Chamber and committees

I do not think that that will be the case, because, as I said to Pam Duncan-Glancy, there remains capacity in our programmes to support individuals and deal with referrals.

Mr Balfour is correct in saying that good progress is being made on narrowing the employability gap among disabled people. That progress has been made in the aftermath of Covid. In addition to that, other existing programmes that remain unaffected by the changes still have capacity to support individuals. I have to concede that, as a consequence of the reduction, the rate of progress in reducing the employability gap might not be as fast as I would like it to be. However, as I set out to the committee, I am faced with some very difficult choices in trying to balance the budget in this financial year. Choices of the type that we are discussing are the ones that remain open to me.

It means that a range of programmes are being funded that, ordinarily, would not have been able to be funded had we not allocated the money in the way that I am allocating priorities today within the Scottish Government’s budget.

On the current financial situation and the issues with which I am wrestling, the Cabinet Secretary for Finance and the Economy, Kate Forbes, and I have written to UK ministers and various Chancellors of the Exchequer. There have been a few in the past few weeks, and we might have more. We have done so to make the case that the effect of inflation has been to erode the value of our budget, and to make an appeal, which I have done with my counterparts from Wales and Northern Ireland, for an uplift in budgets to deal with public sector pay pressures and the pressures of inflation. That is necessary: our budget will not change unless there is a positive change in English public expenditure during our financial year.

Essentially, we have a fixed budget once the tax year starts. I am required by law to set a tax rate, which cannot be changed during the financial year, so tax cannot change. I characterise our powers as cash-management resource borrowing powers. They do not allow us to accumulate a resource borrowing capacity. Therefore, we are, essentially, dependent on any changes to budgets that are made in England.

We have written a series of letters to chancellors and Prime Ministers, but we have received no responses. On Friday, I spoke to the Chief Secretary to the Treasury in the aftermath of the mini budget. The chief secretary made it clear to me then that he is insisting on application of the current comprehensive spending review, which means that there will be no uplift to budgets.

I notice from overnight news information that the chief secretary has now written to—or is in the process of writing to—Whitehall departments to require reductions in expenditure. That is not an encouraging sign for what lies ahead in relation to expenditure in future years.

As I have said to Parliament already, the pay deals that we are having to put in place because of the effect of inflation should be looked at. Members of staff and public servants are concerned about their financial situation, and they want some protection from inflation. I was extensively involved in the local government pay settlement dialogue, and I am glad that we got to a conclusion on that. We estimate that we will have to find, from the public purse, £700 million more for pay than we had anticipated. I am having to make many changes to ensure that we can afford things. The local government pay deal significantly enhances the position for staff on low incomes: there are significant increases—in excess of 10 per cent—in the pay of low-income members of staff, which I very much welcome.

That still does not amount to an awful lot of money for those individuals and it is nothing like what some affluent people will get through the tax cuts that were announced last Friday, but it is welcome progress, nonetheless. Those decisions put financial strain on our budget, and the concerns have been echoed by my counterparts in Wales and Northern Ireland, who operate within exactly the same constraints.

They are two slightly different numbers. The £1.7 billion is, in essence, the erosion of the value of our expenditure. The £700 million is hard money; it is money that has to be found.

On Pam Duncan-Glancy’s first observation, I take a very different view about the constitutional arguments, because I think that they are central to the dilemmas that I face. The analysis that Emma Roddick put to me about the ability of the Scottish Parliament to exercise the full range of powers is absolutely correct—for example, yesterday the Irish Government set out a diametrically different budget—

I was not talking about those organisations; I was talking about members of the Scottish Parliament. Members of the Scottish Parliament have hard choices to make, and it is, frankly, not much use for members to complain about the choices that I have made without giving me alternatives.

I have been completely transparent with Parliament. There was, for example, no obligation on me to come to Parliament on 7 September with a statement about the financial position and setting out the range of changes: I could have just done it all in the background, in an autumn budget revision. There is very little public commentary about autumn budget revisions, so I could have just done that, but I did not. I came to Parliament openly and transparently and shared the problem and my view of the solution. It is then incumbent on members, if they do not like the solutions that I have come up with, to tell me how I should do it differently.

In the process, I will engage with all manner of groups, and I am very happy to listen to them, but, with respect, I have not seen a scintilla of an alternative in terms of what I should be doing.

Obviously, we carry out a great deal of discussion with organisations about the formulation of our budget priorities, so that we have a good awareness of the issues. For example, when we were taking decisions about setting out plans for expanding the range of employability services as part of the formulation of our wider programmes, we engaged with a range of organisations so that the Government had knowledge of what was involved in such programmes.

We have strong monitoring information on the capacity of existing programmes that will be untouched by the changes, which shows that there is still adequate capacity in those programmes to enable them to deal with referrals of individuals. In our existing programmes that are untouched by the changes, there remains capacity to support individuals who require employability assistance. On the basis of those assessments, I came to the conclusion that the Government could make the saving and that we would be able to manage the implications, because we still had capacity within our existing programmes.

We considered a combination of those things. In essence, the earlier budget estimates assumed a greater recovery in public transport patronage post-pandemic than has materialised. I again stress that it is an entitlement, so if it translates into more costs, I will have to address the issue in the course of further judgments that are made during this financial year, which would simply add to the pressures that I wrestle with at a different stage in the financial year.

We looked at the comparison between pre-Covid levels, Covid levels and, to use this terminology, Covid recovery levels in order to form the best estimate. I am not going to sit in front of the committee this morning and say that I am 100 per cent confident that we have that absolutely precise. We will continue to monitor it as the year progresses and, if there is a need to put in further financial support, of course, we will do that.

That sums it up in a nutshell. I have a long track record in this Parliament and as a minister. I served for nine years as finance minister and now find myself—very surprisingly—back in the finance area of activity. I have never seen financial strain and pressure like that which I am seeing and wrestling with just now. I do not use those words lightly. I managed through the financial crash and the years of austerity under George Osborne and Danny Alexander. I left the finance brief in 2016 thinking that we had perhaps managed to mitigate the worst of austerity, but that was as nothing compared with what we are now wrestling with.

The fundamental point that Emma Roddick has put to me is that a centre-left Government that believes in progressive values and wishes to secure a fairer and a greener future for our fellow human beings in our community finds that ever more difficult with the agenda that is being pursued. I would actually not accuse the UK Government of being “conservative”, because certain protections of core values are associated with conservatism, but I did not recognise that happening in the financial statement last Friday.