The Scottish Government announced its 2011-2012 spending plans and draft budget yesterday.

This reaffirms commitments to fund the new Forth Crossing (£1.7-£2.3bn) and the South Glasgow Hospitals (£842m) through traditional capital funding, although it would appear the £800m Scotland's Schools for the Future building programme may now be funded through a mix of revenue and capital funding.

The budget prioritised the improvement of existing assets, such as providing funding for EGIP (the Edinburgh Glasgow rail improvement project). A pipeline of revenue financed projects worth up to £2.5bn was also announced, to be delivered using the non-profit distributing (NPD) model. Anticipated NPD Projects include:

Transport projects with a capital value of £1 billion:

  • Borders Railway project;
  • upgrade of the M8 Baillieston to Newhouse;
  • M74 Raith Junction and M8, M73 and M74 network improvements;
  • the new Aberdeen Western Peripheral Route and the A90 Balmedie upgrade.

Education projects with a capital value up to £750 million:

  • specific projects within Scotland’s Schools for the Future programme;
  • improvements to the further education college estate at Kilmarnock and Inverness and modernisation of the Glasgow college estate.

Health projects with a capital value up to £750 million:

  • the Royal Sick Children’s Hospital and Department of Clinical Neurosciences in Edinburgh;
  • revenue support to finance projects through the hub initiative;
  • individual hospital projects, health centres and mental health facilities across Scotland.

The Scottish Futures Trust (SFT) will deliver the pipeline of projects in partnership with the Scottish Government, local government, NHS boards and other local bodies.

It is intended that NPD be coupled with other 'innovative' measures of funding such as Tax Increment Financing (TIF), the National Housing Trust (NHT) and the JESSICA Fund.

Scottish Ministers have already brought forward secondary legislation under existing provisions of the Local Government Finance Act (1992) to enable six TIF pilot schemes to take place. The first to get provisional approval is the scheme at Leith Harbour in Edinburgh. SFT is also currently working with North Lanarkshire Council and Glasgow City Council with respect to two further schemes at Ravenscraig and Buchanan Galleries.

The first phase of the NHT procurement has also already been launched (in September 2010). It aims to provide around 1,000 additional affordable homes for rent over the medium term in areas where there is a shortage in the supply of affordable housing.

Overall, the approach follows the Government's approach to the Capital Spending Review last month and focuses on the need to support sustainable economic growth through infrastructure investment but with rigorous prioritisation and innovative procurement strategies.