Good afternoon. The first item of business is a statement by John Swinney, on an update on Scotland’s public finances. The Deputy First Minister will take questions at the end of the statement, so there should be no interruptions or interventions.
I am grateful for the opportunity to update Parliament on Scotland’s public finances. As well as using this opportunity to respond to yesterday’s United Kingdom spending review and its implications for Scotland, I will provide an update on the fiscal framework that will underpin the Scotland Bill, the outlook for devolved taxes, and our non-profit-distributing and hub investment programme.
Yesterday, the Chancellor of the Exchequer set out his spending plans for the period 2015-16 to 2020-21. Those spending plans clearly show that he has continued with a programme of austerity with deep cuts to spending on business, transport, local government and the environment. Looking ahead, our fiscal resource departmental expenditure limit budget—our budget for day-to-day spending in Scotland—will decrease in real terms by almost 6 per cent over the next four years. Taken with the cuts that have been imposed in recent years, that means that, by 2019-20, the Scottish Government’s total discretionary budget will be £3.9 billion or around 12.5 per cent lower in real terms than it was in 2010-11.
We recognise the need to ensure that the public finances are on a sustainable footing, but the scale of the cuts is unnecessary. The Scottish Government has consistently advocated an alternative approach that would ensure that the deficit was reduced while also allowing for significant additional investment in public services compared with the chancellor’s plans. Instead, the chancellor has continued to pursue an ideologically driven programme of austerity.
I would like to comment on three specific decisions in the chancellor’s statement. First, the decision to scrap the proposed changes to tax credits was a welcome change of direction. The proposed cuts were targeted at working families on low incomes and would have affected around 250,000 households in Scotland. That is a victory for those who campaigned against those cuts, and it highlights the importance of continuing to voice opposition to UK Government policy. The Scottish Government remained steadfast and focused on defeating the tax credit cuts.
However, the chancellor was clear that planned cuts of £12 billion to welfare in future years will still go ahead. Delayed cuts are still cuts. The chancellor should cease his unnecessary attack on those on benefits and protect rather than punish those who find themselves in need of financial support. The Scottish Government will continue to do all that it can to protect the most vulnerable in society from the UK’s austerity programme and will continue to pressure the UK Government to reverse those cuts.
Secondly, the chancellor announced welcome increases in capital spending that will enhance our ability to invest in long-term infrastructure investment over the spending review period. However, we need to see that improvement in the capital position in its proper context. By 2019-20, our capital DEL budget will still be lower in cash terms than it was when the Conservatives came to office 10 years previously.
Thirdly, the decision to scrap the carbon capture and storage proposal that could have been taken forward at Peterhead is a short-sighted decision that undermines a global economic opportunity for Scotland. We are making the strongest possible representations to the UK Government to reverse that decision.
I will set out the Government’s budget proposals to Parliament for consultation on 16 December.
I will now provide a brief update on devolved taxation. Our forecasts for devolved tax receipts for 2015-16 were considered by the independent Scottish Fiscal Commission, which endorsed them as a reasonable assessment. The revenues from the land and buildings transaction tax remain on track and in line with our expectations.
What?
Order.
We forecast total LBTT revenues of £381 million in 2015-16 before allowing for forestalling losses, and we have collected around £218 million in the first seven months of the tax. The Scottish Fiscal Commission provided an assessment of devolved tax outturn against the forecast to the Finance Committee yesterday. That assessment supports our view that overall LBTT revenues remain in line with expectations.
The revenues from the Scottish landfill tax are performing well against our original forecast of £117 million. Over £37 million was declared for the first quarter of 2015-16. Revenue Scotland will publish data for the second quarter tomorrow morning.
The Office for Budget Responsibility has published updated forecasts for devolved taxes. Those have no bearing on our budget, our forecasts or our revenues, but I welcome the fact that they are now more closely aligned with the forecasts of the Scottish Government.
I continue to discuss the fiscal framework with the UK Government with regard to the taxes that are due to be devolved under the Scotland Bill. The discussions are focused on securing a fair and workable outcome on a financial settlement that is faithful to the recommendations made and principles articulated by the Smith commission. Smith was absolutely clear that the Barnett formula should continue as the major determinant of Scotland’s spending power, and that Scotland’s budget should be no larger or smaller simply as a result of further devolution.
The risks of an unfair fiscal framework were made clear last week by the Scottish Trades Union Congress and Professor Anton Muscatelli, the principal of the University of Glasgow. Professor Muscatelli warned that changes to funding methods that do not properly reflect the Smith commission’s recommendations could leave Scotland worse off by hundreds of millions of pounds. Those are credible independent voices who should be listened to.
We need a fiscal framework that will ensure that, as the Smith commission intended, further devolution provides the right incentives and increases the accountability of the Scottish Parliament by linking the Scottish Government’s budget to Scottish economic performance. Scotland should retain the rewards of her success in the same way as we must bear the risks into the bargain.
It is absolutely essential that the fiscal framework allows us to pursue our own distinct policies that meet the needs and wishes of the people of Scotland, and that it does not tie us to UK Government policies. We aim to complete that work as soon as possible in order to give the respective Parliaments time for due consideration of both the fiscal framework and the Scotland Bill. However, I have been clear that, without a framework that is fair to the people of Scotland, the Scottish Government will not recommend that Parliament approves the Scotland Bill.
I conclude by updating Parliament on our engagement with the Office for National Statistics about the impact on the Government’s infrastructure programme of recent updates to European Union accounting guidance. On 9 September, I advised Parliament that the Scottish Futures Trust had submitted to the ONS proposals for revised arrangements for the hub model. I can today advise Parliament that the ONS has offered the view that the proposed model would be classified to the private sector. That means that I can today advise relevant local authorities and health boards that they can proceed to contract award with hub projects under the revised model. Confirmation of a private sector classification from the ONS means that Scottish Government support for the projects can be drawn from long-term resource DEL budgets as intended.
The revised arrangements for the hub programme will maintain the current balance of public good, with projects taken forward by special purpose companies that are owned 60 per cent by the existing hub private partners, 20 per cent by a charity, 10 per cent by the SFT and 10 per cent by the procuring authority.
More widely in the NPD programme, it has become clear that a rapid reversal of the ONS’s public classification of the Aberdeen western peripheral route project under the revised Eurostat rules will not be possible. I have asked the SFT to continue to review options for the potential amendment of the AWPR project and potentially other NPD projects in the light of the ONS’s welcome decision on the revised hub model. The Scottish Government continues to discuss the budgeting implications with Her Majesty’s Treasury, including for our capital spending plans, and I intend to reflect the outcomes of those discussions in the budget in December. That will have no impact on the delivery of the project, which is on time and on budget.
The Scottish Government has always prioritised public infrastructure projects as a critical tool for growing our economic recovery. I am therefore delighted to be able to confirm that the 10 school and two health centre projects in the hub programme will now proceed. That is around £330 million of capital investment in our children’s education, our national health service and Scotland’s economy. Those 12 projects will make an enormous difference in their communities, both in the immediate boost that is provided by the jobs that their construction will bring, and through the long-term health and education benefits that the projects will provide to local communities and people.
Although the Scottish Government welcomes the chancellor’s U-turn on tax credits, we will continue to argue for him to abandon his policy of austerity and to make the case for greater emphasis on public sector investment. We remain committed to investing in our infrastructure and public services. The ONS decision on the hub programme allows us to continue on that track by moving forward with projects that were previously on hold.
When we set out our plans for the Scottish budget next month, we will be driven by our principles of establishing a system that is fair and progressive and of creating a sustainable economy that ensures opportunities for all within Scotland.
The Deputy First Minister will now take questions on the issues raised in his statement.
I thank the Deputy First Minister for the advance copy of his statement.
I welcome the Tories’ dramatic U-turn on tax credits. Labour campaigned long and hard to reverse cuts to tax credits. However, the chancellor will still be making cuts that affect some of the poorest in our society. [Interruption.]
Order.
Both Labour and the Scottish National Party are anti-austerity. There is no doubt that this is a difficult budget settlement and that there are tough choices ahead. I will focus on how we deal with those choices to protect people from austerity, which I believe is a shared ambition.
We have new powers now, from the Scotland Act 2012, and substantial new powers will come in the future. Scottish Labour has set out some of the choices that we would make with air passenger duty and a top rate of income tax—all progressive measures. I am disappointed that the Deputy First Minister looks like he is setting out plans for only one year. Surely, if we are serious about the sustainability of the nation’s finances and about using our new powers, we should have a full Scottish comprehensive spending review. He knows the numbers for the next three years, so why can he not tell us the outline plans? Surely, he should take the opportunity to consider how the new powers can be used to protect people from austerity.
The Deputy First Minister is no shrinking violet. I expect him to stay the course in the negotiations on the fiscal framework, to secure a good deal for Scotland.
I welcome Jackie Baillie’s remarks on the question of a difficult budget settlement. It is perhaps the start of an acceptance by the Labour Party that the choices that have to be made on these questions are difficult, and I look forward to that being reflected in the dialogue that we have on the budget settlement.
I assure Jackie Baillie that I intend to set out in the budget a range of plans for future years. She will not be disappointed in my perspective on the issues that we face over the course of this spending review.
On the use of the new powers, I hear what Jackie Baillie says about air passenger duty and the top rate of income tax. I suppose that the chancellor’s decision liberates the Labour Party from having to explain how it was going to spend the air passenger duty money twice—that was a little local difficulty that it managed to get itself into. The new powers are there to be used. We in the SNP have our own views about how they can be used effectively, and we will set them out in due course.
From her remarks today and at the weekend, I take it that Jackie Baillie is in what I would describe as supportive mode on the fiscal framework. That is what I am cheerfully telling myself, anyway—perhaps that is my one moment of optimism this week. I hope that the Labour Party engages seriously on the substantial questions that are at stake in the fiscal framework. Regardless of the political leadership of the Government, the issues that are involved in the fiscal framework affect every one of us and every one of the individuals whom we represent. The stronger and more cohesive the view that can be expressed from this Parliament to advance those issues, the better.
I thank the Deputy First Minister for the advance copy of his statement. I thought that he might have had a more cheerful disposition today. For years he has been calling for more money for capital spending and the chancellor has delivered a 14 per cent increase. In addition, following the chancellor’s decision not to proceed with the cuts to tax credits—thanks to the interventions of my colleague Ruth Davidson, among others—the Deputy First Minister no longer has to find the money from his budget to fulfil his colleague Alex Neil’s rash promise to make up any difference.
The Deputy First Minister refers to welfare spending. Will he confirm that the devolution of extensive welfare powers in the Scotland Bill will give this Parliament the option to take a different approach to welfare in future, if it wishes and if it can find the money? As he now has his long-awaited increase in capital spending, when will the Deputy First Minister be in a position to publish his list of shovel-ready projects that can now be pushed ahead?
First, Murdo Fraser tells me that I have got a tremendous uplift in capital expenditure.
When the Conservatives came to office in 2010-11, the capital budget in cash terms was £3.293 billion. By the end of the decade, after 10 dark years of Conservative Government, the capital budget in Scotland will be £3.187 billion. Even after 10 dark, long, weary, cold years, in cash terms, the budget will not have recovered to where it was in 2010-11. If inflation is taken into account, the capital budget will be £600 million less than when the Conservatives came to office. It should be no surprise to Mr Fraser that I am not of a more cheerful disposition today, although I am trying my best to cheer him up.
There will be choices and options available for the Parliament to take a different course in relation to welfare expenditure. The Government is already doing that; we are taking a different approach on council tax benefit and council tax reduction; we are taking a different approach in relation to the mitigation of the bedroom tax; and we are taking a different approach in relation to the Scottish welfare fund.
There is ample evidence of our Administration taking action to take a different course on welfare where the opportunities arise for us to do so, and that will remain our position in the years to come.
Before I take other members’ questions, I point out that time is very limited. The longer members take, the less time there will be for a colleague; indeed, a colleague may drop off the list. If members ask more than one question, they are to blame if there is no time left for their colleagues.
The Deputy First Minister mentioned the carbon capture and storage proposal that is being scrapped. Could he expand on that and explain the impact in Scotland?
It is really a missed opportunity. When the Government came to office, the possibility of a carbon capture and storage proposition at Peterhead was very much on the agenda. It then shifted from Peterhead to Longannet. It did not go forward at Longannet, went back to Peterhead and now it is going nowhere.
The technology is innovative. Professor Stuart Haszeldine spoke very powerfully on the radio this morning about the missed opportunity to take a significant step forward in technology development and also make a contribution to our ambitions on climate change. That would be significant not only for Scotland or the UK but could be important globally into the bargain. We are making the strongest possible representations not just because it is a lost economic opportunity in the north-east of Scotland, but because it is a major opportunity through which Scotland could be exporting technology right across the world, helping to address a major issue that affects all jurisdictions.
I thank the finance secretary for the advance copy of his statement.
I urge him, when he is considering his budget, to think about the mental health issue I raised at First Minister’s question time and also about the possibility of accelerating the programme for dualling the A9 with the extra capital expenditure.
Despite his claims about LBTT, the cabinet secretary is falling behind his forecast. The OBR has revised its projections downwards, not just for the present year but for future years as well. Can he tell me what projections he has, whether he agrees with the OBR and whether he thinks that the decline will continue?
First, I recognise the issues raised by Mr Rennie about mental health. Mr Rennie had the opportunity to question the First Minister about the issue and she made it clear that the Government will pay attention to it.
I know that Mr Rennie will be pleased to welcome the work on the stretch of A9 from Kincraig to Dalraddy, which is the first part of the A9 dualling proposition that the Government is taking forward.
I welcomed what the OBR said yesterday about revising its forecast in line with the Scottish Government’s forecast. Mr Rennie is correct to say that it has reduced its forecast. It is absolutely right to do so, because its forecast was way off beam in terms of the preparation that it undertook. I cannot remember whether Mr Rennie was critical of me with regard to that estimate when I set that out to the Parliament—I might also be accusing Gavin Brown of something that he did not do, but I am pretty sure that he was critical of me about it—but it looks as though my position was closer to the one that will eventually transpire.
We will set out in the budget in December our forecasts on land and buildings transaction tax and they will be available to be scrutinised by the Scottish Fiscal Commission and the Parliament.
I know that, over a decade, the Tories will have cut our budget for public services by a cumulative 12.5 per cent, which is a substantial cut in anyone’s book. Can the cabinet secretary advise how that might impact on the policing budget, particularly when there will undoubtedly be increased demands on our police due to heightened security issues?
It is important to maintain an effective police force that can address all the requirements that we have, from local policing—although, of course, all policing is local policing, I suppose—to some of the more sophisticated work, such as the cyber-resilience issues that we discussed last week, when I set out the Government’s cyber-resilience strategy, which has been heavily influenced by the contribution of Police Scotland. It is important that we ensure that the police service is appropriately resourced and those considerations will be part of the discussions that I take forward with the justice secretary in formulating the budget that will be shared with the Parliament on 16 December.
Although the UK Government reduced spending overall, it increased investment in the NHS in England and allowed for further revenues to be raised for social care there. Does the cabinet secretary recognise that, if he passes on cuts to local government, the consequence could be a reduction in social care budgets? What will he do in his budget, and with the new powers coming through the Scotland Bill, to ensure that our councils can pay for social care?
The first point to make in addressing Jenny Marra’s question is to acknowledge the fact, which has been quite properly understood within Scotland, that the budget that we face involves a real-terms reduction in the resources that are available to us over the course of the spending review. That is a serious reduction, on top of serious reductions that have taken place over the course of the past five years. That cannot be escaped. In a sense, that was my point in response to Jackie Baillie, because I thought that her question acknowledged that challenge and the difficulty that lies at the heart of the budget settlement.
I also accept that we operate an integrated health and social care system, whereby the contribution that is made by social care can have an effect on the delivery of healthcare, and the delivery of healthcare can have an effect on social care. That is why we took the decision to integrate health and social care, and why we are advancing with such speed to ensure that the gains and benefits of creating that integrated service are felt by members of the public and that the services that are delivered are sustainable. Those questions will be at the heart of the discussions that I take forward on the budget issues, and will be part of discussions that I take forward with the Convention of Scottish Local Authorities, with whom I am in regular discussion.
Can the Deputy First Minister confirm that, as a result of the hub projects that he has announced today, the multi-million pound Inverclyde continuing care centre project will now proceed?
I am able to give that confirmation. The Inverclyde care home is one of the projects that will be given the green light as a consequence of the announcement to reactivate the hub programmes, which is a consequence of the decision that we have reached with the ONS.
Yesterday’s statement set out some details of expected income from the apprenticeship levy. Previous parliamentary answers in Westminster indicate that, when it is spent, the consequentials will flow to the Scottish block. There could be almost £1 billion in consequentials over four years. Will the cabinet secretary today give a guarantee not only to me but to those companies that will pay the levy that he will use that to expand the Scottish Government’s apprenticeship programme?
I hear what Iain Gray says, and some of what he surmises from yesterday’s announcement may well turn out to be correct with regard to the revenue that is raised. However, we are at a very early stage in discussions on the implementation of the apprenticeship levy, and even in the design of the levy, with the UK Government. I do not feel that I am in a position to have any detailed information that I can share with Mr Gray today; that is a great frustration for ministers in this Administration.
The Cabinet Secretary for Fair Work, Skills and Training discussed the matter again with her counterpart in the UK Government, and she will update the Parliament on the progress that we make on the detailed issues that underpin Mr Gray’s question.
Lanarkshire’s Labour councillors are engaged in a bit of a pathetic protest outside the Parliament today.
Does the cabinet secretary agree with the assessment from the Scottish Parliament information centre, which says that local government has been given a good deal by the Scottish Government and will continue to be given a good deal, and that the council tax freeze is overfunded? Can he tell us whether councils south of the border have had such a good deal?
It is always nice to welcome guests to the Parliament.
The work that SPICe has undertaken in the past few weeks demonstrates that the Government’s council tax freeze has been fully funded—indeed, it has been overfunded given the level of inflation prevalent in Scotland over the years—and that local authorities in Scotland, in comparison with local authorities in England, have been given very substantial financial support and advantage in comparison with local authorities south of the border.
As I indicated in my answer to Jenny Marra, I will continue my discussions with COSLA as we work in a spirit of partnership to navigate our way through these challenging financial times.
NHS funding south of the border will experience a real-terms growth rate of 3.6 per cent in the next financial year. Will the cabinet secretary give a similar commitment for Scotland next year?
The Government will fulfil its commitment to pass on to the health service in Scotland the Barnett consequentials that arise from the comprehensive spending review. We have delivered, and will continue to deliver, on that commitment.
The Institute for Fiscal Studies highlighted at the UK general election that the Scottish National Party and Tory spending plans would result in equal cuts whereas Labour plans would result in an increase in public spending. Is it not therefore the case that the SNP’s spending plans—[Interruption.]
As I said, that analysis is from the Institute for Fiscal Studies. Is it not therefore the case that the SNP’s spending plans would also have meant that cuts to the budget would have hit our front-line services such as local government and the NHS the hardest?
I am not quite sure what conclusions Siobhan McMahon deduces from the analysis that she has highlighted that would suggest that the SNP was in any way taking a position of that sort. I encourage her to reflect on the outcome of the election, given that analysis of that type did not exactly work out convincingly for the Labour party in Scotland.
The SNP and the Scottish Government have argued that the Chancellor of the Exchequer—as I argued in a letter to him just the other day—has significant flexibility to take a different course to the austerity agenda than that he has chosen to take. He could have invested while still repairing the debt and the deficit and moving the public finances into a sustainable position, and he could have allocated an extra £150 billion to public expenditure. I wish that he had taken that course of action.
The cancellation of the carbon capture project is regrettable, but if that project does not go ahead it leaves in tatters the idea that energy policy in Scotland or the UK can be predicated on continued electricity generation from fossil fuels.
Is it not time to commit to a timescale to phase out fossil fuel electricity generation and commit instead to the infrastructure projects that are produced by the low-carbon infrastructure task force? Those are the kind of projects that would help to build the low-carbon economy that, year on year, we in Scotland have been failing to build.
Mr Harvie must take into account the fact that the Scottish Government has made very strong progress in expanding the proportion of our energy that is generated from renewable means.
We have made very significant progress also in reducing our carbon emissions over the period when we have been addressing the issue. Nobody can dispute the volume of the progress that the Government has made. However, our task would have been made a bit easier if we had had some degree of consistency and order in the energy policy from the United Kingdom Government, which has caused mayhem in the renewable energy sector, has just abruptly halted the carbon capture and storage programme, and is prepared, as Professor Haszeldine said this morning, to commit to unsustainable levels of subsidy for the Hinkley Point nuclear power station, which is just one example of the folly of the UK Government’s energy policy.
Although we are making good progress in Scotland and will continue to endeavour to do so by following some of the examples to which Mr Harvie referred, we cannot disguise the fact that our challenge is made greater by the foolishness of UK energy policy and the damage that it has created for the people of Scotland.
That ends the statement from the Deputy First Minister. I apologise to the two members I could not call.
Previous
Is it Coeliac Disease? Campaign