A National Mission with Local Impact - draft infrastructure investment plan 2021‑2022 to 2025‑2026: consultation

Chapter 3 - Our Coherent, Strategic Infrastructure Investment Plan

The last Infrastructure Investment Plan was published in 2015, and its delivery progress has been reported to Parliament twice each year.^[13] In that 5 year period we have completed a number of milestone developments, as below.

Key Projects and Spending 2015-20

• Housing Supply £3.5bn
• Scottish Water £3bn
• Schools £1.8bn
• Forth Crossing £1.35bn
• Healthcare Facilities £720m
• Energy Efficiency £500m

This draft Infrastructure Investment Plan provides a coherent and strategic picture of our Scottish Government-wide investment priorities to 2025-26. Investment in infrastructure will be key to Scotland’s economic recovery from COVID-19, and also in supporting public services, delivering our transition to net zero, and meeting the needs of people and communities across Scotland.

We are consulting on key aspects of our approach. This will permit finalisation of the Infrastructure Investment Plan to be aligned with the Climate Change Plan update, and likely Budget 2021-22 and the Medium-Term Financial Strategy timings.

The Plan has been developed to implement the Phase 1 recommendations of the Infrastructure Commission. It includes a number of shifts in approach. Notably it:

• Articulates shifts in approach due to COVID-19, and to respond to long-term needs
• Sets out a coherent, strategic plan – rather than portfolio-based, it delivers long-term outcomes across three themes, under a single common Vision
• Sets out plans on a consistent 2021-22 to 2025-26 timeline across all areas, showing how Scottish Ministers will deliver the National Infrastructure Mission
• Introduces a new, common investment hierarchy – enhancing and maintaining existing assets ahead of new build
• Supports market confidence and jobs with a sizeable pipeline of activity
• Establishes a 5-year improvement programme & promotes public engagement

A Coherent, Strategic plan – Three Themes under a Single Vision

A coherent Plan means taking a whole of government approach. We have adopted a single vision for our infrastructure investment choices.

“Our Infrastructure supports Scotland’s resilience and enables inclusive, net zero, and sustainable growth”

In supporting this vision, the Plan focuses on three key themes. These are not necessarily independent. For example, investing in a project which contributes towards net zero emissions could then also improve opportunities and outcomes in the place in which that project is based. Investments also present opportunities for new groups of people to benefit from working in the industry it supports who may not have been previously represented. We will seek to prioritise investments which deliver positive outcomes across more than one theme.

Enabling the transition to Net Zero Emissions and Environmental Sustainability: Public infrastructure investment has a critical role to play in tackling the twin crises of climate change and biodiversity loss. We will increase spending on low carbon measures, climate resilience, and nature-based solutions.

Driving Inclusive Economic Growth: We can boost productivity and competitiveness, and create good jobs and green jobs, by enhancing our transport and digital connectivity and capacity in all areas of Scotland, and by stimulating innovation. We will embed fairness and inclusion, seeking to ensure no-one is left behind.

Building Resilient and Sustainable Places: Delivering on our ambition for a fairer Scotland starts at the local community level. We will invest in our housing and better local delivery of services. With our partners we will meet the diverse economic, social and environmental needs of urban, rural and island areas.

These themes directly link to Scotland’s National Performance Framework, which sets out our overall purpose, and the UN Sustainable Development Goals. They align with our recovery and renewal from COVID-19, ensuring that our short term response to the crisis complements the long term drive towards a wellbeing economy; reducing inequality and improving the quality of life of all of our people.

This Plan sets out the investments which Scottish Government makes at its own hand, in its own facilities and assets required for public services (rather than the service itself) and those of its agencies and public bodies. It does not cover UK Government investment in reserved areas.

While we focus on Scottish Government investments here, we recognise that our approach to infrastructure must be a collective endeavour in order to be successful. The Plan does not cover investment choices made by local government, recognising Councils’ autonomy, we will continue to work closely with Local Government and other delivery partners to pursue shared priorities. We will also continue to engage with the private sector and the Scottish National Investment Bank about the role of external investment within the overall framework provided by this Plan.

• Enabling the transition to net zero emissions and environmental sustainability
• Building resilient and sustainable places
• Driving inclusive economic growth

A Consistent Approach to Financial Planning – 2021-22 to 2025-26

This Plan has been developed alongside considering the likely finance available for Scottish Government programmes, as set out in the Capital Spending Review Framework.^[14] The last multi-year capital spending review was in 2010, and this year is the first time long-term financial planning has coincided with a new Infrastructure Investment Plan.

This means we have been able to plan and choose the right things to enhance and build, alongside ensuring the funding and finance to pay for them. It gives us confidence to set out a full plan to deliver the National Infrastructure Mission over the next Parliamentary term.

The Scottish Government’s final budget envelope for capital investment in future years depends on the outcomes of the forthcoming UK spending review. Scottish Ministers continue to urge the UK Government to prioritise capital stimulus within its own spending plans. The Scottish Government is committed to a number of significant projects, for example including replacing Monkland’s hospital. UK allocations will enable us to provide greater certainty on our plans and scheduling for such projects. Detailed capital budget allocations will be confirmed as part of the Budget process.

Such major projects can be updated on after related public consultation has concluded and once the Final Business Case is prepared ready to join the Infrastructure Investment Plan pipeline. The progress of such major projects is reported regularly to Parliament, as set out on page 27 of this Plan.

Including Natural Infrastructure in our Infrastructure Definition

By investing more in nature-based solutions, we recognise the direct and indirect value that our natural environment can bring. Enhancing nature reserves and protected areas can boost biodiversity and recreational and tourism value. Improving landscaping and open space in housing can encourage passive cooling and sustainable drainage. Planting trees and restoring peatland can increase carbon storage. Our natural infrastructure can contribute a great deal to quality of place and wellbeing by supporting sustainable everyday living and strengthening community resilience.

The Commission recognised the role of infrastructure in supporting environmental outcomes and recommended we include natural infrastructure in our definition. Natural infrastructure can be thought of as the environmental resources (e.g. plants, animals, air, water, soils) that combine to yield a flow of benefits to people both now and in the future. Phrases such as ‘green’ or ‘blue’ economy can also be used. That latter means the sustainable use of our ocean resources for economic growth, improved livelihoods and jobs, and ocean eco-system health.

The International Institute for Sustainable Development (IISD) offers the following definition: “Natural infrastructure is an area or system that is either naturally occurring or naturalised and then intentionally managed to provide multiple benefits for the environment and human wellbeing.^[15]”

We propose to change our definition of infrastructure to incorporate natural infrastructure, guided by the IISD definition and in line with our approach to Natural Capital.^[16] We are consulting on the following changes (shown in bold):

“The physical and technical facilities, natural and other fundamental systems necessary for the economy to function and to enable, sustain or enhance societal living conditions.

These include the networks, connections and storage relating to the enabling infrastructure of transport, energy, water, telecoms, digital and internet, to permit the ready movement of people, goods and services.

They include the built environment of housing; public infrastructure such as education, health, justice and cultural facilities; safety enhancement such as waste management or flood prevention; natural assets and networks; and public services such as emergency services and resilience.

Establishing a New Common Investment Hierarchy

The Commission recommended that we place greater emphasis on making the most of existing assets. Addressing the climate emergency, promoting circular economy approaches and increasing sustainability, requires us to prioritise the assets and materials we already have. The Phase 1 report proposed the development of an investment hierarchy which prioritises maintaining and enhancing existing assets over new build.

An investment hierarchy does not preclude new assets. Rather it is an approach to planning and decision making which would consider future needs, including use of digital platforms and technology, and the suitability of existing assets.

Parts of government have already been evolving hierarchies and adopting a formal asset management approach: Scottish Water’s preparation for the next charge control period (2021-27) includes the development of an Asset Information and Management Strategy. The National Transport Strategy includes a Sustainable Investment Hierarchy and Transport Scotland has an Asset Management Policy, Strategy and Plan for Scotland’s trunk road network.

A new common approach across the Scottish Government is proposed that will support the coherence of our whole programme – and, over time, those of public bodies. It is set out in the diagram overleaf.

In considering the rationale of any new investment hierarchy, The Scottish Government Office of the Chief Economic Adviser (OCEA) has established an overview of the economic and distribution benefits of maintenance and enhancement programmes. See Annex B for more details.

This evidence suggests considerable economic and distributional benefits arise from such programmes, particularly where the focus is on assets in the poorest condition. They can also offer a wider regional distribution of and a greater potential for Scottish Small and Medium sized Enterprises (SMEs) to engage in this work than is typical in larger construction programmes.

We are already investing over £450 million in maintenance in 2020-21, and will work towards doubling this level over the next 5 years, addressing backlogs. Capital maintenance includes asset enhancement, ensuring asset compliance with regulatory requirements, major equipment and fleet.

Draft Infrastructure Investment Hierarchy

1. Determine future need

Consider appropriate infrastructure provision in light of changes in service design, availability of digital platforms and technological innovation, and resilience in light of population and climate change forecasts.

2. Maximise use of existing assets

Maximise use and the safe operation of exiting assets to meet future need

3. Repurpose & Co-locate

Reconfigure or repurpose existing assets, giving preference to co-location or shared facilities where appropriate

4. Replace or New Build

Consider suitability and sustainability of new build assets to meet future need

Measuring Outcomes and the Potential Benefits of Future Infrastructure

Infrastructure can deliver multiple benefits for individuals and communities – such as new childcare facilities, affordable housing and good public transport links reducing the barriers for job seekers and working parents. The Scottish Government uses its National Performance Framework to seek to examine and capture such outcomes, or benefits, as approaches are designed, or evaluated.

While it recognised that robust evidence based frameworks are in place, the Commission recommended development of a new, overarching assessment framework across all infrastructure types to support system-wide, long-term trade-offs and choices with a focus on the twin objectives of net zero emission and inclusive economic growth. It recognised that this will take time to develop.

For this current Plan, they recommended we use “the most appropriate methodology available” that prioritises, on a “no regrets” basis, the contribution to an inclusive net zero carbon economy. Their work also involved a Fraser of Allander^[17] report exploring the relationship between infrastructure and inclusive economic growth, which concluded that a dashboard of indicators would be the best approach.

Scottish Government already prepares business cases considering the likely impact of proposed infrastructure, using the most relevant aspects of the National Performance Framework. Some areas base assessment on the inclusive growth framework, considering participation, population, place, people and productivity. The Scottish National Investment Bank mission-based approach is also outcomes-based.

The diagram overleaf shows the types of indicators that have been considered by the Scottish Government when assessing the potential benefits of infrastructure in this Plan. It offers an illustration, and basis for future work. A key principle will be to ensure that this also supports progress in narrowing gaps in outcomes between disadvantaged and other groups.

Evidence around the difference in economic impact of projects during the construction phase is limited. There is, however, a difference in the impact of how such new facilities are used, and where they are located, and that is where future assessment might best focus.

Promoting Better Engagement with the Public

We encouraged the Infrastructure Commission to engage widely in looking at the right strategic priorities for Scotland. Recognising that infrastructure is with us for a long time, and can be expensive, the Commission has recommended that an informed approach to public engagement and participation is needed, to ensure short and long-term trade-offs are effectively debated, understood and taken into account. We agree, and are committed to openness and transparency.

In developing our exemplar approach, we will build on experiences across sectors and in other countries. For example, The Scottish Government’s Commitment to the Open Government Partnership (OGP)^[18] has drawn out good examples of public engagement in the delivery of large infrastructure projects, including the Queensferry Crossing. And Scottish Water’s 25 year Strategic Plan published last summer was co-created with stakeholders and they will establish a new National Engagement Programme. The development of our future approach will learn from Scotland’s Climate Assembly, and will build on the engagement undertaken to inform the National Planning Framework 4.

Impact Assessment & Prioritisation: Indicative Dashboard

Notes:

• The 15 indicators are shown below mapped against our three themes.
• These are illustrative of the types of indicators we could include in a dashboard assessment framework.
• They are drawn from the National Performance Framework as well as The Scottish Centre for Regional Inclusive Growth Dashboard (available at www.inclusivegrowth.scot).
• The key showing the Sustainable Development Goals and National Performance Framework outcomes is shown overleaf.

Sustainable Development Goal

• End poverty in all its forms everywhere
• End hunger, achieve food security and improved nutrition and promote sustainable agriculture
• Ensure healthy lives and promote wellbeing for all at all ages
• Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
• Achieve gender equality and empower
  all women and girls
• Ensure availability and sustainable management of water and sanitation for all
• Ensure access to affordable, reliable, sustainable and modern energy for all
• Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
• Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
• Reduce inequality within and among countries
• Make cities and human settlements inclusive, safe, resilient and sustainable
• Ensure sustainable consumption and production patterns
• Take urgent action to combat climate change and its impacts
• Conserve and sustainably use the oceans, seas and marine resources for sustainable development
• Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
• Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
• Strengthen the means of implementation and revitalize the global partnership for sustainable development

NPF Outcomes

• Children & Young People – We grow up loved, safe and respected so that we realise our full potential.
• Communities – We live in communities that are inclusive, empowered, resilient and safe.
• Culture – We are creative and our vibrant and diverse cultures are expressed and enjoyed widely
• Economy – We have a globally competitive, entrepreneurial, inclusive and sustainable economy.
• Education – We are well-educated, skilled and able to contribute to society.
• Environment – We value, enjoy, protect and enhance our environment
• Fair Work & Business – We have thriving and innovative businesses, with quality jobs and fair work for everyone
• Health – We are healthy and active
• International – We are open, connected and make a positive contribution internationally.
• Human Rights – We respect, protect and fulfil human rights and live free from discrimination
• Poverty – We tackle poverty by sharing opportunities, wealth and power more equally

The Infrastructure Investment Plan Pipeline, Monitoring and Reporting

There is a well-established suite of monitoring and reporting arrangements, including for the previous 2015 Infrastructure Investment Plan. The Scottish Government supplies the Parliamentary Audit and Post Legislative Scrutiny Committee (PAPLS) with reports twice a year. These include an Annual Progress Report on the Infrastructure Investment Plan itself, and detailed delivery information on all projects and programmes, including timelines and budget.^[19]

This draft Plan details the projects and programmes whose business cases and procurement plans are sufficiently advanced that they represent firm decisions now. As such, it offers the market confidence in a robust pipeline of work and is good for jobs, green jobs and stimulating low carbon economic recovery.

Arrangements for reporting on this pipeline will continue, as before. We will publish the final Pipeline of major projects and programme for this Plan when it is finalised. Additionally, as new projects and programmes are developed they can be added to the pipeline when they are suitably ready, and consequently reported to Parliament.

We also regularly report to Parliament on the climate change implications of the Capital Budget but we are aware of the limitations in our current approach to carbon reporting and wish to improve it. In passing the 2019 Climate Change (Emissions Reduction) Act in Scotland, the Parliament agreed that we should explore new ways to assess the contribution made by the infrastructure investment plan to the emissions targets. Annex C sets out the range of issues being considered in relation to this and in Chapter 4 we are inviting views on how we develop a new approach. Around 36% of the projects and programmes presented in this draft Plan are in the Low carbon category according to the current methodology. We will present more information on the climate change impact of the final Plan when it is published later this year alongside the recast Climate Change Plan.

Supporting Supply Chains

In order to identify and maximise the local industry benefit from the pipeline, The Scottish Government will work closely with the Construction Leadership Forum^[20], as they take forward a range of collaborative actions to address the challenges of COVID-19 and the wider transformation of the sector. We are also looking at how best to support local economies to get more value from public sector investment and supports more local businesses to secure contracts.

A 5 Year Improvement Programme

The Commission’s Phase 1 report recommended a number of improvements to the Scottish Government’s approach to infrastructure. These were intended to be implemented over time, and support development of the next Infrastructure Investment Plan in 2025. The diagram overleaf shows how the Scottish Government intends to take such improvements forward, and the timeline. Taken together, they should ensure better, more consistent, and more transparent future decisions about the right infrastructure to provide.