Finance and Sustainable Growth
Local Government Funding
The local government funding formula was reviewed in 2009 by a joint Scottish Government and Convention of Scottish Local Authorities group. It concluded that the existing needs-based indicators were reasonable and generally fair, and they should be retained for 2011-12.
Following yesterday’s budget announcement, I am disappointed by the approach that has been taken by the Scottish Government, which continues to preside over the unfair distribution formula that has consistently consigned Aberdeen City Council and Aberdeenshire Council to the bottom of the funding league. In light of the further cuts that the councils have to face, it is clear that Scottish National Party ministers do not have any plans to address the situation and are happy to see the north-east being short-changed.
Question, please.
Can I give the cabinet secretary a final chance before the Holyrood election to take action to review the local government funding formula?
As I said in my original answer, the funding formula was reviewed by a joint group from local government and the Scottish Government. I appreciate that there are difficulties with distribution arrangements, but one of the key characteristics of any distribution formula is that the arrangements must be fair and evidence based. The evidence that underpins the distribution formula has been re-examined and retested in order to determine that it carries that characteristic of fairness. It reflects the base of indicators that take into account demography, deprivation, rurality, sparsity of population and island characteristics. All those factors were taken into account during the review.
Is it not the case that the Scottish Government’s approach to local government finance comes directly from the Tony Soprano school of negotiation, which involves the cabinet secretary saying to local government, “If you don’t do this, I will remove an enormous amount of your budget”? How does that fit with the cabinet secretary’s well-worn phrases about parity of esteem and respect for local government?
The Government’s approach to local government issues is to engage in a dialogue with local authorities, as it has done for some time, and to discuss how we can address the significant challenges that we all face in public services and financing those services. As a consequence of those discussions, the Government has reached agreement with local government and has made it clear that, if the terms of that agreement are delivered, a certain resource base will be available to local authorities. It is entirely up to those local authorities to determine whether they wish to access those resources to deliver policy commitments that we and local government believe to be in the interests of the people of Scotland. That is the basis of the arrangement at which we have arrived, and I hope that local government will respond positively to a financial settlement that no local authority could have expected the Government to deliver. The reduction in the local government budget, in the face of a much more severe reduction across the Scottish budget, is a very beneficial settlement for local government in Scotland, and I hope that it receives a positive response. If Mr Kerr can do anything to help to facilitate a positive response, I would be grateful indeed.
As Nanette Milne said, the differences in funding levels are iniquitous. Yesterday, the cabinet secretary said that he is determined to protect front-line council services as far as possible, but he did not say that he intends to do that only for about 80 per cent of councils. Six councils will receive less than 90 per cent of the Scottish average, with the two lowest being Aberdeen City Council and Aberdeenshire Council. When is the cabinet secretary going to start treating the citizens of the north-east fairly?
I will not repeat the points that I made to Nanette Milne; I think that Alison McInnes was here and heard my answer. The Government has taken a particular approach to local government finance in providing a rising share of the Scottish budget compared with what was provided by our predecessor Administration, which Alison McInnes supported. As a consequence, we have improved the amount of resources that are available to local authorities across Scotland.
Taxation Powers
Increasing the Parliament’s financial and economic powers is central to unlocking Scotland’s economic potential. The opportunity to create a more competitive tax regime would drive up investment, employment and economic growth. That, in turn, would increase tax revenues, allowing us to fund public services sustainably year after year. With greater financial responsibility we would have the opportunity to balance the pace and scale of fiscal consolidation with the need to safeguard the economic recovery. That would ensure that the United Kingdom Government’s austerity measures do not undermine the actions that we are taking to support jobs and businesses across Scotland.
I share the cabinet secretary’s view that Scotland should have increased taxation powers, but we also need the political will to use them in order to raise revenue to defend public services against the UK Government’s assault on the public sector. Will the cabinet secretary accept that those taxation powers are there right now for the taking, if he would only empower local councils? Local councils could raise higher bands on the council tax for very wealthy home owners, or they could be levying a land value tax, a hotel tax or a sales tax. Local authorities in other European countries have a range of taxation options. Will the cabinet secretary take the opportunity to empower local councils to raise their own revenue locally in order to defend the public services that all of us, in all political parties, say we want to maintain?
I agree with Mr Harvie that it is important to have financial arrangements in place to protect front-line services. That is precisely what my budget yesterday was designed to do.
I welcome the cabinet secretary’s confirmation in the budget statement yesterday that he will not use the Scottish Parliament’s tax-raising power, which is regressive and would hit only basic-rate taxpayers at a time when they are struggling. Does he agree that the Calman tax proposals that are on offer from the Opposition parties are also regressive, and that the Scottish Parliament needs powers that would allow it to set up a fair and progressive system of taxation that would not place a larger burden on basic-rate taxpayers, compared with people higher up the income scale?
I certainly agree with Christina McKelvie about the importance of the Parliament being equipped with the full range of financial and economic powers. There is a need for us to critically examine and consider the implications of the proposals that were contained in the Calman commission’s report which, judging from the analysis that my officials and I have undertaken, and as we have made clear publicly, would expose the public finances of Scotland to considerable volatility.
Yesterday, the cabinet secretary suggested a higher rate of tax for one sector in Scotland compared with the same sector in England. Has he conducted a business impact assessment on that measure?
The Government will set out the full details of its proposals in relation to the business rate proposition that I advanced in Parliament yesterday in good time to enable Parliament to consider them, along with any implications for the business community in Scotland.
This might come as something of a surprise to some Scottish National Party members, but the council tax freeze benefits the wealthiest home owners by putting £45 in their pockets annually at the expense of services in our communities.
It is not just the bankers’ mistakes that we are clearing up; we are also clearing up the mistakes of the previous Labour Government in the United Kingdom and clearing up from the decisions that the current UK Administration has taken.
Question 3 has been withdrawn.
Budget (Highlands and Islands)
Yesterday, the Scottish Government published a draft budget that, in the face of unprecedented cuts by the Westminster Government, prioritises our purpose of increasing sustainable economic growth. In that budget, we have protected spending on the national health service in Scotland and the share of the budget allocated to local authorities to help to maintain and continuously improve the services that are used by the people of Scotland, wherever they live.
In his post-budget deliberations relating to the Highlands and Islands, will the cabinet secretary guarantee that the £32 million construction contract that was previously given to Rok will go ahead? Will the retendering process be carried out as soon as possible? Will the cabinet secretary ensure that the subcontractors who are owed money from the contract are involved in completion of the work to avoid their losing money to Rok and then losing out on completion of the contracts?
I have every sympathy with the point that Mary Scanlon raises. Last week, I was at an event at which one of the contractors who have been affected by the collapse of Rok asked me a question about that issue. Mr Mather has been involved in extensive discussions about the matter, into the bargain.
High-speed Rail
I discussed high-speed rail directly with the Minister of State for Transport, Theresa Villiers MP, during a meeting on 4 November.
I thank the minister for that up-to-date report.
I believe that the inputs from many sources on the economic case, including from Glasgow and Edinburgh, supported by the analysis that was undertaken by Network Rail, are well understood. The challenge for all of us now is to ensure that the UK Government responds to that economic case, which adds huge value to proposals to create the HS2 line. We definitely see starting with the inclusion of Scotland as an economic proposition that is of great value.
Will the minister say what initial thoughts he has about what could be done in Scotland using his powers to begin advance preparation and, at least, do some of the thinking about how we might connect Scotland to the rest of the UK, which might cut the length of time that we might have to wait for the high-speed rail line to come to Scotland?
As members will be aware, Transport Scotland produced a report on that last year. It was part of the consultation that High Speed Two (HS2) Ltd conducted.
Planning Decisions (Impartiality)
Chartered town planners, including those who hold membership of the Royal Town Planning Institute, are required to act with the impartiality that is demanded by their professional code of conduct. Town planners who are civil servants also observe the high standards of impartiality that are required by the civil service code.
The minister will be aware that questions have been asked in the past about the wisdom of the Government chief planner’s actions in relation to the billionaire Trump’s development. Does the minister agree that Mr Mackinnon’s apparent support for the already controversial proposal from Murray Estates for development on green-belt land near Edinburgh airport raises further questions?
It might be appropriate to remind the member of the question that he asked me in oral questions on 9 September:
Business Rates (Angus)
The decision to match the English poundage rate will save Angus businesses an estimated £2.5 million in business rates in 2010-11.
On behalf of the business community of Angus, I thank the cabinet secretary for his answer. That saving will be replicated in businesses throughout Scotland, unlike under any transitional rates relief scheme, which would have meant, in effect, that smaller businesses were subsidising larger ones.
The point that Mr Welsh makes about the poundage rate is important. The Scottish Government chose to match the rate in England, which delivered the lowest poundage rate that there has ever been in Scotland. That is just one part of a £2.4 billion package of business rates relief that the Government will put in place as part of its support for the business community. An essential element of that package is the small business bonus scheme, which has been successful in protecting small businesses from the harsh effects of the economic downturn.
For clarity, will the cabinet secretary confirm that what might be called the Tesco tax—that is, increasing tax for large retail outlets—breaks his pledge to the Scottish business community that he would maintain parity of poundage rate between Scotland and England?
No, because the poundage rate is set at 40.7 per cent. If Mr Whitton had knowledge of the business rates regime, he would know that there are already supplements in place beyond that basic poundage rate, which were in place when the previous Administration was in office.
Members should try to phrase their supplementary questions so that they are supplementary to the question in the Business Bulletin.
I will try my best, Presiding Officer. Last year, the Government allowed businesses that were seeing an inflationary increase in their business rates to defer part of the payment for that. The inflation rate is now being set as the trigger point, so businesses will know the inflationary increase coming in for next April. Will the Scottish Government do the same as it did last June?
The Government will consider that issue in due course.
Urban Regeneration Companies
I have had discussions with ministerial colleagues about future funding for regeneration in the context of the 2011-12 draft Scottish budget. The Government will continue to support urban regeneration companies with priority investment in Clyde Gateway to support the delivery of the 2014 Commonwealth games. Support will, however, be reduced from previous years’ levels in the light of budgetary constraints, which will require a co-ordinated approach with URCs and their partners.
It is no doubt welcome that the funding for Clyde Gateway is to continue. As the cabinet secretary will be aware, three of the urban regeneration companies—at Clydebank, Inverclyde and Irvine Bay—impact severely on the region that I represent. Those three areas have traditionally shown—and, regrettably, continue to show—signs of structural market failure. Can the cabinet secretary give me any assurance about whether any of the URCs’ plans will require to be radically changed as a consequence of the statement that he has just made?
I acknowledge the work that is going on within the three urban regeneration companies in the region that Mr Finnie represents. Ministers and officials will have discussions with those companies in the context of funding their business plans, to ensure that they continue to make a positive impact on the regeneration agenda, which has attracted support in the relevant localities and is of significance in ensuring that better outcomes are delivered for the communities that are covered by those organisations.
Renewable Energy (Financial Incentives)
The Renewables Obligation (Scotland) Order 2009 encourages the generation of electricity from a wide range of renewable sources and offers the United Kingdom’s highest level of support for wave and tidal energy. The Scottish Government is providing a number of targeted grant funding schemes, including the £13 million wave and tidal energy: research, development and demonstration support—WATERS—fund. We have also provided £15.5 million over the past two years to support community renewables. Initiatives such as the Scottish low carbon investment conference and the recently announced £70 million national renewables infrastructure fund will stimulate significant levels of investment in Scotland’s renewable energy sector.
The minister will be aware of the recent difficulties of Skykon, which manufactured wind turbines in Kintyre. He will also be aware that the company received £2.4 million in regional selective assistance. Will that money be recouped so that it can be used to attract another manufacturer to the Kintyre site? That would protect jobs and ensure that we retained our turbine manufacturing base.
That potential exists. Meanwhile, Skykon is seeing whether it can be refinanced, which is entirely the right thing to do. The potential in the west coast and in Machrihanish and the potential of that plant and the people in it are monumental. The offshore wind that is there to be capitalised on will be there for many generations to come.
Following the discussion about financial incentives, can the minister tell us what percentage of Highlands and Islands Enterprise’s budget is expected to support the development of offshore renewables in this financial year and in the next?
I cannot give Rob Gibson an exact percentage, but I can tell him that HIE and Scottish Enterprise will be involved in the £70 million that we are putting behind the national renewables infrastructure fund and that HIE is very much aligned with renewables. Indeed, its former chief executive, Sandy Cumming, is now, in effect, our offshore renewables specialist and is driving that programme forward.
On my reading of yesterday’s draft budget, the energy line decreases by about 25 per cent, in real terms, in a single year. Will the minister explain to the chamber the implications of such a large hit? Why has energy been picked out for such a big hit in one year?
We are going through a transition to the private sector, along with Scottish Enterprise and HIE—as the member heard from my answer to Mr Gibson—being much more involved in energy.
Question 11 is withdrawn.
Business Promotion (Environmental Credentials)
Yes—there are lots of opportunities right across the Scottish economy for enterprises to use their environmental credentials to boost business, from improving resource and energy efficiency, which will increase resilience and sustainability and reduce overheads, to increasing market share and competitiveness, by reflecting sustainable business practices in marketing, branding and procurement processes.
Will the Scottish Government accept that abandoning the use of gross domestic product as the prime indicator of economic progress in favour of a measure that is more related to sustainability would send a clear message to the world about Scotland’s commitment to sustainable, responsible long-term policies?
The Scottish Government already uses a wide range of measures in addition to GDP to track economic progress. As the Government’s economic strategy set out, the Government’s purpose is to increase sustainable economic growth. Progress is measured through our purpose targets, which include targets for each of our desired characteristics of growth: solidarity and social equity; cohesion and regional equity; and sustainability and intergenerational equity. Those targets are further supplemented by the national outcome indicators that are set out in the national performance framework, which include a national indicator on the ecological footprint.
Does the minister agree that, in that context, there is scope for use to be made not just of ecology, but of the historical environment? Should tourism be encouraged across the wide range of our cultural background?
That is a compelling point. We are having a close dialogue with Historic Scotland and its new chief executive, Ruth Parsons, to effect such changes and developments.
Question 11 is withdrawn.
Youth Unemployment
Tackling youth unemployment remains a major priority for the Government. Our draft budget reflects that priority by protecting education maintenance allowance, guaranteeing existing levels of living costs support for students, safeguarding the number of core college and university places, and delivering 34,500 new training opportunities in Scotland.
Is the cabinet secretary aware that youth unemployment in East Renfrewshire, for example, has risen by a staggering 450 per cent over the past year and a half? Is he willing to work with other partners, including colleagues in the Labour Party team that has come up with a plan to commission 10,000 new jobs under a Scottish version of the future jobs fund, to commit to guarantee the provision of apprenticeship places for all 16 to 18-year-olds?
As Kenneth Macintosh knows, I am always happy to work with other parties on their policy propositions, particularly at this time of year. His front-bench team know that I will be happy to engage on those questions, as we have engaged in the past on the question of apprenticeships, on which we reached an agreed conclusion, after a somewhat convoluted journey, if I may describe it like that. I would be happy once again to engage in, I hope, a less convoluted journey to enable us to make progress on the serious issue that Mr Macintosh raises.
Budget (Central Scotland)
Yesterday, the Scottish Government published a draft budget that addresses the challenges that we face in the public finances. The priorities are promoting economic recovery, protecting public services and delivering progress on the low-carbon economy. As I said to Mary Scanlon earlier, within that, we have protected spending on the front-line national health service and local authority services that are used by the people of Scotland, wherever they live.
How will the £70 million change fund, allied to the reshaping care agenda that was announced in yesterday’s budget, directly benefit carers and their families in the region that I represent? How will the Scottish Executive seek to involve local carer organisations in the implementation? How, for example, does the Executive plan to ensure that the agreement with local authorities leads to the implementation of the carers and young carers strategies, while recognising what carers centres in Central Scotland and throughout the country can contribute to achieving that goal?
I acknowledge the interest that Margaret Mitchell has consistently expressed on the issue of carers. The provisions within the agreement that we have reached with local government make specific reference to the requirement to make progress on the carers strategy. That has been a point of substantial agreement between the Scottish Government and local government for some time.
Local Authority Budgets (Impact of United Kingdom Budget)
Questions arising from any changes in the funding that is provided to Scottish local authorities by the UK Government are matters for the UK Government.
Extra costs are clearly coming through from, for example, the reduction in funding for housing benefit administration costs, the increase in the Public Works Loan Board charges and the new carbon tax. I hope that the minister will take account of those things when he comes to make his final settlement with local authorities, which was signalled yesterday. Of course, that settlement represents significantly reduced expenditure by the Scottish Executive on local government. However, the deal with the Convention of Scottish Local Authorities also represents what I regard to be the final humiliation and emasculation of councils, which were once a proud and almost entirely independent group of organisations and are now reduced to being agents of the Government.
Can we have a question, Mr Peacock?
Will the cabinet secretary be adding anything to the grant settlement to cover the extra costs that are coming through from the UK Government, and will he publish his new definition of parity of esteem with local government?
First, I tell Peter Peacock that I will assume no responsibility for the implications of the United Kingdom Government’s financial decisions. UK ministers should be held to account for the decisions that they take, and if they take steps to pass on responsibilities directly to local authorities they should ensure that the appropriate funding is in place. They should certainly not leave it to the Scottish Government to pick up the pieces.
Local Authority Budgets (Impact of Scottish Budget)
The draft budget represents a very good deal for local government. Under our proposed settlement, the resource support that is available from the Scottish Government will fall by only 2.6 per cent in comparison with 2010-11. The average fall in resource budgets for non-protected areas of the Scottish Government in 2011-12 is 6.4 per cent.
I thank the cabinet secretary for the information that his answer contained, which I am sure will come as a huge relief to local authorities throughout the country, despite the previous questioner’s comments.
Nigel Don raises an important point. Not only is there a contrast between the settlement for local government and the non-protected areas in the Scottish Government, but the reductions in resource budgets in Scotland are very different from those in England. The average reduction in England is of the order of 7.1 per cent, in comparison with 2.6 per cent in Scotland. That is a very good deal for Scottish local government in anyone’s book.
National Renewables Infrastructure Fund
Having the right infrastructure around our ports is a critical step in ensuring that Scotland can benefit from the massive manufacturing jobs potential of renewable energy. In the absence of the fossil fuel levy funds being made available to support such developments, the Scottish Enterprise board, during its November budget planning session, recognised the national renewables infrastructure plan as a priority and approved a paper recommending that up to £70 million over four years be set aside to support it. Scottish Enterprise and Highlands and Islands Enterprise will work in partnership to deliver that fund. Decisions on competing priorities are matters for the enterprise agencies to determine.
The minister will accept that no member in the chamber disagrees with the importance of investing that £70 million in supporting our renewables infrastructure. However, there is concern that the £17 million that the fund will receive next year has been taken from the Scottish Enterprise and HIE budgets, which will impact on the job creation initiatives that those agencies are able to run. Will the minister give us more detail on what the impact of the change will be? Which projects will be lost as a result of transferring that money to the national renewables infrastructure fund?
I welcome Iain Smith’s recognition that the investment is important; it certainly is. However, the development of our renewables infrastructure is part of the complete economic system, therefore the investment will help every business in those areas and will help to rebalance them against other parts of the country as they tap in to the huge potential that renewables offer.
Does the minister believe that the harbours around the north-east, including Aberdeen, Peterhead and Dundee, have strong cases for funding from the national renewables infrastructure fund? Does he believe that that would provide a real boost to the renewables industry in the north-east of Scotland?
Yes indeed—there is enormous potential in the north-east. The boost will be material, and the industries—particularly the North Sea service industry—understand that. We are on the cusp of a new beginning in economic development and activity in the north-east.
Renewable Energy Enterprises (Fife)
The business gateway, led by Fife Council, delivers a full range of support for both new and existing businesses, including start-up training and information on financial support. Scottish Enterprise is working closely with the council to support new enterprises in the renewables sector and to identify and develop opportunities in the renewable energy supply chain, with a particular focus on activity at Fife energy park.
The minister will be aware of Shepherd Offshore’s recent announcement of investment in a project in my constituency, which will see a future focus on renewables. Does he welcome that investment? Will he confirm that the Government will do all that it can to support the project?
We welcome every investment and we will work with anybody and everybody to ensure that we move things forward. I can also tell Jim Tolson that we ran a particularly successful business gateway session in Glasgow just last week, where we had a very much wider community, as well as the business gateway, to provide support. I went to an event on the Wednesday where I met representatives of the Federation of Small Businesses in Fife who are looking to replicate that, which is heartening. There is a real opportunity to weave the company in question into that, and I think the member should be involved in it as well.