Annual Report and Accounts for the Year Ended 31 March 2016
Performance Report
Overview
Statement by Chief Executive
I am pleased to introduce Transport Scotland's Annual Report and Accounts for 2015-2016. The past year has been a busy and exciting time within Transport Scotland as we continue to support Scottish Ministers in delivering transport projects and priorities across Scotland.
The Forth Replacement Crossing (FRC) project is now expected to open to traffic by May 2017, in advance of the contractual date of June 2017 and within a revised budget range of £1.325 – £1.350 billion. The project has now realised cumulative savings of £245 million since construction began in June 2011. All three towers on the new crossing had reached their final height by the end of 2015, making the Queensferry Crossing the tallest bridge in the United Kingdom. The launch of the 543 metre long twin south approach viaduct was completed by June 2015 and the 222 metre long north approach viaduct by March 2016. The impressive deck lifting operations commenced in early September 2015 and by the end of March 2016 50% of the deck sections had been lifted into place.
September 2015 saw the opening of the Borders Railway by Her Majesty The Queen, accompanied by the Duke of Edinburgh and the First Minister. The £353 million project was successfully completed on time and within budget. Patronage of the new railway has exceeded expectations while the steam train experience, which operated throughout Autumn 2015, offered travellers a unique opportunity to enjoy the route and the nearby attractions. We continue to work with our partners in order to realise the full economic benefits of the new railway, to transform tourism opportunities and to open up the communities in South-East Scotland as new places to live, work and visit.
The start of the year marked the transfer of the ScotRail franchise from First Group to Abellio. The new franchise now operates 2,400 daily services on our rail network and will continue to do so for the next ten years. Significant investment to improve our railway stations continues, including the provision of enhanced waiting facilities, additional CCTV equipment and upgrades to existing technology, new customer information screens and new ticket vending machines.
A major milestone in the Edinburgh Glasgow Improvement Programme (EGIP) was passed during 2015 when, over a 44 day period between 13 June and 27 July, Network Rail successfully completed the challenging and complex track lowering and re-engineering of the Winchburgh Tunnel in readiness for electrification. Working closely with the ScotRail Alliance and transport industry partners, Transport Scotland co-ordinated a highly effective 'disruption management and communications plan' which ensured that Scotland kept moving during the tunnel closure period.
We are committed to completing the dualling of the A9 between Perth and Inverness by 2025. With a preliminary estimate of £3 billion, this is the most expensive transport programme in Scotland's history. An important milestone was reached in September 2015 with the first section between Kincraig and Dalraddy commencing construction and completion expected in the summer of 2017. In addition, the three design contracts for the programme, each worth approximately £40 million, are now supporting almost 800 engineering design related jobs in Scotland, including 350 for graduates and apprentices. Since the announcement of the programme in December 2011, over £62.5 million has been spent, including recent ground investigation work.
Looking to the future of rail travel, the High Speed Scotland Summary Report was published on 21 March 2016. This document sets out the appraisal of a high speed rail connection between Glasgow and Edinburgh, which emerged from initial feasibility work carried out by Transport Scotland when considering potential options for linking Scotland to the high speed network being developed by HS2 Ltd.
Transport Scotland continued to support Scotland's airports in developing new routes to improve business connectivity and inbound tourism numbers. Our support for ferries built on the success of previous years, and on 11 December 2015 the MV Catriona, the third hybrid ferry for the fleet serving the Clyde and Hebrides network, was officially launched. The future of ship building on the Clyde was further supported through the award of a £97 million contract to Ferguson Marine Engineering Limited (FMEL) for two 100 metre ferries, also supporting the Clyde and Hebrides network.
In 2015-16 we also increased investment in active travel by 70% and for the first time ever, over 50% of school children travelled actively to school and over 40% participated in on-road cycle training at school.
The past year has also had its challenges, particularly with the unforeseeable closure of the Forth Road Bridge (FRB) in December/January and the significant disruption and inconvenience this brought to local communities and to businesses across Scotland. The closure tested our organisation but we responded immediately with alternative travel plans, traffic management, availability of additional public transport provision and increased communication to keep the public informed so as to mitigate as best as possible the impact of the closure. Our ability to respond and achieve an earlier than planned reopening was in no small measure due to the commitment and performance of our staff and that of our operating company, Amey and other key stakeholders
I am very proud of the skill, flexibility and professional commitment of staff within Transport Scotland. I thank all colleagues involved and also acknowledge our partners across Scotland, who played a significant role in making this a very successful year in transport.
Purpose and Activities of the Organisation
Transport Scotland is an Agency of the Scottish Government responsible for national transport and accountable to Parliament and the public through Scottish Ministers.
We oversee the operation and improvement of the trunk road, ferry, inland waterway and railway networks in Scotland; air passenger facilities in the Highlands and Islands and are responsible for securing air routes for Scotland; national concessionary travel schemes and the provision of network traffic and travel information services. We also support Ministers in prioritising future transport policy and investments, whilst actively promoting sustainable transport and road safety.
The Scottish Government aims to create a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth, and this provides the focus for our work. Our delivery priorities are for improved connections across Scotland; increased safety and more innovation; continuously improved performance; better journey times; better reliability; greener transport alternatives and reduced emissions.
These provide a clear focus to support development and delivery of efficient, effective and sustainable transport infrastructure and services for Scotland.
Key Issues and Risks Affecting the Organisation
The principal risks and uncertainties facing Transport Scotland relate to our major contracts for and financial investment in the provision of rail, ferry, bus and air services, the maintenance of the road, rail and the Highlands and Islands air networks and major infrastructure such as the Queensferry Crossing.
The inherent risks relate to performance by contractors which can also be affected by outside factors such as adverse weather. We have focussed efforts in particular on improving winter resilience on the trunk road network and manage the related financial risks on these contracts by providing support, including monthly reporting to budget holders, directors and the Scottish Government.
Roy Brannen
Chief Executive, Transport Scotland
Performance Analysis
The following high level objectives were set out in our Corporate Plan 2012-15 which was extended by a year to cover 2015-16 and thereby align with the Scottish Parliamentary cycle.
| Improved connections across Scotland and internationally |
| Increased safety, more innovation |
| Continuously improving performance and organisation |
| Better journey times, better reliability, quality and accessibility |
| Low carbon technology and infrastructure, reduced emissions |
The following reflects the key contributions of each Directorate within Transport Scotland during 2015-16. It should be noted that many of the projects/programmes set out below contribute to the achievement of multiple objectives. Regular formal progress reports on each are provided to senior management during the year, including details of progress against targets and narrative on measurement methodologies and variations from targets.
A more detailed analysis of our performance is reported more fully in our Annual Review 2015 and Supplement Annual Review 2015.
Performance in Key Areas
Trunk Roads and Bus Operations
Average speed cameras introduced on the A9 between Dunblane and Inverness with the number of "fatal and serious" accidents in the area falling by almost 59%, and "fatal and serious" casualties down by approximately 64%. The period from July to December 2015 passed without a fatal accident on the route, the first time this has happened since 1978.
The HGV speed limit pilot, raising HGV limits from 40 to 50 mph on the single carriageway sections between Perth and Inverness, is expected to save over 150,000 vehicle hours per year. Journey times for all A9 users are well within predicted ranges and traffic volumes are around 4% higher than they were in 2013, before average speed camera deployment began.
The Agency supported the publication of Cleaner Air for Scotland, Scotland's first distinct air quality strategy which contains a vision for Scotland to have the cleanest air in Europe.
The publication by Road Safety Scotland of a suite of educational resources, covering the 3-18 age group, linked to the key learning approaches within Curriculum for Excellence and built on early intervention.
The completion in September 2015 of the 66 mile, £3.5 million Great Glen Cycleway scheme which forms part of the longer route from Oban to Inverness.
The opening of the new £2.8 million M8 Hillington Footbridge in September 2015 which is a vital link across the M8 motorway.
The publication of the Road Asset Management Plan in January 2016 setting out the level of service we intend to provide on the trunk road network alongside the work and investment required to achieve this.
Investment in bridge structures including completion of two bridges on the A830 between Fort William and Mallaig in December 2015, completion of the Dearg Bridge and strengthening of the Glenfarg footbridge in May 2015, and the opening of both Utha and Garbh bridges in January 2016.
We have continued to support our most vulnerable citizens by investing nearly £200 million in the Scotland Wide Free Bus Concessionary Travel Scheme for Older and Disabled People. Of the 1.5 million National Entitlement Cards with eligible travel concessions, around 1.3 million relate to the National Concessionary Travel Scheme (NCT) for Older and Disabled People with journeys on buses all over Scotland in 2015-16 estimated at around 147 million.
Progressing delivery of the Scottish Government's vision for one Smart ticketing system on all public transport throughout Scotland including via requirements in the new ScotRail franchise contract and recent ferry franchise procurement. Through the Confederation of Passenger Transport, Scottish bus operators have committed to invest in compatible ticketing equipment, in order to dovetail with ScotRail's programme. Public transport operators have established a new Steering Group with Transport Scotland to ensure compatibility and align delivery across all transport modes.
Major Transport Infrastructure Projects
The Forth Replacement Crossing (FRC) project is now expected to open to traffic by May 2017, in advance of the contractual date of June 2017 and within a revised budget range of £1.325 – £1.35 billion. The project has now realised cumulative savings of £245 million since construction began in June 2011.
The FRC Contact and Education Centre has proven to be hugely popular, with local communities, schools, colleges, universities and other organisations taking advantage of the many events held by the project team throughout the year. Since opening over 42,000 people, including more than 10,000 school pupils, have been informed about the project through the outreach and education programme.
Works are now well underway to construct the Aberdeen Western Peripheral Route/Balmedie to Tipperty (AWPR/B-T). Currently around 1,300 people are now working on the new road, with employment on the project set to peak at 1,500 in due course. It is estimated that, when complete in Winter 2017, AWPR/B-T will cut journey times across Aberdeen by half and will generate over £6 billion of additional income (at 2004 prices).
Construction of the £500 million M8/M73/M74 Motorway Improvements Project has continued to progress including the first major bridge as part of the project successfully manoeuvred into position. The new Braehead rail bridge, weighing in excess of 2,000 tonnes, slid into its final position over what will become the new M8 at Bargeddie. More than a third of the new M8 carriageway has already been completed within the site boundary, and disruption to the 100,000 vehicles using these routes every day has been kept to a minimum.
The £9.2 million investment by the Scottish Government in the A82 at Pulpit Rock has removed the bottleneck and traffic lights, which will increase journey time reliability and reduce driver frustration. Works commenced in May 2013, and the road-opened to 2-way traffic on 8 May 2015.
We are committed to completing the dualling of the A9 between Perth and Inverness by 2025. Estimated at £3 billion, this is one of the biggest and most expensive transport projects in Scotland's history. The three design contracts for the programme, each worth approximately £40 million, are now supporting over 800 engineering design related jobs in Scotland, including almost 350 for graduates and apprentices.
We launched the Academy9 Programme in August 2015 to maximise the benefit of the A9 dualling by infusing elements of the various activities involved into the education curriculum and increasing awareness of STEM (science, technology, engineering and mathematics) and civil engineering-related careers with the goal of getting local pupils ready for the local jobs which the programme will create. To date, some 240 pupils from 13 primary schools and 80 S3 pupils from three high schools along the A9 corridor have been introduced to the programme. Meanwhile, in order to keep residents and local businesses up to date on developments, regular newsletters have been published and local events, public exhibitions and drop in sessions have been held throughout 2015.
The design contract worth at least £30 million was awarded in May 2015 for the A96 dualling between Inverness to Nairn (including Nairn Bypass) and work has commenced on the development and assessment of the preferred option with a view to publishing draft Orders for the scheme later in 2016 for formal comment.
The A96 Inveramsay Bridge opened to traffic on 18 March 2016 and the scheme will cut congestion and improve journey time and traffic flows.
Aviation, Maritime, Freight and Canals
Aviation
The Agency continued to improve Scotland's international business connectivity and in‑bound tourism in partnership with Scottish Enterprise and Visit Scotland, including the introduction of Etihad's service from Edinburgh to Abu Dhabi and WestJet's service from Glasgow to Halifax, Nova Scotia.
The contract for supported air services to Campbeltown, Tiree and Barra was renewed. The new contract will result in significant improvement to these services, including the expansion of the Tiree and Barra services from daily to twice a day in order to address capacity issues. Sunday services to Campbeltown will also commence earlier in the year, as part of the new contract.
We increased the Air Discount Scheme discount rate from 40% to 50% for bookings made from 1 January 2016.
Ferries
The £97 million contract was awarded to FMEL, Port Glasgow to construct two new major 'dual-fuel' ferries for the Clyde and Hebrides Ferry Services network. These will be the largest commercial vessels to be built on the Clyde since 2001, and will mark the beginning of a new era of commercial shipbuilding on the Clyde. The ferries will operate on liquefied natural gas and marine diesel.
MV Catriona, launched in December 2015, underlines the Scottish Government's commitment to making our ferry fleet sustainable and reliable, whilst showcasing the expertise on offer at the FMEL shipyard.
We supported Scottish island communities through approximately £30 million of infrastructure investment at Ullapool and Stornoway harbours.
The completion of the roll-out of Road Equivalent Tariff fares to the Clyde and Hebrides Ferry Services (CHFS) network benefits the entire CHFS network with cheaper ferry travel, and fulfills a key commitment of our 2012 Ferries Plan.
Rail
Successfully completed on time and on budget, the Borders Railway is the longest new domestic railway to be constructed in Britain for over 100 years. The 30 miles of track and seven new stations provide a fast and efficient service connecting the communities of Midlothian and the Scottish Borders with Edinburgh and the wider Scottish rail network.
The launch of the new ScotRail franchise in April 2015, now operated by Abellio delivering significant improvements to rail services in Scotland, with more services, more trains and improved facilities.
A recruitment campaign was launched to employ 100 extra drivers across Scotland in preparation for the introduction of brand new electric trains to the central belt network from 2017, and the popular, faster "inter-city" style high speed trains serving Scotland's seven cities from 2018.
The Caledonian Sleeper franchise commenced operation on 31 March 2015. The on train service offer has greatly improved for passengers, with new food and drink menus featuring Scottish-sourced produce. A new headquarters has been established in Inverness, resulting in the creation of over 20 high quality jobs. The franchise agreement specifies the involvement of Small and Medium Enterprises and over 15 such companies are now involved.
The High Speed Scotland Summary Report was published on 21 March 2016. It sets out the appraisal of a high speed rail connection between Glasgow and Edinburgh, which emerged from initial feasibility work carried out by Transport Scotland when considering potential options for linking Scotland to the high speed network being developed by HS2 Ltd.
In December 2015, Gleneagles Station was awarded the Taylor Woodrow Partnership Award sponsored by the National Railway Heritage Awards.
"Delivering the Goods: Consultation towards Scotland's Rail Freight Strategy" was launched in October 2015, setting out a refreshed vision for a competitive, sustainable rail freight sector to support the Scottish Government's Economic Strategy by providing a safer, greener, and more efficient way of transporting products and materials through four core levers: innovation, facilitation, promotion and investment.
There are now eight operational Community Rail Partnerships (CRPs) in Scotland. Abellio's winning bid suggested a new delivery model for CRPs, within a broader "ScotRail in the Community" initiative, whereby the franchise holder would work with and fund established CRPs to develop their plans for a particular rail line. These plans include promotion of the line, utilising vacant station buildings for community based projects and adoption of a station, which can involve keeping station tidy, flower arrangements etc. The franchisee will also work with local community groups to establish interest in creating new CRPs or community initiatives.
Transport Policy
Fastlink, a bus rapid transit scheme, which provides a direct link from Glasgow City Centre to the new Queen Elizabeth University Hospitals Campus, opened in 2015 enabling regular, high‑frequency, high-quality bus service under a bus quality partnership.
Smarter Choices, Smarter Places is a behaviour change programme of over 160 projects across Scotland to increase the number of journeys done by walking, cycling, using public transport and car sharing. The £5 million in grant funding has attracted £6.5 million in match funding from partners including local authorities, Road Transport Partnerships (RTPs), NHS and other partners.
We continued investment in the ChargePlace Scotland network of electric vehicle chargers, which now comprises over 1000 public charging bays (equating to over 500 points) across Scotland, including 100 'rapid' chargers, making it one of the most comprehensive networks in Europe.
Following the success of the Transport Accessibility Summit in March 2015, we set up a Transport Accessibility Steering Group to co-produce an accessible travel framework for Scotland. A workshop in August 2015 prepared the groundwork for the steering group to co-produce the vision and action plan, to ensure the continued involvement of disabled people in shaping and monitoring the plan, which will be published in 2016.
In 2015-16 we also increased investment in active travel by 70% and for the first time ever, over 50% of school children travelled actively to school and over 40% participated in on-road cycle training at school.
We worked in collaboration with the Scottish Government, SEPA, local authorities and other stakeholders to support the publication of Cleaner Air for Scotland. This, Scotland's first distinct air quality strategy, contains a vision for Scotland to have the cleanest air in Europe.
Social and Community Issues
Our staff use the Scottish Government's 'Skills for Success' framework approach to learning, development and career planning. We continue to embrace a programme of education engagement (Career Ready), where staff use their skills and experience of work to help young people in the surrounding area prepare for employment.
In procuring major contracts we are at the forefront of delivering community benefits beyond those of the normal contract requirements. One example of this is the benefits to the community being delivered through the FRC project. This project has continued to directly support an average of 1,200 jobs, with total indirect and induced benefits estimated to be worth around £6 billion to the Scottish economy. In addition, Scottish firms have been awarded subcontracts totalling £264 million. During each year of construction, the FRC delivers 45 vocational training positions, 21 professional body training places and 46 positions for the long term unemployed, as well as providing further scope to maximise Modern Apprenticeship opportunities with 565 places for vocational and professional training and the long-term unemployed generated. The FRC project's commitment to engage with communities and share information regarding construction methods and progress has resulted in over 55,000 people directly engaging in the project by visiting the project exhibition or attending one of the many presentations that have taken place.
To date, £226 million worth of sub-contracts have been awarded as a result of the M8/M73/M74 Motorway Improvements Project. The project currently employs 1,050 people and has delivered opportunities for 35 apprentices and provided training opportunities for recently qualified graduates from a wide range of disciplines, with 27 graduates employed on site, eight of whom are registered for professional body training schemes. These figures are anticipated to rise as construction work on the project continues to increase during 2016.
Over £350 million worth of subcontracts have been awarded as a result of the AWPR/B-T project. The project currently employs around 1,500 people which is expected to rise to around 1,600 people at its peak and will also deliver an annual average of 30 vocational (apprentice) training positions, 15 professional body (graduate) training places and 30 positions for the long-term unemployed.
We are also delivering community benefits for the Highlands and Islands and Dundee in the aviation sector through our sponsorship for Highlands and Islands Airports (HIAL). Infrastructure is provided which supports essential air services and HIAL directly employs around 600 staff in those communities. We also contract three lifeline air services serving Barra, Campbeltown and Tiree which cannot be provided commercially and the Air Discount Scheme provides discounted air fares for the residents of some of Scotland's most remote communities, making fares more affordable.
The contract for the provision of ferry services to the Northern Isles with Serco actively identifies opportunities for supported businesses in the area and Serco remain committed to this principle, providing opportunities for supported businesses to benefit from a much larger range of opportunities and become involved in Serco's supplier forum.
Sustainable Growth
We contribute to the Scottish Government's purpose of sustainable economic growth, by supporting the targets set out in the Climate Change (Scotland) Act and the aims of the Second Report on Proposals and Policies, published in June 2013. Investment is set within a hierarchy which also promotes sustainable growth by seeking to maintain and safely operate the assets we already have, to make best use of those assets, and finally to target infrastructure improvements.
In addition, we have continued to support the development of the cycling and walking infrastructure, alongside the promotion of active travel, working with partners to deliver the Cycling Action Plan for Scotland and progress towards its vision of 10% of everyday journeys by bicycle by 2020. This will be taken forward through continuation of the Future Transport Fund.
We continue to promote alternatives to private car travel through funding to CarPlus to develop a network of car clubs across Scotland, and to the Energy Saving Trust to promote fuel efficient driving as well as working with organisations to encourage their transitions to low carbon travel and transport choices.
Future Developments
Transport Scotland's Strategic Transport Projects Review, published in December 2008, set out investment priorities for the next 20 years. This is targeted at facilitating better movement of people and goods to increase wealth and enable more people to share fairly in that wealth. Priority projects including the FRC, EGIP and AWPR continue to progress.
In addition, we are continuing to work with partners and stakeholders to take forward the development and design of other projects such as the A9 dualling between Perth and Inverness and the upgrading of the A82 between Tarbet and Inverarnan. Work commenced in September 2015 on the first A9 dualling scheme between Kincraig and Dalraddy. The project will support businesses, communities and tourism through Scotland by improving access to and from the Highlands.
Transport Scotland has a new Forth Bridges Operating Company contract to undertake responsibilities of the former Forth Estuary Transport Authority (FETA) as well as those that will come from the Queensferry Crossing. We also have responsibility for the residual FETA assets and liabilities, including those in respect of the existing liabilities accrued for FETA pensions under the Lothian Pension Fund local government scheme. Actuarial valuations have currently identified the value of the pension liabilities at £8.5 million. Transport Scotland utilised the £3.7 million residual value of FETA reserves to part-fund this payment with the balance of £4.8 million funded from Transport Scotland's 2015-16 budget.
Financials
The financial statements for the year ended 31 March 2016 have been prepared in accordance with the Accounts Direction given by the Scottish Ministers in pursuance of the Public Finance and Accountability (Scotland) Act 2000, and in accordance with The HM Treasury Financial Reporting Manual (FReM). The financial statements are consolidated within the Scottish Government Consolidated Resource Accounts.
These financial statements were authorised for issue on 13 September 2016.
Our Annual Review is also published on our website at: www.transportscotland.gov.uk, and the Scottish Government Consolidated Resource Accounts at www.scotland.gov.uk.
Significant accounting policies
The areas where accounting judgements have significant impact are outlined below:
Valuation of the Trunk Road Network
The trunk road network is valued on the basis of current replacement cost, adjusted to reflect the current condition of the road component and the depreciation of structures and communications assets. To produce this valuation requires the use of assumptions, estimates and professional judgement. The model used to produce the valuation is known as the Road Authorities Asset Valuation System (RAAVS), and work is currently undertaken by WS Atkins using standard costs to value the individual components of the network asset and indices to revalue these on an annual basis through a joint contract with the other UK Road Authorities.
Recognition and the valuation of provisions
Due to the long term nature of our road and rail improvement schemes certain assumptions and judgements are required to be made for the estimated cost of land acquisition and compensation claims. This is due to the often protracted negotiation periods involved and the initial uncertainty over both the financial value and the final payment date of any compensation.
Valuation of accruals
Due to the timing and availability of final year end information from external parties and operating companies within Concessionary Travel, Rail and also Roads maintenance contracts, certain assumptions and judgments are required to be made when processing final accruals.
Public Private Partnerships (PPP) – the balance of control
We have three Public Private Partnerships (PPP) agreements in the form of Private Finance Initiative (PFI) contracts (M77-Connect, M74/M6–Autolink & the M80 Highway Management). These arrangements meet the definition of Service Concession Arrangements in accordance with the disclosure requirements of IPSAS 32.
We also have PPP agreements in the form of Non-Profit Distributing (NPD) contracts for the M8/M73/M74 Motorway Improvements Project, with Scottish Roads Partnership (SRP) and Aberdeen Roads for the new AWPR/B-T. Both SRP and Aberdeen Roads are contractually obliged to provide the infrastructure and related services to the public on our behalf. We will retain overall control of the related assets and account for them on the Statement of Financial Position (SFP).
We have reviewed the degree of control exercised by each of the parties in existing PPP contracts and conclude that the degree of control we retain satisfies the requirements that the related assets created are required to be accounted for on our SFP. Details of the accounting treatment can be found in notes 1 and 16 to the annual accounts.
For details of the differences between NPD and PFI contracts, see the Scottish Futures Trust website at www.scottishfuturestrust.org.uk
Rail infrastructure in Scotland
Our responsibility for rail strategy includes setting strategic outcomes, primarily through Network Rail and the ScotRail and Caledonian Sleeper franchises, and defining the level of public expenditure available to support this.
Network Rail outputs and associated funding for Control Period 5 from 1 April 2014 to 31 March 2019 in Scotland was determined by the Office of Rail Regulation (ORR). Following their reclassification as a central government body in 2014, Network Rail now borrows from the UK Government to cover its future financing requirements. The major projects specified by Scottish Ministers for delivery by 2019 are largely funded through this agreement, which includes a ring-fenced borrowing limit to protect the delivery of Network Rail's programme in Scotland. Under the Memorandum of Understanding agreed with the UK Government following reclassification, the Scottish Government, with regulatory oversight from the ORR, continues to manage its own relationship with Network Rail in the delivery and funding of specified outputs on the Scottish rail network.
Funding
Resources to fund our operating costs and capital investment programme were allocated in the Scottish Government Budget 2015-16.
The choice between public and private funding is governed by suitability for alternative forms of finance (including value for money as well as availability). The policy decision set out in the 2015-16 budget is to maximise investment by utilising all available forms of finance (whilst working within a 5% affordability envelope for revenue financed schemes) in light of significant capital constraints.
Financial performance and use of resources
We are required to monitor expenditure against our budget which forms part of the Infrastructure Investment and Cities portfolio. During the year, the budget can be subject to revision and adjustment via the Scottish Government Autumn Budget Revision (ABR) and Spring Budget Revision (SBR). The table below shows the movement in our budget and comparison with the outturn.
| Original
Budget 2015-16 £000's |
ABR Adjust £000's |
SBR Adjust £000's |
Roundings
from
Budget Bill £000's |
Revised Budget 2015-16 £000's |
Outturn
2015-16 £000's |
Variance £000's |
|
|---|---|---|---|---|---|---|---|
| Rail Services | 808,300 | (14,100) | - | 48 | 794,248 | 748,587 | 45,661 |
| Concessionary Travel | 260,600 | - | - | - | 260,600 | 252,431 | 8,169 |
| Motorways & Trunk Roads | 646,550 | 10,196 | (60) | 52 | 656,738 | 724,235 | (67,497) |
| Ferries | 187,100 | - | - | (55) | 187,045 | 200,894 | (13,849) |
| Air | 52,900 | - | - | - | 52,900 | 57,799 | (4,899) |
| Other Transport | 65,900 | 3,240 | (865) | 34 | 68,309 | 66,401 | 1,908 |
| Scottish Futures Fund | 20,250 | - | - | - | 20,250 | 14,597 | 5,653 |
| Local Authority Grants | 29,900 | - | - | - | 29,900 | 29,961 | (61) |
| Total DEL | 2,071,500 | (664) | (925) | 79 | 2,069,990 | 2,094,905 | (24,915) |
| AME | - | - | 1,000 | - | 1,000 | (3,098) | 4,098 |
| ODEL PFI Resource | 80,900 | (2,100) | 1,547 | (13) | 80,334 | 80,322 | 12 |
| ODEL PFI Capital | - | - | 99,223 | - | 99,223 | 99,223 | 0 |
| TOTAL | 2,152,400 | (2,764) | 100,845 | 66 | 2,250,547 | 2,271,352 | (20,805) |
A total of £2,071 million of budget cover was allocated from the Scottish Government Departmental Expenditure Limit (DEL) budget (14-15: £1,942m). Annually Managed Expenditure (AME) relates to land compensation and damage claims on the trunk road network (14-15: -£10m). The remaining £180 million of budget (14-15: £270m) represents on-balance sheet PFI/PPP projects scored out-with DEL. Of this, £80 million is scored against resource and includes payments for the, M77, M80 and M6 schemes. The capital element relates to the construction costs of the M8/M73/M74 project. These budgets form part of the overall budget of the Scottish Government.
Outturn Analysis
| Transport Scotland 2015-16 |
Budget £000's |
Actual £000's |
Variance £000's |
|---|---|---|---|
| Resource – Operating Costs | 897,358 | 900,435 | (3,077) |
| Resource – Investment | 612,615 | 592,088 | 20,527 |
| Resource Depreciation (non-cash) | 111,525 | 93,673 | 17,852 |
| Capital | 448,492 | 508,709 | (60,217) |
| DEL total | 2,069,990 | 2,094,905 | (24,915) |
| AME | 1,000 | (3,098) | 4,098 |
| PFI Resource (ODEL) | 80,334 | 80,322 | 12 |
| PFI Capital (ODEL) | 99,223 | 99,223 | 0 |
| Total | 2,250,547 | 2,271,352 | (20,805) |
The final outturn for the year against the main budget areas is shown in the outturn analysis table. The DEL overspend of £24.9 million, comprises a cash overspend of £42.8 million and a non-cash underspend of £17.9 million. In year savings including lower than expected levels of inflation within Rail Franchise and Infrastructure, contingencies released within High Speed Rail and efficiencies within the FRC project were offset by additional costs of £9.2 million from the closure of the Forth Road Bridge and recognition of £141 million of in-year capital costs of the AWPR project, which now require to be included within Capital DEL following the Office of National Statistics (ONS) reclassification of the project.
The underspend of £17.9 million on non-cash DEL is due to the RAAVS condition outturning lower than budget. The ODEL Capital figures reflect only the construction costs of M8/M73/M74 project, together with the budget allocated in the Spring Budget Revision.
The total overspend of £21 million (14-15: £206m underspend) represents approximately 0.9% (14-15: 9.4%) of the overall budget. This overspend is being managed within the overall Scottish Government budget position.
Transport Scotland has a new Forth Bridges Operating Company contract to undertake the responsibilities of the former FETA as well as those that will come from the Queensferry Crossing. We also have responsibility for the residual FETA assets and liabilities, including those in respect of the existing liabilities accrued for FETA pensions under the Lothian Pension Fund local government scheme. Actuarial valuations have identified the value of the pension liabilities at £8.5 million. Transport Scotland utilised the £3.7 million residual value of FETA reserves to part-fund this payment, with the balance of £4.8 million funded from Transport Scotland's 2015-16 budget.
The Statement of Comprehensive Net Expenditure (SoCNE) on page 27 identifies net operating costs of £1,666 million. Capital expenditure is not recognised as in-year expenditure within the SoCNE, but the table below provides a reconciliation of overall outturn to SoCNE.
| £000's | |
|---|---|
| Net Operating Costs per SoCNE | 1,665,483 |
| Add: Additions to Intangible Assets (note 7) | 30 |
| Add: Additions to PPE (note 6) | 557,364 |
| Add: Additions to Investments (note 9) | 53,711 |
| Less: Disposals of Intangible Assets (note 7) | 0 |
| Less: Disposals of PPE (note 6) | (1,464) |
| Less: Repayments of Investments (note 9) | (3,767) |
| Less: Disposals on Assets held for Sale (note 8) | (5) |
| Less: De-trunkings (note 6) | 0 |
| Add: De-trunkings depreciation (note 6) | 0 |
| Outturn per Management Commentary | 2,271,352 |
A further analysis of actual expenditure in 2015-16, is analysed opposite by operational area within Transport Scotland.
The majority of Transport Scotland's budget is spent, either directly or indirectly, with private sector companies. Only 1% is utilised on the ongoing Agency running costs. The chart below shows the percentage spent on each of the main areas of service provision identified in the budget.
The total asset base is £18 billion, the majority of which relates to the trunk road network. Additions to the value of the asset include the Forth Road Bridge, transferred from FETA on 1 June 2015 and the completion of the A82 Pulpit Rock scheme.
Relationship with suppliers
We are committed to prompt payment of bills for goods and services and aim to settle all undisputed invoices within contract terms and also in line with the Scottish Government 10 day payment policy. We settled 96% of invoices within this timescale (14-15: 96%). The amount owed to trade creditors at the year-end as a proportion of the aggregate amount invoiced during the year, represented 0.3 days in proportion to the total number of days in 2015-16 (14-15: 1.2 days).
Future Spending Plans
The Scottish Budget Draft Budget 2016-17, published in October 2015, provides details of our spending plans that will help deliver sustainable economic growth. These allocations are included in the table below for the coming financial year.
| 2016-17* |
|
|---|---|
| Resource – Operating Costs | 862,784 |
| Resource – Investment | 640,066 |
| Non-Cash | 112,025 |
| Capital | 509,892 |
| Financial Transactions | 7,000 |
| Total | 2,131,767 |
| ODEL | 86,828 |
| Total | 2,218,595 |
*Source- Scottish Budget Act 2016-17
Sustainability
The Climate Change (Scotland) Act 2009 requires us to report on corporate operational emissions across activities such as office energy use and business travel. Collectively, these actions underpin the commitments in our Carbon Management Plan (CMP).
When the CMP was last refreshed in 2013, it set a target to reduce our operational carbon footprint by 16% by the end of 2015-16, based on a 2010-11 baseline. In order to meet this target, the following emission reduction targets were set across a suite of corporate emissions:
- Business travel emission: 19.4% reduction against the 2010-11 baseline
- Commute travel emissions: 7.8% reduction against the 2010-11 baseline
- Office energy emissions: 6.1% reduction against the 2010-11 baseline
- Office waste emissions: 25% reduction against the 2010-11 baseline
The corporate emission reduction target was very ambitious and based on a limited dataset. By 2015-16, our emissions were 8% below our 2010-11 baseline. Whilst not meeting our CMP target, we do note a reduction in emissions against our baseline. A detailed Sustainability Report will be published in late 2016, providing fuller details of our operational carbon footprint. During the year there has been a further 5% reduction in emissions compared to the previous year.
Energy: Emissions from electricity use at Buchanan House have decreased by 1.9%, however there was an increase of 0.4% in gas consumption. The utilities information is specific for Buchanan House only.
Travel: Emissions from business travel have decreased by 17% on the previous year. Emission reductions were achieved for rail travel (26%), underground travel (100%), car hire (28%), taxi travel (51%) and ferry travel (100%). There were however increases in emissions for air travel (28%) and bus travel (44%).
The 100% decreases in emissions for underground and ferry travel are due to an alteration in the emissions factors associated with these modes of transports. The alteration in emissions factors also explains the increase in emissions attributed to air travel. The number of business flights actually reduced from 397 in 2014-15 to 300 in 2015-16, which equates to an 18% reduction in kilometres travelled.
Corporate Operational Carbon Emissions 2015-16
| Element | Metric | Baseline in 2010-11 | Actual in 2014-15 | Actual in 2015-16 | % change compared to previous year | Indicator | |
|---|---|---|---|---|---|---|---|
| Total Emissions | - | kg/CO2e | 724,697 | 732,415 | 689,003 | -5.9% | ⇓ |
| Energy (Scope 1&2 GHG emissions) | Electricity (BH) | kg/CO2e | 315,768 | 300,821 | 295,000 | -1.9% | ⇓ |
| Gas (BH) | kg/CO2e | 221,376 | 211,049 | 212,000 | 0.4% | ⇑ | |
| Travel (Scope 3 GHG emissions) | Business Travel | kg/CO2e | 186,547 | 217,639 | 179,003 | -18% | ⇓ |
| Waste | Waste | kg/CO2e | 1,097 | 2,906 | 3,000 | 3% | ⇑ |
Roy Brannen
Chief Executive
12 September 2016