Skip to main content

Language: English / Gàidhlig

Loading…

Chamber and committees

Meeting date: Thursday, May 31, 2018

Meeting of the Parliament 31 May 2018

Agenda: General Question Time, First Minister’s Question Time, Edinburgh City Bypass (A720), Portfolio Question Time, Medium-term Financial Strategy, Housing (Amendment) (Scotland) Bill: Stage 3, Decision Time


Contents


Medium-term Financial Strategy

The Presiding Officer (Ken Macintosh)

The next item is a statement by Derek Mackay, the Cabinet Secretary for Finance and the Constitution, on the medium-term financial strategy. He will take questions at the end of the statement, so if anybody would like to ask a question, I encourage them to press their request-to-speak buttons now.

15:13  

The Cabinet Secretary for Finance and the Constitution (Derek Mackay)

I am pleased to set out the Scottish Government’s first medium-term financial strategy. This marks the first step of the new budget process that was proposed by the budget process review group and agreed by the Parliament. It is also an important step in the development of the fiscal responsibility of both Government and Parliament, following the Scotland Act 2016.

We must remember that Scotland’s public finances are set in the context of continuing United Kingdom Government austerity, Brexit uncertainty and an inhumane, hostile approach to immigration, all of which present unnecessary risks to our economy and our tax base.

Despite increased powers over taxation, the block grant remains our single biggest source of funding, and it continues to be cut. Between 2010-11 and 2019-20, our discretionary block grant for day-to-day spending is falling by £2.6 billion, or 9 per cent in real terms. In 2019-20 alone, we expect real-terms cuts of £410 million.

Let me be clear: the UK Government does not need to pursue this course. Austerity is a choice based on ideology, not on economic necessity. The Chancellor of the Exchequer is on course to overachieve his fiscal deficit target. The Office for Budget Responsibility confirmed in its economic and fiscal outlook for March 2018 that the chancellor has approximately £15 billion of fiscal headroom in 2020-21 alone. Rather than continuing his programme of cuts to public spending and tax cuts for the wealthiest, he should, as a minimum, invest the headroom available in vital public services and economic stimulus.

Scottish Government modelling suggests that the chancellor could provide additional investment in Scotland of around £5 billion between now and 2022-23, while still meeting the UK Government’s targets on structural deficit and debt reduction. UK austerity is a choice, and it is not one that Scotland has made. I continue to make the case that the chancellor should change course, end austerity and invest properly in public services.

Leaving the European Union is not in Scotland’s interests, either. It is also not Scotland’s will. Uncertainty is leading to subdued growth, and leaving the EU will compound that impact. The UK Government’s proposed approach on immigration could see real gross domestic product in Scotland 9.3 per cent lower by 2040, which would reduce tax revenues and threaten public services.

In the face of the damaging role of the UK Government in Scotland’s economy, our strategy sets out alternatives, and how the Scottish Government will deliver our ambitious programmes. The UK Government still has time to rethink its approach on austerity, on Brexit, and on migration—indeed it appears that this is the week for Tory reflection.

This strategy clearly lays out the consequences of UK choices that are imposed on Scotland, and how alternatives would mean a fairer deal for Scotland. Against the backdrop of UK austerity and uncertainty, our decisions have sought to ensure that we manage our finances responsibly and provide people and businesses with certainty, including through our actions on taxation.

Our approach to taxation is founded on the four key principles of certainty, convenience, efficiency and proportionality. Those principles have shaped our reforms to income tax and land and buildings transaction tax, which, taken together, will boost our spending power by almost £500 million a year by 2022-23. Our policy ensures value for money for our taxpayers and certainty for our vital public services during the turbulent and uncertain times ahead.

The Scottish Government will always be ambitious for Scotland, no matter what is happening elsewhere. Growing and supporting the economy is essential for financial stability and for providing the resources for our public services.

During the current parliamentary session, we will invest more than £20 billion in infrastructure.

The Scottish capital budget for 2018-19 is estimated to support around 40,000 jobs.

We will bring superfast broadband to every home and business across Scotland by 2021 through the R100 programme.

We will invest £1 billion to support city region deals for Glasgow, Aberdeen, Inverness, Edinburgh and the south-east of Scotland. We today secured the new deals for Stirling and Clackmannanshire, and we continue to work on the Tay cities deal, as well as other growth deals.

The low-carbon infrastructure transition programme will fund large-scale projects to deliver Scotland’s energy strategy.

This year, the economy, jobs and fair work budget increased by £270 million—a 64 per cent increase—forming part of our total investment of £2.4 billion in our enterprise and skills bodies.

We are committed to making Scotland a great place to do business by providing the most attractive package of non-domestic rates in the UK, including measures specifically designed to boost investment and support sustainable economic growth, such as the growth accelerator.

Alongside our economic focus is our support for the social contract. We will invest in our treasured national health service by adding £2 billion to the health resource budget over the course of this session of Parliament. We will protect local communities by maintaining the police resource budget in real terms each year. We will ensure the best start in life through our transformative expansion of early learning and childcare, nearly doubling funded provision to 1,140 hours per year. We will tackle the attainment gap with the £0.75 billion attainment Scotland fund. We will ensure that education is based on the ability to learn, not the ability to pay, by maintaining free tuition for university students. We will deliver dignity and respect for all by shaping and funding a distinct social security system in Scotland. Those commitments are at the heart of our social contract and at the heart of meeting the new national performance framework outcomes. Our strategy sets out funding estimates for what is needed to meet those commitments over the next five years.

Today, the Scottish Fiscal Commission will publish new economic and fiscal forecasts that suggest that economic growth will be lower in Scotland than in the UK over the next five years. However, when the effects of population growth are stripped out, Scottish growth is much closer to UK growth. That underlines the importance of this Parliament having greater control over immigration.

The SFC has also produced updated tax forecasts, which show a more subdued outlook on income tax revenues. That is largely due to its assessment of recent wage growth and its conclusion that earnings will grow more slowly in the years ahead than it thought in December that they would. As the SFC describes it, that is its main evolution in judgment since its previous forecasts.

The SFC also confirms that the costing of our income tax policy, which remains largely unchanged since the budget bill, shows that it is expected to raise over £210 million in 2018-19. Our strategy shows that income tax is projected to contribute over £400 million a year in net additional revenues by 2022-23.

Those forecasts are used in our strategy to create a central scenario of potential available funding. We then go on to set out potential upper and lower scenarios based on this central estimate. That provides an indication of what funding may be available to the Scottish Government. By their nature, the scenarios and the forecasts that underpin them contain a degree of uncertainty; as new data becomes available, they are likely to change.

As I have already set out, a significant degree of that uncertainty comes from the lack of clarity over the path that the UK Government intends to take on austerity and on Brexit. When we set the budget for 2019-20, we will have a further set of economic and fiscal forecasts from the Scottish Fiscal Commission, updated block grant adjustments from the UK Government, and the outcome of the UK autumn budget—all providing a more robust set of information on which we will make our budget decisions.

Similarly, we do not currently have any resource budget allocation from the UK Government beyond 2019-20. It is hoped that the UK spending review next year will offer sufficient future year budget information to allow the Scottish Government to develop multiyear budget allocations.

The medium-term financial strategy does not provide detailed budget allocations at this stage—that will form part of our annual budget process. However, on any scenario, we have to operate within the fiscal framework and UK funding policies. I have set out in the strategy our responsible approach to financial planning and fiscal rules, which will allow us to invest in the economy and protect essential public services.

I hope that this strategy informs a responsible debate on budget choices in Scotland and I commend it to the chamber.

The Presiding Officer

We now have around 20 minutes for questions.

Murdo Fraser (Mid Scotland and Fife) (Con)

I thank the finance secretary for advance sight of his statement, and I welcome this new Scottish Government initiative to set out for parliamentary scrutiny its future plans for the public finances.

I also welcome the unexpected but generous recognition by the finance secretary of the success of the Chancellor of the Exchequer and the UK Government’s policies in delivering more progress on deficit reduction than was predicted. That truly shows that the UK Government is in safe hands.

The contrast between the UK Government’s progress and the dismal performance of the Scottish economy relative to that in the rest of the UK after 11 years of this Scottish Government could not be more stark. Last year, our economy grew at half the rate of that in the rest of the UK, and more slowly than the economies of every single European Union country.

We heard last week from the Scottish Government’s officials that, for the four quarters of 2017, the Scottish economy met the criteria for a Scotland-specific economic shock due to our underperformance relative to that of the rest of the UK. Today, the Scottish Fiscal Commission predicts that economic growth in Scotland will be lower than the UK average over each of the next five years.

Despite his protestations, the finance secretary cannot blame those problems on Brexit, which has not even happened yet. The problems pre-date even the Brexit referendum vote.

I have two questions for the finance secretary. First, the Fiscal Commission predicts a more subdued outlook on income tax revenues than it predicted previously. What impact will that have on the block grant adjustment in each of the next five years, what does that mean for overall spending over the period, and what will the impact be on public services?

Secondly, the finance secretary talks about rejecting austerity. Will he now reject the super-austerity of Andrew Wilson’s growth commission, which would cut public spending in Scotland by £27 billion over the next 10 years?

Derek Mackay

On a point of consensus, because we might as well at least try to begin with that, the publication of such a document is a helpful evolution of the Parliament’s process. I am sure that it will be subject to extensive scrutiny at the Finance and Constitution Committee in due course.

There is a lot to cover in what Murdo Fraser has said. First, I do not take any comfort from the chancellor having fiscal headroom. All that that will expose is that the Tories are continuing with austerity for its own sake, rather than having fiscal loosening to enable investment in the public services of the UK and Scotland.

My analysis shows that the chancellor could meet his own targets while unlocking £60 billion-worth of investment across the whole of the UK. That would benefit Scotland to the tune of £5 billion. Why on earth would the Scottish Conservatives not support such an injection into Scotland’s economy? It will be a matter of choice if they do not take the path that I have proposed in the strategy document.

Let us reflect on the positives and strengths of the Scottish economy. We have record-high employment and record-low unemployment, and the SFC forecasts that those trends will continue. Although economic growth in 2016 was disappointing at 0.2 per cent, in 2017 it was stronger, at 0.8 per cent.

Contrary to what the Conservatives said about my tax plans, the reasons behind the subdued forecast from the SFC are to do with population and productivity. Who controls those? It is the UK right-wing Brexit-mad Tory Government, which is trying to keep me in a fiscal straitjacket so that I cannot deliver the economic growth that Scotland wants.

The Tories are in denial once again, but Tory ministers in the UK Government have admitted quite clearly that they have responsibility for Scotland’s economy. Drew Hendry MP asked the Secretary of State for Business, Energy and Industrial Strategy about his use of the term “this nation” and whether he accepted that

“he has responsibility for growth in the economies of all the nations of the UK”,

to which Greg Clark replied,

“I do indeed.”—[Official Report, House of Commons, 18 April 2018; Vol 639, c377.]

It is funny that the Tories in the Scottish Parliament say that the UK Government has no role in Scotland’s economy.

Fundamentally, we have a sound basis on which to grow our economy.

On the impact on the Scottish budget, the figures that were used for the Scottish budget are locked in. By law, the forward look will depend on the final forecast from the OBR and the SFC, before the budget is decided at the end of the year or into next year.

There are issues of methodology. Crucially, the UK Government cannot walk away from the ABC of the Scottish budget—“A” is for austerity, “B” is for Brexit and “C” is for caps on immigration. Those are the things that are subduing the Scottish economy. The Tories say no, but maybe they should read the SFC report when they see it.

It is clear that, when the population effect is stripped out of the analysis, Scotland’s growth is much closer to that of the UK. We have proposed a budget that invests massively in the economy, but that is all opposed by the Scottish Conservatives. In the budget debate, the Tories spoke only about tax cuts for the richest and taking £500 million out of Scotland’s public services.

Further, there is absolutely no evidence whatsoever that the tax divergence is having any negative effect on the economy. In fact, it is levering in new investment for Scotland’s public services, just as we set out. Clearly, the Tory memo that sets out the Tories’ current position on tax cuts for the rich has not quite got to Murdo Fraser yet. The UK Government has a choice, as do the Scottish Conservatives.

Murdo Fraser also asked about the growth commission. I can tell the Tories that austerity is the price of the union, not Scottish independence. [Interruption.] The Tories are asking whether I have read the growth commission report. I was on the growth commission and contributed to the 354-page report, and it is abundantly clear that the Tories have not read it. The Labour Party might show some ignorance on this as well, but if we followed the growth commission’s approach, there would be real-terms growth for our public services. In comparison, we have the cuts that have been imposed on Scotland by the Conservatives, which will continue if they choose not to follow the path that I have reasonably suggested this afternoon.

The Presiding Officer

I appreciate that the minister wanted to lay out quite a lot of the detail of his argument and that there is quite a bit of room available this afternoon—but perhaps not that much room, if we are to make progress with the questions.

James Kelly (Glasgow) (Lab)

I thank the cabinet secretary for the advance copy of the first speech that he made this afternoon.

Last week we had the Scottish National Party cuts commission, and today we have Derek Mackay’s cuts forecast. The SNP continues to pile the agony and pain on to Scotland’s communities. Today’s announcement will give no comfort to patients who are waiting for hospital appointments, parents whose children are in schools that do not have enough teachers and passengers who are stuck at railway stations, waiting for trains that do not turn up. These SNP plans are timid in contrast to Labour’s bold proposals to invest in public services and grow the economy. When is the cabinet secretary going to get off the fence and start taxing millionaires at a higher rate instead of hammering Scotland’s communities?

Derek Mackay

Presiding Officer, I apologise for going on at length, but I just had so much to say—and I could go on for longer. If James Kelly wants more time, he will certainly have it before I appear before the Finance and Constitution Committee.

The strategy sets out the fiscal plans for Scotland. It also sets out the challenges that we face, thanks to Tory austerity, but it proposes alternatives to that path. I would have thought that even the Labour Party could welcome the unlocking of billions of pounds for Scotland’s public services.

The tax measures that I have deployed are intended to accrue more money for Scotland’s public services, unlike Labour’s reckless, incompetent, alternative budget, which would have meant less money for Scotland’s public services. If Labour wants to talk about the NHS, education, the police, the fire service, local government or any part of public expenditure in Scotland, it should read the strategy document and see how we will put our commitments into action in the face of Tory-created adversity. However, it does not need to be that way. That is the case that I am making as finance secretary.

Patrick Harvie (Glasgow) (Green)

I, too, am grateful for the advance copy of the strategy document.

Nobody would expect this five-year strategy document to lay out specific, precise commitments, budget line by budget line, for each of those years. A range of scenarios is set out in broad brush strokes for many subject areas—health, social security, the police, higher education, attainment and so on—but no such scenarios are given for local government.

I have read the document, as Mr Mackay asked James Kelly to do; I think that we have all read it. It does not set out the scenarios for what will happen to local government spending. Is that because local government is in line for deeper cuts over those five years? Will the cabinet secretary now give us a nice, big, long speech about how we should be decentralising economic and fiscal power and giving councils the ability to make meaningful economic choices that are right for their local circumstances? Local tax reform must be part of the Government’s response.

Derek Mackay

I think that I have reached my threshold for making long speeches.

The financial strategy is intended to set out our commitments, all of which were included in our manifesto or have been developed over the course of our time in Government since the most recent Scottish Parliament election. We could debate the investment in local government—in the budgets for the past two years, there have been real-terms increases for local government.

The forward outlook expresses the key priorities of the Scottish Government and the policy commitments that we have made, and local government features in that. A simple answer to the question whether the strategy represents any prospect of severe cuts to local government is, “No, it doesn’t.” It sets out how the proportion of the budget that is aligned to our key commitments will expand over the next few years.

We are trying to address the problem of austerity at source, which is why I directed my comment about choices towards the Conservative Party. The Parliament will have choices to make, and I look forward to the budget discussions with all the political parties in the chamber. I am open to further discussion on local taxation, which is totally in line with everything that I have said previously.

Willie Rennie (North East Fife) (LD)

I thank the minister for providing us with advance sight of his statement.

The forecasts are not just subdued but grim. The cabinet secretary failed to answer Murdo Fraser’s question about the precise cost of the Scottish Fiscal Commission’s downgrade. What is that figure? Will Mr Mackay take advantage of the £600 million of emergency UK borrowing if, on 24 June, the GDP figures are as poor as they were last year?

Derek Mackay

We should all be clear about the fact that the forecasts do not project that we will meet the criteria for the emergency borrowing at any point over the coming period. According to the forecasts, we will not hit those criteria, so we will not be in such a scenario. Therefore, that revenue support in relation to GDP growth will not be available.

I have highlighted the complexity of the fiscal framework. When we determine the budget, later in the year, that determination will be informed by the latest OBR forecasts and the SFC forecasts at that time.

Mike Rumbles (North East Scotland) (LD)

Just give us the figure.

Derek Mackay

I hear a Liberal Democrat member say, “Just give us the figure.” He clearly does not understand the fiscal framework or the complexity of the situation. All those matters will be taken into account as we approach the budget. The methodology, along with the analysis that the SFC provides and all the drivers behind it, will be scrutinised. The OBR will have to revisit its figures anyway, because the outturn is already divergent from its forecast. We will proceed in a prudent manner, in accordance with the timescales in the fiscal framework, which is an issue on which I will return to the chamber.

There are reasons to act on Scotland’s economy and make the necessary investments. I have here a list of interventions that we are making to grow our economy, and I hope that I have the Parliament’s support in making those interventions. If we do not grow the economy in the fashion that is required, we face the prospect of difficult years ahead. That is why productivity, participation and population are all central to our strategy, and we need further levers to optimise our position in that regard.

Ivan McKee (Glasgow Provan) (SNP)

The block grant remains the single biggest contributing factor to the Scottish budget, and the medium-term financial strategy shows that it will continue to be under severe pressure for years to come. The cabinet secretary has made it clear that UK austerity is a choice, not a necessity. How much more money would be available to the Scottish budget if the UK Government were to abandon its obsession with austerity?

Derek Mackay

Even keeping within the chancellor’s own targets, I have been able to express in the strategy and outlook that, if he used the fiscal headroom that is at his disposal right now, at a minimum, that would generate an extra £60 billion of additional investment over the five-year period to 2022-23 compared to the current UK budget plans. What would that mean for Scotland? It would mean £5 billion of extra investment. The document goes much further in relation to a range of other funding disputes that we have with the UK Government. However, at a minimum, that approach could be transformational for public services, investment and economic stimulation in Scotland.

Adam Tomkins (Glasgow) (Con)

Today, the Scottish Fiscal Commission predicts a much more subdued outlook for income tax revenues than it forecast only three months ago—so much so, that according to the figures that have just been published by the Government, by 2022 there will be a £400 million shortfall. Does that not underscore the cabinet secretary’s folly in maxing out the Scottish Government’s credit card in the first year that it was available to him?

Derek Mackay

There we have it—from the party that has said in every other debate not only that we should raise less by having tax cuts for the rich but that we should spend more. The current position of the Conservative Party now appears to be that we should also spend less on capital investment.

It is true to say that I have fully utilised the borrowing powers. I have done that to invest in the infrastructure of our economy, to build houses, to invest in digital, to ensure that we keep people in employment and to prepare for the future in housing, transport, infrastructure and childcare. That is the economic stimulus that comes hand in hand with capital investment. We will stay within our own fiscal rules in that regard, and we will borrow responsibly. We will use the powers that we have at our disposal in a fair and prudent way. Surely, even the Conservatives support that approach.

Ruth Maguire (Cunninghame South) (SNP)

How much additional money will be raised as a result of the cabinet secretary’s tax policies over the period of the medium-term financial strategy? Does he agree that we should continue to prioritise our health service rather than tax cuts for the rich?

Derek Mackay

I agree with that proposition. I also think that I have a new convert in Ruth Davidson—if she believes what she is saying. On the basis of the central scenario that is presented in the medium-term financial strategy, Scottish taxes will raise almost £2 billion more than the associated block grant adjustments over the MTFS period, which, for clarity, is 2016-17 to 2022-23.

Neil Bibby (West Scotland) (Lab)

To improve public finances, we need to improve economic growth, and the SNP’s big idea is the growth commission. Mr Mackay said that he was a member of that commission. Does the finance secretary agree with all the recommendations and the full contents of the growth commission’s report?

Derek Mackay

I am in a curious position, because I have been the chair of the party, the finance secretary and a member of the growth commission. Not only was I a member of the growth commission, I have read its report, which is more than I can say for most Opposition members.

The important point is that, ultimately, the commission’s trajectory shows that we can deliver real-terms growth in the public sector. The “Government Expenditure and Revenue Scotland” figures reflect the current constitutional arrangements, not what we can do with independence. Here is a wee secret: I support Scottish independence because I know what it could unlock for Scotland’s economy, our people and our democracy. Short of having independence, the Scottish Government will do the best that we can with the tools at our disposal.

The Scottish Fiscal Commission’s substantial and exhaustive evidence shows how many of the barriers to our economic potential are in the hands of the UK Government, which is totally undermining our economy through A, B, C: austerity, Brexit and the cap on migration. That lends weight to the argument that we should have independence. However, no matter what, the Scottish Government will do the best that we can to protect Scotland, mitigate the impact of Westminster decisions and move Scotland forward.

Bruce Crawford (Stirling) (SNP)

I am pleased that today marks the written agreement between the Finance and Constitution Committee and the Government and the production of the medium-term financial strategy, which is a good step forward for Parliament. The medium-term financial strategy outlines a range of scenarios for Scotland’s finances. Does the cabinet secretary agree that we are far more likely to achieve the higher end of those forecasts if Scotland is not, against her will, dragged out of the European single market and customs union? What are his views on the impact on the economy of lower migration as a result of the UK leaving the EU?

Derek Mackay

I agree with all of that. I put in the range of scenarios, because I am quite sure that, if I had not done so, Bruce Crawford and the committee would have asked me to. They are only scenarios, but they all tell a story about the choices that we have and the UK Government has.

On the negative impact that Brexit will have on Scotland, the leaked UK Government papers have vindicated what we have been saying about the potential impact on Scotland’s economy across a range of sectors. The interesting figure that has been vindicated is that if we are outside the European single market and we have not secured a free-trade agreement, Scotland’s GDP could be around £12.7 billion lower by 2030 than it would be under continued EU membership. That is equivalent to a loss of £2,300 per head each year for every person in Scotland.

Alexander Burnett (Aberdeenshire West) (Con)

I note my entry in the register of interests. Will the cabinet secretary confirm that the move to uprate business rates by the consumer prices index instead of the retail prices index is permanent and not just for the 2018-19 financial year?

Derek Mackay

It is this Government that has delivered that change, which the Tories voted against when they did not support the budget that I presented to the Scottish Parliament.

I will approach each budget year to year. If the Conservatives want to engage constructively with me on the budget and that is a Tory ask, I will have some clarity. It is a wee bit more attractive to continue with a decision that I have made to move the poundage uplift from RPI to CPI, so if that is an ask from the Conservatives, I thank them for that clarity. Each budget is approached year to year, but I certainly want to ensure that we continue to have the most competitive package of business rates anywhere in the United Kingdom.

John Mason (Glasgow Shettleston) (SNP)

EU funding has in various ways made a significant contribution to the Scottish economy. Has the cabinet secretary had any guidance or confirmation from the UK Government about the future of the equivalent of EU funding, such as funding for universities, agricultural support and structural funds?

Derek Mackay

It is very mixed. Some of my colleagues are engaged in other discussions relating to the future beyond Brexit and the transition phase. Essentially, there is very little guidance and it is still uncertain as the UK Government negotiates—horrendously badly—with the European Union. I do not have any long-term certainty, which is a problem because it creates uncertainty for farmers, educational institutions, research and schemes that have benefited handsomely from EU-derived funding. If we are not careful and if we do not get security over the package—the totality of resources to Scotland—we might well witness daylight robbery of Scottish resources by the chancellor, given what we should be entitled to from the flow-through of money coming back from the EU. We need a bit more than a slogan on the side of a bus—we need something a bit more substantial on the forward look for the fiscal guarantees for Scotland in that regard.

Jackie Baillie (Dumbarton) (Lab)

The Scottish Fiscal Commission’s updated forecasts make for very difficult reading, with subdued income tax revenues meaning cuts to public services. I know that the cabinet secretary was not keen to give us the figure. I suggest that it is in the order of a cut of £1.6 billion. We also see GDP growth revised down overall and a poor performance extended to 2023—a bad set of GDP growth figures revised to be even worse than they were before. It is clear that Scotland’s economy faces a grim outlook and the Government’s failure to grow the economy will hit our public services. When will the cabinet secretary’s Government stop being complacent, drop the referendum chat and focus instead on growing our economy?

Derek Mackay

I say again to Jackie Baillie that austerity is the price of the union, not independence. We are making a very clear case why having more powers enhances the economic and social prospects of the people of Scotland.

Let us move back a stage from the glorious day when we have independence. Let us stick to the here and now—to what the Government is doing right now. We are investing a record amount in city deals. We are investing an increased amount in the economy, jobs and fair work portfolio. There is a 70 per cent increase in investment in business research and development. We are delivering a new national manufacturing institute for Scotland. We are proposing to take superfast broadband to every part of Scotland. We are investing record sums in infrastructure, which is now opposed by the Conservatives. We are creating the Scottish national investment bank. We are creating a new building Scotland fund. We have the most competitive package of business rates anywhere in the United Kingdom.

Of course we want to be able to do more, and surely Jackie Baillie would support us in that regard. The SFC has said that its view of the Scottish economy has not fundamentally changed since December, that the outlook is for subdued growth in Scotland over the next five years, and that the drivers for that are modest population and productivity growth. Why on earth would Jackie Baillie not support us having the tools to tackle the issues that the SFC has identified around population growth and productivity growth? Come on, Jackie Baillie—you know better than that.

Stuart McMillan (Greenock and Inverclyde) (SNP)

The cabinet secretary has outlined that the UK Government’s net migration target could cost the economy some £10 billion in the long run. Can he outline the positive contribution that immigration has made to Scotland’s economy and public finances?

Derek Mackay

As the First Minister has said, alongside all the other benefits that immigration brings to our country, immigrants are net contributors to Scotland’s economy. On average, each additional EU worker coming to Scotland adds £34,400 to our GDP, which represents £10,400 to local government per head. They are very welcome net contributors to Scotland.

Dean Lockhart (Mid Scotland and Fife) (Con)

Based on today’s numbers, the Scottish economy is now projected to underperform the rest of the UK for 14 of the 15 years of SNP government—since well before Brexit. Is that what Derek Mackay means by being ambitious for Scotland?

Derek Mackay

I have news for Dean Lockhart: the UK economy is also underperforming relative to the economies of the rest of the EU and comparable nations. Dean Lockhart should get in touch with the UK Government and try to ensure that we get a better deal for Scotland.

I look forward to the criticism of this strategy, so that I can find out why the Conservatives oppose our efforts to grow the economy and population and why they want to put barriers in the way of further enhancing the rate of productivity and economic growth. I think that the Tories will have some explaining to do about why they would choose a different path from the one that I am proposing which, even using the chancellor’s targets, could unlock £5 billion for Scotland, as well as a host of interventions.

We have outlined an ambitious programme for Scotland that tackles economic and social issues in the face of Tory Westminster incompetence. It is about time that the Tories backed the Scottish Government getting the powers and responsibilities that we need in order to get out of this fiscal straitjacket and deliver for the people of Scotland. If the Tories believe in economic growth, surely they will help to give us the tools to do that job.

The Presiding Officer

That concludes our ministerial statement. We have run slightly over time, but I wanted to get everybody in.