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Push for a new deal

There has been dramatic political change in Scotland since the May elections led to a Scottish National Party (SNP) minority administration. It is the first time the nationalist party has been in government.

After failing to form a coalition they went ahead alone and now need to secure support in parliament on an issue-by-issue basis. Their programme for government sets out to increase the rate of sustainable economic growth in Scotland as their single overweening objective.

Over the past 30 years Scotland's economic growth rate has averaged 1.8% a year. The UK wide average over the same period has been 2.4%.

The minority administration which quickly moved to re-brand the former Scottish Executive as the Scottish government enjoyed a honeymoon period with public and media and in the early months announced several popular decisions, including the abolition of tolls on the Tay and Forth Road bridges and abolition of student tuition fees.

More controversially, they have cancelled the £650M Edinburgh Airport Rail Link scheme, which included a tunnel below the airport, which had been endorsed by the previous Labour/Liberal Democrat administration. In a transport programme announced at the end of June, the SNP proposed a replacement £200M surface scheme.

Ironically, this proposed cheaper connection to the airport relies on the completion of the first phase of the Edinburgh Tram scheme. Having initially said they would cancel the earmarked £500M grant for it, the administration relented after losing a parliamentary vote.

On consecutive days in November the government published its Economic Strategy and its public spending review for the next three years. The latter includes its draft budget for 2008/9.

This will be subjected to detailed consideration in parliament and is likely to be altered. Finance secretary John Swinney will face some difficult decisions in horse trading with the other parties. If no budget is approved by February, First Minister Alex Salmond may call an election.

The spending plans have tested the new government's election promises. The settlement from Westminster provides for only a 0.5% real terms increase in public spending in 2008/9 though for the subsequent two years it rises to 1.6% and 2.8%.

The SNP intends to devolve responsibilities for the delivery of several of their manifesto pledges to local government through a three-year agreement that offers more generous funding in return for these commitments, which include a freeze on council tax at this year's levels.

If they all agree to the package, the Scottish government will give the 32 local authorities £34.7bn between them over three years, including £2.9bn for capital programmes. Resources for local government capital spending will rise by 13% in 2008/9 and remain at that level in the
subsequent two years.

Among responsibilities devolved to local government are coastal protection and flood-prevention schemes. This may lead to such schemes competing within local authority budgets with other capital programmes. In the current year the government is providing £42M for schemes like the White Cart project in Glasgow reported in NCE last month. The Scottish government is also bringing forward a bill next year to modernise the legislation relating to flood management.

Capital works expenditure on motorways and trunk roads will be £611M over the next three years. In addition to the ongoing programme of new sections and improvement schemes, the budget also includes funding for the provision of a new traffic control centre. Spending on routine and winter maintenance is also set to rise each year and £75M is allocated for preliminary work up to 2011 on the new Forth Road crossing.

Proposed spending on major rail projects is £650M over three years. The budget also includes provision for preparing those projects selected for the post-2012 period at the end of the current Strategic Transport Projects Review, which is being undertaken by Transport Scotland. Another £1.02bn is proposed for infrastructure investment in the existing network through Network Rail. This includes £50M for small projects.

In energy the government plans a £10M Horizon Prize to "attract the cream of the world's scientists to put Scotland firmly on the map as a leading centre for renewable energy solutions."

This is additional to the annual Saltire prize promised in their election manifesto to encourage innovation in renewable generation. This has been allocated £2M a year.

Micro generation gets £13.5M a year with support for developing the renewable sector linked to climate change and gets £33M a year. The Scottish Climate Change Bill will be published next year.

Scottish Water is projected to have £182M available for spending each year in order to undertake infrastructure improvements. According to Swinney says this is a record level of investment to ensure that Scottish Water delivers the level of service customers expect.

The Economic Strategy is founded on five strategic priorities, which include infrastructure, development and place. It says transport investment will be focused on making connections across and with Scotland better, especially by reducing journey times by rail to maximise opportunities for employment, business, leisure and tourism.

The target is to increase economic growth in Scotland to the UK average by 2011.

At the launch of the strategy, at Glasgow University Biomedical and Life Sciences Faculty, Alex Salmond said: "I like to focus on sectors which are internationally tradeable. We want new technologies, such as wave power and clean coal, to be manufacturing in Scotland."

The construction sector has been the only area of the economy in Scotland to grow faster than the UK average in the recent past. In the 12 months to July 2007, it rose 3.5%.

Careers Scotland estimates that strong growth in job opportunities in construction for the remainder of the decade will be largely due to airport, rail and road capacity expansion plans.

The modernisation of the land use planning system set out in the 2006 Planning Etc (Scotland) Act will be largely implemented during 2008 and 2009. Funds proposed for 2008/9 will enable e-planning to be universally introduced alongside the new system in which local development plans and strategic development plans replace structure plans and local plans.

Consultation on the regulations for the new regime is taking place currently. The reforms include powers for Ministers to designate through a National Planning Framework developments of national importance. At the other end of the scale, there will be permitted development rights for micro generation.

The award of the Commonwealth Games 2014 to Glasgow brought a new raft of questioning about the completion of the northern extension of the M74, which will be a key access to the sites. Most of the facilities will be in the former industrial east of the city which is now a focus for regeneration.

Although Salmond has told parliament the M74 extension will be built in time he emphasised that "projects have to conform to a budget and to competitive conditions. If we don't do that we will send out the wrong messages".

"We have to find an efficient way of raising capital and mobilising capital in Scotland. You must not waste money on above-the-odds capital investment."

The government is working to establish a Scottish Futures Trust, which would be a bonds mechanism and provide an alternative funding route for public infrastructure projects to the private finance initiative.

Over the past 30 years Scotland's economic growth rate has averaged at 1.8% per year





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