Budget (Scotland) (No 3) Bill: Stage 1

– in the Scottish Parliament at on 8 February 2024.

Alert me about debates like this

Photo of Alison Johnstone Alison Johnstone Green

The next item of business is a debate on motion S6M-12096, in the name of Shona Robison, on the Budget (Scotland) (No 3) Bill at stage 1. I would be grateful if members who wish to speak in the debate pressed their request-to-speak button.

Photo of Shona Robison Shona Robison Scottish National Party

I am pleased to open the stage 1 debate on the 2024-25 Scottish budget. Last week’s committees debate demonstrated the pivotal role of the Scottish budget, and I welcomed members’ constructive contributions. I will respond to the Finance and Public Administration Committee’s budget report ahead of stage 2.

I expect that, today, we will hear more about areas where we should spend more. All members who call for additional spending are welcome to provide me with those propositions, but they also need to be clear on where funding would be reduced in order to make those funding changes.

Before we begin, I will reference the Institute for Fiscal Studies question about how we present the Scottish budget and its prior year comparisons. The Scottish Government has been consistent in how we compare the new budget with past years. In-year budgets change and are still in flux. The IFS recognises that, when we introduce the new budget each year, we are always transparent about that through our budget revision process. I recognise the interest in that, which is why we published additional information at the end of January, to offer comparisons between the most up-to-date current year total and the planned budget for next year. I am pleased that the IFS report also recognises that, taken together, our planned changes to income tax and the council tax freeze will be progressive.

The 2024-25 budget is introduced against a backdrop of a stagnating United Kingdom economy that has been seriously damaged by Brexit and a Tory Government that is failing to deliver the investment that is needed in public services and infrastructure. The price that Scotland has paid for years of Tory economic mismanagement is plain for everyone to see. There has been a real-terms fall in our block grant since 2022-23, with a 10 per cent real-terms cut in our capital budget over five years; that is about £1.6 billion in total, which is equivalent to the cost of building a large hospital.

The autumn statement prioritised tax cuts over public spending and will result in real-terms spending cuts for UK Government departments. Astonishingly, there were real-terms cuts by the Tories for NHS England, and there is not a single penny for the cost of the 2023-24 pay deals in the coming financial year.

Photo of Douglas Ross Douglas Ross Conservative

W ill the Deputy First Minister give her opinion on the views of her former Cabinet colleague the Scottish National Party MSP Kate Forbes, who said that

“Continually increasing taxes is ... counter-productive” and that it

“ultimately reduces public revenue”?

What does she think about those comments?

Photo of Shona Robison Shona Robison Scottish National Party

As I was about to say, we have raised additional revenues for the Scottish budget that amount to about £1.5 billion because of the tax decisions that we have made over a number of years. We would not have had that revenue had we followed UK Government Tory tax decisions. That is £1.5 billion that would not have been available for this Parliament to scrutinise and to demand be spent in other areas. We would be £1.5 billion worse off. The tax decisions that we have made have added to the revenues that are available for the budget, and that is important for public services.

Photo of Shona Robison Shona Robison Scottish National Party

I want to make progress. If I have time, I will let the member in later.

The autumn statement prioritised tax cuts over public spending, and that will result in real-terms spending cuts for UK Government departments. The lack of investment in services in England impacts our funding through Barnett funding arrangements. That is why the Labour Minister for Finance and Local Government for Wales, Rebecca Evans, said last month:

“Over the last 13 years, successive UK Governments have given us more than a decade of austerity, a botched Brexit, and a disastrous mini budget that almost crashed the economy. Despite our best efforts to shield public services, businesses and the Welsh population from the worst impacts of these policies, each has, individually and collectively, had a significant and lasting impact on Wales.”—[

Record of Proceedings

,

Senedd Cymru

/

Welsh Parliament

, 9 January 2024.]

I agree. As the Tory UK Government slides towards the exit at the Westminster election, it seems that it is again looking to cut taxes at the expense of services. I urge the Chancellor of the Exchequer, on 6 March, to reverse his real-terms cuts to the national health service, to fund pay deals and to properly invest in our services and infrastructure. Unfortunately, I suspect that we may be disappointed.

Photo of John Swinney John Swinney Scottish National Party

While the Deputy First Minister is making her representations to the United Kingdom Government on those important questions, will she be mindful that the last advice that we got from the Conservatives in this Parliament was for us to follow the example of Liz Truss? Look at the shambles that that has created.

Photo of Shona Robison Shona Robison Scottish National Party

I totally agree with John Swinney. People are suffering the consequences of that in their pockets because of mortgage interest rates and the cost of living hikes that can be largely attributed to the disastrous mini-budget.

Just last week, the International Monetary Fund—[

Interruption

.] The Conservatives might not like to hear what the IMF has to say, but I am going to say it anyway. The IMF warned the UK Government against further tax cuts. The IMF is calling for it instead to—[

Interruption

.]

The Presiding Officer:

It is becoming increasingly difficult to hear the Deputy First Minister. I would be grateful if members could make sure that each and every one of us can hear clearly.

Photo of Shona Robison Shona Robison Scottish National Party

Last week, the IMF warned the UK Government against further tax cuts, and called for it to invest in public services and reduce debt. The Office for Budget Responsibility has highlighted the lack of detail in the plans and suggested that it would be “generous” to call them “a work of fiction”. Those are pretty powerful words.

Photo of Shona Robison Shona Robison Scottish National Party

I need to see what time I have. I will give way if I have time.

We are doing all that we can to mitigate the effect of the UK Government’s damaging policies but, so long as our funding is tied to UK Government spending plans, our freedom to take a different path is constrained. Despite that extremely challenging situation, which is driven by a succession of poor decisions by the UK Government, the Scottish budget targets spending where it will have the most impact to tackle poverty, to support the growth of a green, fair economy and to protect our vital public services.

The Scottish Government is determined to deliver a better approach for Scotland. We will use our tax powers proportionately to deliver additional funding for the Scottish budget to support our front-line public services in the face of a real-terms reduction in the block grant. The changes that we propose to Scottish income tax in the budget are targeted so that we are asking those with the broadest shoulders to pay a little more. That means that, in 2024-25, we will have an estimated £1.5 billion of additional revenues to support Scotland, which would not be available to support our health and local government services and our social security benefits if we had simply followed UK Government tax policies.

That is funding our largest single investment of £6.3 billion in social security benefits, which is £1.1 billion more than we receive from the UK Government for social security. That is an investment in Scotland’s future and it takes forward our equality mission of tackling poverty and protecting people from harm. We estimate that 90,000 fewer children will live in poverty this year as a result of our actions, which include lifting an estimated 50,000 children out of relative poverty through our Scottish child payment.

We all rely on local authorities for vital public services, and the budget provides a record £14 billion for local government, including £144 million to fund the council tax freeze, which is a 6 per cent increase on the current year. As the Accounts Commission has confirmed, our local government revenue funding is now 2.6 per cent higher in real terms than in 2013-14.

We are also using the budget to deliver on our mission of opportunity, which supports our ambition of achieving a fair, green and growing economy.

The Presiding Officer:

The Deputy First Minister must begin to conclude—in fact, she must conclude.

Photo of Shona Robison Shona Robison Scottish National Party

I will take an intervention in my closing speech.

Offshore wind presents massive opportunities for Scotland, and we are investing nearly £67 million in it in 2024-25. We are also providing more than £307 million to our enterprise agencies to support job creation and business growth.

I recognise the pressures that the hospitality sector faces. In addition to freezing the poundage, we will provide 100 per cent relief for hospitality businesses in our islands, and we are committed to continuing to work with the sector on longer-term solutions.

Today, we heard that, for the first time, global warming has exceeded 1.5°C for a whole year. More than ever, we are reminded of why it is important to tackle the climate emergency for future generations, which is why the Government is committing £4.7 billion in the budget to activities that will have a positive impact on our climate change goals—

The Presiding Officer:

I must ask you to conclude now, Deputy First Minister.

Photo of Shona Robison Shona Robison Scottish National Party

That investment is supported by the revenue from ScotWind.

In my closing speech, I will come to the other areas. I urge all members, because we are putting our investment into front-line services, to support the bill today.

I move,

That the Parliament agrees to the general principles of the Budget (Scotland) (No. 3) Bill.

The Presiding Officer:

I call Kenneth Gibson to speak on behalf of the Finance and Public Administration Committee.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

I am pleased to speak in today’s stage 1 debate on the Scottish budget 2024-25 on behalf of the Finance and Public Administration Committee. I will highlight some key issues that were raised in the committee’s report on the Scottish budget, which was published on 31 January.

As members are aware, the backdrop to the budget is particularly challenging. The Deputy First Minister warned in May of last year that

“tough and decisive action must be taken to ensure the sustainability of public finances and that future budgets can be balanced.”

The committee understands that significant pressures on Scotland’s public finances have presented difficult decisions in relation to taxation and spending. Indeed, in its December 2023 forecasts, the Scottish Fiscal Commission anticipates

“slow and fragile growth in gross domestic product and real disposable income per person”,

as numerous interest rate rises in recent months weigh heavily on householders and businesses, while inflation has stayed higher for longer than expected.

Although resource funding for the Scottish Government will increase by 0.9 per cent in real terms, largely as a result of an improved income tax net position, capital funding will fall by £484 million in 2024-25, mainly due to the reduced UK Government capital allocation.

According to the SFC, capital funding is expected to fall by 20 per cent in real terms between 2023-24 and 2028-29, at a time when Governments should be investing to grow the economy.

In her foreword to the Scottish budget 2024-25, the Deputy First Minister said:

“In setting this budget the Scottish Government has adopted a values based approach, focused on our three missions.

Equality—Tackling poverty and protecting people from harm

Opportunity—Building a fair, sustainable and growing economy

Community—Delivering efficient and effective public services”.

During our budget scrutiny, therefore, the committee sought to establish how the Scottish Government has ensured that its tax and spending plans align with its three missions. Based on evidence heard, the committee remains to be convinced that Scottish Government spending prioritisation has been carried out in a strategic, coherent and co-ordinated way. Our report highlights some individual decisions that appear to conflict with the three missions, such as a lack of progress with public service reform, cuts to the affordable housing budget—although the reduction in capital availability could only have had an adverse impact—further and higher education and employability. We have therefore recommended that more explanation is needed in future years on how the Scottish Government has prioritised and deprioritised its spending and developed its tax plans.

On taxation, the committee heard evidence that there remains much uncertainty around behavioural change arising from increased income tax for those earning £75,000 a year or more. It is not so much about people leaving Scotland or choosing not to come here but about whether the marginal rate of tax that they would pay might deter them from undertaking that extra shift or accepting a promotion. We therefore welcome the analysis that is being undertaken by His Majesty’s Revenue and Customs to identify any behavioural trends in labour market participation arising from income tax changes, and we look forward to seeing how that analysis informs Scottish Fiscal Commission forecasts and taxation policy in future.

We have also raised with both Governments concerns regarding the serious anomalies that exist in how income tax and national insurance policies interact across the UK, which I have raised often over the years. For example, taxpayers in Scotland earning between £43,663 and £50,270 pay the higher rate of national insurance, rather than 2 per cent, while those earning between £110,000 and £125,170 will pay a marginal rate of 69.5 per cent tax, due to the UK Government’s removal of the personal allowance. Professor Bell told the committee that that rate is

“possibly the highest ... in any OECD country”.

We have seen little evidence of either Government seeking to avoid or resolve those anomalies, and therefore I repeat our calls that they work together to mitigate those issues.

The committee has a long-standing interest in improving labour market participation and productivity, reducing economic inactivity and growing the tax base. In our report, we welcomed the Scottish Government’s plans for a labour market participation plan and asked that it include proposals to reduce economic inactivity and involve business and further and higher education to ensure that skills shortages are addressed now and in the future.

In that context, we are unclear, in light of spending cuts to further and higher education, enterprise agencies and employability, how the Scottish Government has prioritised its spending towards supporting the delivery of a fair, green and growing economy, as part of its three priority missions. It would be helpful to receive further detail on that from the Deputy First Minister in her closing speech.

The committee again expressed its disappointment at continued reductions in the capital funding quantum that is available to the Scottish Government, and we urge a change in policy in the UK spring budget to enable more investment in infrastructure to enable and stimulate economic growth. We have also asked the Scottish Government for more information on the steps that it is taking to lever in private investment through what it has described as the “strategic” use of its limited capital spend.

The Deputy First Minister has committed to ensuring that the delayed updated infrastructure pipeline will now be published alongside the Scottish Government’s medium-term financial budget. We seek assurances that that will not be subject to any further delay, given its importance to Scotland’s economy.

The evidence that has been heard suggests that the Scottish Government remains focused on plugging short-term funding gaps at the expense of medium and longer-term financial planning. We have highlighted a number of delays in publishing expected documents that would help to support the medium and longer-term sustainability of Scotland’s finances, with the impression given that the Scottish Government is procrastinating on important decision making. It is especially disappointing that the Scottish Government did not respond to the strong recommendation that was set out in a pre-budget report that the Scottish Government produced as a full response to the SFC’s fiscal sustainability report. We note that that was a missed opportunity to demonstrate a long-term planning approach and begin addressing the significant challenges ahead. That is a priority, and should address issues such as the demographic challenges ahead and how the Scottish Government is ensuring that its social security policies are sustainable and affordable in the long term.

Also outstanding was a comparison of the Scottish Government’s spending plans with the latest estimates or outturns from the previous year’s spend. The Government agreed to publish that information in January to support transparency and maximise the opportunity for scrutiny. We welcomed that approach. However, the figures arrived only today, and it is disappointing that the data was not available in time for committee scrutiny.

In our pre-budget report, we set out a series of recommendations that are aimed at bringing impetus, focus and direction to the Scottish Government’s public service reform programme. The Government’s recent update to the committee provides some welcome principles and objectives for its reform programme, including recognising the importance of prioritising preventative spend, which is an area that the committee has long supported. However, we have noted few other signs of progress, which is disappointing, given the current need for reform. We have asked the Government to look again at our earlier recommendations and to publish a financial strategy accompanying its reform programme, which the former Deputy First Minister committed to in March 2023.

It is crucial that a coherent reform programme is in place; otherwise, there is a significant risk that financial pressures will

“drive a series of uncoordinated cuts across the board, rather than genuine reform aimed at enhancing the delivery of public services.”

Finally, I will touch on the Scottish Parliamentary Corporate Body budget proposal for 2024-25, which the committee considers and reports on in the context of our budget scrutiny. The Scottish Parliament must have the appropriate funding to be able to scrutinise effectively and hold the Scottish Government to account. The committee recognises that a high proportion of the SPCB budget goes on staffing, salaries and office-holder costs. Nevertheless, given the significant financial pressures that the public sector faces, we have asked to see more information in future budget bids on how the SPCB makes the most effective use of its funds, including setting out where savings have been identified and how projects have been prioritised, not least in terms of the Scottish commissioners.

Speaking on behalf of the FPA Committee, I look forward to receiving a response to our wider report on the Scottish budget for 2024-25 and to discussing that further with the Deputy First Minister ahead of stage 2 consideration on 20 February. I also look forward to hearing the rest of the speeches in today’s debate.

Photo of Elizabeth Smith Elizabeth Smith Conservative

Stage 1 of any budget process is obviously about political parties setting out their alternative choices for tax and spend, and I will come to that in just a minute.

I begin by acknowledging that the backdrop to this budget is exceptionally challenging. Global inflationary effects remain, with resulting impacts on supply chains and energy costs; labour markets are still unsettled following Covid and Brexit; and, as I said in last week’s budget debate, the cuts to the Scottish Government’s capital budget have been an issue, which has just been referenced by Kenny Gibson and was referenced by several key witnesses, including Professor David Bell, at the Finance and Public Administration Committee. There is no doubt about that, and I hope that that issue can be addressed by the chancellor in due course.

The Scottish Fiscal Commission has set out its usual, very objective analysis. It is more optimistic about earnings growth and short-run tax revenue income, which has been backed up by several other independent analysts, but it is still deeply concerned about the extent of the fiscal deficit and the potential for it to grow in the years ahead, given the commitments that the Scottish Government has made to increase health and social care and social security spending.

The SFC is also concerned about the fact that the Scottish economy has, for many years, been underperforming when it comes to economic growth. We know that, if the Scottish economy had grown at the same rate as the UK economy since 2017, we would have had around £6 billion more to spend. That might be just one reason why Audit Scotland has today criticised the Scottish Government for its lack of leadership, which rather undermines the Government’s assertion that everything wrong with the Scottish economy is the fault of Westminster.

Photo of Elizabeth Smith Elizabeth Smith Conservative

I will not just now.

If the statistics are not stark enough, the reaction to the Scottish Government’s budget has also been bad. Indeed, I do not think that I have ever seen a worse reaction to a budget, such is the near-universal—and almost daily—condemnation from a vast array of stakeholders, including some of the SNP’s own back benchers. I am not sure whether they are all here today. Presumably, they are now wondering whether they should support the budget.

As Kenny Gibson rightly pointed out, the Finance and Public Administration Committee has had considerable concerns about the fiscal situation.

Photo of Elizabeth Smith Elizabeth Smith Conservative

I will not, if you do not mind.

Let me start with economic growth, which is a key point. I have heard several senior ministers say that growth is a priority. If it is, why on earth would you make substantial cuts to the economy portfolio of 8.3 per cent in real terms, when the overall Scottish budget, according to the analysts, has increased by 2.2 per cent in real terms? Indeed, the economy portfolio, alongside rural affairs and transport, are the three out of 11 portfolios to have real-term cuts. Why would you strip funding to the Scottish Funding Council by £140 million in real terms, when universities and colleges are the very institutions that can promote growth through skills development, retraining and, of course, research?

Why would you cut the affordable homes budget, including that in rural areas, where workforces face the greatest challenges? Why would you cut the employment and enterprise budgets, in real terms, by 24.2 per cent and 16.7 per cent, respectively; the tourism budget by 12.3 per cent; and the Scottish National Investment Bank’s budget by 29.2 per cent?

Photo of Elizabeth Smith Elizabeth Smith Conservative

Yes, I will—in a minute.

We and a large number of stakeholders who have made very strong statements about the budget simply do not understand why the Government has done that. Does the cabinet secretary agree with David Bell’s observation that

“It is not clear that this budget has been designed with growth as a primary objective.”?

Photo of Shona Robison Shona Robison Scottish National Party

I have made it very clear that we have had to prioritise the funding of front-line services because of the real-terms cut to our budget. We have provided more money for health, policing, the Scottish Fire and Rescue Service and local government. If Liz Smith is saying that those were the wrong priorities and that we should not have made the very difficult decisions that we have had to make, is that where she would take the funding from in order to fund her other priorities? At some point, Liz Smith needs to set out what her alternative priorities are and how they would be funded.

Photo of Elizabeth Smith Elizabeth Smith Conservative

I will come to that point. Yes, we do think that the SNP has made a very serious error of judgment over the priorities. I repeat that we are appalled by the lack of concern that the Scottish Government has shown towards business, especially when it will not pass on the UK Government’s 75 per cent rates relief for business.

The Scottish Government has made great play of its public sector pay awards as supporting public services, but what it has not done is live up to its promise that it would return the size of the public sector to pre-pandemic levels. Indeed, since 2016 the Scottish Government’s own civil service has grown by just under 11,000 people. That partly explains why, in paragraph 186 of its report, the Finance and Public Administration Committee is so concerned about the lack of public sector reform. As our convener said, it is high time that the Scottish Government recognised the seriousness of our concern.

I turn to tax. SNP ministers have said on more than one occasion that there is a “moral argument” for middle to higher earners to pay more tax, because it allows the Scottish Government to support public services. The trouble is that the public do not see that higher tax burden or the so-called “social contract” with the Scottish Government delivering better services in health, education, transport, policing or housing. At present, all that they see is cuts, especially for local government, and an unseemly stand-off between central and local government, which is probably why some local authorities are not going to accept the council tax freeze. They have simply run out of money—

Photo of Elizabeth Smith Elizabeth Smith Conservative

I am in my final minute.

There is a wider issue here, which relates to behavioural change. That issue was flagged up by Professor Graeme Roy in his

Herald article on 8 January and has been evidenced in recent surveys. We have the effects of the widening tax differentials between Scotland and the rest of the UK, and the resulting Laffer curve effects, which—[

Interruption

.]

The Presiding Officer:

Mr Swinney, I can hear you shouting. I would be grateful if that were no longer the case.

Photo of Elizabeth Smith Elizabeth Smith Conservative

Kate Forbes was quite right in her comments in the press. It is clear that she understands the Laffer curve effects. We simply cannot have a tax system that creates disincentives and undermines confidence in the economy, or taxes such as the proposed business rate surtax on larger stores, which the Scottish Retail Consortium has criticised.

Budgets are all about choices. I do not doubt that the choices that the Government faces are very tough, but the Scottish Conservatives will put forward our alternative proposals, which include abandoning the National Care Service (Scotland) Bill, which is not properly costed and not properly set out.

On that basis, we will not support the budget at stage 1.

Photo of Michael Marra Michael Marra Labour

The Government’s budget is a chaotic and incompetent one that will leave Scots paying much more and getting much less in return. It is the result of 17 years of incompetence and waste, and of a long-term failure to grow our economy.

On 19 December, I told members that this was a budget of unfolding chaos. Two months on, that chaos continues and the crisis is reaching a crescendo. Key lifeline services across Scotland are still in the dark about how much money they will have to spend or how savings will be achieved, and our councils, colleges and universities are all looking on aghast at Government ineptitude of the highest order.

We have the preposterous situation of colleges and universities already having received applications for courses in the coming academic year but having no certainty at all about whether they will actually be able to run those, come August. Senior college leaders have told me that the process has never been so confused and chaotic. They have described it as a “shambles” and as “soul-destroying”. They say that they are staring into the abyss and that it is a struggle to see what the future is. There is no direction and no leadership, no clarity, empathy or solutions, and no clue.

Photo of Michael Marra Michael Marra Labour

Not at the moment, sir.

Universities do not know how many places they will actually be able to offer to Scottish students this year, although applications are already in.

Why is the budget so especially chaotic this year? We do not have to look far—approximately 5m. We have a weak First Minister and an incompetent finance secretary, leaving a void of leadership at the Cabinet table, with cabinet secretaries scrapping over portfolios, briefing the press and spreading disarray. The First Minister was routed in a by-election and then announced unfunded spending commitments of £1 billion of taxpayers’ money that he did not have. The result is this disastrous budget, with massive and non-strategic cuts across the board.

Let us be crystal clear. Despite the rhetoric, the budget does absolutely nothing for economic growth. Economists and academics, the Fraser of Allander Institute

Photo of Shona Robison Shona Robison Scottish National Party

On the subject of doing things for economic growth, does the member think that abandoning the £28 billion a year green investment pledge, as the Labour party has done today, will help economic growth in Scotland or anywhere else in these islands?

Photo of Michael Marra Michael Marra Labour

I say to the Deputy First Minister that Labour is absolutely committed to ensuring that we can deliver projects in Scotland that will create thousands of jobs and make the transformative change that we need. Unlike this Government, we must focus on delivering outcomes for the people of Scotland. Let us be clear—[

Interruption

.]

The Presiding Officer:

Let us hear Mr Marra.

Photo of Michael Marra Michael Marra Labour

Let us listen to the Fraser of Allander Institute, or to Professor David Bell of the University of Stirling. They have been clear that this is not a budget for growth. We will all pay the price for that. After 17 years of mismanagement of the public finances, people are paying more and getting less.

Labour does not believe that people earning £28,850 have the “broadest shoulders”, as the finance secretary claims that they do.

Photo of Michael Marra Michael Marra Labour

No thank you, sir.

The lesson for the SNP is that a Government cannot use tax as a substitute for economic growth or plug the black hole in our finances with tax rises.

Photo of Michael Marra Michael Marra Labour

No thank you.

If Scotland’s growth had kept pace with that of the other UK regions over the past decade, our economy would be £8.5 billion larger. Just think what that could mean for investment in our public services. Scotland needs a Government that is focused on economic growth and on getting our public services back on their feet. With Labour, it can have one.

Scrutiny of the budget by the whole of Parliament has shown that it is entirely unworthy of support. Our Finance and Public Administration Committee has been damning in its criticism, as was set out by the convener just minutes ago, accusing the Scottish Government of procrastinating on important decisions. Committees from across the Parliament, made up of members from all parties and in many cases led by SNP members, have lined up to criticise the budget.

The Constitution, Europe, External Affairs and Culture Committee reported that the Government’s late withdrawal of funds in-year had considerably damaged the already fragile confidence in the culture sector. The Equalities, Human Rights and Civil Justice Committee was damning of the Scottish Government’s silo working and of a budget process that is difficult to navigate. In a debate last week, the convener of the Social Justice and Social Security Committee cited evidence of the housing emergency, saying:

“It is an affordability crisis, an accessibility crisis, a crisis for children and a crisis of cost, and all those crises have come together as an emergency.”—[

Official Report

, 1 February 2024; c 79.]

The finance secretary has decimated the housing budget.

Committees of this Parliament are speaking as one. Whether we listen to charities, businesses, trade unions or members from the Government’s own benches, nobody—nobody—has confidence in the budget. We agree. Scottish Labour will not be supporting the budget.

A month of the UK Covid inquiry, the Institute for Fiscal Studies this week and Audit Scotland this very morning have all laid bare the scale of waste, cover-up and sheer incompetence at the very heart of this SNP Government. Whether it be the industrial-scale deletion of evidence or budgets with multimillion-pound typos, it is the Scottish people who suffer at the hands of this tired and incompetent Government, with nearly one in six people on NHS waiting lists, crumbling schools and a housing crisis. The Cabinet Secretary for Finance may well be wishing that this was a budget that she could delete before bedtime.

After 17 years, it is abundantly clear that the SNP is out of ideas, and it is time for change. Day by day, it is further beset by crises of its own making and is defending a record of failure. [

Interruption

.]

The Presiding Officer:

Let us hear Mr Marra.

Photo of Michael Marra Michael Marra Labour

O nly a wholesale change in leadership, Government and approach will bring the change that Scotland so desperately needs.

Photo of Alex Cole-Hamilton Alex Cole-Hamilton Liberal Democrat

Let us not beat about the bush: the budget slashes energy efficiency funding in the middle of a cost of living crisis; it carves a third out of the housing budget in the middle of a housing emergency; it cuts the drugs budget in the middle of a drugs death emergency; it removes £63 million from enterprise, trade and investment when the economy is in desperate need of a kick-start; it starves schools, universities and colleges of funding when our hard-won global advantage is slipping away from us; and it puts a red pen through initiatives that would create green jobs and reduce our emissions. Those are the choices that the Scottish Government has made, and I and my party cannot abide any of them.

Photo of Alex Cole-Hamilton Alex Cole-Hamilton Liberal Democrat

I am going to make some progress.

We can add the contempt shown for councils to that list, too. As it stands, the Verity house agreement is now hardly worth the paper it is written on. The European Charter of Local Self-Government is gathering dust on the shelf. Just like many other aspects of tax, there is no vision or long-term strategy from the SNP-Green coalition Government.

That is embodied by Humza Yousaf swinging wildly from a consultation on record council tax hikes to announcing a freeze entirely. The Convention of Scottish Local Authorities was not told beforehand. The decision was not signed off by Cabinet, and even the Green coalition ministers were not told until moments before the First Minister stepped on to the conference stage. Humza Yousaf was deciding tax policy on a whim for the sake of a conference headline. Why should any other party vote for something that even Lorna Slater admits is bad policy? Why, come to that, are the Greens voting for the budget today, when it is clear that councils are not being properly compensated?

What happens if a council decides that it will not cave in to the Scottish Government this year? Will it be penalised by ministers in perpetuity? That is what would happen if the cash was baked in, as the Government has told COSLA that it will do. That council’s proportion of the block grant would remain 5 per cent lower than it would otherwise have been, year after year. That is how it follows.

All of that shows utter contempt for councils, putting them in a bind. The volatility has made it impossible for local authorities to plan their finances. They need certainty to have any chance of safeguarding our libraries, leisure centres and roads. Given that education is half of what our councils do, I really fear for what all of that could mean for our teachers, our schools and our pupils.

Under the SNP Government, Scotland has slipped down the international rankings, and the Scottish Government is miles away from closing the poverty-related attainment gap by 2026, given that it has only just returned to pre-pandemic levels. Pupil premium cash has been devalued, and we could and should dedicate entire debates in the chamber to each of the promises made by the SNP at the most recent election on teacher numbers, stable teacher contracts, class contact time, free school meals, free laptops and refurbished play parks. I am not holding my breath for debates on those subjects in Government time.

When Humza Yousaf launched his NHS recovery plan, one in five children were waiting too long for mental health treatment. Since then, things have gotten even worse. Right now, that target is being broken for one in four of our children. Humza Yousaf made a personal promise to clear those waiting lists. When that was missed, in the very same month that he came to power, there was finally a chance to take Scotland’s mental health crisis seriously and to put the engines of his Government behind it. Instead, he has maintained the pattern of cuts. Last winter there was a £50 million cut. This winter there is a £30 million cut. That is a recipe for more missed targets, more vacancies, more overworked staff and more scandalous long waits that will be visited on our children.

Scotland needs world-class mental health services. Only the Scottish Liberal Democrats have set out plans to treat people quicker, to put more professionals close to people in schools and general practices and to increase the tax that is paid by the social media giants to help pay for that and to undo the damage that they are doing.

The budget will also mean greater use of petrol cars, greater use of oil and gas and more sewage in our rivers. Green MSPs delude themselves if they think otherwise, because the axe has been taken to woodland planting, rail services, the future transport fund, energy transition, energy efficiency, the carbon neutral islands initiative and Scottish Water.

Photo of Shirley-Anne Somerville Shirley-Anne Somerville Scottish National Party

I am aware that Alex Cole-Hamilton does not have much time left, so I presume that he is getting from the long list of things that we should spend more money on to telling us where he is going to cut budgets to allow that to happen.

Photo of Alex Cole-Hamilton Alex Cole-Hamilton Liberal Democrat

I will come on to that—I have already talked about exactly that, in terms: we can fund mental health services, in particular, through taxation. It is a realistic proposition for undoing the harm that the social media giants do and paying for much-needed intervention, which Shirley-Anne Somerville’s Government has neglected time and again.

We are not talking about small cuts. The just transition fund is designed to help communities during the necessary shift away from fossil fuels. Three quarters of that is gone. Such cuts are completely disproportionate in the context of the budget as a whole, and they blow a hole in what is left of the Government’s standing on the climate. I am surprised that the Greens have gone along with that—well, maybe I am not. If SNP-Green ministers want to take credit for the extra funding that is being invested in pay deals and social security, so, too, must they take responsibility for the painful cuts.

Scottish Liberal Democrats will stand up for a growing and thriving economy, which creates prosperity, lifts people out of poverty and generates the tax revenue that we need to invest in lifting up Scottish education, rescuing the NHS and building more warm homes. It is painfully clear that the Government is out of touch and out of ideas.

The Presiding Officer:

We move to the open debate.

Photo of John Mason John Mason Scottish National Party

Clearly, money is tight as we go into the 2024-25 budget, and a number of sectors tell us that they need more money—be that for local government, affordable housing, the farming sector, public transport, forestry or preventative spending. At the same time, on the income side of the budget, the Scottish Trades Union Congress and others ask us to raise more from tax, while hospitality and other sectors want non-domestic rates or other taxes to be cut. We all need to accept that we cannot get all that we would like, so I suggest that we should all accept the realities of a balanced budget—our income has to match our expenditure. If we want to spend more, we need to raise more tax or cut somewhere else. If we want to cut taxes, we need to cut expenditure.

Photo of Pam Duncan-Glancy Pam Duncan-Glancy Labour

Does John Mason support the tax rises by the Green-SNP council in Glasgow that are set to see disabled people in Glasgow paying 75 per cent more for their care, as a result of decisions that have been taken by the council?

Photo of John Mason John Mason Scottish National Party

I do not think that that is a tax, as such. I am talking about general taxation, rather than a specific charge.

It is all very well claiming that growing the economy would raise more tax in the longer term: it might, or it might not. Traditionally, growing the economy has meant that the richest people benefit most and the poorer people get left behind. We want to grow the economy, but how we distribute the income and wealth that we have is a distinct question, and we need to focus on that as well.

If we start on the income or taxation side, we need to take into account what happens across our only land border. Our landfill tax probably has to match England’s, or we could see waste tourism on a big scale. However, on other taxes, we can push the boundaries a bit. A few pence here or there on income tax will not lead to massive behavioural change, especially given that house prices in Scotland are generally considerably lower than they are in London, and that there are many other advantages of living in Scotland, including a better environment, no student fees and a better NHS.

When it comes to property taxes such as NDR or council tax, we have more room for manoeuvre. Land and buildings cannot be moved. A supermarket in Glasgow competes not with a supermarket in Birmingham but with another supermarket nearby, in Glasgow. We therefore do not need to be overly concerned about what England is doing on property taxes.

Photo of John Mason John Mason Scottish National Party

I am sorry; I have given way already.

We must not forget that, compared with other European countries, the UK is a relatively low-tax economy; only some 38 per cent of its GDP goes to tax and public services, which is much lower than countries including France, at 47 per cent, and Belgium, at 53 per cent.

Specifically on NDR, the hospitality sector has been asking for more relief. There have been calls for us to copy England on hospitality and to give greater relief to businesses across the board. However, we need, in the first place, to do what is best for Scotland, and not just blindly copy France, England, America or anywhere else. We also know that some parts of the hospitality sector are doing extremely well and do not need Government support.

On council tax, there is clearly a debate to be had about whether a freeze is a good idea. On one hand, £144 million would not solve everyone’s problems, but on the other hand, we could boost the Scottish child payment or the housing budget. Against that is the fact that some council tax payers are under real financial pressure and will appreciate that kind of relief. There is no clear right or wrong answer.

At this point, I will mention comparisons to the previous year’s figures. Again, there is no single right answer. Should we compare to last year’s approved budget or to last year’s estimated outturn? My answer is that we should compare to both, if we are being transparent. There is no right answer; both are correct.

On the expenditure side, we have to celebrate the tremendous increase for social security from £5 billion to £6 billion. That is exceptional in this year’s budget and shows where the Scottish Government’s and the SNP’s priorities lie, by targeting money at two groups who need it most; namely, families in poverty and people with disabilities. Surely that has to be the right thing to do.

Other areas of expenditure are less favoured. One particular topic of discussion has been the reduction in the budget for affordable housing. Many people in the third sector and beyond are concerned about that; I have to accept that I, too, am concerned. I welcome the Deputy First Minister’s commitment to send extra funding that way.

Housing is part of the capital budget, on which I will make the following points. Westminster decides the vast majority of the capital budget, and the UK as a whole would be doing better if it invested more in housing and other capital projects. However, even if Westminster does not want to spend on capital projects, it could have relaxed Scotland’s borrowing ability for that. Instead, it has imposed an incredibly tight fiscal framework that takes no account of higher inflation in recent years in the cost of steel, concrete and many other components of construction projects.

Finally, I will touch on public service reform, which has been a continuing theme for the Finance and Public Administration Committee. I am interested in how much we spend on administration as a proportion of delivery of actual front-line services. For example, at the Social Justice and Social Security Committee last week, Social Security Scotland told us that its admin costs are about 5.2 per cent of the amount of benefits paid out. For the equivalent benefits in England, the DWP is paying something like 6.3 per cent, so that is good.

At the Finance and Public Administration Committee this week, we looked at the financial memorandum for the Agriculture and Rural Communities (Scotland) Bill. It is about the replacement for the common agricultural policy, and it is looking at admin costs of about 11 per cent. I am not saying that social security and agricultural payments are directly comparable, but it seems that we need to look at administration costs. That, of course, is also linked to the question of commissioners, which has been mentioned.

Overall, we face a difficult task in setting the 2024-25 budget. I believe that we need to target actual front-line services, and we are right to do so where the needs are greatest.

Photo of Graham Simpson Graham Simpson Conservative

I do not need to bother with any scene setting, because Liz Smith has already done an excellent job of that. I agree with her that the Scottish budget has gone up, although a lower capital allocation is regrettable.

I also agree that, in the words of the IFS, Scottish budget documentation gives a “misleading impression” of the funding that is available for the health service, councils and many other services. The IFS found that, by omitting top-ups such as wage rises, spending on the health service would be cut by 0.7 per cent in real terms—while the budget states that there would be a 1.3 per cent year-on-year increase. Neil Gray must be delighted about that.

Photo of Shona Robison Shona Robison Scottish National Party

Does Graham Simpson recognise the irony, when the UK Tory Government cut the NHS budget in England in real terms, and all we got was £10.8 million for the health service? We have put in the additional money to create that real-terms increase. Is he not embarrassed trying to make that point when his own Government has cut the NHS budget in England in real terms?

Photo of Graham Simpson Graham Simpson Conservative

I would be embarrassed if I were the finance secretary, because she has not said that she disagrees with anything that I just said.

There is a real-terms cut to the health budget. I will get straight to it by talking about my portfolio, then I will touch on others. Last week, Màiri McAllan was quizzed about the cuts to her budget, which she admitted are challenging. If I had been her, I would have been furious. If we are to grow as a nation, we need to invest in transport, net zero and a just transition. Similarly, Neil Gray should have been angry at the cuts to his wellbeing economy, fair work and energy portfolio.

However, Ms McAllan did not give me the impression of being furious when she appeared before the Net Zero, Energy and Transport Committee. I asked her about cuts to Strathclyde Partnership for Transport’s capital budget. I say “cuts”, but that budget has been obliterated to nothing, which will have consequences. Projects such as the Glasgow subway modernisation will be affected. The East Kilbride rail enhancement will be hit through cuts to the funding of its park and ride element, and the Lanark transport interchange will experience a financial black hole. Màiri McAllan said that the SPT should use its reserves, but that shows a lack of understanding of its budget—its reserves are accounted for.

The Scottish Government’s budget will impact on our ability to improve public transport and to get people out of their cars and on to it. There are other examples. The bus partnership fund is being cut—again, to zero. That is the fund that pays for infrastructure, thereby allowing buses to move around more easily and quickly.

The Scottish Government says that it wants to cut the extent to which we travel in cars. Well, it could have fooled me. In cash terms, it has cut the total rail services budget by £79.9 million, the future transport fund by more than 60 per cent and the total ferry services budget by £5.5 million. It has cut the total active travel and low-carbon budget by £40.8 million in cash terms. It was meant to spend £320 million on active travel; it will now spend £100 million short of that. People might think that Patrick Harvie should resign over that, but he has not.

I turn to local government. As they do every year under the SNP, councils are making cuts. Those in my patch are shielded to some extent by the booming Strathclyde Pension Fund, which is asking for lower contributions. However, anyone who claims that the Government is putting in enough money to cover what is needed to freeze council tax is wrong. Services will be hit, and some will close. The Convention of Scottish Local Authorities argues that a fully funded freeze would require the Scottish Government to provide funding of £300 million, which is £156 million more than is being offered. What is there to prevent a council from increasing council tax? It is the threat of funding being removed; I have heard that if one breaks ranks, they will all be punished. So much for a new era of respect for our councils from the central Government.

If councils do not get the funding that they need, the potholes will get worse. It is becoming a lottery as to whether people in places such as Edinburgh or Glasgow will make it to their destination if they are driving there.

Housing is also taking a hit. This is the second year in a row in which the affordable homes supply programme budget has been reduced. We can therefore kiss goodbye any hope of hitting the Government’s overambitious affordable homes target.

Photo of Graham Simpson Graham Simpson Conservative

I am just about to close. [

Interruption

.]

The Presiding Officer:

Members! Let us hear one another.

Photo of Graham Simpson Graham Simpson Conservative

Exactly. We should treat one another with respect.

My good friend Joe Fagan, the Labour leader of South Lanarkshire Council, has called the budget “incoherent and inadequate” and has said that it was

“the worst Scottish Budget in the 25-year history of the Scottish parliament”.

That is saying something, but he is right.

Photo of Michelle Thomson Michelle Thomson Scottish National Party

Budgets are about choices.

This year, for completely understandable reasons, certain budget pots, such as health, have been afforded more protection than others. The price that we pay is less support, over the next year, for business. I would be concerned if that was to become a trend.

I note that if we are serious about more positive health outcomes, we need more well-paid jobs. Public Health Scotland itself states that on its website, and multiple long-term studies have proven that causal relationship. That means that we need to take a balanced approach to funding decisions. There is currently a perfectly justifiable focus on making positive social security choices. However, the Scottish Fiscal Commission estimates that spending in that policy area in 2024-25 will exceed the block grant adjustment by more than £1 billion. I note, again, that a really positive impact on absolute and relative poverty in the longer run will be achieved only if we grow significantly the number of well-paid jobs in the economy.

I make those points to emphasise that, in order to serve both the health and the economic security of the Scottish people, we need a longer-term, balanced and strategic consideration of the budgetary process. For that reason, I agree with the call from multiple agencies and the Scottish Fiscal Commission for a multi-year approach.

My second substantive point regards uncertainty. As Nobel prize-winning Professor Deirdre McCloskey put it,

“The economy, like science or art, is more like an organism growing uncertainly toward the light than a steel machine repeating exactly today and tomorrow what it did yesterday.”

We need to avoid thinking that we know precisely what the future will bring. Our assumptions, such as they are, must use the best evidence available, and we must remain curious in the face of uncertainty and plan as best we can.

In that context, I note this morning’s letter from the Finance and Public Administration Committee to the Scottish Government on the approach that is being taken to the National Care Service (Scotland) Bill and its accompanying financial memorandum. I recognise that considerable work has been done to address some of the concerns that the committee has expressed. However, I note that the longer timescales for delivery lead to considerably more uncertainty over funding, evolving assumptions and ultimate delivery.

There is a broader context, which all too often is not considered by some members. As I have put on the record previously, I regret that the narrowness of devolution leads to a narrowness of thought. I have spoken often about the fundamental characteristics of the UK economy that affect budgets at both UK and Scotland level. I was, therefore, particularly interested in part of this month’s report of the Bank of England’s monetary policy committee, which includes an analysis of UK economic performance.

Economic growth reflects a combination of labour supply and productivity. Prior to 2007—members will recall that there was a Labour Government in power at that time—the major component of UK economic growth was productivity growth. However, the bank’s analysis shows that that growth came to a shuddering halt in 2007 and has never recovered, basically because of a failure of overall investment and a collapse in total factor productivity, which speaks to a failure to create effective conditions for an innovation-driven economy.

What growth there has been at UK level since 2010, when the Tories came back into power, has largely been from an increased labour supply as a result of population growth. We know that Scotland is vulnerable in that respect as a result of our demographic challenges. It is little wonder, then, that Professor Sir Anton Muscatelli has commented that

“We need to re-boot productivity growth.”

He went on to say that that will involve the need to

“address skilled labour shortages through skilled immigration”— a critical issue that has not been addressed by the straitjacket of the Tory Brexiteers, with the same mood music from the born-again Brexiteers in the Labour Party.

If we are to reboot our economy and have a secure basis for funding the many desirable priorities that we have, that will be extraordinarily difficult to achieve in Scotland under the current constraints of devolution. We lack the necessary borrowing powers to tackle underinvestment—

Photo of Michael Marra Michael Marra Labour

Does the member recognise that building a skilled labour base requires investment in our colleges and universities? The university sector’s performance is declining in comparison with the sector in the rest of the UK, and the level of cuts that this Government is imposing on colleges and universities gets to the core of her argument, as it means that we are not providing the skilled labour force that we need.

Photo of Michelle Thomson Michelle Thomson Scottish National Party

Michael Marra makes a fair point. I would always want to see more investment in that arena because we are in a highly competitive marketplace. However, the point that I am making is about the wider UK economy. I remind members that we live in that straitjacket, specifically in respect of productivity and our inability to control immigration. I look forward to

Michael Marra commenting on that in further remarks.

We lack the necessary borrowing powers to tackle underinvestment and to partner and encourage private sector investment at scale. Critically, we lack the necessary policy powers to encourage skilled immigration. That is not sustainable.

There is one thing that we can do to set a more positive culture. As the economic historian Joel Mokyr put it:

“Economic change in all periods depends, more than most economists think, on what people believe”.

We need to be more supportive of innovators and entrepreneurs, and more focused on the development of excellence in our skills system. Frankly, we need a revolution in attitudes to match a revolution in investment and labour supply issues.

Photo of Pam Duncan-Glancy Pam Duncan-Glancy Labour

The SNP-Green budget is not just bad news for the people of Glasgow; it is bad news for the very fabric of our society, our education system and our collective futures. COSLA has said that it is not sufficient to keep current services running. For years now, council budgets have been cut to the bone as the SNP and Greens have compounded Tory austerity and siphoned money away from essential services. Their financial mismanagement has left councils having to make brutal decisions just to make ends meet. Their latest policy by press release—the freeze on the council tax, which is a tax that they promised to abolish long ago—has made things worse.

Almost everything that can be stopped, stripped back or cut already has been. The only decisions left to take are the impossible ones. Savings that councils have taken off the table in years past because of the impact that they would have had on local people are back on the table. It is no longer about just stripping back; it is a choice between which essential services can be scrapped.

In Glasgow, it is disabled people and the poorest people in our communities who are paying the price. The approach of the SNP-run council is just as chaotic as the SNP Government is and as non-strategic as its colleagues in Government are towards the budget. Disabled people are not only paying the price; they are doing that via a charge that that party committed to scrapping. Far from getting rid of non-residential care charges, disabled people in Glasgow face eye-watering increases of up to 75 per cent for their care. In many cases, that means that over three quarters of their income from benefits is eaten up. They are left wondering why, once again, the target is on their back. They do not have the broadest shoulders. That is the choice by the SNP and the Greens at both levels of Government that people in Glasgow face.

When the going gets tough, it is always disabled people’s support that has to get going. The proposed eradication of SPT’s capital budget is alarming for many reasons, as we have heard. In particular, it could put critical modernisation projects, such as making the Glasgow subway accessible, in jeopardy. That is why I agree with the SNP leader of SPT, who wrote in a letter to the First Minister that an “unacceptable position” has been put forward without consultation and that it

“simply cannot be permitted to happen.”

The consequences of the budget for our constituents are devastating, and education is not safe either. As council budgets are cut to the bone, our schools are being stretched thin and are being forced to do more with less.

The Cabinet Secretary for Education and Skills does not seem to grasp the gravity of the situation, which makes things worse. During her committee appearance, she spent the same money over and over again, handing local authorities more demands with one hand and taking their money away with the other. It is little wonder that the SNP is failing to make progress on closing the attainment gap when it is leaving local authorities with little choice but to use attainment funding to plug holes in the education budget. Schools are struggling to keep the lights on and the doors open, never mind tackling the challenges of violence and behaviour in them. They are trying to support the increasing numbers of pupils with additional support needs while resources and staff have failed to keep pace or to deal with reinforced autoclaved aerated concrete—RAAC.

The cabinet secretary’s answer is that she reserves the right to claw back £140 million allocated to maintain teacher numbers. Some councils may have had to decide that they need additional resources in other areas of education, such as support staff. That shows the lack of strategy and planning in the Government’s budget. Does the cabinet secretary really think that it is fair to deny councils flexibility when she will vote for a budget that leaves them with barely two pens to rub together?

It is not just schools that are suffering. Our colleges and universities have been hammered with cuts of at least £100 million. Beyond the clear-cut reductions in this year’s budget, the cumulative impact of years of stagnation in the sector is clear for all to see. This year, universities will get 19 per cent less per student than they did in 2013, forcing them to cross-subsidise from a variety of places, including plugging gaps with high fees for international students.

Meanwhile, colleges are facing a reduction equivalent to 8.4 per cent of their day-to-day spend. With a maintenance backlog of £321 million and huge pressures already on course and staff budgets, it is no wonder that the head of Colleges Scotland has warned that this year’s budget will force colleges to make inescapably hard choices.

I attended Glasgow Kelvin College’s graduation service yesterday. It is an outstanding college, nourishing talent and delivering the skilled workforce of the future despite the challenges. Students, staff and families alike were joyous in the celebration of their achievements. They deserve better than a Government that fails to prioritise their future.

Year on year, budget movements in-year, such as clawing back the promised £46 million for further and higher education, have left the sector on edge. How can we expect the sector’s unions and employers to resolve disputes, or expect our institutions to plan for the future, when they cannot trust the Government when it is negotiating with them? I agree with the president of the National Union of Students Scotland, who pointed out that if the Government’s priority was ever education, it

“has a funny way of showing it.”

However, change is coming. Like pupils, students and staff across the sector, Scottish Labour knows that education is an investment in our collective prosperity. It holds the key to unlocking opportunity, unleashing potential and building a brighter tomorrow for generations to come. It is time to reject the anti-council, anti-community and anti-opportunity budget and say that enough is enough. The change that Scotland needs is not more chaos and no plan; it is a Government that values communities, values education and values opportunity. That Government is a Labour Government, and the people of Scotland know it.

Photo of Kevin Stewart Kevin Stewart Scottish National Party

Let us look at the hand that Scotland has been dealt. Every family in Scotland has been feeling the impact of inflation since the Westminster Government drove the final nail into the coffin of an already precarious UK economy with a disastrous Liz Truss budget. Scottish public services are feeling the exact same squeeze as family budgets, and what did Westminster do?

Photo of Kevin Stewart Kevin Stewart Scottish National Party

It delivered an inflation-adjusted cut to Scotland’s block grant—not a rise to protect public services, but a cut.

Photo of Murdo Fraser Murdo Fraser Conservative

Will the member take an intervention on that point?

Photo of Kevin Stewart Kevin Stewart Scottish National Party

It did not need to be that way. Richard Hughes, the chairman of the Office for Budget Responsibility, the UK Government’s very own bookkeeper, spoke here, in this building, and said that the chancellor

“opted to cut two taxes in his autumn statement, rather than to try to protect the real spending power of public services.”—[

Official Report, Finance and Public Administration Committee,

12 December 2023; c 9.]

Photo of Murdo Fraser Murdo Fraser Conservative

I am grateful to Mr Stewart for giving way—eventually. I wonder why he and his SNP colleagues never recognise the point that the Barnett formula delivers an additional £2,000 above the UK average for every man, woman and child in Scotland, to be spent on public services. That is the same Barnett formula that Mr Stewart and his colleagues would scrap tomorrow. Why does he not recognise that point?

Photo of Kevin Stewart Kevin Stewart Scottish National Party

That was a speech rather than an intervention. I say to Mr Fraser that we have an inflation-adjusted cut to our revenue budget—to our block grant—and a 10 per cent cut to our capital budget. That has a major impact on the people of Scotland. Those are Tory cuts that we have to bear.

Austerity is a choice. It is Westminster’s choice, and that is what the Scottish Government has been dealing with year after year—Tory Westminster austerity. We have had Tory austerity piled on top of Tory austerity, and all that we have to look forward to is Labour austerity from Sir Keir Starmer. Hardly a day goes by without Labour promising to outdo the Tories, whether that is in tax cuts for the wealthy, in giving bankers free rein with bonuses or in cutting its £28 billion green transition pledge. Who knows what Labour will renege on tomorrow?

Through it all, the Scottish Government has delivered for the people of Scotland. Yes, taxes are more progressive in Scotland—

Photo of Kevin Stewart Kevin Stewart Scottish National Party

—but let us look at what we get for that. I will take Mr Hoy’s intervention, if he wants to intervene instead of shouting.

Photo of Craig Hoy Craig Hoy Conservative

The member was talking about taxes for the wealthy. Are those who are earning £28,000—for example, nurses and teachers—the kind of wealthy people that he wants to tax more?

Photo of Kevin Stewart Kevin Stewart Scottish National Party

Scotland has more progressive taxation. The very people that Mr Hoy has mentioned are paid much more in Scotland, thanks to the SNP Government.

We have delivered for the people of Scotland. Yes, taxes are more progressive, but let us look at what we get for that. Prescriptions are free in Scotland, yet they cost £9.65 under the Tories in England. People in Scotland have the freedom to drive their car down any public road free of charge, yet there is a £7.60 fee for toll roads under the Tories in England. We have free university tuition in Scotland, but there is a £27,000 millstone around the necks of young people in Labour Wales, and it is £27,950 in Tory England. People in Scotland get a free bus pass when they reach the age of 60, but they have to wait until they get their pension in Tory England—and the Tories keep putting the pension age up.

The list of benefits that folk get in Scotland goes on. There is the baby box; 1,140 hours of free childcare for three and four-year-olds, as well as for eligible two-year-olds; free bus travel for under-22s; and free dental care until the age of 26. In England, people cannot even get a dentist. There are also seven additional welfare payments from Social Security Scotland, including the Scottish child payment. And we have publicly owned rail services.

It does not stop there. We spend more on education, transport, police, housing, agriculture and fishing, economic development and the environment. That extra spending is why we have more police officers, prison staff, firefighters, nurses, general practitioners, consultants and dentists, and it is why accident and emergency departments in our hospitals are so much better than those in the rest of the UK.

The north-east is benefiting from the Scottish Government’s £500 million just transition fund. Westminster has refused to match that, even though the UK Treasury has benefited from hundreds of billions of pounds in oil money that has flowed from the north-east of Scotland to London—another Westminster rip-off.

This is a tough budget, but it reflects our shared values as a nation that is committed to tackling poverty and trying to protect people from the harm that is caused by Westminster austerity. However, we cannot mitigate every horror that is handed down by Westminster. Although the Scottish Government does its best with the powers that it has, what is required is for the Scottish Parliament to hold all the levers of power. It is time for Scotland to get out of broken Brexit Britain. It is time for independence.

Photo of Ross Greer Ross Greer Green

As a number of members have mentioned, there has never been a more difficult context for setting a Scottish budget. We went into the process with a gap of £1.5 billion to fill. As the convener of the Finance and Public Administration Committee pointed out at the start of the debate, the cuts to our capital budget are at 20 per cent, according to figures used by the Scottish Fiscal Commission. On top of that, we are having to set the budget in a process that is deeply dysfunctional. There is a mad dash between an increasingly late UK Government autumn statement and the publication of the Scottish Government’s budget, which is expected before Christmas, yet we still do not know what decisions the UK Government will make in March this year when it publishes its budget, when it could all change again.

Budgets should reflect priorities and make a Government’s values clear, as the Deputy First Minister states in the first line of her foreword to the budget document. The Scottish Government’s priorities are equality, opportunity and community. I have mentioned previously that those are potentially too broad and that some focus is needed, but there is a clear reflection of green values in the budget. The budget puts people and planet first. The contrast this week with the UK Government could not be sharper. Reports have confirmed that the planet has hit the catastrophic threshold of 1.5°C of global warming, but we have a UK Government that is ditching climate action and approving more oil and gas licences.

The Labour Opposition is ditching its climate spending commitment of £28 billion, which was not enough in the first place. Members should compare that to the £4.7 billion for climate and nature in the Scottish Government budget for next year alone. That is securing Scotland’s future and our planet’s future. We are taking action now to tackle the climate crisis and restore our natural world, and we are creating jobs for the future.

Photo of Elizabeth Smith Elizabeth Smith Conservative

Mr Greer is a member of the Finance and Public Administration Committee, which, in paragraph 201 of its report, said that the priorities that the Scottish Government has set for itself are not sufficiently addressed in this budget. Does he agree with that?

Photo of Ross Greer Ross Greer Green

That is absolutely what I was referencing in the context of the three Scottish Government missions. They are so broad that they create a challenge when it comes to focus. I will single out a couple of specific examples later on. As Liz Smith would expect, I have issues with the council tax freeze.

With regard to focusing on the planet, members do not need to take my or my party’s word for it. At the finance committee a few weeks ago, Francesca Osowska, the chief executive of NatureScot, said:

“I see in the budget a shift towards recognising the long-term challenges of climate change.”—[

Official Report

,

Finance and Public Administration Committee

, 9 January 2024; c 42.]

Last week, I mentioned that, contrary to what is said about our party, the Scottish Greens want lots of things to grow. We want more high-quality, lasting jobs in green industries—preferably in Scottish-owned businesses, or, even more preferably, in businesses that are owned by their workers as co-operatives. We are proud to be part of a Government that is delivering that kind of growth.

At the end of last year, the Fraser of Allander Institute report showed that, in 2021 alone, we went from 27,000 to 42,000 jobs in green energy. The budget includes £67 million for the offshore wind supply chain, so we are doubling down on one of the key industries. We cannot prioritise everything, and I think that the Scottish Government needs to be more focused in its economic priorities and strategy. That is one of the sectors that we can prioritise with the confidence that it will result in a very positive return.

I am proud that Green tax policy will mean that, in the coming year, £1.5 billion of additional spending will be available that would not otherwise have been available. I am proud that we are redistributing wealth in Scotland from those who have the most to those who need it the most. I am stunned by the Labour Party’s hostility to that redistribution of wealth. This year alone, the Scottish Government is lifting 90,000 children out of poverty, and this budget will lift more children out of poverty next year.

Photo of Ross Greer Ross Greer Green

I will come back to the Labour Party in a moment, and I am sure that Mr Johnson will want to respond.

The budget puts £1 billion more into social security. Yes, those on the highest incomes—the top 5 per cent—will be paying more, but good luck to those in Opposition parties who go from door to door to tell the other 95 per cent that they wanted to cut their public services to protect the incomes of those at the very top. We need to be honest: if we want a fairer society, we need to pay for it. This afternoon, the Opposition has again demonstrated not just fantasy economics but fantasy mathematics—the numbers do not add up.

I will take Mr Johnson’s intervention at this point, if he would still like to make it.

Photo of Annabelle Ewing Annabelle Ewing Scottish National Party

It will have to be brief, because Mr Greer’s time is coming to a close.

Photo of Daniel Johnson Daniel Johnson Labour

Does Ross Greer not recognise that a marginal tax rate of 60 per cent for those in the middle, which is higher than that for people who are on £70,000, £80,000 or £90,000, is the absolute inverse of progressive taxation?

Photo of Ross Greer Ross Greer Green

I am glad that Mr Johnson brought that up, because, for a start, it is not the middle. We know that the middle, or average, household income in Scotland is around the £28,000 mark. Michael Marra was commenting as though people who are on about £28,000 are paying a huge amount more. People in Scotland who are on £28,000 are paying pennies more in tax, and, in return, they get a range of public services that are not available elsewhere in the UK. I accept that we cannot put all our eggs in the basket of income tax and that we cannot create new national taxes because of the Scotland Act 1998. That is why this Government is delivering a visitor levy, a cruise ship levy, a carbon emissions levy, land tax, a doubling of council tax on holiday homes, an infrastructure levy and, potentially, a public health levy to empower local government.

My party and I clearly do not agree with the merits of the council tax freeze, although I am pleased that it is adequately funded. It is not what the Greens would have chosen, and we do not believe that it can happen again, but I will certainly not vote down a budget with £4.7 billion for climate and nature and £6 billion for social security just because I am unhappy with one policy.

The Government has clearly demonstrated its values, and the contrast could not be clearer with a dysfunctional Tory Government and a Labour Opposition that, according to Sky News last week, is putting protecting bankers’ bonuses ahead of lifting children out of poverty. This Government and this budget are putting people and the planet first, and that is why the Greens are proud to vote for the budget this afternoon.

Photo of Brian Whittle Brian Whittle Conservative

Aspiration is a powerful thing. It drives us to do better and seek out success. It pushes us to do great things and gives us a reason to get back up when we fall. It has helped so many Scots to achieve great things in sport, music, science, technology, business and—yes—even politics. There is no doubt in my mind that we should be fostering and encouraging aspiration in Scotland and, with that, creating an environment where it can flourish.

Under the SNP, however, and never more so than in this budget, aspiration, ambition and entrepreneurship have all but disappeared from the SNP-Green vocabulary. A strong, dynamic and growing economy is the difference between a thriving nation and a stagnating one. No economy can hope to thrive without a population that aspires to succeed and a Government that wants to help it to do so.

Throughout the budget, we see examples of cuts to the very things that contribute to the economy’s long-term health. In education, from early years to colleges and universities, engendering aspiration is vital. That is where aspiration is discovered and nurtured and where young people are encouraged to find their talents and learn the skills that they need to succeed. The Scottish Government has cut that resource.

Once those young people have completed their education and set out into the working world to advance their careers or even to build their own businesses, they need the Government to provide support and investment to grow a strong and healthy economy. Scotland has the tools to do that, from our enterprise agencies to employability and skills schemes and the Scottish National Investment Bank. The Scottish Government has cut them all.

The journey to a successful business often requires owners to leave a secure, well-paid job and take a leap into the unknown world of self-employment. Often, they must invest their savings or put up their house as collateral. They then have to work all the hours that God gives, employ others and be the last ones to get paid at the end of the month—if, indeed, they get paid. They strive, work, bite and scratch to make their business succeed.

After years of graft and worry, people might get to the point where they can start to get the benefit of their risk and bravery. Then they come up against a Scottish Government that vilifies them and wants to scoop more and more of their hard-earned income to pay for the services that have been consistently let down by the Scottish Government—a Scottish Government that has no understanding of what it takes to create and run a successful business.

Although we talk about aspiration and ambition in terms of confident, driven entrepreneurs setting out to make their mark in the universe, the ambitions of many people can be smaller, yet they are no less deserving of encouragement and support. For people who are suffering from physical and mental health problems, gaining the confidence and ability to go out and achieve something can feel like an impossible hurdle to clear. Community facilities, sports centres and the third sector groups that are supported by council funding are every bit as critical to supporting those ambitions and aspirations as enterprise is to supporting entrepreneurs. Thanks to the Scottish Government budget, that funding has been cut and those services are disappearing.

It is not just those cuts to the budget that will harm aspiration. The Scottish Government’s decisions on tax are just as unhelpful. I agree with those who say that the broadest shoulders should carry the greater share of the burden. The difference between us is that I accept the reality that continually adding to that burden to cover for the Scottish Government’s excessive spending and anaemic growth is not sustainable.

Last year, higher-rate and top-rate earners comprised less than 12 per cent of the population but accounted for 65 per cent of the tax revenue. The addition of the advanced rate of tax will see that second number rise even higher. In terms of behavioural change, we assume that that means that very high earners will leave the country. However, an even greater risk comes from the continual squeezing of far more moderate earners to the point that they no longer have sufficient incentive to earn more. That will stifle business growth, lower productivity and guarantee further years of dismal economic performance.

We have already seen the signs of that happening, and not just in the private sector. I spoke to band 7 nurses, who are paid just enough to end up in the higher-rate tax band. They wonder whether working extra shifts is really worth the extra money after tax. How many NHS staff are thinking something similar? How much more pressure will that put on NHS boards that are already struggling to recruit?

What does it say to business owners and entrepreneurs who work incredibly hard and often take big financial risks when the Government keeps piling on the pressure with higher taxes, while making it harder to get help to grow? That is before I even mention people who are operating in the retail, hospitality and leisure sectors, which the Scottish Government seems intent on leaving at a disadvantage to their competitors elsewhere in the UK.

There is no question in my mind but that Scotland needs to increase its tax take. However, while the SNP and the Greens are going for the quick fix of squeezing more and more out of a relatively small pool of workers, despite the risks of diminishing returns, I believe that the only way to sustainably increase revenues is to have more people earning more. To do that, we need a Government budget that has its eyes on the horizon, not on the opinion polls. We need a Government that thinks about and plans for the long term in order to give everyone a path upward, not one that cuts off the lowest rungs of the ladder for short-term savings.

That brings me back to aspiration. Whether it is starting a new business, changing careers or taking a small step on the path towards better mental health, it is aspiration that drives us to make that leap and take that risk. However, the SNP is making that leap wider and the risk greater, and it is leaving more and more people asking, “Why bother?”

Aspiration is still alive in Scotland, but with this Government and this budget, it is left on life support.

Photo of Mark Griffin Mark Griffin Labour

I draw members’ attention to my entry in the register of members’ interests, which shows that I was an owner of a private rented property in the North Lanarkshire Council area until July last year.

This has been a chaotic budget from a Government that is now devoid of any economic strategy and is actively planning to send the housing emergency spiralling. Not only will working people pay more and get less but the 10,000 children who are trapped in temporary accommodation will continue to suffer that misery. It is a budget that started with a raid on people in council tax bands E to H and ended up with an unfunded council tax freeze.

The £200 million cut to affordable house building has united all corners of the housing sector—private, public and voluntary—in anger and complete disbelief. Shelter Scotland says that it has lost confidence that the Government can deliver its plans, and Homes for Scotland says that the cut “threatens Scotland’s social wellbeing”. The Scottish Federation of Housing Associations and the Joseph Rowntree Foundation simply describe it as “brutal”. The budget will make poverty worse and intensify Scotland’s spiralling housing emergency.

Photo of Ross Greer Ross Greer Green

I do not think that anybody in the Greens or the SNP would pretend that the affordable housing budget is in a good situation, but it has already been mentioned that we are facing a £485 million overall cut to the capital budget. This is a sincere question: what would the Labour Party reallocate? If we can reallocate from elsewhere in the capital budget into affordable housing, we should do so. However, I have heard no proposals from the Labour Party yet.

Photo of Mark Griffin Mark Griffin Labour

I acknowledge that the capital budget has been cut, but I fail to understand why that capital cut has been multiplied six times and then handed to the housing budget. It is reasonable to ask from where money should be reallocated to fund priorities, but I do not understand why the Government is asking Opposition members how to fund its promises. It was the Government’s promise—[

Interruption

.] It was the Government’s promise to deliver 110,000 houses, and it is a bit rich to ask Opposition members how to find the money to fund them. [

Interruption

.]

The Deputy Presiding Officer:

Members, we listen to the member who has the floor.

Photo of Mark Griffin Mark Griffin Labour

The finance secretary says that this is a values-led budget, but those values now include increasing homelessness. Those are not my words but the absolutely damning verdict of Shelter Scotland.

Photo of Bob Doris Bob Doris Scottish National Party

Mr Griffin said that it is the Scottish Government’s responsibility, and not the Opposition’s, to fund the commitment for 110,000 new affordable homes. Does that mean that Labour does not support those new affordable homes?

Photo of Mark Griffin Mark Griffin Labour

We absolutely support them, and we will publish our spending plans when it comes to the next manifesto, but surely Mr Doris—[

Interruption

.] Surely Mr Doris understands that his party is in government and that it is the Opposition’s job to hold the Government to account for its promise to the people of Scotland to build 110,000 houses.

The Deputy Presiding Officer:

Please resume your seat for a second, Mr Griffin. I am not really getting to hear Mr Griffin, because I hear a whole series of noises involving members on most benches, as far as I can tell.

Photo of Mark Griffin Mark Griffin Labour

I say again that it is the Opposition’s job to scrutinise the Government’s promises to the people of Scotland. The Government promised to deliver 110,000 houses and is now absolutely reneging on that commitment. Shelter Scotland, Homes for Scotland and a range of other organisations are clear on what the impact of that will be. In the first months of this year—in the weeks leading up to the budget—two of the builders that were creating the social homes that we desperately need have gone bust.

We have a housing minister who is apparently in listening mode but who is failing to listen to public opinion. Today, YouGov research has shown that 80 per cent of people think that we are in a housing crisis. We have the Scottish Housing Regulator projecting that about 4,500 fewer affordable homes will be built in the next five years. There is confirmation that the number of homes that have started to be built has fallen by a quarter and that council starts have fallen by a half. Homes for Scotland has revealed that a quarter of all people in Scotland—sons, daughters, brothers, sisters, family and friends of everyone in the chamber—have some form of unmet housing need.

This is a Government and a budget that are planning for decline and retrenchment. This is a Government turning its back when the need is great. It is a Government pulling the rug from under the housing sector—from council, private and social landlords. The Government is forcing a downturn that will have dire economic and social consequences. For all Mr Greer’s interventions, and even though it is a key plank of the Bute house agreement to hit the 110,000-home target, the Greens seem to ignore the reality and even fail to acknowledge that there is a housing emergency out there.

We have to acknowledge that private housing and affordable housing are interlinked. Every private home that is built generates £30,000 in economic contributions towards building more social homes, alongside the Government grant. The decisions that have been made in the budget will further deter investment in homes across all tenures and suck life out of the housing market.

First-time buyers, children who are in temporary accommodation, workers who should be building the homes that we need, and our friends and family who are in overcrowded accommodation, who are unable to get out of private lets and who are stuck on waiting lists—every single one of them has been failed and given up on by the Scottish National Party budget. In a general election year in which housing will be front and centre, that is a grave miscalculation by a Government that is devoid of an economic strategy, is actively planning to send the housing emergency spiralling and has clearly lost its way.

Photo of Stuart McMillan Stuart McMillan Scottish National Party

I n her opening comments, the Deputy First Minister quoted Rebecca Evans, the Minister for Finance and Local Government for Wales. It is worth quoting Ms Evans again, because colleagues in the Labour Party seem to have one vision this afternoon, which is that everything in Scotland is bad but everything in Wales is wonderful. When Ms Evans was delivering the draft budget on 19 December, she said:

“After 13 years of austerity, a botched Brexit deal, and the ongoing cost-of-living crisis, this is the toughest financial situation Wales has faced since the start of devolution. Our funding settlement, which comes largely from the UK government, is not enough to reflect the extreme pressures Wales faces.”

That is exactly the same situation that Scotland faces.

This budget debate is like most others that I can remember from my near 17 years in Parliament. The Opposition brings forward a list of areas in which it wants more money to be invested, but it has no answers about where that money should come from. A few moments ago, Bob Doris asked Mark Griffin a question, and Mark Griffin, representing the Scottish Labour Party—or the Labour Party in Scotland—did not answer the question.

One point that I agree with is that more money should be invested in our public services. The Scottish Fiscal Commission estimated that the change of tax policy in Scotland will bring an extra £1.5 billion into the Scottish economy for next year. If this budget is not passed and that change is not implemented, the Opposition parties in this Parliament will be voting against that £1.5 billion, in addition to the whole budget. In effect, the Opposition parties want less money for Scotland’s economy and public services in Scotland. I want more money to be invested in local authorities, health, transport, culture, sport and every other devolved area of competence.

I also want more money to be invested in the reserved policy areas, but they are obviously outside the realms of this Parliament at the moment. Our public services are under huge pressure after more than a decade of Westminster austerity. The challenge faced by the Scottish Government and the Scottish Parliament is that the powers of this Parliament are limited and, by law, our budget must balance. If additional resource is to be spent on local government, health or any other policy area, it needs to come from another budget and, to date, no Opposition party has suggested which budgets should be reduced to give to another. However, when I have highlighted why Inverclyde should receive further investment, I have engaged in good faith and have frequently suggested where some of the money could come from.

I am not against public sector reform. Local authorities have already undertaken a great deal of reform, which I welcome, but more reform is clearly required across the whole public sector landscape.

The debate is about next year’s budget, which is the most challenging to date under devolution, with the Scottish Government budget from Westminster being cut yet again and inflation reducing its value in real terms.

As a local MSP, I regularly mention my Greenock and Inverclyde constituency in the chamber. If I did not do that, I would be accused of not standing up for my constituents. I often raise issues that affect the whole of Inverclyde, as I did yesterday, when I asked the Minister for Local Government Empowerment and Planning about extra finance for Inverclyde Council. I thank the minister for his helpful reply that confirmed that Inverclyde Council receives

“funding that is equivalent to £159 per head, which is 6.2 per cent more than the Scottish average and is equivalent to £12.3 million more overall than it would receive if funded at the Scottish average.”—[

Official Report

, 7 February 2024; c 16.]

On 14 December, I met the Deputy First Minister. I had three key asks for the budget, which were an increase in resources for Police Scotland; an increase in resources for the Scottish Fire and Rescue Service; and the Inverclyde task force’s specific requests for funding to help to deliver the extended Kelburn business park in Port Glasgow, due to the demand to go there, and for training assistance specifically to tackle the long-term unemployed challenge. The Deputy First Minister will be well aware that I have also written separately on the Kelburn business park request, and I wrote to Neil Gray, the Cabinet Secretary for Wellbeing Economy, Fair Work and Energy, about the employment assistance.

The budget that is before us delivers on my first two requests, which I warmly welcome. Dialogue on the task force items will clearly continue, but, after today’s bombshell announcement by the BT Group of its intention to close the EE call centre in Greenock later this year and shift 450 jobs to Glasgow, Inverclyde’s situation becomes even more acute. I thank the Presiding Officer for taking my question on the issue at First Minister’s question time.

How the BT Group has handled the situation has been nothing short of appalling. It must ensure that it properly looks after the staff who have been loyal to it over the years. I am of the opinion that it has misled the workforce and the Inverclyde community. Consistently, EE waxed lyrical about the future and the job flexibilities that it offered, including the wide range of part-time positions, which have helped many women to get back into the labour market after having a family. That will be an additional challenge in Inverclyde, no matter what happens with the budget that we pass in this Parliament. However, more will be said about EE in the chamber, so I will go back to the budget.

The budget has been set in turbulent circumstances at global level. The impacts of inflation, the war in Ukraine and the after-effects of the pandemic continue to create instability. In addition, the autumn statement, which delivered the worst-case scenario for Scotland’s finances, failed to live up to the challenges that are posed by the cost of living and climate crises. The cost of living situation that we face is the most important issue that I face as a constituency MSP.

This budget is important. No budget is perfect, but, ultimately, it is important that the budget passes. We know that, without the full powers of independence, we will always have one hand tied behind our back, and we will be limited because of Westminster austerity.

Photo of Ash Denham Ash Denham Scottish National Party

The brutal choices that the Scottish Government has had to make are a result of a fiscal framework that is set up to fail Scotland, as I warned a few weeks ago in the chamber. Are we really surprised any more by the callous actions of a UK Tory Government that is hostile to people who are struggling to survive with dignity but that can find the money for election promises in order to remain in power? It uses tax cuts cynically and irresponsibly for a sugar rush in an election year—petulantly ignoring warnings of any detrimental consequences—and it refuses to tax obscene wealth or invest in long-term economic security and environmental responsibility through the reserved fiscal levers that only it has. All that has a direct and indirect impact on the people of Scotland. While people across the UK continue to suffer from the increasing strain in their cost of living as a result of the UK Government’s irresponsible choices, our Government is left holding the ball of delivering a pay more, get less budget to constituents across Scotland’s communities.

People do not want more excuses. What they are looking for now is solutions. I sympathise with the challenge that the Scottish Government faces in spreading an ever-thinning real-terms budget across increasing demands, but if election promises are not delivered, that only further erodes public trust.

I welcome the Government implementing my proposal for the necessary short-term step of cancelling school meal debt by allocating £1.5 million of funding to local authorities. However, despite the significant cost of living pressure on families, there remains no clarity on the delivery of the Government’s again-delayed commitment of providing universal access to free school meals for all of Scotland’s primary school children. As access to enough food—enough quality food—for primary children is a key driver of their development and of their education outcomes, that promise must be delivered without further delay.

Although the statutory inflationary uplift to £26.70 a week for the game-changing child payment is welcome, it does not go nearly far enough. That is despite the First Minister committing to an increase of £5 in his first budget when he was running for party leader. An open letter that was sent to the First Minister last year, which was signed by more than 150 charities, faith groups, trade unions and civic organisations, urged him to deliver on his commitment as a first step, and then to follow that up by adopting our Alba Party policy of increasing the child payment to £40 a week. That is a must if there is to be any hope at all of the Government meeting its targets to tackle the scourge of child poverty in this land of abundant resources.

However, even such targeted mitigation is not enough, as the Scottish Government is still running to stand still to keep heads above water against the surging consequences of UK Government choices that Scotland’s 59 MPs lack the electoral arithmetic to influence at Westminster.

I welcome the short-term certainty for households that the council tax freeze will provide, but we need to ensure that local taxation is fair, affordable and secure, and we need to deliver quality local services that we can all rely on. The Government must commit to its long-promised reform of local taxation and, in doing so, it must undertake real engagement to ensure that we reach a solution that works for all.

Short-term thinking has got us into a position of cuts and compromise. Only longer-term thinking—thinking that goes beyond the walls of devolution—can deliver security, confidence and ambition for Scotland. Until then, limited resources need to be stewarded very carefully. Now, during a cost of living crisis, is not the time to introduce tax hikes to backfill a budget shortfall. One of the purposes of tax is to create behaviour change, and I believe that the behaviour change that the proposed tax rises will usher in will be detrimental to Scotland in the long term.

I urge the Government to end its short-term mindset of cuts and compromise, and to start to deliver not only on its own election promises, but on the longer-term, foundational changes that are needed to secure us a secure future.

The Deputy Presiding Officer:

We move to the closing speeches.

Photo of Daniel Johnson Daniel Johnson Labour

Let me attempt to salvage a note of consensus.

One thing that we can all agree on, in line with what Stuart McMillan said, is that this debate has a déjà vu feel to it. We will probably all feel that we have left it with exactly the same position that we went into it with, which is perhaps a shame.

However, if the Government wants such debates to be more rational, it needs to be a little more transparent with its numbers. That is not just my point but one that has been made by the Finance and Public Administration Committee. Since the IFS report, the Government has been at pains to stress the need to take a budget-to-budget approach to comparisons but, if we were to do that, we would find, in looking at the entire resource envelope that is available in this year’s budget, that we had 2 per cent more in real terms. I do not think that that would be a fair thing to do, because that is not how budgets work. There are changes that happen in year, but even on those terms, there is 0.9 per cent more to spend in the coming budget year than in the current one.

Therefore, we need a sense of reality. That increase will not make the choices easy, because it is a very small one, but we must be clear about the choices that have been made. They are understandable, because there have been significant pay claims. To strike another note of consensus, the cost of living crisis must be front and centre but, if the Government is not clear and honest about the numbers to begin with, it is very hard to have conversations. If it is not clear about the choices that have been made about pay settlements, we cannot have that discussion and we are left with a confused debate in which we talk at cross purposes.

The Finance and Public Administration Committee is right when it says that budget analysis should include comparison with outturn—a comparison between what the budget proposes to spend and what was actually spent. Then, maybe, we could have a grown-up conversation and a grown-up budget, and one that does not lead to cuts across numerous service areas such as councils.

Despite what the Government says, there are real-terms cuts. The council tax freeze is not fully funded and will lead to £130 million less spending, which is why councils across the land are setting out proposals in their budgets to cut the numbers of teaching assistants, playgrounds and other vital local services. NHS Lothian is saying that there will be cuts into the muscle of the services that it delivers and is cancelling projects such as the new eye pavilion, the national treatment centre at St John’s and the cancer centre at the Western general hospital. It is why A and E at the infirmary is running at 30 per cent above its design capacity.

Mark Griffin was absolutely right to point out the absurdity of what is happening in the housing budget, which is being cut well beyond the decrease to the Government’s overall capital budget. There will be a 26 per cent decrease in the housing budget, which will mean that we will have 1,400 fewer housing starts in the coming year than we did before, a decrease of almost 10 per cent.

Photo of John Swinney John Swinney Scottish National Party

I understand the aspiration for more spending on the health service. However, if Mr Johnson wants to engage in a substantive debate with Parliament, he must explain now where the Labour Party proposes to get the money to address the issues that he has just raised.

Photo of Daniel Johnson Daniel Johnson Labour

That is not how the process works. The Government puts forward a budget. We cannot even amend the budget bill and it is for the Government to defend its spending. We are scrutinising the consequences of the budget; it is for the Government to defend them.

That is why the Government must defend why it is cutting £28 million from university budgets and must explain, if that will not lead to a cut of 3,900 places, how many places will be cut. Unless we can have that grown-up conversation, and if we cannot even know the number of places that will be affected by that university cut, how can we have a serious debate?

As Michael Marra pointed out, this is a chaotic budget. It is not about just the year-on-year situation; it is about 17 years of incremental decisions without long-term thinking or planning, which is exactly why the Finance and Public Administration Committee has been excoriating in its description of the budget’s approach. There is a lack of long-term planning about the affordability of spending decisions and of a balance between overall strategic purposes.

Photo of Daniel Johnson Daniel Johnson Labour

Kenny Gibson went further in his remarks, saying that the budget lacked strategic coherence.

Everyone is looking at the back of the chamber; my speech must be having more of an impact than I realised.

Photo of Alex Cole-Hamilton Alex Cole-Hamilton Liberal Democrat

Daniel Johnson is right to say that the committee was excoriating, as were the chorus of businesses and colleges that spoke out against the removal of the flexible workforce development fund. That decision could crush the upskilling plans of 2,000 employers and 45,000 people. Why should they pay the apprenticeship levy if the opportunities will not be forthcoming?

Photo of Daniel Johnson Daniel Johnson Labour

That is a very fair point. For that to be the component of the college budget that is cut at a time when we should be upskilling and reskilling flies in the face of economic reality and shows why Labour is absolutely committed to reform of the apprenticeship levy.

Ultimately, we need growth: it is only through growth that we will be able to make changes. Alas, over the past five years, Scotland’s growth has been almost half that of the rest of the UK and it has been a third less over the past 10 years. We will therefore continue to get marginal decisions that increasingly add to the burden on those who can barely afford it, and we will end up with marginal tax rates of more than 60 per cent for people on salaries of £40,000—the people we ask to work so hard in our public services, such as nurses, teachers and police officers. That is why Scottish Labour cannot support the budget at decision time this evening.

Photo of Murdo Fraser Murdo Fraser Conservative

Earlier in the debate, Graham Simpson quoted a Labour council leader. Labour council leaders are not always wrong—and nor, I should say, is Mr Simpson. In this case, that council leader said that this was the worst budget in the history of devolution. He is right. I cannot recall any budget over the years that I have been in the Parliament generating such a negative reaction as the one that we are debating today.

The budget has been criticised on all sides. It has been criticised by COSLA, which described it as

“a major blow to communities” that

“has put councils at financial risk”.

It has been criticised by the trade unions, by universities, by colleges and by Shelter, which has described itself as

“angered by the extreme cuts announced”.

It has been criticised by Crisis, the national charity for people experiencing homelessness, by the Federation of Small Businesses, by the Institute of Chartered Accountants of Scotland, by the Confederation of British Industry

Photo of Murdo Fraser Murdo Fraser Conservative

In a second.

The budget has been criticised by Scottish Chambers of Commerce, by the Scottish Tourism Alliance, by UKHospitality, by the Scottish Hospitality Group, by the Scottish Licensed Trade Association, by Scottish Financial Enterprise, by the Scottish Retail Consortium—and the list goes on.

I will happily give way to anybody on the SNP front bench who can give me a similar list of people who have welcomed the budget. Let us hear that from the finance secretary.

Photo of Shona Robison Shona Robison Scottish National Party

I think that Murdo Fraser had the cheek to mention some housing organisations and their concerns about the affordable housing supply programme. Is he really saying that, in the light of his Government’s butchery of our capital budget? Does he really have the nerve to stand up and criticise our spending plans while his Government has butchered our capital budget?

Photo of Murdo Fraser Murdo Fraser Conservative

Not one single name of any external body that supports the budget could come from the finance secretary, because there is not one. [

Interruption

.] Every single stakeholder has condemned the budget. [

Interruption

.]

Photo of Murdo Fraser Murdo Fraser Conservative

T he other point that I make to the finance secretary—

The Deputy Presiding Officer:

Mr Fraser, please resume your seat for a second.

I would say to those on the Government front bench: please do not act like that. Please listen to the person who has the floor.

Please resume, Mr Fraser.

Photo of Murdo Fraser Murdo Fraser Conservative

T he other point that I would make gently—

Photo of Murdo Fraser Murdo Fraser Conservative

Come on—I am still responding to the previous intervention. Mr Mason will get his chance in a moment.

The other point that I would make to the finance secretary is exactly the same point that I made to Mr Stewart: the finance secretary and her colleagues never recognise the fact that, under the Barnett formula, Scotland gets £2,000 more to spend per head of population for every man, woman and child in Scotland compared with the UK average, and she never accepts that point. She should be grateful for the amount of money that is coming from the UK Government, which is far above the UK average. What do they want to do, however? They want to rip up the Barnett formula.

Of all the criticisms of the budget, the most damning of all is that from the well-respected Institute for Fiscal Studies, which has slammed the budget as giving “a misleading impression” of the Government’s spending plans, with the institute’s analysis showing that

“funding for the Scottish Government’s NHS Recovery, Health and Social Care portfolio is currently set to fall by 0.7% in real terms”,

not to increase, as has been presented by the Scottish Government. The institute says the same in relation to council funding: a purported 6.2 per cent real-terms increase falls to 1.8 per cent once actual spending is considered.

Overall, the budget is up in real terms and cash terms, but right across the portfolios we see cuts, cuts and more cuts. The housing budget is cut. Core funding to local government is cut. Support for woodland creation is cut. Support for climate change and renewables is cut. The flexible workforce development fund, much prized by businesses, colleges and trade unions, is scrapped.

Perhaps most serious of all is the impact of the budget on business and the economy. Humza Yousaf and his Administration set out to reset the relationship between the SNP and business, launching a new deal for business group with that purpose. The budget rips that to shreds, however.

If reports are to be believed, Neil Gray has just been reshuffled away from the economy brief. I will miss my engagement with Mr Gray: I thought he was very good at listening, including listening to the Opposition and to business. Fundamentally, however, he failed, because he could not deliver on all the asks that the business community had for the budget. He lost the argument in Cabinet, and he has left his role embarrassed.

Calls for the 75 per cent rates relief for retail, hospitality and leisure businesses that is applicable south of the border to be replicated in Scotland have been dismissed. Instead, plans are being introduced for a new supertax on grocery stores, making them even less competitive than their counterparts down south.

Every budget line that could support Scottish business has been cut. The economy, fair work and energy portfolio has been cut by £118 million, which is 8.7 per cent in real terms. The tourism budget has been cut by 12.3 per cent. Funding for the Scottish National Investment Bank has been cut by 29.2 per cent. Enterprise, trade and investment have been cut by 16.7 per cent. Employability has been cut by 24.2 per cent. Against that backdrop, it is no surprise that, in a survey that was conducted within just the past two weeks by the Scottish Licensed Trade Association, of more than 500 of its members, a staggering 96 per cent said that the Scottish Government did not understand business. I am sure that Neil Gray will be delighted to move away from that portfolio.

Photo of John Swinney John Swinney Scottish National Party

Does

Murdo Fraser consider that his comments might meet with more credibility in the Parliament if he had not been an enthusiastic advocate for the economics of Liz Truss?

Photo of Murdo Fraser Murdo Fraser Conservative

Mr Swinney has not been keeping up with the data. Perhaps he has deleted that information. The UK economy has been the fastest growing of any major European economy since 2010—faster than Germany’s, France’s or Italy’s. Mr Swinney needs to look at the facts and see how the economy is performing. We need to remember that he was finance secretary. Under his watch, since 2014, the Scottish economy has grown at precisely one half of the rate of the overall UK economy.

As Liz Smith reminded us, if the Scottish economy had grown even at the UK average rate, we would have an extra £6 billion to spend on public services.

The Deputy Presiding Officer:

Mr Fraser is bringing his remarks to a close.

Photo of Murdo Fraser Murdo Fraser Conservative

There is much more that I can say, but time is running out.

People have asked us what we would do differently. For a start, we would make different choices. We would not spend £2 billion on a national care service that stakeholders do not want. We would not spend money on pointless papers on independence that nobody will read. We would not have wasted £27.6 million on a census that has failed; wasted millions of pounds on failed court cases; wasted millions on civil servants to work on an independence referendum that is not going to happen; paid out millions in compensation for wrongful prosecutions in the Rangers scandal; or spent millions on propping up Prestwick airport and Burntisland Fabrications—or hundreds of millions on two ferries that may yet never set sail.

This should have been a budget to grow the economy and our tax revenues. It is the worst budget that the Parliament has ever seen and, for that reason, we should reject it.

Photo of Shona Robison Shona Robison Scottish National Party

A s many members have said, the backdrop to the budget is a UK autumn statement that has delivered the worst possible scenario for Scotland—a 1.2 per cent real-terms cut and a 10 per cent cut in capital. I therefore say to Murdo Fraser no: we on the Government benches will not be grateful for cuts to our public services. Murdo Fraser was keen to quote Labour council leaders—little surprise, given that the Tories are in coalition with Labour in half our local authorities.

To come back to the point about public services, I note that we have prioritised what funding we have for our front-line public services, and are providing more than £0.5 billion extra for NHS Scotland, which takes the total funding for front-line health boards to £13.2 billion next year. That is a real-terms increase, despite the Tories’ real-terms cut of £1.3 billion to NHS England. I will not have Graham Simpson or any other Tory member criticising this Government for our real-terms investment in our NHS in Scotland, given that their Tory Government is cutting its own health budget by £1.3 billion. Of course, given that only £10.8 million of consequentials derived from health spending in the autumn statement, we have had to go further in making sure that we put as much money as we can into our front-line health services.

I come to education, in which we are providing £2.4 billion to support our colleges and universities, including by protecting free tuition and driving forward our commitment to widening access. For schools, the budget will deliver £200 million to tackle the poverty-related attainment gap and almost £390 million to protect teacher numbers and fund the teacher pay deal.

On affordable housing, which has been mentioned by a number of members, it is important to recognise that the financial transactions element of the reduction is because financial transactions from the UK Government have gone off a cliff. As I have said, the traditional capital funding has been cut. Capital availability is the number 1 priority for me—getting more capital at the spring budget on 6 March was the number 1 ask that I made of the Chief Secretary to the Treasury when I met her two weeks ago.

I come back to the Tories and what Liz Smith and some of her colleagues have said. The incoherence among Tory members is quite astonishing. On one hand, Liz Smith said that she would have given £260 million out of the £310 million of consequentials to a 75 per cent tax cut for the hospitality sector. That money would therefore be gone from all the other public services that it could have been spent on. Let us just log that for a minute. Liz Smith then said, on the other hand, that she would not spend money on a national care service. Well, that would save £15.4 million in 2024-25. Out of generosity, let us throw in the census funding, which is £50 million. If we take the £260 million and are generous and say that there is another £50 million, that means that there is still about £200 million to find. If we write tax out of that, because the Tories do not want to increase tax, that is another £100 million.

Photo of Shona Robison Shona Robison Scottish National Party

In a minute.

So, before we start with all the spending demands from Graham Simpson, Murdo Fraser and the others, the Tories have a £300 million gap in public services spending because they have already spent the money on tax cuts for business. Where is the £300 million going to come from? I would like an answer from Liz Smith.

Photo of Elizabeth Smith Elizabeth Smith Conservative

I have already set out aspects of that, some of which would be in public sector reform. The Scottish Government promised in 2016 that it would restore pre-pandemic levels of things, but that has not happened.

Does the cabinet secretary agree with her colleague Kate Forbes, who is very anxious about the taxation policies in the budget, because she believes that they will lead to diminishing returns and therefore undermine growth and productivity?

Photo of Elizabeth Smith Elizabeth Smith Conservative

That is exactly what she said. Does the cabinet secretary agree with her?

Photo of Shona Robison Shona Robison Scottish National Party

I acknowledge, based on the analysis of the Scottish Fiscal Commission, that more than half of taxpayers will continue to pay less income tax in Scotland than they would if they lived elsewhere in the UK.

The £1.5 billion of additional tax revenues resulting from decisions that have been made by successive finance secretaries to make sure that we have money for public finances, would also, I presume, be taken out of the Tory spending plans if—heaven forfend—they ever brought a budget proposal to the chamber.

So, if we take out tax and the spending on public services that would now go to NDR business taxes, we now have a gap of about £2 billion in the Tory spending plans. Liz Smith needs to tell us where that £2 billion of cuts—to our front-line services, I presume—would fall. I hope that we get an answer from Liz Smith on that, in due course.

I will turn to Labour, briefly. We heard a litany of spending demands from Labour members, but their Welsh Labour colleagues in Government have had to make the same difficult decisions as we have had to make, to the extent that the only area of Government spending for which they have increased funding is the NHS. Most other departments have had cuts to their funds. All the departments that were mentioned by Michael Marra and others have had cuts to their budgets.

Therein lies the difference between being in the Government and being in the Opposition—Opposition is where members take responsibility for nothing at all. If we look at the decisions that Labour is making in opposition, we see the chaos in its ditching policies including providing £28 billion of green investment and its now being in favour of bankers’ bonuses. There are chaotic U-turns, day after day. I have no idea at all what Labour stands for any more. Not a clue—not one. Of course, it was Daniel Johnson

Photo of Shona Robison Shona Robison Scottish National Party

In a minute.

It was Daniel Johnson who, just last year, called our tax measures “progressive”. Tax is part of the social compact, whereby people who benefit from public services are asked to contribute and those who have the ability to pay more are asked to do so. What happened to Daniel Johnson? We now have Michael Marra, who has given us absolutely no idea of the principles that Labour adheres to. If he wants to do so now, I will take his intervention.

Photo of Michael Marra Michael Marra Labour

W ould the cabinet secretary recognise that it is her budget that is causing chaos in, for instance, the college and university sectors? Student applications are coming in, but institutions still do not know what their budgets are. Will she stand up now and tell them what their budgets for next year will be?

Photo of Shona Robison Shona Robison Scottish National Party

I have already said that we are providing more than £2.4 billion to support our colleges and universities, that we are protecting free tuition and that we are driving forward our commitment to widening access. [

Interruption

.]

The Presiding Officer:

Le t us hear the Deputy First Minister.

Photo of Shona Robison Shona Robison Scottish National Party

I have been clear about our priorities. We have no idea whatsoever what Labour members’ priorities are.

I turn to the contribution of Alex Cole-Hamilton on behalf of the Liberal Democrats. This is where I get to the nub of the matter—what they say when they come up with ideas. Alex Cole-Hamilton’s single proposition was that we should tax social media giants. That would really help with the budget for 2024-25, given that we do not even have the powers to tax such bodies. What a great idea.

The Presiding Officer:

No—I am afraid, Mr Cole-Hamilton, that the Deputy First Minister must conclude.

Photo of Shona Robison Shona Robison Scottish National Party

That is a shame, because I would really like to have heard an answer to that. Perhaps Alex Cole-Hamilton could write to me, because I am really curious to know the answer.

It is a bit like groundhog day. Year after year, I have listened to the Opposition—[

Interruption

.]

The Presiding Officer:

Let us hear the Deputy First Minister.

Photo of Shona Robison Shona Robison Scottish National Party

— in this place, coming forward with criticisms about the spending priorities of others, with not one jot of an idea, a principle or a suggestion as to what they would do different. That is why we are the Government and they are the Opposition.

The Presiding Officer:

That concludes the debate on the Budget (Scotland) (No 3) Bill at stage 1.