The next item of business is a debate on motion S4M-15522, in the name of John Swinney, on the Budget (Scotland) (No 5) Bill.
14:40
Last week, I introduced the Budget (Scotland) (No 5) Bill for 2016-17, which will implement the draft budget that I set out in December. I welcome the report of the Finance Committee, and I will formally respond to it in advance of stage 3, as agreed with the committee.
The budget that is before Parliament today is a budget that will promote growth in the economy and reform public services. It will ensure that the maximum impact is generated from our expenditure and that decisions on revenues raised reflect our principles-based approach to taxation.
Public spending in Scotland continues to face significant challenges, as another real-terms reduction has been applied to our total departmental expenditure limit for 2016-17. Looking ahead, the settlement that we received in the United Kingdom spending review will mean that the Scottish budget will continue to fall in real terms in every year until the end of this decade.
The financial context is also set by the continued pressure on household incomes. Since its election, the Government has been determined to protect household incomes, particularly for low earners. Our longer-term financial decisions are influenced by the expectation that we will get further powers from what will be the Scotland Act 2016. In December, I said that the Government would set out its longer-term intentions on use of those new powers before Parliament is dissolved for the election. To use those powers, we need a fiscal framework that delivers on the Smith commission; it must be a framework that is faithful to that agreement and fair to Scotland.
I met the Chief Secretary to the Treasury again this week, and work is going on, as I speak, to try to reach an agreement, but I must make it clear to Parliament that there is a long way to go; there is significant difference between our respective views and time is short to reach an agreement. On one point, I want to be absolutely definitive: I will sign only a deal that is fair to Scotland and is consistent with the principles that were agreed by the Smith commission. I will not sign a deal that is harmful to the interests of the people of Scotland.
The budget provides the resources that are necessary to deliver a strong and sustainable economy while tackling economic inequality. It delivers an extensive capital programme that will support our economy, enhance our social infrastructure and help to address climate change. It takes forward a bold and ambitious programme of public sector reform, together with our delivery partners, to ensure the sustainability and quality of our services, and it delivers on our commitments to the people of Scotland at a time of continued pressure on household incomes.
In the December budget statement, the Government proposed a Scottish rate of income tax for the first time. The limited nature of the income tax power that is currently available to the Scottish Parliament allows only for a single rate to be set and then applied to all three income tax bands, which means that any increase on the wealthiest taxpayers would also apply to those on the lowest incomes. The proposals from other parties to increase income tax by 1p next year would hit the taxpayers who are least able to pay.
How does that comment match the comment that John Swinney made to the Finance Committee last month? He said:
“I view the Scottish rate of income tax as a progressive power ... Clearly, people on higher incomes will pay comparatively more than people on lower incomes.”—[Official Report, Finance Committee, 13 January 2016; c 40.]
Therefore, surely what he has just said is wrong.
If Mr Rennie had been listening, he would know that what I said was that the proposal to increase income tax by 1p next year would hit the taxpayers who are least able to pay. Of course it would. It would put up tax for the lowest-paid people in our society, whether those individuals were newly qualified teachers, police officers, firefighters, postal staff, bus drivers, charity workers, shop workers or hotel workers. Workers the length and breadth of the land would see their income tax rise.
Would the cabinet secretary reflect on the fact that teachers are doing their own photocopying and buying jotters for the classroom because there are no resources in our classrooms? They absolutely understand why we are proposing to increase income tax by 1p.
Does the cabinet secretary welcome the rebate that we propose that would help to protect people who are on the very lowest incomes?
I want to say to teachers and public service workers the length and breadth of the country, who have had to endure pay constraints because of the austerity programme of the UK Government, that I value the sacrifices that they have made, and that the last thing that I am going to do is put up their taxes.
Jackie Baillie just raised the proposed rebate to mitigate the effects of the tax rise. The immediate conclusion to draw from that announcement of a proposed rebate is that there is recognition that the tax rise is damaging to the incomes of low-paid workers. There are also the legislative and practical issues that would need to be overcome—and quickly—to make that concept a reality from April this year. [Interruption.]
Let us go through the detail. Labour will need to demonstrate clearly the legal basis under which it believes that such a payment can be made. If it is—[Interruption.]
Order. Let us hear the Deputy First Minister.
I am only helpfully going to dismantle Labour’s proposals, so they should be quiet and listen.
If the rebate is a tax relief, it is outside the powers of the Scottish Parliament in relation to income tax, as conferred by the Scotland Act 2012. If it is a social security payment, that is outside the competence of the Parliament, as defined in the original Scotland Act 1998.
Further evidence that the proposal is not properly thought through is provided by the lack of clarity about how it would be administered and, in particular, how it could be done within the £75 million that has been allocated for the proposal by Labour. An estimated 1 million taxpayers—workers and pensioners—could be eligible for the £100 rebate, which would cost £100 million. That is more than Labour has budgeted for the rebate, which does not even meet the needs of individuals within our society.
The second problem is that on top of that would be the costs of setting up and operating administrative systems by 32 local authorities across Scotland. We know already that it costs local authorities many millions of pounds to administer help with council tax bills, for which authorities already have a lot of information about the circumstances of claimants.
Thirdly, the rebate payment is likely for tax purposes to be counted as income, and so those who receive it would be liable to pay tax on it. It does not seem to me to be too much to expect that those who propose policies of this kind have at least considered those issues, but there seems to be little evidence that that has happened.
The only conclusion we can draw is that it is unlikely that anyone would receive the rebate on the basis of the proposition that Labour has offered to the people of this country.
Mr Swinney’s speech is very reminiscent of what we heard from his back benchers yesterday, which was all about detail—fine aspects of detail. [Interruption.]
Order. Let us hear Ms Baillie.
Let me say to John Swinney that it is, to be frank, an excuse for not addressing the question of principle. I want to know what he thinks about the principle of what we are proposing, because that, politically, is important.
That was a very revealing intervention, because the detail matters. On 1 April, a citizen of this country who was going to have their tax raised by Labour—but who will not have it raised by the SNP—would have the right to expect that what is being promised by Labour can actually be delivered. What Jackie Baillie must do in her speech today is explain how the legal, practical and operational issues that I have raised will somehow be overcome by what she has written on the back of a fag packet.
This Government will freeze income tax, and we will deliver a pay rise to around 50,000 of the lowest-paid workers in Scotland. The uprating of the living wage, its extension to social care workers and an uplift of £400 for people who are covered by public sector pay policy who earn £22,000 or less will see tens of thousands people being better off because of this budget.
That is the difference between the SNP and Labour. We want to give the lowest paid a pay rise; Labour wants to give them a tax rise. [Applause.]
I am sorry that Mr Swinney was, I understand, too busy to come out of the Parliament today to talk to the local government workers who were lobbying outside it. As he has reiterated that he has set his face against any increase in tax, what is his message to the 16,000 local government workers who are liable to lose their jobs as a result of £500 million of cuts in the coming financial year?
I say to those individuals that the Scottish National Party is determined to protect their incomes, not punish them with a tax rise that the Labour Party has come out with.
Neil Findlay (Lothian) (Lab) rose—
No afternoon would be complete without Mr Findlay.
It is fairly simple. How can the Government protect people’s income if they do not have a job? [Interruption.]
Let us hear the Deputy First Minister. [Interruption.] Enough, Mr Findlay!
The Government has given public sector workers the guarantee of no compulsory redundancies. That is what we have delivered for the people of this country.
The budget reaffirms our commitment to deliver inclusive growth through investment in education and skills. Almost £5 billion is invested annually in delivering school education, and average expenditure per pupil is higher in Scotland than in England. The health budget in Scotland will reach over £13 billion. We will protect the budget for colleges in Scotland and ensure that higher education spending is over £1 billion in 2016-17.
The Scottish Government is investing £250 million in supporting the integration of health and social care services at local level. That is the biggest reform in how we deliver health and social care services since 1948. That money is designed to pay the living wage to social care workers in our country, which I thought the Labour Party would have welcomed, and which I thought its local authority leaders would embrace and think is a good idea. [Interruption.]
Order.
What have we had? We have had obfuscation from the Labour Party and complaints about the SNP Government doing the right thing to protect people on low incomes in our society. We want to ensure that the health and social care reforms bring together those important services to expand the social care that is available to members of the public, to deal with the financial pressures that are felt across the system, and to ensure that workers are able to command the living wage. Those are the SNP Government’s priorities on health and social care.
As well as doing that, we will maintain 1,000 additional police officers on the streets of Scotland and protect the front-line policing budget in real terms next year. With a further £55 million being provided to support a new phase of change and transformation, we will ensure that police services meet the needs of the people of Scotland.
In a time of austerity, we will inject resources to protect household incomes from the welfare changes that the United Kingdom Government has undertaken.
Will the Deputy First Minister take an intervention?
I am sorry, but the Deputy First Minister is winding up.
The investment that we are making in the Scottish welfare fund is £38 million, and there is £343 million for council tax reduction and £35 million to ensure that nobody pays the bedroom tax in Scotland. That is on top of the commitments to providing free school meals for our youngest citizens and free personal care for our most elderly citizens.
The budget meets the needs and expectations of the people of Scotland. It confronts austerity, protects people and their household incomes, stands in the face of a rise in people’s tax by the Labour Party; and delivers for the people of this country.
I move,
That the Parliament agrees to the general principles of the Budget (Scotland) (No.5) Bill.
14:54
Politics is all about choices, and the SNP today has to make its choice. The budget before us is an austerity budget and so far it is clear that John Swinney has chosen to pass austerity on, rather than break from it.
It does not need to be that way. There is a real opportunity and a chance to do things differently. The SNP can make different choices and our amendment shows the way. We have new powers now, and new powers are coming. I ask the SNP to work with us to use those new powers to invest in our children and in Scotland’s future, and to keep the promise that it has made to the Scottish people time after time: that more powers will mean the chance to do things differently and to make fewer cuts.
The SNP believed in that during the general election when it set out plans to end austerity that it wanted an incoming UK Government to adopt. What has changed since last May? Let me tell the Government. You now have the power to do that for Scotland. You can deliver real change right now.
Will the member give way?
In a minute. This is about our future. I am ambitious for Scotland: I want a growing economy, and I want our young people to do better than the generation that went before them, with better skills for the jobs of tomorrow in the industries of the future.
However, you do not get that without investing in your people and specifically in their education and skills. Investing in education is one of the most significant ways of growing our economy and we have a lot of catching up to do. Take a look at what has happened in education over the past nine years. There are 4,000 fewer teachers in our classrooms and 152,000 fewer students in our colleges, classroom assistants have gone and not enough young people are achieving their potential. What a waste.
Will the member give way?
Will the member take an intervention?
I will take an intervention from Mark McDonald.
Jackie Baillie asked what has changed since May. In the Finance Committee’s report on the budget—[Interruption.]
Order.
Wait for it. Paragraph 27 of the Finance Committee’s report states:
“The Committee supports the Scottish Government’s proposal to set SRIT at 10p for 2016-17.”
Jackie Baillie is a member of that committee and that recommendation was agreed unanimously, so I ask her: what has changed since Friday?
I am sure that Mark McDonald, if he had been paying attention, would have realised that I was not at the meeting on Friday.
Members: Oh!
Order.
Perhaps—[Interruption.]
Order, order. Let us hear Ms Baillie.
Perhaps Mark McDonald—[Interruption.]
Order! Let us hear Ms Baillie.
Thank you, Presiding Officer. Mark McDonald might want to get his glasses tested.
Education spending on the SNP’s watch has fallen by 8 per cent for pre-school, 11 per cent for primary school and 4 per cent for secondary school. Put simply, that is £561 less per head being spent on our school children. That is not a picture of a Government that is investing in our economy or in our future. The SNP has cut the central education budget by £130 million and it wants to cut the local government budget by at least £350 million. As education is local government’s biggest budget, it is inevitable that there will be more cuts to come.
Make no mistake: the big losers in John Swinney’s budget are the local communities, schools and public services that people value. The budget cut to local government is hundreds of millions of pounds. The UK Government has cut the Scottish Government’s budget, but John Swinney has taken that cut and doubled it before passing it on to local government. That is austerity on stilts and it is John Swinney’s choice to do that.
We should not worry, however; as the First Minister told us, it is all simply reprofiling. When is a cut not a cut? When it is reprofiling, of course. Members should expect to see that word used quite often in future.
The share of local government spending is down to 30 per cent, which is a further drop of 1.7 per cent in comparison with last year. Gone is the concordat and mutual respect; gone are the warm smiles and the handshakes. Now it is all threats and draconian sanctions, and a complete disregard for local democracy. The temperature in relations is near freezing. When I am told by John Swinney that he has been very generous and fair to local government—
Will the member give way?
I ask the member to listen to the point first, then he can respond to it.
I point to the 40,000 fewer public sector workers, with the GMB estimating that at least 8,000 more will go and the Convention of Scottish Local Authorities suggesting that it could be 15,000. If this was a private sector closure, John Swinney would have MSPs on their feet in the chamber demanding that task forces be set up. Where is the task force to save local services and jobs from John Swinney’s cuts?
I point out to Jackie Baillie that employment in Scotland is at its highest level. Secondly, Jackie Baillie knows that there are three elements to the local government package that I have required it to sign up to—the council tax freeze, the integration of health and social care and the protection of teacher numbers. Which one of those does Jackie Baillie object to?
John Swinney threatens the lot. [Interruption.] Can I also say to him—
Members: Answer the question.
I will, if members are silent.
Order. Let us hear Ms Baillie.
I did not hear a denial that 40,000 public sector workers have lost their jobs. The workers outside who are protesting for their jobs and their communities are looking to us in the chamber. Where were the SNP ministers or back benchers? John Swinney would not even meet the trade unions to consider the impact of the cuts.
Will Jackie Baillie take an intervention?
Let me touch on the living wage for care workers—something that Labour members have been demanding for some time now, and that Labour councils such as Renfrewshire Council have been delivering and leading the way on.
Will Jackie Baillie take an intervention?
I do not think that Ms Baillie is giving way, Mr Stewart.
I ask John Swinney whether it is fair, in all honesty, to deliver a living wage for workers that is paid for by sacking thousands of their colleagues. Many of us joined the trade unionists from the GMB, Unite and Unison and the councillors from across Scotland who are outside the Parliament today protesting about the cuts to local government, but they have done more than simply protest. They have been positive in offering alternatives and trying to find solutions. Unite has suggested a debt amnesty and Unison has suggested changing how councils borrow, both of which would realise savings. The GMB has worked alongside local councils to protect services. All of them care about the future of their communities and they know that the cuts to come in years 2 and 3 will potentially be even worse than this year’s. No wonder John Swinney did not want to do a spending review and has hidden the cuts to come.
It is time for grown-up politics. It is time to choose.
Will Jackie Baillie give way?
Rory Mair, the outgoing chief executive of COSLA, said:
“If you self-deny the ability to raise more money and you decide that the way to deal with a downturn in resources is to cut, however you dress it up, that’s an austerity budget.”
Too true.
Will Jackie Baillie give way?
Ms Baillie is not giving way, Mr Swinney.
Given the choice between using our powers and making cuts to our children’s future and our country’s future, we choose to use our powers. Scottish Labour would use the tax system in a fair way, raising the Scottish rate of income tax by 1p to avoid making cuts to local schools and local communities.
Income tax is by its nature progressive. An army of experts tell us that, and even John Swinney has said:
“Clearly, people on higher incomes will pay comparatively more than people on lower incomes.”—[Official Report, Finance Committee, 13 January 2016; c 40.]
Those are his words, so there we go. However, with the proposed rebate of £100 to those taxpayers who earn between the £10,800 threshold and £20,000, we would make it even fairer and even more progressive.
I have heard SNP MSPs who are opposed to increasing tax in principle pretend that this is about detail, and I heard that from the cabinet secretary as well. It is really about the decision.
Will Jackie Baillie give way?
I do not have time.
Ms Baillie is in her last 30 seconds.
We have done the detail. Leaders in councils—
There was no answer on the detail. [Interruption.]
I am happy to share and discuss the detail with John Swinney, but let me say to him—[Interruption.] Presiding Officer—
It is time to wind up, Ms Baillie.
Leaders of councils across Scotland, which already make payments, have made it clear that they are ready, willing and able to do this, so the Government should stop pretending that it is too difficult.
It is not too late for the SNP. We could work together to end Tory austerity in Scotland—the SNP used to want to do that—and invest in our children, our economy and our future. I say to John Swinney that he should not persist with the cuts. For all his noise, he knows how painful those cuts are and he knows that he does not have to do that. Let us use the powers that we have, because faced with a choice of using our powers to invest in the future of Scotland or continuing Tory austerity, which is exactly what he is doing, there is no contest.
You need to close, Ms Baillie.
We would choose to use our powers.
I move amendment S4M-15522.1, to insert at end:
“, and, in so doing, believes that the Scottish rate of income tax should be set at 11p for 2016-17, 1p higher than the UK rate set by the Chancellor of the Exchequer”.
15:05
It is with pleasure that I speak on behalf of the Finance Committee in this stage 1 debate on the Budget (Scotland) (No 5) Bill for 2016-17 and to our draft budget report, which was published last Friday.
Scrutiny of the draft budget always works to a tight and demanding schedule. This year’s timetable was even more challenging than usual as the Scottish Government had to await publication of the UK Government’s spending review in late November 2015 before it introduced its budgetary proposals. I would like to thank all those who contributed to our scrutiny, particularly given the challenging circumstances.
As most members are aware, we approach budget scrutiny on the basis of four principles: affordability, which is the wider picture of revenue and expenditure and whether they are appropriately balanced; prioritisation, which is a coherent and justifiable division between sectors and programmes; value for money, which is the extent to which public bodies are spending their allocations well and achieving outcomes; and budget processes, which is the integration between public service planning and performance and financial management.
This year, we concentrated our scrutiny on affordability and budget processes. Historically, budget scrutiny has focused almost entirely on the Government’s spending plans, with little consideration of taxation. However, the devolution of some tax powers, along with the expectation of more to come, fundamentally changes the process and caused us to reassess it. Last year, we considered in detail the land and buildings transaction tax and landfill tax; this year, a key element of our scrutiny was on the Scottish rate of income tax.
Subject committees considered Government spending plans in their areas and we recommended that they examine the extent to which public bodies are adopting a priority-based budgeting approach to deliver the outcomes set out in the national performance framework. The Finance Committee welcomes the work of the subject committees in making the shift towards a more outcomes-based approach. I thank them for their helpful contribution to our scrutiny process.
To enable us to hit the ground running when the draft budget was published, we issued separate calls for written evidence on, in addition to taxation, the work of the Scottish Futures Trust and progress in delivering preventative spending. I thank all who submitted evidence.
Given the new tax powers, for the first time we questioned the Deputy First Minister over two sessions. The first session considered the Government’s tax proposals in detail; we then scrutinised its spending proposals at an external meeting in Pitlochry. That worked well and we will consider the need for any further changes to budget scrutiny as part of our legacy report.
In Pitlochry, we also held workshops with representatives of local businesses, voluntary organisations and public bodies, hearing first-hand about the impact of public spending on their community and how spending should be prioritised. The key issues raised included flood prevention, access to high-speed broadband, transport, housing and community empowerment. Nevertheless, given the topicality and importance of issues relating to taxation, I intend to largely concentrate on those, although I will also briefly touch on the work of the Scottish Futures Trust and on delivering the prevention agenda. Other members will wish to discuss the Government’s spending priorities and I look forward to hearing from them.
Turning first to affordability, the committee considered the need for a balanced budget, with expenditure being no greater than revenue. The draft budget proposes to apply a 10 pence Scottish rate of income tax, meaning that Scottish taxpayers will continue to pay the same rate of income tax as those in the rest of the UK.
To inform our consideration of the issue, we held several oral evidence sessions during the autumn. One or two witnesses favoured a reduced rate of SRIT on the basis that that would act as a stimulus to the wider economy, boosting jobs and growth; others advocated an increased rate on the basis that higher revenues could be used to reduce inequalities. However, a clear majority of responses supported the maintenance of the 10p rate for 2016-17, citing factors such as the complexity for employers, the mobility of labour, the economy’s on-going but incomplete recovery from recession, the impact on our workforce, which has endured below-inflation pay rises in recent years, and the blunt nature of the power.
Having considered the matter in detail in our report, the committee unanimously supported the Government’s proposal to set the Scottish rate of income tax at 10p for 2016-17. Nevertheless, we heard some innovative proposals for changes to taxation going forward, and recommended a wide-ranging debate across Scotland on taxation policy in anticipation of expected new financial powers from April 2017.
To inform such a debate, one of our key recommendations is that future decisions on taxation policy must be informed by behavioural analysis. Expert witnesses explained how taxpayers could be expected to change their behaviour in response to tax changes. Evidence from around the world suggests that higher rates of income tax are likely to lead to behaviours that impact negatively on tax revenues, including reductions in labour supply, tax avoidance and migration. Those behavioural responses are particularly important in relation to high earners, who are more likely to have the means, mobility and motivation to change their behaviour in response to tax changes. Professor David Bell told us that the highest 10 per cent of taxpayers pay more than half of income tax revenues, while the top 1 per cent contributes around a fifth. He estimated that there are around 11,000 additional-rate taxpayers in Scotland. As such a large proportion of tax revenue depends on a relatively small number of taxpayers, the committee was clear that it is imperative that the potential impact of behavioural responses on tax revenues is assessed before changes to taxation policy are made.
Ultimately, the intention underlying the devolution of tax powers is that the Scottish Parliament will be responsible for raising more of the money that it spends and thus that it will be more accountable to the electorate. Nevertheless, a large part of its income will continue to be dependent on the block grant and, as members know, the mechanism by which it will be reduced to compensate for devolved tax powers is of supreme importance to Scotland’s future financial wellbeing. We have consistently raised concerns about the impact of relative population growth on the indexation of the block grant adjustment. We therefore welcome the fact that the Deputy First Minister supports the indexed deduction per capita method and we recommend that that method is agreed in the fiscal framework that will underpin the devolution settlement.
Members will not need reminding that time is of the essence in agreeing the framework if the Parliament is to scrutinise it prior to dissolution. We look forward to questioning the Deputy First Minister and the Chief Secretary to the Treasury on the framework in the coming weeks to consider whether it meets the criteria agreed by the Smith commission and, importantly, whether it is fair to Scotland and to the rest of the UK and meets the no detriment principle. The Finance Committee has consistently raised concerns about the current lack of transparency in relation to block grant adjustments arising from the devolution of financial powers and we believe that full transparency is an essential element in securing public confidence in the process. It is therefore imperative that the fiscal framework contains detailed explanations of how the block grant will be adjusted in 2016-17 and beyond.
Regarding taxes that are already devolved, we have closely followed developments in the first year of their operation, particularly with regard to the land and buildings transaction tax. Stakeholders raised concerns that LBTT had a negative effect on sales at the higher end of the property market. Although it is not possible to fully assess LBTT’s impact before outturn figures for the full year are available, the latest indications are that high-value sales are returning to previous levels, while according to Your Move and Acadata, the middle and lower tiers of the market have been given a new lease of life by the Government’s approach. On that basis, we are supportive of the proposal to maintain the current rates and bands for residential LBTT. However, we have also recommended that the Government conducts and publishes a review of LBTT once the outturn figures for its first year of operation become available. That will doubtless assist the Parliament in its scrutiny of next year’s draft budget proposals regarding LBTT.
Members will be aware that the committee takes a keen interest in the Scottish Fiscal Commission’s work. Indeed, stage 2 proceedings on the bill that puts the commission on a statutory basis will take place next week. I look forward to discussing the issues raised in our stage 1 report then, so I do not intend to discuss the commission at length today, except to reiterate our recommendation that greater clarity is needed on the role of the commission and how it works in practice, particularly regarding whether it is asked to agree the forecasting methodology prior to publication of the official forecasts and what happens if it does not do so.
Regarding the Scottish Futures Trust, the committee invited written evidence on how successful it is in achieving its aim,
“to improve the efficiency and effectiveness of infrastructure investment in Scotland by working collaboratively with public bodies and industry, leading to better value for money and ... improved public services.”
The overwhelming majority of responses were positive and indicated a high level of regard for the SFT, its staff and their professionalism and collaborative approach. Suggestions on how the SFT could further improve its work were also made, and we look forward to hearing the SFT’s views on those suggestions in due course.
Staying with capital investment, an issue around which on-going concerns have been raised relates to the impact of the European system of accounts 2010 regulations, which have led to certain non-profit-distributing projects being reclassified as public sector spending. We note that £398 million was allocated from the capital departmental expenditure limit budget in 2016-17 to cover NPD projects, and we believe that it is vital that full transparency is provided on the impact of reclassification, particularly where it resulted in delays to other planned capital investment projects.
That is no doubt relevant to the fiscal framework negotiations that relate to additional borrowing powers. We would welcome an update from the Deputy First Minister in that regard.
The committee continues to scrutinise the Government’s commitment to
“a decisive shift towards preventative spending.”
We have long taken an interest in the subject. Although there is evidence of progress, the committee remains frustrated by the lack of evidence of a large-scale shift towards prevention. We received more than 40 responses to our call for evidence on the topic, several of which highlighted perceived barriers, including a lack of shared ownership among public sector partners.
It is clear that if a decisive shift towards prevention does not take place, public bodies will face growing demands for services against a backdrop of finite and perhaps diminishing resources. The committee therefore agreed to take further evidence on prevention before reporting its conclusions by the end of this parliamentary session.
As I said, the committee’s budget scrutiny focused on affordability and budget processes, but many other topics were covered in our report, which I am sure that members will raise in the debate. I hope that I have given a flavour of the increasingly broad range of subjects that the Finance Committee considers as part of our draft budget scrutiny, and I look forward to hearing from members.
15:15
The Deputy First Minister is fond of telling us the extent to which he is a victim of so-called Tory austerity from Westminster, so I thought that it might be useful to ask the Scottish Parliament information centre where the total Scottish Government budget for 2016-17 stands in relation to previous years. SPICe told me that the total budget for 2016-17 will be higher in real terms than the budget in every year of devolution from 1999 to 2007. It will be higher than the budget in each of the years 2011-12, 2012-13 and 2013-14. In cash terms, it will be nearly £400 million higher than the current year’s budget.
We know that the Scottish Government will always complain that it does not have enough money, and we know that it will always put the blame for that at Westminster’s door. The difference in this budget is that the finance secretary could have chosen to increase taxation, if he wanted to, and he chose not to do so.
Those of us in the Parliament who have long memories will remember the Scottish Parliament election in 1999, when a fresh-faced Mr Swinney was the architect of the penny for Scotland campaign. It is something of an irony that, 17 years later, that very campaign has been taken up by Labour and the Liberal Democrats and it is Mr Swinney who is holding the line against increases in income tax.
Will the member take an intervention?
No, I will not.
No?
Mr Stewart, the member said no.
Mr Swinney is right to hold the line against increases in income tax. As we have often said, the Scottish Conservatives believe that people in Scotland should not be taxed more highly than people in the rest of the United Kingdom. Sometimes that has been a lonely message to put out, but no more. It gladdens my Tory heart to hear those self-proclaimed social democrats and political progressives on the SNP benches arguing so vigorously and passionately against increases in taxation.
Conservative members are happy to stand shoulder to shoulder with the SNP in holding the line against the tax grabbers on the Labour and Liberal Democrat benches, who would clobber Scottish families. To coin a phrase, we are happy to be better together with the SNP on this issue.
However, the SNP can hardly complain about Tory austerity when it had the choice to raise taxation. [Interruption.]
Order, please.
What all that means is that in the coming election, for those who are unionist voters and for those who voted no in the referendum, there is now only one party that will protect their pockets and household incomes, and that is the Scottish Conservatives.
Will the member give way?
I will of course give way to Mr Rennie, tax grabber.
I have studied the Conservative proposals for the budget, which comprise £189 million in tax cuts and spending increases, but I can see only £50 million in cuts—that involves a cut to the bus pass scheme. Where would the rest of the money come from? How would Mr Fraser pay for his policies?
If Mr Rennie had studied our proposals in detail, he would have seen that we challenge some of the assumptions in Mr Swinney’s budget about the revenue that is likely to be raised. For example, we know that, according to the Office for Budget Responsibility, LBTT revenue is about £42 million behind his projected revenue. We think that some of his sums are wrong.
We would also make different choices. For example, as Mr Rennie well knows, we would introduce a graduate contribution. We have been clear about that. If Mr Rennie studies what we said in more detail, he will see that we have a package of proposals, and I will spell out in more detail why they are important.
We have determined that our priority should be the Scottish economy. A strong and vibrant economy is essential not just for the economic and social benefit of the people of Scotland but as a means of generating the tax income that the Scottish Government requires. That will be particularly important in the coming year and in subsequent years as a closer link between Scotland’s economic performance and the Scottish Government’s tax take is established.
With that in mind, we have proposed a number of changes to the budget—I am glad that Willie Rennie was paying attention to them. First, we have concerns about the increase in non-domestic rates. Partly, that involves the doubling of the large business supplement from 1.3 per cent to 2.6 per cent. Notwithstanding its title, that supplement will hit many relatively modest businesses, as it applies to properties with a rateable value of £35,000 or more, which include relatively modest shops in many Scottish high streets. The First Minister has told us that she wishes Scotland to become the most competitive part of the United Kingdom in which to do business. Unfortunately, having a rate that is double that payable south of the border flies in the face of that.
Perhaps more worrying are the proposals to change empty property relief and end the exemption for industrial property. The business community has expressed the strong view to us that that will be extremely damaging, that it could bring to a halt new speculative industrial development and that it might even lead to the demolition of 1 million square feet of empty factories. That is important because a vibrant, dynamic economy needs a stock of empty properties for new and expanding businesses to move into. We share the business community’s concerns about the adverse impact that those changes will have on the potential for economic growth and on our ability to attract inward investment.
We have concerns about LBTT, which I have spelled out, and we believe that the threshold for the 10 per cent rate should be increased. We maintain the opposition that we have had in recent years to the cuts in college funding, which have resulted in a decrease in college places of 153,000, which particularly impacts on people such as women who are trying to get back into the workforce.
Our package of proposals would put the Scottish economy first and foremost, as we are always conscious that a growing economy is necessary to widen the tax take. We will abstain on stage 1 of the bill tonight to allow further discussions to take place. However, we are clear that this party will not support proposals to increase taxation and, if necessary, we shall be happy to go into the coming election as the only party defending hard-pressed Scottish households that feel that they are already contributing quite enough to Government coffers. That is the distinctive Conservative message.
We come to the open debate. At the moment, I can allow speeches of six minutes, but that might have to change, as we are tight for time.
Before I call the first speaker, I remind everyone that the code of conduct dictates that members should not turn their backs on the chair. I ask members to bear that in mind for the rest of the debate.
15:22
I welcome the budget and highlight the £250 million health and social care package. It bears particular scrutiny as it represents the greatest shift in health spending that we have seen since 1948 and it puts our talk about preventative agendas into practice.
We would think that there would be a consensus in the chamber on that extra money for health and social care, particularly since Mr Swinney has specifically said that it should go to provide a living wage for care workers. That issue has been raised repeatedly in the chamber, because providing the living wage for care workers also in turn tackles delayed discharges, delivers improved quality of care, speeds up the delivery of care packages and increases the number of care packages.
Of course, increasing wages to care workers improves job satisfaction rates, which reduces churn in the sector and ensures that there are fewer staff shortages. That leads to continuity in care packages, which is another issue that has been raised repeatedly in the chamber, as it is important that people who receive care packages in the community see the same people.
That is all very good news, but it is being rejected by Labour councils, backed by their political allies in the Parliament. It is astounding that they would walk away from the budget, given the number of times that Labour has raised the issues of health and social care and of the living wage in that sector.
Will the member give way?
I will finish this point. Two years ago, Neil Findlay lodged a motion about the results of Unison’s staff survey, which were published in its document “Scotland—It’s time to care”. The motion said that resources should be provided to ensure the payment of the Scottish living wage, which we have done.
The Economy, Energy and Tourism Committee recently completed an investigation into low wages.
Will the member give way?
In that investigation, Labour members of the committee repeatedly asked us to introduce the living wage in the care sector.
I will give way.
Ms McAlpine, who are you giving way to?
I will give way to Mr Smith, who is on his feet.
Given that Ms McAlpine quoted what Unison rightly had to say about the living wage for social care workers, does she agree with what Unison has said about the scale of public sector cuts and job losses that will come as a result of the budget? Why is there no task force for the tens of thousands of public sector workers who will be put out of a job by this SNP budget?
When we look in detail at the budget, we can see that it is absolutely despicable that Labour councils around the country are threatening to sack workers. We are talking about a 12.5 per cent cut to this Government’s budget under the Tories. Councils here have been relatively protected, as Mr Swinney has said, compared with councils in England. [Interruption.]
Order, please.
The package represents a 1 per cent cut. If the Labour bosses of councils do not have the imagination and the ability to manage that in the same way as Mr Swinney has managed the budget of the country, they are doing a disservice to the workers they claim to represent.
Will the member take an intervention?
Will the member take an intervention?
I will.
Jackie Baillie.
Will Joan McAlpine tell us what SNP-controlled Dundee City Council is doing in issuing notices to 6,000 employees to ask whether they will take redundancy?
My understanding is that that is completely misleading—it misinterprets what is actually happening.
Labour has pinned its principles to the mast on social care repeatedly in the chamber. It has raised the issue of the living wage for healthcare workers and it has raised the issue of delayed discharges. It has pinned its principles to the mast on that. Now Labour’s principles are under water, because its members have a chance to implement what they say they want, but they are walking away. As far as I can see, they are making a last desperate attempt to hurt the SNP before the election. However, they are not hurting the SNP. The people they are really hurting are the long-term sick, the terminally ill, the frail elderly, the disabled and people stuck in hospital beds. They are the people who will be hurt if the £250 million social care package is not put in place because their Labour councils are walking away from it.
What is Labour’s message to care workers—the care workers to whom it is denying the living wage? Not only is it denying them the living wage, but it is now threatening to tax them. [Interruption.]
Order, please.
As well as threatening to tax them, Labour is offering those low-wage workers—who are not going to get the living wage—a rebate, but we do not even know the legal status of the rebate. It would be a matter of going back to Labour councils for means testing of the rebate.
Will the member give way?
No—I have already taken two interventions. I am sorry; I do not have time.
The member is now closing.
People will have to go back to Labour councils to claim their rebate—if it is legal and if it can be introduced. Of course, Labour members just love means testing, don’t they? [Interruption.]
Ms McAlpine, could you draw to a close, please?
Somebody mentioned the trade unions. I remind members that the Trades Union Congress found that under the Tories real wages in Scotland have fallen by the equivalent of £1,500. That is the amount of money that we have saved people through the council tax freeze, which, week after week, Labour councillors continue to oppose.
Ms McAlpine, you must close.
It is the SNP Government that is protecting workers in the home care service and everywhere else. It is a shame that Labour has lost—
Close, please, Ms McAlpine.
—the tag of the workers’ party that it used to have.
I remind members that, if they take more than six minutes, it is colleagues’ time that they are taking up, and I will have to reduce the time later.
15:29
This is the budget of many firsts. It is the first budget with substantial tax powers. It is the first budget without a fixed income. It is the first budget where we can increase Government spending. It is the first budget with costed alternative tax proposals on the table. It is the first budget where any pretence that councils have flexibility over their budgets has completely evaporated.
This is also the first year when John Swinney has been deprived of his well-worn and rather shabby songbook—the book of songs that he trots out on these occasions. “We value the relationship with our local authority partners”—he cannot say that any more; he has strong-armed them into submission with a triple whammy of fines worth £408 million. If Scotland’s 32 councils were to increase the council tax by just £1 each, they would face fines imposed by the SNP Government totalling £408 million. The historic concordat is simply history.
What else can John Swinney no longer sing? “We have a fixed budget”—he has flexibility now. “If only we had the powers”—he has the tax powers now. “This is a budget against austerity”—not if he uses the powers; he can do something about that if he does. His favourite—“These are Westminster cuts”—is gone, too. With a triple lock on councils to deny them any choice and his refusal to use the Parliament’s powers, he is imposing the kind of budget that he has previously condemned.
The people of Scotland will know that his refusal to act means that every single cut to public services to Scotland is a John Swinney cut. He cannot shirk that; he must accept it. He cannot point anywhere else any more. The £500 million cut to schools and council services is a John Swinney cut. The loss of 152,000 college places—John Swinney is responsible for that. The failure to invest to meet our climate change targets and fuel poverty targets, the cuts to police budgets and mental health services not being treated on an equal footing—this is John Swinney’s budget and he must accept the consequences of his decisions today.
The Liberal Democrats’ case is that the situation is so urgent that we must use the Calman powers that we have now rather than wait for the Smith powers that are due in two years. We recommend that we increase income tax by one penny to deliver £475 million of investment to repair the damage of SNP cuts to education and to make a transformational investment in education.
John Swinney rose—
If Mr Swinney is getting to his feet, can he explain how he will protect the incomes—
I am more than happy to explain if Mr Rennie will give way.
Order.
I will let Mr Swinney in when I let him in.
In the interests of parliamentary courtesy—
Order.
I will let Mr Swinney in when I let him in.
How can John Swinney protect the incomes of the council workers across the country who he is about to sack as a result of this budget? Will he explain that? [Interruption.]
Order, please.
I would be grateful if Mr Rennie would share with Parliament when he became so concerned about those issues—he defended the cuts to our budget under the five years of the Conservative-Liberal coalition.
I am afraid that that is in the old songbook; it is not in the new songbook. Mr Swinney needs to understand that if it was not for the Liberal Democrats cutting tax for those on low and middle incomes, people in Scotland would be far worse off; they have been far better protected than by the SNP.
It will surprise no one that we proposed to spend more than the Tories at the last general election. We believed that the severe cuts that they are now delivering were unnecessary and would risk the economic recovery.
What I am proposing today is consistent with our approach last May. Thanks to the Liberal Democrats in government, those on low and middle incomes have seen reductions of more than £800 each year because of the increase to over £10,000 in the personal allowance. In fact, thousands of people have been taken out of tax altogether—a policy that I remember members on the SNP benches opposing.
Will Mr Rennie give way?
Not just now.
Mr Rennie is approaching his last minute.
Our proposal would mean that we can increase taxes on those with higher incomes while protecting those on lower incomes. For instance, someone would have to earn more than £19,000 to pay more tax next year compared with this year, thanks to a further rise in the tax threshold, and someone who earns more than £100,000 a year would pay 30 times as much extra tax as someone on the median wage in Scotland of £21,000.
Our proposal is a progressive measure to invest in and have a transformational effect on our public services. It would mean investment in a pupil premium, investment in nursery education, investment to stop SNP cuts to our schools and investment to protect our colleges from further SNP cuts. That is the investment that we propose with a penny for education, which the so-called progressives on the SNP benches reject. We will support the Labour amendment at decision time.
15:35
When I asked Jackie Baillie about the Finance Committee’s report on the draft budget, she responded by saying that she was not at the meeting when we discussed it. Her argument is somewhat undermined by the fact that the Labour Party was represented at that meeting and that it signed up to the recommendation on the SRIT in the Finance Committee report. There is one line in the report from which the Labour Party dissented, which is:
“The Committee, therefore, welcomes that the DFM now supports indexed deduction per capita and recommends that this approach is agreed in the fiscal framework.”
The Labour Party is opposing the deal that would ensure that Scotland would get a fair settlement in the fiscal framework.
Will the member take an intervention?
It would be unfortunate if Jackie Baillie tried to explain the thinking behind why something was opposed at a meeting at which she was not present. [Interruption.]
Ms Baillie, Mark McDonald is not taking an intervention.
I will move on.
When the committee took evidence on the Scottish rate of income tax, Stephen Boyd from the Scottish Trades Union Congress said:
“our point is that, at this particular moment in the economic cycle, having been through an historically unprecedented collapse in real wages over the past five years, 2016-17 is not the moment in which to increase taxes on the lower paid.”
Ruchir Shah of the Scottish Council for Voluntary Organisations said:
“We do not need to increase taxes to invest in prevention. Prevention is something that can be done with budgets now ... I do not think that we should look towards the new tax powers as a panacea and as the way to bring extra money into prevention. We need to look at our budgets independently of the tax system.”
I have another quote from that committee meeting:
“the yield that we would get from 1p on the Scottish rate of income tax is actually quite small ... Is there not a better argument to be had about shifting the spend within the overall budget, which is substantially higher?”
That was said by Jackie Baillie. I wonder what has transformed the Labour Party’s opinion between that September meeting of the Finance Committee—that evidence is on the record—the signing off on the committee’s report, which happened just last week, and today’s debate. Perhaps Jackie Baillie can enlighten us.
Mark McDonald realises, of course, that the yield would be £0.5 billion. Failure to use the SRIT now will lead to devastating cuts of £1 billion before any new powers come to this Parliament. Does he not regret the decision that his cabinet secretary is making?
I can only apologise to Jackie Baillie for again quoting her own words at her. She said:
“the yield that we would get from 1p on the Scottish rate of income tax is actually quite small ... Is there not a better argument to be had about shifting the spend within the overall budget”?—[Official Report, Finance Committee, 30 September 2015; c 7, 15, 30.]
If she wants to change her position, that is a matter for her.
Will the member take an intervention?
I am looking to develop my comments a little further.
As the cabinet secretary said when he gave his budget statement to Parliament, this budget is important because of the need for public sector reform—the need to reform the way in which we deliver our services. We are in a period of on-going Tory austerity at Westminster, so doing things in the same way as we have always done them will not be sustainable in the long term. We have seen reform of police and fire and rescue services, and reforms of health and social care are taking place. It is now time to look at how services are delivered at the local level and to drive forward the shared services agenda.
That agenda has been taken forward very well in some areas of Scotland—it would be remiss to suggest that a strategic approach has not been taken in parts of Scotland. However, it is also fair to say that a lot of local authorities are lagging far behind when it comes to public sector reform and the shared services agenda.
An interesting element of the debate is the Labour Party’s insistence that savings can be achieved only by cutting front-line services. Only last week in The Press and Journal, the finance convener of Aberdeen City Council, Labour councillor Willie Young—a man with whom I have my own special relationship—boasted that the council had identified £20 million-worth of savings without a single saving coming from the front-line services that the Labour Party today says are the only things that are left to be tackled. The notion that there are not savings to be found in local government or that local authorities could not achieve different ways of delivering services flies in the face of what Labour councillors are saying.
Since Mr McDonald is fond of quoting other members, I point out that, on 23 April last year, he said:
“we cannot sustain further austerity, which results in those with the least being hurt the most”.
He went on to say that his belief is
“that we need to see a commitment to public spending increases”.—[Official Report, 23 April 2015; c 8-9.]
How does Mr McDonald propose that we raise more money for public services? [Applause.]
I am always grateful when Labour members are fans of my early work. [Interruption.]
Order, please. We must hear Mr McDonald close.
The point that I make to Mr Smith, if he will listen, is that we put forward a comprehensive and costed package that a Westminster Government could deliver as an alternative to austerity. We did not get the result in the Westminster election that we were hoping for, and Mr Smith’s party certainly did not. That was what that comment related to.
The point about the SRIT, on which I have always been consistent, is that I do not believe that it is right that the same increase in tax should apply to those on the basic rate as applies to those on the higher rate.
Mr McDonald, you must close.
The Labour Party disagrees with me on that, but I suspect that the public will disagree with the Labour Party.
If members take interventions, they must take them in their own time.
15:41
Context is everything when it comes to decisions about tax. The context today is the biggest cut to local government budgets in my lifetime. The Finance Committee accepts the SPICe figure of a 5.2 per cent cut to local authority budgets and, on pages 40 and 41 of its report on the draft budget, makes a fairly sharp critique of the nonsense that we have heard from the Government about the cut being only 2 per cent. In Edinburgh, that translates to £85 million-worth of cuts for the coming financial year. I am sure that the 2,000 workers who are going to lose their jobs in Edinburgh are extremely grateful that John Swinney is going to protect their non-existent incomes.
I say to Joan McAlpine, who talked about shocking sackings, that we have an SNP-Labour coalition in Edinburgh. It would pay her to look at the comments of the SNP group leader in the council and what he thinks of the Government’s settlement for local government.
That is the context in which Labour has made its choice. It is the same context in which John Swinney has instead sent an unprecedented letter to local government threatening a further £408 million-worth of cuts if local authorities do not accept the whole package, including the council tax freeze. Just to be clear about what that means, in the past, if councils did not accept the council tax freeze, they would lose the council tax support money. However, this year, if councils do not accept the council tax freeze, they will lose the council tax support money, the social care money and the teachers money. As the leader of the City of Edinburgh Council has said, that is a democratic outrage.
The member talks about a £400 million cut, but that includes money that is set aside for health and social care and to maintain teacher numbers. Why should councils get £250 million for health and social care if they are not going to deliver it? It is not a penalty—the money is for a specific purpose.
Joan McAlpine completely misunderstands the point that I made and the significance of her cabinet secretary’s letter. Councils would lose all that money just if they did not do one thing. If they did not have a council tax freeze, they would lose all the social care money. That is a completely different point from the one that Joan McAlpine makes.
That is the wider context in which Labour has made its decision. For the past 24 hours, I have struggled to understand the SNP’s response. In 1999, at the start of a massive increase of public expenditure from Labour, which all parties welcomed—even the Tories at the time—the SNP supported the penny for Scotland but, now that we have the biggest cut that we have ever seen to local Government, it does not support that.
The SNP is also the party that very recently actually supported a local income tax, saying how fair and progressive it was. Nor do we need to go back very far, because at the Finance Committee last month—two members have quoted this already—John Swinney said:
“I view the Scottish rate of income tax as ... progressive”.—[Official Report, Finance Committee, 13 January 2016; c 40.]
Therefore, all the rhetoric about a regressive income tax that we have heard for the last 24 hours is merely rhetoric. Why is the SNP—[Interruption.]
Order.
Why is the SNP not looking at the effect of the change that we are proposing on people’s actual incomes? I will deal with that issue once Mark McDonald has made his intervention.
The evidence from the STUC was that because of the impact on wages in real terms, 2016-17 is not the year to increase the SRIT. Does Malcolm Chisholm not accept that contention by the STUC?
I certainly know what Stephen Boyd was saying yesterday, and I have heard many speakers from the trade unions and the rally outside a couple of hours ago who were not saying that.
As I was saying, let us look at the effect on incomes. David Eiser, who I am sure that Mark McDonald respects as a good economist and who he has heard at the Finance Committee, has said:
“in assessing the progressivity of an increase in SRIT, it is more relevant to consider the change in after tax income,”
—which is understandable—
“not the change in the amount of tax paid.”
On a £12,000 income—and this is without the rebate—income falls by 0.2 per cent. On £23,000, it falls by 0.6 per cent. On £50,000, it falls by 1 per cent. On £100,000, it falls by 1.5 per cent. As Willie Rennie said, on £100,000 someone is paying 30 times more tax than someone who is on the median income. If the rebate is added in, of course that is even better for those who are earning up to £20,000.
What John Swinney said about our proposals is exactly what he said when we said that local government could deal with this for the bedroom tax, and because of that, the local authority administration systems are already in place.
John Swinney rose—
I have no time; I am in my last minute.
I am still struggling to make sense of the Scottish Government’s position on our proposals, other than to conclude that it is an electoral calculation. That is the top and bottom of it. What I say, and what we say, is that it is better to do what is right than to second-guess the electorate.
Nothing is more important for the future of Scotland than education. I would expect the SNP to agree with that, because clearly it is crucial to the growth of the economy as well as to individual opportunity. We are saying that now, in the current context, in the current circumstances of unprecedented cuts on local government budgets—half of which are to education—the right thing to do is to raise more income. Our proposal would do that in a progressive way.
The choice before the people of Scotland today and next May is a penny for Scotland or double austerity with the Tories and the SNP.
15:47
I am happy to participate in the debate. I decided to do so in the forlorn hope that we could have a clinical and analytical review of—[Interruption.]. Just wait—a review of alternative proposals. However, I was not hopeful and I was right.
With that reflection, let us try to understand the basis of this budget—why we are here in the present and what has happened in the recent past. If we do not do that, there is no hope for any meaningful alternative proposals in the future with the powers to come. I credit the Deputy First Minister for facing the challenges not just of this budget, but of the budgets that he has produced over the last eight years.
To understand the budget, we start by asking: why are we here? Willie Rennie did his Pontius Pilate job of saying, “It’s nothing to do with me, guv.” He obviously does not understand the economic cycle, or he would get on it. We are here because the UK has run up a mountainous debt of £1.6 trillion. We are here because the UK chancellor said that he was committed to a large budget surplus by 2019-20.
As a consequence of current fiscal arrangements, we are here because the Scottish DEL budget will fall by 4.2 per cent in real terms between 2015-16 and 2019-20, and it has fallen by £2.7 billion in real terms in the period 2010 to 2016.
Murdo Fraser rose—
Not just now.
We are here because Scotland’s capital budget, despite George Osborne’s claim to have increased capital spending, will be £600 million less, or 70 per cent lower, than it was in 2010-11. That is why we are here. Under the current fiscal arrangements, we are hitched to the application of a Tory austerity programme of choice, not necessity, that does not have to be applied with the immediate haste that it is being applied. It will get worse.
Will the member take an intervention?
No, not just now.
Six weeks after the November budget forecast, the OBR said that gross domestic product will now be 0.2 per cent less than forecast. The balance of payments deficit in November was double that of the balance of payments deficit in November 2014. At the end of December, borrowing was £69.3 billion, which is almost the figure for the forecast for the whole financial year to March. That is why we are here. We have a Scottish budget that recognises those factors but considers balanced priorities and risk aversion, and I will come on to those in a minute.
What are the alternatives? We have heard that the Tories will cut taxes or at least maintain them and they will also cut benefits further in the face of crippling debt and a challenging global economy. Labour says that it will increase income tax rates by a penny in the pound. That is a sure sign that Labour members know that they will not be in a position to implement that change. It is regressive and unfair. Labour should give us the details.
Will the member take an intervention?
Let me ask some questions and then I will give way.
What will the impact on pensions be? What will be the percentage change on net disposable income for those who are on £20,000, which includes teachers, police officers and nurses, and those who are on £100,000? What will the scheme cost to administer? How much tax is to be paid on the rebate? Stephen Boyd might have changed his views but at the Finance Committee, he said:
“keeping the SRIT at 10p made sense.”—[Official Report, Finance Committee, 30 September 2015; c 6.]
I am sure that Mr Brodie will recognise that the STUC said yesterday that Labour’s proposal is serious and should be given serious consideration. I am sure that he also recognises what we have said about rebates for pensioners and those who are on the lowest incomes. If Mr Brodie regards income tax as a regressive tax, what is a progressive tax?
Mr Brodie, I do not know whether you heard Mr Macdonald because he turned away from his microphone. If you did, now is your opportunity to speak again.
When I get questions like that, it reminds me that the weapons of Labour and its associates are boomerangs.
Whatever the balance of the budget, Labour cannot deny the additional investment. We have talked about the redirection of spending on care and are delivering substantial investment in educational attainment—
Will the member give way?
No, I do not have time.
We are continuing to pursue national security. All that is underpinned by a long-term economic growth platform that supports internationalisation, research, innovation, partnership, growing small businesses and social enterprises.
If I may, I will finish off by saying something to local authorities. I believe that the budget is realistic. It is tight because of the circumstances but it is not anti-austerity. To paraphrase Charles Kettering, if you are doing things the way you always did, you are doing them wrong. These times give us the opportunity to create a productive Scotland by looking at how we share services, how we become lean and mean by disposing of underutilised or non-utilised assets that require maintenance and by procurement through the entrepreneurial spirit of the third sector and community and social enterprises. Is it tough? Yes, it is tough, but when the going gets tough, the tough get going.
15:54
That is quite an act to follow. As the Deputy First Minister knows, I like to give credit where it is due on these occasions and today I want to say something positive about the Government and the Labour Party’s position. The Government is due some credit for its position on ensuring that the living wage should be given to care workers, including those who do not work directly for local authorities.
Will the member take an intervention?
I would like to make some progress.
The Economy, Energy and Tourism Committee was deeply concerned about that in its inquiry into fair work. We heard evidence about the impact that poverty wages in the sector have.
I disagree with the context in which the Government is doing it, but the point is that those workers are due the living wage and we should be grateful that that is going to happen.
I thank the member for giving way. The question is, who is going to pay for the living wage? We are all agreed that it should be there, but we are being told that the voluntary organisations will have to meet 25 per cent of the costs. After years of being strapped for cash, that will be extremely difficult and challenging for them.
I agree with that point very strongly. All that I am saying is that I like to say something nice to each side at the beginning of my speech. I promise that I will move on.
The Labour Party and, to be fair, the Liberal Democrats are due credit, too, for acknowledging a truth that has become increasingly unavoidable, not just this year but over the past several years: if we want to protect local and national public services, we will have to raise the revenue that is necessary to do that. Simply managing cuts from Westminster and blaming a UK Government—which, to be fair, is culpable for the deeply wrong and damaging actions that it is taking—is not enough. It is not enough simply to know who to blame; we have to know what to do about it, and raising revenue will be an important part of the response.
I do not agree with Labour and the Liberal Democrats on how best to do that. From my point of view, the emphasis of their proposal only on income is inadequate. Wealth inequalities are even starker in Scotland than income inequalities. Wealth must become a bigger part of the taxation picture, not a smaller one. Over the years, we have had many debates on the role of central Government versus the role of local government. The proposal to put up income tax by 1p would make local government more, not less, dependent on grants from central Government.
Will the member give way?
In a moment.
Over the coming weeks, the Scottish Greens will set out proposals for a longer-term approach, which will make use of the more sophisticated tax powers that we hope will be devolved. As well as covering income tax and wealth tax, those proposals will address the critical issue of local empowerment. Meanwhile, in the shorter term, we have already proposed an end to the council tax freeze and an end to the financial penalties that the Scottish Government threatens local authorities with if they do not comply.
In addition, this morning, in amendments to the Land Reform (Scotland) Bill, I proposed means of achieving in excess of £300 million per annum in additional revenue from taxation on derelict land. The Minister for Environment, Climate Change and Land Reform did not agree with what I was proposing, but she has agreed to discuss the issue further, and I hope that that discussion will be fruitful. In the shorter term, we could use the council tax multiplier, so that grossly undervalued luxury properties end up paying a bit more.
I will give way to Lewis Macdonald if he still wants to intervene.
I am grateful. I acknowledge that Patrick Harvie has now said that he recognises the need for action in the immediate term. Does he recognise that that is the central point of Labour’s proposal? The crisis in local government funding cannot wait if services are to be protected, and action must be taken in the coming financial year.
I agree completely that if we want to avoid the kind of crisis that Lewis Macdonald is concerned about, which we are all concerned about, action needs to be taken, and that that must mean revenue raising. My proposal is that we do that at local level as well as by ensuring that we properly address the balance between wealth and income taxes. At the moment, Labour’s proposal would push the balance too far in the direction of income when it should be going in the other direction.
I have written to the cabinet secretary on a number of other issues that I hope will be addressed, not least the on-going shifts in the transport budget. There have been hugely significant increases in road building when we should be emphasising a shift towards sustainable, active and public transport. That is a trend that seems to emerge both when budgets are going up and when budgets are going down. At a time when it appears that the world is moving towards a greater degree of ambition on climate change in the wake of the Paris agreement, the climate change budgets are being savaged, there is a lack of any shift towards sustainable transport policies in the Scottish Government’s budget and there has been a dramatic reduction in funding for energy efficiency work. Those are not things that the Greens can possibly support.
I urge the cabinet secretary to give an indication that he is willing to reverse those changes during the scrutiny of the budget, or to at least look at how the severity of their impact can be reduced. I do not say that with great hope of hearing something positive from the cabinet secretary, but my ears will be open.
16:00
I will start by putting some of what is being said in context. Some of that context is the Scottish Government’s strong economic record. The proof is there: the employment level in Scotland has reached a record high of Scots now in work; Scotland has the highest employment rate of the four UK nations and it outperforms the UK as a whole; the youth unemployment rate fell to the lowest level for September to November since 2006; and the number of registered businesses in Scotland has grown by 12 per cent since 2007, along with a growth in Scotland’s productivity rate from the same time. Not only that, our international exports have increased by 36 per cent between 2007 and 2014.
The Government has a strong economic record and it has delivered balanced budgets over its time in office. That can be contrasted with some of the stuff that has been going on recently with Labour, which has put forward what is largely a confusing position. Instead of putting forward positive things for discussion at budget time, which I am sure John Swinney would listen to very carefully, Labour has taken a scatter-gun approach, with anything that will do for a headline in the paper. For example, it was only in December that Jackie Baillie, Labour’s finance spokesperson, said on television that she agreed that the Scottish rate of income tax was a blunt instrument.
Perhaps the member would agree that we have sharpened that instrument by introducing a rebate to make it more progressive and fairer.
That is an interesting point. Earlier, Jackie Baillie said that the detail would be provided; I very much look forward to hearing that detail. The position has changed—Labour’s position has changed even since Friday, when Lesley Brennan and Jackie Baillie did not agree any position whatsoever for the Finance Committee, as Mark McDonald pointed out.
Labour members cannot even agree within their own group, so let us look at the context from which Labour’s new policy has come. In the Scotland Act 2012, following the Calman commission, Labour and the Tories agreed a single Scottish rate of income tax. There was no control over personal allowances, tax bands, tax reliefs or rebates—therefore, it was not progressive.
Now Labour is offering this £100 annual payment. How? I heard it said that we would be given the detail and I look forward to seeing that. It cannot be a tax rebate or a tax allowance, because that is not allowed. If it is to come through local authorities, it must be a benefit. Benefits are generally a reserved matter, and will be so even if the current Scotland Bill is enacted.
That was a look at how the rebate could be paid. Next comes how it will be administered. How will the local authorities get the appropriate data, and how will they check it? Will people have to apply for the rebate? We all know that the low take-up of benefits is worst among those with the lowest incomes. Is this yet again a Labour push against universality?
All those issues and many more will perhaps be explained in detail by Labour in closing, along with the timeline to 1 April for implementation. Labour’s plans are all over the place.
Linda Fabiani talks about looking for extra detail. Could she give us the detail about what the SNP is going to do to stop the swingeing cuts that are affecting our communities?
The SNP is very clear in what it has put forward; John Swinney’s budget has that detail. Labour would do better to work with that. It should recognise that it is the Tories who are the problem here and work with us to get a better deal, and with the councils to make it better for people all round, instead of coming up with crazy economics that have no back-up.
There is a complete confusion in what Labour is trying to do. I said that perhaps clarification would be given, but I am not convinced that it will be. We have heard so many off-the-cuff announcements from Labour over the last while,
“full of sound and fury,
Signifying nothing,”
as is often mentioned in literature. Every time detail is requested, we move on to something else. I have not even heard air passenger duty mentioned today, although it is supposed to be the answer to many issues.
I have no doubt that the consistency and commitment of the First Minister and the Deputy First Minister will result in the correct decision for Scotland on the fiscal framework that is being negotiated, which Labour cannot agree on either. I also have no doubt that, when the confusion and the incompetent financial and operational forecasting of Labour’s proposed policy are contrasted with the record in government and sound financial management in the hardest of times of John Swinney and his team, it will be widely recognised that the Parliament should agree to the general principles of the Budget (Scotland) (No 5) Bill.
16:05
John Swinney has enjoyed a remarkably long run as finance secretary, and he and his SNP colleagues have managed to escape the level of opprobrium and censure that some of his budget decisions have merited in that time. However, his luck has finally run out, and he has finally been found out.
I acknowledge that, in the past, perhaps assisted by his personable manner, Mr Swinney’s political and financial conservatism has often been charitably or sympathetically interpreted as prudence. However, this time, most people—certainly in the media—have identified and named his approach for what it is: Conservatism with a capital “C”.
The Financial Times headline was “Scottish budget follows George Osborne’s example”. The article said:
“While denouncing Conservative austerity policies for squeezing the Westminster block grant for Scotland, Mr Swinney emulated the UK chancellor George Osborne”.
The Telegraph said “John Swinney’s Scottish budget ‘a Tory copycat’”. It said:
“The Finance Minister pledges a ‘Scottish alternative’ to austerity but refuses to raise taxes and copies a series of George Osborne’s policies.”
In what many have seen as a step too far, the finance secretary has put local government at the centre of his budget and decided to cut a whopping £500 million from locally delivered public services. Half a billion pounds is to come out of libraries, day care centres, learning support for the young, and care at home for the old. As The Guardian concisely summarised it,
“Taking his cue from George Osborne’s budget, the SNP’s John Swinney slashed spending for councils”.
If SNP ministers or members do not want to hear that from the press, they can have it from one of their own. The SNP councillor Sandy Howat, to whom Joan McAlpine referred earlier, is the deputy leader of the City of Edinburgh Council. He said:
“A ... cut of this scale would be very damaging for jobs and services within ... local government generally ... the harsh reality is that this will translate to real job cuts that hit real families, in real communities ... Everyone will be hurt by this.”
In some ways, that should all come as no surprise to us. The SNP has been cutting support to our communities for years and passing the blame elsewhere. Although Mr Swinney and his on-message back benchers complain bitterly about cuts from the Conservative Government, the Scottish Parliament information centre has revealed that the Government passed on double those cuts to our local authorities.
Does the member think that John Swinney has been too generous to the health service? Would he rather see some of the money moved from the health service to local government?
As Mr Mason knows full well, that is not the alternative that we are proposing. We propose that the SNP raises income tax by 1p, and protects the low paid and our public services. That is in addition, not instead of.
It should also come as no surprise to see Mr Swinney try to deploy his full range of budget tricks and techniques. He talked proudly about the increase in the affordable housing budget, but a quick glance at the published figures revealed that the overall housing budget is virtually unchanged. In other words, in the middle of a housing crisis, with 150,000 people waiting for accommodation, he has not increased support for housing funding; he has simply moved money from one column to another.
At least those figures were published. On fuel poverty, Mr Swinney tried to publish last year’s draft figures rather than the normal outcome figures to hide the fact that he is cutting the budget for that by £15 million. When he was found out, the SNP came up with the most convoluted form of words. Apparently, all the spending is down to it, but the cuts are someone else’s responsibility.
Worst of all is when the SNP gives no figures at all. It likes to boast about its commitment to the renewables industry, never away from bemoaning any decisions that are taken at UK level despite the fact that the investment comes from UK consumers. However, we discovered not in the budget book but in a subsequent local government finance circular that Mr Swinney has decided to cut business rates relief for the Scottish renewables industry. He did not even have the guts to tell the industry. Why has Mr Swinney chosen to impose that additional penalty on the sector at the same time that he is accusing the UK Government of withdrawing support? Exactly how much will he raise by heaping that substantial additional cost on the sector when it is already withdrawing from Scotland at a rate of knots because of the withdrawal of the renewables obligation?
There has long been a gap between SNP rhetoric and the reality of SNP ministerial spending decisions. In the past, the SNP has managed—incredible as it may seem to us—to pass responsibility or blame either to George Osborne or to our local authorities. When employment goes up, it is because of successful SNP policies. When unemployment goes up, it is because of Westminster.
Today, Mr Swinney opened his remarks with misplaced braggadocio, proposing to dismantle Labour’s proposal. He proceeded to present two of the most feeble arguments that I have heard: that income tax is not progressive, and that we need to look at the proposal in more detail. On the first point, Mr Swinney should—as several speakers have highlighted—check the Official Report for his own remarks about income tax being progressive before trying to tell us that he has changed his mind.
As for the second point, everything that I have heard today—Chic Brodie summed it all up—brings to mind the words of Edwin Morgan, in his admonition to us all to avoid
“the droopy mantra of ‘it wizny me’”,
or in this case, “We cannae do it.” In that poem, Edwin Morgan said to this Parliament that we should avoid being a “nest of fearties”:
“A nest of fearties is what they do not want.
A symposium of procrastinators is what they do not want.”
I fear that that is what the SNP has become. “If only we had more powers”, the SNP members say. Well, today we have called them out. Given the choice between using the powers that we have or cutting Scotland’s future, we choose to use our powers.
16:11
I have taken part in most of the budget debates since my election in 2011, and every one of them has taken place against the backdrop of the Westminster Tory austerity programme. The Scottish Government continues to deliver for our nation, and this time we find once again that the Scottish Government is mitigating the excessive impacts of Westminster spending cuts. This budget protects the most vulnerable in our society from the on-going Westminster austerity programme.
I will address the Scottish Government’s record on education. As we heard yesterday, the passage of the Education (Scotland) Bill shows that closing the educational attainment gap has been a priority for the Scottish Government.
Will the member give way?
For far too long, progress in education has depended on where you were born and where you live. We now have the £100 million attainment Scotland fund that quite rightly targets primary schools that serve our most deprived communities, and £33 million of that investment is being provided this year. The work on educational attainment is happening this year. Let us not forget that, in these times of Westminster austerity, we are continuing to invest in offering 600 hours of free, high-quality early learning and childcare for all three and four-year-olds, moving to 1,140 hours by the end of the next session of Parliament if the SNP Government is re-elected.
We still have £1 billion of investment in Scotland’s very successful university sector while ensuring that Scottish students continue to benefit from free tuition and the continued commitment on teacher numbers in the form of the £88 million funding package.
That brings me to our local authorities. I used to work as a local councillor, and it is my opinion that local government has received a challenging but fair financial settlement.
Will the member take an intervention?
With my previous experience as a councillor, I would say that it has always been thus.
Will the member take an intervention?
Mr Bibby, it does not look like the member is giving way.
It is important that our local authorities work in more innovative ways to deliver services, finding new ways to deliver them—
Will the member take an intervention?
The integration of health and social care is an example of joint working and ensuring that there is no doubling up in service delivery. It is, at its heart, an opportunity for our communities to get a service that suits their needs.
Will the member take an intervention?
Ms Lamont, I do not think that the member is giving way.
That is the challenge for local government, which must lead the way in innovation and delivery of best practice. I mentioned during the debate on the Education (Scotland) Bill yesterday that when COSLA and other councillors came to the Education and Culture Committee I asked them what their innovative plans for education were and in which way they would work together to make that difference. However, it appeared that, for them, it was business as usual. There was a head-in-the-sand attitude. In these challenging times, that is not good enough. We need to ensure that we work together to find new solutions and new ideas while delivering services. We need to have a mature debate, because that is what the public want.
I will take Mr Findlay’s intervention now, if he wants. [Interruption.]
Sorry—Mr Findlay wanted in, but fair enough.
Will the member take an intervention?
Mr Bibby wants in. Any more for any more?
Was there a fair funding settlement for local authorities when you were a councillor, Mr Adam, between 2007 and 2012? You voted to cut 200 teachers from schools in Renfrewshire.
Interventions should be made through the chair, please.
I say to Mr Bibby that the whole point is that it is time to move on and deal with the issue now. [Interruption.]
Order, please.
Our public and our constituents—[Interruption.]
Order!
When Mr Bibby and I meet at the hustings in Paisley, he will—
Mr Adam, will you stop for a moment? Can I have order, please?
I call George Adam.
Thank you, Presiding Officer.
Will the member take an intervention?
During the election campaign, I will defend our case and Mr Bibby can defend his. His is not a good one, and I know which one the public trusts.
Will the member take an intervention?
Ms Lamont, I do not think that the member is taking an intervention.
The Scottish Government is continually working with its partner organisations to try to ensure that we provide what the public want. The Westminster austerity programme seeks to make the old, the weak and the disabled the ones who suffer the most—it seeks to make them suffer for others’ excesses—whereas the Scottish Government’s budget seeks to help those I have mentioned. There is £35 million to fully mitigate the bedroom tax, and funding is maintained for free prescriptions, eye checks and concessionary travel for old, disabled and young people. The Opposition callously calls all of the above “the free stuff”, but those things help every man, woman and child in Scotland and they are valued by members of our community.
Once again, the Scottish Government is standing up for all Scots during difficult, challenging times. We have a distant, uncaring Westminster Government that has no love for our communities. I know who my constituents believe and trust with our national finances and future, and l look forward to seeing, during the campaign in the coming weeks, how the Opposition parties explain their part in all of this.
16:17
Dundee is facing £23 million of cuts to local services. This is the worst local government settlement in real terms across the whole of Scotland. The SNP tells us that there is no alternative and says that the cuts are coming from Westminster. In real terms, the cut that is coming from George Osborne to Scotland is 4.7 per cent, but the cut that is coming from John Swinney to Dundee is 5.5 per cent. There is an enhanced package of cuts for Dundee and other deprived areas across Scotland. It is austerity plus.
With the exception of teachers—Joan McAlpine might want to listen to this—every employee of Dundee City Council has received a voluntary redundancy notice. The SNP fought the previous election guaranteeing that there would be no public sector compulsory redundancies, and Mr Swinney reiterated that today. What he did not say is that people will be politely and quietly asked to go in letters left on their desks.
Does the member understand the difference between “voluntary” and “compulsory”?
Yes, and the SNP has asked every council worker in Dundee with the exception of teachers to go quietly—to take their redundancy.
While council staff in Dundee read their voluntary redundancy letters, they see the services that they have worked so hard to maintain being slashed by the settlement from John Swinney. Where will the cuts fall? The SNP’s finance convener in Dundee has said that he is happy to maintain the council tax freeze, so he must have prepared his budget and he must know where the local SNP plans for the cuts to fall, but he has yet to come clean with the people of Dundee. We have an SNP finance secretary in Edinburgh who is happy to deliver a Tory budget in Scotland and an SNP council in Dundee happy to be good foot soldiers and visit that Tory budget on our local services. Stronger for Scotland? I do not think so.
Kezia Dugdale was right yesterday to suggest that people who can afford it should pay a bit more tax. It is all very well the SNP saying that it is stronger for Scotland but, while it is praising public services and those who deliver them, it is undermining them by delivering eye-watering cuts. Our leader was right to propose the harnessing of the powers of this Parliament. The SNP has been desperate for years to have the power to put a penny on tax—it campaigned for that in 1999 and again in 2003. We were reminded of that on television last night when we saw the First Minister—she was not the First Minister then—campaigning for a penny for Scotland.
Every week, the First Minister says that she wants consensus. Now she has it on the most important political issue. Last week, the Liberals said that they agree with putting a penny on tax and, yesterday, Kezia Dugdale made clear Labour’s position. The First Minister now has the power for which she has campaigned all her political life. I would fully expect the Government to seize that power and initiative when it comes to the vote tonight.
When I heard on the radio yesterday the SNP saying that it wanted to keep things in line with the rest of the UK, I nearly choked on my tea. What utter disarray.
Let me go back to Dundee.
Yes. [Laughter.]
Order, please.
Not right now.
Last week, the Scottish Government, with the British Government, announced a huge package of funding to support and diversify Aberdeen’s oil and gas industry and to prepare it to seize the opportunities of decommissioning. That is very welcome. For two years, I have been raising those opportunities in the chamber. Oil platforms have been sailing down Scotland’s east coast past Aberdeen and Dundee on their way to be decommissioned in Hartlepool. That seems like a terrible loss of work and industry to Scotland and the north-east. I have written to the First Minister, Amber Rudd, the UK Government’s Secretary of State for Energy and Climate Change, and David Mundell to ask each for a meeting to see how the rest of the north-east and Dundee can share in that investment. Dundee needs a working river, not just a waterfront. We desperately need work, and John Swinney knows that.
To add insult to injury, Dundee has been dealt the worst local government settlement in the whole of Scotland, with a budget decrease of 5.5 per cent. That figure is just behind that for Shetland and the Western Isles, but our poverty and deprivation levels are, as John Swinney knows, eye-watering in comparison. The insult was exemplified when Dundee’s two MPs, Stewart Hosie and Chris Law, who were elected last year on an anti-austerity agenda, declined to comment on Mr Swinney’s cuts to Dundee. They said that the issue was a matter for colleagues north of the border. That is a disgrace.
This budget and the SNP are, at best, taking Dundee for granted. In reality, we are the SNP’s sold-out city in Scotland. I seriously hope that that can be redressed at decision time tonight and by John Swinney in his budget.
16:23
Although it is sometimes preferable to speak at the start of a debate, it can also be advantageous to speak nearer the end and to have the opportunity to reflect on what others have said.
The first area that I will touch on is taxation. As has been stated, the Finance Committee focused largely on taxation during its budget study this year and, in particular, on the Scottish rate of income tax, which is our significant new power from April. Some 11 pages of our report were on that subject and we spent a considerable amount of time on it.
I come from a position where I would like to see improved public services paid for by increased taxation. I also consider that the gap between rich and poor is too wide and that we should try to rectify that by increasing both revenue and capital taxation.
Will Mr Mason taken an intervention?
Let me finish my point, and I will take interventions if I have time at the end.
Just on Sunday night I visited the Lodging House Mission in my constituency, which houses Glasgow’s main winter night shelter and is run in conjunction with Glasgow City Mission. It has 40 mattresses on the floor, yet it has had to turn people away some nights because it is not allowed to take more than 40 people on any one night. What kind of society are we in that allows that to happen? I would happily raise taxes to redistribute income and wealth much more fairly.
Will the member give way?
I said that I would give way once I have finished this argument, which has some distance to go.
The Finance Committee looked at whether we could raise the SRIT, and the first question was whether the SRIT is progressive or not—would it tax the better off more than those at the bottom? The answer is yes, it is progressive; we had some useful evidence from Lucy Hunter Blackburn, who compared someone earning £25,000 a year with someone earning £125,000 a year and showed that although their salaries are different by a factor of five, increasing the SRIT by 1.5p would mean that the richer person would pay eight times as much. That tells me that it is a progressive tax, and I am glad that the cabinet secretary agreed with me, although I think that the convener of the committee did not at the time. The main argument to the contrary is that, if you put 1p on 20p, that is a 5 per cent increase in tax, and if you put 1p on 40p, it is a 2.5 per cent increase, so from that point of view I accept that it is not progressive.
I argue that the SRIT is progressive, but certainly not very progressive. A lot of people on lower incomes could at this time really do without a tax increase. Since the report was finalised, we have had the Labour proposal to raise income tax by 1p. On the surface, that might seem to be attractive; I would love to have an extra £400 million that could be spent on public services, but the idea raises a lot of questions. Because it has been suggested so late in the day, the Finance Committee has not been able to examine the practicalities of how it would work. Would local authorities be able to handle a rebate system? What cost would that involve for local authorities? Could the people in most need be properly targeted? Would there be a bureaucratic burden for people who apply? Let us remember that a third of pensioners did not, because of the hassle, apply for pension credit to which they were entitled. Would the rebate payments themselves be taxable? We know that Westminster is not co-operative on such issues. There may be answers to those questions, but the reality is that they have not been looked at in any thorough way.
We had witnesses at committee advocating a tax increase—I was very impressed by NHS Health Scotland suggesting that the receipts be targeted at health spending for those who are most in need—but even the Scottish Trades Union Congress suggested that it is a blunt instrument and that we would be better off waiting a year to get control of the bands and rates, as well.
I confess that I find it to be a difficult question, because I find raising tax for those who are well off very attractive. In the end, however, I fear that there are too many people on relatively low incomes who could be seriously hurt, and I consider that we would be better off waiting just one more year for fuller powers.
I commend John Mason for a very reasoned speech, but does he think that people such as the homeless people in Glasgow whom he mentioned can wait another year? It is a serious matter, and just because the tax is not the most progressive, would he ask his Government minister to test the arguments and find something that works better, if the arguments support that? Does he agree that we should not settle for the detail, but for the potential for that money to make a difference in people’s lives right now?
It would have helped if the Labour party had brought forward its proposal earlier in the process, so that we could have looked at it in a bit more detail.
I see that Mr Rennie has joined us again. He would not allow me to intervene during his speech, but I want to make the point—
Will the member give way?
Mr Mason is in his final minute.
I seem to remember a Liberal Democrat minister from Westminster coming here and refusing to give us control of the rates when we got the SRIT, because the Liberal Democrats did not want us to make it more progressive. It is a bit rich for Mr Rennie to come in at this stage and say that we should be raising tax with the very blunt instrument that we have.
Finally, on expenditure, one of the strengths of what the Government is doing is that it is protecting health spending. Assuming that we cannot or should not raise tax, if the Opposition parties want to say that there should be more for local government, they can say that, but the corollary of that is that health spending would have to be cut as well. I support the budget.
16:29
This is a significant debate, because there are on the table two proposals for which Parliament can vote. We can support the Labour amendment to put 1p on income tax, which will protect public services and the many thousands of local council workers’ jobs that are under threat, and support investment in our schools, which will ensure that we can put forward a programme that can tackle the attainment gap, continue to promote talent and, ultimately, benefit the Scottish economy. Alternatively, we can support the Scottish Government budget, which will slash council spending by £500 million, thereby putting investment in schooling under severe threat and undermining help for the economy.
It seems to me that Nicola Sturgeon and John Swinney have become not political leaders, but managers. Mr Swinney, in particular, has become a budget manager.
Thank goodness someone is managing—[Laughter.]
He has been imprisoned by the accountants at St Andrew’s House, and he is—
Does Mr Swinney have something to say?
I am grateful to Mr Kelly for letting me intervene. I will say out loud what I was muttering to my colleagues: thank goodness that someone manages the budget carefully in this Parliament.
That was a cracking intervention.
Yes—it was worth waiting for, wasn’t it? [Laughter.]
Get on with it!
Order, please.
I will get on with it.
Mr Swinney, if you had been outside earlier and had had the opportunity to speak to council representatives, you might have been able to explain to them why your budget is going to put thousands of council workers on the dole—
Mr Kelly, speak through the chair, please.
Kevin Stewart rose—
I will give way to Mr Stewart.
Does James Kelly not acknowledge that this morning the cabinet secretary was at the Local Government and Regeneration Committee and then the Finance Committee for those committees’ budget scrutiny? Only one Labour member turned up at the Local Government and Regeneration Committee, and that member asked only one question. Is Labour really so bothered about all this?
The problem with the SNP is that in this debate all the bravehearts and all the progressive voices have been silenced. [Interruption.]
Order, please.
Look at them all. They are all meek now. Given the opportunity—
Where was Labour this morning? Will Mr Kelly give way?
Sit down, Mr Stewart. You have had your chance.
Order, please, Mr Kelly. I request that members sit down. Can we have order, please?
Given the opportunity to use the power to do something to protect council budgets, John Swinney has followed George Osborne’s austerity route and the Tory party’s cuts—[Interruption.]
Order, please.
Will Mr Kelly give way?
Yes. Why not?
Given everything that Mr Kelly has said, I wonder why Labour MPs voted with the Tories last year to enact £30 billion of spending cuts to public budgets.
Maybe Ms Fabiani should get into the TARDIS and join us in this time and place. We are debating the Scottish budget, which is affecting Scottish communities and Scottish councils. Why does the Government not take some responsibility, instead of passing the buck?
It cannot be acceptable that teachers do not have the photocopying facilities that they need to be able to give kids their homework, and are asking the kids—some of whom do not have computers and printers—to print things out at home. That has happened in my constituency. That cannot be acceptable. [Interruption.]
Order, please.
It cannot be acceptable that kids will have to walk to school next year because of school transport cuts, as a result of cuts from this SNP Government. [Interruption.] It cannot be acceptable, I say to Ms Campbell, that we are getting into a position in which we have fewer teachers and classroom assistants—[Interruption.]
Order, please, Mr FitzPatrick.
The choice is clear. The time for talking has got to be over. It is time to stand up and be counted, to protect the budgets, to protect council workers’ jobs and to protect our communities.
16:35
This has, indeed, been a unique debate because, for the first time in a couple of years, the Labour Party has come to the chamber with a policy—it might not be the same policy as it had last week and it might not be the same policy as it will have next week but—my goodness!—it is a policy. It is extremely unfair of the Scottish Government to say that Labour has not taken any evidence on the policy and that it has been worked out on the back of a fag packet. That is not true. For months, in the Finance Committee, which has Labour members, evidence has been taken on the policy. The Finance Committee has heard from businesses, councils, the third sector and trade unions. We have had a morass of evidence. However, the Labour Party has just ignored all the evidence apart from one submission—which it has adopted as a policy.
I hope that the Scottish Government does not feel bowed by the Labour Party and its new friends in the Liberal Democrats. I hope that John Swinney stands true to his word, as set out in his opening statement, and refuses to implement an income tax increase for the hard-working population of Scotland. As we—those of us who turned up to the Finance Committee—saw in evidence time and again, the proposal would not be good for those workers or for the economy of Scotland, so I ask the finance secretary to confirm in his closing speech that he will not be bowed by the proposal from the Labour Party.
Our problem with the budget is a different one, as outlined by Murdo Fraser today and in statements that he has made to the press. Our first concern is that, in line with the previous couple of budgets, this budget makes Scotland just that little bit less competitive. On a year-by-year basis, some of those things are noticed less than in others but, in the medium term, by chipping away at our competitive position we could store up problems for the future.
Last year, we complained bitterly about the residential rates of the land and buildings transaction tax, saying that we felt that, although it was right to give a break to first-time buyers, we were concerned about what might happen in other sectors of the market. We remain concerned about that today; we are concerned about the residential market. In terms of the commercial part of land and buildings transaction tax, the top rate of tax might be only marginally higher than in the rest of the UK, but sometimes even being marginally higher can count against us. We need to try to retain every advantage that we can and to erode or remove any disadvantages.
We have heard about empty property charges. We fought hard against that legislation when it came in. However, at the time, the Scottish Government’s position was that we still had a competitive advantage because of the exemption for industrial property. However, in this budget, the plan is to remove that exemption, which will take away one advantage that we might have had.
We have big concerns about the large business supplement—a measure that was introduced without consultation or impact assessment. We hear from businesses that it could cause problems and could lead to businesses choosing to invest in other parts of the UK, instead of in Scotland. Will it apply to oil and gas businesses, which have been hit hard over the past year or so? We hear about all sorts of forums in the north of Scotland and Aberdeen, but we do not know whether those businesses will be hit by the large business supplement. According to my reading of the policy, they will be. That means that we will be doubling the burden for businesses that are already struggling.
Mr Brown mentioned evidence that we heard in the Finance Committee. Does he also accept that the committee received no evidence opposing the supplement?
That is technically correct, although members—including, I am sure, Mr McDonald—received submissions that were addressed to them as individuals. Further, Mr McDonald will recall that we tendered for evidence before the announcement of the policy, so it would have been unusual for businesses to have complained about it, given that they had not heard about it.
Our second problem is that, again, the Government attempts to hide reality. It attempts to obfuscate some of the bad news and it refuses to give clear and plain answers to questions that we ask. The Government says, for example, that housing is an absolute priority, but when we pointed out on budget day back in December that it appears that the housing budget is being cut by £1 million—a small cut, but a cut nonetheless for a budget that is said to be an absolute priority—we were told that the budget for affordable housing was up by £100 million.
The Government is not telling us, however, what is being cut in order to fund that. We understand that the help-to-buy budget is being absolutely hammered. When I asked the Scottish Government today at question time what is happening to the help-to-buy budget, I was just given a three-year figure. The number, £195 million, sounds big, but if that is over three years, it reveals a pretty big cut if we divide it by three.
We also have issues about oversight of the budget. The Scottish Fiscal Commission signed off on the budget, saying that it is reasonable, but it clearly admitted to the Finance Committee that it did not examine any outputs whatsoever. The commission admitted that it would have no idea what numbers would be unreasonable. Despite having increasing concerns about the lack of behavioural analysis regarding the revenue numbers, it was still prepared to pass the budget as reasonable. We will come to that as the proposed legislation goes through.
You need to close, Mr Brown.
I am content to leave it there, Presiding Officer.
16:41
First, I acknowledge all those council workers and shop stewards and all the other people who have travelled from across Scotland to lobby the Parliament today—not to put the case for higher wages or more pay, but to put the case for their jobs and their colleagues’ jobs and for public services across Scotland.
As an Opposition party examining any budget, we know that there will be proposals and moneys within the budget that are to be welcomed. I have already put on record an acknowledgement that the £250 million going into health and social care is to be welcomed. Clearly, discussions still have to take place with local authorities, which still seem unclear as to some of the detail and the conditions. Nevertheless, given the major difficulties that we have with social care throughout Scotland, that money is welcome.
We would go further on housing. It is important that we now make things happen in housing, and we have a housing crisis that needs to be tackled. Again, I note the additional funding that was put in place there.
Being in opposition is about weighing up budgets and the good things within them and deciding whether those outweigh the negatives—and therefore whether or not to support the budget. Sadly, this time round, we find ourselves in a position where we cannot support Mr Swinney’s budget.
For all the bluster and shouting that has taken place in the chamber today, and for all the financial detail of the budget, we should never lose sight of the fact that we are speaking about the impact of the budget on people’s lives and on communities up and down Scotland.
Mr Rowley is right to speak about people’s lives. There is an omission, however, in Labour’s proposal. That omission is how the rebate system would actually work. No one from the Labour benches has outlined that today. Could Mr Rowley please outline how that rebate system would work? If it does not work, that will have a major impact on people’s lives.
There is a clear choice with the budget. There is a clear choice between cutting Scotland’s future and investing for Scotland’s future. On this side of the chamber, we will invest in Scotland’s future.
I do not forget that, when we announced that we would reverse the tax credit cuts that were coming from the Tory chancellor, we were told that we could not do that. The Government and its supporters said that that could not be done. Then, the Government had to move from that position.
Today, we seem to be getting told why the rebate cannot work. We are absolutely confident that the rebate can work, but we are absolutely happy to sit down with the Government and have that discussion, as we are with local authorities.
Will the member give way?
We have spoken to local authorities across Scotland, and we are confident that it can work.
Will the member give way?
Mr Stewart, the member is not giving way.
At the end of the day, this budget is about real people. Last week, I visited a project that supports disabled people who want to be able to shop in our town centres. The project has been told by the local authority that its moneys are going to be cut.
As regards early years investment, there are threats to budgets the length and the breadth of Scotland. If we had a joined-up strategy and a joined-up budget in Scotland, we would not be cutting early years investment for those who most need it in our communities. We know that children might already have their path outlined for them by the age of three or four, which is why there has been an emphasis by local government across Scotland on investing in early years. All those types of project are in danger of being cut, and that impacts on real people’s lives.
I said that I welcomed the fact that Joan McAlpine, in her speech, talked about the living wage. I, for one, have campaigned for and said that we need to introduce a living wage across the care sector. It cannot be right—it is not right—that the majority of care workers in the private sector get no more than the minimum wage. We can agree on that, but when we talk about ill-considered, ill-thought-out proposals, I have to say that, if the third sector is expected to pay 25 per cent of the living wage, I am not sure that it will work.
Indeed, it was Mr Swinney himself, a few years ago, who paid the local authorities to increase the national rate in the private sector, so again I am not sure that that will work. However, we will of course support the principle of introducing the living wage across the care sector as we move forward.
Another criticism that I have of the budget is that I have to ask: where is the strategic focus on a joined-up strategy for moving Scotland and its future forward? I am concerned about the economy of Scotland right now. How many task forces do we have up and running in Scotland? Some 65,000 jobs have gone in oil and gas, and we rightly have a task force trying to address that. We set up a task force for the coal sector when the opencast jobs went. In Fife, I sit on a task force, along with Mr Swinney, because of the job losses there. We have a task force for steel and we have a task force in Glenrothes for the electronics and semiconductor industry. Indeed, if we look right across Scotland, there is not much left of the electronics industry.
Faced with those stark realities as regards where our economy in Scotland is right now, I ask myself: where in the budget is there any indication that we are moving towards an investment strategy and a development strategy to put Scotland’s economy back on track? I certainly cannot see anything within the budget as it stands.
Mr Swinney talked about the reform of public services. I welcomed the Christie report, which said that we needed prevention. However, the Government will not be able to create the investment in prevention if it is cutting public services. That is a backward step. It is not looking to the future of Scotland; it is looking backward.
Let me also be clear: in this chamber early last week, the First Minister quite wrongly said that Labour was pushing for a deal on the fiscal framework at any cost. We are absolutely clear that it must be fair to Scotland and it must be consistent with the principles of the Smith agreement, but the people of Scotland will never forgive us if we fail to get an agreement. That is why we must work night and day to ensure that we get an agreement for Scotland.
I think that my time is up, but I want to say that none of us in this chamber should take our eye off the fact that we are talking about real people; we are talking about real jobs; and we are talking about real communities. Let us work together to ensure that we invest in Scotland’s future and support Labour’s amendment.
16:49
I will begin with Alex Rowley’s remarks on the fiscal framework. I have heard a lot of criticisms from the Labour Party for supposedly not putting body and soul into trying to resolve the fiscal framework agreement. I specifically refer to the stream of comments from Ian Murray, the shadow Secretary of State for Scotland, that have in essence doubted the energy that I have put in to trying to resolve the issue.
The reason why we do not have a fiscal framework agreement is that there is no basis to have one that is consistent with the Smith commission, and I will not sign up to any document that is not consistent with the Smith commission report. No games are being played here. I take deadly seriously my responsibilities as the finance secretary of this country, and if anybody believes that I would do anything other than try to get an agreement that is consistent with Smith, is good for Scotland and enables us to exercise the powers that we are supposed to be able exercise under what will be the Scotland Act 2016, they doubt the purpose of my adult political life.
Will the Deputy First Minister give way?
I am sure that this will be helpful.
I always try to be helpful to Mr Swinney. Given what he said, why does he expect council leaders to sign up to a deal that makes them considerably worse off?
I will come on to that in a second. [Interruption.] Well, I will. I have plenty of time for it. However, I will conclude my point on the fiscal framework first, because members must understand the seriousness of the situation. There are no party politics in play. The issue is about the national interests of Scotland, and I encourage all parties to think that through as we go into a difficult couple of weeks in which we will try to resolve the issues.
Willie Rennie talked about how Murdo Fraser did not have any explanations of or suggestions for how his long list of spending commitments would be paid for. I have sympathy with Mr Rennie. Mr Fraser put out a press release on 31 January that contained all the things that are wrong with the budget and all the extra spending that the Conservatives would make. He said that I was being sent a letter that would explain how that would be paid for. It is now Wednesday and I have yet to receive the letter. If I could receive the letter, it would be helpful. [Interruption.] We will have it at the end of the afternoon. I thank Mr Fraser—I will look at the letter in great detail, so that I can address those points.
Murdo Fraser and Gavin Brown talked about the increase to the large business supplement. Its impact will be an increase in 2016-17 of 3.4 per cent on the business rates for companies that pay the large business supplement. In 2011-12, the comparative number was 4.6 per cent and in 2012-13—in much more difficult economic conditions than we are in today—it was 5.8 per cent. I put the large business supplement in the context of that explanation, which demonstrates why it is appropriate and sustainable at this time.
Patrick Harvie raised issues around climate change, with which we will of course engage as we go through the budget process. The principal difference between last year’s budget and this year’s budget on issues connected to climate change is the removal of ring-fenced funds from the UK Government that were specifically targeted at climate change measures. I have been unable to replace those funds because of spending cuts from the UK Government.
Is the dramatic increase in the road-building budget also the result of the UK Government’s decisions, or is it a question of the Deputy First Minister’s own priorities?
The decisions on capital projects are of course decisions that we take to improve the infrastructure of the country. As Patrick Harvie will know, a range of projects are enhancing the country’s rail infrastructure. Indeed, just last week we announced additional funding to improve connectivity and journey times between the north-east of Scotland and the central belt, as part of the Aberdeen city deal that the UK Government and the Scottish Government brought forward.
Willie Rennie set out his arguments on tax. He has rather changed his political argument and agenda on that. For five years, Mr Rennie made absolutely no attempt in the Parliament to disassociate himself from the swingeing reductions in public expenditure that were delivered by the United Kingdom Government, the consequences of which we had to wrestle with. Therefore, I do not take at all seriously the Liberal Democrats’ sudden renewed connection with and interest in increasing public spending, after the damage with which they associated themselves as part of the Conservative Government over the past five years.
I have a number of points to make on the issue of the local government budget, which was raised by Mr Findlay and other members. The first is that the resource budget in grant in aid is proposed to reduce by £350 million. Secondly, £150 million of capital funding will be removed from local authority budgets for 2016-17, but it will be put into those budgets later in the spending review period. We had that arrangement in the previous session of Parliament, when local government got a lower capital budget at the start of the period and a larger capital budget at the end. All of the commitments that I gave to local government were honoured. In addition, as a consequence of the agreement that I have put to local government, it will get 26 per cent of the capital departmental expenditure limit budget that is available to the Scottish Government for not just the next three years but the next four years.
I cannot understand Mr Swinney’s position on the issue. If the deal for local government is so great, why has he had to impose the triple lock or triple whammy on councils, with fines of £408 million? How can that make sense if the deal is so appealing?
I am applying that approach simply because I want to make sure that the three things that matter happen. Those are the integration of health and social care, including the payment of the living wage to care workers; the protection of teacher numbers; and the delivery of the council tax freeze. I just want to make sure that those things happen, because I think that they are very important.
Although the local government resource budget is falling by £350 million, we are injecting £250 million into the integration of health and social care, in which local authorities are key participants. That £250 million will be able to pay for more care packages that currently cannot be provided. Therefore, that directly addresses the financial pressures on local government. Also, as I explained in my letter to the president of COSLA, which was issued to all local authority leaders, that money enables local authorities to find the financial support to pay the living wage for social care workers, which we have talked about, and to address pressures in the delivery of existing social care services.
The reduction of £350 million in the local authority budget is tempered by the injection of £250 million. The difference between those is less than 1 per cent of the total expenditure of local government. Therefore, some of the rhetoric that we have heard about a catastrophic fall in local authority expenditure is utterly misplaced. We have invested heavily to afford our priorities on behalf of the people of Scotland.
Will the cabinet secretary give way?
I am sorry, but I am going to close on the issues in relation to income tax. [Interruption.] I do not think that the Labour Party can moan about the number of times that I give way to Labour members in these debates.
I agree with Mr Rowley that the debate is all about people’s lives. We have decided not to increase tax on low-income households in Scotland—that is the choice that we have made. The Labour Party says that it has a rebate mechanism, but we have had two hours and 20 minutes of debate this afternoon and not one single piece of detail has been offered as to how the rebate could be paid to members of the public.
If Labour members had wanted some clues about the difficulty of the issue, they need only have gone to the Official Report of the Finance Committee meeting of 13 January 2016. I can share with Parliament that, on that occasion, Jackie Baillie was present for the Finance Committee debate—she was there and she was an active participant in the discussion. I set out the reasons why increasing tax for low-income households but tempering that with a rebate or some mechanism targeted at those individuals cannot be delivered within the powers of the Parliament.
Those arguments were set out clearly—in the Official Report and in a damn sight more detail than the arguments that we have had from the Labour Party on why a rebate can be done—to inform Parliament about why I came to the conclusion that I came to. That conclusion is that the right thing to do at this time is to protect the incomes of low-income households, to invest in the integration of health and social care and to freeze the council tax, and I hope that Parliament will support that at 5 o’clock.
That concludes the debate—[Interruption.] Order. Mr Findlay, I am speaking. That concludes the debate on the Budget (Scotland) (No 5) Bill.
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