Chamber and committees

Will the member take an intervention?

Will the member take an intervention?

The Finance and Public Administration Committee heard much evidence from economic experts on their views on the budget, both for this year and for future years. I, too, take the opportunity to thank them for their time in considering what are complicated issues. I also thank the committee clerks for, somehow, distilling our conversations into the excellent report that we are debating.

The report flags many areas of concern that the Government needs to address in the coming months. However, let us start with a positive. The Scottish Fiscal Commission has advised that the resource funding in the Scottish budget is set to increase by £1.7 billion, which equates to £279 million in real terms—the largest-ever core resource block grant. However, that is just about where the positive news ends.

These are certainly challenging times and we still have many uncertainties, which are highlighted by the report. Even at this late point in the financial year 2022-23, the devolved Government has no real certainty over how this year’s budget will be balanced, or about the impact that that will have on the 2023-24 budget.

When the resource spending review was published in May 2022, we had been told that public service reform was key to providing a balanced budget. We were told that digitisation was key, that public sector innovation was key, that the reform of the public sector estate was key and that improving public procurement was key. However, nine months on, we are still no clearer about when those reforms will be delivered and what they will mean for our public services, or about the impact on our finances if they are not carried out.

We knew that reform meant a reduction in jobs to pre-pandemic levels. We can all guess where the axe will fall if we exclude health services from the reduction in the head count. It will, yet again, fall on local government—the easy target for the Government. Local government is under increasing pressure from the budget. I understand that the finance directors of all 32 local authorities have written to the acting finance secretary, outlining their concerns.

At committee, I often ask the Deputy First Minister about the Government’s commitment to early intervention and prevention. To be fair, I always get back warm words, saying that those are absolutely key. However, again, I see no evidence of that in the budget. More and more local government funding is ring fenced, so that when it comes to cuts it will be our sports grounds that are cut, which will add to obesity and a greater health bill in future years. It will be community centres that are closed, which will lead to social isolation and poorer mental health. It will be education that is cut, which will lead to a widening attainment gap, and social programmes will be cut, which will lead to increased crime and a larger justice bill in the future.

Short-termism is a theme that runs through the committee report—in particular, when it comes to building growth and productivity in Scotland. In his evidence to the committee, Dr Mike Brewer described the budget as being

“predominantly focused on dealing with the short-term challenges that are posed by the rising cost of energy and food.”

Professor Muscatelli stated in the same evidence session that the national strategy for economic transformation

“must be pursued with vigour because it is aimed at genuinely lifting business investment and productivity.”—[Official Report, Finance and Public Administration Committee, 20 December 2022; c 14-15, 10.]

I am concerned by the lack of focus on growth in this year’s budget and by the short-termism that is at its heart.

In previous debates on the budget, I have said that you can tell a Government’s priorities by what it commits finance to. In this budget, we can see only real-terms cuts—education and skills budget cuts, housing budget cuts, rural affairs and islands budget cuts, enterprise budget cuts and Police Scotland budget cuts. This is a short-term budget, from a short-term finance secretary in what, I hope, is a Government that has a short-term future.

Liam Kerr asked earlier when the financial data that underpins the strategy will be published. We never had an answer, so I ask the minister again: when?

Obviously, I was disappointed that the north-east bid was not successful. It highlights, however, that connectivity between Aberdeen and Inverness is more vital than ever. The dualling of the A96 is now key. Can I ask the Deputy First Minister whether the commitment to dual the A96 by 2030 will be met?

Are you saying that you are going to raise more ADS tax, but you do not care about the damage to the general economy due to students being driven away from Scotland because there is no private rental accommodation?

I do not dispute that the figures show that there will be an increase in revenue. However, I feel that, as Michelle Thomson said, no assessment has been done of the wider impact that the decision will have on aspects such as universities and the damage that that will cause to our economy. I will leave it there.

If this was just an increase in tax on second homes or even holiday homes, I would fully support it, but I feel that there is another piece to it—a piece that I spoke about earlier—which relates to students who are trying to rent accommodation. My son has recently been through the experience of trying to rent a flat, and I know how difficult it is for many students. The market has shrunk considerably, and I think that this change will make it even worse. On the sum of £34 million, it is obviously always great to have more revenue go to the Government to spend on local services, but I have real concerns about the unintended consequences and the impact that it will have on the wider Scottish economy.

I was trying to highlight the situation for students. Some have been told to leave their course and go somewhere else. The amount of revenue that international students bring into this country is significant, and if we drive them away to places in England, for example, that will have a much bigger impact than the £34 million that is on the table will have. It seems that there is almost a war on the private rental market in this country. To get more people on to the housing ladder—more first-time buyers—the key is to build more houses. I worry that the measure will have a negative impact on that. I hope that I will be proved wrong, but I have real concerns.

Surely you should be aware of the issues that are affecting the housing market right now because of the lack of supply. A housing crisis that has been described as “unprecedented” by letting agents has seen students being unable to find accommodation this year and the university recommending that they drop out if housing cannot be found.

That takes us back to Michelle Thomson’s point. Surely a risk assessment should be made on the policy changes that are being introduced, so that we do not damage our university sector by telling students to leave. What impact will that have on the Scottish economy?

Minister, I am not saying that it is the sole factor. I was asking whether the policy will make that situation better or worse in the coming year.