Chamber and committees

We have seen that risk over the past 10 days. Mortgage products have had to be withdrawn from the market because they will be fiscally unsustainable for lenders, because of their expectations of where interest rates will head. There is market disruption.

People who had a reasonable expectation of getting a mortgage at one level of interest rate now have to face perhaps double that interest rate, which has an effect on those people’s capacity to borrow. That has been followed by a perilous moment of collapse for the pensions market as a consequence of market uncertainty.

The moral of the story is that the events of a week past Friday—undertaking substantial changes in the fiscal envelope without appropriate forecasts to show how they are sustainable—should never be repeated, because there is a direct connection between those decisions and the market chaos in which the Bank of England has had to intervene to safeguard pensions.

Let us think about that for a moment. Mr Mason and I come from a political stable that has often had to set out our views on how we deliver sustainability and pensions. Well, the United Kingdom Government came perilously close to destroying the pension entitlement of thousands of people because of its recklessness.

Forgive me, I am not absolutely familiar with whether we are obliged to do that through statute—now that I think about it, I think that I legislated for that, so I think that we are obliged to have that in statute. It is a good thing to have a forecast and that is why we should do it.

I invite Mr Mason to wonder what outrage there would have been if I had stood up and said, “I am not going to bother with a Scottish Fiscal Commission forecast”. I can think of some people who might have expressed outrage if I had done that.

To be candid, if I were to ignore an SFC forecast, it would not have quite the consequences of a UK Government ignoring a fiscal forecast, not taking a fiscal forecast or not doing the job properly. We have seen the damage that has been done and our economic prospects have been set back significantly as a consequence of that behaviour.

We would have to have necessary agreement with the Treasury about any revisions to those limits. Obviously, those are issues that we pursue with the UK Government.

There are two points there. First, we must be pretty realistic about the fact that the mini-budget, far from fuelling growth, has actually undermined it. The disruption to the housing market alone as a consequence of that fiscal recklessness will be significant. There is plenty evidence of impact there.

You asked about recent dialogue on the proceeds of crime. It is a while since I have dealt expressly with that. To ensure that I can give the committee an accurate answer, I had better respond to the committee in writing about that.

The last discussions that we had on that were some time ago, because of some of the challenging issues around the devolution of air passenger duty. To my knowledge, those issues have not yet been resolved.

If Mr Lumsden is waiting for me to announce a reorganisation of local government boundaries, I shall save him from the worry. That will not be a part of what we look at.

Once I complete this committee session, I am going to take part in a Cabinet sub-committee on joint priorities with local government. Many of the issues feature in that discussion.

We should be clear. I wrote to the committee yesterday with a revised assessment from His Majesty’s Treasury of the impact on the Scottish block grant adjustment arising from the UK Government’s policy changes on income tax and stamp duty land tax. That assessment indicates a potential positive block grant adjustment of £35 million in this financial year, assuming that we do not make any changes to land and buildings transaction tax in this financial year in light of the change to stamp duty. As I have told the committee already, I think that the disruption to the property market will make those numbers very uncertain.

The purpose of the emergency budget review, which I commenced before the fiscal event, was to explore what more the Scottish Government could do in targeting support to assist people facing financial challenge. That remains the purpose of the exercise.

I have been looking with care at the UK Government’s changes to income tax and stamp duty land tax. At this stage, given the turmoil that we are experiencing and the importance of an orderly forecasting process, I think that any tax changes should be made within the Scottish Government’s normal budget process.

I intend to come back to the Parliament in the week commencing 24 October—the particular date is to be confirmed—to set out the emergency budget review’s conclusions. My view at this stage is that the response will focus on this financial year only and on any measures that the Government can take to support those who are facing difficulty. It will also wrestle with the in-year financial challenges that I set out to the Parliament in my statement on 7 September, which have arisen primarily because of the significant inflationary pressures and the pay deals that are coming in at higher amounts than we anticipated.

The timescale for the Scottish Government’s budget is an emerging picture. As we speak, we are in a position where—this is my understanding, but I do not think that it has been publicly confirmed yet—the UK Government will accelerate the information that was expected to be published on 23 November. We have been assuming that, if that information is available on 23 November, we will be able to produce a budget for the Scottish Parliament prior to the Christmas recess. The steps that will need to be taken for budget scrutiny and the timetabling of that will be the subject of dialogue with the committee. However, if that information is published earlier, it will provide us with a bit more time and certainty about our ability to produce a budget before Christmas.

Under our normal protocols, we are required to give the Scottish Fiscal Commission 10 weeks’ notice of a budget event. If we wanted our budget to be announced on 15 December, we would have to give a notification by this Thursday. The deadline for 8 December has gone if we are to satisfy the 10-week notice period. From the question that you posed, convener, I assume that you share my view that we should go through the normal sequence of events, taking independent advice and getting the information that we should have, which will require us to give the Scottish Fiscal Commission 10 weeks’ notice.

The other point, which I make for completeness, is that I am not certain about the information that we will have available to us. If we receive OBR estimates, we will get estimates of what the block grant adjustment will be. However, I do not know what information we will have about spending or whether the fiscal statement that we will get from the United Kingdom Government sometime in the next few weeks will give us sufficient clarity on whether there will be any revision to the assumptions that we will make, based on a comprehensive spending review.

In all honesty, I cannot see how the comprehensive spending review numbers can be sustained given that there have been £43 billion in unfunded tax cuts and that there is market turmoil. If such turmoil is to be addressed and the £43 billion-worth of tax cuts are to be sustained, rebalancing measures will have to be taken. I fear that those will involve cuts to public expenditure, which will have an impact on the Scottish Government’s budget and on the assumptions that would be in the resource spending review.

I would have to reserve my position on that in relation to pandemic preparations. If I need to give the committee any specific information, I will write to the convener with it.

However, technology can play a huge role in the management of healthcare. If I can get information about my health condition on my Fitbit, simply by voluntarily giving information to allow me to monitor my health and other factors, surely we can find ways at a system-wide level of ensuring that we have the support that technology can bring us in that respect.

Yesterday, I met people from a really interesting company that places sensors in people’s homes to assess their movements, the steps they take and so on. Essentially, they monitor vulnerability. Is somebody getting up at the right time? Are they moving around the house enough? Are they putting the kettle on? Are they cooking? It is all about giving any early indication of whether there is any need for support. If we can get support to that person at the earliest presentation of vulnerability and long before they come anywhere near a care home, a GP practice or an A and E department, we will be able to deliver better outcomes for that individual as well as operate fiscal sustainability.

One of the challenges of deciding our priorities in public expenditure is assessing the most effective use of public expenditure at any given moment. We have to be open to that debate, because the world changes and life changes. We did not have a pandemic until 2020 but, in our budget in 2022-23, we are having to provide £485 million for pandemic activity. Therefore, it is important that public expenditure decisions keep pace with the needs of the time and the agenda that the Government is pursuing. However, for completeness, I have to say that that discussion is not straightforward because, if I said, “Right, we are not spending £485 million on pandemic preparations; we are, instead, going to spend £50 million”, I think that a lot of folk might say, “What on earth is Swinney doing, cutting the pandemic preparedness by £435 million?” Mr Mason has served in this Parliament and on Glasgow City Council, so he will be familiar with the debates about public expenditure. There is not a queue of people lining up to say, “Let’s stop spending money on that and start spending money on this.” Indeed, I rehearsed many of those issues with the Social Justice and Social Security Committee this morning.