I am pleased to open this debate on the Finance Committee’s consideration of, and report on, the Scottish Government’s draft 2013-14 budget. I thank my fellow committee members and our clerking staff, past and present, for their contribution throughout the process. I also thank our budget adviser, Professor David Bell, for his customary informed input.
We agreed that our focus would be on whether the Scottish Government’s spending decisions align with its overarching purpose of increasing sustainable economic growth, building on last year’s work and our scrutiny of “Scottish Spending Review 2011 and Draft Budget 2012-13”, in which the Scottish Government stated:
“decisions taken within this Budget have been shaped by the Scottish Government’s Purpose of creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth. Our Budget supports job creation”.
As part of our wider investigation into increasing sustainable economic growth, the committee held evidence sessions on improving the employability of those individuals who are furthest from the jobs market. The committee recently published a separate report, “Improving employability”, which will be debated on 8 January.
In our budget scrutiny, we asked stakeholders to what extent they considered that Scottish Government spending decisions aligned with its stated purpose and how that objective should be reflected in the draft budget. Given the Scottish Government’s strategy of bringing about long-term structural change, we also asked what spending decisions supported such change and what spending priorities should be in the budget. Full details are available on our web page, and I thank those who gave written and oral evidence.
I will now focus on key aspects of our report, starting with the context for next year’s budget. The committee noted an overall cash reduction of 0.6 per cent and a real-terms reduction of 3 per cent in the departmental expenditure limit Treasury allocation, but the cabinet secretary said in a letter to the committee that,
“As a result of carrying forward money from 2011-12 and 2012-13 and extracting best value from our capital programmes”—
I do not think that that is relevant, given that I am speaking about the report that the committee compiled, which, as the member knows, was published before the autumn statement. What I think about that is not of any relevance. However, I will go on to mention some more figures. We are all aware that, over the piece, we face an 11 per cent reduction in resource and a 26 per cent reduction in the capital budget.
Where was I? In his letter, the cabinet secretary went on to say:
“we are able to plan to spend (within the parameters of the budget exchange mechanism) on a slightly different profile from that originally allocated to us by Treasury for 2013-14.”
Accordingly, as the report states, the budget now shows a 1 per cent cash increase and a real-terms reduction of 1.5 per cent.
Our report highlights the economic uncertainty that the European and United Kingdom economies have continued to face since the financial crisis. The situation was put into context by a witness from the Scottish Building Federation, who, during a round-table discussion, said that there had been a £5.7 billion net reduction in the capital budget between 2009-10 and 2014-15. I am sure that Gavin Brown would accept that the autumn statement has not mitigated that. Concern was also expressed that work was not progressing quickly enough, and it was felt that there was a need “to get procurement moving.”
The committee has invited the Scottish Futures Trust to give evidence on that and other matters next month, but I am sure that the chamber would welcome a response from the cabinet secretary about expediting the process of awarding and implementing public sector construction contracts. As the SBF put it,
“we need to get jobs at the coalface and the shovel in the ground.”
On procurement, the Scottish Chambers of Commerce said:
“capital spend needs to be coupled with measures to ensure that as much of it as possible is spent here in Scotland on Scottish businesses. The Government is currently consulting on procurement legislation, which we hope will increase the chances of achieving that result. We hope that we can keep within Scotland as much as possible of the £9 billion procurement spend that exists in the public sector in Scotland to deliver the maximum benefit to Scottish businesses in the short term and to create the infrastructure that we all need in the longer term.”—[Official Report, Finance Committee, 26 September 2012; c 1621, 1617.]
The SBF believes that the Scottish construction industry has a record that is second to none in training apprentices. The cabinet secretary might wish to touch on the creation of apprenticeships, employment and training opportunities in construction, which is a subject that we will discuss further during the employability debate.
There is strong support in the business community for the Scottish Government’s emphasis on capital investment, and that is welcomed by the committee, but there is
“a need for greater clarity both in terms of the exact additional investment which is being provided and the capital projects which are being supported.”
In our session with the David Hume Institute, Professor Donald MacRae said:
“capital spend in Scotland is low compared with what it has been. I realise that the Scottish Government is constrained by its total budget, but my argument is that we should look to increase those capital spending totals in each of the next three or four years.”
Professor Jeremy Peat added:
“it was the right decision to transfer money from departmental expenditure limit ... resources to DEL capital.”
However, he went on to say that the Scottish Parliament information centre draft budget briefing
“could not find out whether that money is being transferred, how it is being transferred, where it is coming from or where it is going to. It is critical that all of us, and particularly the committee, have consistent data so that we can monitor the changes during the financial year and between financial years in such a way that we know what is happening.”—[Official Report, Finance Committee, 3 October 2012; c 1676-7.]
As a consequence, the cabinet secretary is aware that the committee seeks greater detail about the planned switch from the health resource to health capital budget and the resource to capital switch in the enterprise agency budgets, although he touched on some of that at our Hawick session. We also seek greater clarity about such switches in future draft budget documents.
The Scottish Property Federation drew attention to the importance of generating consumer confidence. The committee highlighted the SPF’s comment that Registers of Scotland has recorded just under £1.8 billion in commercial property sales in the past 12 months, compared with the high of £6.3 billion during 2006-7.
In his statement on the draft budget on 20 September, the cabinet secretary said that capital investment will have
“a focus on transport, housing, digital and maintenance projects.”—[Official Report, 20 September 2012; c 11740.]
I will talk about digital infrastructure and housing.
The McClelland review of information and communications technology infrastructure in the public sector in Scotland identified savings of more than £1 billion over the five years from 2012-13, through improved tendering, procurement and sharing of ICT resources in the public sector. In last year’s debate on the draft budget, I said:
“The committee asked for an annual progress report on savings that have been achieved, with an explanation when savings have not been achieved.”—[Official Report, 22 December 2011; c 5049.]
Potential savings are significant, because the money can be reinvested in projects to support growth and create jobs. This year, the committee again asked the Scottish Government for an annual update on progress.
Broadband provision came up at a number of evidence sessions and was mentioned by Professor Kay and at our workshops in Hawick. Professor Kay asked whether expansion of broadband access is an effective use of public money and said:
“The cost of providing widespread very fast broadband is high, but the business benefits are not clear or substantial ... Bluntly, much of the benefit of very fast broadband is about the rapid download of movies—that is the really data-intensive thing that consumers use. To my mind, that definitely falls into the “nice to have” category.”—[Official Report, Finance Committee, 24 October 2012; c 1704.]
At our Hawick workshops people were keen to make the case that the priority for people in the Borders—and no doubt in other rural parts of Scotland—is to get reliable access to the internet at an acceptable speed.
The Scottish Chambers of Commerce expressed concern about progress in rolling out broadband in the Highlands and Islands. When I asked whether the Scottish Chambers of Commerce want expenditure to focus on giving Scotland a long-term competitive economic advantage rather than on shorter-term capital projects, our witness said:
“Yes. We want to use this opportunity to create the kind of Scotland in which businesses find it easier to compete, to connect and to do business. By delivering capital projects, particularly in transport and digital technology, we can move towards achievement of those goals.”—[Official Report, Finance Committee, 26 September; c 1617.]
“rolling out digital connectivity to all rural communities and businesses is crucial to achieving sustainable economic growth.”
We asked the Scottish Government for more detail on
“prioritising internet access across the whole of Scotland as opposed to prioritising high speed broadband.”
The Scottish Building Federation wants greater capital investment and for capital projects to get moving. Investment in housing is one option. The SBF said in its submission:
“sustaining capital investment represents extremely good value for the public purse since every £1 invested in the construction sector can generate as much as £5 in benefits to the wider economy. Conversely, a failure to sustain investment in this area is likely to have a significant negative impact on the wider economy”.
The SBF went on to say:
“changing demographics and rising population are exacerbating an already chronic housing shortage and making the need for new homes even more acute.”
The point was also made to the committee as part of our on-going demographic change and ageing population inquiry.
The Scottish Federation of Housing Associations talked about the preventative spend aspect of housing. Unplanned hospital admissions cost the national health service £1.5 billion a year, and the SFHA told the committee:
“If people have a home to which they can return, they do not stay in hospital as long. In fact, they do not need to be kept in hospital because the adaptations budget should allow for adaptations to be made to their home.”—[Official Report, Finance Committee, 31 October 2012; c 1753.]
The cabinet secretary might want to comment on the adaptations budget for next year.
We noted in our report that the Infrastructure and Capital Investment Committee focused on affordable housing and made recommendations in relation to that budget. The Finance Committee believes that consideration is given to affordable housing when additional funding becomes available, and I am sure that all members welcomed yesterday’s announcement of an additional £50 million.
“Basically, companies must find risk capital; they must sell some equity in the company in order to fund the development phase before they can build their business. Risk capital is potentially a big problem here in Scotland ... It is great that angel funding is very strong in Scotland, but there are some problems with the next stage. The next level of risk capital is almost impossible to achieve.”
He went on to say:
“Without risk capital, we will not have companies and we will not have an economic future, so we need to solve the problem of how to get substantial risk capital.”—[Official Report, Finance Committee, 3 October 2012; c 1671-2, 1673.]
Outwith our budget scrutiny, we discussed the issue in May with Philip Grant, of Lloyds Banking Group, Professor Jim McDonald, of the University of Strathclyde, and Dr Lena Wilson of Scottish Enterprise. Philip Grant said:
“The networks and frameworks are there, and there is private equity and support. Scotland also has a great professional advisory base that is available to companies to support them. The critical issue is working more closely together.”
He also told us:
“Companies reach a point at which significant capital is required. One option that is available at that time is to seek capital by in effect moving the business into another model through being acquired.”—[Official Report, Finance Committee, 9 May 2012; c 1103, 1102.]
Access to funding is of pivotal importance in supporting and encouraging business growth and maximising company opportunities.
In a budget debate last year, I referred to concerns that had been raised about whether the Government’s £500 million change fund was new money for new projects or substitute money for existing projects. The committee sought more detail about the make-up of that funding and about whether change funding to facilitate prevention is spent in that way or is diverted to other services.
Last year, the committee said that it was essential to monitor the change funds effectively. The Scottish Government responded that monitoring processes were being developed and put in place for each of the three funds and that it would provide an update on progress in this draft budget. Some narrative has been provided, but there is little detailed assessment and, as our report states, there is no detail about how much has been allocated to the change funds and the preventative services that they support.
Monitoring, the need for leadership and the importance of gathering sound data have been recurring themes in the past 18 months. We look forward to a positive response from the cabinet secretary on change fund monitoring and evaluation arrangements.
Greater detail is required on allocations to national health service boards and local authorities, on what additional funding has been made available and on how any shortfall in the £500 million that arises from local authorities will be considered. The committee would welcome initial comments on that and the early provision of information.
The committee is clear in concluding that the emphasis on capital investment is welcome, but it recognises the need for greater clarity about the additional investment that is being provided and the capital projects that are being supported, although some of that was provided yesterday. There is also a need for greater analysis of the linkage between spending priorities and outcomes, including a cost-benefit analysis of the contribution that spending priorities make to sustainable growth. On that and all other aspects of our report, we look forward to the cabinet secretary’s response.
I have covered many issues in the time that was available. I could have gone into much more detail, which I am sure that colleagues from all parties will cover in the next couple of hours. I could also have detailed more of the evidence that was presented.
That the Parliament notes the Finance Committee’s 9th Report, 2012 (Session 4), Report on Draft Budget 2013-14 (SP Paper 231) and its recommendations to the Scottish Government.
I thank Kenneth Gibson for setting the context for the debate and for his opening speech on the Finance Committee’s behalf. I thank the committee for the considered way in which it approached this year’s budget process and for the evidence that was taken.
The debate is an important part of the budget process as we look ahead to the budget bill’s introduction. The Government will carefully consider the detail of the committee’s report and will respond formally in January in the normal way.
More generally, I look forward to working with the Parliament in the new year to build support for the Government’s spending plans. I reiterate the invitation that I made to other political parties and members to meet me to discuss any issues that they have in relation to the bill. The Government’s detailed response to the committee will be published in January and will set out responses to some of the points of detail to which Mr Gibson referred and which the committee made in its report.
As I announced to the Parliament yesterday, the Government will set out in the bill that will be introduced in January its proposals for allocating some £160 million in capital consequentials that have been generated by the autumn budget statement, which are in addition to the plans that are set out in the draft budget. In doing that, my aim is to ensure that the Parliament has the maximum opportunity to consider the Government’s proposals ahead of stage 3 of the bill in February.
It may help the debate if I advise the Parliament of the approach that the Government is taking to setting out its draft budget for 2013-14 before I respond to issues that the committee raised in its report. As members are aware, the draft budget has been published at a time of significant pressure on the public finances and continuing challenges in the economy, globally and in Scotland and the rest of the United Kingdom. Taking into account the budgetary impact of the chancellor’s autumn statement, by 2014-15 we can now expect the Scottish Government’s resource budget to fall by about 7.7 per cent in real terms compared with 2010-11—the last year before the current spending review period—and our capital budget will fall by close to 26 per cent.
The chancellor has indicated that the additional cuts that he is making in 2013-14 and 2014-15 to resource budgets will be baselined in future years and that the increases that he is making to capital budgets in those years will not be baselined. As a consequence of the autumn statement, the Scottish Government’s baseline financial position for resource and capital will be further tightened.
The chancellor has also confirmed that his planned fiscal consolidation will be extended by another year into 2017-18, signalling a prolonged period of austerity that will have potentially damaging implications for our economy, our services and ultimately our citizens. He has done so in the face of the evidence that suggests that his policy of austerity is not working, with downward forecasts in growth and the requirement to borrow an additional £100 billion more over the period 2013-14 to 2016-17 than was forecast in March. The Scottish Government believes that an alternative approach is required and we welcome the fact that the chancellor has in part listened to that message and increased public sector capital investment in the short term.
The Scottish draft budget that was published in September provides detailed spending plans for 2013-14, maintaining the course that was set out in last year’s public spending review. As we indicated then, capital investment is central to our plans. We are supporting our capital programme by taking forward the £2.5 billion non-profit-distributing pipeline of infrastructure projects; by using innovative funding mechanisms to lever in additional resources; and by switching over £700 million from resource budgets to support capital investment over the spending review period.
No, I am not disappointed with the progress of NPD because we currently have £900 million-worth of NPD projects in procurement—that is £900 million in procurement. For example, just a few weeks ago I was at the Inverness campus partnership forum that I chair. The Inverness College procurement is expected to conclude shortly and, as a consequence of that procurement, there will be construction activity on the Inverness College site as part of the Beechwood campus. That will start as soon as the procurement process is completed.
Clearly, I faced a difficult decision when the United Kingdom Government substantively reduced capital expenditure in 2010. I faced a choice of cancelling a whole range of projects or transferring a number of those projects to revenue finance mechanisms such as NPD. I thought, on balance, that the best decision to take was to convert the projects to NPD projects.
We have to face the reality—the First Minister touched on this point at question time today—that NPD projects take longer to deliver than traditional capital investment projects. Anybody who tries to suggest anything different is not confronting the reality of some of the circumstances, which is why the decision to reduce capital investment by the United Kingdom Government was a totally and utterly reckless decision. On that note, I will give way to the other half of the coalition.
What I said in 2010 was my best estimate and assessment of the amount of time that it would have taken. I could have taken the other approach—I could have taken the Tory and the Liberal approach and I could have cancelled all the projects just as they did in England. I could have done that and I am sure that that would have gained a warm reception from Messrs Brown and Rennie into the bargain. Before anybody on the Tory and Liberal benches starts to have a go at me about capital expenditure, they should think about what their reckless United Kingdom Government has done.
The Scottish Government has taken steps to boost capital investment wherever opportunities have arisen. I announced in the draft budget a further £40 million investment in affordable housing. The draft budget confirms an additional £30 million investment in energy efficiency measures and of course, as Mr Gibson mentioned, I announced an additional £50 million for affordable housing yesterday.
As a consequence of four announcements that I have made in the course of this calendar year, an additional £200 million has been allocated to the housing sector, which is a substantial indication of the Government’s commitment to the whole process of capital investment.
Yesterday, we also set out a range of projects to utilise the capital resources that have become available to us. Coupled to the measures that we are taking as a Government to protect the national health service budget, to freeze the council tax, to deliver the most generous package of business rates reliefs in the United Kingdom, and to ensure that employees have a Scottish living wage where they are covered by our pay policy, we have tried to establish in our budget a balance between the necessity of protecting household incomes and supporting incomes at such a difficult time of financial pressure, and delivering the focus on the economy that lies at the heart of the Government’s actions in every respect.
I firmly believe that the Government’s budget is focused on growth, and we will assert that position during the budget process, as is evidenced by the announcements that we made yesterday.
On the point about releasing money into the budget, I was interested to see that the committee report pinpointed the McClelland review and the Government’s assertion that the 2011 spending review would release savings of between £250 million and £300 million a year into future budgets.
Can the cabinet secretary indicate whether any of that money has been released into the budget that we are discussing?
I ask Mr Kelly to cast his mind back to the spending review. I indicated in setting out our approach at that time that we expected public bodies and Government agencies and departments to take on board as an implicit part of their management of their financial resources—which in a number of cases were constrained—some of the techniques that were set out in the McClelland report to deliver greater efficiency and savings. I expect public bodies to operate in that context in implementing their plans.
In the time available to me, I will address a couple of other points in the committee’s report. I welcome its significant focus on preventative expenditure. That is part of the Government’s general approach to public service reform, which acknowledges and understands that, if we intervene early in some of the crisis situations in our society, whether those involve individuals who are on course to offend or reoffend, the welfare of some of the younger citizens in our society—our children—in their early years or some of our more fragile elderly individuals, we will be able to provide better outcomes and support to those individuals while saving the public purse money. I will be happy to report to the committee in more detail on the issues in connection with preventative expenditure.
The focus on public service reform is implicit. The Minister for Local Government and Planning, who is at my side, has been presiding over the review of community planning in consultation with our local authority partners. The purpose of that review is to ensure that, consistent with what I just said to James Kelly, public bodies are co-operating and working together to deliver better outcomes as part of our public service reform agenda, which is an implicit part of our acceptance of the Christie commission’s recommendations.
With regard to the attention that the committee has given to welfare reform, the Government has considered the information that has so far been available on the implications, which, as I think all members will be aware from their case load, are becoming an ever more significant factor in our society. We are addressing that in a number of the interventions that we are making, such as the social fund and the council tax reduction arrangements that are in place. The Government acknowledges that we must monitor the effect of welfare reform, while recognising that there is no way that an Administration with the constrained responsibilities and resources that we have can make good all of the damage that is being done by those reforms.
As I made clear in my earlier remarks, I welcome the committee’s report, which the Government will consider in detail ahead of our response in the new year. I am happy to endorse the motion that Kenneth Gibson has lodged. The Scottish Government has published a budget that I believe provides decisive support to our economy and public services, enhanced by the further capital investment that I have announced this week. It addresses the realities and the difficulties that face the Scottish economy and the citizens of our country today, and I encourage the Parliament to support the committee’s report and the Government’s budget.
For yesterday’s statement on the budget consequentials, the cabinet secretary cast himself in the role of Santa Claus dishing out goodies from his sack. It may simply have been too much festive cheer, but in preparing for today’s debate I began to see Mr Swinney in a different light: a man haunted by spirits of budgets past and budgets yet to come.
Yes, we have Ebenezer Swinney, the man who in his budget of Christmas past claimed to provide us with a budget for jobs and growth, which actually delivered unemployment and recession. He is the man who now claims in his budget of Christmas present that more of the same—cuts to public services, colleges and housing—will somehow alleviate the hardship faced by thousands of households around the country. Of course, he is the man whose only promise for the budgets of Christmas future is an illusory land of milk and honey only a referendum’s vote away—not so much a vision as a cruel mirage, which is already fading under even the most cursory scrutiny.
Of course, as I have pointed out in nearly every debate over the past year, Scotland is not the only country in economic difficulty. However, that does not let the finance secretary off the hook entirely. He still has choices—yes, hard choices, but his choices nonetheless. Both last year and this, it was the cabinet secretary who promised a budget for “jobs and growth”—his words, not mine—and on both criteria he has singularly failed.
On jobs, we have heard the Scottish National Party crowing again this month that Scottish unemployment is below the UK average, but for the previous three months it was above the UK average. In other words, over the piece, it is the same as the UK average. The SNP has made no impact on joblessness in Scotland whatsoever.
The next line in my speech is: “‘It’s not all our fault!’, I can hear the SNP protesting”, but Mr Mason has taken the words out of my mouth. I am simply measuring the SNP against its own criteria of “jobs and growth”—Mr Swinney’s words, not mine.
In the Dickens tale, Bob Cratchit and his son Tiny Tim are struggling to make ends meet because Scrooge will not pay Cratchit a decent wage—there are eerie similarities in our budget of Christmas present. The budget simply passes on Tory cuts, and in some cases the SNP makes the cuts even worse, as in housing.
In evidence to the Infrastructure and Capital Investment Committee during the budget process, Shelter, the Scottish Federation of Housing Associations and the Scottish Building Federation all pointed out the impact of the SNP’s cuts to the housing budget. That is not a Westminster decision; it is an SNP decision, the effect of which has been to devastate the construction industry in Scotland.
The SNP thinks that it has been clever by reducing the housing assistance grants from £70,000 to £40,000, but all that is happening now is that housing associations are unable to borrow on that level of funding to build social housing. In response, of course, the SNP just recalculates and describes mid-market rents as affordable housing.
One area for which there is no doubt about who controls all the levers of power and all the public spending in Scotland is education. It is one area in which we know the Scottish Government can make a real difference through investing in skills and training and the knowledge economy, and yet what do we find? There are huge cuts to college budgets that result in a vast drop in the numbers of people attending college, with a particular impact on adult returners.
Let us take the plans to improve our rail system: the Edinburgh to Glasgow improvement programme was cut in half. That money should be reinstated now so that we can get Scotland working again. I add that, when the contracts are awarded for such programmes, we should have a proper procurement process in place so that apprentices are taken on, there are local jobs, local small businesses benefit, and we do not simply send the contracts to China, as is the SNP’s wont, for the cheapest prices and unsustainable practices.
Mr Macintosh criticised the Scottish Government a few weeks ago for planning to transfer £250 million from resource to capital. He said that it would cost 8,333 jobs. I wonder whether he will now retract that statement. In addition, if he believes that we should spend more money on the Glasgow to Edinburgh rail route, will he say where that capital funding should come from?
I have no idea what the first part of Mr Gibson’s remarks refers to, but on the second part: it should come from the rail regulatory asset base. I do not understand why the Government has not done that. It should restore right away the money that was cut.
There was a particularly revealing quote in John Swinney’s evidence to the Equal Opportunities Committee:
“My strategy was based on the assumption that, by 2010-11, the private sector would be recovering and therefore the consolidation of public sector finances could be done reasonably. I have freely and openly conceded that that assessment and that assumption were wrong. I do not think that I was wrong to make that assumption, but my assumption and my prediction were wrong.”—[Official Report, Equal Opportunities Committee, 25 October 2012; c 701.]
That is some apology—“My policy hasn’t worked, but I wasn’t wrong”—but the real revelation is that John Swinney put all his eggs in George Osborne’s basket, swallowing the notion that cutting the public sector somehow allows the private sector to fill the gap. That is where the real crime has been committed: John Swinney has cut and cut and cut, and the effect on the Scottish economy has been devastating.
If Mr Macintosh participated in parliamentary committees, he might see the context in which comments are made. What I was saying to the Equal Opportunities Committee is that, in 2008, when a Labour Government was in power and was threatening the consolidation of public finances, I brought forward capital investment to ensure that we created employment in Scotland. If Mr Macintosh cares to look at the labour market statistics, he will see that that was entirely successful. What I did not predict was the massacre of public finances by that crowd—the Tories and the Liberal Democrats—which destroyed capital investment and led to an increase in unemployment. Perhaps Mr Macintosh, who apparently vaguely believes in the same approach to economics as I do, will reconsider his remarks in that light.
Interestingly, I think that it is Mr Swinney who vaguely believes in Labour’s approach to economics and has deliberately copied it over the past 10 years, trying to reinvent the SNP as a party of the social democratic left. Clearly, however, this is where it is tested.
I draw Mr Swinney’s attention to an interesting blog entry that Dave Watson of Unison published this week, which points out exactly why Mr Swinney has made mistakes and where he is wrong. Dave Watson points out that
“a staggering 51,700 jobs have been lost in the Scottish public sector” over the past four years.
Thank you, Presiding Officer.
Tens of thousands of Scots have been put out of work as a direct result of Mr Swinney’s decisions, and that figure is matched, I may add, by another 50,000 in the private sector. I could not agree more with Dave Watson’s conclusion that this action
“tells the tale of Scottish Government priorities”.
Let me begin by looking at the overall size of the Scottish budget, to which I alluded in my intervention on Mr Gibson. The Scottish Government made great play in the budget statement of the claim that the DEL budget for the next financial year is going down in cash terms. It was emphasised and re-emphasised and followed up in a letter from Mr Swinney to the Finance Committee that made it clear that, in the Government’s view, the budget was going down in cash terms. However, as a consequence of the autumn statement two short weeks ago, the DEL budget for next year is increasing in cash terms.
In a moment.
A SPICe paper that is available at the back of the chamber states that the budget is £28.608 billion for 2012-13 and £28.615 billion for 2013-14. I admit that the increase is small, but there is an increase of £7.2 billion to the Scottish Government. That is some cut.
Yes. I think that I have acknowledged in every debate on the subject that the budget is going down in real terms but up in cash terms.
Let me move on to some comments on capital investment. Mr Swinney claims to take no lessons from anyone on capital investment because he and only he and the Scottish Government have got it right. First, let me point out to the Scottish Government that it is the total budget that it is given that counts the most. It is within Mr Swinney’s gift to switch money from revenue to capital if he so desires and if that is the Scottish Government’s political priority.
Let us look at the NPD model, which has raised its head a number of times in the past couple of weeks. Back in September in this chamber, we were given the impression not only that all was going well with the NPD model and we were on track with everything that we had planned to do, but that we were accelerating and bringing forward capital spending for schools under the model. That was the narrative that the Scottish Government sought to weave but, my, how it has unravelled over the past couple of weeks.
The Scottish Government originally said that up to £150 million would be spent under the NPD model in 2011-12, but in reality zero pounds were spent in that financial year. We were told that in the current financial year £350 million would be spent under the NPD model, but just a month ago we were told in evidence by the cabinet secretary that £20 million would be spent. That is not the fault of councils, the present UK Government or UK Governments in the past; that is entirely down to the Scottish Government’s political priorities and the fact that it is not pushing the NPD model. Just for good measure, the amount spent next year was initially to be £774 million but will actually be about half of that: £338 million.
It is about time that the SNP Government took a share of the responsibility for the position that the construction sector finds itself in. Kenneth Gibson quoted the Scottish Building Federation, which also said:
“To suggest that this budget, or any budget at this time, could be a budget for growth in the construction sector is out of touch with reality.”
Although it acknowledged the UK Government’s reductions in capital spending, it described in Scotland a
“constipated ... procurement system.”—[Official Report, Finance Committee, 26 September 2012; c 1630, 1618.]
That is not the fault of the UK Government; it is entirely the fault of the Scottish Government, which has not got capital projects moving.
Even yesterday, when we were told how the £205 million or so was going to be spent, the Scottish Government was unable to tell us exactly when the projects were going to happen, other than at some time in the financial year 2013-14. That is not good enough. We have seen the sloth-like performance of the NPD model under this Government; the construction sector deserves far better.
Yesterday, the Scottish Government could not even tell us which of their shovel-ready projects do not have planning permission, but at First Minister’s question time today the First Minister boldly asserted:
“the shovels are in the ground”.
On Wednesday the Scottish Government could not tell us which projects have planning permission; on Thursday it could tell us that the shovels are in the ground. That is why this is not a budget for the economy.
When reviewing the given draft budget, we must ask whether the plan will increase sustainable economic growth. I believe that it will.
Goals are necessary considerations. Money allocation can be a mathematical process—one that could perhaps even be assigned to a computer. We know that the budget has a certain, tightened amount of money to work with and that there are a constant number of areas that require funding, unless we take Professor Kaye’s recommendation and just pick winning areas. However, that is not in alignment with the Government’s approach.
Professor Kaye talked about broadband simply being for people getting films over the internet. I would ask to him to look at my constituency and other rural areas in which, increasingly, people have to interact on the internet or not at all. Registering VAT returns is an internet-only option, and I have constituents who have a round trip of more than 20 miles to register their VAT, which is not terribly helpful to business.
Our goals take us away from the cold, complicated computations and instead allow us to aim higher. President John F Kennedy said:
“Man is still the most extraordinary computer of all.”
It is man and the deliberations of men and women that make the difference.
The Scottish Government has said that the budget’s priorities are to accelerate economic recovery, to continue the shift towards preventative approaches to public service delivery, and to maintain commitments to the social wage for Scotland, which is not something that is accepted in other parts of the chamber. These are all crucial and viable goals from which the people of Scotland will only benefit, and the drafting, reviewing and debating process provides an excellent opportunity to ensure that the final budget best meets those goals. It is also a time to debunk the notion that hacking off parts of the social wage will build support for anything other than further decline, not only economically and socially but in every other way.
Therefore, we must continue to keep our goals of growth and sustainability in mind when we take a closer look at the Scottish Government’s draft budget. There is £40 million for affordable housing, £18 million for skills training, and £80 million for schools for the future. These investments in housing, training and schooling are investments in our future.
You have read the budget as I have and you can see the number as I do. The £80 million for schools for the future is a very important part of creating the necessary infrastructure to ensure that we have a trained and effective population that can seize future opportunities. That is the important point.
The investment plans are directly for the people of Scotland, who are suffering from the downward spiral that the economy went into in 2008 and with which we will be grappling all the way to 2018. They aim to expand the availability of housing and schooling facilities, creating new jobs each year. Housing, skills and schools provide the resources for recovery.
I am trying to follow that metaphor.
I am pleased that Mr Stevenson says that the Government should be measured on how it achieves economic growth. However, the Government has also claimed that this is a budget for jobs. Does Mr Stevenson think that the Government should be measured on whether unemployment goes up or down, either in a stand-alone way or simply in comparison with the rest of the UK?
The member might be somewhat unwise to open up the rest of the UK, given that across the piece we are doing a bit better—and doing so without the powers that would enable us to balance taxation with expenditure in the way that a normal country can. Had we the full powers, we would have a full range of economic levers to address the situation beyond the success that we have had already.
Our investment in construction, skills and the green economy is in addition to a green investment package, with £30 million for fuel poverty, energy efficiency and low carbon transport, and plans to use the fossil fuel levy surplus to establish the renewable energy investment fund.
These are all steps in the right direction, bringing us closer to our climate change targets. Green jobs and a green economy will certainly meet our goals of growth in addition to sustainability—and there is more to come.
Last year, 95 per cent of the £2 billion transport budget was invested back into the private sector, supporting 12,000 jobs. Let us now plan to invest another £180 million over two years in construction, skills and the green economy. In my constituency, there will be £18 million to establish an energy skills academy, which is proudly being taken forward by Banff and Buchan College.
The economy is clearly going through a hard time, but not as hard a time as Ken Macintosh seems to be going through. He really needs “Accounting for Dummies”; if he does not buy it, his sock is going to be empty.
Yet again, I have the opportunity to speak in the last debate before Christmas on the Finance Committee’s report on the draft budget. As I have actually left the committee to join the Infrastructure and Capital Investment Committee, I thank my former colleagues on the Finance Committee, the clerks and the budget adviser for putting up with me for the past year.
Some of us on the Finance Committee felt that we should comment on whether John Swinney had succeeded in the ambitions he announced when he introduced his draft budget: that it would be a budget for economic growth and would boost construction. Three of us felt that we could not see evidence of that, three other members of the committee thought that the budget was wonderful, and one member of the committee disagreed with both camps. Therefore, there was no published judgment on the budget.
I would like to say a little about why I think that the evidence is not there. In the past year, the Finance Committee has spent a lot of time taking evidence on preventative spend. As I said in my speech last year—and the Scottish Federation of Housing Associations often makes this point—socially rented housing surely qualifies as preventative spend, as homelessness and temporary and poor-quality housing affect people’s health and wellbeing, educational achievements and their ability to sustain employment. I think that we all agree that construction is also a fast and effective way of stimulating economic growth.
It is therefore disappointing that the housing budget continues to be squeezed more tightly than capital spending as a whole. The Infrastructure and Capital Investment Committee noted that affordable housing spending is being cut by 45 per cent over the spending review period and that capital spend is reducing by a third.
I think that I am going on to talk about what the member was going to say.
An additional £50 million for affordable housing next year was announced yesterday. That is of course welcome, but the total housing supply budget, including the amount in yesterday’s announcement, is still only £269 million, which is £46 million less than the revised housing supply budget for this year.
The Scottish Government continues to trumpet its figures for the completion of socially rented housing, but much of that housing was funded under the previous, more generous terms and in the period of accelerated spend. Figures that I obtained from the housing minister in answer to a recent parliamentary question demonstrate a significant fall in the number of housing starts over the past two years. The figure went down from 7,677 in 2009-10 to 3,025 in 2011-12. The figure for 2011-12 is less than 40 per cent of the figure for two years earlier, and that fall coincides with the funding that was available to housing associations for new build being cut by 47 per cent over exactly the same period.
In its evidence to the Infrastructure and Capital Investment Committee, Shelter Scotland stated:
“we are heading for a cliff edge with regard to new completions in the next few years.”—[Official Report, Infrastructure and Capital Investment Committee, 24 October 2012; c 973.]
Is it not the case that, when Labour was in power, it spent £562 million and completed 4,832 affordable houses, but in 2011-12, under Mr Swinney, 2,050 houses in addition to that figure were completed for much less public money? Does that not show that the Scottish Government is delivering affordable houses much more effectively and efficiently?
I do not know where Mr Gibson gets his figures from. Actually, the Labour-led Executive built more than 38,000 homes for social rent between 2002 and 2007. That is according to Scottish Government figures. Therefore, I simply do not recognise what Mr Gibson said.
I refer to another answer that I received to a parliamentary question, on the funding that was provided to housing associations for the construction of new homes for social rent across all local authority areas between 2009-10 and 2011-12. The overall funding that was claimed reduced by 53 per cent over those two years, but some local authority areas had much more significant reductions. For example, housing associations in Aberdeenshire claimed only 1.4 per cent of the sum that they had claimed two years earlier. Housing associations in several areas received only 10 per cent of what they received in 2009-10. I heard the answer that was given to my colleague Richard Baker yesterday, but I sincerely request that the cabinet secretary seriously reconsiders the suggestion from the Infrastructure and Capital Investment Committee and the SFHA that the Scottish Government should review the grant level.
It stands to reason that, as the population ages, the need for adaptations to enable older people to live healthily and independently in their own homes will increase. Therefore, I share Age Scotland’s disappointment that the budget line for supporting transitions has been reduced.
The social return on investment report by Bield, Hanover and Trust housing associations states that each adaptation saves Scotland’s health and social care sector more than £10,000, and the associations estimated that their investment of £1.4 million has already saved the Scottish Government £5.3 million. Surely that is a good example of preventative spend that also improves the quality of life for older people.
It has been suggested that there should be information in the budget on in-year revisions, and that they should be presented in addition to the agreed budget for the previous year. I know that previous Governments did not do that, but perhaps all Governments have been wrong. I would argue that it is more important to fully understand the funding picture of previous years in times of austerity. If we want committees or Opposition spokespeople to suggest transfers of funding to and from budget lines, we need that information.
I commend the Finance Committee’s report on the draft budget for highlighting a number of quite difficult issues. I very much hope that the cabinet secretary will take them into account when he produces his draft budget bill next year.
I speak as another former member of the Finance Committee. Indeed, I think that I am right in saying that, of the original members of the committee at the start of this session of Parliament, only the convener and the deputy convener remain. I assure them that it is nothing personal.
We face tough financial times. We have already heard from the convener of the committee about the 11 per cent fall in revenue and the 26 per cent fall in capital that the Scottish Parliament and Government will receive as a result of the austerity measures that are being pursued at Westminster. That makes it all the more interesting that we are somehow supposed to dance with joy when crumbs occasionally fall from the Westminster table.
It is undoubtedly welcome that additional capital investment is coming to Scotland, but that does not disguise the fact that the UK Government remains committed to a wrong-headed austerity approach. We do not have to take the word of the Scottish Government for that; Nobel laureates such as Krugman and Stiglitz are out there saying that the focus should clearly be on economic growth. However, the chancellor has decided not to grow his way out of a recession but to cut his way out, which has been clearly demonstrated to be the wrong approach—not only for the economy but for the most vulnerable people in society.
The budget is about priorities. A Government, a Parliament and a nation that are operating within a shrinking resource and in tough financial times must make decisions about their priorities. This Government has made it clear where its priorities lie. It seeks, for example, to protect front-line health spending. That protection was unanimously backed in the Health and Sport Committee report—signed off by all members of the committee—which said that the best way to do that in these difficult times is to target the Barnett consequentials at territorial health boards.
There has been investment to maintain and uplift the living wage, and there has been an announcement that the pay freeze for public sector workers will end next year. It represents just a modest increase, but it is an increase, nonetheless.
The Scottish Government has also continued to invest in the universal benefits that benefit not only the most vulnerable people, but wider society. It was interesting that Kenneth Macintosh went with his “A Christmas Carol” theme because—as we all know—if it were up to the Labour Party, Tiny Tim would be paying for his prescriptions.
Use and deployment of capital expenditure to deliver economic growth is important. It is a key element of what the Scottish Government is trying to do, not just in terms of the capital investment that is coming forward as a result of the crumbs that are falling from the Westminster table, but in terms of the shift of resource to capital in order to try to boost employment and grow the economy within the limited powers that are available to us.
Another priority for this Government is the preventative spend agenda, which represents the shifting of significant sums of money in order to ensure that, instead of trying to deal with problems at the end of the process and tackling problems that arise, we get down to the root causes of the problems. Those causes are the societal issues that need to be dealt with by developing things such as family nurse partnerships, which ensure that people in the most hard-to-reach areas get the support that they require to prevent problems that might otherwise arise later in their lives. That requires a significant shift in funding, which this Government is providing and, crucially, it requires a significant change in the mindset of the public sector.
As parliamentarians, we must all do whatever we can to ensure that that change occurs, which is where I have a difficulty with the doom-mongering approach that Mr Macintosh so often brings to the chamber. We always hear from the Labour Party that it wants more money to be spent on this or that, but the politics of tough times require honesty from those who argue for additional spending.
No means no, thank you. I was speaking in plain English, Mr Kelly.
It does not behove the Opposition to call for more spending here and there without the consequential admission of where funding would have to be removed from to pay for that. I know that it is a difficult balancing act for Mr Macintosh to carry out—
It is a difficult balancing act for Mr Macintosh to carry out because all Labour’s spokespeople say that they want more funding for the areas for which they are responsible. However, he should at least have the humility and decency when he argues for funding increases also to argue for where he would take the money from to pay for those increases.
I make no apologies and the SNP makes no apologies for making it clear—
I am in my final minute.
The SNP makes no apologies for making it clear that it would be much easier for us to shape and control the future and destiny of Scotland had we the powers to shape our taxation system; to shape our welfare system to ensure that there is a safety net for the most vulnerable people; and to deploy borrowing powers to the betterment of our economy instead of sitting around, hoping for some sort of charitable hand-out from a distant and uninterested Westminster Government.
On what Mark McDonald just said, I wonder why, if independence would deliver so many jobs and so much success, recovery and prosperity, the SNP is waiting for two years. I presume that it has come up with the answer to that before then.
The Liberal Democrats worked constructively on the budget that we voted for budget last year, and I advise the cabinet secretary that we seek to work constructively again this year. That does not mean that we do not have concerns about the budget—we do, and I will outline some of them—but we will work constructively, as we have done before. We will act responsibly in our approach to the budget and, if we want to spend extra money, we will identify where the money should come from.
I agree with Mark McDonald on spend-to-save investment in early education and early intervention; we should accelerate that. That is partly why I was so disappointed with the First Minister’s response at First Minister’s question time today to my request for early education for two-year-olds. I remind members that 40 per cent of two-year-olds in England but only 1 per cent of two-year-olds in Scotland are predicted to receive that kind of support. Professor James Heckman has set out numerous times the fact that investing £1 in a two-year-old will bring a return of £11 later. The evidence for that is overwhelming. I understand that Professor Heckman is coming to visit ministers, who will perhaps be able to tell him that they are going to invest in two-year-olds.
The finance secretary said earlier that anybody who says that NPD is not a complicated and difficult process should be criticised. I presume that he knew in 2010, when he set out his budget, that it was going to be difficult and complicated. I do not doubt that it is complicated, but I am puzzled as to why, at that time, he boasted about the amount of money that he was going to spend through the complicated and difficult NPD process. Nothing substantial has changed since then. There was a Conservative-Liberal Democrat Government at that time, so he knew what the landscape was going to look like, yet he ploughed ahead and predicted. This year, he is having to make significant reductions, as Gavin Brown said, from £353 million to £20 million. I am not sure what has changed in that time. Perhaps the finance secretary could set that out in his summing up.
The Finance Committee’s report is a very good one. It is pretty thorough and looks at the detail in identifying from where the extra capital from revenue has come. The committee is right to have identified that there does not seem to be much clarity about which revenue areas have suffered.
On the change funds, the committee is right to ask exactly what the benefit of the extra investment has been. Some groups, including the Scottish Council for Voluntary Organisations—which, I must say, I am not used to quoting—have highlighted concern about where that money is going and where it is coming from. The committee is right to have identified that we need greater monitoring and evaluation of those funds. If we are to convince the sceptics that early intervention is worth while, we need to have the evidence to prove it.
An explanation is also needed for why the early years fund seems to have been cut by £14 million. There does not seem to be an explanation from the Government on that, so perhaps the finance secretary could set that out.
The committee rightly requests information on whether the Government intends to progress with the Christie commission’s recommendation on a duty to consider preventative measures in budgets. Again, I would welcome a response from the finance secretary on whether there will be a duty on local authorities to consider such matters.
The NUS is running its—almost annual—campaign to secure a reversal of the £35 million cut in this year’s funding for further education colleges. That is worthy of support. We have campaigned with the NUS in the past and we will do so again, and we hope that the finance secretary listens.
On the funding for Aberdeen City Council, when I asked the finance secretary previously about the floor that the Scottish Government set in previous years whereby each council would receive at least 85 per cent of the Scottish average revenue funding, he reassured me that that would be met. However, nothing seems to be forthcoming on how the Government will meet Aberdeen’s £25 million shortfall. Aberdeen City Council’s current level of funding seems to be at 78 per cent of the Scottish average, which is well short of the 85 per cent floor—hence the £25 million shortfall.
We welcome the extra money for social housing that was announced yesterday, but I want to be reassured that the new money will go into genuinely affordable housing. There is concern in the sector about where the money will be targeted.
I was also pleased to see that money is to be given to an Atos project in Forres. I was surprised that the SNP back benchers did not criticise Atos, but I congratulate the finance secretary on identifying a project that will be very good for that part of the country. Considering back benchers’ criticism of Atos in the past, I was surprised that they were not more vocal.
With that, I conclude my remarks.
I welcome the tone of today’s debate on what is a good Finance Committee report. We are all aware of the current stress on families, our communities and in the country that has been caused by the economic straits that we are in. To exacerbate that stress by exercising some sort of visceral, or even cosmetic, tribalism serves no purpose at all. We should leave the “Oh yes we can”, “Oh no you can’t” to another place; let us clearly and cogently discuss the committee’s report and debate our spending priorities.
I know that our priorities are clearly different from those of the Opposition, but I say in all honestly to Opposition members that, as Mark McDonald said, it is incumbent on them to spell out their alternative budget plans and how they would address the issues in the committee’s report. If the Opposition aspires to reduce or increase the cost or revenue elements in the budget, or to change the recommendations in the report, it is necessary for it to tell Parliament—and, indeed, the electors—exactly what it would increase or reduce as an alternative. Those decisions should then be judged in terms of their employment impact, investment returns and effect on long-term sustainable economic growth.
To assist in that, I agree with the recommendation in paragraphs 203 and 204 of the Finance Committee’s report that there should be some technical changes to the presentation and formatting of future budgets. We need clarity and consistency of terminology, just as we need a bridging analysis from one year to another, so that we can compare each of the proposed budget lines to those of the previous year’s budget and to the likely outturn, with appropriate statements aligned to major itemised changes. The draft budget would then lend itself to more discussion around principles and policies rather than the batting of sometimes confusing numbers all over the place.
I support the committee’s report and, in general, the cabinet secretary’s budget. I do not do so blindly, because I have to compare its purpose and objectives with those of the UK budget which had—until the UK Government’s autumn statement conversion—no plan to balance investing in jobs with accelerating the opportunity to pay down its massive deficit and borrowing.
I am also supportive for other reasons; I will give three examples. First, I received a letter two weeks ago from an outgoing college principal who declared quite clearly that she and her colleagues are particularly anxious to embrace the exciting future plans that we have for colleges. That is not something that we hear often in the chamber.
Secondly, on Monday I attended a meeting of the Ayrshire and Arran NHS Board’s review board. The head of nursing, when asked about the shortage of nurses, said that there is no such shortage and that she is operating within budget. Thirdly, we have a council that had an underspend of £3.8 million. Although there may be some doubt about competency over the latter, there is little question, even when recognising the seriousness of the situation and the short-term implications that we face, that the people of Scotland have accepted the need for innovation, change and efficiency, as is reflected in the committee report. It is important that in a recent YouGov poll more than 60 per cent of Scots agreed—24 per cent disagreed—that we should be able to invest money in the short term on capital projects so that we pay down the deficit more quickly than will the austerity regime that has been adopted by the UK Government.
In more specific terms, in these straightened times, the establishment and maintenance of business confidence, particularly among small and medium-sized enterprises and in the third sector, is critical to our medium and long-term sustainable economic growth. Although the report—as I do—welcomes the fact that the budget will maintain spend in cash terms, the Finance Committee’s invitation to the Government to respond to issues about access to risk capital and seed funding is particularly welcome. Those sectors are the engines of future growth. They need to secure their future, and critical to that is financial and business support.
I welcome the Finance Committee’s report and its constructive questions and recommendations. Difficulties mastered are opportunities won, and I am sure that all of us in our approach to the budget and the nation’s financial wellbeing will be constructive.
I welcome the opportunity to take part in the debate on the Finance Committee’s draft budget report. As we move towards the Christmas season, Parliament, as always, debates the Finance Committee’s report—it is one of the traditions of the parliamentary year—and quite a number of today’s participants have spoken in the debate over the years.
I want to thank the Finance Committee for its report, which is a useful contribution to the process and the debate. It highlights some of the flaws in the Government’s approach, and the report brings out four particular areas that underline the weakness and lack of robustness in the Government’s budgetary approach.
First, a link to outcomes is lacked. On page 5 of the report, the committee queries whether there is any proper cost-benefit analysis and whether any economic modelling exists on the linking of spending priorities to economic growth. Page 6 notes the financial scrutiny unit’s point that the draft budget does not include in each portfolio section an explanation of how that portfolio budget contributes to national outcomes.
“was unable to provide systematic evidence of linking funding options back to the outcomes”.
There is no link to economic growth, which is obviously important, bearing it in mind that recent Bank of Scotland statistics show that gross domestic product has fallen in the previous three quarters. There is also no impact assessment of how resource-to-capital switches will contribute to sustainable economic growth.
The Local Government and Regeneration Committee highlighted an absence of clearly identifiable, meaningful and measurable outcomes to assess the effect of regeneration on sustainable economic growth.
There is also a lack of detail. The Finance Committee asked why the revised estimate on NPD was not provided in the draft budget. We have had some debate on that this afternoon.
Members have spoken about the change funds. Little detailed assessment has been made of their implementation and it is unclear how the £500 million figure for those funds has been arrived at.
Furthermore, a lack of transparency has been brought out. The Infrastructure and Capital Investment Committee has said that it is difficult to assess how to allocate money for active travel because of the lack of transparency in the budget.
The Rural Affairs, Climate Change and Environment Committee said that little progress has been made in developing methodologies that would allow the Scottish Government to understand individual policies’ full downstream impact on climate change targets.
Finally, the Education and Culture Committee said that a feature of this year’s budget is that several witnesses were unable to identify movements and changes from previous years. Elaine Murray spoke about that.
That brings me on to my next point. When the process is flawed in four areas, that contributes to sloppy policy making and, therefore, gives us a weak budget.
There are fewer houses being built now than at any time since 1926. That is in the budget documents.
I am sorry, but I am running out of time.
Earlier in the week, we saw the impact of deprivation in communities throughout Scotland, and last week’s Audit Scotland report highlighted how health inequalities are still a big issue.
The SNP keeps telling us that the budget will shrink not only over the coming years, but all the way to 2026. It strikes me that its attitude to that shrinking budget is to look away now. It is not prepared to embrace the debate and face up to the issues.
Mr Gibson’s committee asked for information on how the Government is implementing the Christie report, but still nothing has been provided. Also, on the McClelland review, despite what the cabinet secretary said, there is no detail on how identified potential savings are being released to the Government.
The report shows that the SNP Government’s budget is flawed and that it must revisit some of the areas that I have mentioned as the budget progresses through the parliamentary process.
I speak as a relatively new member of the Finance Committee. I am not the newest member, because Malcolm Chisholm has taken that mantle from me, but I was not on the committee for all of the evidence gathering for the report. I thank colleagues for the work that they did and other committees for the work that they undertook in assessing the budget.
I commend the Finance Committee’s report. As Chic Brodie said, it is a good report. I will speak to a number of parts of it and about the Scottish Government’s budget more generally. However, before I do that, it is important to set out the background to the budget, which is reflected in the report.
Paragraph 10 of our report says:
“In addition to a declining budget the”
“is also faced with considerable economic uncertainty as the European and UK economies struggle to recover from the 2008 financial crisis.”
It goes on to quote the cabinet secretary’s evidence to the committee, in which he said:
“the settlement that we received in the UK spending review is the toughest since devolution. Over the four-year period between 2010-11 and 2014-15, our budget will have been reduced by more than 11 per cent in real terms and, within that, our capital budget will have been reduced by a third. The position in 2013-14 is particularly challenging”.—[Official Report, Finance Committee, 5 November 2012; c 1797.]
In paragraph 13 of its report, the committee states that it
“recognises that continuing to meet its budgetary commitments in these circumstances remains a significant challenge for the Scottish Government.”
I welcome the cross-party recognition of that point because, frankly, it is not always reflected in the debates that we have in the chamber.
I turn to housing, which I know is an area of wide interest, and the part of the report that deals with it.
The Infrastructure and Capital Investment Committee suggested that housing should be an area of focus, and in paragraph 85 of its report the Finance Committee says:
“The Committee believes that consideration is given to additional funding for affordable housing should additional funding become available.”
Just yesterday, it was announced that an additional £50 million would be invested in affordable housing. I think that that deals with the point made by Mr Rennie, who I see is not in the chamber at the moment. The money will be invested in affordable housing; I do not know whether he thought that it would be invested in building a palatial mansion for some character. Before the Scottish Government has made a formal response to the Finance Committee’s report, we can see that it has responded to the request in paragraph 85, which is welcome.
Concern is still being expressed about the housing budget—we have heard that again today. As Kenny Gibson pointed out in his intervention on Elaine Murray, in the final year of the Labour Government only 4,832 houses were completed—perhaps that is a ghost of budgets past for Mr Macintosh—whereas, in 2011-12, this SNP Government built 6,882 houses. I think that our record is a good one.
However, we should look to do more wherever we can. We should look to lever in funding from other sources. During the part of the budget scrutiny process that I took part in, the committee visited Hawick. Eildon Housing Association made the point that we should be innovative and should try to utilise other sources of funding. It gave the example of pension funds. I know that John Swinney has responded positively to that suggestion and that the Government is looking at that general area.
I turn to the core purpose of the budget: supporting the Scottish economy. I want to set out some of the action that the Scottish Government has taken over the past few years that I particularly welcome. In February of this year, a capital spending package of £380 million until 2015 was announced, which will focus on housing, transport, health, digital and maintenance projects. In addition, £700 million has been switched from the resource to the capital budget to support capital investment. A commitment has been made to no compulsory redundancies in the public sector. A living wage is being introduced for all workers who are covered by the Scottish Government pay policy. The council tax has been frozen for the fifth year in a row. Free higher education has been maintained and prescription charges have been abolished.
Those measures are all responses to the economic circumstances of the time and are helping families in difficult times. In addition, the Government is providing the most generous package of business reliefs in the UK, which is helping to maintain the Scottish high street. I return to the report’s recognition of the circumstances and the significant challenges that the Scottish Government faces. In that context, I think that the Scottish Government has a good record.
Ken Macintosh referred to ghosts of budgets past, present and future, which was an interesting analogy. I want to focus on the future because, if I remember correctly, the ghost of Christmas future was a portent of doom figure. If we continue to operate in circumstances in which the UK Government decides the size of Scotland’s budget, we may well reflect on just how right Mr Macintosh was to talk about the ghosts of budgets future. He was probably more right to do so than he realised, because if, as a country, we vote no in 2014, the only certainty is that we will face more austerity. In the autumn statement, the chancellor revised his economic growth forecast down once again, from the 0.8 per cent that was predicted in the UK budget to -0.1 per cent this year.
Even though Joseph Stiglitz and David Blanchflower are urging a different agenda, the UK Government prefers its austerity agenda and its attack on the welfare system, all of which is harming the Scottish economy.
I thank the Finance Committee for its excellent report. I am pleased to be back on the committee, although I was not a member while it was compiling its report.
Mark McDonald said that Labour members who have spoken in the debate have argued for more money for everything, and I expect that the cabinet secretary will be looking to make a similar point when he winds up the debate. However, if SNP members and others had listened to the Labour speeches, they would know that we are concentrating on two areas for extra spending: colleges and housing. Those are absolutely the right choices, for the sake of the individuals involved and for the sake of economic growth in the wider economy. A focus on those areas would also enable us to address social injustice and inequality.
I realise that it is difficult to realign revenue budgets, but I ask the cabinet secretary to concentrate, over the next two months, on the resource budget for colleges, in particular, and to reinstate that budget as far as possible.
I will give way later, if I have time.
We all know that Audit Scotland pointed out the 24 per cent cut in college budgets between 2011-12 and 2014-15, which translates into the £34 million cut that is the focus of the current NUS campaign, which I support. That cut should be the focus of the cabinet secretary’s attention in relation to resource budgets in the next two months, and I hope that he can reinstate the budget as far as possible, not just for the individuals involved, 30 per cent of whom are from deprived areas, but in the interests of economic growth, as the Education and Culture Committee pointed out.
We face the same combination of issues in relation to housing. We need to address housing for the sake of individuals and the wider economy. Kenneth Gibson reminded us that every £1 that is spent on construction translates into £5 for the wider economy. In the current financial circumstances, what I am asking the cabinet secretary to do is hard, but an opportunity was presented by the substantial amount of extra capital that he received from the UK Government, and he did not allocate enough to housing in his announcement yesterday.
In a minute.
Even after the three in-year additions to the housing budget that were announced during the 12 months before yesterday’s announcement, there was a 45 per cent cut to the affordable housing budget over the spending review, compared with a 33 per cent general capital cut. That is the foundation of the Infrastructure and Capital Investment Committee’s report, which all members of the committee accepted.
I will give way to the member.
Kenneth Gibson rose—
Jamie Hepburn rose—
I give way to someone.
I understand that Mr Chisholm thinks that more money from the £205 million that was announced yesterday should be spent on affordable housing. Which of the projects that Mr Swinney announced, 93 per cent of which should be completed within 15 months, should be cancelled so that we can put more money into affordable housing?
People will make different choices on that. In previous budget rounds, I have tended to argue that housing should be the number 1 priority for capital expenditure. I have made my views known on other matters, including aspects of the road-building budget. People can make other choices; I am presenting the case for housing, which is pressing.
The interesting point that I highlighted in a question to the cabinet secretary yesterday is that a year ago there were to be 6,000 new affordable homes per year and, after each of the three additions to the housing budget in the past year, the figure has still been 6,000. As far as I can see, after yesterday’s announcement of a further £50 million, the figure is still 6,000. I think that the reason is that we are struggling to achieve the target of 6,000 affordable homes per year, of which 4,000 are supposed to be in the social rented sector. The evidence for that is that in 2011-12 there were 3,000 social rented starts, as Elaine Murray said.
What we are hearing is a focus on input. Mr Kelly said that there should be more focus on outputs. Does Mr Chisholm accept that more houses are being built under the SNP than were built under the Labour Party?
That is not the case. That was a good time for Jamie Hepburn to intervene, because I had just pointed out that there were 3,000 social rented starts in 2011-12, and it is obvious that it is the starts that will result in completions in future years.
The good figures for completions that the Scottish Government had in 2011-12 were based on the much higher grant levels for housing associations that had pertained. Now, we have lower grant levels. Housing association after housing association told the Infrastructure and Capital Investment Committee that the £40,000 grant was unsustainable, and I have heard the same thing from housing associations in my constituency. That is the key reason why delivering 6,000 homes will be difficult. Of course, 6,000 will not be adequate to meet the need. The cabinet secretary needs to pay attention to the Infrastructure and Capital Investment Committee’s recommendation that the £40,000 grant should be reviewed.
I have only 40 seconds left. I speak regularly about climate change and I will not repeat what I said about it last week. The Infrastructure and Capital Investment Committee, which has an SNP majority, said that some change should occur between transport budget lines—it did not ask for extra money for transport—to provide more money for active travel. That is important not just for climate change but as a fundamental plank of health improvement. I hope that the cabinet secretary will look at that.
In the budget debate, Labour is focusing on colleges and housing. I ask the cabinet secretary to do all that he can in the next two months to find more money for those aspects.
We should look at how the way in which we make budgets has changed over the years. Under the SNP Government, we have worked within the national performance framework—NPF—process, which did not exist before. Partly, that has drawn attention from critics. In its report, the Finance Committee said—as the Rural Affairs, Climate Change and Environment Committee has said—that the Government
“was unable to provide systematic evidence of linking funding options back to the outcomes” in the national performance framework. A new way of operating takes time to develop. However, we are beginning to get that link-up, which is an improvement, so we thank the Finance Committee for looking at issues in that fashion.
The Scottish Government needs to emphasise the consistency of references to the NPF and we will try to hold the Government to that. I hope that each committee will look at the areas to which the NPF refers—and it refers to all areas—and use that as a measure of progress. That is a theoretical matter, but it is becoming a practical matter of having better assessment of what is going on.
The Rural Affairs, Climate Change and Environment Committee took seriously the focus of our deliberations on sustainable development. The word “sustainable” in relation to development is important. To reassure Malcolm Chisholm, I am glad that cycling infrastructure will receive £3.9 million from the extra spending as a result of the autumn statement—every little helps. It would be nice for all active travel to have 10 per cent of the transport budget, but individuals must be encouraged to take part in activities such as walking; such behavioural change must be brought to the process. The budget can recognise a spend by the Government, but people must respond if we are to make the country healthier and ensure that we travel more carefully.
I feel strongly about one issue that is in the Finance Committee’s report and which various committees have mentioned: broadband. I am glad that, in his introduction to the debate, Kenny Gibson pointed out that very-high-speed broadband is excellent for downloading movies, but I have not found it difficult to watch the iPlayer at a speed of 2MB or 4MB.
If people in my constituency, in the north of Scotland, had 2MB or 4MB regularly, they would be able to do business and have the way of life that would allow them to participate in and improve the sustainable economic development that we are keen to have. That is not the dash for high-speed broadband that is big news for people in the cities. The situation is not good enough, which is why I am glad that Highlands and Islands Enterprise and other groups—with the help of European, British and Scottish Government money—will press forward with the broadband case.
It is essential that we get in place as early as possible the systems that will work in the most out-of-the-way places, because there is no way that we can lay fibre to the most remote communities. That is why improved broadband via satellite and so on, which is becoming a way forward, must be funded, because the British Telecoms of this world and other providers are only looking for a market. Because there are so few people in those areas, they will not provide a service, so we must back such development with public money. If I want to see a priority, it is an increase in that area.
The third point to concentrate on from the RACCE committee perspective is the climate challenge fund and climate change issues. I am delighted to have heard from the environment minister that the Government has agreed to our suggestion that the climate challenge fund, which has been so successful for many different communities, should have targets that allow the people who take up the fund to then create a commercial activity beyond it. That is a step forward and I am delighted that that part of the Finance Committee report has already been delivered.
However, I am not entirely convinced that every committee has taken mainstreaming the whole issue of climate change seriously. Last year, we asked each committee that was making reports to the Finance Committee to come up with means whereby they would assess whether the climate change obligations of the whole of the Climate Change (Scotland) Act 2009 were being met.
I am sorry, I do not have time. You may get to make a speech, you never know.
From the RACCE committee perspective, we want to see climate change issues mainstreamed in a good deal more detail and indeed not consigned to paragraphs 194 to 198—they should be up front. We look forward to such a change in the next budget process.
We hope that the cabinet secretary can reassure us on the issues that I have told members about in this late afternoon, end-of-term speech that is nevertheless the precursor to a budget that will take Scotland forward, attempts to measure things more accurately than before and, indeed, is beginning to deliver for this country in a way that we can be proud of.
As a member of the Finance Committee, I was pleased that the entire committee was able to agree on its report, as that was not the case last year. As our budget from Westminster continues to shrink annually, the cabinet secretary’s job correspondingly gets that bit tougher, and it is vital that the whole chamber reflects the cross-party support at committee level for the Government’s efforts to do the best for Scotland.
The committee took evidence from a range of witnesses, some of whom were supportive of the budget and some of whom raised concerns. I am glad that the committee took the full range of views on board and produced a balanced, thoughtful report that provides praise and constructive suggestions in equal measure, in a manner that will hopefully aid the cabinet secretary in his efforts.
Although I recognise that this is a national budget, I want to take some time to lay out what the budget means for the Highlands and Islands.
The cabinet secretary has done a good job in doing what he can, given the limitations on the Government. It is becoming intolerable that, when we talk about having control of our budget and the tax system and about raising our own funds and deciding how best to invest, other members in other parties seem to think that that is a crazy idea. The ability to do that will ensure that we can make a difference to the economy of this country.
To pick up on a couple of specific points, I welcome the £32.4 million for Highlands and Islands Airports Limited—that is the 10 small regional airports as well as Dundee airport. Those small airports provide an essential service and provide jobs and an infrastructure that would otherwise be absent. They therefore contribute to economic growth.
Sorry—I beg your pardon, Presiding Officer.
The continuing regeneration of our island populations, as confirmed by the recent census results that were released this week, is undoubtedly due in part to that type of support. The Scottish Government’s funding of the air discount scheme also ensures that those services remain affordable for most of our constituents.
An important issue that was examined by my committee as well as the Rural Affairs, Climate Change and Environment Committee and the Economy, Energy and Tourism Committee was the Government’s stated commitment to
“deliver digital connectivity across the whole of Scotland by 2020”.
We heard from the Scottish Chambers of Commerce, which correctly pointed out the frustrations in the Highlands and Islands at the lack of availability of fast and reliable broadband, which can inhibit economic development. Investment in that, particularly in geographically remote areas, can be viewed as contributing to economic growth. It is vital that all of Scotland has reliable internet access, and I once again echo the committee’s request for the Government to examine the need to prioritise that.
In the time that I have left, I will reflect on our approach to economic policy. There has been ample discussion in the chamber of the need for and concentration on economic growth, as if that on its own is a silver bullet for the tough times that ordinary families face. However, we should remember that, during the early years of the new Labour Government, economic growth also meant a growing gap between the richest and poorest in our society.
A number of witnesses who gave evidence to our committee said that the increase in the health budget made the rest of the budget difficult for the cabinet secretary. However, in other reports that have not focused on economic growth, good health has been a priority, so we should recognise that investment.
However, we should begin to rebalance our ideas about what constitutes a strong economy. An economic approach that is based on the financial sector, where money begets money with no discernible communal benefit, seems to be neither strong nor sustainable. Although it is more than a year old, I recommend to members—as Patrick Harvie did in the budget debate last year—the Carnegie UK Trust’s report “More Than GDP: Measuring What Matters”, which makes a far more thorough and eloquent case for such an approach.
I commend the budget, and look forward to seeing it help ordinary Scots in these tough times.
I am pleased to be able to speak in the debate, although I am not a member of the Finance Committee. I commend the committee for its work in producing such a comprehensive report, which I have had the benefit of reading.
The report correctly identifies the context for the draft budget as one that is as challenging as any that a Scottish finance secretary has ever had to deal with. It is challenging for two reasons: first, because of the generally grim economic circumstances; and, secondly, because of the cuts that are being imposed by the Westminster Government, which amount to a real-terms cut of 11 per cent over four years and, within that, a capital cut of almost 26 per cent.
Gavin Brown might like to pretend that there is no such thing as inflation but, in reality, that is just fantasy economics. Far from the chancellor’s promises of a much better outlook by now, the overall state of the economy is now much worse than when he took office. The prospect of a triple-dip recession, which is unheard of and unprecedented, looms large. The UK faces the loss of its coveted AAA rating, and the fiscal position has worsened rather than improved.
In its central aim of reducing the UK deficit, the austerity policy has failed, but, worse than that, it now appears that it has locked us into a downward spiral of economic misery, and the chancellor has no answer.
I do not have those figures to hand, but I think that the member is missing the point. The UK will possibly lose the AAA rating because of poor fiscal and economic policy. The chancellor has no answer except the promise of more austerity. What is perhaps more disappointing is that neither in London nor in Scotland does the Labour Party have any answer either, except perhaps from Johann Lamont, with her own special brand of austerity to be unveiled at some point in the future by her cuts commission. Her claim that many of this Parliament’s greatest achievements are unaffordable misses the fundamental point about any Scottish Government budget: that, by definition, it must be balanced, which therefore means that current policies are affordable.
If there is one aspect of the budget that might genuinely be held to be unaffordable, it is the £1 billion of private finance initiative payments that must be found annually. Buying infrastructure on a credit card was never affordable. That is perhaps the most unfortunate legacy in Scotland of the long years of the Labour-Liberal Democrat Administrations, and one that it will take a long time to forget.
I think that the clue is in the term “non-profit-distributing”.
It is tempting to assume that the thread of economic illiteracy runs through all the Opposition parties in the chamber but, from reading the committee report, I know that that is not the case. Opposition members have the same good grasp of economics as we have, which is perhaps why I see so little genuine criticism of the draft budget in the report. They do not criticise it because, in fact, they accept that it is a good budget that strikes a careful balance between social policy and economic policy; and between maintaining demand and confidence on the one hand, and providing the stimulus of capital investment on the other. It is a budget for both jobs and growth, maintaining jobs through a no compulsory redundancy policy and creating them and stimulating the economy through careful transfers from resource to capital.
When thinking about the budget, I always consult two advisers who have spoken to Scotland down through the centuries: Adam Smith, who defined our values of economic wisdom and prudence; and Robert Burns, who articulated our social conscience. Together, they represent our shared cultural values of good economics and an egalitarian social conscience—two sets of values that are not mutually exclusive but mutually reinforcing. I suggest that each of those advisers would be happy with the finance secretary’s budget and its careful compromise.
It is a good budget for jobs and growth, but we will in the future see even better budgets when Mr Swinney has the full range of fiscal levers and full prudent borrowing powers when Scotland is independent.
I am very grateful, Presiding Officer. It will be enough time to make one simple point.
I have been calling for the publication of the report on policies and proposals under the Climate Change (Scotland) Act 2009. I called for its publication in advance of the introduction of the draft budget so that committees could undertake detailed and informed scrutiny of whether the budget fully funds the climate change policies that the Government is required to implement. That is not my request; it is a requirement of the 2009 act to revise the RPP given the failure to meet the first climate change target. The Government has not published that in time for budget scrutiny, so I ask the cabinet secretary to give a simple, clear, cast-iron guarantee that he will publish the document so that we understand the Government’s climate change policies before he asks members to vote on the budget.
As I stand to make my closing speech, I have fresh in my mind the speech of Mike MacKenzie, who tickled me rather towards the end of his speech when he said of NPD that the clue is in the name. He genuinely believes that there is no profit in the non-profit-distributing model. He and the other SNP back benchers are going to be devastated when they find out that it is capped profit instead of no profit. I have to say that, up to now, it has been no profit, but that is basically because it has no been happening since it was announced in December 2010.
Yes, the NPD programme has taken a little bit longer than we expected. It was announced in December 2010 and re-announced in September 2011, when the figures were put in front of the Parliament. Something happened during that year to reduce use of NPD almost to zero. The figure is a mere £20 million in the current financial year. The cabinet secretary stood up in the chamber and said that he is not disappointed by that because there is £900 million in procurement, yet he told the Finance Committee that, next year, £338 million will be spent. Apparently, there is £900 million in procurement, but only £338 million will be spent in the financial year 2013-14. That is the first thing that the Government has failed badly on when it comes to capital spending.
Its other big-ticket item to win back Scotland’s economy is the magical resource-to-capital plan. Apparently, more than £700 million will be shifted from resource to capital during the current spending review period to create jobs. There are just a couple of flaws in the suggestion. One is that a big slice of the money comes from savings from the Forth crossing, so Mr Swinney is saving money from one capital project, putting it into others and somehow describing that as a transfer from resource to capital when it is, of course, simply from capital to capital.
The other flaw concerns the enterprise agencies. More than £200 million over two financial years—the current year and next year—was going to be transferred by the enterprise agencies. However, we heard recently that the figure is not £200 million at all but is going to be only £99 million. We have lost £101 million of transfer from resource to capital over the course of a year. At the same time, with the other hand, the cabinet secretary is demanding money for shovel-ready projects because the enterprise agencies have lots of them. Perhaps if they transferred the money from resource to capital that they said they were going to transfer, there would be no need for the money for the enterprise agencies’ shovel-ready projects.
The central question that the committee asked was whether the budget is a budget for the economy. That is the yardstick by which the Scottish Government wanted to be judged. Indeed, a week before the budget was announced, Mr Swinney said:
“I guarantee I will squeeze every penny out of the money we have available to us to boost the pace of recovery and to support the hard pressed households of Scotland.”
The central theme of the Finance Committee’s investigations was to look at whether the budget is a budget for the economy, and we found evidence in favour of that proposition. There was an evidence-taking session at which evidence was presented, or asserted, that it is a strong budget for the economy. The only difficulty for the Government is that all that assertion came from one person—it came from the cabinet secretary himself, who said that he believes that it is a budget for the economy.
It was difficult to find one single other organisation that genuinely believes that it is a budget for the economy. The Scottish Council for Development and Industry stated in its written evidence:
“it is difficult to discern a pattern of spending which aligns with successive Scottish Executive’s/Scottish Government’s top priority/purpose of increasing sustainable economic growth.”
“Spending on the ... NHS ... budget has ... been favoured at the expense of others”.
“Whilst this meets the election pledge of passing on the UK Health Barnett consequentials, it is less clear how it helps secure faster economic growth”.
Perhaps most damagingly of all for the Scottish Government, the Finance Committee’s own budget adviser said:
“Given the relative changes in other budgets, it is difficult to avoid the conclusion that maintaining current spending on health is currently the main priority of the Scottish Government.”
The committee was encouraged to investigate the claims as to whether or not this was a budget for the economy. When we look at what is happening to colleges, for example, at a time of high youth employment, it is difficult to suggest that this is a budget for the economy. When we look at what is happening to housing, with the construction sector on its knees, it is difficult to say that this is a budget for the economy. When we look at the new taxes—the retail levy or the empty property tax—it is difficult to see how those support the economy. When the Government increases the amount that it expects to take in business rates by more than £200 million a year, year on year, it is almost impossible to say that this is a budget for the economy.
This has been an interesting debate but the question remains: is this a budget for jobs and growth? The result of the debate is very clear: we are unable to tell whether that is the case, because the Government has not looked at an analysis that would provide us with that information.
Many people talked about how the budget is presented. It seems that, year after year, we talk about the need for level 4 figures and for us to be able to see the budget’s outcomes, not just the inputs. We talk about that, but we are no further forward. We need an analysis that tells us whether the budget is doing what it is supposed to be doing. The only evidence is what we read in the newspapers and see in our communities: poor economic growth and a falling number of jobs. Therefore, we can say only that it does not look like a budget for jobs and growth.
Others have talked about how we measure things. Should we be looking at more than GDP to identify growth—should we be looking at the wellbeing index, for example? It is very difficult even to look at the Government’s own measures for this budget’s outcomes. I hope that the Government will take that issue away and reconsider it, so that we can measure things.
We in the Labour Party are clear that the priorities need to be expenditure on housing and colleges. Expenditure on housing needs to be a priority because that would not only provide homes and jobs but tackle fuel poverty and our carbon emissions. Expenditure on colleges needs to be a priority because colleges provide education and the skills that we will need to do those very things in housing.
Many speakers—Elaine Murray in particular—talked about housing and its preventative spend role. The SFHA has also talked about that—it mentioned fewer people being hospitalised in its submission on the draft budget. We also know that good housing enhances educational outcomes and attainment; indeed, it has an effect on crime and employment. If we are looking at preventative spend, we should acknowledge that housing is one of the main tenets in that regard.
Will Rhoda Grant welcome the fact—which other members of her party do not seem to welcome—that more than 2,050 affordable houses were completed last year than were completed in the final year of her party’s Government?
I welcome any house that is completed. The problem is the Government’s policy. Malcolm Chisholm made the point eloquently when he said that the SNP started its term in government with a manifesto promise that it was going to build 6,000 social rented houses per annum. However, those have become “affordable houses”, the definition of which changes daily. Malcolm Chisholm clearly said that despite additional funding being levered in—the £50 million that was announced yesterday—the target has not changed. We are seeing inputs but we are not seeing outcomes. If this Government was really looking at outcomes, surely more funding for affordable housing would mean that the target would grow. However, the target is static—indeed, it has fallen, in real terms, because we will not see the 6,000 social rented houses that were promised in the Government’s manifesto.
No matter what the Government puts in, we are not getting anything out, which is hugely disappointing, given housing spend’s role in providing not only good housing but jobs and apprenticeships.
Elaine Murray and others touched on the housing association grant, which is an issue of real concern especially—if I can be parochial—in my Highlands and Islands area. HAG falls because people cannot build in rural areas through lack of economies of scale. Elaine Murray mentioned Aberdeenshire housing associations, which are planning only 1.4 per cent of their normal housing build. That will have a devastating impact on those communities and we need to do something now about the situation. Obviously we welcome any efficiencies that can be made but I have to say that if people are looking only at numbers rather than at providing houses where they are needed, performance will be very poor indeed.
The housing budget can also be used for retrofitting, which ensures that not only the houses that we build but those that have already been built can be decarbonised. The Economy, Energy and Tourism Committee has discussed the huge issue of fuel poverty, and I was disappointed that the SNP majority on the committee voted down a recommendation that the Government spend no less than £100 million on the matter. I hope that the Government will consider using some housing funds for retrofitting not only to lift people out of fuel poverty but to do something about our climate change targets, which were mentioned by Rob Gibson and Patrick Harvie, who, in his minute, made a very passionate plea for the RPP to be published. The fact is that all those retrofitting projects would have an impact on climate change targets.
I am very aware that my time is running out, but I want to touch on the revenue to capital issue, which certainly came up at the Economy, Energy and Tourism Committee. Many witnesses questioned whether the move was indeed adding to the number of jobs. The fact is that we have lost 51,700 public sector jobs and 41,300 direct or indirect construction jobs; the revenue that has been moved to capital expenditure is going somewhere other than Scottish construction. There is real concern about leakage and things moving abroad, with all the impact that that has on our communities.
I very much hope that the Government will take those points into account and use the powers that it already has to provide economic growth and jobs in Scotland.
Mr Kelly reminded Parliament that, somewhere along the line, a distinguished parliamentary tradition was created of making the draft budget the last topic of debate before Parliament rises for the Christmas recess. Certainly when I became the finance minister it was a source of great joy to me that this was how I would spend my last afternoon in Parliament before retreating to my constituency for the summer recess—[Interruption.] I mean the Christmas recess.
Of course, the debate used to be populated by other great beasts who sat on the Labour benches for four years. David Whitton and Andy Kerr would open and conclude for the Labour Party and would, on various occasions, refer to me as Santa, Scrooge, Ebenezer and so on. I see that Mr Macintosh has decided to go down the same route. I simply remind him of what happened to Mr Kerr and Mr Whitton, who are no longer with us. He might join the two ugly sisters at some stage, if he continues to make the same tiresome contribution to these debates.
Of course, we have also heard very different contributions to the debate. My friends and colleagues Chic Brodie, Jean Urquhart and Kenneth Gibson set an important tone with thoughtful speeches about how the Finance Committee has tried to help Parliament by undertaking genuine parliamentary scrutiny and dispassionate analysis of whether or not the Government is making progress in fulfilling its commitments to the people, and whether the financial propositions for which I am responsible are supporting the Government in its wider agenda.
At the other end of the spectrum, the award for the most miserable contribution to the debate must, without a doubt, have to go to James Kelly, who gave us six minutes of undiluted miserabilism about the budget. He talked about the lack of focus on outcomes in the Finance Committee’s report, but at no stage did he mention the national performance framework that is available 24 hours a day, seven days a week, 365 days a year for members to assess whether the Government is making progress on achieving outcomes.
James Kelly also did not manage to mention the carbon assessment that the Government publishes with the budget, or the analysis of carbon reduction. He managed to mention the Audit Scotland report that was very critical of health inequalities, but he managed not to mention the 40 per cent decline in deaths from heart disease and strokes in our country. That is not just this Government’s responsibility; our predecessors also contributed significantly to that. Where was the balanced contribution from Mr Kelly for which Jean Urquhart and Chic Brodie appealed? If anyone wishes to do some Christmas reading on how to deliver a miserable speech to Parliament, I suggest that they look at Mr Kelly’s speech. It will suffice as a guide in every respect.
We have had a pretty substantive discussion about capital issues and the timing of NPD projects. Members are familiar with the fact that the Government gives estimates for its projected plans for some of those projects. Some projects encounter difficulties; for example, it is clear that the Aberdeen western peripheral route project has had great difficulty. With the Edinburgh sick kids hospital, we have had to resolve significant issues to do with land access with the private consortium that runs The Royal infirmary of Edinburgh. Those issues are now happily resolved. I have told members that £900 million of NPD work is currently in procurement and will, of course, be undertaken and deployed.
There has been comment on whether the capital programme has delivered enough work to the construction sector. I would be the first to admit that construction has had a very difficult time over the past few years, but let me share with members a quote from 19 September 2012 from Ken Gillespie, who is the managing director of Morrison Construction. He said:
“Construction feels that we have a stronger market in Scotland than we have elsewhere in the UK ... The Scottish Government identified very early in this recessionary period the benefits of infrastructure investment to the economy. Unlike central government, they got on and did it. We are seeing a pipeline of projects coming to market which will support economic recovery in Scotland ... The Scottish Government’s procurement agency, the Scottish Futures Trust, are adopting a far more sophisticated approach to public sector procurement.”
I will simply leave those words with members for them to reflect on in the spirit that my colleagues asked for in considering dispassionate evidence from observers.
There have been substantive contributions from Elaine Murray and Malcolm Chisholm to the debate on housing expenditure. I simply make the point that I have made on numerous occasions; the housing outcomes that we want to achieve cannot be delivered or determined only by whether we provide the same amount of money that has been provided in the past because there are also questions of efficiency and value. Members will, at this time of financial constraint, expect me to try to deliver efficiency and value in the housing programme. I have, of course, put an extra £200 million into the budget in the course of this year, and the Government will look to strengthen housing expenditure where possible.
I do not accept that evidence because, on other occasions when we have heard about pressure on the level of the housing association grant and been told that we cannot deliver the outcomes, we have been able to go on to do that. The Government will, of course, continue to engage in dialogue with housing associations.
If Mr Chisholm will forgive me, I have to conclude my remarks. I apologise to him, because I am about to mention him, into the bargain. However, I cannot take an intervention.
Ultimately, it all comes down to choices; I accept that entirely and I have made my choices and set them out in the budget. It is now up to other people to make their choices.
In his speech, Mr Chisholm said that Labour is very focused on housing and college places. He went on to ask for more money for active travel, and Ken Macintosh asked for more money for the Edinburgh to Glasgow rail improvement programme. However, nobody graced this great Christmas debate with an idea of where the money for that would come from.
Mr Brown, to his credit, said that he does not like empty property relief or business rates, and that the health budget is too high. That is an interesting point. The Conservatives are now supporting reductions in health expenditure—
The serious point is that the test for all parties in Parliament is whether they can offer constructive contributions about how money in the budget can be redeployed. Let us hear those suggestions; we have never heard them from the Labour Party or the Conservatives. We look forward to hearing the proposals of the Opposition: we are all ears.
I congratulate you on giving me my full speaking time this year, Presiding Officer. I think that last year I got a bit curtailed by somebody.
In closing this debate on behalf of the committee, I thank the cabinet secretary for his assurances that the committee’s report will be responded to in detail. We look forward to that response.
I will address three topics to start with, before dealing with statements that were made in the debate and, finally, winding up with some comments on the report.
The first topic is skills and employment. As the convener said, the committee has undertaken a separate inquiry into improving employability and published its report on that earlier this month—we hope that that will be the subject of the very next debate in the chamber.
Some issues arose that affected both that inquiry and budget scrutiny, and today I will focus on the points that emerged during the draft budget examination. One of the points that were highlighted in the draft budget report was that made by Professor Jeremy Peat during a round-table discussion with the David Hume Institute, when he spoke about making the best use of people and developing people with the right skills.
I want to draw attention to a few points on that theme of human capital. For example, in the session with the David Hume Institute, Professor Donald MacRae of Lloyds Banking Group Scotland said:
“I do not believe that the explanation for our low economic performance is a low level of human skills or human capital.”
“Not only is the quality of Scotland’s human capital strong—indeed, it is one of our genuine sources of economic potential—but it is particularly strong at the higher education level.”
However, he went on to say:
“The human capital challenge emerges not with more highly skilled people but with those who do jobs requiring lower levels of skills and qualifications. If I wanted to worry about something in the human capital sphere in Scotland, it would be that.”—[Official Report, Finance Committee, 3 October 2012; c 1656.]
The second topic that I want to touch on is picking winners, which has already been commented on by one or two speakers, including Stewart Stevenson. In written evidence to the committee, Professor John Kay said:
“the appropriate industrial strategy for Scotland is that it should be based on the principle that small countries succeed in the world economy by exporting narrow specialisations on a global scale.”
He suggests that that means picking winners by identifying and promoting sectors in which Scotland has a genuine competitive advantage and that
“the emphasis should be on sectors that are winners, not on ones that we would like to be winners.”
Professor Kay’s contribution was thought provoking, but not everybody agreed with it. For example, a contrasting view on the issue of picking winners was discussed at our round-table session with the David Hume Institute. At the beginning of the session, the convener talked about the evidence that the committee had heard on access to capital and mentioned the point that had been made to us about companies reaching a point at which significant capital is required and they may move the business into another model, for example through being acquired. Professor Colin Mason of the Adam Smith business school at the University of Glasgow said:
“The challenge is, therefore, not just to create more high-growth firms but to keep them owned and managed in Scotland. How do we do that? We cannot simply pick winners. We cannot predict in advance where high-growth firms will come from either at the firm level or the sectoral level. A lot of companies that we interviewed said that support at the early stages is critical. We need, therefore, a package of early support that is relevant to potentially high-growth firms. That means things like equity finance, export assistance, and management training.”—[Official Report, Finance Committee, 3 October 2012; c 1660-1.]
Professor Kay considered that
“the contribution that the whisky industry makes to the Scottish economy is significantly overestimated.”
That was quite a controversial point. He was disappointed in the industry’s contribution, and argued:
“The growth of the Scottish whisky industry is not that impressive, given the extent of global growth in spirits consumption. There are a lot of questions that we should be asking about the whisky industry and its contribution to Scotland.”—[Official Report, Finance Committee, 24 October 2012; c 1713.]
More generally in relation to the food and drink industry, Professor Kay stated that he is “not sure” that Scotland’s potential to have a premium brand in food and drink is being realised.
Although the session was not part of our draft budget scrutiny, the whisky sector featured in our evidence session with Scottish Enterprise earlier this year, at which the chief executive of Scottish Enterprise said:
“The burgeoning middle class in Brazil offers huge opportunities for Scottish consumer goods; for example, one of the fastest-growing markets for whisky is Brazil.”—[Official Report, Finance Committee, 9 May 2012; c 1085.]
Given the points that were made in evidence to the committee, we have invited the Scottish Government to respond to the views of Professor Kay regarding its role in the development of skills and capabilities in areas where Scotland has a genuine competitive advantage and how best to realise Scotland’s potential to have a premium brand in food and drink.
The third topic that I will address, which has also been mentioned, is non-domestic rates income, which is addressed on pages 23 and 24 of the report. The committee notes the evidence of Scottish Chambers of Commerce and its comments about NDRI. It said that its members
“are acutely aware that they are essentially paying a larger share towards the overall spend in the Scottish budget.”
Gavin Brown touched on that latterly, as well. Scottish Chambers of Commerce went on to say:
“We believe that that can go only so far before it becomes unsustainable; it cannot go on for ever. We must look for a more equitable way of allocating finance to ensure that non-domestic rates play a proportionate role.”—[Official Report, Finance Committee, 26 September 2012; c 1634.]
The other side to that is that the committee is aware that control over taxes is severely limited at the moment and that, if a company makes profits, we are unable to benefit through corporation tax.
The committee notes the concern of the Economy, Energy and Tourism Committee about any potential shortfall in non-domestic rates income and the impact that that could have. The Finance Committee has, therefore, asked the Scottish Government for more regular reports on collection performance.
I will make a few comments on the issues that were raised in the debate. This afternoon, one of the key issues was housing. A number of members have asked where, if more money is to be put into housing, it is to come from. When I intervened on Ken Macintosh, he did not give me an answer to that.
Elaine Murray talked about the £40,000 level of HAG and whether that was sustainable. However, she forgot to mention that there have been free reserves in housing associations. Although those cannot be continued year after year, a number of housing associations—for example, Parkhead Housing Association in my constituency—have used their free reserves to continue their development programme. Nevertheless, everybody accepts that that cannot go on for ever.
There is evidence that some housing associations may have used up their reserves and that some—those that were formed by stock transfer—never had any. However, others still have reserves. I am sure that we will get a response on that from the Government in due course.
Willie Rennie and others mentioned preventative spending, in which context £1 of spending can maybe save £5 here, £7 there or £9 somewhere else. We are now not choosing between preventative spending and other spending; we are having to choose between different forms of preventative spending and deciding where the money is to come from. The problem is in choosing where to disinvest.
I move on to a few comments on the report. The report strikes a good balance; it neither is unduly critical of the Government nor blindly praises the Government for all that it does. The final sentence of paragraph 226 makes that clear. The report did not need any amendment—as Malcolm Chisholm said, it was an excellent report. However, a critical amendment to the report was proposed at the committee and I felt duty bound to propose a balancing one that praised the Government. The reality was that neither amendment was necessary, and I think that it was good that both were defeated. I think that Jean Urquhart got it right by voting against both amendments.
It is important that the Parliament’s committees system works well. There is a danger that MSPs in the party of Government blindly support the Government, and Opposition MSPs blindly oppose the Government. Each of us faces the individual challenge of balancing our duties to party and to Parliament as a whole, and I believe that the Finance Committee has had some success in doing that.
In conclusion, the committee has raised a number of crucial issues, to which we hope the Scottish Government will respond. The committee will seek to continue its scrutiny of those issues through its draft budget examination next year and through other aspects of our work programme, such as the work on improving employability, our inquiry into demographic change and the ageing population and our scrutiny of the tax powers under the Scotland Act 2012. Those powers have the potential to put much more teeth into future budgets.
I support the motion in the name of the convener.