STUC calls for funding of infrastructure projects

Business Editor, Sunday Herald

Sunday 1 July 2012

A £50 million Treasury grant for rail sleeper services, currently loaned to Scottish Water, should be used by the Scottish Government to fund its own wish list of "shovel-ready", projects the STUC has said.

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UK Treasury disputes Swinney’s claim of capital spending restrictions By Colin Donald

Comments by Stephen Boyd, assistant secretary of the STUC, have added to pressure on the Scottish Government to reverse a decision, revealed by The Herald in February, to deposit cash for Caledonian Sleeper investment with the quango, pending an investable rail project.

The call came as it was revealed last week that the Scottish Government underspent its 2011-12 cash budget by £79 million. The figure, which compares to last year's £12m underspend, is a dramatic reversal of Finance Secretary John Swinney's previous success in aligning resources with economy-boosting projects in a downturn. Swinney announced last week that last year's excess cash would go towards this year's £105m spending programme including renewables, regeneration and housing, a process he described as "accelerating [a] programme of capital investment". The new list omits any of the projects previously identified as being "shovel ready". While stressing the importance of eventual investment in the Sleeper programme, Boyd said: "Given the current state of the economy the STUC believes it is necessary to maximise government spend in the here and now, preferably on job-creating investments."The STUC firmly believes that 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."Questioned over its choice of spending targets, the Scottish Government initially told the Sunday Herald that "the Treasury stipulated the conditions for use of this money and that it was specifically for the Sleeper services so could not be spent on shovel ready projects".However, a Treasury spokesman disputed this, saying: "At the Autumn Statement the UK Government made available £50m to co-fund the refurbishment of the Caledonian Sleeper service. It was agreed that the Scottish Government was free to spend this on whatever capital projects it chose in 2011-12 providing that £50m was used to support the Sleeper in the long term." The Scottish Government has not challenged the Treasury version, nor has it provided an explanation of why, if short term spending of the £50m on infrastructure were forbidden, it transferred the funds to an infrastructure quango. Gavin Brown MSP, Conservative finance spokesman, said: "The words and actions of this SNP government are simply not in tune. On a weekly basis they demand more money for 'shovel-ready' projects. Yet an extra £50m from the UK Government went straight to Scottish Water instead. On top of this we learned this week that the Scottish Government had £79m for the financial year 2011-12 that they were incapable of spending. The unplanned underspend was six-and-a-half times larger than the previous year – why did this not go on 'shovel-ready' projects? When all is said and done with the SNP, more is usually said than done." In February, The Herald revealed that Swinney had moved the Sleeper cash to Scottish Water's investment programme as part of the 2011-12 Spring Budget Revision. Questioned in the Scottish Parliament over the unannounced move, described by opposition MSPs as "lacking transparency", Swinney confirmed that he had not considered spending the money on shovel-ready projects. He said: "The mechanism that I chose for deploying the resources enabled me to have the flexibility to draw the resources back out, given the overall financial commitments that the Government has given to Scottish Water over a five-year period." In fact, the cash is not fully recoverable from Scottish Water until 2014-15.A senior civil servant familiar with the budget process told the Sunday Herald that Swinney was "taking rather unconvincing refuge" in the argument that £50m could be hard to recoup from future budgets. "Obviously, the capital budget has to be managed and its difficult to predict precisely, but £50m is not a huge amount, and compatible with the kinds of uncertainty they are used to managing. It doesn't feel to me like a very convincing explanation." A Scottish Government spokesman said: "The fluctuations and nature of the overall Scottish Government capital budget means that if we had spent the money on shovel-ready projects in 2011-12 it could not have been guaranteed this would create the £50m of headroom in our future capital programme that would be needed to support the sleeper service, which we support, and met the Treasury's funding stipulations."Last month, the Road Haulage Association in Scotland, representing around 1000 Scottish businesses, demanded that the Treasury cash be spent on the £35m roads component of the shovel-ready list.

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STUC calls for funding of infrastructure projects

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