A National Mission with Local Impact: Infrastructure Investment Plan for Scotland 2021-22 to 2025-26

Chapter 3: Our Coherent, Strategic Infrastructure Investment Plan

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. 

The last Infrastructure Investment Plan was published in 2015, and its delivery progress has been reported to Parliament twice each year.^[19] In that five-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 Infrastructure Investment Plan provides a coherent and strategic picture of our Scottish Government-wide investment priorities between 2021-22 and 2025-26. 

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 five-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 independent and the Plan deliberately recognises that infrastructure investments deliver multiple benefits for the economy, society and the environment. 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 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. The forthcoming 'Investing with Purpose: Scotland's Private Capital Investment Plan' will set out our strategy to attract internationally mobile private capital.

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

This Plan has been developed alongside considering the finance available for Scottish Government programmes, as set out in the Capital Spending Review. 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. Detailed capital budget allocations have been set out in the Capital Spending Review^[20] and Draft Scottish Budget 2021-22^[21] provides information on the breakdown of spend in the next financial year.

Including Natural Infrastructure in our Infrastructure Definition

The Infrastructure Commission for Scotland recognised the role of infrastructure in supporting environmental as well as social and economic outcomes and recommended we include natural infrastructure in our definition. This approach was also supported by the majority of respondents to our consultation with 95% supporting its inclusion. 

Investment in nature-based solutions builds resilience and delivers multiple benefits. For example, enhancing nature reserves and protected areas boosts biodiversity and can also increase recreational and tourism value. Improving landscapes and open space in housing encourages outdoor activity, delivers passive cooling and provides sustainable drainage. Planting trees and restoring peatland increases carbon storage. 

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."^[22]

Our natural infrastructure can contribute a great deal to quality of place and wellbeing by supporting sustainable everyday living and strengthening community resilience. 

The concept is already integrated in many of our infrastructure programmes such as housing and regeneration, flood, water and drainage management, and active travel, and well as more specific investments in green networks (such as the Green Infrastructure Strategic Intervention),^[23] woodland creation and peatland restoration.

The inclusion of natural infrastructure in our revised definition, creates a more holistic view of the entirety of Scotland's infrastructure assets and recognises the wider contribution natural capital can have towards creating sustainable, attractive places to live and improve wellbeing; generating economic growth and also reducing carbon emissions. 

As we progress the development of our prioritisation framework, we will incorporate the latest data and techniques in evaluating the benefits of investing in natural assets and nature-based solutions, drawing on our growing evidence base (which includes our Natural Capital Accounts).

Establishing a New Common Investment Hierarchy 

The Infrastructure Commission for Scotland 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 consideration of an investment hierarchy framework 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. Police Scotland in its Estate Strategy has put a digitally enabled service model at the forefront with its future property assets being represented by a modernised network of mostly community bases co-located and integrated with partners at its core.

A new common approach across the Scottish Government will be introduced that will support the coherence of decision-making and provide guidance for public organisations. It is set out below. 

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 estimate that we are already investing over £450 million of capital funds in maintenance in 2020-21, and will work towards doubling this level over the next five years, addressing backlogs. This figure includes capital spending on maintaining and enhancing assets and major equipment. 

The hierarchy approach recommended by the Commission was broadly supported by respondents to the consultation, with the majority of consultation responses (64%) indicating the steps we proposed are the right ones. Recognising some aspects of the hierarchy could be strengthened to link to our long-term goals of achieving a net zero inclusive economy and to incorporate natural infrastructure, we have amended the wording in certain areas.

Now that the steps have been established, we will incorporate the hierarchy into future infrastructure investment as part of a wider asset management approach to business case development and the decision-making process. Working with Scottish Futures Trust, we will develop guidance for public organisations to support the development of asset management strategies.

The hierarchy alone will not solely determine which projects will be funded. However, it should help to reinforce positive behaviours around maximising the benefits from maintaining our existing assets where appropriate to do so. This should take into account asset obsolescence and poor condition, while ensuring we are reflective of local infrastructure needs, such as the different level of existing infrastructure in rural and island communities when compared to towns and cities. 

Recent changes to the HM Treasury Green Book guidance on business case appraisal methodology will be considered and aligned, where appropriate, with our Place Principle and net zero inclusive growth aims as central components of project evaluation. 

The hierarchy is closely linked to the impact assessment and prioritisation framework discussed in the next section and its development will be an iterative process which will be developed as part of the future route-map for the infrastructure investment decision framework.

New Scottish Government Investment Hierarchy

Determine future need

Consider appropriate infrastructure needs and demand in light of net zero carbon and inclusive growth priorities, changes in service design, availability of digital platforms and technological innovation, and resilience in light of population and climate change forecasts.

Maximise the useful life of existing assets

Maximise adaptation, repair and maintenance of exiting assets.

Repurpose & Co-locate

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

Replace, Create or Build New Assets

Consider suitability and sustainability of new assets.

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^[24] report exploring the relationship between infrastructure and inclusive economic growth, which concluded that further work to explore the links between infrastructure and inequality is required but where we wish to measure the impact of infrastructure on economic welfare, 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. 

In the draft Infrastructure Plan, we asked for views on the types of indicators that should be considered by the Scottish Government when assessing the potential benefits of infrastructure. The diagram on page 27 of the PDF was offered as an illustration, and basis for future work. 

The majority of consultation respondents (70%) agreed with our approach to setting a framework using a dashboard of indicators whilst recognising the challenges and complexities involved in getting it right. Links to the National Performance Outcomes and Sustainable Development Goals were also welcomed in ensuring a holistic assessment can be made of impact and outcomes. The framework would need to include a clear, transparent and consistent set of indicators to inform decision-making and help consider trade-offs and understand the wider impact of investments.

As the route-map sets out, and as we have broad consensus that this approach is the right one, the dashboard and framework will be further developed during the period of this Plan.

The views expressed in the consultation responses will help inform the key considerations in this process, such as:

• If and how indicators will be weighted;
• How it will inform trade-offs;
• What data will be used and will it be of sufficient quality, relevance and readily available;
• How it will interact with the Common Investment Hierarchy described above;
• Ensuring alignment with other key policies, including recognising equality, fairer Scotland and island communities impacts;
• Use of qualitative and quantitative measures;
• Ensuring it is comprehensive;
• Taking account of regional variations; and
• Building in mechanisms to collect further data to inform future improvements.

In progressing this work, we will ensure it is aligned with wider work, e.g. on the National Performance Framework and the Wellbeing Economy Framework, to ensure a consistent approach is shared across Scottish Government decision-making frameworks. 

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 girl
• 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
• Human Rights – We respect, protect and fulfil human rights and live free from discrimination
• International – We are open, connected and make a positive contribution internationally.
• Poverty – We tackle poverty by sharing opportunities, wealth and power more equally

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)^[25] 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 also learn from Scotland's Climate Assembly, and work alongside public engagement on the National Planning Framework 4.

The Infrastructure Investment Plan Pipeline, Monitoring and Reporting 

Additionally, 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. ^[26]

This Plan, under its three themes, 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. 

Additionally, Annex D publishes the subset of those plans that meet the criteria for being reported to the Parliament's PAPLS Committee every six months. Not every area of spend is subject to detailed scrutiny, but historically projects with a capital value of £20 million and programmes with a £50 million value have been subject to detailed reporting. 

We newly propose to lower the reporting threshold to £5 million for projects and £20 million for programmes to provide even greater transparency. Certain programmes are also broken down to show specific projects where this is appropriate (in line with the new thresholds). These changes are being made in response to efforts to further enhance the transparency of our reporting. In doing so, we have been guided by international best practice, including the recommendations of the European Cooperation in Science and Technology (COST) framework^[27] and the OECD.^[28]

The Scottish Government is committed to a number of significant projects for example replacements for Monkland's hospital and HMP Barlinnie where full business cases are still being prepared. Whilst these represent commitments, costs and timescales can only be indicative at this stage and will be updated once the full business case is prepared and the procurement process concluded.

Carbon Assessment

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. 

In the consultation on the Draft Plan we set out our planned approach to developing a new methodology, acknowledging that this would take time. This approach was broadly supported by respondents to the consultation. 

In the meantime, we will continue to use the broad carbon taxonomy approach and Annex C sets out the summary of how the Infrastructure Investment Plan pipeline aligns with that taxonomy. 

Supporting Supply Chains

In order to identify and maximise the local industry benefit from the pipeline, The Scottish Government will take forward a range of actions collaboratively with the Construction Leadership Forum^[29] and, working within established suppliers' forums, continue to address the challenges of COVID-19 and incorporate lessons learned as appropriate into post-pandemic practice through the Supply Chains' Development Programme, including how best to support local economies to get more value from public sector investment and supports more local businesses to secure contracts 

A Five-Year Implementation Programme

The Infrastructure 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 figure overleaf shows how the Scottish Government intends to take such improvements forward, and the timeline. 

The key elements of this implementation programme include: 

• Developing an infrastructure needs assessment, incorporating the outcome of the National Planning Framework 4, Strategic Transport Projects Review 2 and the Housing to 2040 Strategy; 
• Develop a new infrastructure appraisal framework to meet our net zero and inclusive growth aims incorporating changes to carbon assessment;
• Develop an enhanced approach to public engagement and participation in infrastructure investment.

Taken together, they should ensure better, more consistent, and more transparent future decisions about the right infrastructure to provide.