Chamber and committees

Covid had a big impact, in that it paused construction. We have also talked about issues including Brexit. Those things led to a drop in building, then there was an increase, again. There are peaks and troughs. As we go forward to 2032, external factors will continue to have an impact. The announcements last Friday, the shock to the markets, the increase in interest rates and so on will have other impacts, but we will not see the figures on that for another year.

The peaks and troughs are why I talked about the midpoint of the review to 2032, to take stock of where we have got to and of whether there is a need to back-end any catch-up that might be required, should we have such impacts.

I have forgotten the other bit of your question.

There is a lot in that question. As you are aware, through the emergency bill, we are taking exceptional measures in exceptional circumstances, and we will lay out the detail to Parliament in short order. We have made it clear that the bill will include temporary measures until the end of March.

The social rented sector has concerns—for lack of another word—about what will happen to rent levels in the social rented sector beyond 1 April. We have said that we will work very closely with social landlords on whether a cap on social rents should be applied from 1 April and, if so, what level the cap should be at. In doing that, we need to take cognisance of the economic circumstances between now and then, and to have regular reviews. The circumstances relating to tenants being unable to afford their rents have driven us to taking the action that we are taking, so the wider economic circumstances and the challenges of tenants will be key factors in determining what happens from 1 April.

What happened last Friday and the impacts on interest rates and inflation all have to be taken into account, because what happened will have an impact on the social rented sector’s borrowing costs.

One thing is absolutely clear: we will work very closely with the sector. We have to be careful that anything that we do does not interrupt the sector’s investment plans, because those plans, along with local authority investment plans, help to deliver the affordable housing supply programme.

We have quite a lot of things to balance and get right, which will not be easy. However, we are very aware of the concerns of RSLs. Patrick Harvie, the minister who is taking forward the emergency bill, and I have met RSLs on a number of occasions, and we will continue to work very closely with them to ensure that we support them.

Marie McNair mentioned subsidies. We will discuss that issue with the sector in relation to shared risk, who should carry the risk and what the Government can do to support the sector.

Officials have been meeting people at UK Finance, because we are very aware that it is also important that the social rented sector’s lenders have confidence in the sector in Scotland so that they continue to invest. They will also be affected by some of the UK Government’s decisions from last week. We have to consider such issues in the round.

I cannot tell you here and now what will happen on 1 April, because we cannot predict what the circumstances will be like, but we will work very closely with the sector, taking all those factors into consideration, to try to get the measures as right as possible.

First, let me say that the £30 million rural housing fund is there to encourage development in rural Scotland. We still have access to the affordable housing supply programme, and that fund is there to try to encourage development—along with the Scottish land fund, I should add. The rural housing fund is demand led, so it requires projects that people want to take forward. I talked about peaks and troughs earlier, and that fund will be very much guided by the projects that come in.

I think that around 6,000 homes had been delivered in rural Scotland previously. The good news is that over the first year of the operation of the new target, 1,600 new homes have been delivered in rural Scotland. If that trend were to continue, it would give us quite a lot of confidence that we are seeing an uptick in the delivery of homes in rural Scotland. However, the caveat is that there are peaks and troughs, so the situation will be dependent on those projects coming forward.

It is important that there is support. That takes me back to my visit in Inverness; it is important that organisations are supporting local communities to bring forward projects and get them through the feasibility stage and on to submission stage. All those things are quite technically difficult, and community housing trusts have an important role. I spoke to some of them at the event in Inverness. A toolkit has been developed to support local organisations with projects, and some organisations had access to the land fund and the rural housing fund to get projects to fruition. That is still taking too long, and we need to consider how to shorten timeframes to get more projects through, but there is some optimism, given the 1,600 figure.

Thank you for the opportunity to engage with the committee. It is good to be here.

There can be no doubt that recent times have been challenging and that the challenges continue. We have dealt with Covid and are now dealing with a cost crisis that is pushing millions of people into poverty.

The Scottish Government is wholly committed to doing all that we can to tackle those immediate pressures, but our mitigations are constrained and we need the United Kingdom Government to take wider action to increase our budget or to grant us greater powers to borrow. We are already having to find £500 million in savings across Government in order to focus resources on tackling the cost of living crisis. Those savings come from areas where we consider that there is least impact on public services and on individuals, but those choices have not been easy and will have consequences. We are committed to an emergency budget review process, both to identify funding to cope with inflation-driven cost increases and to support those who most need our help during the crisis. That is the harsh reality of having a fixed budget and limited powers.

Despite that, we have put in place measures worth almost £3 billion this year and announced in the programme for government that we will seek to introduce emergency legislation that gives renters security through a rent freeze until at least March 2023 in both the private and social sectors. That legislation will also include a moratorium on evictions.

We will present a housing bill later this year to improve affordability in the longer term, which will include new and strengthened rights for tenants and will take action on short-term lets and preventing homelessness. The warmer homes Scotland programme will also support households to install energy efficiency measures, thereby helping to reduce energy costs and usage.

All that support goes hand in hand with delivering more affordable homes. I am proud to say that Scotland has led to the way in the delivery of affordable homes across the UK, with 111,750 affordable homes delivered since 2007, more than 78,000 of which were for social rent, including 19,339 council homes. We will make £3.6 billion available during this session of Parliament for the delivery of affordable homes, so that we can continue the important work that we began in 2007 of ensuring that everyone in Scotland has a warm, safe and affordable place to live.

I was given a timely reminder of the importance of good-quality affordable homes during my recent summer visits. Speaking to tenants is a great way to understand at first hand how important it is that we continue working with partners to deliver affordable homes and contribute to the delivery of national outcomes.

We know that a smaller number of homes can make a huge difference to rural and island communities, and we are taking forward the development of a remote rural and islands housing action plan to meet housing needs in those areas and to help to retain and attract people to those communities. We recognise the continuing external market conditions of inflation and supply-chain impacts, and we are committed to continuing to work closely with all our housing partners to help to mitigate those pressures, where possible, through the operation of our flexible grants system.

I cannot conclude these remarks without acknowledging the struggles that are being experienced by the people of Ukraine. We have extended a warm Scots welcome to them; indeed, Scotland is currently accommodating almost 20 per cent of the total number of Ukrainians in the United Kingdom. We recognise existing temporary accommodation challenges that might be having an impact, but we must and will continue to work hard to reduce the number of all those in temporary accommodation.

I look forward to engaging with the committee this morning on the affordable housing supply programme. I know that there are many challenges facing delivery, but I believe that our strong established partnerships and flexible systems will enable us to continue to make good progress.

The target was initially formulated as a result of the overarching work undertaken in the development of “Housing to 2040”, which is, of course, our long-term housing plan and which set out our initial ambition of delivering 100,000 affordable homes by 2032. In considering that previous target, housing need and the views of the sector, we increased the figure to 110,000 affordable homes across Scotland by 2032 in the 2021-22 programme for government.

After discussions with stakeholders covering rural Scotland, I was keen to include a target for rural homes, because I thought it important to drive that ambition in rural Scotland. I am sure that we will come on to talk about this issue, but we know that there are additional challenges in those areas, and I felt that a specific target would help drive developments there. The target emerged from those discussions—and it is, of course, an important part of the Bute house agreement.

Clearly, the relationship with local authorities is also hugely important, given their role as strategic housing authorities. They are best placed to make local decisions and to reflect the particular nature and characteristics of their local areas, all of which then feeds into the national plan and targets. All of that led to a target that we feel is ambitious but deliverable.

The housing need and demand assessment is undertaken at local level, allowing for consideration of local information and circumstances that go beyond the national projections for housing numbers. It covers, for example, tenure, size, type and location of housing as well as considerations of affordability and specialist provision. It is, therefore, a valuable tool in the process.

We need to keep targets under review. We intend to carry out a review at the mid-point to 2032 to assess whether the current plans should continue unchanged or be adapted.

I hope that that answers some of your question.

Through the drafting of the national planning framework 4, the planning system will shift to being more directive about the quality of places, including by guiding where new development should happen and how those developments can deliver more for new and existing communities. The framework proposes strengthening the planning policy for affordable homes and, in essence, provides a better, more positive and encouraging system for affordable housing—not just in urban Scotland but in rural Scotland as well.

I was asked about the issue at the Communities Housing Trust event that I took part in in Inverness. Planning came up quite a bit in that discussion. For us in Government, although we do not always get this right, it is important that all policies face in the same direction. We have clear ambitions for the affordable housing supply programme, but those will only be as good as the ability to get land availability and the planning system right. We therefore need to get a close eye on the operation and practice of the new framework, to make sure that it makes it easier to deliver affordable housing. It still has to take into account all the concerns that anyone might expect, but it should be more proactive in supporting affordable housing.

There is no hiding the fact that it is a tough time for the construction sector and for SMEs, in particular. It is really difficult. Some of the larger organisations, developers and builders have resilience because of their size, but—to be blunt—SMEs do not always have that. All the factors that I talked about earlier really impact on SMEs. Ivan McKee has been doing important work with the construction sector on how we can support SMEs, by looking at local supply chains and how SMEs can get themselves into pole position to bid for work on contracts, whether as contractors or sub-contractors.

We also have to consider that one of the difficulties in the Highlands and Islands is to do with capacity to meet demand and that, sometimes, it is not possible for local SMEs to meet demand.

We will continue to work as a Government on how we can support our SMEs to take advantage of opportunities. The global factors and the cost base for SMEs are really challenging, but we will continue with that work.

Another important aspect that I should have mentioned in relation to the meetings that Ivan McKee and I have had with the construction sector is the sector’s concern about contracts and risk sharing. If costs go up, should they be met by the contractor alone or by the customer, that is, the housing association or local authority? I think that it has to be a shared risk. Clearly, as a Government, we do not get involved in contracts; that is for local partners to resolve. However, we met RSLs, councils and the construction sector to put out a message about flexibility. To ensure that contracts and projects continue to come in, there has to be a level of flexibility as we navigate through these challenging times. I think that that message has landed with both the construction sector and the customer—our RSLs and councils.

That issue with the feasibility stage has been raised on a number of occasions and is being addressed.

We expect the full plan to be published in spring next year. The work has some priority strands, about which I will be able to give an update prior to that—probably towards the end of the year. I will be happy to write to the convener with that information, if that would be helpful in advance of the full plan being published.

The first thing to reiterate—and you have probably heard me say this before—is that benchmarks are not grant rates or grant ceilings, and they should not have a role in shaping the expectations of grant funding levels for any particular project. Benchmarks are tools for determining the appraisal route for grant applications. As I said earlier, when we look at approvals, we see that half the projects are coming in at benchmark and half above the benchmark.

The current set of benchmarks will be adjusted to account for inflation using the differential in relation to the Scottish social housing tender price index for the year to December 2022, which is populated by data that has been received from RSL and council-approved projects. Alastair Dee might want to come in with further detail.

I noted that, at the tail end of his tenure, the previous Prime Minister announced the extension of the right to buy to the social rented sector—to housing associations. Obviously, we will have no truck whatever with that. We lost about 50,000 social rented homes when the right to buy council houses was introduced by the Thatcher Government, and it has taken us a long time to replace those homes. Through acquisitions and the ability of local authorities and RSLs to purchase off market, we are trying to regain some of that territory.

Therefore, opening up the right to buy is the very last thing that we would do, and we will resist any attempts by the UK Government to interfere in such matters. As far as I and the Scottish Government are concerned, housing is entirely devolved to the Scottish Parliament, and I do not think that there would be any appetite in the Parliament—I certainly hope that there would not be—to go down the right-to-buy route.