The next item of business is a statement by John Swinney on the financial implications of the United Kingdom budget 2014. The cabinet secretary will take questions at the end of his statement and there should, therefore, be no intervention or interruptions.
14:26
I welcome this opportunity to update Parliament on a package of measures that the Scottish Government intends to take to support Scotland’s economy.
I intend to allocate the consequential funding arising from the UK budget for our 2014-15 budget, along with some identified underspend from this year that I will carry forward. That package will support jobs, skills development and children and families, adding to the decisive steps that the Government is taking to help Scotland’s economic recovery and build for the future.
We do so against the backdrop of the UK Government’s continuing cuts to public spending, which were confirmed again in last month’s UK budget. Published alongside the budget were economic forecasts from the Office for Budget Responsibility. Its latest growth forecasts simply serve to remind us of how badly the UK Government mismanaged the recovery in the first place. The UK had one of the deepest and longest recessions among the G7 partners, and its average growth throughout the recovery has been weaker than the average growth of the United States, Canada and Germany. That has resulted in the UK economy being further away from its pre-crisis levels of output than the economy of any country in the G7, with the exception of Italy.
Despite the damaging approach that is being taken by the UK Government, Scotland’s economy continues to overcome those obstacles and we should be optimistic that we have put in place the foundations of longer-term recovery. Scotland continues to outperform the UK across all headline labour market indicators, with a lower unemployment rate, a higher employment rate and a lower economic inactivity rate. Although the economic data is encouraging, we must reinforce our focus on delivering recovery.
The fact that the peak-to-trough recession in Scotland was shallower than in the UK is due in no small part to our consistent and sustained investment in growth and in capital infrastructure in particular. This week, confidence in the construction sector in Scotland reached its highest level since the start of the recession. Our approach has, to date, mitigated the impact of the downturn on the Scottish economy.
Whenever there has been an opportunity to invest further in our economy, the Government has taken it. I am pleased to announce today a number of measures that will boost our economy, create jobs, support skills development and strengthen Scotland’s infrastructure.
First, I announce to Parliament that the Scottish Government will develop plans to extend our current programme of non-profit-distributing investment, with additional investment taking us through to 2019-20. That programme will build on the successes of our current investments, delivering colleges, schools, roads, hospitals and community health facilities throughout Scotland. It will provide the construction sector with the long-term certainty of a future pipeline of work. It is also affordable within the headroom of the 5 per cent limit that we chose to put in place to ensure that we can deliver now for the economy without overconstraining future budget choices.
The current revenue-funded programme is now delivering strongly. Projects worth £650 million started construction in 2013-14, and we expect all the other major NPD projects to follow suit in the coming financial year. The procurement of the M8/M73/M74 improvements took only 23 months from Official Journal of the European Union stage to financial close, which is much quicker than the average time of 36 months. There has been significant investor interest in financing the programme, and we continue to secure good value for money.
Our schools programme to deliver 67 schools for the original price of 55 continues on track, and the first of our new community health facilities is now in operation in the city of Aberdeen.
We are keen to maintain that positive momentum and to extend the programme further. We know that every additional £100 million of construction activity is estimated to support more than 1,300 jobs. We also get the long-term benefits of using those assets. I have therefore asked the Scottish Futures Trust to explore with a range of public bodies the development of robust business cases for individual projects. I will come back to Parliament with the details of the programme of investments in the draft budget in the autumn, which will total additional NPD investment in the Scottish economy of a further £1 billion.
In addition, I announce a further allocation of £10.3 million in financial transactions funding to provide shared equity capital support to the help to buy scheme in 2014-15. That will bring our overall investment in the help to buy (Scotland) scheme to £235 million over three years. In making that announcement, I recognise the benefits that the scheme has for the construction sector and the wider economy, and the important role that it plays in supporting aspiring home owners throughout Scotland. The announcement does not preclude further decisions about financial transactions. We will continue to listen to the industry and to explore opportunities to build on the already significant package of support that we have put in place.
I am pleased to confirm to Parliament that the Scottish Government will make an exceptional one-off contribution of £500,000 to Dumfries and Galloway Council to deal with the aftermath of recent flooding in the local area. I fully understand the extreme situation that the local authority has faced since the turn of the year, and the grant will allow it to carry out the required essential repairs to the affected infrastructure.
While the Chancellor of the Exchequer failed in the budget to reverse the capital budget cuts, he took the opportunity to reiterate the UK Government’s approach, which will see further public spending reductions until 2018-19. Indeed, based on the UK Government’s projections, we have so far seen less than half the chancellor’s cuts—some 60 per cent of them are yet to come.
The brunt of the austerity agenda is borne by some of the most vulnerable groups in our society. Earlier this year, we provided much-needed support to some of those vulnerable groups through our welfare reform mitigation and early years commitments. Today, I plan to go further in providing support to those vulnerable groups.
Despite the progress that we are making in the labour market, the Government remains deeply concerned about the levels of youth unemployment. In the Budget (Scotland) Bill, I committed to bringing forward swift measures and appropriate resources to implement the recommendations of the Wood commission on developing Scotland’s young workforce. I reaffirm that commitment and will ensure that the implications of the final report, which is due to be published in May, will be taken forward as part of the 2015-16 draft budget later this year.
In the meantime, I take the opportunity to announce the allocation of £12 million this year to begin the implementation of the Wood commission’s recommendations and to further enhance our existing measures to support youth employment in programmes such as the modern apprenticeship scheme. Our young people deserve our best efforts, and we will do everything in our powers to improve their vocational pathways and to provide employment opportunities.
As the First Minister announced in January, we will further expand the provision of early learning and childcare to make it available to more of our most vulnerable two-year-olds. As well as benefiting the children, that will open up employment opportunities for their families by removing lack of childcare as a barrier to work. To ensure that we have the physical capacity to meet our commitment to expand childcare, I have decided to allocate all the capital consequentials from the UK Government’s budget to local government.
We will continue to work with our partners at the Convention of Scottish Local Authorities to fully understand the capital cost implications of the expansion of childcare services, but the initial investment of £23.5 million in 2014-15 and £7.7 million in 2015-16 will emphasise our determination to properly resource our early learning and childcare services within the constraints of devolution.
The Government has made it clear that we will allocate a full-year cost of £42 million to local authorities to fund the expansion of free school meal eligibility. Recent discussions with COSLA have persuaded me to allocate a further £12 million of resources to local government on a full-year basis to replace the elements of subsidy that local authorities apply to the provision of school meals across Scotland. The allocations for 2014-15 will be adjusted to reflect the January 2015 start date of free school meal provision.
Access to a nutritious meal not only delivers better outcomes for our youngest learners, but provides very welcome financial support to hard-pressed families, many of whom have been badly affected by the austerity agenda. We also know that disabled people and those with health conditions are likely to be negatively affected by a number of the welfare reforms and changes that are being introduced, such as the personal independence payment, which is replacing disability living allowance for working-age people. On-going issues with the work capability assessment, which is used to determine entitlement to health-related benefits, also continue to cause concern, with many people wrongly deemed fit for work. I therefore want to ensure that more support and advice are available for those affected by the welfare reforms and benefit cuts, and I announce today a further £1 million in both this financial year and the next to mitigate the impacts of welfare reform.
We cannot undo all the damage of welfare reform, the austerity agenda or the consequences of Westminster’s economic mismanagement, but the actions of this Government demonstrate our determination to take the initiative where we can. In its analysis, which accompanied the budget, the Treasury admitted that the average household will already be the equivalent of £757 worse off as a consequence of the cuts that have been announced to date, but in the poorest households that rises to £814. We should genuinely worry about the damage that could be caused to our people and communities by the time we reach 2018-19. However, under the current constitutional arrangements championed by the other political parties, Scotland would have no option but to accept funding decisions taken by Westminster.
This Government will continue to argue that Scotland deserves better. We deserve real control over our finances, and our people deserve the right to take their own decisions about the economy, taxation, public spending and public services.
Thank you, cabinet secretary. I now call Iain Gray. Mr Gray, you have just over a minute.
Thank you, Presiding Officer. I also thank the cabinet secretary for advance sight of his statement.
The last time that the cabinet secretary allocated consequentials, which was in January, he used them, as he told us, to extend the provision of free school meals and free childcare. He was adamant then that he had fully funded those commitments. His allocation today of more than £30 million of capital spending and £12 million of resource spending to local government to provide the required funding is welcome, but it is surely a straightforward admission that in fact the commitments made in January were never fully funded.
As for the mitigation of welfare reform, to which the cabinet secretary has allocated £2 million today, this is the date—1 April—by which he promised to have a scheme in place to fully mitigate the bedroom tax, whether through discretionary housing payments or otherwise. At the weekend, UK ministers indicated that they would indeed allow such a scheme through discretionary housing payments. Can the cabinet secretary tell us whether the scheme, which we both agreed is so important, is fully in place today, as promised?
In relation to the approach to the implementation of expanded childcare provision, we always made it clear that there were capital costs that would be the subject of discussion with the Convention of Scottish Local Authorities, and those discussions are under way. I set out in my statement today that £31.2 million of capital support will be available to local government to undertake the physical work that is required to provide for the expansion of childcare.
In relation to revenue support for free school meals, the Government has listened carefully to the points put forward by local government. I simply say to Mr Gray that that is what happens when we work in partnership with our local authority colleagues: we listen to what they say and respond where we can and where the points put forward are justified.
Mr Gray knows that I appreciate and value the dialogue that I had with him and his colleague Jackie Baillie in the run-up to the budget process in relation to discretionary housing payments. Of course I welcomed the Labour Party’s support for the Government’s budget. At the time, I made it clear that our preferred route for dealing with the implications of the bedroom tax was for the cap on discretionary housing payments that the United Kingdom Government applied to be removed. To date, we have not been advised that its removal has been agreed. I saw the same media reports to which Mr Gray referred.
The Deputy First Minister raised the issue at the joint ministerial committee in London on Wednesday of last week. We continue to await the outcome of discussions within the UK Government. A variety of helpful advice and input has been given to try to resolve the issue, and I hope that we get to the conclusion that I would prefer—the lifting of the DHP cap—so that we can implement the Government’s preferred approach.
However, I assure Mr Gray that we cannot go on waiting for ever. We will consider other proposals if we are unable to secure clarity from the UK Government. I remain optimistic that the UK Government will agree to the point that we have made on the issue.
I, too, thank the cabinet secretary for the advance copy of his statement.
If the Scottish Government’s NPD promises are to be credible, they have to deliver on the ground, today. The Scottish Government said that, for 2013-14, it would deliver £330 million-worth of projects on the ground, but that figure was revised downwards to £185 million-worth. Can the cabinet secretary guarantee that at least £185 million-worth was delivered on the ground in 2013-14?
The cabinet secretary stated that we still do not
“understand the capital cost implications of the expansion of childcare services.”
The policy was announced months ago, so when does the cabinet secretary envisage the Scottish Government will understand those capital cost implications?
Where are the underspends to which the cabinet secretary referred at the beginning of his statement?
Today, £635 million of NPD expenditure is currently in construction. A further £1.4 billion of projects are in procurement or have entered development through the hubs. I hope that that is sufficient reassurance for Mr Brown that the Government’s programme Is taking its course.
Mr Brown knows—because we have been round the houses on the subject many times—that I have accepted that the Government was optimistic about the timescale for implementation of the NPD projects; it took longer than we expected. Surely now that the Scottish Government has rescued the capital programme of Scotland from the swingeing cuts of the United Kingdom Conservative Government, the Conservatives will accept that this Government has done a good job in progressing £635 million of construction work that would never have happened if the Conservatives had been responsible for the programme.
Mr Brown’s second question was about the capital cost of childcare. I and the Cabinet Secretary for Education and Lifelong Learning have said previously that we have to work with our local authority partners to establish—it is a facility-by-facility exercise—where the extra capacity will be required. Some facilities have, because they have surplus accommodation, capacity to accommodate children who are entering nursery education, but others will have to develop additional accommodation. We are doing a case-by-base analysis—again, working in partnership with our local authority colleagues—to ensure that we do the job properly. The issue will be resolved timeously and we are putting in place the financial commitments to enable it to happen.
If I turn the logic of Mr Brown’s argument around—I think that there was some logic in his question—he is essentially arguing that we should not embark on those commitments unless we have in place all the necessary capacity. We are taking steps to implement the expansion across the country.
Mr Brown’s final point was on underspends. The Government has to secure a level of underspend from its budget this year to carry forward to support budget provisions in 2014-15. Some additional underspend will come, beyond that, through some energy programmes that are not spending as strongly as I had anticipated. I have rehearsed the arguments with the Finance Committee, so Mr Brown knows why that is the case—it is to do with uncertainty over electricity market reform. We will, of course, make a statement to Parliament towards the summer recess on the outturn position, once all the information is clear and to hand.
Before I call Jamie Hepburn, I remind members that I expect one question, and that it should be short. I want to get as many members in as possible, and I need to protect the time for the following debate.
Will the cabinet secretary provide detail on the impact of loan funding from the UK Government and, in particular, how it affects the Scottish Government’s finances?
If I picked up Mr Hepburn’s question correctly, it relates to financial transactions, which in essence are loans that are made available to the Scottish Government. They cannot be spent as core capital expenditure. I cannot, for example, allocate financial transactions to projects that would become part of the responsibility of Government; such projects must be taken forward by third parties. Of course, the transactions are repayable, and we are in negotiation with the United Kingdom Government about the terms of those repayments, which will take place over a number of years, once the resources have been allocated and deployed.
Investment in the Wood commission proposals is welcome. The consequentials in the area have come from an increase of 100,000 in apprenticeship places in England. Can the cabinet secretary guarantee that the investment will provide additional apprenticeship places and can he estimate how many there will be?
We have in place much more significant commitments on apprenticeships than were in place when we came to office; we inherited about 16,000 apprenticeship places, but are now up at 25,000; I am confident that 25,000 will have been secured in 2013-14. The Government will consider carefully how we can use the resources for assisting young people into employment, and we will consider carefully how the modern apprenticeships programme can be expanded. We will consider implementation of the Wood commission recommendations, in concert with Sir Ian Wood, whose final report, which is due in May, we anticipate with enormous interest. I think that it will be a transformational report that will be of enormous value to Scotland.
Of course, many of the initiatives that were announced in the United Kingdom Government’s budget—for example, support to employers to take on individuals—already exist in Scotland, so the United Kingdom Government is having to catch up with the measures that we have already introduced here.
What has been the impact of the UK budget on Scottish airports, given that it failed to go far enough on air passenger duty?
Clearly, any optimism that the Chancellor of the Exchequer might acknowledge the significance of the impact of air passenger duty on Scottish airports was dashed by the budget. The chancellor accepted that air passenger duty is a factor that undermines the competitiveness of some transport connections, which is why he acted to revise the duty in relation to certain international destinations. I only wish that he had had Scotland in mind when he took those decisions.
We know that, under the cabinet secretary’s plans, people on low and middle incomes will pay more income tax. Does the cabinet secretary understand that there is disappointment that he has not gone far enough on childcare, and could have matched the 40 per cent provision in England for two-year-olds? When will he do that?
I try my best to keep up in Parliament, but I am afraid that I just did not understand the first part of Mr Hume’s question.
Mr Hume was a supporter of the Government’s budget and voted for it. I am awfully sorry that his leader is not here, because his leader is always much nicer to me than Mr Hume is and he is much more appreciative of what I do to support the Government’s childcare agenda. I am sure that, if Mr Rennie had been here, he would have been much more supportive of the Government than Mr Hume has been.
What support will be available for Dumfries and Galloway, which I represent and which has suffered disproportionately from inland flooding and tidal storm surges that caused coastal damage at Port William, Drummore and Kirkcudbright, among other places?
Dumfries and Galloway Council made representations to the Government about the severe impact of the tidal surges and flooding over the winter. We all saw that the area endured a significant and disproportionate impact. The local authority approached me and I had a constructive meeting with it on the subject. I agreed to match fund to the tune of £500,000 the support that the council looked to put in place to remedy the difficulties that it had experienced. That will enable £1 million-worth of investment to remedy some of the challenges that Dumfries and Galloway faces.
Not all of the funding for schools, colleges or health facilities under the NPD programme comes directly from the Scottish Government, so it is not included in its 5 per cent cap. Will the cabinet secretary, as the Auditor General for Scotland has requested, tell Parliament exactly what is included in the 5 per cent cap and how he will report on it to Parliament?
I have given a pretty comprehensive explanation of the methodology behind the 5 per cent cap, and I have set out clearly to Parliament what is in it. I had thought that it would be viewed across the chamber as an element of valuable fiscal discipline—in contrast to the recklessness of the public finance initiative commitments that I inherited when I came to office in 2007. Those costs were galloping off, and nobody had given a minute’s thought to what constraints should be applied.
The mechanisms and methodology have been explained well to Parliament and the Government is operating within the 5 per cent cap that it volunteered to set in order to provide fiscal discipline.
I welcome the additional £1 million for welfare reform mitigation. Will the cabinet secretary advise where he expects that money to be allocated?
Does he agree that it would be far better if we had in the Parliament the powers to shape and reform our welfare state, rather than having to mitigate decisions that are taken at Westminster?
The Government is looking carefully at emerging issues in welfare reform. The Deputy First Minister is considering priorities and we are in discussion about how they can be best addressed in the coming period. Further information will be set out to explain exactly how the support can be used to maximum effect to assist people who are suffering from the anxiety that is caused by the welfare reform programme.
In general, the third sector will welcome the £1 million for welfare funding, but it has been brought to my attention that a welfare reform capacity building fund of around £2.5 million has been set up, and the opinion has been expressed to me that the £1 million might have been better added to that fund to build capacity in support and advice. Why was the choice made to spend the money directly on advice services and not on topping up the welfare reform capacity building fund?
The way that I expressed it may have misled Mr McMahon, but I was certainly not announcing that £1 million would go directly to advice services. The possibility that he has raised will be considered among the proposals that the Deputy First Minister will consider. The matter was covered by my response to Mr McDonald that we will make further announcements in due course, but I hear clearly what Mr McMahon has said; the Deputy First Minister has, likewise, heard it.
Is not it the case that the Treasury figures that have been quoted by the cabinet secretary which show that the poorest households are particularly unfairly hit by the austerity cuts underline the argument not only for the powers, but for the political will to develop a more progressive tax system in which high-income individuals—including all members in the chamber, as well as wealthy corporations, which have enjoyed corporate tax cuts for too many decades already—begin to pay their way in society?
The Government’s interest is in advancing an agenda that makes Scotland a more prosperous country and which tackles the inequality that exists in our society. Those are the principles that underpin the Government’s programme and its aspirations to be an independent Government that can exercise responsibility, and can make choices and live up to those principles in securing a more progressive, prosperous and fairer society. That is exactly what the Scottish Government will do.
The UK budget showed that Westminster has once again failed to deliver for Scotland. Will the cabinet secretary confirm what changes we could make in terms of creating opportunities and securing investment if Scotland were independent?
I ask you to restrict yourself to your statement, cabinet secretary.
Clearly, there would be a great deal more flexibility than I am able to exercise within the powers and responsibilities that are available to me under the devolved settlement. However, what I have tried to do in my statement today is to maximise the flexibility that is available to me and maximise the impact of the spending that I have at my disposal.
Has the SNP Government any plans to charge a £10-a-month health tax on the sick, as proposed by Labour?
No—
Cabinet secretary, as that question does not refer to your statement in any shape or form, I would appreciate it if you did not even attempt to answer it.
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