Meeting of the Parliament

Meeting date: Wednesday, January 21, 2015

Official Report 841KB pdf

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Budget (Scotland) (No 4) Bill: Stage 1

The next item of business is a debate on motion S4M-12101, in the name of John Swinney, on the Budget (Scotland) (No 4) Bill.

I call John Swinney to speak to and move the motion. Deputy First Minister, you have 14 minutes.

14:40  

Parliament begins its consideration of stage 1 of the budget bill against an encouraging set of economic indicators that have been issued today. Employment is at a record high; unemployment is at the lowest rate of any country in the United Kingdom; and Scotland’s year-on-year gross domestic product grew by 3 per cent in the 12 months to quarter 3 in 2014, which is higher than growth in the UK over the comparable period.

The Scottish Government believes that our approach to economic recovery is now becoming sustained, and in this budget we take forward further measures to boost the economy and address the inequality that inhibits our progress.

I am sure that the Deputy First Minister would be disappointed if I did not raise the important point that that economic growth, employment growth and unemployment reduction are based on an economic plan that his party said would not work but which is working for Britain.

I have referred to the fact that growth in Scotland was higher than growth in the UK over the comparable period. That must mean that the measures that this Government is taking are having a more emphatic effect on economic recovery.

The Budget (Scotland) (No 4) Bill that we are debating today will give effect to the 2015-16 draft budget that I published in October and the provisions that have been announced since then. I thank the Finance Committee for its scrutiny report, which provides a comprehensive overview of the draft budget, and today I will address some of the issues raised in it and respond in full in advance of next month’s stage 3 debate.

The Finance Committee asked me to provide an update on progress with agreeing the block grant adjustment with Her Majesty’s Treasury in relation to the new devolved taxes, and I have written to the convener to confirm that we have finalised a one-year adjustment for 2015-16 at £494 million. Issues remain outstanding on the effect of forestalling and the time lag in tax collection. I am unable to confirm when those issues will be resolved, as they depend on negotiations with HM Treasury, but the high-level agreement provides sufficient certainty to allow me to finalise the Scottish Government proposals for the rates and bands for the devolved taxes.

I have prepared an updated forecast of the revenue that I expect to raise. The Scottish Fiscal Commission has endorsed the forecast as reasonable, and I have placed a copy of the letter that I have received from the commission in the Scottish Parliament information centre.

In October, the draft budget provided me with the opportunity of being the first finance minister in Scotland for 308 years to set national tax rates. Even that experience did not prepare me for the surprise of seeing the design of my national tax being replicated across the UK by the Chancellor of the Exchequer two months later.

I was clear that I intended the design of the taxes and the associated bands to be influenced by Adam Smith’s four maxims, particularly that taxes should be proportionate to the ability to pay. I also said that the taxes would be revenue neutral.

If, as Mr Swinney maintains, the design has been copied exactly, why have we had forestalling?

My point to Mr Brown is that the chancellor, having had years and years to reform stamp duty land tax, took two months to look at Scotland’s reforms and said, “That looks like a good idea—I’m going to do that for the rest of the United Kingdom.”

One consequence of the chancellor’s announcement in December is that the amount of revenue that I need to raise to meet the commitment to revenue neutrality is lower than was anticipated at the time of the draft budget. As a result, I have chosen to review the rates and bands for residential land and buildings transaction tax. In doing so, I will remain true to all of the principles that I established in October.

It was my priority then and it remains my priority to help first-time buyers to enter the housing market and to assist people as they progress through the property market. Consistent with the principle that tax should be proportionate to the ability to pay, the burden of taxation should fall on each according to their ability to pay.

I have designed the following rates to support the Scottish market. While in London the average house price is £510,000, in Scotland it is £170,000 and the average price of a detached house is around £244,000. With effect from 1 April 2015, to provide further support for first-time buyers, the threshold for beginning to pay tax will be increased to £145,000, which will take 50 per cent of transactions, or another 5,000 homes, out of tax altogether.

A marginal rate of 2 per cent will apply to transactions of between £145,000 and £250,000. To restore the benefit of my proposals to those who buy properties up to the value of £330,000, I will introduce an additional marginal rate of 5 per cent for transactions of between £250,000 and £325,000. For those between £325,000 and £750,000, the marginal rate will be 10 per cent. In order to ensure that we are able to provide benefits for those at the bottom of the market while retaining the principle of proportionality, the top marginal rate of 12 per cent will now affect all transactions above £750,000.

As a result of my announcement today, more than 90,000 taxpayers—nine out of 10 taxpayers—will be better or no worse off under the Scottish system than they would have been under UK stamp duty land tax; all those who buy a residential property in Scotland for £330,000 or less will pay up to £400 less tax under LBTT or will pay no tax at all; and 99.9 per cent of those people involved in residential transactions will pay less tax, or no tax at all, compared with the rates and bands that were proposed in October. Only people who buy a home for more than £945,000 will pay more in tax under our new plans compared with our draft budget proposals.

Given that 50 per cent of transactions will be lifted out of tax altogether, the measures that I propose send a very clear message. In exercising our first judgments on national taxes, this Government has put fairness, equity and the ability to pay at the very heart of the decisions that we have taken.

For clarity, could the cabinet secretary tell us how much less overall in taxation will come in as a result of the changes compared with what he announced previously?

In October, I estimated that the taxes would bring in £558 million. The block grant adjustment has been agreed at £494 million, so the figure is the difference between those two numbers.

I will bring orders before the Parliament to set the rates of land and buildings transaction tax that I have outlined, and I can confirm that I will bring forward orders to set the rates of non-residential land and buildings transaction tax and Scottish landfill tax at the rates that I announced back in October.

Within the context of constrained public finances, in which our budget has fallen by nearly 10 per cent since 2010, our programme for government and the budget bill contain a range of measures that are focused on making Scotland a more prosperous country, tackling inequality, and protecting and reforming our public services.

The draft budget outlines and supports a range of interventions that directly deliver economic stimulus and employment opportunities, but which also deliver longer-term assets that will improve productivity and connectivity throughout the country. Through a series of measures that are supported in the bill, we will secure infrastructure investment of around £4.5 billion in 2015-16, with investments being made in housing, in schools and in health services.

Greater connectivity in our transport system will be delivered, along with a superfast broadband network to more than 95 per cent of properties by the end of 2017. The convener of the Finance Committee may wish to note that it is anticipated that communities in Arran—where I appeared before his committee during the budget process—will be able to access the new network from spring 2016.

In December, I confirmed to Parliament that I would allocate consequentials from the autumn statement in order to continue to match English poundage rates and to ensure that we continue to provide the most competitive business rates regime in the UK. We must ensure that the economic opportunities that emerge are available to all. The budget bill supports measures that reduce obstacles to labour market participation, including enhanced childcare provision, and it includes measures to create employment, education and skills development opportunities for those who are not currently in work or training.

We expect to see the draft Scotland bill published tomorrow. Although we do not believe that the proposals contained in the bill will go far enough, they will be a step in the right direction and will enable us to add to our extensive efforts to break intergenerational cycles of poverty, inequality and deprivation.

The budget bill allocates £81 million to mitigate the most harmful impacts of the bedroom tax, and we will continue to work with stakeholders and partners to ensure that the costs of delivery are kept to a minimum in order to ensure that maximum support is provided to those who are most in need.

We will invest over £390 million to deliver affordable homes, of which 4,000 will be for social rent as well. We will deliver a £30 million help to buy Scotland small developers scheme to benefit small and medium-sized enterprise developers and to increase the reach of the help to buy scheme.

We remain committed to eradicating fuel poverty in Scotland. I share the concern of the Economy, Energy and Tourism Committee that the delivery of the target will be increasingly challenging. The £94 million pounds of resources that have been allocated to domestic energy efficiency in 2015-16 will add to the hundreds of thousands of homes that are already warmer and cheaper to heat as a consequence of our investments to date.

Over the course of the spending review, we have had to make some difficult decisions in order to live within our budgets, and we have driven reform both to improve outcomes and to ensure that the public finances are sustainable. As part of that, we have had to exercise significant constraints on pay policy, but we will continue to target our pay policy at those on the lowest incomes within the tight budget constraints that we face through measures such as the Scottish living wage, and we will provide security to public sector workers through our policy of no compulsory redundancies.

Our approach to reform is about ensuring that we are able to protect public services in Scotland—services on which our people depend and in which they have confidence. It has enabled me to provide a fair settlement for local government in each year of the spending review while providing additional resources for new responsibilities.

Our approach has also enabled us to deliver, for the first time, an overall health budget of over £12 billion while exceeding our commitment to pass on consequentials from health spending in England in every year since 2010-11. This morning I had the pleasure of visiting the Glasgow south hospitals to see at first hand examples of how the additional £380 million being provided to the health service in Scotland in 2015-16 is being allocated to front-line services. It is decisions such as those that go a long way to explain why voters believe this party is the most trusted to protect the national health service in Scotland.

A key part of our approach to public service reform is the need to deliver a preventative approach. I welcome the Finance Committee’s focus on this area, and I will address the committee’s conclusions. We are making sustained progress in delivering a shift of emphasis to prevention. That is why we have provided over £170 million to support further integration of health and social care services and have taken forward the three change funds that we set out in 2011.

The approach on provision of care at home has resulted in an increase in the support to those citizens with the highest level of need, enabling individuals to remain in their homes for longer and with better support. Some 80 per cent of people receiving support at home now benefit from telecare, which increases the ability to deliver preventative services.

There are more than 400 individual improvement projects that, as part of our early years collaborative, are improving outcomes for children and families. Over 1,900 people each year have received personalised support from trained mentors through the reducing reoffending change fund, which is designed to help to reduce reoffending within our society.

The change funds, while important, do not represent the totality of the resources that we devote to prevention. We are aspiring to deliver a decisive shift, but we are also looking to address problems that surround the inequalities in our society that in some cases have existed for generations. The Scotland performs update that I published alongside the draft budget highlights examples of success in shifting to preventative interventions in Highland, Perth and Kinross, North Lanarkshire and Aberdeen City Council areas. I encourage colleagues to follow the detail that is set out in that information.

In the range of preventative interventions that we take forward, the examples may appear to be small, but the impacts on individual children and parents are significant, and they have the beneficial effect of reducing the long-term demand for public services and the challenges that we face in the current public expenditure climate as a consequence. The Government will continue to focus relentlessly on delivering that shift of emphasis to introduce more preventative interventions to guarantee the sustainability of public services in the years to come.

Over the coming weeks I will, as has been the case in all budget processes, work with colleagues from across the political spectrum to secure support for this budget. It is a budget based on the Government’s aspiration to deliver the more prosperous and fairer Scotland that our citizens so clearly demand. It sets out the basis on which the Government believes that that can be achieved.

I move,

That the Parliament agrees to the general principles of the Budget (Scotland) (No.4) Bill.

14:55  

It is with pleasure that I speak on behalf of the Finance Committee in this stage 1 debate on the Scottish Government’s budget bill for 2015-16 and on our draft budget report, which was published last week.

The scrutiny of the draft budget works to a tight and demanding schedule. As members will be aware, we approach budget scrutiny on the basis of four principles: affordability, the wider picture of revenue and expenditure and whether each is appropriately balanced; prioritisation, a coherent and appropriate division between sectors and programmes; value for money, the extent to which public bodies are spending their allocations well and achieving outcomes; and budget processes, the integration between public service planning and performance and financial management.

This year, we have focused our scrutiny on two of the principles: affordability and budget processes. We agreed before the summer recess that our main focus would be on affordability. In particular, we looked at Government proposals for the newly devolved taxes and at whether revenue and expenditure were appropriately balanced. We continued our commitment to scrutinising the preventative spend agenda by considering how public bodies work together to deliver services across Scotland.

We invited the subject committees to structure their scrutiny on the remaining principles of prioritisation and value for money. I thank those committees for their valuable input.

To support our scrutiny of the draft budget, the Finance Committee issued a call for evidence on the introduction of land and buildings transaction tax. We received 20 written submissions in response and took oral evidence from a range of witnesses during the autumn before taking evidence from the cabinet secretary on the Isle of Arran. As part of our Arran visit we held workshops with local businesses, voluntary organisations and public bodies. We heard first hand from them about the impact of public spending on their communities and how that spending should be prioritised.

I place on the record the committee’s gratitude to all those who assisted in our consideration of the draft budget.

Turning first to affordability, the committee considered the need for a balanced budget. As the cabinet secretary has mentioned, the Government is responsible for raising the newly devolved taxes, which are land and buildings transaction tax and Scottish landfill tax, with effect from the 1 April.

The draft budget states that the proposed rates are intended to be revenue neutral and set out the forecast receipts for the two taxes in 2015-16. The committee scrutinised the robustness of those forecasts along with commentary published by the Scottish Fiscal Commission.

On the forecasts for residential transactions, the committee identified a number of ways in which robustness and transparency could be improved. We recommended that a breakdown of expected receipts for each band is provided and published as part of future draft budgets; that the SFC produces an analysis of the behavioural response to the introduction of LBTT; and that, like the Office for Budget Responsibility, the Scottish Government should aim to produce five-year forecasts.

The committee noted the differences between forecasts made by the Scottish Government and the OBR for non-residential transactions. We recommended that updated figures relative to available outturn figures be provided alongside next year’s draft budget. That recommendation was also made in respect of forecasts for revenues raised through Scottish landfill tax.

The committee also considered evidence in relation to the proposed LBTT rates and bands. The evidence was broadly supportive of the proposed structure of the tax as it then was. However, organisations such as Homes for Scotland and the Scottish Property Federation expressed concern that the rates might have a detrimental impact on those considering moving to larger residential properties, particularly those in property hotspots such as Aberdeen or Edinburgh. Proposals for alternative rates and bands were made to address those concerns.

As members are aware, changes to UK stamp duty land tax were announced in the chancellor’s autumn statement. I listened with great interest to what the cabinet secretary said on the subject and look forward to hearing others’ views later in the debate.

The committee expressed serious concern that a permanent agreement between the two Governments has not yet been reached on the block grant adjustment. The topic has been on the committee’s radar for some time—years in fact—and we have previously taken evidence from both Governments on the subject. Indeed, we expressed concern in October 2013 about the lack of available detail, and we found then that

“there remains a considerable lack of transparency in relation to the adjustment of the block grant.”

Almost 18 months on, our report on the draft budget stated that the committee

“finds it unacceptable that the Parliament is being asked to consider the Draft Budget without knowing what impact the block grant adjustment may have on the Government’s spending proposals.”

The committee considered that the adjustment must

“be agreed and fully explained to the Parliament prior to Stage 3 of the Budget Bill.”

I am glad that some progress has been made and the figure of £494 million has been presented to us, but we would like further information in the run-up to stage 3.

Our report highlighted the need for greater transparency from both Governments and sufficient time for effective parliamentary scrutiny of adjustments to the block grant. We noted that both Governments have agreed that an interim adjustment will be put in place for 2015-16 only and we have made clear our disappointment at the lack of a long-term solution. However, as there is now no alternative, given the pressing deadlines for considering the draft budget, we recommended that there should be a reconciliation with outturn receipts.

The committee shared the cabinet secretary’s concerns about the proposed inclusion of a “constraining factor”, which would attempt to calculate what the devolved taxes would generate up to 2030 and adjust the block grant accordingly to ensure that neither Government was any better or worse off. The committee agreed that that would totally defeat the point of devolving the taxes. That concern and others that have been expressed about the slow pace of progress on the adjustment become even more important in light of the expected devolution of further fiscal powers following the deliberations of the Smith commission. We look forward to discussing that and related issues in our evidence session with the Chief Secretary to the Treasury next Wednesday.

We considered the preparation for the collection of devolved taxes in detail. The committee has taken a keen interest in the progress that has been made towards ensuring that Revenue Scotland and its partners are fully prepared for the devolved taxes going live, and we will continue to monitor that closely as we approach 1 April.

Regarding prioritisation, we invited the subject committees to consider whether there was a coherent and justifiable division between sectors and programmes. Audit Scotland said that a priority-based approach should focus on delivery of priority outcomes and allocation of money to services that make the greatest contribution to delivering those outcomes. For that reason, we recommend that subject committees continue to focus on prioritisation as part of their budget scrutiny. That should include the extent to which public bodies within their respective remits are adopting a priority-based budgeting approach.

A related subject is ensuring value for money in achieving outcomes that have been designated as Government and public agency priorities. The committee’s consideration of last year’s draft budget focused on the national performance framework. Our expectation is that public bodies should be able to demonstrate how their aims, objectives and activities contribute to national outcomes. We heard in evidence from Audit Scotland that the NPF is a major step forward and that there is evidence of its impact in the alignment of resources and action across different parts of the public sector in certain policy areas.

However, Audit Scotland also considered that

“the Scottish Government needs to demonstrate a more systematic approach to implementing its outcomes approach by clarifying the links between longer-term outcomes, its priorities and performance measures across all policy areas.”

The committee endorsed that view. We believed that there is much scope for the Parliament and its committees to use the data in Scotland performs to hold the Government and public bodies to account for the delivery of outcomes. On a related theme, we recommended that much greater emphasis be placed on examining the impact of spending on outcomes.

I wish to touch on the committee’s continued scrutiny of the Government’s commitment to

“a decisive shift towards prevention”,

which is a subject that we have taken an interest in for several years now, and which the cabinet secretary touched on earlier. In addition to the previously announced funding for change funds, including those related to the early years, care for older people and reducing reoffending, the Government stated that community planning partnerships would play a “decisive role” in the shift towards prevention.

Nevertheless, we remain concerned by the lack of progress that has been made to date on driving public sector reform in that respect. We support the Government’s intentions in seeking that “decisive shift” and we recognise that there has been progress, particularly in relation to integrated working. However, we expect to see significant progress over the next year. I am heartened by Mr Swinney’s comments earlier today.

The committee also considered a variety of issues from the impact of welfare reform and fuel poverty to the Government’s progress towards achieving its climate change targets and realising predicted savings through its police reform programme.

When we visited Arran, we heard about the impact of the lack of broadband connectivity on businesses in rural and island communities. We also heard about issues to do with the availability of affordable housing. The Government is well aware of the importance of those matters, which the relevant committees have addressed in greater detail in their reports. I am sure that members will pick up on some of those themes later in the debate.

As I said, the committee’s budget scrutiny focused on affordability, although we also sought to monitor progress in relation to preventative spending, prioritisation and value for money. I hope that I have succeeded in giving a flavour of the broad range of subjects that we considered. I look forward to the Scottish Government’s response and to hearing members’ speeches.

15:05  

I think that this is the first time that a woman has occupied the post of shadow finance secretary or finance secretary for any party since the Parliament’s inception. [Applause.] If you hang around for long enough, it all comes to you in the end.

It is a privilege and a challenge to be asked to do this job. I am sure that John Swinney agrees that nothing is more important than the stewardship of the nation’s finances, to ensure that we have the money to spend on our priorities.

Growing the economy, encouraging aspiration, tackling inequality and delivering social justice are all at the centre of our positive vision for Scotland. I want us to be ambitious for the country and for our people.

In that regard, I want people to have trust in their Parliament and their Government when we make financial and economic projections, irrespective of our parties, because we need to be serious about how we do that. Labour is proposing that we establish a Scottish office for budget responsibility—an independent watchdog that would scrutinise the budget and have oversight of economic and fiscal projections. That is more important than ever. Budget debates used to be all about how we would spend the money that the UK Government allocated; now and in future we will have the power to raise a substantial proportion ourselves. We will have new powers over taxation, welfare and job creation. We will have to balance the books, rather than concern ourselves only with one half of the balance sheet.

With that additional responsibility comes the need for better scrutiny, transparency and forecasting. The Finance Committee thinks so, respected economists think so, and the Smith commission thinks so.

I say with the greatest respect to the cabinet secretary that the Scottish Fiscal Commission is a pale imitation of what is required. I have enormous regard for the people who serve on the commission, but the truth is that they are not independent of Government. Two members are on the Government’s Council of Economic Advisers. It is not possible to both scrutinise and advise Government without there being a clear conflict of interest. The commission’s remit is limited, the resources that are available to it amount to £20,000 and, although the cabinet secretary will tell us not to worry because the commission will evolve and be put on a statutory footing, there is no evidence of that and no bill in the legislative programme to do it.

What we want for Scotland is a powerful Scottish OBR, which draws from experience around the world. We should have no fear of transparency and scrutiny. The matter is urgent, because we need to build capacity in Scotland for an OBR that can provide an effective scrutiny mechanism from day 1.

The Scottish Government produced three oil and gas bulletins prior to the referendum. One bulletin was published with the heading “Oil Analysis shows boom years ahead” and suggested that the price could exceed $150 a barrel. The white paper on independence suggested $113 a barrel. The oil price is now consistently below $50 a barrel.

That is the biggest threat to jobs in Scotland since Ravenscraig, and the loss of revenue would take £6 billion a year out of our finances—the equivalent of every doctor and nurse in our national health service. The Scottish Government did not see the threat coming. We need to be confident that what the Government is predicting is as accurate as it can be.

Will the member give way?

I will give way in a second.

A Scottish OBR is a modest measure, which will not cost a lot of money, but it is such a critically important bit of the infrastructure that we need to set it up now.

Labour thinks that we need to establish a resilience fund of at least £10 million in light of the crisis in North Sea oil and gas. That is not an oil fund, as some people would have members believe, but an emergency fund, to help areas that are affected by significant job loss.

I have been astonished by the Scottish National Party’s glacial pace in reacting to the economic storm that is being caused by the falling oil price.

Will the member give way?

Will the member give way?

SNP members are not glacial in getting up now. [Interruption.]

Order, please.

I say genuinely to SNP members that everyone in the chamber owes it to the oil workers and their families across Scotland to strain every sinew to provide help.

I will make a couple of observations on land and buildings transaction tax. It is the first Scottish tax in 308 years, so this is a moment of record. Let me echo John Swinney’s surprise for slightly different reasons. Having announced his intentions at the tail end of last year to make the tax fair and progressive, it took him just 100 days to change his mind. That must be the fastest U-turn in history. I feel for the SNP members of the Finance Committee who voted against the Tory proposal only to find now that the cabinet secretary had aligned himself with the Tories. That is, of course, something that they have been very comfortable doing in successive budgets since 2007.

I am curious as to whether Jackie Baillie has examined the proposal that Gavin Brown put forward in the Finance Committee versus what Mr Swinney has outlined if she is seriously trying to suggest that they are the same thing. Does she agree that what Mr Swinney has outlined is progressive taxation?

I am very happy to look at the detail of John Swinney’s proposal, which was, in fairness, outlined in his speech today. [Interruption.]

Order, please.

We will support anything that helps home owners and, indeed, the house building industry, so we will examine the detail of what John Swinney said today.

I do not remember the cabinet secretary mentioning this, but he used to tell us that local government got an increasing share of funding. He does not do so any more because it is not true. In 2010-11, local government received 38 per cent of the Scottish Government budget; I understand that the figure now is 32 per cent, which is 6 percentage points less. If local government were to achieve the same share, it would be in line for an extra £1.8 billion. Every single local authority in Scotland has had a real-terms cut. [Interruption.]

Order, please.

There are now 40,000 fewer public sector workers. The Joseph Rowntree Foundation tells us that local government spending in Scotland will have fallen by 24 per cent in real terms by 2015. That is the funding for our schools and social care. In Edinburgh, the council needs to make £67 million in cuts over the next three years and cuts of £22 million in the next year alone. It is talking about cutting 1,200 jobs. In Glasgow, the figure is a staggering £29 million from the budget in one year alone. In Dundee, the council needs to make cuts of £30 million in the next three years, and it is talking about closing schools and cutting spending on textbooks. It is not alone; it is the same for East Renfrewshire Council, West Dunbartonshire Council and Renfrewshire Council. Such unpalatable decisions are affecting all local authorities, whatever their political complexion. This is, after all, about our children. Are we giving them the best start in life when we limit their opportunities in education?

Will the member give way?

No.

Are we taking care of our older people when they are forced to cancel community alarms because they cannot afford to pay for them? [Interruption.]

Order, please.

I know that Mr Swinney and, indeed, the First Minister are shouting about the cuts that are visited on the Scottish Government by the Conservative and Liberal Democrat coalition. In part, they are right, but that is not the full picture.

Will the member give way?

Mr Stewart, Ms Baillie said that she was not giving way to you.

The cuts that have been passed on to local government are not just austerity; they are austerity plus from the Edinburgh Government. In October, the cabinet secretary wrote to every council to tell them that the level of cuts that the Scottish Government had experienced since 2010-11 was 10 per cent, but he did not tell them that the scale of the cuts that he was passing on would be greater still. To use his own figures and analysis, the cut in Renfrewshire was 17 per cent and the cut in Edinburgh was 20 per cent. The cabinet secretary may shake his head, but that is what those local authorities are saying.

The Scottish Government has set up a commission to consider local government finance, which we welcome, but the changes will not happen until 2016. There is an urgent need now to act to protect our schools and care services. [Interruption.]

Order, please, First Minister.

The issue is too big to be resolved by the rough and tumble of debate in the chamber, but I ask the cabinet secretary to take the matter away and work with local government to see what he can do in the interim to alleviate the cuts.

I have a simple question for Jackie Baillie. I am hearing that she wants to give more money to local government. Before she ends her speech, can she tell us what part of the Scottish Government budget she proposes to cut?

I said that the issue is too big to be resolved—[Interruption.] It absolutely is.

Order.

We are talking about £1.8 billion of funding—[Interruption.]

Order. Ms Baillie, please stop. Can I have order in the chamber, please? Ms Baillie, I will recompense you—[Interruption.] Order. Ms Baillie, please sit down for a moment. Can we have order in the chamber, please? Ms Baillie, I will now give you another minute to finish your speech, because of all the interruptions.

Thank you, Presiding Officer.

I say to the First Minister and the Deputy First Minister that the scale of the cut in local government is so significant that a solution is not achieved by the rough and tumble of debate in the chamber. It is about taking the issue away and looking at it in partnership with local government. We stand ready to help in that process but, unfortunately, it does not seem that the Government cares—[Interruption.]

Order, Mr Bibby.

—about funding local government to provide those front-line services.

I will spend my remaining time focusing on health, because the pressure on our NHS is obvious this winter. The Cabinet Secretary for Health, Wellbeing and Sport agreed to put £100 million into the NHS over the next three years to deal with delayed discharge. That is welcome, but the Scottish Government must recognise that it is a drop in the ocean. There are other pressing issues in the care sector that ministers will be aware of. Levels of unmet need are rising. We fund crisis rather than funding prevention so, although I hope that the money makes a difference, I fear that we will need to return to a debate about social care soon.

Equally, the problems in our NHS are not caused just by delays—

Ms Baillie, you must conclude.

—in getting people out of the back door of hospitals; there are serious pressures on the front line too. Thousands of Scots are waiting too long at accident and emergency or are having planned operations cancelled at the last minute because of a lack of beds. It makes no sense to have unused capacity in our NHS, so today we are calling for another £100 million in the coming year—

Please conclude, Ms Baillie.

The remaining Barnett consequentials could establish a front-line fund to increase the capacity of NHS services to operate seven days a week. In conclusion, Presiding Officer, that means extending capacity to build planned surgery—

I am sorry, Ms Baillie, but you really must close.

It is my final sentence. We need planned surgery at the weekends and diagnostics in the evening, to free up beds so that people can be seen more quickly. Every day brings new stories about the pressure on our NHS. Our staff, who dedicate their careers—

Please finish, Ms Baillie.

—to saving lives, are overshadowed and underresourced. They need a front-line fund—

Ms Baillie, I am sorry. You must sit down.

—to support staff and to support patients.

15:17  

I guess that the Deputy First Minister must be licking his lips at this stage, because getting the Labour Party on board to support his budget will be fairly easy. All that he has to do is rename the fiscal commission the Scottish OBR, and suddenly he has 40 votes in the bag. He will have to work a little harder to get the Conservatives’ full support, and I can say categorically—to spare Mark McDonald’s blushes—that the proposal that I put to the Finance Committee is slightly different from the proposal that the Deputy First Minister made today.

In all sincerity, I praise some of the actions that the Deputy First Minister has taken so far, because he has been particularly accessible in the past couple of weeks and has been in listening mode. I know that, while he has been speaking to other parties, he has also engaged with stakeholders and has tried carefully to take the temperature on the ground in relation to the residential rates of the land and buildings transaction tax. I shall praise elements of his proposal before outlining areas where I still have concerns and want to work with the Scottish Government to make progress before stage 3.

First, the Deputy First Minister ought to be applauded for coming to Parliament today with an early announcement. It is fairly typical in the budget process of almost every Parliament to wait until the final stage to pull a rabbit out of the hat to generate some news and make something happen at stage 3. I urged him—and I know that others did too—to say something earlier and to try to ameliorate the position because of the displacement that was happening and the forestalling that we know was projected by a number of agencies. The fact that he agreed to make an announcement today should be welcomed and applauded.

Secondly, I welcome the fact that, in relation to the rates that he proposed in October, what the Deputy First Minister proposes now is a tax cut. If my maths is correct, the figures that he gave Malcolm Chisholm show a reduction in the region of £64 million, which means £64 million less in tax in April than would have been the case if the Deputy First Minister had not made changes. As a Conservative, I welcome that.

In the interests of completeness, does Gavin Brown accept that I gave the firm commitment to Parliament and the Finance Committee that the introduction of the tax would be revenue neutral for the changes that the UK Government applied? The issue for me has been to remain true to that commitment to revenue neutrality as the driver of the sum of money that was to be raised through taxation.

When I referred to a tax cut, I meant one relative to the rates in October; I was not trying to paint the change as an overall tax cut. The Deputy First Minister’s exact wording was:

“I have decided that the taxes raised should be revenue neutral, raising no more or less than the taxes that they replace.”—[Official Report, 9 October 2014; c 39.]

That is what he said on day 1 and has said on most occasions since then. It is a matter of public record that that is what he said.

We welcome the increased threshold. We called for it to be increased to £140,000 and it has been increased further than that—to £145,000—which will make buying easier for first-time buyers. The final thing that we welcome is the 5 per cent rate. The tax does not go immediately from 2 to 10 per cent; it is more gradual—it goes from 2 to 5 per cent and then to 10 per cent.

For all those reasons, I am happy to praise publicly the actions taken, but we still have concerns, which I hope that we can tackle and make progress on in the coming weeks. We will consider the changes carefully. I intend not to make snap judgments but to review the numbers and engage with experts and stakeholders, as I have done over the couple of months since the rates were announced.

I have some concern that we still have a sharp increase: a jump to 10 per cent at a lower level than in the rest of the UK. The tax rises to the 10 per cent rate at £325,000, which at first blush still strikes me as a particularly low point at which to move up to 10 per cent.

We acknowledge the Scottish Government’s point that the housing market in London is different from that in Scotland but, at the UK level, the tax does not go up to 10 per cent until £925,000. In our proposal, we capped the 5 per cent rate at £500,000 to try to recognise the difference. I am a bit concerned that the tax goes up to 10 per cent at £325,000. That is better than it going up to 10 per cent at £250,000, but we will work hard to make progress on that.

It is still a tax on aspiration, although to a lesser degree than it would have been. The crossover point is a little higher than it was in October, but there is still scope to push it up further, not just to help people to get the family home of their choice but because of the impact that that could have on the market. There is still the possibility for distortions to occur. If the £325,000 to £500,000 segment of the market is penalised, that does not have an impact just on that segment; there are reverberations around the housing market and there could be a wider economic impact.

I get to give our closing speech today, so I will come on to various points then. On revenue neutrality, the number of sales required in the modelling that I have seen is about 84,000, whereas the Scottish Government predicts 100,000. I wonder whether the Scottish Government has been slightly conservative in its estimates and whether it could get to revenue neutrality with further changes to the tax rates and bands, which we will push for over the next couple of weeks. I will leave it there.

Because we are incredibly tight for time, speeches will be a maximum of six minutes.

15:23  

I welcome the strong economic performance that the cabinet secretary outlined, with employment at record levels and the lowest unemployment rate in the UK. I also welcome the Scottish Government’s continued support for agencies such as Skills Development Scotland, Scottish Enterprise, Scottish Development International and the Scottish Council for Development and Industry, many of which deliver excellent work and support for organisations and people in my constituency in north-east Scotland. Last year, I held a jobs fair in my constituency at which SDS provided a workshop on CV writing and interview skills, which helped a number of my constituents from an area of Aberdeen in which—although the city’s economy has been buoyant—there have been particular issues with getting people into employment. That was despite the local Labour Party objecting to SDS having any involvement in the process.

Those agencies’ role in the north-east has been in sharp focus in recent months because of the on-going issues affecting the oil and gas sector. I welcome the Scottish Government’s establishment of the energy jobs task force, which recognises that intervention is needed to ensure that those who face redundancy or potential redundancy get support, alongside the work that the partnership action for continuing employment—PACE—teams will do in the area.

That underlines the point that the key interventions that are needed in the area must come from Westminster. Alongside the endorsement of the Scottish Government’s budget today and the impact that it will have in supporting the work in north-east Scotland, we must be clear and unite in calling for fiscal intervention from Westminster where it is required, whether that is through a reduction in the supplementary charge, the introduction of an investment allowance for marginal fields or tax credits for exploration. That could boost exploration activity and ensure that, when the price recovery happens, as experts predict it will, the industry is in the most advantageous position to capitalise on it.

I would have a degree more sympathy for the positions that some politicians have outlined if they first acknowledged that they campaigned for the UK to remain responsible for the oil and gas sector and to have control of the fiscal regime in the North Sea and then pointed in that direction in calling for the key interventions that are required. We have heard again today talk of a resilience fund. At least a rough figure has now been stuck to it, but we still do not understand exactly where the funding is supposed to come from and nor do we understand who it is supposed to be given to directly, how it would be disbursed or what purpose it would serve.

It will be of great interest to the many communities across Scotland that have undergone economic shock in recent times that it is only now and in specific circumstances that the Labour Party has decided to call for a resilience fund.

I recognise the point that the member makes about working out the detail, but does he at least acknowledge the value of the principle of an intervention fund for industries that suffer sudden shocks to the system, as has happened to the oil and gas industry in Aberdeen, and will he call on his ministerial colleagues to endorse that principle?

Until I understand exactly what the fund is to be used for and where it is to be directed, it is difficult for me to say anything about the broad principle of such a fund. Having a pot of money is all well and good, but it needs to be targeted. The Scottish Government’s intervention to establish a jobs task force is right, because it has been established with a defined purpose to support individuals and companies for which redundancies are arising or have the potential to arise.

Is Mr McDonald aware that, during the 13 years of the Labour Party’s period as the United Kingdom Government, successive Labour Governments received in total in taxation from oil not £10 million but £93,000 million and that not one penny was set aside for Scotland, whether in a resilience fund or an oil fund?

I absolutely acknowledge that. Anybody who has cast a cursory glance over the letters pages of The Press and Journal in recent weeks will have seen that people in the north-east are not being hoodwinked.

Jackie Baillie said that she would be interested to look at the detail of the cabinet secretary’s announcement on tax. To compare what was proposed at the Finance Committee and what the cabinet secretary has announced, she had to do only two things. One was to read the annex to the Finance Committee report, which outlines what Gavin Brown proposed, and the other was to write down what the cabinet secretary announced on the bandings. I would not have thought that that would be a stretch for her.

If Jackie Baillie had done that, she would have found that the threshold up to which people will not pay tax has been increased, which will help more first-time buyers, and that the upper threshold for the 5 per cent rate has been reduced from the £500,000 that Gavin Brown proposed to £325,000, as the cabinet secretary outlined, which will ensure that those who buy properties at the higher end of the market pay a fair share of taxation on those purchases. She can put out her pre-prepared lines if she wants, but she should at least take cognisance of what has happened in the debate before she does so.

I will have to be brief, because I took two interventions. On adjustment to the block grant, we need to learn lessons from what the UK Government has dragged its heels on. That applies to future taxation and to late announcements—an issue that has been highlighted by, for example, Professor David Heald.

I am afraid that you must finish, Mr McDonald.

While we have to consult and announce our proposals early, the Treasury and the chancellor have the ability to pull the rug out. The chancellor attempted to do that with stamp duty and it could happen again in relation to income tax and assignation of VAT.

Mr McDonald, we have no time.

We have to ensure that there is a fair financial playing field when it comes to devolved taxation in the future.

I warn members that, if they take interventions, they must do so in their own time. We have no extra time.

15:30  

We know that there is a crisis in our accident and emergency departments in Scotland. We need only to open a newspaper to see exactly how bad things are. Over Christmas, we heard reports from across the country of the pressures on our NHS. The Victoria infirmary in Glasgow used a portakabin for casualty patient overflow. A man waited on a trolley in A and E for more than 20 hours at the Royal Alexandra hospital in Paisley. Ninewells hospital in Dundee admitted to delaying treatment because it was too busy and, in Aberdeen, the Royal infirmary had to cancel 80 operations in the first week of 2015. Yesterday, Raigmore hospital closed a ward.

We are seeing a similar strain on our other front-line services. Last weekend, a surgical ward at the Southern general hospital in Glasgow was left without heating or hot water for more than three days. Nurses were working in their coats and patients were sleeping with scarves and hats on, in Dickensian conditions. I am sure that the cabinet secretary will agree that having no hot running water on a surgical ward is unacceptable. The Scottish Government promised to invest in real terms in our front-line care—in helping those to the fore of our NHS—but still patients have to cope with unacceptable conditions and staff have to deal with a lot of pressure.

Yesterday provided further evidence that the Scottish Government is running to catch up when it comes to the NHS. The Cabinet Secretary for Health, Wellbeing and Sport showed a tacit disregard for all members in the chamber when she chose to go to the press before declaring a new piece of policy to the Parliament. However, perhaps she did not think that coming to the chamber was necessary because, as with the £65 million that was announced following the Christmas A and E crisis, the £100 million to tackle delayed discharges was simply a reannouncement of funds that were already allocated to health.

Can the member tell us whether this is new money or a reannouncement of money? What is her view? She cannot have it both ways.

My understanding of the Government announcement yesterday is that there is £30 million of Barnett consequentials and then £35 million, and £35 million the following year, from the Scottish Government budget. I do not know whether that clarifies the minister’s own Government policy for him, but I am sure that he will let me know if it does not.

We know that there is just £30 million this year—a fact that was downplayed in yesterday’s Government announcement. It took the cabinet secretary seven weeks to decide where the allocated health consequentials were to go, although she claims to know what the problems are in the NHS and she claims that tackling delayed discharge has been her top priority since coming into the job. That is seven weeks of planning time—an element that is crucial in helping our NHS and our local authorities to tackle delayed discharge and to plan as the integrated boards come into being on 1 April.

We will go into more detail on the NHS tomorrow, during the Government’s debate on its 2020 vision for health. However, as Jackie Baillie said today, Labour is calling on the Scottish Government to deliver a front-line fund for our NHS. The Scottish Government keeps reannouncing health consequentials, but we would like it to put Barnett consequentials into health and social care, because health and wellbeing are crucial to communities across Scotland.

Will the member give way?

I will just finish this point and then I will come to the member.

That means not just the currently unallocated £29 million from health but the £71 million of general consequentials, too. An NHS front-line fund would allow hospitals facing extra pressure to move to a seven-days-a-week operation. That would mean that hospitals could better deliver care, with planned surgery at the weekend and diagnostics in the evenings.

The Government has said that it will plan and run a 24/7 service, and it has put pilots in place, but I do not believe that it has made any progress on that in the past couple of years. Time is running out, and there is severe pressure on our NHS, which is why we are calling today for action.

I understand from Jim Murphy’s comments that the resilience fund to which front-bench Labour members have referred would come from non-health consequentials. Jenny Marra appears to suggest that all consequentials, including non-health consequentials, should go towards that front-line fund. I seek some clarity on that.

No—I said that £71 million of general consequentials should be allocated to the front-line fund.

Giving £100 million to a front-line fund would free up beds and ensure that patients receive a quicker diagnosis and better care. We would tackle patient flow through our hospitals. We are calling for that because A and E departments are having to put out calls for untrained volunteers to help with the waiting time crisis. The winter crisis in the NHS is becoming an everyday crisis for the people of Scotland. Everyone, from Audit Scotland to the Royal College of Nursing, is telling us that our NHS needs that investment.

The Government and the Opposition have correctly identified delayed discharge as the biggest challenge in our health service. That money is needed to inject more movement, improve patient flow and free up evening and weekend capacity in our hospitals, which will bring about the modern health service that the Scottish people expect. I hope that the cabinet secretary will consider that proposal for his budget.

15:36  

What has always been distinctive about the budgets that have been put forward by John Swinney—and by the SNP Government—is that they are cohesive and look at the overall picture, and propose actions for a purpose. The Government draws up its budgets with partners, where appropriate, whether they are businesses or trade unions. The budgets are based on three main strands: making Scotland a more prosperous country, tackling inequality and protecting and reforming public services.

Again, John Swinney has come forward at this stage of the budget process with a cohesive budget. Unfortunately, the main Opposition party has not been able to rise to the challenge and say, “Okay—we think that there are other things that could be done to bring about fairness and equity in our society.” As always, Opposition members look for something that they perceive to be a political weakness, then harp on about it.

With regard to Jackie Baillie’s speech I say that it takes some brass neck for a Labour politician to accuse others of making overoptimistic fiscal forecasts. Gordon Brown managed to get his borrowing predictions wrong by more than £400 billion and during Labour’s time in office the national debt almost trebled.

Does Linda Fabiani agree that it is a good idea to free up capacity on evenings and weekends in our hospitals in order to improve patient flow?

I have total confidence in the ability of the Scottish Government’s health team to look at the health service in the round, to work with its partners and to come up with the best possible solution. It is not about picking things out of a hat to get a headline on the front of the newspaper.

We have a good baseline from which to start on our pledge to make Scotland a more prosperous country. Scotland’s economy is on track this year to record its strongest performance since 2007, and we are leading the way with the highest employment and economic activity rates and lowest unemployment rate among all the nations in the UK. In addition, business start-ups in Scotland are at a record high.

Some credit must be given to the Deputy First Minister for managing that in spite of what the Institute for Fiscal Studies has described as spending cuts “on a colossal scale”. The OBR has noted that, under the coalition Government’s plans, total public spending would fall to 35.2 per cent of GDP by 2019-20, to what would be its lowest level in about 80 years.

There are many quotations from many respected agencies. For me, the most telling quotation comes from Ed Miliband who—backed up by his troops marching through the lobby to vote for the Tories’ austerity cuts—confirmed that the Labour Party, too, is wedded to austerity.

Labour and Tory spending plans are very different. Does Linda Fabiani know that the Institute for Fiscal Studies shows that Labour’s plan is to spend more or tax less than the Tories to the tune of £43 billion? That is before additional revenue streams from the mansion tax and the increase to the top rate of income tax. Is not what she just said more spin than substance?

The Westminster MP in my constituency clearly does not understand what he did last week. I had thought that the Labour Party in Scotland would understand the implications of that vote. Is Jackie Baillie aware that it also endorsed George Osborne’s welfare spending cap?

Tackling inequality is a real priority for the Government because, in common with many economists throughout the world, we believe that equality and cohesion are good for growth as well as for individuals. The ability to share that growth is important. That is why the Scottish Government has taken the steps that it has taken in relation to the Council of Economic Advisers and poverty impact assessments of all its policies.

We are doing what we can to mitigate Westminster’s welfare cuts, with more than £100 million having been committed to that in 2015-16. However, preventative spend is the real issue. Kenny Gibson talked about it as convener of the Finance Committee, but in the previous parliamentary session, when Malcolm Chisholm and I were members of that committee, we did studies about the importance of preventative spending, especially in the younger years. It is a long-term issue. We cannot change such matters overnight.

If we can do one thing for Scotland—even if we cannot agree on its constitutional future or the powers that we should have—it is surely to agree that the important thing is to make Scotland a fairer, better and more prosperous country. Businesses are coming on board with that, and trade unions have always believed it and are working well with the Scottish Government towards that end. Surely the Labour Party in particular—with a history in what used to be a movement—can recognise that in the longer term our country does not need political sniping, but needs us to work together and to agree certain principles on which we can all move forward, regardless of other arguments about the constitution or the results of elections. That is what is important.

We talk about the new politics in Scotland. That is what people expect. An awful lot of people who used to value the Labour Party expect it too.

15:42  

The Deputy First Minister knows that Liberal Democrats take a constructive and realistic approach to the budget process. We have voted twice for his budgets and voted against on only one occasion. That is not because we thought that each of the budgets for which we voted was perfect. They were not perfect by any means but they were good enough for our support.

The first time round, we supported the budget because we got extra money for our colleges and house building. The second time round, we voted for the budget because we got an expansion of nursery education for two-year-olds and free school meals—things that we had advocated prior to that. When we did not achieve what we wanted to achieve with our realistic and costed demands, we voted against, but we have done that only once. That will be our approach this year again.

I hope that we will have constructive discussions with the Deputy First Minister, as we have in previous years. We understand the strains and know the financial pressures. We know that the demographic time bomb that we all thought was somewhere in the distance is here now and is impacting directly on our public services. We understand the impact of poverty not only on the individuals whom it affects directly, but on the public finances. If individuals do not contribute to the economy, we cannot raise the taxes that help to pay for our public services.

We also have the additional challenge of climate change. We are all trying to grapple with that and ensure that we invest enough in the right areas.

Those three are considerable pressures, so we understand the pressures that the Deputy First Minister faces in trying to get the budget to balance. If there had been a different vote last September and Scotland had become independent, he would have an additional pressure of £7 billion this year because of the drop in the value of oil revenues.

We know the pressures and we do not need any additional pressures. I am grateful that we have the United Kingdom to maintain the investment in public services that we have grown used to in Scotland.

All that is possible because we have managed to get the economy back on track and we are getting the country working again. We have 168,000 more jobs in Scotland than we had when the UK Government came into power in 2010. That is based on a plan that SNP and Labour members said would not work. Because we have got the economy back on track—although there is still more work to be done—we also have additional Barnett consequentials, which we have to choose how to allocate. For the remainder of my speech, I will deal with what we would like to see in the budget this year.

Danny Alexander has suggested that most of, if not all, the Barnett consequentials should be spent on upgrading the A9 and the A96. Is that Liberal Democrat policy in Scotland?

We fully support capital spend on the upgrade of the A9. Despite making repeated promises, the Scottish Government has been backward at progressing that project, and we would like to see it accelerated, certainly on the capital side. However, today, I will talk primarily about the revenue side, which the bulk of additional Barnett consequentials will provide for.

First, we know that the national health service is under extraordinary pressure; we heard from Jenny Marra earlier about some of the pressures. I argue that the SNP took its eye off the ball during the referendum. Cancer waiting times have been missed, accident and emergency departments have been pushed to the limit and there are insufficient funds to prevent the latest charges. I welcome some of the announcements in recent days to try to address some of that, but we also need to ensure that we get the right priority for mental health as well, because that is often the poor relation in the NHS. We have additional funds from the Barnett consequentials, which we would like to be invested in the health service to deal with those particular difficulties.

Our second priority concerns childcare, which the Deputy First Minister has heard me discuss in previous debates. Last year, we made some progress, and we now have 15 per cent of two-year-olds getting 15 hours of nursery education every week. That figure will rise to 27 per cent in August. However, in England, the figure is at 40 per cent. I would like Scotland to catch up with that level, for the very reasons that Linda Fabiani talked about in relation to ensuring that that early intervention can make a real change in the lives of children, especially those from impoverished backgrounds. That is the best education investment that we can make, and that is why we advocate it.

It is with a degree of trepidation that I discuss the next item, which is student loans. It is a brave area for any Liberal Democrat to venture into these days. However, if it is the right policy to advocate, I will certainly do so.

You are in your final minute.

We advocated that there should be no tuition fees in Scotland. We know that there is a difference south of the border in terms of Government policy, but that is what we argued for. Now, we also want the threshold for the repayment of student loans to be raised. In Scotland it is £16,910 and in England it is £21,000. We want that gap to be closed. We understand that the resource accounting and budgeting charge was underspent in the past year, and we want the flexibility that that would create to be used to raise the threshold to £21,000. We think that that would benefit Scottish students, and so it is something that we support.

I am afraid that you must conclude, or else I will have to drop the last speaker from the debate.

We advocate general care, the NHS and ensuring that people with student loans get that extra support. We will work with the Deputy First Minister on those issues.

15:49  

I welcome the opportunity to speak in the debate. I think that we are all pleased to be members of the first Scottish Parliament since 1706 to set national rates of taxation.

I commend John Swinney’s announcement today. As ever, he has been fleet of foot. He has listened and he has adapted and he has done so in the light of changes that were made elsewhere for whatever motivation—we do not know what that motivation might have been—and in the light of constant insecurity regarding what may or may not come from the UK Treasury in the block grant, and he has delivered. Good for him. I have to say shame on others, in particular Jackie Baillie, for all the posturing that we have heard today.

The difficulties that have arisen as a result of what has happened elsewhere should give us pause for thought. The Deputy First Minister has had to contend with a problem that was created by the fact that he has at his disposal—and we, as Scotland’s Parliament, have at our disposal—only a small fraction of the full wealth and potential of this nation. Even after the Smith commission, if its recommendations are ever implemented in full, we will still have at our disposal only a minority of all the resources of the nation, which we should be applying to the betterment of our fellow citizens. Until that situation changes, any Administration will face big challenges in setting tax rates, because it will be able to apply and utilise only a small number of the essential tools.

When John Swinney announced his intentions in October 2014, he talked about the principles that he was guided by—not just revenue neutrality, but Adam Smith’s four maxims. It is useful to look at those. At the centre of them is the principle of fairness in taxation, which has been enunciated through the ages and which Smith expressed by saying:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities”.

Smith had another important view of taxation, which was also given in “The Wealth of Nations”. It says:

“The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person.”

Therein lies Parliament’s difficulty. Although we now have control over the rates of a limited number of taxes, we do not have control over all of them, and without that control we cannot command the circumstances in which certainty, manner and quantity are all made “clear and plain”.

The Irish nationalist and mystic, George William Russell—no relation—observed that there is what he called a “fundamental proposition” that states that

“whoever controls the taxation and trade policy of a country controls its destiny and the entire character of its civilization.”

He said that in the context of the struggle for Irish independence; we might put it in less dramatic terms today.

In reality, however, Scotland cannot be a normal country with a normal system of taxation if the control of so much of it and of our spending power lies outwith the country. That has been demonstrated more than adequately by two events in the past week. Austerity is devastating our communities and it is devastating individuals in Scotland. It was made in Westminster by Tory, Liberal and—shamefully—Labour hands, and we can do nothing about it.

The renewal of Trident, which is being done by the same people, is another moral and economic tragedy that has been foisted upon us in the same way. In Russell’s terms, the “entire character” of our country is being skewed and distorted by financial and other decisions that are not made here.

I am a strong supporter of the position that Gwynfor Evans took on devolution of powers: when people are starving, they should not be refused even half a loaf. However, the problem of consuming endless half loaves is that people do not get a balanced diet. In taxation terms, if we have control of only a small part of the taxation mix, the decisions that we make on how to utilise that small part are always compromised by what we cannot do. Moreover, it will always be second-guessed, disrupted and, sometimes, deliberately undermined by those who control the greater part of taxation. We have seen that already.

John Swinney’s principles were, and are, right. His decisions were, and are, right. There is no doubt about that. He has fulfilled his original objectives. However, nothing currently in the system will allow anything to be easier for him or his successors in the future.

The Smith commission proposals are piecemeal and will allow the same problems to recur; indeed, there is an argument that they will encourage more meddling by Westminster, as we have seen from the Treasury’s admissions this week. That is a graphic example of Winnie Ewing’s maxim: it is another case of Britannia not ruling the waves but waiving the rules.

The only sensible solution is full fiscal autonomy. Independence is, of course, my preference and that of others, but we could have full fiscal autonomy and we would be able to solve the problem. Full fiscal powers would allow full decision making on all the range of taxation that a Government chose to utilise. It would be fair and it would arise from need and from clear plans and ambitions. It would fulfil the first and second maxims of Adam Smith. It would be “certain, and not arbitrary.” Everything would be known because everything would be decided here in Scotland’s Parliament, and not elsewhere.

That is what happens everywhere else—it is the normal thing to do. How odd it is to be in this chamber, where the Opposition parties constantly espouse the abnormal, the arbitrary, the unclear and the least effective solution. Perhaps that is why they are—and will, according to all the opinion polls, remain—Opposition parties.

15:54  

This budget debate is marked by the first-ever tax-setting proposals by a Scottish Government, by the Finance Committee’s very useful commentary and by serious, clear and strictly prioritised choices from the Labour Party. I will deal with those three issues in reverse order.

One of the most important suggestions that was made by Jackie Baillie was about setting up an office for budget responsibility. I note that the proposal was rubbished a few days ago, but not so much in today’s debate—perhaps because people realised that the Finance Committee itself had recommended that

“the Scottish Government should consider the option of inviting the SFC to produce the official macro-economic and fiscal forecasts for Scotland”.

Of course, those are the key distinguishing features of the Office for Budget Responsibility. The suggestion was supported a few days ago by the very distinguished economist Angus Armstrong and also by David Bell, who told the committee that

“A Scottish forecasting body would help ensure ... a critical mass of independent economic analysis ... in Scotland.”

The proposal has very high-level backing, and the Scottish Government should certainly take it more seriously than it did a few days ago.

Labour’s choices, which come in two parts, are strictly prioritised and clear; in fact, the choices have never been as clear and prioritised as they are today. Contrary to the Twitter storm about Jackie Baillie contradicting something that she said about the oil fund, the £10 million resilience fund is not an oil fund. They are completely different funds; the resilience fund is an emergency fund to help areas that are affected by job losses. Again, I hope that the proposal will command the support of the whole Parliament.

Mr Chisholm always argues from principle, so on a point of principle, why is it that—given that the UK has for four decades been the recipient of all the £300,000 million of tax revenue—Scotland with its fixed budget for fixed functions, which do not include oil or energy, should have all the liability for setting up that fund?

I think that Mr Ewing will find that Ed Miliband, Ed Balls and, indeed, Jim Murphy were calling for a great contribution from the UK Government as well—indeed, for a contribution far beyond the £10 million for a resilience fund.

As far as our prioritisation is concerned, the biggest announcement today was that the rest of the consequentials should go to health and social care. Yesterday, we had the botched announcement on delayed discharge; not only was it botched in terms of procedure but—as Jenny Marra eloquently reminded us last night and today—it was also delayed. That is regrettable, given the problems that we have had in the health service over the past two months. That said, we certainly welcome the money—indeed, we need it. As we know, the number of bed days that are occupied by delayed discharge patients has been going up dramatically; I think that it has gone up by more than 30 per cent in the past two years. The trend is all in the wrong direction, so the money is certainly welcome.

The other significant announcement from Labour today was about hospital capacity. Although we recognise that we have to build up capacity in the community, we cannot ignore hospitals. What Labour was announcing today was money that could implement what is actually Scottish Government policy. The Government has been talking about diagnostics being done in the evening and surgery being done at the weekends, but it has no hope of implementing those policies without extra resources.

As for setting taxes, this is clearly an historic occasion. However, despite John Swinney’s boast that the Conservatives had copied his announcements two months ago, we can say that he has at least partly returned the favour today by raising the same amount of money from the land and buildings transaction tax as will be raised from the equivalent tax in England. That said, I accept and welcome the fact that the land and buildings transaction tax is more progressive. The affordability issue was dealt with extensively in the Finance Committee’s budget report, and Kenny Gibson has covered it well.

I want to move on to perhaps the central and most interesting part of the Finance Committee’s report, which relates to preventative spend. Linda Fabiani rightly praised the committee’s intentions in that respect, and we should recognise the contribution that it has made over two Parliaments to driving the agenda forward. John Swinney said that there had been sustained progress on the preventative approach, and he talked about the £170 million for the integration fund and then about the change funds.

However, that in a way illustrates the problem that we have, because the Finance Committee has said that we must try to emphasise the impact of spending on outcomes. There, of course, we have a problem, because the Finance Committee said:

“As is outlined below in relation to each of the Change Funds and the role of CPPs, there is little evidence of the essential shift in resources taking place to support a preventative approach.”

John Swinney said that there had been an increase in support for those with the highest level of need who receive care at home, but Audit Scotland said that

“There is little evidence of progress in moving money to community-based services”,

and it identified that there had been a decline in the amount of money that was being put into home care for older people. It is clear that a massive challenge is faced in delivering the preventative care agenda, and I think that the Finance Committee has done us a favour in emphasising that.

The Finance Committee also highlighted prioritisation, and its report includes on pages 22 and 23 a very interesting quotation on health from Andrew Walker. Politicians are always reluctant to prioritise—they want to spend money on everything—but today the cabinet secretary will not hear that we intend to spend money on 10 different things over and above what the Government will spend it on. I know that John Swinney likes to end his budget speeches by saying that this Labour member said this and that Labour member said that, but today we are all saying that money should be spent on the resilience fund and, most of all, on health and social care.

16:01  

It is worth restating at the start some of the Scottish Government’s positive successes, which we have now become used to but which not all parties have always supported. The freezing of the council tax for the eighth year is certainly helping some of my struggling constituents, and the absence of prescription charges means that there is no demeaning means testing. The free bus travel that is being provided for the over-60s improves mental and physical health, and the fact that there is free personal and nursing care removes the worry that many people have about older age.

We would all like to spend more money on something. For example, Shelter, the Chartered Institute of Housing in Scotland and the Scottish Federation of Housing Associations would like more to be spent on housing; many of us would like that to happen, too. Scottish Care would like higher fees to be charged for care homes so that the staff could be paid the living wage. Again, many of us would like that, too.

However, we need to emphasise that money can be spent only once. If Opposition members want to say that we should spend more on health and less on education, they are perfectly entitled to do so. However, despite what Malcolm Chisholm said, quite a few different spending desires have been mentioned and the Opposition will not be taken seriously if it says that we should spend more on health, education and local government while refusing to tell us where the money should come from.

Will the member take an intervention?

Not just now—I will take one later.

The Equal Opportunities Committee, of which I am a member, focused on age transitions, especially those that are made by young people who cross the adult age frontier and older people who move into retirement, in which they might have more care needs. As a member of the committee I might be biased, but I commend the Equal Opportunities Committee for not simplistically just asking for more money but instead—for example, in relation to employment services—asking the Government to review the balance between funding for urban areas and funding for rural areas. That is a very balanced approach.

Preventative spending remains a real focus for the Finance Committee and, I hope, the whole Parliament. Paragraph 201 of the committee’s report, which Malcolm Chisholm quoted, talks about that. We need to focus on long-term outcomes and not get too bogged down in the number of nurses in A and E. Ideally, over time we should require less A and E provision and, presumably, fewer A and E nurses. That would allow more nurses to do preventative work in the community. The Royal College of Nursing is keen that we emphasise sustainability, and I am more than happy to endorse that.

Of course, the NHS will change as we go forward—I think that we will debate that tomorrow—and there will probably be more emphasis on prevention, but part of the process will involve politicians of all parties taking a long-term view rather than just measuring what is easy to measure in the short term.

I have said this before, but I say it again: taxes are a good thing. Most obviously, we cannot have public services if we do not have taxes. Taxes pay for much of our education, health, housing and transport, as well as our defence systems. Of course no one wants higher taxes for the sake of it, but no one should say that lower taxes are a good thing per se. Taxes also help us to narrow the gap between the richest and the poorest in terms of income and wealth. There is no sign of that being done voluntarily, so taxation is the obvious way to do it.

The budget that we are discussing is the first for our two new taxes. I welcome the arrival of LBTT and the landfill tax; I especially welcome the more progressive nature of the former. However, there have been some problems along the way, including the fact that, whereas our budget was set out in considerable detail and lengthy consultation and input were allowed, the changes that were made at Westminster were subsequently announced at a few hours’ notice with no consultation and no input.

That puts the Scottish Parliament and the Scottish Government in the impossible situation of having to announce figures while not knowing what the UK figures will be and then having to react at short notice. That is a fundamental flaw in the devolution settlement, and the more taxes we control, the more likely it is to occur.

Of course, the answer is for Westminster to give up its theatrical style of setting its budget and to set out its overall plans before the devolved Parliaments set theirs, so that we can tweak the UK system for our own situations. However, I am not holding my breath to see whether that happens.

All that has put John Swinney in an impossible situation. Having committed to revenue neutrality—which I agree with—something has had to give, as neutrality with the previous Westminster position would be portrayed as a tax increase in Scotland, while neutrality with Westminster’s new position could be seen by some as a tax cut, at a time when public expenditure is seriously squeezed. We have heard today that the Deputy First Minister has chosen the latter and passed on the full tax reduction.

I will take an intervention now, if Jackie Baillie still wants to intervene, but I am not sure that it was on this subject.

It was on an earlier subject. As we have in fact outlined during the course of my speech, and as others have covered, the NHS front-line fund and the resilience fund would both be funded through autumn consequentials.

You are in your last minute now, Mr Mason.

I am not sure whether we heard how local government was to get extra money, but there we go.

Another problem with the whole system has been the problem with the block grant adjustment. That was meant to be agreed long ago and was meant to be a solid system that would last for years. Such a system is in place for the Scottish rate of income tax from 2016, but it is still not in place for those relatively small taxes. The Finance Committee has become increasingly frustrated at the slow rate of progress; we are having to make do with a one-off adjustment for 2015-16.

The whole point of devolving a tax is that we in Scotland make our own decisions and live by the consequences, for better or for worse. Yet it has seemed that Westminster wants to design a system whereby Scotland could never win, however well we manage things ourselves. It is a real concern for the Finance Committee, looking ahead to future years, if that level of Westminster thrawnness continues.

In conclusion, many of us would like to see higher expenditure on a range of subjects, but we have to live within our means—something that Westminster has regularly failed to do. John Swinney is to be commended for his success in managing our finances.

16:07  

The Deputy First Minister started his speech this afternoon with his usual summary of the economic situation. He was right to say that there is good news. There is an old saying that success has many fathers. In this chamber we have got used to the tussle between Mr Swinney, trying to claim credit for the economic successes, and representatives of the coalition parties, on this occasion represented by Mr Rennie, trying to state that it was all down to decisions taken in Westminster, where most of the macroeconomic levers are held.

However, Mr Swinney was a little bit partial in his quoting of today’s statistics. We saw two new economic indicators published today, one of which was the unemployment figure. Mr Swinney is right to say that the level of unemployment is still lower in Scotland than in the UK as a whole, but unemployment in Scotland went up 7,000 in the period from September to November. We also saw the economic growth figure published, and although the rate of economic growth in Scotland is still rising—it is 0.6 per cent—it is now lower than the figures for the two previous quarters and, for the first time in 2014 statistics, it is lower than the figure for the rest of the UK.

Those two economic indicators for the third quarter of 2014 suggest that we are not doing as well as we were or as well as the rest of the UK. What event happened—uniquely in Scotland—in the third quarter of 2014 that may have had that economic impact? We have, incidentally, seen the same economic impact on retail figures, house prices and economic confidence among small businesses. Perhaps, in trying to claim credit for successes, the Deputy First Minister needs to reflect on the fact that the referendum, which was his party’s initiative, may not have been entirely beneficial to the Scottish economy.

I am interested in the point that the member raises. Aberdeen and Grampian chamber of commerce has said that its members say that the referendum did not have a significant impact on their businesses. Is the member just engaging in the usual idle speculation and scaremongering that have become associated with the Scottish Conservatives?

Mr McDonald occasionally makes a living as a stand-up comic, and that was about par for the course. I was simply quoting some interesting statistics that show that, against historic trends in which we have been matching or exceeding the UK’s performance, in the third quarter of 2014—uniquely—the trends went in the opposite direction. I would have thought that, were the member concerned about those trends, he would be reflecting on the events that took place in the third quarter of 2014 that had an impact only in Scotland and not elsewhere in the United Kingdom.

As a number of members have pointed out, with the setting of new tax rates, this budget is of historic significance. I welcome that. This is what a grown-up Parliament should be like, where we are debating not just how we spend the money but how the money is raised and how the tax rates are set. I look forward to the Smith commission proposals being implemented so that we can have a much more rounded discussion on the setting of tax rates.

We need to put the budget into context otherwise the SNP will continually complain about Westminster cuts. I was in the chamber yesterday when Alex Neil said that Westminster had slashed to ribbons the Scottish Government’s budget. The reality is that the 2015-16 budget is, in real terms, the second highest budget that the Scottish Government has ever had to deal with. According to SPICe, the only budget that was higher in real terms than the budget that Mr Swinney is dealing with today was the 2009-10 budget. In each of the past 16 years, with that exception, the budget was lower. That does not exactly represent the savage cuts or the slashing to ribbons of the budget, which are phrases that we sometimes hear from those on the SNP benches.

There never seems to be any shortage of money when it comes to the Scottish Government’s preferred projects, whether that is the extra money that it announced yesterday for health—incidentally, it is playing catch-up on the position taken by the UK Government—or, for that matter, the £10 million that was produced as if by magic for the V&A project in Dundee. There is no great sign of a cash shortage.

When it comes to taxation, the LBTT changes that were previously announced by Mr Swinney would have hit many aspirational families hard. For example, anyone buying a house costing more than £254,000 would have paid more. My colleague Gavin Brown previously proposed an amendment that would have helped every house buyer in Scotland and which would have been fully funded following the chancellor’s stamp duty cut, handing the Scottish Government an extra £64 million a year. We welcome the changes that Mr Swinney announced today. I listened with interest to the detail and I will take away the proposals and look at them. Gavin Brown was entirely right to say that they merited a cautious welcome.

Mr Swinney is always talking about the competitive rates regime that we have in Scotland for business. We welcome that, too. We strongly supported the small business bonus scheme. However, we are not so keen on some of the more recent developments, whether that is the empty property relief or the phasing out of the retail levy. We have not seen the Scottish Government mirror the changes down south to give an additional bonus to retail premises. We are also seeing the proposed introduction of rates, all on the sporting interests, to take £7 million a year out of the rural economy. We may have a competitive advantage, but I regret that it is being watered down.

This is not the budget that the Scottish Conservatives would have set out, but aspects of it are welcome. We will be happy to see it proceed to the next stage to allow further discussions.

Many thanks for finishing timeously. We are very tight for time. I ask for speeches of up to five and a half minutes. We will be writing to some members as well.

16:13  

I will try to keep within the five-and-half minutes timescale; perhaps I will be even quicker than that.

I thank the cabinet secretary, John Swinney, for his contribution to and his expert handling of the Scottish budget, which will make Scotland a fairer and a much more just society, despite the austerity measures that are being pursued by the Westminster Government. I must say to the Scottish Labour Party members here that their colleagues joined the Tories at Westminster to vote for £30 billion-worth of austerity cuts. In yesterday’s debate, I said that that was a rather sad state of affairs.

I will concentrate my remarks on a number of specific areas: health; justice—if I have time; and preventative spend, which is absolutely the way forward. Not only members of the Finance Committee, including Kenny Gibson and Malcolm Chisholm, but various other members cited the committee’s report. I will do that, too.

I quote the Finance Committee’s report because we should all look at what it says and agree. Paragraph 200 says:

“The Cabinet Secretary accepts ‘that preventative spending remains a work in progress, but it is work that the Government and public authorities have to deliver, because it is the key to the sustainability of public services.’”

Public authorities are an important part of this. The cabinet secretary may be frustrated, but things are not moving quickly enough. However, the Government is pushing forward with reform, and in paragraph 201 the Finance Committee comes back and says:

“the Committee continues to be supportive of the Government in seeking a decisive shift to prevention and recognises that some progress has been made especially in relation to integrated working.”

That is important. The reason why I raise it and why I mentioned public authorities is that local authorities have a huge part to play in preventative spend and joint spending. We must remember that, and I am sure that we will take it up with our local authorities.

I welcome the cabinet secretary’s commitment to preventative spend and the change funds for early intervention and tackling reoffending. Preventative spending initiatives will receive funding of about £500 million, and £100 million will be made available to health and social care partnerships to support the integration of health and social care. It is not just my view as an MSP but, I honestly believe, the view of local authorities, councillors and the public at large that that cannot come soon enough to ensure that we deliver that joined-up thinking.

In my area, we have bed blocking simply because we do not have that joined-up, integrated funding of social care and health. I have raised that with Greater Glasgow and Clyde NHS Board and I am sure that other members have raised similar issues with the health boards and councils in their areas. I look forward to that funding coming to fruition.

Under this Government, total health expenditure is increasing in real terms to £12 billion in 2015-16, regardless of what others have said, and the Scottish Government has announced an extra £100 million to help with delayed discharge. That is welcome, and I am glad that Malcolm Chisholm welcomes it—I think that he is the only member on the Labour benches who said that.

I want to ask the Labour Party where the extra £100 million was coming from, because I remember the debate that we had last week. On top of the 1,000 extra nurses that the Scottish Government was putting forward, Labour was putting forward another 1,000 nurses, but we never found out where it would get the money from. I am sure that Jackie Baillie will correct me if I am wrong, but my understanding—

We did, in fact, set out clearly that it would come from the proceeds of the mansion tax. That would fund the additional 1,000 nurses.

Actually, that was not the question that I was asking. Labour did not really set it out. It became a kind of bidding war. We promised 1,000 and then the Labour Party came in with an extra 1,000 on top of ours. If we had promised 50, it would have put forward another 50. The question that I was asking—I said that I would stand to be corrected—was where the £100 million was coming from. I recollect that Jackie Baillie mentioned something about autumn consequentials, but I would like confirmation. I look forward to getting confirmation on that point, because the policy of 1,000 extra nurses in the debate last week came from Jim Murphy. They were pulled out of the air all of a sudden. I just want to clarify that it is not another creeping Westminster policy or Jim Murphy policy coming into the Scottish Parliament.

You have 20 seconds remaining.

If we could get that clarification in writing, I would like that.

I wanted to touch on various other areas, but I know that we are tight for time. The budget will bring a fairer society here in Scotland and I thank the cabinet secretary very much for it.

16:18  

I say to Sandra White that the 1,000 extra nurses is a Scottish Labour Party policy and it is one that we absolutely need. We need those nurses to go into our national health service.

The impact is not just about the shortage of nurses and the cuts to beds in our hospitals. I do not know whether members saw the article in The Sunday Times on 18 January that said that the number of negligence claims in the NHS in Scotland is increasing. An article in the Fife Free Press today drew my attention to the massive increase in the number of negligence claims against NHS Fife; we are talking about litigation claims amounting to £17 million. Let me put that in perspective. I welcomed the announcement the other day of £100 million to tackle bed blocking, as I welcome any money that is intended to address the crisis in the NHS, but over three years NHS Fife’s share of the money will be £6.73 million, at a time when it faces litigation claims amounting to £17 million.

We need preventative action and we need more nurses, which is why the Labour Party in Scotland is committed to putting more nurses in.

John Swinney rightly said that the economy in Scotland is doing well, and I agree with him that that is something to celebrate. However, the problem with his budget is that I see in it no strategy for spreading the benefits across the whole economy. It seems to me that there is no clear strategy, although there is a lot of rhetoric about addressing inequality and tackling poverty and deprivation, as there has been in this debate. I cannot see how the budget will tackle inequality, poverty and deprivation across Scotland.

For example, this year local authorities face a real-terms cash cut, at a time when they face major pressures. Councils, whatever their political administrations, will face deep cuts that hurt communities throughout Scotland. We need to address that as part of a wider strategy, but such a strategy is lacking in the budget.

Unemployment has fallen, which should be celebrated, but there are still far too many people out there who are not getting opportunities. We must be more ambitious. It is not about increasing benefits and getting more people on benefits. People need to be able to get jobs and skills. They need opportunities. The budget lacks a strategy in that regard.

The Government has downsized the number of social rented houses that it wants to build. Mr Swinney talked about investing £390 million to build homes, including 4,000 social rented houses, but Shelter Scotland estimates that we need to build 10,000 houses for rent per year if we are to begin to tackle the housing crisis.

We need a strategy that works with local government. I am not arguing that all the money must necessarily come through the Government; there are pension funds and other opportunities. There seems to have been a failure to work with local government to develop a strategy.

The Deputy First Minister talked about the work that goes into prevention. What analysis has been done to show how much of the money that has gone into the change funds has been used by local authorities to offset the cuts that they face?

I point out to the finance secretary that, right across Scottish local government, the council tax freeze has not been resourced to the correct level. There has been a bad deal for local government, and Jackie Baillie was right to say that it will not be addressed in one budget.

We need a clear and coherent strategy for tackling inequality and ensuring that the wealth of this country is spread throughout Scotland. The budget fails to provide that.

16:24  

I do not think that anyone should disagree that Scottish budgets have been set in a tough context for the past few years or that any finance minister in power at present, whatever their political party, would have a difficult job to do. An austerity agenda is being imposed by the UK Government and there is no sign of a let-up from any of the UK political parties, whatever the result of this year’s election. There are limits to what any Scottish Government can do.

At the same time, there have been concerns that we are not yet acting as much as we could within those limits. I mention the constraints on the ability of local authorities to make decisions of their own on the amount of revenue that they need to raise, and I cite the long-standing opposition to the continuing real-terms pay cuts, which members will be aware of tomorrow if they choose to cross the Public and Commercial Services union picket lines and come into Parliament. I understand why that opposition began when the austerity agenda kicked in, but we have seen transfers from revenue to capital, and that money could have funded an inflation-level increase in the public pay packet. It has not done that.

We have also seen repeated failures on the unanimously agreed climate change targets. Year after year, parliamentary committee reports on the budget, like the one in my hand, say that it is unclear how much funding is attached to the climate change agenda. That problem has continued.

On the changes to the land and buildings transaction tax, I will look closely at the detail of what has been announced today. I supported the initial rates that were proposed in October and I remain a wee bit concerned. I worry that, if the decision effectively repeats or replicates a tax cut programme from the UK Government, that is a bad precedent to set in the context of the future devolved tax powers that we will have.

I think that Mr Swinney said that, under the changes that have been announced today, only people who buy a property of £940,000 or more than that would pay more than they would under the October rates. If that is the case, a substantial part of the tax revenue reduction is being handed back to people at the extreme end of the property market.

I will make one point to Patrick Harvie. The key consideration for me has been the question of the commitment that I gave to Parliament on revenue neutrality. That is what drove my decision. I would not want Patrick Harvie to interpret the decision as being that we commit ourselves in all circumstances to replicate whatever is done within the United Kingdom.

I guess that the question is: neutrality compared to what—the situation when the initial proposals were made or the situation as it will be after UK changes?

Let us be clear: before we get the wider taxation powers, there is no path through UK austerity without either handing on cuts to the public services that people depend on or raising taxation on those who can afford to pay it. People who are on very high incomes, such as us in the chamber, can afford to pay it. Let us hear no nonsense about a tax on aspiration. Nobody is taxed for aspiring to own great wealth; people should be taxed for actually owning great wealth or having very high incomes. That is a feature of a decent society.

On the additional issues that we have sought to raise with the Deputy First Minister, there will be no great surprise about our returning to the theme of energy efficiency. We have done that over many years. Although the Deputy First Minister mentioned in his speech the figure of £94 million, if I remember rightly, it is clear from the WWF submission that it has recently called for at least £125 million a year. It said:

“Given previous under-funding, we now think substantially more will be needed.”

Greater progress is required if we are going to get anywhere close to our targets on fuel poverty or climate change.

We have also raised the issue of unconventional gas and fracking. Whatever position we take on that issue in Scotland and on whether that industry should have a role in Scotland, it is clear that unless the UK Government halts the current licensing round—we will call on it to do that—local authorities may find themselves under pressure to deal with very many complex, novel and challenging planning applications.

If we want local authorities to be in a position to defend Scotland and its people against unwelcome developments of that nature, we need to resource them properly. Such an approach was taken in relation to wind farms—additional resources were made available—and we think that the same should happen in relation to unconventional gas.

You should draw to a close, please.

I will be brief.

We have also raised issues to do with sustainable transport, air pollution hotspots in particular, and our on-going interest in the wave and tidal sector.

We look forward to seeing progress being made on all those issues. If it is, we will be able to vote in favour of the bill at stage 3. We will not oppose it tonight.

16:29  

John Maynard Keynes was once the hero of the Labour Party, but even Churchill was a grudging admirer of that great English economist. He once said that whenever he asked three economists for an opinion he invariably got four answers—two from Mr Keynes. That seemed to perplex Churchill, but it points to an essential quality of the good economist—the capacity to understand the sometimes counterintuitive nature of economics. That goes hand in hand with understanding that economics is not a zero-sum game, which in turn is a vital part of understanding wealth creation.

The link between public finances and the economics of wealth creation is a fascinating one, and one that Mr Swinney understands perfectly. To date, there has been no greater wisdom on the subject than that provided by Mr Keynes. However, as things stand, the finances of present-day Scotland have been a zero-sum game. The all-important feedback loop that rewards good economic stewardship by increasing the taxation take has been missing, and that is the key fact missed from the unionist parties’ perspective.

It took an economist of Mr Keynes’s stature to reveal the often counterintuitive nature of economics and to develop his countercyclical wisdom for Governments, and it is the difficulty of that concept and lack of public understanding of counterintuitive economics that the unionist parties often rely on. That is why they are so united in persevering with their failing austerity agenda.

All the more credit is therefore due to the Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy, not only for delivering a balanced budget year on year but for doing so within that constraint, following the wisdom of Keynes and proving it in practice. Keynes’s advice was that countercyclical Government spending should concentrate on infrastructure and capital spending. That was the medicine that he prescribed for the ailing economy, and it works.

It is notable that the Scottish economy has outperformed the UK economy—as Murdo Fraser acknowledged—across the whole range of indices since Mr Swinney first put those principles into practice, compared with the 30 preceding years, when it underperformed compared with the UK economy.

It is well known that the multiplier effect enhances the effect of capital spending on infrastructure significantly. It is well known that infrastructure spending creates new jobs and supports existing jobs. It is well known that those effects spread throughout the supply chain and keep on spreading.

What is sometimes not appreciated is how the improved infrastructure in itself helps to improve our long-term economic performance, our productivity and our competitiveness. That is why I am so pleased to see the budget setting out our plans for a further £1 billion extension to the non-profit-distributing pipeline of infrastructure projects. That is why I am so pleased to see projects such as the Forth replacement crossing being delivered so successfully and under budget, as well as projects such as the new south Glasgow hospitals and the ambitious schools for the future building programme, which is investing £1.8 billion in 91 new schools by March 2018. A new school recently opened in Kirkwall, and new schools are planned for Lerwick and Oban, and such projects support jobs across the Highlands and Islands and across Scotland.

That is why I am so pleased about the budget delivering an extra £125 million for housing, bringing this year’s expenditure for housing to £390 million, and that is why I am pleased that we are on target to fulfil our manifesto commitment of delivering 30,000 affordable new homes. That is why I am so impressed that Mr Swinney has been able to deliver such projects against the backdrop of a 26 per cent cut to our capital budget—a very unwise cut.

The Scottish public have had an education as they have observed those enlightened policies in action. They now have an enhanced understanding of the nature of economics and the part that public finances play in that. No longer will the Opposition parties be able to continue pulling the wool over the public’s eyes; no longer will they swallow medicine that is killing and not curing the patient; and no longer will they believe the zero-sum myth of austerity economics.

Mr Swinney is due great credit, not just for delivering a wise and balanced budget once again but because he has followed such wisdom in the knowledge that it is the best stewardship of Scotland’s economy.

16:35  

Even John Swinney would blush a little at the praise that Mike MacKenzie heaped on him at the end of that speech.

In my opening remarks, I focused exclusively on the land and buildings transactions tax and I made the key points that we wanted to make. In closing, I will focus on some of the issues that have come through in the debate and a couple of points that I hope that the cabinet secretary can either answer in his closing speech or reflect and provide information on in the coming days and weeks.

As is standard in a budget speech, the cabinet secretary began with an assessment of the economy as a whole. The picture is good: there is a lot of good news out there on employment, unemployment, growth and youth employment. The cabinet secretary was right to point out that, although the unemployment rate in the UK is almost identical to that in Scotland, the rate is marginally lower in Scotland, which ought to be welcomed.

However, there should be a word of caution. Murdo Fraser picked up on the issue and gave his own reason for why he thought the figures were as they were, but it is unusual to see decreasing unemployment in the UK and increasing unemployment in Scotland in the same quarter. It does happen occasionally and it is difficult to read too much into one quarter’s statistics, but the fact that between September and November there was a 58,000 decrease across the UK as a whole and a 7,000 increase in Scotland should be noted. That might just be one quarter’s results and the issue might disappear when we get the next figures, but we must keep a careful eye on it. If it becomes a trend, the Government will need to take note and do something about it. However, that was just one quarter.

We heard a little bit about housing today; Mike MacKenzie touched on it laterally in his speech. My question on housing is simply for detail and information from the cabinet secretary. When he gave his draft budget to Parliament, he talked about £125 million of funding for housing this year, over and above the amount for the previous financial year. As far as I am aware, £30 million was announced a couple of weeks later and a scheme for how that money will be spent was set up. It is perfectly possible that I have missed some of them, but I am struggling to find the Government’s plans for the other £95 million. When I speak to stakeholders in the industry, they tell me that there is an appetite to find out more of the detail. If the cabinet secretary is in a position to provide any further particulars today, I and those stakeholders would welcome them.

Murdo Fraser touched on business rates. Once again I say that we still support the small business bonus. It is one of the best policies that this Government has ever come up with and one that I want to see continued for as long as possible. In our manifesto we had a commitment to legislate for it so that it would exist broadly in perpetuity. There do not seem to be any risks to it at this stage and the Government seems fully to be committed, which is to be welcomed.

As Murdo Fraser alluded to, over the past three or four years we have slowly but surely lost some of our competitive advantage with regard to number of business rates measures. The big advantage that we had on empty property rates narrowed. The retail levy was regrettable; although it is coming to an end, it set back certain parts of industry. The UK Government’s bonus for retail properties, for which there was about £29 million of consequentials, has not been passed on in the current financial year and there are no proposals—and no commitment—to follow up on it in the coming financial year. Although properties in Scotland at the lower end of the scale do very well with the small business bonus, the bonus for retail properties is aimed at all retail properties below a rateable value of £50,000. There are some businesses in Scotland that could benefit from that. Perhaps it is time to do something on business rates.

The final issue that I want to touch on is preventative spending, which a number of speakers have cleverly touched on. As far as I am aware, every political party in the Parliament buys into preventative spending and supports it, and we can all see the benefits. Three years ago during the spending review, when the cabinet secretary announced that there was to be a huge focus on preventative spending with £500 million over the course of three years and a “decisive shift”, everybody welcomed that.

Now that those three years are almost at an end and the Finance Committee has spent two years looking at the issue, it is time to take stock and listen carefully to what the committee had to say in its report on the budget. All members of the committee reiterated our support for preventative spending and recognised that progress has been made. However, paragraph 201 states:

“As is outlined below in relation to each of the Change Funds and the role of CPPs, there is little evidence of the essential shift in resources taking place to support a preventative approach.”

The cabinet secretary is right that it is not just those funds that are preventative spend, but they are an important slice. It is also correct to say that preventative spending does not have an effect overnight and that it sometimes takes five or 10 years or even longer. However, after three years and a spend of £500 million or thereabouts, we ought to be able to talk about some of the outcomes and see what some of that money has achieved and some of the “decisive shift” that ought to have taken place. I ask the Government to reflect on that so that we do not have a similar report from the Finance Committee in 12 months.

16:41  

Another year, another budget, but we can truly say that 2015 is a year like no other. The first new national taxes set in Scotland since the act of union will come into force this year and the first phase in the devolution of income tax will come into play next year, with a lot of work still to do. Tomorrow, we will have the first draft of the next Scotland act, which will take forward the next phase of income tax devolution and much more besides.

The stage could hardly be better set for the current Scottish Government to show how it would use increased powers if it had the opportunity to do so. However, the story of the budget will not be about John Swinney boldly delivering a distinctive Scottish agenda; instead, it will be about how the Deputy First Minister changed his tune on tax policy, apparently not in response to the views of Scottish taxpayers but in response to changes elsewhere that were brought in by a Tory chancellor.

It is one thing to claim that the Scottish Government is constrained in what it can do because powers are reserved to Westminster, but it is more surprising to hear that ministers will use their new tax powers to stay in step with the UK Government rather than setting a bold new course of their own. Gavin Brown and Murdo Fraser of course offered a welcome from the Tory benches for the changes that Mr Swinney has made, which certainly speaks for itself.

The member’s colleague Malcolm Chisholm said that he thought that the changes that the cabinet secretary has made will mean that the tax is progressive. Does the Labour Party support or oppose the system that the cabinet secretary has outlined?

That is an interesting point. Mr Swinney said in October that his policy would be driven by the maxim that taxes should be proportionate to the ability to pay, and he repeated that point today. He said:

“In exercising its first judgments on national taxes, this Government has put fairness, equity and the ability to pay at the heart of what it has done. That is the benefit of putting decisions about Scotland’s future in Scotland’s hands.”—[Official Report, 9 October 2014; c 40.]

However, the change today will cut by half the proposed level of tax on properties that are worth a quarter of a million pounds. That will of course be welcome to those taxpayers, but it is hardly proportionate to the ability to pay and it hardly seems to be making Scottish decisions in the Scottish Parliament. Mr Swinney could have made many other choices without missing his target of remaining revenue neutral. The changes that he has chosen to make to his original proposals are telling.

The question of how to decide on devolved taxes is not just about this year’s budget. The challenge for the Scottish Government on the transfer of tax powers is surely not just to be revenue neutral. If ministers want to make full use of new powers, as they say they do, they will have to make tough decisions. As Patrick Harvie said, that will only get harder from now on. John Swinney signed the Smith agreement, as did Mr Harvie, so he knows better than most just how tough it will be in future for Scotland’s devolved Government to avoid taking responsibility for tough decisions.

I do not think that Mr Macdonald answered the previous question. Can he explain exactly what the Labour Party’s position is on the rates that have been proposed for land and buildings transaction tax?

Mr Mackay will recall that, like members of his party, Labour members voted in favour of Mr Swinney’s original proposals, or at least we voted against the Conservative amendments to them. That is where we start from. In the process of further budget discussions, we will be very interested to hear how the Government explains the social equity and justice that lie behind its proposals.

We know that the more decisions on taxation are taken at Holyrood in future, the more future Scottish Governments will have to balance the competing interests of different voters and different taxpayers. That will mean making decisions that some people will not like. If the Scottish National Party has to think again about the first tough decision on raising taxes, the Scottish Labour Party will lay out an alternative direction for both the Scottish Government and the Government of the UK.

We want more front-line funding for health, of course, as has been said today. Perhaps there at least we can find common ground on how best to use Barnett consequentials. We also want a mansion tax on the most expensive properties across the United Kingdom to pay for 1,000 extra nurses in Scotland and to boost the NHS. We want a resilience fund for the Scottish economy, to help when particular sectors in particular places face a severe short-term challenge from workplace closures or job losses. That is within the remit of the Scottish Government and its stewardship of the Scottish economy. A budget of £10 million, as we have suggested, would be enough to allow for meaningful interventions, yet apparently ministers do not want to do that because they do not think that they should be responsible for saving jobs in the oil industry. [Interruption.] I will of course be very interested in hearing from Mr Ewing if he wants to intervene. I heard his point that, as the UK Government had had the benefit of tax revenues, why on earth would the Scottish Government want to pay for economic intervention to protect oil industry jobs?

Can we cast aside partisan politics and agree that what the industry needs above all is the tax action on the basis of the measures that I set out in my statement to Parliament? Will the Labour Party specifically support those measures?

As I am sure that Fergus Ewing will know from Ed Balls’s visit to Aberdeen yesterday, the Labour Party has made clear its support for major fiscal changes to support the oil industry. We have yet to hear from the Scottish Government what resource it will put into its responsibility of stewarding the Scottish economy in light of the falls in the price of oil. We also need real action on energy prices. Introducing a cap is the kind of action that a Labour chancellor would take at the earliest opportunity.

When it comes to using the Scottish Parliament’s new powers over income tax, decisions will have to be made that will not be popular with every voter. However, I am hopeful that—although we may not agree on all those issues—the Scottish Government will support our proposals for a Scottish office for budget responsibility. John Swinney signed up to the wise words of the Smith agreement that

“the Scottish Parliament should seek to expand and strengthen the independent scrutiny of Scotland’s public finances in recognition of the additional variability and uncertainty that further tax and spending devolution will introduce into the budgeting process.”

Scottish Labour’s proposal of a Scottish OBR offers the chance to achieve just that.

A fiscal commission with a limited remit, no matter the eminence of those whom Mr Swinney appoints, will not meet the letter or the spirit of the Smith agreement. That will take a truly independent body with scope to assess economic policies in advance and to make the link between raising revenues and spending them. That, of course, is also recommended in the Finance Committee report. The Scottish Government will be responsible not just for making decisions about raising taxes but for the complex business of balancing the books while adjustments are made to the block grant in view of the new circumstances. That will all require new levels of expertise and scrutiny.

Here we are, entering a new era for the Scottish Parliament for the raising and spending of revenues in Scotland. What we need now is not just a Government that responds to Tory tricks from Westminster but a Government that sets out a bold agenda of its own. Perhaps, indeed, the only way to deliver the letter and the spirit of the Smith agreement is to have a Scottish Government that believes in it; then we can really make devolution work.

16:49  

Mr Macdonald said that the Scottish Parliament is entering a new era, and it certainly is. I have sat in this place for nearly eight years now, dealing with the budget bills, and today is the first time that Michael Russell has contributed to a budget debate. It was worth the eight-year wait, because we heard from him—in that familiar magisterial style to which we have become accustomed—a thoughtful and substantive analysis of the tax approach that the Government has taken based on the principles set out by Adam Smith. Mr Russell set out his analysis eloquently, and placed the Government’s approach in the context of the challenges that we will face in exercising the wider responsibilities that we will acquire as a result of the Smith commission proposals and the subsequent expansion of the Parliament’s financial powers.

Mr Russell made the point that significant constraints will remain on what the Scottish Government is able to achieve, even with the powers that will be deployed as a result of the Smith process, given that wider powers will remain reserved to the United Kingdom. That observation must underpin our analysis of all the budget questions.

During the debate, a number of members from other political parties set out the propositions that they will advance in the budget negotiations. I take the opportunity at the outset of the spring budget revision process to reiterate what I said in my letter to the spokespeople from the Opposition parties: that I will, along with the Minister for Parliamentary Business, take part in good faith in dialogue on the budget.

Patrick Harvie spoke about the necessity of ensuring that local authorities are properly resourced to consider, assess and take decisions on applications for fracking or other unconventional energy schemes, and I am sympathetic to that point. He also raised points about energy efficiency and sustainable travel, which the Government will consider seriously.

Willie Rennie made points about health and childcare, on which the Government will of course engage. On his point about student loans, I say to him that the Government is already considering issues with regard to the threshold. However, some of the mechanisms for undertaking any changes require Treasury consent as they would affect the annually managed expenditure budgets, over which I have no control. Although I may think that the changes are a good idea, I would have to persuade some Liberals in the Treasury to give their consent. Willie Rennie will know to whom I am referring.

I will, of course, engage in discussion with the Conservatives and the Labour Party on the budget, as I have done already. I will say a bit more on some of the priorities that we have heard about so far.

A number of points have been made on the importance of preventative interventions. Sandra White and Linda Fabiani made strong contributions on prevention, as did Gavin Brown in his closing remarks. The convener of the Finance Committee outlined the committee’s long-standing work on advancing that area of policy, which the Government welcomes.

I will make two points at this stage. First, we all support the shift towards prevention, but I think that we accept that these things take time and will not be delivered overnight. We need to set out clearly to the committees of the Parliament the progress that is being made on prevention. Secondly, we must accept the centrality of preventative interventions to budget sustainability in the long term. The Government views the shift to prevention as critical in dealing with the financial challenges that we will face as a result of the interaction between diminishing public expenditure and our country’s demography, as we need to ensure that quality public services are delivered effectively.

I will say a few words about land and buildings transaction tax and the changes that I have announced today. First, I encourage Parliament to get beyond the somewhat pathetic posturing in the debate. In October, I set out to Parliament the principle that revenue neutrality would be the maxim for taking forward the implementation of the tax. If I had come back today not having observed revenue neutrality, Labour and Conservative members would have accused me of a breach of faith; that is what Labour members do at the slightest opportunity.

Will the cabinet secretary take an intervention?

I will give way to Mr Macdonald in a minute. Revenue neutrality was the driver of my position, not a desire to follow the actions of the Conservative Government. I remain true to the commitment that I gave to Scotland about revenue neutrality.

Does Mr Swinney accept that many options were available to him to achieve revenue neutrality in amending his original proposals other than the option that has followed the Conservative proposals so closely?

Mr Macdonald has fallen into to same trap as Jackie Baillie. Jackie Baillie attacked the whole proposal and then said, “I must go and look at the detail.” That summed up for all of us the beautiful preparation that Jackie Baillie had done for today’s debate.

I am looking forward to debating with the cabinet secretary in future.

I was very clear that anything that helped home owners and the house-building industry was to be welcomed. My criticism was of the cabinet secretary’s handling of the proposal, not the detail.

Members: Ah.

Well, there we are—that clears it up. That was about as good as Jackie Baillie’s defence of the Labour OBR proposal on “The Politics Show” on Sunday afternoon. I am surprised that Jackie Baillie came to Parliament with the OBR proposal today given the filleting that she took on television. She sat on television and said that there was no commitment to extra resource for the Fiscal Commission. Has she not read the Official Report of the Finance Committee, at which I made it absolutely clear that, if the Fiscal Commission wants more resources, it can come to me to ask for them? She attacked the Fiscal Commission’s limited remit. In response to questions from, I think, Michael McMahon—he is at the back and can correct me if I am wrong—I told the Finance Committee that the Fiscal Commission’s remit would be commensurate with the Parliament’s current responsibilities. As the Parliament gets more responsibilities, we will expand the Fiscal Commission’s responsibilities.

I simply cite those minor points of detail that are part of the parliamentary record to say to Jackie Baillie that, if she wants to debate with me in the chamber, she had better do her homework first and do it better than she has done it today. [Applause.]

In land and buildings transaction tax, I have remained absolutely true to my principles. Lewis Macdonald asked me about other options for revenue neutrality. An approach that takes 50 per cent of transactions out of tax is designed to help first-time buyers and to get people on to the property ladder. The crossover point of £330,000 is in pretty close proximity to the crossover point of £325,000 in my previous proposal. The changes that I have made to enhance progressivity at the £750,000 level possibly attracted the endorsement of Malcolm Chisholm, who seems to have thought about the issues before he spoke, unlike Mr Macdonald and Jackie Baillie.

My final point is about the interaction between health and local government expenditure. In her speech, Jackie Baillie said that there had to be more money for health and more money for local government, although her handling of the First Minister’s intervention by saying that it is all too complicated and we all have to go away and sort it out at some other time was really a very precious moment in parliamentary history.

If I assume that the Labour Party supports the increases in health expenditure that the Government has put in place and we take health expenditure out of the equation, we see that, when we came to office, local government got 55.7 per cent of the resources available to the Scottish Government. In 2015-16, local government will not get 55.7 per cent; it will get 57.2 per cent. When we take health expenditure out of the equation—and Labour supports the increases in health expenditure—and we look at local government in the remainder of public expenditure, we see that its share is going up and not down.

Will the cabinet secretary give way?

I am sorry; Mr Swinney is about to conclude.

I will happily endlessly debate this particular question with Mr Macdonald in the many months and years to come. When we came to office, local government’s share of the Scottish budget was going down under the Labour Party; it has gone up under the Scottish National Party Government, and we are determined to do that to support public services.

I will happily engage with other parties on the remaining issues around the budget and I look forward to sharing further details with the Finance Committee and the Parliament.