Convener, good morning to you and colleagues on the committee.
The Scottish budget has been set in extraordinary circumstances. On 31 January, the United Kingdom left the European Union against the express wishes of the majority of the people of Scotland. In the next year, the UK Government will enter into trade negotiations with the EU, for—it has said—agreement by the end of 2020.
The outlook for the economy continues to be dominated by Brexit and the significant uncertainty that is associated with whether the UK will reach a trade agreement with the EU and the potential terms of EU and non-EU trade that will take effect from that point. As a result, a no-deal Brexit remains a risk to the Scottish economy, and the scale of the uncertainty is likely to continue to impact on business and consumer sentiment.
The other factor to consider is the late UK budget, which was deferred from 6 November last year to 11 March. As the committee and Parliament know, that has meant challenges to the funding that is available for public services in Scotland and to the implications of the UK Government’s tax policy for the country. Further delay to the budget would have exacerbated the uncertainty, so today’s confirmation that the UK budget will proceed on 11 March is welcome.
Against that background, we set out our proposals for the finance, economy and fair work portfolio, as it was. Despite challenging headwinds, there are encouraging trends in the economy. The labour market continues to perform strongly when compared to historic records, and Scotland’s productivity continues to grow. In the year to quarter 3 of 2019, productivity in Scotland grew by 0.8 per cent compared to growth of 0.1 per cent in the UK.
Independent forecasts for Scotland expect growth of around 1 per cent this year and say that growth will strengthen gradually, although it will stay below historical levels. We must do all that we can to establish the right environment for business to grow, create jobs and invest in.
Our newly refreshed economic action plan sets out a range of positive actions that the Government is taking to deliver inclusive growth. It sets out how we will tackle the global climate emergency, grow an inclusive economy and face up to the challenges of Brexit, changing demographics and shifting global circumstances.
The Scottish Government is committed to delivering a successful economy that works for all of Scotland. Our approach to inclusive growth means that we are proactively investing to improve our prospects for long-term transformational change that is underpinned by a strong, competitive economy alongside reduced levels of inequality and poverty. In the budget, we are making a number of commitments to improve our competitiveness, boost investment across Scotland and support our commitment to fair work, enabling access to quality jobs and decent incomes.
In 2021, we are committed to providing £220 million in seed funding to support the establishment of the Scottish national investment bank. We are increasing the international trade and investment budget by more than a quarter as part of our ambitious plan to increase the value of exports from 20 per cent to 25 per cent of Scotland’s gross domestic product over the next years and to mitigate the effect of the UK’s exit from the EU.
We are investing in the new manufacturing institute for Scotland, which will bring together industry, research and the public sector to help companies across Scotland to embrace new manufacturing techniques, support research and develop the skills of our workforce.
We will maintain the UK’s most competitive business rates regime with the lowest poundage and relief schemes including the small business bonus and the business growth accelerator, which the Scottish Fiscal Commission estimates to be worth £744 million.
We will make at least £37 million available to support research and development projects and meet our target of doubling business investment in R and D by 2025.
We are investing around £2.3 billion in our colleges, universities and enterprise and skills bodies, to enable them to provide the vital support that is required to realise Scotland’s economic vision. Our green growth accelerator model will extend the current growth accelerator model to unlock additional investment for infrastructure projects that support our transition to a net zero-emissions economy.
Scotland’s employment rate remains high compared with historical records, and our unemployment rate remains low. This morning’s labour market statistics exemplify that. There has been a positive change since the previous quarter: employment is up to 75 per cent and unemployment is down to 3.5 per cent, which is near the record low that we saw last year.
I recognise that there is more to be done. We have to tackle barriers to work, support training and promote fair work—all are essential elements of improving Scotland’s economy and improving opportunities here. We will continue to develop and deliver our fair start Scotland service, which gives individualised support to 38,000 people who are facing the greatest barriers to employment. We will double our investment—from £10 million to £20 million—in the flexible workforce development fund, which supports the upskilling and retraining of Scotland’s workforce. We aim to support more than 2,000 women to return to work following a career break. As we set out in our fair work action plan, we will continue to work towards Scotland being a world-leading fair work nation. As part of our new approach to funding employability services, we will better align funding and deliver stronger outcomes for people who are seeking work by bringing together a number of existing funding areas, including the local employability model, the employability fund and community jobs Scotland.
This budget also supports the discovering your potential programme, which is aimed at reducing inequality by targeting care-experienced young people, who are one of the most disadvantaged groups in the labour market. We will support parents to reduce barriers to work and provide support to help low-income parents in work. We will also work to close the disability employment and gender pay gaps.
I hope that my opening remarks are helpful. Kathleen Swift, Dominic Munro and Richard Rollison and I will be happy to do our collective best to answer your questions.