Independent Budget Review
Good morning. Our first item of business this morning is a debate on the independent budget review.
09:15
I thank the members of the independent budget review panel—Crawford Beveridge, Sir Neil McIntosh and Robert Wilson—for their thorough and insightful report. Over a short period of time, they have developed a substantial commentary on Scotland’s public finances. They have done us a great service through their work; I hope that Parliament will join me in commending the approach that they have taken.
The IBR report provides us with a frank assessment of the financial challenge that we face because of shrinking income from the Westminster block grant and rising spending pressures. That challenge has implications for Government, Parliament, the broader public sector and the people of Scotland. That is why the Scottish Government is leading a comprehensive debate across Scotland to establish where agreement about the panel’s conclusions lies among the people and Parliament. That debate is an essential part of preparing the Government’s budget.
The scale of the financial challenge is extraordinary, but the IBR report provides an independent commentary on a wide range of issues that members may wish to cover today, including efficiency, public sector pay and staffing, how and to whom we make available public goods and services, capital spending and the shape of the public sector in Scotland. I assure Parliament that the Government is listening to views from across the political spectrum and across the communities of Scotland in working to achieve consensus in the Government’s budget. There are serious topics for discussion, and it is important to have the opportunity to debate them in Scotland’s Parliament.
If the cabinet secretary receives representations from businesses with regard to the rates burden as a result of increases to their bills, will he have an open mind on the issue, or is his mind closed?
The Government has taken its decisions on the rates revaluation issue. Parliament has debated the issue on a number of occasions. On all those occasions, it has accepted the Government’s view that we should not introduce a transitional relief scheme. In fact, the business rates position delivers a saving of more than £200 million because of the Government’s decision to link the rate poundage in Scotland to that south of the border. That benefit is in addition to the small business bonus scheme and the other reliefs that the Government provides, which total more than £2.4 billion of assistance to the business community over the period of the revaluation. The Government’s commitment to the business community is clear from the measures that we have taken.
I remind members of the financial position that we face. Until the comprehensive spending review reports on 20 October, we will not know what Scotland’s budget settlement for 2011-12 and the years beyond will be. However, it is clear that we are entering a period of significant fiscal consolidation. By 2015-16, the current United Kingdom Government will have implemented a combination of tax rises and spending cuts worth £128 billion, two thirds of which was inherited from plans by the previous UK Government. Based on information in the chancellor’s June emergency budget, the Scottish Government’s chief economic adviser has forecast that the resources controlled by the Scottish Government could contract by some 3.3 per cent per year on average in real terms over the next four years.
The chief economic adviser’s analysis sets out long-term public spending forecasts. Where annual figures are included, those are much more sensitive to a range of economic factors and, crucially, to the nature of the UK Government’s decisions about public spending in any given year. For example, if the United Kingdom Government announces in the comprehensive spending review significant changes to its policy on taxation, to spending on defence or welfare, or to its funding allocations to the health service or other public services, any or all of those measures could have a major impact on Scottish budgets as a result of the operation of the Barnett formula, even though the long-term reductions in public spending at UK level remain more or less unchanged. For that reason, we simply cannot be sure of Scottish spending figures until after the results of the CSR have been announced. It would be foolish to set a budget on anything other than the definitive sums of public money that will be available in the next financial year.
However, we can estimate the potential level of funding that is available. The Scottish Government’s current assessment of the estimated Scottish spending figures includes projections of a £3.7 billion real-terms reduction in the Scottish departmental expenditure limit budget between this year and 2014-15. We estimate that a reduction in one year of £1.2 billion in public spending in cash terms and of £1.7 billion in real terms is in the nature of the challenge that we face in 2011-12. To put those figures into perspective, they are roughly equivalent to the totality of the annual budget for the Scottish Government’s justice portfolio and around twice the size of our rural affairs and environment budget. The projections for capital spending alone—which are for a reduction of £500 million to £600 million—come close to around 20 per cent of the Scottish Government’s total capital budget, at a time when capital spending can play a significant role in supporting jobs and economic recovery.
I stress to Parliament that there remains significant variation around the figures that I have given, due to the impact of individual Whitehall departmental budget agreements. As we all know, those departmental budgets are still being fought over as we speak. However, although we must wait for the details of the comprehensive spending review to establish a final position, the scale of the chancellor’s cuts is absolutely clear. At the same time, demographic and other pressures are increasing the demand for some key public services and, therefore, their costs.
In framing our choices around the budget, we must consider the views of the independent budget review panel but must also take into account the latest information that we have about the economic recovery, both here in Scotland and more generally across the United Kingdom. The recovery remains fragile and the position of our labour market remains particularly challenging. The UK Government’s plans will see the longest and deepest period of cuts to spending on public services since at least the second world war. That is why we have argued so strongly that the approach that the chancellor is articulating involves cutting public spending too far and too fast. There is a danger that a downturn in public sector activity will come at a time when it is not certain that other sectors of the economy have the capacity to offer alternatives to those who are looking for work. Similarly, the public sector is a major customer for the goods and services that the private sector provides.
For nearly seven minutes, the cabinet secretary has told the chamber about assessments and analysis that the Scottish Government has carried out. What is the Scottish Government’s position on what the current level of borrowing and, therefore, debt in the UK should be?
I have said to Mr Purvis in a number of answers to parliamentary questions that we believe that the United Kingdom Government should reduce the fiscal deficit at a slower rate than it is currently doing. That is essential to ensure that we balance the interests of the private and public sectors.
Our scope for managing the financial challenges that we face would be greatly enhanced were Scotland to have greater fiscal powers.
Will the minister give way?
I am making progress on my speech.
Parliament can play its part later this year, when the Scotland bill is published at Westminster. When it is, we must work together in Scotland’s long-term interests to ensure that the flawed Calman commission proposals do not put our public finances at risk. I would also welcome Parliament’s support in making the case for effective borrowing powers for Scotland. The bleak financial outlook brings that case into ever sharper focus. For example, each £100 million increase in capital investment funded by borrowing is estimated to support approximately 1,500 jobs in Scotland.
However, over the months to come, we must operate within the fixed financial envelope that the United Kingdom Government gives us. We will do all that we can to advance Scotland’s interests through the levers that are currently at our disposal, including the power of argument with Her Majesty’s Treasury on issues such as fossil fuel levy revenues—on which Mr Scott responded positively yesterday—and spending on the Olympics.
The cabinet secretary says that he will do everything possible with the levers that are at his disposal. He will recall that there was a second question in the referendum that set up the Parliament, which gave us powers to increase the level of income tax by 3p in the pound. What is preventing him from doing that?
Clearly there are choices to be made about whether to use the Scottish variable rate of taxation. What the Parliament would have to judge on that question—and the Government’s position is not to use the Scottish variable rate—
Why not?
Because citizens in our country are already facing dramatically higher taxation as a consequence of decisions of the United Kingdom Government, repairing the financial damage delivered by the Government that Lord Foulkes supported. If Lord Foulkes wants to argue for the use of the Scottish variable rate, he is of course free to do so, if that is the Labour Party’s position.
Will the minister take one more intervention?
If that is what Lord Foulkes is going to confirm, I will allow him to do so on the record.
I am grateful to the minister. Where does he think that money comes from for Governments to spend, other than from taxation? In this instance, he has the power, if he wants to use it. Does he just want to use the product of taxation of English people?
My appetite has been whetted for the stance of members on the Labour Party’s front bench in the debate. I will be intrigued to see whether they share the enthusiasm for the use of the Scottish variable rate that Lord Foulkes is demonstrating. I thought that it was just the council tax that was going up, but now income tax is going up, too.
Against the background that I have set out, we established the independent budget review panel in February. Although the primary response to the review will come in the Government’s draft budget in November, we have already responded to a number of the key points and recommendations in the IBR report. I will say more today about the contents of the report.
Our response has been designed to create the appropriate space and opportunity for a wide debate on the questions that the review raises and to enable the Government to establish consensus on how we can formulate an agreed budget.
The IBR recommends no less than a 2 per cent efficiency requirement beyond the current financial year and we have confirmed that that is what we intend to pursue. We will announce details of our future approaches to efficiencies in November.
We welcome the IBR’s recognition of the strongly held view that water services should not be subject to privatisation. We believe that Scottish Water, which is performing extremely well, should remain under public ownership. We will take forward the recommendation to reduce the number of public bodies, utilising the powers created by the Public Services Reform (Scotland) Act 2010, with a view to removing duplication and delivering further rationalisation of public bodies.
The IBR report comments on a number of policies, goods and services that we provide to the public and it is right to do so. We have made clear in our response to the IBR that a number of policies will be priorities for the spending review.
We remain committed to the eligibility criteria for free personal care in Scotland and to the eligibility criteria for concessionary travel in Scotland into the bargain. Our preference is to retain the council tax freeze at a time when many households are still feeling the effects of recession. However, we acknowledge that there are a range of views and we are consulting accordingly, particularly with our local authority partners.
We have also made it clear that we hugely value the role that the national health service plays in Scotland, in terms of the health and wellbeing of our people, the support that it offers the most vulnerable in our society and the contribution that it makes to the performance of Scotland’s economy. We will therefore apply any Barnett consequentials arising from the protection given to the health service by the UK Government to the health service in Scotland.
We also share the IBR’s views on the importance of continuing to scrutinise the role and shape of the public sector in the long-term interests of Scotland’s public finances and the quality of the services that we provide. We must keep up the pace on public service reform. As the IBR suggests, that debate must involve the private and third sectors, and the users of our services, too. That dialogue is actively under way.
The IBR also confirms the value of many of the measures that we have already set in train to deliver savings and maximise efficiency, equipping us well for the challenges ahead.
Since 2007, we have relentlessly pursued greater efficiencies. We exceeded our target in 2008-09 by some £300 million. We are in the process of collating the 2009-10 outturn and we are confident that we will exceed the target of £1.069 billion. Our efficiencies target for the current financial year is £1.6 billion.
We have streamlined the public sector and will, by next year, have reduced the number of public bodies in Scotland by 25 per cent, delivering estimated net savings of around £125 million by 2013 and recurring annual savings of around £39 million thereafter.
We have acted to obtain savings through better procurement and by reducing the scrutiny burden. The IBR has endorsed our search for better value in capital spending through the Scottish Futures Trust, which, as it announced two weeks ago, has delivered more than £100 million in benefits and savings to infrastructure investment in Scotland in 2009-10. That work is crucial when future capital spending is under such threat.
Will the cabinet secretary give way?
I have more to say. I have already given way twice to Mr Purvis.
Following the publication of the UK spending review in October, further difficult choices will be required on capital spending. It will be vital for colleagues across the chamber to work constructively to develop a positive consensus on the way ahead.
We have also looked at our own operations, making substantial savings in administration, marketing, publishing and travel, and further work will be undertaken to deliver efficiencies in that respect.
We have adopted a prudent approach to public sector pay, starting at the top by freezing ministerial pay for a second year. Senior civil servants’ pay is being frozen in 2010-11. Uniquely in the United Kingdom, in 2009-10 and again this year we have asked the chief executives of public bodies to waive any bonuses to which they might be entitled. The Deputy First Minister has led the way in pressing for a review at the UK level of the NHS distinction awards, which is now under way. For the past three years, we have progressively tightened our stance on public sector pay policy in general. We will need to have further and more acute public sector pay constraints, given that 60 per cent of our cash costs are in staff salaries. Our approach to pay will be set out alongside the draft budget.
We have clamped down on public sector bonuses and set a cap on total staff numbers in post in the core Government this financial year, as well as establishing an early severance programme that will reduce our running costs in future years. Similar schemes are in operation elsewhere in the public sector, such as in the Scottish Environment Protection Agency and Scottish National Heritage. Local government has of course taken tough decisions on its pay bill.
We have established a presumption against external recruitment, strict controls on head-count numbers and robust limits on the use of consultants, all of which are managed within strict financial controls.
I have listened with interest to what the cabinet secretary has had to say. How will the Scottish Government look after areas such as mine to ensure that they are not disproportionately affected by all this? Such areas have high dependency on public sector jobs and traditionally have had higher levels of unemployment and lower levels of pay than the rest of Scotland. How will my community be protected from the general approach to this economic crisis?
I recognise all the issues that Mr McNeil raised. As part of the work that we undertake in the budget, the Government will take particular care to ensure that in three important areas—economic and social impact, equalities and carbon assessment—we scrutinise the cumulative impact of any decisions at which we arrive. The issues that Mr McNeil fairly raises on behalf of his constituents will be at the core of the analysis that the Government undertakes of the impact of its decisions. In terms of the Government’s purpose and addressing the long-term inequalities that exist in Scottish society, we must be fully mindful of our obligation to ensure that we do all we can, in all areas of Scotland, in a tough financial climate, to address some of those challenges.
On all the issues that I have raised about pay and staff numbers, the Government is involved in and will take forward detailed discussions with trade unions to ensure that we operate in a collaborative and co-operative fashion.
I have given Parliament a comprehensive assessment of the issues raised by the IBR and I have set out a number of areas where the Government is actively taking forward the conclusions of the review. I look forward to colleagues across the political spectrum sharing with Parliament their thoughts and reflections on where the IBR proposals can be addressed and what action we can take.
I will make a few remarks on public engagement before I close. The nature of the challenge that we face means that we must actively involve members of the public in dialogue and debate about the issues. We published the IBR report on the Government website and invited members of the public to offer their views. There have been more than 30,000 hits on the website and wide-ranging comments and suggestions have been made.
As part of our summer Cabinet programme, we discussed the IBR report at a series of public events around the country, which stimulated lively debate with some 800 members of the public. We are taking forward a programme of meetings in locations across Scotland, with the help of community planning partnerships. I was in Livingston on Tuesday night with Crawford Beveridge and Alex Linkston, the distinguished and soon-to-retire chief executive of West Lothian Council, to discuss the issues with a range of stakeholders. There will be further ministerial events around the country, to engage different stakeholders and members of the public.
We are, of course, directly engaging with delivery partners, including the Convention of Scottish Local Authorities, NHS boards, the higher and further education sector, the trade unions and many others. Of course, the dialogue with the Parliament and its committees is of enormous significance in arriving at a budget. I am meeting the finance spokesmen from each political party and Margo MacDonald. We had a first meeting at the end of August and we will meet again shortly. As a basis for that discussion, I intend to provide as much financial information as I can, to assist colleagues in participating in the process.
The independent budget review has raised many challenging issues about the financial landscape that we face. The Government is determined to address those issues in a fashion that will lead to the formulation of a budget that can command consensus in the Parliament.
09:36
Like the cabinet secretary, I thank the people who provided us with the report of the independent budget review, which we debate today.
I must be honest. I did not hear from the cabinet secretary much that was new on the Government’s position, which is disappointing. We seem to be having another conversation, which is another method whereby the Government avoids making decisions and bringing forward specific proposals on the many challenges that are set out in the report. In a debate such as this, we should be scrutinising Mr Swinney’s proposals for balancing Scotland’s books, but that is not possible because he refuses to bring forward such proposals.
Local authorities, health boards, voluntary organisations, quangos and the business community in Scotland are making or are about to make decisions, and there are decisions on pay arrangements at UK level, but the Scottish National Party Government is a decision-free zone. That is due to the lack of the budget that should be available to us. Even the most uninformed observer knows that the Parliament faces the biggest challenge that it has ever faced, but the Scottish Government is not leading but running away. It ran away on the local income tax, it is running away on the referendum and it is running away from its own budget.
Yesterday, Alex Salmond tried to excuse his lack of leadership and concrete proposals by referring to
“calls for some kind of back-of-the-envelope budget”.—[Official Report, 8 September 2010; c 28246.]
Mr Swinney spent some time on the defensive in that regard. Alex Salmond clearly has no faith in the work of his chief economic adviser, Dr Andrew Goudie, or in Mr Swinney’s views. Mr Swinney said that he is engaging with the Scottish public and meeting trade unions and business organisations on the basis of a forecast that the budget will shrink by some £3.7 billion in real terms during the next four years. Is that a back-of-the-envelope calculation? I think not. Either Mr Swinney is misleading the Scottish people or, as I think is the case, he has the basis for a draft budget. None of the caveats that he made in his speech has been made before in relation to the crucial and well-known budget figures that could enable us to begin the conversation that we should be having.
Mr Kerr is a former finance minister and will therefore understand the point that I made, which was that the calculation of a precise budget figure in Scotland is dependent on the setting of budgets by a plethora of UK Government departments and the subsequent Barnett formula calculations. We have given an estimate of the direction of travel of the budget. If we were to set a budget on one basis, only to find out a couple of months later that the budget was different, would not that be a recipe for confusion about public services and public expenditure in Scotland?
No, it would be a recipe for providing the rest of Scotland with an insight into what the Scottish Government thinks are the responsible actions that it should be taking. Mr Swinney is the Cabinet Secretary for Finance and Sustainable Growth. He leads a large team of civil servants and it is his duty and responsibility to open up the debate on how we should handle the challenge of the budget.
As I said, we face extraordinary circumstances. It would not be extraordinary for the cabinet secretary simply to reflect on his projections, Dr Goudie’s projections, the Centre for Public Policy for Regions projections and all the other projections that are available to us and then to bring forward a draft budget. If he does that, I will be the first person to say that we understand and appreciate that the budget is based on projections—[Interruption.] The projections are based on educated insights. I think that Mr Swinney can calculate his budget to within £200 million—less than 1 per cent of the total. Therefore, in these difficult times, it is his duty and responsibility to do so.
I am not calling for crystal-ball budgeting, as the First Minister suggested yesterday. It will not take Mystic Meg to work out what is going on and allow us an insight into the Government’s proposals. Councils and health boards throughout Scotland are making decisions, and the UK Government has made decisions on pay. Quangos and other organisations are managing to make concrete proposals. Why is it that the only decision-free zone—the Bermuda triangle of budgeting—is around Mr Swinney? We all understand that these are straitened and difficult times, but the earlier the debate can take place, the better the dialogue that we can have and the decisions that we can make. We simply do not have the opportunity for dialogue at the moment.
When will the Labour Party come out of its Bermuda triangle and tell us how it proposes to repair the damage to the public finances that was caused by its Government?
I will come on to that, because I intend to spend some time on the issue. However, let us consider what the Tories said in opposition and what they are doing in government. We all remember Andrew Lansley saying that the NHS would be safe in the Tories’ hands, but what is he doing to the NHS now? We will take no lessons from Mr McLetchie about honesty and clarity before elections.
In yesterday’s debate, Edwin Morgan’s line about the Scottish people was quoted:
“A symposium of procrastinators is what they do not want”,
but Mr Swinney and the SNP Government are procrastinating.
Is Mr Kerr aware that the Labour-led Welsh Assembly Government proposes to publish its budget around 18 November? If that is okay for Labour in Wales, why is it not okay for the SNP Government in Scotland?
My view is that we should have greater dialogue and discussion in such straitened and difficult times. If discussion is not based on a draft budget from the Government, it can be based only on the back-of-the-envelope, Mystic Meg projections that Mr Swinney says are somehow of no purpose in the debate.
On Mr McLetchie’s point about the budget deficit, I quote from paragraph 2.4 of the IBR report:
“The worldwide recession that began in the United States in 2008 and quickly swept through global financial markets, threatening the collapse of several of the UK’s largest banks, has created severe budgetary pressures for many governments (both national and regional).”
Mr McLetchie should note that those are not my words. The IBR does not lay the responsibility squarely at the door of the Labour Party. Indeed, it was Labour that led the international response to the global recession. Our actions saved not just many Scottish banks but as many jobs as possible in those banks. It was about securing the hard-earned savings of the people who invested in and had mortgages with the banks, and it was about securing the financial system.
Given what Mr McLetchie said about damage to public finances, which Mr Swinney also mentioned, we might suspect that he thinks that Labour should have followed the Tories’ strategy in the crisis, which was endorsed by no economic commentator of regard. The measures that the Labour Government took were recognised then, are recognised now and I think will be recognised in future by economists as exactly the right decisions in the face of a global recession that began in the United States housing market and spread throughout our financial institutions.
The UK Labour Government pumped money into the economy at exactly the right time. We did that to protect jobs, to support household finances, to stop the banks collapsing, to subsidise mortgages, to cut VAT, to fund new apprenticeships, to give cash incentives to buy new cars and to support viable businesses. We postponed tax payments, we brought forward public spending and we introduced quantitative easing by the Bank of England. We fought back; we did not sit back, as the UK Tory Government has done and as the SNP Government is now doing here in Scotland.
I remind Mr McLetchie of some of the facts about the recession. The result of our action was that unemployment, repossessions and business failures were less than projected and were massively less than during the Thatcher recessions, when the Tories chose to wash their hands of any economic intervention on behalf of the people of the UK. The latest growth figures are a vindication of Labour’s response to that recession, but we are now seeing a reversal of that under the current Lib Dem-Tory Government. The country was moving in the right direction, with economic growth recovering and projected to continue to recover and unemployment improving and projected to get even better. Under the Tories—with the aid of the Lib Dems, who jumped into bed with them after leaving their principles at the bedroom door—that whole recovery is being put at risk.
Will the member give way?
I will in a minute.
However, I support Mr Swinney on this point, which is that the Tory-Lib Dem Government—[Interruption.]
Order. One moment, Mr Kerr. I remind members that they cannot have conversations across the chamber.
As Mr Swinney pointed out, the Tory-Lib Dem Government has embarked on the longest, deepest and most sustained period of cuts in public services. We now have a Chancellor of the Exchequer, supported by the Liberal Democrats, who believes that he can slash public spending, raise VAT, cut benefits, take billions out of the economy and out of the pockets of the people of Britain and Scotland and cut thousands of public sector jobs and private sector contracts before the recovery has been sustained.
Does Mr Kerr, like me, agree with Alistair Darling’s recent comments that he now regrets not taking stronger and more proper action on the banks in this country?
I am not sure what the member means by that, because strong and proper action was taken by Labour. On the issue of banking regulation, although Mr Mather—I see that he happens to be present in the chamber—is always going on about Labour’s rush to the bottom in regulation, both Mr Swinney and Mr Salmond are on record as arguing, as did the SNP manifesto, for the removal of the gold plating of regulation in financial services.
On the subject of party-political manifestos, let me refresh Mr Purvis’s mind by reading from page 15 of the Scottish Lib Dem manifesto:
“We must ensure the timing is right. If spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of cuts on an objective assessment of economic conditions, not political dogma.”
However, the Tories and the Lib Dems have now got together behind the political dogma of shrinking the size of the public sector because the Lib Dems have bought into the ideology of the Tory party. That can only create a further crisis within Scottish public services and beyond.
Let us not forget about the accelerated deficit reduction plan. The UK Government’s plan aims to deliver £4 of spending cuts for every £1 of tax increases. Labour’s proposal was to change that balance so that there would have been £2 of spending cuts for every £1 of tax increases. That would have radically shifted the approach to deficit reduction in a more appropriate, practical and humanitarian way.
Does the member care to tell us what elements would be included in his £2-worth of spending cuts?
We have said, and we will continue to say, that we need to deal with public sector pay. I understand entirely the need to ensure that we reduce that cost within portfolios. However, what I and everyone in the Parliament wants to see is the Government’s response, so that we can have an informed debate on some particular measures. That is not to say that the decisions that we would have made would have been less painful, but the current situation is that the Scottish Government will not say what it will do so we cannot debate those very important issues. I repeat my principal point that today’s debate will not take the Scottish people or the Parliament any further forward because the Government should have, but has not, published its proposals.
I remind Mr Kerr that the Scottish Government has made very clear its commitment to the funding of health services. Will he confirm that his position is that he would pass on Barnett consequentials to health?
The SNP Government’s position is very clear in the 4,000 jobs, including those of 1,500 nurses, that have been lost from the health service. The position will be clear to those health service workers who are losing their jobs. However, Mr Swinney and Ms Sturgeon have been somewhat separate on those matters recently, with the Sturgeon position favouring ring fencing and the Swinney position favouring the protection of the Barnett consequentials. I am happy to endorse my party’s position, which is that we would ensure that the Barnett consequentials are delivered to health in Scotland. I have no difficulty with that at all. Of course, with a budget that has grown by £1 billion over each of the past three years and with £1.5 billion in reserves, we would not have made 4,000 NHS workers redundant, including 1,500 nurses. That is simply a shocking indictment of the handling of the Scottish public services by this SNP Government.
We face the double whammy of accelerated cuts at UK level at the hands of the Tories and the Liberal Democrats and the mismanagement of our finances here in Scotland by the SNP. The cancellation of the Glasgow airport rail link, the fact that our unemployment rate stands higher than that of the rest of the UK and the 30,000 jobs that have been lost as a result of the Salmond slump are additional negative factors that, in respect of the management of the Scottish economy, will affect our ability to grow our way out of this very difficult situation.
I return to the principal point in today’s debate, which is that, yes, hard work has been put in by those who were involved in the preparation of the IBR report, but the report only goes so far. We have not yet received the Government’s detailed response to each recommendation that is contained in the report. We need that information to inform Parliament and beyond about how we respond to the recommendations. As I said consistently before and during the summer, the Scottish Government has the information available that would enable it to publish its budget. We know that, the people know that and the Government should know that, so the Government should publish its budget now to allow that debate to take place. As Mr Swinney occupies the position of finance secretary, it is his duty and responsibility to deliver that budget to us—
He has got the car and the salary for it.
As my colleague reminds us, Mr Swinney receives a car and salary for his position.
If Mr Swinney seriously expects the Opposition spokespersons—this is a genuine point, which I have put to him privately as well as publicly—to sit round the table and engage in serious discussions on building that big-tent consensus, he needs to do better in making clear his intentions for the budget and his position on each of the recommendations in the IBR report. That is the only way to build consensus and to allow effective discussion to take place. We are happy to take part in that decision-making process.
From the outset, we have placed fairness and economic growth at the heart of every decision that we would take. At the end of the day, the key test is what the effect is on the people of Scotland rather than on head counts or salaries. The budget should be about jobs and livelihoods, about how people feed their kids and about how they pay their mortgages. We need to ensure that we respond responsibly to those issues. We will engage in that debate, but I again make this appeal. No one in Scotland who reads over today’s debate will be any further advanced or have any greater information on how the Scottish Government intends to approach those challenges. Only when we have that information will we be able effectively to take part in the decision-making process.
I remind members that every family is faced with the challenges that face the Parliament and the Government. There is no excuse for Government, either north or south of the border, to pursue policies that increase the scale of concern, worry and unemployment among our people. We need to work together, but we can do so only on the basis of information and of equal treatment and fairness. If he wants to build that big-tent approach, I suspect that the cabinet secretary will need to do better than he has done today.
09:54
What we debate today is much more important than the content of yesterday’s debate on the Government programme. The impact of the spending decisions that this Parliament and the Government take will touch the lives of every family in Scotland in the years ahead. The shadow of spending cuts looms across every policy area and will be the backdrop to debates in the Parliament for not only the remainder of this session of Parliament, but the following term and perhaps beyond.
I will not pretend that dealing with the spending reductions will be easy or pain free; it will be neither. It is also important not to paint too bleak a picture. Spending will fall, but it will still be higher in real terms than it has been in most of the years for which the Parliament has been in existence. Difficult as it will be, we should not doubt the capacity—with political will and innovation in the public services—to deliver more of the services that we want to deliver than a bare extrapolation of spending cuts might suggest. In some areas—I do not pretend in all—we will be able to deliver more for less. That is a good thing.
It would be wrong to pretend that future Governments of any political complexion will be able to fund everything that has been provided in the past. There will have to be savings: some existing services will disappear; others will be reduced in scale or ambition. Of course, none of that is easy or popular to say, but it is true, as the report makes it clear. We should thank the members of the review team for their work and for the honesty with which they brought forward the report. Indeed, there would have been no Beveridge report if we had not made that a condition of Conservative support of the budget earlier this year. The review means that no party on any side of the chamber can expect to face the electorate next May without having seen their future plans tested against the benchmark that is set out in the report. At last, there is a public debate on what we can afford and where we should prioritise.
The review document is uncomfortable reading for everyone. That said, it is better to confront uncomfortable and unpalatable choices sooner than leave them to fester and become even more difficult. Of course, that is the rationale for tackling the deficit. It is the underlying reason why devolved spending in Scotland must fall. Indeed, spending would have fallen even if Labour had won the election or if the First Minister had managed to secure an even more improbable coalition than the one that is currently in Downing Street. With a few exceptions that are limited to the SNP front bench and the Labour leadership contenders, we are all deficit hawks now. Some of us were deficit hawks pre-election, too. Others, such as former Prime Minister Tony Blair, have been on a journey and now accept the need to tackle the deficit.
Yesterday, we heard the argument from the Government benches that the choice is between reduced public spending and independence. We need only look across the Irish Sea to see that that is nonsense. The choice is not whether to spend less, but where to spend less. We all know that spending reductions are politically unpopular. That is why this year’s budget and the spending review will be the biggest test of the SNP Government. Equally, as I have said before, it is a challenge for the Parliament, including for those of us in opposition. If the Parliament, collectively, and our parties, individually, fail to face up honestly and openly to the challenges that the spending cuts will present, we will have let down those who elected us. We have a choice: we can descend into a partisan rabble and confirm the very worst prejudices of those who dismiss this place as a second-rate talking shop, or we can try to find some common ground on a long-term solution to take us through the current difficulties and justify some of the hope and confidence that some people once had in the Parliament.
Does Derek Brownlee accept that there is a genuine difference between party rabble and a genuine difference of opinion? Where there is a genuine difference of opinion, it is our responsibility to get up and say it.
Absolutely, but the obligation on us all is also to try to find a solution. That is the difference. We can have a debate, but we must all try to get to a solution at the end of the day. We can find that common ground only by talking. The Conservatives will take part in any cross-party talks on this year’s budget and the spending review.
In the remainder of the time that I have available to me, I will set out our initial thoughts on where things should go. I said earlier that the report made uncomfortable reading for all of us. I will start by addressing one such area. It is crystal clear that the review does not believe that any portfolio should receive the protection or ring fencing that we advocated for the national health service. We knew before the review that advocating protection of the NHS budget would force other spending areas to take a higher share of the cuts. Although the review says that it could find no compelling reason to protect health, we see one overriding that is based on sound finance and on the attachment that we all have—individually and collectively—to the NHS and what it delivers for us. The reason is this: inflation in the health service has always run much faster than general inflation did. No Government since the creation of the NHS has ever managed to eliminate that trend. It will always be more difficult to make spending reductions in the NHS than elsewhere, even although there are some areas in which savings can undoubtedly be made. Our view is that the savings will probably need to be recycled within the NHS to deal with the pressures from demographic change, medical advances and public expectation.
Even if we were to preserve the health budget, we would still face difficult issues in terms of prioritisation within the budget and how to deliver better outcomes at a time of what will be, in historical terms, very low increases in NHS spending. That is why we remain of the view that the Government is wrong to try to abolish prescription charges and why we opposed two of the three previous reductions.
Surely all services could have been protected if George Osborne had kept his pre-election promise to keep to Labour’s public spending, if and when elected. Does the member accept that there are other choices? Given that the top 1 per cent of the population own a quarter of the wealth, why do we not just tax the rich?
The member’s Government chose not to do that. Her Government set out spending cuts that Alistair Darling said would be faster and deeper than Thatcher’s. We have to get into reality here.
Protecting the health budget should not happen lightly. Speaking bluntly, the price of protecting any budget or, in some cases, the price of a budget remaining, must be reform. Whether it is the health service, police, local government or any other part of the public service, we should make it absolutely clear that no one should expect to continue as if we are in a world of ever-rising spending. We need to look at working practices, structures and prioritisation of every part of the public sector. No group should think that it is exempt from that; all of us have a duty to the taxpayers to ensure that every part of the public sector plays its part in reforming to meet the challenge of providing public services in an environment of overall lower public spending.
I turn from one uncomfortable area to another. The concessionary fares scheme is valued by many people across Scotland. In some ways, it has become the third rail of politics. For me, the single most uncomfortable part of the report is not the various options that were trailed on how costs could be controlled—unpalatable as they were—but the scale of the projected increase in spending on the scheme from £180 million today to £290 million in four years’ time if nothing changes. Surely no service can sustain that level of increase at a time of falling resource. Some of the increase is due to demographics—we have an ageing population—and the inevitable consequences of a demand-led service, but some of it relates to the assumption that costs will just drift higher. The taxpayer provides significant subsidies to bus services in Scotland through the concessionary fares, the bus service operators grant and other local authority support. Surely there must be scope for Government to negotiate on containing costs in future years. Unless that can be done, I cannot see how any Government can avoid introducing restrictions on the current scheme in the medium term. I say that despite what the current Government promises and what we would all like to see.
Mr Brownlee may not be aware that the Government has negotiated with the bus companies to secure a lower reimbursement rate than the rate that we inherited. That has resulted in financial savings being made without the eligibility criteria or operation of the scheme being undermined. That is exactly the type of methodology that he is talking about, in which the Government is acting to protect services, but doing so in a fashion that ensures value for money and protection for the taxpayer into the bargain—
That is long enough, Mr Swinney.
If that could be sustained for the duration of the spending review and beyond, that is fine. My understanding is that the agreement is not for the duration of the spending review. I stand to be corrected if that is wrong.
As we make savings, we need to ensure that cuts in one area do not lead to increased costs in others. For example, it would be a false economy to save money on free personal care if all that that did was to load further costs on to the NHS. We need to look at how we align incentives. In the past, we have advocated unified budgets for social care and health. That would mean that there would be no financial advantage to either the NHS or social care in shifting people from one service to the other. In that way, decisions would be based solely on what is appropriate.
Of all the spending pressures, perhaps the greatest come in capital spending. It is impossible to see how we can avoid the cancellation or delay of some planned capital projects. That is why the review recommendation on the need to prioritise is so crucial. Indeed, we have criticised both the current and previous Governments on that. We believe that the recommendation that the Scottish Futures Trust should have its role enhanced in order to get more from the available resource should be accepted.
I turn to Scottish Water. We believe that it should no longer rely on taxpayer support for its funding; that move would save £140 million a year and generate a large capital receipt that would protect other vulnerable capital projects. If the Scottish Government believes that there is scope for Scottish Water to generate additional income from power generation, that is fine. However, unless Alex Salmond has invented a wind turbine that works only in public ownership, there is no reason why the proposal could not be combined with an end to taxpayer funding of Scottish Water and lower bills for consumers.
Across Government, the single biggest decision that will require to be made will be to contain the pay bill. There are some who pretend that that can be done solely by cutting bonuses for the well paid or sacking a few chief executives here and there. Those who argue for that either do not understand the public finances or are trying to mislead. As the report makes clear, there is little choice but for pay restraint for everyone, with a recruitment freeze for all but essential posts. That will only mitigate, not avoid, job losses in the public sector. We believe that the UK Government’s position of a pay freeze for those earning more than £21,000 is a useful starting point for the debate on pay restraint. The best that we can hope for is that retirements and natural turnover, coupled with pay restraint and a recruitment freeze, can minimise job losses. We reckon that a recruitment freeze would save about £150 million for each percentage point of staff turnover. That is not pain free, but it is much less painful than having mass redundancies, and the public sector should introduce such a freeze as a matter of urgency. If we can do that and also reduce the level of sickness absence—the report highlights the astonishing fact that there is no common public sector reporting on that—we could save significant sums of money.
In the end, fewer people will be employed in the public sector, which will be difficult for individuals and families. That is why we need to make private sector job creation the central priority for the next decade. Yesterday, the First Minister said that the first stage of devolution was over. He was right. Although the spending reductions will be tough, it is for us to decide whether the next phase of devolution is marked by stagnation and economic pain or by new jobs, more opportunities and a more successful Scotland.
Public spending will be constrained in the years ahead, and we have no choice over that. Only if we equate Scotland’s future with the level of public spending and only if we believe that we cannot compete in economic terms with other nations should we allow that spending restraint to restrain our ambition. That is the biggest choice that any of us has to make about public spending.
10:06
I welcome the opportunity to debate the report from the independent review panel today. It would have been a sharper debate, and it would perhaps have focused more attention on some of the options, if it were testing the opinion of Parliament at 5 o’clock on a motion, rather than simply being a take-note debate.
The present context is a confused situation for many members of the public. The language is that of unprecedented cuts and the worst situation since the second world war, as the First Minister said yesterday. In many respects, that is absolutely correct. As Derek Brownlee has correctly indicated, the context is also shown in the Government’s own advice from Dr Goudie, as published in a paper in April: that, even with the worst element of reductions in the Scottish budget, we are going back to the levels of spending of about 2004.
That assessment does not take inflationary pressures into consideration. In some elements of the public sector, such as health, they have a faster effect. That assessment also does not take into consideration the growing pressures on public services or the pressures resulting from the recession. Getting the context right is important for the debate. Most people will be confused when they hear stories about the worst financial situation since the second world war when we are returning to spending levels of only six years ago.
The choices that we need to make now are not simply for next year—they are for the next decade. Sir Neil McIntosh was absolutely right when he spoke about this at the Finance Committee on Tuesday. He said that we now have an opportunity to reshape the way in which we deliver public services. The immediate task is to make an immediate response to the independent budget review. In my and my party’s opinion, that must be a fair response. It can take into account some small areas of expenditure within the overall scheme of the Scottish budget. That does not stop us considering bonuses, which have gone up over the past three years. In fact, Liberal Democrats were the first to collate figures on overall bonus spend in the public sector—they had only ever been collated with regard to executives.
The highest levels of pay in the public sector have gone up, whereas staff numbers in many parts of the public sector have gone down. As the cabinet secretary asserted in his speech, the use of consultants and agencies has been reduced, but information that we collated through freedom of information, and which has been reported in The Scotsman today, shows that the use of agency staff has gone up by 10 per cent over the past three years, while the head count has gone down in many of the areas concerned. That is not cost effective—it is more expensive.
Over the past four years we have heard about many examples of other countries that we should follow. First, it was Iceland, which appeared in four ministerial blogs as part of the national conversation. It does not appear any more. Then we had Ireland, but then Ireland was no longer the model that we should follow. It was then Norway, with its oil fund—and with its 17 per cent higher basic rate of income tax. Funnily enough, that is never mentioned by the SNP.
I note the member’s interest in trashing all our European neighbours. Will he please acknowledge that Norway has been recognised internationally as having one of the highest, if not the highest, standards of living in the world?
This is entirely my point—the SNP cannot use two examples and tell the public that they should be following Ireland’s economic model, which is based on very low corporation tax and property tax, which means that the country goes bust in a recession, at the same time as saying that we should also follow Norway, which has a 17 per cent higher basic rate of income tax. The SNP has got to be honest with people.
I point out that the SNP has moved on, rather rapidly, to Australia. We have heard about a greener-grass approach involving a different country in each year when the SNP has been in office. Now, we must focus on this country.
I strongly agreed with the Cabinet Secretary for Finance and Sustainable Growth in one area. In his statement to the Parliament on 23 June in response to the UK emergency budget, he said:
“net borrowing this year is forecast to be £149 billion, or 10.1 per cent of gross domestic product. That is the highest rate of borrowing in the G20.”
Recent reports from the Organisation for Economic Co-operation and Development consider Portugal and the fiscal situations in Greece and Ireland, and they show the seriousness of the situation. John Swinney was right to say that the UK has
“the highest rate of borrowing in the G20.”
He added:
“That is an unprecedented challenge, and a period of fiscal consolidation is inevitable.”
The finance secretary went on, however—and this is what was seemingly ignored by the First Minister yesterday. John Swinney said this on 23 June:
“The Scottish Government agrees that there is a clear need to deliver sustainable public finances and to set out a credible consolidation plan.”—[Official Report, 23 June 2010; c 27564.]
A “consolidation plan” is cuts. To have no cut in the Scottish budget was not an option for John Swinney in June, but it was the only option for the First Minister yesterday.
Will Mr Purvis give way?
I will in a moment—I think this might be the point that the cabinet secretary wishes to come to.
I would not presume that.
The issue is not whether we reduce the budget, as John Swinney said in June, because that is a given. It is a question of how it is done, how fast and how far.
I am grateful to Mr Purvis for giving way, although I am thankful that we do not think in exactly the same way, such that he can predict what I am going to ask him.
With the fixed financial arrangements of the devolved settlement—and given the more acute pressure from the Calman proposals and the threat to income tax, which the First Minister spoke about yesterday—the Scottish Government would not have the flexibility to expand the economy that would come with the normal financial powers of independence.
Dear me! The cabinet secretary cannot say on 23 June that we have the highest rate of borrowing in the G20 and on 9 September say that the Scottish Government would borrow more. It is simply incredible.
Mr Purvis—
I will make some progress, although I will come back to the point if I can. As the cabinet secretary knows, the current level of debt comes to more than £2,000 for every Scottish man, woman and child.
The Scottish Government has said that the cutting goes too far and too fast, but it has refused to say what the correct amount and pace of reduction should be. Turning to the work of the chief economic adviser, the Government published the economic forecasts in April. That was a 46-page assessment covering the period up to 2024, to the decimal point of the Government’s forecast of finances. Alas, the Government cannot say what the correct level of debt should be, as a percentage of gross domestic product, for this year.
The cabinet secretary is right: I have lodged questions asking that question. He confuses providing a response with answering a question. Let me remind him that he said that there needed to be “a credible consolidation plan” in Scotland but, three months on, there has been no work on that and no sign of the Government providing any credible plan. If the Government believes that the debt is being reduced too fast, it should tell us what the pace should be. Then we would be able to work out the share for every man, woman and child in Scotland.
The UK’s national debt is not unprecedented by historical or international standards: it is currently 68 per cent of GDP and the average for advanced economies is 77.3 per cent. Also, the maturity of the debt in Britain is double that of other advanced economies, so why are the Liberals signing up to savage cuts?
Elaine Smith comes at that from a sincere point of view. If she wishes to saddle the country with continuing debt of that level, she will have some allies on the SNP back benches, but it will constrain not only the options, but the economy going forward. The OECD has reported on that in the past few days.
Will the member give way?
I am afraid that I do not have time.
When it comes to the choices that we need to make now, we need the Government to highlight its own choices. It cannot wait until four months after the publication of the “Independent Budget Review” to provide those responses.
It is true that, as the cabinet secretary said, we met last week and will continue to meet. That is absolutely appropriate and the Liberal Democrats will continue to take part in those meetings. However, I record my disappointment that, while we were sitting in his office last Tuesday, his officials were preparing a public meeting in my constituency about which I learned on the BBC website under a narrative of discussing Westminster cuts. Courtesy seems to be another victim of the prioritisation of party positioning.
The debate should have been informed by the Government’s policy intentions. In June, the UK Government published, rightly or wrongly, its pay policy for the coming years: a freeze for those earning more than £21,000, which will allow an uplift of £250 for those who earn less than £21,000. We have discussed pay—it is one of the biggest elements of the budget—but we still do not know what the Scottish Government’s position is. It has known for two years that there would be a requirement to restrain public pay. For two years, it has been able to prepare the ground, but the ground is not prepared. Therefore, we have a mixture of negotiations across the public sector, with potentially different settlements for teachers, council workers and health workers. Most people in the public sector will not consider that to be fair.
Through our research, we revealed the true extent of the most senior staff’s pay within the public sector: 5,000 staff—the top 1 per cent of staff—in the public sector have an astonishing pay bill of £651 million. That is not sustainable, is not fair and cannot be justified over the next two years. It needs to be reduced.
We have an opportunity to examine delivery of public services more widely. The first bullet point in the independent budget review group’s remit was to assess the policies that would address the Government’s purpose of economic development in Scotland. It is regrettable that there was little in the report about positive options for economic development in Scotland.
In the budget, we spend £380 million on business and the economy through the agencies Scottish Enterprise, VisitScotland and Skills Development Scotland. Within that £380 million, the cost for staffing and administration is £140 million. There is scope to consider things differently. Radical options are needed, but they should be led by the Government because it has a duty to provide Parliament with its options, which the Opposition will scrutinise constructively.
We move to the open debate. At the moment, it looks like I can allow speakers about six and a half minutes each.
10:19
Thank you very much, Presiding Officer.
The Liberal Democrats have sold out to the Tories.
Order.
Yes—could I have some order, please, Mr Gibson?
As we have heard, we face a difficult time ahead. That is one thing on which we have achieved consensus across the parties.
No, we have not.
Lord Foulkes seems to think that we are not facing difficult times, but there will be £83 billion of spending cuts over the next four years, two thirds of which, of course, were planned by the previous Labour Administration. Scotland needs to take its share of those cuts because of the constitutional settlement under which we live.
Will the member give way?
No, I will not.
We also need to take our share because we have suffered from mismanagement by previous Governments in the UK.
However, we have the “Independent Budget Review”. I am a member of the Finance Committee, and we were privileged to have a long discussion about the review the other day with Crawford Beveridge and Neil McIntosh. It was an interesting discussion. We have, in the report, a weighty tome that contains a lot of good ideas. I am glad that the review was commissioned and I had hoped that it would have created much more space to talk about some of the issues that are discussed in it, rather than some of the yah-boo stuff that we have heard.
How can it be an independent review when Crawford Beveridge is a well-known nationalist and acolyte of Alex Salmond?
I am used to that kind of vacuous nonsense from Lord Foulkes. It does not warrant a response.
All we have heard from the Labour members is the cry of, “Why no budget? Why no budget?” The cabinet secretary laid out the reasons well in his opening speech. In the current situation, it would have been irresponsible and nigh on impossible to come up with a budget before we have the firm plans that are due in October.
Will the member give way?
No, I will not.
The situation is far too uncertain and it would not be fair to lay in front of the Scottish people a budget that would have to be changed later on. Let us consider the way in which budgets are brought together in the approved annually managed expenditure and the departmental expenditure limits that John Swinney, as Cabinet Secretary for Finance and Sustainable Growth, has to deal with. Those are variable at the moment because of the country’s current financial situation.
Will the member give way?
No, I will not.
A succession of Opposition members are whining away on television and in the chamber about the fact that they cannot do anything until John Swinney comes up with his budget for their discussion. I suggest that they cannot do anything because they do not have a clue what they are doing and do not have an original thought or idea among them.
On 27 August last year, John Swinney wrote to me about the discussions with other parties:
“In the discussions to date it has become clear to me that the work of the Review”—
the cross-party review with Opposition members—
“would benefit from having a clear set of Budget proposals before it to enable consideration of alternative choices. I therefore suggest the following approach.
I intend to publish a draft Budget which will contain the Government’s proposals to manage the public finances. Thereafter, I would welcome discussions amongst the political parties”.
I suggest that Mr Purvis speak to his colleagues south of the border and ask them why they are delaying. It would be much better for Scotland if we could get some firm proposals from them.
Based on the extract of the letter that Mr Purvis just read out, does Ms Fabiani recognise that I opted to set out a draft budget last year because Opposition parties were not prepared to tell me their policy priorities in advance of a budget being set out? I reverted to their preference last year and now they will not set out their arguments.
I suggest that the only reasonable man in the chamber at the moment is Mr Swinney, the Cabinet Secretary for Finance and Sustainable Growth. [Interruption.]
Order.
Despite Lewis Macdonald saying on “Newsnight” last night that the Labour Party cannot do a thing until it hears from the SNP, Iain Gray saying “I know nothing” on “Newsnight” and Andy Kerr making up policy on the hoof—all of a sudden, we know what Labour will do with the Barnett consequentials on health—there are a lot of commitments from the Labour team.
Will the member give way?
No. I have come up with a list of Labour commitments. The party has made plans for what it wants to spend money on. Unfortunately I do not have time to read out all the commitments that it has made in parliamentary motions that have been debated in the chamber, but the figure amounts to £1.2495 billion extra.
Could the member go back to 2007 and read her party’s manifesto for the commitments that it made and did not deliver? Also, I say just for the purpose of the debate that her figures are complete nonsense.
We are not talking about manifestos; we are talking about the things that Labour members have said they want money to be spent on now while we are in the worst financial crisis that this country has seen for a long time. I will say the figure again: £1.2495 billion.
I know that I am running out of time, but I would like to talk a wee bit more about what the debate is about: the independent budget review. The other day, Mr Crawford Beveridge said that he had hoped that, as a result of the discussions about the reform of public services, we would get the space for conversations to take place about the future of public services. He also talked about the opportunity for a new kind of politics and said that now is the time to do that. In our cabinet secretary, we have someone who is willing to consider a new kind of politics and to look for consensus. Sadly, the tired old parties are hooked on Calman and are unwilling to move forward. It really is time for a new politics. I urge the other parties to join the SNP in creating it.
10:26
As many of the students who have gone back to school recently did, I normally look forward to the start of a new parliamentary term with a sense of anticipation. However, we are barely into the second day and my expectations have almost evaporated after hearing the uninspiring and visionless statement that the First Minister delivered yesterday, and the rather disappointing start that the cabinet secretary made this morning. Perhaps it is the optimist in me that raised my expectation levels too high, so I will bring them down to the level that the Government has set and look at the IBR in that vein.
Someone once said that if all economists were laid end to end, they would never reach a conclusion. From the IBR report, it would appear that the same could be said about some Government advisers. The document is more of a catalogue than a road map leading us towards the solutions to the problems in our public finances that were caused by the global recession.
If the cabinet secretary was an optimist, like me, he could view the report as being a glass half full. It is a helpful document, as far as it goes, because it challenges us to seek reforms, modernise services and deliver effective monitoring and scrutiny processes. We could use it if we saw it as a menu of options that could help us to make the decisions that we have to face.
It would be understandable if Mr Swinney had taken a pessimistic, glass-half-empty perspective on the picture that has been painted by the Beveridge committee, and considered the panel’s diagnosis as simply pointing us towards an inevitable and unpalatable amputation of the limbs of public services. The fact that he was 11 minutes into his speech this morning before he outlined his plans to go for another town hall tour to prevaricate shows how typically cynical the Scottish Government is. It spends its time hunting for someone to blame for taking what is missing from the glass rather than looking to do what it can with what remains. Public engagement is all well and good, but decisive action seems to be beyond this Administration when a scapegoat serves it better.
Like the programme for government that was trooped out yesterday, the cabinet secretary’s response to the IBR report is more noticeable for what it does not say than it is for what it does say. In addition to not proposing anything constructive to deal with the problems that Beveridge has identified, the Government has added to them by cutting 2,500 teachers and 4,000 national health service jobs while concentrating on wasteful initiatives such as the Scottish Futures Trust when its budget was growing. The mess that the Government has made of public services as a consequence is not so much the result of hard times coming but of soft times going.
We have known for three years that local authority services in Scotland have had to bear the brunt of economic pressures because of the additional burdens that have been placed on them in combination with the underfunded council tax freeze. Those further pressures have caused a crescendo of anguished pleas to emerge from our local authorities, so I had hoped that the cabinet secretary would indicate this morning that he had listened to the requests that have been made by councillors, especially the SNP ones, to end the council tax freeze, and told us that he now intends to assist our councils rather than resist them. It is disappointing that all that he has indicated is yet more prevarication.
By how much does the member think the council tax should have gone up in each of the past three years, and by how much more does he think it should go up this year? The people of Scotland have a right to know just how expensive a Labour Executive would have been.
I will answer Mr FitzPatrick in two ways.
I only need a number
I do not pluck numbers out of thin air, which is what some people would prefer us to do. We know from our local authority colleagues and the trade unions that operate within local authorities that the burdens that have been placed on local government have not been funded properly by the current Administration. That is a fact.
Yesterday, the First Minister told us that, had the Calman income tax proposals been introduced for the start of the last spending review, the fall in income tax revenue because of the recession would have resulted in a Scottish budget for 2009-10 that was almost £900 million lower. Imagine the devastation in local government services during that same period if a local income tax had formed the basis for funding local government services. They would have been decimated.
So, we will not take any lectures from the SNP, which wanted to decimate local government, has decimated local government, and now refuses to engage positively with local government other than scaremongering with the view that council taxes are going to go through the roof. There is no requirement for that to happen if the Government properly funds the services that it asks the local authorities to deliver.
It is not only local authorities that have been let down by the Government. We have been told that the SNP will now turn to the people of Scotland to get their backing for a referendum, but the fact is that the Government will not use the powers that are available to it for the benefit of the people of this country, which is what the people want here and now. The people of Scotland will not forget that they have been abandoned during the past three years and that the SNP has abdicated its responsibilities, which appears to be its continuing modus operandi. No doubt the SNP is already working on another version of the blame game that has marked its tenure in office, but when the people of Scotland bring that tenure to an end next May, the SNP will pay the price that it deserves to pay.
10:32
The members of the review panel—Crawford Beveridge, Sir Neil McIntosh and Robert Wilson—have been faithful to the task that was entrusted to them by the Government and Parliament. The clarity of their report is welcome, even if it makes for stark reading.
This is not the time to go into denial mode although, amazingly, the Labour Party appears to be in a state of double denial. First, it denies any liability for the catastrophic state of public finances that was inherited by the incoming Conservative and Liberal Democrat Government, and secondly, it appears to deny that it has any responsibility for resolving it. What price that there will be no substantive proposals from the Labour Party about what it would do to fund the £1.7 billion gap that has been identified in the IBR report for next year, or the £3.7 billion that must be found over the four-year spending review period? It is astonishing that we have heard nothing today on that subject from Mr Kerr, apart from a minor little mumble about public sector pay.
I can see it now. With breathtaking hypocrisy from now and all the way to election day, the Labour Party will seek to denounce any reduction as either an SNP or a Lib Dem and Tory cut, and to absolve itself from any responsibility or liability whatsoever. We are talking about a party that says that it believes in a United Kingdom and therefore in the right of a United Kingdom Government to determine the bulk of our funding, and which aspires to be the Scottish Government after next May when, like it or not, it would have to work within the parameters of that funding and the spending review totals. If Mr Kerr would like to give us a substantive proposal, that would be excellent.
In government, we took steps to resolve a global economic recession. I do not dispute that that placed Britain’s economy in debt. We went into the recession with the lowest debt and the lowest unemployment levels in the history of the UK, and we are in better shape to come out of it because of the actions that Labour took. I do not dispute that we have a responsibility to ensure that we balance the books, but the books are out of balance because we took the right steps.
There is a structural deficit that must be resolved, and it will not be resolved by economic recovery alone. To pretend otherwise does no service to people in this country. The member is blinding himself to reality.
Will the member take an intervention?
I am sorry, but I want to make some progress.
I want to make three points on the IBR, the first of which relates to efficiency savings. The report recommends a significant change in the Government’s present policy. It recommends that in the future, efficiency savings should no longer be retained and recycled by councils or other public bodies, but that an assumed annual efficiency saving of not less than 2 per cent per annum should be built into future budget allocations.
Not surprisingly, the Convention of Scottish Local Authorities has cried “Foul!” In its briefing to MSPs on the report, it proudly states in paragraph 24:
“COSLA has successfully argued all along for councils be able to self verify efficiency gains, with suitable guidance in place, and for a light touch to be adopted with regard to external scrutiny and we want this to continue to be the case. This is something that we have very much developed in partnership with the Scottish Government.”
However, the light touch, self-verifying approach that has been implemented in collusion with Mr Swinney has resulted in wholly unsubstantiated—as Audit Scotland has confirmed—claims that hundreds of millions of pounds of savings have been achieved. That point was made in the report and in evidence to the Parliament’s Local Government and Communities Committee. Audit Scotland also tells us that it is extremely difficult to determine whether a claimed efficiency saving is just that—in other words, whether it means doing more for the same or doing the same for less—as opposed to being a cut, a reduction in quality or the manipulation of money around the system. How convenient it is for COSLA and the Scottish Government that councils can retain all the so-called efficiency savings that they do not have to prove that they have made in the first place. As the report recommends, that lax approach to the public finances has to stop.
Secondly, although a large section of the report deals with issues such as public sector pay, staffing levels and the like, one of the elephants in the room that continues to escape attention is the hundreds of millions of pounds in unpaid liabilities to meet equal pay claims that our councils will have to find over the spending review period. The Local Government and Communities Committee and the Finance Committee have been banging on about that for the last four years; indeed, Mr Swinney used to bang on about it when he was in opposition. However stark the report may appear, members should bear in mind that the funding picture could be even bleaker, and thousands of workers who may well lose their jobs as a consequence will have bitter cause to regret that the Scottish Government, Scottish councils and their own trade unions failed to resolve those matters long before now, at a time when the public finances were in far better shape.
Finally, over the next four years of the spending review, regardless of which party or parties form the next Scottish Government, this Parliament will have to be a lot more careful about imposing new financial burdens on councils and other public bodies in Scotland as a result of the laws that we pass. All of us remember the SNP pledge to reduce class sizes in primaries 1 to 3 in all Scottish schools to a maximum of 18 pupils, a policy that the present Cabinet Secretary for Education and Lifelong Learning once claimed could be implemented over a four-year period. Of course, he kens better noo, but it was never achievable in the best of times, and it is certainly not achievable in the present financial climate.
However, the same cabinet secretary is presently consulting on a similar proposal, albeit in a much more scaled-down form, to introduce a legal maximum of 25 pupils in primary 1 classes as from next year. I ask him and the Government whether that is the sort of additional obligation that we should be imposing on our councils at the present time. Will it not be hard enough for them to meet all their existing statutory obligations to educate our children without imposing new burdens on them?
Wind up, please.
Regardless of the extent to which we may think that smaller class sizes benefit children in the early years, should we not focus the available funds on schools and children who are at a disadvantage rather than have an across-the-board rule? That approach would be more in Scotland’s interest than the approach that has been taken to date, and I hope that that point will be taken on board.
10:40
Today’s debate, as others have said, is immensely important for the people of Scotland. Given the looming reduction in the Scottish block grant, we have a bitter pill to swallow and, whether we like it or not, the union dividend will deliver a cut of £3.7 billion in our budget over the next spending review period. The cut in the block grant is equivalent to a cut of £4,300 per year for every household in Scotland. The IBR has speculated that it could be 2025 before the Scottish budget returns to 2009-10 levels of funding.
Will the member take an intervention?
I think that I will make some progress.
Those figures are sobering, but through that sobriety we should remember that, although the Lib Dem-Tory coalition has made things worse, two thirds of the cuts were planned by the Labour Party. We in the SNP are clear in our view that the cuts go too far, too fast. The Scottish Government’s approach has been measured and sensible. This is not the time to rush into making rash decisions. Andy Kerr might think that it is okay to produce a budget on the back of one of Mr Gray’s fag packets, but I think that John Swinney is right to wait until the actual numbers are revealed on 20 October.
Does the member think that the chief economic adviser in Scotland was using the back of a fag packet or guesswork when he said that he could predict with 99 per cent accuracy what the budget would be in October? Does the member disown that figure?
I will, of course, come on to deal with that 1 per cent error—
Variability.
Yes.
To produce a budget of the kind that Labour has suggested would be irresponsible. Yesterday, the First Minster explained to Parliament—perhaps Ms Alexander was not listening—why such crystal-ball budgeting does not work. He explained that the possible variance in the budget was huge, and far greater than the figure of £200 million that some people have come up with.
However, even if we could predict the budget to the nearest £200 million, that would be the difference between continuing the extremely popular council tax freeze and increasing council tax by a whopping 10 per cent. In my constituency, that would result in an increase of £120 a year in the council tax bills of band D households. That is money that my constituents cannot afford. I would have thought that even a party that was responsible for frequent double-digit increases in council tax would understand that that is not acceptable in these economically challenging times.
I am not surprised by Labour’s position because, thus far, it has failed to produce any suggestions on how to tackle the challenges that face us. It is more than a case of keeping your cards close to your chest—Andy Kerr's are still in the packet. If Labour is playing a game of “I’ll show you mine if you show me yours”, Andy Kerr and Labour should recognise that John Swinney has placed a number of cards on the table and that it is their turn to tell us what they think.
The SNP has said what it will do with any Barnett consequentials from health. In an answer on “Newsnight”, Iain Gray made it absolutely clear that under Labour there would be no protection for health. Today, we have heard a change in that tune—Andy Kerr suggested that he now supports the SNP position.
I clarify for the record that Iain Gray said that there would be no ring fencing of spending on health, which of course is the position of the Cabinet Secretary for Finance and Sustainable Growth.
We need to know who speaks for Labour on health—is it Iain Gray or Andy Kerr? That is a big question.
If Labour members cannot bring forward any constructive ideas of their own, at least they could give us their views on those areas on which the cabinet secretary has produced proposals. An area that I think is particularly important and on which I disagree with the IBR is concessionary travel. I fully agree with the cabinet secretary’s stated intention of protecting concessionary travel. It has been some time since he made clear our party’s position on the matter, but we have still not heard whether the Labour leadership agrees with us. The retention of the concessionary travel scheme is vital to our elderly and disabled citizens. I know from speaking to my constituents in Dundee that it can make a real difference to their quality of life. The universal nature of the current provision is an important aspect of the scheme.
Another area in which the SNP Government has made its position clear is on keeping Scottish Water in public ownership. As the First Minister laid out yesterday, the forthcoming water bill will keep Scottish Water in public hands. It has the potential to raise hundreds of millions of pounds of revenue from new economic activity, such as utilising existing land for renewables development.
When we face such serious challenges in public finances, it is not the time to be selling off valuable assets that could provide a good income stream for the public finances. In conjunction with Scottish Water, the Scottish Government has come up with some truly innovative proposals that I believe will secure the future of a vital service. The debate is one for the whole chamber to be involved in, and I know that some members will have other ideas, such as mutualisation or even privatisation. However, we have still not heard a clear answer from Labour on its position.
In the weeks ahead, we have an opportunity to discuss what we think are the most important services. What are our priorities? Labour members cannot continue to bury their heads in the sand as their list of spending pledges gets longer, as Linda Fabiani set out. Right here, right now, the people of Scotland want to know: will Labour keep concessionary travel? Will Labour commit to keeping Scottish Water in public hands? By how much would Labour put up the council tax? Do Labour members agree with George Foulkes that the Scottish variable rate should be used to increase tax on Scottish households? Who speaks for Labour on health? Is it—
It’s me!
Order.
Is it Iain Gray or Andy Kerr? The people of Scotland want to know whether the Labour position is that of Andy Kerr, who is correct in supporting the SNP position, or that of Iain Gray, who intends to slash health service funding. There are many more questions that will need to be answered—
I think that they will have to wait for another time, Mr FitzPatrick. I call Wendy Alexander, to be followed by Robert Brown.
10:46
Thank you, Presiding Officer. I do not think that I can add to the levity.
In some ways, today has been a useful debate. We are edging forward, but one or two myths are still getting in the way. The first myth, which we have just heard a little of, is that these are Westminster cuts—ergo, if we were independent tomorrow, we would not have to make any cuts. We have only to look over the Irish Sea, where there was a much smaller banking bailout but there have been deeper wage cuts, sharper cuts to services and a compromised credit rating.
The second myth—I look to the benches opposite—is that the cuts are the result of Labour’s mess. Of course, the truth is that we are dealing with the consequences of the near-implosion of the global banking system. No country was or is untouched. In response to that crisis and in restoring stability, 50,000 Scottish jobs in the financial services community were saved, and there was then the staving off of recession. In consequence, high levels of public debt were taken on, requiring a retrenchment in public spending.
Where are we now? Neither Scotland nor the UK has suffered the sovereign debt crisis that has been seen in other parts of Europe.
We all accept that problems existed in the banking sector. Does the member also accept that, for every year it was in power bar one before the banking crisis, the Government that she supported added to our national debt and our deficit, making the problem worse?
The fact is that, going into the crisis, Britain had the second lowest debt of any G7 nation, but let me move on. I concede that there is absolutely a need for debt reduction; I simply think that it is too far, too fast under the Conservatives.
That brings me to the Scottish context and the third myth. It is a First Minister special: if we just had fiscal autonomy, the need for cuts would disappear. Who is he kidding? Desiring a new financial system—today, tomorrow or the day after that—is fine, but it is a red herring when dealing with the cuts. Ask Ireland, Iceland, France, Germany, Spain and the Basque Country—every one is completely fiscally autonomous and every one needs to retrench in the face of falling revenues.
The Government is in full red-herring mode when it claims that the Calman proposals would uniquely put our public finances at risk. What Mr Salmond forgot to mention is that, last year, Scotland’s income tax take was down £549 million; its corporate tax take was down £641 million; its VAT take was down £402 million; its stamp duty take was down £300 million; and its inheritance tax take was down £91 million. I could go on—on the most recent figures, oil revenues were probably down £6 billion in the past year.
Desiring to collect the cash itself does not protect a Government from falling revenues, so let us beware the red-herring defence in which people witter on about tax powers instead of facing up to the responsibility of having less cash to spend.
What should we do about the cuts? The IBR is a useful contribution and I pay tribute to its authors, but to decide which of the IBR options merit support we need to know how much each recommendation would save. Let me explain. If any member—I look at Mr Brownlee—said that they were willing to sign up to all of the IBR, what would it mean? Would it cover half the £3.7 billion hole? Would it cover it once or twice? The only person who knows is Mr Swinney, and he wants to keep it a secret. If the Scottish Government wants a serious debate on the IBR options, it should price each and every one. Mr Swinney knows the price; he simply will not share it.
I am aghast at Wendy Alexander’s ignorance. I mean no discourtesy in that, but the independent budget review costs every single one of its propositions: the changes to eligibility in free personal care are costed, and the assumptions on staff pay are all costed. That is not an excuse for the Labour Party to use in this debate.
Nor is it an excuse for the cabinet secretary. What did he talk about this morning? Higher efficiency savings—how much will they save? Fewer public bodies—which ones and how much will that save? More public service reform—in what way and how much will that save?
That is not what you just said.
It does not—
Withdraw what you said.
No, I said that the IBR does not cost every option. It costs some of the universal benefits, but this morning the cabinet secretary said that he is going with three options and none of what he said assists any public sector organisation in Scotland in trying to balance its books from next March. The problem is that, instead of helping, the Government is rubbishing the baseline that its own economic expert has given it. The SNP is hiding the choices for another 10 weeks, past party conference season and until Christmas is upon us.
The challenge for the rest of us—all of us here—is to figure out what debate best serves the nation. We should not be dismissing the chief economic adviser, who has said that he can predict for us with 99 per cent accuracy and give the most authoritative forecast of how much money we will have as of next March. Given that, we know that the cuts are unprecedented, and we know their magnitude to within 1 per cent because John Swinney has not disowned Andrew Goudie’s figures this morning.
We have options from the IBR, but the Government will not reveal the savings that they would yield. Therefore, it is up to us. Would every organisation in Scotland welcome 99 per cent certainty about how much money they will have next March? It is up to us, as the nation’s legislators, to determine what serves the nation best and to decide whether we will have a debate about uncosted ideas or actual options. The SNP will not defy the will of Parliament, so we should think hard as to what we do next.
10:54
Wendy Alexander is right to say that the debate is beginning to edge forward. I begin by saying, as others have done, that the independent budget review is a really good piece of work and immensely helpful in setting the scene as we approach the difficult financial challenges ahead.
It is worth putting the challenge into perspective. In 1999, the budget was around £14 billion. Now, it is nearly £33 billion, although I accept the point that others have made that we have put new obligations, duties and services in place. Crawford Beveridge and his colleagues tell us that there will be a requirement for a cut of about 12.5 per cent in the next four years. Without question, that is hugely challenging, but it is not the end of the world as we know it. As Jeremy Purvis pointed out, it will still leave the Scottish Government with revenues higher than in every year before 2004, and in cash terms the revenue budget will barely change. The problems come from the effects of inflation and rising demand for resource. We must, therefore, look very carefully at the effectiveness of the way in which we manage our public services.
Linda Fabiani and others—in fact, every nationalist member—included in their speeches a sentence about how none of this would have happened had Scotland been independent. Indeed, yesterday, the First Minister put independence at the heart of the debate leading up to the election next year. He told us that the fall in income tax revenues because of the recession would have resulted in almost £900 million off the Scottish budget if the Calman proposals had been in place because of the transfer of direct control of 10p of income tax to the Scottish Parliament. The Secretary of State for Scotland has already indicated that the original Barnett proposals would need to be adjusted to take account of that. However, what the First Minister omitted to tell us—this is the point that Wendy Alexander was making—is that, if Scotland had been independent, the effects of the recession would have lopped more than twice that figure off the income tax revenues going to an independent Scottish Government, as it would have received all the effect of the recession on income tax receipts, not just half of it. On top of that, there would have been a drop in corporation tax receipts, national insurance receipts and VAT receipts, to mention only the bigger ones. On a roughly equivalent basis, that would amount to a cost to an independent Scottish Government of something in excess of £2.2 billion. I readily concede that my figures need refinement, but I suggest that the cost of independence, in purely budgetary terms, would be of the order of £4 billion per annum off the current Scottish budget. That is the reality that the Scottish Government must face in putting independence forward as a serious proposition—although I am amazed that it is still doing that.
The First Minister told us yesterday that Scotland needs control of its own resources and the ability to grow revenue. I am not sure whether these independence revenues grow on fir trees somewhere in Aberdeenshire, but we need a little more detail on the SNP’s latter-day take on the miracle of the loaves and the fishes. The reality is that the financial crisis that was caused by banking greed affects most countries in the developed world even if, in Britain, it was made worse by the negligence of the Labour Government. There is no bypass for Scotland any more than there has been for Ireland or Iceland.
The IBR report emphasised the need for the earliest possible central guidance on how to tackle these significant financial pressures. It is the responsibility of ministers in government, with the resources of the civil service behind them, to develop proposals, to be clear about the realities of the position, to signal clearly—as the report said—national priorities and to convey the right degree of urgency. I will make one or two observations about the approach.
First, in my view and that of the review, there are definite issues with ring fencing any section of the budget, particularly because health accounts for a third of the Scottish budget, not a sixth as it does on a United Kingdom basis. The effect of that is obvious. As the review points out, it would result in a much more substantial reduction in non-health budgets if we were to ring fence the health budget. I say to the cabinet secretary that, whatever the formula surrounding these matters turns out to be, we must scrutinise very closely every budget line and every aspect of the budget that is before us.
Secondly, there is a close relationship between the cost of pay and the number of jobs in a reducing budget. The more pay restraint can be agreed, the fewer jobs will be at risk. Ultimately, we are working within a fixed and reducing budget, and the public sector is under the same pressures as the private sector.
Thirdly, efficiency savings will be a vital part of the equation. The review suggests that there is a limit to the efficiency savings that can be squeezed out of the public service. I believe that every doctor, nurse, teacher, dustman, administrative worker and cleaner should be asked which part of their job is vital and which part of the job consists of doing unnecessary paperwork, circulating process that adds no substance or picking up the results of inefficient practice. The challenge is to extract those ideas and manage their implementation, but our primary obligation is to squeeze out value from every pound of public money that is invested in our common services. I welcomed the cabinet secretary’s focus on public engagement, but I think that it must be a bottom-up process rather than a top-down process that is imposed by ministers, and it must focus on effective management in the public service.
Fourthly, there must be an equal partnership with the voluntary sector. Many voluntary sector services are more flexible, more human in scale and more effective than is possible in large Government or local government departments. There must be a framework that takes full account of the effects of particular cuts. For example, Glasgow City Council recently cut the budget for community transport—it was nothing to do with the wider cuts; the cut was made last year—at the same time, incidentally, as adverse publicity about the unsuitable use of council limousines. The cut has threatened the viability of organisations that provide social outlets and respite for people with learning difficulties, disabled youngsters and others. That is highly likely to result in more mental stress and more pressure on council services—a totally vicious circle for all concerned, and a lesson in how not to approach such matters.
Finally, I am clear in my mind that, apart from the issue that the report raises of what services should be provided by the state—and which of those should be comprehensive and which should be means tested—there must be a focus on the quality of the service provider. That applies to police forces, local authorities and the rest.
We live, as the Chinese curse wished on us, in interesting times and many people depend on our public services being of a high quality and effective at what they do. None of us came into politics to cut resource, but the current financial crisis imposes on us the obligation to manage its consequences in the best interests of our people. The Liberal Democrats stand ready to play our part in that, but we need a steer and leadership from the Government. That is the responsibility that the SNP took on in accepting office three years ago and it must rise to the challenge. Its decisions will affect real people, real families, real jobs and real services.
Before I call Dave Thompson, I remind members that they have about six and a half minutes each.
11:01
I congratulate the Scottish Government on commissioning the independent budget review and thank the review panel for its widely praised and respected report. Our economic prospects are certainly not good, but they are being made worse by the Lib-Con ideology, which is overenthusiastic about slashing public services. The proposals are regressive, and the widely respected Institute for Fiscal Studies estimates that the poorest 10 per cent of families will lose more than 5 per cent of their income while the richest 10 per cent of households without children will lose less than 1 per cent. The impact of a 2.5 per cent increase in VAT will also be greatest on low-income households, and the three-year freeze in child benefit will reduce the income of 621,000 families in Scotland, with the greatest proportionate effect being on low-income families. The Lib Cons are making the poorest pay for Labour’s recession.
Mike Russell said:
“The real example of Ireland - and all nationalists need to take note of this - is that the economic miracle was a product of reduction in Government size - from 51% of GDP ... through 41%”.
Does the member share that view?
The member should accept that this was not just a worldwide recession that happened on its own. The Labour Party was in power, banking regulation was lifted, and so on. I am coming to that just now.
In looking at how we got here, it is worth noting that a closely allied economy similar to the UK’s did not have a banking crisis in the past three years or a recession. That economy is the Australian economy. The National Australia Bank, a highly successful international banking group that owns the Clydesdale Bank, is headquartered in Australia and is subject to Australian regulation. It is no surprise, then, that the Clydesdale Bank was one of the few UK banks that were, largely, unaffected by the crisis.
Will the member give way on that point?
Members may wonder why that was. Simply, Australia retained the robust banking regulation that used to be run in the UK by the sharp-minded civil servants at the Department of Trade and Industry. That robust regulation was abandoned by the Tories and Labour to the benefit of City bankers but at great public cost. We witnessed the catastrophic love-in that consecutive Tory and Labour Governments have had with the bloated City of London—a love-in that Gordon Brown admitted to early in the recent general election campaign. The same Gordon Brown left office with the highest peacetime debt in history, and the SNP now has to deal with the consequences of that mismanagement by successive UK Governments and the last Labour Government in particular. Westminster insists on banking regulation and other such matters being reserved to it but has proved itself monumentally incapable of sound financial management of our assets.
The competence of the SNP Government, in contrast, puts the UK Government in the shade.
Will the member give way on that point?
I need to make progress.
As to the future, the independent budget review suggests a number of options that could be considered to address—
Will the member give way?
If I had given way to all the interventions so far, I would not have been able to give my speech; the member must bear with me.
There are a number of options that could be considered to address the forthcoming cuts to Scotland’s block grant—the pocket money that we get back from London after first sending it the tax that is collected from hard-working Scottish families and well-run Scottish businesses. If only we had the independence and the full financial freedom that we need to do things differently, we could avoid much of this ideologically driven London-inflicted pain.
The biggest tools in the economy, which affect all businesses and mortgages in Scotland, are the interest rates that are set by the Bank of England. Why is it SNP policy that, on independence, the Bank of England would continue to set interest rates for the Scottish economy?
The crucial point is that if we had independent financial freedom, we would be able to use—
We would not—the SNP says that the Bank of England would carry on setting the rates.
Mr Purvis should let me answer his question.
We would have a full toolkit to deal with the problems that arise here. We would make different decisions on spending, and deal with the depth and the speed of the cuts differently. We would not waste money on renewing the Trident nuclear missiles, and we would have borrowing powers to allow us more flexibility.
We would do things differently in relation to VAT and the freeze on child benefit. The fossil fuel levy would not languish in a bank in London but would be put to good use in Scotland. Those are all things that we could do if we could make our own minds up, which Mr Purvis does not want us to be able to do.
A number of the options that the IBR report suggests have, I am pleased to say, been ruled out by our Scottish Government. As has been said, free personal care and concessionary travel are safe under the SNP.
Existing eligibility for the concessionary travel scheme will not be limited—in fact, it will be extended from next April to include injured service personnel and veterans. I know that the bus pass is a benefit that is widely appreciated in the Highlands and Islands. A constituent came into my recent Fort William surgery specifically to make the point that the scheme should continue, as she had heard the untrue Opposition scare stories that it would be removed. I was, of course, able to reassure her that, with the SNP in power, that benefit is safe.
The take-up of the scheme among those over 60 was 79 per cent in 2008, and will rise to 1 million people by 2016. Evidence suggests that the largest increase in take-up since the scheme’s introduction has been among those aged 60 to 69 on lower incomes, and those without access to a car. Those are the very people whom we should be trying to help in these hard times.
It is worth noting that the Scottish concessionary travel scheme is already far more generous than the system in England. We get free bus travel across the country at all times from the age of 60—
The member should be finishing now.
I have just two more points. England’s scheme is off-peak and excludes long-distance journeys, and the age limit is going up to 65, in line with the increase with the state pension age for women.
The member should finish now.
The question for the Opposition is whether it will guarantee the bus pass, as we have done. A simple yes or no answer will do.
11:08
The prospect of almost £4,000 million being removed from the Scottish budget is by any standard a crisis. It tells us what—if we are honest—many people have known for a long time: that if the country’s decision makers do not take action to ensure the sustainability of public services in the future, future generations will live in a very different country and find it a good deal harder to fulfil their hopes and aspirations.
The reality of the situation is dawning on an increasing number of people in Scotland, who need—and are entitled to—some direction. The independent budget review has rightly recognised that those pressing issues will first and foremost require strong leadership. That means leadership among a wide range of public sector organisations in our country; in our local government and our health service; in the Parliament; and from those who sought and gained the privilege of government.
Leadership does not mean talking nonsense about Westminster cuts. It was not Westminster cuts that turned the once much acclaimed Irish economy on its head, placed Greece in the position that it is in today, left Spain with its economic difficulties and put people on the streets in Italy. We should stop that fallacy in the interests of explaining to people in Scotland just how serious the situation is.
The IBR report emphasises the urgency of the situation and, on a number of occasions, asks for “immediate action” from the Scottish Government. Unless we have changed the meaning of our language, “immediate” means “now”. I and others think that there has been a fair degree of prevarication from the Scottish Government. The evidence is the fact that the report was published in July, and, as we stand here in September, there has been no action in the areas in which the report sought an immediate response from the Scottish Government. The report asked for early or immediate action, but the Government tells us that it will be November at the earliest before we see the first direction of travel. We should compare that with examples of the real leadership that is being shown in other parts of the public sector.
People in local government do not know the full extent of the contraction that is heading their way. However, they know that it is coming and that it will be serious, so they have taken what must be an extremely difficult decision on pay that covers the next few years. They are politicians, as we are, and they have to live with the threat of their services being brought to a grinding halt. However, in an attempt to secure the provision of jobs and services in the future, they have put people first and accepted the pain that often comes with real leadership.
When that is contrasted with the prevarication that we have seen—from the emergency budget back in June to the publication of the independent budget review—it is not difficult to conclude that the Scottish Government is putting considerations around next May’s election well before the needs of our citizens.
That is unacceptable: first, due to the depth of the crisis, and secondly, because it is not those on the salary level of politicians who will feel the full force of the contraction. It is those who are on the bottom rung, most dependent and least able to defend themselves. They may be less concerned with who governs, but they depend enormously on strong and straightforward governance.
The Scottish Government has huge analytical capacity at its hand. Through the work of its chief economic adviser, it knows to within a tiny margin the size of the problem that it faces. The Government should face up to that and demonstrate the strong leadership that the independent budget review—which the Government commissioned—tells us is so important. It is important to deal with the immediate crisis, and so important to consider properly how we organise and what we expect of public services in Scotland in the future.
It is a poor reflection on any set of politicians that they seek the privilege and honour of power, and then—in their own interests—refuse to govern.
11:13
I will concentrate on free personal and nursing care, and the Government’s absolute commitment that it will continue and be protected from cuts. However, I must comment on the continuous calls from the Opposition—particularly from Labour—to bring forward a draft budget. Those members know only too well that the variance in the factors that affect the Barnett formula is so huge that it would be totally irresponsible to do so; even more so when we will not know until 20 October what the block grant will be.
If my memory serves me right, members decided in July that they did not want a budget to be brought to the Parliament; all parties voted down an early budget. We should think about that aspect. It is irresponsible to talk about bringing figures forward at an earlier stage when we do not know what the knock-on effects on the Barnett formula will be.
Tom McCabe spoke about local government and others, and like local government we have a responsibility. However, with all due respect, he seems to forget that it was the previous Labour Government in Westminster that said that the drastic cuts that were coming—not only to Westminster but to the Scottish Parliament—would be greater than those that Thatcher made. He should remember that and dwell on it—those were not my words, but the words of the previous Labour Government in Westminster.
Free personal and nursing care is delivering real benefits to tens of thousands of older people. It is—or was—supported by all the political parties in the Scottish Parliament. I remind those parties what they said about free personal care only a few months ago. A motion from Ross Finnie of the Liberal Democrats in June said that free personal care
“has widespread support and continues to deliver real benefits for tens of thousands of Scotland's most vulnerable older people, allowing them the dignity and independence of growing old in the comfort of their homes”.
Murdo Fraser of the Tories said:
“The Scottish Conservatives are proud of the policy of free personal care, which was introduced with our support in 2002 ... Free personal care is a policy that we support but which is not supported by our UK counterparts, and it is therefore one of a number of areas of difference between us.”—[Official Report, 24 June 2010; c 27683, 27684.]
I would like the Tories to confirm that there are still differences between them.
Jackie Baillie of the Labour Party said:
“I am proud that it was the previous Labour and Liberal Democrat Scottish Executive that introduced the policy of free personal care ... There is no doubt that free personal care is greatly valued by those who receive it. We on this side of the chamber are clear in our view that free personal care should remain.”—[Official Report, 24 June 2010; c 27686.]
Contrast that with the leader of Glasgow City Council, Gordon Matheson’s comments. Just a couple of weeks ago, he said:
“What I am saying is that these kind of issues must be on the table. We look at the challenges we now face and that includes universal free personal care.”
Questioned on “Newsnight Scotland”, Andy Kerr said:
“Secondly, free personal nursing care, well bluntly I’d want to look more.”
The Labour Party must come clean on the issue and clarify its position on free personal and nursing care. Does it agree with the leader of Glasgow City Council and Andy Kerr that the issue should be put on the table and looked at more? The people of Scotland should be told. In fact, when we consider the statements from the leader of Glasgow City Council, Gordon Matheson, one of which was to put up the council tax—
These are difficult financial times, and I ask the member whether her party supports the fact that councils pay 80 per cent more to place a person in residential care in a council home than they do to place them in the independent and voluntary sector.
I am talking about people staying in their own homes. I will get to residential care, which I know is a hobby horse of Mary Scanlon’s; I am sure that she will raise it later.
The point that I am trying to get at is what the Labour Party stands for. We need clarification on the issue.
The member quoted me earlier. For the record, I shall repeat what I said: we are supportive of free personal care. It is as clear as that.
I am glad. That is another commitment—the Labour Party is supportive, but will it cut it? The people of Scotland need to know that Labour will not cut free personal care and that it will protect it. When we consider what Gordon Matheson—
Will the member take another intervention?
No. I am sorry.
Gordon Matheson of Glasgow City Council, with the agreement of some members of the Labour Party, has said that he wants to put up the council tax—a call backed by Iain Gray. We are talking about an end to the McCrone agreement, and now free personal and nursing care is up for grabs—backed by Andy Kerr. We have to ask ourselves, who is running the Labour Party? Is it Glasgow City Council? God forbid. Is it Iain Gray? We need answers.
It will probably be David Miliband soon.
It could well be.
Without free personal and nursing care, particularly at home—a point that I wanted to make to Mary Scanlon—an increasing number of elderly people would be forced to move into care homes. That would deprive them not only of their home comforts but of the dignity and independence of living in their own homes. We all admit that we face difficult times. That is the very reason why we must protect our most vulnerable citizens. I ask Opposition members to vote with the Scottish National Party and ensure that free personal care is not cut and is protected.
11:19
I say to Linda Fabiani, and perhaps also to Tom McCabe, that I for one do not accept that the level of our current deficit warrants the savage and rapid cuts proposed by the Con-Dem Administration at Westminster and by this so-called independent review. I have been a rather long time in politics, and I have seen people come to accept something as fashionable, as automatic, as “it has to happen”. That is why, in the 1960s, we ended up with those awful high flats that people now regret having built. We are now accepting the cuts mantra, again and again, as if it is inevitable. We are moving like lemmings towards a terrible fate.
Jeremy Purvis talks about £2,000 for every man, woman and child. That is absolutely meaningless. I have a mortgage 50 times that. It is manageable. It does not cause me any problems as long as I can sustain it. As long as a country can sustain a debt and repay it over a period, it is manageable.
Bruce Crawford rose—
Wait a minute.
What we have is a cover, which has been accepted by the SNP and the Liberal Democrats, for the implementation of Tory dogma that has been long planned by a Cabinet of multimillionaires.
Is George Foulkes seriously suggesting that he has found a new definition of “structural deficit”? He referred to our deficit being repaid over time. That is not the definition of a structural deficit, and it is a structural deficit that this Government, this Parliament and the UK Government is having to deal with.
I am not being lectured to by Liberals, who have gone into alliance with the Tories and are now collaborators in the implementation of Tory cuts.
Earlier, Duncan McNeil asked John Swinney about protecting the vulnerable. Let us look at what is happening down south. Cameron has brought in Sir Philip Green to recommend cuts. Sir Philip Green, who is a multibillionaire, and whose wife is a tax exile—she does not pay taxes in the United Kingdom—will tell us how we can cut back on things, affecting the most vulnerable in our society.
We all accept that some cuts need to be made, but we do not all accept the scale or speed of those cuts. The SNP is living in a fool’s paradise. All the time that the party is talking about next year’s budget cuts, it is spending, spending, spending. At the Public Audit Committee, three senior officials—who probably earn £0.5 million between them—told us that they will employ 15 more co-ordinators to deal with some of the problems, while in Lothian we are losing 333 nurses on the front line. Jeremy Purvis was right: the Government is spending more than £70 million unnecessarily on consultants. I ask John Swinney whether ministers will set an example—not just on this issue but on carbon footprints—by reducing the number of limousines in which they sail around the country while the rest of us use buses. They are not prepared to set an example.
Furthermore, there is a totally unnecessary inquiry into fingerprints, costing £4 million. Then there is the capital programme. I have added up the figures that we get in the Public Audit Committee. The proposed capital expenditure for the next years is £11.3 billion. I asked the Father Jack of the Administration, the Minister for Transport, Infrastructure and Climate Change, how he will pay for it. By some miracle he will find that money. It is absolutely ridiculous to suggest that that money will be available. The SNP is living in a fool’s paradise.
I say a word to the Scottish Council for Voluntary Organisations, which has sent us a representation in which it accepts some of the IBR’s recommendations. The SCVO is falling into a trap. Yes, it accepts radical redesign in the way in which some services are provided, and I agree with that, but it wants mainstream roles for the private and voluntary sectors. I used to work in the voluntary sector, and I know that we have to be very careful that that would not mean lower wages for those who do the jobs that were done by people in the public sector, or volunteers taking on the jobs of professionals. That is the danger.
Finally, I come to the point that I raised with John Swinney. I am getting fed up of coming in here—I am glad that I am retiring at the next election; no doubt other members are, too—and hearing the continual whine from the First Minister, John Swinney and others that they do not have the fiscal powers to deal with anything. They are in government, they are the ones who have to make the decisions and they have money from the UK Government, which, under the Barnett formula, is much more generous per capita than for any other part of the UK. If they think that that is not enough, they have the power to impose a tax of up to 3p in the pound. As John Swinney said in an answer to me, that would give them £1 billion extra. They are simply not prepared to do that, and they should be honest about that. What they really want is the English taxpayer to stump up some more for better services in Scotland.
In the past two days, we have seen the first death throes of a dying Government. I am looking forward to May and seeing the end of the SNP hypocrisy.
11:25
I might see whether I have the nerve to develop one or two of George Foulkes’s themes in a moment or two, but first let me set in context why we are here.
Let us not forget that the situation stems from private sector failure of historic proportions that can be traced back to the deregulated free-market, centre-right economics that all the Westminster parties supported, albeit that they might enjoy passing comments and banter about whose recession it is. They have all had the free market finance fetish that has been so strong, and have supported selfish City-boy values. All of those political parties have feted those values throughout my lifetime.
I normally like Mr Brownlee’s speeches, even if I disagree with him, but it was disgraceful to hear him describing the independent budget review, which is the expression of the Tory-Liberal cuts agenda, as the Beveridge report. He might point out that that styling was Crawford Beveridge’s idea, but members should not allow the repetition. The document that we all know as the Beveridge report identified five giant evils in society—squalor, ignorance, want, idleness and disease—and laid the foundations of the welfare state. It was and remains a source of pride to anyone with a social conscience. The Liberal-Tory cuts agenda to which the budget review is a response will increase each one of those five giant evils. Even if it is found in Scotland’s constrained and limited form of government that, regardless of which party happens to be in power, some elements of the budget review become unavoidable, they should be a source of pride to nobody, regardless of party politics.
The UK Government has choices at its disposal, and there are decisions that it can make. This is a matter of a set of choices, not necessity. As George Foulkes said, the UK Government can slow down. Even if there is a desire to reduce the deficit over time, that does not need to be done with the zeal for public sector cuts that leave many of us with the suspicion, which we can hardly be blamed for, that the approach is simply opportunism by the radical right, who hate the public sector for ideological reasons and care little for equality and social justice. Other cuts can be made. The things that we do not need can be cut, from weapons of war to the legions of private sector consultants who siphon public funds and the absurd levels of high pay at the top end. I include in that the pay of politicians such as us. We are all paid more than £50,000 a year, and I sometimes think that some of us have forgotten that that is a hell of a lot of money to most people. Consideration of public sector pay at the top end should include consideration of our pay.
There are other choices in raising revenue. There is the idea of a financial transaction tax—the so-called Robin Hood tax—to raise money for public services and bring a bit of stability into the reckless and irresponsible finance sector.
There are those in Scotland who might argue that those choices are unavailable to us within the limitations of devolution. Some people might say that we are where we are and we simply need to start to make the cuts, but there are choices that we can make. Lord Foulkes raised the issue of the variable rate of income tax. A decision on that would be complex, controversial and difficult to take, but if we are not setting down red lines in discussing the budget review, we should all be honest about that and say that we need to look at all the options.
Does the member recall that there is a mandate from the people for varying tax, as one of the questions in the referendum was on that?
There is indeed. As someone who would prefer a far wider range of financial powers for the Parliament, I now regret that a form of tax-varying power was designed that makes it very difficult, although perhaps not impossible, to justify using it.
The council tax has been mentioned. We should not simply debate whether it should go up or not or whether a freeze is justified; rather, we should be debating broadening the tax base for local government. Why not empower our local councils to decide for themselves not just the proportion of their spending that they will raise locally but whether they will raise it from a property-based council tax, a land tax, a sales tax or business rates? Why not empower them to make for themselves the choices that are right in their part of the country?
Other means of raising revenue may be available to us, one of which the First Minister mentioned yesterday when he talked about making Scottish Water—a publicly owned company—a major renewable energy generator. That could be a profoundly important long-term option, and it is an example of the ideas that we need to consider in the short term. We should look beyond our perceived boundaries.
The independent budget review report makes a suggestion in discussing the capital budget. Let us remember that the hit on the capital budget is predicted to be much more severe than the hit on the rest of the budget, with all of the implications that that might have for the social housing sector, for example. The report suggests the complex and controversial proposal of road user charging. Again, that would be difficult to design and it would be difficult to persuade people to accept it, but it can be designed with social justice and geographic justice in mind. I honestly do not know whether we ought to have it, but if we are not putting down red lines at this point, we should at least be willing to examine the options.
I laughed at a paragraph on capital budgets in the report. It says that variability in capital budgets by cancelling projects is not always there
“as certain capital projects may be of such high perceived importance that they prove very difficult to forgo for political and presentational reasons”.
Which capital projects can I think of? Oh yes—basically, I can think of all of the transport budget. For far too long, major transport spending decisions have been made with short-term political, geographic or presentational interests, not proper transport interests, in mind. Unless we are willing to look again at some decisions that all the political parties have supported in the past, I am afraid that we will not be ready to look at the other, more controversial cuts in the public services that people in Scotland value highly.
11:32
Once again, we find ourselves in the chamber attempting to clear up the mess of Labour’s recession. The task could not be much more difficult. The economy has contracted by 6 per cent, which is even more than Iceland’s economy has—thousands have lost their jobs and the country is drowning in debt. The people of Scotland are facing a decade of austerity and misery, due largely to the economic practices of the previous new Labour Government. Given that London is the world’s largest financial centre, claiming that it is somehow an innocent victim of the global recession is simply laughable. It is as culpable in the crisis as Wall Street is.
Will the member give way?
I will let Mr Kerr in later; I want to make some progress first.
The scale of the economic vandalism cannot be overstated. The UK national debt is set to top £1 trillion next year. Anger, disappointment and incredulity at such incompetence are understandable, but the SNP Government is attempting to get on with the task at hand, despite the limited powers that are available. It is repairing the damage, restoring our battered economy, protecting jobs, securing investment and ensuring that high-quality front-line services are delivered.
The most telling contribution from the Opposition was Lord Foulkes’s somewhat embarrassing speech. He seems to believe that Scots do not pay taxes, but rely on handouts from London. It is interesting to note that, when he suggested raising tax by 3 per cent, Mr Kerr shook his head vigorously to make clear that that is not Labour policy. One would have thought that, before they came into the chamber, Labour members would have had some idea of their position on such important issues.
Elaine Smith raised an important issue. She talked about perhaps taxing the rich more heavily. Sadly, we do not have the powers in the Parliament to take such a decision if we wanted to do that.
Labour, which says that we have to bring our budget forward now rather than waiting a few weeks until we have the precise figures, itself ducked the entire issue of the £311 million that the UK Government said we could either cut now or have as cuts next year. It did not clarify the position on that at all. Iain Gray ducked and dived on it until it faded from the media spotlight.
There is no hiding from the fact that there will have to be cuts in the near future. That is one of the side effects when, in the words of former Labour minister Liam Byrne, “There’s no money left.” However, it would be foolhardy to say where cuts and savings will be made without full knowledge of what the Scottish Government’s budget will actually be. Of course, we will soon find that out, as we are only a few weeks away from having the information. Mr McCabe suggested that the SNP is somehow holding back plans for electoral advantage, but my understanding is that the bill will be passed some months before the election, so it will be in the full glare of attention from the public and the media.
The real issue at hand is that we do not have all the powers that we need. We heard an attack on three of our local neighbours from Mr Jeremy Purvis, who is not with us in the chamber at the moment. He said that Ireland is bankrupt—everyone seems to assume that that is the case—and that so is Iceland, but let us look at the actual figures for their economies. Per capita income in Iceland last year was $38,000, and purchasing power parity was also $38,000. The figures for Ireland were $51,000 for the actual and $39,500 for purchasing power parity; for Norway they were $88,600 and $53,000; and for the UK they were $35,000 for each. The standard of living in poor wee Iceland is still 7 per cent higher than in the UK. In Ireland it is still 10 per cent higher—and Ireland does not have our oil and gas reserves—and in Norway it is 50 per cent higher. I am not aware of any great campaigns to return Norway to Swedish control, Iceland to Danish rule, or Ireland to the benevolent control of London, which left it a poverty-stricken backwater when it got its independence last century.
We should remember that the Liberal Democrats’ austerity measures follow on, a year later, from when they suggested an £800 million cut, so perhaps it is not just a case of the Tories wagging the dog, as we perhaps thought before.
In opposing the SNP’s view that Scotland should be independent and have responsibility for its own affairs, it seems that the Labour Party and the other unionist parties have replaced Obama’s “Yes, we can” with the slogan “No, we can’t.”
Can I link a couple of the member’s points? He talked about having powers here in Scotland under independence, and he also talked about the power of the City, its largesse and regulation. Under his party’s manifesto, the proposal was for light-touch regulation suitable to the Scottish financial sector. The manifesto pledged to
“minimise the burden of bureaucracy by ensuring Scottish regulations do not have British gold-plating.”
Under independence, therefore, there would be even less regulation of the banks.
The point of an intervention is to ask something. It is not to go on and add a couple of minutes to the endless speech that the member made this morning. We actually believe in the Scottish people. That is the difference between us. We have faith in them. We are not saying why we cannot do this and that—things that all the countries in Europe take for granted. I looked up Lichtenstein in Wikipedia after Scotland’s rather desperate 2-1 victory the other day to find that it has the highest per capita income in the world. It is a small, landlocked state in the middle of Europe with nothing but mountains and glens, yet we, apparently, cannot aspire to be even half as prosperous. We have to stick with the poverty, the unemployment and the emigration that we have had for decades under the United Kingdom. [Interruption.]
Order.
When we joined the union, Scotland’s population was a fifth of England’s; now it is a tenth. That shows us where wealth has moved in the past three centuries and how Scotland has been neglected. People in Denmark do not grow up thinking that they will have to emigrate in order to get employment. They know that they can have a good standard of living in their society.
One thing that is causing the Scottish Government difficulties is the public-private partnership legacy. This year, the education budget alone is hit by costs of £244 million, and the NHS is having to stump up £1 billion over five years, yet Iain Gray is calling for more private finance initiative expenditure to fund the Glasgow airport rail link, which is a white elephant and totally unnecessary.
You must wind up, please, Mr Gibson.
I am interested to know where Labour would find the £175 million to fund that project.
Thank you. That concludes this morning’s part of the debate, which will continue at 5 to 3 this afternoon, after questions.