Seòmar agus comataidhean

Yes. Absolutely.

I will start on that, and then I might go to Kersti Berge, the director. The table that I have in front of me is the level 3 budget. Is that what you are referring to?

Good morning. Thank you for inviting me to give evidence and for your flexibility in making a slight change to the agenda that allows me to attend Cabinet today.

I am happy to talk about my portfolio budget today. Given the difficult financial circumstances, I am pleased to have secured a draft budget that includes substantial investment in some key areas, namely homelessness, affordable housing, heat in buildings, building standards and cladding remediation. By way of context, which is certainly relevant to budgetary matters, in the housing emergency action plan of September 2025, we committed further funding to enhance our offer in this financial year. That included an additional £40 million to invest in acquisitions, the establishment of a national fund to leave, and additional funding for housing first.

In my statement on the housing emergency action plan, I also committed up to £4.9 billion of a mix of public and private funding to support the delivery of at least 36,000 affordable homes over the spending review period. Our budget and the spending review that we are here to discuss today have confirmed that mix. A record £4.1 billion of that will be public investment, and we are confident that we will leverage the remaining £800 million, which we can discuss today.

We are complementing that record sum with record certainty. The sector has been asking for multiyear budgets for a number of years, and I am pleased that we are able to provide that. For this financial year, it means that £926 million will go to the affordable homes supply. That is the single biggest allocation since our records began in 1989.

The committee might remember that we doubled the adaptations budget to £20.9 billion in 2025-26. Our budget maintains that. It also includes £8 million of support for councils with rapid rehousing transition plans, £2 million for our newly rolled-out national fund to leave and an additional £4 million that we will invest in homelessness prevention actions. Although they are not in my budget, it is worth noting that £106 million of discretionary housing payments are also supporting policy objectives in the portfolio, including £83 million to mitigate the UK’s bedroom tax.

I turn to decarbonisation. I will be quick, as I do not want to spend too long on opening remarks. Our allocation of £1.3 billion to heat in buildings over the spending review period will allow us to maintain investment in our schemes and in our headline grant and loan offer.

On cladding remediation, we will make £371 million available over the spending review period, in line with our commitment that home owners should not have to pay for essential cladding remediation. That speaks to the national effort that will be required over the 15-year programme, in which we expect between £1.7 billion and £3.1 billion to be invested.

I will pause there in the interests of time, but there is much to dig into, and my colleagues and I will answer your questions.

11:15

Everything centres on our target of delivering 110,000 affordable homes by 2032. When I talk about that target, I sometimes like to remind those I am speaking to that it is the second target, because the first one—to deliver 100,000 affordable homes—was met in 2021. That is important context. Overall, around 141,000 affordable homes have been delivered since 2007.

You are quite right: in 2021, we set a new target of providing 110,000 affordable homes by 2032. By September 2025, we had delivered just over 31,000 affordable homes towards that target. We will have numbers for the rest of this financial year, and we expect 36,000 to be delivered over the next four years.

I have a couple of points to make about that. First, I expect 36,000 not to be the ceiling of our ambition over the coming four years. It is the minimum number of houses that I would like to be delivered through a mixture of public grant and the scope that exists for leveraging private investment.

Secondly, you touched on the issue of the accelerated delivery in the latter years. That will be necessary, because the first couple of years of the target’s programme were disrupted, as were so many things across our economy, by Covid, Brexit and inflationary pressures, which continue to hurt the construction industry. We are having to respond to that, and we will have to increase delivery towards the end of the programme.

However, I want to give the committee the confidence of knowing that everything that we are doing now is about trying to scale up in order to be in a position to achieve that target. It is not simply a question of how much public grant we can offer. The four-year certainty that we are providing will allow the supply chain and our construction industry to scale up in order to be in a position to deliver, and our councils and the house builders to know what is coming.

I know that there is a sharp curve towards the end, but everything that we are doing at the moment is about preparing to be able to deliver that.

On that last point, the public grant rises. I am fairly sure that that table has been published as part of the spending review. If it has not been, I am sure that it will be in due course. The profiling of the public grant over the four-year period is such that it rises. That is intentional.

By way of factoring in inflation, we will take account of a degree of predictable inflation when we think about how we will use that funding and what it might deliver. Of course, there will always be things that are outwith our control. No one expected some of the economic shocks that we have suffered in recent years. Part of that is outwith our control, but when it comes to funding, certainty and the policy landscape—for example, exclusions from rent control for mid-market rent and build to rent—for everything that is within the Government’s control we will try to create an atmosphere where we can simplify and speed up delivery in the coming years.

That is a very important question on an issue that occupies our minds a great deal.

In the early years of this parliamentary session, delivery was hampered by the economic events that we know were on-going and to which you have alluded, and there were underspends in those years. If I am getting my financial years correct, we fully utilised last year’s budget—the 2024-25 year—and we are on track to do the same in this financial year of 2025-26.

That demonstrates two things. First, general conditions are picking up. Secondly, the approach that has been taken to the deployment of the affordable home supply programme by the Scottish Government and by Kirsty Henderson’s team means that it is working on the ground. The programme works closely with those to whom we are offering grants; we stay in close contact with them and help to monitor progress. It is also a flexible scheme. Kirsty can probably say more about this than I can, but Kirsty and her team in their area offices not only review proposals and make the money available once the allocated spend has been made—and not in advance of that—but equally, the team can be flexible and move money around to where it can be spent to make sure that we are fully spending that budget. Kirsty might have more to say about managing underspends.

The only thing that I would add to that is that, at the beginning of this parliamentary term, we committed to £3.5 billion of investment, and that commitment will be met. Albeit there are different project variables that we have been responding to, that commitment will be met.

If it is of interest to the committee, that £3.5 billion over five years is compared to £4.1 billion of public investment over the coming four years. That will be a significant increase in investment and over a shorter period.

The committee knows that I have undertaken the sequencing work in respect of all the regulatory issues around heat in buildings and that the energy performance certificates reform—which we have brought to committee—was recommended to be first, with the private rented sector minimum energy efficiency standard and other issues to follow.

I am still waiting for public clarification of the warm homes plan content, which will inform the policy decisions on things such as PRS MEES. I am very aware that, as I take that decision, I will have to be conscious of the support that is offered to landlords. However, as of today, I do not know what is in the warm homes plan, so I have not made a final decision on PRS MEES in Scotland. I cannot comment, therefore, on the funding that would flow from that, but I will, no doubt, discuss it with the committee in due course.

When the UK Government will produce its warm homes plan is entirely outwith my control. The plan has been delayed a number of times so far, although the indication that we are getting from the UK Government is that the intention is that it will be forthcoming fairly soon. I would not want to overstress that point to the committee, because there is nothing that I can do to control that. What I can do, once I am in receipt of the plan, is consider it and its implications for Scotland, very quickly, and come back to you.

Mr MacGregor talked about a figure having been spent, and I was able to put on the record my own figures, which show that, by the end of December, £15.9 million had been spent.

I take this opportunity to encourage us not to put some misplaced emphasis on those consequentials, which have arisen once and will not arise again. Consequentials that arise from spend in England and Wales are absolutely fine, but they do not necessarily mirror the stage of the programme that another country might be at. As you all know, we had to introduce primary legislation in order to navigate Scotland’s unique legal system.

As welcome as £97.1 million of consequentials might be, they arise only once, as I said, and the amount is far less than the £371 million that we are allocating over the spending review period, and it is a complete drop in the ocean compared with the up to £3.1 billion that will be required to be spent over 15 years. I understand the scrutiny, and I completely welcome it, but I would just encourage us not to put a misplaced emphasis on consequentials, given the scale of the programme and the spend that will be required.