Official Report 1027KB pdf
The next item of business is a debate on motion S6M-18779, in the name of Murdo Fraser, on improving Scotland’s finances. I invite those members who wish to speak in the debate to press their request-to-speak buttons, and I call Murdo Fraser to speak to and move the motion.
14:52
It is my great pleasure to open the debate on improving Scotland’s finances—an ambition that I am sure we all share across the chamber.
To help to inform the debate, I note that, over the past few weeks, we have had two significant publications highlighting the state of public finances in Scotland. Just last month, we had from the Scottish Government the annual “Government Expenditure and Revenue Scotland” report, which sets out what is, in effect, an income and expenditure analysis not just for the Scottish Government but for the totality of public spending in Scotland. The messages from that report are stark. The net fiscal deficit for Scotland now stands at £26.5 billion, which represents the gap between the amount of money that is raised here in taxes and the total that is actually spent. That figure represents 11.7 per cent of gross domestic product—twice the United Kingdom level.
In practical terms, that means that if Scotland were to become an independent country, the Government of the day would have to find around £13 billion, either in tax rises or in public spending, just to mitigate the current level of UK fiscal deficit—
Will the member give way?
I am happy to give way to Mr McKee, who will explain to us where that £13 billion would come from.
Murdo Fraser is barely a minute into his opening remarks and he has completely misrepresented what GERS is. He should know that it is very clearly Scotland’s fiscal position under the current constitutional arrangements. The whole point of independence is that it would give us the capability to raise more money and spend it more effectively than we currently do.
Mr McKee has let the cat out of the bag: he has just said that we would have the opportunity to raise more money. I will give way to him again if he can give me one example of how the extra £13 billion would be raised.
The whole point is that we would not have to raise that amount of extra money, because we would not be paying for significant parts of the Whitehall machinery and other costs that are incurred down south that Scotland receives no benefit from but that are allocated to our expenditure. Through growing the economy by focusing on our strongest sectors, we can emulate countries such as Ireland, which has many tens of billions of surplus euros, or Norway, with its trillion-dollar wealth fund. We would be in the position to do that if we were an independent country.
I will give you the time back, Mr Fraser.
That was a U-turn from Mr McKee within 10 seconds. He stood up and said that we would raise the money, but he has changed his mind completely in the course of just a few seconds. Let me move on, because Mr McKee has already taken up half my time with his intervention.
As is revealed in the GERS figures, the union dividend now accounts for £2,600 for every man, woman and child in Scotland. With that level of extra cash to spend on the national health service, education, justice and infrastructure, surely Scottish residents have the right to expect public services that are so much higher in quality than those in the rest of the UK. Patently, that is not their experience, and, in many cases, outcomes in Scotland are poorer than they are in England, where much less money is being spent.
The second publication that should concern us is the latest report from the Scottish Fiscal Commission, which is the independent watchdog that exists to scrutinise Scottish public finances. The SFC has identified an economic performance gap that it estimates will cost the public sector £1.058 billion in the current fiscal year. In practice, that means that we are losing £1 billion in revenue that would otherwise accrue if Scotland’s economy performed at least at the level of the UK average. The consequences of Scotland’s relative economic underperformance are severe. According to the SFC, the Scottish Government faces a projected £851 million negative reconciliation in the financial year 2027-28, exceeding current borrowing limits, due to the slower increase in earnings in Scotland compared with that in the rest of the UK. At present, no one in the Scottish Government has any idea how that can be funded. Even more seriously, extending to the financial year 2029-30, according to the SFC, Scotland faces a projected £4.8 billion fiscal gap that is made up of resource spending of £2.6 billion and capital spend of £2.1 billion.
The simple fact is that spending is growing faster than revenue, fuelled by increases in the public sector pay bill and the growth in welfare spending. Despite pledges from the Scottish National Party to reduce the size of the public sector workforce, the devolved civil service has grown by almost 60 per cent since 2018-19. Increased pay deals will simply add to the burgeoning public sector cost unless the workforce reductions that were promised are delivered. Perhaps the biggest concern is around social protection spending, which has grown by 55 per cent in real terms since 2020-21, crowding out other budgets. As the SFC makes clear, that is simply not affordable.
Whichever party is in government by 2029-30, that black hole has to be filled. So far, the SNP is in complete denial about the scale of the problem, perhaps hoping that, by then, it will be somebody else’s responsibility to fix it or that Westminster will, once again, come to the rescue—although, given the state of the economy and the UK’s finances under Keir Starmer and Rachel Reeves, it is likely to be very disappointed.
So, what do we believe needs to happen? First, we are past the point at which we need to end short-termism in Government spending. We need a full multiyear spending review to identify priorities, make savings and inform needs. Secondly, we need a strategy to cap welfare spending growth, which is currently consuming too large a share of resource spending. Simply put, we have too many people of working age who are in receipt of benefits when they should be part of the workforce. That requires investment in apprenticeships and reskilling, as well as schemes to assist those who are currently far from the workplace to be engaged in meaningful employment.
Will the member take an intervention?
The member will be concluding shortly.
I apologise to Mr Macpherson.
Thirdly, we need proper public service reform to see where savings can be made. Mr McKee promises that he can find £1 billion-worth of backroom savings in Government departments, although we have yet to see a detailed plan for that, and private correspondence that was released following freedom of information requests suggests that his ideas have been met with something other than enthusiasm by his cabinet secretary. However, doing that would be, at least, a start, and we encourage Mr McKee to do that good work on our behalf.
Finally, and perhaps most significantly, we need a proper focus on productivity and economic growth to broaden Scotland’s tax base. Only by allowing private sector businesses to thrive, thereby expanding the economy, will we see more better-paid jobs created and greater tax revenues generated to fund the public services that we all need.
In conclusion, it is clear that the SNP is clueless about how to address the enormous financial black hole that it has created. Only the Scottish Conservatives have the ideas to tackle the issue. That is the point that is made in our motion today, which I am pleased to move.
I move,
That the Parliament notes with deep concern the Scottish Fiscal Commission’s forecast of a £4.7 billion funding gap in 2029-30; recognises that without the Union dividend of £2,578 per person there would be a substantial deficit, with Scotland’s 2024-25 net fiscal balancing standing at -£26.5 billion (-11.7% of GDP); regrets that the Scottish Government continues to dismiss these realities and prioritise constitutional campaigning over sound financial management; calls for urgent measures to restore credibility to Scotland’s finances, including a full multi-year spending review to identify priorities, savings, and reform needs, a strategy to cap welfare spending growth, which is currently consuming a significant amount of resource growth, and create jobs by moving more people into work through reskilling and apprenticeships, a focus on productivity and economic growth to broaden Scotland’s tax base by allowing businesses to thrive, and a robust public service reform and stronger Audit Scotland oversight to deliver better value; believes that the Parliament must focus on NHS waiting times, education standards, and community safety rather than fiscal denialism, and resolves that Scotland’s future depends on fiscal discipline, growth, and accountable government within the United Kingdom.
15:01
I thank Murdo Fraser for bringing attention to the fact that the Scottish Government has been constrained for many years by the austerity measures of the UK Government, which were taken forward by the Conservative Party.
The GERS figures that I referred to earlier show that public sector spending in Scotland is now equivalent to 52 per cent of gross domestic product. If that is austerity, at what level does Mr McKee think it should be?
What has happened over those years is clear, and nobody would deny that we have been under those austerity measures. As I said before, the whole point of independence is to put us in a position where the constitutional arrangements allow us to grow the economy and focus on what is important to deliver increased tax revenues across Scotland. I thank Murdo Fraser for giving us the opportunity to highlight the positive actions that this Government is taking in what is a very challenging fiscal environment.
The Scottish Government has balanced the budget in each and every financial year, against the backdrop of economic turmoil and hardship for many.
You have to.
I hear Conservative members shouting that we have to do that. Of course we do. The point is that we do it—we deliver that every year—which requires us to manage the budgets that we have in front of us effectively and efficiently. That does not happen by itself. Enormous pressures have been placed on public and household finances by prolonged Westminster austerity; the economic damage of Brexit, which costs us £2.3 billion in public sector revenues every year; the Covid pandemic; the war in Ukraine and the energy crisis, which has been made worse by both UK Governments during the past few years; and inflation shocks. However, this Government has deployed every lever at our disposal to ensure that we stay true to our values and deliver for the people of Scotland while delivering a balanced budget. That is fiscal discipline in action.
The minister says that he can balance the budget between now and the end of the decade by saving £1 billion in public expenditure through cutting waste and reducing the public sector workforce. His colleagues said that they had considerable concerns about his £1 billion figure. Can he say what those concerns were?
The reality is that we are going to deliver that. If the member wants to know where the number comes from, it comes from the numbers that we published last year. Openly, across the whole public sector, spend on corporate costs will reduce by 20 per cent over the next five years, at 4 per cent per year. That will involve a range of measures, including in procurement, where we have already saved more than £200 million; in estates, where we have already saved many tens of millions of pounds; and in workforce reduction. That is where the £1 billion is coming from, and the member should have no doubt that we are going to deliver that.
The current UK Government appears to be continuing the trend of austerity, and its spending decisions will significantly hamper Scotland’s fiscal position for the coming year. The UK spending review was a missed opportunity to take the necessary measures to stimulate economic growth and put public services on a sustainable path.
Our funding for day-to-day spending is set to grow by only 0.8 per cent in real terms over the next three years. Had our funding for day-to-day priorities grown in line with the UK Government’s overall spending, we would have £1.1 billion more to spend on priorities over the next three years.
What would the minister say to Paul Johnson of the Institute for Fiscal Studies, who said that under no circumstances could what the UK Government is doing be described as austerity across the UK? Will the minister acknowledge that there is an additional £2,600 per person in Scotland? It is not austerity, and the independent experts say that it is not.
I have just clearly said that, if our spending in Scotland had been growing at the same rate as UK Government spending was growing, in total, we would have £1.1 billion more to spend on our priorities over the next three years.
I want to talk about the actions that we are taking. We have a very thorough public service reform strategy, which was published in June and which we are taking forward across a whole range of activities to deliver that £1 billion. The fiscal sustainability delivery plan sets out a clear and credible path to managing Scotland’s public finances over the next five years by increasing value from our spending and driving efficiency and productivity across public services; delivering sustainable and inclusive economic growth; expanding Scotland’s tax base and creating more good jobs; and taking a strategic approach to taxation to ensure that the tax system is fair and competitive and that it delivers sustainable revenues.
We have committed to a Scottish spending review—which Murdo Fraser called for—and that is happening, as he well knows, alongside the 2026-27 Scottish budget. That will provide the spending plans for three years for resource and four years for capital, with spending focused on delivering the greatest impact across our four priorities of eradicating child poverty, tackling climate change, growing the economy and ensuring high-quality and sustainable public services. Those are our priorities and the priorities of the people of Scotland.
Ultimately, it is only with the full powers of independence and full control of fiscal levers that we can deploy a truly sustainable system to support efficient and effective public services that deliver for the people of Scotland. Until that time, we will continue to do everything within our powers to meet the challenges that our public finances face, and we have set out a clear path to achieving that.
I move amendment S6M-18779.3, to leave out from “notes” to end and insert:
“that Scotland’s public services have been hampered by the UK Conservative administration’s austerity budgets; recognises the deep harm that the UK Conservative administration has done to the economies of the UK and Scotland with Brexit, and that this has reduced Scotland’s public spending by £2.3 billion annually; further recognises that this loss of public finances impacts on Scotland’s vital public services, including Scotland’s NHS, support for a just transition, and skills training; notes that a public sector reform programme is underway with the aim of saving public money while protecting the delivery of frontline services; believes that the UK Labour administration should either explore the application of wealth taxation or devolve the necessary powers to Scotland so that the Scottish Parliament can do so; welcomes that the Scottish Government has already announced plans for a three-year spending review to be published alongside the upcoming Budget, and believes that it is only with the powers of independence and full control of the fiscal levers that a truly sustainable and fair system can be developed to support efficiency and public service delivery.”
15:06
Over the past 14 months, the UK Labour Government has decisively ended austerity and has already invested an additional £5.2 billion in Scotland. The UK spending review in June saw a further £9.1 billion of investment in Scotland over a three-year period.
That funding can be transformational for public services, which have been decimated by, yes, 14 years of Tory austerity, but also 18 years of SNP incompetence. The current fiscal arrangement—the Barnett formula and the pooling and sharing of resources across these islands—means that spending per person is significantly higher in Scotland than in England. The Scottish Government’s own GERS figures for 2024-25 show that spending per head in Scotland is more than £2,600 higher than the UK average.
For years, the SNP claimed that Tory austerity was the reason why public services in Scotland were so bad. It no longer has that excuse, yet more people in Tayside than in the whole of England are spending more than two years on NHS waiting lists. Scottish 15-year-olds are a full year behind their English counterparts in maths, and more than 10,000 Scottish children are living in temporary accommodation. Capital projects such as the A9 and the replacement of Barlinnie are running years—even decades—late, and costs are spiralling wildly out of control.
The largest block grant in the history of devolution has not even touched the sides of SNP incompetence and waste. No reasonable, responsible Government would put the Barnett formula at risk—that is absolutely clear—yet scrapping the Barnett formula is official SNP policy. Shona Robison told the Scottish Affairs Committee on 16 January 2025 that full fiscal autonomy was the Scottish Government’s preferred position. This very morning, the cabinet secretary told a tax conference here in Edinburgh that the SNP is “negotiating on that”.
Those words should send a shiver down the spine of every Scot. The SNP’s war on the Barnett formula would wipe £14 billion from Scotland’s annual budget. That is a quarter of our total budget, as set out in the GERS figures from the Scottish Government. Professor Mairi Spowage from the Fraser of Allander Institute said at that conference that, if we did that, Scotland would get a lot less funding. I would love to hear from Government ministers today how they think the negotiations to get rid of the Barnett formula for Scotland are going and what that level of cuts would mean for Scotland’s public services.
The approach has been panned by people who, unlike ministers, are looking at the facts. Respected institutions such as the IFS point out that drastic spending cuts and vast tax rises would be needed to balance the books were the SNP to have its way.
The SNP must recognise and learn that, as a responsible Government that works with the UK Government in a new kind of relationship, it has to take responsibility for Scotland, as a legitimate interlocutor with the UK Government. There must be an honest set of negotiations, but that has not been the case so far, with the Scottish Government having made £135 billion of spending demands since the UK Labour Government took over.
The SNP would know all that if it had bothered to do its homework first. The finance secretary admitted that no detailed work has been undertaken on full fiscal autonomy, and the Scottish Fiscal Commission told the Finance and Public Administration Committee that it has had “no instructions” on it from the Government, despite full fiscal autonomy being Government policy.
The truth is that that is a very serious misstep from a knackered SNP Government that has failed to deliver on the issues that really matter: Scotland’s NHS, schools and housing. Scotland has long suffered at the hands of the economically illiterate and fiscally inept SNP. A Scottish Labour Government will work in partnership—proper partnership—with the UK Government to translate the record investment into delivery on the ground. We will get the basics right, defend the Barnett formula, get Scotland’s NHS back on its feet and set the new direction that this country so badly needs.
I move amendment S6M-18779.2, to leave out from “notes” to end and insert:
“recognises that, as a result of the Barnett formula, spending per head of population is higher in Scotland and that full fiscal autonomy would end this arrangement.”
15:11
Every year, when the GERS figures are published, unionist parties treat them as though they are some kind of gotcha. They claim that the numbers prove that Scotland cannot afford independence, but that is not what the GERS figures show. Depending on how accurately you rate them, they reflect Scotland’s finances inside the UK—inside the union. By definition, they cannot say anything about what Scotland’s finances would be like outside the UK.
Unfortunately for Mr Fraser and his colleagues, who are unable to come up with many persuasive things to say on the subject of the union, they cling to the GERS figures as an alternative to proper debate about the future of the union. They want independence supporters to just go quiet and disappear, but half of Scotland believes in independence, and we are not going away. Why? Because the union is not working for us. It allows the rich to get richer, unchecked. It sees cuts to services that are relied on by millions of people as the only way to balance the budget.
Will Lorna Slater take an intervention?
I will make some progress.
The UK is one of the most unequal countries in Europe. Wealth is concentrated in very few hands, while families across Scotland struggle. There is no shortage of money, but it is hoarded by a few, while millions struggle.
The UK child poverty figures are morally repugnant. As of April 2024, 4.5 million children in the UK—31 per cent—lived in relative poverty. That was a record high. A hundred thousand more children fell into poverty compared with the previous year. Most of those children—72 per cent—live in working households.
Food insecurity is widespread. In 2024, one in six UK households experienced hunger. More than 14 million people, including 3.8 million children, were food insecure. Child poverty is not just a number; it represents millions of people suffering inside the union.
Will Ms Slater take an intervention?
I will carry on.
Nearly 1.7 million children are affected by the two-child benefit cap. That policy has pushed about 350,000 children into poverty and 700,000 into deeper poverty. The gap between rich and poor is not theoretical. A cross-party commission estimated that scrapping the two-child cap, paired with benefit increases, could lift 4.2 million people out of poverty, including 2.2 million people in deep poverty.
In environmental terms, the system is also failing us. Environmental taxes made up just 1.9 per cent of GDP in 2024. That was down from 2 per cent. You heard that correctly—during a climate crisis, the UK Government is collecting less in taxes through environmental measures. As a total share of taxation and social contributions, the figure dropped from 8.4 per cent in 1997 to 4.5 per cent in 2024. That decline persists even as the climate emergency intensifies and recognised economists are calling for change.
Overhauling tax powers to ensure that those who have profited from wrecking our climate pay for its clean-up is very reasonable and fair. How is it a just transition if ordinary workers are being asked to pay for the consequences of the actions of massive oil and gas corporations?
This week, University of Oxford experts argued in the Financial Times that a land and property wealth tax is vital in order to “improve housing affordability” and ensure that rising land values benefit society, not just landowners. However, Westminster does not act. Instead, it refuses to tax wealth properly, underfunds the NHS and lets polluters off the hook.
Environmental taxation income is falling when it must instead rise in order to pay for the just transition. Scotland can choose differently. With independence, we can choose to close the wealth gap to redistribute wealth.
You need to bring your remarks to a close now, Ms Slater.
We can invest in public services. We can make Scotland a fairer and greener country when it is an independent country.
15:15
Today’s debate has turned into the usual constitutional battle, as these things do, but the Parliament needs to have an honest and grown-up conversation about the reality of Scotland’s finances, and I would like to think that we can do so. I say that not as someone taking a constitutional or political point of view but as a member of the Public Audit Committee, which is a great committee because we get sight of and scrutinise all the numbers, many of which have been quoted by speakers in the debate. We look at the numbers objectively and fairly, as does Audit Scotland.
We are talking not only about figures on a balance sheet but about people. When we look at the state of Scotland’s finances, we are talking about whether we have enough schoolteachers, whether people with mental health problems or additional support needs are being helped back into the workplace and whether there is enough money to build new ferries for our island communities or enough to fund outdoor education. Apparently, there is never enough money to do it all, but the numbers are serious, and the Conservatives are right to bring them to the Parliament’s attention today.
By 2030, there will be a £4.7 billion funding gap. That is the Scottish Fiscal Commission’s own number; it is not a made-up political number for a Daily Mail headline but a real, independently forecast number. The Government needs to have a harsh look at the reality, because it is in denial about the figures.
In the motion, another interesting point that I agree with is about scrutiny. I have a lot of respect for Audit Scotland’s role, but its powers are somewhat clipped at the moment, and I want to see them expanded. For example, there should be mandatory deadlines for ministerial responses to Audit Scotland’s section 22 reports. There should be stronger enforcement powers, in particular when issues of poor performance or financial mismanagement have been identified. I also want the Parliament’s committees to have enhanced scrutiny powers to ensure that any recommendations that they make actually lead to reform, because too many reports just sit on ministers’ shelves.
Too many projects have gone massively over budget. The new ferries were supposed to cost less than £100 million; the bill is now sitting at more than £400 million. What could the Government have done with that extra £300 million? What extra public services could it have supported with it? HMP Glasgow is 10 times over budget—the figure sits at nearly £1 billion of spending. We can argue about the reasons why that has happened, but think of the money that has been wasted on those inflationary costs. The A9 is already more than £100 million over budget. I suspect that that figure will rise massively, if it ever gets completed. We cannot blame all those costs on inflation, because had the projects been delivered on time—when inflation was incredibly low and money was cheap to borrow—it would not have mattered.
We need to improve Scotland’s productivity, which grew by only 1 per cent each year from 2008 to 2023. That is important because lack of economic activity affects how much money the Government has to spend. Taking more than £3 billion in additional tax revenues due to tax differentials north of the border has resulted in only just over £600 million of cash being available for the Government to spend. That is 20 per cent—20p in every extra pound that is paid by Scots. We have to look at that properly.
We also need to look at spend. The welfare budget is sitting at more than £6 billion and is due to rise to £9 billion. At the minute, it is 15 per cent of the entire budget, and it will rise. The health and social care budget is sitting at around 40 per cent of the entire budget. If we put those two areas together, 70 per cent of Scotland’s budget will be spent on two portfolios. Where does that leave education, transport, preventative healthcare and all the other measures? It is about time that we got people back into the workforce by supporting those who need it most.
The reality is that there is a £4.7 billion gap, productivity is lagging, and we are spending more than we are getting in income. That has to be addressed. We cannot talk, argue or borrow our way out of the problem. We will have to sit down as grown-ups in the room and agree a way out of it.
We move to the open debate, with back-bench speeches of up to four minutes.
15:20
My passion is the outcomes for Scottish children; that is, providing a positive future and ensuring an education that encourages knowledge and allows children to be children. What is essential to achieving such outcomes for our children? I would go as far as stating that, to achieve anything through a state-funded process, the robust health of our economy is essential, as it literally funds everything that we do.
The country is forecast to have a £4.7 billion funding gap by 2029-30, as highlighted by the Scottish Fiscal Commission. As our motion states,
“the Scottish Government continues to dismiss”
that as a reality. However, it is a reality, even if the Government refuses to recognise it. Making changes for the better comes from recognition and acceptance that there is a problem and actively taking steps to eradicate the issue. We have therefore requested measures in our motion. I will speak to the second of those measures, which is
“a strategy to cap welfare spending growth, which is currently consuming a significant amount of resource growth, and create jobs by moving more people into work through reskilling and apprenticeships”.
In Scotland, we carry too high a number of people who are economically inactive, and not enough is being done to fix that. I return, as I have many times, to parental employment. A paper was produced by the Social Justice and Social Security Committee containing answers to some of the issues that I have mentioned. What issues are preventing people from gaining continuing and meaningful employment? Too many people of working age are being let down by the basics of insufficient transport, lack of flexible childcare and restrictions in reskilling. In many cases, those three issues converge, making it completely impossible for people to come off welfare and support themselves.
When it comes to transport, bus services are restricted and restrictive. I have previously spoken about the fully subscribed Fife College course that had to be cancelled due to a timetable change by the local bus company. It does not take a genius to work out that, if people cannot get to work or college, they cannot participate.
I turn to childcare. I know that the Deputy First Minister shares my frustration on that issue. Childcare in Scotland is meant to ensure that the funding follows the child, but that is simply not true. We have disparity in the offer across 32 councils. There are councils barring children from outwith their local authority area, which restricts where and when parents work. The Scottish Government is forcing parents to choose between family and work, and that is unacceptable.
On reskilling, college places have been drastically underfunded by the SNP Government. People might get a college place, but they will be hindered by a lack of ability to get to college and by the inflexibility around their childcare offering.
It is essential that we grow our economy. In that way, we will increase the tax base and reduce the tax burden on the ever-squeezed middle earners, who are more than frustrated. Over the summer, I talked to many people who are, quite simply, hacked off with this Government. They pay more in taxes, have swallowed massive council tax rises and are facing exactly the same next year. They have been promised cheaper, greener fuel bills, but prices continue to rise. Frankly, there is simply too much month at the end of the money for far too many Scots. As politicians, we ignore them at our peril.
15:23
Once again, we are having a debate in which the Opposition says that Scotland is too wee, too poor and too stupid to be independent. In this shameful, unfair union, Scotland is too wee in population terms, Scotland is too poor and Scotland would be incredibly stupid to stay in the union any longer. When Scotland was dragged into this union, our population was just over one fifth of that of England. Now, three centuries later, the population of Scotland is less than a tenth of that of England. That is the true union dividend—or rather, loss, which is what it really is.
The Tories are indeed correct: Scotland is too wee, and all thanks to their beloved union. Their campaign against the people of Scotland is still on-going. Scotland is in desperate need of new families and more children. What is the Westminster answer? Austerity, which makes people think twice about having more kids. There is also the two-child cap. Imagine banning women from having children. Imagine punishing people for trying to grow their family. The Tories are truly the anti-family party, and Labour is no better.
It does not stop there. From Brexit, sending our young European workers fleeing, to the current pantomime of both Westminster parties dressing up in a vile parody of Farage—or, as one of his former teachers said, “fascist” Farage. It is almost as if Westminster wants the Scottish population simply to wither away, leaving nothing but a barren wasteland called North Britain.
The union loss does not stop there. The Tories have the temerity to mention the deficit. The day Scotland entered the union we did not have a single penny of debt to our name but, the morning after, we were saddled with a share of Britain’s—or should that be England’s—£15 million debt pile. And, boy oh boy, did the British debt pile keep growing after that. Three centuries later, and the British national debt mountain now stands at £2.9 trillion. That is £41,572.17 of debt for every single man, woman and child. That is the true union loss: a mountain of debt racked up by Westminster in Scotland’s name. Yet again the Tories are correct: Scotland is too poor—at least, we are poor in the union, with that £41,572.17 of debt for every single person.
It is only getting worse. Starmer and Reeves, the Thatcher tribute act, have driven British debt repayments higher than even Liz Truss could manage. The union debt loss—not dividend—is truly the gift that keeps on giving. Yes: thanks to the union loss—not dividend—Scotland is currently too poor and too wee, and, yes, we would be stupid to stay in the union any longer. Now is the time for us to leave the sinking ship. Now is the time for independence because, with the powers of independence, we can grow our population, grow our economy and unshackle ourselves from the union debt loss—not dividend.
15:28
The title of the debate is “Improving Scotland’s Finances”. To do that, we need to produce an economic strategy, based on growth; to develop an industrial strategy; to address productivity; to rise to the challenge of the green industrial revolution; to be at the forefront of the technological changes that are required to address the climate challenge; and to recognise the changing demographics, with an ageing population and low birth rates.
We need to increase funding, but to do so in a way that does not increase taxes for working people, who are already worse off than they were in 2010, and who have suffered with austerity, wage stagnation after the financial crash, increased costs and higher interest rates. As has already been mentioned in the debate, the Scottish Fiscal Commission forecasts that Scotland faces a funding gap of roughly £4.7 billion a year by 2029-30. That is equivalent to 4 per cent of day-to-day spending and 23 per cent of the capital budget. Recent GERS figures highlight that Scotland’s public spending deficit now stands at more than £26 billion, or around 12 per cent of GDP.
Scotland’s finances are undoubtedly in a challenging state, but addressing the state of our public finances comes down to political choices. We can choose to protect public services, save jobs and invest in our communities, or we can repeat the failed experiment of austerity. The Scottish Government’s political choice, as set out in its medium-term financial strategy, appears to be one of further cuts to public services.
Public sector workers and public services should not pay the price for the Scottish Government’s mishandling of public finances, yet its plans for public sector reform will result in precisely that. There is still a lack of detail from ministers on what services will be subject to cuts and which jobs will be lost, but the Scottish Trades Union Congress has warned that up to 10,000 jobs could be lost.
Scotland has already lost more than 1,000 firefighters, 1,000 police officers and around 65,000 local government workers since 2006. Those are the very people who keep vital front-line and local services running. A loss of an additional 10,000 workers will undoubtedly have an impact on those, and on the delivery of wider public services, at a time when they are more needed than ever.
I would therefore be grateful if the minister could provide any detail about which services will be subject to cuts and job losses, and how they will deal with that deficit.
Will Katy Clark take an intervention?
The member is about to conclude.
I apologise, but I do not have time.
In its fiscal sustainability development plan, the Scottish Government outlined steps that it would seek to take on tax. One of those was for ministers to undertake engagement regarding the taxation of wealth and to publish a literature review on the subject. I would appreciate it if the minister could outline how that would work and, indeed, how work on land taxation more generally is progressing.
Ahead of the Scottish Government’s budget, I hope that ministers will engage seriously with unions, and those of us in the Parliament, on the issues that are being raised in today’s debate.
15:32
I will begin by repeating three of the key facts that have underpinned contributions to the debate so far.
Fact 1: by 2029-30, resource spending will be £2.6 billion above the available funds, and capital spending will be £2.1 billion above the available funds. Fact 2: social security payments in 2029-30 will rise to £8.8 billion from the current £6.8 billion in the current budget, which is a nearly 30 per cent increase in just four years. Fact 3: the economic performance gap is just over £1 billion.
It is little wonder, then, that the Scottish Fiscal Commission and other forecasters are warning of serious long-term fiscal unsustainability. The trouble is that, with current demographic trends and a high incidence of economic inactivity, plus the fact that the Scottish economy has been seriously lagging behind the UK economy for more than a decade, Scotland has not been creating the growth that it desperately needs to pay for an increasingly dependent population.
Will Liz Smith take an intervention?
I will not just now, minister. I will come back to you in a minute.
Further, the Scottish Government has not been focused on getting people back into work, broadening the tax base or prioritising economic growth.
The Government tells us that it is addressing the issue with public sector reform, a reduction in the public sector workforce and preventative measures to reduce long-term demand for welfare payments. As yet, we do not have the details.
Inside all of that, there was a really interesting admission from the Cabinet Secretary for Finance and Local Government at the Finance and Public Administration Committee last week, when she acknowledged that she was facing some tough decisions and that some areas of spending must be reined in. For example, in relation to free school meals, she said:
“We will not be able to roll out the universal offer as far as we had perhaps initially wanted to ... we have to prioritise those children who are most in need.”—[Official Report, Finance and Public Administration Committee, 2 September 2025; c 34.]
Finally, we have an admission from this Government that things have been spiralling out of control. Finally, it has been forced to admit that it cannot adopt the principle of universalism across the board, not just because universalism does not prioritise those who are most in need but because it is wholly unaffordable.
I hope that that is at last a sign that the Scottish Government has finally woken up to the folly of the years that it has spent in the pursuit of universalism, whether in relation to benefits, prescriptions, university tuition or whatever, because its current policies are serving only to make that big black hole much bigger.
I hope that that will also mean that we will finally address the widespread belief that it is the duty of the state to fix everything. That approach has clearly failed when it comes to the public finances, most especially in Scotland, where the rise in the number of benefit claimants is deeply worrying. It has also failed because it has allowed a dangerous claim culture to develop. Far too many people believe that they are unfit to work when they are not. That is not good for the Scottish economy, and it is not good for society, either.
Senior figures in the business community all say that Scotland is not performing nearly as well as it should be because there has been insufficient emphasis on growth and on creating better jobs. All along, they have watched the SNP Government prioritise the wrong things, which has detracted attention from policies that are proven to create growth. They want the Government—I know that the Deputy First Minister agrees with this—
Will Liz Smith give way?
I will come back to the minister in a minute.
They want there to be much better collaboration between the private and public sectors, and they want the Government to be serious about broadening the tax base, rather than taking an approach that is having detrimental impacts on our middle and higher earners.
I will take a quick intervention from the minister.
It will have to be incredibly quick.
I will rattle through some facts. Fact 4: we balance the budget every year. Fact 5: we have laid out such plans in the fiscal sustainability delivery plan. Fact 6—
We do not have time for this.
Fact 6 is that the business community does not believe the minister.
15:36
I want to thank the Tories for bringing the debate to the chamber, because it highlights exactly why the union does not work for Scotland and why only independence can deliver a brighter future for the nation and everyone who lives here.
Nothing at all will convince me of the case for the union. Economically, the UK is a basket case, from the financial crash and the lack of action against those who caused the problem in the first place to the fact—this is another fact—that Brexit is a disaster. Modelling by the National Institute of Economic and Social Research suggests that, in 2023, the UK economy was already 2.5 per cent smaller than it would have been if the UK has remained a member of the European Union, and it expects that figure to rise to 5.7 per cent by 2035. In Scotland, that equated to a cut in public revenues of around £2.3 billion in 2023.
Here is another fact. The short-lived Liz Truss-Kwasi Kwarteng mini-budget tanked the economy by taking out of it more than £40 billion. I am sure that we all remember the cheerleaders among the Scottish Tories urging the Scottish Government to follow Liz Truss’s lead. [Interruption.]
Please resume your seat, Mr McMillan. I will not have a cross-chamber conversation going on while a member has the floor. Please show some courtesy and respect, members.
I will repeat that point, just in case members could not hear it. We cannot forget about the cheerleaders among the Scottish Tories who urged the Scottish Government to follow Liz Truss’s budget. I am glad that the SNP Scottish Government rejected those Tory demands.
Sadly, the financial carnage that the Tories created—this is yet another fact—left a mess of huge proportions, and the UK Government that took over from them was always going to have a lot on its plate. I even agreed with Anas Sarwar—which is not something that I often do—when he said last June:
“I will not disagree when it comes to the carnage the Conservatives have imposed on this country, and the state of their public finances.”
The position that the Labour Government was left in was pretty similar to the one that Labour left the Tories in 2010. I am sure that we all remember the note that Liam Byrne left for them, in which he said:
“I am afraid there is no money.”
I turn to Labour’s amendment. It is true that Labour inherited a mess, but we all know that it has a sufficient majority in the Commons to fix it. However, the 18 months of misery and chaos that we have had under Keir Starmer’s Government has done nothing at all to instil any confidence in Labour’s handling of the economy—or anything else, for that matter.
Labour recognised that the country had had 14 years of austerity, which was clearly going to have an impact on public spending and delivery. Westminster austerity, whether Tory or Labour, does not stop at the border. It was made in Westminster for England, Northern Ireland, Scotland and Wales. When in opposition, Labour’s Wes Streeting said something that we can all agree on:
“all roads lead back to Westminster”.
He uttered those comments while trying to defend Labour’s running of the NHS in Wales. That was because of austerity. The uncomfortable truth for Labour is that the same austerity hammered the people living in Scotland as well.
Last year, Labour promised to cut fuel bills by £300. They have increased by nearly £200. Labour hammered employers with the national insurance contributions hike in its previous budget. Labour announced the cutting of the winter fuel payment, only to eventually roll back on it after outrage from the public. Labour went on an austerity journey with its welfare cuts that hurt those who need the help the most.
Will the member take an intervention?
The member is concluding.
Quite frankly, no matter which party’s Prime Minister resides in Downing Street, Scotland will always be hamstrung due to the limitations of devolution. That is why independence is essential for our future.
The financial forecasts that have been spoken about today are all under the current constitutional arrangements. Labour and the Conservatives have proved that they are not up to the job. That is why Scotland needs independence.
We move to closing speeches. I advise members that there is no time in hand and that therefore they should stick to their allotted speaking times.
15:40
I am glad that the Scottish Government amendment, which we intend to support, supports the taxation of wealth and mentions “a just transition”.
I point out to Scottish Government colleagues that we have the power in Scotland to tax the single largest type of wealth: land and property. The main way in which we do that—council tax—is also by far the most broken and unfair element of our tax system. The SNP has been promising to reform council tax for nearly 20 years, and it is time that it got on with it.
The council tax is based on property values from before the new Scottish Green leaders were even born. As a result, it is now completely broken. We would not tolerate most people paying the wrong rate of income tax, but that is exactly what has been allowed to happen for 34 years with council tax.
Will the member take an intervention?
Very briefly.
Ms Slater, will you support the next SNP budget if the SNP does not reform council tax?
Always speak through the chair.
I will not be in a position to say what our view on the next budget will be until we have seen it, but reform of council tax is very high on our agenda and will always be part of our conversation.
The current council tax system was a quick and dirty replacement for Thatcher’s hated poll tax. Everyone has agreed for years that it must be replaced completely. Despite that, the Scottish Government has lacked the courage to make that change. The wealthiest people in the most valuable houses are getting off with an absolute steal. They pay less than they should, while far more ordinary households pay much more. It may sound dry, but the council tax is crucial for funding schools, social care, bin collections and other local services. It should never have been allowed to become so completely broken. Those with the broadest shoulders and the biggest houses should be paying more than those less privileged to fund the local services that we all rely on.
The reform of local taxation is an opportunity to progress the Scottish Government’s already proposed policy of a carbon land tax. That would raise revenues by incentivising landowners of Scotland’s largest estates to reduce carbon emissions by restoring their degraded peatland and creating more woodland—both key tools to tackle the climate and nature crisis.
The Scottish Government is absolutely right about what more is possible in an independent Scotland. I ask that it sets the example by showing us what is possible, within the powers that we already have, to make Scotland greener and fairer.
15:43
In the contribution that we have just heard from Lorna Slater, there is an important point that speaks to the Government’s amendment. If the Government were at all serious about a wealth tax, it would have done exactly what Lorna Slater set out: it would have reformed council tax and non-domestic rates, because they are taxes on wealth. However, for 18 years, the Government has shown absolutely no interest or seriousness about doing either of those things. That exposes the Scottish Government for what it is.
This afternoon’s debate has been—somewhat predictably—frustrating, but, in a sense, quite helpful, because—
Will the member take an intervention?
I want to make some progress.
In a sense, what we have discovered is that the two parties that are across the chamber from mine are probably more similar than they care to remember. Both want us to have exceedingly short memories. The Conservatives want us to forget that, in 2022, their party caused the single most drastic one-day economic event in this country’s history since 1993—the previous time that they did it—resulting in the shortest career for a British Prime Minister in political history.
Likewise, when Ivan McKee gets to his feet and professes that the Scottish Government has balanced its budget every year that it has been in office, the SNP wants us to forget that, for the past three years, its Government has had to introduce emergency budget measures every September. I understand that, right now, meetings to look for savings are happening because the Government is concerned about the finances in this financial year.
More important, the debate was meant to be about the economy. Although the parties are similar, their mistakes are slightly different. The Conservatives want us to believe that we will cut our way to growth. That misunderstands the role of the state and public services in their interaction with the economy. The SNP wants us to believe that we can tax our way to growth, which is, to be frank, short-sighted.
Most important, both positions misunderstand how the Government should seek to use its money to support the economy in partnership. I was at a round table at the start of this week, at which we discovered that health tech businesses, rather than flourishing in Scotland with our £25 billion-plus expenditure in health, are having to leave this country in order to grow. That is the reality. Scottish Government expenditure, which is significant and growing, does not help to grow the economy; it forces companies out.
Michael Marra was absolutely right: there has been no acknowledgement of the £5.2 billion that has come forward from the UK Government since Labour was elected, nor of the £9 billion over the spending review. The SNP asks us to completely ignore the £2,500 per person that the Barnett formula provides us with. This is important. It is not about independence. The party opposite believes in full fiscal autonomy. That is now the SNP’s official position. Shona Robison and Angus Robertson have said it. The SNP needs to explain to us where the £14 billion—because that is the size of the fiscal transfer—would come from, either in growth or in additional taxation. We did not hear an answer.
Two parties in the chamber want us to forget their errors, their mistakes and the very real costs that they have passed on to every Scot in the country. That is why we need a change in direction—a Government that understands public expenditure, which will use it wisely and which understands that, to grow the economy, we do not cut public services but invest in them.
15:47
I am ever the optimist, so I will start with a few areas that I hope the Parliament can unite to commend.
In the past few weeks, a fascinating report from NatWest has confirmed that Scotland had one of the highest rates of start-ups in the UK in the first few months of this year. That is a testament to our investment in the infrastructure that supports start-ups and to the brilliant entrepreneurs.
A few weeks before that, our labour market statistics were some of the best in the UK.
Back in June, KPMG’s chief economist said:
“Scotland’s economy is well placed to strengthen in the months ahead, and if conditions improve as we expect, could give it a modest edge over the UK as a whole in 2026.”
A few weeks after that, Scottish businesses, supported by Scottish Enterprise, delivered their highest-ever level of planned international exports—an unprecedented £2.46 billion during the year to March, which was up by 20 per cent on the figure for the financial year 2023-24. In fact, the current price value of goods exports increased by 15 per cent from the pre-pandemic period while the rest of the UK experienced an increase of about 6 per cent.
As I have said in probably every economy speech since I came into my role, I live in hope that, aside from the politics, the parties in the chamber can join together to commend our brilliant businesses, ingenious entrepreneurs and very talented workers. It is tough out there, and people have covered some of the reasons why, but—my word—Scotland’s businesses are doing a brilliant job, whether they are in tech, manufacturing, life sciences or the food and drink sector. There is such a contrast between the doom and gloom that often characterises the Parliament’s discussions about the economy and the optimism and hope of our businesses and our industries. As Kevin Stewart said, we are certainly not “too wee” or “too stupid”. Our businesses and our workers prove that.
I very much appreciate those comments, but will Kate Forbes not reflect that we did not hear any of that in any of the preceding speeches from those on the SNP benches? They were all doom and gloom too, were they not?
I have not singled anyone out. The funny thing is that I think Daniel Johnson has tried to drive a wedge in an area where I hoped that all of the Parliament—those from all parties—could join together to commend.
There is no doubt that the cost of living remains extremely tough for people. I think that it was Katy Clark who talked about that—I ask members to forgive me if it was somebody else. Flatlining wages across the UK, which have not grown in line with inflation since 2008, have been really tough for people. The impact of Covid, combined with stubbornly high inflation and the catastrophe of the Truss budget, has been felt in real terms by households across the country, and it has also had an impact on public finances.
Although today’s debate is obviously just a bit of fun for some—the Tories—I am with Jamie Greene, because we need to take our public finances seriously. As we approach the next budget, the parties’ approaches to that budget will be on display. The Parliament has always been very quick to call for more spending and very slow to identify how to find it. I am old enough to remember when the Conservatives’ form of opposition to welfare support, when it was first being devolved, was to tell us to be more generous. Now they have very much changed their tune.
I want to touch on economic inactivity.
I reassure the Deputy First Minister that we are entirely serious about looking at the Fiscal Commission’s warnings about public finances. However, in 2023, the Scottish Government promised that it would reduce the size of the public sector workforce in Scotland. How is that going?
That cues me up nicely to talk about workforce. I thought that Roz McCall gave an absolutely brilliant speech—I hope that that does not ruin her credibility. She talked about the serious issue of economic inactivity, which we can all get behind. During the past few months in particular, I have convened a lot of work between employers, public and private employers and the third sector to look at how we resolve this. The Government has been quite good at helping people into work, but the question remains of how we keep people in work and break down the data, because this is not a homogenous group, especially after Covid, when a lot of people left the job market and have not returned for various reasons. I am keen to work on that issue on a cross-party basis.
As we look ahead to the Labour budget in November, which is being introduced at the last possible point because Labour has hedged itself in and has a crisis of confidence, the prospect for Scotland is either to wait and see what we will be given for another year, or for us to say that we have had enough of this. We have all the comparative advantages of other small, independent, advanced economies. We can be just as wealthy as them, but only as an independent country.
I call Stephen Kerr to close on behalf of the Scottish Conservatives.
15:53
I reinforce what Murdo Fraser said to the Deputy First Minister: the reason why the Scottish Conservatives brought the motion to Parliament for debate today is that this is a very serious situation. A former colleague who is now appearing in a different place said that we should have an adult conversation, and we should. However, in all honesty, could the Deputy First Minister or Ivan McKee possibly think that the speeches that we heard from their back benchers this afternoon were serious? They were hardly serious at all. It was like they were doing a stand-up routine—they were practically unhinged in the way that they conducted themselves and the arguments that they put before the chamber.
One of the most remarkable speeches that we heard today—there were a number from those on this side of the chamber—was from Liz Smith. I particularly liked her fact 6, which was that the business community knows exactly how it feels about how the Scottish Government is managing our public finances. Liz Smith talked about facts. A well-known Burns phrase that is often repeated from various places in the chamber is:
“Facts are chiels that winna ding.”
That is the whole problem for the SNP in this debate—the facts are the facts. For example, SNP members criticise the GERS report, but it is the Scottish Government that produced the report. It is their Government that says what it says. Those are the facts and they cannot be argued with.
We were only a few seconds into the debate before minister McKee was on his feet contesting something that Murdo Fraser had said. It might be a good exercise for minister McKee—and for all the Scottish ministers—to look in the bathroom mirror every morning, when they get up, and repeat to themselves 10 times,
“Facts are chiels that winna ding”,
because no matter how often they stand up and deny the facts, the facts will remain. They can move themselves to any position that they like and any fantasy that they wish to entertain, but the facts are the facts.
While I am on the theme of facts, let me address directly a comment that was made by Kevin Stewart. He said that the majority of the people of Scotland who do not want to break up the United Kingdom are too stupid. We should have that clipped and put on social media 24 hours a day. I tell him that the people of Scotland are not too stupid, and they know a good deal when they see it. Being part of the United Kingdom is a very good deal for Scotland, and I am very proud of that fact.
By the way, we are not banning women from having children—I have never heard such nonsense. That speech needs to be fed through some artificial intelligence somewhere to find out whether there is any logic or reason in it. I can tell Kevin Stewart for a fact that, frankly, his idea that we should be ashamed is far from the truth.
Will the member give way?
For entertainment purposes and no other reason, I will.
Mr Kerr is proud of the union, but is he proud of the £41,572.17 of debt for every man, woman and child that has been put in play by his beloved Westminster and the union?
The reason why we have those levels of debt might be the nonsense that has been spoken by Kevin Stewart and other members on his side of the chamber when it comes to more and more spending, more and more borrowing and more and more tax. That is the only answer that the parties on the left have to the problems that we face as a country—both Scotland and the UK—as we can see from the travesty of financial and economic mismanagement by Rachel Reeves and Keir Starmer.
There are many other things that I would like to say, but I want to pay compliments, as is right and proper, to my colleague Roz McCall. She spoke as a compassionate Conservative, and she spoke about the facts. There we go—we are back to facts again. I have reintroduced SNP members to facts. Roz McCall reminded us that the facts of economic life are conservative. That is the baseline of what we say in our motion. Members cannot run away from those realities. They might try to paint them a different colour—mainly yellow on this side and red on that side—but the reality is the reality. She spoke about knocking down the barriers that get in the way of people getting back to work, and I compliment her on her speech. It was practical conservatism spoken large in this chamber, as was Liz Smith’s speech, which I have already referenced. She talked about a dangerous claim culture. If we are going to have a grown-up conversation about the state of the public finances, we need to address the issues that Liz Smith rightly and properly raised in this debate.
I see that I am, sadly, running out of time. I have so much material courtesy of everyone who spoke in the debate, but particularly SNP members.
In all seriousness, Audit Scotland has repeatedly warned that runaway welfare costs, rising public sector pay and healthcare pressures are crowding out investment in education, policing and infrastructure. Those warnings are not political attacks; they are sober analysis from our independent auditors, and yet, instead of action from the Scottish Government, we get complacency.
I will conclude. The Scottish Conservatives’ motion calls for honesty and action, not spin and distraction. Message 1 is that we must control welfare growth and move people from dependency to dignity through work, skills and opportunity. Message 2 is that we must invest in productivity to grow the tax base and drive economic growth. Message 3 is that we should reform the public sector and public services—rather than tinkering at the edges—to cut waste and deliver value.
We must end vanity projects. We have had a few—
Mr Kerr, you will now need to conclude.
—in the first two weeks that we have been back in Parliament, including the nonsense paper on independence—
Mr Kerr, you now need to conclude.
Thank you—I conclude.
Thank you, Mr Kerr. That concludes the debate on improving Scotland’s finances. We need to protect the time for the second Scottish Conservatives debate, which is about to start.
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