Ben Wray, head of policy and research at Common Weal, reports from a symposium by Scottish Environment LINK looking at how to address the lack of investment in low-carbon infrastructure in Scotland
INFRASTRUCTURE is in the news at the moment in Scotland with the temporary closure of the Forth Road Bridge for repairs. So too is climate change, with the big Paris climate talks rumbling on in the French capital.
So, putting the two together, it seemed like an apt time to attend a symposium on how to tackle the investment gap in Scotland in the transition to a low-carbon economy. The event was organised by Scottish Environment LINK’s Economics Taskforce, and consisted of a day of insighftful presentations from environment campaigners and economists that are worthy of a wider hearing.
Sam Gardner from WWF Scotland introduced the organisation’s low-carbon taskforce which is coming up with 10 big ideas for low-carbon infrastructure to lobby the Scottish Government on.
Gardner highlighted the crucial role the public sector plays in infrastructure development, and said that the Scottish Government’s current infrastructure pipeline is currently not in sync with its policies for meeting its climate change targets, with no evidence that any cross-thinking has been going on as of yet between what are considered to be two priority areas.
“Only 50 per cent of the plans in the government’s infrastructure pipeline are low-carbon, defined as compliant with the Climate Change Act.”
Only 50 per cent of the plans in the government’s infrastructure pipeline are low-carbon, defined as compliant with the Climate Change Act, whereas to meet the requirements of the Act that figure should be 75 per cent.
Elizabeth Leighton from Existing Homes Alliance Scotland talked about their campaign for no one in Scotland to be living in a hard to heat, draughty home by 2025, a statement signed up to by the Scottish Government and many civic and voluntary organisations in Scotland.
Meeting this energy efficiency target, defined as all homes upgraded to at least EPC Band C by 2025, is a huge challenge for the Scottish Government: PS10.7bn is needed in investment (PS4.5bn from public funding), a four times increase in current spending on energy efficiency in the housing stock.
Leighton added that an extra 8-9,000 jobs per year would be created in the process, with a benefit to cost ratio of 2 to 1 – the obvious positive ramifications on health and reduced heating bills from well insulated homes are obvious.
One contributor highlighted the potential to retrofit existing homes through pre-fabrication models, citing an example in Denmark where a whole street was refurbished in one day using this technique.
“One contributor highlighted the potential to retrofit existing homes through pre-fabrication models, citing an example in Denmark where a whole street was refurbished in one day using this technique.”
David Eiser, Stirling University Economics Professor, gave the symposium an overview of the financial situation in Scotland over the coming years.
He said that new income tax powers coming to the Scottish Government at the start of the next parliament from the Scotland Act 2012 gave the government the chance to raise significant sums of money if it so wished, but would have to be raised the same amount across all bands, and therefore could be seen as regressive and likely to be politically unpalatable. The estimates he gave for revenue from tax rises were nonetheless interesting – a 1p increase would raise an extra PS440m, a 2p increase would raise an extra PS850m.
Nearly one billion is what is required to offset UK Government cuts to the block grant, which Eiser pointed out were actually set to be tougher in the upcoming parliament – with a 1.3 per cent per year average cut – than they were in the previous one – an average of one per cent cut per year. With the NHS protected, Eiser said there would be average cuts of 12 per cent to other Scottish budgets.
On a slightly brigher note, the capital spending budget is set to grow five per cent in real terms to 2019/20 (PS3 to PS3.2bn), with ten per cent of that available to spend each year. It is as yet unclear whether the Scotland Bill would bring with it extra borrowing powers for the Scottish Government as it is to be negotiated as part of the Fiscal Framework agreement.
“The capital spending budget is set to grow five per cent in real terms to 2019/20 (PS3 to PS3.2bn), with ten per cent of that available to spend each year.”
Gemma Bone, PHD student at Newcastle University, introduced a visionary new paper she is writing for Common Weal, NEF, Friends of the Earth Scotland and Move your Money as part of a collaboration on new models for banking. The paper will make the case for a Scottish national investment bank, supported by local council banks as a means to generate serious amounts of financing in Scotland for long-term, low-carbon investment in socially useful projects. More on that in the New Year.
Frank van Lerven from Positive Money made the case for Green Infrastructure QE and the use of green bonds, a similar argument that new shadow Chancellor John McDonnell has made. Van Lerven said that a Scottish investment bank, in co-ordination with the Treasury and the Bank of England, could use this method for raising capital, although it’s difficult to see that sort of partnership occurring any time in the near future.
Dave Watson from Unison gave a fascinating presentation on the potential for Scottish pension funds to be invested in to low carbon infrastructure.
The potential figures involved are enormous – Scotland’s largest pension scheme (local government) has PS27bn in assets. The funds are managed jointly by employers and trade union representatives, and Watson was clear that infrastructure was an obvious choice for such investment decisions as the pension funds need long term cash flows to put their money in to that are likely to be reliable in its returns.
The pension fund managers have a ‘fiduciary duty’ to put the money in places in the best interests of their members, but during the discussion it was clear that the current context of falling oil prices means that fossil fuel based investments – which many pension funds are invested into – are a liability in that respect, with green infrastructure potentially much more lucrative.
“The potential figures involved are enormous – Scotland’s largest pension scheme (local government) has PS27bn in assets.”
Watson said that pension funds would usually be looking for a 5 per cent return rate, which if green infrastructure investment could provide that there’s no good reason, other than trying to change a culture that is quite stuck in its ways, that those sort of pension fund investments couldn’t me made.
Anne Schiffer from Friends of the Earth Scotland looked at financing options for community energy projects, and said that recent UK Government decisions, most importantly the scrapping of feed-in tariffs, had cut off many of the obvious options, meaning they would have to get more creative to find sources of funding.
She said that options including share schemes for the general public, setting up a fund between community energy projects across Europe and crowdfunding.
The day clarified two things for me: 1) That there’s a growing awareness that pressure groups need to not just say what they want to see happen but, in the context of UK Government austerity, provide answers as to how to finance it as well. There is ways the Scottish Government can find the money to address the investment gap, but activists and campaigners have to help them with identifying what they are so that there’s no excuses for failure. 2) There’s a community of people working on serious, hard headed policy solutions to these issues. Common Weal aims to be part of this, with three upcoming papers on banking, housing and investment tools that all in one way or another are about tackling the investment gap and building low-carbon infrastructure.