Statement by the Cabinet Secretary for Finance and the Economy on preparations for the 16th Scottish Government’s budget

#**Statement by the Cabinet Secretary for Finance and the Economy on preparations for the 16th Scottish Government’s budget.

Presiding Officer with your permission I’d like to make a statement on preparations for the upcoming budget.

Based on the first edition of the budget, Scotland will receive a total of £32,170 million from the Government in the 2022-23 financial year split between the Block Grant, VAT Rebate and HCLG Compensation. This is a fall of £1.5 billion from the previous financial year. The Block Grant falling, whilst not ideal, is a feature, not a bug, of the devolved funding settlement we had reached. A settlement which ensures taxpayers in every part of the United Kingdom both pay in and receive a fair amount. Not the same amount, a fair amount. If the Government had come to us and said they wished to seek a new devolved funding settlement, we would have engaged constructively with them to find a new settlement which was fair on Scottish taxpayers. We would have happily hosted talks in Edinburgh, travelled to London and met whomever for however long necessary to reach an agreement which was fair and lasting, They did not do this. Indeed both privately and publicly we were told the Government backed the F4. We now know this not to be the case, and we are disappointed that we were told this days after the publication of the budget and just days before a revised version was due to come out. This is no way to treat a devolved administration, and our feelings on this have been made both privately and publicly forcefully to the Government. We were not, and are not, prepared to blow up the F4 without a lasting and durable replacement. For that reason, we asked the Government to stick by the F4 as it comes to Scotland and they have accepted this.

However, the current situation clearly cannot hold. After the election, this government will seek to convene a meeting of the Joint Ministerial Council here in Edinburgh to discuss devolved funding to find a lasting settlement. Before such a meeting, I will of course listen to colleagues within this debate and meet with representatives of opposition parties to discuss the issue and the position we will take going into those talks. But I want to make clear from the outset that any solution that the Scottish Government will back has to be one which is fair to taxpayers in Scotland and is a meaningful, durable solution. We believe that to be the F4, and any alternative to it must be one which sticks by the principles agreed to by all parties and governments when the F4 was agreed. Failure to do that would not result in a lasting settlement and would therefore not have our support.

With regards to the HCLG settlement, I welcome the recognition by the Chancellor that the Wales HS2 settlement was unfair, and as such an equivalent per head amount is now being given to Scotland. Whatever its name, I welcome this move and I thank the Chancellor for listening to my concerns during our discussions on this matter and taking them on board.

At this stage there are a few technical changes I think it would be good to get out in the open. Again thanks to the Chancellor we have been given an updated, more accurate, Income Tax Calculator. This shall, providing they do not object, be published alongside the budget document and budget spreadsheets. When it comes to income tax the personal allowance is not devolved, although the government does have the power to set an income tax rate of 0% for any given level of income. So whilst we note the decrease in the PA in Westminster, that may not automatically mean we start charging those just above it income tax, and our full tax plans will be set out in the budget.

When it comes to LVT I was never clear how my successors in the 13th Scot Govt worked it out. Due to meta reasons we were unable to find out. For that reason my department shall be using a calculator provided to us by Brexit Glory several years ago. If someone wishes to make a new calculator they are free to do so and my door is open, but I will not pretend I have the knowledge to do that. This again will be published at the time of the budget.

So where does this leave the budget? Well it is my intention to publish the budget come the second week of March. This will leave enough time for a second debate should we decide it is necessary to make any amendments to it.

Of course the question the public will want me to answer is regarding our agenda of cutting public expenditure. I fully intend to cut all waste from the upcoming budget. Accounting errors and financial mismanagement across the last year mean there is waste to be cut, and the budget will detail exactly how we are doing that. It does mean, however, more drastic steps to control public expenditure will not be required.

I have consistently said that the Scottish Government would take decisions about public sector pay once we knew the full facts of devolved funding. We now know this, and so I can announce that all public sector workers in Scotland shall receive a pay increase of 1% + CPI, so on current forecasts this shall be 3% in the upcoming financial year, an increase of the simple inflationary increase promised to them in the last budget and under current legislation. I will, in conjunction with the Cabinet Secretary for Communities, be writing to local governments to ask them to ensure the funding they receive for this is passed onto workers and is not used on other projects.

There are two sectors for whom this will not apply. The first is those who work in the social care sector. They are often either employed by local authorities or through agencies, and the government would like time to put together a more comprehensive set of measures for these workers. We will bring this forward in the budget. The second set is teachers. Teachers have received a pay rise of 5% in 2019/20, 6% in 20/21 and 7% in 21/22. Deserved and generous pay increase, but it is right that we use public expenditure now to lift the pay of others who have not had such a generous pay rise. For that reason, they shall receive a pay rise equivalent to CPI in this financial year, 2%.

As I have always done when involved in putting together a budget, I will make myself or a member of the department available to discuss funding requests from opposition and backbench MSPs. They know how to contact me or other members of the government should they wish to do so. This Government said we would responsibly manage our finances, and that is what we are going to do and it is what the budget we outline next month will do, and I commend this statement to the chamber.

Debate under this statement shall end with the close of Business on February 13th, at 10pm GMT.