Chamber and committees

The Government has taken forward the legislation on the national care service and we are developing those propositions. Obviously, we are having a lot of consultation and dialogue on those points. Today, we have not really got into specific funding decisions about particular areas of policy, so I would not want to give commitments on particular decisions that the Government is making on any aspect of policy, other than to say that we intend to fund what we have committed to doing. However, it all has to be fiscally sustainable and I am wrestling with that challenge in this financial year because we have had a number of significantly increased costs, principally through pay deals and the loss of value through inflation. We have to make sure that all of our current delivery of the budget is fiscally sustainable and that future years are fiscally sustainable as well.

Those will be set out in the financial memorandum that is associated with the bill.

I do not think that I used the word “grown-up” at any stage in my answer to Mr Greer—I possibly argued for a more considered discussion. I am all for that. I do not mean to be disrespectful to anybody, because I am as much a player in that as anybody else, but we probably need to have a more considered debate in Parliament about some of these questions. I give the committee the assurance that I will endeavour to do that through my stewardship of this brief for, I hope, a very short time—if the finance secretary happens to be listening to the session.

I tried to demonstrate that by coming to Parliament with the statement on 7 September. That was not a statement that I was required to make, but I made it because I felt that, in the interests of openness and transparency, I should tell Parliament what I was doing to wrestle with the in-year financial pressures. Normally, that is done in the autumn and spring budget revision process, which does not attract an awful lot of attention, but we are wrestling with some substantial issues.

Therefore, there is a need for us to have an open, considered discussion. I am not persuaded that we need more legislation to do that, because, to go back to what we have talked about, the existing legislative framework on the Scottish Fiscal Commission puts some substantial obligations on Government to adhere to the legislation and for Parliament to be informed by the Fiscal Commission of its conclusions and views. However, I am happy to consider any further relevant points.

The connection to the discussion about the national performance framework is interesting. I accept that it is difficult to look at a pound in the budget and follow its journey into the national performance framework. It is possible to look at the national performance framework periodically and ask, “Do we think that public expenditure and policy decisions are supporting the achievement of this direction of travel and, if not, what do we need to reshape about public expenditure or policy to enable that to be more the case?” However, it is a difficult process to establish a direct connection between public and expenditure outcomes.

A fair conclusion would be to look at decisions on public expenditure and, for example, come to a conclusion on whether the Government is doing enough to support early intervention and preventative measures. If the Government spends all its time running around picking up the pieces of things and not leaping away up stream to avoid problems occurring, that is a pretty big debate for the Parliament to have.

That would probably also lead to changes in how we spend public money. There is not often a queue of people saying, “Please take money away from me because it could be better spent over there.” However, Parliament could always make that decision and agree collectively that we could do with, for example, early intervention. I am a firm believer in early intervention. That is why we invested to expand funded hours of early learning and childcare to 1,140 a year. The Cabinet came to the conclusion that we needed to take a bold decision to alter the life chances of children in our society. The same rationale effected the decision to embark on the Scottish child payment.

Therefore, we took big, bold policy decisions that have financial implications, and we have put them into the budget, in the hope that they help to narrow the attainment gap and erode child poverty. I would argue that there is real benefit in those policy decisions, but they have come at a price in terms of a cost to the budget and, obviously, Parliament is welcome to air some of those questions as we proceed.

I reassure Michelle Thomson that although, today, she is faced by a quartet of men, on any other day, if the director general of the Scottish exchequer or the chief financial officer had been with me, the panel would have looked remarkably different. We have very appropriate levels of gender balance across the Scottish Government, even if we do not have it on the panel today. Indeed, if the Cabinet Secretary for Finance and the Economy was here, it would be very different as well; that is another encouragement for her to come back to her role as quickly as possible.

To be absolutely serious, I unreservedly accept the points that Michelle Thomson made about the importance of assessing the impact of budget measures on women and on other groupings and considerations within our society.

In Scotland, we are very fortunate to have the Scottish Women’s Budget Group, which has been very much involved in the Scottish Government’s financial planning and budget work for many years, and it was actively involved when I was the finance minister. I know that the Government has good dialogue with that group. I will meet with the organisation as part of the dialogue that I will take forward on the budget, and I will listen carefully to the representation that it makes, just as I listen to a range of different organisations.

In the construction of our budget, it is important that we take adequate account of the impact that it may have on different groups in our society, particularly women. If we have to take tough decisions during a financial year, it is probably even more important that we pay particular attention to those issues to avoid getting into a situation where we create a potential negative impact during that process.

I do not think that there is a pot of money is likely to come with the investment zones, but there will be fiscal incentives through reduced national insurance contributions, which is an issue that is properly within the competence of the United Kingdom Government under the constitutional arrangements. The UK Government says that it would like the concept to be extended to Scotland but that it properly understands that there are many devolved issues.

I have no complaints about the nature and the manner of the dialogue that we are having on that question. Some of the judgments come down to some of the issues that Mr Mason has already raised with me.

We have to proceed with great care here. I cannot accuse the United Kingdom Government of proceeding with great care on the issues and, with the greatest respect, I cannot accuse the Scottish Conservatives of proceeding with great care on the matter either. Within the past 10 days, I have been called on to mirror tax policies that have now been dumped by the UK Government, just 12 days later. That is no way to undertake tax policy—it is a total farce.

We have to look at the issues carefully. There is a relevant relationship between the tax position in Scotland and the tax position in the rest of the UK. However, there are the other policy commitments that people have access to in Scotland, such as significantly lower council tax and free prescription charges, as well as the fact that children in Scotland get more early learning and childcare than children in the rest of the UK get, and the fact that children who live in Scotland do not have to pay tuition fees if they go to a Scottish university.

Despite all the talk about relative tax positions, for some people, some of those UK Government decisions are completely incidental compared to the difference in council tax between Scotland and England, which is about £500 on average for band D. It is about £500 lower in Scotland, so there have to be really dramatic changes before a band D council tax payer in Scotland will decide to uproot their family and entire circumstances to try to get a degree of income tax advantage, while jettisoning a host of other benefits to which they have access in Scotland.

That is why, as I said in my opening remarks, I am going to air that debate about public expenditure and taxation. It is a rounded debate. We cannot have a compartmentalised debate about tax rates without looking at the whole public expenditure and tax proposition, because that will affect many of the choices that people make.

Finally, for the record, of course I want Scotland to be an attractive place for investment. The record speaks for itself. Other than London and the south-east, Scotland is the most successful location for foreign direct investment across the UK and has been for the best part of the past 10 years, if not longer.

I do not think that it could have had forecasts on the implications of its tax decisions. It had forecasts on the condition of the UK Government economy and public finances. I understand that some forecasts from the OBR were made available when the Chancellor assumed office on 6 September. I do not think that OBR forecasts were commissioned of the particular changes that were made but I am absolutely certain that forecasts would have been run within His Majesty’s Treasury and that the Treasury would have told ministers about the damage that was likely to be done. I can only assume that ministers decided to ignore that.

I have had a couple of conversations with the Secretary of State for Levelling Up, Housing and Communities on those questions. The United Kingdom Government is very keen that we develop a proposition in Scotland that is comparable to what is being taken forward in England. The secretary of state has indicated to me that he fully understands that many of the characteristics, aside from the national insurance contribution benefits, are, in essence, on devolved questions.

I have agreed to explore what those zones might look like. Mr Mason puts some pretty fair points to me about the concept of investment zones. I suppose that the critical question is, do they generate real new growth or are they, in essence, providing for displacement? If they are providing only for displacement and there is an erosion of the tax value, the growth estimates that the UK Government is putting out will not be realised as a consequence. We have to make some very sensitive judgments about that, but we are engaging constructively in that discussion with the UK Government.

We are looking at all those questions as we assemble our judgments on the position that we have to resolve in relation to our tax proposals in the budget. We will set out our position to Parliament as part of the commentary on the budget and the judgments that we think are relevant at that time.

In relation to dialogue with the Scottish Fiscal Commission, I had a discussion with its chair quite recently in which we reflected on those uncertainties, but not with any certainty of our own about the information that might be available to us. My officials are in regular discussion with the Scottish Fiscal Commission to ensure that, as far as possible, we are in a position to satisfy our full obligations on the provision of information. As I said in my opening statement, I am wholly committed to ensuring that we carry out that exercise properly and fully, as is envisaged by statute and by agreement with the Scottish Fiscal Commission.

There is a bit of a moving picture as to the information that we might have available to us. We will only have answers to those questions based on whatever material is published by the United Kingdom Government and the certainties that it would have. As things stand, based on conversations that are now about two weeks old, I am fairly confident that we will not have a United Kingdom Government budget before we have a Scottish Government one. We will therefore be dependent on the information that comes out from the further fiscal statement that is expected in the next few weeks.

On potential revisions, we have set out the resource spending review, which is an indicative direction of travel on public expenditure based on the comprehensive spending review and our assessment of appropriate block grant adjustments. Obviously, the review does not translate into a budget, which is the exercise that we are about to undertake for 2023-24. If there is a change to the content of the UK Government’s spending plans for the next financial year—which, as I said in my previous answer, I fear will be the case because of the unfunded tax cuts and the market turmoil that is being experienced—that could have an effect.

The committee will be familiar with the fact that the choices that are made by the United Kingdom Government can have different impacts on our budget. A significant reduction in social security expenditure will not necessarily have a direct impact on the Scottish Government’s budget, although it certainly would have an indirect effect on the challenges that we face. However, reductions in English departmental expenditure, such as on health, education and local government, would have a direct impact on public expenditure in Scotland.

The committee will also be familiar with the fact that ministers are obliged to balance the budget, so we would have to take decisions based on the appropriate balance between taxation and public expenditure in the light of the data that had become apparent and the block grant adjustments that would follow from that.