Autumn Statement: £800m boost to Scottish Government’s capital budgets

Chancellor Philip Hammond has announced an £800 million increase in capital spending for Scotland over the next five years during an infrastructure filled Autumn Statement at Westminster yesterday.

Whilst a number of his proposals apply to England only, the additional capital revenues that will accrue to the Scottish Government will enable an increase in its planned infrastructure spend.

Among the Chancellor’s announcements was a £23 billion National Productivity Investment Fund over next five years as well as £1.3 billion for upgrades to ease highways congestion. Mr Hammond also outlined a £450 million investment to trial digital signalling on railways to” achieve a step-change in reliability” and £1 billion to invest in full-fibre broadband and trialling 5G networks.

The decision to focus on infrastructure spending means that Holyrood’s budget will increase by more than £800 million through to 2020-21, though the Scottish Government will decide how the investment is spent.

Further commitments were given for Scotland’s City Deals with funding confirmed for deals in Aberdeen and Inverness, negotiations with Edinburgh ongoing and proposals to be considered from Tay Cities.

The Chancellor also announced for the first time that the UK government will also open negotiations with Stirling, a move that means that deals will have been agreed, or in the process of being agreed, with each of Scotland’s cities.

Other measures to directly benefit Scotland include an increase in research and development investment by £2 billion a year by 2020-2.

Fuel duty is frozen for the seventh successive year, which should save the average car driver in Scotland £10 each time they fill their tank. The National Living Wage is increasing from £7.20 to £7.50.

Scotland is also benefiting with more than £3.3m of LIBOR funding raised from fines levied on banks being distributed to good causes.

Additionally, the government will meet its manifesto commitment to increase the personal allowance to £12,500. Over the last Parliament, 2.4 million individuals in Scotland saw an average gain of £517, due to an increase to the personal allowance.

Chancellor of the Exchequer Philip Hammond said: “The investments I have outlined today will have benefits right across the Union.

“Research and development funding will benefit the United Kingdom as a whole and where responsibility for infrastructure investment rests with the devolved administration in Scotland, they will receive the appropriate funding share.

“The decisions I have announced today mean that Scotland will receive very significant additions of £800m to its capital budget.

“It is also great news that I can also confirm wider investments for Scotland including the opening of city deal negotiations with Stirling and announcing that we are open to doing so with the Tay Cities.”

Secretary of State for Scotland, David Mundell added: “The Autumn Statement will build an economy that works for everyone in Scotland and the rest of the UK. The rise in the National Living Wage means a well deserved pay rise for thousands of Scots, and the freeze in fuel duty will make it about £10 cheaper for drivers every time they fill up their car.

“Most significantly for Scotland is the £800m of extra capital funding. This is as a result of the Chancellor’s decision to invest in infrastructure, but it is for the Scottish Government to step up now. If it is used properly by the Scottish Government, this will make a real difference to productivity, jobs and growth in Scotland.”

Sector response

With the capital budget set to increase by more than £800 million through to 2020-21, the country’s home building industry called for the same funding priority for housing to be given north of the border as was set out by the Chancellor for England.

Nicola Barclay, chief executive of Homes for Scotland, said: “Nothing is more important to Scotland’s social wellbeing and economic success than ensuring we have enough homes to meet the needs and aspirations of our growing population. (Yesterday’s) focus on housing by the Chancellor not only recognises the importance of this but also generates a significant budget boost for the Scottish Government which we must see similarly prioritised towards home building, if this country is to thrive and grow.

“No other single industry has the potential to positively impact so many different policy areas. Whether it’s jobs, skills, health or education, building homes makes a hugely positive difference to the lives of all those living in Scotland.

“We therefore urge the Scottish Government to make the most of this additional money and attract further private sector investment by allocating it to a national all-tenure home building programme.”

RICS Scotland welcomed the additional funds for Scotland’s capital budget but warned that it is vital that the money is put into infrastructure projects that return the highest economic and social impact, whilst stimulating the Scottish construction industry.

Gail Hunter, Director RICS in Scotland, said: “The UK government’s £1.4bn commitment to affordable housing is much needed. RICS market surveys have shown a consistent lack of housing supply across Scotland over the last two years, increasing property prices and rents within the sector. This announcement will result in Scotland benefiting £100m and we encourage the Scottish Government to utilise this money to further increase their commitment to building 50,000 new, affordable homes.

“In addition, the Scottish Government should use this opportunity to increase supply by investing in raising the standard of existing housing stock, through a planned maintenance scheme for tenement properties.

“RICS has long called for the expansion of City Deals across Scotland. We welcome the announcement of City Deals for Edinburgh and ‘Tay cities’ of Perth and Dundee, together with plans for a further deal for Stirling, ensuring all Scottish cities are in line for funding.”

Scottish Chambers of Commerce (SCC) welcomed the clear focus on infrastructure in the Chancellor’s Autumn Statement and said the continued commitment to Scottish City Deals will help to bolster business confidence in Scotland.

Liz Cameron, chief executive of SCC, said: “The Chancellor has used his first major budgetary announcement to place the UK government’s focus firmly upon infrastructure.

“This is a key priority for business and the news that £800m of additional capital resources will be coming to Scotland through to 2021 as a result of the Autumn Statement is extremely good news for Scotland and will give the Scottish Government the ability to do more to address Scotland’s connectivity and housing needs and accelerate some long overdue projects, such as improvements to the A82, the Berriedale Braes on the A9 in Caithness and deliver much needed upgrades to Scotland’s outdated rail infrastructure north of Perth.”

On City Deals, Liz Cameron added: “The Scottish Chambers of Commerce network has been lobbying the UK Government hard to secure the future of new and existing City Deals in Scotland and we are delighted that the Chancellor has not only committed funding to the existing deals but has also expanded consideration of the new proposals for Edinburgh, the Tay Cities and Stirling. City Deals are vitally important to securing the growth of Scotland’s economy and delivering upon the needs not just of our cities but their wider regions. Their continued expansion is excellent news for Scotland.”

On Digital Infrastructure, she said: “We have long had an ambition for Scotland to become an ‘always connected’ economy and the Chancellor’s strong backing to the roll out of full-fibre broadband and 5G mobile communications could put us well on the road to this.

“That said, the challenge to achieving this in Scotland remains huge, particularly as large parts of the country are still missing out on superfast broadband and even basic 2G or 3G mobile communications coverage. The Scottish Government must respond with new targets for digital coverage and performance in Scotland.”

FSB Scotland called for Scottish firms to receive a local infrastructure boost following the Autumn Statement.

Andy Willox, the FSB’s Scottish policy convenor, said: “The Chancellor is right to get trade moving by addressing shortcomings in local infrastructure. Any additional monies coming to Scotland should be used for public works that deliver for local economies.

“With one in three local roads in Scotland in an unacceptable condition, we’re looking for the Scottish Government to step up. Scotland has much poorer mobile coverage than England. UK government efforts to boost coverage through 5G must deliver for firms in Stirling and Sutherland, as well as those in Shoreditch. While we strongly support Scottish Government plans to deliver universal superfast broadband, much more needs to be done to ensure Scotland doesn’t get left behind.”