Draft Budget 2014-15

Part of the debate – in the Scottish Parliament on 19th December 2013.

Alert me about debates like this

Photo of Murdo Fraser Murdo Fraser Conservative

I will concentrate my remarks on the Finance Committee’s report, and specifically on the recommendations that were made to that committee by the Economy, Energy and Tourism Committee, which I have the pleasure of convening. A number of those recommendations were picked up directly in the Finance Committee’s observations.

I think that we would all agree that we want the Scottish Government to use its budget to maximise Scotland’s economic potential. In practice, that means putting in place measures that will assist with the growth of Scotland’s private sector businesses and industries. A number of aspects of the draft budget will have an impact on the ability of businesses to do just that, and I will highlight those.

One issue that came up when the EETC took evidence on the draft budget was procurement opportunities, particularly for small and medium-sized enterprises. I am well aware that the Procurement Reform (Scotland) Bill has been introduced and is being scrutinised by the Infrastructure and Capital Investment Committee. It was clear to us that there is a large burden of expectation on the bill to improve the availability of public contracts for smaller, more local businesses.

During the budget process I asked the cabinet secretary what percentage of Scottish Government spend was won by domestic businesses. His reply was that 80 per cent of the contracts that were awarded through the public contracts Scotland portal go to Scottish businesses. However, what is not clear is whether the 80 per cent of the number of contracts awarded represents an equivalent share of the value of the contracts. It might be, for example, that very large value infrastructure projects are going to companies outwith Scotland; we need to know whether that is the case in order to get a true picture of the benefit to the Scottish economy from the Government’s procurement spend. I was pleased that our committee asked the Infrastructure and Capital Investment Committee to pursue that issue as part of its scrutiny of the Procurement Reform (Scotland) Bill.

Our committee spent quite a lot of time looking at the performance of Scottish Enterprise, Highlands and Islands Enterprise, and the business gateway. Scottish Enterprise has an ambitious target of increasing the number of its account-managed companies by 20 per cent over the period to 2015. On the basis of its record to date, it is doubtful whether that can be achieved. That is an area on which we need more evidence to see what steps are being taken by both Scottish Enterprise and HIE to accelerate the rate of increase. It is clearly in everyone’s interest that we see more high-growth companies being brought within the reach of our enterprise network.

Concerns were raised with the committee about the operation of the business gateway. The committee has looked at that issue in the past, and we have asked the Scottish Government for further information on how it views the performance of the network. Specifically, we have suggested to the Scottish Government that now is the time for a review of small business support that would cover both the business gateway network and the work of the enterprise agencies. In view of the importance of those agencies to growth in the economy, it is important that we keep that under constant scrutiny.

I was surprised to see that Scottish Enterprise is seeking to fill a gap in its income for the coming year of £26.3 million from what it refers to as “further asset realisations”, which are in effect property sales over and above the routine annual disposal of excess assets. Scottish Enterprise admitted in evidence to the committee:

“This may not be the best time, in the economy, to dispose of or to realise money from those assets.”—[Official Report, Economy, Energy and Tourism Committee, 30 September 2013; c 3307.]

Indeed. If they are commercial property assets, as a great majority of them will be, it might not be the best time to sell them when the commercial property market is very depressed and they might achieve a very low value—in effect, we might be talking about a fire sale. That is a matter of some concern, and the committee agreed that we should seek further information on what is proposed; that was picked up by the Finance Committee in its report.

The Scottish Government has put great store by its principle of prioritising capital spend in order to stimulate the economy. It seems rather to turn things on their head for Scottish Enterprise to dispose of its capital assets at a time when they might not realise the best price to be achieved in normal economic times in order to fill a gap in its annual income. I am not sure that that amounts to responsible stewardship of the public finances.

Scottish Enterprise, Highlands and Islands Enterprise, Skills Development Scotland, VisitScotland and the Scottish Further and Higher Education Funding Council are all part of the strategic forum, which requires to make savings of £40 million in each of the next two financial years. From the information provided to us, the projected savings amounted to £27 million for 2014-15. We must therefore assume that the Scottish funding council, which is not under our committee’s remit, is contributing the missing £13 million in savings, but it would be helpful to have that clarified. There seemed to be a certain lack of detail from the cabinet secretary on that point when he gave evidence to the committee.

The committee is concerned, too, about the funding of fuel poverty programmes. We heard in evidence, as we have heard it in previous years, that £200 million must be spent annually to keep up to date with fuel poverty programmes. Some of that money comes from the energy companies, but there is a lack of clarity about how much exactly is coming from the private sector. It is important that that is identified.

As we have heard already in the debate, the Scottish Government decided to take £10 million out of the fuel poverty budget to provide support to people impacted by the underoccupancy charge for social housing. To my mind, that is the wrong priority. We already have a major issue of fuel poverty in Scotland and it is a matter of regret that the fuel poverty budget has been raided.

There is much in the Scottish Government’s budget that can be supported, but there are a number of key areas of concern. I hope that, as the budget progresses through Parliament, we will see those concerns addressed and a greater focus on private sector business growth and support.