Autumn Budget Statement
We move to a statement by John Swinney, the Cabinet Secretary for Finance, Employment and Sustainable Growth, on the autumn budget statement. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions. Mr Swinney, you have 10 minutes.
14:40
I welcome this opportunity to update Parliament on how we intend to allocate the additional capital consequentials for 2012-13 and 2013-14 arising from the Chancellor of the Exchequer’s autumn statement of 5 December. I will not, at this stage, allocate all the additional funds that will be available for 2014-15. Parliament will be aware that the chancellor is planning a United Kingdom spending review in the first half of 2013, which is likely to impact on the overall budget that will be available to the Scottish Government in 2014-15. I wish to reflect on the outcome of the UK spending review before I allocate any additional capital consequentials for that year.
For this year and next, however, I am pressing ahead with quick decisions on capital allocations that will mean that we will get on with much-needed investment to support jobs and recovery in Scotland. In addition, I want to ensure that Parliament has the maximum opportunity to consider the changes ahead of the formal stages of the budget bill in January and early February. Our intention is to amend the budget bill to reflect the additions that I am setting out today.
We have welcomed the fact that the chancellor has, in part, listened to our message that capital investment is needed to stimulate the economy. We have taken a consistent approach to the need for additional capital spending to boost economic recovery, dating back to our calls to Alistair Darling in 2008 prior to the pre-budget report. This year, the Scottish Government has written eight times to the UK Government asking for an immediate capital stimulus to provide much-needed work to the Scottish construction sector and to boost local economies all over Scotland. In addition, we have twice written jointly with the other devolved Administrations. At a time when public sector investment is so crucial in encouraging economic recovery, additional capital funding would have been very welcome, had it come earlier.
Taking into account the budgetary impact of the chancellor’s autumn statement, we can now expect the Scottish Government’s capital budget to have fallen by around 26 per cent in real terms by 2014-15, compared with that of 2010-11. We have, where possible, added to the capital departmental expenditure limit that is provided in our spending review settlement. We are supplementing our capital programme through revenue-financed investment by switching from resource budgets and using capital receipts. Earlier this year, we were able in February to add to our capital budgets through capital consequentials from the 2011 autumn statement, and in June through a package including use of the fossil fuel levy funding. Now, I am able to announce further additions.
In November, we provided an updated list of shovel-ready projects worth £820 million that could begin construction by the end of 2013-14 if funding were to be made available. The additional funding that I am allocating today means that ministers can now give the go-ahead to some of those projects. Today, I announce the Government’s proposals for additional capital investment of around £190 million this year and next, starting with a combination of the consequentials from the autumn statement of £4.6 million in 2012-13 and £160.2 million in 2013-14.
In addition, due to the progress that has been made I am once again able to redirect contingency funds—funds that will not now be needed for the Forth replacement crossing project—which amount to a further £25 million this year. Some of the commitments that I make today will need continued investment into 2014-15, amounting to a further £15 million of investment to be funded in that financial year. In total, the programme that I am announcing today amounts to £205 million.
In deciding how to allocate the additional investment, our overriding concern has been to focus on projects that will have a significant jobs impact and which will be able to deliver quickly, and on projects that will reduce carbon emissions and help meet our climate change targets.
In September, the First Minister and the president of the Convention of Scottish Local Authorities wrote a joint letter to local authorities, encouraging them to consider how they could boost their own capital investment. We are now allocating to local authorities, for that purpose, £46 million of the consequentials, on the condition that they spend the additional funding on projects that are ready to be delivered and which are not already funded in their capital programmes for 2012-13 or 2013-14. A mechanism to provide assurance in that regard will be agreed with local government.
We will invest £21 million in transport in order to develop our cycling, ferries and canals infrastructure and to maintain our trunk road network, in line with our continued commitments to increasing active travel, to supporting our lifeline services, to encouraging regeneration along our canal network—which is now the responsibility of the Scottish Government—and to continuing to invest in our strategic network, all of which activity encourages connectivity and sustained growth.
More than £11 million will be invested in economic development projects, through our enterprise agencies, on a range of early-start projects, all of which will provide the foundations for economic growth in their respective areas.
There will be £22 million spent on regeneration projects in Dalmarnock in Glasgow, Irvine and Ardrossan, including the development of highly energy-efficient office space in key locations, to attract inward investors to Scotland.
We will invest £10 million in our justice system, including the Scottish Court Service’s estate. We noted the Justice Committee’s concerns about the maintenance backlog that is associated with the Scottish Court Service estate, so we will invest to address immediate investment needs, maintenance across the historic court estate and improved energy efficiency.
More than £7 million will be spent in rural, environment and tourism projects, through the Forestry Commission, the national parks and VisitScotland. Investment in forestry will include work on long-distance paths, which will bring recreational and tourism benefits during this year of natural Scotland. We will also provide fresh investment for VisitScotland’s network of visitor information centres in order to ensure a high standard of provision for our visitors in the run-up to and during 2014, when Scotland welcomes the world with the Commonwealth games, the Ryder cup and our next year of homecoming.
Nearly £7 million will be allocated to culture and heritage projects, through the National Theatre of Scotland, Historic Scotland, National Museums of Scotland and Creative Scotland, to improve cultural venues and maintain the existing culture and heritage estate.
There will be £10 million allocated to maintain our health estate. Investment will be targeted to tackle further the maintenance backlog that was identified in the report “State of the NHSScotland Estate 2011”, which was published in February 2012.
There will be investment of nearly £20 million in further and higher education projects. That investment will enable us to support the development of the Roslin international centre for livestock improvement, which is at the cutting edge of collaborative academic development; to address pressing maintenance needs in the college estate; and to accelerate progress on the proposed Kilbeg development on Skye, which involves Sabhal Mòr Ostaig and will ensure that the college continues to be a source of employment and economic and cultural regeneration in an area of low population. There will also be investment to allow the Gaelic education sector to expand, where there is pressure for growth.
One of our highest priorities is action on housing, which is why the Government is allocating a further £50 million to affordable housing. This is our fourth tranche of additional funding for housing this year; additions were also made in February, June and September. The Government has therefore allocated nearly £200 million of extra funding to housing this year, thereby demonstrating that where it has an opportunity to invest it does exactly that. The investment will not only increase the supply of affordable housing and social rented homes, but will support our construction sector, help to create jobs and stimulate economic growth.
A significant proportion of this investment will commence in this financial year, with the majority of projects starting construction in the first half of 2013-14. Taken together, the proposals will create jobs, boost the economy and bring lasting improvements to Scotland’s asset base. I have made available at the back of the chamber a table that sets out the profile of investments. We will work with the organisations involved to provide more detail of individual projects over the coming weeks.
The changes that I am announcing today, which will deliver a building boom for Scotland, will be reflected in the forthcoming budget bill. I will welcome debate about the proposals as part of the budget process in the new year.
The cabinet secretary will now take questions on the issues that have been raised in his statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business.
I thank the cabinet secretary for the advance copy of his statement.
Everyone likes to play Santa at Christmas, and I have no doubt that everyone who has been named today and who has been shouting up the cabinet secretary’s chimney will be pleased to hear his news. Perhaps it is less clear what the impact of the decisions will be on the Scottish economy.
There has been concern about exactly how shovel-ready the Scottish Government’s list of projects is. The cabinet secretary described his projects as ones
“that could begin construction by the end of 2013-14”.
They do not sound all that shovel-ready to me. When does the cabinet secretary expect to see the first shovel in the ground? Can he guarantee that all the projects that he has outlined will be under way by this time next year?
A guide to the criteria that the Scottish Government will use to measure the success of its economic policy is also missing from the statement. Each project may be very worthy in its own right, but it is difficult to get a sense of exactly how many jobs will be created and how the economy will grow as a result of the investment. How will the cabinet secretary ensure that the funding secures maximum advantage to the Scottish economy and avoids the procurement disasters of the Forth replacement crossing process? Specifically, can he tell members whether he is insisting on contracts going to local Scottish small businesses, whether there will be guarantees on the number of jobs that will be generated or secured and on the apprenticeships that are awarded—
You really need to end now, Mr Macintosh.
Will the cabinet secretary include tax transparency, union recognition and the living wage among his criteria?
On the impact on the economy and the expectations of employment creation, my estimate is that the investment that I have announced today will support approximately 2,000 jobs across Scotland. I am not sure which statement Mr Macintosh was listening to, but I said:
“A significant proportion of this investment will commence in this financial year”—
that is, in 2012-13—
“with the majority of projects”—
So, that is an admission that they will all be shovel ready.
The minority of money is available this year.
I said:
“A significant proportion of this investment will commence in this financial year, with the majority of projects starting construction in the first half of 2013-14.”
In answer to Mr Macintosh’s question about whether all the projects will be under way in a year’s time, that will be halfway through 2013-14, which is precisely what I said in my statement.
On the question about the Forth replacement crossing procurement arrangements, the effectiveness of those arrangements has resulted in the release of an extra £25 million of resources which are to be deployed on other capital projects. That is because the Scottish Government undertook an effective and powerful procurement process on the Forth replacement crossing, which is keeping costs under control and delivering economic benefits to others. In his peroration—if I can call it that; it certainly was not a question—Mr Macintosh invited me to break every single procurement rule that I am obliged by law to follow. If the Labour Party is now resorting to trying to get a soundbite out of suggesting that the Government should break the law, Mr Macintosh should think again.
I thank the cabinet secretary for the advance copy of his statement and for acknowledging on the record that the money that was given by the UK Treasury, which was announced two weeks ago,
“will deliver a building boom for Scotland”.
However, what matters most for our construction industry is when the shovels will go in the ground, not when a project is announced or, indeed, reannounced, as happens in many cases. Will the cabinet secretary publish exactly in which month each of the projects that have been announced today will start on site? [Interruption.] Members on the Scottish National Party back benches may mutter, but we have heard big announcements about non-profit-distributing projects, but it turns out that only a tiny fraction of them will happen this year. That is why we are asking for a monthly breakdown.
Can the cabinet secretary also tell us which of the 43 projects on the shovel-ready list do not have planning permission?
I have no intention of publishing a monthly list to say when the projects will start. As Mr Brown well knows, the Government and its public agencies take forward a range of different capital interventions to deliver the capital programme. Some of the projects that I am announcing today, such as those on health maintenance and in the further and higher education sector, can—provided that the financial resources are available in the relevant financial year—start immediately.
The Government regularly updates the Public Audit Committee on progress on the capital budget and the capital programme, which is sufficient information for Parliament. We report annually on our deployment of the capital budget and we update the Finance Committee on the contents of the budget provision and the capital programme. In all those areas, the Government is fulfilling the need for a strong information flow to Parliament.
On Mr Brown’s final point about the condition and deliverability of projects, we have always made it clear that all the projects that are on our shovel-ready list are able to be delivered in 2013-14. That was, and remains, the position.
In the light of the UK Government’s extension of austerity to 2018, what risks for Scottish jobs are created by its continuing failure to fund fully the shovel-ready projects on the Scottish Government’s list or—alternatively—to provide Scotland with the normal powers of an independent country so that we can do it for ourselves?
Stewart Stevenson highlights one of my frustrations in relation to capital expenditure in recent years. The widely accepted view has been that more capital investment by the public sector would have helped to support the process of growth in the economy in a sustained way since 2008.
We warned, when the austerity programme started in 2010, that there would be a consequential impact on economic activity; we take no pleasure in seeing that our view has been vindicated. The fact that the United Kingdom Government has now put in place more capital investment indicates that it got that wrong in 2010, and our persistent pressure has delivered a solution that will assist in the process. It is clear that we could have, if we had had that resource earlier, made more of an impact on the economy. However, we will now deploy that resource effectively to try to support the process.
On Mr Stevenson’s final point, if Parliament had the full range of economic powers that any other independent country takes for granted, we could clearly make more of an impact.
Housing associations have said that the Scottish Government’s reduction in the housing association grant has prevented them from being able to build new homes—in particular, homes for people on the lowest incomes. Does today’s announcement mean that the grant will now increase?
No, it will not. The Government has been able—I have gone through the detail before with members of Parliament and the Labour Party on countless occasions—to build more houses, despite the fact that we have reduced the level of housing support grant, by driving up efficiency in the programme. We are achieving the objective—which I thought would have united us all—of building more homes.
The challenge for the Government is to maximise the efficiency of the building programmes in order to ensure that the money has the biggest impact on our society. Members should forgive me for not following the direction that Richard Baker suggests, but I am more interested in building as many affordable homes as I possibly can than I am in taking that route.
I welcome the cabinet secretary’s statement, in particular the announcement of Ardrossan’s share of the £22 million and the fact that 93 per cent of the £205 million will be spent within 15 months.
The chancellor’s partial U-turn still leaves Scotland—
Can we get a question, Mr Gibson?
The chancellor’s partial U-turn still leaves Scotland with a 26 per cent cut in its capital budget. Does the cabinet secretary agree that the UK Government should—as is suggested by people including Nobel laureate Joseph Stiglitz and Professor David Blanchflower—focus even more on capital investment and employment than on austerity and stagnation?
I have made no secret of the fact that I believe that the balance of the United Kingdom’s economic policy has been wrong. We have seen some welcome changes in the past few weeks, with the UK Government recognising the significance that must be attached to capital investment projects. We will pursue those and will continue to encourage the UK Government to take a more balanced view in its economic policy—especially given that the Office for Budget Responsibility has downgraded significantly the forecasts for economic growth in the United Kingdom. That evidence suggests that the UK Government should take a different course of action.
I thank the finance secretary for the advance copy of his statement. In particular, I welcome the very positive news about the extra finance for housing.
However, many of the shovel-ready projects that were included in his November list have been excluded today. I want to understand his decision-making process and why he prioritised the projects that he has announced today, rather than the A96, the A68 and the health centres in Aboyne, Inverurie and Stonehaven. Why are those projects less important than the ones that he has announced today?
The cabinet secretary has said that he is not going to allocate the full £394 million that has been allocated by the UK Government. However, surely, a project such as the A9 would benefit from having early notice of extra funding so that that essential project could be brought forward.
I will explain to Willie Rennie the rationale behind selection of projects. If we had put forward a list that totalled £820 million and we got only £360 million, there would be a bit of a mismatch between the two figures. [John Swinney has corrected this contribution. See end of report.] We cannot do everything.
I acknowledge Willie Rennie’s interest in the various projects that he mentioned. If, however, we had supported those projects, we would not have been able to support some of the other projects that we have announced today. A particular emphasis in the selection of projects has been on progressing projects that will assist us in meeting our obligations in reducing carbon emissions, and in achieving our climate change objectives. I would have thought that Mr Rennie would have significant sympathy with the Government in relation to those aims.
On our not allocating the full consequentials for 2014-15, I observed in my statement that the United Kingdom Government is going to go through a spending review from the start of 2013, so I want to reflect the consequences of that in the Scottish Government’s spending plans. That will require us to look with great care at the projects that we can support in the medium term, which is the correct planning environment in which to take things forward.
Nine more members want to ask a question of the cabinet secretary. Therefore, I would be much obliged if members could cut out any preamble and come straight to the question. If the cabinet secretary’s answers are as brief as possible, that too will be helpful.
I thank the cabinet secretary for prioritising investment in cycling infrastructure to the tune of £3.9 million. Does he agree that it is deluded, misguided and ideologically blinkered to think that we can cut capital investment in the middle of a recession and still have economic growth, and that if only this Parliament had the economic powers that it needs—
We get the point, Mr Eadie. Cabinet secretary.
—we would make our own decisions rather than be dependent on a UK chancellor?
I am glad that Mr Eadie has welcomed the additional investment in cycling, which comes on top of the other allocations that I made earlier in the year to support the move to more active travel. If we had a broader range of financial responsibilities, we could take a wider set of decisions in Scotland.
In his press release, the cabinet secretary identified £800 million of projects throughout Scotland that could get under way now. I presume that those have already been identified. Can he, therefore, advise how much of the £50 million that has been allocated to affordable housing in 2013-14 will be allocated for provision of new housing for social rent?
As I said in my statement, there will in due course be more detail on the projects that are to be taken forward in dialogue with stakeholders. The details that Elaine Murray has asked for will be set out by ministers very shortly.
I thank the cabinet secretary for his statement. Will the Scottish Government continue to look for additional money to fund capital projects?
The point that I made in response to Mr Gibson’s question indicated that, in the most recent autumn statement, we have seen a deterioration in the estimates of economic growth, so the evidence supports a continued expansion of capital investment. That will remain an argument that the Scottish Government makes to the United Kingdom Government to support economic recovery in Scotland.
In my area, people must accept a cut in their housing benefit because of a lack of one-bedroom properties. When I asked the Government for figures on such properties’ availability, I was told that no such figures are held centrally. How will the £50 million that has been announced today alleviate shortages of affordable one-bedroom homes and help households that are faced with the double whammy of welfare cuts from Westminster and housing cuts in the cabinet secretary’s spending review?
Clearly, local areas are best equipped to determine the balance of their housing requirements. I think that we would all accept that that is the right approach to take. In relation to the wider housing budget, I have made the point that the Government has allocated an additional £200 million of resources to the housing sector this year as a consequence of the various announcements that I have made, which I think will be broadly welcomed by the sector.
I understand, support and sympathise with Margaret McCulloch’s concern about welfare reform. I encourage her to join the rest of us in doing something about that by trying to acquire the powers that would ensure that our country has a fair and decent welfare system.
I welcome the cabinet secretary’s statement. Will the Scottish Government continue to press for a fuel duty regulator after the chancellor eventually listened to the case that was proposed by the Scottish National Party to scrap the increase in fuel duty?
I welcome the chancellor’s decision not to apply the increase in fuel duty. That is a recognition of the severe pressure on households which, of course, is mirrored by the actions that we have taken to relieve the financial pressure on households through the council tax freeze. The Government continues to press for a fuel duty regulator, which is a fair and sustainable approach.
I am happy to welcome the commitments to social housing and active travel, but did the cabinet secretary at least consider using some of the money to partly reverse his own revenue to capital shift, allowing him to match inflation for public sector pay in 2013-14 and see an end to real-terms pay cuts?
I acknowledge that, technically, the point that Mr Harvie makes is feasible, given that I could have relaxed the requirement on resource to capital transfers. The difficulty that I face is that I must ask public sector workers to work with us in dealing with the significant financial pressures that we face. My priority has been to maximise public sector employment as much as I can, given the constraints that have been applied to our budget. That will remain my stance. I acknowledge the pressure that public sector workers are experiencing because of pay constraints, but I remind Mr Harvie that the Government has, in its pay policy, provided for an increase in public sector pay, which has been reflected in settlements that are being offered by other parts of the public sector in Scotland.
Which of the five Dundee shovel-ready projects will go ahead? Will the cabinet secretary guarantee that the funding that he announced today will mean that Dundee shovel-ready projects will go ahead?
Further detail will be shared with Parliament by ministers in due course. Of course, a number of projects have emerged from the city of Dundee that need to be addressed, and I am sure that the city will benefit from the announcements that I have made today.
I remind Jenny Marra—I know how enthusiastic she is about complimenting the Government on the commitments that we make to the city of Dundee—that the waterfront development that is going ahead with tremendous activity at fantastic pace is, of course, financially supported by the Scottish Government. I know that she will want to put out a press release to compliment the Government about that.
The Government is also a strong financial supporter of the Victoria and Albert museum in Dundee—we made a big financial commitment to it. If my memory serves me right, I seem to remember one of Ms Marra’s press releases telling us that we would never support it in the first place.
The Government’s list of shovel-ready projects includes more than £300 million-worth of health projects, so why has health received only £10 million today, which is 1 per cent of the £1 billion that has been identified as being required for backlog maintenance?
As Mary Scanlon will know if she looks at all the funding arrangements that we have put in place for the health service in the round, the Government has given the health service strong financial support. The budget that is available to the health service has increased as a result of the passing on of the Barnett consequentials, as part of the budget settlement that I announced in September. We have given that commitment for the duration of the parliamentary session.
The Government will take a host of different opportunities to strengthen investment in maintenance in the health service. Back in February, I announced that we would strengthen our maintenance commitment to the health service, and the Government will continue to look for any opportunities that present themselves.
The three announcements that have been made during the past year of extra money for housing have not changed by one iota the Government’s previously announced objective of providing 6,000 affordable homes a year. How will today’s announcement of an extra £50 million change that target?
I remind Mr Chisholm that shortly before the spending review in 2011 a number of stakeholders said that the Government would have to allocate about £610 million to deliver our commitment to build 30,000 affordable homes over a five-year period. We had gone beyond that level of funding, and we have gone further beyond it with the additional resources that I have announced today. Therefore, I am very confident that the Government’s commitment on housing will be fulfilled. As a consequence of the four announcements that I have made during this calendar year, we have increased the housing budget by £200 million, which I think will be welcomed by the sector.