Chancellor of the Exchequer’s Economic Update

– in the Scottish Parliament on 9th July 2020.

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Photo of Linda Fabiani Linda Fabiani Scottish National Party

Good afternoon, everyone. I remind members that social distancing measures are in place in the chamber and across the parliamentary campus. Please take care to observe those measures, including when entering and exiting the chamber.

The next item of business is a statement by Kate Forbes in response to the Chancellor of the Exchequer’s summer economic update.

Photo of Kate Forbes Kate Forbes Scottish National Party

I welcome this opportunity to provide an initial response to the Chancellor of the Exchequer’s economic update yesterday. I will start by saying something positive: I welcome elements of the chancellor’s statement. Last week, I called for an £80 billion stimulus package from the United Kingdom Government to build a strong, green and inclusive economic recovery. That would be around 4 per cent of gross domestic product, matching the scale of Germany’s plan, and more in line with the Prime Minister’s rhetoric referring to Franklin D Roosevelt.

Although I support certain measures, not least the reduced rate of VAT for tourism and hospitality, which I had called for, much of the rest falls short of delivering what I believe is needed to boost the economy and protect jobs. For example, there is no extension to the furlough scheme for hard-hit sectors, there is no further support for households in financial difficulty and, despite us now being into July, there is silence on the question of reasonable fiscal flexibilities for this Government to allow it to respond appropriately to the pandemic.

Many of the initiatives are short lived. Rather than providing long-term certainty for businesses or households, they simply push the problems back towards the turn of the year, when we will also have to contend with the end of the transition period with the European Union.

The chancellor’s jobs plan may have a headline value of up to £30 billion, but we should be clear that that figure is contingent on demand, while some of the measures may prove to be poorly targeted. The figure also comprises the Prime Minister’s investment package that was outlined last week, which we know extends to future years and does not add new money this year. I say all that merely to clarify the facts and the context. I am sure that we can all agree that accuracy is important.

Another fact is that the chancellor’s jobs plan itself generated only £21 million for the Scottish budget, a position that was confirmed today by the Fraser of Allander institute. I appreciate that many of the measures are UK wide, and that the England-only spend is mostly recycled from existing budgets, but that disappointing figure is at odds with those that were being quoted by some parties yesterday. We cannot have both a UK-wide package and significant consequentials.

Granted, there was further detail published yesterday, separate from the jobs plan, albeit nearly all of it concerned previously trailed measures, such as Monday’s culture announcement and—belatedly—some of the long-promised funding for personal protective equipment. Those and other previously known measures that were separate from the chancellor’s statement were reflected in a figure of £800 million of consequential uplift, which was also quoted by some people yesterday. Although that is welcome, it includes only £27 million that we were not aware of beforehand. It is helpful to be clear about what the various funding amounts relate to.

For the record, the currently notified estimate of Covid-related consequentials for the 2020-21 Scottish budget is £4.6 billion. That is all resource, except for £10 million of capital and financial transactions. I reiterate that that is welcome. However, even with some simple analysis of the scale of the support that is needed, whether for businesses, communities or public services, it is clear that that is not enough to fund the recovery sufficiently and to balance the budget. That is why, together with devolved Government counterparts, I continue to have constructive dialogue with the Treasury. My expectation and my hope is that further information is yet to come on the consequentials position. I will of course continue to keep Parliament updated.

I stress that it is not only the funding amounts and the lack of flexibilities that matter here—the timeline and the process are crucial, too. It is intensely problematic for Scotland’s recovery that again we have had to await the culmination of the UK Government policy process and respond to announcements in this way, as our funding position is drip fed to us with limited engagement in advance on policies that interact with our devolved responsibilities. I was fully transparent with Parliament in the debate on 16 June when I said that this year’s resource budget was facing

“a shortfall of hundreds of millions of pounds.”—[

Official Report

, 16 June 2020; c 30.]

As time passes without the requisite certainty or flexibility from the Treasury, we now face the possibility of having to take some critical decisions at fiscal risk. I say that in the spirit of openness and working with the Parliament, as our collective efforts to budget more responsively and strategically are hampered without the prospect either of funding certainty or of any relaxations to the fiscal framework’s limitations.

I now turn from the fiscal position to the specific measures. In advance of yesterday’s update, I have been working since early spring to ensure that the UK Government is fully aware of our concerns and Scotland’s needs. Last week, I published a report on the UK fiscal path, which pressed the UK Government to avoid a return to austerity and adopt more flexible fiscal rules. Growing the economy and reducing inequality should take priority over deficit reduction until the economy has fully recovered. As I alluded to earlier, the report calls for a UK-wide fiscal stimulus package worth £80 billion. Such a package would generate funds to enable Scotland to shape its own investment response to the pandemic, as would temporarily loosening Scotland’s fiscal flexibilities and providing a guarantee against negative Barnett consequentials being applied to the Scottish budget in the current financial year.

I also wrote to the chancellor on Saturday with some further specific points. We need a national debt plan that promotes fairness as well as economic recovery in response to the significant and widespread increase in debt as a result of Covid-19, which affects all parts of society. For households, that means working with lenders to ensure that loan, mortgage and rent holidays can be extended to those experiencing financial hardship. For businesses, that could mean scrapping interest charges or converting loans to equity, managed by public policy banks such as the Scottish National Investment Bank. Young people have been particularly affected by the pandemic as they are more likely to work in industries that are affected by closure and less likely to be able to work from home. I recommended a jobs guarantee for young people to ensure that they have access to work, an apprenticeship or training that helps prevent the damaging effects of being out of the labour market at the beginning of their working lives, building on the success of the Edinburgh guarantee programme. To support consumer confidence, we recommended a temporary reduction in the standard rate of VAT to 15 per cent, coupled with targeted additional measures for vulnerable areas such as hospitality and construction to support businesses and boost consumer spending. That would help Scottish households and provide a stimulus to support business.

The different devolved Administrations share similar views on the general funding position and the need for fiscal flexibilities, and we have worked closely together for weeks to make a clear and consistent case to the UK Government. I have also worked with parties across the chamber to build consensus on the principle of further fiscal flexibility, as reflected in the Parliament’s resolution on 16 June.

To set the context I will quickly recap on measures the Scottish Government had already taken ahead of the chancellor’s statement. Colleagues will know that we have already committed a business support package that is worth over £2.3 billion, which includes reliefs that will continue over the course of the coming year. We have already moved to implement the £230 million investment package that was announced last month to help stimulate Scotland’s economy, which will create jobs in construction, low-carbon initiatives, digitisation and business support by providing a pipeline of work for business. We have also acted to support the oil and gas industry, which is a critical component of our economy and has a crucial role to play in the transition to net zero—specifically, we recently established the £62 million energy transition fund, which will support our energy sector and help us make significant progress as we move toward a net zero society. We also recognise the importance of boosting employability and have acted in response. We have already confirmed an initial £33 million for employability in 2020-21, to flex and enhance existing services so that support is aligned to the challenges that we face. We have also committed a range of support beyond our communities fund, including £30 million to provide laptops for disadvantaged children and young people so that they can study online.

The advisory group on economic recovery set out in its recommendations a proposal for a Scottish jobs guarantee for young people. We have acted at speed to address that. Last Friday, Sandy Begbie was appointed to lead on the implementation plan for that work, and he will report by the end of July. The group’s recommendation also set out the importance of industry leadership. Through our developing the young workforce programme, we have a network of industry-led groups that are well positioned to support the implementation of any guarantee.

We are clear that such jobs must be meaningful and must allow young people to develop skills that reflect the emerging opportunities. We must ensure that our young people are supported to make the best of such opportunities. We are clear that abiding by the principles of fair work and payment of the real living wage will be essential.

Given that much of the content of the chancellor’s jobs plan is new to us, my ministerial colleagues and I are still assessing its detail, but I will offer some initial thoughts on it. The incentive payment for employers to bring employees back from furlough is welcome for those that it supports, but the benefit could vary depending on different businesses’ prospects for a return to full operation, which might risk the scheme’s missing its target level of support.

On tax, I welcome the temporary cut in VAT for the tourism and hospitality sector. We have argued for that not just for weeks but for years, and I am pleased that the chancellor has heeded our calls. However, the statement missed the opportunity to cut taxes for employers. We argued that the stimulus package should finance a 2p cut in employers’ national insurance contributions to reduce the cost to businesses of hiring staff, but the chancellor has not taken action on that.

I turn to the chancellor’s announcement yesterday on stamp duty land tax. I have heard calls for me to replicate that change in Scotland, under land and buildings transaction tax. We have a strong track record on LBTT. Due to the reforms that we have previously carried out, our higher starting threshold of £145,000 in Scotland has meant that around half of all such transactions have resulted in the payment of no tax. We continue to focus support on first-time buyers and on assisting people as they progress through the property market.

I have listened to calls for me to raise the starting threshold for LBTT to help to stimulate housing market activity and the economy. It is important, though, that any change that is made in Scotland is focused directly on the particular needs of the Scottish economy. I therefore announce that I will increase the starting threshold for residential LBTT from £145,000 to £250,000. Because of the time required to prepare legislation and for Revenue Scotland to be ready to collect and manage the tax, the change will not come into force immediately, but I will work to enable it to be introduced as soon as possible. The rates for the additional dwelling supplement and non-residential LBTT will remain unchanged. That approach means that eight out of 10 people purchasing a property in Scotland will be taken out of LBTT—excluding the additional dwelling supplement—and that every home mover who purchases a property valued at above £250,000 will be £2,100 better off.

Although changes to LBTT offer support to all those purchasing a home, making them is a blanket measure that might not help first-time buyers. I am also heeding this morning’s warning from the Institute for Fiscal Studies that first-time buyers are

“a group that might actually be made worse off by the policy”.

Therefore, I am pleased also to announce further targeted support for those who may be most concerned about making such an investment at this time.

The Scottish Government’s first home fund was launched in December 2019. Even prior to the outbreak of Covid, it had been welcomed by stakeholders and take-up of it had been high. As a result of pent-up demand having been released following the end of stay-at-home measures, and reflecting the more limited availability of higher loan-to-value mortgages in the market, demand for support is likely to outstrip current funding. In this financial year, I will therefore provide an additional £50 million directly to support first-time buyers with their deposits, recycling underspend in the Scottish Government’s financial transactions budget. That will support an estimated additional 2,000 first-time buyers’ purchases and lift the total funding for that targeted measure to £200 million.

By taking a distinctive approach in Scotland to raising the starting threshold under LBTT, I am able to target further support elsewhere, and to do so where the UK Government has failed to provide funding to devolved Administrations.

The chancellor’s announcement yesterday of support for the economy and jobs resulted in just £21 million of consequentials for the Scottish Government. Although, clearly, UK-wide schemes will apply in Scotland, our assessment is that much more support is required for the labour market.

That is why I am today committing to make available an additional £100 million for targeted employment support and training this year, in order to help keep people in work or to help them retrain. Even alongside the chancellor’s youth employment scheme, that is unlikely to be all that we will need to do to support employment and skills over the next year, but it is a first step. The Cabinet Secretary for Economy, Fair Work and Culture will set out the policy details to Parliament soon.

Beyond those initial actions, we will consider the UK Government’s announcements and their impact on Scotland more closely and respond more fully. I welcome contributions on the detail from across the chamber.

I continue to seek to engage Parliament at every step of our fiscal response to Covid-19, reflecting the Government’s route map and the evolving challenges for businesses, communities and public services. Following the summer budget revision, which set out more than £4 billion of spending to address Covid, I will continue with the collaborative approach in looking ahead to the autumn budget revision and, of course, the 2021-22 budget process.

The chancellor’s economic update provided an opportunity for the UK Government to explain how it will support the Scottish economy, along with the rest of the UK economy, to recover from the impact of the Covid-19 outbreak. Although the update showed that the UK Government is willing to act, we will continue to press for action that better meets the needs of Scotland in the areas in which the Scottish Parliament does not have the power to act.

The Scottish Government’s ambition is to work towards the elimination of Covid-19 in Scotland, and for the Scottish economy to return to delivering prosperity and growth. In order to achieve that, I have set out to the UK Government the additional focused, limited and temporary fiscal flexibilities that we seek. We will continue to liaise constructively and in the hope that it will heed those calls.

As I said, under the current arrangements, our budgeting approach and timetable in response to the crisis continue to be heavily contingent on those of the UK Government. The fiscal powers that we are seeking would enable the Scottish Government to respond to Covid-19 more effectively and to reboot our economy. They are relatively limited powers—I am still not quite sure why we are debating them—but they would ease some of the immense pressures on our budget and give us more tools to kick-start our recovery.

It is also essential that the UK Government provides early clarity on its plans for the spending review and the budget this autumn in order to enable us to plan and contribute. Yesterday, the chancellor outlined measures worth up to £30 billion, but most of that bypasses devolution and does not provide the Scottish Government with the funding that we need to enable us to tailor an economic response that meets Scotland’s needs.

Like all Governments, we are facing huge spending pressures, but we do not have the tools that others have to meet them. Along with the Governments of Wales and Northern Ireland, we have set out a reasonable and proportionate set of new financial powers that would enable the Scottish Government to respond more effectively. This Parliament has voiced its support for that principle, and I dearly hope that the UK Government will listen and act.

The Deputy Presiding Officer:

The cabinet secretary will now take questions on the issues raised in her statement, for which I will allow around 40 minutes. It would be helpful if members who wish to ask a question could press their request-to-speak buttons.

Photo of Donald Cameron Donald Cameron Conservative

I thank the cabinet secretary for prior sight of her statement. The truth is that, yesterday, Rishi Sunak announced an ambitious plan for the whole of the UK, incentivising employment with a job retention bonus scheme and cutting tax for hard-pressed sectors such as hospitality. Those measures will directly benefit Scottish workers and businesses. Far from bypassing devolution, that is devolution working, with the UK Government continuing to inject unprecedented funds directly into the Scottish economy.

It is, of course, still not enough for the Scottish National Party Government—even though yesterday’s announcement was warmly welcomed by the Federation of Small Businesses, Scottish Chambers of Commerce and the Scottish Tourism Alliance, to name but a few.

Rishi Sunak’s cut to stamp duty plainly does not apply to Scotland. Although the cabinet secretary just announced a tax break for LBTT, taking the threshold up to £250,000, there remains a significant disparity between Scotland and the rest of the UK. Will the cabinet secretary explain why she is not committing to a fully equivalent cut for LBTT and why the change cannot be made immediately, given that there will now be a massive incentive to delay, thus causing disruption to the market in that bracket?

Photo of Kate Forbes Kate Forbes Scottish National Party

Rather than talk about the wonderful benefits of the union, I point out that, for devolution to work properly, we need adequate funding. The Tories regularly stand up in the chamber making demands of the Scottish Government to act further and to put in place our own economic stimulus—indeed, Donald Cameron has just done that. However, the Scottish Tories cannot make such demands if they deny us the powers and funding that we need to do what they demand. The UK Government’s announcements yesterday are welcome. I have put on record my welcome for the VAT cut and the wider support for businesses. However, there is no getting round the fact that that bypasses devolution.

Donald Cameron asked two questions about land and buildings transaction tax. On the first, the answer is that eight out of 10 buyers in Scotland will be taken out of paying LBTT. As he knows full well, the Scottish housing market is slightly—actually, a lot—different from the market in the rest of the UK. Tax devolution is about having separate policies for Scotland rather than just matching the policies in the rest of the UK. He will also know full well that the block grant adjustment, which has not been confirmed by the UK Government, does not allow us to fully replicate decisions that are made elsewhere.

Donald Cameron also asked why we cannot implement the change immediately. We will respond as quickly as we can in the circumstances. I had no advance warning of the intention to make a change to SDLT, which was announced yesterday—I heard when everybody else did. I have made it clear that time is required to prepare legislation and for Revenue Scotland to be ready to collect and manage the tax, but we will move quickly. The alternative would be to say nothing and create even more uncertainty in the market, so I have chosen to give that clarity, understanding fully the limits of the legislative process and the challenge for Revenue Scotland.

Photo of Jackie Baillie Jackie Baillie Labour

I welcome the package of measures from the UK Government, but it can be viewed only as a first step in tackling the economic crisis. On the scale of the economic stimulus, given that France has a package of €15 billion and Germany has a package of €14 billion, it seems that the £3 billion from the UK Government is much less than required. What proportion of the Scottish budget can the cabinet secretary set aside to deal with the economic recovery?

I welcome the cabinet secretary’s announcement about LBTT, but she will be aware that any delay in implementation causes postponement in house sales and purchases, which is unhelpful to the housing market. Can the cabinet secretary tell us how quickly she will move to put in place legislation? What is the time delay?

I welcome the £100 million that the cabinet secretary announced for youth unemployment. However, given that she has received only £21 million in consequentials, can she set out where that money will come from?

Photo of Kate Forbes Kate Forbes Scottish National Party

On the money that we have set aside for economic recovery, we have already taken the early steps that I set out in my statement to ensure that any capital underspend is recycled in order to provide jobs. As Jackie Baillie will know, there is already significant investment through our budget, with £2.3 billion for the initial response for businesses.

However, the challenge, and the reason why yesterday was incredibly frustrating, is that, as Jackie Baillie knows full well, in order to provide additional support, the primary source of additional finance for the Scottish Government is through UK Government consequentials. For all the talk of £800 million, which is warmly welcomed, it is largely for personal protective equipment and funding announcements that have already been made. There is only £21 million of additional resource from the economic stimulus package. We will use every penny of that to continue to invest in the economy but, until there is additional support, it will be difficult to do that, and we will have one hand tied behind our back. Of course, if we had more significant borrowing powers, that would be much easier.

On LBTT, we will move incredibly fast. It is not a problem with the Scottish ministers—we will move quickly. However, there is a legislative process to go through, and Revenue Scotland needs to be ready so that the change can be introduced effectively and efficiently. We will move very quickly. I cannot give a precise date just now, and I do not think that it would be particularly helpful to do so, given the issues of uncertainty in the market.

On youth unemployment, we are aware that we will need to do far more. Next week, the Cabinet Secretary for Economy, Fair Work and Culture will set out a far more comprehensive and detailed package of policies to protect jobs and support people to get back into work. There will be significant detail in there.

I agree with Jackie Baillie that much more is needed. As I look across the budget, the challenge is to ensure that we free up any headroom that is available—there is not much—to have that singular focus on protecting and creating jobs.

Photo of Patrick Harvie Patrick Harvie Green

In relation to the measures on hospitality, I am looking forward to getting back to the pub as much as anyone, but I want to do that when it is safe. I also want to do it when I know that the people who are working there are being treated decently.

The announcements from the UK Government come in the same week in which we heard that G1 Group in Glasgow, one of our biggest hospitality employers, is announcing another wave of redundancies—doing so, it seems, well in advance of the end of the furlough scheme, which could keep those jobs going for a bit longer. Union organisers in Unite hospitality tell me that the staff who are affected were not consulted in advance in the way in which they were supposed to be and that younger workers with less than two years’ service are being targeted, because they do not have the same employment rights as others have. There is also genuine concern that the employer is using furlough money—

The Deputy Presiding Officer:

Will you come to your question, please?

Photo of Patrick Harvie Patrick Harvie Green

There is genuine concern that the employer is using furlough money to pay people’s wages in lieu—an approach that even the UK Treasury wants to rule out.

What can the Scottish Government do to ensure that employers do not abuse the measures that have been put in place, that recovery does not become another race to the bottom on wages and employment standards, and that a sector that has endemic problems of poverty pay changes and starts to look after the people who do the work that earns it its profits?

Photo of Kate Forbes Kate Forbes Scottish National Party

My first point is that employers are starting to make decisions about redundancies in part because they know that the furlough scheme is coming to an end and that there is a cliff edge in October. There was an option for the chancellor yesterday to extend the furlough scheme, albeit on a sectoral and phased basis, as France has done, for up to two years, which I think would avert a rapid increase in redundancies, particularly in the hospitality sector.

The member’s point about ensuring that fair work practices are in place is important. I assure him that all our support for employability, skills and retraining and for businesses to keep people in work will have fair work at its heart. As I said, Fiona Hyslop will set out the details soon, and I give an assurance that we want to ensure that individuals—particularly young people—who find themselves in one of the most challenging job markets in a generation are supported not just to be in work but to have fair wages and meaningful contracts.

Photo of Willie Rennie Willie Rennie Liberal Democrat

I thank the finance secretary for advance sight of her statement—even if it was titled as from the First Minister; I am not sure whether she had a hand in that.

I hope that the finance secretary is aware of the work of my colleague Jamie Stone MP on financial support for the excluded. He is standing up for the self-employed, the freelancers and others who have been left behind. In her discussions with the chancellor, will she raise that important issue? Will she also commit her Government to supporting those people?

Photo of Kate Forbes Kate Forbes Scottish National Party

The short answer is yes. I have already raised the point a number of times, particularly in my quad calls with the UK Government and Welsh Government and Northern Ireland Executive representatives. I will continue to raise the issue.

We will make sure that funding that we put in place tries to catch everyone. The member knows that in our initial response we moved further, for example to ensure that the newly self-employed got support. We cannot do that for everybody, but we have moved further where we could.

Of course, the two things that are hindering us are access to funding and relaxed fiscal powers: if we had both of those, we would be able to go even further.

Photo of Bruce Crawford Bruce Crawford Scottish National Party

Many of us in Holyrood welcome much of what the chancellor announced yesterday to protect jobs and the economy. However, does the cabinet secretary agree that it is equally true to say that it was what was missing from the announcement that caused the most concern?

Prior to the announcement, the finance ministers from all three devolved nations reasonably asked the chancellor to ease current financial restrictions on devolved Governments, which would have enabled each nation to kick-start their own recoveries. Is it not deeply disappointing that the Tory Government has ignored those calls?

Photo of Kate Forbes Kate Forbes Scottish National Party

It is disappointing. We made those calls in good faith. We have been reasonable. We have set out the bare minimum of what is required in order to reboot the economy and to give us as much flexibility as possible to use our budget effectively. That does not cost the UK Government anything, but it would make an enormous difference to Wales, Northern Ireland and Scotland. We have made those calls for weeks and, for all that the chancellor may have said yesterday about the union, the one thing that he could do in that regard would be to make devolution work better by listening to our reasonable calls and acting.

This is not about technical powers, divorced from reality; this is about us being able to invest in the economy, support communities and protect jobs.

Photo of Maurice Golden Maurice Golden Conservative

Yesterday, the British Government gave Scotland’s tourism and hospitality sector a massive boost by reducing VAT to just 5 per cent. The chancellor is doing whatever it takes to directly help individuals and businesses in Scotland, unlike the SNP, which is interested only in playing tribal, constitutional politics. [

Interruption

.] Will the finance secretary now play her part in helping Scotland by extending the current business rates holiday for as long as is needed?

Photo of Kate Forbes Kate Forbes Scottish National Party

I am sorry, but I did not hear the end of that.

The Deputy Presiding Officer:

I also found it difficult to hear the end of the question. I would very much like to hear it again—not the whole thing, just the last bit.

Photo of Maurice Golden Maurice Golden Conservative

Will the finance secretary now play her part in helping Scotland by extending the current business rates holiday for as long as is needed?

Photo of Kate Forbes Kate Forbes Scottish National Party

I put on record that I will do whatever it takes. I have said that we will use all of the resources and fiscal levers that are at our disposal to protect jobs and reboot the economy. The point that I am making is that, if the Scottish Tories stand up and make demands, they must tell us where the funding will come from or give us the powers to do it ourselves.

With regard to non-domestic rates, that is an obvious example of another request that has not come with consequential funding attached. Therefore, although I am sympathetic to the argument, I would like to know what part of the budget that money should come from, because we cannot borrow revenue in order to extend those grants, and I cannot recycle money from one part of my budget to the other, because of arcane fiscal rules.

That is the problem here. For all the demands that the Scottish Tories make, they must give us the powers or the funding to do what they ask.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

Last year, UK GDP was £2.21 trillion. The chancellor’s economic boost, announced to great fanfare, amounts to barely 1.3 per cent of that, despite the UK economy shrinking by more than 20 per cent in April alone.

Does the cabinet secretary agree that, with the Confederation of British Industry predicting a further 5.3 per cent contraction in the economy next year as a direct result of Brexit, much more needs to be done, including rebalancing taxes that are paid by high-street retailers with those that are paid by online businesses, if our town centres are not to suffer continuing decline and further job losses—another 5,300 have been announced by Boots and John Lewis only today?

Photo of Kate Forbes Kate Forbes Scottish National Party

The scale of the economic challenge that we are facing requires an ambitious and practical response. It is highly likely that the chancellor will have to come back with more, and I think that he has delayed a lot of the more significant announcements to the autumn.

On yesterday’s announcement, we know that there has been and will continue to be a contraction in the economy. We know from our Scottish Government analysis that the recovery is unlikely to be V-shaped and will, instead, be more protracted. That is why we need to look not just to the short term but to the long term. We know that a lot of the welcome initiatives that were announced yesterday have a short shelf life. VAT reduction will come to an end in January—the middle of winter and the hardest point for the tourism industry. We know that the support for wages and jobs will also come to an end in that time period. Looking further ahead, we need to ensure that support is in place for the Scottish economy, in particular.

Photo of Alex Rowley Alex Rowley Labour

It is deeply disappointing that the chancellor completely ignored the calls from devolved Administrations for greater flexibility and borrowing powers. Labour will continue to work with the Scottish Government to push on those issues.

The cabinet secretary talked about LBTT, house building and support for buyers of new houses. This is an opportunity for us to look at housing as a whole and consider the types of ambitious national housing programmes that could join all the bits together.

The cabinet secretary will have seen the calls from Shelter Scotland for an extension of the no-eviction policy for people who are struggling to pay their rent.

Does she agree that we need a national house building programme for Scotland that will bring about sustainable jobs, training opportunities and apprenticeships? Will she agree to consider introducing such a programme and to look at housing as a whole, rather than in parts?

Photo of Kate Forbes Kate Forbes Scottish National Party

Alex Rowley’s offer at the outset to work with us on fiscal flexibilities is helpful. As I said, it has cross-Government and cross-party support and a lot of independent think tanks and commentators have also expressed their support for something that does not cost the UK Government anything, but supports the Scottish economy.

Alex Rowley will know about our ambition for housing to date, with our target of 50,000 new homes by the end of this parliamentary session and the work that has gone into investing in new homes. We want that level of ambition to be continued.

On the extension of no-eviction policies, one of the comments that I made on fiscal pathways was on the national debt plan, recognising that those who are already in debt are most likely to go after high-cost credit and to face challenges such as eviction. As we come through recovery and start to ease lockdown, such pressures will not disappear, so there is a case to be made for looking at how we support households with their household finances.

Photo of Emma Harper Emma Harper Scottish National Party

How will money announced by the UK chancellor, along with support that the Scottish Government has already put in place, assist cultural organisations, including those in Dumfries and Galloway such as the Big Burns Supper, the Stranraer Oyster Festival and the Kirkcudbright arts festival? Will she provide assurances that any money that is ring fenced for such organisations will go to the sector?

Photo of Kate Forbes Kate Forbes Scottish National Party

Again, in a positive spirit, I welcomed the UK Government’s announcement last week of its investment in culture, because it recognises the severe impact of the pandemic on that sector in particular. We hope that the UK Government acts swiftly to share information on how the grants and loans will work, following which we will establish the best means to provide additional support to those organisations that are devastated by Covid-19.

As Emma Harper would expect, we are continually in discussions with Creative Scotland, and we will consider how to ensure that the £10 million that we have already made available for performing arts venues gets out of the door as quickly as possible to those who need it most.

Photo of Alexander Burnett Alexander Burnett Conservative

I refer members to my entry in the register of members’ interests.

We all welcome business support grants and the finance secretary’s initial confirmation that the deadline would be 31 March 2021. We were disappointed by but understood the change of plan to close the scheme early so that the remaining money could be repurposed, as Kate Forbes repeated just now. However, the scheme closes tomorrow and there is no replacement for it. Businesses—including those in events management and catering, which have received nothing so far—have been waiting to hear about the replacement scheme today. When will the cabinet secretary repurpose the funds or provide additional funds for businesses?

Photo of Kate Forbes Kate Forbes Scottish National Party

We keep our funding under review at all times. I am not aware of having promised to replace the scheme with a new one, but we will ensure that funding continues to be made available to the businesses that need it most.

To ensure that our funding goes even further, as Alexander Burnett will know, some of the remaining money has already been repurposed through the pivotal enterprise resilience fund and the hardship scheme, neither of which exist south of the border and neither of which receive consequentials to make them happen.

We will keep the funding under review and hope to continue to work with business organisations to identify the businesses that need funding the most.

Photo of George Adam George Adam Scottish National Party

Does the cabinet secretary agree that although the chancellor’s announcement of a £30 billion package of support for jobs is welcome, the UK Government has yet again bypassed devolution? As a result, the Scottish Government will receive only £21 million to support jobs and the economy. Surely that is a missed opportunity to ensure that we have an approach to jobs that is tailored for Scotland’s economy.

Photo of Kate Forbes Kate Forbes Scottish National Party

The incredible arguments that were made yesterday about this being both a UK-wide initiative and also generating consequentials cannot be true; both of those facts cannot exist together.

I hope that I laid out in my statement where the different elements come in to the overall package. Although the overall package is very welcome in parts—particularly the cut in VAT—it is a missed opportunity and does not give us the funding that we need to tailor our response to Scotland’s economy. We will continue to work with industry and engage with the UK Government to ensure that the Scottish Government has the resources that it needs.

Photo of Sarah Boyack Sarah Boyack Labour

Will the cabinet secretary commit to forwarding on, without delay, all the new consequentials to local government from last week’s announcement by Robert Jenrick as well as the remaining business grants that are not yet used?

Will she act now to give local government financial flexibility by changing primary legislation urgently so that councils do not have to produce balanced budgets, given the crisis? That would mean that they could reprofile their deficits to meet the urgent challenges that they face in trying to reopen services safely, retain jobs and support our local economies through investment.

Photo of Kate Forbes Kate Forbes Scottish National Party

I will give two brief answers to that.

The first is that we are already working with local government to consider financial flexibilities and we will continue to do that. Most of the asks are about reserved legislation, but we are working closely with COSLA and I speak to Gail Macgregor regularly on what those flexibilities would be.

Secondly, the UK Government announced last week that there would be a further £500 million of funding and a scheme to reimburse lost income. We are working with COSLA and we are pressing the UK Government to provide further detail urgently on how the fiscal flexibilities can be applied for local authorities in Scotland. As yet, we do not have full certainty and transparency on how that will work.

Photo of Sandra White Sandra White Scottish National Party

I understand why there has been a lot of talk about fiscal stimulus and flexibilities but, as others have mentioned, and as I am sure the cabinet secretary will agree, what is needed is the transfer of borrowing powers. That is important. We have heard about moneys being “given” from Westminster to Scotland. Will the cabinet secretary please let it be known that those moneys are not given; they are moneys that we pay taxes toward?

Photo of Kate Forbes Kate Forbes Scottish National Party

Absolutely. They are not gifts; the Scottish taxpayer pays for them and will contribute to the bill at the end.

The UK Government has funded most of the interventions through borrowing at record low interest rates, which is welcome.

The borrowing powers that we have are all well and good in normal times. However, during an extraordinary crisis such as the one that we are in now, they do not work. The very simple requests that we have made about repurposing the borrowing powers would make all the difference and would allow us to be flexible in our response and ensure that hard-pressed households and budgets across the country have the support that they need.

Photo of Mark McDonald Mark McDonald Independent

I fully support the cabinet secretary’s calls for greater flexibility and powers to enable Scotland-specific solutions.

However, I want to ask her about potential flexibility that she could look to introduce. A person in my constituency has received their rates bill and an increase of 10 per cent is to be applied, despite their income currently being down by 75 per cent. Can the cabinet secretary have a look at how that system operates?

When she looks at further business support, as she alluded to in response to Alexander Burnett’s question, will she consider whether some flexibility might be accorded to areas such as Aberdeen, where rateable values are high due to historical economic buoyancy and where many businesses of comparable sizes to those elsewhere in Scotland often miss out on support because of their rateable value?

Photo of Kate Forbes Kate Forbes Scottish National Party

The challenge around paying rates is the very reason why we have introduced such wide-ranging rates relief. We have said from the beginning that, if a business does not meet the criteria for rates relief and considers itself unable to pay the rates, it should speak to its local authority in the first instance about what could be done to support it.

On rateable values, many businesses will be getting 100 per cent rates relief right now—businesses in the leisure, retail, hospitality and aviation sectors are not paying any rates currently. However, looking beyond the end of this year, we will take decisions about any extension to the scheme as part of the budget process.

Photo of Ruth Maguire Ruth Maguire Scottish National Party

North Ayrshire is at risk of being particularly hard hit by any economic harms. The Ayrshire growth deal could be part of the solution to that. It is crucial that the deal is signed and that money is released so that work can begin and the potential benefits to my Ayrshire constituents can be realised. Will the cabinet secretary commit to that and urge her UK Government counterparts to do the same?

Photo of Kate Forbes Kate Forbes Scottish National Party

We are very much committed to signing a deal for Ayrshire as soon as possible, and Michael Matheson made that point clear to UK Government colleagues last week on a call with Iain Stewart, a minister at the Scotland Office. We will continue to press the UK Government on the matter so that communities in Ayrshire can start to benefit from a growth deal investment without further delay.

Photo of Dean Lockhart Dean Lockhart Conservative

Instead of the finance secretary just asking for more money from the UK Government, people want to know how the Scottish Government is using its budget. For example, the Scottish National Investment Bank has a budget of £500 million, which comes from financial transactions money from the UK Treasury. Will the finance secretary give a commitment that all that budget will be used to save existing viable businesses in Scotland, rather than being wasted on speculative projects, which resulted in a loss of £150 million last year alone?

Photo of Kate Forbes Kate Forbes Scottish National Party

Instead of asking for more funding, perhaps the Tories could give me the means by which to raise that funding in the first place.

We are using all our budget—every line in it—to respond to Covid and reboot the economy. I do not know what “speculative projects” Dean Lockhart is talking about, but it would be wise for him to consider the fact that the rules right now prohibit me from using money that is saved from projects that do not go ahead in other parts of the budget. That is one of the arcane rules, and he has made the point for me as to why those rules need to be relaxed.

Photo of Neil Findlay Neil Findlay Labour

I must say that this is a depressing session of Parliament. People’s jobs are at risk, and if all we get are infantile contributions from the Tories, we will see jobs going down the tubes and nothing happening on the ground.

A report last week by the Social Market Foundation identified that West Lothian is likely to be the worst hit area of this recession. What targeted support will go to my West Lothian area to prevent a repeat of the 1980s, when unemployment was at 23 per cent and, in some council schemes, youth unemployment was at 77 per cent?

Photo of Kate Forbes Kate Forbes Scottish National Party

That is precisely what we want to prevent a repeat of. The detailed policies on what will be done to support people with the funding that is being made available today will be outlined next week.

Currently, where businesses and organisations have indicated that they will have to make redundancies, we are willing to step in and provide as much support as possible. The bottom line is that we want to ensure that people stay in work and that we create new jobs for those who have already been made redundant.

Photo of Rona Mackay Rona Mackay Scottish National Party

A key principle of fair work is fair pay. Does the cabinet secretary agree that the UK Government should ensure that young people who use the kick-start job creation scheme are paid at least the real living wage?

Photo of Kate Forbes Kate Forbes Scottish National Party

Absolutely. We welcome support for young people, but the UK Government made its announcement without any consultation with the Scottish Government, and the Cabinet Secretary for Economy, Fair Work and Culture will be writing to the UK Government to express concern on the matter. We are clear that those jobs must be meaningful and must allow young people to develop skills that reflect the emerging opportunities. We need to ensure that our young people are supported to make the best of the opportunities. That approach must have the principles of fair work and payment of the real living wage at its heart.

Photo of Michelle Ballantyne Michelle Ballantyne Conservative

David Phillips, associate director of the Institute for Fiscal Studies, has said today that the cabinet secretary’s claim that the Scottish Government will receive only £21 million is not true. I therefore ask: is the cabinet secretary’s figure clever political spin? In light of her response to Sandra White, can the cabinet secretary confirm whether she believes that the total budget that is coming to Scotland this year is less than, equal to or more than the fiscal framework—rather, if the fiscal framework provides that—in relation to the amount of tax that is—[

Interruption

.] If members wish me to repeat the question, that is fine. Does the cabinet secretary believe that Scotland gets more money through the fiscal framework than it takes in taxes in Scotland? Do we benefit as a union together?

Photo of Kate Forbes Kate Forbes Scottish National Party

That question perhaps suggests that Michelle Ballantyne missed the detail in my statement, in which I made it very clear that, of the £30 billion of economic stimulus money, only £21 million is coming to the Scottish Government. That figure was reinforced by the Fraser of Allander institute this morning.

I did not quite follow the rest of Michelle Ballantyne’s argument or statement, but I would make the point that the cost of responding to Covid far outstrips the consequentials that we have received. Unless and until we are given additional powers to raise that money ourselves, I will continue to press the UK Government to provide adequate funding for the response that we need to make.

Photo of Graham Simpson Graham Simpson Conservative

The change to the starting rate on LBTT is to be welcomed as far as it goes. However, delaying the implementation of the change means that people will not buy and sell houses until it comes in. Can the cabinet secretary at least give an indication of when the change will come in? Will it be this month, next month or the month after? The market needs to know.

Photo of Kate Forbes Kate Forbes Scottish National Party

I respectfully point out that, by making the announcement yesterday without any consultation with the Scottish Government, the UK Government has already stalled the housing market in Scotland, because people will be waiting for confirmation. That is why I have provided clarity today, and it is why I have committed to ensuring that the legislative process and Revenue Scotland can work as quickly as possible to put the measures in place. That is better than introducing even more uncertainty by delaying any announcements. When UK Government tax decisions have an impact on Scotland and we get no advance notice of them, we have to make do with what we have.