Chamber and committees

It depends. If a local authority is looking to develop an ownership-model municipal bus service, there are all the capital costs that are associated with that, such as purchasing buses, running garages for maintenance and so on. That is why a number of local authorities are looking at the franchising model, where the authority would enter into a franchise agreement with a bus operator to provide the services in its area and the authority would specify the services that it wants—their frequency and timetable. That is similar to the way in which the system has operated in relation to rail.

It is £30 million that is coming from the public sector budget.

What timeline is it over? Do you know, Kerry?

In the past, we have been able to reallocate an underspend and re-utilise that budget, so it is not lost in that sense. However, through greater public awareness and understanding, we can promote the schemes and the programmes to encourage more people to take up the options that are available to them, whether they are for domestic or business premises.

I have flagged up to a number of businesses in my constituency that are experiencing significant energy challenges as a result of the big price increases that there might be loans available to them through the Business Energy Scotland programme, to enable them to invest. One company—I will not mention it by name—is at an advanced stage in that process. It is looking at putting in solar panel systems, which is part of the programme, to reduce its energy costs as it is an energy-intensive business.

Continuing to improve the awareness of the public and business is important. I think that it would be fair to say that the situation during the past year has meant that people now focus on their energy costs in a way that they did not previously—their focus is much greater. There is an opportunity to ensure that we are driving forward energy efficiency as part of reducing future energy demand.

It is important to understand that it is not as though nothing is happening. Although it is in-house at present, a considerable amount of work is being done by officials, working with local authorities, housing associations and other organisations on how we can look at collectively working together to deliver not only some of these energy efficiency programmes but alternative heating systems.

We have created the heat networks unit within the directorate, which is playing an important part in helping to bring together expertise around local authorities and housing associations, which are looking at heat networks as well. The national agency will be able to take that up on to a much more national scale through dedicated resources, staff and expertise, to support local authorities and housing associations in taking forward these policy areas.

We are trying to avoid getting into situations where local authorities have to reinvent the wheel each time they try to design a heat network or where housing associations have to reinvent the wheel to get heating efficiencies. We want to bring together the expertise and skills base that can support them to bring that work forward.

Can we do that quicker? We have ambitious targets on heating buildings. The Climate Change Committee’s report from the end of last year showed the need for us to ramp up our action in that area. If there are areas where we can speed up that process, we will not be slow in making sure that we do that.

I hope that that reassures you that a considerable amount of work is going on; we are not waiting for the standalone agency to be created before we drive that work forward.

That area has changed dramatically over the past year. If we were having this discussion last year, I would be saying that blue hydrogen would probably play a big part in the early development of the hydrogen economy. What has significantly changed over the past year is that, because of gas prices and so on, there has been a big switch in the sector to being much more focused on green hydrogen, because its potential production costs have dropped significantly. Companies that previously focused on blue hydrogen are now looking at going straight to green hydrogen, because the cost base has dropped sufficiently.

Blue hydrogen will continue to play a role in the energy transition in some of our big energy intensive sectors—for example, grey hydrogen is used in Grangemouth, but Ineos has plans to move towards blue hydrogen, which is aligned with the Acorn Scottish cluster project. For some companies, blue hydrogen will be a bridging technology before they move to green hydrogen.

The focus over the coming years will be much more on green hydrogen, not only because that is what is happening here but because that is what is happening on a Europe-wide basis. For example, the REPowerEU programme has a big focus on low carbon and on green hydrogen being the future priority; blue hydrogen is seen as being a bridging technology in some energy intensive sectors.

That is the pattern of travel, which is why you can see in the hydrogen action plan that our focus is much more on green hydrogen, particularly because of its export potential. There is significant potential for us to be a major exporter of green hydrogen and hydrogen derivatives such as ammonia and methanol and to develop liquid organic hydrogen carriers. We are involved in work on that with partners in Rotterdam and the Net Zero Technology Centre. I see green hydrogen becoming more of a focus and playing a bigger part than I would have said this time last year.

You mentioned three areas: skills, companies at a domestic level, and planning. Planning is not so much of an issue, because planning elements will rest largely with us. Quite a number of the big offshore developments that are planned over the course of the next 10 years have potential hydrogen projects associated with them. I am very conscious of the need to make sure that we have the right support in place for that. Some changes are taking place within my directorate to facilitate that, including recruiting additional staff and bringing in a strategic lead at director level to drive that forward. That is happening just now and the budget provides an additional £5 million to support the development of that element. Those are the planning aspects that sit within my portfolio.

There is a challenge around skills, not just here in Scotland but globally. During the past year to 18 months, in countries across the globe, particularly in Europe, the scaling up of offshore and onshore wind has been quite marked. It became more of a priority during the energy security issues of last year.

There will be a number of challenges here. There will be a skills challenge because of the restrictions on access to labour. There will also be a materials challenge in that access to some of the raw materials that are needed for the manufacturing of these products will become constrained because of the level of global demand. There will be a capacity constraint in relation to industry manufacturing some of the components, given the level of demand that might be experienced. That is why, in my view, having a clear and effective consenting process is extremely important to give the industry confidence that the process that we have here in Scotland for rolling out these projects is a priority area, which means that they can be taken forward in a timely fashion.

I do not want to speak for Ivan McKee on this, but it would be fair to say that I am also doing a lot of trade work because, during the past year to 18 months, the area of energy has just increased dramatically. We are receiving demands from ministers of overseas Governments to meet us, and the number of businesses in Scotland that are looking to invest overseas has increased dramatically. When I was in Japan in November last year, a lot of the talk was about accommodation of inward investment from Japanese companies here, but also Scottish companies investing in south-east Asia and renewable energy as well. That has scaled up significantly. I know that Mr McKee has found that challenging because of the demands that it is placing on him, which is why I am doing some of that work, and other ministers have also been involved in picking up some of that demand.

On the budget provision, at this stage I am comfortable that we have sufficient budget provision to meet demand. We need to refocus some of the staff who are involved in some of the broader energy work on the areas that we need to prioritise rather than looking for any extra resource. The work that we are doing just now to bring together the trade, investment and energy aspects is all about trying to knit them together much more effectively to be more focused and more efficient in the use of resources.

I think so—I think that those two things come together, although they might not be entirely aligned time-wise, in a way that will be helpful in providing that level of scrutiny.

I very much hope that, when the draft climate change plan update is published later this year, we will be in a position, if we have strand 2 and strand 3 in place for the next year’s budget, to be able to see exactly how the budget delivers on the climate change plan, which will have to be much more detailed, for different portfolio areas. That will mean that, whether on transport or agriculture, we will be able to set out very clearly the actions and the policy impact. The question will be whether strand 2 and strand 3 allow us to provide the level of transparency on the budget process that aligns with that. The committees will then be in a position in which they can see clearly whether what is said in the climate change plan fits with what is set out in the budget. I think that, ultimately, that is where committees and the Parliament want to get to; it is certainly where I want to get to, so that there is transparency right across Government.

The Deputy First Minister and I are taking forward that work on a joint basis. Obviously, the Fraser of Allander Institute is the lead body. I am not sure what engagement it has had with other partners. From the briefing that I had with the institute, I know that it had been looking at international examples. There are a limited number of international examples in this area. I do not know whether there are plans for further engagement in that respect for strand 2 and strand 3, but I am happy to take that away to find out whether further work is being done on the approach that other countries have taken to their budget process.

There has been a shift, which reflects the challenging capital budget allocation that we face. Not only was there a reduction in the capital allocation to the Scottish Government from the UK Government, but we have to meet significant inflationary pressures within the capital allocations. Some aspects of construction inflation are operating at 17-plus per cent. Not only is that a more challenging level of capital, but its buying power is weakened as a result of the significant inflationary pressures. We have had to balance some of that.

The reduction in the budget for motorways and the trunk road network is about reprofiling some of the life-cycle maintenance work that is carried out. There is some reprofiling of some of the structural repairs programme that was being taken forward, and some aspects of capital land and works have also had to be reduced.

A couple of areas have continued to be a priority. For example, the access road to Argyll and Bute from the A83 at the Rest and Be Thankful continues to be a priority, so allocations have continued to allow the work to be taken forward. There has been an increase in funding for the road safety programme to continue to build on the progress that we are making on road safety measures.

By and large, that is a reflection of the challenges with regard to capital allocations. It is not the case that these things will not happen, but they will take place over a longer period. We are having to stretch out some of the life-cycle maintenance work.

The expectation from our discussion with Forestry and Land Scotland is that the 16,500 hectare target can be managed within the budget settlement that we have provided.