Chamber and committees

The Scottish Government borrowed in 2017-18 using the Equal repayments (ER) method - an annuity profile of equal annual payments, hence varying levels of principal and interest (in the earlier years more interest and less principal is paid and vice versa in the latter years of the loan). This method is allowable under the Borrowing Memorandum of Understanding agreed between Scottish Government and HM Treasury. Decisions on repayment method have yet to be taken for 2018-19 and beyond.

No borrowing has yet been undertaken in 2018-19 or 2019-20 therefore repayment periods have not been agreed. Where the lives of the assets being purchased through the loan justify longer terms, these can be agreed as set out in paragraph 60 of the Fiscal Framework.

Polling by YouGov for the Times showed that more than half of Scots support our income tax changes. When asked if they supported the income tax changes announced at the Budget, 54% of respondents said they supported the change, and only 27% did not. That is double the number of respondents supporting the policy change than not.

Between 2007 and 2017, Scotland’s productivity has increased by 5.4% in total, or 0.6% per year on average. This compares to a UK increase of 1.7% in total, or 0.2% per year on average.

The Scottish Government is taking action to support the Scottish economy’s productivity, in line with the priorities set out in our Economic Strategy – to tackle inequality and increase competitiveness. This is very much aligned with our vision for education in Scotland – to ensure that we achieve excellence and equity for all of our children and young people in a highly performing education system.

The Scottish Government is investing enormously in the provision of funded early learning and childcare (ELC) for all 3 and 4 year olds and for the most disadvantaged 2 year olds and has recently announced a multi-year funding deal with local authorities that will ensure the successful delivery of the transformational expansion of ELC to 1140 hours a year from 2020. We are investing £750m through the Attainment Scotland Challenge over the course of this parliament to tackle the attainment gap. Furthermore, we are making Higher education more accessible and investing over £1.8 billion to support the Further and Higher Education sectors through the Scottish Funding Council’s 18-19 budget, guaranteeing that Higher Education will remain free of tuition fees for all eligible Scottish or EU domiciled undergraduate students.

Taken together, these measures are creating an excellent, work relevant education offer for Scotland’s young people, giving them the skills for the current and anticipated jobs market – which can help drive increased productivity. These policies can also help deliver inclusive growth by helping to close the attainment gap, contributing to our preventative actions to reduce Child Poverty and ensuring that every child, no matter their background or circumstances, has an equal chance of going on to higher education.

Quarterly National Accounts Scotland (published 2 May 2018) shows that during 2017, Scotland’s net trade position improved, driven by a net-trade surplus with the Rest of the World. The net-trade surplus with the Rest of the World was driven by an increase in international exports. This has been supported by both the relatively lower value of Sterling, which has been a feature since the EU Referendum, and stronger growth in the global economy.

The Scottish Fiscal Commission (SFC) identify Scotland’s industrial and demographic structure as a downside risk to growth alongside the UKs changing relationship with the EU, a weakening outlook for global trade and weak demand from activity in the UK Continental Shelf (UKCS).

The Scottish Government is using the powers it has to support growth across our industries and ensure that our economic potential is realised. For example, our investment of almost £2.4 billion in enterprise and skills, the most competitive business rates package in the UK, while investing in our National Manufacturing Institute and Scottish National Investment Bank.

The SFC identify Scotland’s projection for slower population growth and declining population aged 16-64 (in contrast to growth in the UK as a whole) as a particular drag on growth in GDP in Scotland. One of the factors that risks limiting population growth going forward, is lower international migration growth.

The contribution of migration to Scotland's economy and demographic profile is crucial, and relatively more important than it is to other parts of the UK. Powers over migration are reserved to the UK Government, however it is increasingly clear the UK Government’s immigration policy does not address Scotland's economic, demographic and social needs. As such, the case is overwhelming for the Scottish Government to be able to set the rules for migration in a way that will attract and retain people with the skills we need.

Decisions on repayment method have yet to be taken for 2018-19 and no decisions on use of borrowing have been taken for 2019-20.

I also refer the member to the answer to question S5W-17426 on 16 July 2018. All answers to written parliamentary questions are available on the Parliament’s website, the search facility for which can be found at http://www.parliament.scot/parliamentarybusiness/28877.aspx

The SFC’s report, Table 3.5, clearly states that the main reason for their downgrade in income tax receipts is a change in their projections for wage and employment growth. There is no evidence that would suggest our income tax policy is leading to a downgrade in forecasts. In their December report the SFC note that the income tax policy is “not of a large enough magnitude to have a significant aggregate impact on the Scottish economy” (page 76). The SFCs reports can be found here: http://www.fiscalcommission.scot/media/1196/scotlands-economic-fiscal-forecasts-publication.pdf and here: http://www.fiscalcommission.scot/media/1314/scotlands-economic-and-fiscal-forecasts-may-2018-full-report.pdf

The Scottish Government is committed to ensuring that revenue funded investment, including borrowing, is maintained at sustainable levels and as a result future revenue commitments will be kept within a maximum of 5% of available budget limits. When taking account of borrowing undertaken to date and borrowing anticipated in 2018-19, £1.5 billion of the £3 billion borrowing limit still remains available.

The Scottish Fiscal Commission have noted that consumption growth over the recent past has been supported by factors such as households reducing their savings and increasing their borrowing. This has decreased the savings ratio, which the Scottish Fiscal Commission have forecast to decrease at a lower rate in future years.

The Scottish Government position is that over the longer term, both consumption and household savings should be supported by increased productivity and balanced wage growth.

Increasing productivity is central to achieving the ambitions set out in Scotland’s Economic Strategy, and therefore it is a key aim of much of Scotland’s Economic Policies. Furthermore, the Scottish Government is taking forward numerous measures to ensure the benefits of increasing productivity can be shared fairly, such as encouraging employers to pay the real living wage and supporting access to flexible working.