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Hard hat time

Will 2013 be the year of the hard hat in Scotland?

A rare Westiminster-Edinburgh combination of will and means suggests that it should be.

As a result of Chancellor George Osborne's autumn statement and the mechanics of the Barnett Formula, the Scottish Government is to get an extra £394 million to spend on building new and upgrading existing infrastructure.

The cash injection is Scotland's share of the Coalition Government's £5 billion infrastructure fillip for the UK as a whole, to include high-speed broadband for Aberdeen and Perth for the first time. On the downside, the news was offset by further £70m cut to the Scottish current budget, added to the £1.1bn in cuts that the Scottish capital budget has already had to endure.

Osborne's autumn statement contained a handful of other measures that may provide a boost to Scotland's economy, which also included freezing fuel duty, raising personal tax allowances, cutting corporation tax, incentivising small business investment and an above-inflation rise in the basic state pension.

But even if it amounts to a mere rounding error in the overall drop in the £161bn ocean of cuts the Chancellor is now envisaging up to 2018, the extra cash for shovel-ready capital projects should make a noticeable and lasting difference to Scotland's landscape, next year and beyond. The £394m is more than enough to cover the original £300m list of good-to-go projects that the Scottish Government unveiled in 2011, and enough to take a sizeable bite out of the expanded and revised – if somewhat vague – £800m list that the Scottish Government unveiled in November.

This longer wish-list is nothing if not comprehensive. Read as a whole, it partly suggests decades of under-investment by previous governments during the economic good times and partly an SNP Government bursting with ideas to impact some difficult-to-reach parts of the country. It also contains several projects – a £2m National Theatre of Scotland "Glasgow Regeneration" project, for example, where it is not yet clear how exactly shovels would be involved.

For those who suspected that recurrent complaints about lack of cash for these projects were an easy political hit for the Scottish Government, there was an element of suppressed comedy in Finance Secretary John Swinney's grudging gratitude for the TV cameras last week, and his grim-faced celebration that the Coalition had "finally heeded Scotland's calls to boost capital spending".

But even if this shooting the Scottish Government's fox was a cunning plan cooked up by Osborne and Scottish secretary Michael Moore, in the current climate, any means of getting those fabled tools into Scottish soil is cause for celebration.

The Scottish Government has previously claimed that: "These projects could start work in either 2012-13 or 2013-14 if additional capital allocations were made available now. All of these projects have either completed the necessary planning and procurement processes or could get under way in 2013-14 if consented."

It seems there is now nothing standing between Scotland and a mini-construction bonanza, except for the process of picking which of the projects to action first.

The criteria for those decisions will be partly based on which are the lowest hanging fruit in terms of readiness, and also – unless the SNP is different from every other governing party in the history of politics – which will deliver the most value to target seats on the 2016 electoral map.

But civil servants may also be advising Ministers on how to get the biggest bang for the buck in terms of the "multiplier" for the Scottish economy, which will involve tough choices between options which are hardly comparable: How much consultation is needed to decide whether it is better to spend £8.4m on "essential maintenance and statutory compliance" for Scotland's courts, or £11m on the A68 Pathhead to Tynehead Junction?

Swinney has claimed that: "If these projects could get under way now, rather than being delayed, they would play a major part in helping to tackle unemployment. Capital investment is central to the Scottish Government's economic strategy, with every additional £100 million of capital spending estimated to support around 1400 jobs in the Scottish economy."

Almost no-one argues that capital spending is not useful. As Stephen Boyd, assistant secretary of the STUC has put it: "The lessons of economic history are unequivocal: Government spending is required to get the economy moving. Spending on infrastructure makes sense: this provides employment today while expanding the economy's long-term capacity for growth. Spending on infrastructure will be tolerated by markets in a way that social spending (if it embeds future spending commitments) might not be. So, yes, spending on 'shovel-ready' projects makes sense in current circumstances."

Nevertheless, the trick will be to ensure that maximum value for the Scottish economy as a whole can be extracted from next year's implied 5000-plus job injection. According to some economists, the equation of construction work with short-term economic stimulus is not as obvious as the pre-eminence of the shovel-ready theme suggests.

Speaking on BBC Radio Scotland yesterday, Stirling University economics professor David Bell commended the Scottish Government's record (Edinburgh trams apart) for being "pretty good at delivering projects on time and on budget". But he agreed that all politicians tend to overplay the value of capital projects to deliver wider economic benefit in the short term: "[Assuming] capital projects as leading immediately to growth can be a little bit misleading. Things like additional rail capacity, say between Perth and Inverness's growth prospects, would add to Inverness's growth prospects. But it's when assets are in place that the growth will occur.

"In the meantime, yes there are short-term effects in terms of employment and so on, but these are not in themselves going to turn economy around."

This note of caution about the shovel-ready list is echoed by the Inverness-based economist Tony Mackay, who believes that, despite the claims about the list, the only available quick stimulus to the Scottish economy, is a cut in VAT to 15%, a measure which, of course, is not in the Scottish Government's gift.

Mackay strongly urges a sense of realism about what the autumn statement windfall of £394m could deliver in terms of wider economic benefit, given that "Scottish jobs for Scottish workers" is neither possible or desirable

"With the shovel-ready projects, there will be a high level of 'leakage' of economic benefit in a small country like Scotland, because of the capital equipment and the raw materials like steel will be brought from outside and many of the jobs would not go to workers for Scottish firms. This does not just apply to mega-projects like the Forth Crossing. "

Mackay is most familiar with the economy of the Highlands and Islands, where leakage is a particular problem, as workers don't even tend to spend their money locally but take it to the big cities.

He said: "Half of the construction projects, including the biggest ones at Dounreay and Lewes Castle [on the Isle of Lewis, now in administration] go to companies from Northern Ireland.

"They are bringing in their own cheaper labour from Ireland, and they are undercutting local firms.

"I spoke to Western Isles Council about the lack of local workers on the Lewes Castle project and there is nothing they can do. They have to put projects out to tender, and they are won by lowest bidders, subject to certain conditions

"There is absolutely no guarantee that Scottish firms will win the big "shovel-ready" projects. They have to accept bids from reputable firms like (Northern Ireland's) Graham Construction. But the point is that these projects are not really benefiting Scots.

"The obverse is that Scottish construction firms can bid for jobs in Latvia or Italy or Greece, but there's not many of them who are doing that.

"Most of the Scottish construction firms are really only interested in the Scottish market, or possibly the north of England. Unlike companies like Graham, they don't seem to be tendering for work overseas, possibly because the wage rates are higher here."

The ability of the Scottish procurement machine and the Scottish construction sector's ability to rise to the challenge of that extra infrastructure will be telling.

If it proceeds as expeditiously and beneficially as the Scottish Government has suggested, the feelgood – or feel-less-bad – factor may work in favour of their wider political aims.

PROJECTS READY TO GO

l A96 Threapland: £6m

l A68 Pathhead to Tynehead Junction: £11m

l A95 Lackgie: £4m

l A702 Candymill Bend and Edmonstone Brae: £4m

l Trunk Road maintenance: £34m

l Cycling infrastructure projects: £3.9m

l Ferry port infrastructure: £5.7m

l Canal infrastructure projects: Regeneration and Tourism: £6.3m

TRANSPORT TOTAL: £74.9m

l Highlands and Islands Enterprise: economic development projects: £9.8m

l Scottish Enterprise: economic development projects: £40.4m

l Port of Leith masterplanning: £119m

l VisitScotland: investment in Visitor Centre infrastructure, including Glasgow Visitor Information Centre: £1.3m

l Roslin International Centre for Livestock Improvement: £10m

ENTERPRISE TOTAL: £180.5m

l Forestry projects: access, road infrastructure and buildings refurbishment: £6.2m

l National Parks: developing the rural economy: £12.4m

l Scottish Natural Heritage: co-location Fort William: £0.2m

RURAL AND ENVIRONMENT TOTAL: £18.8m

l Scottish Court Service: estate improvement, essential maintenance and statutory compliance: £8.4m

l Upgrading the Safety Camera Network: £2.4m

JUSTICE TOTAL: £10.8m

l Affordable Housing Supply Programme: additional grant funding: £40m

HOUSING TOTAL: £40.0m

l Clyde Gateway: Office and Industrial Developments for Economic Growth: £63.4m

l Irvine Enterprise Area: Infrastructure and Innovation Campus, and Irvine Ailsa Road Industrial Units: £5.9m

l Ardrossan Quayside and Medical Centre: £4.7m

REGENERATION TOTAL: £74m

l National Theatre of Scotland: Glasgow regeneration project: £2m

l Works to Historic Scotland's estate: £1.4m

l National Museums of Scotland: maintenance: £3.6m

l Creative Scotland: grants programme: £1.5m

CULTURE AND HERITAGE TOTAL: £8.5m

l College projects: targeted investment in priority estates: £65m

FURTHER AND HIGHER EDUCATION TOTAL: £65m

l Health: backlog maintenance/equipment replacement: £75.0m

l Health: bring forward projects through capital funding projects currently earmarked for revenue funding: £188.9m

l NHS Highland Renal and Endoscopy: £2m

l NHS Highland Day Services: £15m

l NHS Grampian Inverurie Health Centre and Community Maternity Unit: £7m

l NHS Grampian: Aboyne Health Centre: £2m

l NHS Grampian: Stonehaven Health Centre: £2m

l NHS Grampian: additional theatre capacity: £3m

l NHS Lanarkshire: Monklands – additional backlog investment: £10m

l NHS Tayside: Additional theatre capacity – Ninewells: £3m

l NHS Tayside: Intensive care unit upgrade: £1m

HEALTH TOTAL: £308.9m

l 20 x 3G Pitches £6.0m

l National Sporting Facilities: £2m

l School Investment: £5m

l Community Hub investment: £3m

l Sports legacy projects £23.6m

SPORT TOTAL: £39.6m

TOTAL CAPITAL INVESTMENT: £820.8m

Contextual targeting label: 
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