Chamber and committees

I welcome the calls from the cabinet secretary and from Mr Greer for a more constructive approach to the budget process. Indeed, I believe that it is necessary. I suggest that we need three things. First, we need earlier and more open on-going dialogue—meeting a day or two before the budget is published does not provide for that.

Secondly, we need more transparency about the numbers. The calls for that have been made not just by Opposition parties but by Audit Scotland, too. We need to be able to track where the money goes, from budget to announcement to outturn to consolidated accounts. For us to be unable to see how money is spent is impossible.

Finally, there must be consistency. I note very different figures—£12 an hour and £15 an hour—being discussed in different places, and some consistency would be helpful.

There are some things in the budget that we can support, but we cannot pass a budget on the back of low pay for social care workers and cuts to front-line and foundational services that are delivered by councils. For those reasons, we will not be voting for the budget.

Mr Swinney has got his sequencing a bit out of order. The point at which we made the claim was before the budget was—

I seek clarification on two points. First, will those measures take place during the coming budgetary year rather than the current one? Secondly, I assume that they will be paid for from the £284 million reserve that was contained within the spring budget revision—or will the money come from other sources?

I agree with the need for a better budget process. However, would the member accept that, if we compare last year’s budget with the resource funding that is available for this year, and we assume or take it on good faith that the Government did not use Barnett consequentials for Covid on recurring items, £3 billion that was unallocated from last year’s budget is going into this year’s budget?

Similarly to Liz Smith, I would reflect that this is in some ways an odd debate, but it is a very important one. Although it might be a little hypocritical for me, while sitting at home, to remark on the lack of people who are sitting in the chamber for the debate, it is perhaps a regret that there is not more interest in it. It might be about a technical requirement, but matters of taxation are hugely important and we need more discussion of these matters rather than less.

Let me also start with some points of agreement. I think that the Scottish Government is correct to leave the rates fundamentally unchanged and to raise the thresholds in line with inflation, thereby alleviating so-called fiscal drag at a time when we seek to both build a recovery and alleviate economic damage. It would be wrong to increase levels of taxation. That approach stands in sharp contrast to that of the UK Conservative Government, which is planning to introduce a national insurance rate rise that will apply to absolutely everybody in the most regressive and cruel fashion, whereas the Labour Party has proposed a windfall tax on utilities, which could be used directly to alleviate the cost-of-living crisis that is resulting from rising utility bills and other costs. I say gently to Liz Smith that her points on Scottish Government policies stand in sharp contrast to the actions of her party’s Government at UK level.

More importantly, we need to look at the detail, not least because of the implications that the comprehensive spending review will have in years 2 and 3, when fiscal plans will be under much greater pressure, and because of the Scottish Fiscal Commission’s insights in recent months on income tax growth.

It is important to look first at the detail of what the Scottish Government has done on income tax. Although I broadly support its progressive approach, not every impact of the changes in the levels is progressive, and nor do the measures go as far as they could. If we look at the impact, we find that those who earn under £25,000 will pay just 65p less tax in 2022-23 than they paid in the previous year, whereas those who earn £25,000 or more will pay £4.57 less. That is not a progressive impact.

More importantly, if we measure ourselves by the standards of the UK Government, we find that, in essence, the levels and rates in Scotland are only marginally more progressive. Those who earn less than £27,850 will pay just £21 less tax in Scotland than those in the rest of the UK. That inflection point is incredibly low. I do not think that £27,850 is a point at which people suddenly become rich. We need to give more consideration to the fact that people in Scotland who earn above that level are paying more tax. We also need to think carefully about whether we could use other tax powers, such as the ability to create new levies that might promote behaviour change with regard to reaching net zero.

More importantly, and to echo some of Liz Smith’s insights but not her prescriptions, we need to look at the longer-term trends that the Scottish Fiscal Commission has highlighted. We have higher rates of taxation for higher earners, but we have lower revenues. We are raising £190 million less through our income tax measures than we would have been if income tax had not been devolved. That is because we have grown our tax base more slowly than the rest of the UK has done.

The explanations from the Scottish Government point to oil and gas and the situation in the south-east of England, but that does not explain the whole picture. Virtually every Scottish region underperformed every other UK region, and Scottish regions certainly underperformed the UK average, in terms of both growth in earnings and the number of employees in the economy.

The explanation involving oil and gas does not bear much scrutiny either. The east of Scotland was the second-worst performing region in the whole of the UK, and it is largely unaffected by changes in the oil and gas sector. The east of Scotland also has many of the things that point to success for the south-east of England. The financial services and tech sectors are just as prevalent in Edinburgh as they are in the south-east, but we are lagging in that area.

I do not pretend that I have the answers, but these are serious issues that need serious examination. We also need to look at the workforce participation figures that we have at a time of labour shortages. Again, we have the supply-side levers in relation to skills and education policy, so we should at least be able to outperform the UK average, even if we cannot necessarily outperform every single region of the rest of the UK.

Those are long-term trends. We need strategic and sustained intervention. We need to acknowledge the relatively limited steps that have been taken to date, and we need to look at the impacts that they have had. However, ultimately, we need to talk much more about tax—both about how we raise it and, more importantly, how we grow wages and in turn grow the tax revenue that we generate so that we can invest in public services.

I just did, in my closing breath, Presiding Officer. I apologise if it was not clear.

Presiding Officer, I apologise for not being there in person. I am dealing with something of a domestic omicron wave. However, by the same token, that allows me to attest to the efficacy of the vaccine and the booster.

After two years of Covid-19, the budget needed to be a turning point. It needed to build resilience and support recovery, it needed to create jobs and build back our public services, and it needed to help people who had put themselves on the front line to care for the vulnerable and those who had missed out on their education.

We support some things in the budget, such as the increased funds for the national health service and the increase in the child payment—which, as the Government knows, will not be enough to meet its own statutory child poverty targets.

The budget delivers neither the focus on, nor the foundation for, the wider needs of recovery. Instead, it offers an insulting pay rise of just 48p for social care workers and underfunds our councils.

On the cabinet secretary’s announcement, £120 million is welcome, but still leaves local services short of £250 million. Moreover, it seems that although Derek Mackay’s sofa has been moved out of the office, Kate has found a few pennies down the back of her armchair. That is no way to construct a budget seriously and rationally, as the cabinet secretary seems to seek to propose.

We need more honesty about the numbers. The Government wants to compare the budget to this and last year’s emergency Covid funding. The Government was clear that Covid money would only be used for non-recurring Covid spending. I took it at its word and agreed with that principle. However, that means that with a £2.9 billion real-terms increase in core funding in the block grant, that sum was unallocated as it went into the budget. To bake emergency Covid funds into its calculations and compare a year of emergency with a year of recovery misrepresents the position that we are in, but that is the approach that the Government took, as it allocated the emergency funds.

Less money is available in total, but almost £3 billion is unallocated and available for investment in recovery. If the Government were to apply the logic that it applies to its funds to the funds of local government—including the emergency funds that local government has had at its disposal—local government would have faced a 25 per cent cut, which is not the line that I hear from the cabinet secretary.

We know that the Government is not transparent when it comes to its budget and to how Covid money has been spent. Audit Scotland said so in July—and again in September and December—and was also clear that it was not possible to track the money from budget to announcement to outturn to consolidated accounts.

The Government must be honest about the numbers, but so must the Conservatives. Using the figure of £3.9 billion at a time of raised inflation is disingenuous, and to claim that figure as additional spend is simply to imply a cut in every other budget line in real terms, not cash terms.

The budget requires difficult decisions—more so because of the SNP’s mismanagement of the economy. The Scottish Fiscal Commission’s forecasts are clear: Scottish income tax receipts are underperforming compared not only with the south-east, as the SNP tried to claim, but with the average of the UK as a whole. On wages and employment growth, every Scottish region, bar one, underperformed compared with the UK average. That failure to grow jobs and wages not only lets down Scottish workers; it has also left the Government with £200 million less than it would have had if income tax had not been devolved.

What we needed in the budget was focused intervention to get people into work, to fill labour shortages and to re-skill people into better pay. When it comes to the economy, the Government’s constitutional distraction leaves Scots with less money in their pockets and the Scottish Government with less money to invest in public services and recovery.

Where is the plan to address labour shortages? Where is the plan for our cities and for building green industry and supply chains? What sums up the SNP Government is that, two years into the pandemic, it has yet to publish an economic or jobs recovery plan. Its promised 10-year plan is delayed until another day—there is no plan for the here and now, and there is a delayed plan for the distant future.

It is in social care and local services that the budget moves from being flawed to being unsupportable. The continued decrease in local authority funding is unacceptable, regardless of what the cabinet secretary manages to pull out at the last minute. Analysis from the Scottish Parliament information centre confirms that local councils are the losers in the budget. Almost every other budget line was static in its share of spending, whereas cash-strapped local government’s share of funding has fallen by 2.4 per cent. Whether we look at the real-terms cut that COSLA outlined or at the SPICe analysis of local government’s share of total spend, whichever way one cuts it the budget further centralises public services and undermines local services.

On top of that, the pay offer to social care workers of an increase of just 48p per hour is nothing short of scandalous. The reality of their work is that staff deal with vulnerable people around the clock and work under tremendous time pressure.

Findings from the Audit Scotland report that was published this morning underline those points and the stark realities. The report outlines the lack of worth that is felt by every social care worker, and it outlines the immense vacancy pressures across the sector. It notes that

“36% of services reported having vacancies in December 2020”,

which is three times higher than the rate across all employers in Scotland. Furthermore, 20 per cent of staff

“are not on permanent contracts ... 11% are on zero hours contracts”,

and “15% ... work unpaid overtime”.

We need a social care system that pays its staff well and attracts people to the sector. The question is not whether paying £12 an hour is affordable; it is whether, in terms of recruitment and preventing bed blocking in the NHS, we can afford not to pay care workers that reasonable sum.

There are, of course, things in the budget that Labour supports, including the needed increases in the Scottish child payment and NHS funds, but the SNP budget fails to deliver for the people who desperately need it. We cannot build a national care service on low pay—

We cannot grow the economy by underfunding local services, and we cannot build recovery or re-skill without targeted support. For those reasons, Scottish Labour cannot support the budget.

I move amendment S6M-02949.2, to insert at end:

“, but, in so doing, believes that this must be a Budget that prioritises Scotland’s recovery; expresses concern that the measures in this Budget are not of a scale or pace needed to meet the child poverty targets and lift children in Scotland out of poverty, and notes the calls on the Scottish Government to deliver an immediate increase to social care pay to at least £12 per hour.”

Can you hear me any better now?

I am very sorry to disappoint members, because now they have to listen to me. However, that will perhaps be more interesting than watching my mouth move but not hearing any of my words.

I concur with Stephen Kerr that it is somewhat strange speaking in a debate wearing a different hat, as the deputy convener of the Finance and Public Administration Committee. However, although the tone of my remarks may be somewhat more subdued, I hope that the substance remains largely the same.

I begin by repeating the thanks of the committee convener to the clerks, our advisor Mairi Spowage, and Ross Burnside of SPICe. I also thank all my fellow committee members for their work on our report.

Above all else in this important debate, which forms part of the budget process, I was struck by the degree of consistency and agreement on fundamental points. I was perhaps most surprised—and, indeed, encouraged—by the number of committees that referred back to Christie, because it is a topic that our committee has reflected on and is keen to focus on as part of our on-going work. Ultimately, it is in all our interests and an overarching priority that we ensure that spending is effective and goes on things that prevent negative outcomes.

I was also struck by the number of members who spoke about the need to focus on inequality and poverty. I take great encouragement from the fact that that seems to be an overarching priority for all committees. Regardless of the party persuasion of the convener who spoke in the debate, it is clearly a priority for this Parliament. I take huge encouragement from that.

Perhaps one of the most surprising topics that I saw as a common thread was data. Whether it came from the Health and Social Care Committee or the Social Security Committee, a clear theme was that we have to understand what is going on if we are going to spend our money correctly. I reflect—again—that that is a theme that the Finance and Public Administration Committee is keen on.

I was struck by Stephen Kerr’s comments about the need to focus on outcomes. Ultimately, that is an important element of all our spending, and I quite agree with the point in relation to education. If we are going to achieve our aim of eliminating the poverty-related attainment gap, focusing on outcomes is critical. That remains true across all spending.

I will briefly highlight Claire Baker’s comments about the need to focus on growth, which I will say more about later. Ultimately, if we are going to have a successful economy and successful public services, addressing the issues that impact on long-term growth is an overarching imperative and a mission for us all.

The convener spoke about some of the broader issues that arose during our pre-budget scrutiny, including the need to prioritise policy interventions that can make the most difference to long-term issues such as inequalities and poverty, in a way that positions prevention, reform and national performance framework outcomes at the heart of Government spending plans and approaches. I look forward to looking into some of those issues in more detail in the committee’s forthcoming inquiry.

For now, I want to focus on the specific findings in our pre-budget report that relate to the impact of Covid-19 on Scotland’s public finances, which I would suggest was the core theme in all the contributions today. Unparalleled levels of public funding have been provided to our public services’ pandemic response and to support businesses that have been impacted by restrictions. At the time that we published our report, £13.6 billion had been spent on the Covid response in Scotland in the current and preceding financial years. A further £0.5 billion is expected as a consequence of the UK autumn budget. At the end of 2021, the omicron variant brought with it more restrictions and the need for more financial interventions to support businesses.

With that level of funding, it is critical that there is clarity and transparency regarding how funds have been used—a point that was raised by the convener of the Public Audit Committee and a number of other contributors. Although the Finance and Public Administration Committee accepts that there can be challenges and that it can be difficult to delineate Covid spend and day-to-day spend, that point remains important as the situation normalises. The committee therefore asked the Government to commit to providing transparent and timely information on all Covid allocations, to allow proper scrutiny of where and how effectively the money is being spent, and to allow us to learn any lessons for the future. In response, the Government said that it would continue to provide updates on Covid allocations. However, the Auditor General for Scotland has since repeated his calls for more openness and transparency in that area.

We heard that, in the early months of the pandemic, Her Majesty’s Treasury had provided a funding guarantee of in-year funding to the devolved Governments, which brought more certainty to budget planning. With no such guarantee in place in 2021-22, the Scottish Government was in the uncertain position of having to allocate spend in Scotland without knowing whether the full amounts announced by the UK Government would be spent, and therefore whether they would flow to Scotland. That, we heard, made budget management much more challenging. We therefore asked the UK Government to commit to a similar guarantee if the fiscal situation rapidly develops. In the longer term, we have called on the two Governments to look at whether funding guarantees could be a better way of managing devolved finances.

We also highlighted issues that we think should be considered as part of the upcoming review of the fiscal framework, based on the experience of the pandemic. Although the framework broadly worked as intended, we heard that areas of concern remain. The health and economic impacts were largely the same across the UK, and additional funding arrangements were made available, such as the aforementioned guarantee and extra in-year Barnett consequentials. We have called for the review to look at how the fiscal framework might be strengthened to withstand a situation where future health or economic shocks impact disproportionately on one part of the UK. The latest forecasts from the Scottish Fiscal Commission, which suggest that Scotland is lagging behind the UK on a number of indicators, might bring more urgency to the issue.

Some sectors, including the hospitality, retail, leisure and travel sectors have, as we know, been disproportionately affected by Covid, with some building up significant levels of debt in the process. We therefore asked the Scottish Government to consider how it might best support those sectors to recover, rejuvenate and grow in the wake of Covid.

We note the Scottish Government’s intention to continue some reliefs for the retail and hospitality sectors in the first three months of 2022-23.

The economic outlook is better than was forecast at the start of last year. Forecasters have revised upwards their expectations for growth over the next five years, following stronger-than-predicted growth in the first half of 2021, which was supported by the vaccine roll-out. The economy is expected to return to pre-pandemic levels by the second quarter of 2022.

However, there are worrying signs. As I said, Scotland appears to be trailing behind the rest of the UK when it comes to economic performance. In particular, the Scottish Fiscal Commission noted in its report that employment and wage growth in Scotland are lagging behind the UK average. The SFC also said that Scotland’s income tax receipts are forecast to fall behind the block grant adjustment, which will have an impact on Scotland’s fiscal sustainability.

In our pre-budget report, we asked the Scottish Government to support the Scottish Fiscal Commission in its preparatory work for the production of a fiscal sustainability report, which would be produced in each session as we look ahead to the next 30 to 50 years. Given the most recent forecasts, such a report could be essential in the identification of longer-term trends and would allow a change of direction to reverse trends, if necessary.

I support the motion in Kenneth Gibson’s name, on behalf of the Finance and Public Administration Committee.