Budget 2011-12

– in the Scottish Parliament at 2:00 pm on 17th November 2010.

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Photo of Alex Fergusson Alex Fergusson None 2:00 pm, 17th November 2010

The next item of business is a 25-minute statement by the Cabinet Secretary for Finance and Sustainable Growth, John Swinney, on the budget. As the cabinet secretary will take questions at the end of his statement, there should be no interruptions or interventions during it.

Photo of John Swinney John Swinney Scottish National Party 2:03 pm, 17th November 2010

Presiding Officer, I would like to make a statement on the Scottish Government's draft budget for 2011-12, which I am publishing today for Parliament's scrutiny and consideration. I am also publishing an equalities statement on the budget, a carbon assessment of it and associated documents.

The budget addresses a financial challenge without precedent since devolution and reflects the biggest reduction in public spending imposed on Scotland by any United Kingdom Government. As the spending review confirmed, in cash terms, the Scottish budget will be cut by £1.3 billion next year. Within that, Scotland's revenue budget will be around £500 million lower and our capital budget £800 million lower.

The scale of those cuts poses a significant challenge to the delivery of public services in Scotland and our economic recovery. Our latest assessments show that, after a downturn that was shallower than that in the UK as a whole, the Scottish economy grew by 1.3 per cent in the second quarter of 2010, which was a stronger performance than in the UK, and the quarterly growth in our construction sector of more than 10 per cent is evidence of the effectiveness of our capital investment programme. However, although the Scottish economy is on the road to recovery, it remains, as today's labour market figures demonstrate, fragile.

I fully accept that a clear and credible plan is required to put the public finances back on a sustainable footing and that that is the unavoidable consequence of the previous UK Government's mismanagement of the public finances.

We and others, including our counterparts in Wales and Northern Ireland, have made it clear to the United Kingdom Government that it is cutting spending too far and too fast. Over the next four years, the UK Government's spending plans will see Scotland's budget fall by £3.3 billion in real terms—an 11 per cent cut. Within that, our capital budget will fall by £1.2 billion in real terms, or a staggering 36 per cent. Two thirds of the cuts were planned by the previous Labour Government, and Alistair Darling described them as "deeper and tougher" than those under Thatcher. Updated analysis by the Scottish Government's chief economic adviser, published today, estimates that it could take until 2025-26 for the Scottish budget to return to last year's levels. Over that period, the cumulative real-terms loss will be £39 billion.

This is a Parliament of minorities, and we all have a role to play in shaping this budget. The people of Scotland expect nothing less. The challenge now is for us in this Parliament to work together to deliver a budget that works for the people of Scotland. We know that it is more than a one-year challenge and that it will affect every person in Scotland. It will force all of us to ask fundamental questions about the way in which we invest in our public services and our key social and economic priorities.

That is why today's budget addresses the sharpest fall in public spending in any one year of the spending review. It is also why we confirm to Parliament that we are establishing the commission on the future delivery of public services, to be led by Campbell Christie, to ask those fundamental questions about future provision. Led by one of Scotland's most distinguished public servants, the commission will be charged with providing recommendations about how public services must change to meet the medium and long-term financial challenges and the expectations of the people of Scotland. Despite the challenges, we remain ambitious for Scotland's public services, and the commission will advise on how best to deliver excellent, sustainable services for our communities in the future. The commission will report next summer to inform spending plans for the period 2012-13 to 2014-15. Further details of the commission will be announced shortly.

Turning to the immediate challenge that we face, as finance secretary, I have a duty to this Parliament and to the people of Scotland to balance the budget. In February of this year, we established the independent budget review panel, whose report in July was warmly commended, and I thank its members for their efforts and insights. Since the panel's report, we have engaged in an open conversation with the people of Scotland about the spending challenges and choices that Scotland faces.

In bringing forward my proposals, I have been guided by three overriding priorities: to promote and secure Scotland's economic recovery; to protect and invest in Scotland's front-line public services; and to take forward action on climate change so as to maximise Scotland's potential. Throughout that process, I have been ever mindful of my responsibility to ensure that the poorest and most vulnerable in our society receive the support that they need.

To address the challenge, I will use a series of mechanisms to reduce the impact of the cuts. In recent years, the public sector in Scotland has led the UK on efficiency savings, outperforming Whitehall in each of the past two years. In this budget, we intend to build on that excellent work, which has already seen Scotland exceed our 2 per cent targets, delivering £839 million in efficiency savings in 2008-09 and almost £1.5 billion in 2009-10.

But we must go further. I can announce today that we are seeking efficiency savings of 3 per cent across public services for 2011-12. Each delivery body will be expected to report publicly on their plans, the actions undertaken and the results achieved.

Since entering office in 2007, we have taken radical steps through our simplification programme to reform and streamline the public sector, reducing costs and improving delivery. In October, we announced the establishment of the Scottish education quality and improvement agency, initially bringing together Learning and Teaching Scotland and Her Majesty's Inspectorate of Education into one organisation. That will improve efficiency and drive innovation as we move forward with curriculum for excellence. I can announce today that the General Register Office for Scotland and the National Archives of Scotland will be amalgamated to save further costs and improve service delivery. We remain on track to reduce the number of public bodies by 25 per cent in 2011.

Achieving more focused and effective scrutiny is central to our overall commitment to improvement in the public sector. We will maintain a focus on scrutiny improvement, delivering cash savings of at least 20 per cent over the next four years.

We will continue to lead the way by delivering even greater savings from reforming procurement. In 2009-10, Scotland's public sector delivered savings of £312 million from improved procurement. We intend to build on that. The Government intends to deliver further savings of £61 million in 2011-12 and some £200 million over the next three years. More detail can be found in "Efficiencies from Procurement", which is published today alongside the draft budget.

We will maximise receipts from the sale of surplus land and buildings to combat the savage cuts to capital investment by the UK Government. The Scottish Futures Trust is developing proposals to increase revenue from land and property assets, and we will build on the success of the SFT, which has already identified savings of £111 million in 2009-10. [Applause.]

Within the Parliament's existing revenue powers, we have explored options for maximising our income. We have been mindful of the need to consider the effect of the significant tax rises that the UK Government has announced before we act. I therefore confirm that we will not raise the Scottish variable rate of income tax. I intend to secure additional resources in 2011-12 by increasing the business rates that are paid by the largest retail properties, including supermarkets and out-of-town retail parks. That will also support our town centres.

The final mechanism that I will highlight is public sector pay, which is a large and important element of our budget. Approximately 55 per cent of our resource spending in Scotland—about £14 billion—goes on pay. Since entering office, we have demonstrated our commitment to pay restraint for high earners while supporting those who are on low pay. Ministers have taken a pay freeze for two years in a row and, in the Scottish Government, pay for the senior civil service was frozen this year.

The independent budget review offered sound analysis on public sector pay and pointed out that, at a time of declining budgets, every penny that is spent on pay increases is likely to be paid for by shedding jobs. I have therefore considered carefully our pay policy, which I am publishing today—several months earlier than usual.

My aim is to maintain public sector jobs and services by constraining pay and to support those who are on the lowest incomes. When we entered office, pay for the lowest-level staff in the Scottish Government was about 5 per cent higher than the minimum wage. In 2010, it is 25 per cent higher. We are proud of that record. [Applause.]

Our pay policy applies directly to the 30,000 staff of the Scottish Government, its agencies and most non-departmental public bodies. In addition, the policy sets a framework for discussions with national health service staff, teachers, police and firefighters. Local authorities will continue to be responsible for setting pay with local government staff.

I confirm to Parliament that I intend to implement a pay freeze—a 0 per cent basic award—for all staff in 2011-12, with the exception that staff who earn less than £21,000 will receive a minimum increase of £250, and I confirm that the Government will introduce a living wage of £7.15 per hour. [Applause.] Furthermore, I will suspend all non-consolidated pay, including bonuses, in that year, and I am taking action to reduce the costs of high-earning staff across the Scottish public sector.

The costs of the senior civil service will fall by at least 10 per cent by the end of 2011-12 and by 25 per cent by 2014-15. The Government is now operating the presumption that, when a non-departmental public body's chief executive resigns or retires, their replacement will start on a salary that is at least 10 per cent lower than that of the person whom they replace.

We are further reducing the number of chief executives who have access to bonuses from the level that we inherited in 2007. As I said, we will suspend bonus payments in 2011-12. We are working to reduce the number of board members of public bodies into the bargain.

We are committed to cutting the number of senior managers in NHS Scotland by 25 per cent over the life of the next Parliament. Yesterday, the Deputy First Minister confirmed that we are freezing the amount that is paid to NHS consultants in distinction awards. Scotland leads the UK in taking that action. [Applause.]

Photo of Alex Fergusson Alex Fergusson None

Order. I asked for no interruptions; I ask for no further interruptions until the end of the statement.

Photo of John Swinney John Swinney Scottish National Party

As the Parliament knows, one of our most cherished approaches to Scottish Government staff in the past three years has been that of no compulsory redundancies. That has created the right atmosphere to enable us to find the substantial savings year on year that have already transformed efficiency in the Scottish Government.

Clearly, the financial circumstances are totally different from what has gone before and, understandably, given the position that we are in, even that most prized policy has had to be reviewed. However, I am delighted to tell the Parliament that this Government believes that we can sustain our policy position of no compulsory redundancies, on condition that we reach agreements on flexible working practices, which reduce costs while maintaining headcount and services.

The Scottish Government will not lay down what flexibilities are necessary and appropriate for a particular staff group, so our policy encourages employers to negotiate no compulsory redundancy agreements with staff and their representatives as part of collective bargaining negotiations for 2011-12. The details will be for agreement between employers and staff groups.

Proposals for increased flexibilities in exchange for no compulsory redundancies must be fair and effective. We will continue to discuss with the Scottish Trades Unions Congress how that can be achieved. The key aim remains to maintain headcount as far as possible while living within sharply reduced budgets. The Scottish Government also commits itself to seeking to ensure that all public sector employers in Scotland engage with this framework.

These measures demonstrate that we have used all the mechanisms at our disposal to ensure that the public sector in Scotland delivers maximum value for money for every pound that we spend. However, the scale of Westminster's cuts are such that it is simply not possible to find all the savings required through those mechanisms.

Further reductions in spending are unavoidable if the budget is to balance. Where we have been forced to make such reductions, we have protected the services and activities that deliver most for the people of Scotland. We have reduced the budgets of the Scottish Further and Higher Education Funding Council, Learning and Teaching Scotland, the Scottish Qualifications Authority and Skills Development Scotland, but those reductions will be made without detriment to the number of university and college places, the implementation of curriculum for excellence or support for those who are unemployed.

We will put in place fewer and more focused bidding rounds in the Scotland rural development programme and will review the size of grants awarded. In the light of the unprecedented cuts to our capital budget, our spend on transport projects will prioritise existing projects over new. Expenditure on maintenance of the motorway and trunk roads network has been reduced.

Our enterprise agency and tourism budgets have been reduced, partly by building on our earlier reforms and by seeking further reductions in staffing levels, increased efficiencies within the bodies and the removal of lower priority activities.

These decisions have been difficult and they will have an impact—I make no claim to the contrary—but they have been taken so that we can place at the heart of our decision making the reinforcement of our social contract with the people of Scotland.

In difficult times, the Scottish Government has acted to create economic opportunities, protect household income, support front-line services and improve our environment.

As we ask households to accept pay restraint in order to protect jobs and assist the economy, the Government reaffirms our social contract by providing the resources for the full removal of prescription charges and for a freeze in the council tax for a fourth year in succession. We are also maintaining existing eligibility criteria for concessionary travel. We reaffirm our social contract by taking measures that enhance the resilience of the Scottish economy and protect communities across Scotland from the worst impacts of the United Kingdom Government's cuts.

The purpose of the Scottish Government is to focus public services on creating a more successful country, with opportunities for all of Scotland to flourish through increasing sustainable economic growth. By making the difficult decision to limit pay awards in the public sector, we are using the savings to protect jobs. Our pay restraint policy will support thousands of jobs in local economies across Scotland. That action will not only protect the delivery of key services but will assist demand in the wider economy, ease labour market pressures and mitigate equalities impacts.

I can also announce today that our budget will fund 34,500 training opportunities in 2011-12, while upholding our commitment not to introduce tuition fees; support business growth, including the continuation of the highly successful small business bonus scheme; fund a near £400 million housing and regeneration budget, which will contribute to building 6,000 new affordable homes; support the development of the Victoria and Albert museum project in Dundee; spend more than £11 million on broadband interventions to support our digital ambition for Scotland; and invest a further £11.9 million in support for our food and drink sector.

In response to the cuts to our capital budget that Westminster has imposed, we will take decisive action to support jobs and skills. In response to a real-terms cut of 25 per cent in capital departmental expenditure limit allocation from the Treasury, I have decided to boost capital spending next year by transferring £100 million from this year to support the essential capital projects for the Scottish economy next year. We will proceed with our priority capital projects, including the Forth replacement crossing, the south Glasgow hospitals project and the schools for the future programme. We are protecting the share of the capital budget that is allocated to local government, to allow councils to undertake essential investments in and maintenance of the services that they provide.

We will also undertake a programme of infrastructure investment worth £2.5 billion in health, education and strategic transport projects. That new programme of investment will be supported by revenue finance and delivered using the non-profit distributing model. It will be taken forward by the Scottish Futures Trust, working with partners across the public sector, and will support jobs and growth and deliver vital new infrastructure to cushion the impact of a 36 per cent cut in real-terms capital spending over the four years to 2014-15.

My second strategic priority is investment in front-line services, which is central to both our short-term and our long-term economic success. Scotland's greatest economic asset is her people.

Their development through support for education, learning and skills and through services to improve health and wellbeing is a central theme of our budget.

Over the past few weeks, I have seen at first hand the professional and devoted care that my wife and young son have received from our national health service; all of us have shared such experiences. I confirm to Parliament that we will deliver on our pledge to protect NHS spending by allocating an additional £280 million of resource funding to the health budget in Scotland, honouring our commitment to pass on Barnett consequentials from the UK settlement. That will help us to build on the substantial gains that have been made since 2007 and ensure that our investment in health and health improvement continues to support sustainable economic growth.

As Scotland's biggest employer, the health service makes an important direct contribution to local economies across Scotland. Helping those who are out of work because of poor physical health to return to employment and improving the health of those who are in work to contribute to economic performance. One of our objectives in the budget is further to encourage joint working between the health service and local government in providing adult social care. To assist that work, the Deputy First Minister has agreed, as part of our discussions with the Convention of Scottish Local Authorities, to allocate £70 million in the NHS budget to a change fund that will allow the NHS and local authorities to work together to achieve better outcomes for some of the most vulnerable in our society and to reduce demand on acute services.

Scottish local authorities are responsible for delivering many front-line services. We have, therefore, agreed with COSLA's leadership a settlement for local government that reflects our joint determination to protect those services, as far as is possible, and so improve outcomes for the people of Scotland. The agreement that we and COSLA's leadership are recommending to individual councils also reflects local government's key role in economic recovery. The agreement, details of which I will now set out, will help authorities to deliver services that are vital to people in all parts of Scotland and to promote economic growth.

In return for a funding settlement that maintains local government's share of the overall Scottish budget, local authorities will agree to deliver certain commitments, including a commitment to the delivery of the current single outcome agreements and a number of social strategies that we have agreed with local government. One of those strategies is to give every child the best start in life through implementation of the early years framework, which represents a long-term investment in increasing sustainable economic growth.

On school education, the budget provides funding to maintain the pupil-teacher ratio in the crucial early years of primary school, provides places for all probationer teachers through the induction scheme in August 2011, acts to reduce teacher unemployment, and supports the implementation of curriculum for excellence. We are also protecting the educational grants for school pupils—the education maintenance allowance—that have been cut south of the border.

Our agreement with COSLA will extend the council tax freeze into 2011-12; maintain the delivery of existing commitments on free personal care and work with local government to support carers, which provides quality of life benefits—benefits that some seek to remove—to some of the most vulnerable in our society; and maintain the total number of police officers at 1,000 more than were in post before the Government came into office.

Our agreement with COSLA is conditional. It has been agreed between the Government and COSLA's leadership. It is for individual authorities to decide whether they wish to accept it or not, and the condition is as follows. The average resource budget reduction in non-protected areas of the Scottish budget next year is 6.4 per cent. If authorities accept the agreement, their resource funding will reduce next year by only 2.6 per cent. That is a much greater degree of protection than in other parts of the budget, and it is a much superior provision to that for local government in England. If councils choose not to accept the agreement, their funding from the Scottish Government will therefore fall not by 2.6 per cent but by 6.4 per cent.

Our third strategic priority—seizing the opportunities that are presented by the transition to a low-carbon economy—provides Scotland with massive opportunities based on our comparative economic advantage. Today I am laying before Parliament the Scottish Government's draft report on proposals and policies—the RPP—as required under the Climate Change (Scotland) Act 2009. On Monday, I published the Scottish Government's low-carbon economic strategy. Together, the RPP and the low-carbon economic strategy set out a coherent picture of the steps that are required to make the transition to a low-carbon Scotland, the economic and social benefits of which Scotland is uniquely placed to take advantage.

We have set ambitious statutory targets to reduce emissions by 42 per cent by 2020 and by at least 80 per cent by 2050. We are acting to meet those targets. We will deliver the £70 million renewables infrastructure fund, which will receive £17 million in 2011-12. We will raise our targets for renewables from 50 per cent to 80 per cent by 2020, due to Scotland's success in the renewables agenda. We will protect the level of spending on the sustainable action fund and increase by £1 million to £10.3 million the amount of that fund that is going to the climate challenge fund in 2011-12.

Those targets will drive new thinking, new technologies, new solutions and new investment, which will ensure that Scotland is an early adopter at the forefront of developing a sustainable, modern, low-carbon economy. The current global economic situation should be a spur, not a hindrance, to that effort. A low-carbon society will deliver on our purpose of enabling prosperity while ensuring sustainability.

This budget has involved difficult choices, not because of actions taken in Scotland but because of decisions taken at Westminster. Today, I have fulfilled my responsibility by bringing forward this draft budget to Parliament, and it is now Parliament's responsibility to scrutinise it, to discuss options and to achieve a consensus at this pivotal time for Scotland's economy and for our vital public services.

It is clear to me that the current budgetary situation highlights the need for urgent reform to ensure that Scotland never again faces years of sustained cuts to our public services. This is a time for the Parliament to reflect on the future and on the responsibilities that it wants to take.

Faced with these unprecedented challenges, Scotland has an opportunity to take a different path—one where the Scottish Parliament and Scottish Government take much greater responsibility for the key financial decisions that affect Scotland. Full financial responsibility would give this Parliament the key fiscal and economic levers to promote growth in Scotland and to use the proceeds to invest in Scotland's public finances. With greater financial powers, this Parliament could make different choices. We may have differing views on what those choices might be, but I passionately believe that, together, we can reach outcomes that will improve Scotland's prospects.

If these cuts teach us nothing else, they surely teach us this: the time for this Parliament to take greater responsibility for Scotland's economy and finances is now. That is a debate that Scotland must have. I commend the budget to Parliament.

Photo of Andy Kerr Andy Kerr Labour

Every budget is a test for the cabinet secretary and for the Government. This is a defining moment for the Parliament because of the challenge that our economy faces, because we need to tackle the plague of youth unemployment and because we need to put fairness and economic growth at the heart of the budget.

The Government has failed. It has put party before nation, it has put self-interest before public interest and it has put the finance secretary's job before the jobs of the people of Scotland, whom he is supposed to serve. He is not running a country; he is running an election campaign.

Mr Swinney said that we face

"more than a one-year challenge", so in his own words he condemns his own one-year budget. It is outrageous that our local authorities, health service, universities, further education colleges and police and fire services are being denied their ability to plan. They are all demanding clarity so that they, too, can set budgets, deliver services and reassure staff, but they cannot do so, because of the Scottish National Party.

Just what information did the cabinet secretary not have that denied this Parliament a three-year budget? Does he agree with Strathclyde police authority, which said that his actions represent a dereliction of duty that is only fuelling uncertainty?

The Minister for Housing and Communities, Alex Neil, has let the SNP cat out of the bag. He said on BBC television just over an hour ago that should the SNP be re-elected, it will publish a budget for three years. Why cannot we have that three-year budget today?

Photo of John Swinney John Swinney Scottish National Party

Mr Kerr has been demanding for several weeks that I publish the budget. I have now published the budget, so I think that we could have expected something a bit more substantial than that from him. Mr Kerr mutters, in his usual fashion in these exchanges, that the budget is just for one year. This Parliament only ever sets a budget for one year. It might publish longer-term spending plans, but it only ever sets a budget for one year.

Let me explain clearly to Mr Kerr exactly why a one-year budget is appropriate and why the establishment of the Christie commission is important. He should understand this, given his perspective as one of my predecessors in office. What has to happen in the period going forward—I accepted this in my statement—is a fundamental reform of our public services.

Mr Kerr will know from his experience as a finance minister that if numbers are set out for a prolonged period, which set out essentially the expectations and parameters of individual bodies, it becomes ever more difficult to get the type of reform in public services that we require. In the financial situation that we face—which I respectfully point out is the creation of the Labour Party—we have to embrace that message of fundamental reform.

The responsibility that I have exerted as finance secretary is that I have fulfilled my duty to confront the year of public expenditure that will have the sharpest fall of any year in the public spending profile that has been set out to us.

I have taken the difficult decisions. I have taken the very tough decisions. [Interruption.]

Photo of John Swinney John Swinney Scottish National Party

What Mr Kerr has done is put in place more obstacles to our resolving the long-term future of the public services of Scotland. That is what this Government will resolve.

The more Mr Kerr talks about the need for a four-year budget settlement, the more it reminds me of his expectation that it will be this Government that is in office to preside over that four-year term.

Photo of Derek Brownlee Derek Brownlee Conservative

I thank the cabinet secretary for his statement and for confirming his real focus.

The Conservatives welcome the council tax freeze, the commitments on police numbers and the public sector pay restraint, which will protect jobs. However, this budget has to mark the first year of a longer-term plan of public sector reform and a relentless focus on jobs and growth. Whoever is in government in May, we need a budget that is focused on the months after the election, not the month before it. If—and only if—the final budget meets those tests will we be able to support it.

On this side, we will make that assessment only after scrutiny of the Government's plans. As a start to that assessment, I will ask the cabinet secretary about efficiency savings. The Conservatives will always support genuine efficiencies where they can be made. Rather conveniently for the cabinet secretary, we will not know whether his 3 per cent target has been achieved until next autumn.

Last year, the Government claimed to have saved £1.5 billion and the cabinet secretary repeated that figure again today. Next year, that target will rise by half. If that is achievable, why did the First Minister make such a fuss this year about having to save a further £300 million?

Photo of John Swinney John Swinney Scottish National Party

I welcome Mr Brownlee's comments because they change an impression that I had from reading the morning's newspapers, in which he advanced a line that was rather dismissive of efficiency savings. He lodged numerous amendments to the Public Services Reform (Scotland) Bill that demanded that numerous public bodies publish efficiency savings, so I was a bit confused about why the Conservatives were suddenly against efficiency. However, he has set the record straight on that question.

The point about the issues in this financial year is that, as Mr Brownlee well knows, the Government has been concerned to take decisions that ensure that economic recovery is not interrupted. I have decided to take £100 million out of this year's budget and to put it into next year's to tackle one part of the reduction in the capital budget that the Conservative Government has inflicted upon us. We have done that by deploying within the year the careful financial management that we have deployed throughout our term in office. Therefore, we will be able to cushion some of the difficult decisions that would face us on the capital programme on 2011-12.

I say to Mr Brownlee that I take such encouragement from our performance on the efficient government programme because we have within Government created a culture that tackles the way in which we spend money and observes carefully its effectiveness, impact and impetus in order to guarantee that we can spend as much of our resources as possible on achieving the Government's central purpose, which is to increase sustainable economic growth. I would have thought that the Conservatives would support that.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

I, too, thank the Cabinet Secretary for Finance and Sustainable Growth for his statement.

Last year, we began a campaign to bring down top pay in the public sector. John Swinney said that it was impossible—in fact, I recall that Alex Salmond said that we would end up in the Strasbourg court—but the language today is helpful.

Last week, I called for bonuses for consultants and others to be reined in. Alex Salmond said that there would be an exodus of senior staff from Scotland, but the language today is helpful.

We also called for Scottish Water not to borrow from the taxpayer. John Swinney said that that was impossible, but the budget document shows today that we were right.

John Swinney and Alex Salmond described what we called for as impossible and illegal. We learn today that we were right to campaign on those issues but, although we hear the right language, unfortunately, much of the action is deferred.

The Scottish Government has reduced the pot for consultant bonuses: it is being reduced from £28 million to £26 million. Only this morning, it cancelled the roadshows that it had planned to use to publicise the bonuses, but that is welcome. However, the cuts for colleges for our young people—the learners of today and workers of tomorrow—are too severe because the budget is too short term.

The cabinet secretary said in his statement that there is

"more than a one-year challenge", so why has the SNP ducked that challenge and published only one year's set of figures? Colleges, councils, business and the voluntary sector all need more than a one-year set of figures. In Wales, people are asking the Welsh Assembly Government to provide that, and it seems that they are getting a different response.

If the cabinet secretary accepts that we were right on so many other issues—top pay, bonuses and Scottish Water—will he consider providing longer-term figures so that the budget is one for all the people in the public, private and voluntary sectors in all parts of Scotland for the long term, and not only for an election campaign?

Photo of John Swinney John Swinney Scottish National Party

The points that were made to Mr Purvis about the steps that he wished us to take and the difficulties that would arise for us under employment law are absolutely valid and still stand. The announcements that I made today were arrived at after careful consideration of what options are available to us that would not have the Government in employment tribunals or acting illegally. They are sustainable actions.

Mr Purvis has a bit of a nerve to put a question on the consultant distinction awards. If we look back at the record, under the last Government of which Mr Purvis's party was a participant, the consultant distinction awards increased by 40 per cent. Under this Administration, they have increased by 5 per cent. This is the first time—the very first time ever—[Interruption.] Mr Purvis is back to muttering again. I will keep on repeating what I was saying so that everyone can hear it nice and clearly. For the first time, the budget for distinction awards is reducing. It is reducing because of the action that the Deputy First Minister is taking.

Mr Purvis's point might have had more substance if the United Kingdom Government had taken the same action. Just for the record, the Liberal Democrats are participants in the United Kingdom Government, along with their friends in the Conservatives. Distinction awards are not, of course, taking the same course in Scotland as they are in the rest of the United Kingdom. I welcome Mr Purvis's comments on the steps that the Government is taking. We are setting out a range of provisions in tackling levels of remuneration that we consider are not sustainable.

I turn to the point on colleges. The Cabinet Secretary for Education and Lifelong Learning has been in negotiation with the further education and higher education sectors. As I made clear in my statement, although the budget for the Scottish Higher and Further Education Funding Council is reducing, we have a guarantee that the number of places in universities and colleges will remain the same. That is about getting greater value and effectiveness for the public money that we spend. If the debate in the Parliament over the next few months as we consider the budget is based on the point that levels of activity can be sustained only if the budget is constantly increased, it will be a pretty futile debate. The Conservative and Liberal Democrat Government in London has reduced our budget by £1.3 billion. The challenge that I have addressed is how we can deliver greater value from that reduced budget. That is the test that this budget will pass.

In answering the final question on longer-term provision. I reiterate the point that I made to Mr Kerr a moment ago. We have established the Christie commission because we acknowledge that the medium-term budget position requires us to reform fundamentally public services in Scotland. That will be the basis of the remit of the Christie commission; it will be the basis on which the Parliament must set out the spending envelope for the three-year period. I reiterate the point that the sharpest fall in public expenditure will be between this year and next. We in this Government have addressed that challenge.

Photo of Alex Fergusson Alex Fergusson None

We come to open questions. As is to be expected, a large number of members wish to ask questions. Brevity in both questions and responses is encouraged.

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

I congratulate the cabinet secretary on bringing forward a budget that protects jobs and front-line services in spite of the massive cuts to Scotland's grant. In particular, I welcome the support that will allow the V & A project in Dundee to continue.

The cabinet secretary confirmed that he will seek a council tax freeze for another year. That is in stark contrast to the views of the Labour Party. Will he set out the value of the council tax to individuals and councils and the impact that there being no freeze would have on household incomes and council budgets?

Photo of John Swinney John Swinney Scottish National Party

The key point about sustaining the council tax freeze is that it comes at a time when householders face acute challenges in their incomes as a consequence of various tax rises that the United Kingdom Government is applying. In taking our decisions, we have to be mindful of those tax rises. People across the country have benefited from the council tax freeze. It has given them protection of their household income that is valuable in these difficult times. For those reasons, the Scottish Government believes that sustaining the council tax freeze is the correct approach to take to delivering protection to households in Scotland.

Photo of Johann Lamont Johann Lamont Labour

I am sure that members across the chamber recognise the significance of the housing budget in stimulating the economy, supporting construction jobs and meeting housing need. Will the cabinet secretary acknowledge that his decision to present only a one-year budget is to the detriment of those who are trying to bring forward social housing projects in a planned way? Will he further acknowledge that, because of uncertainty, those cuts may impact on the level of risk and cost, and will—logically, therefore—reduce the ability to develop projects efficiently?

Will he clarify what proportion of the money in that budget that has already been committed—which is estimated to amount to £249 million—is being spent up front by housing associations and others? How will that impact on the need for moneys to be available to deliver 6,000 new affordable houses in the next year?

Photo of John Swinney John Swinney Scottish National Party

I say to Johann Lamont that the size of the capital difficulty that we face is no different from the size of the capital difficulty that we would have faced if the Labour Government had been returned to office, because the present UK Government's capital spending plans are identical to those of the previous Government.

As regards the question about three-year planning, housing associations have the ability to take decisions on the basis of their own financial health and strength. Clearly, the Government makes a contribution to that process. Housing associations can make judgments on the basis of the information that we have provided and the pattern of public expenditure that has been set out in my statement.

The forward programme is predicated on the creation of 6,000 additional new homes in Scotland, which represents a strong programme of investment in an extremely difficult capital budget. I point out to Johann Lamont that other devices are available to expand the scale and effectiveness of the housing budget, such as the national housing trust initiative that Mr Neil has announced, which will provide additional opportunities for the development of the affordable housing sector in Scotland.

Photo of Gavin Brown Gavin Brown Conservative

The cabinet secretary wants to increase the business rates that are paid for larger retail properties. Will he expand on the size of that increase? Can he give us a precise definition of "larger"? Would the proposed move put larger retail properties in Scotland at a competitive disadvantage in comparison with retail properties elsewhere in the UK?

Photo of John Swinney John Swinney Scottish National Party

Details on the specific levels and the application of the increase in business rates for larger retail properties will be set out in an order that will come before Parliament in due course, and which it will have the opportunity to consider. The detail of the application of the business rates increase will be clear from that order. The Government recognises that there are a number of strong and significant retail properties the length and breadth of Scotland, predominantly in out-of-town shopping areas. We consider that the proposed measure is an appropriate use of the financial provisions that are available to us in striking the balance that must be struck between increasing revenue and reducing expenditure.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

The cabinet secretary said that he had achieved a £1.5 billion saving last year and that Westminster had cut his budget for next year by £1.3 billion. He said that that 3 per cent cash cut in the block grant was a cut

"too far and too fast."

What level of cash reduction would he say was fair for Scotland in our current economic circumstances?

Photo of John Swinney John Swinney Scottish National Party

I point out to Mr Rumbles that his attempt to conflate those two numbers does not take into account the effect of inflation on the cost of running public services or the impact of demography or other factors that increase the demands on public services. If, by conflating those two numbers, Mr Rumbles is trying to suggest that the process of removing £1.3 billion in cash terms from a budget in one year is a straightforward exercise, he needs to think again.

As regards what level of public spending reduction would be appropriate, I have set out to Parliament on a number of occasions the Government's view that the fiscal consolidation period could be extended to a more significant extent. The fiscal consolidation period that we are now dealing with is a year swifter than the Conservatives argued for in opposition, and it is a year swifter again than the approach that the Labour Party took. So there are choices about how we can deliver fiscal consolidation without creating the disruption to public services that the Conservative and Liberal Democrat Government has created.

Photo of Patrick Harvie Patrick Harvie Green

By deciding to shift money from revenue into capital, the Government is concerned to protect the road-building programme at the expense of housing, public transport, public sector workers, the voluntary sector, the culture budgets and many other socially progressive areas.

Is not it unreasonable for an SNP Government to be handing Tory cuts on to Scotland when there are no middle England voters to pitch for? Why does the cabinet secretary think that two thirds of the Scottish electorate voted for a Parliament that had tax-raising powers if not for a time like this, when we need to defend the country against a right-wing cutting agenda that it did not vote for?

Photo of John Swinney John Swinney Scottish National Party

I have some sympathy with Mr Harvie's point that the UK Government is pursuing an agenda for which there is not strong political support in this country, based on what the members of the Government parties said before the election. I have some sympathy with that point, but I hope that Mr Harvie will accept the position that I am in.

As a finance minister in a devolved Scotland, I have to set a sustainable budget within the financial allocations that are made to me by HM Treasury. In that context, I have a duty to set a balanced budget. Mr Harvie asks about using the tax-varying powers, but they cannot be used in isolation. If they are to be used, it can be only when we take into account the sharpness of the increases in taxation that members of the public will have to deal with through their household incomes. Mr Harvie can argue that people in Scotland want increased taxes, but I do not think that they will be able to deal with increased taxes, especially bearing in mind the fact that I have asked the public sector in Scotland to work with the Government by freezing public sector pay. On those grounds, I do not think that there is a compelling argument in favour of using the tax-varying powers at this time.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

I welcome the cabinet secretary's achievement in producing such a positive budget in difficult circumstances. The lack of any Labour alternative is glaring. Unlike Mr Rumbles, I will at least ask my own question and not one that David McLetchie asked 13 days ago.

Can the cabinet secretary set out how he addressed the widely trailed and inaccurate claims of a 16 per cent cut in higher education budgets at the same time as protecting student places, preserving the education maintenance allowance for our poorest students and keeping them out of poverty, and avoiding the Labour-Liberal Democrat-Tory tuition fees?

Photo of John Swinney John Swinney Scottish National Party

There has been a great deal of speculation in a number of areas of the public sector about the levels of budget reductions that might be experienced. Most of those assessments have been driven by the debate that is going on south of the border and the way in which the UK

Government has marshalled its arguments. We have taken our own decisions, which are—as I said in my statement—designed to promote economic recovery, to protect front-line services, and to take steps on the low-carbon economy. In that respect, the Government has worked extremely hard to balance its commitments to ensure that on, for example, the protection of student numbers in a difficult financial settlement, the Cabinet Secretary for Education and Lifelong Learning could work to release the value that allows us to concentrate on delivering the same outcomes with less money. That focus has to run through all our decisions on public spending in Scotland today. The scale of budget reductions is such that we have to achieve greater value and impact from the diminished resource that we have at our disposal.

Photo of Richard Baker Richard Baker Labour

Given that police boards have already announced cuts that the Scottish Police Federation has said are equivalent to reducing police numbers by 2,800, and given that the cabinet secretary's budget outlines a £31 million cut to the police central Government grant, where is the money coming from to maintain police numbers? How will the cabinet secretary assure police boards that his plan will sustain the funding to maintain new recruits when he has refused to set out a three-year budget?

Photo of John Swinney John Swinney Scottish National Party

I would have thought that the first thing that Mr Baker might, as Labour's justice spokesman, do would be to welcome the fact that we have secured a commitment to maintaining the 1,000 extra police officers on the streets of Scotland. I thought that Labour Party members might have been queuing up, perhaps not to say, "Well done," but to say a modest word of encouragement about the decisions that we have taken. We have put in place resources and negotiated our agreement with the Convention of Scottish Local Authorities, which has been put to local authorities, to provide funding that delivers 1,000 police officers in addition to those who were on the streets when we came to office. I would have thought that Mr Baker might have applauded that in Parliament today.

Photo of Alex Fergusson Alex Fergusson None

If we are going to fit in all members who want to ask a question, we need to speed up the process a little.

Photo of Jamie Hepburn Jamie Hepburn Scottish National Party

The cabinet secretary has confirmed that he does not intend to use the Parliament's tax-varying powers in the budget. Does he agree that, far from being a progressive measure—as some members seem mistakenly to believe—any such move would in fact have a regressive impact, given that only the basic rate of tax can be varied and any increase would fall hardest on the poorest taxpayers? Does not that reinforce the point that we need proper powers over taxation in the Parliament—powers of independence?

Photo of John Swinney John Swinney Scottish National Party

Mr Hepburn makes the fair point that the tax-varying power can be applied only to the basic rate of income tax and that therefore it does not take into account the significant divergence in incomes that exists in Scotland today. His argument for wider financial and economic powers is a compelling one, and I am happy to confirm that I support it.

Photo of David Whitton David Whitton Labour

Mr Swinney tells us that Scotland's economic recovery is fragile, but that he has

"a clear and credible plan", but there was no evidence of that in the statement. How is it credible in seeking sustained economic growth to yet again cut the budgets for the bodies that are tasked with achieving that growth—Scottish Enterprise, Skills Development Scotland, VisitScotland and the Scottish funding council? If Mr Swinney is so concerned about his responsibilities to the poorest people, why is he following the example of SNP-led West Dunbartonshire Council and rejecting Labour's policy of introducing the living wage for low-paid council workers? If he can hold a 6.4 per cent gun to councils' heads over the council tax, why not for over introduction of a living wage for local authority workers?

Photo of John Swinney John Swinney Scottish National Party

We have just had the first example of many that we are going to hear from the Labour Party in the months ahead, with Mr Whitton singling out areas where he does not want budget reductions. I would bet that, in the course of this question session, a few other members will get to their feet objecting to some activity. Is not it a bit rich that Mr Whitton comes here and complains about reductions in the Scottish Enterprise and Skills Development Scotland budgets, when regular viewers will know that Mr Gray is never here on any day of the week complaining about budgets other than those for Scottish Enterprise or Skills Development Scotland? There is therefore just a tad of hypocrisy in Mr Whitton's point.

On the Scottish funding council, we have delivered a budget settlement in which the education secretary has secured an agreement from the university and college sector that places will be maintained. I would have thought that members would say that that is a true and proper approach to delivering greater effectiveness in the way in which we spend public money.

On the living wage, Mr Whitton will know that local authorities are responsible for their pay settlements. I made that clear in my statement. I have taken responsibility on the Government's behalf to put in place a living wage, and I am proud that the Government has done so.

Photo of Jamie McGrigor Jamie McGrigor Conservative

In his statement, the cabinet secretary said that he has set "ambitious" and world-leading targets on emissions and renewables, but last Friday the chief executive of Aggreko, the energy expert Mr Rupert Soames, said in this chamber that the problem is more with the timescales for the targets than with the targets themselves and that, broadly, we need to add 10 years to all of them. Does the cabinet secretary agree with that captain of industry?

Photo of John Swinney John Swinney Scottish National Party

The short answer is no. The previous Government put in place what I remember were vividly ridiculed as very ambitious renewables targets for 2011. The previous Administration was correct to be bold in doing that, but it was ridiculed when it set out those targets. Nevertheless, those targets have been achieved—and they have been achieved early.

The key thing in this debate is to have the investment certainty and the policy certainty that we can deliver the approach on renewables. That is what the Administration has offered and it is what we are determined to deliver. Anybody who is considering investing in renewables and wondering whether Scotland is a country that is committed to the renewables revolution can get a strong and convincing answer from the practical actions that have been taken by the Government, and by Mr Mather in particular.

Photo of Hugh O'Donnell Hugh O'Donnell Liberal Democrat

The cabinet secretary referred to Scotland's people being its greatest asset, and many of them work in the voluntary or third sector. In his negotiations with COSLA, to what extent has he sought assurances that those people will be protected from the trickle-down effect of any cuts that may be imposed by the local authorities, so that those in the voluntary sector who provide front-line services will be protected?

Photo of John Swinney John Swinney Scottish National Party

The critical point is not what agreements I arrive at, but the level of financial commitment that I am prepared to make for the delivery of public services. First, local authorities will have been planning for a much more significant reduction in their budget than the one that I have delivered in the budget settlement today. There has been a deliberate decision by the Government to protect front-line services and to ensure that our communities are not harmed by budget reductions having a negative impact at the local level. That is why we have delivered a 2.6 per cent reduction in the local authority budget compared with the budget reductions in excess of 7 per cent for local authorities in England, which will cause some of the acute problems to which Mr O'Donnell refers.

Secondly, the Government is increasing the core third sector budget from £20.7 million to £24 million. That demonstrates that, even at a time when our budget is reducing dramatically, we are putting more core resources into the development of the third sector.

Thirdly, through the Christie commission, details of which will be announced later, we are determined to ensure that, in the future design of public services, there is a strong opportunity for the third sector to express its point of view. That will be implicit in the remit and the membership of the Christie commission.

Photo of Margo MacDonald Margo MacDonald Independent

As the reason for the cabinet secretary's switch of resource from revenue to capital spend is his determination to protect jobs and, consequently, to retain skills and capacity, which I support whole-heartedly, would he look favourably on a request from me that would involve a modest investment of capital—just over £500,000—in the refurbishment of the Midlothian ski centre, which is a national resource that is supported by one small local authority, and the proposed white-water sports complex in Leith docks, which is another potential national resource? Finally, if required, will he make available a small amount of capital to keep Dalry swim centre open until its long-term future is assured? That echoes the point that he made at the conclusion of his previous answer about the redesign of services involving agencies that, until now, have not been involved.

Photo of John Swinney John Swinney Scottish National Party

I hear Margo MacDonald's points loud and clear, as always. I suspect that local authorities have been wrestling with a number of issues, of which I recognise the Hillend ski centre as an example. The financial settlement that I am giving to local authorities, which is much more beneficial than they would have expected, will make it a great deal easier for them to tackle some of those challenges. I am happy to receive representations on such issues, but I make the general point to Margo MacDonald and to Parliament that I have allocated resources in the budget and, if we wish to support other priorities, we must be prepared to move resources from budgets that are already committed, within the budget document, to supporting existing priorities. I issue that general message to all members of the Parliament.

Photo of Brian Adam Brian Adam Scottish National Party

The budget includes support from the NHS for care services that are delivered by local authorities. What other steps are to be taken to ensure that public services give the best possible value across organisations and boundaries?

Photo of John Swinney John Swinney Scottish National Party

One of the central messages of the Government's programme of public services reform has been to encourage a process of collaboration and alignment between different public bodies. We see a lot more evidence of that in the current environment. On the point that Mr Adam raises about the change fund and joint work that is done between local authorities and the health service, there is a lot of good evidence of increasing joint working that will be undertaken. As part of our public services reform agenda, these messages will be central to how the Government takes forward its priorities for delivering effective public services within a constrained financial environment.

Photo of Wendy Alexander Wendy Alexander Labour

Is not the hidden story of this budget a complete Government U-turn on how capital spending is financed? Will the cabinet secretary confirm that the current pipeline has been so run down that not one non-profit-distributing school or hospital project is on the Government's future deal notice board at the moment? Given those three wasted years, and the lead times for new procurement, how many years will it be before a new school or hospital project starts being built with the £2.5 billion that the cabinet secretary has belatedly allocated today?

Photo of John Swinney John Swinney Scottish National Party

Wendy Alexander mentioned three wasted years. If I am not mistaken, during the past three years, the Scottish Government has had a huge capital investment programme that we increased in size in order to deliberately attack the fall in public sector housing activity. Again, I would have thought that, in the spirit of generosity, there might have been a welcome for all that.

On the point about revenue-based finance, if the Government had committed to a greater pipeline of projects in 2007, those projects would have been complete now, and the Government would have to be starting to pay for them. That would have resulted in even greater strain on the public finances than I am having to wrestle with today, because what I am having to wrestle with today are the consequences of the reckless financial decisions that were taken by Mr Kerr and all his other colleagues. I therefore ask Wendy Alexander not to give me a lecture on managing the public finances.

As a point of absolute detail and clarity, new school developments are under way in Scotland today and we should be celebrating them in this Parliament.

Photo of Stuart McMillan Stuart McMillan Scottish National Party

The continuation of the council tax freeze will be welcomed by people across Scotland, apart from those in the Labour and Liberal Democrat headquarters. Will all the money that is allocated to local authorities for the council tax freeze go towards the local authorities, even if at least one of them does not implement the freeze? That is to say, can the money that is allocated be distributed to the other local authorities that implement the freeze, so that they will get additional funding to spend in their areas?

Photo of John Swinney John Swinney Scottish National Party

The answer to that is no. There is a particular proposition that is there for local authorities to accept or reject. It has been negotiated between the Government and—

Photo of Andy Kerr Andy Kerr Labour

Where is the respect agenda now?

Photo of John Swinney John Swinney Scottish National Party

Mr Kerr, as always, is muttering from the side. If he shouts a bit louder, I will hear him even more clearly. He talks about respect—I have been in dialogue with local government for months, over the summer, to work out a common agenda on tackling the significant financial pressures that we face. Out of that discussion between the Government and the political leadership of COSLA has emerged an agreement that enables us to fund the council tax freeze; 1,000 extra police officers on the streets of Scotland; the maintenance of free personal care; the opportunities for teacher employment through probationers; and a range of other targets, not to mention the change fund for adult social care. This is an excellent deal for local government in Scotland.

I had hoped that Michael McMahon might stand up to tell me how good a deal this is for local government in Scotland, but I see that he has skedaddled already.

Photo of John Scott John Scott Conservative

The cabinet secretary has said that he will maintain 1,000 new police on the streets, which I welcome, as those police were put there in the first place at the insistence of the Scottish Conservatives. He has our continuing support in that regard.

However, Richard Baker quoted figures that show a reduction from £237 million to £210 million in the budget for policing. How does the cabinet secretary propose to maintain police numbers on that declining budget, given that 93 per cent of policing costs are for staffing?

Photo of John Swinney John Swinney Scottish National Party

I reassure John Scott that the funding for those 1,000 police officers is contained in the local government settlement. That is the key point that must be followed.

We have secured agreement from local government that enables us to put that number of police officers on the streets. That is important, because this country is currently experiencing a 32-year low in the crime rate, which is a tribute to the decisions taken by the Government with support—which I acknowledge—from the Scottish Conservative party.

Photo of Charlie Gordon Charlie Gordon Labour

The cabinet secretary told us that the Forth replacement crossing, the south Glasgow hospitals and some new schools will be the only new capital projects next year. All other new projects will be funded through public-private partnerships. Will he guarantee that all the PPP projects—[Interruption.]

It seems that some members do not like the name PPP. Well, the name Windscale was changed to Sellafield, and that made no difference.

Photo of Trish Godman Trish Godman Labour

Can we have a question please, Mr Gordon?

Photo of Charlie Gordon Charlie Gordon Labour

Will the cabinet secretary guarantee that all the projects in the Commonwealth games transport plan will be ready for 2014? That is apart from the Glasgow airport rail link, of course, which he has already cancelled.

Photo of John Swinney John Swinney Scottish National Party

I will be clear with Parliament. As I said in my statement, a number of transport projects will not be able to proceed because of the limitations of the capital budget. I was explicit with Parliament on that point.

To correct Mr Gordon, a number of new capital projects will take their course through traditional Government capital expenditure, in addition to the Forth replacement crossing, the schools programme and the south Glasgow hospitals into the bargain.

On the point about the Commonwealth games infrastructure, the Government has given commitments to ensuring that we progress work to deliver the Commonwealth games and provide the necessary transport infrastructure to support them, and we will honour those commitments.

Photo of Sandra White Sandra White Scottish National Party

I welcome the announcement that the elderly and the most vulnerable will be protected by the continuation of free personal care and concessionary travel. How will the cabinet secretary ensure that those services are delivered by the health services and local government?

Photo of John Swinney John Swinney Scottish National Party

As I stressed in my statement, we are progressing work between the health service and local government to guarantee a focus on the needs of vulnerable individuals in our society. It is important that we deliver those public services, and we made the decision to establish the change fund, which is a helpful and beneficial measure that will enable us to provide the support that some of the most vulnerable in our society require.

The general focus in our public services—in the health service or in local government—on the same national outcomes that we seek to achieve is beneficial in addressing the concerns that Sandra White has properly raised today.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

The cabinet secretary has said repeatedly that the Barnett health consequentials would be passed on in Scotland. How has the 0.5 per cent real-terms increase in the English health budget become a £33 million real-terms cut in the Scotland health budget, according to table 8.02 on page 117 of the budget document? How has the £2 billion of health money for adult social care in England translated into £70 million in Scotland, which is only one third of the Barnett consequentials?

Photo of John Swinney John Swinney Scottish National Party

I am afraid that Mr Chisholm has been making a miscalculation about his Barnett consequentials. The Barnett consequentials arising from the health service changes in England were £280 million and they have been passed on to the health service in Scotland.

Photo of Christina McKelvie Christina McKelvie Scottish National Party

The cabinet secretary has delivered the budget that Scotland needs to protect its services, families and communities during the tough times ahead, although he has had to work within the constraints of the cuts that have been imposed on him by the UK Government. Does he agree that the economic crisis has demonstrated beyond any doubt that the best way in which to enable Scotland to avoid the worst of Tory cuts and pursue a better way for our economy, our jobs and our public services is to give Scotland control of our own economy?

Photo of John Swinney John Swinney Scottish National Party

The question from Christina McKelvie highlights the significant constraints that exist in the decision making of any finance minister in this Parliament. Having that broader range of financial powers to make a judgment about how we can take forward our economic recovery is a fundamental element of the powers that the Parliament must seek.

Photo of David McLetchie David McLetchie Conservative

As the cabinet secretary has told us how much he regrets having to cut spending and equally how much he wishes he had tax-raising powers, will he tell us which taxes he would like to increase in order to finance the higher spending that he desires?

Photo of John Swinney John Swinney Scottish National Party

I have never had Mr McLetchie down as a tax raiser. If that is a new, important persona that he is adopting, we will be interested to learn more about it.

The Government wants to secure opportunities to grow the tax base by generating greater economic performance. I thought that Mr McLetchie would be familiar with that argument. In Mr Brownlee's question, he encouraged the Government to maintain its focus on increasing economic activity in Scotland. I absolutely accept that challenge and that principle, which is important. The crucial point is that, if we are successful in the devolved context in increasing economic growth in Scotland, the Scottish taxpayer does not get the benefit of that. The benefit goes to the United Kingdom Government. That is why we need financial powers in this Parliament.

Photo of Elaine Smith Elaine Smith Labour

Does the cabinet secretary support the STUC's there is a better way campaign, which proposes alternatives to cuts? If so, how does he justify his attack on public sector pay and public services?

Photo of John Swinney John Swinney Scottish National Party

I have had a number of constructive discussions with the STUC and l listened carefully to the presentation that its general secretary gave on its there is a better way campaign. I think that Elaine Smith knows that I have some considerable sympathy with that view of the world in terms of the strategic economic decisions that the UK Government has taken. However, Elaine Smith will also understand that I have an obligation to live within the financial settlement that has been provided to me by the UK Government, and I have taken a set of decisions that are designed to address that challenge as effectively as possible.

I will certainly continue my dialogue with the STUC and trade unions on these questions. I hope that employees in the public sector will understand that the approach that the Government has taken is designed to protect and maintain employment in the public sector. We do not come at the matter from an ideological position of wanting to run down public sector employment. That is not our position. We have tried to take steps, particularly on pay restraint, to deliver the best opportunity to protect public sector employment.

Photo of Trish Godman Trish Godman Labour

I call James Kelly. Please be extremely brief.

Photo of James Kelly James Kelly Labour

In June, when the Parliament debated the Criminal Justice and Licensing (Scotland) Bill, the Liberal Democrats supported the SNP Government's introduction of a presumption against short-term sentences on the basis that the Government would fund it with at least £12 million as per the financial memorandum. Does the cabinet secretary agree that his Government has conned the Liberal Democrats? The community justice services budget has been cut by £400,000 in real terms and no funding has been provided for that policy.

Photo of Trish Godman Trish Godman Labour

I am glad that that was brief.

Photo of John Swinney John Swinney Scottish National Party

That was the second time this afternoon that we have begun to get ideas about areas in which we should spend more money, without anybody coming forward and saying where the money would come from.

There are many difficult decisions implicit in the budget and we have to face up to them. Whether the Liberal Democrats are conned is not a matter that I would speculate about. What is important is that we focus on delivering the outcomes that I know the justice secretary is determined to deliver through the approach to shorter sentences and community disposals.