Chamber and committees

At the statement that Mr Arthur gave to the Parliament on the provisional Scotland reserve position at the end of the financial year, the expectation was that the reserve would hold £650 million. The budget bill provided for £511 million of that to be inserted into the budget, and we expect to deploy the remaining £139 million at the autumn budget revisions, to support announcements that have already been made to provide assistance to different aspects of public policy in the course of the Government’s work.

As ministers have made clear, there are very strong arguments for windfall taxes, and we have supported measures that have been taken forward in that respect. We believe that, if there are windfall profits out of the proceeds of a range of different activities, there is an argument to consider whether those should be the subject of additional taxation.

Mr Mason will appreciate, though, that issues of corporate taxation are reserved to the United Kingdom Parliament, and the Scottish Government has very limited scope to take forward any issues of that type. We can explore any issues that may arise through the non-domestic rates system, but I stress that that is very much a peripheral approach to tackling the scale of the issue that Mr Mason raises with me.

The Government takes forward on-going discussions to consider the exercise of the tax powers over which we have existing competence. The conclusions of those discussions will feature in the budget proposals that will be brought forward later in the year, and members will have the opportunity to scrutinise those. There are very limited opportunities for the Government to extend beyond those existing tax responsibilities, but we consider all those questions as part of our efforts to ensure that the public finances are sustainable.

We are in what I would call the foothills of discussions about the fiscal framework, and there are some mountains yet to be climbed. We will raise and discuss those issues, and the response that we will get from the UK Government will be a matter for further consideration and explanation to Parliament. However, this crisis and Covid illustrate the necessity for the Government and Parliament to have a wider range of financial powers and flexibilities to enable us to manage the challenges that we face.

In answering Annabelle Ewing’s question, I cite the Scottish child payment as probably the most recent and significant intervention in the matter. It represents a very welcome and highly focused intervention to support families who face financial challenge and difficulty. We set out yesterday that it will be extended in November and that the payment will be increased.

That is one example—there are others that I could list—of where the Government is taking action to support families who face challenge. Doing that forces us to make choices about how we use our resources because, if we fund the Scottish child payment, we are not able to fund other proposals and services that other people may wish us to fund.

I am not quite sure where Mr Johnson gets his £1.7 billion figure from, but I will happily engage with him on those questions. The substance of the challenge that we face is the rising costs in budget lines. The point that I made about the £1.7 billion relates to the value of our budget because of the impact of inflation. Clearly, we are managing the challenges within the overall budget figure.

I estimate—I have already cited this figure to Parliament—that, on the basis of existing offers, the additional cost of public sector pay is about £700 million. That is a substantial sum of money that we must reconcile within a fixed budget. What I have set out today takes us substantively towards addressing many of the challenges.

Mr Johnson asked about some of the references to head count in the resource spending review. At this stage, none of my predictions on what will happen in the years to come would affect the contents of the resource spending review but, of course, we will have to turn the resource spending review into individual budgets. That process will be determined by many of the decisions that the UK Government takes on the contents of its budget for the next financial year.

To reiterate a point that I made in my statement, if the UK Government reshapes the balance of its budget between what it expects to generate in tax and what it intends to deploy in spending, that will undoubtedly have an effect on our budget, which may require us to revisit some of the assumptions in the spending review.

The budget will go through the normal process of parliamentary scrutiny. The autumn budget revisions will go to the Finance and Public Administration Committee in due course and there will be an opportunity to fully scrutinise all the changes that I am making. I am here today to provide transparency on the changes that we are having to make. Such a statement would not ordinarily be made at this stage in the parliamentary year. It is because we are having to take operational decisions of such a magnitude as we have never taken before that I have come to Parliament to make a statement and to address members’ questions.

I hear Mr Balfour’s point and I understand it. He makes a fair point, but the challenge that I face is that I cannot spend money twice. That is the point that we are reaching because of the pressures that we are facing. I hear what he says and I will explore what opportunities there are to try to address the issues that he raises, but we are under severe financial pressure, and to meet the costs of public sector pay, we have to take the decisions that we are taking.

I will try to minimise the impact on members of the public—I have given Parliament that assurance today—but the wider context for our financial pressures is set by the parameters in which we operate from the UK Government. If those were relaxed, I would be in a position where I could allocate more money than I am able to allocate today.

I will wait until I see all the detail before I decide what the tax stance of the Scottish Government and the proposals are going to be. We will see what the contents of tomorrow’s announcements are, but I reiterate my point to Parliament that, if there is an approach that rebalances tax and spending in the United Kingdom, I would imagine that there will be an impact on the spending power of the Scottish Government. That is an issue that Parliament will have to wrestle with very carefully.

That is a very important issue and it is one of the areas of work that is taken forward by the financial advisory services that the Government funds around the country. There is advice available to members of the public.

There is obviously a question about the degree to which people are aware of these opportunities to supplement their income entirely appropriately. I will take forward the point that Christine Grahame makes, to ensure that our advice agencies understand the importance of encouraging awareness of the opportunities.

As I indicated earlier, in the local government finance settlement for this year, there was a 9.2 per cent cash-terms increase for local government and a 6.3 per cent real-terms increase. That is before we get to the additional money that I put into local government as a consequence of the pay deal.

Local government, in a very tight financial settlement, is being well supported. As I indicated in my answer to Mr Rennie, we are trying to minimise the impact of any judgments on individuals and communities, and that will be the approach that the Government continues to take as we look for ways to support those who are facing the greatest challenge from the cost crisis.