Scotland’s capital spending budget is to be slashed by 36 per cent after finance secretary John Swinney presented his draft budget to the Scottish Parliament.
The announcement follows last month’s Comprehensive Spending Review and the country’s overall funding will fall from £28.2 billion in 2009/10 to £27.3bn in 2010/11.
Key capital projects including the Forth Road Bridge will be protected but among the biggest losers are housing and regeneration.
The housing budget will fall from £448 million to £390.8m, a drop of 12.7 per cent.
Mr Swinney said spending on capital projects would be sustained by moving £100m from this year’s budget, and plans were still on track for constructing a replacement for the Forth Road Bridge.
Overall the capital budget will fall by £1.2bn, or 36 per cent.
Scottish Building Federation chief executive Michael Levack said the draft budget was not as bad as it might have been.
He said: “Heading into today’s announcement, the settlement from last month’s UK spending review suggested the capital heading of the Scottish budget would have to bear the entire burden of a £900m cut in public spending next year.
“In this context, John Swinney’s announcement that £100m will be transferred to the capital heading of the budget is clearly very welcome news for the construction industry. But the burden of these cuts on capital spending is still a heavy one.”
He added: “I listened with particular interest to Mr Swinney’s proposal to establish a new £2.5bn programme of revenue financed investment for construction projects. We now need to see the detail of how this programme will be implemented on the ground.”
But he conceded the sector faced a long future of “doing more with less”.
He added: “Over the coming weeks, I hope that MSPs will work together to prioritise additional funding for affordable housing and to maximise investment in the school building programme. These categories of expenditure should be our overriding priority if we are to accelerate the path to economic recovery.”
In his budget speech, Mr Swinney said he had been forced to take difficult decisions on housing.
He said the government would seek to “re-profile some housing and regeneration capital spending; and to focus the support available to those affected by the economic downturn”.
It pledges to use £50m from the Scottish Joint European Support for Sustainable Investment in City Areas fund to help provide affordable homes in disadvantaged areas and expand on its National Housing Trust initiative to kickstart projects that have stalled because of the recession.
Mr Swinney said: “Despite the biggest reduction in public spending imposed on Scotland by any UK Government, this is a budget that protects jobs, economic recovery and frontline services.
“In bringing forward my proposals, I have been guided by three over-riding priorities: to promote and secure Scotland’s economic recovery; to protect and invest in Scotland’s vital front-line public services; and, to take forward action on climate change so as to maximise Scotland’s potential.”