme, maintaining overall levels of investment and supporting thousands of jobs. In doing so, the Scottish Government has sought to maximise impact and value for money for tax payers and society as a whole. This is more important than ever in a time when public resources are constrained.

The Scottish Government's long term aspirations for Scotland's infrastructure are set out in this plan, which also reflects a number of existing strategic projects and programmes to which we remain committed, including the upgrade of the A9/A96; the Edinburgh Glasgow Improvement Programme on rail; the Scotland's Schools for the Future programme; the delivery of affordable and social housing commitments; world class digital connectivity; capital funding for local government and a range of projects across the NHS, further and higher education and justice estates. The plan also reaffirms our commitment to Scotland's inclusion within a Britain-wide high speed rail network.

Alongside existing commitments this plan details support for a number of new initiatives which reflects the Scottish Government's view that a holistic approach is required that takes into account the wider benefits of investment and the way in which infrastructure projects are procured and delivered.

The benefits of infrastructure investment can be felt at national, regional, community and household levels. Nationally planned infrastructure attracts business investment, stimulates economic activity and deepens access to the labour market, which can all have important impacts at a local level. Our investment in infrastructure goes beyond one-off, large scale projects. Smaller scale, local interventions to our infrastructure networks can, together, make a nationally significant contribution to supporting economic growth and tackling inequalities. This plan sets out significant local investment which will benefit individuals, families and communities, from increased housing provision, and the development of local digital networks, to the expansion of nursery and childcare provision. It establishes energy efficiency as a national infrastructure priority for the long term, underlining the Scottish Government's commitment to tackling climate change and fuel poverty.

The Scottish Government will continue to maximise the contribution of private investment in the Scottish economy. We recognise the importance of private sector infrastructure investment and the relationship between Scottish Government investment plans and private sector infrastructure plans.

Scotland's strengths in attracting investment include our people and it is vital that opportunities for developing, retaining and exploiting our natural pool of talent to support the long term delivery of infrastructure projects, in both public and private sectors, are provided. We recognise the importance of developing and retaining these skills within Scotland to achieve our goals.

We will also continue to protect and enhance our natural capital, our brand and reputation as a country of outstanding and natural beauty, our commitment to low carbon and the opportunities our resources and assets provide for our economy and future generations.

1.2 HOW INFRASTRUCTURE INVESTMENT CONTRIBUTES TO MAKING SCOTLAND THE PLACE WE WANT IT TO BE

The Scottish Government wishes to create a fairer and more prosperous nation, in which opportunities are open to everyone, and where, because of that, everyone is able to contribute their talent, skill and commitment. We aim to make Scotland the best place in the UK to do business by focusing on innovation, skills and productivity.

A Stronger Fairer Scotland

Scotland has shown the world that it is a democratically engaged society. The Scottish Government is accountable to the citizens of Scotland in all that it does and we are committed to protecting individuals' rights and reflecting our drive to achieve social justice and equality in all that we do.

Our infrastructure investment must also reflect these values and this plan focuses on programmes and initiatives that will drive inclusive growth and promote equality in Scotland.

A Strong Sustainable Economy

Increasing competitiveness and tackling inequality are the two mutually supportive goals of Scotland's Economic Strategy ( SES). Both are necessary pre-requisites for boosting productivity and creating greater prosperity for all.

Our ambition is that Scotland is seen as the best place in the UK to do business for our indigenous companies and inward investors. We will do this by focusing on skills, productivity, innovation and fair work. Our planning system is a key route through which the Scottish Government can help businesses to invest and grow. In June 2014 we published Scotland's third National Planning Framework ( NPF3) and revised Scottish Planning Policy ( SPP). NPF3 is the spatial expression of our economic strategy, about where opportunities and challenges are. SPP introduces a presumption in favour of development that contributes to sustainable development. Giving due weight to the net economic benefit of development proposals is part of the contribution to sustainable development along with other matters including climate change and improved wellbeing.

Transport and digital infrastructure are key areas where improving connectivity between our cities and centres of economic activity is vital to boosting productivity and competitiveness. Improving connections between more remote and rural communities is another important aim. For many, digital connectivity is as critical as physical connectivity in accessing health, economic, social and educational opportunities.

The Scottish Government will continue to target investment in infrastructure projects that maximise wider economic benefits. This plan sets out how we intend to invest to create a strong sustainable economy, for example by:

• overseeing the significant expansion of our digital infrastructure;
• continuing our major programme of investment in road, rail and ferries;
• investing in early years and childcare, allowing more people to work;
• continuing to collaborate across the public and private sectors to stimulate a major pipeline of new housing supply, leveraging in additional private sector investment to make our direct investment go further; and
• investing in public sector enabling infrastructure to leverage additional private sector investment across Scotland, for example through the use of the Tax Incremental Financing ( TIF) and the Growth Accelerator ( GA) models, and accessing private finance to deliver revenue-financed infrastructure through the NPD/hub programme.

The Scottish Government will continue to engage with industry partners to ensure that the market opportunities that public investment can present for Scottish business and industry are transparent and well understood. Through our Enterprise Agencies, we will launch a Manufacturing Action Plan for Scotland that will deliver concrete initiatives to boost productivity, stimulate innovation and investment and support supply chain development. This will be a dynamic strategy that will evolve in line with changes in the Scottish economy and future updates to this infrastructure plan.

The new sustainable procurement duty means that authorities should consider how economic, social and environmental wellbeing impacts within their area when making purchasing decisions. Within that duty it will be appropriate to consider the contribution that can be made by strategically significant industrial sectors, for example steel and other manufacturing.

Meeting Scotland's ambitious greenhouse gas emissions targets requires a comprehensive approach to low carbon infrastructure which also tackles climate change. Establishing Scotland as a low carbon place is already a central theme of NPF3 and we are broadening our infrastructure approach, building on the success of our approach to renewable energy, to improve the efficiency of Scotland's homes and non-domestic building stock.

Protecting and Reforming our Public Sector

High quality and efficient public services help to build a society that is fair and prosperous. Our world is changing and our services must respond to changing public demands and expectations. This will include responding to changes in demography, the geographic spread of our people and in the way that we access and consume services. Investment in digital public services forms an essential part of the Scottish Government's aspirations for public service reform and an approach built on a strong customer focus.

We will continue to work with our partners to develop and deliver our reform and improvement agenda and to ensure Scotland's public services and assets are fit for purpose both for the world we live in now and in the future. A high quality, robust and secure digital infrastructure is critical to this ambition and we will therefore continue to build and sustain a national digital ecosystem of shared service capabilities based on open standards and an open systems architecture. This will enable us to share common technologies and processes across different public services, providing a common experience for users and helping to ensure that we maximise the efficiency of our investments. Over the coming years, this infrastructure will provide the capability to support a series of key digital programmes covering services in areas such as health, justice and the environment.

Strengthening our Communities

Scotland's communities are diverse; made up of people with rich and varied backgrounds who each have something to contribute toward creating a more prosperous and fairer Scotland.

There is a vibrant and diverse range of community-led initiatives underway, including managing renewable energy and local broadband projects, running childcare services, preserving local heritage and managing forestry enterprises. The work of these groups is having an impact from our islands and remotest rural villages to the hearts of our cities and towns.

We want to ensure that more of the money we spend is directed by communities themselves - by the individuals and organisations who know best how to tackle poverty and inequality, harnessing the energy of local people.

When people feel they can influence what happens in their community, and can contribute to delivering change, there can be many benefits, and our aim is to support approaches that can contribute to a growing sense of democratic renewal and change.

Our vision is one of a truly connected Scotland, with first-class road and public transport links between our cities and across our wider geography. Work is already underway to dual the A9 and A96, connecting Inverness with Aberdeen and the central belt, meaning that our seven cities will be connected by transport links appropriate to the Scotland we want to see. This includes major investments in the rail links between these cities to ensure modal choice is available to all travellers.

Investment in ferry and rail services will also ensure they have the capacity and capability to support continued passenger growth in the coming decades.

We are taking action across Government programmes to empower our island communities and, recognising the important role infrastructure plays in realising our islands' potential, we will prioritise relevant transport, energy and digital investment.

Improving digital infrastructure, both fixed broadband and mobile services, is a key priority. Whilst the rollout of fibre broadband is well underway, further investment will be required if we are to become a world leading digital nation. Our focus over the next 5 to 10 years is to build on current activity and ensure that the necessary investment (both public and private) is made in fit for purpose digital infrastructure across all of Scotland.

New strategic electricity grid reinforcements are still required to unlock the economic potential of developing large-scale renewable energy projects on the Scottish islands. The Scottish Government has been clear that this is a top priority and has been working with the UK Government and key stakeholders through the Scottish Island Renewables Delivery Forum to facilitate work towards the delivery of the island links.

1.3 SCOTLAND'S ECONOMIC STRATEGY

The Scottish Government's economic strategy was refreshed through the publication of Scotland's Economic Strategy ( SES) in March 2015. Investment in infrastructure is a key driver of both short and long-term economic performance and makes an important contribution to delivering the ambitions set out in the strategy. SES is based on the two mutually supportive goals of:

1. increasing competitiveness; and

2. tackling inequality.

SES sets out four priority areas for achieving these overarching aims:

1. investing in our people and our infrastructure in a sustainable way;

2. fostering a culture of innovation and research and development;

3. promoting inclusive growth and creating opportunity through a fair and inclusive jobs market and regional cohesion; and

4. promoting Scotland on the international stage to boost trade and investment, influence and networks.

SES identifies investment as one of the four priority areas and sets out how we will:

• invest in Scotland's people at all stages of their life to ensure that we have a well-skilled, healthy and resilient population and an innovative, engaged and productive workforce;
• provide the physical and digital connectivity needed to ensure that all of Scotland is open to the national and global economy and is able to access high quality public services;
• invest in Scotland's infrastructure to help Scottish businesses to grow, innovate, and create good quality employment opportunities;
• prioritise our investment to ensure that Scotland protects and nurtures its natural resources and captures the opportunities offered by the transition to a more resource efficient, low carbon economy; and
• invest in strengthening the success and resilience of local communities.

Investment is key to driving long-term improvements in competitiveness and in creating opportunities for everyone in society to benefit from these improvements. Infrastructure contributes to productivity, economic activity and people's well-being in different ways. This could be in the form of improved journey times, more accessible public transport, greater digital connectivity, higher quality affordable housing or new techniques to improve our environment.

1.4 FURTHER FISCAL DEVOLUTION

The Scottish Government will continue to use its devolved powers to boost the Scottish economy and tackle inequality, but many of the powers to shape the structure of the economy remain reserved to the UK Government.

The Scotland Act 2012 came into force on 1 April 2015 giving Scotland limited borrowing powers for capital expenditure. In November 2014, the Smith Commission recommended that the Scottish Government should be granted sufficient borrowing powers to support capital investment, and that consideration should be given to the merits of undertaking such action via a prudential borrowing regime. This increased flexibility will bring about new opportunities to finance, deliver and manage Scottish infrastructure assets in line with long term economic cycles. We will continue to press for the full implementation of the Smith Commission recommendations on borrowing.

1.5 STRATEGIC FINANCIAL PERSPECTIVE

The UK Spending Review 2015, published on 25 November, has now set devolved Scottish budget totals for the period 2016-17 to 2020-21. Over this period, the annual Scottish Capital DEL budget will increase by £1.9 billion. However, this is still lower than Scotland's capital budget was in 2010 in real terms. Scottish Ministers have consistently argued for an alternative to the UK Government's austerity measures, which have resulted in cuts to investment and to public services and which risk undermining economic recovery. Therefore, over and above planned traditional capital spending, we will continue to take forward an extensive programme of revenue-funded infrastructure investment, including through our hub programme of schools and NHS developments. The Scottish Draft Budget 2016-17 confirms the intention to make full use of current capital borrowing powers to borrow up to £316 million in 2016-17. We will also make further use of financial transactions funding.

1.6 PRIORITIES

Investment decisions must balance competing pressures and challenges including financial and constitutional constraints described above. These limit the amount of capital which can be invested.

The PfG and SES provide a clear strategic direction for our infrastructure investment decisions. To further assist with decisions on the prioritisation of projects, the Scottish Government has developed a set of guiding principles:

1. delivering sustainable economic growth through increasing competitiveness and tackling inequality;

2. managing the transition to a more resource efficient, lower carbon economy;

3. supporting delivery of efficient and high quality public services; and

4. supporting employment and opportunity across Scotland.

These principles provide the framework for investment decisions and enable a wide range of projects to be considered in the context of how they promote the Scottish Government's overarching purpose. This high level assessment of the outcome of proposed projects and programmes is refined over time, as business cases are developed.

The focus of this plan will enable households across Scotland to benefit from improved and sustainable economic opportunities through increasing competitiveness and tackling inequality. Further, our strategic investment aims to move Scotland toward a lower carbon economy, while supporting delivery of efficient and high quality public services, and employment opportunities across Scotland.

Transforming early learning and childcare provision

Investment in Early Learning and Childcare ( ELC) remains one of our most important policies to improve outcomes for children and support participation in the labour market, especially for women.

In the PfG, the First Minister confirmed that the Scottish Government will take forward a radical expansion of ELC provision between now and 2020, including the infrastructure required to support the commitment to expand provision for three to four year olds and eligible two year olds from 600 to 1140 hours per year, equivalent to 30 hours per week during term time. We are committed to delivering the 1140 hours commitment by the end of the next Parliament, and the capital investment is forecast to be spread over three years from 2017-18 to 2019-20.

Scotland subscribes to The Organisation for Economic Cooperation and Development ( OECD) and European Commissions' rationale for state provision of early learning and childcare, which is to:

• promote social justice by providing the best start in life for all children and thereby improve children's outcomes;
• develop gender equality, particularly in labour market participation;
• reduce further costs on demand for public services; and
• encourage economic growth.

Therefore, investment in ELC is fundamental to the two key pillars within the SES of increasing competitiveness, and tackling inequality.

Enhancing housing supply in Scotland

The Scottish Government's vision for housing is that "all people in Scotland live in high quality sustainable homes that they can afford and that meet their needs." We have a major ambition to increase and accelerate the delivery of new housing supply, particularly affordable housing, in Scotland. We see this as central to support achievement of the Scottish Government's economic, social justice and health ambitions.

We have a strong record on housing and have been working hard with our partners to boost supply across all housing tenures and to tackle the significant shortfall of affordable housing compared to Scotland's needs. We also started a new generation of council house building. And we have taken steps to safeguard social housing for the future by abolishing the right to buy. Over the lifetime of this Parliament, our planned investment in affordable housing will exceed £1.7 billion and we have already met our target of 30,000 affordable homes by March 2016. The Scottish Government has also focused on addressing market failure through support for private home ownership, providing equity products through the £305 million Help to Buy (Scotland) and Small Developer schemes to address restricted mortgage lending and housing affordability post-2008.

Despite strong delivery to date on housing interventions to increase both affordable and market housing, not enough homes are being built. There is a persistent gap between actual supply and projected requirements. National Records of Scotland 2012 based household projections predict an increase of 325,000 households in Scotland over the period 2014 to 2034. This is why the Scottish Government has committed to a new, ambitious five year target to deliver 50,000 affordable homes over the lifetime of the next Scottish Parliament and will invest more than £3 billion to deliver it and continue market support through shared equity approaches. This year we and our partners agreed a 'Joint Housing Delivery Plan for Scotland' and are taking forward the required actions in a system wide response to raise ambition and delivery across the housing sector.

The planning system has a key role to play in enabling development and delivering our ambition. The PfG included a new commitment to undertake a wide-ranging review of the planning system, with a strong focus on improving the effectiveness of planning processes that support the delivery of good quality housing developments.

The review is being undertaken by an independent panel and all sectors and members of the public were invited to contribute written evidence to the review by the beginning of December to inform the process. The panel will make recommendations to Scottish Ministers in Spring 2016. The Scottish Government will issue its response to the findings of the review panel later in 2016.

It is important to ensure that new homes of the right size, type and tenure are built in the right location. Our programmes continue to support this but more can be done to bring forward additional developments. One barrier to development highlighted by local authorities and developers is infrastructure blockages; in some cases significant up-front investment is needed to support development in these locations. Across Scotland there are number of such strategic sites that could offer a major increase in housing supply across all tenures. The delivery of infrastructure is also a key area for the planning review. It is considering whether existing funding and delivery mechanisms are fit for purpose as well as the need and scope to introduce alternative solutions to ensure planning can do all it can to enable development.

To address infrastructure and other issues constraining affordable housing supply, we will work with local authorities and other partners to put in place new investment and other actions to tackle the complex development, financing, infrastructure and collaboration issues impeding housing supply in Scotland. Scotland has pioneered innovative housing financing models and we wish to build on that success to lever additional private finance at larger scale.

Digital

The digital revolution can impact the lives of everyone in Scotland in a positive way and the Scottish Government's Digital Strategy reflects this transformational change.

A recent report commissioned by Scottish Futures Trust ( SFT) suggests that increased digitalisation could boost the Scottish economy by up to £13 billion. As well as having the potential to generate significant economic benefits, increased digital capabilities will also have a positive impact on the provision of health, education and social inclusion.

Ensuring Scotland is a world leading digital nation is an ambition shared by many right across all areas of Scottish society. This ambition is four-fold: a Scotland where our people have access to the best of digital technology and are capable and confident in its use at home, at work and on the move; where our businesses have the skills and confidence to exploit digital technologies; where the economic environment encourages digital innovation and supports the creation, growth and development of businesses; and where Scotland is seen as an attractive place for inward investment in digital technologies.

The Scottish Government has long recognised the benefits of world class digital connectivity across the whole of Scotland, and its vital role in enabling a vibrant and inclusive digital nation. Scotland's Digital Future: Infrastructure Action Plan outlines a commitment to a future proofed infrastructure that will deliver world class connectivity across the whole of Scotland by 2020, with an interim milestone of delivering a step change by 2015.

Health

Our priorities for investment in healthcare infrastructure are driven by the investment principles established by the Scottish Government, and by the need to support, through investment, the quality ambitions established in the NHS Healthcare Quality Strategy, that healthcare will be patient-centred, safe and effective. Putting in place the right assets and facilities services is crucial to achieving our '2020 Vision' for health. This will require significant change to our assets and facilities.

We will prioritise investment that supports this change. New diagnostic and treatment centres will allow planned surgery to take place more quickly and will support increased demand through demographic changes. At the same time, we will invest in both new build and reconfiguration of community health facilities to support a shift of care into communities. Meanwhile we will continue to manage the existing estate to ensure it is safe, reliable and fit for purpose. Investment in renewables and energy efficiency will help reduce energy costs and tackle green-house gas emissions. Our final priority is the completion of the £1.15 billion programme of revenue-funded infrastructure investment that is already in progress.

Infrastructure can impact directly on the quality of life in communities, whether in relation to how services are accessed, movement and transport or in the quality of the physical environment. Ensuring that there are appropriate methods to evaluate how infrastructure investment considers the needs of, and impact on, communities is an important element in linking investment with action to reduce inequalities. The Scottish Government has worked with NHS Health Scotland and Architecture and Design Scotland to develop a Place Standard evaluation tool. Place Standard has been designed to allow decision makers, communities and the private sector to come together and consider key issues related to improving quality of life and reducing inequalities within a consistent framework. Place Standard aims to create positive and structured conversations between key groups which lead to investment decisions that consider how investment can maximise the potential to improve the quality of life in communities across Scotland.

Transport

Investment in Scotland's transport infrastructure will support the sustainable travel hierarchy as set out in the National Transport Strategy ( NTS) and SPP. Improvements to digital networks will help reduce the need to travel, following which walking and cycling represent the most sustainable modes of travel. Our policies support increases in walking and cycling for short, everyday journeys, but priority must be placed in making these active forms of travel as easy, safe and attractive as possible. This means improved routes as well as facilities at the destination and integration with other forms of transport including road and rail based public transport options. Local facilities should also connect into the national walking and cycling network of longer distance routes, identified by the Scottish Government as a national development in NPF3 and being developed by Scottish Natural Heritage ( SNH), Scottish Canals and Sustrans Scotland.

NPF3 is clear that enhanced connections between cities and within city regions is vital, in particular enhanced rail connections as we decarbonise our transport networks. As part of that objective to provide a more efficient, lower carbon travel option we will continue to advocate and promote Scotland's inclusion within a Britain-wide High Speed rail network that links Edinburgh and Glasgow with London and other major cities.

The key priority for the strategic transport networks is to ensure that all of Scotland can contribute to its success. It is vital that the range of modes available reflects the needs of commuters, business and tourists with the motivation for each being different. Investing to connect all of Scotland's cities by dual carriageways was a key part of the 2011 Plan and good progress is being made on this.

The Scottish Government is committed to supporting Scotland's remote island communities. Contracts for two new major ferries for Clyde and Hebrides services have been awarded to Ferguson Marine Engineering Ltd of Port Glasgow. As part of a major investment, Brodick harbour redevelopment will be progressed over the next three financial years to secure a safe, efficient and reliable ferry terminal and service.

Investment in Scotland's railways, whether through funding the rail services under the rail franchise or in the management and enhancement of the railway infrastructure, directly supports the Scottish Government's purpose and seeks to deliver our aspiration for the railway. We have taken important steps to improve capacity, journey times and performance through improvements to infrastructure, an expansion of services and an enlargement of the geographical scope of the network. However, more is required to achieve our ambition for a railway that offers value for money, acts across the industry in a coordinated, integrated manner, supports social cohesion, particularly for more remote areas, improves access to and opportunity for employment, education, leisure and, most importantly, has a relentless focus on passenger interests. Among the key enablers of this would be the full devolution of Network Rail in Scotland. The Cabinet Secretary for Infrastructure, Investment and Cities has written to the UK Transport Secretary seeking this and also made representations to the Shaw review, which is considering Network Rail's future shape and financing.

Energy Generation

Our approach has led to dramatic changes in the energy system in Scotland over the last decade. Renewable electricity output has risen three-fold in 10 years and the equivalent of half our entire electricity use is met by renewables.

However, there are new challenges facing the energy sector as a whole, including a raft of UK regulatory and policy changes, particularly those aimed at cutting support for onshore wind and solar power but also the withdrawal of support for the only credible technology which can reduce large scale emissions from gas powered electricity generation - Carbon Capture and Storage, which now threaten the Scottish Government's approach to energy. These changes, combined with the sustained uncertainty concerning future levels of support for other technologies such as offshore wind, will have an impact on Scotland's ability to meet its renewable energy targets and will put crucial investment and jobs at risk.

In September, the Minister for Business, Energy and Tourism announced his intention to develop a new overarching Scottish Energy Strategy. The aim is to create a firm, long-term basis for energy investment in Scotland and will be a core element of the next stage of the Scottish Government's approach to supporting the long-term decarbonisation of the energy system. The strategy will also aid us in optimising the benefits to Scotland's communities, consumers and businesses, and drawing on our significant energy resources and expertise.

Our energy supply sector also makes a significant contribution to our economy both from the growth of renewables but also from the more established extraction and generation industries. North Sea oil and gas has made an enormous economic contribution to the Scottish and UK economies over the last 40 years. However, as the basin matures, future developments are more technically challenging, and, within the current context of a low global oil price, it is critical that both the regulatory and fiscal regime ensures that the industry is able to continue to attract investment.

Energy Efficiency

Recognising the importance of energy efficiency, the Minister for Environment, Climate Change and Land Reform announced in June 2015 that energy efficiency would be assigned the status of a national infrastructure priority.

Investment in domestic energy efficiency helps tackle fuel poverty, reduce greenhouse gas emissions, and therefore helps to meet climate change targets, and supports the economy through providing opportunities for regional SMEs to be involved in the delivery of Scottish Government programmes.

Furthermore, by investing in the energy efficiency of our businesses, we will help to ensure that energy costs are affordable for our businesses helping them to remain competitive on the global stage. This investment will provide local employment, benefiting people and communities across Scotland and help grow our low-carbon economy.

The cornerstone of this activity is Scotland's Energy Efficiency Programme ( SEEP), which will set a vision that achieves a substantive improvement to the energy and heat efficiency of our building stock, investing in the majority of our existing buildings to make them fit for Scotland's low carbon future. In the future SEEP will provide multi-year funding to improve the energy efficiency of buildings in Scotland over a 15-20 year period and will draw on the success of our existing area based approach and incorporate new powers over energy company obligations which are to be devolved. By assigning energy efficiency the status of a national infrastructure priority and establishing a clear delivery programme, we will ensure long-term stability for energy efficiency and heat funding and policy to give home and business owners, and our private sector partners, the certainty to invest in improving the energy efficiency of Scotland's buildings.

The new programme is now in its first phase, which involves delivering existing programmes more effectively, developing new pilot schemes and preparing for the effective implementation of the powers that are set to be devolved through the Scotland Bill. The second phase will commence around 2018 when the new powers come into effect and we are able to tackle fuel poverty and enhance energy efficiency more comprehensively than ever before.

1.7 TACKLING INEQUALITIES: ROLE OF INVESTMENT

Tackling inequality is one of the twin goals of SES and is also key to this plan's success. Our investment in infrastructure aims to address inequalities in society and also to promote equality in terms of protected characteristics, including gender, ethnicity, disability and age. While some progress has been made against a range of indicators, we still need to do more to address the structural causes of inequality.

Infrastructure investment in general improves access to labour markets, supports increased participation and reduces inequality by making employment opportunities more accessible. It is also important in terms of which communities benefit from investment and how that benefit is distributed. This plan supports the aim of tackling inequality through an overall approach that balances economic and social investment and reflects our strategic aim to create a fairer Scotland.

Early Learning and Childcare

Investment in Early Learning and Childcare ( ELC) promotes social justice by providing the best start in life for all children and thereby improving children's outcomes. It also increases parents' labour market participation, which in turn promotes economic growth and reduces the costs of public services more generally.

Bearing in mind that women are often the primary carers of children, this investment benefits women in particular. Access to affordable ELC remains a significant barrier to many women seeking to return to work, after taking time out to have a baby or to look after infants or others in the family. Although Scotland's female employment rate is now the second highest in Europe (Eurostat, 2015), many women still face too many challenges in the labour market, so this investment is important.

Education - Schools

Education is a fundamental element of investment for equality and available capacity is essential to enable growth and sustainable places. Local authorities, as both education and planning authorities, are well placed to work with developers to support additional education infrastructure where required. Substantial progress has been made since 2011 in improving the condition of Scotland's primary and secondary schools, working in partnership with local authorities. However, further investment is needed in order to deliver our policy commitment to reduce the number of pupils in poor condition schools and as part of co-ordinated action to enhance our children's experience of learning, whether that be through curriculum improvements, targeted measures to support better attainment, better provision of school meals and importantly, their physical environment. We are taking targeted action to deliver significant improvements in areas with high levels of multiple deprivation.

Education - Further and Higher Education

Investment in further and higher education has an important impact on addressing inequality through widening access to university and developing the young workforce. Ensuring the college and university estates are fit for purpose supports their ability to deliver high quality environments that reflect current practices in the workplace as well as supporting effective learning and the quality and impact of universities' research expertise. Investment in college and university estates promotes participation through delivering improved access for disabled people to teaching, student support and social spaces.

Housing

The Scottish Government is committed to working with businesses and communities across Scotland to deliver a strong economy supporting a fairer society. Investment in housing contributes to boosting employment and creating a strong economy, building a fairer Scotland and empowering communities.

A sufficient supply of new homes and maintaining and improving existing housing is an essential element of Scotland's economic development and the delivery of our ambitious climate change targets. Housing availability is central to economic stability and security and integral to labour market flexibility, a pre-requisite for sustained economic growth. More and better housing leads to construction jobs and makes it easier for other workers to move around, helps to make appropriate housing available to more people and, done well, good local housing provision empowers and anchors communities.

A sufficient supply of accessible housing is also an essential part of delivering a healthier Scotland and to help older people and disabled people to live independently and safely at home. Appropriate housing for older people is becoming particularly critical to respond to a rapidly ageing population, help tackle preventable morbidity amongst that ageing population, and facilitate independent living and social care, allowing older people to remain at home for longer. We are looking at the issues raised by Disabled People's Organisations ( DPOs) about the availability of accessible housing for disabled people and working with DPOs to consider what further actions may be necessary. The correlation between disadvantage and poor housing, means measures to increase the supply of new, affordable and high-quality homes should have a positive impact on disadvantaged groups, including the fuel poor.

We have listened to rural stakeholders and to help address the unique issues associated with provision of housing in rural Scotland, we will introduce a Rural Housing Fund. The aim of this fund will be to increase the supply of affordable housing of all tenures in rural areas of Scotland. Further detail on these initiatives can be found in Chapter 3.

Digital

Widespread availability of high quality digital connectivity across the whole of Scotland is critical to Scotland's future and is a central component of Scottish Government policy and the SES. It can support local business growth, benefit tourism, increase social cohesion, improve access and delivery of public services and help to reverse depopulation of rural and remote areas. It can also reduce the need to travel and support increased home and remote working.

Digital technology is becoming an integral part of life and business and we are maximising opportunities which allow people to develop the confidence and skills they require to participate in a Digital Scotland. We are adopting an approach in delivering digital opportunities which encompasses all age groups from 'cyber tots' through 'cyber teens' to 'silver surfers'.

We published our digital participation strategy, A National Framework for Local Action in 2014. The strategy sets out how the Scottish Government will work with public, private and third sector organisations to ensure that digital technology is not allowed to reinforce social and economic inequalities.

A digitally enabled Scotland therefore underpins the Scottish Government's commitment to create opportunities for all to flourish, through increasing sustainable and inclusive economic growth.

Scotland has some of the most challenging and rural geography and left to the commercial market alone, only 66 per cent of homes and businesses across Scotland would have been connected to next generation broadband infrastructure. The Highlands and Islands would only have seen 21 per cent coverage with no commercial coverage planned for the Western Isles, Orkney Islands and Shetland Islands. Many rural communities and businesses across Scotland would have been excluded from improved digital connectivity if left to the market alone, bringing a range of social and economic challenges.

Our investment in digital infrastructure will help to address regional disparities in economic performance; encourage strong rural towns and island communities; and open up access to key services and markets for all across Scotland.

The range of initiatives which we are working on with partners to tackle Scotland's digital skills shortage includes efforts aimed at closing the gender gap which exists in this area. We need more women to pursue the qualifications, training and career choices which will enable them to play their part in achieving a world leading digital economy.

This key objective underpins our Digital Skills Investment Plan and the partnership-funded projects established under it - such as 'CodeClan', the digital skills academy recently opened in Edinburgh, and 'Digital World', the multi-channel marketing campaign set up to attract more people towards careers in digital.

Health

Investment in healthcare infrastructure is crucial in tackling inequalities and promoting equality. Investment in new and improved facilities can improve access to important healthcare services, and provide accommodation suitable for outreach services and integrated teams, spanning health and social care, which are better able to serve their populations. In addition, investments in infrastructure can provide training, education and employment, improving the opportunities available.

For example:

• the £842 million New South Glasgow Hospitals project established a number of key economic targets to be incorporated into the project delivery, with a particular focus on targeted training and recruitment. The project established a target of 250 new entrant recruits, including 88 apprentices; and
• the £10 million Possilpark Health and Social Care Centre is part of Phase 1 of a regeneration process underway for the area which will transform the area's physical environment. The new centre provides improved access to a range of primary care facilities; accommodation for adult nursing, health visiting teams and secondary care outreach services; health improvement teams offering smoking cessation support and children and young people health services.

Transport and connectivity

Transport infrastructure facilitates aggregation and helps firms connect more readily to markets. Transport Scotland will take forward plans that balance strategic economic objectives with the need to promote modal shift and balance funding for new assets with the maintenance of current ones. Our investment in transport across Scotland will deliver the best possible connectivity across the roads and public transport network, improving journey times and tackling inequality by improving accessibility of services and opportunities. Further, we aim to invest in a way that reduces carbon emissions in Scotland.

Infrastructure provision, in particular improving transport infrastructure, can be instrumental in lowering regional disparities and boosting the overall productivity of the country. The OECD suggests that integration of transport infrastructure plans with land-use and social policies could also raise well-being and social welfare by reducing commuting times and contributing to inclusive growth. Geographical and social segregation can be caused from insufficient transport infrastructure.

As well as investing in infrastructure, we are continuing to fund schemes that ensure that transport is sustainable and affordable for everyone. Reflecting the diverse geography and population of Scotland, the Air Discount Scheme provides discounted fares on eligible routes and funds lifeline services which cannot be provided commercially. With the Road Equivalent Tariff scheme we link ferry fares to the cost of travelling an equivalent distance on land, and covers fares for passengers, cars, small commercial vehicles and coaches. We have a policy of limiting train fares to no more than inflation, and freezing off-peak fares if inflation stays below 3.5 per cent. We also reimburse bus operators for participating in the National Concessionary Travel Scheme, and provide funding to them to invest in greener, less polluting vehicles.

Recognising the physical barriers which may restrict disabled passengers in accessing transport we will work with disabled people and transport providers to develop a national vision and action plan for accessible transport for all in Scotland.

Our planning system is already designed to ensure that when development plans are prepared they account for the relationship between land uses and transport needs/demands. We have undertaken and reported on research on the key actions needed to help deliver infrastructure improvements related to new development.

Energy Efficiency

Our focus on energy efficiency and demand reduction will help to tackle deep-rooted inequalities and eradicate fuel poverty by making Scotland's homes more affordable to run and healthier to live in. Fuel Poverty is driven by three factors: income levels, energy prices and the energy efficiency of the home. The Scottish Government, even with the proposed additional powers under the Scotland Bill, will only have limited levers over the first two of these and it is vital therefore that we can do all we can to improve the energy efficiency of Scotland's homes if we are to continue to tackle fuel poverty over the long term.

The Scottish Government operates a range of fuel poverty and energy efficiency and heat programmes, each with their own eligibility criteria. These programmes will have the greatest positive impact on older people and disabled people and single adult households as these are the groups most likely to be in fuel poverty. Over time all households, in both new and existing housing, should see positive benefits from improvements in energy efficiency, comfort and housing quality.

We have also developed innovative solutions with partners and continue to look for such opportunities. For example, we provided loan funding to and supported the development of Our Power, an energy supply company set up by a consortium of Registered Social Landlords to supply gas and electricity to their tenants. The business model should enable them to reduce their tenants' energy bills by up to 10 per cent further helping to reduce the number of households in fuel poverty living in the social rented sector. Over the next five years they aim to have 150,000 customers. Our Power plans in future to develop in-house generating capacity via renewables projects, aiming in this way to retain the value of Scotland's renewable energy resources for communities and households with high levels of fuel poverty.

Regeneration

It is widely acknowledged that regeneration plays a vital role in stimulating sustainable economic growth and in promoting equality by supporting those communities suffering the effects of deprivation and disadvantage, addressing market failure, and increasing opportunities for those areas to attract investment and jobs. As with the PfG and SES, the 2011 Regeneration Strategy: Achieving a Sustainable Future reflects the core values of stimulating sustainable economic growth and tackling inequality.

The strategy sits within the wider context of other policies, including those focussed on infrastructure and capital investment, alongside social policies and can be seen as an integrated theme of our infrastructure investment activities in Scotland. We are already delivering significant regeneration outcomes and recognise that these should be embedded in our ways of thinking and as such should be considered as an integral part of the process in taking investment decisions locally, regionally and nationally. Further information on regeneration and associated outcomes, is contained in Chapter 2.5.

1.8 CLIMATE CHANGE OBJECTIVES

The Climate Change (Scotland) Act 2009 set world leading and challenging targets for reduction of greenhouse gas emissions across Scotland of 42 per cent against 1990 levels by 2020 and at least 80 per cent by 2050.

The 2009 Scottish Government's Climate Change Delivery Plan sets out four transformational outcomes, which we continue to work toward:

• a largely decarbonised electricity generation sector by 2030;
• a largely decarbonised heat sector by 2050 with significant progress by 2030;
• almost complete decarbonisation of road transport by 2050 with significant progress by 2030; and
• a comprehensive approach to ensure that carbon (including the cost of carbon) is fully factored into strategic and local decisions about rural land use.

Low Carbon Scotland (2013), the second Report on Policies and Proposals ( RPP2), contains the Government's plans to meet Scotland's climate change targets up to 2027. Work has started on the third report ( RPP3) that will detail the plans to meet the targets up to 2032. In June 2015, the Minister for Environment and Climate Change announced to parliament a set of measures in response to the latest statistics on carbon emissions and delivery of Scotland's statutory climate change targets. In 2016, the Scottish Government will set statutory emissions reduction targets for the year 2027 to 2032 and subsequently will publish policies and proposals showing how it will deliver the annual targets.

Directly linked to meeting these targets are our Energy Targets :

• 100 per cent electricity demand equivalent from renewables by 2020;
• Interim target of 50 per cent electricity demand equivalent from renewables by 2015;
• 11 per cent heat demand from renewables by 2020;
• 12 per cent reduction in final energy consumption by 2020;
• At least 30 per cent overall energy demand from renewables by 2020; and
• 500 mega watts community and locally-owned renewable energy by 2020.

The Scottish Government is committed to:

• making Scotland a leading low carbon investment destination;
• securing investment and jobs from the growing Low Carbon sector; and
• ensuring that the benefits of this transformational change are shared across the economy and communities.

The Scottish Government supports the development of low carbon and renewable energy infrastructure and technologies, including community engagement with, and ownership of, local energy assets:

• Renewable Energy Investment Fund ( REIF) which provides funding for renewables projects of benefit to Scotland;
• Community and Renewable Energy Scheme ( CARES) provides support for communities and rural businesses to get involved in renewables, including to build their own schemes and invest in commercial schemes. In particular, CARES Local Energy Challenge Fund supports large-scale, low carbon demonstrator projects which show an energy economy approach linking local energy generation to local energy use;
• a comprehensive range of support for district heating schemes, through our Heat Network Partnership, District Heating Loans Scheme and more recently projects development support through the Low Carbon Transition Programme;
• Low Carbon Infrastructure Transition Programme delivering one integrated programme of support activity for low carbon projects across the public, private and community sectors; and
• further feasibility and industrial research work in the field of Carbon Capture and Storage ( CCS) and the roll out of significant CCS assets over time.

Establishing Scotland as a low carbon place is already a central theme of NPF3. We are pleased that many of the projects suggested by Scotland's Way Ahead Initiative (SWAI) had already been identified by Scottish Government and steps taken toward delivery. For example our energy efficiency retrofit programme and development of a low carbon transport hub, which is the main aspect of the proposed European Structural Fund strategic intervention being led by Transport Scotland.

Scotland's Energy Efficiency Programme

Heat is at the core of Scotland's energy system, is the biggest element of our energy use and the largest source of our emissions. That is why energy efficiency must be at the heart of our efforts to decarbonise our energy supply and reduce our greenhouse gas emissions.

Improving the energy efficiency of our building stock is a significant investment opportunity. The Scottish public sector estate alone accounts for some 19 million square metres (equivalent in size to 4,000 football pitches) Therefore, a substantial opportunity exists to lead the way in Non-Domestic Energy Efficiency ( NDEE) measures. Over the past year Scottish Government Procurement and SFT have been taking forward the procurement process for a public sector wide non-domestic energy efficiency framework which will be available in early 2016. The economies of scale and standardised approach offered by a pan public sector framework is attractive to both the public sector and private sector - offering both better solutions and better value for money. The scale of investment opportunity estimated to be up to £300 million and there are a number of associated benefits to the development of the framework including:

• total jobs supported from associated investment - estimated to be in region of 2,400;
• carbon reduction and energy/bill savings; and
• potential to reduce carbon reduction commitment liability.

The implementation of energy efficiency across the public sector has the potential to act as a catalyst for retrofit projects across both public and commercial sectors.

Street Lighting Replacement Programme

Across Scotland there are some 900,000 street lights costing Local Authorities £41 million in annual electricity charges. These street lights also impact on the environment by releasing nearly 200,000 tonnes of CO2 into the atmosphere every year.

With electricity prices forecast by the Department of Energy and Climate Change to increase substantially over the next ten years it was timely that in 2015, SFT published its latest Street Lighting Toolkit. This Toolkit is aimed at providing local authorities with the most up to date information to enable them to prepare robust business cases to invest in spend-to-save measures to phase in new LED lighting. Our work to date with SFT, local authorities and Resource Efficient Scotland has already seen committed street lighting investment levels increase from £6.9 million in 2013-14 to £29 million in 2014-15. The estimated forecast total investment in 2015-16 is £45 million.

The Green Investment Bank has committed a Green Loan worth £6 million to Glasgow City Council to support its plans to convert 70,000 streetlights to low energy.

Low Carbon Transport Initiatives

Reducing emissions from transport is key to achieving our overall emissions reduction targets. For road transport, a switch away from polluting fossil fuelled vehicles to cleaner new technologies such as electric, hybrid and hydrogen fuel cell vehicles is vital. SPP is clear that electric vehicle charging points should always be considered as part of new development and provided where appropriate. NPF3 notes that electric vehicles may have a particular opportunity on our islands with examples already emerging of charging units being deployed at ferry terminals.

Our Electric Vehicle ( EV) roadmap, Switched On Scotland, published in 2013, sets out Ministers' ambitious vision: to free Scotland's towns, cities and communities from the damaging emissions of petrol and diesel fuelled vehicles by 2050.

To support the delivery of this vision, since 2011 we have invested more than £11 million in the development of the ChargePlace Scotland network of over 900 publicly available EV charging bays (over 450 units). We are also supporting the development of hydrogen refuelling stations in Aberdeen and Fife.

Our Active Travel Vision, published in November 2014, identifies what Scotland will be like in 2030 if we achieve our ambitions for increasing the proportion of everyday journeys that are undertaken by walking and cycling - thereby helping to achieve the transition to a low carbon economy. The vision makes clear that this will require significant increases and enhancements to the network of walking and cycling paths throughout Scotland and improved integration between active travel and public transport modes.

The June 2013 Cycling Action Plan for Scotland reiterates our commitment that, by 2020 10 per cent of everyday journeys will be undertaken by bike (currently less than 3 per cent). The National Walking Strategy, launched in June 2014, sets out our plans to increase walking for all purposes, including day to day "functional" walking, as a key element of delivering the ten year Physical Activity Implementation Plan.