Budget (Scotland) Bill: Stage 3

– in the Scottish Parliament at 2:30 pm on 10th February 2000.

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Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 2:30 pm, 10th February 2000

We now move to the debate on motion S1M-498 on stage 3 of the budget bill.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour 3:34 pm, 10th February 2000

I am glad to be able to present to the chamber today this new Parliament's first ever budget bill.

For the first time, this Executive and this Parliament have been able to examine and debate properly Scotland's budget and how it should be spent. It is a privilege to ask members to vote for the allocation of our £16 billion budget.

This is a budget for the people of Scotland. For the first time in our recent history, we are debating the spending priorities for Scotland in our own Parliament. Our new processes are innovative and participative, but we must not forget the responsibility that lies firmly at our door as the first members of this Scottish Parliament.

Let us pause for a moment to consider what that responsibility means. It is not about arithmetic, juggling the numbers or winning points against the Opposition, however enjoyable that might be. It is about spending the people's money well on the people's priorities. We have a fixed budget—a budget of the people's money. We are here today to allocate £16 billion, which we are able to allocate well, without using our tax-varying powers.

I am sure that we all take that immense responsibility seriously. I, too, take it seriously. As the Minister for Finance, I have a few rules that guide my thinking—and that of my ministerial colleagues—on our budget proposals.

As with everything else that we do, I am determined that our budgets represent best value for the Scottish taxpayer. I want to squeeze more from each pound of taxpayer's money to ensure that every pound is prudently spent. I am committed to challenging the status quo. We have a new Parliament with a new Executive in a new, devolved Scotland. We must seek continuous and radical improvement to how we spend our money and how we deliver public services.

I repeat: no one here should be in any doubt about today's budget bill, which is about ensuring that we find the right balance between our hospitals and our schools, our social justice programme and our assistance to industry. There are no easy answers. We must be guided by the principle that this is not our money that we are spending, but that of the people of Scotland.

At times the emphasis in our debates on our spending allocations for next year may have been more towards political sound and fury than quiet reflection, but the debate itself has been an achievement, as it has been carried out in full view of the public whom we represent. It is another excellent example of how the Parliament is working, making a difference and modernising Scotland.

By necessity, the arrangements have been slightly curtailed this year, in advance of the full process, which will begin next year. Even so, it has been a far more open and democratic process than ever before.

Our priorities in the budget bill are the priorities of the Scottish people. There is a consensus over the key areas of spending, such as health and education, where our budget for next year is concentrated.

This budget does many things. It meets needs throughout Scotland's communities and for all Scots, young or old. It takes the best of existing practice and, by building on it, makes it better. It delivers more spending on the key programmes, as we promised in our programme for government.

The budget marks new opportunities to use our devolved powers to regenerate Scotland and to build the kind of society that we require for the new millennium—a society where the idea of social justice is accepted by all and where everyone is valued and has the opportunity to achieve their full potential. That means that we must deliver a budget for our children, our young people, our families, our older people and our communities. That is what we are doing.

As a result of the budget there will be nursery places for all four-year-olds and progress towards our target of places for all three-year-olds. It allocates £8 million in 2000-01 to support 46 community schools by the end of that financial year, £16 million to establish class sizes of 30 and under for primary 1 and primary 2 in 2001 and £16.5 million to honour our partnership commitments on schools next year. There is £9 million to ensure that we achieve our target of 2,000 more students in higher education and £29 million to increase enrolments in further education institutions by 21,000 students next year.

The budget will also lead to better trained, paid and supported staff in the NHS and will support a drive for patient-centred care throughout the NHS, with NHS Direct, more one-stop clinics and electronic booking systems. There will be better facilities for staff and patients, including new investment in hospitals. It also provides for the establishment of a new food standards agency and a high-tech NHS that retains a human touch.

Under the budget free admission to National Museums of Scotland will be extended. It allocates £5 million to the Scottish university for industry to connect people and businesses that want to improve their skills with people who can offer them the learning that they need in the format required.

The budget will provide for the establishment of a drugs enforcement agency, a greater range of court-based support services for witnesses and a new domestic violence fund to improve a range of services, including more refuge spaces.

The budget allocates £3 million to support access to the countryside and £500,000 to develop proposals for the national parks that were mentioned earlier. It backs agri-environment schemes with an extra £250,000 in the next year to support environmentally sensitive areas.

There is a comprehensive package for tackling dampness and condensation and for providing warm and healthy environments for low-income householders, especially pensioners.

There is provision for 6,000 new and improved homes, and the five major trunk road schemes that are planned will have a total capital cost of £140 million over three years. Thirty million pounds from the public transport fund will be spent.

In each spending programme real improvements will come about because of the new spending—improvements that raise the quality of life for all Scots at every stage of life. As a result of cross-departmental co-operation, such improvements will no longer work in isolation. That is exemplified by the launch of the social justice strategy. Our initiatives can, at last, reinforce each other and lead to the delivery of truly ambitious goals.

All that is being delivered at a time when the Scottish economy is in excellent shape. The policies of the Parliament and the platform of stability provided by our close connections with an equally strong UK economy have given us the lowest unemployment figures for a quarter of a century, low and stable inflation and continuing growth in gross domestic product.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I am grateful to the minister for giving way.

On the equality of the market within the UK, does the minister recognise the concerns among the Scottish business community about his decisions on the uniform business rate? Will he guarantee, before announcing that the provisional business rate is the final rate, to meet representatives of the Scottish business community such as the Scottish Council Development and Industry?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I wrote to the SCDI some 10 days ago, asking them to convene a meeting of representative business organisations to discuss the plans. I hope, when points such as Mr Wilson's are made in budget discussions in future years, that they are backed up by examples of where the money would come from to fund the gaps that Mr Wilson and others have identified in debate from time to time. We look forward to those improvements as we look forward to the improvements in services and expenditure that have already been identified.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I have just done so. I have made my point.

Our programme includes targets and commitments up to 2003. A spending review is under way that will add two years to the spending plans. The Executive will, in the coming months, develop plans for those years. Those plans will carry forward our programme for government through 2003 and, I am sure, beyond.

Unlike this year, in future the decisions will be taken in the light of an allocation that has not been inherited. Decisions about where new money might be spent will be made, rather than decisions being made on how to reallocate an existing budget. In the coming months we will scrutinise carefully all the programmes for which we have responsibility, including those that straddle a number of ministerial and departmental responsibilities, such as the programmes for social justice, sustainable development and the fight against drugs.

We will continue to look for efficiency savings and to consider whether there are areas where we can reduce spending, because another challenge to us all is the reality of a fixed budget. Savings can be made in order to make way for increases in spending elsewhere. Calls for higher expenditure without explaining how that will be achieved do not impress anybody, and they add nothing to the quality of debates.

Photo of Andrew Welsh Andrew Welsh Scottish National Party

I am sure that the minister will agree that it is important to maximise every pound so that more money is available for spending on public services in an open and fair way. Will he, therefore, look again at the system of self-financing public sector pay awards? That is a very unfair system for local government and can only result in money being taken away from services.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I hope that Mr Welsh, as convener of the Audit Committee, will agree that, in this atmosphere of increased expenditure in so many budget areas, it is right and proper that we continue to press down on other areas of expenditure to achieve the balanced budget that we seek.

At central, Scottish and local government levels there is a constant need for us to review efficiencies and previous services and to ensure that the services that we have are fit for the new century, rather than the past century. I hope that the ways in which we tackle the issue in the years ahead—working together with other levels of government—will achieve that goal.

I will conclude by saying that the bill sets out our proposals for the next financial year. Those proposals are firmly rooted in our programme for government and they will support our progress in implementing that programme. The proposals promote equality and opportunity. They are realistic and fair and, in a Scotland where everybody matters, they represent a good deal for Scots and for all Scotland.

Members of the Scottish Parliament should know that today we are once more making history. This is the first Scottish budget and it will be good for Scotland. It is a tribute to all involved: to the Finance Committee and to the architects of the Scottish Parliament's financial procedures. We have reached, on target, the culmination of our budget discussions for the coming financial year. I urge members to join me in voting for the Scottish Parliament's first budget bill.

I move,

That the Parliament agrees that the Budget (Scotland) Bill is passed.

Photo of Andrew Wilson Andrew Wilson Scottish National Party 3:45 pm, 10th February 2000

I welcome the final stage of the first budget process. We look forward to a more substantial consultation on and wider consideration of next year's bill.

At this late stage we will not obstruct the course of the bill. However, we will not actively support or promote this bill or the financial structure that underpins it. The harsh reality is that in no way does that financial structure adequately meet the needs of Scottish local government, schools, hospitals or the full range of Scottish public services.

It is the structure of Scotland's finances that concerns SNP members and many other people across Scottish society. The budget is one-sided and is entirely dependent for its content on decisions that are made elsewhere. Those decisions are made according to an artificial formula and priorities in the rest of the UK that do not reflect those in Scotland.

Most absurd, the bill is based on the decisions of the increasingly bizarre holders of the offices of Secretary of State for Scotland and deputy Secretary of State for Scotland. How is it sustainable that the so-called Scotland Office should have responsibility for allocating its own budget out of Scotland's financial allocation and then passing the remainder to the Scottish Parliament?

The sums may not be vast, but we know that, in its first year, the Scotland Office has recorded a financial cost overrun of 138 per cent, the worst performance of any central department in history. Perhaps that happened because the leaders of that office spend all their time ranting against the SNP and other respected institutions in Scottish society rather than focusing on their own role. Those two men—in search of a role and insulting all-comers—undermine the office that they hold and the seriousness in which they can be held.

The official Scotland Office website shows one speech by the Secretary of State for Scotland, which was delivered in July last year—every other speech was of political content. No speeches of Brian Wilson are logged on the website. That office is paid substantial sums to represent Scotland's interests. The need for that office must be called into question. The money that would be saved by abolishing it would pay for 250 teachers in one year, or for a similar number of much-needed nurses.

Photo of Kenneth Macintosh Kenneth Macintosh Labour

Does the SNP have anything to contribute to this debate other than questioning the constitutional settlement? That is a boring theme. We are here to make this Parliament work, and not to rewrite the constitution.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I remind the member that his role as a backbencher is to question, and not toady to, the Executive.

It is our job to highlight the wider structural issues that affect the budget—this is more than a one-sided debate. There is the key issue of the Barnett squeeze, which is exercising the minds not just of SNP members, but of academics and business commentators across Scotland. It was identified a year and a half ago in a series of academic papers, key among which was that by Professor Brian Ashcroft of the Fraser of Allender Institute. Professor Ashcroft pointed out that spending in key areas will increase two and a half times more quickly in the rest of the UK than in Scotland. That matters because either one regards Scotland's share of UK spending as justified or one does not; either that share of UK spending meets Scotland's needs or it does not.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I have taken the member and am now moving on. Either that share of spending meets the choices of the Scottish public about the allocation of our nation's resources or it does not.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I will be grateful if the Minister for Finance takes the opportunity in this intervention to say whether he regards Scotland's current per capita share of UK spending as correct.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

It is an interesting adaptation of the intervention to ask questions of the member intervening. I want Mr Wilson to give a clear answer to this question: does he accept that increases in expenditure in relevant areas of public expenditure in England will be matched pound for pound in Scotland?

Photo of Andrew Wilson Andrew Wilson Scottish National Party

The formulaic response that that question calls for is that it is correct. The issue at stake, however, is whether Scotland's per capita share is being preserved or undermined. Will we in future have the same proportion of teachers and nurses that we have today? The squeeze is happening and it is up to the Minister for Finance and the Parliament to recognise that.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

If I can finish—I know Mr Macintosh is seeking a ministerial role but perhaps listening rather than speaking would be the best tactic for him.

Future allocations depend on a formulaic structure that is undermining Scotland's spending in key areas. Even Professor Arthur Midwinter, a man with whom I rarely concur, in a paper published this week concluded that our per capita share of UK spending will fall by 0.5 percentage points year on year. That can only mean that public servants will lose their jobs or public services will be cut. We cannot sustain that.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

It amounts to hundreds of millions of pounds a year. As I said—before I take Dr Simpson—even the Scottish Parliament information centre found that, through the Barnett squeeze, Scotland would lose £500 million from the health budget. That is something Dr Simpson would, I am sure, be exercised about.

Photo of Richard Simpson Richard Simpson Labour

On Mr Wilson's calculation of a 0.5 per cent squeeze, which I do not fully accept because it assumes things will stay the same every year, does he agree that it would then take 36 years for us to reach the average expenditure of the United Kingdom? Does he accept that the amount of increase in the total sum of money we receive will put our health spending above the average for Europe within five or six years?

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I do not accept that for the current course of expenditure. That is not my analysis but Arthur Midwinter's, and he, like Dr Simpson, denies the existence of the Barnett squeeze. It is vital that we address the issue because the current situation is not sustainable. Members can take a party line on the matter or they can think more deeply about what it means for Scotland's budget. The issue is being debated in the rest of the UK and we need to catch up.

Why do we never hear from Labour or anyone else that, despite the fact that our per capita spend in certain areas may be higher, even on the Government's own discredited analysis, Scotland's per capita revenue contribution is considerably higher than the UK average? We are generating the wealth and it should be up to us how we allocate it. Instead we have a structure that does not suit the Scottish position. We have the highest-taxed businesses and the highest council taxes in the UK, the highest fuel taxes in Europe, soaring taxes on pensions and soaring water charges, and a cluttered and inefficient tax system. Even the Prime Minister has admitted that the proposed cut in income tax is to compensate for tax rises elsewhere. Where is the sense or the efficacy of moving the burden from open, progressive taxation to back-door, indirect, regressive taxation?

All we can do is stand by and watch. We have no power or control over processes that are unsustainable and do not meet the needs of a modern country. Without such power we cannot improve local government, health and education, although that expectation is placed on this Parliament. It will be unable to fulfil it unless we change that.

Photo of David Davidson David Davidson Conservative 3:53 pm, 10th February 2000

I was pleased to hear the Minister for Finance say that he has stopped juggling. Perhaps we will get some real economics in future.

In his last attempt at a presentation on this bill he said we do not have a bottomless purse. I agree but I suspect that that is the only thing on which we agree. I am disappointed that some of our colleagues in other parties still see Scotland as undertaxed. We have had comments to that effect from the SNP and the Liberal Democrats and I hope we will hear no more of them.

There are many demands on the budget, especially from the multitude of ministers and advisers that surround us these days. The Minister for Finance mentioned efficiency savings. I trust that he has given each of the ministers clear indications of the percentages of savings he expects them to produce and what they will be spending the money on. I am disappointed that information is not in the supporting papers on the budget that we have received. I think it would show that there is a lot of slippage—something that the minister has commented on in the past—within public services, including the Executive, that we need to attack. There is room to get more for the buck that we spend and I hope that, in next year's more prolonged budget exercise, the minister will address that issue and make clear his expectations for departmental management.

Photo of Keith Raffan Keith Raffan Liberal Democrat

Mr Davidson is talking about savings and reallocation within the budget, so I wonder whether he will clarify a point of Tory policy. On 4 November 1999, Murray Tosh called for cuts in the enterprise budget to allow increased spending on the roads programme; yet on 26 January 2000, Annabel Goldie expressed deep concern about any reductions in the enterprise budget. There is clearly a problem. Will he sort out with Miss Goldie and Mr Tosh exactly what their policy is?

Photo of David Davidson David Davidson Conservative

I would be delighted to sort it out with them. We have two different stresses. We have said throughout this Parliament that there is a need to put more impetus into enterprise and into the development and creation of wealth. Without that, we will not be able to deliver the social programmes that the people of Scotland expect. I expect that Mr Tosh's point about transportation was to do with the moving of budgets, but I shall certainly clarify that matter for Mr Raffan later.

I am coming to the crux. Andrew Wilson mentioned certain aspects of the budgetary process and the basis of the budget. I would rather turn to the way in which we focus on economic management. This week, the Finance Committee heard a good presentation from Mr Graham Leicester, the director of the Scottish Council Foundation. He stated:

"If I had to point to a weakness in it, it would be its lack of strategic direction."—[Official Report, Finance Committee, 8 February 2000; c 329.]

In his summing-up, I would like the minister to say which minister has specific responsibility for the direction of the economic strategy in this Parliament. To date, there seem to have been certain rivalries in that area and it is about time we heard an absolutely clear position on that matter.

I turn now to spending on core services, which the Conservatives would like to be directed in slightly different ways. After last week's health debate, I was pilloried by some Labour members in the tea room for daring to suggest that we get some money back from Westminster, from the stealth taxes that have been gathered under Labour during the past two or three years, to use in our health service, for example.

Funnily enough, the good Professor Midwinter, who was quoted earlier by Andrew Wilson, said in a report released on Monday:

"Scottish Ministers may be unable to meet their commitments on health spending unless they go direct to the Treasury for extra cash."

I am grateful to the professor, but I remind the members that they heard it from us first.

There has recently been a furore in local government over some of the problems there. I ask the minister to ignore some of the pleas to give councils the freedom to raise council tax and put the whole burden on the less than 40 per cent of people who pay it. Settlement should be based on improved outturns, core service focus and service delivery efficiency. It would be nice to see the formula mention the expected collection of uncollected taxes from the past—money that belongs to the public purse and should be in the cash flow going into service delivery.

This budget was supposed to be a justification for the trust that Scotland's people placed in new Labour. I am somewhat disappointed that it seems not to be delivering on many of the manifesto pledges to enhance public services and to secure a future for those who work in them and rely on them.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I agree with Mr Davidson's criticisms of the current position. Will he comment on the fact that Conservative party policy is to cut taxation as a proportion of the national income, which must result in the allocation from Westminster falling even further under a Conservative Government, should there ever be one?

Photo of David Davidson David Davidson Conservative

I am surprised at the naivety of Mr Wilson's question. Obviously, if money is spent wisely on wealth creation, the same low or even lower tax percentages will bring in more tax—it is called fiscal drag, but that may be something that he has not come across. Put simply, if one increases the economy, which is what it is all about, one will increase opportunity, get people into work, collect far more tax and get the national insurance contributions required to deliver the services that Scotland really needs.

A couple of weeks ago, I said that I felt that this was a smoke-and-mirrors sham of a budget, starving our key services of support. I have not moved far from that position. However, to be fair to the minister, we have not really had a full opportunity in this short year to expose the budget process to scrutiny by having this Parliament's committees going through it line by line.

I look forward to that process next year, but in the meantime, I trust that the minister will use his supplementary estimates prudently—a word that seems to be a favourite of his—and not just look to them to steer the economy. We need to have a better reaction to what is going on, and better anticipation. I look forward to seeing that from the minister, unless he feels that someone else may be stepping into his shoes.

Photo of Keith Raffan Keith Raffan Liberal Democrat 4:00 pm, 10th February 2000

I was interested by Mr Davidson's speech. Of course, he was not able to reconcile the competing bids of Mr Tosh and Miss Goldie. Clearly, they do not speak to each other, and I hope that he will perform independent mediation and try to sort out exactly what the Tory priority is. Is it enterprise, or is it the roads budget?

Photo of Keith Raffan Keith Raffan Liberal Democrat

I will give way in a second.

It is not only that they do not speak to each other here; they do not speak to their counterparts in Wales. I congratulate the minister on taking this budget through. It is the first budget bill of the Scottish Parliament, albeit it went through a compressed process. It is a trailer for what will happen next year.

I know that my review may be regarded as somewhat subjective, so let me quote a distinguished, objective and independent source, namely, Mr Nicholas Bourne, the leader of the Welsh Tories in the National Assembly for Wales. So impressed was he by the way in which the Scottish Executive is run that, after a recent visit here, he waxed lyrical in The Western Mail. He said that what has been achieved through a coalition in Scotland is exactly what he wants to see in Wales. He said:

"As a result of the coalition Scotland has a much more stable administration and that showed in the way business was conducted. There is a lot to be said for stability."

I pay tribute to the minister for the part that he has played in achieving successful coalition Government and stability. Oh, would that the Scottish Tories had such intelligent and perceptive leadership.

This budget reflects the priorities of the partnership—the need for better public services, with more than £80 million more for education, in particular.

Photo of David Davidson David Davidson Conservative

In the middle of Mr Raffan's theatricals he talked about the Liberals supporting the budget, and he acknowledged the support that was being given to core services. If that is the case, can he explain why two of his colleagues, the members for Gordon and for West Aberdeenshire and Kincardine, wish a special deal to be done for Aberdeenshire Council, on the basis that the minister has been niggardly with it. Obviously, not all the Liberals agree; yet he talks about us not agreeing.

Photo of Keith Raffan Keith Raffan Liberal Democrat

We do agree, and I will come to that later in my speech. I am delighted to inform Mr Davidson—because I do not want to keep him in suspense—that Mr Rumbles, who will be winding up for us in this debate, will highlight those concerns about the local government financial settlement. I would like the minister to show greater flexibility. I would like the formula to be changed. I would like an independent review of local government finance. However, that does not mean that we disagree fundamentally with the minister. It means that I hope we can edge him in that constructive direction.

Having said that the minister expresses the priorities of the partnership in this budget, I hope that the Chancellor of the Exchequer's budget on 21 March also will reflect our priorities in Scotland. For it to do so, he must abandon the 1p tax cut and spend the extra revenue on the national health service. As Iain Gray conceded last Thursday, 18 of our health service trusts have forecast deficits, amounting to more than £50 million. I realise that that is a small proportion of the total NHS budget, but we need urgently a cash injection.

Photo of Keith Raffan Keith Raffan Liberal Democrat

I do not want to miss giving way to Andrew Wilson, but I will not do so quite yet.

I hope that the Minister for Finance will put pressure on the Chancellor of the Exchequer, and I hope that Labour non-Executive members will follow me and—not too Don Corleone-like—put pressure on the minister to ensure that he puts pressure on the chancellor. Better services must come before lower taxes. We in the partnership stand unequivocally for better services.

The Financial Times said last Friday, in its editorial entitled "Portillonomics":

"The Tories have become ensnared in the contradiction of promising lower taxes and better public services simultaneously."

In fact, they seem to be advocating cuts and public service increases without consulting each other, as I have pointed out already. Not that I want to be too cruel to the Tories. After all, they spent most of the past week adopting good, sensible Liberal Democrat policies, particularly on the independence of the Bank of England and the setting of interest rates. Michael Portillo is the architect of those U-turns. Ladies may not be for turning, but that gentleman certainly is. He has told us repeatedly that one cannot run a cigarette paper between him and Mr William Hague on policy issues. Now we see why: Mr Hague does what Mr Portillo tells him.

Although there have been clear U-turns on both the monetary policy committee and the minimum wage, the position on the Tories' tax guarantee, to which Andrew Wilson referred, is anything but clear. We started the week with a guarantee, then Mr Portillo refused to confirm that it was a guarantee, so Mr Hague said that it was an aspiration expressed in a guarantee, and then the position went back to being that a guarantee is a guarantee. Mr Portillo's refusal to confirm that it was a guarantee then became "theoretical".

Tory policy making is now so chaotic and it is chopping and changing so rapidly that we do not have to wait in suspense for a couple of days to find out the next instalment, like we do for "EastEnders"; it happens within hours. It is no wonder that leading Tory and right-wing commentator Simon Heffer wrote in desperation last week:

"Just when you feel that the Conservative party might be turning a corner, or at least that it cannot become any more absurd, it proves you monumentally wrong."

I said that the budget reflects the priorities of the partnership, but that does not mean that there are not concerns. Concerns about the local government financial settlement will be addressed by my colleague Mr Rumbles in his winding-up speech and will be addressed by me when we debate the local government financial settlement.

Photo of Malcolm Chisholm Malcolm Chisholm Labour 4:06 pm, 10th February 2000

It is hard to believe that, only 12 months ago, the Scottish budget was dealt with by a statement. If we were lucky, we got one debate thereafter, so this has been an important step forward.

We have begun the process of opening up what has, historically, been the most secretive and under-examined part of Scottish government. We should congratulate everybody—and especially the Finance Committee—on all the work that has been done.

I look forward to much more progress next year, because the other committees could not be involved this year. The big change next year will be that every member of the Parliament—through the committees—should get involved in examining the budget, because it is at the heart of everything that happens in the Parliament.

Photo of Richard Simpson Richard Simpson Labour

Does Mr Chisholm agree that as we make the process more transparent and change the way in which the budget is written, we will also engage the public in relation to the committees, which will be equally important?

Photo of Malcolm Chisholm Malcolm Chisholm Labour

I agree with Richard Simpson. The key word is transparency. The problem with the budget process is that it has never been very transparent, although it is sometimes not easy to make it so, because it is very technical. However, that must be our intention.

Much of the debate this year has been conducted in terms of headlines, which is perhaps inevitable, so I might as well use some headlines of my own, as I, too, have been reading Arthur Midwinter's essay this week. I noticed two figures, which have not yet been mentioned in the debate today. They show that in the three-year period that started with this Parliament last spring, the real growth in public expenditure in Scotland is 2 per cent a year. In contrast, during the final three years of the previous Government, real-terms public expenditure fell by 1.6 per cent a year. I am sure that Andrew Wilson will welcome the massive difference that a Labour Government has made.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

Despite having increased by 2 per cent a year, public expenditure still lags behind the increase in average earnings. Given that 60 to 65 per cent of the overall Scottish budget goes on wages and salaries, that can only mean a cut in public sector pay or a loss of jobs.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

That is not right, because there is 2 per cent real growth over and above inflation, which is beyond the level of pay awards.

The Scottish National party has also been using its headlines, although to be fair to Andrew Wilson, perhaps he did not use so many in his speech today. We have become used to its headlines during the budget debate. The one that I have got used to, as a member of the Health and Community Care Committee, is the figure of 0.8 per cent real-terms increase in the health budget for next year. That is an artificial figure because of the massive in-year increase in this year's health budget. The real figure for growth in the health budget over three years is 11 per cent, which is the largest increase that we have known over a three-year period.

Andrew Wilson's main point has been about what he calls the Barnett squeeze. I welcome the discussion about that, because we must go behind the headlines. One of the key issues that we must consider is the effect of the Barnett formula. Let us have transparency about that as well. As Jack McConnell said, the key thing is that per person, increases in expenditure will be the same in Scotland as in England.

Andrew Wilson was not quite right to say that our priorities must be based on the rest of the UK's priorities because, as health or education expenditure increases in England, we will receive the same money in our budget. However, we can spend that in whichever way we want, on our own priorities.

Once again, I welcome the process that we have engaged in this year and look forward to going behind the headlines next year to examine Barnett and to pick up on what Jack McConnell said about best value. To add a new dimension to that, we need to consider not only cost and quality, but expenditure over time. I have seen the correspondence between Mike Watson and Jack McConnell on public-private partnership projects—we must consider the effect of those projects over time. There has been much controversy about that issue in the newspapers this week—it is one that the Parliament should deal with next year.

Photo of Adam Ingram Adam Ingram Scottish National Party 4:11 pm, 10th February 2000

I take this opportunity to question the financial responsibility in the budget. I have taken the trouble to look at the Executive's press release, dated 15 December 1999, which proudly trumpeted an increase in local government spending ahead of inflation.

Jack McConnell announced that he had been able to increase finance to councils—grant-aided expenditure—ahead of inflation, by 3.7 per cent. He said:

"I want to give local authorities a stable financial regime . . . We will build on our constructive dialogue with local government to respond to the issues which affect vital local services."

Perhaps Mr McConnell would like to explain why it is that all over Scotland, councils are crying out in pain, warning that massive cuts in services and in jobs will have to be imposed so that they can balance their books next year.

In Ayrshire, for example, East Ayrshire Council has announced a shortfall of £7 million, to keep services at the same level as last year. In South Ayrshire, the shortfall is £4 million to £5 million. In North Ayrshire, Labour councillors are to meet officials from their district party to alert them to a financial disaster in the council to the tune of £7 million. That will mean the closure of two old people's homes and two children's homes, the possibility of an entire tier of middle management having to be paid off, education and social work departments being merged, opening hours for main libraries being cut and so on.

Is the minister aware that Labour insiders in North Ayrshire have said in the local press:

"The voters aren't going to forgive us for what we're going to have to do. And that is before we even consider the council tax?

Will the minister take any responsibility for the crises that are being visited upon our local authorities by his management of Scotland's financial affairs, or are those Labour-run councils being visited with a less than divine retribution for years of mismanagement at local level?

The minister often accuses the Scottish National party of financial irresponsibility. I put it to you, Presiding Officer, that it is this Administration that demonstrates financial irresponsibility daily, by stripping resources from our local authorities and preventing them from delivering essential services to our old, our young and the most vulnerable in our society.

Why, then, is all not as rosy in the local government garden as the minister's stunning increase of 3.7 per cent would have us believe? The minister might have increased local authorities' budgets, but he has also increased their work load. The 3.7 per cent increase diminishes quickly when we consider the amount of new work that local government has to undertake. According to the Convention of Scottish Local Authorities, costed new burdens alone come to some £120 million. Taking account of those costed new burdens, the increase in grant-aided expenditure falls to 1.1 per cent.

The Executive does not appear to believe that local authority workers deserve any sort of wage rise and, as a consequence, like the Tories before it, it has included no provision for pay awards. A further £100 million must be deducted from local authority spending power, to cover that burden. It is little wonder that, under scrutiny, the minister's budget increase of almost 4 per cent falls rapidly, to the point at which current service levels can no longer be met.

Despite the prevalence of ex-council members in the Parliament, the Executive seems to have forgotten the importance of allowing local communities to spend their money as they see fit. Consequently, councils find that specific grants are set to increase by more than 7 per cent, further restricting their ability to determine spending. How does that square with the minister's statement on 15 December?

I am sick and tired of listening to announcements from the Administration of trendy new initiatives with ring-fencing attached, the impact of which, if any, will be marginal. To say that the minister's presentation of council budgets is done by smoke and mirrors is to be polite. The Administration cannot escape the financial recklessness for which it is responsible simply by expecting councils to make cuts.

Photo of Mike Watson Mike Watson Labour 4:16 pm, 10th February 2000

I was disappointed to hear Adam Ingram's rather cynical speech. His dissection of the speech of the Minister for Finance was cynical in a similar way to Andrew Wilson, although he dressed it up rather more attractively. Adam Ingram continually runs down the budget, attacks it for not being good enough and, as Andrew Wilson did, attacks it for not being in line with Scotland's priorities. However, if the budget is not in line with Scotland's priorities, Andrew Wilson had better tell us what those priorities are and how they will be financed.

It is not good enough to say, "Our manifesto will contain all the details; just hold on," because that means holding on for three years. The Scottish National party cannot get away with that. Mr Ingram talked of smoke and mirrors—one cannot conceal things behind smoke and mirrors for three years. What is particularly depressing about the open process to which Malcolm Chisholm referred—Andrew Wilson can smile as much as he likes, but he has no answer to this—is that at no stage has the SNP offered an amendment or an alternative proposal.

Photo of Mike Watson Mike Watson Labour

I will allow Andrew Wilson to intervene in a moment, because I would like to think that he had something to say in reply.

It is wrong simply to criticise without being willing to offer something to replace the thing that is criticised. Budgeting is about priorities. Those priorities have been identified and the challenge is to go as far as possible within those parameters. If the SNP thinks that those parameters should be widened, it should tell the Parliament and the country how that could be done.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I am grateful to the convener of the Finance Committee for giving way. We have consistently argued that there should be much more scope in the devolution settlement to do such things.

On the subject of openness, will Mike Watson tell the Parliament why, as convener of the Finance Committee, he injudiciously used his casting vote to prevent an opening up of the Barnett formula through a proper inquiry backed by the Liberal Democrats, the Conservatives and the SNP? Why did he not back the cross-party approach that would have judiciously opened up the Barnett formula?

Photo of Mike Watson Mike Watson Labour

That is rather injudicious. As a member of the Finance Committee, Andrew Wilson knows that the committee will be examining the Barnett formula. The way in which the discussion has gone shows that the Barnett formula is an issue that exercises the Parliament widely. The formula will be considered by the Finance Committee—there is no doubt about that and it would be disingenuous to suggest otherwise.

The BBC—whatever one thinks of it—has costed the SNP's proposals at £2.5 billion. That figure was raised in the previous debate on the matter and the SNP disowned it—the SNP cannot disown it now. It is not a Labour party or Scottish Executive figure—it came from the BBC. The SNP must say where that money will come from. The budget that we are discussing today will produce a real increase of 6.8 per cent over the complete programme of the comprehensive spending review. Over and above that, due to the carry-forward from one year to the next, it will produce a further £130 million. Why do we get no credit for that?

I suppose that it would be too much to ask Andrew Wilson, Adam Ingram and other SNP members to shut up, but I must tell them that now is the time for them to put up and tell us how they propose to fund a budget to replace this one. Why do they not use the mechanisms available so that they can constructively criticise the proposals by saying "Delete this," or "Move that budget from here to there"? At the moment, the SNP is sniping from the sidelines, taking it easy, but failing to come up with specifics. That is not the purpose of a debate such as this. The budget process is open and transparent. If Andrew Wilson has figures for an alternative budget, I urge him to use them.

Earlier on, Andrew Wilson referred to the Scottish National party as a respectable institution. That organisation, respectable or not, has intelligent researchers who can come up with figures. The SNP must know what the figures are, and if it believes that the priorities in the budget are not correct, it is about time that it began to tell the people of Scotland what its priorities would be.

Jack McConnell, the Minister for Finance, has identified the appropriate priorities. We are approaching the end of our first process in dealing with a budget bill. Next year's will give us full openness and accountability. I hope that the SNP, the Conservatives and others—including the Scottish public—will use that process fully to say what they would put in place of budget proposals that they are not satisfied with. The people of Scotland deserve no less from this Parliament.

Photo of Nick Johnston Nick Johnston Conservative 4:20 pm, 10th February 2000

It is most unlike me, but I wish for once to be parochial. Last Thursday, I sat in on the meeting between the minister and Perth and Kinross Council on its budget difficulties. Mr Raffan, who has left the chamber, was there, too. I am not trying to pre-empt the local government settlement debate, but I feel that what I will say is relevant to the budget debate.

I would like to highlight the concerns of my local council, which are reflected across Scotland. I will do so to illustrate the impact of the Executive's agenda on people in our towns and villages. Perth and Kinross Council is one of the most efficient in Scotland. It has developed innovative solutions to service provision, which are bringing positive financial benefits. However, those benefits will be fully realised only in the longer term. The council is also fully committed to the principle of best value, and it is delivering the class sizes that the minister mentions. We should acknowledge that its expenditure on service delivery per head is the eighth lowest in Scotland, and further acknowledge that only East Renfrewshire Council and City of Edinburgh Council have fewer staff per head of population. Its council tax levels are among the lowest in Scotland, with increases in council tax in Perth and Kinross of 8 per cent over the past three years compared with a Scottish average of 26 per cent.

The council faces difficult decisions, because of population growth both among the elderly and among what have been described as breeding pairs. Of the schools in Perth and Kinross, 90 per cent are nearing full capacity.

The council's provisional revenue budget is estimated to be £12 million in excess of the expenditure guidelines. In building up the budget, the council believes that it has accurately and honestly reflected the true cost of delivering the same level of service to the citizens of Perth and Kinross as it did in 1999-2000.

The council has identified approximately £8.3 million of savings measures. Those savings represent demanding steps that the council will be forced to adopt in meeting the budget deficit. That is relevant to the debate, because it highlights the impact on the citizens of Scotland of the cuts that are being imposed.

Among the savings are a 10 per cent reduction in school supplies; a reduced budget for behavioural support; a cut of one third in the budget for visiting specialists—for example, music, physical education and art teachers; a reduced budget for roads maintenance; a reduction in the operating budget for residential homes and other social work facilities; a reduction in the budget for the maintenance of playgrounds; a reduced provision for clothing grants; and a reduction in the budget for street sweeping. Other measures include the introduction of a £2-a-week charge for the community alarm service; increased charges for home care; increased senior citizens' fares from a quarter to a half; and an introduction of charges for child health services. Finally, the council will cease all high school bursaries, cease all pre-school home visiting, and freeze the Perthshire Tourist Board grant.

I know that the minister will respond in due course, and I am happy to let him do that. I wanted merely to point out that if that efficient and well-run council can find savings and can collect its arrears in council tax—and I believe that that collection is running at about 94 per cent—there is no reason why every other council in Scotland should not do the same.

I want to put on record the pressures placed on even the most efficient of councils by the Executive's actions. I know that hard decisions have to be made, and we supported the minister when he said that the pot was only so big. But let us have some flexibility in local government settlements, and let us ease the burdens on local councils and local people.

Photo of Kenneth Macintosh Kenneth Macintosh Labour 4:24 pm, 10th February 2000

This is our first Scottish budget. It is another milestone on our journey to devolution. But it is not the sort of occasion that our colleagues would see at Westminster. Obviously, the Chancellor of the Exchequer's budget is on a different scale and provides a different type of political drama.

There is another crucial difference in which we should take pride. The Minister for Finance has not gone into weeks of purdah, closeting himself with his coterie of advisers, and emerging like a magician with his red box and his solution to all our worries. This is a budget that we can take part in, as many have. The Scottish Executive has published its plans and objectives for all to see, and both MSPs and the wider community have been able to contribute to and participate in the decision-making process.

This year, the budget process has been curtailed because this is the Parliament's first year and there has been a lack of parliamentary time. However, we can already see that the process is being approached in the right manner.

What is that process? As many of my colleagues have pointed out, it is about money. Everyone is always asking for more money; budgets prioritise such claims, and this one is no exception. Difficult decisions have been taken, but they have been taken in the context of our programme for government, which is a set of short-term and long-term objectives that will deliver social justice. The budget is about hard cash being directed at the people who need it most.

What does that mean for the people of Scotland? As with the rest of the UK, the budget means a real-terms increase in health spending, which means fully funded pay awards for nurses and other health service staff.

Photo of David Davidson David Davidson Conservative

I find Mr Macintosh's previous comment a little strange. I have received communications from many health board areas and hospital trusts saying that although they have received an above-inflation increase, it is not sufficient for next year and they will have a hard struggle. Although I do not disagree with the fact that efficiency savings must be found, the situation is not all milk, roses and honey.

Photo of Kenneth Macintosh Kenneth Macintosh Labour

I agree with Mr Davidson that the situation is not all milk, roses and honey; difficult choices have to be made. However, even Mr Davidson will recognise that we have found billions of pounds over and above the spending plans that we inherited from the previous Administration. We have invested that money in the health service to increase substantially health service pay in a way that the previous Administration could not. We should all welcome that as a recognition of the hard work and commitment of health service staff throughout this country.

The budget does not echo decisions that are being taken in the UK; specific decisions have been taken for Scotland. The budget means extra millions for our roads, not for an airy-fairy wish list of roads that will never be built but, thanks to difficult decisions made by the Minister for Transport and the Environment, for projects such as the upgrading of the A77 death trap in my area.

For young families in every constituency, the budget means nursery places for all three and four-year-olds who want them. That is a huge investment for both the children concerned and the whole community. Furthermore, in Scotland, we have made a commitment to find an extra £50 million for higher and further education, which will be directed at people who are least able to afford a university place and will encourage greater access for all.

I am not sure which side of the coin has the greatest merit. Is it the fact that we share with our neighbours in the rest of the UK and our colleagues in Westminster the desire to invest huge amounts of money in our schools, hospitals and homes; or is it our ability, in this Parliament and budget, to make our own decisions, set our own priorities and pursue our own agenda?

Whether the issue is where we differ or where we agree on common priorities, I particularly welcome the fact that the people of Scotland can now actively participate in the spending decisions that affect their lives. The decisions that have been taken are realistic, achievable and responsible and they are seen to be so because the process is open, accessible and participative.

In the future, we will be able to look back and measure what we have done to tackle poverty and social exclusion, and to raise standards, expectations and attainment levels. Although this year we are limited to agreeing priorities and objectives, we can unite behind those objectives. I commend the budget.

Photo of Alex Neil Alex Neil Scottish National Party 4:28 pm, 10th February 2000

I will begin by disagreeing with a comment made by the Minister for Finance in his opening statement. He said that

"the Scottish economy is in excellent shape."

That is one of the most complacent statements that the Parliament has heard in the past 10 months.

Let us examine the state of the Scottish economy. There are still about 130,000 people on the dole; that is not an excellent state for them to be in. Secondly, Scotland is suffering from depopulation and a brain drain.

Photo of Alex Neil Alex Neil Scottish National Party

I am sorry—I have only four minutes.

Earlier this week, a forecast suggested that, if the depopulation in Scotland continues at its present rate, the country's population will be down to just over 3 million by the end of the next century. Scotland is the only country in western Europe that is suffering from such a level of depopulation.

Depopulation and unemployment feed on each other. We should not underestimate the structural problems in the Scottish economy that result from depopulation, in particular the brain drain of the young and the bright—the very people whom we need to rebuild the Scottish economy.

Our industrial base is one of the narrowest in western Europe. We rely on three or four industries, each of which faces particular difficulties. We rely on only three or four sectors for 75 to 80 per cent of all our exports.

On priorities, the Minister for Finance should look at the budget of Scottish Enterprise, which spends £30 million a year on consultants and £7 million a year on export promotion. As a country, we spend less on the promotion of all our exports than the Danes spend on promoting their bacon abroad. Surely we should get our priorities right and turn those figures round—we should be spending £30 million on export promotion and perhaps £7 million on consultants.

We are suffering because of the inflation—in particular, the 30 per cent hike in house prices in the south of England—that has forced the Bank of Scotland to jack up interest rates to twice their real level in mainland Europe. That means that our businesses—big, medium or small—pay twice as much to borrow money as do their competitors in euro-land. It is commonly accepted in the City of London that the exchange rate is overvalued to the tune of about 25 per cent.

Look at the other structural problems in the Scottish economy, such as the fact that we rely almost totally on inward investment for the growth of wealth and jobs in Scotland. Until three years ago, Labour members agreed that we had such problems, but now that they are in office everything has suddenly become rosy. We still face those structural problems. We do not have the indigenous growth that a modern economy requires from its small and medium businesses, and a high percentage of our businesses is owned by foreign companies.

To say that the Scottish economy is in excellent shape is a statement of complacency that is beyond belief. We need a budget that will tackle Scotland's fundamental economic and social problems. Spending on health and education may be going up, but that is because spending on housing, transport and enterprise is going down. The Executive is robbing Peter to pay Paul.

Photo of Mike Watson Mike Watson Labour

What is the alternative?

Photo of Alex Neil Alex Neil Scottish National Party

The alternative is to have fiscal autonomy, so that instead of giving a 1p tax cut to those who do not need it, we invest the money in essential services in Scotland. Another part of the solution would be for us to get our share of the budget surplus of £7 billion to £12 billion this year, which would be well over £1 billion. From those two measures alone, we would have an extra £1.5 billion to spend on essential services. That would help to generate jobs, tackle poverty, solve the housing problem and all the rest of it. The answer is there; the problem is that we need fiscal autonomy to be able to implement it.

Photo of Des McNulty Des McNulty Labour 4:34 pm, 10th February 2000

Andrew Wilson summed up the SNP's position on the Executive's budget clearly and effectively when he said that he would not support it, oppose it, or present any alternative to it.

The whole purpose of introducing a transparent budgetary process is that people can be clear about their options, the alternatives and where they stand. We have heard none of that from the SNP.

Mike Watson made the point that the SNP has not offered one amendment or proposed any alternative during the entire debate. If the SNP's priorities differ from ours, why does it not state them clearly so that we can discuss them budget head by budget head so that we know where the SNP stands?

Instead, all we get from the SNP is a series of statements about what it would do, based on economics that remind me of the stories my mother told me when I was young about finding leprechauns at the bottom of garden and digging up pots of gold. The SNP is waiting for the pot of gold and looking for the leprechauns in the hope that they will deliver.

I feel sorry for Andrew Wilson, because he cannot sit in the chamber all the time with his wee pocket calculator, totting up the commitments as they are made. It is unfortunate for him that his experience as shadow Minister for Finance is of being force-fed junk commitments by his front-bench colleagues.

Earlier in the week, I was interested to read in a newspaper that the singer who wears the Mr Blobby costume has lost his voice as a result of the demands of the role. Sometimes, Mr Wilson must feel like the Mr Blobby actor, because he has commitments coming at him all the time and all he can do is mouth the same old platitudes. It is a difficult role. I feel some sympathy for him.

There is a level of dishonesty in the SNP's approach, which must be picked up. Every local cause across Scotland—every campaign—is being promised that the SNP will find additional resources, whether in Tayside, the Highlands or South of Scotland. Everything is on offer from the SNP.

Dorothy-Grace Elder probably leads the way for the SNP in shamelessness, but her colleagues are not far behind. In some ways, that reflects the experience of the SNP in local government, where it has a separate policy for every street of every district of every town. The same approach is being adopted by the SNP in the Parliament. The SNP's lack of success in local government should alert it to the fact that voters are aware of the incompatibility of the promises that are being made.

Some of the comments that have been made about the Barnett formula beggar belief, or at least beggar understanding. People are not interested in arcane debates about percentages. They are interested in whether there is more money. The question is not whether there is a higher percentage of growth here or there, but whether there is more money for schools, hospitals and other services.

Jack McConnell has detailed, point by point, what Labour will spend its money on. Commitments on nursery schools, the health service and education have all been mentioned. Each time, the commitment has been costed. The extra money per capita that is available in Scotland is the same, pound for pound, as the extra money that is available south of the border. Andrew Wilson cannot deny that, so he tries to talk about percentages instead.

I would quite like some real comparisons to be made, because some of them—on the health service, for example—would be very positive.

Percentages are sometimes misleading, but I believe that the fact that Scotland spends more of its total expenditure on health than does England means that we have prioritised a better health service.

Photo of Des McNulty Des McNulty Labour

If I may make a European comparison—

Photo of Des McNulty Des McNulty Labour

A European comparison would not show our health spending in an adverse light.

In conclusion, there is a question of honesty in the way arguments are presented. At the end of the day, the SNP will have to defend its case on the basis of its economic competence, which nobody will be able to judge unless it puts its cards on the table. What would the SNP do? Where would it spend money? What positive choices would it make? Unless the SNP is prepared to answer those questions, the people of Scotland will not take it seriously.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat 4:39 pm, 10th February 2000

I take the opportunity of this debate to highlight the severe difficulties facing councils, such as Aberdeenshire Council, as a result of the Minister for Finance's proposed budget. I understand that the local government settlement will require separate approval by Parliament and that a debate is scheduled for the end of the month. However, I want to take the opportunity now—as Nick Johnston, who unfortunately has left the chamber, and Adam Ingram did earlier—to register my objection to the fact that the Minister for Finance's funding formula has resulted in a real crisis for councils. I want to highlight the issue by looking at the situation of Aberdeenshire Council.

Evidence from the Accounts Commission, Her Majesty's inspectorate of schools, the Chartered Institute of Public Finance and Accountancy and the Manpower Services Commission shows that Aberdeenshire's services cost less than those of most other councils. That cost-effectiveness has been achieved while Aberdeenshire's population continues to rise at a rate more than five times the Scottish average, resulting in an increasing need to spend more just to maintain present services.

In education, Aberdeenshire's need to spend is set to outstrip the Scottish average while the formula Mr McConnell is operating will provide a less-than-average grant. As we know, support from the Executive is the main basis of council funding. As a result, Aberdeenshire needs to cut nearly £13 million from its budget. That represents real cuts in basic services, and people's jobs are on the line.

At this point, I would like to remind the Executive that Aberdeenshire's spending per head of population is only 89 per cent of the Scottish average, and that it has a staff ratio 12 per cent below the average. In other words, it is already operating with nearly 1,150 fewer staff than the average Scottish council. I believe that Mr McConnell has some experience of Stirling Council. If Aberdeenshire had the same level of funding per head of population, the council would be £25 million better off. That would address the crisis of the £13 million shortfall, and more.

I believe that Mr McConnell has recognised that Aberdeenshire Council is a model council. I want to know how such a model council, so prudent in its spending, can be treated in this way. Giving one year's flexibility is simply not good enough, as the problems are just put off for a year. We need greater flexibility and a proper use of funds that are, as Adam Ingram pointed out, currently ring-fenced by the Executive.

I will give members one example. Next year, the schools excellence fund will put £1.75 million into Aberdeenshire. That money is aimed at adding value to the educational experience. We trumpet that, but it just adds insult to injury if at the same time the council is forced to make secondary school teachers redundant—and that is the plan. We have got something fundamentally wrong here, and it is up to the Minister for Finance—not anybody else—to address the problem. Both Nora Radcliffe and I are very conscious that the voters of Aberdeenshire did not send us to the Scottish Parliament to ditch teaching jobs and cut central services.

I end by making it absolutely clear to the Executive—and to the Minister for Finance in particular—that although today Nora Radcliffe and I will vote for the Executive's overall budget proposal, Mr McConnell does not have our support for the local government settlement. There must be movement before that debate is held if our support and that of others is to be forthcoming. We thank the Minister for Finance and other ministers for the constructive and businesslike meetings that we have had so far, but it is no good telling us that it is out of the minister's hands because of the formula. The Minister for Finance is in charge of the formula, not the other way around.

It is up to the Minister for Finance to come up with the flexibility on funding that Aberdeenshire Council and so many other councils need. Essential services are in real danger and people's jobs are on the line.

Photo of Annabel Goldie Annabel Goldie Conservative 4:44 pm, 10th February 2000

I thank the minister for his explanation of the Budget (Scotland) Bill. I noted particularly his phrase

"spending the people's money well on the people's priorities".

It is right that this party should affirm that there is no bottomless purse and that we are committed to no new or higher taxes. However, I must suggest to the minister that that makes analysis of

"spending the people's money well on the people's priorities" particularly critical.

I suggest that we consider the first component, spending well. I presume that that means not spending freely, but spending prudently. That brings me to words that I regard as helpful, such as "efficiency" and "savings".

I had hoped that this bill might have been accompanied by a projection of efficiency and savings from the minister, in particular of what specific efficiency and savings directives he has issued to his ministerial colleagues. The Parliament needs to identify a base cost for core services. Without that, fire-fighting supplementary estimates will be a fact of life.

I think that economic management requires strategic direction, which currently seems to be lacking. I fully accept that there may not be culpability on the minister's part, and I acknowledge that we are working in a new system and in a new structure, but we have to begin asking the question, "Who is responsible for strategic direction in economic management?" Without that direction, we are being led to a budget that is rather like a wheel with no spokes.

I share the view of my colleague, Mr Davidson, that some rigorous discussion with the Chancellor of the Exchequer about the tax take from Scotland is long overdue, and Professor Midwinter's warning about the health service should not go unheeded.

Efficiency in local authorities needs to be demonstrated. They should be rewarded for better outturns, core service focus and delivery efficiency. I echo the sentiments of Mr Johnston and Mr Ingram, and even the comments of the wolf in fluffy pink clothing, Mr Rumbles: attention demands to be paid to what local authorities are doing. The efficient ones have to be acknowledged, but I am not sure that there is any formula that does that. I also feel that, given the recent disclosures about uncollected community charge and council tax, this matter is long overdue for attention, and I would like to think that within the minister's formula, whatever it is, there is provision for that facility. It seems that the minister requires an intimate knowledge about what is going on in local government. Only then will the phrase "spending well" have a ring of conviction.

As for the people's priorities, it is clear that we are running short on essential public services. The rural economy is in a state of unprecedented disintegration, we underperform in business expansion and there are huge questions about the health service. What is disclosed in the bill is that more remains unexamined, uninvestigated and unmeasured in terms of outturn and efficiency. In those circumstances, I regret that this party is unable to support the minister's budget, and we shall feel it necessary to abstain when the question on the motion is put at decision time.

Photo of Andrew Wilson Andrew Wilson Scottish National Party 4:47 pm, 10th February 2000

I am grateful for the opportunity to close for the SNP in this historic stage 3 debate on the first Budget (Scotland) Bill.

I begin by congratulating Malcolm Chisholm on his excellent speech. He was absolutely correct: we should always point to the positive where possible. The bill represents a step forward from the current process operating at Westminster.

We should not kid ourselves, however. The budget process here is no benchmark of what goes on elsewhere in the world. I can find out more from a trip to the website of the Finnish finance ministry about what is going on in Finland than I can about what is going on here in Scotland. We have a lot of work still to do, and some openness from the Government would be helpful as we progress. We are not there yet.

Photo of Mike Watson Mike Watson Labour

On the theme of openness as displayed by Andrew Wilson's colleague, Alex Neil, in an illuminating speech, will Andrew confirm that the two aspects of change in the budget to which Alex Neil referred are in fact SNP policy and that Andrew subscribes to them?

Photo of Andrew Wilson Andrew Wilson Scottish National Party

I am not aware of the specific points that Mike Watson refers to, but the key point that Mr Neil made was that if Scotland had the normal powers of a normal country, such as Finland or indeed Ireland—not richer countries than Scotland—we would have the opportunity to access the surplus in the nation's finances, which at present more than meet the Maastricht criteria. That would amount to an excess of 10 per cent of the Scottish budget at present.

Added to that is the fact that the SNP has a commitment from the last election to freeze, not cut, income tax. Ten per cent is not a small amount of money, and accessing that surplus is the sort of thing that we could do if we were a normal country with normal powers. The budget, with the constraints placed upon it, is not a normal country's budget; it is a cake division—robbing Peter to pay Paul.

Mr Watson agrees. He asks what we would do. He has to rob Peter to pay Paul. I did not come into politics to argue about divisions of a cake when we should be arguing about how to allocate the nation's finances. We need to think about both revenue and expenditure. That is real politics and it is what a national Parliament should be discussing. Normal budgets go much wider.

The SNP is the only party that entered the election in May with the honesty to say how we would implement a serious programme of value release across Scotland instead of simply making efficiency savings. We listed in detail each one of the SNP's spending commitments from the penny for Scotland. Incidentally, the penny for Scotland was pilloried by new Labour from the right wing of the political spectrum and yet is agreed with by the Liberals in this debate. It would make a serious contribution to tackling the crisis that faces us.

I see that a wannabe—if not gonnabe—minister is seeking to intervene. I am delighted to give way.

Photo of Kenneth Macintosh Kenneth Macintosh Labour

I would prefer not to be subjected to personal insults in the chamber. I know that that was not a terribly personal one, but Andrew Wilson and I get on well and I do not want to start name calling in the chamber.

Contrary to what Andrew Wilson said, the SNP proposed efficiency savings. It suggested a huge programme, based on an efficiency saving of something like 5 per cent across the budget. However, the party never specified where the savings would come from.

Photo of Andrew Wilson Andrew Wilson Scottish National Party

Mr Macintosh should ask the numerous advisers who sit in the back of the chamber. The target across the Scottish block was 0.75 per cent, which Professor Arthur Midwinter described as a modest programme. The target can still be achieved if the Government follows through on its commitment to release value across the budget. Mr Macintosh's numbers are wrong, but we will forgive him, as the debate is very detailed.

This Parliament must tackle the Barnett squeeze. Every party, with the possible exception of Labour, agrees with that. If we do not tackle it, we will not meet the priorities of the people of Scotland. Arguing about the division of a cake is not enough. A national legislature should have the normal powers that a normal country would have. Why run away from normal powers? What does the Executive fear?

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour 4:52 pm, 10th February 2000

I am delighted to wind up the debate and to wind up a process that began last June with our decision not to use the tax-varying power and the early discussions on the financial procedures legislation. We have conducted the most open and transparent discussion about Scottish public spending ever. Next year's will be even more open and transparent. There have been a number of good, solid contributions to our discussion today and I would like to respond to a few points.

I will return later to the issue of local government finance that Adam Ingram and Nick Johnston raised. However, I would say to Nick Johnston, who boasted about the 94 per cent council tax collection rate in a council in his area, that that rate is still below the average collection rate in England. Our attempts to improve the collection rate across Scotland will include Perth.

Malcolm Chisholm was right to point out the substantial increases in all the budgets. It is not true to suggest that the budgets for transport, enterprise or housing are being reduced. The figures before us today show real-terms increases in all those budgets. Malcolm was also right to point out that this bill is about this Parliament deciding its priorities in an open and transparent way.

Mike Watson made that same point when he talked about the important role played by the Finance Committee and other bodies in the deciding of those priorities. He again exposed the disappointing record of the Conservative and Scottish National parties on the budget. Never have they suggested an amendment to the budget. Since the announcement of a large part of the budget in the comprehensive spending review, they have had more than a year to suggest alternatives, but they have not done so. Mike Watson also referred to the £2.5 billion-worth of spending commitments from the SNP's front-bench spokespersons. I might return to that point before I finish.

Ken Macintosh made the solid point that we are going to allocate—not only next year, but the year after as well—some £50 million extra for student financial support. That is just one of the real improvements that I did not list in my opening speech, although I could have done.

Alex Neil was wrong to say that the Scottish economy is not in a strong and improving position. The truth is that unemployment is at its lowest level since 1976—lower than the EU average and lower than in France and Germany. Youth unemployment has decreased by 60 per cent in two years and long-term unemployment has decreased by 30 per cent in the same period. Output is rising and services are showing growth. Unlike the rest of the UK, Scotland is experiencing growth in the manufacturing sector. To the third quarter of 1999, we experienced export growth of almost 8 per cent. All recent surveys have shown that the Scottish economy is in an increasingly healthy position. Our job in this Parliament is to talk that up and improve it, not to talk it down or run it down.

It is also important to address the point that Andrew Wilson made—very quickly, so that we would not notice it—at the end of his winding-up speech. He described how, in the eyes of SNP members, fiscal autonomy might improve the position of Scottish public spending. Andrew Wilson is keen on quoting Brian Ashcroft in his speeches in these budget debates, but he never mentions the fact that Brian Ashcroft has been quoted as saying that

"the net transfer from England to Scotland is an unavoidable fact."

Brian Ashcroft recognises the structural budget deficit. I presume that Andrew would too—if he was honest and quoted a bit more of what Brian Ashcroft has said in recent years. Andrew Wilson is also keen on making cheap jibes about speakers in the chamber. Given the SNP finance spokesman's record on facts and figures about independence and the financial position of Scotland and England, he cannot say much that we should take too seriously.

Mike Rumbles made several points about Aberdeenshire Council. As some of them were made in an over-personal way, it would be appropriate for me to respond briefly. The formula for the distribution of local government finance in Scotland—which will be addressed in more detail in the debate on the settlement in two weeks' time—is agreed after long discussion with the Convention of Scottish Local Authorities. The leader of Aberdeenshire Council sits on the committee that agrees that formula with me. That formula is a collective agreement between Scottish local government, this Executive, ministers and, eventually, this Parliament. It is important that that procedure remains.

I first met Aberdeenshire Council in June. Its members made a coherent case to me and John Reid that day concerning why they had gone over guidelines. They apologised and said that they would not have gone over guidelines if they had known that that would have posed a difficulty or problem. They wished—

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I apologise to Mike, but I gave him a chance to say what he had to say without interrupting him. I want to clarify several points that he raised.

It is important to note that Aberdeenshire Council asked us not to cap its spending; we did not. It then asked us to give it an extra year to return to guidelines; we have.

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I would welcome any proposal from Aberdeenshire Council that helps it to deal with problems in its budgets. It is important that its members are factually accurate about its current budgetary position and that they recognise that they were participants in the making of decisions that led to the distribution formula. Until they make some—

Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I ask Mike Rumbles to let me finish this point.

Until they make some specific suggestions as to the flexibility they require, I cannot respond. As soon as they do, I shall respond. I want to make it clear to everyone who lives in Aberdeenshire that there is no need for Aberdeenshire Council to make any teacher redundant next year as a result of the budget settlement.



Photo of Rt Hon Jack McConnell Rt Hon Jack McConnell Labour

I shall finish by addressing the overall nature of this budget, and the so-called underspending that was referred to by Andrew Wilson. In committee and in this chamber, we have heard several points over recent months about spending levels. There has been a distortion of the health spending real-terms increase for next year and a distortion of other budgetary increases as well. We have also heard a number of promises.

I suspect that we may have a new game from the SNP's commercial company, which was set up to boost the fortunes and finances of the party—presumably, it lost so much after it lost its able chief executive to this Parliament last year. I thought for a minute that Andrew Wilson might do a Michael Portillo and announce a U-turn in his speech on the tax position, but he did not.

Perhaps Andrew Wilson should be aware that the company might be about to advertise a new game called, "Who wants to spend like a billionaire?" I believe that the game has three options. One is to ask the audience, but if he were to ask the audience sitting behind him, he might find that Richard, Nicola, Kay or Kenny—or some of the others—propose to spend so much money that he cannot afford to address those proposals. He might then want to take the 50:50 option, which involves deleting two options—or two people—from those available. I can tell him that, by my calculation, if he deletes the two Kennys, he would halve his budget deficit overnight.

There is, of course, a third option—Andrew could phone a friend. However, given the history of budget deficits in the 1990s promoted by the party sitting opposite the SNP, he could phone any number of Conservative friends to find a way of keeping things going for a few years.

We have had another good budget debate. One of the main purposes behind the establishment of this Parliament was to ensure that Scotland's finances came under Scotland's control. It is a fundamental purpose of the Parliament that we agree our budgets. We are spending more than £16 billion. We must spend that money well on the right priorities and we must debate those choices in the year ahead. I strongly commend the Budget (Scotland) Bill to everyone.