Chamber and committees

Today’s debate is an important part of the Parliament’s scrutiny of the Scottish budget, and I appreciate the engagement across the committees in preparation for the debate.

It has been a particularly challenging budget to develop. The war in Ukraine, the surge in the inflation rate and the damage to the public finances that was done by the mini-budget in September have created an exceptionally difficult landscape in which to develop and bring forward the Scottish budget. As a Government, we have had to make difficult choices, and the Parliament will have to consider and determine those choices in the course of the next few weeks.

A balance must be struck between the funding that is available and what it can deliver for the people of Scotland. We have actively chosen to increase the funding that is available to the Scottish budget through our fair and progressive approach to taxation. We have brought to the Parliament a budget that sets a different path for Scotland, which prioritises the elimination of child poverty, the transition to net zero and the sustainability and effectiveness of our public services.

The Finance and Public Administration Committee’s report recognises the nature and scale of the financial challenges that we continue to grapple with in the current financial year and that set a challenging context for the year ahead. As I made clear in my evidence to the committee earlier this month, I take seriously the points that the committee’s convener made in his speech and in the report about the undesirability of there not being a path to balance the budget at this stage in the year. I assure the Parliament that that is not for want of trying and that it is a measure of the scale of the challenge that we face because of the factors that I recounted earlier in my speech. I further assure the Parliament that we are working to address the issues in the time that is available to us.

We have limited fiscal powers, so we have had no option but to reduce our spending in order to meet the pressures on our budget, not least the £700 million of additional funding that we have allocated for public sector pay, which makes a substantial contribution to assisting public sector employees to deal with the cost of living crisis that we face.

We recognise that public sector pay is an important issue to the Parliament. I explained in my budget statement that I was not publishing a public sector pay policy because of the uncertainty about the outlook for inflation and the need to conclude some pay deals in the current year. We can still make progress on pay discussions for 2023-24. Indeed, the Scottish Government continues to engage on pay issues with trade unions and public sector employers. Along with the Cabinet Secretary for Health and Social Care, I have been actively involved in negotiations relating to the agenda for change groupings that we are trying to resolve for 2023-24.

I appreciate that there is a wide range of views across the chamber on what the budget should support, and the debate offers an opportunity for a wider conversation. I look forward with interest to hearing the perspective from a range of committees in members’ contributions to the debate.

I thank the Finance and Public Administration Committee for its pre-budget scrutiny report and stage 1 report and for its acknowledgment of the wide-ranging challenges that the Scottish budget faces. I will carefully consider the recommendations in the report and will reply to the committee in writing in due course.

For the 2023-24 Scottish budget, I have carefully balanced the growing asks against the funding that is available. The budget recognises that we must take action now to enable us to overcome the even greater fiscal challenges that lie ahead. Our approach is set out in our medium-term financial strategy, and we continue to take steps to improve that each year in response to the challenges that we face. Further updates in relation to the implications of the current environment and the different environment to which the convener referred will be set out by the Government in due course—that is likely to be in the medium-term financial strategy.

Critical for the Scottish Government is our continued commitment to ensuring that our public services provide the support that people and communities need, improving outcomes and reducing inequalities while remaining fiscally sustainable. The UK Government’s financial plans will make that incredibly challenging, with the funding outlook for the later years of its spending review period looking increasingly bleak. For those and other reasons, I have taken decisions to increase the higher and top rates of taxation in the next year in order to boost the revenue that is available to the Scottish Government and the Scottish Parliament to address those questions.

Reform of our public services is vital to ensure their sustainability. We have already pursued those issues with public bodies and set out our approach, which is built on joining up service delivery to direct resources towards more person-centred services and, in doing so, make better use of resources.

Secondly, we will undertake a rigorous review of the public body landscape, the work that public bodies do and how resources are used to improve outcomes. That work is not easy and will involve a whole-system approach, which we know will take time to deliver the results that we require.

Thirdly, we are expanding the utilisation of digital technology in the delivery of our public services.

Finally, we will carefully manage public sector employment, in dialogue with public bodies and with our trade union partners, who must be at the heart of dialogue on all such questions.

Change happens when we all buy into and contribute to a vision of effective, sustainable and person-centred services that is both achievable and ambitious, and that will be the focus of the public service reform work that the Government undertakes.

I place on record my thanks to all the committees for their scrutiny work on the budget. In the time that is available to me, I will reflect on a number of the issues that they raised, although I will come back to that in my closing speech, when I have heard from committees about some of the issues that we can further address.

The Economy and Fair Work Committee acknowledged the current challenging economic circumstances and expressed interest in the financial support that we intend to provide for a range of economic and business areas, including enterprise agencies, tourism and the hospitality sector. The 2023-24 Scottish budget maximises the support that we can deliver for businesses through the budget directly and through non-domestic rate support mechanisms.

The Health, Social Care and Sport Committee acknowledged that the scale of the financial and operational challenge across the health and social care sector is unprecedented. That is why the 2023-24 Scottish budget will provide more than £19 billion of investment in health and social care. That is an increase of more than £1 billion, which has been made possible due to the additional revenue that we have raised through our fair and progressive taxation system. As a result, we are exceeding our commitment to pass on all the health and social care resource consequentials to the health and social care system.

The Social Justice and Social Security Committee offered views on a range of social justice and poverty issues. The Scottish Government takes those issues seriously, and I hope that our response in the budget to those significant issues is commensurate with the seriousness of the issues that the committee put to us.

We have taken exceptional steps to support Scotland through the cost crisis and, by the end of March 2023, we will have invested about £3 billion in a range of measures to support households. In addition, we are investing £442 million in delivering the Scottish child payment, which is the most ambitious child poverty reduction measure in the UK. We hope that that measure, along with the uprating in April 2023 of all other Scottish benefits by the September consumer prices index figure, demonstrates that we are providing a comprehensive package that will help us to eliminate child poverty in Scotland.

The Education, Children and Young People Committee raised the important issues of colleges, universities and early learning and childcare. The education and skills resource budget for next year will increase by £132 million, to more than £3 billion, to enable us to address many of those issues.

The Local Government, Housing and Planning Committee focused its pre-budget scrutiny on affordable housing. The Government has put in place investment to support the continuation of the long-term affordable housing programme—next year, we will make available more than £750 million for affordable housing. The local government settlement has been enhanced through a cash increase of £570 million, or 4.5 per cent, which represents a real-terms increase of 1.3 per cent.

The Net Zero, Energy and Transport Committee sought evidence on topics including the fair fares review and bus support, heat in buildings and the joint budget review. We have set out a range of measures, including the investment over the course of the parliamentary session of more than £1.8 billion in heat and energy efficiency, to enable us to properly address the challenges that the committee put to us. In addition, as we have set out on previous occasions, we are expanding the fuel insecurity fund.

In conclusion, I highlight the work that we have taken forward with our recent announcement of the islands deal. We have set out commitments to support our rural and island communities, and the rural affairs budget reflects those challenges.

I look forward to hearing responses from committees and will reflect on those issues in my closing speech. I stress the importance of ensuring that we set a budget that utilises the resources that are available to us, but I make it clear that some very difficult choices had to be made to get us to the position that we are in. I look forward to hearing the views of committees as we take forward our constructive engagement on the Scottish budget.

May I first take a moment to reflect on Mr Beattie’s point? It is an important one, but I cannot say much about it because it concerns a parliamentary matter. However, the unusual subject matter that Mr Beattie has had to raise is one that the Parliament needs to reflect on. It is a matter not for the Government but for the Parliament, and it is one that it needs to take very seriously indeed.

Very briefly.

I am seeking not to get hung up on that technical point. Mr Johnson will understand that it is a rather invidious position for me to be in to be commenting about the auditors. I am simply pointing out to the Parliament that it needs to take seriously what Mr Beattie and the SCPA have put on the record.

Liz Smith made the most revealing comment of the whole debate when she said that in today’s contributions we have looked at the substance, the scrutiny and the evidence, and in next week’s we will get into the party politics. I therefore ask members to forgive me if I pay slightly more attention to what some colleagues say today than I will do next week. That is a little warning.

As he regularly does, Mr Mason gave the Parliament some pretty sobering warnings about the importance of the hard choices that are involved in the budget process and also in the reconciliation of difficult questions about tax. I welcome his support for the tax stance that I have taken.

Mr Mason’s speech was followed by that of Douglas Lumsden, who made a strong argument for more funding for local government but did not offer a single scrap of evidence as to where that money was to come from. That just passes the usual test of contributions from the Conservatives on such questions: it is empty rhetoric.

In his contribution Mr Greer recognised the importance of the budget making provision—as we have had to do by adaptation and amendment in this financial year—for the challenge of public sector pay. On the concerns that I hear from members about the fact that the Government is not yet in a position to confidently set out its route to balance in this financial year, I say that it is not for the want of trying. It is also a measure of the scale of the difficulty and the challenge that the climate of surging inflation represents for us.

There are three principal themes to the Government’s budget. I will reflect on each of them in responding to members’ contributions.

First, in relation to the attack on child poverty, Michelle Thomson made a significant comment, reflecting on the Adam Smith legacy event, that it was important to have empathy for others—to walk in their shoes. If anyone needed to understand that, the contribution that Natalie Don made to the debate—in powerfully setting out the arguments made by the Social Justice and Social Security Committee, and the emphasis on the sustained measures on tackling child poverty—was an important example of such empathy and of understanding such challenges, which her committee has done in focusing on the position of low-income households. It also relates to the point that Claire Baker made about the importance of sustained investment in employability. I am glad that in next year’s budget we have been able to improve the available resources for employability despite the interim cuts that I have had to make this year.

I turn to the theme of net zero. Edward Mountain set out—as did Finlay Carson—some of the inherent challenges in the journey towards net zero but also the necessity of making those commitments. The Government believes that we have put in place, with regard to capital expenditure in particular, the type of support that is necessary in that respect.

The third principal theme of the budget is sustainable public services. Gillian Martin, on behalf of the Health, Social Care and Sport Committee, reflected on the importance of the budget settlement for the health service and on the investment in social care.

Audrey Nicoll, on behalf of the Criminal Justice Committee, reflected on the difference between the budget settlement and the resource spending review, and on the fact that the Government has listened carefully to the challenges to ensure that we properly invest in the criminal justice system and meet its challenges.

Ariane Burgess made clear, with regard to the local government settlement, the importance of the investment that we have made and the need to ensure that that is sustained in the period to come.

In concluding, I will reflect on a couple of other contributions. The first is a point that Siobhian Brown made in relation to the Covid recovery activity. I reassure Parliament and the COVID-19 Recovery Committee, as I did last week, of the importance that we attach to mainstreaming the thinking behind the Covid recovery strategy across the Government’s programmes. One of my priorities in the budget has been to do exactly that.

Lastly, Clare Adamson made a powerful point—

I might wish to pursue that discussion with Mr Mountain in due course. My feeling would be that what we publish in relation to the carbon assessment should fit his requirements, but if it does not, I am happy to explore that further, because the issue has to be resolved. I think that we are doing enough in that respect, but I will happily explore the matter further.

Clare Adamson made an important point about the relationship between the amount of money that is spent on cultural investment and the disproportionate impact that that has on our society and wellbeing. If I did not know that point already, I would not have been listening to Fiona Hyslop, who for many years, as the longest-serving culture secretary in the Parliament, used to beat me into submission in budget agreements with that very argument. I pay warm tribute to her for that. It is an important point, and I assure Parliament of my sympathy with that view. I reiterate that I want to ensure that we do all that we can to support investment in our cultural sector, recognising that, in the tough times that we are living in, people need to enjoy and appreciate the importance of investment in the culture that makes us who we are as a society.

That is not a point of order.

On the level of provision that we have here, I do not really think that that could be the case, to be honest. I would expect to undertake expenditure around PPE preparedness—the committee will be familiar with the importance of the PPE provision in general in all aspects of the health and social care system. I cannot be certain, but it is likely that we will have a booster vaccination programme, so that money will be spent. In addition, the testing arrangements are at a level of preparedness in that we maintain a capacity to undertake testing, which creates a platform for us to significantly increase it should we be required to do so.

The best answer that I can give is that I expect that expenditure to be required during the financial year. Of course, we monitor the situation regularly. The committee will appreciate from the updates that I have provided on the wider financial situation that, for the Government, demand and pressures on the budget in general can vary widely over the course of the financial year. Even if we do not have to spend the money in those areas, I imagine that something else could come along that would demand further expenditure.

There is a significant role for greater digital connectivity in our public services, which will enable us to better manage information about the way in which people interact with their public services. People of Mr Whittle’s and my generation have in their minds an image of IT systems as large and complex things but, of course, we all have phones with various apps on them that gather and use all sorts of flexible information. There are opportunities to better use that data—the apps on my phone tell me about my fitness, my health and wellbeing and how much I exercise, and sometimes they are reassuring and sometimes they are a wake-up call. A lot can be done to address these questions, and I am open to how we explore that.

We have access to and collect a lot of data. Whether those are the right data sets to help us address some of the questions that we face is a matter of debate, but I am generally open to the idea of using digital connectivity better. A critical part of our public service reform agenda is that, as we go through a really challenging spending period, we expect public bodies to be adept at using digital connectivity to support the finding of the solutions that we are looking for—that is what we are setting out to them.

If I may say so, we went from, “This is particularly disjointed,” to, “This is a series of sweeping generalisations”.

I am not dismissing Jackie Baillie’s points because I recognise the importance of that. What is the point of a national performance framework if we do not align our policy interventions with—this is crucial—a budget to support the outcomes that we are trying to achieve? There must be alignment.

I am very mindful of that point. My contention is that, in taking budget decisions, I am doing as much as I can to align our budget with the successful delivery of progress on the national outcomes in the NPF. However, I am open to a conversation on whether we could strike a better balance or put emphasis on particular areas. I assure the committee that the Government takes that endeavour seriously.