Finance Secretary John Swinney said Scotland would have £3.3bn less to spend over the next four years after the spending review dictated an 11% budget cut.

For construction this will mean a £1.2bn fall in the capital budget – “a staggering 36%”. He warned that the scale of cut was unprecedented and would inevitably slow the pace of implementation of the Government’s infrastructure programme.

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 the replacement for the Forth Road Bridge, which is budgeted to spend £200m next year.

The Scottish Government said it would use alternative funding routes to help fill the yawning gap in project spending.

This includes taking forward a new pipeline of revenue financed investment worth up to £2.5bn, to be delivered through a Non-Profit Distributing model.

Scotland is also banking on innovative measures such as Tax Increment Financing, the National Housing Trust and investment through the Scottish Joint European Support for Sustainable Investment in City Areas fund to help fill the gap.

Capital spending cuts

Funding for the prison service is one of the biggest losers in the budget, facing a 22% cut while housing will see a cut of 19.3% in the next year.

There will be less money for rail and motorway services, and the axe has also fallen on the education budget with a 12% cut to colleges and universities.

Swinney told the Scottish Parliament that funding for the maintenance of the motorway and trunk road network “has been reduced”.

“This decision has been difficult and will have an impact and I make no claims to the contrary,” he said.

The budget document shows a cut in network strengthening and improvement cash from £56.4m this year to £15m next year, while the budget for other road improvements is cut from £49.7m to £24.2m.

The draft budget states: “In order to reduce the level of spending within housing and regeneration, we have taken the following difficult decisions: 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 JESSICA fund to help provide new affordable homes in disadvantaged areas and expand on its National Housing Trust initiative to kick-start projects that have stalled because of the recession.

The new pipeline of NPD investment will help support key projects across core public services, including:

The projects that will be taken forward by the Scottish Futures Trust, using a non profit distributing model of the private finance initiative. This will be delivered in partnership with the Scottish Government, local government, NHS Boards and other public bodies.