Future Budget Planning Assumptions
The next item of business is a statement by John Swinney on future budget planning assumptions. As always, the cabinet secretary will take questions at the end of the statement, so there should be no interventions or interruptions during it.
15:08
I wish to make a statement to Parliament about budget planning beyond 2011-12.
When I presented the Government’s draft budget on 17 November, I explained that we had provided detailed financial plans for the next financial year only. In addition, we set strategic directions for the years ahead, outlined the on-going pressures on budgets and described our broad policies and priorities for the remaining years of the spending review period.
We took that approach for a number of reasons. First, we took seriously our responsibility to set out our detailed plans to balance the budget for next year and to submit those to the Parliament for scrutiny and debate. Because of decisions by the United Kingdom Government, the toughest year of the spending review period is 2011-12, when £1.3 billion will be taken out of Scotland’s budget and our total departmental expenditure limit will be reduced by more than 6 per cent in real terms.
Members will recall that approximately two thirds of the reduction was planned by the Labour Party before it left office. The remaining one third is attributable to the present Conservative and Liberal Democrat Westminster Government and its determination further to advance the scale and pace of the cuts. Members will also recall that in the first year of the spending review period we face a cash-terms cut in our resource budget of 2 per cent or around £500 million, with a very modest cash-terms increase thereafter. Our capital budget falls by £800 million in cash terms in the first year, with further cash cuts thereafter.
The analysis of proposed UK future spending trends that was first published by the Government’s chief economic adviser in April and was refreshed in the draft budget document illustrates for everyone the sheer scale of the continued real-terms tightening in Scotland’s budgets. Our draft budget for 2011-12 deals with that challenge by setting out how budgets will be adjusted in line with the sharply reduced spending power that is now available to Scotland—and this is the most acute reduction in public expenditure in any one year of the entire comprehensive spending review period.
Secondly, we recognised that the scale of the cuts that Scotland faces, as well as the pressures from issues such as the ageing population, means that fundamental and wide-ranging change in the public sector is unavoidable—and it is absolutely necessary. Over the past three and a half years, we have taken significant steps to reform Scotland’s public sector. We have exceeded our efficiency targets; we have simplified the public sector landscape and reduced the number of public bodies; we have reduced the burden of scrutiny; and we have enabled local councils to better meet the needs of their communities.
However, the scale of the cuts over the next four years, combined with long-term increases in the demand for key public services, means that fundamental change is unavoidable. We have asked the Christie commission to report soon after the election, with recommendations on how public services can be protected by making them more effective and efficient, by encouraging greater collaboration and by redesigning them affordably and sustainably. We argue that budgets for future years should be set in the light of careful consideration of the Christie commission’s recommendations and other reform activities, not in advance of them.
Thirdly, and critically, we are conscious—and every party represented in the chamber is well aware—that the UK Government has proposed further constitutional change, with a significant impact on Scotland’s public finances, as set out in the Scotland Bill. This Government welcomes the opportunity that Parliament now has to scrutinise those proposals thoroughly. We continue to believe that some of the new powers, for example the power to borrow, should be introduced in time to make a material difference to spending plans over the years to 2014-15. That could make a big difference to Scottish public expenditure, particularly capital expenditure, on projects such as the Forth replacement crossing and the new south Glasgow hospitals. I hope that every party in the chamber will join me in calling for the UK Government to bring forward borrowing powers as soon as possible. I hope that the ad hoc committee of the Parliament that has been established to examine the Scotland Bill will be able to explore that issue further. There could well be further implications for future spending plans into the bargain.
Finally, we are conscious that the people of Scotland will have the opportunity next May to speak to all of us in the Parliament. The Administration that is formed thereafter will be responsible for setting budgets to support its programme for Scotland in future years. I look forward to the opportunity that the election presents to debate Scotland’s future and how we protect Scotland from the worst excesses of Westminster’s cuts. Any future spending priorities will be set in the light of the priorities that have been assessed and voted on by the Scottish people. The Scottish Government that is in place in 2011 will benefit from the conclusions of the Christie commission and its thinking on public sector reform. That work, which we have put in place, will be of enormous assistance in wrestling with the financial challenges that we face.
When we debated the budget on 25 November, other parties took the view that, notwithstanding the unique circumstances that we face, it was necessary for budgets to be laid out for several years in advance to enable public service managers to plan and manage their operations into the future. The Parliament agreed with that view. I respect that view, and in normal times I would have taken it myself. However, we are in times that are far from normal. The level of change that has to take place in the coming months and years means that any such plans will be subject to enormous change and uncertainty.
Furthermore, public service managers have had to manage within one-year budgets in the past. In planning for 2010-11, for example, which was the last year of the 2007 spending review, managers were not told their likely 2011-12 budgets. Had we sought to make any predictions, they would simply have been wrong, because no one could have foreseen with any accuracy the scale of the cuts that were to be imposed in respect of next year. Members will also recall that, in the summer of 2006, the United Kingdom Government postponed the planned spending review. As a result, public services were planned for 2007-08 on the basis of a one-year budget, with no certainty about future years until autumn 2007.
Nevertheless, this Government listened to and accepts the clear message that was delivered by the Parliament. More information is requested about public spending options in Scotland in future years. We will therefore publish illustrative figures for the years up to 2014-15. I will discuss with Opposition parties the approach that is to be taken to the exercise, and in particular the importance of addressing how we apply to those budgets the Government’s firm view that change to budgets will arise out of the work on the public service reform agenda and the work of the Christie commission. I expect to publish the figures after the Christmas recess.
It is important that we have a clear view of what the exercise is and is not about. I have tried to provide clarity on those points. However, we should not forget that there is a wider set of issues. Illustrative budget figures will help to set the context for the debate about greater financial responsibility for Scotland. The future for Scotland lies in taking decisions here about taxation, spending and borrowing, about taking control of the key economic levers to maximise Scotland’s opportunities and address Scotland’s challenges, and about charting our own course and not following in the wake of another economy or a set of priorities that have been dictated in another place by a different set of circumstances and considerations.
The fact is that the existing arrangements do not provide anything like that degree of choice for Scotland. The provisions of the Scotland Bill might take us some way in that direction, but in the Scottish Government’s view they will not take us far enough. In the meantime, we are obliged to work within the framework that is handed down to us by the chancellor and the Treasury. We will seek to do so in a way that provides as much information as possible to members of this Parliament.
We have 20 minutes in which the cabinet secretary will take questions.
I thank the cabinet secretary for early sight of his statement. It is good to know that at least one minister in the Scottish National Party can get a statement out on time.
Having said that, I must indulge in what Mr Swinney describes as cheap abuse. We heard five pages of waffle before the cabinet secretary finally gave into the will of Parliament and announced that he would provide illustrative figures for the years up to 2014-15. That is another SNP U-turn, but it is welcome nevertheless.
I make it clear that we asked not for detailed budgets but for longer-term figures, to determine the path of travel for local government, the national health service, the voluntary sector and others who rely on the Government for their finance.
The Scottish Government will now do what the Northern Ireland Executive and the Welsh Assembly Government announced that they would do as part of their budget processes. Mr Swinney said that he would seek to provide as much information to members as possible, but he delayed giving level 4 figures to the Economy, Energy and Tourism Committee, and it is clear that he would have delayed providing the numbers for the years to 2014-15 if he could have done so.
Why must we wait until after the Christmas recess to see the illustrative budgets? Will the cabinet secretary give us a date on which we will see them? Will we have them before the stage 1 debate on the budget bill on 26 January?
I thank Mr Whitton for his warm and generous welcome for what I announced. I would hate to deliver a statement that he did not like, given his churlish response.
I have made clear on numerous occasions my position on the will of Parliament. Indeed, I was not the author of that view; it was Mr Whitton’s mentor—I say that with no disrespect to the late Donald Dewar—who made it clear that the Parliament would not be able to bind the Government other than through legislation. I accept that view. The Government does not accept the will of Parliament on all occasions. The last time that I stood up and accepted the will of Parliament was on the Edinburgh trams.
That wasn’t a good idea. That was Mr Whitton’s idea, or was it Mr Gray’s?
No, I must correct the First Minister—[Interruption.]
Order, Mr Scott.
I must correct the First Minister: Mr McNulty was in the vanguard of all of that. Perhaps demanding that the will of Parliament be accepted is not always Mr Whitton’s strongest ground.
We will publish the numbers after the Christmas recess. I confirm to Mr Whitton that they will be published before the stage 1 debate on the budget bill, which will take place in late January. I look forward to hearing from Mr Whitton exactly what he will do about the budget. For weeks and weeks we have heard about the process; now we need to know what Mr Whitton will do about the budget in the period to come.
I thank the cabinet secretary for his statement, and for the apparent decision to comply with what Parliament sought.
The motion that was passed did not just ask for detailed information. It suggested that the legislative framework should be changed—[Interruption.]
Order! If members on one side wish to have conversations with members on the other, they should do so outwith the chamber.
The motion also suggested that the legislative framework should be changed, so that future Scottish Governments would be required to provide three-year figures when there was a spending review. Is the Government minded to accept that suggestion?
Now that we have clarity on the timing of when the Government will bring out indicative figures for future years, can we have clarity about how detailed they will be? In 2007, the spending review that the cabinet secretary’s Government published produced figures up to level 3. Will the new indicative figures also be at level 3?
On the legislative framework, Mr Brownlee will accept that changing legislation requires substantial consideration. The Government will examine that question and will be happy to consult on it.
On the level of detail that will be involved, as I indicated in my statement I will discuss with Opposition parties the approach that is to be taken to the exercise. I say in all seriousness—and in no way other than in all seriousness—that the budget numbers will have to change because of the nature of the public service reform agenda that must be pursued. I hope that, in the spirit of co-operation, we can come to some kind of understanding about how that is to be reflected in the way in which the information is dealt with.
I, too, thank the cabinet secretary for his statement, particularly the 12 words,
“We will therefore publish illustrative figures for the years up to 2014-15.”
I also thank him for the other 1,344 words.
The finance secretary’s statement is one of three ministerial apologies that have been made in the past three weeks, in which the United Kingdom Government, previous Executives or others have been to blame. The tenor of the finance secretary’s statement today was that circumstances were out of his control.
However, on circumstances that are within his control, why has he not taken a position? When the cross-party meetings with Opposition spokespeople took place, the finance secretary did not explain that the Government intended to set up the Christie commission, or what its remit would be.
Also, the cabinet secretary mentioned borrowing powers and the hope that the UK Government would confer them. He also specifically mentioned the Forth replacement crossing and the Southern general. Does the Government still intend to have financial close on the Forth replacement crossing in spring 2011, or is he looking to finance it differently, such as through borrowing rather than straight capital build?
Mr Purvis’s response was slightly cheerier than Mr Whitton’s, but not much.
During my discussions with the Opposition parties, I have tried to foster an understanding of some of the challenges that we face. I have provided Opposition parties with extensive information about the pay issue and with extensive budget information. On occasion, I have even costed proposals for individual Opposition parties, or had my officials do it, to try to be helpful.
The single variable rate. What about that?
If Mr Scott could ever summon up the enthusiasm to press his button and ask a question, I would be more than delighted to answer it. If Mr Purvis is not good enough at asking the questions, perhaps Mr Scott will take over.
Let us move on, cabinet secretary.
The Government has published the Christie commission’s remit—it was part of the budget statement—and the membership of the commission is also publicly available.
The Government’s plans for the Forth replacement crossing remain entirely intact. We intend to move to financial close in spring 2011. We will finance the Forth replacement crossing out of traditional capital. I made the point in my statement that allocating so much capital expenditure to a major project has major implications. Borrowing powers would allow us to deliver some of the wider capital programme, which I thought was an aspiration of the Liberal Democrats as well as the Government.
We come to open questions. If any member has still to press their request-to-speak button, I encourage them to do so.
This week, the Parliament has commenced the scrutiny of the Scotland Bill, warts and all. The cabinet secretary will be aware that Opposition parties have trumpeted it as bringing the most significant transfer of fiscal powers since 1707. Given the fiscal powers outlined in the Scotland Bill, and given what we already know about the potential for the plans to cause huge fluctuations in revenue, can the cabinet secretary tell me how the fiscal powers could impact on any medium-term spending plans that the Government has?
Based on the timescale that the UK Government has set out for the application of the new income tax provisions, I think that the earliest that we could expect the plans to have an effect would be in either 2014-15 or 2015-16. We will watch with interest where the timescale goes on that question.
I concede to the UK Government that the income tax powers are complicated, and it will have to take a great deal of care about how it designs them, because they could have significant implications for Scottish public expenditure. Other powers are easier to introduce, such as borrowing powers. They could be introduced straightforwardly—we would not have to wait until 2014-15 and we would not have to have the strain in the capital programme that we will face as a consequence of the budget cuts from the UK Government.
The finance secretary has all the information that he needs to produce the illustrative figures. In fact, he had it on 17 November. Why exactly do we have to wait until after Christmas for the illustrative figures? Bearing in mind that he is putting so much weight on the Christie commission, why were the recommendations of the Beveridge report, which was supposed to look precisely at the allocations, largely ignored in the budget?
Mr McNulty must have spent most of his time reading tram manuals rather than the budget document to have missed the fact that the Government has taken on significant parts of the independent budget review report. On public sector pay, we have accepted huge elements of the—
Council tax?
Mr McNeil obviously is pressing his button, too. We will wait for a question from him into the bargain.
We have taken forward recommendations on pay, efficiency, procurement and the Scottish Futures Trust—I am sure that that will go down well with Mr McNulty. The Government has taken forward plenty of the recommendations of the independent budget review, and I explained in my statement exactly why the Government’s original position on the public service reform agenda was the correct one to adopt.
I have accepted the will of Parliament on the question. This is the second time that I have done that. I hope that this time it is a slightly wiser judgment than it was the last time.
The Christie commission has been set up to look at the future of public service delivery. Will the cabinet secretary confirm that the SNP intends to reflect that review in future budgets, and that it is important that financial details for future years are not fixed in stone, so that changes can be made to reflect any changes to services proposed by the Christie commission?
Those points will have to be reflected in future budgets. The challenge that we face in the medium term is to redesign public services fundamentally with the objective of meeting the expectations of the people of Scotland. I differ from the UK Government in that I think that it has taken a pretty crude approach to balancing the budget in the longer term. There is no sense in its budget of a fundamental approach to public sector reform, and significant changes have been applied to budgets without a reform agenda being demonstrated. A reform agenda will have to be at the core of any Scottish Government response.
Let us hope that the forward planning of Scotland’s finances is more robust than the forward planning of the transport system.
Police authority budget planners clearly face a major challenge to protect public safety up to 2015. On the publication of the 2011-12 budget, the assumption was that police officer numbers would be maintained at 17,234. What assumption will be made about police officer numbers when the indicative figures are published along with the associated documentation?
That will emerge as part of the presentation of the numbers. Today, I am confirming my response to the decision of Parliament. It is a tad rich that Mr Kelly is holding me to account on police numbers, bearing in mind the fact that he entered the Parliament on a manifesto commitment to add not one single police officer to the 16,234 who were left when the previous Government left office. I leave my remarks at that.
The cabinet secretary will be aware that, at the Treasury Committee on 4 November, George Osborne stated:
“We are looking at whether this whole framework of DEL-AME needs to be revisited, particularly the AME part of it, because this is a very large budget—I think virtually half of Government spending ... So we are looking at a new framework and I hope to say more about that in the Budget on March 23.”
What implications does the cabinet secretary believe that that could have for Scotland’s future spending plans?
Significant implications could arise out of that, and we are seeking clarification of the approach that the chancellor has outlined. The DEL budget is the one over which the Scottish Government has full control; annually managed expenditure is a demand-led, UK-controlled budget. If there is to be a shift in that activity, we need to understand all the implications. For example, the chancellor has decided to devolve council tax benefit, but we are not altogether clear whether all the money is to be devolved or what the implications of that will be. That is obviously a material shift in the accounting of the Scottish Government. Such questions are substantial and are another variable that has to be dealt with in our longer-term budget planning.
I put on record my support for the Christie commission, which is the correct way to look at how we deliver what are currently totally publicly delivered services. We may need to use our imagination a bit more over the next decade. With that in mind, I wrote to the cabinet secretary this morning, suggesting three projects in Lothian that might act as templates for the commission. I ask him to look kindly on those.
I am afraid that I have been in committee all morning, so my correspondence has not caught up with me.
It will be in the Evening News.
Mr Finnie tells me that it is in the Evening News, which is even more readily accessible than my correspondence folder. I will consider those projects with great interest, and I thank Mr Finnie for his prompt.
Does the cabinet secretary agree that it is a bit rich of the Labour Party to demand medium-term spending plans when it twice deferred producing comprehensive spending reviews, in 2006 and 2010? The major difference is that there were no massive budget cuts coming its way, no Christie commission and no Calman commission, just a leadership change and an election. Does the cabinet secretary agree that, if it was good enough for Labour then, it should be good enough for Labour now?
Mr Adam has known me long enough to know that I would not expect an iota of consistency from the Labour Party.
I read the objectives of the Christie commission and re-read the original objectives of the independent budget review, and they are pretty similar in many respects. What does the cabinet secretary consider to be the major differences between the two?
As I know that Mr Brown considers these questions carefully, I encourage him to read chapter 7 of the independent budget review report, which suggests the necessity of our fundamentally examining the method of delivery and manner of public services. That is entirely the foundation of the remit of the Christie commission. So, two very different types of exercise are being undertaken.