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Chamber and committees

Meeting of the Parliament [Draft]

Meeting date: Wednesday, November 20, 2024


Contents


National Insurance Increase (Impact on Public Services)

The Deputy Presiding Officer (Annabelle Ewing)

The next item of business is a debate on motion S6M-15529, in the name of Neil Gray, on the impact of the national insurance increase on public services. I invite members who wish to participate in the debate to press their request-to-speak buttons.

15:15  

The Cabinet Secretary for Health and Social Care (Neil Gray)

During the recent United Kingdom general election, we highlighted the real and pressing challenges in United Kingdom public finances. At the time, those challenges were largely dismissed by the Labour Party. Rachel Reeves said:

“I am under no illusion about the scale of the challenge we face”

and

“we don’t need higher taxes”.

Although I have a degree of sympathy for the Chancellor of the Exchequer with regard to the challenges that she inherited, Labour has not chosen to meet those challenges by looking to those with the broadest shoulders, as we called for. Instead, Labour has delivered a hike to employer national insurance contributions, without, it would appear, first considering the impact that that would have. Rather than a progressive approach, Labour has chosen a regressive tax on employment. That approach was in line with Labour not realising the consequence that was first seen in July in relation to the winter fuel payments, where, without any consultation with the Scottish Government, Labour decided to cut the funding for that vital benefit to Scottish pensioners.

Crucially, the Chancellor of the Exchequer has not committed to fully reimbursing the costs of the increase to those providing public services. Those costs will be challenging for the Scottish Government to bear. We expect the uplift next year to the Scottish Government’s overall resource funding position to be only around 1 per cent in real terms, before national insurance contribution consequentials. In short, if the UK Government does not fully reimburse those costs, there will be a significant detrimental impact on the delivery of public services.

Alex Cole-Hamilton (Edinburgh Western) (LD)

Does the cabinet secretary recognise that there is not only an increase in the percentage of employer national insurance contributions but a decrease in the annual earnings threshold, which will sweep far more workers into the category of workers for whom employers must pay national insurance, which will increase the bill to employers? That is of particular importance with regard to care home providers. We have seen a mass exodus of providers from the market in the Highlands already, and the change will only accelerate the problem.

Neil Gray

I agree with Alex Cole-Hamilton about the impact that the changes will have. This morning at Leith surgery, I heard the exact point that he was referencing about lower-paid workers being brought into that category, which will have a disproportionate impact on those who employ lower-paid workers. The point that he makes is absolutely right, which is why I hope that we can count on the support of the Liberal Democrats for our motion at decision time.

The decision to increase employer national insurance contributions will increase the direct costs that are faced by the Scottish public sector by well in excess of £500 million in 2025-26—costs that could not be foreseen prior to the budget just a few weeks ago. In the days that followed the announcement, it was evident that neither the chancellor nor her colleagues seemed to understand the impact of the decision, with the chancellor saying one thing and the Chief Secretary to the Treasury saying another. We heard that the costs had been reimbursed and also that the costs had not yet been reimbursed. At one point, the chief secretary claimed that many primary and social care providers would benefit from the more generous employment allowance introduced by the budget, but the employment allowance is not available to any contractor that does more than half their work in the public sector.

Now, just two weeks before our budget, we still do not know how much funding we will receive. In fact, we will not get formal confirmation until after the coming budget process has been concluded—perhaps as late as May.

Today, the Scottish Government has published its estimates of the direct costs to the Scottish public sector from that change, looking across our health and social care services, education providers, the third sector and others. We have shared those costs with the Treasury and have asked it for urgent clarification on the level of compensation that Scotland will receive. If the chancellor does not fund that in full and instead relies on the Barnett formula, it could be that, with costs of more than £500 million, at best £380 million would be forthcoming. Depending on what is reimbursed, that could be a cost to services of around £140 million to £200 million. If the reimbursement is less than £380 million, that will put the Scottish budget in an extremely difficult position.

Murdo Fraser (Mid Scotland and Fife) (Con)

I do not disagree with many of the points that the cabinet secretary has made. However, there is something missing from his speech, and from his motion, and that is any reference to the impact on the private sector, which provides the earnings and the taxes that support public services.

Has the Scottish Government, as part of the work that it is doing, undertaken any analysis of the impact of the national insurance increase on Scotland’s private sector?

Neil Gray

I appreciate the point that Murdo Fraser makes, because I think that the increase is regressive for growth, which is supposedly the UK Government’s number 1 priority. The UK Government’s own figures, from the Office for Budget Responsibility, demonstrate that the increase is going to have a negative impact on growth.

Later in my speech, I will come to some of the elements in the private sector that have a contractual relationship with public services, and Ivan McKee will touch in greater detail on the impact on the wider economy, which Murdo Fraser is right to point out.

The funding situation means that Scotland’s public services would pay the cost of the UK Government’s tax increase. It would mean that what the UK Government’s budget gives to Scotland with one hand, the chancellor will take away with the other.

As members know, NHS Scotland is our largest employer, with more than 180,000 staff working day in, day out to protect the nation’s wellbeing. My officials have estimated that the total direct costs to the national health service alone in 2025-26 will be almost £200 million as a result of the change.

We also estimate at this stage that there will be a further £40 million cost impact on independent contractors that provide vital NHS services, such as general practitioners, dentists, pharmacists and optometrists. That is not included in the £500 million, which is of acute concern to me. The chancellor has decided not to include any funding for independent contractors, which means not a penny for the GP practices on which our communities rely.

Dr Iain Morrison, chair of the Scottish general practitioners committee, recently told The Scotsman:

“These additional costs could threaten the viability of practices and lead to cutbacks in services—which ultimately means that it is patients who will suffer.”

I have also heard directly from Dr Morrison—and I will be meeting him later today—on his concerns regarding the national insurance uplift, and from professionals representing NHS dental, ophthalmic and pharmaceutical sectors. I am grateful for all their submissions.

Will the cabinet secretary give way?

Neil Gray

All are clear that failing to mitigate the cost pressures that are felt by contractors risks jobs and NHS service delivery now, and jeopardises our on-going reform and ambition to move to a preventative and community-based model of care in Scotland.

Do I have time in hand for an intervention, Deputy Presiding Officer?

Yes.

I give way to Mr Hoy.

Craig Hoy

Will the cabinet secretary concede that the cost pressures that GPs and dentists face were already in place as a result of decisions that were taken by his Government? It is the cumulative impact that is now effectively the straw that could break the camel’s back.

Neil Gray

No—I recognise that the uplift that we have given to GP services is challenging, but it aligns with the recommendations from the review body on doctors’ and dentists’ remuneration. I am looking at what more I can do as I look to shift the resource and the balance of care from secondary care services into primary and community care services, and I continue to engage with the British Medical Association and with Dr Morrison and others on that point.

The decision, however, strikes at the heart of our GP practices being able to employ an additional receptionist to cope with the additional lists in some areas, or an additional advanced nurse practitioner. Those are the staff who can help to deliver the services that we need in communities, and that is why the increase is such a regressive step.

Having to wait until May 2025 for confirmation is—as I heard when I was at Leith surgery this morning—too late for our independent contractors such as GPs. They will have to make hiring decisions now without knowing how much those staff will ultimately cost. Many of those contractors are ineligible for the employment allowance, ironically as a direct result of the work that they provide for the NHS, so they will bear the full brunt of the change. That is the case not only in Scotland, but across the UK. However, in Scotland, we recognise the importance of our independent contracting partners, even if Labour’s budget fails to do so.

While the impact on health and social care is profound, the changes to national insurance will impact on all areas of the public sector in Scotland. The Convention of Scottish Local Authorities estimates that the impact on local government will be £265 million, after accounting for the impact on teachers’ pay. Our police service will face increased costs of more than £25 million, our prison service will face an additional £6 million bill, and our Fire and Rescue Service will face further costs of more than £5 million.

Scotland’s universities and colleges will see cost increases of £60 million, and for those helping the most vulnerable in our communities, the additional costs will bring significant anxiety and growing concern after years of cost pressures posed by the pandemic and the ensuing cost of living crisis.

Social care services will be particularly penalised by the chancellor’s decisions, facing costs of more than £84 million—a move that Donald Macaskill, the chief executive of Scottish Care, whose event some of us were at on Friday, has called

“the straw that breaks the camel’s back”.

The Scottish Council for Voluntary Organisations has estimated that the third sector—that vital network of charities, social enterprises and grass-roots community groups that work to support our population’s wellbeing—will now have to send an additional £75 million to the UK Exchequer each year. That begs the question why, when faced with a need to increase revenue, the chancellor did not ask those with the broadest shoulders to contribute more. Why did she decide to balance the budget on the backs of charities, care providers, hospices and health services?

It is clear that although the financial impact to Scotland’s public sector is extensive—reaching more than £500 million—the wider non-financial costs to services and our economy might be far greater. Ivan McKee will speak about that in his closing speech.

Those challenges were avoidable. The Scottish Government will do everything that it can to protect its public services and the voluntary sector, but we cannot do that without the means. Had the UK Government chosen to discuss the possibility of raising employer national insurance contributions with the devolved Governments, we could have helped it to understand the challenges for Scotland. We are now, unfortunately, past that point.

The folly of Labour’s position in its amendment today is stark. The cost to the directly funded public sector is more than £500 million. It is even greater when we consider that the UK Government refuses to protect GPs, social care providers and others. The ridiculous and unsustainable folly of Labour’s position in Scotland is that the 1 per cent real-terms increase to our block grant is to pay for it, but the costs outweigh the available funds.

Once again, it all boils down to Scottish Labour asking Scottish public services to pay for a bad UK decision. What a shameful position it has got itself into, where it will sell out our Scottish public services to fill the UK Treasury’s coffers. This Government will not stand for it, and I ask the Parliament to support our motion to ensure that we send a message that we will not stand for the sell-out of our public services.

I move,

That the Parliament believes that the UK Government should fully reimburse the over £500 million costs of employer national insurance contributions to the delivery of public services in Scotland as a result of the UK Autumn Statement; recognises that, if the Chancellor of the Exchequer does not fully reimburse these costs, it will have a detrimental impact on the services that the people of Scotland rely on, and notes with concern the wider impact of the increase in employer national insurance contributions on the education, hospice and charitable sectors, not least for those who deliver services such as social care.

15:27  

Craig Hoy (South Scotland) (Con)

In politics, there are lies, damned lies, and then there are the election commitments and employment claims from Labour’s new Chancellor of the Exchequer. Rachel Reeves might or might not be an economist, but it is now crystal clear that she is supremely capable of being economical with the truth. It is clearer by the day that people, businesses and our public services will pay the ultimate price.

When it comes to national insurance, let us be clear about what the Labour Party’s manifesto said. It said:

“Labour will not increase taxes on working people, which is why we will not increase National Insurance”.

In recent weeks, Labour has argued that its commitment applied only to working people, not to employers. However, Rachel Reeves’s broken-promise budget—

Will Craig Hoy take an intervention?

I will. Perhaps Jackie Baillie can give us her interpretation.

Jackie Baillie

I genuinely find it quite extraordinary that 14 years of the Tories has just been wiped out at a stroke. What happened to Boris Johnson and Liz Truss, who crashed the economy and placed us in the position that we are now in? The Conservatives need to have some self-awareness.

Craig Hoy

Jackie Baillie is forgetting that inflation was falling, interest rates were falling and economic growth was on an upward path, which the OBR now says is under threat as a result of the Labour Party’s budget.

The devil is always in the detail of any chancellor’s statement, and we should be alert to that. That is priced into politics. However, this budget is not priced in because few, if any, chancellors have sought to raise tax by such a staggering amount in a single budget—£40 billion—and no chancellor has sought to do it in such an underhand way.

For the record, Labour’s manifesto did not state explicitly that the commitment applied only to employee national insurance—I accept that. However, we know that it was deliberately opaque. Paul Johnson, the director of the Institute for Fiscal Studies, reinforced that point when he stated publicly that increasing employer national insurance contributions is a

“straightforward breach of a manifesto commitment.”

Even if we give the UK Labour Government the benefit of the doubt—even Scottish Labour members will struggle to do that today—it remains clear that a rise in employer contributions still amounts to a tax on working people and on public service delivery.

The OBR forecasts that about three quarters of employer national insurance contributions will be passed on to employees, including those effectively delivering Scotland’s public services. Scotland’s public sector will be hit unduly hard because it is larger and because the workers in it are paid more than in the rest of the UK.

Today, we will hear that this £25 billion tax on jobs will hit many organisations that directly and indirectly deliver our public services. It could cost councils alone £265 million. It will hit our general practitioner surgeries, universities, care homes, the palliative care sector and independent nurseries, and a huge range of third sector organisations and private contractors now face severe financial pressures.

In short, the decision will cost jobs and result in lower real-terms wages, thereby reducing the overall amount that the measure will raise after its indirect consequences are accounted for.

The OBR also says that passing on employer national insurance contributions increases will contribute to a “sharp” slowdown in real household disposable income growth in 2026-27 and 2027-28—the growth that the UK Government said that its budget would deliver for Scotland. In other words, the increases will undermine growth here in Scotland and across the UK.

Therefore, it is no surprise that alarm bells are ringing across the public sector and in the many organisations delivering services on behalf of the state. Those concerned about the negative impact of all that come from a variety of well-respected groups in Scotland, all of which are now issuing similar stark warnings.

The chairman of the British Medical Association’s Scottish general practitioners committee, Dr Iain Morrison, said:

“We would call on both governments to urgently provide reassurances on additional funding and ensure GPs will not be forced to shoulder the burden of these extra employment costs at the expense of the care they will be able to provide to patients.”

It is increasingly clear that the impact will not just be on GPs but on the third sector and charities. Marie Curie warns that Scotland’s hospice sector began this year with a predicted £15 million budget deficit, and that was before NHS pay awards were announced. The organisation says that, without urgent support, further service cuts and vulnerable patients being turned away will become unavoidable, and it calls on ministers, including Scottish ministers to act now. It added:

“With the additional funding from the UK Government, the Scottish Government now has the opportunity and financial means to demonstrate its commitment to supporting essential palliative care services.”

Neil Gray

I recognise the challenges that Craig Hoy mentions. However, does he accept that, as we have set out, the resource block grant uplift is less than 1 per cent and therefore amounts to a very narrow window of opportunity to provide investment? Does he agree that it would be better to tackle the issue at source, and to ensure that the UK Government properly mitigates its proposals rather than the Scottish Government having to mitigate a bad UK decision once again?

Craig Hoy

I accept that in terms of the consequences of the increase to national insurance contributions, but perhaps the Scottish Government would have had more cash to play with at this point had it not agreed those inflation-busting public sector pay increases, which were not in its budget last year and have led to the black hole in finances that the additional £1.5 billion is now being used to fill.

It is not just health-related organisations that have expressed concern. The Scottish Council for Voluntary Organisations warns that the scale of additional costs put the sector’s essential services, jobs and organisations at risk.

Peter Mathieson of the University of Edinburgh, which has already announced the potential for job cuts, is warning that the small increase to tuition fees for students generates income that will be way below the significant increase in staff costs resulting from the national insurance increase. That is why organisations across Scotland, which are charged with delivering many of Scotland’s public services, are rightly concerned and are demanding that they are fully reimbursed for the additional employer national insurance costs.

However, I make this appeal to Scottish ministers: as they consider their own budget, they must pass on every single additional penny that they receive from the UK Government to cover national insurance payments. That includes to local government, where the Scottish Government has an appalling record of pocketing the cash and giving the Scottish local authorities the leftover.

Douglas Lumsden (North East Scotland) (Con)

This afternoon, I heard from Aberdeenshire Council that it has an extra £10.7 million of additional costs in relation to national insurance. In relation to the real living wage, there is an extra £1.5 million in costs, and in relation to the health and social care partnership, there is an extra £6.3 million. Because of the Labour autumn budget, Aberdeenshire Council will have to find an extra £18.5 million.

Mr Lumsden, that is a very long intervention.

Does the member agree—

Mr Hoy, I think that you have heard enough to respond to that. In doing so, I ask that you start to bring your remarks to a close.

Craig Hoy

I thank Douglas Lumsden for his very succinct intervention.

I fully accept that there are cost pressures in councils right across Scotland. The Scottish Government cannot absolve itself of blame there, either. It, too, has made poor financial decisions, wasting £2.7 billion of taxpayers’ money this term alone, while short-changing Scotland’s councils.

The Scottish Government has failed to grow the Scottish economy; it would have had an additional £600 million to spend this year alone had it done so.

It is now clear that, together, the Labour Party and the Scottish National Party have contributed to an environment—

Mr Hoy, you will have to conclude. Please move your amendment. Thank you.

—that threatens the very survival of public services across Scotland.

Mr Hoy, please conclude and move your amendment.

Craig Hoy

I conclude on that point.

I move amendment S6M-15529.2, to leave out from “should” to end and insert:

“increasing employer national insurance contributions will have a detrimental impact on all sectors of Scotland’s economy, including the public, private and voluntary sectors; further believes that it will harm the ability of the NHS in Scotland to deliver services and will undermine social care and third sector organisations involved in public sector delivery; recognises that the rise in employer national insurance contributions is a breach of the Labour Party’s manifesto promise, which stated that it will not increase national insurance; acknowledges that this tax rise on jobs will disproportionately impact Scotland due to a higher number of public sector workers and higher public sector pay levels; notes that the Scottish Government’s policy decisions have already increased the tax burden on hardworking people and businesses in Scotland; calls on the UK Government to reverse its increase to employer national insurance contributions, and further calls on the Scottish Government to use its Budget on 4 December 2024 to start the process of reversing the increased tax burden that it has imposed on Scotland’s economy.”

I call Jackie Baillie to speak to and move amendment S6M-15529.3.

15:36  

Jackie Baillie (Dumbarton) (Lab)

It is not often that the SNP Government holds a debate on any aspect of health, as it normally wants to run away from its own dismal record. However, if there is an opportunity to blame someone else, it is first in the queue.

What is puzzling—[Interruption.] What is genuinely puzzling is that the Scottish Government is still supposedly in discussion with the UK Government, and I have not heard that negotiations have ended. Perhaps more negotiation and less posturing would serve the people of Scotland much better.

I turn to the substance of the motion.

Will Jackie Baillie give way?

No, I have to make progress.

The Labour UK Government made a choice in the budget to protect working people and invest in public services. It had to fix 14 years of mess—

Will the member give way?

Jackie Baillie

No—the fact that you are loud does not mean that I will give way.

It had to fix 14 years of mess that it inherited from the previous Tory Government.

The budget keeps our promises to Scotland. It has ended the era of austerity, provides billions for investment in public services and prioritises economic growth. It is no secret that public services in Scotland are in crisis after years and years of cuts and mismanagement by the SNP Government. There has been repeated failure—

Will Jackie Baillie give way?

Jackie Baillie

—to reform our school system, and performance in international comparisons continues to decline. One in six Scots is on an NHS waiting list. I will give way to the cabinet secretary if he will tell me how he is going to fix that.

Neil Gray

The opportunity to fix that is made much harder by the decision on national insurance contributions.

The Labour amendment asks us to use the less than 1 per cent uplift to our resource budget to mitigate a bad UK Government decision. That is surely an unsustainable position for any party in the Scottish Parliament that has to defend Scottish public services.

Jackie Baillie

I did not hear a question in there, nor an explanation of why one in six Scots is on an NHS waiting list. NHS workers are struggling to treat patients in a system that is not facing up to the reality of an ageing population and doing so with equipment that is, frankly, years out of date. Hospices have been asking the SNP for help for almost two years. Third sector care providers have been warning about the crisis in social care for years, and the cabinet secretary has done nothing. Instead of listening to them and making a difference, the SNP has prioritised division and managed decline.

The Scottish Government has been given the largest increase in its budget in history, outside of the Covid years. It is now for the Government to decide how to deliver that increase to the front-line services that people depend on. There is an extra £789 million of funding for health and social care this year and an additional £1.72 billion for next year. I understand the concerns of those in the health and care sector, but I also understand that Scotland will receive additional money to help the public sector to manage the changes to national insurance. Of course, it will be for the Scottish Government to decide how that money is disbursed. The SNP can now decide whether it will give extra funding to hospices, GPs, dentists and care providers.

Will Jackie Baillie give way on that point?

Jackie Baillie

Just listen for a minute.

That is devolution, because the Scottish Government will get the money and can decide its priorities for allocation.

I know that Wes Streeting will allocate funding to hospices shortly, taking account of the pressures on their services, so why cannot Neil Gray do so now? The cabinet secretary could make a commitment now about how the money that he receives will be spent. Perhaps he can tell the Parliament whether he intends to use it to cover employer contributions for civil servants in St Andrew’s house or Victoria Quay. I am sure that members will want to be reminded that the civil service in Scotland has grown from 15,800 staff in 2007 to 26,900 in 2024. Will the cabinet secretary tell us now that any money for national insurance contributions will be spent on those who deliver health and social care services in our communities rather than on the army of civil servants?

Neil Gray

That is an appalling example of obfuscation from Jackie Baillie. She is suggesting nonsense about what has been projected, but the UK Government has said that it will not pass on support to GP contractors, social care providers or anybody who operates with a public contract in the health service. Therefore, we will not be expected to do that with the money that comes to us. That is an appalling example of a defence of an appalling position from the UK Government. Jackie Baillie surely has to realise that the chancellor must step in and ensure that there is proper mitigation for Scottish public services.

Jackie Baillie

I look forward to the debate but, frankly, that was not an intervention—it was much longer than that, so I hope that I will get some time back.

In the list that the Government has published, there is £10 million for Scottish Government employer national insurance contributions. The cabinet secretary could use that to fund the hospice movement, to fund GPs and to do things differently.

The Scottish Government has already received significant resources, but who trusts it to spend those wisely? We have 17 years of evidence that demonstrates that the Government is financially incompetent. I know that the people of Scotland will take a very dim view if the NHS and social care do not start to improve soon. The single biggest threat to Scotland’s NHS and social care is the SNP’s dangerous incompetence, and no amount of deflection and scaremongering can hide that.

The Chancellor of the Exchequer is considering the impact of the changes to employer national insurance contributions before they come into force in April. As a result of those changes, around half of all businesses that are liable for national insurance will pay the same or less than they were paying previously, and around 57,000 businesses in Scotland will pay nothing at all. Two people on the SNP benches, who I know will benefit, have set up companies to avoid paying tax and national insurance on their additional earnings. That hypocrisy is breathtaking.

The SNP must get on with the discussions with the UK Labour Government, listen to calls from stakeholders and use the money that it has to ensure that public service delivery is prioritised. While the SNP carps from the sidelines and mismanages Scotland’s budgets, Labour is delivering record levels of funding for Scotland, supporting the NHS and cleaning up the mess that the Tories left behind. Disappointingly, after 17 years, all that the SNP can do is posture and let Scotland down.

The Deputy Presiding Officer

I remind all members who are seeking to speak in the debate to ensure that they have pressed their request-to-speak button.

I call Ross Greer to open on—[Interruption.] Ms Baillie, did you move your amendment?

Jackie Baillie

I move amendment S6M-15529.3, to leave out from “believes” to end and insert:

“understands that the decisions taken by the Chancellor of the Exchequer in the Autumn Statement were necessary to fix the foundations of the economy and fund public services; welcomes the increase to the Scottish devolved budget of £1.5 billion in 2024-25 and £3.4 billion next year, which will deliver the highest ever devolved budget settlement in 2025-26; recognises that the Chancellor of the Exchequer has committed to providing funding to the public sector to support it with additional costs associated with changes to employer national insurance contributions, and calls on the Scottish Government to engage with organisations in the education, care and charitable sectors in the deployment of this additional funding, and to use its Budget to guarantee the sustainable delivery of frontline public services.”

Thank you.

I call Ross Greer to open on behalf of the Scottish Greens.

15:44  

Ross Greer (West Scotland) (Green)

Thank you, Deputy Presiding Officer. I certainly was not going to move that amendment.

If this morning’s polling did not confirm it, that contribution from Jackie Baillie shows just how rattled members of the Labour Party in Scotland are by the appalling decisions that their colleagues in the UK Government are taking.

I wanted to start on a positive, because the Greens believe that the UK Government should increase spending, and I welcome the principle behind the budget and the fact that spending has increased. I recognise that we need to invest and increase spending on public services to recover from 14 years of UK Conservative austerity.

I do not agree with all the Labour Government’s spending decisions—including on dead ends such as carbon capture and storage, for example—but that is for another debate. Employer national insurance contributions, however, had to be one of the worst places that it could have gone to raise additional revenue. That has been proven by the flood of emails into all our inboxes from concerned employers, workers and parents—I will come on to childcare in a moment.

As well as the decision itself, the process has been appalling. How do the Labour Party and the UK Government expect the Scottish Government, local councils, charities and third sector organisations to be able to set competent budgets when nobody knows what their plan is for mitigating the situation? No one yet knows what the consequentials for the Scottish Government will be. Jackie Baillie repeatedly mentioned hospices, but nobody yet knows what level of compensation hospices will receive.

The stakeholders that I have spoken to have had indications from the Treasury that Scotland is simply going to get a Barnett consequential share. What I did not hear from Jackie Baillie was any recognition of the fact that, because of the size of our public sector, there will be a huge shortfall in funding for Scotland.

I did not believe that the Labour Party wanted a smaller state until I heard Jackie Baillie’s speech, but it sounds as though she wants more civil servants to lose their jobs. I would be interested to hear her party leader clarify that when he is invited to speak to the Scottish Trades Union Congress in a few months’ time.

Kevin Stewart

We have heard Jackie Baillie say today that she wants civil servants to lose their jobs. She talked about the growth in the civil service in Scotland, but she did not talk about the fact that, because we now have greater powers, we require more folk to deliver those public services for people.

Ross Greer

I am grateful to Mr Stewart for that intervention. The most obvious example of the expansion that he talked about is Social Security Scotland, with payments such as the game-changing Scottish child payment lifting tens of thousands of children out of poverty. I am proud that we have more civil servants in Scotland delivering such measures.

COSLA has briefed us all, I am sure, over the past few weeks on the impact that the employer NI contribution increase will have on local authorities. It reckons that the direct cost to councils will be £265 million and that, just in adult social care, the additional cost for the services that it contracts out will be £85 million. That is before we get to the third sector and private providers in children’s social care and early learning and childcare. The cost is massive.

If we consider early learning and childcare, the cost for Government is significant, but the cost for parents and carers will be significant as well, because providers will pass on the increase through an increase in their fees. The Pregnant Then Screwed campaign has pointed out that it will lead to parents—mums, in particular—leaving the workforce to care for their children. That will have a wider negative economic impact on the tax base and our economy as a whole and on the businesses that they will leave at a time of existing labour shortages.

The Barnett consequential share alone would not take into account council arm’s-length external organisations—ALEOs—because there is a different landscape in Scotland compared with the situation in England. In addition, there is the £40 million question mark around dentistry, optometry and pharmacy, which the cabinet secretary mentioned. The Labour Party has not taken any of that into account, and it has not provided clarity to anyone.

Jackie Baillie and I both know the wonderful work that is done by Children’s Hospices Across Scotland at Robin house in Balloch. The hospice sector across the UK, including in England, still does not know whether it will be partially or fully compensated by the UK Government. I would welcome Jackie Baillie clarifying on behalf of the Labour Party whether the hospice sector and the palliative care sector in England are going to be fully compensated. If they are, I would argue for that to be directly passed on to Scotland. However, as yet, we have received absolutely no clarity, and those who provide end-of-life care at the most difficult point in a family’s life are unable to plan ahead for their next financial year. That is shocking. I cannot believe that we are here, just a few weeks into what was supposed to be a progressive change of Government at Westminster.

15:49  

Alex Cole-Hamilton (Edinburgh Western) (LD)

I am grateful for the opportunity to speak in the debate, because there is a great deal of concern out there. Let me put this plainly from the start—the decision of the chancellor, Rachel Reeves, to increase employer national insurance contributions without ensuring that GPs, care home providers and charitable organisations such as those in the hospice community, which we have just heard about from Ross Greer, are not compensated is a huge mistake that risks stretching primary care, social care and the voluntary sector to breaking point.

Even before those tax rises, GPs in my constituency had told me time and again how up against it they are right now, and patients feel that, too. There was a time when people could see their GP at the first time of asking, but our constituents now tell us that sometimes they have to phone dozens of times to get an appointment that is several weeks hence. Extra national insurance contributions will mean that many GP practices cannot follow through with recruitment plans that could have helped to ease the pressure.

Given that you are involved in budget conversations, will you say how the Liberal Democrats would fix the crisis in general practice?

Always speak through the chair.

Alex Cole-Hamilton

I am grateful for Sandesh Gulhane’s intervention. It will not surprise anyone who is watching the debate to know that, as we did in the general election campaign, the Lib Dems prioritise early access to primary care. That means ensuring that primary care has the resources that it needs to see people fast.

GPs are being punished by a flaw that is at the heart of the rules. They are being treated as private contractors, but their work is entirely in the public sector. They are not entitled to employment allowance, which would reduce their national insurance liability by up to £5,000 each year. The Institute of General Practice Management estimates that the rise will mean that the average GP surgery’s tax bill will go up by around £20,000 a year, which is equivalent to hundreds of appointments.

Will the member take an intervention?

I will, if I can have the time back.

Yes, you can.

Neil Gray

Alex Cole-Hamilton made an important point. We share an ambition to see more resource going into primary care. Does he recognise that, if there is not full mitigation of the cost of the national insurance uplift to the entire public sector, that will put at risk the Government’s ability to make further investments in primary care?

Alex Cole-Hamilton

The UK Government is not the sole arbiter of what the Scottish Government can put into primary care, but I recognise that that becomes all the harder if mitigation is not put in place.

It is not only GPs who are stuck between a rock and a hard place; other care providers will be forced to make cutbacks, too. Ross Greer spoke eloquently about the challenge for pharmacies and hospices. Many dental practices are struggling and might be forced to reduce their already limited NHS provision as a result, which would have serious consequences for already sparse patient access. Dental deserts have emerged across our country as a matter of course. Today, my party uncovered that the UK Government made no assessment of its tax hike on dentistry before making the change, and the British Dental Association has said that that is “reckless”.

Scotland’s social care sector is in crisis. It, too, will be hit hard. In the Highlands, we have already seen a rash of closures across care homes, which will be accelerated by the increase in employer NI contributions. I met care providers who are ashen faced about the landscape that they see. They pointed out that, as I said in my intervention on the cabinet secretary, the issue is not only the increase in the NI percentage but the decrease in the earnings threshold, which is drawing in more part-time workers. Already, thousands of people who are too frail to go home are left languishing in hospitals—sometimes for months—because of the lack of care home places or care packages in the community to receive them. Not only is that unbearable for patients, but it causes a delay—an interruption in flow—across our national health service. None of that has been helped by the Scottish National Party’s decision to plough its time and money into the so-called national care service, which nobody now wants and which the Scottish Government should scrap immediately.

The last thing that the sector needs is for the UK Government to heap on more financial pressure through staffing costs. Labour needs to rethink that, because it is giving with one hand to the NHS but taking away with the other. If it will not cancel its counterproductive tax on jobs—which this tax is—it should exempt GPs and care providers, so as not to make the health and social care crisis worse.

We move to the open debate.

15:54  

Kevin Stewart (Aberdeen Central) (SNP)

Let us be clear that we are in this mess because Labour tried to secure Tory votes by promising not to raise income tax, national insurance and VAT, despite knowing fine well about the multibillion-pound black hole in the Westminster budget that was left by the Tories. Labour broke its promise by raising employer national insurance contributions. It now claims that the public sector will be protected from the tax hike, but it will not give a straight answer as to who is a public sector worker and who is not.

Labour certainly cannot give a straight answer on whether the block grant to the Scottish Government will include compensation for the national insurance hike on public sector workers or whether it expects the Scottish Government to add the national insurance hike to the long list of Westminster mistakes that Scotland has to mitigate.

The Scottish budget will be published in two weeks, but the Cabinet Secretary for Finance and Local Government does not have answers to basic questions from Labour. We need to have some of those answers from Labour today. Will the block grant include additional compensation for the national insurance hike on public sector workers? Are GPs and their receptionists public sector workers? Will Labour reimburse them, or will it push its national insurance hike on hard-pressed GPs, knowing that the BMA has said that that will force general practices to close?

What about council workers? Will Labour reimburse the tax grab on them, or does it expect councils to sack teachers and scaffies to make up the difference? What about our colleges and universities? Job losses have already been announced.

Others also face Labour’s axe. Will Labour reimburse care workers? The Coalition of Care and Support Providers in Scotland has made it clear that, if Labour does not do so, the effect on the social care sector will be catastrophic. Sue Freeth, the chief executive of VSA in Aberdeen, has said that there will be

“a catastrophic impact on Scotland’s social care providers, including VSA.”

VSA looks after 2,000 people across 25 services in Aberdeen and the north-east of Scotland. The impact of the changes on VSA alone will mean that it will have to find up to £468,000. Sue Freeth has said:

“It is crucial that Westminster reverse this regressive policy for our sector, as this will cause Scotland to have an even greater crisis in public services.”

If the care system in Scotland has to bear the costs and then contracts or collapses because of Labour cuts, will the Labour Party pay for the hundreds of millions of pounds of extra NHS spending that will be required to treat frail older people in Scotland? Such questions must be answered.

One of the other hardest-hit sectors will be childcare. Mr Greer mentioned the thoughts of Pregnant Then Screwed, Scotland on all of this. Let us look at the quotes from parents. One parent said that they would likely have to leave their job in the NHS. That would be a double whammy.

The policy has been a huge mistake by the Labour Party. We need answers to all those questions. We need to see the cash from Rachel Reeves or else the public sector and public sector delivery in Scotland will suffer.

You need to conclude.

It is clear that the policy has been a big mistake. Labour needs to ensure that it resolves its error.

15:58  

Liz Smith (Mid Scotland and Fife) (Con)

Fifty prominent Scottish businessmen told the Prime Minister that the main threat to Britain’s economic recovery was putting a tax on jobs, which is exactly what increasing employer national insurance contributions is. That was back in 2010, when—if Jackie Baillie cares to remember—Gordon Brown and David Cameron were fighting it out for the keys to number 10 and, indeed, when the late Alex Salmond supported the Scottish businesses’ line of attack, because he feared the worst about the effects on the Scottish economy.

That tax on jobs, which is now in place thanks to the UK Labour Government, means that employers will have to fork out £900 extra for each employee on median average earnings and £770 extra for those on the minimum wage.

A knowledge of just the most basic economics tells us what will happen: costs will rise, jobs will be lost and prices will rise for consumers. That knowledge also tells us that the policy will make the hiring of staff and the creation of new jobs, especially in labour-intensive industries such as retail and hospitality, much more challenging, which, in turn, is likely to have a negative effect on economic growth—the very thing that we so desperately need.

Where is the logic in a policy that our universities, for example, have said will cost them more than £45 million? That is on top of the serious funding gap that Anton Muscatelli spoke about at the weekend when it comes to being the main driver of economic growth and innovation.

Labour’s rationale is to plug what it says is a £22 billion black hole—a statistic that we know is much disputed by economists. It wants to ensure that much money is available for investment in public services—especially schools and the national health service—and it has told us that there are other policies that will help business, so no one should get too worried.

The trouble is that any potential benefits are immediately countered by several significant negative externalities. As the chancellor was speaking, the UK’s disability charities, which provide such vital services to some of the most vulnerable in our society, were telling the Prime Minister that the national insurance rise will mean life-changing cuts. Robert Kilgour of Independent Care Homes Scotland also said that it was a “killer blow” to the sector. In other words, it is public sector good and private sector bad all over again. My colleague Sandesh Gulhane will expand on what that means for the medical profession. The concern about the tax hike on employer national insurance is that it is proving to be an existential threat to many businesses.

I will say a bit more about that in the context of the Scottish economy and the current predictions from the Scottish Fiscal Commission. I would not be a Conservative if I did not believe in lower taxes and a smaller state; I see that the public sector now accounts for 22 per cent of the workforce. I also believe in rewarding aspiration and supporting innovation and entrepreneurship. I therefore strongly believe that we need to develop a more effective working partnership between the public and private sectors, as has been done in many other European nations.

In Scottish National Party economic theory, the SNP expands on the social contract, which, according to the First Minister’s statements and other ministers’ speeches, is based on ensuring that the social infrastructure across the country is coherent and generous when it comes to supporting our communities and our most vulnerable groups. That principle is all well and good, but it cannot be put into practice unless there is sufficient money to sustain the delivery and quality of public services. Herein lies the dilemma for the SNP, because its big-state, high-tax economy is not producing the revenues that Scotland so desperately needs to create. It is therefore of little surprise that the combination of that problem, together with Labour’s national insurance hike, has led to businesses screaming from the rooftops. I do not blame them.

16:02  

Stuart McMillan (Greenock and Inverclyde) (SNP)

I remind members that I am the chair of Moving On Inverclyde, a local recovery service and third sector organisation.

We have already heard today that the uplift that is coming is less than 1 per cent. We have also heard Craig Hoy and the Conservatives criticise public sector workers getting wage rises, and Jackie Baillie admitting that we have had 14 years of austerity affecting the economy. That is quite interesting, given that, previously, those 14 years of austerity seemed to affect elsewhere in the UK, not Scotland.

Craig Hoy

Will the member draw a distinction between public sector workers at the front line—after all, we all support significant wage rises there when they are affordable—and the army of spin doctors and other backroom staff that has ballooned under the SNP, particularly since the Covid pandemic?

Stuart McMillan

That seems to run contrary to Mr Hoy’s comments earlier in the debate. However, as my colleague Kevin Stewart indicated after Ross Greer’s contribution, the fact is that the Scottish Parliament now has additional powers, and we need additional civil servants to deal with them. If Mr Hoy does not like that, that is entirely up to him.

Jackie Baillie, who I see is leaving the chamber, listed some UK budget actions in her contribution, so let me list some other actions—or inactions—in the UK budget. The budget failed to scrap the two-child benefit cap, which, according to the Child Poverty Action Group, affects 1.6 million children, with families losing up to £3,455 per child. It scrapped the universality of the winter fuel payment, which Labour’s own figures show could result in 4,000 excess deaths this winter. Estimates suggest that the cost to the NHS will be just shy of £1 billion, £100 million of which will be in Scotland.

The Women Against State Pension Inequality—the WASPI women—were once again forgotten about. As for the triple lock for pensioners, the chancellor claimed that state pensioners would get a £470 uplift, but, as money expert Martin Lewis has pointed out, that is “simply factually not true”.

Labour also targeted students by raising tuition fees in England and Wales, despite previously ruling out such action. There has also been the broken promise of lower energy bills, now that we know that energy costs are going up. We also cannot forget the fact that mortgages are now going up, too, thanks to Labour’s budget and Labour’s actions.

The list goes on, but those are just some examples, and they are indicative of the same misery that the Tories inflicted on us for 14 years. It was announced this morning that the Labour-led Inverclyde Council has launched funding to mitigate the winter fuel payment decision taken by its bosses at Westminster.

All of that is before we even get to Labour’s decision to increase national insurance contributions for employers. Although some might have agreed at the outset that it is reasonable to place that additional tax burden on employers, given the challenging financial situation that the UK finds itself in, it will have a knock-on effect on employees and customers, as we have already heard from colleagues. Labour is raiding the payroll accounts of charities, care homes and small businesses with this national insurance hike.

We also know about pharmacies, general practices and dental practices, hospices and housing associations—the list goes on. Indeed, in my constituency, the Ardgowan hospice and the Cloch Housing Association have raised with me directly the impact that the national insurance hike will have on their operations. We are talking about thousands of pounds being handed back to the UK Government in national insurance payments that we will not see any return on.

Therefore, I see no change from Labour; what I see is a consistent approach to what we had with the Tories in Westminster. I see an out-of-touch, red-and-blue Westminster establishment that is so far removed from reality that the only option for Scotland is for us to become an independent nation.

16:07  

The lack of insight from those on the Tory benches today is astounding. Let us be absolutely clear that 14 years of Tory chaos and decline have very much led us down the path to where we are today.

Will the member give way?

Carol Mochan

No, thanks—I want to make progress in my first minute.

Our public services are seen as an essential part of society by anyone who considers themselves part of the Labour and trade union movement. They are, to put it quite simply, part of our core belief system. Not only are they a testament to genuine, lasting politics, but they stand as a legacy of the serious transformational power that a Government can wield. I am proud to say that, when we look at our country’s history, we see that, at every level of government, that has been at its best when Labour is in power.

However, whether it be my party or other parties—

Will the member give way?

Carol Mochan

I want to make progress.

However, whether it be my party or other parties in Government, if there is a shared belief and a shared goal, we should all work together to get the best outcomes for our communities. My plea to the Scottish Government is to use that ability to be transformational. It can improve Scotland’s public services and give people a better future.

Neil Gray

How does Carol Mochan expect us to take forward transformational change on a 1 per cent real-terms uplift, if the majority of that is going to be spent paying down the Treasury costs of a national insurance uplift?

Carol Mochan

What I am saying is this: let us have a discussion about what is actually happening. I hope that, as I go through my speech, we will be able to have a think about that.

In today’s debate, I ask the Government—indeed, the cabinet secretary—to recognise the powers that we have here in Scotland, to acknowledge the increase in funding that is coming to Scotland, and to debate the transformation that we can have with a UK Labour Government that, by the admission of the Scottish Government, the cabinet secretary and others, is seeking to have a positive relationship with devolved Administrations. I repeat—a positive relationship with devolved Administrations. It is an important point.

I accept that the public, public services and the third sector rightly have an interest in the issue of how we fund public services. It is important that, if the Government of the day alters that funding, we provide people with clarity as to why those decisions have been made. People have a right to know, which is why we should be clear and transparent in all our Parliaments—and, of course, in this one.

As the Labour amendment indicates, this move is, in the long term, about improving public services and getting this country on a firm footing.

Will the member take an intervention?

Carol Mochan

I want to make progress.

In order to even get close to achieving that, however, we require a sustainable public sector that everyone can benefit from. That is an achievement in which, I must say, the Scottish Government has often seemed to lack interest, given its decisions in recent years. It is disappointing that the SNP’s posture in its motion, after 17 years in Government, is about the UK Government and not about an opportunity to discuss what we can do.

In the recent UK budget, Labour chose to protect working people, which meant asking the wealthiest—and business—to pay their fair share. That will not be an overnight process after more than a decade of devastating Tory austerity, but it is a solid step in the right direction. Scotland is set to receive an extra £3.4 billion in Treasury funding—our biggest settlement since devolution. I say that again: it is the biggest block grant in the history of devolution, and the SNP Government has a responsibility to discuss its delivery. What will it choose to do? Will it choose our front-line services?

I remind the chamber that, in that increased block grant, Labour has taken into account the effect on the public sector of the additional national insurance contributions that it will be subject to. That is responsible governance. The UK Government has made it clear that it will listen to the devolved Governments and take the liabilities that they face into account. That is an open and on-going discussion, in which I hope that the Scottish Government will engage constructively.

I see that the minister is laughing. I am seriously trying to ask—

Will the member give way?

Of course.

Ivan McKee

That is completely delusional—I just heard another member say that—when the reality is that, if the UK Government were serious about the matter, it would have done its homework, done the calculations, known what the numbers were and had that conversation before it made the announcement. It has not done that; it is back-pedalling and does not know what the numbers are. We know what the numbers are and what the impact is, so if the UK Government will not pay in full, that is not a negotiation. It is undercutting public services, which the member claims to care so much about.

I can give you the time back, Ms Mochan.

Carol Mochan

Thank you.

If only we could have constructive conversations in this chamber. That comment comes from a minister in a Government that has implemented an uncosted council tax freeze and which has put the public sector under enormous pressure. The same SNP that has drastically cut local government funds in its draft budget, which will put pressure on every part of our economy, and which has one in six Scots on a waiting list and a burgeoning two-tier healthcare system, does not allow us to discuss those things. I ask the minister and the Cabinet Secretary for Health and Social Care to take the time to do so.

I say again that Labour has chosen to protect working people, which means that it is asking those with the broadest shoulders to take on as much as they can. Those are the initial steps. We know that more discussion needs to be had, but I hope that the Scottish Government will take action and discuss with the UK Government what can be done and where to go to ensure that we have an excellent public service in Scotland.

I call Clare Adamson.

16:13  

Presiding Officer, can I check the timings?

The Deputy Presiding Officer

There has been some question about them as a result of the reallocation of timings among the Labour group. Ms Mochan was entitled to six minutes, but open-debate speakers are otherwise restricted to four minutes.

Clare Adamson

Thank you for clarifying that, Presiding Officer.

This afternoon, we had a Government statement on transitions for disabled people. As convener of the Education and Skills Committee in the previous session of the Parliament, I know how important it was to Johann Lamont to do something about transitions for disabled people, so I was delighted when Pam Duncan-Glancy continued that campaign in this session of the Parliament.

I asked the minister earlier this afternoon about how vital third sector organisations and social enterprises will be to delivering the ambitions for transitions for disabled people. One of the most heart-wrenching emails that I received this week about the national insurance hike was from Potential Living, a Scottish charity that was created by parents and carers in Motherwell in 1982, which provides care to people with additional support needs in the Motherwell, Wishaw and Bellshill areas. Potential Living, which employs nearly 200 people, is one of many charities in my area that are worried about the devastating impact that the hike will have on them.

I want to get to some fundamental truths in my contribution. My MSP colleagues on the Opposition benches will already know them. They are starting to accept a few truths that have long been denied. First, I do not believe that Labour MSPs and MPs support the hike in employers’ national insurance contributions. They know as well as I do that such a hike will be passed on to lower-income workers through earnings drag, redundancies, pay-rise squeezes and an increase in the cost of living as other organisations pass those costs on to consumers. It is a disproportionate hit that working people can ill afford during a cost of living crisis. Fixing the financial devastation that was left by the Tories should not be done on the backs of the people who are the most vulnerable and least able, whether that is cutting the winter fuel payment or the disproportionate impact on lower earners from the national insurance hike.

The second truth is that the UK Government made the move to avoid breaking a pre-election promise, but it is just semantics, because it will be passed on to working people. The third truth is that Labour MSPs received the same briefings that I did in advance of the debate—a litany of briefings from social enterprises, charities, social care providers, GPs and hospices, all warning of the calamitous impact that this regressive tax hike will have on their already stretched finances.

The fourth truth, as they have shown, is that Labour MSPs have to defend the hike because their London bosses have told them to. They know that it is wrong, and they know that charities, care providers and social enterprises, which do crucial work in all our communities, are not an acceptable target. This fiscal measure is not in line with their values, but they have to defend it.

The final truth, which has long been denied, is one that I hope the public are starting to appreciate. It does not matter whether it is the Tories or Labour or any other political entity that is imposing fiscal and economic policy in Scotland—what matters is that it is being imposed. There has been no consultation and, as the minister said, we have had no input and no say. The only way that we can fix that is with Scottish independence.

16:18  

Sandesh Gulhane (Glasgow) (Con)

I refer members to my entry in the register of members’ interests. I am a practising NHS GP.

Labour members’ speeches so far have been at best confused, trying to defend the indefensible. Although the stated intention of the Labour Government’s decision to hike employers’ national insurance contributions, which Scottish Labour robustly supports, is to fund national initiatives, its decision has far-reaching consequences. The decision will harm Scotland’s essential services, affecting our frail, elderly and vulnerable populations. As a doctor and MSP, I have seen first hand the damage that the policy will cause to health and social care services across our communities.

Let us start with the impact on primary care services. The hike places a staggering financial burden on general practices in Scotland. From conversations with colleagues, I know that the average practice now faces an additional £20,000 to £30,000 per year in staff costs due to the increase. Let that sink in—£20,000 to £30,000. Unlike NHS trusts, GP practices are not exempt from this increased tax on our local NHS. For GP practices, especially in rural areas, where we already face a chronic shortage of GPs, the added cost is unsustainable. The hike will make it even harder for patients to secure an appointment, and that is on Anas Sarwar’s watch.

Neil Gray

From the discussions that we have had, the member will know that my intention is to put more resources into primary care, partly for the reasons that he has set out. Does he recognise, as Alex Cole-Hamilton does, that the increase in national insurance payments will make it much harder to do that, especially if it is not fully funded by the UK Government?

Sandesh Gulhane

The change will make some GP practices unsustainable, let alone making it harder for them to operate.

Let us turn to dental services. Dentistry is another essential health service that will also be impacted by the tax on our local NHS. The British Dental Association has already highlighted the unsustainable funding model for NHS dentistry in Scotland. Labour’s tax attack threatens to force even more dental practitioners out of business, which will exacerbate Scotland’s dental health crisis. Without change, people across Scotland face a future in which even a routine dental appointment will become a luxury that they cannot access.

Let us consider care homes. Care homes play a critical role in supporting our ageing population. Private care homes can receive half of what a local authority pays itself to look after people, but Labour plans to shield local authority-managed care homes, not the whole sector. When care homes are forced to cut back, it is our elderly population that suffers.

Third sector organisations will also be hard hit. The voluntary sector is a significant employer that Carol Mochan has talked about wanting to support. It makes up 5 per cent of Scotland’s workforce and delivers vital public services, yet Labour’s appetite to tax knows no bounds. The Scottish Council for Voluntary Organisations estimates that Labour’s tax hike will cost the voluntary sector about £75 million. Charities and non-profit organisations provide crucial support to Scotland’s most vulnerable. In fact, Scottish Labour leader Anas Sarwar has praised charities in parliamentary motions, recognising their importance. Charities such as Prostate Cancer UK, the Royal Strathclyde Blindcraft Industries and Includem, which I have met, have told me that they do not know how they will cope with the tax grab. Perhaps Anas Sarwar might echo his Labour colleague Rhoda Grant and advise our charities to suck it up and get their “affairs in order”, but perhaps he should submit a motion apologising for his party’s cash grab on the third sector’s vital resources.

Labour’s hike in national insurance contributions is nothing short of a cash grab on the frail, the elderly and the vulnerable. The policy endangers primary care services, essential dental and health practices, care homes and third sector organisations that form a safety net for our communities. Scotland deserves better.

16:22  

Christine Grahame (Midlothian South, Tweeddale and Lauderdale) (SNP)

The Labour manifesto proposed to

“deliver economic stability with tough spending rules so that we can grow our economy and keep taxes, inflation and mortgages as low as possible.”

Then there was the notorious promise that working people would see no difference in their pay packets, because there would be no increase in income tax or national insurance for those “working people”, which, apparently, did not include any employer, no matter whether they ran a humble corner shop with a couple of employees.

What is the impact of increases in employers’ national insurance? More than 7,000 charities in Scotland employ more than 133,000 people, which is 5 per cent of Scotland’s workforce. As already referenced, the SCVO has estimated that it could cost the sector £75 million. The third sector cannot pass increased costs to service users, so cuts to services must follow. My inbox is full of briefings from charities, large and small, confirming that. For example, the Scottish Society for the Prevention of Cruelty to Animals—I declare an interest as I am a member—is set to lose £400,000 a year due to the measure, which is almost double the cost of feeding all the animals in its care across Scotland for one year.

In the health service, there are currently 35 GP practices in my constituency. The tax hike from the UK Government will impact their services and is unavoidable. Heaven knows what the additional cost will be to the NHS Borders across all its services, let alone the care sector.

Among local businesses, I have been advised that the wage bill of Borders Buses will rise by at least 6 per cent, which will restrict its investment in future recruitment and training and might force it to cut back on marginal services, potentially impacting the local communities that it serves.

In the retail sector, more than 80 businesses, including supermarkets such as Asda and Tesco, have written to Rachel Reeves, saying:

“For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale.

The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level. This will impact high streets and customers right across the country.”

All of that was predictable: higher prices for essentials, cutbacks and job losses. Indeed, the independent OBR has projected that approximately 50,000 jobs could be lost due to the increase in national insurance contributions.

Someone’s pay packet might look the same, but it certainly will not buy as much as it used to—that is if they still have a pay packet, having avoided losing their job due to one of those cutbacks. I ask Ms Mochan, how is that protecting working people?

I return to that Labour manifesto promise to

“grow our economy and keep taxes, inflation and mortgages as low as possible.”

How is that going? Is a predicted figure of 50,000 job losses growing the economy? We have higher prices and mortgage increases—is that keeping mortgages and inflation “as low as possible”?

We have a depressed economy, people are unable to afford essentials, and there are cuts to public services and charities. No wonder Jackie Baillie sounded so rattled, defending the indefensible. No wonder the Labour benches are practically empty. No wonder Labour had spare speaking slots. Shameful.

16:26  

Ash Regan (Edinburgh Eastern) (Alba)

“Make work pay,” Labour says while making employing people cost much more. Increasing the rate that employers pay and the threshold at which employers start paying is brutal for the public sector and other organisations with modest profits and large workforces that are trying to balance their budgets and plan for growth. The Scottish Government is correct in saying that, if the public sector is not reimbursed for the £500 million cost of employer national insurance contributions, the impact on employees and users of public services in Scotland will add further pain to already stretched sectors.

Due to Scotland having a higher percentage of its workers in the public sector workforce and more generous public sector pay deals, our public services will have disproportionate cost pressures compared with those in the rest of the UK. Scotland is yet again being forced to pay for UK Government mistakes—this time, those of the Labour Party.

Like UK Labour’s cloth-eared approach to means-testing pensioners’ winter fuel payments, the situation demonstrates a lack of care or a lack of understanding of Scotland’s different geography, demographics and economic make-up. Scottish Labour is now in the untenable position of pleading for Scottish votes on a platform of reversing its own Government’s budget positions. If Scottish Labour members are now feeling ignored by their Westminster colleagues, at least they know what Scotland feels like, being consistently ignored and having our resources exploited at the whims of Westminster.

Any funding that Labour claims it will give back to Scotland is, in fact, giving back a proportion of Scotland’s own contribution from our people and our resources, and, if there is no adequate reimbursement, the funding that is given to the public sector will be absorbed by the increased costs of employing its workforce. Labour’s drip-feed, “Will they, won’t they?” approach to mitigation is neither serious nor building any confidence across sectors that need consistency and confidence in order to do their workforce planning.

The urgency of the situation is starkly evident from commentators’ responses to Labour’s UK budget, with the IFS and industry sectors sounding the alarm on the immediate and long-term consequences of this anti-growth budget. The chancellor claims that she has presented a budget for growth, but that needs to be taken with the same large pinch of salt as Labour’s manifesto pledge that it would not increase national insurance. The increased fiscal burden on Scotland’s sizeable public sector will inevitably impact front-line services in healthcare, social care and education, through increased staffing costs. What options are there for balancing budgets other than reducing services, delaying projects, freezing recruitment or even cutting staff to offset increased employment costs?

Short-term thinking must end if we are to have an economy that works for all the people and the businesses in Scotland. A change in that approach is not just necessary but vital. Does Scottish Labour honestly believe in a UK Government solution for funding black holes in its own finances that involves passing the buck to Scottish public services, and to our voluntary sector and our small businesses, by dramatically increasing the cost of employing people? That is not good enough.

I support the Government’s motion, although I do not think that it goes far enough. Labour should rethink this economic vandalism.

16:31  

Ross Greer

Day after day, headlines are emerging that show the real-life impact of the change. For example, at the start of this week, the University of Edinburgh announced plans for redundancies. I would push back slightly on that particular institution, given that it has more than £1 billion in cash reserves and more than £2.7 billion in its overall reserves, and given that it has just awarded its principal a £20,000 pay rise. Nevertheless, there are other universities in Scotland with next to nothing in their reserves and with no ability to withstand the significant additional cost of the increase—a £40 million cost—across the sector. Our universities are major economic drivers in Scotland and they attract significant amounts of investment, so to threaten them in that way is monumentally counterproductive. The situation for our colleges is even worse, as they do not have the ability to build reserves and withstand shocks that universities—although only some universities—have.

As Sandesh Gulhane mentioned, the SCVO estimates the cost to the voluntary sector to be £75 million. Does the Labour Party think that it is worth it? I would at least respect Labour MSPs for their honesty if they stood up in the chamber and said that they genuinely and sincerely believed that it was worth the cost in order to increase public spending. I would disagree, but I would respect the honesty. However, we have heard anything but honesty from Labour today.

I have been warned—as, I am sure, other members have been—by some charities and social enterprises that they are now considering not being real living wage employers. I would profoundly disagree with their taking such a retrograde step, but I would understand entirely if the choice was between doing so and making staff redundant or cutting back on services on which vulnerable people rely.

Museums Galleries Scotland is ringing the alarm bell, as it does not expect to be compensated. The culture sector is already under monumental pressure, and other sectors are also facing catastrophe.

I will address the question of where else the money could come from. As I said in my opening speech, I and the Greens believe that increasing public sector spending was necessary. It would have been far more progressive, however, to lift the 2 per cent national insurance increment payable on incomes above the upper earnings limit, which kicks in at £50,000. That would have raised £10 billion, and £4 billion extra would have been raised if that had been extended to income from investments, such as the income that landlords receive.

A total of £16 billion could have been raised if capital gains tax had been equalised with income tax. Closing the loopholes in the offshore energy profits tax—the windfall tax on oil and gas—would have raised £6 billion, with the added bonus of not incentivising oil and gas companies to attempt to open new fields in the North Sea.

A wealth tax starting at 1 per cent on assets above £1 million would have raised £70 billion. That was in the Scottish Greens’ manifesto at the most recent election. Even a far more modest wealth tax—starting at 0.5 per cent, say—would have raised more than enough to cover the costs. Replicating Scotland’s progressive income tax systems UK wide would have raised at least £12 billion.

More public sector spending is essential. We need to undo the damage done by 14 years of Conservative austerity to the NHS, the social security system, local government and the emergency services. Government shows its values when it decides whom it is redistributing from and to. I disagree with various aspects of UK Government spending, most obviously on things such as the renewal of Trident nuclear weapons, but I agree on the principle of increasing spending. However, an increase in national insurance was just absolutely the wrong way to go about raising that money. It has clearly not been thought through. If Labour was determined to do it, it should have been ready to answer questions on it, as Ivan McKee said, or it could have at least given a year’s notice to allow those discussions to take place.

It was incredible to hear Jackie Baillie’s response from a sedentary position to my challenge on CHAS’s Robin house and other hospices that that is a matter for Neil Gray, when Neil Gray has not been told by the UK Government how much money he will get to compensate for the costs of the decision. Carol Mochan, in her contribution, talked about anything other than national insurance.

I agree with Christine Grahame that the Labour MSPs taking part in the debate are clearly ashamed of the decision that their colleagues down south have taken. They should take that message back to them and urge them to reconsider. Our voluntary sector, our public sector and businesses across Scotland depend on their showing the courage to do that.

16:35  

Mark Griffin (Central Scotland) (Lab)

The debate is fundamentally about the UK chancellor’s choices in our budget. The old saying is that to govern is to choose. We have no choice over some things, such as having to clean up the absolute financial catastrophe that was left behind by the Tory Government before we came into office. However, let us talk not just about one of those choices; let us talk about all those choices in the round.

The UK chancellor’s choices have given Scotland a budget that keeps the promises that Labour made during the election, ends the era of austerity and provides billions of pounds of investment in public services. Those choices mean an extra £1.5 billion for the Scottish Government this year—

Will Mr Griffin give way?

Mark Griffin

No.

There is an extra £1.5 billion for the Scottish Government this year and another £3.4 billion next year. Scotland’s capital budget, which had previously been projected to fall significantly, will now rise by 7.1 per cent in real terms next year. The chancellor’s choices mean that the 2025-26 financial settlement is the biggest in the history of devolution.

Neil Gray

Mark Griffin is right in saying that to govern is to choose, but what choice is the Scottish Government left with if his party is asking us to pay the UK Treasury’s national insurance contributions uplift from the 1 per cent real-terms uplift to our resource block grant? We can share the data on that so that Mark Griffin can cast his eye over it. What choice do we have to invest in transforming public services?

Mark Griffin

The resource budget this year is £1.5 billion more than it was when the UK budget was set in the spring. It is £3.4 billion more next year. That is £5 billion more for the Scottish Government to spend, along with the commitment from the UK Government to mitigate the impact of the change on our public services.

Across the UK, the chancellor has chosen to increase spending by £70 billion per year over the next five years. The Scottish Government’s finance secretary said that the budget was a

“step in the right direction”

and that it met a core ask of the Scottish Government, but it is for the finance secretary and this Government to choose what the next step for Scotland is. Will we see the radical new direction for public finance that has been taken in the rest of the UK, or will it be more of the same—managing decline and living with the consequence of successive bad financial choices?

This is a budget that chooses to protect working people and that makes sure that the wealthiest citizens and businesses pay their fair share in order to increase funding for public services. The chancellor’s budget can help us to fix our NHS, kick-start our economy and deliver investment for Scotland if we choose to do so.

Despite what many members would have us believe, the Treasury has clearly confirmed that it will compensate public sector employers for the higher costs resulting from the national insurance contributions increase. It is absolutely scandalous that the commitment from the Treasury has been misrepresented in the debate as it has been.

Will the member give way?

Mark Griffin

The key point for Scotland—this point was made by Ash Regan—is that, because there will likely be a disproportionate impact on the Scottish budget from increases in employer national insurance, given that Scotland has a larger proportion of public sector employment, there is a conversation to be had with the Treasury about the liabilities that the Scottish public sector might have. The UK Government has stated clearly that it is more than happy to take an active part in those discussions. I suggest that it is more important that the Scottish Government, instead of grandstanding in the chamber, takes the opportunities to negotiate and properly discuss—as it clearly wants to—the detail with the UK Government, to fulfil its commitment to mitigate the impact on public services in Scotland.

Christine Grahame: [Made a request to intervene.]

The new Labour budget is good news for working people and for public services in Scotland, but only if the Scottish Government chooses to spend that money wisely.

Will the member give way?

I can understand why some SNP colleagues might be confused about some of the choices that Rachel Reeves has made, but—

Give way!

The Deputy Presiding Officer

Please resume your seat, Mr Griffin.

Mr Stewart, I will not tolerate barracking of that nature. It is up to the member on their feet whether they take an intervention. The fact that Mr Griffin has made it clear that he is not taking that intervention does not invite you to heckle.

Mark Griffin

Thank you, Presiding Officer.

Let us be honest: the Scottish Government would not know a good budget decision if it looked it in the face, because it has been such a long time since it made one. Scotland is suffering from 17 years of SNP budgets that have taken us in absolutely the wrong direction. We are dealing with the consequences of a careless disregard that this Government has shown with our hard-earned cash. The choices that the SNP Government has made—

On a point of order, Deputy Presiding Officer.

Please resume your seat, Mr Griffin.

Christine Grahame

I seek clarification, Deputy Presiding Officer. I am certainly not challenging you in any way, but I do not know whether Mr Griffin said that he was not taking interventions. I just want to know whether that is the case, so that I do not waste my time trying to intervene.

The Deputy Presiding Officer

That is not a point of order. I suggested that Mr Griffin had made it clear that he was not taking that intervention, so it was not appropriate to shout in the way that Mr Stewart did. It is up to Mr Griffin, in the very limited time that he has left, whether he takes any interventions.

Mark Griffin

I have taken an intervention from an SNP member on the front bench.

Clearly, there are facts that need to be set straight. In the time that I have available, I will attempt to do so—without any further interventions, which seem to muddy a very clear picture that the UK Government has set out on the compensation for public services in Scotland to mitigate the change to national insurance.

The UK Government is giving Scotland a record financial deal. It could have a real, positive impact on public services in Scotland, but the SNP must get used to using money better. The billions of pounds in extra cash that are delivered cannot simply be used to cover up the cracks of this Government’s buy-now, pay-later policies.

Labour has delivered real change in the UK with a budget that asks those with the broadest shoulders to pay their fair share towards our NHS, our schools and our communities. Labour has opened the door to a better, fairer way of funding those services. Now, in Scotland, it is for the SNP Government to make sure that the choices that Rachel Reeves has made also deliver real change for Scotland, as opposed to complaining about how the money that it asked for has been raised and then spending it badly.

16:43  

Murdo Fraser (Mid Scotland and Fife) (Con)

This debate has seen all parties in the chamber—with one exception—united in condemnation of a Labour budget. We have seen the three stalwarts of the Labour Party sitting on the front bench. They are rather lonely and seemed rather embarrassed throughout this whole debate—and so they should be.

Craig Hoy reminded us earlier of the broken promise by Rachel Reeves. In advance of the general election she said that Labour

“will not increase national insurance”.

Of course, she did quite the opposite.

That is up there with other Labour pledges—the pledges not to remove the winter fuel allowance and not to remove agricultural property relief on inheritance tax, and the promise to cut energy bills for every household by £300. None of those has been delivered; they are all broken promises.

Craig Hoy was quite right to quote the Institute for Fiscal Studies director, Paul Johnson, who said that that is a

“straightforward breach of a manifesto commitment.” [Interruption.]

If Jackie Baillie wants to intervene on me, instead of shouting from a sedentary position, I will happily give way to her.

Jackie Baillie

I find it interesting that Murdo Fraser is displaying the same lack of self-awareness that I referred to earlier. After 14 years of a calamitous Tory Government, we have had to clear up the mess, and we are now focused on improving the lot of working people, both in Scotland and across the UK.

Murdo Fraser

I remind Jackie Baillie that the deficit that was inherited by the Conservatives from the Labour Government in 2010, when we came to power, was in fact more than double the deficit that we left to the Labour Party in July this year.

If anyone is crashing the economy, it is Jackie Baillie’s colleagues in Westminster. The outcome of the budget is £40 billion in tax rises—the highest on record and the highest tax burden in the history of this country. What are the consequences of that budget? According to the OBR, there will be lower growth. Today, inflation is up to 2.3 per cent; it shot up just in the course of the past month. There is the prediction that, instead of interest rates steadily reducing, which was their trajectory when the Conservatives left office, they will go up, and wages will be lower.

Christine Grahame

On the OBR’s prediction, does the member accept, as I do, that 50,000 jobs could be lost across the UK economy simply because of employer contributions to national insurance rising—something that the Labour Party would not let me intervene to say?

Murdo Fraser

Yes. I am happy to agree with that excellent point made by my friend Christine Grahame on the SNP benches.

What happened to all the pledges from the Labour Party in advance of the election and the budget? The approach that it was going to develop was to go for growth. It said that the way to get more money for public services was to grow the economy. What it has done is deliver a budget that will do the opposite—shrink the economy and not grow it.

We have been debating the budget’s impact on Scotland. The health secretary highlighted in his opening speech the impact of some £500 million on the public sector. He is right to highlight that, but it is only part of the picture. Our criticism of the SNP motion is that it illustrates only a small part of the overall impact on Scotland of the national insurance changes, because public services are not only delivered directly by the public sector. As we have heard throughout the debate, public services are also delivered through general practices, dentists and community pharmacies. Sandesh Gulhane was right to highlight the impact on those by saying that this was a new tax on our local NHS.

We see the budget impacting hospices, museums and galleries, and universities and colleges. On universities alone, there has been a £45 million hit. Ross Greer rightly identified that the University of Edinburgh is looking at having to make redundancies in the face of the changes, and many other universities will have to do the same.

When it comes to the care sector, 49 members of the Coalition of Care and Support Providers in Scotland said that the cumulative cost to their members will be £21 million, and the overall cost to the sector will be much higher than that.

Of course, there will be a broader impact on the third sector, which is not mentioned in the Government motion. Sandesh Gulhane cited the SCVO estimating that there will be a £75 million hit on the sector, and that is without taking account of inflation. Christine Grahame highlighted the SSPCA, the animal welfare charity that we all know very well. It has said that there will be a £400,000 hit annually on its activities, which is double the cost of funding all the animals in its care for an entire year. That is just one charity, but that situation will be reflected across the sector.

We also have to look at the private sector impacts. This week, the British Retail Consortium wrote to the Chancellor of the Exchequer highlighting on behalf of its members that national insurance increases will cause a hit of £2.33 billion across retail in the UK, in addition to £4.73 billion in other new costs. Altogether, that is a hit of more than £7 billion for the retail sector across the United Kingdom as a result of the chancellor’s choices. The Scottish Hospitality Group has said that there will be an average cost of £160,000 per business. Stephen Leckie of the Crieff Hydro, who was in the media the other week, said that the additional cost to his business alone from national insurance changes will be between £450,000 and £500,000 a year, which will have a serious impact on his business’s profitability.

To conclude, the Scottish Government is talking about mitigation for the public sector. I have sympathy with that approach, but it does not go far enough, because it does not cover the cost of mitigation for the third sector, for the parts of public services that are delivered by third sector contractors or for the private sector. Our approach is instead to say that the UK Government should abandon the increase altogether, because it damages growth, it damages the economy and it will cost jobs.

The Scottish Government can use its budget to try to relieve this tax burden. I commend my colleague Liz Smith, who said that she had found an SNP economic strategy—I am not sure that I have found one yet, but I am glad that she was able to do so. However, there is an opportunity, in the SNP budget, which will come in just a few weeks’ time, to look at business rates and income tax and to use some of the Barnett consequentials from the UK budget to try to alleviate some of the pressure. I encourage the SNP to do that. That is the point that is covered in my colleague Craig Hoy’s amendment, which I am very pleased to support.

I call Ivan McKee to wind up the debate.

16:51  

The Minister for Public Finance (Ivan McKee)

The debate has been interesting and has provided some clarity on people’s positions—or lack of positions—on what is a very important matter with profound and broader implications. My colleague the Cabinet Secretary for Health and Social Care laid out the impact of the UK Government’s national insurance rise on public services—we have already identified an impact of more than £0.5 billion on direct services. He also talked about the impact on some other services—we estimate another £40 million impact on NHS contractors.

However, there is much more on top of that, whether it be in adult social care, children’s social care, early learning and childcare or universities and colleges. That number runs to perhaps another £200 million in total, which is a significant impact.

Sandesh Gulhane

To govern is to choose, according to Mark Griffin, and the choice by Labour to tax our local NHS is disastrous. Does the minister agree with Alistair Haw, the chief executive officer of the Scottish Huntington’s Association, that the hikes will hurt “the most vulnerable”, as his charity struggles to cope?

Ivan McKee

Yes, of course they will. The Scottish Government has made that point repeatedly, since the UK Labour Government implemented these very misguided tax increases. Kevin Stewart highlighted the sectors that will be impacted, which include GPs, social care, dentists, optometrists, universities, colleges, charities, the third sector and hospices—the list goes on and on.

As members have said, it is also important to mention the impact of the national insurance contribution increases on the wider economy, which, in the long run, we all rely on to provide the wealth to pay for our public services. This morning, I had the pleasure of having a round-table meeting with people from a dozen key sectors in our economy, in which we talked about many issues, and it is absolutely true that the national insurance increases were the single most important issue that most sectors wanted to raise with me. They encouraged the Scottish Government to continue to press the UK Labour Government on the misguided nature of the measure.

In the retail sector alone, the Scottish Retail Consortium has calculated an impact of £190 million, which will be passed on through job losses in the sector or increases for consumers. That is the last thing that we need at this difficult time of the cost of living crisis. Members have already referred to the comments by the chair of the OBR on the impact of the tax rise on the wider economy. The Scottish Government is focused on delivering growth; we recognise that the purpose of today’s discussion is to talk about the impact on the public sector, but we very much recognise the impact on the wider economy and the private sector, too.

Clare Adamson made an effective contribution, pointing out, for those who missed it, the lack of support for the measure among Labour members in the Scottish Parliament. It is not dissimilar to the situation with the winter fuel payment cuts, from which Labour members have been running for cover. In fact, Labour had to reduce the number of speakers that it put forward for the debate today, because it was struggling to find members to fill the slots.

We had three contributions from Labour members. We had the diversionary Jackie Baillie, whose claims of billions of pounds of extra resource coming to the Scottish Government have been thoroughly debunked by the analysis that has been done. As has been highlighted in the debate, the increase in real terms is less than 1 per cent.

Jackie Baillie

I will ask the minister two simple questions. Have you, or have you not, been in dialogue with the UK Labour Government about additional resources to deal with the national insurance contributions? If so, once you get the additional money, is it not the case that the decision is a matter for the Scottish Government?

Questions should always be through the chair.

Ivan McKee

Just as I make the point about the diversionary Jackie Baillie, she stands up to throw more of a smoke screen around the issue.

Of course we have been engaged with the UK Government—it is ridiculous to suggest otherwise. There are letters from my colleagues—the cabinet secretary for finance, the cabinet secretary for health and others—to the UK Government pleading for clarity on what it is going to take forward. We wait and wait and wait, and nothing comes back from the UK Government as to what it will be. [Interruption.] If Jackie Baillie can intervene and tell me what the number is, I will be delighted to hear it. [Interruption.] Exactly—Jackie Baillie does not know the number. There is no number, because the Treasury has not provided it.

For all the talk of the delusional Carol Mochan, talking about talks about talks about talking about working together—

Minister, if you could resume your seat.

I can.

I suggest that you are steering a bit close to nicknames—let us have a bit of courtesy and respect. You can still get your point across in other ways. Please resume.

Ivan McKee

The Deputy Presiding Officer has removed my opportunity to provide some alliteration in this debate. I will do my best to steer around his very clear guidance.

We had Carol Mochan talking about talks about talks about working together. We have made that effort to reach out to the UK Government, but again, nothing is coming back. There are no numbers, and no clarity on what money we have to make the choices that she talked about.

It is the UK Labour Government that is finding out that to govern is to choose, and it has made some very poor choices in its first few months, the consequences of which have been felt right across the Scottish public sector and the Scottish economy.

Kevin Stewart

While the minister is talking about numbers, I note that some numbers have been left out today—numbers such as the 7,000 charities in Scotland that are at risk from this rise, and Marie Curie being taxed an additional £3 million, which can be made up only by cutting services for people with cancer. Does the minister think that that is acceptable? Does he think that the Labour Party should rest on its laurels and allow that to happen?

Ivan McKee

No. It is absolutely not acceptable. Even as we approach decision time, we see the gaps on the Labour benches. Their members do not want to sit here and listen to the harsh reality of what their Government is doing to Scotland’s public services and Scotland’s economy.

Mark Griffin was in denial, talking about setting the record straight. Well, let us set the record straight. He talked about choices, but the Treasury has not confirmed anything. That is the reality of where we are—we are waiting for a number that will absolutely have to be well in excess of that half a billion pounds, including all the other costs. We are talking about perhaps another £100 million or £200 million on top. We will see what the Treasury comes forward with, but we will be very clear in pointing out the difference between what we need and what it is willing to offer when we eventually get a number—and we really have to hope that we get that number in advance of when we have to deliver the Scottish budget in a few weeks’ time.

We understand that the chancellor had to make some difficult decisions to address the gaping fiscal hole left by the Conservatives. We already knew about the lasting impact of the twin disasters of Brexit and the failed mini-budget of the Johnson-Truss years on the UK and Scottish economies. Those were decisions that Scotland opposed at every turn—and yet, once again, we have to live with the consequences.

The Labour Party did not listen to our warnings about the scale of the challenge that was coming. Its manifesto ruled out more progressive tax options to address it. We made the same points throughout the election campaign in July, but Labour denied them at every turn, before it had to accept the black hole that existed once it was in office.

Increasing employer national insurance was, and is, fundamentally the wrong choice. We have heard today that, despite its being a reserved tax, it will have an enormous impact on public service delivery in Scotland. We still do not know how much funding we will receive to mitigate the damage, the mechanism by which it will be applied or the timing of when it will be confirmed.

The latest indication from the UK Treasury is that it will apply the Barnett formula in the usual way. If that is the case, our funding could be as low as £380 million—and perhaps even lower, based on the OBR’s estimates of the total cost to the public sector. That is very far away from the reality of what we need to cover the direct employment costs to devolved Government and, of course, to local government. As has been highlighted, the change will cost £265 million for local government alone, never mind the additional costs for all the other contracted services that are so critical to our NHS and wider public services.

Crucially, we do not know when any Barnett-formula funding—or any other funding—will arrive. We might have to wait until the UK Government’s spring statement for confirmation of the amounts, which is simply unacceptable when we are so close to the Scottish budget. We will, of course, ensure that our budget accounts for the increased costs that the chancellor is imposing on us, but we are waiting to hear whether the chancellor will provide the funding or whether, unfortunately, the money will have to be taken from elsewhere to enable us—as we must do by law—to balance our budget every year.

If the Scottish Government does not receive the funding to meet those costs, it will be yet another sign of the Labour Party implementing austerity by the back door, whether through the removal of winter fuel payments, the continuation of the bedroom tax or the increased national insurance burden. It will fall, yet again, on the Scottish Government and the Scottish Parliament to try to mitigate the damage of UK Government decisions. Our fiscal powers stretch only so far, and it is for the reasons I have mentioned that we are calling on the chancellor to act now and ensure that public service delivery in Scotland is protected.

The Deputy Presiding Officer

Thank you, minister, and congratulations on weaving in your alliteration after all.

That concludes the debate on the impact of national insurance increase on public services. There will be a brief pause before we move to the next item of business to allow those on the front benches to change places.