Meeting of the Parliament (Hybrid)

Meeting date: Wednesday, September 7, 2022

Official Report 1001KB pdf

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Public Sector Pay and Emergency Budget Review

The next item of business is a statement by John Swinney on public sector pay and the emergency budget review update. The cabinet secretary will take questions at the end of this statement, so there should be no interventions or interruptions.

14:54  

The cost of living crisis represents an unprecedented challenge. Families face a winter when they cannot afford to heat their homes, businesses face energy bills that they cannot pay and parents are struggling to feed their children. That is the reality of the crisis.

Although we are a long way from the full effects being known, last month, the Bank of England set out the reality that the United Kingdom is facing a recession as deep as that in the 1990s and as long as that following the 2008 financial crash.

That is the context within which the First Minister set out the programme for government. She confirmed that we will extend and increase the child payment in November and that we will protect the roofs over people’s heads with a rent freeze and a moratorium on evictions. Free school meals will be rolled out further, the fuel insecurity fund will be doubled, rail fares will be frozen until at least March and the warmer homes fuel poverty programme is being widened. That all comes on top of the almost £3 billion in support that is already budgeted for, and an existing £800 million of reliefs for business in this financial year.

The UK Government holds reserved powers over energy, tax, the bulk of benefits and business support, and over regulation that could help to address the crisis. The UK Government has borrowing powers and the ability to deploy financial instruments that can transform household and business budgets. It has all that, yet, as the crisis has worsened, no substantive action has been taken to help people and business. Urgent action is overdue, so I urge the Prime Minister and the Chancellor of the Exchequer not to waste another day before setting out their plans.

Today, I will update Parliament on the impact of the cost crisis on the public finances, and the steps that we will take to keep them in balance while funding the support that is in our power to provide. The crisis is not just a cost of living crisis, as some characterise it. The costs of doing business, of third sector support and of public services are all rising as well. Indeed, in all my experience, now and during my previous tenure as finance secretary, there has never been a time of greater pressure on the public finances.

Our budget was based on a UK spending review that simply did not foresee the levels of inflation that are now a reality. Last summer, inflation was just 2 per cent. In December, when the budget was agreed, consumer price index inflation stood at just 5.4 per cent. Now, it is more than 10 per cent and is predicted to go higher still. The result is simple: almost every cost that the Government incurs has risen. At the same time, our budget is now worth around £1.7 billion less than it was worth in December.

That alone would require the budget to be revisited, but in times of crisis the job of the finance secretary is not simply to balance the books; it is also to find the money to help families, to back business and to fund the priority projects that improve lives for the long term. Therefore, the emergency budget review must both identify funding to cope with inflation-driven cost increases and aim to support those who most need our help during the crisis.

The review must do so using only the fixed powers of the Parliament. Our total budget is fixed. We cannot vary income tax in-year. Our reserve funding is fully allocated. We have no legal ability to borrow to fund day-to-day spending on things such as pay increases. Our capital borrowing is allocated for projects such as new schools and housing projects that are supporting employment and investing in our recovery. In short, the Scottish budget is at the absolute limits of affordability.

Today, I will set out to Parliament the initial steps that the Scottish Government has taken, and steps that it will take, to manage the nation’s finances while maximising the support that we make available to help those who are in need. First, let me quantify the demand arising from public sector pay. As the First Minister set out to Parliament yesterday, in the midst of a cost crisis, our role in pay negotiations is to maximise the support to the lowest paid as a crucial part of our response to the crisis. My job is not to fight low-paid workers’ pay claims; it is to fund those pay claims. Accordingly, we have seen police officers agree a 5 per cent deal, while in ScotRail, the Associated Society of Locomotive Engineers and Firemen has similarly settled at 5 per cent.

Negotiations with some of the largest workforces, including the national health service agenda for change workforce, are on-going, but the enhanced pay offers that have been made, excluding direct local government contributions, total approximately £700 million. Last week, we also reached a proposed local government pay settlement. As a result of our intervention and the hard work of the unions and their members, the pay rise that is proposed for the lowest paid was significantly increased, with awards in excess of 10 per cent, while the increases for the most well-off were capped at £3,000. That is more money for the lowest paid, funded by the Scottish Government.

The proposed settlement means, however, that we must find additional savings. We said that there was no more money, and there is not. Funding the agreement means taking money from elsewhere.

Pay is not the only cost pressure that we face. We have rightly given a warm Scottish welcome to people who have been displaced from Ukraine as a result of the illegal and on-going Russian invasion. Almost 18 per cent of all displaced Ukrainians coming to the United Kingdom are coming to Scotland. That requires us to find around £200 million, which was not planned for at the time of the budget, just as the invasion began. I hope that no one in the chamber begrudges that support.

Public sector pay and the cost of supporting displaced Ukrainians, along with the rising costs due to inflation, are therefore placing enormous strain on our budget. In addition to those factors, we have a clear determination to support those who will find themselves in difficulty this winter. We have already provided almost £3 billion of support to people and, as the First Minister set out yesterday, we will go further. I have heard and am listening to proposals for further action. We are doubling bridging payments, freezing rail fares until beyond March, giving more help for energy efficiency, providing greater support for businesses and the third sector, and managing the impact of rising energy and food bills on hospitals and schools. None of that can be done without reducing planned spend in other areas and in other programmes.

Difficult choices must be made. There is no unallocated cash. There is no reserve that has not been utilised. Every penny more spent on one policy is a penny less spent on another policy. I have therefore written to the Finance and Public Administration Committee today, setting out around £500 million in reductions in planned spending and forecasting that we have made in recent weeks. Those include a reduction of £53 million in the budget for employability schemes. They include utilising funding of £56 million that has been generated by the ScotWind clearing process—funding that will be reinstated in future years and used, as planned, to invest in the just transition. The reductions include a £33 million deferral of ring-fenced agriculture funds, to be returned in future years and, while not impacting on eligibility, they include taking a risk-based forecasting approach based on demand and making a reduction of £37 million in the budget for concessionary fares.

Throughout the process we have made savings that we consider will have the least impact on public services and on individuals. Still, those decisions have not been easy and—in particular, the reduction in employability funding—they will not be without consequences. Given the circumstances that we face, however, they are unavoidable. At a time of acute labour shortages, historically low unemployment and soaring inflation, we have taken the view that we must prioritise wage increases over spending on employability. That is not a decision that we have taken lightly. It is not a decision that we would have wanted to take.

Any changes to budgets will be formally set out to Parliament in the budget revision process, but it is in the public interest that underlying savings are set out now, so that the scale of the challenge that we face is clearly understood and so that no one in the Parliament, or anyone who is negotiating pay deals, can be unaware of it. Many of the individual savings are small amounts of money, but together they add up to a significant reduction in expenditure, thereby enabling money to be invested in addressing the financial challenges that we face. Last week’s intervention by the Scottish Government in the local government pay dispute demonstrates what we are having to do. In order to shift to full consolidation of the award, further savings had to be made.

I have committed to publishing the outcome of the emergency budget review within two weeks of the UK fiscal event that is planned for later this month. Further savings will be required to balance the budget, especially if inflation continues to rise. The majority of our spend cannot be changed at this stage of the financial year. It is contractually committed or supports vital programmes. In short, what I have set out today is just the beginning of the hard choices.

There is one further point that Parliament must reflect on, and this is why I require time, following a UK fiscal event, before I can set out the results of the emergency budget review. For eight weeks we have heard the new Prime Minister talk of unfunded tax cuts—which will not help the lowest-paid people or those who are reliant on universal credit—and of cutting public sector spending to deliver tax cuts for businesses.

If, in pursuing those policies, the United Kingdom Government reduces the budgets of any portfolios for which we have devolved responsibility, the challenge that we face will become harder, as our budget will become smaller. That is the harsh reality of a fixed budget and limited powers. The Scottish Government simply does not have access to many of the levers that would provide the greatest support in this crisis, such as those relating to taxation of windfall profits, regulation of the energy market and borrowing.

That is why the new Prime Minister and her new chancellor must take action immediately. They have reserved to themselves the powers to deal with this crisis, so my appeal to the United Kingdom Government is to cancel the energy price rises and fund the targeted support that people desperately need; to help families who will struggle to feed their children and heat their homes this winter; and to provide the additional funding that is necessary to meet the impact of higher public sector pay and inflation.

We will do everything that we can. We will make the hard choices, but only the UK Government can act to end this crisis. It should do so, and I encourage it to do so now.

The cabinet secretary will now take questions on the issues that were raised in his statement. I intend to allow about 40 minutes for questions, after which we will need to move on to the next item of business.

I thank the cabinet secretary for advance sight of his statement. One word was missing from the statement, which was “sorry”—sorry to the people of Edinburgh and those in the rest of Scotland for the impact that the strikes have had on their lives, especially here in our capital city, where waste piled up on the streets for 12 days during our showcase Edinburgh festivals.

Scottish Conservatives warned Scottish National Party ministers during the passage of the SNP-Green budget that councils across Scotland would be put in a position in which they were unable to meet pay demands. Ministers did not listen and, after year-on-year cuts to council budgets, councils were limited in their ability to address local issues. Just this year, local councils have faced a cut of £251 million in real terms.

The cabinet secretary stated today that the Scottish Government is providing £3 billion. However, a report by the independent Scottish Parliament information centre shows that only £490 million of support has been put in place since October 2021. I am sure that the cabinet secretary does not want to mislead Parliament, so I hope that he will correct the record today.

I will ask two specific questions. It is clear that local government needs a new funding settlement, which the Government has failed to deliver for 15 years. Will the cabinet secretary look again at the idea of a new cross-party discussion about local government funding settlements in the future?

The cabinet secretary has announced £53 million of cuts from employability fund schemes. If we are going to face a recession, such schemes will be such an important part of getting people into work and saving jobs in Scotland. At the same time, the SNP Government is keeping £20 million aside for a referendum. Will he rethink that decision and invest in jobs, not a referendum?

I deeply regret the inconvenience that members of the public in Edinburgh and other parts of the country experienced during the disruption to refuse collection. The ability to address the issue and avoid industrial action would have been helped if, when the Government put more money on the table, Conservative leaders in the Convention of Scottish Local Authorities had not voted to offer workers a 3.5 per cent increase as opposed to the 5 per cent increase that the Government had made it possible to fund. The playing of politics by Conservative leaders in COSLA directly caused the industrial action in the city of Edinburgh, and they should be ashamed of themselves.

On funding, before the additional resources that the Government has provided, the local government settlement for 2022-23 represented an increase of 9.2 per cent in cash terms, or 6.3 per cent in real terms. That is a substantial funding increase for local authorities.

Mr Briggs should know me well enough to know that I would never put myself in the position of misleading Parliament, and it is disgraceful that he has made that suggestion. I will happily put in SPICe the substance of the list of support that the Government is putting in place to assist with the cost of living that is being wrestled with by members of the public. I have it in front of me—it totals £2.968 billion, and I will happily put that information with SPICe. Mr Briggs should be careful about whom he accuses of misleading Parliament.

I am happy to take forward discussions about the funding of local authorities; indeed, the Cabinet has agreed to embark on discussions with local authorities about funding, achievement of outcomes and the role of ring fencing, so that we can engage with them on questions of flexibility.

On the point about employability funding, I was explicit in my statement that I would rather not be making that reduction in public expenditure. However, I have no other choice. The point that I made in my summation to yesterday’s debate, which I make again today, is that we are operating in a fixed budget—we can go to no other pot of money than to take that money from existing commitments, which is why we have taken the decision on employability funding.

We think that the judgment is reasoned and rational, because we are experiencing historically low unemployment, we have significant inflationary pressures and the requirement and demand for employability services is likely to be low for the remainder of this financial year. That situation might not be the case in future financial years, as we look at the impacts. The UK Government could act to stabilise the situation, and I hope that it will.

On the question of the allocated resources for the referendum, my statement is focused on this financial year. The commitment to spend £20 million on an independence referendum—for me, that is necessary to ensure that Scotland can decide its own future and get out of the unhealthy and unsatisfactory arrangements of the UK—is expenditure for next year. If Miles Briggs wants to engage substantively in arguments about the challenges of the financial year, let us talk about this financial year and not about the next one.

We have allocated a little more time to reflect the wide interest and the number of members who want to participate, but that will require shorter questions, and shorter answers from the cabinet secretary.

I thank the Deputy First Minister for advance sight of his statement. Families and businesses across the country are already feeling the pain of rising energy bills, which is why Scottish Labour has called for active measures and welcomes the fact that the Scottish Government has come to agree with many of those pledges.

We appreciate that the Government is not immune from such pressures, as we face an unprecedented economic crisis. However, as well as specifying £500 million of cuts today, the Deputy First Minister has hinted at a larger figure of £1.7 billion. We need greater clarity.

On the £3 billion of support, the Deputy First Minister does not need to place anything with SPICe, which has already done the analysis—only £500 million of that figure has been put in place since the rise in energy costs; the rest pre-dates the rise. [Interruption.] The Government does face difficult choices but, if that is to be anything other than a euphemism, we need greater clarity, transparency and honesty.

What is the total value of the funding shortfall for which the Scottish Government is planning? Given that his predecessor suggested that head count would need to be reduced across the public sector by 30,000, will the Deputy First Minister confirm that that reduction forms part of the plans? Given the scale of the cuts that he has seemed to imply with the £1.7 billion figure, what plans has he asked civil servants to examine? When will he confirm when those plans will be put in place and the timeline for implementing them?

I am not quite sure where Mr Johnson gets his £1.7 billion figure from, but I will happily engage with him on those questions. The substance of the challenge that we face is the rising costs in budget lines. The point that I made about the £1.7 billion relates to the value of our budget because of the impact of inflation. Clearly, we are managing the challenges within the overall budget figure.

I estimate—I have already cited this figure to Parliament—that, on the basis of existing offers, the additional cost of public sector pay is about £700 million. That is a substantial sum of money that we must reconcile within a fixed budget. What I have set out today takes us substantively towards addressing many of the challenges.

Mr Johnson asked about some of the references to head count in the resource spending review. At this stage, none of my predictions on what will happen in the years to come would affect the contents of the resource spending review but, of course, we will have to turn the resource spending review into individual budgets. That process will be determined by many of the decisions that the UK Government takes on the contents of its budget for the next financial year.

To reiterate a point that I made in my statement, if the UK Government reshapes the balance of its budget between what it expects to generate in tax and what it intends to deploy in spending, that will undoubtedly have an effect on our budget, which may require us to revisit some of the assumptions in the spending review.

The budget will go through the normal process of parliamentary scrutiny. The autumn budget revisions will go to the Finance and Public Administration Committee in due course and there will be an opportunity to fully scrutinise all the changes that I am making. I am here today to provide transparency on the changes that we are having to make. Such a statement would not ordinarily be made at this stage in the parliamentary year. It is because we are having to take operational decisions of such a magnitude as we have never taken before that I have come to Parliament to make a statement and to address members’ questions.

It has taken us 10 minutes to do two questions, and we have 18 members who want to ask questions and half an hour for them to ask those questions, so we will have to pick up the pace a bit.

Although £82 million of what the Deputy First Minister calls savings is actually Barnett consequentials from the UK Government, can he provide more detail on the precise impact of the cuts to the budget? He has given us broad outlines, but I think that people deserve to know what the real impacts will be on rural communities, training funds and, of course, employability schemes. Can he give the people who will face the cuts a bit more detail on what the impacts will be?

I understand the aspiration that Mr Rennie sets out. We will engage in parliamentary scrutiny on such points and answer and address any questions that members have on them.

At the outset, I offer the reassurance that the Government is trying to take a set of decisions that minimises the impact on individuals. That will not be possible in all circumstances, but we are trying to take decisions that minimise the impact on individuals and to make judgments about when we think it is appropriate for us to reduce funding with that objective in mind.

I believe that all MSPs are keen to see everyone in employment paid more, given that we have rocketing inflation. However, given the financial straitjacket of devolution and the fact that we have had real-terms cuts to Scotland’s budget of 5.2 per cent this year, even before inflation spiked, what are the implications for the sustainability of Scotland’s public finances? Is the Scottish Government looking at whether it can continue to mitigate UK Government cuts in reserved areas?

The expectations on public sector pay in the budget were at 2 per cent. We are obviously at an increased level, and consolidated salary increases will flow through to future years, which will place increasing pressure on future years’ budgets. We must restate annually the contents of the resource spending review in order to take account of those factors. That puts increasing pressure on the Scottish Government’s budget and, as Mr Gibson highlighted, we do not have the range of flexibilities that we need to expand the size of that cake.

The Government will reflect on the decisions that need to be taken as we look at the contents of the budget, but we believe that it is vital that we sustain the support to mitigate the actions of the UK Government, especially for people in our society who are vulnerable, in order to protect our citizens in their time of need.

I remind members who wish to ask a question to press their request-to-speak button now or as soon as possible.

With tomorrow’s announcement from the UK Government, there is the possibility that the Scottish Government will receive additional funding as a result of the tax cuts down south. Can the Deputy First Minister confirm that the Scottish Government would use that money, should it arise, to fund tax cuts for hard-working Scots to avoid us being the highest-taxed part of the UK?

I will wait until I see all the detail before I decide what the tax stance of the Scottish Government and the proposals are going to be. We will see what the contents of tomorrow’s announcements are, but I reiterate my point to Parliament that, if there is an approach that rebalances tax and spending in the United Kingdom, I would imagine that there will be an impact on the spending power of the Scottish Government. That is an issue that Parliament will have to wrestle with very carefully.

In the Deputy First Minister’s statement, we were reminded that the bulk of benefits are reserved to Westminster, in particular the state pension. Incidentally, I do not think that that is a benefit—it is an entitlement.

Forty per cent of those who are entitled to pension credit do not claim it, and it has been like that for over a decade. Pension credit is a gateway to other benefits, so that saves the Treasury billions. As the UK Government is not pushing those claims—that may be deliberate—what can the Scottish Government do, despite the matter being reserved, to help Scottish pensioners claim their entitlement, which makes such a difference to so many?

That is a very important issue and it is one of the areas of work that is taken forward by the financial advisory services that the Government funds around the country. There is advice available to members of the public.

There is obviously a question about the degree to which people are aware of these opportunities to supplement their income entirely appropriately. I will take forward the point that Christine Grahame makes, to ensure that our advice agencies understand the importance of encouraging awareness of the opportunities.

It is local government that usually takes the hit when it comes to Government cuts. The country has seen the impact of £6 billion of cuts over the past decade. What will the impact of the review be on local councils and communities?

As I indicated earlier, in the local government finance settlement for this year, there was a 9.2 per cent cash-terms increase for local government and a 6.3 per cent real-terms increase. That is before we get to the additional money that I put into local government as a consequence of the pay deal.

Local government, in a very tight financial settlement, is being well supported. As I indicated in my answer to Mr Rennie, we are trying to minimise the impact of any judgments on individuals and communities, and that will be the approach that the Government continues to take as we look for ways to support those who are facing the greatest challenge from the cost crisis.

The workforce in the third and voluntary sector play an important role in delivering key services across Scotland, often in partnership with Government and local authorities. Today’s announcement will have an impact directly on them, I am sure.

What assessment has the Scottish Government made of the pay and other financial pressures on the sector? What can the Scottish Government do to support the sector at this hugely challenging time?

I acknowledge the significance of the third sector and its importance in providing support to individuals, which we saw during the pandemic and is ever more necessary now, during the cost crisis.

The sector will be under the same financial pressures that the Government is under. Our ability to support the sector to a greater extent is an issue that we will keep under constant review as we look for ways to maximise the support that is available, to provide resilience and capability in communities to meet the effects of the financial crisis that we face.

Does the Deputy First Minister agree that, if the Scottish Government had not wasted hundreds of millions on ferries that do not float, the malicious prosecution of Rangers, the delays with the sick kids hospital, of course, and other botched SNP projects, he would not be announcing the £560 million cut that he is announcing today?

Bluntly, no, because most of what Pam Gosal talked about was capital expenditure, and we cannot use capital expenditure to pay folks’ salaries. It is just not possible. I am very happy to answer questions in Parliament, but it would be helpful if they were slightly more relevant to the realities of life.

Today, the Deputy First Minister has outlined the hundreds of millions of pounds of savings that will have to be made for the Scottish Government to make the enhanced pay offer to public sector workers. Nobody wants to see those savings made, but we have heard how the Scottish Government’s fixed budget has fallen in real terms under Westminster, so we do not have a choice. Mr Briggs might want to think on that. Does the Deputy First Minister agree that not only do we need Westminster urgently to provide additional funding but we need independence, to put future decisions firmly in the hands of the Scottish Parliament and not the Tories at Westminster?

The cost crisis illustrates the limitations of this Parliament’s ability to deal with changing and dynamic circumstances. During Covid, we saw the United Kingdom Government extend its financial interventions to a quite extraordinary level. That was welcome. It was necessary in that moment, and it is necessary now. However, it would be better if we were able to take the decisions in this Parliament, as an independent Parliament, about the choices that our people need to face. It would be better if we had those controls at our disposal and did not have to wait for the UK Government to take decisions that we hope will assist us in our endeavours.

At this moment, as the cabinet secretary outlines £500 million of cuts, public corporation Scottish Water has reserves of almost £500 million, following its price hike earlier this year—a rise that looks set to happen again next year. Has the cabinet secretary demanded that public corporations that have vast reserves play their part in easing the financial pressures that millions of Scottish households face by holding down utility bills and investing in capital projects such as public district heat networks that get houses, public buildings and businesses off the gas grid?

I expect all public bodies, including public corporations, to play their part in assisting the Government as we wrestle with the unprecedented situation that we face.

A number of claims have been made in recent weeks about the status of the Scottish reserve. The Deputy First Minister referenced the reserve in his statement; will he expand on what he said and clarify the status of the reserve at present and what has been allocated from it?

At the statement that Mr Arthur gave to the Parliament on the provisional Scotland reserve position at the end of the financial year, the expectation was that the reserve would hold £650 million. The budget bill provided for £511 million of that to be inserted into the budget, and we expect to deploy the remaining £139 million at the autumn budget revisions, to support announcements that have already been made to provide assistance to different aspects of public policy in the course of the Government’s work.

I welcome the fact that tackling the cost of living crisis is front and centre of the Scottish Government’s programme for government. In comparison, the UK Government has been missing in action. That has caused anxiety for families and businesses, not only in my Aberdeen Donside constituency but across the country. Has the new UK Government contacted the Scottish Government to outline the emergency plans that are needed to tackle the cost of living crisis?

I have to say that nothing has reached me yet. That is not to say that there have not been approaches about dialogue. However, nothing has reached me at this stage.

As I indicated to Parliament yesterday, the First Minister asked the previous Prime Minister to arrange four-nations discussions on the cost of living emergency. Her request was turned down at that stage. I have been in touch with the former chancellor and I wrote to the new chancellor overnight to request an urgent intervention to address the very issues that Jackie Dunbar has raised.

The cabinet secretary revealed today that almost £10 million will be cut from the justice budget. At today’s Criminal Justice Committee meeting, Police Scotland voiced real concern about SNP cuts resulting in fewer officers on our streets. Without giving us the usual stock excuses that blame the UK Government, will the cabinet secretary tell people why jeopardising public safety is the right thing to do?

I would not countenance jeopardising public safety and I do not think that it helps the quality of debate for Mr Findlay to go chucking around accusations like that. I remind Mr Findlay that crime in Scotland is at a 40-year low and that we properly and effectively fund the Police Service.

I am pleased that the Cabinet Secretary for Justice and Veterans has been able to secure a 5 per cent pay increase for police officers. The whole purpose of my statement is to indicate to members that there are limitations on the resources that we have available to us and that we will have to make hard choices. However, as part of those hard choices, I am pleased that our Police Service serves us so well and that we have such low levels of crime in Scotland today.

It seems to me that some organisations, some businesses and perhaps some individuals have been making huge profits during Covid and the energy price challenges. Does the Deputy First Minister support the idea of a windfall tax? Is there anything that the Scottish Government can do on that, or are we dependent—again—on Westminster?

As ministers have made clear, there are very strong arguments for windfall taxes, and we have supported measures that have been taken forward in that respect. We believe that, if there are windfall profits out of the proceeds of a range of different activities, there is an argument to consider whether those should be the subject of additional taxation.

Mr Mason will appreciate, though, that issues of corporate taxation are reserved to the United Kingdom Parliament, and the Scottish Government has very limited scope to take forward any issues of that type. We can explore any issues that may arise through the non-domestic rates system, but I stress that that is very much a peripheral approach to tackling the scale of the issue that Mr Mason raises with me.

I listened carefully to what the cabinet secretary said about operational decisions for this year, but Scotland’s two richest families have as much wealth as the poorest 20 per cent of the population. What work is being done to consider how the Scottish Parliament’s existing tax-raising powers—for example, over land-based taxes—could be used to target the super-rich, whose wealth has increased substantially during the pandemic?

The Government takes forward on-going discussions to consider the exercise of the tax powers over which we have existing competence. The conclusions of those discussions will feature in the budget proposals that will be brought forward later in the year, and members will have the opportunity to scrutinise those. There are very limited opportunities for the Government to extend beyond those existing tax responsibilities, but we consider all those questions as part of our efforts to ensure that the public finances are sustainable.

The Deputy First Minister touched on some of the steps that the Scottish Government is taking to mitigate the cost of living crisis. Can he provide any further detail on how the Scottish Government will maximise the current direct financial assistance that is available to those who are most in need, taking into account the financial straitjacket that the Scottish Government is subject to—sadly—under the current constitutional settlement?

In answering Annabelle Ewing’s question, I cite the Scottish child payment as probably the most recent and significant intervention in the matter. It represents a very welcome and highly focused intervention to support families who face financial challenge and difficulty. We set out yesterday that it will be extended in November and that the payment will be increased.

That is one example—there are others that I could list—of where the Government is taking action to support families who face challenge. Doing that forces us to make choices about how we use our resources because, if we fund the Scottish child payment, we are not able to fund other proposals and services that other people may wish us to fund.

Can the Deputy First Minister confirm that no budget has been taken from this year’s allocation to the just transition fund for the north-east and Moray, and that every penny of the £20 million from this year’s budget will be allocated this year?

No money has been taken from the north-east transition fund. Whether all of it will be allocated this year is a matter that will be subject to ministerial decision making in the course of this year, but we want to see that money allocated in full for the remainder of this financial year.

Normal independent countries have and will be using extensive borrowing powers to ease the burden of the cost of living crisis. What progress has been made in discussions with the UK Government with regard to more flexibility within the existing fiscal framework, particularly around additional borrowing powers, which are needed now more than ever?

We are in what I would call the foothills of discussions about the fiscal framework, and there are some mountains yet to be climbed. We will raise and discuss those issues, and the response that we will get from the UK Government will be a matter for further consideration and explanation to Parliament. However, this crisis and Covid illustrate the necessity for the Government and Parliament to have a wider range of financial powers and flexibilities to enable us to manage the challenges that we face.

The Deputy First Minister will be aware that, before Covid, the number of people with disabilities in employment in Scotland was lower than the number in the rest of the United Kingdom. Covid has meant that many disabled people have been left behind. The cuts to employability training will affect the most vulnerable disabled people in our society. What message does that send to disabled people in Scotland? It says that they are not important with regard to getting back into employment. Will he rethink the cuts, particularly around disability?

I hear Mr Balfour’s point and I understand it. He makes a fair point, but the challenge that I face is that I cannot spend money twice. That is the point that we are reaching because of the pressures that we are facing. I hear what he says and I will explore what opportunities there are to try to address the issues that he raises, but we are under severe financial pressure, and to meet the costs of public sector pay, we have to take the decisions that we are taking.

I will try to minimise the impact on members of the public—I have given Parliament that assurance today—but the wider context for our financial pressures is set by the parameters in which we operate from the UK Government. If those were relaxed, I would be in a position where I could allocate more money than I am able to allocate today.

Thank you, cabinet secretary. I observe that the response to my appeal to pick up the pace was absolutely exemplary and it has set the standard for the rest of the session.