Meeting date: Thursday, February 2, 2017
Meeting of the Parliament 02 February 2017
Agenda: General Question Time, First Minister’s Question Time, Awards for Valour (Protection) Bill, Ferry Services, Budget (Scotland) Bill: Stage 1, Business Motion, Decision Time
- General Question Time
- First Minister’s Question Time
- Awards for Valour (Protection) Bill
- Ferry Services
- Budget (Scotland) Bill: Stage 1
- Business Motion
- Decision Time
Budget (Scotland) Bill: Stage 1
The next item of business is a debate on motion S5M-03768, in the name of Derek Mackay, on stage 1 of the Budget (Scotland) Bill.14:31
I am delighted to lead this debate on the principles of the Budget (Scotland) Bill for 2017-18. It is undoubtedly a bill of huge importance to Scotland and a test of the maturity of this Parliament. I seek Parliament’s approval for spending plans that will have a positive impact on our economy, our public services, our communities and our environment—plans that will be supported, for the first time, by income tax proposals made under the powers devolved to us by the Scotland Act 2016.
I welcome the Finance and Constitution Committee’s report on the draft budget. The Government will respond fully to the report before stage 3, but I can offer some initial reflections in this debate. I welcome the committee’s recognition that the 2017-18 budget is fundamentally different and more complex, and I look forward to the work of the budget process review group. The review group will consider the impact of the chancellor’s announcement to alter the timing of the United Kingdom budget and I share the committee’s view that the United Kingdom Government should provide clarity on its autumn budget plans as soon as possible. I have raised this matter with the chancellor, with the full support of the finance ministers of the other devolved Administrations. The group will also reflect on the committee’s comments on transparency with regard to the operation of the fiscal framework and the associated forecasts.
I turn to the principles of the bill and to my engagement with the other political parties. The Government’s budget plans are focused on stabilising and growing our economy, empowering our communities, protecting our environment, promoting equality and improving our public services. Our plans have been framed by wider economic and political factors that have been emerging, such as the impact of the Brexit vote, and by our programme for government.
We remain totally committed to the programme for government—
The minister says that he wants to grow the economy. Why then has he cut the budget of his main economic development agency by 48 per cent?
I will come to Scottish Enterprise.
We are operating with a chancellor who continues to apply restrictions and constraints to our public finances. We have acted positively, investing in our country, and we will use our taxation powers in a fair and balanced way that focuses on taxing in a way that is proportionate to the ability to pay. We propose to protect low and middle-income taxpayers, at a time of rising inflation, by freezing the basic rate of income tax.
However, I recognise that this is a Parliament of minorities, where compromise and finding consensus is a necessity. We know that there is now more of a link between Scotland’s economic performance and the revenues that we have available to spend on our public services. That is why stability and stimulating economic growth is so important to this Government and it is why we will deliver measures such as the £500 million Scottish growth scheme, more investment in higher and further education, new investment in innovation and investment hubs, and of course £4 billion of investment in infrastructure across transport, public services, affordable housing and digital infrastructure.
We propose to reduce the business rates poundage and expand the small business bonus scheme, which will lift 100,000 properties out of rates altogether, and to expand rural and renewables reliefs. This budget will help us to tackle climate change, including through the national priority status that we will attach to energy efficiency.
At a time of significant challenge in our economy, this is a budget that will support jobs and lay the foundations for future growth—economic growth that must be inclusive and sustainable.
We have made it clear that education is this Government’s number 1 priority. We propose to invest £1.6 billion in higher and further education, continuing the provision of free education and maintaining 116,000 full-time college places. We are maintaining investment in skills and training and increasing the number of modern apprenticeships, as well as creating our new skills fund.
We are maintaining the £50 million attainment Scotland fund and investing an additional £120 million to go directly to our schools to tackle the attainment gap in Scotland. We also plan to provide £60 million for the first phase of work to expand early learning and childcare to 1,140 hours by the end of this parliamentary session. Overall, this is a package of measures that places equality of opportunity at the heart of this Government’s approach to Scotland’s economy.
I have said before that I believe that this budget provides a strong settlement proposal for local government, including the additional funding for educational attainment, increased capital resources and increased revenues from council tax. The budget provides real-terms protection for front-line policing and a real-terms increase in total funding to the national health service, with increases to front-line NHS budgets being invested in primary care, community care, social care and mental health.
However, I have been listening very carefully to the other parties in this Parliament across the political spectrum on both tax and spend and I have entered into negotiations in good faith in order to build the consensus that this country needs. I particularly welcome the constructive approach that has been taken by the Green Party. It has asked me to consider changes to our income tax proposals and to provide additional funding for local government. My latest assessment of the financial position this year and our projections for 2017-18 has enabled me to identify an additional £100 million of resource funding and £30 million of capital funding that could be provided through central Government resources.
That will be funded through the use of the budget exchange mechanism, updated projections of the Scottish Government contribution that is required to bring the non-domestic rates pool into balance, and a reduction in the anticipated cost of borrowing repayments next year. In my discussions with the Green Party, I have made it clear that at a time of economic uncertainty, rising inflation and rising prices, this Government does not think that it would be right to increase tax rates.
No party in this Parliament has a majority, but the considerable mandate that we were given in the election means that I believe it would not be right to make a fundamental change to the proposals we put to the people of Scotland. However, having considered the proposals put to me, I can confirm that this Government will lodge a Scottish rate resolution that sets the same tax rates as originally proposed but which applies a cash freeze on the higher rate threshold.
Yesterday, Scottish Chambers of Commerce warned that to create a tax differential income tax was “highly dangerous” for the Scottish economy. Why is the cabinet secretary listening to the Green Party before the voice of Scottish business?
Our proposals are fair and balanced. Some in the business community were concerned about the prospect of higher tax rates, but this Government is not proposing that. Our proposals protect basic rate taxpayers and ensure that 99 per cent of taxpayers who are on the same income this financial year will not pay any more income tax in the next financial year. However, the proposals will generate an additional £29 million of revenues in 2017-18.
The proposals that I am putting before Parliament balance the need to raise additional revenues, while asking the highest earners—the top 10 per cent of earners—to forgo a significant tax cut at a time of UK Government austerity. For the people who are covered by that higher rate, the income forgone amounts to £7.70 a week, which is less than the cost of a single prescription in England.
However, in return for that contribution, Scottish taxpayers will continue to benefit from significant investment in our public services, including above-inflation investment in the NHS, free prescriptions, free personal care, free higher education, no business rates for 100,000 small businesses, new resources to tackle the inequality of the attainment gap, investment to support our efforts on the environment, and the doubling of free childcare. In other words, they will get the best deal for taxpayers in the whole of the UK.
Patrick Harvie. [Interruption.]
I have not said a word yet.
The cabinet secretary knows that the Greens believe that he can go further on taxation and that people who are on generous incomes such as ours can afford to pay more tax. Can the cabinet secretary confirm that the £29 million that he talked about generating by abandoning his inflation-based increase in the higher rate threshold will be added to the £130 million that he already spoke about, and will it result in an additional £160 million going into local government services up and down the country?
Let me be clear with Patrick Harvie and the Parliament that, with the support of the Scottish Green Party for all stages of the budget bill and for the local government finance order—together with agreement to allow the Scottish rate resolution to come into force—I propose to allocate those additional resources of £160 million to local government. The resources are to be allocated through the normal formula distribution and spent at the discretion of individual local authorities.
Will the finance secretary take an intervention?
Once again, this Government has listened and acted.
In line with this Government’s commitments and priorities, I wish to make two further additions to the budget. My proposals already protected the police resource budget in real terms and provided additional reform funding of £36 million to continue the process of transforming the police service and to meet the VAT costs that are imposed by UK Government ministers. The Scottish Police Authority and Police Scotland will shortly set out a long-term strategy for a flexible, modern and sustainable police service that is capable of meeting the changing nature of crime and society.
Today, I can announce further funding of £25 million within the police reform and change budget to support that new phase of transformation, funded through a combination of capital and resource headroom that I judge to be available in 2017-18. That is more support for the police in Scotland.
A range of measures to support our economy were outlined in the draft budget and I have engaged further with Scottish Enterprise.
Will the finance secretary take an intervention now?
I have 30 seconds left to speak. I have spoken to Willie Rennie quite enough—it did not amount to very much.
I propose to provide an additional £35 million to Scottish Enterprise to support our economy at this time.
Presiding Officer, this budget is putting the programme for government into effect, but I also believe that it responds to requests from all sides of this chamber in a reasonable and constructive way by protecting health budgets; delivering a living wage for social care workers; delivering free tuition; expanding early years provision; making efforts on energy efficiency; increasing house building; and supporting local services.
In my draft budget, I explained that supporting it would deliver £700 million of additional spending on public services. Today, I can say that, as a consequence of my proposal, that figure now increases to over £900 million in additional spending for Scotland’s public services.
By any measure, this budget delivers for Scotland. For our economy, our communities and the wellbeing of our nation, I commend the principles of this bill and seek Parliament’s agreement to them.
That the Parliament agrees to the general principles of the Budget (Scotland) Bill.14:45
Today, this Parliament has an important decision to make—indeed, one of the most important that it has ever made. We can deliver on the promises that the majority of us in the chamber made to the people of Scotland at last year’s election, when all but one party represented in the chamber said that we would stop the cuts to valued public services and invest in our economy instead, or we can walk by on the other side as teachers struggle with fewer resources with which to educate our children; as more and more carers’ visits to our elderly family members are reduced to 15 minutes; and as welfare advisers who support those who are most in need face even more cutbacks.
I listened to the First Minister very carefully at lunch time, and she said to Ruth Davidson:
“given the pressure on public services as a result of Tory austerity, it would be wrong to cut taxes for the top 10 per cent”.
I agree. Equally, however, it would be wrong to take that Tory austerity and pass it on to the poorest Scots in the face of public service cuts—Labour is just not prepared to do that. I got into politics to stand up for the very people who will be hit the hardest by the Scottish National Party’s cuts.
I also heard the First Minister refer to Labour’s position on the budget as being somehow playground politics. I say to her that I met Derek Mackay several times throughout the budget process and spoke to him on the phone, too, and the conversations were cordial and constructive. I know that he knows that, and I know that he would agree with that. I therefore reject completely the suggestion that the Labour Party has been playing games. We have been very clear from the outset—[Interruption.] We have been very clear from the outset: we said that the price of our vote was no cuts to public services. The more that they try to bait me to say that Labour was never serious about engaging with this budget, the more inclined I might be to say exactly what we were talking about in those meetings.
The truth is that the finance secretary spent the first half of the meetings saying that there were no cuts and the rest saying, “How much do you need to get rid of the cuts? We won’t do it after all.” It was completely duplicitous. The finance secretary said to me—[Interruption.] The finance secretary said to me that he had no mandate in his manifesto to increase taxes, and I said to him that he had no mandate, either, for these cuts to public services.
With the concession that he has given the Green Party to move away from his manifesto commitment on the top rate of income tax, the cabinet secretary has abandoned the principle of sticking to his manifesto, and it leaves him open to accusations about why he did not use the 50p top rate of tax. If he has moved away from his manifesto once, he can do it again in the name of protecting vital public services.
It has been Labour that, throughout this process, has been honest enough to say that if we want high-quality, universal public services, we have to talk about how we pay for them—and, crucially, who pays for them. That is why we have lodged an amendment saying that the tax powers of this Parliament should be used in order to stop the SNP’s millions of pounds’ worth of cuts to local schools and care for the elderly—services that are the very fabric of our communities across the country and which the Labour Party will always fight for.
However, Labour’s amendment is not just about stopping the cuts; it is about growing the economy. For Scotland’s economy to thrive, we need strong public services. That means good, well-funded schools giving young people the skills that they need to compete for the jobs of the future; and it means investing in the infrastructure projects that are essential to businesses across the country. In this globalised world, if we are to fight for our futures, we need to be able to attract investment into Scotland. We are competing with the world’s major economies for investment and jobs. Nations such as China and India are investing to grow their economies and Scotland must and should do the same.
However, the SNP’s budget does the opposite, and the employers looking for a high-skilled, well-educated workforce will go elsewhere if we do not invest in the greatest natural resource that this country has: its people. We know that the SNP’s constant threat of another independence referendum is not good for our economy either and is certainly not good for our future prosperity. If Scotland were ever to leave the UK, we know that that would be devastating for the public services that we all value. That is why Labour will not and cannot back any SNP plan to impose another referendum on the people of Scotland.
Will the member give way?
Not just now, thank you.
There is a different path available to us because of the new powers that the Scottish Parliament has—powers that so many of us fought for—and it is our responsibility to put them to good use, because this Parliament does not have to be a conveyor belt for Tory austerity. That is why we have come to the chamber with an alternative to the SNP’s millions of pounds’ worth of cuts; in fact, we are the only party to have lodged an amendment to the budget motion. I make no apologies for saying that Labour will not vote for an SNP budget that imposes millions of pounds’ worth of cuts on local services such as schools and care for the elderly—we just will not do it—because to do so would be a betrayal of the voters who sent us here in the first place.
Will the member take an intervention?
No, thank you.
I know about the impact of the SNP’s cuts from my work in Edinburgh. I make a particular appeal to Patrick Harvie here. He has campaigned against austerity his entire political life and has spent the month since the Government published its draft budget warning about the impact of the SNP’s cuts on communities across Scotland—I agree with him about that. All I ask is that he maintain his opposition to the cuts to local services such as schools and care of the elderly.
Will Kezia Dugdale give way?
I will give way in a moment.
Here is what the Greens manifesto actually called for: a 60p top rate of tax and a 43p rate of income tax. Those were the lofty, progressive ambitions of the Greens, but today they have settled to be the fig leaf that the nationalists so desperately want and need.
Kezia Dugdale knows fine well that if every party in what is a Parliament of minorities was just to say, “Our manifesto or nothing,” we would be failing the people of Scotland. However, does she not recognise that what we have achieved, unlike what Labour has achieved, is an additional £12 million-plus for the City of Edinburgh Council—her city council—for public services that she is concerned about this very tax year?
No, I do not accept that. I say to Patrick Harvie very clearly that the tax changes announced—[Interruption.]
The tax changes announced today constitute £29 million-worth of new money, which is one tenth of the money that we need to stop the cuts and one thirtieth of the amount of money that Mr Harvie’s party’s manifesto said was needed to stop the cuts. To accept anything less than bold use of this Parliament’s tax powers amounts to an astonishing and deeply disappointing revelation from the Greens. However, we should not kid ourselves: it is not the Greens’ responsibility to Parliament that is shining through, but the responsibility that they have put on themselves to do nothing that might jeopardise the prospect of another divisive independence referendum. The truth about the Greens is this: nationalism first; austerity second; and—somewhere down the list—their environmental credentials. If the Greens vote for this budget tonight—a budget that passes Tory austerity on to Scots—in the face of a better way, it will be remembered as the day when the Greens abandoned any claim to be a party of the progressive left.
We all remember Nicola Sturgeon as the anti-austerity crusader in the 2015 general election; now, she has become the minister for cuts. The nationalists who claim to be stronger for Scotland now want to weaken our public services and rip the heart out of our communities.
Today, all parties have the chance to back up their previous commitments with action and to say to the people of Scotland that the policies that we put forward were not just to get us through an election but were promises to be delivered. It is make-your-mind-up time. Labour stands for stopping the cuts and investing in public services. There is a better way, and I ask members to join Labour in that fight.
I move amendment S5M-03768.1, to insert at end:
“, and, in so doing, believes that Scottish income tax rates should be set as follows for 2017-18 to invest in public services: basic rate at 21p above £11,500, higher rate at 41p above £42,385 and additional rate at 50p above £150,000.”14:55
The Finance and Constitution Committee recognises that this is an historic budget for Scotland. The new income tax powers, combined with the previously devolved taxes, mean that approximately 40 per cent of the money that the Scottish Government spends will now come from taxation that is raised in Scotland. The Scottish Government’s borrowing powers have increased to a limit of £3 billion for capital spending and £1.75 billion for resource borrowing and cash management.
I will summarise briefly the committee’s view on the Scottish Government’s taxation and borrowing proposals. The committee recognises that there is a wide range of views on income tax, including on rates and bands, in the chamber and beyond. The members of the committee were likewise unable to come to a consensus on those matters.
On land and buildings transaction tax, the committee considers that it is too early to draw any definitive conclusions on the impact of the rates and bands from the available outturn data. On Scottish landfill tax, we noted that, as in previous years, the Government proposes to increase the rates in line with inflation. The approach is similar to that of the UK Government and is intended to address the possibility of waste tourism. On capital borrowing, the committee notes that the Government intends to utilise the maximum amount of £450 million in 2017-18.
The committee notes that the total drawdown of £915 million in capital borrowing powers for 2015-16 to 2017-18 was a result of projects being brought on balance sheet as a consequence of the European system of accounts 2010 ruling. The committee notes the impact of that drawdown on other capital projects, and asks the Scottish Government to provide a full and comprehensive analysis of the use of its borrowing powers.
As the committee makes clear, those new powers provide both opportunities and risks; that is because the outlook for the public finances is now much more dependent on the performance of the Scottish economy. There is now a direct incentive for the Scottish Government to grow the economy in order to increase the amount of tax that is raised in Scotland. However, the way in which the fiscal framework works means that it is the performance of the Scottish economy relative to the performance of the UK economy that matters. Scotland will benefit only if there is higher growth in per capita tax revenues in Scotland than per capita performance of receipts from the equivalent taxes in the rest of the UK. If Scottish tax revenues per capita grow at the same rate as those in the rest of the UK, the Scottish budget will be no better or worse off than it would have been prior to the devolution of the relevant taxes.
Given the linkage between productivity levels and future tax revenues, one of the major challenges for the Scottish Government is to ensure that productivity growth performs at least as well as in the rest of the UK. The chairman of the Office for Budget Responsibility explained to us that the defining puzzle of the present economic recovery has been that productivity has grown much less quickly than has historically been the case. He suggests that, although that is not unique to the UK, it is probably more pronounced here. The committee has therefore asked the Scottish Government what analysis it has undertaken of its options for addressing the productivity puzzle in Scotland and what opportunities the new financial powers provide to improve productivity growth.
Implementing the new financial powers and the framework would have been challenging enough during a period of economic stability. The committee recognises that the added uncertainty arising from the Brexit vote significantly increases that challenge. A key question for the committee is whether the impact of Brexit in Scotland will differ from that in the rest of the UK. We did not hear any evidence at this stage to suggest a differential impact. However, the likelihood is that rising inflation will have an impact on the Scottish Government due to the declining real-terms value of budgets and the increased costs of commitments to maintain spending in real terms. The committee has asked to what extent the Scottish Government has taken steps within the draft budget to address the potential disproportionate impact of inflationary pressures arising from Brexit on households on lower incomes and on public services.
A further significant challenge for the committee and colleagues across the Parliament is to develop our understanding of how the fiscal framework works. The Fraser of Allander institute describes it as “exceptionally complex and opaque” and “without precedent internationally”. It potentially introduces a much higher level of uncertainty and volatility to the budget process. Our report highlights three areas: how the annual adjustments to the block grant for each of the devolved taxes are calculated; forecasting tax revenues for each of the devolved taxes; and reconciling the differences between forecasts and outturn figures.
In essence, the annual budget is now dependent on the Barnett-determined block grant minus the adjustment for each devolved tax and plus the tax revenues from each devolved tax—it is quite simple really, isn’t it? The block grant adjustments and tax revenues are initially based on forecasts, which are reconciled with outturn figures once the data is available. Given the complexity of that arrangement, the committee emphasises that it is essential that there be complete transparency in how the fiscal framework operates. It is hoped that our report on the draft budget will provide some clarity on the process.
The committee also recognises that the operation of the fiscal framework is a responsibility that is shared between the Scottish Government and the UK Government. Therefore, the committee is disappointed that the Chief Secretary to the Treasury declined to give evidence as part of this year’s budget process. It is vital that we have the opportunity to hear from a minister from Her Majesty’s Treasury on the operation of the fiscal framework. We will continue to pursue the matter with HM Treasury.
The committee recognises that the new powers and the fiscal framework fundamentally change the budget process. Consequently, the committee and the cabinet secretary have established a budget process review group. The committee has asked the group to consider a number of issues that arose during this year’s process, including: budget timing, multiyear budgeting, medium-term financial strategy, and transparency and accountability.
A number of subject committees raised timing issues. The impact of the proposal to move the UK budget to the autumn will also need to be addressed, as the cabinet secretary described. The committee has also asked the review group to explore the options for a more strategic approach to financial planning.
The committee believes that consideration needs to be given to improving the transparency of the draft budget document, as the Fraser of Allander institute highlighted. For example, the committee agrees with the Local Government and Communities Committee that greater transparency is required in relation to the local government allocations in the draft budget. Due to the different presentation and sets of numbers relating to the local government settlement, some members were concerned about the level of financial resource available to local government in the settlement.
I am pleased to present to Parliament a unanimous report by the Finance and Constitution Committee for consideration. It was achieved by committee members coming to a consensus through a collective approach despite the obvious differences that existed. Therefore, I thank all members of the committee for making my job easier and the committee clerks for the professional and helpful way that they approached their task.
I commend the Finance and Constitution Committee’s report on the Scottish Government’s draft budget for 2017-18 to the Parliament for consideration.15:04
I start my remarks with an apology. In last week’s budget debate, I referred to the leader of the Green Party as Patsy Harvie. I can only apologise to Mr Harvie for that gross calumny with regard to his character. We know today that it is not the Greens who are the patsies in the chamber but the entire SNP front bench, for they have swallowed hook, line and sinker the Green Party’s hard-left, high-tax agenda. They have let Patrick Harvie pull all the strings, and it will be hard-working Scottish families that suffer as a consequence.
The Cabinet Secretary for Finance and the Constitution had a choice as he went into this debate. He could come with us, drop his plans to make Scotland the highest-taxed part of the United Kingdom and work with us to deliver an ambitious budget focused on growing the economy—
Will Murdo Fraser give way?
Not just now.
Or he could turn sharp left and embrace the anti-growth, anti-business agenda of the Green Party. What a pity and what a tragedy for Scotland that he chose to throw in his lot with the lentil-munching, sandal-wearing watermelons on that side of the chamber. [Interruption.]
Mr Mackay was well warned by the business community as to the consequences of going further on tax than he originally intended. [Interruption.]
I am afraid that I cannot hear what Mr Fraser is saying, but I ask him to calm it down just a wee bit.
Thank you, Presiding Officer. They do not like it when they hear the truth about their budget—
No, Mr Fraser—I do not like it. That is the difference.
Maybe they will like this more, Presiding Officer. Yesterday, Scottish Chambers of Commerce described a move to increase the tax differential between Scotland and the rest of the UK as “highly dangerous”. Today, Mr Mackay and his Government have shown contempt for the views of the Scottish business community and have demonstrated that they have zero interest in trying to help to grow our underperforming economy. They might as well put up a sign at the border saying “Scotland is closed for business”.
May I put into context what Murdo Fraser is talking about? As a result of the decision today, a person who earns £100,000 will pay £86 more than they would have paid under the SNP manifesto, but they will pay £2,080 less than they would have paid under the Green manifesto. I do not think that the Government has given way a hell of a lot.
There we have it from the Liberal Democrats. The Greens are not hard left enough for Willie Rennie. He wants to go even further.
Derek Mackay had so many advantages with this budget. He is a lucky man, first because he has had more money to play with than ever before. By his own admission, his budget for the coming year is up on the current year, in real terms, by some £501 million. He has half a billion pounds more to spend than he had in the current year. In these budget debates, we hear a lot from members on the SNP benches about Tory cuts and Westminster austerity, but their own document tells us that, in both cash terms and real terms, their total budget for the coming year is up against the previous high point of 2010-11. When it comes to total managed expenditure, there is not a cut to be seen in the document.
However, it is not just because he has at his disposal money that his predecessors could only dream of that Mr Mackay is a lucky man. He is also lucky because he has a greater range of powers over taxation than any previous finance minister had. He has a great opportunity to use those powers and resources to build an ambitious budget—a budget for growth, a budget to expand the tax base and a budget that is worthy of the extensive powers at his disposal.
Sadly, in place of that ambition, we have a weak, hesitant, dismal set of measures that, together, amount to a budget that tells us nothing about the type of Scotland that we want to see. It is a budget that will see local services cut while council taxes are being hiked; a budget that cuts funding to the enterprise networks, even after the extra money that has been put in today; a budget that reinforces reductions in college places when we should be doing the opposite; and a budget that will make Scotland the highest-taxed part of the United Kingdom, scaring away investment and sending out a message that the risk taker, the wealth creator, the entrepreneur and the successful are not welcome here.
Will the member take an intervention?
Not just now.
This should have been a budget to grow the economy. Our growth rates today are one third of the UK average. Our unemployment rates are higher, our employment rates are lower and our business confidence is well below the UK average. Those are the key issues that the budget should address, but instead it will simply make matters worse.
If we grow the economy, our tax revenues will grow with it. Our research has shown that, if Scottish growth had matched UK average figures since 2007—the year that the SNP came to power—our gross domestic product would have been £3.1 billion higher over the past ten years, which equates to nearly £1,300 for every Scottish household. If we simply raised to the UK average the proportion of higher and additional-rate taxpayers—the very people on whom Mr Mackay wants to impose an extra tax burden—the Scottish finances would stand to benefit to the tune of £600 million a year in extra revenue, and what a difference that would make to the finance secretary’s spending power.
Once upon a time, the SNP used to believe that it could help grow the economy by cutting taxes. I think that the finance secretary is far too young to remember, first time round, the film genre that was the brat pack movies of the 1980s but, if he has time, I suggest that he takes a look at the 1986 John Hughes classic “Ferris Bueller’s Day Off”, in which a young Matthew Broderick sits in a class of bored teenagers listening to Ben Stein’s economics teacher trying to explain to them the principles of the Laffer curve. Has anyone seen that? Anyone?
Will the member take an intervention?
Oh—Mr McKee has seen it. He can instruct the finance secretary about it.
Mr Fraser frequently mentions the Laffer curve in this place, so I just want to ask him about that. For a single peak Laffer curve with a point of inflection where the rate of change of revenues with respect to rates—dR/dt—equals zero, can he enlighten us whether he believes that we are currently in the range where dR/dt is greater than zero or less than zero and why, or does his understanding of Laffer curves extend only to soundbites and does he have no idea what he is actually talking about? [Interruption.]
Well, Mr Fraser—
Unfortunately, I could not hear Mr McKee’s question, such was the hilarity generated. [Interruption.]
Mr Fraser, sit down.
I want to hear the debate, and that goes for those on the front benches, too—not that I am looking at anybody in particular, Mr Swinney.
Thank you, Presiding Officer.
If Mr McKee wants a lesson on the Laffer curve, all he needs to do is ask the former First Minister Alex Salmond, who was never done talking about the benefits of cutting taxes. Month after month, year after year in this very chamber, the former First Minister lectured us on the benefits of cutting corporation tax in order to grow the economy. For more than a decade, that was the central tenet of SNP economic theory. The question is: where was Derek Mackay when all the rest of us were being bored rigid by his former boss on those topics? Why was he not listening? The finance secretary might not want to remember but, in election after election, he and his colleagues stood on a tax-cutting platform. Alex Salmond at least understood how economics works. Who would have thought that we on these benches would be saying, “Bring back Alex”?
The budget represents a huge missed opportunity. It fails to address the problem of our underperforming economy; it cuts support to local government, which will mean that services are being cut at a time when the council tax is going up; and it sends out a message that Scotland will be the highest-taxed part of the United Kingdom. We will vote against the budget. It is a dismal and unambitious budget that damages Scotland. There is now only one party that champions the Scottish economy and is on the side of Scottish business, taxpayers and hard-working families, and that is the Conservative Party. If we stand alone in this chamber on their side, we do so with no regrets.15:13
In between the name calling and the laughable curve, the one thing that we have learned is that the Conservatives want to slash taxes for the wealthy and are deeply against cuts to public services. They used to accuse us of believing in a magic money tree, but it is clear that they are in that position today.
In a period of minority government, it is the responsibility of all parties to exercise influence for the good and to make a meaningful difference. That is a healthy kind of Parliament. I even think that it is good for ministers to know that the votes are not in the bag when they turn up to work. They need to work for those votes and convince people by compromising.
Government needs to compromise, and today the Greens have achieved the biggest budget compromise in the history of devolution in Scotland—[Interruption.]
I want to hear Mr Harvie, please.
I am grateful, Presiding Officer, because I know that our Labour colleagues in particular are keen to hear what we have to say.
We began the discussion by recognising that there was a big gap between Green and SNP propositions. On tax, we had the most radical proposition in the election last year, which was to cut tax for low earners. Everybody who was on a low or average income would see their tax go down, and we would move to progressive taxation as well. We proposed investing in public services and giving local councils the financial flexibility that we believe they need. We had a long list of other measures, from social security changes to low-carbon infrastructure.
Even before the draft budget was published, Greens had been making progress. The Government had committed to rolling out the healthier, wealthier children initiative, which saves money for households that are hard pressed; to creating a young carers allowance; and to protecting people in Scotland from the UK Government’s sanctions regime. That is the difference that the Green approach was making, even before the draft budget was published.
Will the member take an intervention?
I will in a moment.
As for the package that the Scottish Government has proposed for local government, there is clearly a wide range of interpretations. The Government rolls in a lot of extra budgets that we do not think should be counted as part of the core local government settlement. Others compare the budget at the beginning of the financial year with the outturn of the previous year. We do not think that either approach is appropriate.
The Scottish Parliament information centre—our independent researchers—compared the budget this year with the budget at the beginning of last year and came up with a cut of £166 million. We have set out practical ways in which the Government could reverse that cut and invest in public services.
It is also clear, from what I have been told by the cabinet secretary, that the proposition today does not take away from normal in-year financial allocations.
As I said earlier today, the cuts that are under consideration around the country at local council level are things that none of us should be willing to impose on our councils. Greens regard the cuts as unacceptable, and the basis of the compromise is not £29 million, as Kezia Dugdale said, but the addition of £160 million to the un-ring-fenced local government allocation—the biggest single budget concession since devolution.
Kezia Dugdale rose—
That will make meaningful differences in communities up and down the country. Maybe Kezia Dugdale would like to tell us how she thinks that the £12 million in Edinburgh ought to be spent to reverse dangerous cuts.
When Patrick Harvie has struck the deal that he has, it is important that he is very clear with the chamber about exactly how much of the money that he has secured will come from progressive taxation. Is it, or is it not, £29 million?
I am very clear that the Scottish Government has given far less ground than I think it should, and far less ground than I think it could, on progressive taxation. However, the reality is that an additional £160 million is going into the un-ring-fenced local government allocation.
There is a strong and unanswerable case for more progressive taxation. The SNP cites its manifesto from 2016—a manifesto, by the way, that included no pledge on what the higher rate of income tax ought to be.
Will the member give way?
I have allowed an intervention already.
The SNP gave a pledge on the basic rate, but it gave no pledge on the higher rate. Even a modest 1 per cent increase on the higher rate would generate £80 million. A small drop in the threshold for the higher rate would generate an additional £80 million.
The fact that the Scottish Government found that money in other ways is not what I would have wished. This is not a budget that I would have written. However, nobody who cares about protecting public services in Scotland can look at the £160 million of extra investment and say, “No, thanks. I would rather just keep ranting and make no difference in people’s lives”.
I ask Labour colleagues, with respect to their position, how much more we could have achieved if a constructive approach had been taken by all Opposition parties. We could have pressed the Scottish Government to go even further. As it happens, the Greens are the only political party that has managed to persuade the Government to make any changes at all.
As for Labour’s amendment, Kez Dugdale wants to pretend that it is a budget amendment, but she knows well that the budget cannot be amended except by the Government. Even if we thought that low-income households should be paying more tax, as she wants, a basic-rate increase would affect everybody above the personal allowance level and she knows that well.
Even if we thought that low-income households should be footing the bill, there would clearly be no majority for Labour’s reasoned amendment. It is a pretext for Labour to say to what remains of its fan base how much it hates the SNP. What has that approach achieved? Has Labour’s posturing saved a single council service? Has it prevented a single cut?
Even worse, Labour is reduced to an act of desperation, with Labour activists today spending a grumpy afternoon online trolling the Greens and pretending that we voted for an aviation tax cut when that tax is not even devolved yet. I can be clear that, when the air passenger duty cut comes to a vote, the Government knows that the Greens will make the most consistent case against its policy and will continue to do so.
Greens have made more of a difference in the real world in this one budget debate than Labour has made in 10 years of opposition. It is a position that we should be proud of and—
Mr Harvie, you are well over your last minute. Please conclude.
I know that Green activists around the country will be putting in place the budget changes as soon as possible.15:21
We have all listened to Patrick Harvie a lot over the years. We listened to him at the last election, when he promised us a greener and bolder Parliament. After today, it is not green and bold; it is grey and timorous. We should no longer listen to lectures from Patrick Harvie about austerity and compassion after today’s concession.
I was going to begin with a compliment to the finance secretary. I know that he does not like it; he might feel uncomfortable. Everybody praises John Swinney for what he managed to achieve over his many years as finance secretary, but I thought that he had an easy time. In his first parliamentary session, he had the Conservatives, desperate to support him at every budget in order to do down the Labour Party. That was relatively simple.
It was successful, too.
It was quite successful, absolutely.
Then the SNP had a majority, so John Swinney did not have many hurdles to overcome. Now, in this session, the task is tougher. Derek Mackay has done pretty well. I have found him to be a very reasonable finance secretary. He works in partnership. We have had numerous meetings and telephone calls over many weeks and the discussions have been constructive. As a finance secretary, he has outshone John Swinney.
The problem is that the SNP, too, has lectured us about austerity. I remember the First Minister going to Westminster to lecture everybody about how Scotland was a more compassionate, open, generous country. If only we could follow Scotland’s model. Today, the SNP has turned down an opportunity to invest £500 million in education and £200 million in mental health. Something that everybody in the chamber tells me that they support whole-heartedly has today been turned down.
The SNP has also turned down the opportunity to invest significantly in our colleges and schools and to clear up this Government’s mess in the police service, which Alex Neil admitted was a significant problem of over £200 million. All that has been turned down today in the pursuit of an agenda that is contrary to what the SNP promised that it would deliver.
We put forward a costed and reasonable compromise package in the budget but the Scottish Government could not even accept that. It could not accept a package that was going to be bold and that recognised that all parties in the Parliament are in the minority. The SNP could not accept that compromise and it has missed a big opportunity. Its promises are hollow. We will cast a harsher eye over those promises in future years. When the SNP promises to make a big change to Scottish society, or that it will revolutionise Scottish education, we will cast a harsher eye on that.
The situation has got worse in recent months. What has the Government’s response to the Brexit vote been? It has carried on exactly as it said it would before the Brexit vote. There have been no changes whatsoever and no further investment in our economy by investing in the skills of the people. There has been no further investment in mental health and no further investment in the critical bits that will turn our economy around. None of that has changed. Despite all the lectures about Brexit and how harsh it will be, the Scottish Government has not lifted a finger to do anything about it at all. Any idea that the SNP is a party of the economy has been blown apart today.
Most of my incredulity is, however, for the Conservatives’ claims. The Conservatives stand up here and lecture everybody else about the tax rates. Today’s deal between the Government and the Green Party will deliver £86 more for somebody who earns £100,000 and the Conservatives think that that is outrageous.
Will the member give way?
Not just now. Then they say in the same breath that they condemn any cuts to public services. If we believe in public services, we have to will the means. We have to make the difference to the tax rates. The reality is that the Conservatives will say one thing in one place and something else somewhere else. That is why they have no credibility on the economy whatsoever.
Will the member take an intervention?
Not just now. Today is a big missed opportunity to have a budget that will make this country more liberal and economically strong. It was an opportunity to meet the challenges of Brexit, to invest in our people, and to get the Scottish education system back up to being the best in the world. All those opportunities have been thrown away by this timorous and grey deal.15:27
I start by saying that I am the parliamentary liaison officer for the Cabinet Secretary for Finance and the Constitution.
Back in May, Ruth Davidson declared that being a strong Opposition does not mean
“shouting louder or emoting harder, or a more frenzied gnashing of teeth”—[Official Report, 25 May 2016; c 13.]
That was almost prophetic, because that is precisely what the Opposition has become in this debate.
To continue a theme of other members, this is a Parliament of minorities—although the SNP still has more MSPs than the Conservatives, the Liberal Democrats and the Labour Party put together, we are all minorities. We are parties that were elected by the people of Scotland on different manifestos, with differing policies, plans and priorities, but with one job to do, which is to govern at all times for the people of this country.
The single most important function of Parliament and Government is to pass a budget. How we do that is a measure of maturity, but maturity has been distinctly lacking from the debate so far. Our delivering the budget means that there is a responsibility on every party genuinely to suggest credible ideas, and an opportunity for every party to actually achieve something.
Labour has, for all its noise, not got a single thing to show on the budget. It was all just noise and politics—a bit like its amendment. Labour has a £2 billion wish list of budget demands and would make people who earn more than £11,500 pay for them. That is not fair: that would shift the burden of Tory austerity on to working-class people.
Can Kate Forbes tell us—as she asks for suggestions—the form of words that health board recruiters should use to attract and recruit consultants and health workers from elsewhere in the United Kingdom, given that moving from England, Wales or Northern Ireland will cost them money under the Scottish Government’s tax proposals?
My response to that is twofold. First, one of the unhelpful mistruths that have been spread is that people’s taxes will rise under the proposals. In fact, 99 per cent of Scottish taxpayers will not pay a penny more. Secondly, anyone who moves to this country gets free childcare, free prescriptions, free education for their young people and free personal care for the elderly. If that is not an attractive proposition, I do not know what is. The Tories have spun a relentlessly narrow narrative about higher taxes, which I argue does more to scare off investors than the SNP Government does. The Tories are incredibly miserable about Scotland’s future. They talk about tax because they have nothing else to talk about—except for the Brexit shambles.
We know how the Tories would balance the books: they would cut tax for the richest to cut services for the most vulnerable. However, the books do not balance: under the Tories’ plans, a person on the additional rate would save approximately £6 a week, but would spend more than £8 on a single prescription. That does not add up.
Back in May 2016, the First Minister said:
“We will work hard to build consensus and partnership.”—[Official Report, 25 May 2016; c 5.]
She would not do that, however, at the cost of “inertia” in Parliament. Despite the apathy and lack of engagement among both the Labour Party and the Tories, we still come here today with a budget for the people of Scotland. The budget acknowledges that there is pressure on our public services, so it will not cut taxes for the top 10 per cent of earners at the cost of care for our elderly, education for our children and services for our society. The budget recognises that real people still face real tough financial times, so we will not raise income tax.
Would Kate Forbes please explain to me why it is so unthinkable to use income tax while her party is more than happy to force councils to put up council tax, and why that is perfectly justifiable?
My response to that is simple. The newsflash is that real people out in the real world, who are not interested in our political rhetoric, are struggling to make ends meet. Labour’s plans would mean that all people who earn more than £11,500 would start paying income tax. That would shift tax so that working-class people would pay more. We have not increased taxes.
I close with a reminder of what other parties may find themselves voting against—
Will the member take an intervention?
The member is in the last minute of her speech.
I have only 30 seconds left.
I will close with a reminder of what other parties may find themselves voting against tonight. In saying no to the budget, they will be saying no to more than £100 million in digital infrastructure and delivery of superfast broadband. They will be saying no to more than £470 million of direct capital investment to deliver 50,000 affordable homes, and they will be saying no to £47 million to mitigate the effects of the bedroom tax. They will be saying no to continued dualling of the A9 and improvements to the A82, and they will be saying no to spending £1 billion on mental health. If they can tell the people of Scotland that they have said no to those things, they are braver than I am.15:34
I will set the points that I wish to make in the debate in the context of the three conclusions that were drawn on page 11 of the Education and Skills Committee’s draft budget report, which relate to higher education. The conclusions not only reflect the concerns that were raised by Audit Scotland in its 2016 report into higher education, the evidence that was submitted to the Parliament’s Public Audit and Post-legislative Scrutiny Committee and recent statements by Universities Scotland; they also raise serious questions about the criteria by which the Scottish Government is making its judgment call on higher education policy.
In the first of those conclusions, on page 11 of its report, the committee says that it is
“unclear how a cash funding reduction of 1.3% in higher education resource matches with a commitment to protect core research and teaching grants.”
That concern was dismissed by the Cabinet Secretary for Education and Skills, who said that the Scottish Government is protecting teaching and research in cash terms because the capital budget is increasing by £20 million. Furthermore, he claimed that recent changes had allowed universities to increase their revenues, which, in turn, had helped them to increase their reserves and their profitability. However, it is not right at all for the cabinet secretary to argue that he is protecting budgets on the basis that it is possible for universities to make up the financial shortfalls by raising more money of their own via private means. The irony is, of course, that the Scottish Government’s changes have been made because Scottish universities can now charge students from the rest of the UK higher fees.
That lays bare the fact that the percentage share of the sector’s total income that is provided by the Government via the Scottish Further and Higher Education Funding Council is constantly falling. It fell from 41 per cent of the sector’s total income in the 2005-06 academic year to 34 per cent in the 2014-15 academic year. That is what has led Alastair Sim and, indeed, Audit Scotland to make the point that, for publicly funded activity, universities are being funded below cost, at around the 90 per cent mark.
When the Scottish Government claims that it is protecting the core teaching grant and the research grant, and that it is securing funds for widening access and providing free higher education, it is doing so without explaining the true context for the sector. That is the main point of the committee’s second conclusion on page 11, where it says that although
“it is a legitimate expectation of private bodies to augment core provision of services with its own income generation,”
the Scottish Government has not produced a satisfactory rationale to explain its budget choices. That is simply not good enough.
The long and the short of the point that Ms Smith is making is that she believes that the universities should be given more money by the Government. The Conservatives have argued for a reduction in tax that would come into effect on 1 April. I know that they argue that that would be a device to grow the economy. However, on 1 April, we must give a budget to the universities. How would we fund Liz Smith’s proposed increased contribution to the universities if we were to reduce the money that was available by cutting tax on 1 April?
The Government would do so by virtue of the simple reason that it has £0.5 billion extra. It knows exactly what our policy reaction to that would be.
John Swinney rose—
Please sit down just now, Mr Swinney.
If the cabinet secretary allows me to make my point, I will let him in again. Why is it that Universities Scotland, the Auditor General for Scotland and several other experts in the field all maintain that the sector is not sustainably funded?
This morning, I spent two and half hours explaining to the Public Audit and Post-legislative Scrutiny Committee why I believe that the university sector is sustainably funded, so I have dealt with that question.
I come back to Liz Smith’s response to my intervention. She said that we have £500 million, but it has been allocated to other areas of expenditure. She wants to spend more money on the universities but she also wants to cut taxes. Where would the money come from to fund the universities?
Mr Swinney knows that, over a long period of time, we have supported additional money coming in from—[Interruption.] Let me finish. Mr Swinney knows very well that we have a policy that would bring in additional money without increasing tax and without cutting college budgets—which has been a policy of the SNP. We aspire to having a graduate contribution.
Mr Swinney knows that. [Interruption.] We are very happy indeed—
I ask members not to debate across the chamber and to make their points through interventions.
I will give you extra time, Ms Smith.
I think that I heard Mr Swinney say from a sedentary position that a graduate contribution would put people off. I do not think that it would. He knows well that, down south, when it comes to bursary support, the fees issue has not put people off going into higher education. At this morning’s meeting of the Public Audit and Post-legislative Scrutiny Committee, Mr Swinney found it extremely difficult to rebut the charge from the university sector on sustainable funding.
Will Ms Smith give way on that point?
No, I will not, if Ms Robison does not mind. I want to make some progress.
Mr Swinney has to answer this key point—the sector feels badly underfunded just now because of the policy developments that the Scottish Government has set out for it. Unless the Scottish Government recognises that fact, our competitive ability and our ability to retain academic excellence will take a bad hit. Mr Swinney’s Government has to answer the point, but at the moment it has no answer at all. I leave it at that.15:40
Over the past few weeks, in considering the draft budget Parliament has been challenged to think about the kind of country that we want Scotland to be. As we have heard today, budget decision making rarely breeds harmony, but I suggest that the majority of us in Parliament should find some common ground in a document that charters a fair Scotland within the challenging context of Westminster austerity.
The budget will invest £60 million to expand free early learning and childcare while exempting 100,000 small businesses from business rates. It will deliver record investment in the NHS, while limiting the large business supplement to fewer than 10 per cent of properties. The budget will provide £120 million for schools while ensuring that 99 per cent of adults pay no more income tax. Those elements illustrate what the SNP Government has set out to do—which is to invest in our vital social services and in growing our economy.
Protecting and expanding our social infrastructure is so important because it demonstrates our priority of addressing the real problems that are faced by real people. That is why we are investing to increase free childcare to 30 hours a week by 2020. That leap forward in hours will benefit children, working parents and parents who need to access education or training in order to return to work. It might also benefit entrepreneurial parents who are setting up a business. Such investment is critical in the UK, where childcare costs are among the most expensive in Europe.
The Government is also maintaining education as a top priority. The £120 million that is going to schools is £20 million more than was previously announced by the Government. Schools will have discretion and creativity of approach in using those funds beneficially in the classroom.
The budget also delivers on what every party in the Scottish Parliament has called for: protection of and investment in our NHS. The SNP has put forth the boldest NHS investments yet: an increase of £304 million, elevating the total health revenue budget to £12.7 billion.
How does Ash Denham square the boast about the biggest amount of health spending in all time with the fact that NHS Greater Glasgow and Clyde is saying that it will have to cut £333 million from its budget? I would be grateful to know.
As Jackie Baillie is well aware, the budget will increase spending for local services, and announcements have been made today about additional funding. Perhaps Labour should consider engaging more constructively in the process. At this point, its voters must be wondering why there has been no constructive comment from the Labour Party. What is the relevance of Scottish Labour?
I think of my constituents in Edinburgh Eastern and how much the NHS investments will serve them. Edinburgh will benefit from a new elective care centre, a national trauma centre, a sick children’s hospital and a department of clinical neurosciences, as well as redevelopment of the Royal Edinburgh hospital. In fact, NHS Lothian will see £1.3 billion of investment.
That is precisely the kind of care that Scots deserve and expect under the SNP Government. That is why, with 47 per cent of the vote, they sent the SNP to Holyrood with a mandate to pass those policies. That is a directive that we cannot ignore. I am proud to defend the budget, knowing that not only my constituents in Edinburgh Eastern will get the best in health and social services—so will all of Scotland.
As such, now is not the time to give a tax cut to our highest earners, as the Tories would have us do.
Ash Denham said that she is proud to support the budget. Is she more proud to support the budget that is propped up by the Green Party than the budget that Derek Mackay proposed in December? [Interruption.] I am just wondering. Which one is it?
A minority Government clearly has to make compromises. I had assumed that even the Conservatives would understand that. We will take no lessons from the Tories on the economy, given that they are about to drag us off the Brexit cliff edge.
The Tories’ tax policy would shred Scotland’s social fabric and impede investment to grow our economy. The Tories might not see the societal damage that their policies would inflict, but voters in Scotland are well aware of it, and they expect a budget that includes the manifesto commitments for which they voted—commitments to help people to prosper in their lives, not to fall behind.
That is why members of this Parliament would do well to think of the working parent who can never manage to get ahead because they do not have access to free childcare, of the bright young student who cannot afford to go to university, and of the pensioner who needs personal care to allow them a dignified retirement in their own home.
We have a democratic and moral mandate. There is an expectation that the parties whose members are elected to this Parliament will respect Parliament and its processes. There is a presumption that we will engage constructively and responsibly. That approach has been lacking. However, the SNP will not let our democratic and moral commitments falter.
I see that I am running out of time, so I will skip ahead to the end of my speech. In reflecting on the kind of country we want to be, those are the tenets for which we should strive. I think that many members, across different parties, can agree on that, which is why I ask them to join me today in voting for the budget.15:46
I refer members to my entry in the register of members’ interests. I am a local councillor.
At the end of last week’s Labour debate on the budget, the Cabinet Secretary for Finance and the Constitution made a telling comment when he said:
“we are in a Parliament, not a council chamber. Maybe the debate should have been conducted in that way.”—[Official Report, 25 January 2017; c 78.]
It seems that the more than 1,200 men and women across Scotland who serve their communities as local councillors, more than 360 of whom are SNP councillors, are not capable of the level of debate of which Mr Mackay is capable.
Those men and women, of all political persuasions and none, are currently wrestling with tough and painful decisions about which services in the community should be cut and which of their neighbours’ jobs should be axed.
Does Mr Smyth welcome the fact that, between them, Mr Harvie and the Cabinet Secretary for Finance and the Constitution have come up with an extra £5.114 million for Dumfries and Galloway today? Surely that is to be welcomed. Surely Mr Smyth will tell his constituents that that is the case.
I will be quite happy to come to the maths on Dumfries and Galloway in a second. I have done the maths and I can tell Mr Stewart exactly what that figure means in the context of the cuts in Dumfries and Galloway.
Men and women across Scotland will still have to wrestle with cuts as a result of the budget. The cabinet secretary was dismissive of debates in council chambers. I have been a council finance spokesperson and I have seen a fair few budget debates, some in the context of a minority administration, and some in the context of coalition with colleagues in the SNP. However, in all that time, I have never seen the smoke and mirrors and dodgy double counting that I witnessed when the cabinet secretary delivered his statement on the draft budget in this Parliament in December.
In that statement, he said:
“we will invest an additional £300 million in NHS resource budgets”.
That included £107 million for social care, which is part of the health budget. The problem is that the cabinet secretary went on to claim that the £107 million was also part of the local government budget, when he said:
“additional investment in social care means that, in the coming year, there will be no overall reduction in the funding that is provided by the Scottish Government to support local government services.”—[Official Report, 15 December 2016; c 49.]
Not only did the cabinet secretary double count the funding to try to claim that health spending is higher and cuts to councils are lower, but he failed to acknowledge that the £107 million is ring fenced for the living wage and a small number of specific new requirements. There was not a penny more in his draft budget to meet growing demand for existing social care services.
I support the living wage. I have campaigned for it for most of my political life and I am proud to have been instrumental in ensuring that my council became the first living wage-accredited council in Scotland. I also proposed that my council should pay the living wage to care workers in organisations that the council commissioned, but my proposal was voted down by the then Tory-SNP coalition. I welcome the partial U-turn by the SNP, but Labour will continue to campaign to ensure that all care workers, including those who carry out sleepover shifts, who are currently excluded by this Government, receive the living wage.
However, because the £107 million in social care funding is taken up by the living wage, tens of millions of pounds of cuts will still need to be made to existing social care services as a result of the draft budget. Those cuts are sanctioned by the cabinet secretary. In his letter to council leaders on 15 December 2016, he wrote that local councils can cut
“their allocations to Integration Authorities in 2017-18 by up to their share of £80m below the level of budget agreed with their Integration Authority for 2016-17”.
That is £80 million of cuts to existing social care services for our most vulnerable, at a time when demand is growing.
Never before have we seen such contempt shown towards local government and services; never before have we seen such a systematic breakdown in the relationship between local and central Government as the one we are witnessing under this Scottish Government. Local government is seen not as a partner of the Scottish Government but as an enemy. When it comes to properly funding local services, there is no meaningful negotiation—just imposition. If local government dares to call for a fair settlement, the threat of sanctions is waved in its face.
The consequence is that, right across Scotland, communities are now facing up to the prospect of losing local services and jobs. After £1.4 billion of cuts to local government in the past five years, the debate in council chambers, for which Mr Mackay has such contempt, is no longer about which services to trim; it is about which services communities will have to scrap altogether.
It seems that the Government will get its cuts budget through, thanks to the Green Party. Keeping the Yes coalition together, it seems, is more important than keeping council jobs and services.
I appreciate the member giving way, and I agree with a great deal of what he said about the relationship between central and local government and the need for more investment as well as more local control. However, the Green approach has brought his local council £5 million more that it would not have had otherwise. How much difference has the Labour approach made?
I say to Mr Harvie that I have done the maths on my local council in Dumfries and Galloway. It means that, instead of having to plug a £20 million funding gap, because of the cuts it will have a £16 million revenue funding gap. Perhaps Mr Harvie will tell me, along with the SNP, exactly where that £16 million-worth of cuts will come from.
I also say this to the Greens and to Mr Harvie: as I have shown, the deal that they have done will still mean millions of pounds of cuts to council services, and members on this side of the chamber will not rest until every single voter in every single ward with a Green candidate at the council elections in May knows exactly who has voted with the SNP to cut their local jobs and services. It says a lot about the Green Party that, in his speech, Patrick Harvie spent more time attacking Labour for opposing the cuts than he did opposing the SNP for proposing the cuts.
We on this side of the chamber know that all those cuts can be avoided—all of them, not just some of them. This Parliament has the power to make different choices, to be genuinely progressive and to say that if we want decent public services, we need to fund them properly. That is what Labour’s amendment does.
Members have a choice. They can vote through a draft budget that still includes £169 million-worth of cuts to council services and jobs, or they can send a clear message to this Government to come back with a new or amended budget that says, “No ifs, no buts, no more cuts”.15:53
I am delighted to be taking part in this debate on Scotland’s budget at this historic time.
This Parliament is being tasked with putting together not only a spending budget but one to raise revenue. That is part of the process of moving more and more responsibility to the Scottish people and the Scottish Parliament—a process that, we believe, will only continue and accelerate over time.
Today, we will take decisions that are central to the future prosperity of the people of Scotland and of our economy. We have a heavy responsibility to get that right—to balance the need to stimulate growth with the need to provide quality public services both in the short term and in the long term.
In the elections last year, the people of Scotland made their views clear. They want this SNP Government to continue in office. They trust us to govern responsibly and competently in the interests of the country. However, no party secured a majority, and the voters expect all parties to work together, constructively, to deliver a consensus budget in the interests of the country.
The people will watch this process, and they will judge us on how we conduct ourselves. They expect maturity and an appreciation of the responsibilities that we now hold. They will reward those who step up to the plate, who understand those responsibilities, and who work with others in this Parliament to move forward.
Ivan McKee is right that the first responsibility of any local member is to their constituents. Will he, as a representative of the city of Glasgow, condemn the £324 million of cuts since 2007 and—despite the Greens’ deal today—the £130 million of cuts that will come to the city in the next two years? Who is he going to stand up for, Glasgow or the SNP?
An extra £17 million has been given by Derek Mackay, the finance secretary, to Glasgow City Council today—extra money that is going to every school in the Glasgow Provan constituency as a result of the Government’s £120 million to close the attainment gap.
The people of Scotland will reward those who understand that responsibility and work with us, in this Parliament, to move forward, and they will punish those who do not and who use the platform that they have in this place and beyond to disengage from the process and shout from the sidelines. They will look on as the Tory party trashes its reputation for fiscal responsibility. Not a day goes by without a Tory member demanding more spending in one portfolio or another; yet, at the same time, we see the alternative truth narrative that the Tories peddle on Scottish tax.
The reality is that, for 100,000 small businesses, the small business bonus means lower taxes than in England; for council tax payers the length and breadth of Scotland, the council tax freeze means lower taxes than in England; and for lower earners, our manifesto commitment to a higher starting threshold will mean lower taxes than in England. In addition, the whole package of superior public services that are provided in Scotland includes no tuition fees and free prescriptions.
The Tory narrative on Scottish tax is tired and untrue, and it is counterproductive to the task that we should all be engaged in, which is encouraging businesses to invest in Scotland’s economy. It demonstrates their skin-deep commitment to devolution and their belief that Scotland should mirror the policies of the Tory Westminster Government, and the people of Scotland will recognise it for what it is. The Tories’ focus on the top 10 per cent of earners, to the exclusion of the 90 per cent, will limit their support in this country, as it always does, against a backdrop of the economic vandalism of Brexit, which will further trash their reputation for economic competence.
Mr McKee talks about the trashing of reputations. I have sat in this chamber for six years, listening to Patrick Harvie’s moralising, sanctimonious speeches. Have Mr Harvie and the fist-clenching Ross Greer not just done the impossible and made Nick Clegg look like someone who is principled?
What the Greens have done, by engaging constructively in this process, is release another £160 million for local government, which should be welcomed.
If the Tories have trashed their reputation for fiscal competence, Labour has enhanced its reputation for irrelevance. Labour today presents a package of tax increases with the vast majority of the money that they would raise coming from a 1 per cent increase in the basic rate of income tax—a 21 per cent tax starting with those earning £11,500. How on earth does Labour expect to be taken seriously when it proposes to punish the very lowest earners in our society with a tax increase to pay for Tory austerity? Such economic and political ineptitude demonstrates why Labour is not only unfit to govern but unfit to oppose, and it shows why the people of Scotland will continue to reject Labour at the ballot box. Labour’s failure to engage in the process demonstrates that its interest is not in delivering an agenda but only in opposing for opposition’s sake.
The budget provides an extra £300 million of investment in the Scottish national health service, which is above the rate of inflation, as part of our SNP manifesto commitment to increase NHS spending by £500 million more than the rate of inflation over the course of this parliamentary session—a full £0.5 billion more than the Labour Party committed to the NHS in its election manifesto last year. The budget also delivers a £120 million attainment fund, which is essential to closing the attainment gap in our schools; it delivers an extra £4 billion of investment in infrastructure to support growth in the Scottish economy; and it delivers an extra £160 million to local government through the changes that have been announced by the finance secretary today. The budget delivers for the people of Scotland, and I look forward to voting for it.
The process of reaching a compromise in the interests of the people of Scotland has been the most instructive part of these activities over the past few days. A clear line has been drawn between those who understand their roles and responsibilities in this Parliament and those who do not, who use the Parliament as a platform for politicking and, as a consequence, achieve nothing.15:59
The people of Scotland deserve a budget for jobs, a budget to increase their take-home pay and a budget to grow the economy. Instead, the SNP is delivering a budget that increases the tax burden for hard-working people in Scotland compared with the rest of the UK, slashes investment in the economy and makes Scotland the highest taxed part of the UK. That is precisely why we will vote against the budget today.
This budget fails to recognise the new fiscal and economic framework that now applies. As the Fraser of Allander institute has explained, how Scotland’s economy performs relative to the rest of the UK is now crucial for future budgets in Scotland; that point was made very well by Bruce Crawford earlier. Given the new fiscal framework, what we really need is a budget that will stimulate economic growth. We simply cannot continue with an economic scenario in which Scotland grows by only 0.7 per cent when the rest of the UK is expanding at above 2 per cent.
We need a budget that will create new jobs and boost wage growth in Scotland. Last year, workers in Scotland had the lowest rise in annual pay of any region in the UK. We need a budget that will help to create the 120,000 new businesses identified by Scottish Enterprise as being required to reach productivity, export and employment targets. Unfortunately, this budget does none of that; instead, it contains a number of measures that will negatively impact economic growth in Scotland.
Take, for example, the enterprise budget. Despite Mr Mackay’s last-minute U-turn today, the budget for Scottish Enterprise has been cut yet again. That means that for each year that the SNP has been in power, the budget for Scottish Enterprise has been cut, and it is now 40 per cent below the budget levels of 2009. It is difficult to understand the rationale behind that cutting of the enterprise budget at a time when the economy is close to recession. According to Scottish Enterprise, its investments have contributed to the creation of 55,000 new jobs over the past four years, and for every pound that it invests in the economy, it generates about £9 in return.
Will the member take an intervention?
I will in a second.
In other words, the multiplier effect of reducing the Scottish Enterprise budget will lead to the loss of hundreds of millions of pounds to the Scottish economy. We need to recognise that cutting the enterprise budget will reduce levels of new business and job creation, result in lower productivity and innovation levels, and ultimately lead to lower Government revenues.
I ask Mr Lockhart the same question that I asked Liz Smith. The Conservatives want to cut taxes on 1 April, but Mr Lockhart is making the argument for an increase in the enterprise budget. Where is that money to come from?
You have to start some time. I would identify—[Interruption] I am coming to that. I would identify the close to £500 million that the SNP’s maladministration has lost over the years. If you were more efficient in government, you would have more money to spend. [Interruption] We have identified cost overruns close to £1 billion.
This budget presents a unique opportunity to send out a clear message that Scotland is open for business. Unfortunately, the SNP is sending out another message—that individuals and businesses will be taxed higher in Scotland than elsewhere in the UK. Take, for example, the SNP’s large business supplement, which is basically a penalty on business expansion. At a time when we need to encourage small businesses to scale up and employ more people, that SNP expansion tax will penalise businesses that want to expand. Even after taking into account the increased threshold for that tax, more than 20,000 businesses in Scotland will be taxed higher than their counterparts in the rest of the UK. It should come, therefore, as no surprise that the Scottish economy continues to badly underperform that of the rest of the UK.
It is not only expanding businesses that will be penalised by the budget. At a time when the Scottish economy desperately needs more job creators, technology leaders, entrepreneurs, risk takers and highly skilled workers, all of whom would expand the tax base and contribute to higher Government revenues, those individuals now face higher tax in Scotland than in other parts of the UK. There is nothing progressive about increasing tax for hard-working people.
Will the member take an intervention?
I need to make progress.
Ultimately, increasing tax will result in lower spending for vital public services—there is nothing progressive about that. As Scottish Chambers of Commerce has said,
“The sooner our politicians realise that supporting economic growth”
not hiking taxes will increase revenues, the sooner Scotland will prosper.
Dean Lockhart refers to Scottish Chambers of Commerce. Liz Cameron of Scottish Chambers of Commerce said:
“We very much welcome the Scottish Government’s decision to match the basic business rates poundage to that south of the border, resulting in an overall decrease in rates revenues.”
Does he also agree with that comment?
Scottish Chambers of Commerce and many other business organisations have expressed real concern about the revaluations of business rates coming up. For every quote that Mr Mackay has from business, I can give him 10 that are negative on the budget.
The finance secretary is indeed lucky. This budget benefits from £0.5 billion extra funding from the UK Government at a time when the SNP is running a £15 billion budget deficit—the largest Government deficit in western Europe.
They are your “Government Expenditure and Revenue Scotland” numbers.
It is somewhat ironic, although not surprising, that the SNP budget is being supported by the pro-independence Green Party. I say that it is ironic because, if the SNP and the Greens get their wish for an independent Scotland, Parliament will not be debating how to spend £0.5 billion extra: it will be debating how to strip out £15 billion from vital public services across Scotland. Ash Denham talked about damaging our social fabric, but the decimation of public services in Scotland is precisely what will happen if the SNP continues to pursue its single-minded obsession with independence.
I remind all members to speak through the chair, please, and not to each other.16:08
This is indeed a historic budget that is published against a backdrop of economic and political uncertainty. More than ever, the people of Scotland need a budget and this Parliament needs to deliver it. A Conservative minister, Michael Fallon, came to Scotland today to tell us, in essence, to leave Brexit to the Tories, forget about independence and get on with the day job. I think that it is high time that he told his Conservative colleagues in this chamber that getting on with the day job involves negotiating and passing a budget on behalf of the people of Scotland.
The Tory party’s internal war over Europe is wreaking havoc on the UK economy and on our social fabric, with the pound falling, inflation rising and the horrific prospect of our EU citizens being used as a bargaining chip in negotiations. At this moment, the people of Scotland do not want brinkmanship and posturing: they want us to get on with running the country—doing the day job, it might be said.
The harm caused by the Tories’ infamous and failed deficit reduction programme, followed by Brexit, has wrecked their reputation as a sound pair of hands on the economy. In this chamber, hearing the Tories demand both tax cuts and increased spend is just the latest manifestation of their fiscal incompetence. The Conservatives in Scotland may well try to distance themselves from their colleagues down south, but the people of Scotland are not daft. We can hear the demands for tax cuts for the richest 10 per cent and we know where the money is coming from: no more free prescriptions, no more free education and less money for public services.
We heard this week that the UK Government’s policy on tax and benefits will succeed only in delivering the biggest increase in inequality since the time when Margaret Thatcher was in Downing Street. Having last night seen the one remaining Tory MP in Scotland vote against the expressed view of the people of Scotland, we do indeed seem to be right back in the 1980s this week. We did not need Murdo Fraser to mention brat pack movies to remind us of that, because it feels like it.
It seems that the Labour Party, too, is stuck in the 1980s, confirming its irrelevance by not even coming to the table to negotiate. Although its plan to increase everyone’s taxes, even for the poorest in society, was something that we could not agree with, I am sure that we could have worked together on areas in which we have common interests.
The Lib Dems are keen to appear entirely reasonable in public, but behind closed doors they are entirely uncompromising and say that they will never support the budget put forward by the party of independence, regardless of what it might offer to the people of Scotland.
I firmly believe that this budget is filled with things worth supporting. It protects public services, safeguards household incomes, supports economic growth and empowers local communities and people across the country. There is much in the budget of which to be proud and much that members of all parties can get behind. As I said last week, it is a budget that delivers record investment for health—substantially more than any other party in the chamber offered in its manifesto.
Does Maree Todd accept that, in the last quarter of 2016, growth in the UK was at 2.2 per cent while growth in Scotland was at 0.7 per cent, and that unemployment in Scotland was up whereas it was at an all-time 10-year low in the rest of the UK? Which bit of the budget fills members with any confidence that growth in Scotland will improve under the deal that Maree Todd’s party has just done?
Given that we are still part of the United Kingdom, that is a damning indictment of the UK Government’s management of the finances of Scotland.
As someone who worked in mental health for 20 years, I am well aware that mental health has often been the poor relation of general medical services. I am therefore delighted to see a budget that will deliver record investment that is set to exceed more than £5 billion in the current session of Parliament.
I draw everyone’s attention to the commitment in the budget to protect the environment. Climate change is one of the defining issues of our age, and it is significant that the Scottish Government’s budget sets out its commitment to deliver our climate change ambitions of reducing greenhouse emissions; investing in energy efficiency; supporting the renewable energy sector; and creating a vibrant climate for innovation. The budget will tackle fuel poverty, provide high-quality jobs and ensure that Scotland continues to lead the world in developing new technologies and addressing climate change. I cannot believe that the other parties in the chamber do not support that.
Will the member take an intervention?
I am in my last minute.
The budget has made closing the poverty-related attainment gap our number 1 priority, and the new £120 million pupil equity fund shows our commitment to doing just that. It will give teachers and school leaders the ability to decide on the best way of using the extra funding to close the poverty-related attainment gap and improve standards in their schools. My old school, Ullapool primary, is set to receive more than £14,400 in funding from the scheme.
There is much for members on all sides of the chamber to support in the budget. It is time for us all to do our day jobs, find consensus and deliver the budget for which the people of Scotland voted.16:12
The SNP was returned to government on a promise that it would make education its top priority, and I agree with that. Nicola Sturgeon said that closing the attainment gap would be her overarching mission as First Minister, and we on the Labour side of the chamber, who have long championed the issue, agree with that too. However, rhetoric must be matched with resource. In the words of former Vice President Joe Biden,
“Don’t tell me what you value. Show me your budget and I’ll tell you what you value.”
When we look at the budget, we see that the values are only too clear. Words and promises are not backed by investment, and intent and objectives have no new money behind them. On education, the Government refuses to consider using the new powers that this place now has. If anyone wants a sign that the draft budget was one of cuts, they should ask themselves why the Government is now conceding a compromise with the Greens to mitigate the cuts that just a few days ago it claimed did not exist.
It may not be obvious where education appears in the budget, because the reality is that education is delivered primarily by local councils. Spending on schools comprises approximately half of everything that local government spends. There were £327 million-worth of cuts in the draft budget that Derek Mackay put before us. The Government cannot make cuts on that scale without undermining the ability of our schools to deliver education.
Today, we have compromise. Whether the mitigation equates to 10 per cent, a quarter or a half, there are still cuts, and when those cuts fall on local government, it is our schools that will suffer.
It may be unsurprising that the SNP is unwilling to use tax powers, but it is deeply disappointing that the Greens, who have said time and again that they stand for the principle of progressive taxation, have compromised and rolled over in the way that they have. The compromise that the Greens make today will not be accepted by parents or teachers, and anyone who believes in the future of children should not accept it. It is telling that Patrick Harvie, in his speech, spent so much time attacking Labour, rather than dealing with the cuts that the Government has proposed.
Will the member give way?
Will the member give way?
I will take an intervention from Alison Johnstone.
Daniel Johnson will be aware that, as a result of the commitment that the Greens secured for local government today, we will be able to save libraries in Edinburgh from a £2.54 million cut, restore £1 million to welfare advice, head off a cut of £400,000 to Edinburgh Leisure and stop £300,000 being cut from the budget for support teachers. That is in his constituency.
Alison Johnstone knows fine well that, in the draft budget, £38 million of cuts were being handed down to the City of Edinburgh Council. That is the reality of the cuts, which are being only partly mitigated, that her party is supporting.
We have only to look at the numbers to see what is happening in education in this budget, and what has happened to it in the nine previous budgets that the Government has passed. We have £1.4 billion of cuts in revenue. Teacher numbers are down by 4,000. Support staff numbers are down by 1,000. Spend per primary pupil has fallen by £561—that is 10 per cent—since 2010. Those cuts are equivalent to more than £400,000 for every school day since 2010.
Members might not like our numbers or want to accept the damning survey results that the Education and Skills Committee has been receiving from teachers, but they should listen to the Organisation for Economic Co-operation and Development. Its survey results from headteachers make the story clear: 45 per cent of headteachers say that their schools are hindered by lack of teaching staff, 32 per cent say that the schools are hindered by lack of assisting staff and 31 per cent that they are hindered by a lack of educational materials.
However, it is not just about the numbers. Anyone who has spent any time with staff from our schools will hear the same stories. Indeed, the Unison survey was interesting. I will repeat some of the stories from it. On textbooks, someone said:
“Maths resources are woeful, every book has either no front cover, no back cover and pages missing, not because of damage to the resource but because the school has not been able to purchase new books.”
Will Daniel Johnson give way?
I will in a moment. The same is true for our science subjects. Another contribution to the survey said:
“we have less money every year to provide the basic material for teaching—chemicals, apparatus, glassware and text books”.
One primary school headteacher in my constituency put it to me that she did not want more control over her budget—she has enough control already—she just wants enough budget so that she has janitorial cover so that she is not the one unblocking the loos at lunchtime.
I will give way to Mr Mackay.
Time is tight. You must be quick, Mr Mackay.
It is a timely point and intervention. In light of what he says about resource issues, will Mr Johnson explain why he will vote against £120 million of additional resource for attainment to go direct to schools in Scotland?
My answer to that is simple: he should look to our reasoned amendment. We say that we should stick up for local services, use the powers of the Parliament and stop the cuts. It is really very simple.
Does John Swinney find the cuts funny?
The importance of education must be matched in the budget.
Education is John Swinney’s department.
Mr Findlay, will you stop shouting from the back benches?
It is simply not good enough for the SNP to talk up education while making cuts year after year and hiding behind the smokescreen of local government as it does so. The Labour Party believes in progressive taxation. We value public services, which is why we make the argument that we should use the Parliament’s powers to put a penny on income tax. That way, we would not have to see the damage that will be done to local services by the budget that the SNP has proposed.
That is the difference between the Labour Party and the SNP. We believe in progressive taxation, progressive policies and the powers of the Parliament. I am sorry that the SNP does not.
Time is tight. Speeches must be no more than six minutes including interventions.16:18
The Labour Party didnae believe in progressive taxation when Tony Blair and Gordon Brown were Prime Ministers: for all but one month in 13 years, the higher rate of tax was lower than it currently is under the Conservatives.
All that we have heard today from the three Opposition parties is sour grapes. Kezia Dugdale was marginalised. The Tories’ Murdo Fraser was unhinged and Dean Lockhart was incoherent. Willie Rennie was outmanoeuvred. Patrick Harvie is the man of the moment, along with Derek Mackay. It is a tribute to both of those individuals, who have worked hard to deliver a budget for Scotland.
Kezia Dugdale talked about engagement and how Labour genuinely engaged with the cabinet secretary. I remember when Andy Kerr genuinely engaged with a former cabinet secretary. He came to the SNP Government with a shopping list and said, “Labour would like this, this and this.” The cabinet secretary agreed to every single one of Labour’s demands, but Labour could not get its own group to agree to its demands. The reality is that, whatever the SNP proposes, Labour will oppose it. As my colleague Mike Russell said in this Parliament a decade ago, if the SNP invented the light bulb, Labour would denounce it as a dangerous anti-candle device.
What we actually have today is over £900 million for public services, but the increases were met with grim faces on the Labour benches. We should remember that, in the autumn last year, Labour members were talking about £500 million or £700 million of cuts to local government services, which of course have not actually arisen in any shape or form. [Interruption.] They are greetin fae the sidelines.
If they want to talk about cuts, I remind them that I was a councillor in Glasgow City Council when Tony Blair cut £168 million—more than 10 per cent—from the city’s budget in two years, and I was an MSP when Gordon Brown, as Prime Minister, cut £500 million from this Parliament’s budget. Also, it is only two years since Labour MPs walked through the lobby with the Tories and voted for £30 billion of cuts, which is why Labour has one MP in Scotland and not 41.
Will the member take an intervention?
As I like to do, I am happy to give way to Jackie Baillie.
I am very grateful to the member for taking an intervention. Perhaps he will recall that, during the period from 2007 to 2011, every single budget that the SNP put through was supported by the Tories.
The reality is that a budget had to go through. We negotiated with the Tories. Sometimes we had to change our budget by 0.5 or even 1 per cent, but the core SNP budget went through. I am really delighted that the Tories supported those budgets. It allowed us to show that we were a competent Government and to kick Labour into touch in the 2011 election. Thanks to the Tories helping us with those budgets, we could get an overall majority and have a referendum.
Let us talk about taxation, which the Tories have been droning on about. In Scotland, the average band D council tax is £1,152. In England, it is £1,530. I say to John Scott that I do not see a huge number of people coming to Scotland from England to escape an increase in council tax. It does not say much for his view of doctors if he thinks that a £300 or £400 increase in their taxation might deter them from coming to our beautiful country, the appeal of which he clearly underestimates, just as he underestimates the chaos in the English health service.
I turn to North Ayrshire Council and the alleged devastating cuts. In 2016-17, its budget was £279.443 million in revenue and capital. In the coming year, it will be £303.89 million in capital and revenue, which represents an increase of £24.447 million, or 8.8 per cent. As I represent North Ayrshire, I am pleased to say that that represents the highest percentage increase in Scotland. That includes £2.925 million in health and social care integration funds and £4.392 million of additional money to help to close the attainment gap—something that I thought Daniel Johnson might welcome, but it appears that he is not going to do so. Labour tries to ignore those additional resources with its fantasy figures.
Let us talk about some other areas where the SNP Government is delivering. No one has talked about the £3 billion for affordable housing or the delivery of 50,000 new affordable homes. On the small business bonus scheme, Andy Willox said:
“By giving full ... relief to 100,000 Scottish firms, the government has lifted the prospects of smaller businesses”
that otherwise face
“a tough 2017.”
The Scottish Government continues to invest in rural and island housing, and we are significantly increasing—because many MSPs from across the party divide have asked for it—the funds that are available for mental health spending, from £39.45 million to £52.2 million, which represents an increase of 32 per cent.
We are also delivering on skills, with Andy Willox saying:
“We called for a new flexible fund to help firms develop their skills—especially the ones they need to tap the power of the digital economy. So what was announced ... fits the bill perfectly.”
On productivity, David Lonsdale, director of the Scottish Retail Consortium, said:
“It is also welcome to hear that the Scottish Government has listened to our calls to invest in improving productivity. The investments in digital and transport infrastructure will assist this.”
Hugh Aitken, director of the Confederation of British Industry Scotland, said:
“The commitments in this budget, on housing, and digital and transport connectivity, will lay the foundations to allow firms to get on with growing our economy and creating jobs for the long term.”
Mr Gibson, will you close now, please?
I say to colleagues that this is an excellent budget and I urge every member to support it.16:25
Scotland needs a budget for growth, but it is getting a budget that will make us the highest-taxed part of the United Kingdom, and that will not stimulate growth; it will stymie it. In Scotland, we have only 17,000 additional-rate income tax payers. What should we do about that? We should double that number and double it again. But what are we doing about it? We are going out of our way to make them the highest-taxed citizens anywhere in the United Kingdom. The top 1 per cent of earners in the UK pay 28 per cent of the income tax that is received by Governments in the UK.
We are told that those with the broadest shoulders should carry the heaviest burden, and I fully agree, but they already do. More than a quarter of all income tax is paid by the top 1 per cent of earners. In a rational and fair Scotland, we would not seek to penalise those taxpayers; we would seek to double, triple or quadruple their number. Even if we raised their number to the UK average, that would yield an additional £600 million in tax receipts, all of which would come to the Scottish Government.
Will the member give way?
Not at the moment.
The tragedy of the budget is that, despite all Derek Mackay’s earnest appearances to the contrary, he in fact understands that point, or at least his officials do, some of the time. Just yesterday, the Finance and Constitution Committee took extensive evidence at stage 1 of the Air Departure Tax (Scotland) Bill. It is Scottish Government policy to cut air passenger duty—or air departure tax—by 50 per cent over the lifetime of this Parliament. Why? Because it knows that cutting taxation stimulates growth.
To quote the Scottish Government’s policy memorandum, air departure tax is to be cut to boost
“Scotland’s air connectivity and economic competitiveness, encouraging the establishment of new routes which will enhance business connectivity and tourism.”
It states that that
“not only creates new routes but creates new jobs”.
All that by cutting tax—cutting tax, but not cutting the revenues accruing to the Scottish exchequer, because the new jobs will come with new wages, and wages are taxed. Yesterday, the Finance and Constitution Committee heard that cutting APD could generate fresh economic activity in Scotland worth £200 million per year. Cut tax; grow the economy—I point out to Mr Mackay that that is the Laffer curve. He should not need Murdo Fraser to remind him of it.
Why is it that the SNP gets that when it comes to air departure tax but has introduced a budget that fails to reflect those core economic truths anywhere? It is not as if we can somehow afford not to grow the Scottish economy. GDP growth in Scotland is lower than in the UK as a whole; our employment rate is lower than the UK’s; our employment growth rate is lower than the UK’s; our inactivity rate is higher than the UK’s; our claimant count is higher than the UK’s; our skills gap is higher than in the UK as a whole; we have fewer apprenticeships per head than in the UK generally; and the proportion of our workforce lacking digital skills is greater than in the UK as a whole. I say to Maree Todd and others on the SNP benches that none of that can be blamed on Brexit—none of it at all. All of it is the responsibility of the Government that has been running the Scottish economy for a decade—this SNP Government.
Scotland’s productivity is likewise poor. We are in the third quartile of Organisation for Economic Co-operation and Development countries—not the third decile, as the Cabinet Secretary for Economy, Jobs and Fair Work said earlier—when the Scottish Government aims to be in the top quartile. The chief executive of Scottish Enterprise recently told the Parliament’s Economy, Jobs and Fair Work Committee that, to achieve that would require a 200 per cent hike in innovation levels, at a time when Scottish Enterprise’s budget is being slashed.
How on earth Derek Mackay taking his axe to the enterprise agencies is going to deliver economic growth for Scotland is something that neither the Economy, Jobs and Fair Work Committee nor the Finance and Constitution Committee has been able to understand. Perhaps the cabinet secretary will explain it to Parliament this afternoon.
Yet this is the budget for which comparisons between Scotland and the rest of the UK have mattered as never before. As Bruce Crawford said earlier this afternoon and as the Finance and Constitution Committee pointed out in its report, Scotland’s economic performance relative to that of the UK as a whole is now a key factor in determining Scotland’s budget. Do well relative to the rest of the UK, and Scotland will reap the rewards. Do poorly, as we are doing now, and Scotland will suffer. “Stronger for Scotland”, they say. If only that were true.
The one virtue of the SNP’s budgetary policies for the Scottish economy is that they are, at least, comparatively clear. That is to say, they are clearly bad for the economy—bad for business, bad for taxpayers, bad for skills and bad for public services.
That much may be clear, but there is, alas, a great deal about this budget that is anything but transparent. Indeed, parts of it seem to have been presented in a manner that is positively designed to mislead. Figures do not compare like with like and comparisons of spend over time do not correspond. There is an urgent need for greater transparency in the Government’s budget documents, as the Finance and Constitution Committee unanimously agreed.
This is not the budget that Scotland needs, it is not a budget that deserves our support and it is not a budget that we can support. I will join my colleagues tonight in voting against it.16:31
I am delighted that there now seems to be a majority in Parliament for approving this budget at stage 1. I think that we all have to accept that there is a lot of good in the budget, and I particularly welcome the continuing commitment to build 50,000 affordable homes, the £1 billion investment in mental health, the increase in spending on primary healthcare to 11 per cent and, of course, the £120 million to tackle the attainment gap.
I understand that £21 million of that £120 million is coming to Glasgow. That reflects the challenges and needs in the city, perhaps especially in my Shettleston constituency, where the cabinet secretary was yesterday. I believe that it is absolutely right that the emphasis should be on where the need is greatest.
Will the member give way?
Let me go a wee bit further.
It is all very well that some councils have argued recently that they are receiving less funding per head than other councils. Surely the stronger argument is that funding follows need. In that regard, I thank the Government for recognising the position of Glasgow.
Does John Mason, as a fellow Glasgow MSP, accept that the removal by this Government of £324 million to Glasgow since 2007 will have had a massive impact on the life chances of our young people? Our suggestion for this budget is not just to accept what is already in it but to give greater resources to the Scottish Government to direct towards needs and towards tackling equality.
First, we have to live within our means. If Johann Lamont is arguing for more for local government and for cuts to the health service, I would oppose that, I am afraid. I would also oppose her suggestion of taxing people on £11,000 more—that is ridiculous. I will come on to that later.
It goes without saying that we would all like to do more, if we had more money. I think that the Government has been realistic in balancing up what we can raise with what we need to spend.
In one briefing, I saw the phrase “cash limited” being used as if that were a bad thing. The reality is that we are all cash limited, whether as individuals, as organisations or as Governments. We might be able to increase our income, but there is still a cash limit on what we can spend on any one sector. It is all very well listing what we would like to spend on the NHS or whatever, but there has to be a realism about what we can afford.
I look at the positions of the individual parties, starting with the Conservatives. At least the other three parties—Labour, the Lib Dems and the Greens—have been honest enough to say that they want to spend more on services and they need more tax to fund it. By contrast, the Conservatives ask for more spending in several areas—just this afternoon, they have been asking for more money for colleges, local government, universities and Scottish Enterprise—but they also either want tax cuts or want us to at least match tax rates in the UK. How can that be? They now have two chartered accountants on the team, so I would have expected much better than that from the Conservatives. They seem not to have understood so far that, if you want more spending in one sector, you have to either cut in another sector or raise taxes, and if you want to cut taxes, you have to cut some of the expenditure.
Is a third option not to grow the economy so that there is more money?
It has already been well pointed out by John Swinney that there is a time element to that, as we are looking at the budget for next year and I do not think that there is a lot that you can do in that time. Nor is growing the economy entirely clear cut; we have all tried it and have been toiling since about 1707.
I argue that tax is a good thing. If we believe in a healthy society with good public services and improved health and cohesiveness, sensible levels of taxation are an important part of the mix. I accept that taxes can be too high, as when Labour raised them to 98p in my lifetime. That discourages people who are living here and does not encourage businesses either.
If we want to attract businesses, and people for that matter, we need a good education system, a strong health system and good roads, railways, and other infrastructure. This is where the Conservatives and, I fear, Scottish Chambers of Commerce get it wrong. It is not as simple as saying that low tax rates make us more attractive. In its briefing, Scottish Chambers of Commerce admits that our income tax differentials
“may seem modest in year 1”.
That is fair comment, but it warns against
“even more punitive Scottish tax rises”.
There have not been any punitive Scottish tax rises, so that is not very credible.
I agree that Labour’s proposal of going 5p higher than the UK represents too big a jump in one go. We do not know what the reaction to that might be. If it led to behaviour change and people leaving Scotland, that would not be healthy. Scottish Chambers of Commerce, however, says that we are making modest changes this year and I agree with it.
At least we have some clarity this week about Labour’s amendment. Alex Rowley told us in the debate last Wednesday that no one earning under £21,000 would pay more. However, today the Labour Party’s position is different and everyone earning over £11,500 would pay more. A marginal rate of 20 per cent tax and 12 per cent national insurance contribution is far too much for people on £11,000 or £12,000.
The budget process should be that Westminster sets its budget first, we set our budget and then local government does so after that. Westminster needs to get its act together over how it does the budget. The process can certainly be improved.
Overall, it reflects well on this Parliament that deals can be done. No one gets exactly what they want. Perhaps the public likes that and prefers a bit of give and take.16:37
From the start, Labour has made clear our opposition to the cuts to public services. Kezia Dugdale has met and written to the finance minister on several occasions and, as other members have said, we had a debate in Parliament last week. There is no doubt about our position. The truth is that the SNP does not want to do a deal with Labour. Remember that for four years SNP was joined at the hip with the Tories to get its budget through.
The SNP’s idea of consensus is simply that we need to agree with it. Our clear approach from the start has been to use the new powers of the Parliament to stop the cuts in full, not in part, to invest in public services and to grow the economy. That stands in stark contrast with the SNP, which is content to operate simply as a conveyor belt for Tory austerity. We have the power to do things differently, but it comes down to political choice.
In the face of austerity, a post-war Labour Government invested: it created the NHS. In the face of austerity, the SNP Government cuts. It is a Government that boasts about the money that it is giving to health, but that deception was laid bare yesterday with the report from NHS Greater Glasgow and Clyde that talks of cuts of £333 million on top of the cut of £69 million this year, which is causing sweeping centralisation of services.
Despite today’s sleight of hand from the finance secretary, local services including schools and care of the elderly still face millions of pounds of cuts. That is even before we consider the SNP’s fundamentally dishonest approach of double counting, with the Scottish Parliament information centre and the highly respected Fraser of Allander institute showing that the same funds for social care were in both the health and council budget lines. Rather than cutting, Labour would invest in our public services and our people. There is no greater investment that a country can make for the economy than to invest in its people.
Scotland’s economy has many strengths, but that cannot mask the major problems that we face. Across virtually every economic measure, we are underperforming when compared with the rest of the UK. Unemployment is up, economic inactivity is up, growth is stagnating and business confidence is plummeting. In the face of all that, the SNP is in denial and is pretending that everything is okay.
Most worrying of all for our debate today is the fact that employment is down. I said in the chamber last week that the fall in employment has serious consequences for our country. Fewer people paying tax and a lower tax yield means less money for our public services. It is therefore self-evident that growing the economy is a key priority.
The cabinet secretary tells us that Scottish Enterprise should be overjoyed because he cut it by a staggering 48 per cent but now it is to get back £35 million. He failed to tell us that, despite his apparent largesse, there is still a cut of £50 million in real terms to the Scottish Enterprise budget. So much for growing the economy. As for the £35 million, it is financial transaction money. I invite members to explore what that means. It is allocated by the Treasury, is only used for loans or equity and needs to be repaid. Money is given with one hand and then, through sleight of hand, is taken away with the other.
Will the member take an intervention?
No; I have heard enough from the cabinet secretary already.
Let me put it in the simplest of terms so that the SNP understands. I was taught that if I took £100 away and returned £40, I would still be £60 short. The Government should not expect congratulations for making huge cuts and then putting a little back, when it is not real money.
I turn to the Greens, who have settled for a small change in the threshold, which will deliver £29 million. That is really the only new money on the table. The other £130 million is smoke and mirrors, shifting budget lines, accounting trickery, and relying on underspends that might be needed for other things and cannot therefore be guaranteed. We are pulling apart the deal that the Greens arrived at; they have settled for very little indeed. What we have seen today are lofty progressive principles being abandoned for low politics and the illusion of influence. The Greens are fooling no one but themselves. They are certainly not fooling the SNP, which has played the Greens like a fiddle.
I pay tribute to the cabinet secretary’s guile. Kenneth Gibson gave the game away. There was a marriage of convenience with the Tories, whom the SNP then abandoned. The Greens await a similar fate. Let us not pretend that this is anything other than a grubby back-room deal among parties with more interest in forcing another independence referendum on the people of Scotland than in protecting local services such as schools and care of the elderly. Shame on them.16:43
Today’s stage 1 proceedings have reinforced what the Scottish Conservatives have been saying for weeks: the budget is not fit for purpose. My colleagues have comprehensively addressed why that is the case, but it bears repeating.
The SNP, aided by the Greens, have chosen to hike taxes on families and firms, making Scotland the most expensive part of the UK in which to live, work and do business. The SNP is asking Scots to pay more while it continues to deliver the same shambles on education, the NHS, and our justice system. While Derek Mackay is raiding the pockets of hard-working Scots, he has conveniently failed to mention that he has £0.5 billion pounds more to spend this year.
The SNP likes to claim that it is competent at running the country, but the budget has shown that to be fantasy. I see the First Minister sitting on the front bench; I wonder whether she will do a report card on her cabinet secretaries after the debate. I would not like to see the grades that would be given to Messrs Mackay, Brown and Matheson.
In Mr Mackay, we have a finance secretary who had to ask my colleague Murdo Fraser to explain the Laffer curve. From his reaction to Mr McKee’s essay, I am pretty sure that there is no way that he wrote what Mr McKee read out.
Dean Lockhart was quite right to outline that, despite the last-minute changes, there is still a cut to the enterprise networks. We might think that Mr Brown would have spoken up against that at Cabinet, but perhaps that is expecting too much. Earlier this week we found out through a freedom of information request that Mr Brown had “little awareness” of the role of Highlands and Islands Enterprise—two months after he had set up a review on HIE. That is hardly competent government.
Will the member take an intervention?
On justice, Mr Matheson, who has been dubbed by some “the invisible minister”, would probably have preferred not to have been seen when he appeared before the Justice Committee. We were considering the Crown Office and Procurator Fiscal Service budget, and we had already heard from the Crown Office that it would have to lose jobs as a result of the real-terms cuts from the SNP Government, but the justice secretary said, in response to my question about his Government’s cuts and job losses:
“I am not expecting any at present.”—[Official Report, Justice Committee, 10 January 2017; c 8.]
A week later, the Crown Agent told the same Justice Committee that 30 jobs would be lost because of the SNP’s cuts to the budget.
I would dearly love to tell SNP ministers to go back to school and learn their briefs, but given the shambolic nature of education under the nationalists, I am not sure that they would learn very much.
We have heard some great quotations in the debate, which I have enjoyed greatly. Ash Denham confirmed to me that she prefers the budget as amended by the Greens to the one that Derek Mackay proposed in December. Maree Todd told us that this, our Scottish Parliament, with its powers over finance, the economy, enterprise, education, policing and the NHS, does not have the powers to improve things. I tell that SNP member that we have the powers; we just do not have the right Government to use them.
Kenneth Gibson stood up and called Patrick Harvie the man of the hour—words that spread fear through many of us, myself included. So, what about the man of the hour? How tough a negotiator is Patrick Harvie? What was his negotiation for the vital six Green votes to get the budget passed tonight? How much ground did he get the SNP to concede? The answer is “far less” ground than they should have conceded. Those are not my words; they are Mr Harvie’s own words. He said in response to Kezia Dugdale that he had got “far less” from the Scottish Government than he should have. It is hardly the amazing deal that the Green MSPs say they got.
Will the member take an intervention?
I will give way to the man of the hour.
I am grateful to Douglas Ross for giving way, because it allows me to ask him the same question that I would have asked Jackie Baillie. Both of them have said that we should have got more. Can the member tell me of any occasion when any budget has been debated in Parliament when either the Conservatives or the Labour Party have achieved anything like the scale of the impact that the Greens have managed today?
We achieved business rates cuts, 1,000 extra police officers on the beat and a town centre regeneration fund. If members want to learn how to negotiate, they should listen to the Conservatives, rather than saying that they did not get enough from the SNP and then complaining when members criticise them for it.
I will also mention business rates. I have been contacted by countless businesses in Moray that have been affected by the proposed rises that the SNP Government is overseeing.
No, you haven’t. [Laughter.]
It is not a laughing matter. Hotels in Forres and entertainment venues in Elgin have told me that the increases will harm their businesses. We know from today’s First Minister’s question time that even SNP members cannot swallow the increases that those businesses would have to apply to their fees to meet the hike in business rates. Those businesses are right to expect more from the SNP and from their Scottish Government.
I will say more about the deal that has been done to secure tonight’s budget. We now know the price of dealing with the Greens. The nationalist alliance between the two parties represented in the chamber that want to separate Scotland from the rest of the UK also wants Scottish taxpayers to pay more. The SNP—I am sorry. I mean the SNP and the Greens have lurched far further to the left than any—[Interruption.]—of us feared they would. I stopped for a moment when the First Minister spoke from a sedentary position. Does she wish to intervene? No. Okay. The First Minister does not wish to intervene. That is very telling about her Government’s budget.
As Murdo Fraser has said, Scottish businesses will suffer because of the budget. Hard-working families will suffer because of the budget. The SNP would love to paint our opposition to the tax hikes as protecting the rich, but it is about protecting many public servants, including teachers, nurses and policemen and policewomen. Those are the people who will suffer under the SNP plans.
The Scottish Conservatives have outlined an alternative approach that would increase the tax base and provide an environment that is ripe for growth at a time when the performance of Scotland’s economy has never been more pivotal in providing cash for public services.
Because we have ambition for Scotland, we cannot support the Government’s budget while it proposes to make Scotland the highest-taxed part of the UK. For those reasons, the Scottish Conservatives will vote against the budget at decision time.16:50
I was thoroughly disappointed by Douglas Ross’s comments and the content of his speech. He showed that the Tory party, as well as not being fit for government, is not fit for opposition. We had remarkably disappointing contributions from a number of Conservative members. [Interruption.] I was turning my attention to the Tories, but that seems to have upset the Labour Party. Better together is back together for the budget, which may be a sign of things to come. They are not just back together for the budget; from what I have seen this afternoon, they are bitter together. What a woeful contribution to what was meant to be a mature debate on the public services of our country.
This has been quite a lively debate in which members have taken a number of different positions, as is to be expected. Throughout the process, I have tried to find the common ground—the consensus—that exists in the Parliament to deliver a budget for Scotland that we can all agree to.
The comment by Douglas Ross that most disappointed me was his appalling attack on the education service of Scotland in referring to what he described as the “shambles” in Scottish education. That is symptomatic of how the Conservatives have reverted to type in constantly—regardless of the subject—talking Scotland down. If people are scared away from investing or living in Scotland, it will be because of the messages that they hear from the Scottish Tory party, whose day job seems to be standing up for Westminster and the hard-right Tory Government.
I now regret not taking an intervention from Willie Rennie, especially if he was to start by saying, “I think Derek Mackay has done a good job.” I say to the Liberal Democrats that there is much in the budget that they can support.
As for the Labour Party, we know that its amendment is totally meaningless. It is not proposing to end austerity; with its proposition on the basic rate of income tax, it would simply pass austerity on to households across Scotland. It has not considered the risks that that would pose to the Scottish economy and it has taken no cognisance of the advice that its proposal on the additional rate might lose money for Scotland’s public services. What the Government proposes now is not the investment of an extra £700 million in our public services but the investment of an extra £900 million in our public services, yet the Labour Party will not support that.
Will the minister take an intervention?
In a moment.
On the subject of support, I have a number of quotes that demonstrate support for our budget from sector after sector. Colleges Scotland says:
“The increased investment in Scotland’s colleges is very welcome indeed, particularly in these tough financial times.”
We have discussed the Scottish Chambers of Commerce’s welcoming of our business rates position as it relates to the small business bonus and the poundage, as well as its welcoming of our infrastructure spend. The Educational Institute of Scotland has welcomed the additional funds to tackle the attainment gap and inequality, while the Federation of Small Businesses has spoken about how we are giving hope to small businesses in difficult times. I could go on reciting quotes in support of our budget, but it is only right that we hear from Anas Sarwar.
The SNP used to support the 50p tax band. At the Finance and Constitution Committee, the cabinet secretary said that if that band were introduced in other parts of the UK, he would consider introducing it in Scotland. Why is he only a unionist when it comes to Tory tax policy?
The problem is that the Labour Party believes its own rhetoric. I did not say what Anas Sarwar suggested. I tried to explain the block grant adjustment to the Labour Party members on the committee, but it is clear that I failed to do so. I explained the difference in what happens to the outturn for our resources under the new fiscal framework. I will happily arrange a full briefing for members of the Labour Party who want to understand how that works.
Our proposition was that the additional rate should remain under review. We would want to be certain that such a rate would actually generate resources for public services, rather than jeopardising them, which is what the Labour Party suggests.
The Labour Party has criticised my position on local services. It is true to say that the potential spending power for local services is not £240 million. After the budget, with the co-operation and engagement of the Greens, the totality of spending power for local services will increase to more than £400 million.
Different members have mentioned different council areas. Colin Smyth mentioned his council area, which will see an increase of £12 million for local services. Kezia Dugdale mentioned Edinburgh, which will see an increase of more than £30 million—3.92 per cent. Ivan McKee mentioned Glasgow, as did other members—its increase is £45 million. Kenny Gibson mentioned North Ayrshire, which will see an increase of £26 million.
We are investing in our public services and infrastructure, whether that is housing, digital, water, roads, rail—that would be opposed by the Labour Party, too—or new community facilities. There is fantastic investment that will increase the number of houses that we are building. We are delivering stability for our economy and stimulating growth with further investment in innovation and internationalisation.
The Conservatives kept referring to the extra resources that we have to spend. As I have said repeatedly—this is backed up by the Fraser of Allander institute—the figures that they are using do not refer to full discretionary spend. I might need to do another briefing to educate many of the Conservatives on the actual discretionary spend that the Parliament has at its disposal.
Will the minister take an intervention?
I will not take an intervention because I have only two minutes left.
I want to make an important point about what the Conservatives propose. They were elected to be a strong Opposition, but I would like to see them tell those they represent that they are opposing a generous package on business rates and the relief that the SNP Government will provide. The Conservatives will be opposing investment in education, our trade strategy and a range of other infrastructure projects. Scotland remains an attractive place to live, work and invest in. It is the Tories who have been talking Scotland down, and we will not pass on the Tory tax cuts.
If there is divergence in our tax proposition, it is because the SNP believes in the social contract, which includes free education, rather than tuition fees; free prescriptions; free personal care for the elderly; the abolition of bridge tolls; the council tax freeze during those difficult times; no compulsory redundancies for the Scottish Government and health service workforce; and massive investment in the NHS. The Tory party is actually in favour of tax rises, but only for people who are poor, who are seeking education or who happen to live south of the border, where council tax has rocketed under the UK Tory Government.
We believe in a budget that delivers stability, stimulates our economy, invests in education, tackles inequality, focuses on attainment, supports every part of the country, invests in our infrastructure and listens and responds to the voices in Parliament. It is a good budget. I am proud of the budget and I look forward to taking it to the country. I believe that the Parliament can unite, even at this late stage, to recognise that the extra spending of £900 million is good for Scotland in building a better and fairer society, of which we can all be proud.