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Budget (Scotland) (No.4) Bill [Session 5]

Overview

The Budget Bill is the final stage in the annual budget process. The Bill allows the Parliament to set public spending in Scotland for the financial year 2020-21.

The overall figure budgeted for is £43.0 billion. 

This figure includes spending on: 

  • Health and Sport – £15.3 billion 
  • Communities and Local Government – £11.3 billion 
  • Education and Skills – £4.2 billion 
  • Social Security - £3.8 billion 
  • Transport Infrastructure and Connectivity – £3.5 billion 
  • Justice – £2.7 billion 

This is the fourth Budget Bill for Session 5 of the Scottish Parliament.

You can find out more in the Budget (Scotland) (No.4) Bill as introduced that explains the Bill.

Why the Bill was created

The Scottish Parliament has a statutory duty to produce a Budget each year. 

Statutory duty is the law that a company, a government organisation, or the members of a particular profession must obey. 

You can find out more in the Bill as introduced document that explains the Bill.

Becomes an Act

Budget (Scotland) (No.3) Bill passed by a vote of 63 for, 55 against and 0 abstentions. The Bill became an Act on 18 March 2020.

Introduced

The Scottish Government sends the Bill and related documents to the Parliament.

Budget (Scotland)(No.4) Bill as introduced

Related information from the Scottish Government on the Bill

Opinions on whether the Parliament has the power to make the law (Statements on Legislative Competence)

Information on the powers the Bill gives the Scottish Government and others (Delegated Powers Memorandum)

Stage 1 - General principles

Committees examine the Bill. Then MSPs vote on whether it should continue to Stage 2.

Committees involved in this Bill

Who examined the Bill

Each Bill is examined by a 'lead committee'. This is the committee that has the subject of the Bill in its remit.

It looks at everything to do with the Bill.

Other committees may look at certain parts of the Bill if it covers subjects they deal with.

What is secondary legislation?

Secondary legislation is sometimes called 'subordinate' or 'delegated' legislation. It can be used to:

  • bring a section or sections of a law that’s already been passed, into force
  • give details of how a law will be applied
  • make changes to the law without a new Act having to be passed

An Act is a Bill that’s been approved by Parliament and given Royal Assent (formally approved).

Delegated Powers and Law Reform committee

This committee looks at the powers of this Bill to allow the Scottish Government or others to create 'secondary legislation' or regulations.

It met to discuss the Bill in public on:

Read the Stage 1 report by the Delegated Powers and Law Reform committee published on 18 February 2020.

Debate on the Bill

A debate for MSPs to discuss what the Bill aims to do and how it'll do it.

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Stage 1 debate on the Bill transcript

Murdo Fraser (Mid Scotland and Fife) (Con)

I am grateful to the finance secretary for giving way. Could she clarify exactly what will happen with concessionary travel for the under-19s? Yesterday, the Green Party was trumpeting the new policy initiative that is to be delivered, but the wording in the finance secretary’s agreement says that the funding will support “preparations” for a new scheme, with the aim, if possible, of delivering it next year. Is that a cast-iron guarantee, as the Greens claim, or is it simply a possibility, as the finance secretary says?

Willie Rennie (North East Fife) (LD)

I pay tribute to Kate Forbes. I find her polite and respectful in our discussions. Even when we strongly disagree, she is respectful. I appreciate that. It creates a more conducive environment for constructive discussion. I received a letter from her yesterday in which she was respectful of the constructive way in which all the parties have engaged in the budget discussion.

The Cabinet Secretary for Finance has a difficult job ahead of her, particularly with some of the legacy issues that she has to deal with, such as the £10 million loan to Our Power that was lost when that organisation collapsed. The Aberdeen western peripheral route is £65 million over budget. The IT system for agricultural payments is about £180 million over budget. The Royal hospital for sick children here in Edinburgh is about £90 million over budget. We know that the cost of the ferries in the west of Scotland has effectively doubled. The cost of the Baird family hospital and Anchor centre in Aberdeen is estimated at £35 million over budget. That is a considerable legacy for the cabinet secretary to deal with.

There are fundamental issues with the way our public services are working as a result of some of the decisions that her Government has taken, including in particular the lack of proper investment in mental health services that is causing considerable cost to the rest of the health service and to wider public services such as our police, schools and many other public services. We know there is a massive backlog in social care packages in many areas. We heard yesterday about the IJB in Fife that has a considerable deficit.

There are fundamental issues about the way our public services are working that mean that it is difficult for Kate Forbes to secure a balanced and effective budget. However, we must do away with the charade that the Government has left no flexibility at all for any other parties to put forward priorities that they would like to see reflected in the budget. Let this be the last year for that. The idea that there is no magic money tree has gone. The new phrase that appeared this year was “emerging underspends”. There were “sudden Barnett consequentials” and we saw the “non-domestic rates reprofiling”. Those are phrases that we are familiar with from some previous years, but we will be wise to them if they come up in future. She said that there was no magic money tree, but she has given it a good whack with a big stick. That argument has fallen. Kate Forbes was either bluffing or she was incredibly brave; in the end she was just bluffing. We have found that out.

The Liberal Democrats put forward reasonable and measured proposals for the budget. We had some fundamental disagreements about the overspend on several capital projects and on the way that mental health services and social care have been working. We were prepared to put forward costed and reasonable proposals. We looked at the COSLA advice about the £95 million shortfall that it saw in the revenue budget, but there is a £117 million shortfall on the capital budget that the finance secretary has not addressed.

That was just to meet promises that the Government has made on behalf of local government. Those are not local government promises, they are Government promises. At the very least, their costs should have been met already within the budget. The £590 million that COSLA identified as Scottish Government commitments should have been a fundamental part of the budget, but it never was. It should not have been up to other parties to make the case for the Government to meet promises that it made in previous years.

Forgive me for not accepting that that is enough. We know that the £200 million inflation cost that is also not included in the budget will have a direct impact on local government services. We will see more services closing. We will see it become more difficult for local authorities to fund the education that they need to provide in our schools—they are already struggling to do that. We will see it become much more difficult to provide social care packages and maintain the social fabric of our local communities. Forgive me for thinking that that amount is not enough.

The police estate is in a terrible condition. We have seen the reports about the state of police stations. I am afraid that that small amount of money—£5 million—will not deal with the legacy issues that we have in our police estate. We should be seeing far more going to the police. I think, from what the Scottish Police Federation has said, that there is a still a £20 million shortfall on what should have been the basic amount included in the budget.

The finance secretary criticises those who believe that independence is not a good idea. She criticises me for expecting her to accept, even in just this one year, that an independence referendum will not happen. We know that the reality is that it will not happen, so I do not know why the finance secretary—

Willie Rennie

Not just now. I do not know why she is holding back funds for that possibility, when everybody knows that it is not going to happen.

Willie Rennie

Not just now. I am not expecting her to give up on believing in independence. I have never expected her to do that, just as she would not expect me to give up on believing that the United Kingdom is the best constitutional future, but to hold back money for something that is not going to happen is a complete and utter waste of money, and I think that the finance secretary should reflect on that.

Willie Rennie

That point might have merit if the finance secretary was not holding back funds for a possible independence referendum this year. Everybody knows that that is not going to happen, so why are we doing that? Why are we wasting that money? That money could go to the police or to councils. The finance secretary is putting the constitution ahead of the priorities for this country and she should reflect on that.

I hope that the finance secretary has learned a lot from the process; I am sure that everyone in the chamber has learned a lot. Above all else, the one thing that we must do is ensure that our public services, our health service and our education system are properly funded. I am afraid that with this budget, they certainly are not.

The Deputy Presiding Officer (Christine Grahame)

Because you are sitting down. Thank you very much, Mr Neil.

The Deputy Presiding Officer

I remind members that their speeches should be five minutes. I will allow time for interventions. Mr Neil took two interventions. This is a debate, and taking interventions makes it lively.

16:05  



The Deputy Presiding Officer

No. The member has to wind up.

The Deputy Presiding Officer

Please wind up.

The Deputy Presiding Officer

Yes. I have made sure of that. If you get a five-minute speech and take interventions, you get another minute if it takes that long. Be happy.

The Deputy Presiding Officer

The member is winding up his speech.

Murdo Fraser (Mid Scotland and Fife) (Con)

This has been a lively debate. If the award for the most statesmanlike speech goes to my good friend Bruce Crawford, the award for the most amusing, so far, goes to Alex Neil. Although he was, of course, totally wrong about everything that he said, he entertained us.

In these troubled times, it is good to have in life certainties on which we can rely. In Scotland, we can always rely on the weather in February being miserable, we can be confident that our football team will perform dreadfully against whichever low-ranked opponent it is playing this week, and we can guarantee that, despite all their posturing and bluster, the Scottish Greens will always end up voting for the SNP budget. So it has turned out once again this week, with the Greens lining up with their fellow nationalists.

This year, it looks as though they have sold themselves very cheap. Only a few weeks ago, the Greens were setting out their red lines for the budget. They were demanding that road-building projects be cancelled and that dualling of the A9 and A96 be stopped. They were even calling for a four-day working week to be introduced. None of those things has been delivered, thank goodness.

Instead, what is now being trumpeted by the Greens is the introduction of free bus travel for people aged under 19. Yesterday, press releases from the Green Party and social media comments from Green MSPs claimed their victory in delivering that policy to tackle climate change. However, it is a debacle; when we look at what has actually been agreed, it falls far short of a firm commitment. I will quote directly from the Cabinet Secretary for Finance’s written answer yesterday. It says that there is

“£15 million to support preparations to introduce new concessionary free bus travel for young people aged 18 and under, with the aim if possible to begin in January 2021”.—[Written Answers, 26 February 2020; S5W-27621.]

There will just be “preparations”—there is just a possibility, as the finance secretary confirmed earlier—and there is just £15 million against an annual estimated cost of £80 million. Mr Harvie can now explain how that is a firm commitment.

Murdo Fraser

We are, after that intervention, none the wiser as to whether the policy will be delivered.

It is not just on that policy that the Greens have been sold short. Yesterday, they were claiming that the proposed flyover at the Sheriffhall roundabout should be revisited. It is a vital infrastructure project for connecting Edinburgh to Midlothian and the Borders. However, because the project is being delivered as part of the Edinburgh and south-east Scotland city region deal, a change to the policy would require the agreement of the UK Government and local authority partners: it would be up to them. The finance secretary confirmed that yesterday in a television interview, so the Greens have been sold short again.

I have to congratulate Kate Forbes on what she has achieved so far as finance secretary. She has been in the job for only nine days, but already she has stitched up Patrick Harvie far more successfully than her predecessor achieved in more than three years in the role.

Overall, the budget is a disappointment, but it could have been so much better. It was based on a 3.7 per cent uplift in real terms in the total available resource spending, thanks to the Boris bonus that is due to increased Westminster spending. Against that, as Bruce Crawford reminded us, we have to offset the negative reconciliation of more than £200 million from poorer income tax receipts than were forecast three years ago, and the downward effect of lower income tax forecasts relative to the rest of the UK on the amount of money that is available for the Scottish Government to spend. That all demonstrates, once again, that if we could grow the Scottish economy at even the same rate as the UK average, we would have many hundreds of millions of pounds more to spend on public services, without having to increase taxes any further.

Alex Neil made a speech about the fiscal framework, but he seems to have forgotten that the person who negotiated the fiscal framework was Mr Swinney, on behalf of the Scottish Government. If Mr Neil has a problem with what is in the fiscal framework, he needs to take that up with his colleague on the front bench.

Despite all the extra money that is available to the Scottish Government, and the fiscal transfer from the rest of the United Kingdom of £10.7 million, the budget still delivers cuts. There is an extra £95 million in revenue for local government, which is welcome, but there is nothing extra for capital. That means a real terms cut of £117 million in capital for local authorities across Scotland. It will mean that projects that are currently being planned—local roads and infrastructure projects, new school builds and refurbishments, leisure and recreation centre investments—will all have to be rethought because the SNP Government, backed by the Greens, is cutting the budgets of local authorities.

Right across Scotland today, local authorities are having to set budgets and make cuts. As Donald Cameron reminded us, they are having to make cuts in school-crossing patrollers, teacher numbers, classroom assistants, music tuition, the opening hours of libraries and leisure facilities and the opening hours of local recycling centres—from a budget that is supposedly focused on climate change. That is what is being delivered right across Scotland, thanks to the SNP and the Greens working together. At the same time, as Graham Simpson reminded us, many places are facing council tax rises of nearly 5 per cent this year.

In effect, the budgets of local councils across Scotland are being raided to fund the pet project of the SNP and Greens. If we see free bus travel for the under-19s being provided, the buses will be travelling on heavily potholed roads, because the Greens have stolen the money out of local government to fund that scheme.

The Scottish Conservatives engaged constructively on the draft budget; I thank the Cabinet Secretary for Finance for her constructive engagement. However, we cannot support the budget. Despite the extra resources that are available to the Scottish Government, the budget falls short of what Scotland requires. It will deliver more cuts, it does not tackle the drugs crisis, and for all the noise that they are making, the Greens have sold themselves short once again. It is a budget that Parliament should reject.

16:51  



Murdo Fraser

Can the finance secretary confirm that, if the Scottish Government were to match any changes in the UK income tax rates, under the fiscal framework negotiated by Mr Swinney, there would be no additional cost to the Scottish Government?

MSPs agreed that this Bill could continue

Stage 2 - Changes to detail 

MSPs can propose changes to the Bill. The changes are considered and then voted on by the committee.

First meeting on amendments

Documents with the amendments considered at this meeting held on 4 March 2020:

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First meeting on amendments transcript

The Convener (Bruce Crawford)

Good morning and welcome to the sixth meeting in 2020 of the Finance and Constitution Committee. The first item on our agenda is evidence on the Budget (Scotland) (No 4) Bill at stage 2. This is the opportunity for the committee to put questions on the bill and its amendments to the cabinet secretary and her officials before we move to the formal proceedings. We are joined for this item by Kate Forbes, Cabinet Secretary for Finance, and Scottish Government officials Andrew Watson, director of budget and public spending, and Graham Owenson, head of local government finance. I welcome the witnesses to the meeting.

The Cabinet Secretary for Finance (Kate Forbes)

I have some brief comments that will cover both sections of the meeting. Before turning to the stage 2 amendments, I put on record my thanks to the committee for its report on the budget—to which I responded yesterday—and for the constructive and flexible approach that the committee has taken to this year’s budget process. As committee members will be aware, the truncated timetable continues: the principles of the Budget (Scotland) (No 4) Bill were agreed last week, consideration of the Scottish rate resolution will take place in Parliament this afternoon and stage 3 will follow tomorrow.

The amendments have two broad purposes: five amendments give effect to the budget increases that were agreed with the Green Party, which I outlined at stage 1; and 15 amendments update schedule 1 to the bill to reflect the revised ministerial portfolios. As I confirmed to Parliament on 26 February, as a result of the agreement with the Greens, I will be providing an additional £95 million in resource to local government and an additional £60 million for the transport, infrastructure and connectivity portfolio, which consists of £15 million in resources to introduce free bus travel for young people aged 18 years and under—subject to the necessary preparations—and £45 million capital for net zero projects, £15 million of which will be transferred to local government. There is also an additional £13 million of resource and £5 million of capital to the justice portfolio for police services. Overall, those amendments increase the Scottish budget by £173 million, which is £123 million of resource and £50 million of capital. I outlined the source of that funding in my letter to the committee of 28 February. I am happy to take questions on all of that.

The Convener

In your initial budget proposals, you included the sum of £468 million of anticipated Barnett consequentials. On 12 February, you told the committee that those anticipated consequentials had been fully allocated in the budget and that there was no more resource because every penny had been deployed. You then told the committee that, since the budget was published on 6 February,

“It has become clear ... that additional consequentials of up to £43m are due to the Scottish Budget in respect of the Fossil Fuel Levy”

and that

“A revised assessment in respect of wider UK Government consequentials has been made”

as a result. When and how did it become clear that additional consequentials would be due and when did you decide to carry out the revised assessment of the wider United Kingdom Government consequentials?

Kate Forbes

Thank you for the question, convener. As members will be aware, in order to provide certainty to ratepayers and public services, I needed to secure safe passage of the budget, which required me to find agreement with at least one other party in the Parliament. Although the parties were very forthcoming with what they wanted to see, they were slightly more hesitant in saying—with some exceptions—where they wanted that money to come from. Therefore, I had to review the assumptions that underpinned the budget. I set out how the agreement with the Green Party was to be funded in my letter to the committee of 28 February.

In particular, there was some late information that emerged when the UK Government notified English councils about provisional non-domestic rates. That was too late to inform the original budget proposition, but we have since analysed the implications and taken those into account. Specifically on the fossil fuel levy, the Office of Gas and Electricity Markets contacted us on 18 February with new information that has informed our current position.

As members know, the budget has taken place in exceptional circumstances. There has been a higher level of risk in light of the fact that we have baked in anticipated consequentials and are therefore exposed to whether the United Kingdom Government delivers on its manifesto commitment.

Clearly, I needed to revisit the judgments and assumptions so that I could deliver a budget.

The Convener

You used the word “risk”. I am interested in understanding the extent of that risk and how you will deal with a shortfall in funding, if funding does not materialise as anticipated.

Kate Forbes

When it comes to risk, there is always a judgment call to be made. The context is important in that regard. I deemed the risk of not delivering a budget at all and thereby creating huge uncertainty for ratepayers and public services to be higher than the risk of making the judgments that I made about funding sources.

There is always a degree of risk when we make assumptions and rely on forecasts—and, under the fiscal framework, that applies to a larger proportion of our total budget, given the assumptions that are built into the block grant adjustment and forecasts of tax receipts and social security expenditure.

The assumptions that I have made as part of the funding package need to be seen very much in the context of the wider risk that is associated with this particular budget, in light of the fact that we are acting before the UK Government does. As I said, if the UK budget delivers less than we have assumed that it will deliver, we might need to review our position. It is worth bearing in mind that there might be a number of fiscal events this year that have an impact on the Scottish budget.

The assumptions that we have made are prudent and within a level that can be addressed through routine budget management processes. However, I do not want to hide the fact that there is risk, because this year we are more exposed to what the UK Government does or does not do than has been the case in previous years.

Finally, it is worth noting that, in light of all that, we have considered and included different sets of assumptions in order to spread the risk. The approach that I have taken draws on a mix of funding sources: underspend, the non-domestic rates pool, the fossil fuel levy and assumptions about the UK budget. That means that, if there is variation in one area, the hope is that the mix of funding sources will mitigate and certainly spread the risk, reducing our exposure.

The Convener

There is significant concern about the coronavirus outbreak and its impact on Scotland. The primary concern is health and the impact on people, of course, but there is also the potential for the virus to have a significant financial impact.

There are reports that the Chancellor of the Exchequer is reassessing his budget in light of the coronavirus outbreak. What discussions have you had with the UK Government on the matter and on potential funding to support the response that the Scottish Government will necessarily have to make? I am thinking, not least, about the health budget, but the issue will affect all parts of life and will no doubt have an impact on the economy.

Kate Forbes

Notwithstanding the obvious, serious human impact, we are very mindful of the need to make appropriate preparations in our budget, including in the context of what the national health service is doing.

I had a call with the Chief Secretary to the Treasury, Stephen Barclay, last week—on Wednesday, if I remember correctly—and I raised the issue with him then. It is important that we are able to share information and have on-going dialogue about funding. It is not yet clear—and Stephen Barclay could not provide me with any clarity on this—how the UK Government will respond to the matter in its budget next week, never mind how it is responding now in terms of potential funding and consequentials.

I have a quadrilateral next week, on Tuesday, when, along with my Welsh and Northern Irish counterparts, I will again speak to the Chief Secretary to the Treasury. The issue is on the agenda, and I will be happy to keep the committee informed about associated funding developments as they evolve.

The Convener

It is important that you let us know as soon as you can about where that might be going, and particularly about the health budget challenges, at least immediately. Any light that you can throw on that after your quadrilateral next week would be very helpful. I know that we are going to discuss health today.

Angela Constance (Almond Valley) (SNP)

Good morning, cabinet secretary. I am aware that, during the stage 1 debate, you spoke about the Cabinet Secretary for Health and Sport having identified £10 million of resources in her portfolio to increase the investment in tackling the harm that is caused by drug misuse. Can you provide more detail on the source of that funding and—this is important—how it will be spent?

Kate Forbes

As Angela Constance said, I announced at stage 1 that the Scottish Government was making available additional funding to help to reduce the harms and deaths that are caused by drug and alcohol misuse. That additional funding is up to £20 million, and that is an increase of £7.3 million from within the health portfolio. Therefore, that is money that Jeane Freeman has identified in her portfolio on top of the initial proposals in the draft budget. Although it is, of course, for Jeane Freeman to talk about health spending, that money will help to deliver the recommendations of the drug deaths task force and provide investment for mental health support. It will also allow wider consideration of additional NHS-funded rehabilitation beds. That means that, for the 2020-21 budget, Scottish Government and NHS funding for reducing the harms from drug and alcohol use will rise to £95 million in total.

Angela Constance

Obviously, tackling inequality in all its forms is an important part of the budget. Can you speak about the overall contribution that your budget will make to supporting low-income households and helping the Parliament to meet its child poverty targets, bearing in mind that, to meet our targets, we have to move beyond mitigation and not just prevent people from going backwards but lift them out of poverty?

Kate Forbes

The coming budget year is critical because, although we have been investing in mitigating the worst impacts of UK Government welfare cuts, the first Scottish child payments will be made next year in order to put money directly into the hands and pockets of eligible children and families. Our spending plans therefore most certainly support low-income households.

Previous estimates have suggested that we expect to spend at least £1.4 billion in total to mitigate the worst effects of cuts and tackle child poverty head on. That includes £21 million for the Scottish child payment. There is also still the £110 million to mitigate UK Government welfare cuts, including almost £60 million to mitigate the bedroom tax, and over £180 million to close the poverty-related attainment gap in schools.

The budget certainly tries to deliver on tackling child poverty head on, which is one of our four key strategic aims.

Angela Constance

The Convention of Scottish Local Authorities and others have argued for increased resources for councils, which has resulted in £95 million going to local government over and above what is in the draft budget. I know that £50 million of that comes from a reprofiling of the non-domestic rates income distribution.

I understand that the calls for that additional resource principally related to the climate emergency and child poverty, and I know that the money is not ring fenced. I support decisions being made locally and local accountability, but do you have any sense of where that additional resource for child poverty will be directed to and whether it will be for mitigating decisions that have been taken elsewhere or for measures to lift children out of poverty? We should bear in mind that we are accountable for our targets and that we need to understand when investment is mitigating to prevent people from going backwards and when it is taking people forward.

10:15  



Kate Forbes

It is important to stress that that £95 million is not ring fenced, so it will be for local authorities to determine how that money is spent.

On the question of COSLA working in partnership with us to deliver common aims, we are both signatories of the national performance network, one of the outcomes or indicators of which is tackling poverty and inequality. My hope, certainly, is that that funding, which is resource funding, will be used to support the families and children who rely on public services the length and breadth of the country. We are stepping up considerably our efforts to tackle poverty, which is why we have the Scottish child payment in place. We have to work closely not only with COSLA but with every public body to do that, because I do not think that any organisation can tackle that in isolation. There needs to be a streamlined, joined-up approach to dealing with poverty.

The Convener

I know that a number of members want to ask about support for under-19s using bus services, so we will deal with all of that in a oner.

Alexander Burnett (Aberdeenshire West) (Con)

I would like to know what climate change assessment was done on the policy. Obviously, giving free travel to people who do not drive might have less of an impact than, for example, maintaining the bus services that are being removed in various areas across Scotland, and particularly in the north-east.

Kate Forbes

I think that the policy change is profoundly valuable not only in terms of meeting our climate change targets but in terms of supporting young people, particularly in rural areas. I started working in a rural area when I was a teenager and spent the first hour’s wage just on getting to my workplace, so I think that the policy will make a huge difference to young people across the country.

It is important to say that we have made the commitment as part of our agreement with the Greens and that we now need to get moving on the preparations and due diligence that are required. Transport Scotland is urgently developing project plans to deliver on the commitment. Three initial workstreams have been identified to explore how best to deliver. It is important that we do that work in partnership with young people in rural and urban areas to ensure that it delivers the improvements that they want to see in public transport.

Alexander Burnett

My point is that, if there are no bus services in rural areas, because they have been cut, it does not matter whether they are free or not.

Kate Forbes

Often, bus services are cut because they are not viable. As someone who represents a rural area, I am aware of the fact that, sometimes, they are not viable because they are not used well enough, and that that is because they are too expensive. My view is that, in the same way as we have seen a take-up in bus service use by over-60s as a result of Government policy, we will see that happen among young people. Where a young person has had to choose to drive—if they have had access to a car—or just to stay at home instead of going to a sports tournament or a youth club or taking an extracurricular activity at school that would require them to stay late, they can now choose to take the bus. The more people who take the bus, the more viable the service and, the more viable the service, the more likely it is that it will be retained.

Alexander Burnett

You mentioned the work that needs to be done in preparation for the introduction of the policy. What consultation has been done with the bus companies before the announcement not only with regard to the overall free travel policy but with regard to the £15 million for preparatory work?

Kate Forbes

The costings were arrived at in consultation with Transport Scotland and the work is to allow us to understand the implications in advance of any announcement. You should bear in mind that the policy has come out of budget negotiations and a budget deal. As every party appreciates, those conversations are private and confidential. Obviously, we need to identify as much of the detail of the issue as possible, but I was clear in my letter that there is still some work to be done around making the appropriate preparations and conducting due diligence to ensure that what we do in this space works.

John Mason (Glasgow Shettleston) (SNP)

I am very grateful for my card, which gives me, as an over-60, many opportunities to travel on the bus. Will the arrangement be the same for young people, or are you suggesting that they might get something different? I get free bus travel and pay a reduced fare on the trains in Strathclyde, and I get to go on the subway for less.

Kate Forbes

At the moment, the Young Scot card-based, non-statutory young people’s bus discount scheme is in place. I can go into detail of the three workstreams that we are proposing in order to ensure that preparations are done. There is some flexibility in how the scheme is rolled out but, ultimately, we want to ensure that it is easy and straightforward for a young person to get on and use the bus. The scheme may involve building on the discount schemes that are already in place, so that we are not starting completely from scratch.

John Mason

I will talk about the £15 million that has been mentioned. I accept that, inevitably, there is a bit of uncertainty about the timing of the introduction of the scheme, because it depends on when you complete all the work. If the scheme gets going next January, such that it will run for three months of the coming financial year, will that cost be included along with the cost of setting up the scheme?

Kate Forbes

If, as we hope, the scheme were to start in January 2021, the funding that we have put aside in the budget this year would cover the preparation work and also the commencement of the scheme during the next financial year.

John Mason

So it would be a bit more than a full year.

Kate Forbes

Yes.

John Mason

Thank you.

Alex Rowley (Mid Scotland and Fife) (Lab)

Who knows what the cost will be, so where did the figure of £15 million come from? Will you publish more information on the workstreams and how the scheme will be taken forward? There are a lot of legitimate questions—my colleague mentioned that someone can have a free bus pass, but it might be the case that no buses come to their area. As you know, that is a serious problem in rural Scotland. As their budgets have been cut, councils have been less able to subsidise bus routes, and bus companies have been pulling more and more bus services, particularly in rural areas. Local authorities have the power to set up public bus companies, but they do not have the resources to do so. Therefore, is there a need to take a more holistic look at bus travel and public transport in general?

A number of councillors have contacted me—I do not know whether they have contacted you—to ask whether there will be changes, because bus travel to and from schools is a big cost for councils and the education sector. Just down the road from me, there are a number of schools and the service buses run right past their doors. What are the implications in terms of the amount of money that it costs local authorities to provide transport for under-18s to get to and from school?

Will you publish information and ensure that local authorities and all the other key stakeholders are involved as the proposal is developed?

Kate Forbes

The short answer is yes. It is worth bearing in mind the comment that was made by Alex Rowley’s colleague in the chamber last week during the stage 1 debate, which showed that Labour assumed that rolling out free bus travel to all under-25s would cost about £26 million. We must make sure that we take people with us and that we consult appropriately. I do not think that we would want to do that in isolation of all the other factors that Alex Rowley has rightly identified.

The first of the three initial workstreams, which will look at policy and legislation, will have to include consultation and engagement with stakeholders; the second will be about carrying out research, gathering evidence and reviewing the options that are currently available around travel concessions and how we extend them; and the third will be around operational implementation, which will include consideration of whether we could potentially adapt the existing Young Scot card-based, non-statutory young people’s bus discount scheme.

None of those three streams can be done in isolation from local authorities and the bus companies. There will be extensive consultation and engagement. Ultimately, most of us want to get to the same end point, which is to make it as easy and straightforward as possible for young people to use the bus.

Alex Rowley

What about school transport?

Kate Forbes

What is the question there? Are you asking whether the measure covers school transport?

Alex Rowley

Local authorities have been asking—councillors in Fife raised the question with me again at the weekend—whether, once it becomes free for under-19s to use buses, that will include school transport or whether the local authorities will continue to be expected to pay for school transport separately.

Kate Forbes

We have to explore that with local authorities. The scheme will make a big difference in cases where young people are unable to get school bus transport. The most obvious case, which parents have raised with me over the past week, is when a child does extracurricular activities after school and so cannot get the school bus home. At present, it costs £2 or £3 for them to get the bus, which mounts up.

All those questions will have to be explored with COSLA, and we intend to do so. Certainly, the commitment should be in addition to what is already provided. It is important that we have answers to the questions, which is why we have given ourselves a significant lead-in time before the introduction of the scheme next January.

The Convener

I guess that Patrick Harvie will want to ask some questions on that issue as well.

Patrick Harvie (Glasgow) (Green)

I have just one or two. Obviously, there are questions that will be for transport ministers to answer some way down the line, particularly in relation to the argument for a more holistic approach that Alex Rowley rightly set out. The other day, I was getting off a bus when the driver called me back and said, “When are you going to take us over? We all want to work for the corporation again.” There is a lot of appetite for public bus companies, and that case will continue to be made.

George Adam (Paisley) (SNP)

Was the driver a 90-year-old? [Laughter.]

Patrick Harvie

I did not ask—I am far too polite.

There are two questions that I would like to explore with the cabinet secretary. The first of those questions, which is on measuring the impact, relates to one of Alexander Burnett’s questions. Obviously, one area in which the measure can achieve a social and environmental impact is the reduction in the costs of family travel and not just the costs of young people travelling on their own. For example, young people will be able to take the bus rather than their parents giving them a lift, and the scheme will reduce the financial cost of families travelling together. Will there be an attempt to measure the social justice impact as well as the environmental one as the scheme starts to be implemented?

My second question is on how the scheme will work. You mentioned that the Young Scot card is one of the options. Do you agree that it would make sense to develop and implement the system in a way that would be scalable if a future Scottish Government decided to expand the age range or the modes of public transport that were covered? I presume that we would want a scheme that is flexible enough to do that rather than having to design a completely new replacement system if such changes were approved later.

Kate Forbes

The short answer to the second question is yes. As I mentioned, in light of the fact that we have a scheme in place for over-60s, it makes sense not to reinvent the wheel and to look at what works already and whether we can roll it out for the under-19s. We definitely want a scheme that we can work with, particularly in terms of future direction. That is not me giving an indication of what the future direction is, but it makes sense to build a scheme that gets it right the first time so that we do not have to reinvent the wheel every time that we make a policy change in the area.

The first question, which was absolutely brilliant, was about how we measure the policy impact of the changes on more than one portfolio area. We have discussed in the past how we measure the impact of a policy that delivers benefits in multiple areas. I have previously used the example of emissions reductions in travel zones, which impact on health as well as transport. With free bus travel, there are social justice impacts, health impacts—in terms of prevention—and a transport impact. At the moment, we capture that through the national performance framework, outcome by outcome, and we measure the impact of our policies against those outcomes. The policy can deliver multiple outcomes, not just a single outcome.

10:30  



Neil Bibby (West Scotland) (Lab)

This week, the Sunday Mail reported that Scottish Enterprise staff have been emailed by Steve Dunlop, the chief executive, ordering them to freeze all future support grants and to slash internal budgets. Were you aware that Scottish Enterprise was running out of money when the Scottish Government decided to cut its budget for next year by 9 per cent? Has the Scottish Government considered the economic impact of a reduction in Scottish Enterprise’s budget?

Kate Forbes

It is important to say that the comment about Scottish Enterprise running out of money is not accurate.

I have said in the past that we want to ensure that the investment that goes through our enterprise agencies goes into the economy. It is perfectly acceptable for organisations to look at being as efficient as possible to maximise the resources that are ultimately invested in the economy. That is what matters.

In the budget this year, which of course is one of the first years in which we are funding south of Scotland enterprise—with overall investment in the next financial year of around £28 million—it is important to look at the investments that we are making in the economy in the round, through not only Scottish Enterprise but the other investment vehicles.

Neil Bibby

If businesses are not getting the support that they need, it does not appear that the transition to south of Scotland enterprise and the Scottish national investment bank is working. Is it acceptable and prudent for Scotland’s leading enterprise agency to freeze its support of businesses in Scotland right now?

Kate Forbes

I am not aware of any freeze in direct support for businesses. Every organisation needs to look at the way in which it operates—I expect every organisation to do that—to ensure that it delivers value for money for the taxpayer and our public services. Whether it is through Scottish Enterprise, Highlands and Islands Enterprise, south of Scotland enterprise or the Scottish national investment bank, the priority is to ensure that the money that we invest goes to businesses, organisations or, in some cases, community groups, as they are the most important factor. We must support the enterprise agencies to do that as well as possible.

Members cannot look at this year’s budget in terms of the investment through the Scottish national investment bank or the enterprise agencies and come to any other conclusion than that we are investing in the economy.

Murdo Fraser (Mid Scotland and Fife) (Con)

When you came to this committee three weeks ago to talk about the budget, you assured us that every penny had been accounted for, yet you have now found an extra £173 million. I am glad that you located the missing sofa and that that cash has materialised.

I note that, of the £173 million, £50 million comes on the basis of a reprofiling of non-domestic rates distribution over the next three years. Is it fair to characterise that as you essentially borrowing this year against future income in the years to come?

Kate Forbes

The only issue that I take with that sentence is the word “borrowing”. As Murdo Fraser knows, because I included the relevant table in the letter that I sent to the committee, the non-domestic rates pool does not impact ratepayers or local government funding—that is absolutely clear. It brings forward forecast growth to invest, but that does not in any way disrupt our plans to bring the non-domestic rates pool into balance. That is shown in the table that I provided.

Murdo Fraser

Thank you for providing that helpful clarity.

You will have seen that, in the committee’s budget report, we highlighted income tax reconciliations, which will be £204 million for the 2020-21 budget. The projected sum for the following year is £550 million, which is a much larger sum. How prudent is it to start spending future years’ income in the coming budget when we know that we will potentially have a much bigger issue to address in a year’s time?

Kate Forbes

As I said earlier to the convener, it is a judgment call. In this year’s budget, I have not touched the reserve, which remains the same, and I have left £93 million of resource borrowing headroom, as originally planned. That is because we are aware of the volatility and the uncertainties that are coming down the line, which are part of a much bigger question to do with the fiscal framework.

In my initial conversation with the Chief Secretary to the Treasury last week, he raised the point that we needed to discuss and ensure that the fiscal framework is working for both Governments. The current level of volatility in income tax receipts is concerning. Next year, our borrowing powers will not cover the £550 million or so for reconciliation. The UK Government is able to borrow for figures like that and to cover and smooth over them, but we do not have that capacity. Although I am making prudent decisions now to ensure that we have as much headroom as possible next year, it will still not be sufficient headroom, through the levers that we have, to deal with that level of reconciliation.

Murdo Fraser

Thank you. I would just observe that, although there is limited capacity to borrow, that borrowed money has to be repaid at some point and you are therefore simply storing up additional issues for future years.

I want to return to the non-domestic rates income instruments, which I note for the coming year are £2.749 billion, rising to £3.423 billion in the year 2023-24. That means that, over the next three years, you are expecting non-domestic rates income to increase by £674 million. According to my calculation, that is a 25 per cent increase in non-domestic rates income over the next three years. That seems an astonishing uplift—it is well above the rate of inflation—in business taxation over a three-year period. How do you arrive at those figures?

Kate Forbes

Those figures are based on the most accurate forecasts that we have, led by the evidence. However, Graham Owenson might have more to add to that.

Graham Owenson (Scottish Government)

Those are Scottish Fiscal Commission estimates, which are based on consumer prices index inflation. We also need to take into account where we are in the appeals cycle when appeals have been settled. In the earlier years, when we get a lot of appeals, income will be low; in the later years, when appeals have been settled, the income will be higher. It is to do with where we are in the appeals cycle.

Murdo Fraser

I think that I understand that as a technical response. However, given that the Scottish economy is not projected to grow particularly quickly over the next three years, it seems to me that you are expecting to take from Scottish business a 25 per cent increase in taxation, which is bound to have an impact on the competitiveness of Scottish business.

Graham Owenson

The rates that individual businesses will pay will be no higher than the CPI inflation increase each year.

Murdo Fraser

Where does the nearly £700 million growth come from?

Graham Owenson

It involves a range of technical factors, but the main one is where we are in the appeals cycle. In the earlier and middle years, when we are settling appeals, income will be lower; income will be higher in later years, once those appeals have been settled.

Murdo Fraser

Yes, but overall there will be an additional tax burden on Scottish business of nearly £700 million over the next three years.

Kate Forbes

Those were technical answers as to how we arrive at the forecast. Quite separately, in terms of what business will see, next year Scottish business properties will pay a lower headline poundage than those in the rest of the UK and 95 per cent of properties will pay less than they would elsewhere in the UK. We continue to have the most generous rates relief anywhere in the UK. Businesses will therefore see the positive impact of the recent Non-domestic Rates (Scotland) Bill in terms of the changes that have been made to the appeals system; they will also pay a lower headline poundage than anywhere else in the UK. Therefore, I think that we can continue to say that Scotland provides business with the most competitive rates regime of anywhere in the UK.

Murdo Fraser

I have just one more question, convener. There has been some suggestion in the media that the chancellor will announce next week as part of the budget a fundamental review of non-domestic rates for England and Wales. Would the Scottish Government consider doing that?

Kate Forbes

Again, such questions are challenging because they are all what-ifs and we have to pin down our budget now. We are going early with our budget in order to give certainty to ratepayers. We have to think very carefully about making changes, and we do not intend to make such changes to rates and taxation in year. It is important to make that point.

We need to do what is right for businesses in Scotland. Our reliefs scheme, which is the most generous in the UK, our decision to make headline poundage slightly lower than it is in the rest of the UK, and our unique reliefs, such as the business growth accelerator, all show that we adapt our policies to the Scottish business environment. We should not necessarily replicate what is happening south of the border, because, if we did that, we would have to get rid of a lot of our very generous reliefs.

The Convener

A couple of members want to ask supplementaries on reconciliation and reserves and on business rates. Murdo Fraser asked about reconciliation and reserves. Am I correct in saying that John Mason is interested in that area?

John Mason

I do not have a question on non-domestic rates.

The Convener

The issue of reconciliation has been raised, too.

John Mason

I am interested in reserves generally.

The Convener

You can raise that matter now. It all relates to Murdo Fraser’s questions.

John Mason

My questions follow on from the convener’s excellent speech last week—I do not know who wrote it, but it was very good—about taking a longer-term view on the Scottish budget, whether we should set aside reserves and the tension associated with that. In the cabinet secretary’s reply, which we received yesterday, she said that it is a matter of judgment and about finding the balance. I totally agree with that.

I met people from Glasgow City Council on Saturday. I think that councils have a 2 per cent target for reserves. What are your thoughts on that? It is sensible and wise to put money into reserves, but it means that less money is available to spend today. How do we get the balance?

Kate Forbes

I think that we have the right balance in the budget. It is a very important judgment call to make. On one hand, we have to make prudent decisions in order to deal with future volatility, but, on the other hand, any money that is in the reserve is not being invested in our public services at a time when every party in the Parliament is calling for greater investment in different budget lines. This year, we have taken the right decision by leaving £100 million in the reserve. I consciously decided to do that, as part of reaching agreement with another party. Subject to what the UK Government does on its budget day, my view is that we should add to the reserve in order to increase the Government’s ability to manage the inherent volatility under the fiscal framework.

John Mason

Have you any thoughts on a figure? Ideally, would you like a target of 2 per cent, which is what councils have?

Kate Forbes

It is very difficult to give a percentage rate, because a lot of things change annually. We will give greater thought to Parliament’s comments about what should be held in the reserve as part of the medium-term financial strategy, which will be published later this year. That will provide the longer-term strategic view on how we should manage volatility and reserves.

The Convener

I say to John Mason that I like my compliments without barbs, so he should watch what he is doing when he asks questions in future. [Laughter.]

Donald Cameron (Highlands and Islands) (Con)

Am I right in thinking that the Government considered non-domestic rates income as an option in last year’s budget and that it described its decision as exceptional at that stage? Can we deduce from the fact that the Government is now taking the step for the second year in a row that it is no longer exceptional?

Kate Forbes

This is very much an exceptional budget in exceptional circumstances, and exceptional decisions have to be taken in order to manage not only the volatility of the fiscal framework but the uncertainty that is inherent in going ahead with our budget before the UK Government’s budget. That is why we say that we are baking in anticipated consequentials in the budget bill.

What is most important in that regard is our commitment to bring back the non-domestic rates pool; we will be doing that and meeting our target in the coming years, as I identified in my letter to the committee. Graham Owenson might have something to add on the technical questions.

10:45  



Parliament would have cause to ask more questions if it meant that the non-domestic rates pool was out of balance for longer. However, our decisions are prudent and we will still see non-domestic rates brought back into balance in the same timescale. It basically spreads the income over several years, rather than just the year in which it was taken. Incidentally, we did not go into negative territory on the non-domestic rates pool last year—we did not have to use that facility last year.

Graham Owenson

That was the clarification that I was going to add. We forecast that the pool would be in deficit of minus £100 million in 2019-20. However, the latest forecast is that it will actually show a small surplus, so we did not use that facility.

Donald Cameron

The first point that I was making is that you specifically described reprofiling as exceptional last year. I am not talking about the budget in general, but the policy of reprofiling, which was described as an exceptional decision.

The second point is that you were plainly aware that it was a source of funds, not only because you mentioned it last year, but because you made provision for £100 million-worth in the draft budget. Is that a fair comment?

Kate Forbes

Parliament has to determine whether it would rather that I used the non-domestic rates pool or made £50 million-worth of cuts to another portfolio line. I do not think that there is an appetite for cuts. As far as Parliament and I am aware, the non-domestic rates pool exists. Our commitment is to ensure that it is in balance by 2022. That remains our position.

The Convener

That was a supplementary question, Donald, so I will come back to you to ask your other questions.

Alexander Burnett

I alert members to my entry in the register of interests, and state that I pay business rates.

Could one of you explain a bit more about the cycle? You have said that there is a rise of £700 million in 2023-24, because of the timing of the cycle. My understanding is that businesses have to pay their rates every year, regardless of whether they appeal. Is that £700 million the difference between successful and rejected appeals or is it something else?

Kate Forbes

I do not mean to be patronising, but it might be helpful if I gave the member a technical explanation of how the pool works. I will clarify the point again: our decisions around the non-domestic rates pool do not have an impact on non-domestic rates payers and they do not have an impact on local government funding. The issue is how the non-domestic rates system works and how we smooth the access of local authorities to the funding.

As you can imagine, the big challenge—this came to light when we were having our discussions on whether to devolve non-domestic rates to local authorities—is whether we should devolve the associated risks. At the moment, the central Scottish Government takes the risk of non-domestic rates. Local authorities have a forecast of non-domestic rates to determine what they can spend next year. If that forecast was not the same as the amount that the local authorities take in—it often is not—the risk would lie with local authorities. We do not take that approach; we use the pooling system to ensure that local authorities have guaranteed funding from year to year. That means that in some years, a surplus will build up and in other years the audited returns are less than the forecast, so it will go into negative balance. Our commitment is to try to smooth the income over a particular period of time. Last year, for example, a surplus built up, so we did not go into negative balance. This year, in order to ensure that we have funding to deliver on our negotiations, we have made the decision to reprofile the non-domestic rates pool.

Alexander Burnett

In the answer that Graham Owenson gave, he talked about the appeals cycle and the difference in appeals. That is what I do not quite understand.

Graham Owenson

When appeals are settled, successful appeals will be backdated to the start of the revaluation cycle. However, they may be settled two, three or even four years down the line. In that case, the four years of successful appeals income will be lost in one year.

Alexander Burnett

My original question was whether that £700 million, less CPI inflation for rates, is actually the quantum of successful appeals.

Graham Owenson

Appeals are a significant factor. Another significant reason for the spike in apparent income is that empty property relief will be devolved to local government from 2022-23.

The Convener

We will move on to another area. I call George Adam.

George Adam

The Scottish Police Authority’s budget will increase by £60 million this year. We all know that the Scottish Government is committed to protecting the police budget in real terms. Does that funding exceed its commitment, and, if it does, by how much?

Kate Forbes

George Adam is right to say that the Scottish Government committed to protecting the SPA revenue budget in real terms over the lifetime of the Parliament.

We estimated that that would result in a £100 million boost to the SPA’s revenue budget over that timeframe. Following next year’s budget, we have exceeded our £100 million commitment. In addition to our real-terms protection in 2020-21, we are providing a further £25 million in revenue funding to maintain officer numbers. The total policing budget will increase by £60.2 million in 2020-21; that is a 5.1 per cent increase on the 2019-20 budget position.

Alex Rowley

Is there enough money in the Scottish Fire and Rescue Service budget to meet the pay offer that is on the table for fire service personnel?

Kate Forbes

We have ensured that we will protect the SFRS’s budget next year, and that sufficient funding will go to front-line staff.

If the member is referring to the on-going campaign and how far that funding will go to meet the pay offer, I will ask my colleague Ash Denham to write to him with the specific details.

Alex Rowley

The point is that the pay offer—as you know, there is a much wider offer on the table—was rejected by staff. However, the chief fire officer suggested that there is now a danger that there is not enough money in the budget to cover the pay offer.

Kate Forbes

It is worth mentioning that the Scottish Government is not a party in the negotiations concerning firefighter pay; that is a matter for the SFRS as the employer. However, we have committed funding, and we continue our commitment to support the modernisation of the SFRS. There is a further uplift of £6.1 million on top of the increased spending power of £5.5 million in 2019-20, and £15.5 million in 2018-19. In total, we have provided £63 million of additional spending capacity for service transformation over the past three years, so that the SFRS can do more to keep our communities safe. However, I stress that the Scottish Government is not a party in the negotiations about firefighter pay.

Alex Rowley

Moving on, I will speak about a point that Patrick Harvie made, which you welcomed, on the policy impact of budgets. Last year, one of the headline budget announcements was the one-off, one-year £50 million capital spend for town centres. It was a significant investment that was widely welcomed. As the finance secretary, how can you ensure that the money was actually used? As we move on to the next budget and the next, how can the impact of that investment be measured?

Kate Forbes

The simple answer is that, although we provided that capital funding specifically for the regeneration of town centres, because that had been highlighted as an area that needed investment, we committed to giving the money to COSLA—to local authorities, which were enabled and empowered to spend it as they saw fit.

This is part of the big debate about ring fencing. We have significantly reduced ring fencing so that local authorities have autonomy over 91 per cent of their budgets and how they spend them. It is important to allow local authorities to determine how the money is spent. They will be able to make judgment calls in that regard and they are, of course, accountable to their local electorate for how the money is spent.

Although we are keen to ensure that our money is used well and invested wisely, the money is given to COSLA, and it is for local authorities to determine how they spend it.

Alex Rowley

We are talking about a big announcement last year about tackling town centres in Scotland. Fifty million pounds is a lot of money, and I would expect the Government at least to be confident that something has happened as a result. Was the money spent on a one-off? Did it go into street furniture? Did it make a difference to our economy? Where is the policy behind the approach?

Angela Constance talked about tackling poverty and inequality. Fife Council has a £10 million overspend on children and families and a £10 million overspend on health and social care, so the additional £6 million that will come in as a result of the budget deal with the Greens will be used to offset those overspends. Last Thursday, Audit Scotland published “The 2018/19 audit of Fife Integration Joint Board: Report on significant findings”, in which it said that the Fife IJB’s financial future is so unstable that something will have to give.

Where is the overall policy direction of the budget when it comes to health and social care and children and families? It is fine to keep putting money into new areas, but areas into which you have put money previously are overspending and cannot cope. It seems that, each year, there is a budget of initiatives with no strategic overview of where in our country we are trying to make changes.

Kate Forbes

I have two answers to that. First, local authorities are ultimately accountable to their local electorate for how they spend their money, and local councillors need to answer—just as members of the Scottish Parliament who have been elected to serve constituencies or regions must—for how they use the resources with which they have been entrusted. You ask about the Government determining whether local authorities have spent the £50 million on the right kind of regeneration, but that is ultimately a question for local authorities, which are accountable for it.

Secondly, on the direction of travel, as part of the budget process we meet COSLA regularly and COSLA identifies areas of pressure, which are the areas in which we try to support COSLA through increased investment. That is why an additional £100 million is going from the NHS—from the health portfolio—into social care, as you mentioned, to support local authorities and IJBs that are dealing with the pressures of meeting the needs that come with changing demographics and an ageing population.

COSLA also identified inflationary pressures on teachers’ pay, which is why we invested in teachers’ pay. We meet COSLA regularly as part of the budget process. COSLA identifies the pressures and we try to respond through the budget deal.

Alex Rowley

When John Swinney was the finance secretary, he set up the Christie commission on the future delivery of public services. At the time, the whole approach to the budget was going to be policy driven and we were going to look much more at preventative spend, to drive change. Has that approach been ditched?

Kate Forbes

Absolutely not. It is still very much—

Alex Rowley

So where is the joined-up thinking?

Kate Forbes

Preventative spend is absolutely core to our decisions on the budget, and I think that you can see that throughout this year’s budget. We were very clear about our four strategic aims in this year’s budget. On tackling poverty, tackling the climate emergency and investing in the economy, we have core aims, which we are backing up with investment.

The other way of looking at the issue is to consider outcomes. At the end of the day, COSLA, local authorities and the Scottish Government are co-signatories to the national performance framework, which contains a clear set of outcomes on which we want to deliver. The real test of our spending commitments will be how they deliver on those outcomes, which we share with local authorities.

I do not think that we are doing any of this work in isolation. We must look at the ways in which investing in one portfolio area is delivering results and benefit in another portfolio area.

11:00  



Alex Rowley

With the greatest respect, finance secretary, how are those objectives going? How are they being met? You seem to be just passing the buck to local authorities and saying that councillors should be accountable.

Kate Forbes

You asked me whether I feel that the regeneration fund of £50 million has been spent wisely. That is totally at odds with what Labour regularly criticises me on, which is ring fencing and disempowering local authorities in how they spend.

My point is that we invest in those funding pots but it is for local authorities to determine how that money is spent. You would probably be the first to criticise me if I was too rigid in saying how local authorities should spend it. Ultimately, we are accountable to the electorate for the spending decisions that we make. Local authorities are accountable, as am I, and as is each of us. The national performance framework, which all of us are signed up to, is the way that we measure progress against outcomes, and our strategic aims in the budget determine what we prioritise in this year’s spending.

Tom Arthur (Renfrewshire South) (SNP)

As a consequence of the deal that was negotiated ahead of the budget, East Renfrewshire Council will receive an additional £1.8 million and Renfrewshire Council an additional £3.1 million. Both of those areas lie within my constituency. That money is part of an overall uplift of £95 million. Will you share with the committee what the total allocation to local government now is, contextualise that within the overall Scottish budget and compare it with local government spending in England?

Kate Forbes

The total increase in resource funding for local government is £589.4 million, which is a real-terms increase of 3.9 per cent. That means that next year’s budget delivers the highest annual resource budget increase—in terms of budget to budget, at £509.4 million—for local government since this Administration came into power, in 2007. If capital funding is included, the overall funding increase is £238.3 million, which is a real-terms increase of 0.7 per cent.

I often think that the comparison is best captured by what the finance spokesperson for COSLA said, which is that, compared with England and Wales, where local authorities are “collapsing”, in Scotland we are doing things quite differently.

Tom Arthur

I appreciate that you are new to your role, cabinet secretary, but I am interested in your reflections on the budget process. We face significant strategic challenges in the coming decade, particularly with respect to demographics and increased health spending. What are your reflections so far on the parliamentary process and the way that we, collectively as a Parliament, go about the budget-setting process?

Kate Forbes

We need to be realistic about where the challenges are. I do not want to keep going back to the fiscal framework, but the review of it needs to be brought forward. Not having done that review means that we are unable to deal with volatility as well as we could.

That might sound technical and boring—like something that is of interest only to the finance committee and me—but it is about what money and funding we have to invest in our public services, and that is of interest to everybody in the country. The fiscal framework needs to be looked at to ensure that it is not hamstringing our ability to respond to the challenges that we face.

On the budget process, the budget delivers record investment in our health service, raising it to £15 billion. We are committed to passing on all the consequentials that come to us for health to the health service, in order to protect it.

Quite rightly, questions are often raised about how we ensure that we are taking a preventative approach. An obvious example is the way in which, this year, funding from the health service has moved into social care. Ensuring that we provide adequate social care might reduce cost pressures in areas of the health service.

The Convener

There are two other areas that people want to ask questions on. Donald Cameron has a question on consequentials.

Donald Cameron

During the stage 1 debate, last week, you repeatedly said that there was a lack of clarity around consequentials. Do you accept that, despite those statements and that professed uncertainty, your draft budget used consequentials that were, as the convener mentioned earlier, £468 million more than the Treasury’s forecast of more than £1.1 billion, as per the spending round last September?

Kate Forbes

We accept that £1.1 billion of additional resource budget was allocated at the UK spending round, to which we have added £142 million of anticipated additional consequentials from the forthcoming UK budget. That is part of the overall £468 million, because the remainder is capital.

I have repeatedly made the point that, in seeking guarantees about that funding, officials in the Treasury have consistently referred to the Conservative Party manifesto from December. Therefore, we have based our decisions on the best available evidence. To have waited until that funding was guaranteed, after our budget was complete, would have introduced even greater challenges to the process. The question, really, will be whether the UK Government delivers on the commitments that it made at the election in December.

Donald Cameron

Your funding for the majority of last week’s agreement comes from consequentials. I have come to that conclusion by subtracting £25 million underspend and £50 million of reprofiling from a total of £173 million, which comes to £98 million. Is it correct to say that that money comes from consequentials?

Kate Forbes

It is not quite correct, because of the fossil fuel levy. It might be worth having a technical answer on that. I would not characterise the fossil fuel levy money as part of the consequentials, because it should come to us anyway.

Donald Cameron

It is my understanding that the fossil fuel levy money is, in fact, a type of consequential.

Andrew Watson (Scottish Government)

It is slightly different from the annual consequentials that we receive as a result of UK fiscal events. The money is a surplus that directly accrues to the Scottish Government and the Scottish block rather than being a consequence of movement in UK spending that generates Barnett consequentials in comparable programmes.

Donald Cameron

I do not want to split hairs; it is just that, in the answer that you gave to a question from Murdo Fraser last week, the money was described as additional consequentials.

Do you agree that it is hypocritical to complain about uncertainty around consequentials, as you did last week, while, at the same time, using close to £100 million of additional consequentials to reach an agreement?

Kate Forbes

The point about whether the fossil fuel levy represents a consequential is quite important, because it is confirmed in a different way. As I understand it, your point is that it is hypocritical to use consequentials in advance of knowing what our guaranteed funding is. That is the irony of this entire process. We are going ahead of the UK Government because we are trying to provide certainty to ratepayers and the public services. If we had waited until after the UK Government’s budget, in order to get guaranteed certainty, the implications for taxpayers do not bear thinking about.

I accept that there is increased uncertainty around our decision to come forward. However, the UK Government was perfectly able to guarantee our funding, if it had wanted to, in the past few weeks. All that it has done is refer us to the Conservative Party manifesto; therefore, we have based our budget on the best available evidence. Is it as watertight as confirmation of block grant adjustments after the UK Government’s budget? No, but there are all sorts of uncertainties that are part of our annual budget process. For example, with regard to last year’s budget, only a matter of weeks ago, the UK Government clawed back capital consequentials late in the year because there had been an underspend associated with policy decisions south of the border. There will always be uncertainty.

Donald Cameron

My point is that it is hypocritical to complain about uncertainty around consequentials after you have used £100 million of additional consequentials to reach a deal.

Kate Forbes

My question to Donald Cameron is this: if the Conservatives fail to deliver on the promises that they made to the electorate in the December election and we therefore see a cut from the UK Government, whose fault is that?

Donald Cameron

I am not here to give evidence, cabinet secretary—you are.

On the specific consequentials that you referred to, I think that you said that some of the money came from local government funding in England. Is that right?

Kate Forbes

It came from policy changes to do with non-domestic rates. In advance of the UK budget, no UK Government minister is giving us any information on what the UK Government intends to do with its budget, despite our repeatedly asking. The UK Government indicated to local government that it is going to make some changes around non-domestic rates, which is where we got our information from.

Donald Cameron

So it is not about additional funding from the UK Government going to local authorities in England.

Kate Forbes

No, it is about changes that the UK Government is making to non-domestic rates, which it had to indicate to local authorities in England and Wales. It is worth bearing in mind that those local authorities are facing the same levels of uncertainty as we face.

Donald Cameron

In my final question, I want to try to analyse the issue of the fossil fuel levy. I am advised that there was no mention of that in the draft budget. Can you be a bit more specific about the role of Ofgem in the matter?

Kate Forbes

Ofgem contacted us on 18 February with new information, which has informed our current position. The issue with the fossil fuel levy is largely to do with how to apportion the surplus in the fossil fuel account. That money has always been there—it is our money—and Ofgem contacted us about how to apportion the surplus.

John Mason

I realise that European Union funding is not part of our budget, but the committee referred to it in a fair amount of detail in our report, and you responded to that report. Have you had an indication from the UK Government as to whether—and, if so, how and when—it will replace EU funding such as structural funds and common agricultural policy funding?

Kate Forbes

We share the committee’s concerns regarding the uncertainty that is associated with that EU funding and the serious consequences that there will be from its loss. The Conservative Party committed to replacing certain funding streams as part of its election manifesto, but, on that issue as on everything else, we await further detail on the exact amounts, how those funds will operate and when they will be provided. We will continue to push for clarity to ensure that there is no cliff edge from December 2020 onwards. However, on that and on everything else, we await confirmation on 11 March, in the hope that it will come then. If it does not, we will be waiting for the spending review.

The Convener

That was a lengthy evidence session, but it was useful for information sharing. We should have a wee break, so I will suspend the meeting for five minutes, after which we will begin the formal process on the Budget (Scotland) (No 4) Bill at stage 2.

11:13 Meeting suspended.  



11:18 On resuming—  



The Convener

We begin the formal proceedings at stage 2 of the Budget (Scotland) (No 4) Bill.

Section 1—The Scottish Administration

Section 1 agreed to.

Schedule 1—The Scottish Administration

The Convener

Amendment 1, in the name of the cabinet secretary, is grouped with amendments 6, 7, 19 and 20.

Kate Forbes

Amendments 1, 6 and 7 will increase three portfolio totals in schedule 1, in accordance with the budget agreement with the Scottish Green Party. Amendment 1 will increase the communities and local government authorisation by £95 million. Amendment 6 will increase the justice authorisation by £18 million, to deliver on the commitment to increase police resources, with £13 million of resource and £5 million of capital.

Amendment 7 will increase the transport, infrastructure and connectivity authorisation, to deliver on the commitment to provide an additional £60 million, which will be £15 million of resource towards the preparations to introduce free bus travel for young people aged 18 years and under and £45 million capital for net zero projects, including £15 million for local government.

Amendment 19 will update the total amount of resources in schedule 1, and amendment 20 will increase the total cash authorisation for the Scottish Government.

I move amendment 1.

Amendment 1 agreed to.

The Convener

Amendment 2, in the name of the cabinet secretary, is grouped with amendments 3 to 5 and 8 to 18.

Kate Forbes

These technical amendments will update schedule 1 to reflect the revised ministerial portfolios. Amendments 2 to 5 reflect the formation of the finance portfolio. Amendments 8 to 10 reflect the formation of the rural economy and tourism portfolio. Amendments 11 to 15 reflect the formation of the economy, fair work and culture portfolio. Amendments 16 to 18 reflect the formation of the constitution, Europe and external affairs portfolio.

I move amendment 2.

Amendment 2 agreed to.

Amendments 3 to 19 moved—[Kate Forbes]—and agreed to.

Schedule 1, as amended, agreed to.

Sections 2 and 3 agreed to.

Schedules 2 and 3 agreed to.

Section 4—Overall cash authorisations

Amendment 20 moved—[Kate Forbes]—and agreed to.

Section 4, as amended, agreed to.

Sections 5 to 11 agreed to.

Long title agreed to.

The Convener

That ends stage 2 consideration of the bill. Thank you, everyone.

Meeting closed at 11:22.  



Budget (Scotland) (No.4) Bill as amended at Stage 2

Stage 3 - Final amendments and vote

MSPs can propose further amendments to the Bill and then vote on each of these. Finally, they vote on whether the Bill should become law

Final debate on the Bill

Once they've debated the changes, the MSPs discuss the final version of the Bill.

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Final debate transcript

James Kelly (Glasgow) (Lab)

Does the cabinet secretary think that this is a fair budget if someone who earns less than the living wage will pay an above-inflation increase of 4.8 per cent in council tax while a Government minister earning £90,000 and above will pay less in income tax?

Willie Rennie (North East Fife) (LD)

This budget was inevitable. Just as night follows day—probably as certain as Stewart Stevenson making a speech later on about his ancestors—there was no doubt that this was an inevitable budget. Councils were always going to face cuts. That has been the Scottish Government’s approach to budgets for a number of years now.

Willie Rennie

I will not, just now. I had hoped that Stewart Stevenson would tell me about one of his ancestors. Alas, that will come later, I am sure.

Although the Government says that the budget is a generous deal, it is cutting £200 million from local government budgets. That is not generous. I suppose that it was inevitable that more money would be found, despite the protests from the new finance secretary. The Government said that there would be no more money, but later said that there would reprofiling of the non-domestic rates pool and that there were emerging underspends. It was either very naive to take an approach that included no money for flexibility to account for other parties’ priorities, or it was extremely reckless. It was rather naive even to suggest that in the first place.

It was inevitable that the Greens would back the budget. After their fabricated jig that has been going on for a number of years now, they have been duped by promises of a review about the possibility of maybe having free transport for young people. The council tax talks have been going on for a year now, which Rhoda Grant rightly alluded to, and have made little progress, with no proposition whatsoever being forthcoming from the Government. We need real progress on that—if it is not yet more duping of the Green Party.

The budget was inevitable, but some things have changed. Once, the Government could claim—it tried to claim—that it was competent on capital projects, but now it is wholly incompetent. It is mismanaging project after project: the Aberdeen western peripheral route is over budget, the ferries have doubled in cost, the farm payments information technology system is way over budget and the Aberdeen hospitals are the latest catastrophe in the mismanagement of capital projects. This is a Government that is not capable on capital projects, which is why we should be reluctant to endorse a financial strategy from it for the next financial year.

The Government has failed in a number of areas. In relation to councils, which I have already mentioned, the Scottish Government began the budget process without even baking into the budget the promises that it had already made on behalf of local government. Those were promises that were imposed on local government. Some of them were good. However, a Government should never propose to improve public services unless it is prepared to fund them in the first place. To start off with a negative is wholly irresponsible. The Government has made promise after promise. In the future, it should make funding promise after funding promise, rather than leave councils to pick up the tab.

The Government has also failed the police. We have heard repeatedly about leaking roofs, fungus growing in police stations, the broken down cars and—[Interruption.]

The Cabinet Secretary for Justice should listen to this very carefully. We have heard repeatedly about the stress and strain that ordinary hardworking police officers are under. Remember: one in three police officers turns up to work mentally unwell. We should be funding the police force properly. We should not be asking them to look after us and keep us safe while failing to fund them.

Willie Rennie

This Government got itself into a mess of its own making. [Interruption.]

Willie Rennie

This Government centralised the police when it did not have to. The Government ended up with a VAT bill of its own making. That is why the Scottish Government cannot be trusted to manage Scotland’s police. The justice secretary should be ashamed of himself for making that intervention.

The Government has failed—[Interruption.]

Willie Rennie

Thank you, Presiding Officer. These are important matters and they deserve to be considered incredibly carefully. It is a matter of trust in the Government. The Government has failed our public servants repeatedly and should be ashamed for doing so.

Willie Rennie

I will not, just now.

The islands of Orkney and Shetland were promised two whole years ago that their interisland ferries would be funded in full. A package of £16 million was the price. The islands are still £5 million short—two years later. Yet again, that is a promise that was made by the SNP Government that was not kept.

The Government has failed on the councils, the police and the ferries. It has also failed by keeping money back from public services. We all know that there will be no independence referendum this year, but the finance secretary has told me that she is keeping money back for that possibility. That is not something that we should be doing when our police are short of money, when councils are short of money and when ferries in the northern isles are short of money.

The Government has the wrong priorities. Only when it has the right priorities will the Scottish Liberal Democrats support the budget.

15:49  



Colin Beattie (Midlothian North and Musselburgh) (SNP)

I am grateful for the opportunity to contribute to this debate on the Scottish Government’s budget proposals for 2020-21. I am very conscious that the Scottish budget has been prepared against a backdrop of chaos and uncertainty in Westminster. We are in quite an unprecedented situation as we are uncertain how much of our tax money will be returned from London to fund vital services in Scotland.

The easy option would have been for the Scottish Government to have introduced a standstill budget that simply replicated last year’s budget, pending information on what Scotland’s handout might be. It is to the Scottish Government’s credit that it did not do so; instead, it chose to move forward in key areas that the people of this country value and support.

The budget includes a record £15 billion investment in healthcare and care services, which will deliver an essential child poverty payment, and expand early learning and childcare support by £645 million.

The Government pledged to deliver 50,000 new homes in this session of parliament, and it is investing £800 million in this budget to do so. In addition, the Government is committing an additional £300 million to ensure that momentum is maintained and the target is reached. There is nothing more important than providing a family with a home, a roof over their heads; it is a fundamental right.

Some £220 million has been committed to the Scottish national investment bank. That is a real opportunity to provide burgeoning young companies with patient capital, which is so lacking in the present market.

My experience as an MSP is that mental health is a significant issue that I have to deal with in my constituency. The investment of £117 million in mental health for people of all ages and at all stages of life represents a significant step forward, and I hope that that investment will be spent wisely.

I am pleased with all the investment and progressive steps forward that this Government is taking, and that income tax levels have been held so that no one will pay more this year than they paid last year. It is really important to note that more than half of Scottish taxpayers continue to pay less than they would if they lived south of the border. Our tax system in general is fair and progressive—it is probably the fairest in the UK.

All that investment and solid commitment to progress is in spite of the brutal Tory policy of austerity. After 10 years, the evidence of its failure is indisputable. Indeed, Scotland’s discretionary resource budget has been cut in real terms by £840 million over the past decade. The SNP Government has repeatedly called for an end to the austerity programme. It has been ignored. Although there are some fine words in London about ending austerity, the reality is that it lives on, and there is no indication that the UK will signal an end to that state of affairs.

Before I continue on the Scottish budget proposals, I make a small plea for my constituency. As part of the arrangement with the Green Party, there is a proposal to review the current initiative for Sheriffhall roundabout. The Edinburgh and south-east Scotland city deal means that plans are in place to upgrade the roundabout in order to help businesses and residents cope with the volumes of traffic. The Green Party has asked for a review of the upgrades, which would delay the process. A review is not in the interests of my constituents, and the considerable reaction from them to the Greens’ proposal has been overwhelmingly negative.

Alison Johnstone (Lothian) (Green)

The member will be aware that, on the day that the proposed roundabout is due to open, congestion will be 5 per cent worse than it currently is. Does the member really think that that is a good spend of £120 million? That money could make a difference by transforming the gridlock, the pollution and the congestion that blights our communities.

Colin Beattie

I cannot agree with the member’s assessment. Perhaps, if I can continue, I will be able to explain a few of the points.

Alison Johnstone

It is not my assessment; it is Transport Scotland’s assessment.

Colin Beattie

I can only agree with my colleague Christine Grahame on that point.

The benefits of putting in place a solution to that long-standing choke point on the Edinburgh city bypass are multiple. I will list one or two of them. First, safe cycling and pedestrian routes will be put in place for the first time. That is an excellent first step in making the route greener and more sustainable. Many of my constituents have been waiting for those routes, so that they have alternative ways of travelling safely. Delaying the upgrades would prevent access to a green means of travel.

Secondly, instead of there being a significant traffic build-up at the Sheriffhall roundabout, traffic will be distributed to a variety of points, which will produce marginal traffic build-ups, as opposed to the significant traffic jams that currently happen. That will minimise idling traffic and longer car journeys as a result of delays.

Colin Beattie

I need to make progress.

The traffic jams resulting from the inadequate traffic-flow system mean that vehicles are often idling and producing high emissions and pollution. That is to the detriment of the surrounding villages and my constituents. The emissions could be lowered through better traffic flow, and the upgrades would enable that.

It makes every economic sense to have an efficient transport system in order to encourage businesses to move to or remain in the area. Efficient transport links reduce pollution and sustain jobs. Public transport and cyclists alike depend on them. I ask the Scottish Government and the Green Party to reconsider that potentially damaging and deeply unpopular review.

That was my small moment of dissonance in otherwise unequivocal support for what I consider to be an excellent budget. I extend my congratulations to the cabinet secretary on constructing it.

Colin Beattie

In recognising the benefits of the Scottish budget, I also feel a sense of frustration when I consider what we are not able to do because the powers are not currently within our grasp. It has been made abundantly clear that Westminster is not going to reinvigorate Scotland—only we can do that.

Colin Beattie

With limited powers but huge ambition, we are achieving much more than anyone could expect. I urge support for the budget.

16:21  



James Kelly

Will the member take an intervention?

James Kelly (Glasgow) (Lab)

We are at the final stage of the budget process. I have no doubt that Kate Forbes is glad to be nearing the finish line, having picked up the reins of the budget process in very difficult circumstances.

Bruce Crawford made some interesting points about the budget process that should be taken seriously. They should certainly be taken seriously by the Government, which was criticised by the Fraser of Allander institute over transparency and the amount of information that it put in the public domain to facilitate budget discussions.

It is time that the Government started to be more open about the process. When the budget was published, we heard that there was no money left—all the coffers had been emptied and every penny had been spent. Kate Forbes might be new to the job, but, as with previous cabinet secretaries going back to John Swinney, lo and behold, there was a change in the forecast and new assumptions. As a result, hey presto, £173 million was found down the back of the sofa. [Interruption.] In the Scottish Parliament’s version of groundhog day, the Greens then suddenly appeared and said that they would support the budget after all. If we are really serious about having a proper and transparent budget process, then the Government must let us know at the point at which the budget is published what money is available and not change the amount half way through.

Rhoda Grant and Claudia Beamish made very strong points about cuts to council services. The fact is that, in real terms, there have been £898 million-worth of cuts since 2013, and £205 million-worth this year. That shows that, at the heart of this Government, there is a policy of penalising local councils. It is not only about the figures; we just need to look at the analysis—

James Kelly

For a start, people such as Tom Arthur and I should be paying more tax.

As I was going to say, if we look at the analysis in The Herald on Sunday, we see cuts to library services. Some councils will have to close libraries. Meanwhile, MSPs and Government ministers will, this year, actually pay less in income tax. That is totally unfair. [Interruption.] It is not nonsense. Members should look at the analysis by the Scottish Parliament Information Centre. It is totally unfair—

James Kelly

No, I will not take an intervention at this point. Mr Neil should read the SPICe blog.

As The Herald on Sunday also pointed out, support for children with additional needs will have to be cut in a number of council areas. That is totally unacceptable. We face a situation where, all across the country, local councils will have to make cuts. When will SNP MSPs start standing up for the communities that they were sent to the Parliament to represent?

James Kelly

No, thank you.

Some of those MSPs will not even be standing for re-election next year, so they do not have to worry about reselection. For once, they should discover a backbone and stand up for their constituents. At 5 o’clock, Scottish Labour will oppose the budget, because of its inherent unfairness.

Government ministers, in the Holyrood bubble, in their chauffeur-driven cars—both Mr Neil and Mr Crawford have been there—who will not be paying the same amount of income tax, cumulatively over the year, should compare their situation with that of single parents in communities across Scotland who will be paying 4.84 per cent more in council tax this year. If that single parent wants to send their kid to a library, the service might be cut or it might be closed. If their kid needs additional support, that will be cut as well.

There is an inherent unfairness at the core of this budget. For that reason, Labour will oppose it at 5 o’clock.

16:43  



Final vote on the Bill

After the final discussion of the Bill, MSPs vote on whether they think it should become law.

Scottish rate resolution

Before considering the Bill at Stage 3, the Parliament debated and agreed to a motion about income tax.

It was agreed to charge income tax on some non-savings and non-dividend income of a Scottish taxpayer in tax year 2020/21.

Budget (Scotland) (No.4) Bill [Session 5] as passed

An "as passed" version of the Bill was not produced because no amendments were made at Stage 3.

This Bill was passed on 5 March 2020 and became law on 18 March 2020
Find the Budget (Scotland) (No.4) Act 2020 on legislation.gov.uk

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