1. At this, the last First Minister’s Question Time before Christmas, I wish all members and people across Scotland all the compliments of the season. I will ask my question in a spirit of good will.

To ask the First Minister what engagements she has planned for the rest of the day. (S5F-00670)

I too wish you, Presiding Officer, members and everybody across the country a very happy Christmas and a good new year.

Reciprocating that spirit of good will, I can advise the Parliament that, later today, I will have engagements to take forward the Government’s programme for Scotland—plus, probably, a spot of Christmas shopping.

In the last 90 minutes, the Auditor General for Scotland has reported back on the Scottish Police Authority. For the third year running, she has cited

“weak financial leadership and management”.

She describes that as “unacceptable”. How does the First Minister put it?

The First Minister:

I agree with the conclusion that the Auditor General reached in the report published this morning. She says that the Scottish Police Authority and

Police Scotland have taken

“steps to improve ... financial leadership ... and governance arrangements but these have not yet had a chance to have an impact.”

Police Scotland and the Scottish Police Authority are working to improve their financial management, which the Parliament should support.

The Scottish Government is working with the Police Authority and Police Scotland to ensure the financial sustainability of policing in the years ahead. That is why we have included in the draft budget a real-terms increase in protection for the resource budget of the Scottish Police Authority and an increase in the capital budget—and we are also continuing the reform budget. That is all intended to put the police on a good financial footing so that they can continue the excellent work that they do.

I note the First Minister’s reply, and I will get to the budget in a second, but let us just spell out the report itself. Last year, the Auditor General said that there was a potential funding gap of £84 million by 2018-19. This year, we learn that the cumulative funding gap that our police service may face over the course of this parliamentary session is now running at £190 million.

Poor leadership is responsible, says Audit Scotland. It says that there are inaccurate financial records, and that the Scottish Police Authority is failing to provide information about what money is being spent on.

The report from Her Majesty’s inspectorate of constabulary for Scotland, which is also out this morning, says that

“urgent work is still needed” to improve the way that public funds are being spent. Does the First Minister really have confidence that the system is working or indeed improving?

The First Minister:

In the section 22 report that was published this morning, which I quoted in response to Ruth Davidson’s earlier question, the Auditor General said that the SPA and Police Scotland are taking

“steps to improve ... financial leadership ... and governance arrangements but these have not yet had a chance to have an impact.”

That is the conclusion of the Auditor General, which I support.

On the wider budget issues, as I said, we are protecting the Scottish Police Authority’s resource budget in real terms. That is important, given the challenges that our police service faces. We are also ensuring a real-terms increase in the capital budget, and the reform budget, which should have ended completely by now, is being continued to assist the police with the on-going work of reform.

As members will be aware, the police are also working on their long-term strategic plan and associated financial strategy as part of the policing 2026 programme. I met the chief constable and the chair of the Scottish Police Authority earlier this month to discuss their progress on that work. We will continue to work with and support the police as they face up to the challenges ahead.

I will say one final thing. Right now, there would be an additional £25 million a year available to the police if—[

Interruption

.] The Conservatives do not like to hear this. There would be £25 million a year extra available to invest in our police if the United Kingdom Government did not insist on making Police Scotland the only police authority in the entirety of the UK that has to pay VAT. Will Ruth Davidson get behind our calls to stop that?

The charges from the Auditor General are “weak financial leadership”, “inaccurate records” and “poor financial management”. Running to “Westminster bad” is not exactly going to cut it, First Minister.

There is something terribly familiar about all the responses that we have heard so far today. We have heard that it is terribly regrettable, that it is all in the past and that we are going to do better. Let me read out the reaction from the Scottish Government to last year’s report from the Auditor General, which says exactly the same thing:

“The commitments given in this week’s Scottish government draft budget ... will put the police budget on a sustainable footing for future years.”

A year on, Police Scotland is now staring down the barrel of a £190 million budget deficit. We have heard it all before.

There is an issue in the two reports that were published today that I want to address specifically: transparency. The Auditor General says that there is

“very limited publicly available detail” provided to the Scottish Police Authority board on how Police Scotland spends its money. Let me read verbatim from the report. It states that

“the SPA allocated £972.9 million to Police Scotland for 2016/17. There was very limited publicly available detail provided to the SPA Board in its papers about what this allocation was to deliver.”

In other words, nearly £1 billion of funds was handed to Police Scotland without our knowing what it was for. Does the First Minster find that as extraordinary as I do?

The First Minister:

The £1 billion that we invest in our police provides the police officers the length and breadth of this country who keep this country safe. If Ruth Davidson does not know what the police budget is for, I suggest that she does a bit more homework in the future before she comes to the chamber. There are also 1,000 more police officers across this country as a result of the investment and commitment of this Government.

Let me return to the Audit Scotland report. When I quoted it, I was doing exactly that—quoting the Auditor General. I will do it again. The conclusion of the report that was published this morning states:

“The SPA and Police Scotland have begun to take steps to improve both financial leadership and management and governance arrangements but these have not yet had a chance to have an impact.”

That is not my view; that is the view of the Auditor General. I would expect the SPA and Police Scotland to act on all the recommendations that have been made by Audit Scotland and by Her Majesty’s inspectorate of constabulary.

The one point that Ruth Davidson did not address in her question is the VAT position, which is material. The UK Government tells us that, because the police service in Scotland is funded by central Government, it has to pay tax. Do we know what the UK Government did when it decided to set up academy schools in England and fund them from central Government? It amended the Value Added Tax Act 1994 in order to exempt academy schools from VAT. There is £25 million pounds a year, right now, that should be going to our police service but is going to the Treasury. Ruth Davidson will not have any credibility when she stands here talking about the police until she backs us in telling her Tory colleagues at Westminster to do the right thing and stop taking money out of the pockets of our police service.

The Scottish Government was warned about VAT—it knew what would happen and it did not listen to Parliament. You know that the First Minister is in trouble when she cannot answer for herself but runs to “Westminster bad”.

Twice today, the First Minister has stood up and talked about the increasing police budget.

Let us have a look at that, because I want to challenge the First Minister on it. The Scottish Government claims that the policing budget is going up by £7 million in real terms, but, like everything else in last week’s budget, that is not quite what it seems. The reform budget, which was £55 million last year, was reduced to £36 million for this year. We asked the Scottish Police Federation about that, and it says that, despite its name—and what the First Minister tries to claim—the reform budget is crucial in terms of service delivery. In fact, far from increasing the amount of money that the single force has by £7 million, it appears that the SNP is actually cutting it by almost £12 million.

On top of cuts to councils and double counting, is this not just another stealth cut that is emerging from Derek Mackay’s slightly unravelling budget?

The First Minister:

The resource budget of the Scottish Police Authority is not increasing by £7 million, as Ruth Davidson says, but is increasing by £19 million—that is real-terms protection for the resource budget. The capital budget is going up by just under £4 million, which is also a real-terms increase. That is the reality.

Ruth Davidson talks about the reform budget. That budget should have been completely ended two financial years ago. Instead of that, we have continued support through the reform budget to assist the police in making the reforms that they need.

Let us come back to the nub of the issue. Ruth Davidson is standing up here again, as she does week after week, asking for more money for the police, the health service and education, but where is that money coming from? The only criticism of our budget that Ruth Davidson wanted to make last week was that we were not giving big enough tax cuts to the richest earners in Scotland. Here is the incoherence and inconsistency at the heart of the Tory proposition: tax cuts for the rich, but standing up in Parliament asking for more money for every single public service.

As we know, there is a potential source of additional money for our police service. Ruth Davidson has just conceded that the UK Government’s refusal to exempt our police service from VAT is nothing more than political spite. The UK Government can do it for academy schools in England but it will not do it for police services across Scotland. That is absolutely despicable and the Tories should be ashamed of themselves.