Draft Budget 2017-18

– in the Scottish Parliament at on 15 December 2016.

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Photo of Kenneth Macintosh Kenneth Macintosh Labour

We move to the statement by Derek Mackay on the draft budget. The cabinet secretary will take questions at the end of his statement, so there should be no interruptions.

Photo of Derek Mackay Derek Mackay Scottish National Party

It is a great privilege to set out to the Parliament my first draft budget, which is the first budget in which the Scottish Government will make use of powers that have been devolved through the Scotland Act 2016, including income tax powers. It is an historic budget, delivered in challenging economic and political circumstances.

The tax and spending proposals that I will set out today will improve our public services, support our economy and provide the foundations for future sustainable growth and prosperity. Over the coming weeks, I will work with all parties and stakeholders to build support for the proposals.

The Scottish economy has grown over the past year, despite weak global growth and the impact of a low oil price on our oil and gas sector. Unemployment, although it varies from month to month, is down over the past year, and employment is higher than it was before the 2008 financial crisis.

The United Kingdom Government’s plans for a hard Brexit represent a key risk to Scotland’s economy. The fall in the pound is pushing up inflation. That puts pressure on household budgets, and companies are re-evaluating their plans.

Those risks are compounded by the UK Government’s continued austerity programme. In the coming years, we will face cuts to our funding for public services and to social security. Between 2010-11 and 2019-20, Tory austerity will see our fiscal departmental expenditure limit budget, which funds discretionary spending and capital investment, fall by more than 9 per cent, or £2.9 billion in real terms, with a share of a further £3.5 billion of cuts by 2019-20 still to come.

As a result of those pressures, the economic forecasts that I am publishing today, which underpin our tax projections, assume that Scottish gross domestic product will grow by around 1 per cent in 2016-17 and by 1.3 per cent in 2017-18. To put that in context, Scotland’s GDP has historically grown by around 2 per cent a year. The lower forecasts reflect the impact of the Brexit vote.

The economic uncertainty makes it all the more important that this budget provides support for the economy, jobs and household incomes through a fair and balanced set of tax and spending proposals. This Government will not follow the same damaging approach as is being taken at Westminster.

The new devolved powers mean that more of the money that we spend will be funded from taxes that are set by this Parliament. In addition to the currently devolved taxes, we will introduce a bill to devolve air passenger duty to Scotland. The new tax will be known as air departure tax and will be operational from 2018. We will reduce the tax burden by 50 per cent by the end of this parliamentary session, thereby improving international connectivity and boosting tourism.

In all our tax proposals for 2017-18, I am grateful to the Scottish Fiscal Commission for scrutinising and endorsing the forecasts of receipts. This Government is committed to a principles-based approach to taxation and, in particular, to the principle that tax should be proportionate to the ability to pay.

Our land and buildings transaction tax has already lifted 15,000 households out of tax in comparison with those who pay stamp duty in the rest of the UK—we are supporting people into home ownership. Following the successful introduction of LBTT, I propose to keep residential and non-residential rates and bands for 2017-18 the same as this year—a tax freeze that maintains our progressive approach. I also propose that the Scottish landfill tax, which contributes to our environmental objectives, will rise only in line with retail prices index inflation.

In using the Scotland Act 2016 income tax powers for the very first time, we must take a balanced approach. Let me be clear. I will not pass on the costs of UK austerity to the household budgets of taxpayers on the lowest incomes. I can confirm that we will protect taxpayers on low and middle incomes at a time of rising inflation by freezing the basic rate of income tax. However, we cannot accept, at this time of austerity, top earners benefiting from an inflation-busting tax cut. Therefore, I will limit the increase in the higher rate threshold to inflation and I will not give a substantial real-terms tax cut to the top 10 per cent of income earners. The higher rate threshold will therefore be set at £43,430.

Although I sympathise with those who have argued for an increase in the additional rate, I have had to balance that with the risk to our economy, and I am maintaining the current rate.

This Government’s approach—endorsed by the electorate—is the right thing to do for our economy, for jobs and for public services. For the first time, there is now a direct link between Scotland’s economic performance and public spending.

This Government has consistently delivered a competitive environment for business and we have used our tax powers to support growth. Not only have we ensured that smaller businesses pay zero or lower rates of non-residential LBTT, but large businesses enjoy a lower rate than in the rest of the UK.

The introduction of the small business bonus scheme has saved businesses more than £1 billion since its introduction in 2008. I am pleased to set out measures that confirm a highly competitive business rates regime for Scotland in 2017-18, particularly for the thousands of small businesses in Scotland.

First, I will reduce the business rates poundage by 3.7 per cent to 46.6p. Secondly, we will expand the small business bonus scheme by raising the eligibility threshold for 100 per cent relief to a rateable value of £15,000, which will lift 100,000 properties out of rates altogether. Thirdly, although I have listened carefully to business, just as I cannot cut tax for the wealthiest individuals, I cannot cut the rate of the large business supplement. However, I will restrict the supplement to the very largest businesses by increasing the threshold to £51,000, which will reduce the tax burden on 8,000 businesses.

In addition, I will match the chancellor’s recently announced rates reliefs for rural areas, and I intend to match reliefs for fibre infrastructure, subject to confirmation of the detail.

Finally, I come to the question of transitional relief following revaluation. The introduction of such relief would place a significant burden on many of our smaller businesses. That is not the right way forward. Given that all businesses will benefit from the lower poundage that I have announced today, I do not propose to run a transitional relief scheme.

The poundage cut, the small business bonus extension, and the large business supplement—which is focused only on the very biggest businesses—all represent a good deal for Scottish business and a great deal for Scottish jobs. However, we will not stop there. To help small businesses grow, we will launch the £500 million Scottish growth scheme in 2017, offering financial support for business investment. That three-year scheme, which has now been approved by the Treasury, will provide investment guarantees, and some loans, to small and medium-sized firms that would otherwise struggle to grow because of a lack of finance.

Building on the success of the Dublin hub, we will increase support for our new innovation and investment hubs in Brussels, London and Berlin, and we will double the number of people who work for Scottish Development International in Europe to promote our exports. We will support our rural economy through the provision of increased support for the food and drink industry and more than £100 million of investment in digital connectivity to drive access to superfast broadband towards 100 per cent by 2021.

Today’s budget reaffirms this Government’s commitment to infrastructure investment. Over the next year, we will complete the combined M8/M74/M73 improvements—the M8 bundle—the iconic Queensferry crossing and the Aberdeen western peripheral route, and we will make progress on the A9 and the A96, among many other projects. We will also complete the electrification of the Glasgow to Edinburgh rail line and will introduce longer, faster and greener electric trains as part of our £5 billion investment plans for Scotland’s rail network by 2019.

Following recent performance issues, some in the chamber have called for a rail fares freeze, which they have claimed would cost around £2 million. However, the real cumulative cost of a one-year freeze to the first break point in the franchise would be £58 million. That would compromise the investment programme that is so vital to improving the performance of our rail network.

However, we recognise that investment can mean disruption for passengers, as we upgrade lines and introduce new stations, so I can announce that, in the coming financial year, we will invest not £2 million but £3 million in a package of targeted fare reductions to ease costs for passengers and thank them for their patience. The Minister for Transport and the Islands will set out more detail tomorrow.

Investment in our transport network is complemented by funding for city deals for Glasgow, Aberdeen and Inverness. We will continue to support city deals for Edinburgh, Dundee, Perth and Stirling, and we are considering the scope that exists for an Ayrshire growth deal. I can also announce that today I have signed, with Dundee City Council, the financial agreement to allow the Dundee central waterfront growth accelerator to go ahead, which will support economic growth in the area and 500 jobs. I will be inviting proposals from councils for two further tax increment financing projects in the coming year, which will leverage private investment in infrastructure.

This budget invests heavily in housing. We delivered our target of building 30,000 affordable homes in the previous session of Parliament. Looking forward, we will deliver at least 50,000 new affordable homes, including 35,000 for social rent, over the current session. Today’s budget confirms the provision of around £470 million of capital funding for housing in 2017-18, which, coupled with other funding mechanisms, will help to deliver that commitment.

This budget secures infrastructure investment of around £4 billion. That investment will underpin productivity growth and support an estimated 30,000 jobs. Investment in housing also helps to tackle climate change by improving the efficiency of our housing stock. Today’s budget will help us to meet our climate change targets. I have protected resources for zero waste and sustainable and active travel, and have increased funding for woodland creation, peatland restoration and the sustainable action fund. I can confirm that funding of more than £140 million will be provided in 2017-18 to support energy efficiency programmes as part of our commitment to invest at least £500 million over the course of the parliamentary session.

Delivering long-term economic growth requires investment in people as well as business. Closing the attainment gap, reducing child poverty and ensuring equality of access to higher education will generate long-term benefits for our economy and public finances. That is why we are prioritising education, and the budget provides the resources to match.

We will invest in skills and training, building on the success of our opportunities for all initiative and extensive consultation on the apprenticeship levy. Revenues from the levy mean that Scotland will receive £221 million in 2017-18. Let me be clear: it has been suggested that this is a new fund of £221 million, but it is not. The UK Government has given with one hand and taken away with the other. For the most part, the levy replaces existing funding for apprenticeships and related activity. However, I can confirm today that £221 million will be committed to interventions that support skills, training and employment in Scotland. In 2017-18, we will see the next stage in our expansion to 30,000 modern apprenticeship new starts a year, and we will also respond to the needs of employers by establishing a flexible workforce development fund. Details of funding have been published today, and the Minister for Employability and Training will set out further information tomorrow.

This budget also funds the expansion of early learning and childcare to 1,140 hours by the end of the parliamentary session by providing an initial £60 million to support the first phase of workforce and infrastructure development. Future years will see significant additional investment as we deliver on our commitment to transform childcare in our country. The Government’s defining mission is to raise educational attainment in our schools. At the election, we pledged £750 million over the course of this session to the attainment fund and, in a radical departure, we said that £100 million per year from that fund would be spent at the discretion of Scotland’s schools to help close the attainment gap. The revenue that we identified to fund that new stream of direct support was the increase in the council tax that will be paid by those in higher-band homes.

I know that many MSPs did not agree with that proposal. Parliament debated it and voted on it, and I have listened to Parliament’s views. However, I will not sacrifice the educational chances of Scotland’s poorest pupils and will not abandon our radical plan to give schools direct control over significant new resources. Instead, I can announce today that I will not simply make good on our pledge but will go further: next year, instead of £100 million going directly to schools, £120 million will be spent at the discretion of headteachers. That £120 million will fund a new pupil equity scheme. Schools across the country will be allocated around £1,200 for each pupil in primary 1 to secondary 3 who is eligible for free school meals. What is more, I will not fund that from the council tax; instead, I will use the Scottish Government’s own resources. Councils will keep the full value of the revenue from the council tax rebanding: every penny that is raised locally will be spent locally, as councils see fit. We will deliver our pledge to help schools close the attainment gap from central funds. We have listened, we have acted and we will deliver for Scotland’s poorest pupils.

However, we will not stop there. At a national level, we will also provide central funding of £50 million for closing the attainment gap; maintain the pupil teacher ratio following this week’s increase in teacher numbers; provide £60 million for our flagship early learning and childcare commitment; and invest over £1.6 billion in higher and further education, ensuring that access for eligible students remains free and maintaining 116,000 college places. The commitments that I am announcing today mean that, overall, national investment in education and skills will increase by £170 million this coming year. Let no one be in any doubt: from birth and the earliest years, through school and beyond, education is the Government’s number 1 priority.

Our mission to raise educational attainment will contribute to our efforts to address poverty and build a more equal society. As part of our social contract with the people of Scotland, we will provide £47 million to continue to mitigate the bedroom tax, and we will abolish it at the earliest opportunity. We will continue our support for the independent living fund and, as part of our new powers, we will begin to build a social security system that is based on dignity and respect.

I have published a public sector pay policy for 2017-18 that guarantees the Scottish living wage, offers those earning less than £22,000 a basic pay award of more than 1 per cent and caps other basic awards at 1 per cent while continuing our no compulsory redundancy policy.

Today’s budget also delivers on our commitment to protect the resource budget for policing in real terms, supporting front-line policing as we seek to maintain record low levels of recorded crime.

We have also made a clear commitment to increase the NHS revenue budget by £500 million above inflation by the end of this parliamentary session, going beyond anything offered by any other party in the chamber. That will see the shares of the front-line NHS budget invested in primary care, community care, social care and mental health all rise. We will invest £72 million next year in an improvement fund for primary care and general practitioner services and over £150 million in mental health over five years. Overall, next year we will invest an additional £300 million in NHS resource budgets—£120 million more than inflation—which is a massive step towards what we have promised to Scotland’s health service.

As I have set out, local government will receive £120 million from central Government to fund our shared ambition to close the attainment gap. In addition, we will maintain councils’ share of capital spending with an increase of £150 million compared to 2016-17. If we stopped there, Scottish Government funding for local government services would be set to fall by £47.4 million next year. However, I want to do more to protect vital local services, so I have decided to go further. Last year, we transferred £250 million from the NHS to support health and social care partnerships. I can announce today that, on top of that transfer, we will provide additional funding of £107 million from the NHS next year. That additional funding will deliver the living wage for social care workers and will protect overall investment in those crucial services. That will secure a total of £8 billion for health and social care services, ensuring that people have access to the right care at the right time and in the right place.

That additional investment in social care means that, in the coming year, there will be no overall reduction in the funding that is provided by the Scottish Government to support local government services. That funding will increase by £59.6 million. Of course, Government funding will not be councils’ only source of additional revenue next year. As I have said, the £111 million that will be raised through council tax rebanding will be retained locally and local authorities will be free to increase the council tax generally by up to 3 per cent next year, generating—if they so choose—a further £70 million.

The measures that I have announced today mean that the total support from the Scottish Government and through local taxation provides an increase in spending power on local government services not of £59.6 million but of £240.6 million, or 2.3 per cent. That is a settlement that invests in education, social care and local services.

This is a budget for growth and public services; for our environment and our communities. It delivers increased investment in education and record investment in the NHS, and it protects low-income households from tax hikes and supports more and better jobs. Overall, it delivers £700 million of additional spending on our economy and public services. It is a budget for Scotland and I commend it to Parliament.

The Presiding Officer:

The cabinet secretary will now take questions. There will be around 40 minutes for questions.

Photo of Murdo Fraser Murdo Fraser Conservative

I thank the cabinet secretary for providing an advance copy of his statement.

This is an historic budget. For the first time, this Parliament has control over an extensive range of taxes in Scotland. He might not think so right at the moment, but the finance secretary is a lucky man because he has more choices than his predecessor ever had thanks to a Conservative Government at Westminster delivering financial devolution. He had the choice to use the new powers to support economic growth and to tackle our underperforming economy. It is much to be regretted that he has chosen instead to hike taxes on families and businesses in Scotland, risking choking off economic recovery and depriving Scottish public services of vital tax revenue. That will make Scotland the highest-taxed part of the United Kingdom. As it stands, this is not a budget that we can support.

Despite his complaint about Westminster cuts, the finance secretary has received an additional £140 million in real terms from the Treasury compared with the current year. The package included an extra £800 million for capital, and we have said that we want to see that spent in four priority areas—housing, energy efficiency, digital infrastructure and rail projects. I look forward to hearing more detail about the Government’s capital plans.

As Ruth Davidson made clear earlier today, we welcome the dramatic climbdown on using council tax funding for the national policy on an education attainment fund. That proposal was an affront to the principle of local accountability and an assault on local government. The rethink proves the power of the strong Opposition that the Scottish Conservatives provide.

The First Minister said earlier that the budget will protect local services, but the supporting documents tell us that local councils face a £130 million cut in their revenue grants, even if they are allowed to keep all of the council tax increases. How does such a cut protect local services? The finance secretary accuses the UK Government of giving with one hand and taking away with the other. Has he not just played exactly the same trick on local authorities?

We welcome the signal on cutting air passenger duty to help to grow the economy, but why not apply the same logic to other taxes? Scottish businesses have been crying out for relief on business rates, but the budget retains the punitive level of the large business supplement—at double the UK rate—and puts Scottish businesses at a competitive disadvantage.

By not matching the UK increase in the threshold for the 40 per cent rate of income tax, the finance secretary is making Scotland the most expensive part of the UK in which to live, work and do business. The First Minister’s hand-picked chair of her growth commission and the SNP’s former economy spokesman in this Parliament, Andrew Wilson, gets it when he says that the way to grow tax revenue is to grow the number of high-earning taxpayers. If the finance secretary will not listen to us, will he at least listen to the First Minister’s adviser and think again on tax?

Yesterday, the finance secretary said that he would deliver a budget that was pro-enterprise, pro-entrepreneur and pro-growth. By hitting the Scottish economy with higher taxes, has he not failed on all three counts?

Photo of Derek Mackay Derek Mackay Scottish National Party

I think that Murdo Fraser has forgotten a number of things, not least that, since entering office, the Tory Government has reduced Scottish financial support by around 9 per cent—there has been a 9 per cent real-terms reduction in Scotland’s budget since the Tories took office. To put that into a value context, there has been a reduction of about £2.9 billion in Scotland’s budget over a decade.

In the tax debate yesterday, we discovered not only that the Tories want a different position on tax just to undercut, but that they are actually anti-devolution now—they are against devolution and us making different choices on the things that we value, such as the NHS, free prescriptions, free education and concessionary travel. Ruth Davidson, the leader of the Opposition, is shaking her head, but clearly she has not seen the press releases that Murdo Fraser writes for the Conservative Party.

Our budget outlines a range of measures that are very pro-enterprise and pro-business and that will grow the economy. The Tories want to have it both ways: they want to reduce tax, but only for the very richest in our society; while, in this Parliament, the nicer, softer Scottish Tories want to increase expenditure in many areas. They cannot have it both ways: they cannot cut tax, as they propose, and spend more on public services—and they have not even suggested how to do so in this budget.

The budget represents a very strong package for business rates and it will continue to grow our economy, in particular by supporting small businesses with a range of measures. I would have thought that Murdo Fraser could at least have welcomed that.

He also asked about the capital investment plan on which much detail has been provided. He demanded more investment in housing, energy efficiency and digital, and there is substantially more investment in all those areas, but I suspect that the Tories will vote against the budget nonetheless.

The key issue here is that we are giving more resources to our vital public services, and that is being opposed by the Conservatives. While we build a pro-Scottish economic message, it is clear that the Tories want to talk Scotland down. I will keep listening, as I have done, to our local authorities and to parties in the Parliament. That is why we will fund the attainment fund through our central resources. We will support local government but deliver on our commitment to educational attainment.

In all those areas, the Government’s record is strong and our proposals will deliver our programme for Government.

Photo of Kezia Dugdale Kezia Dugdale Labour

The Scottish National Party’s finance secretary has unveiled a budget that will see the heart ripped out of public services. School results and teacher numbers are in decline. Our valued NHS workers are overstretched. However the finance secretary tries to spin it, today’s budget means a real-terms cut of £327 million from the SNP Government to local services—it is there in black and white on page 91 of the budget document and SNP members would do well to read it.

The SNP Government is making up the difference by holding councils to ransom and forcing them to use their tax powers while it refuses to use its own. It could have asked the richest 1 per cent to pay a little more, with a 50p top rate of tax, but, again, it refused to do the right thing.

The budget passes on Tory cuts to the people of Scotland and makes Derek Mackay no better than a Tory chancellor. We have the powers to do things differently; let us use them. Let us stop the cuts and ask those who have the broadest shoulders to pay a bit more. Let us protect local services. Let us grow the economy and create well-paid jobs. Labour cannot support a budget that has more than £300 million of cuts to local services at its heart.

Is it not the truth that Scotland needs a plan for investment, for jobs and for our economy—a plan to protect our public services from SNP cuts?

Photo of Derek Mackay Derek Mackay Scottish National Party

I cannot help but reflect on where Jeremy Corbyn, who sits in the UK Parliament, sits on tax. Does Kezia Dugdale think that Jeremy Corbyn is no better than a Tory chancellor, as he said that he would continue with the Tory tax proposals?

On overall public spending, Kezia Dugdale said that there was no real new spending on public services, and that is just not true. There is £700 million extra for public services in Scotland coming from the Scottish Government in the detail in the budget document. When we look at all the detail of the settlement for local authorities, their ability to raise council tax and the wider package for local government services, we see that this is a good deal and a fair deal.

No wonder the Convention of Scottish Local Authorities has not rejected the package that I offered; it knows that the Scottish Government has made a good and fair proposal and that we have listened to points of difference while delivering in the key priority areas.

On that point, I would have thought that the Labour Party would have welcomed more money for education. I remember Alex Rowley saying that if we wanted to do something on attainment, we should fund it centrally, and we have done that. We have not just delivered on our commitment, we have surpassed our commitment to £120 million for the attainment fund. The Labour Party should reflect on the positives of the budget, reconsider its position and welcome the substantial increase going to Scotland’s public services.

Photo of Bruce Crawford Bruce Crawford Scottish National Party

I am, of course, delighted that the UK Government has followed the Scottish Government’s lead on the Stirling/Clackmannanshire city region deal. Now detailed discussion and the potential transformation can begin in earnest.

However, on the bigger picture, will the cabinet secretary confirm that the good news of a £300 million uplift in NHS resource funding in Scotland is an above-inflation increase, matches the Barnett consequentials from spending in England, and is certainly greater than anything promised by any other party in this chamber?

Photo of Derek Mackay Derek Mackay Scottish National Party

Yes, I can confirm all of that and, of course, I welcome the partnership working around the city deals. That way of working is very productive for unlocking local economic potential. On the specific question around the NHS, yes, today marks an important step in delivering that commitment. We have passed on resource consequentials in full, and the increase in the health resource budget of over £300 million in 2017-18 represents an above-inflation increase in excess of £120 million.

Photo of Donald Cameron Donald Cameron Conservative

Investment in our NHS is much needed, particularly in primary care, but it is important to note the distinction between primary care and general practice in particular. Between 2010 and 2016, increased investment in general practice, specifically, has lagged far behind that in health boards. For years, this Government has failed those general practitioners who work at the front line of the NHS. Today, will the cabinet secretary specify how much of the £72 million stated to be an improvement fund for primary care and GP services will go directly in support of Scotland’s struggling GPs?

Photo of Derek Mackay Derek Mackay Scottish National Party

I say to Donald Cameron that we have a far better relationship with staff in the NHS than the UK Government has with its professionals south of the border and, of course, we will engage and have further transfer to local services.

Donald Cameron has just made my point for me: front-bench Conservative members want tax cuts; and back benchers want more public expenditure. They cannot have it both ways.

It is clear that only this party and this Government are delivering more for the NHS overall and for GPs specifically in Scotland.

Photo of James Kelly James Kelly Labour

Despite all the gloss, the budget document shows that there have been £327 million of cuts in the SNP Government’s grants to local government. Why has the SNP reversed its position in the 2015 election on a top tax rate of 50p, meaning that local communities will be hammered while the richest 10 per cent of taxpayers do not pay any more?

Photo of Derek Mackay Derek Mackay Scottish National Party

I point out to James Kelly that it is customary when elected to government to deliver the manifesto on which you were elected. The election was in May 2016 and in this budget we are absolutely delivering on our manifesto commitments.

We have said that we will keep the additional rate under review. However, there is a risk that if we increase it, we could lose revenue and receipts, and that would impact on public services. That is not a gamble that this Government is willing to make. There are extra resources: I say once again that if we look at the totality of the resources going to local government services, there is an increase—not a reduction—in the settlement.

Photo of Patrick Harvie Patrick Harvie Green

The cabinet secretary says that he wants to listen to Parliament. I welcome that, but I regret that he does not seem to be listening to anyone when it comes to income tax policy.

We know that the poorest third of our society will see their incomes go down next year, while high earners will get a tax cut. Those may be UK Government decisions, but the Scottish Government now has the power to reverse those effects and has chosen not to. The result is a 1 per cent cap on most public sector pay increases, while members of the Scottish Parliament will enjoy a 1.8 per cent increase in our salaries. At the same time, there is a brewing dispute with local government and a tax break for the most polluting form of transport in the country.

Is it not clear that if the cabinet secretary wants to persuade public sector unions, local government and Parliament, he will have to do a lot more listening over the coming month and make meaningful changes to his budget plans?

Photo of Derek Mackay Derek Mackay Scottish National Party

Of course I will listen to all voices in Parliament. I have shown that I was willing to do that in relation to how we fund and support the attainment fund and our support for local government.

I say again, however, that the most important people we should listen to are the people of Scotland. I remind Patrick Harvie that, at the election, we secured a mandate to deliver our tax proposition and to put that to Parliament.

I will continue to engage with all parties in the Parliament to see where we can find some agreement, but we will certainly not follow the Conservatives in passing on a tax cut for the richest in society.

On a number of occasions, Patrick Harvie has pointed to our tax position. I gently remind the chamber that Scottish Government ministers have taken a pay freeze since 2008, which is the right thing to do. Perhaps some other members should reflect on that.

The key issue is not to pass on austerity to the taxpayers of Scotland, which is what we would do if we followed the Labour approach of increasing the basic rate. That is not a choice that we are willing to make. I will of course continue to engage on all matters in relation to the budget as we take it through the Parliament.

Photo of Willie Rennie Willie Rennie Liberal Democrat

I thank the finance secretary for an advance copy of his statement.

I welcome the decision to abandon the plan to strip council tax funds from councils, but will the cabinet secretary clarify why it appears that the Highlands and Islands Enterprise budget has been cut, as has the budget for universities? With our international standing in education slipping and our economy faltering, there is an urgent need to use our brand-new powers to raise £500 million to get education back up to the best. That is the best way to boost the economy. I cannot see the required scale of spending in his budget. We need a transformational budget, and this budget falls well short of that.

The First Minister said today that there were acres of common ground between the parties, but I tell the finance secretary that he has miles to travel before we can reach an agreement. He will know that the Liberal Democrats are pragmatic and reasonable people but is he prepared to make the changes to his budget that are necessary to meet the urgent needs in education and our economy?

Photo of Derek Mackay Derek Mackay Scottish National Party

If Willie Rennie is a pragmatic and reasonable man, I am sure that, if he engages in talks with me in a positive and constructive spirit, he will see the positivity of the budget.

On the wider question whether I am willing to engage to consider what we can do differently and areas on which we can go further, the answer is yes, I am willing to engage in such a discussion. [

Interruption

.] I can hear the Conservatives complaining to the left of me—physically speaking, of course. It will be easier to engage with other parties in the chamber than it would be to engage on ideas with the Tory party, which just wants tax cuts for the rich and undermines Scotland’s economic message, to be frank.

Willie Rennie mentioned Highlands and Islands Enterprise. The totality of support for the Highlands and Islands is a strong package. Our enterprise agencies provide assistance and I will give one example of the Government stepping in, which is the deal that was able to be done in Lochaber, where Government intervention helped to secure hundreds of jobs and has, potentially, brought hundreds of new jobs to the area. That is the kind of intervention that the Government has made throughout Scotland whether on steel, shipyards or the facility at Lochaber. That is the kind of direct intervention that we can make while supporting the region’s economy through our support for food and drink, exports and skills.

Incidentally, the university budget is increasing as a consequence of this budget.

The Highlands and Islands can also enjoy the business rates reduction that I have outlined, further interventions, and support from the Scottish growth scheme. When Willie Rennie looks at the totality of support for Scotland’s businesses and regions, he will see that, overall, it is a strong package for growth that also supports some of our more vulnerable communities.

Photo of Clare Haughey Clare Haughey Scottish National Party

Throughout the previous parliamentary session, local authorities and Opposition politicians continually called for the council tax freeze to be lifted and for bills to increase. Does the cabinet secretary agree that, given the increase in spending powers for councils that could come from the new powers, it would be ridiculous for local authorities to refuse to use the powers in order to make political points against the Government?

Photo of Derek Mackay Derek Mackay Scottish National Party

Clare Haughey will know the Scottish Government’s position that it will be up to local authorities to determine the council tax increase. We want it to be limited to a 3 per cent increase, but it will be up to local authorities to determine the increase that is appropriate to them.

The settlement is very strong and fair to local authorities. [

Interruption

.] I hear the Labour Party complaining to the right of me—perhaps it is to the right of me. I have heard the Labour Party say for years that the council tax freeze is unsustainable. When we lift the council freeze, it says that our policy is unsustainable. I wonder exactly what the Labour Party’s position is on the council tax. I suppose that we will find out when Labour authorities make their determinations.

The settlement is very fair to local authorities, and they will be able to take a balanced approach when they consider the council tax. I remind taxpayers that our balanced approach has been more progressive. The general increase will be a matter for local authorities, but our position is to limit the increase at 3 per cent.

Photo of Dean Lockhart Dean Lockhart Conservative

The relative decline of the Scottish economy in the past decade and Scotland’s increasing underperformance compared with that of the rest of the UK have become the hallmarks of the Government. Improving the economy is now the single most important issue that we must address if we are to improve vital public services in this country.

The budget will deliver nothing that will promote the economy in Scotland or boost our international trade. Indeed, it will do the opposite. It cuts the enterprise budget by 22 per cent at a time when Scotland desperately needs to grow the economy and our international trade. Does Mr Mackay not understand the seriousness of the decline in the Scottish economy?

Photo of Derek Mackay Derek Mackay Scottish National Party

Dean Lockhart, of course, is from the party that gave us the consequences of Brexit chaos, total mismanagement, poor handling, spending money on things such as palaces and nuclear weapons, and tax cuts for the rich. It has absolutely no ideas about productivity or innovation.

It is clear that Dean Lockhart wrote his question before he heard my speech, because there were clear lines in my speech about growth areas, the Scottish growth scheme, increasing exports and supporting food and drink, and industrial interventions, and there was a clear focus on innovation, trade missions and, crucially, of course, a business rates poundage reduction for every business in the country. That is a very sound package to support our economy.

I will make another plea to the Conservatives. Do they really think that it helps the Scottish economy to continually talk it down? It is about time that they started to talk it up. [

Interruption

.] We can see that I have hit a raw nerve. While we promote Scotland and our economic message and give people reasons to live, work and invest in Scotland, the Tories just want to see Scotland do less well. What a proposition from a party that is clearly London dominated and which has undermined our economy with its mismanagement of Brexit.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

I warmly welcome the cabinet secretary’s statement and note the crocodile tears of the Tories about the amount that is to be invested in public services.

The budget is the first to be conducted under the fiscal framework that the Government and the chancellor agreed. Can the cabinet secretary advise members what the impact on the budget would have been if the UK Government’s original plans to use the framework to cut Scotland’s budget had gone ahead? Those plans drew not a peep of opposition from Tory MSPs, who are incapable of putting Scotland’s interests first.

Photo of Derek Mackay Derek Mackay Scottish National Party

Kenny Gibson has a point. [

Interruption

.] I can hear Ruth Davidson shouting at me. She is always shouting. She shouted before about a line in the sand and no new powers to Scotland. There was then the prospect of new powers, and it was then a matter of delivering the new powers more quickly. When it came to the finances of the fiscal framework, the Conservatives said to Mr Swinney that there should be compromise. He did not compromise, and he secured a better deal for Scotland and Scotland’s budget.

The published block grant adjustment figures will show that we are £46 million better off as a result of using our model compared with using Westminster’s model. That shows that John Swinney was absolutely right in standing up for Scotland and ensuring that we got a better fiscal framework that works for Scotland.

Photo of Jackie Baillie Jackie Baillie Labour

I listened to the cabinet secretary’s statement; I even had time to read sections of his draft budget. If the economy is so important—and it is—why has he cut the enterprise budget by £50 million? There is a 22 per cent reduction in that budget line. Why has he cut the Highlands and Islands Enterprise budget by £8 million? That is a 10 per cent reduction in its budget line. Why is he silent on how he will fund infrastructure projects? Is that because he had to use all his capital borrowing from last year and this year to cover up for John Swinney’s £942 million error in the classification of projects such as the Dumfries and Galloway hospital and the Royal hospital for sick children? Will he tell me what projects will be delayed as a consequence? How much will he need to borrow next year to plug the gap?

Photo of Derek Mackay Derek Mackay Scottish National Party

I will start with Jackie Baillie’s question about what projects will be delayed. The answer is none—no projects will be delayed as a consequence of our investment decisions.

We have outlined the position on classification. I have set out plans for investment in digital and housing, as well as in transport, infrastructure, energy efficiency and other areas.

I have covered the points on the enterprise budgets. It is clear from those budgets that I expect efficiencies, but I expect efficiencies across the public sector. I am delivering a good, strong package of support for businesses. I have outlined the Scottish growth scheme and the use of the strength of our balance sheet to support businesses in Scotland, expand our exports, deliver on innovation and productivity, reach out on the living wage and provide a business rates package that is good, competitive and will support Scottish business.

If the member looks in the round at the support that we are offering, she will realise that this is a budget to grow our economy and to support business.

Photo of John Mason John Mason Scottish National Party

I very much welcome the extra £128 million that the cabinet secretary is making available for schools. Can he confirm that the money will be allocated according to need and, in particular, that Glasgow, which has considerable needs, will get its fair share?

Photo of Derek Mackay Derek Mackay Scottish National Party

Yes,

I can confirm that every local authority will keep its council tax revenues and that the attainment fund will be distributed on the basis of need. Therefore, Glasgow will be a major beneficiary of the fund. Its allocation will be about £1,200 per pupil, which means that Glasgow can expect to receive £21.5 million. That will make a significant impact on closing the poverty-related attainment gap in the city.

Photo of Elizabeth Smith Elizabeth Smith Conservative

I am sure that all parties will welcome the initial £60 million for expansion of childcare. What is the total cost of the SNP’s promise to deliver 1,140 hours of free childcare by the end of this session of Parliament?

Photo of Derek Mackay Derek Mackay Scottish National Party

I am happy to write to Liz Smith with details of that matter. We are expanding childcare to support families and our economy. It is right that investing in staffing and infrastructure and in how we reach out with that programme supports our childcare commitments. The allocation is a step in the right direction, as part of the phased implementation of our childcare policy.

Photo of Neil Bibby Neil Bibby Labour

After months of delays and disruptions, ScotRail passengers deserve a break. I am pleased to see that, after pressure from Scottish Labour and passengers, the Government finally seems to agree. While we wait for more information from the Minister for Transport and the Islands tomorrow, will the cabinet secretary tell us today whether the fare reductions relate to regulated or unregulated fares? Will Abellio be funding any of the fare reductions?

On other fares, will the cabinet secretary explain why he did not see fit to tell Parliament that he plans to cut the concessionary bus fare budget for older and disabled people by £9.5 million?

Photo of Derek Mackay Derek Mackay Scottish National Party

We will consult on the sustainability of concessionary travel, but it is perfectly clear that there is continued support for the concessionary travel scheme.

On rail fares, was Neil Bibby not listening when I said that we would commit £3 million to that package of support, and that the Minister for Transport and the Islands will outline the detail tomorrow? We have moved from Labour’s figure of £2 million of support to £3 million of support, but the big question is whether the Labour Party will vote against the budget or support it in order to let that happen while we deliver the £5 billion package of rail improvements, which would be totally undermined by Labour’s proposition.

Photo of Kate Forbes Kate Forbes Scottish National Party

The draft budget recognises that economic growth has a direct impact on revenue for public spending, with the announcement of a major package of support for Scotland’s businesses. Can the cabinet secretary say how rural businesses in particular will benefit? Members should note that I am the cabinet secretary’s parliamentary liaison officer.

Photo of Derek Mackay Derek Mackay Scottish National Party

Today’s draft budget outlines details of our actions to deliver economic growth across Scotland, regardless of location. We will double rural rate relief from 50 per cent to 100 per cent. We will expand the small business bonus scheme so that it exempts 100,000 properties from business rates and we will reduce the rates poundage by 3.7 per cent. We are also committed to delivering 100 per cent superfast broadband coverage by 2020-21 to transform connectivity and improve the productivity of businesses in remote and rural areas, which will transform the prospects of people who live there.

Photo of Douglas Ross Douglas Ross Conservative

The Justice Committee is conducting an extensive inquiry into the role of the Crown Office and Procurator Fiscal Service. Witness after witness has said that the service is not sufficiently resourced, but on page 148 of the cabinet secretary’s draft budget document, he has cut—[

Interruption

.] Shh! He has cut its budget by £4 million. The Crown Office and Procurator Fiscal Service is a pillar of our criminal justice system. [

Interruption

.]

The Presiding Officer:

Order, please. We cannot hear Mr Ross.

Photo of Douglas Ross Douglas Ross Conservative

Thank you, Presiding Officer.

Why has the SNP Government cut the Crown Office and Procurator Fiscal Service budget, in spite of the clear evidence from witnesses to the Justice Committee’s inquiry?

Photo of Derek Mackay Derek Mackay Scottish National Party

My first reflection on Douglas Ross’s contribution is “Here we go again, from the Conservatives. Cut tax and spend more.” I have engaged with the justice system in Scotland and I am satisfied that the budget position that I have outlined will support the service to continue in a sustainable and satisfactory way. I believe that it is a sound settlement for the service.

Photo of Daniel Johnson Daniel Johnson Labour

As Labour has been warning, the introduction of the apprenticeship levy presents a real risk to the Scottish Government’s skills budget. Will the finance secretary confirm that, despite the new levy on businesses, the skills budget will actually fall by £10 million in real terms? Indeed, the cut to Skills Development Scotland is on top of a cut to Scottish Development International, a cut to Scottish Enterprise and a cut to Highlands and Islands Enterprise. With over £70 million of cuts to enterprise and skills, is not the budget a hammer blow to business support?

Photo of Derek Mackay Derek Mackay Scottish National Party

I have said that information has been outlined and that there will be more detail tomorrow from the

Minister for Employability and Training

. Clearly, there are new resources for education and there is support for skills in the workforce development fund. There is a range of measures that will support employers and people who are working their way through the education system, which will ensure that colleges can calibrate their systems to support employment. There are a range of areas in which we are supporting the economy, education and apprenticeships. Of course, apprenticeships have increased under this Government and will continue to increase as a consequence of our investments.

Photo of Christina McKelvie Christina McKelvie Scottish National Party

We are hearing reports of a crisis in social care in England, with workers on low wages and chronic underfunding of the system, so the cabinet secretary’s commitment to invest £8 billion in health and social care is a welcome sign that there is no such complacency in Scotland. Can he confirm that, in delivering the living wage for social care workers, that money will also resolve the issue of pay for overnight shifts? How many low-income care workers will benefit directly from the policy?

Photo of Derek Mackay Derek Mackay Scottish National Party

That is a very fair question from Christina McKelvie. [

Laughter

.] The Conservatives are laughing about the living wage in the social care sector. Perhaps they should take the matter a bit more seriously—it is very important.

In response to Christina McKelvie I say that the new support for social care should support delivery of the living wage and should also cover sleepovers. Because there is no clearly established cost for that, we will have to monitor and review the position, but the financial package is to deliver the living wage in the social care sector. It will be key to the transformation of health and social care that we do that, as we help to improve capacity and quality within the system by acknowledging the value of its workers, who do some of the most valuable work in Scotland. I am pleased that we will be able to continue to support them with a well-deserved pay rise.

Photo of Brian Whittle Brian Whittle Conservative

I am disappointed to see in the budget that there is to be an 8.3 per cent slash in sport funding over the next two years. I want the cabinet secretary to explain to me how that speaks to a preventative health agenda. Ministers talk about preventable health problems all the time, but in reality the Government has shown a lack of understanding of how we should approach the matter. I wonder whether health inequality is important to the cabinet secretary. Why would he cut the sport budget by so much?

Photo of Derek Mackay Derek Mackay Scottish National Party

At least the Conservatives are now absolutely consistent in that they are demanding more expenditure in pretty much every area, while wanting tax cuts for the rich.

On sport and healthier lifestyles, we have a great deal of investment in our preventative approach, with more support for family nurse partnerships and more interventions around healthier lifestyles. When it comes to sport and sporting events, there is considerable budget support to ensure that the big sporting events are supported, while we also ensure that sport is supported through schools and other areas. Members should look at the total package that is going to sport, and they will see that the sector is very well supported.

Photo of Neil Findlay Neil Findlay Labour

Because of Mr Swinney’s mistake with the non-profit-distributing model, £932 million has gone on balance sheet, from being off balance sheet. Despite that, Mr Mackay says that there is not less money for investment in infrastructure projects. Can he explain his great money trick?

Photo of Derek Mackay Derek Mackay Scottish National Party

Trust Neil Findlay to reduce the matter to that level of nonsense.

The Government has invested heavily in infrastructure. Through our pipeline of projects, some of which were opposed by the Labour Party, we have built new infrastructure, schools, hospitals and community centres. We will continue to deliver on capital investment for housing, infrastructure, schools, hospitals, digital, and energy efficiency.

We have set out our capital plans and our spending commitments, and we will spend in a prudent way. We have kept within our financial limits, we have delivered balanced budgets and we have a clean bill of health from the auditors, who have said that we have a good record on financial management. I would rather listen to the Auditor General for Scotland than to Neil Findlay any day.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

The cabinet secretary said in his statement that the Aberdeen western peripheral route will be completed next year, but Keith Brown came to the Rural Economy and Connectivity Committee just yesterday to tell us that the Aberdeen western peripheral route will not be completed until 2018. If the cabinet secretary got that wrong, what else does he think he has got wrong in his statement?

Photo of Derek Mackay Derek Mackay Scottish National Party

I am surprised that Mike Rumbles does not know that I was talking, in the budget that I have set out, about the financial year. We are delivering the Aberdeen western peripheral route, which the Liberals failed to do after being in office for years. The opposition parties talk about major infrastructure projects, but only this SNP Government has actually been delivering them.

Photo of John Scott John Scott Conservative

As far as I can see from the budget document, there is no change to the empty property reliefs on industrial buildings. Is that—literally—destructive tax to remain at 90 per cent, which discourages investment in new buildings that would help to grow the economy, and which means that buildings are being destroyed daily?

Photo of Derek Mackay Derek Mackay Scottish National Party

We have gone from the message of “Just spend more money on everything” to the other Tory message on the economy in Scotland, which is doom-mongering from John Scott.

We have not changed the position on empty property rates relief, but we have changed other positions, to the advantage of businesses. We have improved the position on poundage—that will mean a tax cut for every business in Scotland. There will be more support through the small business bonus. The large business supplement has been refined and there will be greater relief. That package will be welcomed by many businesses in Scotland, including the many that will be lifted out of paying business rates as a consequence of our non-domestic rates position.

With our package of measures, we will be able to grow Scotland’s economy, deliver more receipts and invest in public services. The SNP and the SNP Government have got the balance right.

Photo of Elaine Smith Elaine Smith Labour

On a point of order, Presiding Officer. I apologise for not being able to give you advance notice of this point of order.

As you are aware, copies of statements are provided to MSPs when ministers deliver them. Surely at that point key information should not be redacted. Today, key figures on tax were withheld, which was particularly galling given that they were in the press this morning. Furthermore, the minister said several times that further information would be provided by ministers tomorrow. Surely such important information ought to be provided to members in the chamber. Will you advise why members were given redacted statements, whether that is acceptable and how further important information on the budget should be provided to members?

The Presiding Officer:

The provision of budget statements in advance of their delivery is entirely a matter of courtesy and is a matter for the Government. I am sure that the cabinet secretary will reflect on your remarks when thinking about whether to change practice.