Meeting of the Parliament

Meeting date: Tuesday, November 21, 2023

Official Report 911KB pdf

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Autumn Statement: Scottish Government Priorities

The next item of business is a statement by Shona Robison on the autumn statement and Scottish Government priorities. The cabinet secretary will take questions at the end of her statement, so there should be no interventions or interruptions. I call the cabinet secretary to speak for around 10 minutes.

14:16  

Tomorrow, the Chancellor of the Exchequer will make his autumn statement, setting out the United Kingdom Government’s budgetary plans for 2024-25. The actions in his statement will largely set the context for our budget on 19 December.

The disappointing reality is that the amount that Scotland has to spend on services is still largely driven by a Westminster that is wedded to even deeper austerity. That means that, although I will announce our budget in 28 days’ time, I still do not know the quantum of funding that is available to support Scotland’s needs.

It is only a little over a year since the disastrous Truss mini-budget, which turbocharged the cost of living crisis, inflicting misery on individuals, communities and businesses. We have seen 14 increases to interest rates, and stubbornly high inflation. Even given the recent reduction in inflation, prices are still around 15 per cent higher than at the start of last year. Inflation remains at more than double the Bank of England’s target rate. The Resolution Foundation expects the current UK parliamentary term to be the worst for living standards since the 1950s. Tomorrow, the chancellor needs to recognise that and to change course.

Our public finances have continued to face significant challenges from inflation, Brexit, the war in Ukraine, the increased costs of public sector pay and a capital budget that does not come close to what is required. Despite those challenges, I am pleased that, last week, the Auditor General for Scotland gave the Scottish Government’s accounts for 2022-23 an unqualified audit opinion—for the 18th year running.

This year, we have prioritised public services and delivered fair pay deals for our public sector workers. However, those come at a cost, and we must deliver a balanced budget. Pay deals added an estimated £1.26 billion to our recurring pay costs in 2023-24, and £1.75 billion across the public sector. That was around £800 million above the amount that was budgeted for 2023-24. We have worked to try to mitigate the impact of Westminster austerity but, without a change in course from Westminster, I fear that we are now at the limits of what it is possible to mitigate using the powers of devolution.

Today, I wrote to the Finance and Public Administration Committee to outline the measures that I have taken to ensure that those costs can be met in this financial year. Those decisions have been exceptionally difficult, but they are necessary to protect the services that are needed most.

In total, savings and funding prioritisation of £680 million have been required in-year, with £284 million already being expressed in the autumn budget revision and the remaining £396 million that will be set out in the spring budget revision. Of those reductions, £391 million is resource and £289 million is capital.

The reductions have included £10.5 million from the future transport fund; £30 million from energy industries capital programmes; savings delivered by the Scottish Funding Council, including £46 million from the withdrawal of the strategic change transformation fund as communicated in May; £3 million from efficiencies in Marine Scotland; £28 million from agricultural budgets, with a commitment to return that funding in future years; and a redeployment of £6 million that is held in reserves by Forestry and Land Scotland, with that funding also to be returned in future years. Further details are included in the letter to the Finance and Public Administration Committee, which was provided to Opposition business managers prior to this statement.

Furthermore, as inflationary pressures continue to exacerbate the cost of living crisis and pressures for households and businesses across Scotland, I have protected overall health spending, our investment in key programmes such as the Scottish child payment, and the tripling of the fuel insecurity fund for this financial year.

This challenge is a result of prolonged Westminster austerity and is not unique to Scotland. Last month, the Welsh Government set out that it needs to find £600 million in savings before the end of the financial year. Accounting for differences in the size of our budgets, that would be equivalent to more than £1 billion for Scotland.

The devolved Administrations have worked together to call on the United Kingdom Government for additional funding and in-year budget flexibilities to support the management of the pressures that we all face. The response so far to the calls has been, at best, insufficient.

In developing our budget for 2024-25, I am guided by our three missions of equality, community and opportunity, and by the Bute house agreement. In doing so, I will be reflecting on the feedback from committees following their pre-budget scrutiny process.

When I presented the medium-term financial strategy to Parliament in May, I laid out the scale of the challenge that we face. I showed that our central resource spending outlook for 2024-25 was £1 billion higher than our central funding scenario, which was based on the Scottish Fiscal Commission forecasts at that time. Our funding for capital projects is facing a real-terms cut next year.

We must meet those challenges in the 2024-25 budget. The decisions that we take must be underpinned by reform to ensure that people in Scotland get value from the taxes that they pay and secure a sustainable future for our public services.

Last week, the Auditor General for Scotland raised the importance of reforming our public services to ensure that they remain financially sustainable in the long term. We are committed to public service reform that will help to deliver fiscally sustainable public services that improve outcomes and reduce inequalities.

The powers that this Parliament needs to deliver a better budget for Scotland are still retained at Westminster. The chancellor needs to act tomorrow to deliver for investment in public services and infrastructure; to prioritise net zero and tackling fuel insecurity; and to support people with the on-going cost of living crisis. I have written to him to stress the importance of those areas. From the briefing to the media in recent days, it appears that that may not be the course that he follows, with suggestions that tax cuts may be prioritised over investment in public services. Bluntly, when Westminster consistently underinvests in public services, it means that we have less funding to spend on our public services in Scotland.

As I have set out, those concerns are shared by the other devolved Governments. The Welsh finance minister and I both raised the need for increased funding to address that with the UK Government directly.

That is especially important for infrastructure investment. However, our budget for capital investment is constrained by UK Government spending decisions, with funding projected to fall in real terms by 6.7 per cent between 2023-24 and 2027-28, and potentially by more, given sustained inflation. That, of course, limits our ability to deliver projects at the required pace.

I have called on the chancellor to rectify that. This must be new money and not funding that we have already allocated to other commitments. That happened with the UK Government’s recent announcement in response to our request for additional funding to support flood recovery, which was disingenuous to say the least.

A key part of this is ensuring that there is the necessary investment in the infrastructure that we need to meet our net zero targets and to realise the opportunities for jobs and the economy. That should include confirming a decision on the Acorn carbon capture and storage project—we have pressed the UK Government repeatedly on that, and we need to see action—and providing an appropriate market mechanism for hydro power, because lack of action from the UK Government is preventing Scotland from fully realising its potential.

It is unacceptable that, in a country as energy rich as Scotland, about 830,000 households—33 per cent of all households—are in fuel poverty. Although the energy price cap has dropped, many consumers are still paying significantly more than they were two years ago. With Gillian Martin, I have called for a social tariff for priority consumers and for the £400 energy bill support scheme to be reinstated. The UK Government must also take longer-term action to reform the electricity market so that everyone benefits from the net zero transition.

We can all see the pain that the cost of living crisis is causing. We are using our social security powers to deliver a system that is built on dignity, fairness and respect. This year, we are investing £5.3 billion in Scottish Government benefits and payments—including our unique Scottish child payment—which will reach about 1.2 million people.

However, the majority of social security spend in Scotland remains reserved to the UK Government. I have called on the chancellor to increase working-age benefits in line with inflation to ensure that they retain their real-terms value for struggling families across the UK. I also urge him to go further by legislating for an essentials guarantee that would provide those who are most in need with the most basic of necessities. That would benefit 8.8 million families and provide dignity and security for people who rely on universal credit. I have, again, called on the UK Government to remove the heinous rape clause, the two-child cap and the benefit cap, which disproportionately affect women and children.

I have been frank with members about the challenges that we face and the difficult decisions that we have had to take to balance our budget and make best use of public money. We are doing all that we can with the limited powers that we have, but we need the UK Government to step up and use its powers for the benefit of Scotland. The priority for any fiscal headroom should be investment in public services. Tomorrow, the chancellor has the opportunity to make a real difference for people across Scotland, and I urge him to take it.

The cabinet secretary will now take questions on the issues that were raised in her statement. I intend to allow up to 20 minutes for questions, after which we will need to move on to the next item of business.

I was going to begin by complimenting the cabinet secretary, who I thought was very gracious at this morning’s Finance and Public Administration Committee meeting when she acknowledged that, through the fiscal framework discussions, relations between the Scottish Government and the UK Government have been convivial. That is a good sign. However, her statement has completely undermined that, because it was a catalogue of negativity in which she blamed Westminster for everything that has gone wrong in the Scottish Government.

I want to ask the cabinet secretary three questions. First, she was right when she said in her recent letter to the Chancellor of the Exchequer that businesses in Scotland have faced serious challenges in recent years. Why, therefore, did the Scottish Government refuse, in last year’s budget, to pass on the same rates relief as its counterparts in England and Wales? Virtually the entire business community called for that in order to stimulate economic growth and protect Scottish businesses’ competitiveness.

Secondly, the cabinet secretary cited tourism and hospitality as sectors that face particular challenges, but does she accept that one of the biggest challenges that they face is entirely of the Scottish Government’s own making, when it comes to the unworkable policy on short-term lets?

Thirdly, the cabinet secretary talked about public services, but will she finally acknowledge that one of the biggest difficulties that they face comes as a result of the crippling Scottish National Party cuts to local government funding over a sustained period?

To be precise, I point out that I described my discussions with the former Chief Secretary to the Treasury, John Glen, as an “oasis in a desert”—the desert being the rest of the UK Government—when I was talking about our difficult relationship with the UK Government in terms of making ourselves heard and getting it to take on board the needs of Scotland’s public services.

On Liz Smith’s point about negativity, I am sorry, but there is a lot to be negative about. The choices that we face will be set largely by the choices of the UK Government tomorrow.

I said in my statement that the UK Government should prioritise public services. Liz Smith, in her final question, talked about local government funding and seemed to agree with me that the chancellor should prioritise public services funding. I hope that, if the chancellor does not do that tomorrow, but instead prioritises tax cuts for better-off people over public sector funding, Liz Smith will stand with me and will criticise him equally for that choice.

On business support, we have for many years agreed to and supported the number 1 ask of business, which is that we freeze the rates poundage. We will come to our conclusions about business support as we take forward the budget discussions over the next few weeks.

I thank the Deputy First Minister for advance sight of the statement.

In 16 years of Conservative Government we have had 16 years of short-term thinking, poor transparency and poor sustainability. It is therefore little wonder that the Deputy First Minister wrote a letter in such terms to the chancellor.

However, is the Scottish Government not making many of the same mistakes? On transparency, she rightly asked how the mooted fiscal changes will be paid for, but how will the council tax freeze be paid for, and will local authorities be asked to foot the bill?

On long-term planning, the Scottish Fiscal Commission is clear that there is a £2 billion hole, but where is the plan to address that?

On growth, cuts are being made to infrastructure investment in things such as ports and motorways. Does that not undermine the economic growth and growth in incomes that we need if we are to gain, through the fiscal framework, the extra money that is so badly needed?

As I set out in my statement, the challenges that the Scottish Government is facing are exactly the same as the challenges that are being faced by the Welsh Labour Government, and it says exactly the same thing. The issues are the UK Government’s lack of financial flexibility and the quantum that is delivered for public services in Scotland and Wales. There is nothing exceptional about the Scottish Government’s position—it is exactly the same as the Welsh Government’s position. Indeed, Northern Irish public services face the same problem.

On transparency, I do not think that anyone could criticise me for not laying out the scale of the problem in my letter to the Finance and Public Administration Committee. That letter lays out the difficult decisions that we have had to take to balance our budget in 2023-24, and it intimates the even greater challenge for next year, should additional resources not come to the Scottish Government, given the impact of inflation and all the other impacts that I laid out in my statement.

I absolutely accept the point on fiscal sustainability, and I will lay out in the budget the steps that we are taking on that. The Auditor General has also challenged us to do that. When I set out, in the medium-term financial strategy, the scale of the problem for next year and beyond, I was clear that there are measures that we had to take ourselves—not least on public services reform.

However, let us not beat about the bush. Tomorrow, the chancellor could solve the issues that Wales and Scotland face by making sure that the priority is public services funding. I hope that the Labour Party will support us in calling for that. If it does not, that will speak volumes.

Scotland’s budget process, including scrutiny of the draft budget, is heavily constrained by a timetable that is, in effect, imposed by the Chancellor of the Exchequer and by the imposition of one-year settlements. No detail of the chancellor’s autumn statement is provided in advance. Given that, what difficulties does it present in preparing Scotland’s draft budget, particularly during the cost of living crisis, when it is so crucial to protect Scotland’s public services and invest in infrastructure to build a fairer, more equal and prosperous Scotland?

Kenny Gibson makes the important point that the lateness of the autumn statement makes it particularly difficult to plan for Scotland’s 2024-25 budget. The budget process is complex to develop and is reliant on forecasts from the Office for Budget Responsibility and the Scottish Fiscal Commission for finalisation of the tax and social security policies, alongside portfolio spending plans. We will always endeavour to produce a Scottish budget at the earliest opportunity for the Parliament, but the complexity and risks that are now embedded in developing the Scottish budget and its forecasts mean that a late UK autumn statement represents a particular challenge to that.

Does the Scottish Government support a continued freeze on fuel duty?

We have set out our priorities in a letter to the Chancellor of the Exchequer. The priorities that I have set out clearly today are that the resources that are available to the chancellor should go on funding public services and that they should not go on tax cuts for the better off, such as through cuts to inheritance tax and support for bankers’ bonuses. Those are our priorities. It is for the Tories in the Parliament to set out theirs. [Interruption.]

Let us listen to the questions and answers.

The cabinet secretary mentioned tax cuts. If there were to be tax cuts tomorrow at Westminster, would poorer people or richer people suffer more?

We have had no engagement from the UK Government on its plans to cut tax. They are always seen in briefings to the media. We do not know where the tax cuts will land, how they will be funded or whom they are to be targeted at, so it is difficult to answer John Mason’s question, at this stage. The track record of the Tory Government suggests that the poorest people in our society are unlikely to be the ones who benefit most from any of its policies. We will set out our tax plans in the budget on 19 December.

To compensate for its financial mismanagement, the Scottish Government is raiding budgets that are essential to meeting our net zero targets. It is also kicking the can down the road on when it will repay the farmers their missing millions. What impact will those budget cuts have on meeting our net zero targets and when will farmers get their missing millions?

I wonder whether, if Rhoda Grant were sitting in the Welsh Parliament, she would have said the same to her Welsh Labour Government colleagues, who have had to announce the same type of in-year spending reductions because of the same pressures on budgets. There is no difference.

We have set out our priorities. None of the decisions has been easy. I said in my statement that the agriculture reductions that I set out will be returned to the budget in a way that aligns with the spending profile of those budgets. I am happy to set that out. I will meet NFU Scotland tomorrow to have further discussions about the matter.

I hope that, instead of blaming the Scottish Government, Labour will, as its Welsh Assembly colleagues have done, join us in pointing the finger where it should be pointed: at the UK Tory Government.

The Westminster Parliament has cut our capital and revenue budgets, thus affecting what can be invested. There are other adverse effects, including inflation and the cost of borrowing. In addition to that, reinforced autoclaved aerated concrete is added to the list.

What confirmation has the Scottish Government received from the UK Government with regard to the capital and resource budgets? Will those budgets at least increase with inflation in order to protect the investment that the Scottish Government is attempting to make?

We have had no confirmation from the UK Government that budgets will increase in line with inflation. The funding that we have received from the UK Government has not matched the scale of the challenge that we face, with inflation eroding our spending power. Although we are using the levers at our disposal, that hinders our response to the economic turmoil that we face.

The cut to capital is particularly difficult because of the investments that we want to make. The real-terms cut to capital budgets for the foreseeable future will have a major impact. At the Scottish budget, I will set out our infrastructure investment plan, but there is no doubt that the cut will have a huge impact on our infrastructure here, in Scotland, and, in turn, on our ability to grow the Scottish economy, which is helped by that infrastructure investment.

The national health service is in peril like never before in its 75-year history. Staff and patients look to the Scottish and UK Governments for hope, but the waiting lists and staff shortages are as bad as ever. There is little confidence that the chancellor’s autumn statement or the steps that the Scottish Government will take will change anything.

Has the Cabinet Secretary for Finance had discussions with health boards about their finances for this year? Discussions about cuts appear to be under way already, because boards simply do not have enough money.

Our 2023-24 Scottish budget provides record funding of over £19 billion, providing new investment of more than £1 billion in supporting recovery and reform to secure sustainable public services. The health service has, of course, remained a priority for many years and we continue to invest, with a total increase of over £730 million to NHS boards in 2023-24, which is nearly 6 per cent.

That is in the face of rising costs—with inflation and all the impacts that it has—and the pay deals, as I mentioned in my statement. Trying to continue to deliver services and to deal with the Covid backlog is a challenge, and there is no way to express it any differently. We will continue to prioritise health funding, but members should be under no illusion: it will be very challenging to do that if we do not see a real commitment from the chancellor tomorrow to additional funding for the health service.

The UK Government has given strong indications that it is likely to reduce public service funding across England, while indicating that welfare claimants who do not engage with their jobcentre or take work offered may lose benefit support. Can the finance secretary comment on whether a cut in NHS funding in England will lead to less by way of consequentials or less funding for the Scottish Government to spend on health and social care? Will she join me in condemning outright the removal of welfare support from those who need it the most?

On Emma Harper’s first point, yes: whatever funding we get here for public services in Scotland absolutely depends on departmental allocations and spending decisions by the UK Government. Whether there is less or more for health determines what we get, which is why it is so important that there are additional resources for the health service.

I do condemn the plans to remove support from some of the most vulnerable people. We have consistently opposed the widespread use of sanctions, as there is clear evidence that they do not work and that, at best, they lead people into unstable work while causing further health problems and significant harm. It would be a shocking state of affairs if tax cuts for the better-off were funded at the expense of the poorest in society.

Apologies for being late: I was losing a battle with the printer next door.

Progressive tax changes secured by the Greens are worth £1 billion to Scotland every year. There is still scope to make income tax fairer and to raise more, but we also need to broaden our tax base and not be so dependent on income, which is why measures such as visitor and cruise ship levies are so important. Does the Deputy First Minister agree that, although Scotland’s tax and social security system is already the most progressive in the UK, we can make further progress in delivering tax reforms that are focused on the ability to pay and in maximising funding for our public services?

As Ross Greer has said, the Scottish Government has already delivered one of the most progressive income tax systems in the UK while, importantly, raising extra revenue to invest in public services and Scotland’s economy. It has been shown that, because of the decisions that we have made, 10 per cent of households have seen their incomes increase by almost 4 per cent compared with the rest of the UK. That is driven largely by the flagship policy of the Scottish child payment. As Ross Greer knows, decisions on tax policy for 2024-25 will be set as part of the budget on 19 December. In the run-up to the budget, I look forward to continuing to discuss with him and his Green colleagues, and with others across the Parliament, what that should look like.

The cabinet secretary has been at pains to stress the need to invest in public services, but, astonishingly for a Cabinet Secretary for Finance, not once in her statement did she mention economic growth. Does she accept that driving growth should be a key focus for the Scottish Government, through measures such as targeting investment and boosting skills development, particularly through colleges? The Fraser of Allander Institute recently showed that every £1 invested in colleges delivered a boost to the economy of more than £8.

We have been very clear about the need for economic growth. We set that out clearly in our national strategy for economic transformation—NSET—as well as covering the levers that we will use for investment in net zero, green energy and targeting growth sectors, which we know is important in relation to growth in tax revenues.

However, we will not take any lectures from Brian Whittle or the Tories on economic management, given the catastrophe of the Truss mini-budget. I cannot remember whether Brian Whittle was a supporter of Liz Truss, but the damage that her budget inflicted on the Scottish economy should embarrass Brian Whittle and his colleagues for some time to come.

The UK Government has, so far, failed to confirm any additional support for families that are facing pressures as a result of the soaring cost of living. If Westminster is incapable of taking any decisive action, it is clear that Scotland urgently needs the powers to do so itself. Can the Deputy First Minister provide an update on the Scottish Government’s latest engagement with the UK Government on the transfer of further powers to the Scottish Government over, for instance, the economy, energy, employment and social security—

Cabinet secretary.

—so that the Scottish Government can—

Cabinet secretary!

The Scottish Government has proposed further devolution of important powers to the Parliament to address many of the issues that the member has covered. The devolution of employment law was supported by the Parliament earlier this month, and the devolution of migration powers was debated last week. Devolution of those powers could help us to grow our population base and, in turn, grow the economy. However, it is clear that the UK Tory Government has no intention of providing Scotland with the further powers that we need. Instead, it has undermined and constrained our existing powers, not least with the misuse of the Internal Market Act 2020. I would therefore not hold my breath in that respect.

Where is the ring-fenced £28 million that Shona Robison, the finance secretary, promised to return to Scotland’s agricultural budget? When will it be put back?

As I said in my statement, we will return the money to agricultural budgets and, as I said in answer to a previous question, we will do that in line with the spending requirements of the sector. I will discuss that further with NFU Scotland when I meet it tomorrow. I will set out further details in the budget when we come to that on 19 December.

Thank you, cabinet secretary. That concludes this item of business. There will be a brief pause before we move to the next item of business to allow front benches to change.