Budget Outturn 2011-12
The next item of business is a statement by John Swinney on the budget outturn 2011-12. The cabinet secretary will take questions at the end of his statement and there should, therefore, be no interventions or interruptions.
09:36
I am grateful for the opportunity to inform the Parliament of the provisional Scottish Government financial outturn for 2011-12 and to set out further measures to deliver economic stimulus.
The Government is focused on maximising the value of every public pound as we pursue programmes to support economic recovery and deliver high-quality, efficient public services. The Government’s three-year spending plans are predicated on a carry-forward of £100 million from 2011-12 to 2012-13, and I confirm that that has been achieved. I also report to the Parliament that the provisional outturn for 2011-12 is expenditure of £27,539 million against a fiscal departmental expenditure limit budget of £27,718 million—an underspend of £179 million, which includes that £100 million carry-forward. Deducting that planned carry-forward leaves a fiscal DEL underspend of £79 million—0.3 per cent of our total fiscal DEL budget.
Fiscal DEL is now the key control aggregate used by Her Majesty’s Treasury and is made up of the cash resource and capital budgets. The £100 million planned carry-forward and the additional underspend of £79 million have been reported to HM Treasury. The total sum is made up of £149 million in resource and £30 million of capital.
There is a forecast underspend in non-cash DEL of around £8 million on a budget of £632 million. That is the ring-fenced element within the budget that is intended to cover depreciation, some impairments and other technical accounting items. An underspend in that budget cannot be used to buy goods and services.
The 2011-12 provisional outturn white paper is due to be published by the Treasury in July. In it, the total DEL underspend for the Scottish Government, against Treasury control totals, will go on record as being £187 million.
The Parliament will wish to note that the devolved Administrations budget exchange mechanism that was agreed with HM Treasury in July 2011 will be utilised for the first time this year. Since devolution, the Scottish Government had had the facility to carry forward any unspent budget to future years in a process known as end-year flexibility. However, end-year flexibility was abolished unilaterally as part of the 2010 United Kingdom spending review. In the knowledge that there could be no guarantees that unspent balances could be retained across different spending review periods, the Scottish Government drew down practically all of its unspent end-year flexibility balances in the years up to the end of 2010-11.
Together with my finance minister colleagues from Wales and Northern Ireland, an agreement was reached with HM Treasury in July 2011 for a budget exchange mechanism for the devolved Administrations to operate over the current spending review period. That new mechanism allows the Scottish Government the flexibility to carry forward from one financial year to the next up to 0.6 per cent of its resource DEL budget and 1.5 per cent of its capital DEL budget. That equates to a cap this year of around £195 million in total.
Accordingly, I inform the Parliament that the balance of the fiscal DEL underspend will be carried forward in full to augment existing spending plans in 2012-13. The sums to be deployed will be confirmed in the autumn budget revision when the audit of the financial year is complete.
In the meantime, the £30 million capital DEL underspend from 2011-12 will be used to fund existing capital projects, due to the alteration of timescales compared to plan. The deployment of the balance of £49 million fiscal resource DEL in 2012-13 will support Olympic legacy initiatives and assist the economic stimulus package that I will announce today.
I draw the Parliament’s attention to two key areas in our spending plans for 2012-13 that are designed to further stimulate economic growth. Unlike the UK Government, we believe that investment is needed sooner rather than later. In March, the Prime Minister asked the First Minister for a list of shovel-ready projects that could be supported to protect jobs and inject growth into the economy.
We have written to the Prime Minister on several occasions to urge the UK Government to take action now to encourage growth. Although the chancellor has performed many U-turns on his budget proposals, sadly that has not been the case on capital investment. As a result, this Government has looked again at what we can do to encourage growth in Scotland.
First, we will continue our investment in the renewables and low-carbon sector, which offers huge economic opportunities for Scotland. The first projects to be funded by the fossil fuel levy will begin this year.
In March 2012, we announced the development of a new renewable energy investment fund to leverage additional funds. Having consulted with industry on that proposal, it is clear not only that that money is much needed, but that the industry would welcome the money over a longer period than the immediate financial year. As a result, we are drawing down the fossil fuel levy funding of £103 million this financial year to be invested in renewable energy projects. In line with guidance from HM Treasury, we propose to spread the investment of the fossil fuel levy funding of £103 million over the three years of the spending review to ensure that we maximise the value for money from that spend on renewable energy initiatives and to match the timescales that the industry requires.
We have identified some £16 million of renewable energy projects into which we can invest the fossil fuel levy money this year, and we are working on the best possible vehicle for deploying the finance that marine, district heating and community projects require. We are now working on the longer-term project pipeline for the fossil fuel resources so that all the £103 million will be spent on the promotion of renewables.
Secondly, in the interim, the remaining resources will be put to good use to help economic stimulus and wider benefits. We will accelerate nearly £3 million in funding to deliver another round of the green bus fund to support manufacturing employment. We will provide funding to the Rutherglen low-carbon zone and invest a further £2 million in improvements to the Arnish renewable energy facility in the Western Isles.
One of the challenges that Scotland’s economy faces is the impact that the UK Government’s decision to reduce the number of air bases in Scotland will have on the local economy. The closure of RAF Kinloss brings with it challenges for the people and the economy of Moray. We have already confirmed that the region will benefit as one of our enterprise areas, thus offering incentives for private investment. Today, we are investing an additional £10 million in getting work under way to support enterprise and infrastructure activity in Forres. A further £6 million to support the Inverness campus will bring wider benefits to the Highlands and Islands and support a strategic development with significant economic potential.
We will also continue our support for essential infrastructure. I can announce today that the A75 between Hardgrove and Kinmount will be upgraded later this year.
This Government has invested significant sums in housing. Last year, we achieved our target of delivering more than 6,000 affordable homes. Today we will add to that investment by accelerating £15 million in housing expenditure from future years plus an additional £20 million to deliver a further 650 homes and assist in revitalising the construction sector.
Communities throughout Scotland will benefit from an acceleration of £15 million of maintenance projects in the health service, and a number of regeneration projects in Riverside Inverclyde will also be brought forward.
Tourism has offered a real boost to Scotland’s economy in recent years. It is one of the success stories, having increased revenues and visitors through the downturn. As we look ahead to the winning years and next year’s year of natural Scotland, we will support a number of projects in our national parks and through Forestry Commission Scotland and botanic gardens that will enhance facilities for visitors. We will also invest in our cultural heritage, with support for the maintenance of historic properties and national collections.
This package of measures, worth more than £100 million in this financial year, will be funded through the careful stewardship of our overall budget through the spending review period. The measures that I have announced today are designed to continue our efforts to develop the renewables sector in Scotland and to give a much needed boost to transport, health, tourism, regeneration and the construction industry in housing. It is a capital investment programme that Scotland needs and that this Government is delivering.
I commend these outturn figures to the chamber. They demonstrate once again the firm grip that this Government has on Scotland’s public finances. Our latest economic stimulus is a demonstration of our determination to act to secure the future of this country in the face of Westminster economic neglect. This Government is focused on delivering sound and strong leadership to Scotland in these difficult times and on using all the powers that we have to create new opportunities for our people. We have demonstrated that effective governance can be delivered in Scotland and we aspire to achieve much more with the full powers that we seek.
I invite the Parliament to commend today’s outturn figures and the competent financial management that they represent, to welcome the economic stimulus that is vital to boosting growth and to support our longer-term efforts to deliver the lasting changes that Scotland needs and deserves.
I thank the cabinet secretary for the advance copy of his statement. This is the first use of the new budget exchange mechanism, and I will begin by asking the cabinet secretary whether he believes that the new framework achieves the right balance between spending controls and end-year flexibility.
This has been a month for budget U-turns at Westminster. I am pleased that Mr Swinney is partially following suit by reinstating some of what he cut from the housing budget in Scotland. The cabinet secretary has clearly recognised the strength of the Opposition’s argument about cutting such a vital sector when we are supposedly pursuing economic growth. Has he yet recognised the damage that he has done to Scotland’s colleges and the prospects for Scotland’s young people? If so, why is there nothing in today’s announcement about education?
The statement gives Mr Swinney the opportunity to report on how much taxpayers’ money has been spent. Has he made any assessment of the outcomes that have been achieved through his spending decisions? Earlier this year, he said that his was a budget for jobs and growth. We now know that more than 25,000 jobs were lost last year in the public sector alone—the area for which the cabinet secretary has primary responsibility. Has the outturn of the minister’s budget been to deliver any economic growth for Scotland? If so, in which areas?
Mr Macintosh’s first point was about the appropriateness of the budget exchange mechanism. We arrived at a sensible and useful agreement with the Treasury on the scale of the budget exchange mechanism. For many years before I became the minister with responsibility for finance, my predecessors were in the position of being unable to spend all of their budget and had enormous underspends that were of a very different character from the one that I have set out today—in 2004-05, the underspend was £382 million, which represents quite a feat of financial management by anyone’s description—so I think that the budget exchange mechanism has to be set at a realistic level and must represent a sensible level of carry-over. I have no complaints about the mechanism and I think that the arrangements that we have put in place, particularly because our spending plans were predicated on a carry-over of £100 million, have enabled us to utilise it.
Mr Macintosh also asked about housing. I have brought forward expenditure into this year to support the construction sector. As the member well knows from our discussions on other subjects, I cannot spend money that I do not have and I have allocated capital budgets fully. I remind Mr Macintosh that our capital budget has been reduced by approximately 33 per cent on an annual basis, so, clearly, some things will be unable to be afforded.
My statement did not go through all the projects that I am announcing today, but the note that has been made available to the Parliament gives information on particular projects that are being taken forward. In the college sector, we are supporting the infrastructure expansion at the West Highland College in Fort William. Of course, I referred earlier to the funding for the Inverness campus, which the last time I looked was a college project in Inverness, and a substantial one for the benefit of the Highlands and Islands.
Mr Macintosh’s final point was about outcomes, the assessment of which is carried out through the constant monitoring of the national performance framework, which demonstrates whether the Government is making progress, along with our public sector partners, in achieving the national outcomes that we believe to be important. Clearly, that is a particularly challenging environment in the context of the economy just now. However, the fact that unemployment is falling and employment is rising is an indication of the progress that is being made, which is coupled with the fact that we continue to command substantial private sector investment in the Scottish economy, as demonstrated by the Ernst & Young attractiveness report that was published just last week.
I, too, thank the cabinet secretary for advance notice of his statement.
A year ago the cabinet secretary claimed that by having a record low underspend of £12 million he had a firm grip on Scotland’s finances, and in that I think he was correct. Today, with an underspend of £79 million that is six and a half times the size of the previous one, he claims he has a grip on Scotland’s finances. Investment is needed now, but there is £79 million that he was unable to spend in the financial year. Why is the underspend this year six and a half times the size of the underspend last year?
There was a capital underspend of £2 million last year, but £30 million this year, which is 15 times the size of the previous underspend for capital. What has slipped? Given the number of shovel-ready projects that the cabinet secretary claims, why was he unable to bring investment forward so that we did not have an underspend of £30 million this year?
Finally, while we welcome the additional housing money that he mentioned today, some of which is accelerated and some of which, on the face of it, is new, what is the actual real-terms cut to the housing budget now for 2012-13?
If Mr Brown looks at the note that has been made available to the Parliament, he will see that the underspend in 2010-11 was £98 million; that is the comparison at which Mr Brown should look.
The Government operates a very tight capital programme in which we must ensure that projects have resources available to them when they are required, according to the timing of the construction projects. We have about £30 million of expenditure that we considered would be likely to materialise in this financial year that will be required at the start of the next financial year. I am sure that Mr Brown will accept that in the timescales of an end of financial year a sensible and pragmatic decision is to enable that expenditure to be undertaken when it is required, perhaps a couple of months after the end of a financial year compared with immediately before a financial year—that is what the benefit of the budget exchange mechanism is for Scotland.
Finally, the Government is putting in place £35 million of housing expenditure in this financial year that would not have been capable of being delivered because of the significant reductions in capital expenditure that have been applied to the Scottish Government by the UK Government. I think that on this occasion Mr Brown would be well served by welcoming the fact that the Government is using every device that it can to make up for the severe cuts in public expenditure that have been applied by the UK Government.
Many members want to ask a question of the cabinet secretary. Time is tight, so to allow me to get as many members in as possible I would be grateful if members would ask only one question, without preamble, and if the cabinet secretary could be as succinct as he needs to be.
The latest figures show that Scotland has the highest employment rate in the UK. Also, Scotland is top of Ernst & Young’s UK attractiveness survey. Does the cabinet secretary agree that that proves that Scottish Government efforts to boost the economy are far more successful than the cuts agenda pursued by the UK Government and that it disproves the lie of the Scotland is not good enough to make its own decisions campaign that the independence referendum is deterring inward investment?
It is pretty clear from Mr Gibson’s points about the high employment level and the Ernst & Young report that the Scottish Government’s economic measures are having a beneficial effect on the Scottish economy. I have demonstrated that we can deploy further flexibility and are prepared to do so. It is clear that the UK Government has the capability to deliver flexibility, but it does not have the willingness to do so. That demonstrates that government in Scotland for Scotland is in the best interests of the people of Scotland.
The cabinet secretary has used the budget outturn statement to make announcements on spending £16 million of the fossil fuel levy. How will the remainder of the £103 million fund be spent? When will the cabinet secretary be in a position to bring that detail to the Parliament?
Some £16 million of the £103 million total is being used on fossil fuel levy projects this financial year; the remainder will be spread over the subsequent two financial years. We will set out details to the Parliament once those projects crystallise and we are confident that they represent best value for money. I reiterate that the Government has every intention of ensuring that every penny of the £103 million from fossil fuel levy resources is utilised to support renewable energy developments in Scotland.
I congratulate the Government on being 0.3 per cent within budget. I wish that I had been able to achieve that at any point in my working life.
Danny Alexander and Alistair Darling have suggested that Scotland’s capital budget has perhaps increased, but I understood that it was cut by £600 million between 2010-11 and 2011-12. Can the cabinet secretary clarify the matter?
The point that Mr Mason makes is correct. Broadly, the capital budget in Scotland is around £1 billion lower than its trend position in the latter part of the previous decade. It is clear that that puts enormous pressure on public expenditure and our ability to fund all the programmes that we wish to fund. We are trying to deploy as much flexibility as we can to address the needs of the Scottish economy, and my statement was designed to do that.
The latest European Union construction figures show that, in April 2012, production in construction fell by 18.1 per cent in the UK. That was by far the largest recorded fall among the member states—Slovenia was a distant second, with a fall of 9.3 per cent. Does the cabinet secretary agree that the evidence against the UK Government’s austerity agenda is stacking up? Will he join me in calling on the UK Government to bring forward £300 million for the Scottish Government to invest in shovel-ready projects?
A series of measures that are designed to provide opportunities for the construction sector across a range of different areas of the economy in Scotland, geographically and sectorally, is at the heart of what I have said. I recognise the difficulties that the construction industry faces. The level of decline and contraction in the sector has been going on for a more significant period than any of us envisaged; it has not recovered in the fashion that I would have estimated or predicted. Ensuring that capital projects of a construction nature can be taken forward is therefore an important foundation of the programme that the Government takes forward.
I thank the cabinet secretary for early sight of his statement and welcome the reallocations to social housing. Does the cabinet secretary think that they will be enough to meet the Scottish National Party’s manifesto commitment on social rented housing?
Also, does he plan to make a statement on the extra capital—the extra borrowing—that will be available through the Scotland Act 2012? We have heard about the acceleration of the A9 project. What else will benefit?
I made the point in my statement that the Government’s commitment to deliver 6,000 affordable homes was met in the previous financial year, and we have every intention of meeting our targets in the years to come.
I will, of course, make whatever statements the Parliament requires of me in relation to the use of borrowing powers, but it is some way off 2015, which is when we get those powers. A few budgets have to go under the bridge before we get anywhere near the borrowing powers that are promised by the Scotland Act 2012. I make the simple point that the Scottish economy needs investment now, which is why the Government has acted as it has done today.
Will the cabinet secretary invest as much of the fossil fuel money as possible in community and co-operative renewables projects rather than continuing to invest in large-scale projects? Those are often owned by foreign multinationals and venture capital firms whose profits flow out of the local economy—
Will you come to your question, please?
Will the cabinet secretary ensure that there is investment in local community renewables projects in order to keep the money in the local economy?
In my statement, I made the point that the Government is working on the best vehicle for deploying the finance that marine, district heating and community projects require. I am sympathetic to the point that Mr Findlay makes. Community renewables projects are excellent examples of the way in which we, in all our areas, can participate in the renewable energy revolution, and the model of co-operative ownership in that respect is a substantial opportunity for communities across Scotland.
The cabinet secretary has previously invested funding in green buses, which has brought fuel bills down for bus companies such as Lothian Buses. Can he confirm that there will be further investment in green buses this year, and that it will be open to the new East Lothian Buses to bid for that?
We will bring forward expenditure on the green bus fund from future years to provide a further stimulus to manufacturing employment in Scotland. That will be openly tendered, so any relevant and eligible party will be able to participate in the process.
I hope that you will allow me some preamble, Presiding Officer, because when a cabinet secretary does what we have been asking for, the obvious response is to say, “Thank you very much.” May I, on behalf of my constituents, welcome Mr Swinney’s announcement regarding the A75 Hardgrove to Kinmount upgrade scheme. In my members’ business debate of Thursday 31 May—
Will you come to your question, please?
—I suggested that this might be a mechanism for funding the scheme, and I am delighted that the cabinet secretary has taken it up. Can he tell us the probable timeline for completion of the scheme and its estimated cost?
I estimate the cost to be of the order of £20 million and I expect construction activity to start probably around the turn of the year.
The cabinet secretary highlighted that he has remained within the budget exchange limits. Does he agree, however, that it is ridiculous that the Treasury is able to cap the exchange mechanism and that, if the Parliament had full financial responsibility, we would be able to deliver the full range of shovel-ready projects now, rather than waiting for George Osborne’s next U-turn?
I follow up my earlier comments to Mr Macintosh by saying that I am a believer in and practitioner of fiscal responsibility. There have to be rules around public expenditure and control of public expenditure, so I cannot disagree with the statement that some constraints have to be applied. However, it would be much more relevant for the Scottish Parliament to be able to consider the full range of variabilities and flexibilities to enable us to adjust our economic interventions to meet the needs of the people of Scotland, rather than having to wait for somebody else to take those decisions. I have demonstrated today another example of how we can do that within Scotland, in so far as the limitations that are placed on us enable us to do it.
I welcome the acceleration of £15 million of maintenance projects in the national health service, but may I reasonably ask what action the finance secretary is taking to ensure that all public sector buildings, new and old, are properly maintained and not allowed to fall into disrepair?
I think that that is the most reasonable question that I have ever heard Mary Scanlon ask. It is obviously a sign of great things to come. I admire her consistency in making her point about maintenance in the NHS. She has made a number of comments about that over time, and it is an important matter.
There is an obligation on public bodies, particularly given many of the issues that we are raising with them about energy efficiency, to ensure that maintenance is prioritised and that they pursue sensible, modest investments that can deliver real returns, particularly in energy efficiency. That is part of the management arrangements that are put in place for all public bodies in Scotland.
That ends the statement and questions.