Scottish Government Funding - Islands Programme, Carbon Neutral Islands Capital Fund and Regeneration Capital Grant Fund
Argyll and Bute Council · 19 June 2025
Back to Environment, Development and Infrastructure Committee — 19 June 2025 and its agenda
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ARGYLL AND BUTE COUNCIL ENVIRONMENT, DEVELOPMENT AND INFRASTRUCTURE COMMITTEE DEVELOPMENT AND ECONOMIC GROWTH 19 JUNE 2025 SCOTTISH GOVERNMENT FUNDING - ISLANDS PROGRAMME, CARBON NEUTRAL ISLANDS CAPITAL FUND AND REGENERATION CAPITAL GRANT FUND 1.0 EXECUTIVE SUMMARY 1.1 The Scottish Government has announced that Islands Programme funding of £5.3m would be available for the 2025/26 financial year to fund capital projects on inhabited Scottish islands. A further £1.4m is available to support the Carbon Neutral Islands (CNI) in their progression towards net zero. In addition, a call for stage one Expressions of Interest for Regeneration Capital Grant Fund (RCGF) applications for projects delivering in the 2026/27 financial year has also recently been issued. This paper outlines the funds, the respective requirements for applications to each fund and progress made towards identifying projects for submission. All three funds have made a significant contribution to the delivery of capital projects across Argyll and Bute over previous years. 1.2 Members are asked to note that these are all highly competitive funds and based on previous years it is considered likely that budgets will be oversubscribed. Once applications are submitted, the Transformation Projects and Regeneration Team will continue to have a role in ensuring that we fulfil the grant conditions including monitoring and reporting requirements. Project Officers within lead organisations will be responsible for managing the delivery of successful projects and ensuring all funding is drawn down in line with the criteria for the programme. RECOMMENDATIONS It is recommended that the Environment, Development and Infrastructure Committee:- i). Note the process for applying to the Islands Programme and Carbon Neutral Islands Capital Fund and the 22 July 2025 deadline for applications.
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ii). Approve the recommended Island Programme projects detailed in paragraph 4.10 that will form the basis of funding bids to the Scottish Government. iii). Approve the submission of any of the potential CNI Capital Fund Projects listed at paragraph 4.15, subject to the project lead determining that this is still a project that should be progressed. iv). Note the process for applying to the Regeneration Capital Grant Fund and the 27 June 2025 stage one deadline. v). Approve the submission of any of the recommended RCGF projects listed at paragraph 4.22 that will form the Expressions of Interest from Argyll and Bute Council to the Regeneration Capital Grant Fund for 2026/27. vi). Agree to delegate authority to the Executive Director with responsibility for Development and Economic Growth to approve the funding applications prior to submission to the Scottish Government. vii). Note that the Transformational Projects and Regeneration Team will be responsible for managing expenditure and ensuring compliance with grant funding conditions for successful projects.
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ARGYLL AND BUTE COUNCIL ENVIRONMENT, DEVELOPMENT AND INFRASTRUCTURE COMMITTEE DEVELOPMENT AND ECONOMIC GROWTH 19 JUNE 2025 SCOTTISH GOVERNMENT FUNDING - ISLANDS PROGRAMME, CARBON NEUTRAL ISLANDS CAPITAL FUND AND REGENERATION CAPITAL GRANT FUND 2.0 INTRODUCTION 2.1 On 13 May 2025, the Scottish Government announced that Islands Programme funding of £5.3m would be available for the 2025/26 financial year to fund capital projects on inhabited Scottish islands. The fund is open to all local authorities in Scotland with inhabited islands and will be distributed on a competitive basis. The fund will be administered by Scottish Futures Trust (SFT) on behalf of the Scottish Government. 2.2 The Scottish Government have also announced a £1.4m fund to support the Carbon Neutral Islands (CNI) in their progression towards net zero. This fund is only open to islands within the Carbon Neutral Islands Programme. Islay is one of six Scottish Islands that is eligible for this funding. CNI funding will also be distributed on a competitive basis for capital projects that support the transition to net zero. This paper provides background to the funds and sets out the proposed projects that will form the basis of funding applications to the Scottish Government. 2.3 On 15 May 2025, the Scottish Government also issued a call for Expressions of Interest for Regeneration Capital Grant Fund (RCGF) applications for projects delivering in the 2026/27 financial year. The fund is available for large scale transformational change projects with strong regeneration outcomes and is open to all local authorities across Scotland and the Clyde Gateway URC. This paper provides background to the fund, the process that has been gone through to identify potential projects and sets out the projects that are proposed to form the expressions of interest to be submitted by the Council.
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3.0 RECOMMENDATIONS 3.1 It is recommended that the Environment, Development and Infrastructure Committee:- i). Note the process for applying to the Islands Programme and Carbon Neutral Islands Capital Fund and the 22 July 2025 deadline for applications. ii). Approve the recommended Island Programme projects detailed in paragraph 4.10 that will form the basis of funding bids to the Scottish Government. iii). Approve the submission of any of the potential CNI Capital Fund Projects listed at paragraph 4.15, subject to the project lead determining that this is still a project that should be progressed. iv). Note the process for applying to the Regeneration Capital Grant Fund and the 27 June 2025 stage one deadline. v). Approve the submission of any of the recommended RCGF projects listed at paragraph 4.22 that will form the Expressions of Interest from Argyll and Bute Council to the Regeneration Capital Grant Fund for 2026/27. vi). Agree to delegate authority to the Executive Director with responsibility for Development and Economic Growth to approve the funding applications prior to submission to the Scottish Government. vii). Note that the Transformational Projects and Regeneration Team will be responsible for managing expenditure and ensuring compliance with grant funding conditions for successful projects. 4.0 DETAIL Islands Programme 4.1 The key objectives of the Islands Programme for 2025/26 are: • To sustain, enhance and develop transformational and critical infrastructure projects based on local priorities whilst supporting the National Islands Plan. • To reshape infrastructure by supporting shovel worthy projects, co-ordinating with other funded and planned initiatives on the islands to drive sustainable island growth. • To support projects which use clear Place based, Community Wealth principles to support inclusive island growth and reduce poverty while working to achieve the Scottish Government’s Net Zero Ambitions and a Just Transition. • To maximise leverage of partnership, investment, and cross policy funding.
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4.2 The Council has been successful in securing £1.5m of Islands Programme funding over the last three financial years. This has helped to deliver flood protection, digital infrastructure, care facilities and housing enabling infrastructure on the islands of Mull, Iona, Islay, Tiree and Coll. Funding of £5.3m is available in the 2025/26 financial year and this will be subject to a competitive bidding process. 4.3 In notifying the Council of the opening of the Islands Programme for 2025/26, the Scottish Government advised of the following timescale for submission and determination of applications: • Applications deadline – 22 July 2025 • Investment Panel recommendations – August 2025 • Projects for 2025/26 funding announced – early Autumn 2025 • Grant drawdown / project delivery - to 31 March 2026. It should be noted that the timescale for submission and drawdown of this fund is extremely challenging which requires the Council to prioritise projects that are sufficiently developed to be delivered this financial year. Members are asked to note that there is no facility for funding to be carried forward into the 2026/27 financial year. 4.4 Officers from the Transformation Projects and Regeneration Team have referred to the internal project pipeline and colleagues from other teams and services including the Health and Social Care Partnership to identify viable projects. Due to the short timescale for submission of applications, the fact the application period falls over the summer holiday period and subsidy control regulations, priority has been given to Council and other public sector projects. 4.5 All projects were considered against the following Scottish Government scoring methodology for the fund:- • Deliverability (30%) o Demonstrating Deliverability o Viability • Need and Partnership (35%) • Project Outcomes (35%) 4.6 SFT have emphasised there is a particular importance on deliverability as there is no ability for funding to be carried forward into the next financial year. Projects must be able to demonstrate that a financial commitment (i.e. have spent the money or have a signed contract) will be in place before 31 March 2026, ideally earlier. This is a challenging timescale given the need to follow public procurement regulations, confirm match funding and obtain statutory consents before contracts can be signed. 4.7 The Council have undertaken pre-application discussions with SFT in order to shortlist projects that are considered to have strong alignment with the funding criteria. SFT have advised that the 2025/26 funding will prioritise projects that deliver critical infrastructure and can demonstrate community support. 4.8 Following identification of potential Council led projects, it became clear that there were only a limited number which were suitable and ready to be delivered. On this basis, we
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took the decision to review potential community projects submitted through the Aspiring Places Portal. Two community projects (Unlocking Ulva and Skerryvore Lighthouse Cottages) have been identified as having a good fit with the objectives of the Islands Programme and as such are being recommended for funding bids to the Scottish Government. 4.9 Further details of priority projects for Islands Programme funding is included in the Table in paragraph 4.10. Given the timescales for submission of applications, work is already underway in preparing these applications for submission before the deadline of 22 July 2025. 4.10 Members are asked to note that funding is sought for the initial pre-construction phases of the Royal Hotel project. Funding from the Islands Programme is sought as part of a package of financial support for this project which includes match funding from the UK Government’s Community Regeneration Partnership, private sector funding and HIE. Project Name - description Project Lead IP funding request Total project value Former Royal Hotel, Rothesay – Detailed design works Transformation Projects and Regeneration £400,000 £6,200,000 Community Digital Hubs Phase 2 Strategic Transportation £100,000 £100,000 Unlocking Ulva – Community Barge Project North West Mull Community Woodland Company £200,000 £200,000 Skerryvore Lighthouse Shore Station - The Lighthouse Cottages Hynish Trust £225,000 £300,000 Carbon Neutral Islands Capital Fund 4.11 In addition to the Islands Programme, the Scottish Government has also confirmed £1.4m of funding to support the Carbon Neutral Islands (CNI) programme. The CNI project is a Scottish Government commitment aimed at supporting six islands to become carbon neutral by 2040. Islay is the only island within Argyll and Bute that is part of the CNI programme. 4.12 Islay Energy Trust have worked with the CNI Steering Group to prepare a Climate Change Action Plan. In 2024/25, they received £246,444 to deliver solar and battery storage to solutions to seven community buildings on the island whilst Islay Development Initiative received £142,285 to support their forestry project. 4.13 In order to ensure compliance with the national subsidy control regimes and to make funding applications submitted through the Council open, fair and transparent we are moving toward utilising Aspiring Places to gather community projects. For the first time,
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the Council has put out a call for expressions of interest to be submitted through the Aspiring Places platform and eight projects were submitted within the deadline. 4.14 Proposals have been reviewed by the CNI Steering Group on Islay and their proposed projects have been taken into consideration in identifying the projects listed below.. The timescale for application, decision and expenditure mirror those of the Islands Programme with a focus that outputs and outcomes should also contribute to the local Climate Change Action Plan. For the CNI Capital Fund there is a minimum project value of £75,000. 4.15 Work is ongoing by the CNI Steering Group to assess the viability of the proposed projects and we will seek feedback from SFT, if possible. This may lead to some of the following projects not progressing to application stage however at the time of writing; it is recommended that the following projects be submitted as bids. Should this change prior to committee a verbal update will be provided. Due to the timescales for submission of applications, work will commence in preparing these applications for submission before the deadline. Project Name - description Project Lead CNI funding request Castlehill Solar Array Expansion IET £200,000 Additional Measures - Community Buildings Phase 2 IET £310,000 Ionad Chaluim Chille Ìle Wind Turbine Initiative IET £200,000 Islay EV Capacity Initiative IET 300,000 Regeneration Capital Grant Fund 4.16 The Regeneration Capital Grant Fund (RCGF) is seeking expressions of interest for projects to be delivered in the 2026/27 financial year. RCGF supports place-based approaches to delivering regeneration and inclusive growth projects. The funding should help to address persistent vacant and derelict land as well as supporting locally developed, transformational place-based regeneration projects that involve local communities, help tackle inequalities and improve the economic, social, and physical environment of deprived, disadvantaged and fragile remote communities across Scotland. There is a focus on larger scale transformational projects that have strong regeneration outcomes including supporting and creating jobs, business space and bringing derelict land back into use. 4.17 Argyll and Bute Council has previously been successful in securing substantial funding through RCGF including the 2025/26 allocations for Fyne Futures Local Food Production and Training Centre and the Isle of Luing Community Slate Quarry projects. 4.18 The RCGF will follow a two stage application process with the following timescales: • Stage 1 Expressions of Interest - 27 June 2025 • Investment panel recommendations and applicants notified - August 2025 • Stage 2 application deadline - November 2025
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• Investment panel recommendations agreed - December 2025 • Projects for 2026-27 funding announced - early 2026 • Grant drawdown/project delivery - by end March 2027 4.19 As with the CNI funding, the Council have put out a call for community projects to be logged on the Aspiring Places platform. In order to allow a period of time for these significant projects to come forward the deadline for the submission of expressions of interest on Aspiring Places was set as 2 June 2025 and 33 projects were submitted for consideration. 4.20 Following this deadline, two officers reviewed the projects to identify those that fit most closely with the aims and objectives of the fund, which is to support largescale transformational projects that have strong regeneration outcomes as well as addressing market failure. A number of the projects put forward through Aspiring Places were assessed as not meeting the majority of these aims however officers recognise the benefits that these projects could bring. Where possible officers have signposted organisations to other funding sources, which may help them to progress their proposals. 4.21 We have also reviewed the emerging Pipeline of Projects to determine whether there are any Council led projects that might be eligible for RCGF funding. There was just one project with a funding gap that was eligible for this funding and could deliver within the timescale required. 4.22 Officers will now contact the potential projects to confirm the details on Aspiring Places and undertake other checks. Whilst further work is required to confirm the details of the projects, at the time of writing, it is recommended that the following projects be submitted as Expression of Interest bids for RCGF in 2026/27. Should this change prior to committee a verbal update will be provided. Due to the timescales for submission of applications, work will commence in preparing these applications prior to committee due to the imminent deadline for submission. Project Name - description Project Lead RCGF request Total project value Council Led Projects Kintyre Sea Sport Rural Growth Deal Project RGD Team £800,000 £3,100,000 Aspiring Places Projects Sonas Childcare South Islay Development £900,000 £1,085,100 Tarbert Harbour Watercraft Launch & Recovery Slipway and Community Activity Hub Tarbert (Loch Fyne) Harbour Authority £850,000 £1,400,000 Lighting Up the Shore Station - a sustainable hub for Tiree Hynish Trust £850,000 £850,000 Nonhebel Park (Final Phase) Mull and Iona Community Trust £400,000 £600,000
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Tighnabruaich Community Refueling and Community Hub Tighnabruaich District Development Trust £120,000 £200,000 4.23 Members are asked to note that these are all competitive funds and based on previous years it is considered likely that budgets will be oversubscribed. As such, it is important that projects are sufficiently developed to enable the best chance of success and to ensure that if successful the funding can be fully drawn down for the benefit local communities. 4.24 Once applications are submitted, the Transformation Projects and Regeneration Team will continue to liaise with SFT and the Scottish Government. Where projects are being delivered by other teams within the Council or third parties, the Team will work with the identified project lead for successful projects to ensure that we fulfil the grant conditions including monitoring and reporting requirements. Project Officers within lead organisations will be responsible for managing the delivery of successful projects and ensuring all funding is drawn down in line with the criteria for the programme. 5.0 CONCLUSION 5.1 The Islands Programme, Carbon Neutral Islands Capital Fund and Regeneration Capital Grant Fund offer can support island and community based infrastructure projects, which can help to sustain and enhance our area. Priority projects have been identified based on strategic fit with funding criteria and deliverability within challenging timescales. 5.2 The Transformational Projects and Regeneration Team have a strong track record of securing and overseeing the delivery of grant funded projects working in partnership with other Council teams and external stakeholders. 6.0 IMPLICATIONS 6.1 Policy - all applications are required to support relevant Scottish Government policy such as the National Islands Plan. The strongest applications will also support local policy. 6.2 Financial - if successful, the projects will secure funding from the Scottish Government however, some projects may also require match funding, where this is the case and it impacts on the Council this will be sought through other Council/HSCP approval processes. 6.3 Legal – the support of legal services will be required in relation to the grant contract, creation of standard securities and other legal requirements associated with the funding.
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6.4 HR – as an applicant for the grant there is an expectation that the Council meets the Fair Work First requirements of the Scottish Government. As the council currently do not meet all requirements, an application for exemption has previously been granted. Staff time will be required to prepare the applications, monitor and report on the applications and deliver the projects. 6.5 Customer Service – no implications anticipated. 6.6 Risk – each project will have its own risks, which will be managed by the team identified as the project lead. At this stage, there is a risk that the funding applications will not be successful and significant staff resource is required in developing and submitting applications. Given the time timescale for expenditure, there is a risk that delays in project delivery could reduce the funding received. 6.7 Climate Change - The projects will have varying impacts on climate change but all projects will look to minimise any negative impacts where possible. All projects put forward for CNI Capital Finding are focused on supporting the delivery of the Islay Climate Change Action Plan and making a positive contribution toward the move to net zero. 6.8 Fairer Scotland Duty - as an applicant for the grant there is an expectation that the Council meets the Fair Work First requirements of the Scottish Government. As the council currently do not meet all requirements an exemption has been granted by the Scottish Government. 6.9 Equalities - protected characteristics – no implications anticipated. 6.10 Consumer Duty – no implications anticipated. 6.11 Island Communities – for two of the funds projects are required to be based on an inhabited island to be able to bid for funding, the limited amount of funding available and the nature of the fund means that it isn’t possible for all island communities to benefit from this round of funding. All projects will seek to improve their local communities. 6.12 Children’s Rights and Wellbeing – no implications anticipated. Kirsty Flanagan, Executive Director with responsibility for Development and Economic Growth Councillor Jim Lynch Policy Lead for Economic Development, Housing, Communities and Islands 4 June 2025 For further information contact: Fergus Murray, Head of Development and Economic Growth Fergus.murray@argyll-bute.gov.uk
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Jonathan Welch, Transformational Projects and Regeneration Manager Jonathan.welch@argyll-bute.gov.uk Anna Watkiss, Senior Development Officer Anna.Watkiss@argyll-bute.gov.uk