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Budget

– in the Scottish Parliament on 19th November 2019.

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Photo of Bruce Crawford Bruce Crawford Scottish National Party

1. To ask the Scottish Government what the implications are for its budget of the general election and the postponement of the United Kingdom budget. (S5T-01892)

Photo of Derek Mackay Derek Mackay Scottish National Party

The general election on 12 December has forced us to cancel our plans to publish the Scottish budget on that day, and the uncertainty that is caused by the postponed UK budget continues indefinitely. I agree with the Finance and Constitution Committee’s view that the Scottish budget should, optimally, be published after the UK budget. The consequence of that is that the 2020-21 Scottish budget will not be published before Christmas. I am mindful of the importance of parliamentary scrutiny time around the Scottish budget and will continue to work with the committee to agree a new budget date as soon as possible.

Photo of Bruce Crawford Bruce Crawford Scottish National Party

Will the cabinet secretary confirm that, without the tax policy announcements of a UK budget and the tax, social security and economic forecasts that the Office for Budget Responsibility produces, the Scottish Government simply cannot know how much money is available to spend in 2020-21? Will he say what representations have been made to the Tory Government about this challenging situation? Does the Tory Government comprehend the scale of the problem? If so, what response has the cabinet secretary had?

Photo of Derek Mackay Derek Mackay Scottish National Party

Mr Crawford’s analysis is quite right: without the tax policy announcements of a UK budget and the tax, social security and economic forecasts produced by the OBR for a UK budget, which determine the block grant adjustments, the Scottish Government simply cannot know how much money is available to spend next year. Without a new date for the UK budget, we do not know when that certainty will come.

I wrote to the Chief Secretary to the Treasury and to the Chancellor of the Exchequer—the prospective chancellor—earlier this month, to express concern and to stress that the UK budget should proceed as soon as possible after the general election. I also stressed the need for early dialogue and information sharing with the Scottish Government after the election. I have not had a reply to my letters. Therefore, I do not know about UK ministers’ comprehension of the situation. I am sorry to say that I fear that they are not too interested in the effective working of devolution or the public services of Scotland.

Photo of Bruce Crawford Bruce Crawford Scottish National Party

Will the cabinet secretary confirm that there remains the issue of interaction between taxes that are set by the UK Government and those that are set by the Scottish Government, which can cause significant difficulties for Scottish tax policy if the UK Government does not set its tax policy first? Does he agree that, for the Scottish budget to take place in an orderly fashion, it is essential that the UK budget takes place as soon as possible after the general election? What will the consequences be for Scottish public services if the UK budget is delayed beyond the very beginning of the calendar year?

Photo of Derek Mackay Derek Mackay Scottish National Party

The UK budget contains a number of important pieces of information in relation to devolution and devolved and partially devolved taxes, without which it is more difficult for the Scottish Government to set its budget. We do not have the block grant adjustments, based on the most up-to-date forecasts, or the latest UK policy intentions—let us bear in mind that there might be differences between intentions that are announced by prospective UK Governments in the election period and what features in a spending review or a budget.

I agree that it is essential that the UK budget takes place as soon as possible after the general election. I have emphasised that point to the Treasury and I have alerted the Treasury to concerns about other matters. If the UK Government wants devolution to work successfully, it must engage seriously in this and understand our processes.

The consequences of a delay for public services are important, because, for local government and for public bodies, uncertainty continues about the substantive budgets, which people wish to know about. Of course, in dialogue with trade unions and others, many public sector employers need to consider pay remits that will have effect from 1 April. I will continue to engage with the unions, the Convention of Scottish Local Authorities and others on the budget process, but we will need the UK Government to act as quickly as it can post-election.

My officials will continue to work with committee clerks and the Scottish Fiscal Commission, which has engaged on the matter, on contingency options around the budget process and timetable, so that we can productively use the time before the UK general election to have ourselves as well placed as possible to respond to different scenarios. The failure of the UK Government to engage on the matter is very severe for Scotland’s public services.

Photo of Dean Lockhart Dean Lockhart Conservative

There is a slight hint of hypocrisy in the Scottish National Party complaining about a delayed budget when the party voted to have an early general election.

According to a recent Fraser of Allander institute report, Scottish income tax revenues are on track to disappoint, relative to those in the rest of the UK. As a result, despite the block grant from Westminster increasing by more than 2 per cent, the overall budget available to the Scottish Government will increase by less than 1 per cent.

Does the cabinet secretary agree with the Fraser of Allander analysis?

Photo of Derek Mackay Derek Mackay Scottish National Party

The important point for the Scottish Conservative Party to understand is that it is the Tories who have continuously proposed—I am not specifically referring to the general election—tax cuts for the rich in society over the course of continuous budgets, which would lead to cuts in spending for our public services. Our progressive tax policy has raised revenues for us to invest in our public services.

On the cancellation of the UK Government’s budget, the UK Government could have gone earlier if it had so desired, but the Prime Minister’s track record appears to be that he could not get anything through Westminster, never mind his having the chaos of a budget failing as well. The UK Government’s track record is that it has been incompetent and chaotic, and that may well have led to a chaotic budget process as well.

On the general election, the key point is that we are where we are. There is nothing to prevent the UK Government from proceeding as quickly as possible. I understand that its budget was ready and good to go, although I do not know whether that is true. Any incoming UK Government, whoever it may be, should proceed with a budget as quickly as possible so that the Scottish Government can properly consider the matters that are devolved to us and set out our tax and spending proposals, and the Scottish Parliament can properly scrutinise those proposals. The UK Government must not leave it to the last minute, with all the negative consequences that that would have for the people of Scotland. That is why I am encouraging the Treasury, in the circumstances, to take the action that I have set out.

Photo of Rhoda Grant Rhoda Grant Labour

Councils need to set their budgets and their council tax, which is time limited, and the fact that the devolved social security powers are new means that that expenditure could not be part of a roll-on budget. The cabinet secretary talked about planning for various scenarios. When will he share those scenario plans with the Parliament?

Photo of Derek Mackay Derek Mackay Scottish National Party

I am engaging with the Finance and Constitution Committee to set out a timetable that can be mutually agreed with Parliament, recognising, as the committee does, that we need a bespoke process that will get us through these unprecedented circumstances.

I share the concern that we must have a timely local government settlement. I have engaged with Opposition spokespeople and I appreciate the consensual approach to that, but there are matters that people need to understand. We do not have a simple mechanism that would allow a roll-over from one financial year to the next. The circumstances were not foreseen by the creators of or signatories to the Scotland Act 2016. If we do not pass a rate resolution, we will raise no income tax, which would be catastrophic to the public services of Scotland. We also need to pass a non-domestic rates resolution and the necessary orders, and to agree a financial settlement for local government. There are many significant matters that cannot be wished away by those who think that there is an easy alternative process.

Working within the circumstances, I will present a budget to Parliament as soon as I possibly can, hopefully in agreement with the parliamentary authorities and the Finance and Constitution Committee. I set out in the medium-term financial strategy a range of determinants that could impact on our fiscal plans, and they have come true, given the risks, the volatility and the variables that we are wrestling with.

I will continue to engage with the Opposition spokespeople to try to ensure that we have a process that will get us through this in an effective, consensual and cohesive manner, but whatever we do, I call on all parties in this Parliament, in these unprecedented circumstances, to work together to ensure that there is no risk to the revenues and expenditure for our public services. Whatever we do, we must work together to address the volatility, uncertainty and chaos that have been foisted upon us by the UK Government, and ensure that devolution can deliver even in these exceptional circumstances.

Photo of Patrick Harvie Patrick Harvie Green

If we are still waiting, part way through January, for a UK budget to be published, what is the last date on which the Scottish Government can make a decision about whether it will need to attempt to introduce a Scottish budget in the absence of a UK one? If we have to debate a Scottish budget without a UK budget being in place, potentially with emergency bill procedures, surely that is one more example not only of the UK Government’s political contempt but of a fundamentally dysfunctional fiscal framework that needs to be fundamentally redesigned.

Photo of Derek Mackay Derek Mackay Scottish National Party

I agree with Patrick Harvie’s fundamental point, and I have already alerted the Treasury and the Finance and Constitution Committee to it. Even before the cancellation of the UK budget, I was of the view that, given the experience that we now have, the fiscal framework requires to be reviewed urgently, and the situation that we are now in proves why the framework needs to be revisited as a matter of urgency.

As the Finance and Constitution Committee—of which Patrick Harvie is a member—knows, if the UK Government sets the UK budget so late that it presents the difficulties that I outlined in an earlier answer, it is not impossible that the Scottish Government would proceed before the UK Government’s budget is set. However, that would bring considerable and almost unacceptable risks to the process. There would be risks in trying to arrive at the numbers that we would be working with and in trying to second guess the UK Government in relation to the tax proposition and other matters. It would be a risky process.

We will impress upon the UK Government the need for it to set a UK budget and outline its policies as quickly as is responsible. We, of course, will respond to that. That will give us an orderly approach to budget setting in Scotland. I am concerned about the risks of our setting a budget before the UK Government has set its budget, and I know that the Finance and Constitution Committee agrees that there are risks. We will continue to work with Opposition spokespeople on a range of contingencies, should it transpire that the UK Government will continue with this uncertainty not only by not setting a budget but by not even setting a budget date. That is the position about which we are wrestling with the UK Government.