Wellbeing Economy, Net Zero and Energy
Good afternoon. The first item of business is portfolio questions, and the first portfolio is wellbeing economy, net zero and energy. I invite members who wish to ask a supplementary question to press their request-to-speak button during the relevant question.
Manufacturing
To ask the Scottish Government what plans it has to promote Scottish manufacturing. (S6O-03452)
Through our making Scotland’s future programme, we recognise how vital the manufacturing sector is to our economy. We promote that through investment that goes into supporting companies and the workforce. That includes our £75 million investment in the National Manufacturing Institute Scotland and its manufacturing skills academy, as well as our advancing manufacturing challenge fund initiative, which continues to deliver free support to small and medium-sized businesses.
Skills Development Scotland has revised the apprenticeship frameworks for engineering to create more modern and flexible qualifications, and we recently held an engineering as a career event to encourage more young people into the sector.
The minister will be aware that the recent Royal Bank of Scotland business activity index shows a 12th successive monthly decline in incomplete business, with Scottish manufacturers blaming that decline on a falling inflow of new orders.
Fife has a long and dynamic history of being at the leading edge of manufacturing and engineering, with businesses such as Normand and Thomson dating back to 1905. With the First Minister and the Deputy First Minister having pledged to get the economy “firing on all cylinders”, what will the Scottish Government do to support manufacturing in my region and across Scotland that will actively boost the economy?
The member is absolutely correct to highlight the significant role that manufacturing plays in our economy. Indeed, it accounts for 173,000 jobs and more than half of Scotland’s international exports. I completely agree with the importance that the member places on that in relation to her region and across Scotland.
We are committed to working constructively and in partnership with the sector to ensure that manufacturing is fully supported in Scotland and that we can realise our ambition for the country to become the home of manufacturing innovation.
I have already mentioned the £75 million of investment in the National Manufacturing Institute Scotland and the significant investment that was provided through the advancing manufacturing challenge fund. We also look to engage constructively with a range of partners, including the United Kingdom Government, on the matter. In addition, the Scottish Government has a national innovation strategy, which sets out ambitions that will benefit the sector.
We will continue to engage constructively with the sector and other partners to ensure that we support a thriving, innovative and dynamic manufacturing sector. I am more than happy to engage with members on their ideas about how we can support manufacturing in Scotland.
I have a number of supplementaries. I will try to take them all.
The head of high-value manufacturing at Scottish Enterprise has stated:
“The energy transition is the single biggest market opportunity for Scotland’s manufacturers”.
With the Scottish Government bringing vast opportunities to Scotland, such as the Sumitomo Electric Industries development, will the minister provide an update on the Government’s efforts to incentivise growth and diversification in low-carbon technology in the Scottish manufacturing industry?
Thanks to the investment by the Scottish Government and our agencies, Scotland now has an extensive manufacturing support infrastructure to help companies to diversify and grow. Just last week, we announced £4 million of funding from the Government and Highlands and Islands Enterprise to support the establishment of the manufacturing innovation centre for Moray.
Our advancing manufacturing challenge fund has supported the establishment of 12 projects Scotland-wide, providing free support for SMEs. The National Manufacturing Institute Scotland and our innovation centre support firms in established sectors to achieve greater efficiency and provide technological support to a range of projects in low-carbon emerging markets.
Our enterprise agencies’ strategic plans also highlight their focus on growing and strengthening Scotland’s supply chain companies’ capacity to enter such markets.
The national shipbuilding strategy refresh was completed in March 2022. One of the key recommendations was to enhance the competitive position of financing for shipbuilding programmes. Although a home shipbuilding credit guarantee scheme has been introduced, there is still not a competitive product range on performance bonds and builders refund guarantees. Will the minister outline what the Scottish Government can do to promote greater competitiveness in shipbuilding financing in Scotland?
I appreciate the member’s long-standing interest in that area. He will forgive me if I am not able to respond to him in detail at this point, but I assure him of the Scottish Government’s strong interest in and commitment to engaging constructively in that area. In that spirit, I am more than happy to engage directly with the member.
The manufacturing sector is watching the delay to the Berwick Bank offshore wind farm. Getting investment and confidence in the sector depends on there being a swift process of consents. Ahead of the highly anticipated wave of applications for onshore and offshore projects, what confidence can the minister give me that we have sufficient capacity in consenting? In other words, how many vacancies do we have in that area?
I recognise the importance of the member’s question in regard to our consenting regimes and the need to ensure that we have robust but efficient and speedy decision making. He will appreciate that it is not possible for me to comment on on-going and live applications. However, I assure him that the Scottish Government places considerable importance on that area and that it is committed to working constructively with partners to support an efficient and swift consenting regime in Scotland. The Government recognises the significant role that that plays for individual projects and in ensuring long-term investor confidence.
I recently heard from a manufacturing business in my constituency that it is looking overseas to expand, purely due to the way in which United Kingdom immigration policy has hindered the recruitment and retention of skilled employees. What work is the Scottish Government doing to help manufacturing businesses recruit the staff that are needed to meet growing demands?
Scotland’s migration service, which was launched in March, supports businesses to navigate the immigration system, including by providing advice from qualified advisers.
We are working with our partners, including Skills Development Scotland, to emphasise the opportunities and higher average salaries in this highly skilled sector. Recent examples include the funding of a pilot to ensure that people who apply for opportunities with large companies and are initially unsuccessful are redirected to smaller companies in the sector with recruitment needs. We also sponsored a recent event that was designed to boost educators’ knowledge of a modern and rewarding career in manufacturing.
Household Recycling Targets
To ask the Scottish Government what elements it has identified that led to it not meeting its household recycling targets in 2013 and 2020. (S6O-03453)
Analysis of factors influencing recycling targets was published with the circular economy and waste route map consultation in 2022. The most significant driver of performance that was identified was recyclable waste being thrown away. In response, our £70 million recycling improvement fund is delivering modernised services and increasing the quality and quantity of recycling across Scotland. The overall recycling rate in Scotland is at its highest level since records began in 2011.
Our draft circular economy and waste route map and the Circular Economy (Scotland) Bill aim to modernise recycling services and make recycling easier for householders in order to address that very issue.
I thank the minister for that answer, but let us remember the facts. According to the Scottish National Party, household recycling was supposed to be at 50 per cent in 2013 and 60 per cent in 2020. I have a simple question: in what year will the 50 per cent target be met?
Mr Golden is right to point to that. The household recycling rate is at around 42 per cent at the moment. The overall recycling rate in Scotland as a whole is 62.3 per cent.
Across these islands, the Welsh have the best recycling rates in the UK, and their approach is informed by much of what is in the Circular Economy (Scotland) Bill. Their approach gave more powers to local authorities to address household contamination and set targets for councils. I am in close, regular contact with the Cabinet Secretary for Climate Change and Rural Affairs for Wales, Huw Irranca-Davies. Indeed, he is working with me and UK Government and Northern Ireland ministers on the game-changer in waste collection, which is a UK-wide deposit return scheme.
We might want to reflect that, if our DRS in Scotland had started in March, as it was supposed to, 80 per cent of drinks containers would have been recycled this year, rising to 90 per cent next year. That would have made a huge impact on our waste recycling targets. Let us let the Circular Economy (Scotland) Bill go through, and let us work with other UK nations to get a DRS back on track.
In Scotland, overall recycling rates are at their highest ever. Can the minister detail how the Circular Economy (Scotland) Bill, which she referenced in her previous answer, will help to meet our ambitions?
I thank Ms Haughey for pointing that out. She is right—the figure is 62.3 per cent—but there is an awful lot more that we can do. Progress has been made on household recycling, which is why the Circular Economy (Scotland) Bill and draft circular economy and waste route map set out further measures to improve and modernise local recycling. That includes working in collaboration with local authorities and households to design new statutory standards for recycling, to create a more consistent and easy-to-use service across Scotland. The bill will help us to achieve our ambitions for a circular economy and drive up reuse and recycling rates. I am willing to work with any member across the chamber on how we can make that more robust.
I will try one more time. When will the 2013 household recycling targets be met?
The point about the targets that were set in 2013 or 2014 is that the Climate Change Committee has recommended an approach of having targets for separate waste streams and carbon-based metrics. The new targets may include consumption, reducing waste, reuse and local recycling, as well as material-based and emission-based targets. That is a far better and more detailed approach than we previously had.
Question 3 has been withdrawn.
Wood-burning Stoves (Restrictions on Installation)
To ask the Scottish Government what discussions it has had and will have with rural communities, such as residents and businesses in the Midlothian South, Tweeddale and Lauderdale constituency, regarding the restrictions on the installation of wood-burning stoves. (S6O-03455)
The new-build heat standard currently applies only to new buildings and certain conversions. Wood-burning stoves can still be installed to provide emergency heating where justified, recognising the unique needs of rural and island communities. The Cabinet Secretary for Net Zero and Energy wrote to Ms Grahame recently to confirm that we are taking seriously the concerns that Ms Grahame and others have raised. Obviously, I am new in this post. We are urgently reviewing the position in light of those concerns and ensuring that we work with and communicate with all concerned parties, including businesses, as we do so. I believe that I have already said that I would go to Ms Grahame’s constituency to speak to one such business.
Thank you very much, minister. I had forgotten that I had invited you—I am glad that you reminded me.
Speak through the chair, Ms Grahame—unless the invitation is extended to me.
I beg your pardon, Presiding Officer. I should know better.
I am glad that the minister reminded me that I had invited the minister to visit my constituency.
I refer to the letter of 16 May that the minister referred to, which responded to various concerns that I had. To quote it:
“I would like to reassure you that we have heard the concerns raised recently ... and we are taking these fully on board.”
It seems that, with fresh people in post in the Government, we may very well be doing that. Therefore, I again ask the minister to come round my constituency with me—that is a second invitation, which not many people get from me—to evidence the log piles that are stacked beside cottages in the villages. Logs are cheap and accessible locally. The minister can reach out and understand the impact that there would have been had wood-burning stoves been banned—I appreciate that it was not a complete ban—for usage in areas where they are essential.
Christine Grahame makes a good point about sustainable supply of fuels for these forms of heating. I assure her that I take very seriously the concerns that she and many others have raised. I am happy to reiterate the commitment to urgently review our position, which was made in the letter of 16 May. Again, I accept that second invitation to go to the member’s constituency. Meaningful dialogue with those affected, particularly in relation to the concerns that have been raised by island and rural communities, will be key to that review. I want to involve individuals and businesses in that. I want to respond to the many pieces of correspondence that I have had from members across the chamber on the issue.
My motion that will be debated next week recognises the importance of wood-burning stoves in the rural and island communities that the minister mentioned. Those stoves are often the only source of heat and hot water when power is lost. The Scottish National Party’s ban could leave vulnerable households and communities isolated and at greater risk, as well as worsening high levels of fuel poverty. The measure has cross-party support, including from Christine Grahame and the current Deputy First Minister, Kate Forbes. Does the minister accept that the Scottish Government has got this wrong from the very start? Will she commit today to reversing the SNP’s ban on wood-burning stoves?
It is really important that I correct Jamie Halcro Johnston: there is not a ban on wood-burning stoves.
There is. It is an effective ban.
There are new regulations in place, and I know that Mr Halcro Johnston knows that. I look forward to responding on behalf of the Government in that debate next week.
I know how people who live in rural constituencies heat their homes—I am from a rural constituency—which is why, initially, I liaised with the minister responsible at the time on the fact that a lot of homes have such stoves for secondary use or for use in an emergency situation. I am committed to taking on board a lot of the correspondence that has come my way on the issue and to looking at how we ensure that rural communities are not disproportionately affected by what we do.
I am pleased to hear the minister commit to urgently reviewing the issue. Constituents have reached out to me who are genuinely unsure whether they can continue with planned builds, and housing associations and councils are similarly uncertain about what the policy will mean for them. Given that contradictory information is circulating, clear messaging from the Government is necessary to reassure rural and island residents. Can urgent reassurances be given to those who are in the process of building green homes that depend on wood-burning stoves—a renewable and sustainable source of heating—and those who hope to build such homes in the future?
Emma Roddick makes a good point about sustainability and about biomass being used for heating in rural areas. Buildings that are currently under construction with a building warrant prior to 1 April are unaffected by the regulations. For new warrants after 1 April, as it stands, direct emission heating systems, including wood-burning stoves, can still be installed to provide emergency heating, when that can be justified.
I acknowledge that it can be difficult to reconcile the current guidance with the nature of wood-burning stoves, which are often installed for more frequent use rather than just for emergencies. I am actively working to address those concerns and am actively considering how we can give better direction in that area. I will work with all concerned parties to ensure that I address those concerns.
Question 5 was not lodged.
National Planning Framework (Impacts on Energy Policy)
To ask the Scottish Government what discussions the net zero secretary has had with ministerial colleagues regarding any plans to review any unintended impacts of the fourth national planning framework on energy policy. (S6O-03457)
Planning and consenting are key to realising the enormous social and economic benefits of our energy transition and net zero journey. Therefore, I regularly discuss those issues with my ministerial colleagues, including, most recently, this morning, when I, together with the Minister for Climate Action and the Minister for Public Finance—who are with me in the chamber—met senior officials to discuss a range of related matters, including how we ensure that our planning system can protect our natural environment on the one hand and be a key enabler of decarbonisation and green economic growth on the other, and, crucially, how our communities can be supported and empowered in that respect.
Following the adoption of NPF4 in 2023, we are monitoring its implementation and taking action to support the application of its policies in practice.
Although I fully appreciate the broader intention behind NPF4’s energy policy principles and our move towards a just transition, many of my constituents have brought to my attention the cumulative effect of a high volume of wind farms, such as the five that are proposed in the north Carrick area alone, with turbine heights in excess of 200m. Can the cabinet secretary explain how NPF4 allows my constituents to raise the impact that that might have on their communities, their amenities, private water supplies and, indeed, local biodiversity? How can we ensure that local voices are heard?
NPF4, which is more the domain of the Minister for Public Finance than it is mine, makes it clear that the impacts on communities, nature and other things, including the cumulative impact, which Ms Whitham is absolutely right to mention, are important considerations in the decision-making process. All applications for site-specific developments will be considered and assessed, and I reiterate that local communities must always have their say.
We are aware that some communities are experiencing an intensification of renewable energy development proposals. Our planning officials have been engaging with communities across Scotland to support better collaborative working. We are also calling on the United Kingdom Government to make changes to modernise Scotland’s consenting regime under the UK Electricity Act 1989. That would, among other things, require pre-application community engagement to become mandatory, which I think Ms Whitham’s constituents would welcome. We have written to all parties offering the opportunity to work with the Scottish Government in pursuit of that aim.
Question 7 was not lodged.
Retail Sales (Support)
To ask the Scottish Government what measures it is taking to support businesses to address reported declining retail sales. (S6O-03459)
Our retail strategy sets out how we will work with businesses and trade unions to deliver a strong and prosperous retail sector in line with the vision of the national strategy for economic transformation. The strategy sets out a clear vision for a retail sector in Scotland that is successful, resilient, sustainable and profitable. It seeks to build on retail’s strengths and maximise opportunities for the sector to fulfil its potential and contribute to our economic transformation.
The Scottish Retail Consortium said that retail across all sectors in Scotland has seen a drop in sales on a year-on-year basis since April. Food sales dropped by 3 per cent and non-food sales, excluding online sales, decreased by 4.9 per cent. Given that the Scottish National Party has refused to pass on business rates relief, what specific support can the minister and the Scottish Government give to our local retailers?
On the specific point about non-domestic rates, I first highlight the considerable support that the Government provides through non-domestic rates relief, which is valued at some £685 million this year, from an estimated revenue of £3.1 billion. Specifically, a significant proportion of that goes towards the small business bonus scheme, which the member knows is a significantly generous scheme from which many retailers benefit.
More broadly, retail is not immune from the significant economic pressures that we have been facing, whether that is the broader cost of living crisis or the response to the significant inflation that we have seen. That is thankfully now reducing significantly, but it has led to significant rises in interest rates, which will have an effect in the form of depressing consumer spending.
However, we are committed to continuing to work constructively with the retail sector. Yes, we recognise that regulation and fiscal powers and taxation play an important part, but we must work more broadly to recognise consumers’ changing habits with regard to the channels that they use to access retail, and we should not look at retail and policy in isolation but see it in a holistic way that aligns with our broader aspirations around town centre and local living, for example.
I am very much looking forward to taking up my responsibilities around retail, and I pay tribute to my predecessor, Joe FitzPatrick, and the role that he undertook in taking forward the retail strategy. I am committed to working constructively with all members and the wider sector to ensure that we have a prosperous and flourishing retail sector in Scotland.
Does the minister share my concern that the UK Government’s refusal to substantially raise the threshold at which businesses pay VAT is leading to ever greater numbers of small businesses being forced into VAT registration? Despite cumulative inflation of 32 per cent since 2017, the threshold of £85,000 was frozen for seven years until a paltry raise to £90,000 was carried out as part of this year’s UK budget. Of course, that has a very adverse impact on our businesses. Does he also agree that the suggestion by Labour Party advisers that the threshold should be lowered to £50,000 is not only damaging to business but downright irresponsible?
I call the minister to answer on those matters for which he is responsible.
As is implicit in your much-valued advice, Deputy Presiding Officer, the UK Government retains the majority of the tax policy levers to boost much-needed economic growth. I would insist that it ensures that the increase to the VAT registration threshold that was introduced in April this year needs to provide value for money and give businesses the long-term assurances and certainty that they need to support economic growth. Therefore, we will continue to call on the UK Government to provide businesses with the support that they need to protect jobs and the economy.
However, the better solution would be that powers over VAT and the broader fiscal levers, which are currently in the hands of the UK Government, be devolved to this Parliament so that we can more holistically and effectively put in place policy measures that will support our economy and our economic needs.
Thank you, minister. That concludes portfolio questions on the wellbeing economy, net zero and energy. Before we move to questions on the next portfolio, there will be a brief pause to allow those on the front benches to change positions.
Finance, Deputy First Minister Responsibilities and Parliamentary Business
The next portfolio is finance, deputy first minister responsibilities and parliamentary business. I invite members who wish to ask a supplementary question to press their request-to-speak buttons during the relevant question.
Fiscal Framework
To ask the Scottish Government whether it will provide an update on the impact of the updated fiscal framework. (S6O-03460)
The forthcoming medium-term financial strategy will provide an update on the fiscal outlook and will reflect the impact of changes agreed to the fiscal framework, including the Scottish Government’s latest borrowing and reserve policies.
The Scottish Government has postponed publication of this year’s MTFS in order to allow time for the incoming First Minister to take a view on critical policy issues and to align the fiscal strategy with the Government’s wider policy priorities. The MTFS will now be published on 20 June.
Recent analysis from the House of Commons library paints a very concerning picture, and suggests that Scotland’s block grant will consist of just 3.5 per cent of the United Kingdom’s Government spending in 2023-24 and 2024-25, according to autumn statement plans. Does the Government agree that that underscores the need for a detailed explanation of how the fiscal framework affects Scotland’s block grant and the overall fiscal autonomy of our country? Is it not time for a thorough review of the fiscal framework and the reprioritising of delivering independence to ensure that future Scottish Governments have all the fiscal levers of a normal country?
It is no secret that the Scottish Government’s preference was for a broadly scoped review that explored opportunities for further devolution. Our position on full fiscal powers and independence is there for everybody to see. However, the improvements that we made were important. The set of improvements to the fiscal framework is sensible and proportionate and provides the Scottish Government with more effective levers to manage risk and volatility. It also ensures that we are able to lock in the index per capita model, which will result in Scottish public finances being better to the tune of hundreds of millions of pounds over the next few years, compared with what they would have been.
We have a number of supplementaries. I will try to get them all in, but they will need to be brief.
The cabinet secretary mentioned the index per capita method, which I think John Swinney, in his previous role, achieved. Will she confirm that we could be in a much worse position if we did not have the index per capita methodology?
Yes. The fiscal framework review was very limited in its scope and nature. Given that it was a negotiation, the ability to expand that was very limited. However, John Mason’s point is that the index per capita mechanism has significantly benefited the Scottish budget, because it ensures that the budget is protected from the risk of slower population growth in Scotland relative to the rest of the UK. Without the levers over aspects such as migration, it is very difficult to turn that around.
The authors of the independent report, which informed the review of the fiscal framework, estimated that, by 2026-27, the benefit for income tax alone could rise to around £500 million a year relative to the Treasury’s preferred methodology.
The cabinet secretary was very clear at the Finance and Public Administration Committee and in the chamber that the fiscal framework has yielded a set of changes that are
“fair and pragmatic and will strengthen the financial management levers available to the Scottish Government”.
Does the cabinet secretary recognise that the fiscal framework is very valuable to Scotland and shows good joint working between the Scottish and UK Governments?
I said at the time that, given the limitations of the review, it was fair and pragmatic. Although we would have liked—and will continue to seek, particularly if there is a change of Government—a more fundamental review of the fiscal framework, the index per capita mechanism alone was very important. I mentioned to John Mason the benefit of, potentially, £500 million a year relative to the Treasury’s preferred methodology. We should all welcome that. The fiscal framework could be further improved, and we will pursue that with the new Government.
In a debate last December, the ultra-nationalist Alba party described the fiscal framework as “a trap”. Does the cabinet secretary think that an additional £2,200 per head of public spending in Scotland is a trap, or does it help to sustain core public services?
Scottish revenues, through personal and business taxation, contribute to the whole of the United Kingdom. The idea that, somehow, Scotland is subsidised is not a proposition that I support. Scotland more than pays our share, not least when we look at the revenues from energy that have flowed to the UK Government over many years. The point of the fiscal framework was to recognise that, while we are under the current constitutional arrangements, there is a risk of slower population growth in Scotland relative to the rest of the UK. I hope that Labour will join us in furnishing the Scottish Government with the powers over population growth, such as migration. We would be keen to work with any future UK Government to have a migration system that suits the needs of the Scottish economy.
If we are going to get in all the supplementaries, the questions and responses will need to be a bit briefer.
Ethical Procurement
To ask the Scottish Government how it promotes ethical procurement processes across the public sector to embed principles such as fair work and sustainability, including in the college and university sector. (S6O-03461)
Scottish public sector buyers are encouraged to consider economic, social and environmental factors systematically through use of the national sustainable procurement tools, associated guidance and training. The tools have been designed to help public bodies to comply with policy and legislation, including a focus on ethical procurement and the recently updated fair work first in procurement guidance. The Scottish Government’s procurement policy and guidance encourages consideration of ethical requirements on a case-by-case basis in a way that is relevant and proportionate to each procurement, enabling buyers to do what will have the greatest impact for a particular contract
PJ’s Foods employs around 100 workers in Maryhill and it is a living wage and living hours employer. The company has informed me that it is disadvantaged by a United Kingdom-wide higher education procurement framework—the University Caterers Organisation framework—and how it may be interpreted by Scottish universities. Consequently, a company that is not a living wage company now makes a daily 400-mile round trip from Bradford to Glasgow to fulfil a university catering contract for sandwiches, generating some 124,800 food miles and 50,000 kg of carbon dioxide emissions each year. I ask the minister to meet me and PJ’s Foods and to visit the company to discuss how the TUCO procurement framework disadvantages Scottish businesses that do not supply products in other parts of the UK, and how that process can be improved.
I would be delighted to accompany Bob Doris to meet the supplier in question and I thank him for bringing the issue to my attention. Although public bodies are responsible for their own procurement decisions, I have asked officials to look into the issues that Mr Doris has raised so that we can understand them more fully. Since 2009, Advanced Procurement for Universities and Colleges, which is the procurement centre of expertise for the Scottish university and college sector, has worked to specify requirements on menu plans that are based on freshness, the use of seasonal food and flexible and frequent delivery times. It has taken steps, including dividing frameworks into geographical lots, to encourage the active participation of small and local businesses.
As the minister will know, local work is supported by public procurement as much as possible. As Bob Doris mentioned, we can reduce the number of miles from manufacture to use, which is important for climate change. What will the Scottish Government do to encourage and support local public procurement?
I am sure that Mr Whittle will be aware of the annual report on procurement that is produced by Scottish Government officials on behalf of the public sector across Scotland, which is a requirement of our procurement legislation. The report indicates that more than half of the £16 billion that is available was spent with Scottish companies and more than half of that was spent with small local businesses. The amount of orders that were placed locally and with small businesses in Scotland is far in excess of the equivalent number for the rest of the UK as a whole or the European benchmark. We will continue to make progress to ensure that more orders are going to small and local businesses, and we will work to take a range of steps to encourage and support that. The data will be in our public procurement reports.
United Kingdom Economy
To ask the Scottish Government what its response is regarding Scotland’s budgetary forecast to reports that the UK economy officially exited a recession and outperformed the first quarter of 2024 forecast of the Bank of England. (S6O-03462)
It is very welcome news that the United Kingdom has exited recession—a recession that Scotland avoided—but it is important to temper that with the recognition that the UK as a whole still faces significant challenges, with gross domestic product per person falling in the past year and borrowing ending the year higher than forecast by the Office for Budget Responsibility. There is no sign of any improvement for our budget, which remains about £400 million lower in real terms than it was in 2022-23 as a result of the UK Government’s decision to prioritise tax cuts over investment in public services.
Although we are all glad to see the UK Government pull out of recession, we must ensure that the Scottish economy continues to grow. Leading industry figures such as Sandy Begbie from Scottish Financial Enterprise have warned that increasing income taxes could make it more difficult for talented workers to move to Scotland. Now that the anti-growth extremist Greens are out of government, will the minister ensure that economic growth is placed at the heart of Scottish Government policy? Will he rule out an increase in income taxes?
I would not describe any colleagues in the chamber as extremists. That is an important point that I want to put on the record.
As the member will be aware, we face an exceptionally challenging set of fiscal circumstances. Because of cumulative decisions that have been taken about the Scottish budget, we have £1.5 billion more in revenue to spend on public services—to invest in our health service, local government, the criminal justice system, enterprise agencies and others—that we simply would not have had if we had followed the UK Government’s policies.
We recognise that it is important to have a balanced and proportionate tax policy, and we recognise the importance of ensuring that Scotland remains an attractive destination for those who are on high salaries. I am sure that the member will welcome the recently published data and analysis that show net positive migration to Scotland from the rest of the UK, and that is across all tax bands in the most recent year for which we have data.
We absolutely recognise the importance of economic growth and—
Thank you, minister. I am going to have to take a supplementary from Kenneth Gibson.
—our policies will reflect that.
The UK economy is smaller and living standards are lower than they were at the start of the parliamentary session—the first time that that has ever happened. Does the minister agree that it is a sign of increasing desperation from the Tories that they consider it a cause for celebration that the UK economy has stopped shrinking, when growth is still lower than it is in Europe, Asia, the Americas or Australia, as we continue to pay the price of Brexit and Tory economic incompetence?
The latest figures show that, despite a small increase in the latest quarter, UK GDP per person is down by 0.7 per cent on the past year. The UK Government needs to face up to the fact that its actions are making the UK poorer, with the National Institute of Economic and Social Research estimating that Brexit has reduced the size of the UK economy by 2.5 per cent. The UK Government’s poor decision making, typified by Brexit and its immigration policy, means that the Scottish Government must work even harder within its limited powers to help businesses and workers to thrive.
Carbon Emissions Land Tax
To ask the Scottish Government whether it will provide an update on its commitment to consult on the introduction of a carbon emissions land tax for large landowners. (S6O-03463)
The Scottish Government is committed to reducing emissions from all sectors, including land, which was highlighted by the Climate Change Committee’s recent report. We will set out our approach for achieving that in the summer, and carbon taxes will form part of those considerations.
The cabinet secretary might be aware that the John Muir Trust has estimated that maximising carbon sequestration in forests and peatlands could lead to emissions savings of more than 6 million tonnes of carbon, which is the same as taking 4 million cars off our roads. However, it is clear that we have been too slow to realise that potential, which is yet another reason why Scotland has missed nine out of the last 12 climate targets. Following the consultation period during the summer, will the cabinet secretary commit to introducing legislation at the earliest possible opportunity to ensure that it is passed before the end of this parliamentary session?
I acknowledge what Mark Ruskell said about the John Muir Trust. The proposal for a carbon emissions land tax is one of the options that merit consideration. It should be looked at alongside all potential fiscal and regulatory options to reduce emissions from Scotland’s land.
I am not able to give information on the timeline, but I assure Mark Ruskell that I will update Parliament once that has been established and we have more information to share. I am happy to keep him posted.
Block Grant Changes (Impact on Capital Budget)
To ask the Scottish Government what assessment it has made of the impact of the reduction in Scotland’s capital budget as a result of changes to Scotland’s block grant. (S6O-03464)
Our block grant for capital is expected to reduce in real terms by about 9 per cent by 2027-28, which represents a cumulative loss of more than £1.3 billion. In addition, our financial transactions allocation has been reduced by 62 per cent since 2022-23, which amounts to a reduction of £290 million. That means that we will have to continue to make tough decisions to reprioritise our infrastructure pipeline to ensure that it is affordable and deliverable and that it provides the best value for money.
Westminster is set to cut Scotland’s capital budget by almost 9 per cent in real terms over the next five years, which will have a significant impact on my constituency. For example, there will be less funding available to build affordable homes, and South Lanarkshire Council will continue to refuse to build a much-needed high school to serve communities such as Newton Farm, Drumsagard village and Halfway. Does the cabinet secretary agree that it is deeply concerning that a potential Labour United Kingdom Government is signing up to public spending cuts, doubling down on Tory austerity and further restricting Scotland’s capital spending power?
The real-terms cuts that our capital budget faces are significantly impacting on our ability to deliver much-needed infrastructure investment, whether that is in Clare Haughey’s constituency or across Scotland. I called on the UK Government to increase investment in capital projects and to release Barnett consequentials for devolved Governments, but the spring statement provided no additional capital funding.
I hope that everyone in the chamber agrees that it is absolutely imperative that whoever forms the next UK Government after the UK election changes course, reverses the cuts to capital spending and invests for the future. If they do not, they will be held accountable for that loss of capital investment.
I recognise those cuts, but the reduction in inflation has released the pressure on capital spending—in factual terms, an additional £229 million is available as a result of that reduction. Will the cabinet secretary set out what that additional spend will be allocated to? What are the Government’s priorities?
The infrastructure investment pipeline will be set out, alongside the medium-term financial strategy, on 20 June. That is when we will set out to Parliament how we will use the capital budget that is available to us and what other levers we will use.
Ardeer Peninsula (Revocation of Special Development Order)
To ask the Scottish Government whether it will provide an update on the implementation of the fourth national planning framework specifically in relation to revocation of the special development order at the Ardeer peninsula. (S6O-03465)
We are continuing our programme of work to implement the Planning (Scotland) Act 2019. We remain committed to implementing its provisions, including those relating to compensation on revocation of a development order. When my predecessor, Joe FitzPatrick, met Ruth Maguire late last year, he acknowledged that resources had necessarily been focused on preparation of the national planning framework, but that we would look to take forward the work in question later this year, and that remains the case.
I thank the minister for that update. The sand dune system at Ardeer has been destroyed for commercial gain. I understand the specific and complex circumstances around planning in Ardeer. Will the minister meet me to discuss the matter further, with a view to having a solution that will ease the concerns of my constituents in Stevenston?
I would be happy to take up Ruth Maguire’s offer of a meeting to discuss the matter, which I know is very important to her and her constituents.
Private Finance Initiative Debt Obligations (Impact on Local Authority Budgets)
To ask the Scottish Government what work has been conducted to assess any impact of repaying private finance initiative debt obligations on local authority budgets. (S6O-03466)
PFI was an expensive mistake by successive Labour and Conservative Governments that simply did not deliver best value for the people of Scotland, and the repayment of which places significant pressure on council budgets.
For context, the total estimated payments for local authority PFIs over the lifetime of the contracts is more than £15 billion, which is around 4.7 times higher than the estimated capital value of the projects involved.
Glasgow City Council paid £61 million last year in PFI repayments, and that will continue for many years to come. We also have the unforgivable impact of Labour’s equal pay scandal, which will cost the same city around £30 million per year for the next three decades.
When the council entered into those PFI contracts, Labour was in power at council level, in Holyrood and at Westminster. Given the financial vandalism of PFI to local authorities, can the cabinet secretary assure me that the Scottish Government will never return to that calamitous model? Does she agree that that is a clear reminder of why the people of Scotland should never again trust Labour with the reins of power?
I absolutely agree with James Dornan. The Conservative and Labour PFI models were an expensive mistake that simply did not deliver best value for the people of Scotland. In taking forward alternative funding models, the Scottish Government will ensure that best value for the people of Scotland is at the forefront of the decisions that it makes.
We have another portfolio question before we move to the next item of business. I would appreciate it if members on the front benches did not have a conversation across the chamber.
Block Grant Changes (Impact on Local Authority Funding)
To ask the Scottish Government what impact the reduction in Scotland’s revenue budget as a result of changes to the block grant has had on funding allocations to local authorities in the current financial year. (S6O-03467)
The United Kingdom Government has failed to deliver for Scotland at successive fiscal events. When more support is desperately needed for public services, Scotland’s block grant from the UK Government is less in real terms in 2024-25 than it was in 2022-23.
Despite sustained UK Government cuts, the Scottish Government has increased local government’s share of the budget and the 2024-25 budget delivered record funding of more than £14 billion to councils, which the independent Accounts Commission has recently confirmed represents a real-terms increase and follows real-terms increases in both 2022-23 and 2023-24.
The UK Government has cut Scotland’s capital grant by 16.1 per cent. That is the reality that we have to live with. As Labour’s Wes Streeting recently said,
“All roads lead back to Westminster.”
Does the cabinet secretary agree that it is imperative that all parties in this Parliament accept that reality and come together to speak as one in calling for an end to public service cuts, given the impact that those have on the money allocated to Scotland?
I am pleased that Labour’s Wes Streeting has recognised the reality of the situation. I am sure that his Labour colleagues here will recognise that, whether it comes to health funding or funding for local government, as it impacts the Welsh Labour Government, so it impacts the Scottish Government.
I am sure that, from now on, we will hear a lot in the chamber about Wes Streeting’s realisation of the reality that all roads lead back to Westminster.
I have a practical suggestion. Glasgow City Council has almost £0.5 billion in lender option borrower option—LOBO—loans, which run at rates of about 7 to 9 per cent, which is far higher than the Public Works Loan Board rate. A similar debt renegotiation to that done by Newham London Borough Council could save Glasgow City Council £450 million, or £11 million per year. Could that be an option for the Scottish Government to help broker debt renegotiation, cancellation and amnesties across Scottish local government?
The lending policies and the debt that local authorities have need to be responsible, affordable and sustainable. We engage regularly with councils and the Convention of Scottish Local Authorities to ensure that that is the case.
The fiscal framework that we are taking forward with COSLA will look at all matters that relate to the affordability and sustainability of local government’s finances.
That concludes portfolio questions on finance, Deputy First Minister responsibilities and parliamentary business. There will be a brief pause before we move to the next item of business to allow speakers on the front benches to change.