Note of Information for Infrastructure and Capital Investment Committee

Note of information for Infrastructure and Capital Investment Committee

An analysis of the economic benefit derived from extending High-Speed Rail to Scotland;
Details of the High-Speed Rail steering group;
Details of the Mortgage Indemnity Guarantee Scheme;
A breakdown of Fuel Poverty Statistics by local authority area;
Scottish Futures Trust benefit statement; and
Timetable for NPD projects.

An analysis of the economic benefit derived from extending High Speed Rail to Scotland:

The analysis of the economic benefit derived from extending High Speed Rail to Scotland will be one of the first tasks of the Partnership Group.

There have been many analyses of the potential benefits to Scotland. Amongst the headline figures that have been presented are that:

High speed rail could bring economic benefits worth £20 billion to the Scottish economy, mainly due to reduced journey times (British Chambers of Commerce and Greengauge 21 figures);
A further £5 billion of wider economic benefits through job creation, jobs being created in areas close to the line and agglomeration (Greengauge 21);
At 3 hours, high speed rail could capture 67% of the overall travel market between Scotland and London. At 2.5 hours, that rises to 80% (Scottish Strategic Business Case, Transport Scotland);
A 3 hour journey time (between Scotland and London) would create modal shift from air, with reduced carbon emissions.

The Partnership group will build on the work already presented, to better understand the nature of the benefits to Scotland.

Also in a scenario where Birmingham, then Manchester and Leeds are able to capitalise on early improved high speed connections to London, Ministers want to explore the potential for disbenefits for economic marginalisation.

The priority of the Partnership Group will be to outline and promote:

The economic benefits of high speed rail to both Scotland and the UK, and present the economic regeneration potential of high speed rail;
The carbon reduction benefits of high speed rail – specifically that high speed rail in the UK only returns environmental benefit when it creates modal shift from Scotland – London flights.

Details of the High-Speed Rail steering (partnership) group

The membership of the high speed rail group – the Scottish Partnership Group – is yet to be confirmed. The two local authorities set to be most closely involved in the project – Glasgow and Edinburgh – will be represented, and we already have commitment from both authorities. However, the essence of this group is that it will present a pan-Scotland voice, and it will be necessary that we have the full engagement of local authorities across Scotland. We want the full involvement of local authority, business and transport groups across Scotland.

At this stage we anticipate that the Partnership’s management group will comprise representatives from Transport Scotland, Network Rail, City of Edinburgh Council, Glasgow City Council, CBI Scotland, Scottish Trades Union Congress, Confederation of Scottish Local Authorities, and the Scottish Futures Trust.

The detail of work streams, and individual working groups proposed, is also under development. At this early stage we see a number of principal work streams:

Firstly refreshing the Scottish Business case for high speed rail, clearly setting out the economic and environmental benefits of high speed rail to Scotland, and - vitally - the promotion of its outcomes;
Taking forward a study of options for high speed rail route and stations. This will include options on the infrastructure enhancements which could be developed to facilitate, and draw maximum benefit from, the arrival of high speed trains in Scotland from 2026;
The Partnership Group will also consider the mechanisms for bringing high speed rail to Scotland: the enabling powers, financing and planning that will be required.

Transport Scotland officials are working with stakeholders to set up the structure of the Partnership Group and its work streams.

Mortgage Indemnity Scheme: Further Detail

The Minister for Housing and Transport announced the Scottish Government’s agreement to provide £250,000 to Homes for Scotland to support the development of a private sector mortgage indemnity scheme for new build housingon 29 June.

Mortgage indemnity schemes support the provision of higher loan to value lending to individuals who can afford it by providing lenders with reassurance that they are covered in the event of borrowers being unable to repay their mortgage. As such, they create new home buying opportunities for those who can afford the mortgage required to purchase a new property, but would otherwise be excluded due to the high deposit levels required in the current economic climate.The announcement of Scottish Government support to Homes for Scotland to develop a scheme reflects our commitment in the Housing Strategy and Action Plan, Homes fit for the 21st Century, to explore opportunities to support the development of such initiatives given their potential to support supply and address the significantly diminished levels of available mortgage finance for first time buyers.

The Scottish Government’s contribution will enable Homes for Scotland to commence more detailed work with lenders and house-builders on a scheme over the next few months. The £250,000 announced includes a grant to Homes for Scotland to support the associated start up costs, including to ensure all statutory and legislative requirements are met. In addition, loans will be provided to Homes for Scotland which will be repaid once the scheme is operational, or a decision is made that there is insufficient interest from lenders for it to be viable. The Scottish Government has not committed to direct involvement in any scheme that is established.

The specific details of any scheme, including in relation to the type of homes included and their location, would be determined by the agreements reached between participating house-builders and lenders following discussion. However, we would expect any initiative to support both first time buyers and home-owners looking to purchase a new home. Eligibility criteria for borrowers would be set by the mortgage lender following standard procedures.

Estimated breakdown of Households in Fuel Poverty by local authority

Definition of Fuel Poverty: 10% of income spent on energy costs.
Analysis uses a 3 year dataset - 2007/09
Fuel poverty
Not fuel poor / Fuel poor / Unobtainable
000s / % / 000s / % / 000s / %
AberdeenCity / 79 / 77 / 22 / 21 / 2 / 1
Aberdeenshire / 68 / 67 / 32 / 31 / 2 / 2
Angus / 31 / 63 / 17 / 34 / 2 / 4
Argyll and Bute / 27 / 64 / 14 / 34 / 1 / 2
Clackmannanshire / 19 / 85 / 3 / 14 / - / 2
Dumfries and Galloway / 39 / 58 / 28 / 41 / 1 / 1
DundeeCity / 52 / 76 / 15 / 22 / 2 / 2
East Ayrshire / 39 / 74 / 14 / 26 / - / -
East Dunbartonshire / 32 / 74 / 11 / 26 / - / 1
East Lothian / 31 / 73 / 11 / 25 / 1 / 2
East Renfrewshire / 26 / 73 / 9 / 26 / - / 1
City of Edinburgh / 165 / 76 / 48 / 22 / 5 / 2
Eilean Siar / 5 / 41 / 7 / 58 / - / 2
Falkirk / 53 / 78 / 15 / 21 / - / 0
Fife / 105 / 66 / 49 / 31 / 5 / 3
GlasgowCity / 206 / 73 / 69 / 25 / 6 / 2
Highland / 63 / 63 / 36 / 36 / 1 / 1
Inverclyde / 28 / 77 / 8 / 22 / - / 1
Midlothian / 25 / 72 / 9 / 27 / - / 1
Moray / 26 / 67 / 12 / 31 / 1 / 2
North Ayrshire / 46 / 74 / 15 / 25 / 1 / 1
North Lanarkshire / 102 / 71 / 39 / 27 / 2 / 2
Orkney Islands / 5 / 53 / 4 / 44 / - / 3
Perth and Kinross / 41 / 63 / 23 / 36 / - / 0
Renfrewshire / 62 / 79 / 17 / 21 / - / 0
Scottish Borders / 31 / 61 / 19 / 37 / 1 / 2
Shetland Islands / 6 / 62 / 3 / 35 / - / 3
South Ayrshire / 36 / 71 / 14 / 27 / 1 / 2
South Lanarkshire / 86 / 63 / 49 / 36 / 1 / 1
Stirling / 28 / 73 / 9 / 24 / 1 / 2
West Dunbartonshire / 33 / 79 / 8 / 20 / - / 1
West Lothian / 53 / 74 / 18 / 25 / 1 / 1
Scotland / 1,646 / 71 / 646 / 28 / 37 / 2

Scottish Futures Trust Statement of Benefits 2010-11

The Scottish Futures Trust published its second annual Statement of Benefits covering 2010-11 on 28 June 2011. This outlines £133 million of benefits delivered during that period. Offset against their budget of £4m, this produces a net benefit figure of £129 million. Added to the £111 million delivered in their first full year of operation, 2009-10, this gives a total of £240 million of benefits delivered by SFT.

SFT’s reported benefits of £129 million for 2010-11 are within the £100-150 million annual target that Ministers have set for the organisation. It is also equates to around £32 of net benefits per £1 spent on SFT.

SFT’s Statement of Benefits relates to future benefits, which will be delivered as a result of work SFT undertook during the course of 2010-11. The benefits SFT have delivered can be broken down into three types:

Efficiency gains – where SFT has helped to drive down the actual or forecast costs for delivering a project (e.g. in terms of the procurement, design, financing or construction costs) or has helped to accelerate delivery of projects (e.g. the hub initiative);

Additional investment – where SFT has helped to develop financing vehicles which lever in additional infrastructure investment over and above that limited by capital budget allocations (i.e. the National Housing Trust and Tax Increment Financing models);

Avoided costs – where SFT’s expertise has helped to save the public sector money by reducing the requirement to buy in private consultancy and advice. It also brings the added benefits of retaining knowledge and experience in the public sector. (e.g. the work SFT has undertaken on the NPD programme)

SFT’s Statement of Benefits was independently validated by Grant Thornton LLP and a team of academics from the London School of Economics and Political Science.

Benefits and savings will be realised over different timescales - some will be delivered immediately; others during the lifespan of the project or once the infrastructure has been delivered.

SFT’s benefits from its operations during 2011-12 can be broken down as follows:

Benefit Value / Benefit Type / Activities and projects
£2m / Avoided Costs /

Validation review of several projects in procurement.
Centre of expertise role in waste procurement.
Development work in TIF, NHT, Asset Management and Contingency Management.

£15m / Efficiency Gain: Funding and Finance /

Scrutiny and review work on the Western Isles and Orkney Schools Projects (£12m)
Support to the Borders Rail Project.
Programme Support and Standardisation for the NPD programme as well as on-going support to individual projects within the programme.

£19m / Efficiency Gain: Validation /

Forth Replacement Crossing project.
Waste projects in procurement.
Vessel Investment Programme future asset management plan. (£11m)
The Borders Rail Project.
NPD projects in procurement.

£17m / Efficiency Gain: Delivery (including Aggregation and Collaboration) /

hub programme with central SFT programme management. (£5m)
Schools programme with central SFT programme management. (£4m)

£42m / Efficiency Gain: Centre of Expertise /

Budget Recasting - the review of historic budgets in order to identify headroom and improve budget planning (£30m).
Asset Management - creating an environment and support function to reduce the cost of operating and maintaining the public sector property estate (£7m).
Operational PPP Projects knowledge sharing and contract improvement.
Waste projects central expertise.

£38m / Additional Investment /

TIF – development of delivery model and leading on its implementation (£22m).
NHT – development of delivery model and leading on its implementation (£16m).

Timetable for NPD projects

SFT will publish full and up-to-date information as soon as available, this will be drawn to the attention of the Committee.