Deputy First Minister Responsibilities, Economy and Gaelic
Good afternoon. The first item of business this afternoon is portfolio questions. The first portfolio is Deputy First Minister responsibilities, economy and Gaelic. As ever, I would appreciate succinct questions, and answers to match.
Question number 1 was not lodged.
Green Industrial Strategy
To ask the Scottish Government how its green industrial strategy will encourage companies to remain in Scotland. (S6O-03750)
The green industrial strategy creates certainty for businesses by spelling out where we believe the greatest opportunities lie and where we will focus our attention and resources. In doing so, the strategy provides clear direction and focus to create confidence and encourage investment. We will use all the powers at our disposal to make Scotland a fantastic place in which to invest in green economic opportunities. The strategy contains a range of specific actions, including hosting a global offshore wind investment forum next spring and working with the sector to develop hubs to address hydrogen production and demand.
This morning, the Scottish Government’s task force for green and sustainable financial services published its first report. The report identifies a worrying trend of top jobs in finance drifting south. Does the Deputy First Minister accept that, if Scotland is to realise the economic benefits of the transition to net zero, the Scottish National Party Government needs to abandon the damaging tax gap that it has created with the rest of the United Kingdom—a gap that is driving away investment and putting Scotland at a competitive disadvantage?
I am absolutely delighted that Douglas Lumsden has read the recommendations of the task force for green and sustainable financial services. I am extremely proud of the report, which was drafted by an independent group, chaired by David Pitt-Watson. It is a brilliant piece of work that outlines how Scotland can build on our strengths as a finance centre and marry that with the huge economic opportunities in the green industries. The report makes it clear that the prize is big. We start with very strong foundations and will build on them.
On the specific question, I refer the member to the independently produced figures from His Majesty’s Revenue and Customs on the behavioural impact of the tax changes.
Oil, gas and energy companies operating in the north-east have said that they are slowing down investment as a result of UK Government policies, with Unite the union warning that Labour’s plans could put 30,000 jobs
“over a cliff edge by 2030”.
Given that investment in our renewables future is dependent on those workers, can the Deputy First Minister say any more about what the Scottish Government can do to protect and build investor confidence in Scotland’s energy industry?
Kevin Stewart is absolutely right to highlight the importance of giving investors and the sector confidence to protect the jobs. I cannot disagree at all with Unite the union’s warnings, and I sincerely hope that Labour will heed those warnings.
The fiscal regime for North Sea oil and gas is reserved to the UK Government. We have been clear about the importance of effective and substantive investment allowances for activity in the North Sea, to allow reinvestment in decarbonisation as part of a just transition to net zero.
On supporting the workers, the green industrial strategy highlights the opportunities where we want to see growth and more employment and give a future to those workers.
The Deputy First Minister knows that I am concerned about Liberty Steel’s Dalzell plant, which is important for the green industrial strategy, and particularly for onshore wind. Can she provide the Parliament with an update on the plant?
Willie Rennie has raised that issue with me in the past. We have constant engagement on the Dalzell plant. There are currently no matters of importance to report. I am happy to have a separate conversation with Willie Rennie if there are substantive issues that he wants to draw to my attention, and I can ensure that we get a reply to him. However, from my on-going engagement on the matter, there is nothing to update the Parliament on.
Drinks Sector (Contribution to Economy)
To ask the Scottish Government, as part of the development and delivery of its economic strategy, what assessment it has made of the contribution of the drinks sector to the economy. (S6O-03751)
The drinks sector is vital to Scotland’s economy, generating a turnover of £6.3 billion per annum and directly employing around 13,000 people, and supporting thousands more jobs throughout the wider supply chain.
As a Government, we will continue to support the sector in the huge role that it plays in contributing to our priority to grow Scotland’s economy. We also welcome the sector’s willingness to innovate, particularly through the good work that it is doing around cutting emissions from production to help tackle the climate emergency.
I recently visited the Tennent’s facility in Cambuslang in my constituency and I was delighted to learn of its plans to upgrade the distribution centre, ensuring jobs and careers on site for many years to come. Local production and the sourcing of products support thousands more jobs across the country, and international exports help to boost the Scottish economy.
Will the minister consider meeting that staple Scottish brand to explore further how it can continue to support and grow the Scottish economy?
I thank Clare Haughey for bringing that important investment to the chamber’s attention. It is a good news story; it is very good news for the Cambuslang area in particular, as well as for the country and the drinks sector as a whole.
As business minister, I would be more than happy to meet the company, if Clare Haughey wishes to help to arrange that. I know that I speak for my colleagues when I say that they would be willing to meet the company, if that is more appropriate.
There are a number of good news stories in the drinks sector in Scotland. It is good to hear about the investment in the Tennent’s facility in Cambuslang.
I remind the chamber of my entry in the register of members’ interests in relation to hospitality that I received from the Scotch Whisky Association.
The minister will recall that the Scottish Government previously consulted on draconian rules to restrict alcohol marketing, which caused a great deal of alarm among the drinks sector. We have not had an update recently from the Scottish Government on where matters stand in relation to that. Can he tell us now?
A number of comments have been made about that. The Scottish Government is about to commission Public Health Scotland to carry out a review of the evidence on a range of options that is available to the Scottish Government under devolved powers. Once that is concluded, there will be further consultation. I will ensure that Parliament is kept up to date on that, as it has been up to now.
It is interesting that Murdo Fraser mentioned the Scotch Whisky Association, because one of the biggest concerns that it has expressed to me, and to the Government as a whole, is the rate of tax applied by the United Kingdom Government under his own party’s Administration over many years.
I noticed a tweet from the Scotch Whisky Association, in the past 24 hours, which stated:
“Spirits like #ScotchWhisky sold in the UK are subject to the highest rate of taxation in the G7, and double the average across Europe”
The UK tax is double the tax in France, five times that in Japan and three times that in Italy. That is a big issue for the Scotch whisky industry, if Murdo Fraser wishes to take that on board.
Ferguson Marine (Governance Arrangements)
To ask the Scottish Government what improvements it has considered making to governance arrangements at Ferguson Marine, in light of recent reported concerns around quality control at the yard. (S6O-03752)
The strategic commercial assets division is responsible for governance arrangements around the delivery of Glen Sannox and Glen Rosa. That includes weekly meetings with the management team at Ferguson Marine, and recently introduced daily reports from the technical advisers that enable us to closely monitor progress in relation to the handover of Glen Sannox. The implementation of quality control measures is an operational matter for Ferguson Marine, in line with the framework agreement that was refreshed this year to take account of the need for operational independence.
I cast the Deputy First Minister’s memory back to the end of June and the glorious summer day when I stood at the front of this chamber and asked her whether she was expecting any delays to the delivery of Glen Sannox. Would it be delivered by the end of July, as was promised, I asked. In response, I was reassured twice, if not three times, that there were no delays.
Two days later—funnily enough, once we had all exited the building for the summer recess—and guess what? Delays were announced and—I give a spoiler alert to colleagues—the ship is still to be handed over to CalMac, and it is nearly October. Given that that is supposedly a strategic national asset for the country, what faith can we have that the Scottish Government—which sits as a director of the company—has any oversight of or responsibility in decisions, including in relation to any delays, which we usually discover in the media, instead of in this chamber?
The member will know that, in the light of the yard’s operational independence, I do not control or dictate when the chief executive officer and the chair—who are directly accountable to Parliament—choose to update Parliament.
I had no involvement in the timing of the letter. When I answered the member, I was doing so on the basis of all the evidence that I had before me at that point. It is really important to put that on the record.
In the most recent letter, of 12 September, to the Net Zero, Energy and Transport Committee—the letter was issued on the decision of the chair—the interim chief executive officer of Ferguson Marine indicated that the handover date for MV Glen Sannox would move to mid-October 2024. On the basis of all the evidence that I have in front of me, the proposed handover for MV Glen Rosa remains at 30 September 2025.
Can the Deputy First Minister say any more about how the Scottish Government is working on the next phase of the modernisation of the yard, to ensure that it has a sustainable and competitive future?
Our aim and ambition is for the yard to have a sustainable and competitive future. We are fully committed to delivering that beyond the completion of MV Glen Sannox and MV Glen Rosa.
When I visited the yard in July, I signalled the Government’s willingness to back the board’s investment plan, provided that it delivers value for money and meets commercial standards. As work on the CalMac Ferries continues, our priority is helping Ferguson Marine to secure and win commercial contracts, positioning it to thrive in a competitive market, learning from successful international models and strengthening the yard’s competitiveness through investment.
Hospitality Industry (Fair Work)
To ask the Scottish Government what its response is to the findings of the Fair Work Convention’s inquiry into fair work in the hospitality industry. (S6O-03753)
I was pleased to attend the publication launch of the report of the independent inquiry into the hospitality industry yesterday. We welcome the report and its recommendations, which are the culmination of extensive consultation, research and dialogue with employers, employees, trade union representatives and key industry trade bodies. Some of the recommendations are intended to support workers and employers to improve pay, working conditions and inclusion in the sector.
I thank the Fair Work Convention for conducting this important inquiry. The Scottish Government will carefully consider its recommendations and set out a response in due course.
The inquiry recommends the establishment of a voluntary fair work charter for hospitality that stipulates a range of workers’ protections, from payment of the real living wage and recognition of real living hours to effective voice, robust anti-bullying procedures and safe home policies for all workers asked to travel or work after 11 pm. How quickly does the minister expect that charter to be in place? What mechanisms could be put in place should an employer breaches any aspect of it? How does he expect public bodies, including local authorities, to support its implementation? Will the Scottish Government incentivise the adoption of the charter through conditionality of public funding?
I recognise the member’s long-standing interest in this area, and I know that she, too, attended yesterday’s launch. As I said in my original answer, the report is a substantial and detailed piece of work that a range of stakeholders has put a tremendous amount of effort into, and I want to ensure that the Government’s consideration of it is commensurate with that.
Clearly, the member will be aware of and appreciate the range of activities that the Scottish Government has undertaken to promote fair work within the limitations of devolved competency. That signifies the huge importance that this Government places on fair work. As such, we will engage in that spirit with the report’s recommendations and will update Parliament accordingly.
While employment law remains reserved to Westminster, it is vital that the Scottish Government does all that it can to incentivise and promote fair work. Will the minister say more about how the Scottish Government is working to drive fair work practices across the private sector? Will he join me in continuing to call for employment law to be devolved to this Parliament, so that we can ensure that workers are treated fairly and paid fairly in Scotland?
I echo the member’s call for the devolution of employment law to this Parliament.
We use a range of methods through our leadership on fair work principles, and our support of the Fair Work Convention and detailed considerations of its reports. We also seek, through conditionality, the use of public finances to incentivise the uptake of practices that are consistent with fair work, such as the real living wage and effective employee voice.
We welcome the agenda that the new United Kingdom Government has set out with regard to making work pay; indeed, Scottish ministers are committed to engaging closely on that. However, I echo the point that one certainty in British politics is that Labour Governments are followed by Conservative Governments, which invariably have an alternative set of priorities when it comes to fair work. Fair work principles and the rights of trade unions have been rolled back under Conservative Administrations. Therefore, to ensure that we can progress fair work and that it is embedded and made permanent in Scotland, we require the devolution of employment rights to the Scottish Parliament.
The transportation portfolio is mentioned numerous times in the report by the Fair Work Convention inquiry into fair work in the hospitality industry. Does the minister agree that, given that Scotland now has the most expensive train fares in Europe, the reintroduction of peak fares on ScotRail further increases inequality for workers in hospitality, particularly in rural areas, where employees find it more expensive to commute to work?
The inquiry report makes a range of recommendations to which we will give detailed consideration. Matters pertaining to peak fares have been set out in some detail by my ministerial colleagues. Their reintroduction is, ultimately, a consequence of the significantly challenging position that we face with the public finances, which was caused in no small part by Mr Whittle’s party.
Scottish National Party incompetence.
Thank you, Mr Lumsden. May I continue?
Question 6 was not lodged.
Economic Growth (Measurement)
To ask the Scottish Government whether it will set out how it measures economic growth, including what metrics it uses to assess success in economic growth. (S6O-03755)
The Scottish Government publishes monthly and quarterly gross domestic product figures for onshore Scotland. That is the headline measure for Scottish economic growth. The national performance framework also has indicators, some of which show whether growth is improving or worsening. However, following the unprecedented disruption to GDP during the Covid pandemic, recent trends are distorted and performance cannot meaningfully be compared to previous years. Therefore, that indicator was not reported for 2023.
Growing the economy is one of our four programme for government priorities. Since 2007, Scotland’s GDP per person has grown by 10.7 per cent, compared with only 5.6 per cent in the United Kingdom as a whole.
One measure of growth might be to ask what size the Scottish budget is and what it would have been had the Scottish Government made the same policy choices as the UK Government. When the Scottish Fiscal Commission did so, it pointed out that the Scottish National Party’s policy choices have cost the Scottish budget £624 million, something that the Cabinet Secretary for Finance and Local Government failed to mention in her recent statement.
Does the minister think that Graeme Roy’s or Shona Robison’s analysis is correct? Does he accept that the SNP’s drastic spending cuts are the result of its policy choices?
This is Scottish devolution. We take decisions in line with the priorities in Scotland. We do not replicate UK policies and UK choices.
I point out to the member that today’s article from Ian McConnell in The Herald newspaper, which was just published in the past few hours, is entitled:
“Scottish economy grows as UK stagnates, new data reveal”.
That relates to the latest monthly figures for GDP. The Scottish economy is faring well under many indicators against a difficult backdrop, much of which was caused by UK Government policy.
If we look at what the business insights and conditions survey says about the optimism—or otherwise—of the business community, we see that the community’s highest concerns are inflation and energy prices, and then we have the cost of Brexit to add to that. Those relate to UK policy choices that we would not have made in Scotland. That is why it is important that we do what is best for Scotland. According to many different indicators for economic growth, Scotland is performing relatively well compared with the rest of the UK.
UK Government debt has risen to its highest level since the 1960s. The UK Chancellor of the Exchequer has announced £22 billion-worth of cuts, and economists warned last week that the impact of Brexit is worsening. Will the minister advise how we can grow Scotland’s economy in such a challenging UK environment, which leaves Scotland tied to a failing economy?
Our programme for government sets out the steps that we are taking to grow our economy, to create jobs, to support innovation—through, for instance, the Scottish National Investment Bank—and to attract investment in net zero, housing and infrastructure. Our economy is performing relatively well, as I indicated in my previous answer. For instance, last year, earnings in Scotland grew faster than they did in any other part of the UK.
However, there is a limit to the actions that we can take while many of the key powers on tax and the economy remain reserved to Westminster. That is why we want further powers for the Scottish Parliament and independence, which would give us the powers to build a greener, fairer and wealthier Scotland.
The information and communications sectors, for example, are performing particularly well and are contributing to the GDP figures that I have mentioned. Those are national strengths in this country that will help us achieve economic growth in the future, which is why we are focusing on many of those strong sectors.
It is vital that we close the £600 million performance gap, but cherry picking economic data does not help. The Government is right that, since 2007, performance based on GDP per head has been 11 per cent in Scotland compared with 6 per cent in the rest of the UK. However, since 2016—the point of income tax devolution—Scottish economic growth based on GDP per head has been 2.6 per cent, whereas it has been 4.4 per cent in the rest of the UK. In Manchester, since 2007, GDP per head has grown by 21.4 per cent. Likewise, with inward investment, although the Government is right to point to EY data, data from the Office for National Statistics shows that, in terms of value through the number of jobs created, Scotland is lagging behind both the West Midlands and the north-west of England, with fewer than half the number of jobs that have been created by inward investment in those areas.
Does the minister agree that, if we are to close the performance gap, we need to use a broader set of measures? Most important—and I am interested in his answer to this—do we need a better view of how Scotland compares with the other nations and regions of the United Kingdom?
It was intriguing that Daniel Johnson mentioned 2016, because there was an event in 2016 that had a very detrimental impact on Scotland’s economy—it was called Brexit. All the evidence shows that Brexit has had a disproportionate impact on the Scottish economy compared with the impact on the rest of the UK, given our exports to the European Union and other factors.
I asked a serious question.
The member is shaking his head in frustration. Brexit has had an enormous impact on the Scottish economy, but his party has stuck to the Tory policy of supporting Brexit, which has compounded the damage to the Scottish economy. Indeed, just in the past week, a university published a report that shows that small businesses have been hit particularly hard as a result of our exports being curtailed due to Brexit.
I accept that we should always keep the measures under review. I think that we can all agree that that is an important point, but let us live in the real world and not turn a blind eye to the impact that Brexit and other factors—including budget cuts from Westminster—have had on the Scottish economy.
Retail Sector
To ask the Scottish Government what measures it is taking to boost confidence in the retail sector. (S6O-03756)
The Scottish Government deeply values the vital role that retail businesses play in the growth of Scotland’s economy. We will continue to build on the foundations that we have already created jointly with business representatives, and we remain fully committed to the new deal for business.
In relation to sectoral support, we are maintaining the small business bonus scheme, which is the most generous scheme of its kind in the United Kingdom and offers up to 100 per cent relief from non-domestic rates. Our retail strategy sets out how we will work with businesses and trade unions to deliver a strong and prosperous retail sector.
Data from the Scottish Retail Consortium and KPMG shows that total sales in Scotland decreased by 0.5 per cent between August last year and August this year. Given that our high streets are already struggling thanks to the Scottish National Party’s failure to pass on rates relief last year, does the minister accept that more needs to be done to help the sector to deliver the economic growth that Scotland needs?
It is always important to recognise that a wide range of factors can have an impact on the data that ultimately materialises at the end of a month. Annie Wells will be aware of some of the meteorological conditions that had an impact on high streets over the summer—if we can even call it summer.
I have had similar exchanges with Annie Wells previously in the chamber. The challenges that the retail sector faces are significant and structural, and they are not unique to Scotland. There has been a combination of factors over many years. For example, when my party came to power in 2007, online retail sales—this is from memory—accounted for about 2 per cent of retail sales. That figure peaked at more than 30 per cent during the pandemic, and it is still in the 20s. There was also significant growth in the number of out-of-town retail facilities in the 1980s and 1990s. A range of factors is having a direct impact on high streets today.
Important work is being done on this, but it will not be an overnight fix. Although the regulatory and fiscal environment is of significant importance, there is a broader range of factors to consider, and key to that will be regeneration of and investment in our town and city centres. Of particular importance is increasing the residential population of our town and city centres, which will be significant for the future of the high street and the retail sector.
Retail Economics and Tradebyte have reported that British brands and retailers have seen international sales to the European Union plummet by almost £6 billion since Brexit. Can the minister provide any update on what assessment the Scottish Government has made of the continued cost of Brexit to business?
Business surveys show that, of all Scottish businesses trading with the EU, 48 per cent of exporters and 58 per cent of importers face increased costs because of Brexit. Brexit has been estimated to have left the UK economy at least £69 billion worse off compared with EU membership, and the Scottish Government continues to favour Scotland’s rejoining the European Union single market as an independent country.
That concludes portfolio questions on Deputy First Minister’s responsibilities, economy and Gaelic. There will be a short pause before we move on to the next portfolio to allow front-bench teams to change positions, should they wish.
Finance and Local Government
Compulsory Purchase System (Consultation)
To ask the Scottish Government, in light of the commitment in its 2024-25 programme for government to “consult on modernisation of the compulsory purchase system to help deliver a wide range of projects in the public interest”, whether this consultation will include compulsory sale orders and compulsory rental orders in its scope. (S6O-03757)
Compulsory purchase orders can be effective in supporting the delivery of much-needed development in the public interest. However, the legislation is recognised as being complex and out of date. We believe that its reform could contribute to outcomes that people associate with compulsory sales orders, such as bringing more vacant property back into use. That is why, as a first step, we have established an advisory group to review the current legislation and its operation and to seek ways of improving it and making it easier to use. We also continue to consider the justification for, and practical operation of, compulsory sales orders.
Compulsory sales orders and rental orders are critical to tackling the blight of abandoned buildings and derelict land and transforming them to build community wealth, particularly while local government finances are so restricted. Will the Government confirm that the review will also look at enabling the public sector and communities to capture uplifts in land value resulting from development, for example through disregarding hope value?
Work is being done on land reform, but, on the specific issue that Ariane Burgess raises, the work that has been done on compulsory purchase orders is to update the legislation to enable the process to be smoother and to be applied more effectively. The value that is ascribed when a compulsory purchase order goes through has to take into account a number of factors relating to the value of the asset that is being purchased at that time.
Compulsory sales orders could be a valuable tool for local authorities to use to remove the blight of empty homes in our communities. As well as the review of community purchase orders, is the Government looking at a suite of measures to tackle the blight of empty properties, including a council tax multiplier that could fund some compulsory sale or purchase orders?
Councils already have the opportunity to increase council tax on empty properties; that is an option for them to take into account. The Government is undertaking work to look at what can be done to bring more properties back into use. Work with stakeholders is on-going, and we are looking for all opportunities and levers that we can use in that regard.
The reform of compulsory purchase orders is important, because it will make them easier to use and a more effective tool for local authorities and other public bodies. We are also looking at the scope and value that compulsory sales orders could bring to that picture. However, they are not a panacea. There are many complexities around the application of compulsory sales orders that need to be considered as part of the review.
Fiscal Position
To ask the Scottish Government what analysis it has undertaken of what Scotland’s fiscal position would be today if a yes vote had been returned in the independence referendum of 18 September 2014. (S6O-03758)
As an independent country, Scotland would make its own decisions, including on matters such as European Union membership. Modelling suggests that, as a result of Brexit, compared with being in the EU, the United Kingdom economy was 2.5 per cent smaller in 2023, which represented a cut in Scottish public revenues of around £2.3 billion.
Independence would give Scotland full control of the economic levers that, as outlined in the “Building a New Scotland” economic prospectus, are needed to bring about lower energy prices, investment of up to £20 billion in major infrastructure and strengthened workplace rights, all of which would boost our economic future and allow Scotland to escape the UK’s economic model, which concentrates wealth in London and the south-east of England, while producing inequality, low investment and low productivity.
Since 2014, Scotland has suffered under four failed Tory premierships, and we have been taken out of the EU against our will, with Brexit wreaking havoc on our economy. As we heard earlier, we have witnessed high inflation, a disastrous economic experiment from Liz Truss and a cost of living crisis that was made worse by a Westminster Government that was intent on protecting itself and its friends instead of the majority of the population.
Does the cabinet secretary agree that independence is the only way that we can ensure that we get cheaper energy, bearing in mind the comments of Greg Jackson, the chief executive officer of Octopus Energy, who said that
“Scotland would have the cheapest electricity in Europe”
if the UK implemented regional pricing and market reform?
As a country, we are blessed with extraordinary natural and energy resources, and we have a world-leading renewable energy industry. An independent Scotland would design the electricity market in line with Scotland’s interests. That would allow, for example, the link between the price of electricity and the price of gas, which is a key factor in driving high prices for Scottish households, businesses and industry, to be broken. With full powers, we would seek to pass the lower cost of renewables on to customers, and the price of electricity would more accurately reflect our abundant low-cost renewable resources.
Meanwhile, we will continue to push the UK Government to ensure that the electricity market reforms support Scotland’s net zero ambitions, as well as our aim of tackling fuel poverty.
The Scottish Government’s own “Government Expenditure and Revenue Scotland”—GERS—figures show that Scotland would have a nominal deficit of £22.7 billion, which is 10.4 per cent of gross domestic product. That is a truly unsustainable number, and it is more than double the rate of the UK as a whole.
Instead of giving us fantasy economics, can the finance secretary tell us what tax increases would be necessary to fill that gap?
Of course, the GERS figures, which represent a notional fiscal deficit, represent Scotland’s fiscal position under the current constitutional arrangements. Secondly, 90 per cent of the GERS fiscal deficit is due to UK Government choices. Thirdly, equating GERS with Scottish Government finances is just plain wrong, given that this Government has balanced the budget every year for 17 years and will continue to do so.
Financial Powers Devolution
To ask the Scottish Government, in light of recent United Kingdom Government announcements ahead of its budget statement, whether it will provide an update on its latest engagement with the UK Government regarding the potential devolution of further financial powers to Scotland. (S6O-03759)
I have been clear in my initial engagement with the Chief Secretary to the Treasury that Scotland requires further fiscal flexibilities in order to provide greater funding certainty and stability for our public services, and I know that my counterparts in the other devolved Administrations also want to explore that issue with the Treasury.
I have recently written to the Chancellor of the Exchequer to set out the Scottish Government’s priorities ahead of the UK budget, and I intend to raise the issue of further fiscal flexibilities when I meet the Chief Secretary to the Treasury next month, along with the Welsh and Northern Irish finance ministers.
Under current constitutional arrangements, Westminster austerity continues to harm Scottish folk, as Labour’s recent cuts to the winter fuel payment demonstrated. Does the cabinet secretary agree that the case could not be stronger for full financial powers to lie with this Parliament so that we can deliver the fairer investment that our public services and folk across Scotland deserve?
Jackie Dunbar is right that it could not be clearer that Scotland would be best served by the full range of fiscal powers and choices that independence would bring.
Meanwhile, I will work to try to persuade the UK Government to deliver improvements to the current fiscal devolution settlement next week. As I said, I will meet the Chief Secretary of the Treasury and the devolved finance ministers and set out the need for further fiscal flexibilities to enhance Scotland’s financial management powers. We want to pursue further devolution of tax powers, and I do not believe that we are alone in that among the devolved nations.
Economic Performance
To ask the Scottish Government what its response is to the comments of Professor Graeme Roy, chair of the Scottish Fiscal Commission, that Scotland’s net position in 2022-23 was around £624 million lower than it would have been had Scottish economic performance matched that of the rest of the United Kingdom. (S6O-03760)
Previous Scottish Government analysis, as reported in the 2022 medium-term financial strategy, outlines the historic impact of the downturn in the oil and gas industry and strong growth in earnings and financial services around London and the south-east of England, with the associated effect on Scottish income tax revenues due to the operation of the fiscal framework.
The Scottish Fiscal Commission acknowledges that more recent economic data is positive, with faster 2022-23 and 2023-24 earnings growth in Scotland than in any other part of the UK. Our programme for government and upcoming tax strategy will build on that, identifying areas that can support economic growth though creating good, well-paid jobs that support our tax base and revenue.
The Scottish National Party Government has been in power for 17 years and is not a powerless bystander. The cabinet secretary’s argument has been torpedoed by the Scottish Fiscal Commission. The £624 million figure is remarkably similar to the fiscal gap that the cabinet secretary is trying to meet at the expense of the people of Scotland, including those in my constituency in the Borders. Will the cabinet secretary admit that ordinary working-class people in Scotland are bearing the brunt of the SNP’s hapless spending choices?
Rachael Hamilton forgets one point, which is that that figure refers to a previous financial year, not this one, where the gap is driven largely by the UK pay review body’s recommendations being accepted, which adds £800 million this year to our in-year pressure. Rachael Hamilton is comparing different years.
Let me say this, which is very positive: the SFC’s judgment is that, although the income tax policies that have been announced for 2024-25 are not economy moving, the Royal Bank of Scotland’s growth tracker is reporting Scottish business confidence as being at an 18-month high and gross domestic product per person, growth in productivity, earnings growth and foreign direct investment all outstripping those of the rest of the UK.
It would be good to occasionally hear some positive news from members on the Tory benches about the Scottish economy, because there is a lot of positivity to talk about.
If the finance secretary is taking credit for all the things that she has just listed, does she accept any responsibility for the £624 million gap?
I have explained that the gap is linked to the operation of the fiscal framework and the block grant adjustment in regard to earnings growth. The comparison at that point was due to a downturn in the oil and gas industry in Scotland, which bore down on revenues, at the same time as strong growth in earnings and financial services in London and the south-east of England. If members know how the fiscal framework operates, they will know that that widened the gap to £624 million. That is how the fiscal framework operates.
I am saying, however, that the SFC acknowledges that more recent economic data shows faster earnings growth in Scotland than in any other part of the UK, which consequently means additional revenues for the Scottish budget. That is how the fiscal framework works.
Private Finance Initiative Repayments
To ask the Scottish Government what estimate it has made of the cost of private finance initiative repayments in the current financial year. (S6O-03761)
The latest published data shows that the total estimated cost of private finance initiative payments in 2024-25 is £1.1 billion.
I thank the minister for that response. PFI, a Tory creation, was enthusiastically rolled out by previous Labour Governments. Now, in 2024, history is repeating itself, with Labour keeping cruel Tory policies such as the two-child cap and bedroom tax. From toxic PFI debt to protecting people from the worst of Westminster austerity, can the minister confirm how much the Scottish National Party Government is spending to pay for the poor choices of Labour and the Conservatives?
I would say that the minister should deal with the question at hand, which is the cost of PFI.
There are currently 74 on-going PFI contracts, and the total estimated cost of all the remaining payment charges from 2024-25 onwards is approximately £13.6 billion. The Scottish Government has called on the United Kingdom Government to reverse the damaging policies of the previous Administration, including by removing the benefit cap and abolishing the bedroom tax and the two-child limit. We are spending £134 million this year alone on mitigating the damaging welfare policies that were put in place by the previous UK Government, including the benefit cap and the bedroom tax.
That money could be spent on services such as health and education or on further ambitious anti-poverty measures, and it would pay for around 2,000 teachers or band 5 nurses each year.
Midlothian Council and East Lothian Council (Budgets)
To ask the Scottish Government what discussions it has had with Midlothian and East Lothian councils regarding the financial impact of national policies, in light of reports of their constrained budgets. (S6O-03762)
Following discussions with Midlothian and East Lothian councils, I used the limited discretion that is available to ministers to adjust the local government distribution funding floor for this year’s budget. That ensures that funding allocations more accurately reflect the latest population census data, which directly benefits both councils. Discussions with both councils continue, alongside discussions with all authorities and the Convention of Scottish Local Authorities.
Midlothian and East Lothian are two of the fastest-growing areas in Scotland. In the light of those population changes, how is the Scottish Government ensuring that national policies are equitably funded across all local authorities?
As I referenced in my original answer, the needs-based distribution formula is kept under constant review and uses the most up-to-date data available, including the new census data. As Midlothian and East Lothian council areas have growing populations, they will receive an increased share of the available funding, all other factors being equal.
Any change to the distribution formula more widely would require the agreement of COSLA and the 32 local authorities.
Decriminalised Parking Enforcement (Revenue Generation)
To ask the Scottish Government, in relation to the local government funding settlement, what discussions the finance secretary has had with ministerial colleagues regarding the potential revenue that local authorities could generate through decriminalised parking enforcement regimes in their areas. (S6O-03763)
Although ministers routinely discuss revenue-raising opportunities with local authorities and among one another, there have been no specific discussions on decriminalised parking enforcement. Decriminalised parking enforcement is a regime that local authorities may choose to apply for, depending on the requirement for parking enforcement in their area. Currently, 22 of the 32 local authorities in Scotland operate that regime, but it should always be viewed as a form of enforcement rather than as a source of income.
Dumfries and Galloway Council is currently applying for decriminalised parking enforcement—its application is with Transport Scotland. Although I agree that it should be about enforcement and not revenue, given the revenue that has been generated by many other local authorities, can the minister give an indication of the timescale in which Transport Scotland will provide a decision on the application? Does she agree that decriminalised parking enforcement also has the ability to better address illegal parking and make our communities more accessible for those with disabilities?
Transport Scotland officials have been in on-going discussions with Dumfries and Galloway Council regarding decriminalised parking enforcement, but it is yet to receive a completed application. Once an application is received, it can take in the region of 12 months to bring DPE powers into force, due to the time that it takes to draft, consult on and lay the necessary Scottish statutory instrument.
Local authorities are best placed to determine whether taking on DPE powers is the best way to address illegal parking in their areas, but I encourage those without DPE to consider investigating whether it would be beneficial.
Tax Policy (Impact on Recruitment)
To ask the Scottish Government whether it plans to reassess its tax policies, in the light of reports from some businesses that higher taxes are having a negative impact on recruitment, including in the most recent Fraser of Allander Institute survey on Scottish income tax. (S6O-03764)
Tax policy for 2025-26 will be announced as part of the Scottish budget, and we continue to monitor closely the impact of our tax policy on the wider economy.
Since the introduction of Scottish income tax, in 2017-18, more taxpayers have come to Scotland than have left, with net inflows averaging almost 4,200 people per year. The latest available data, from 2021-22, shows that net migration of taxpayers was positive across all tax bands, with taxable income increasing by £200 million as a result.
Highly skilled workers are essential to building the kind of high-growth economy that Scotland deserves, but many firms admit that they are struggling to attract and retain talent. Does the cabinet secretary agree that the greater income tax burden that is being placed on higher earners in Scotland has led to warnings from various quarters that some taxpayers are considering moving away? Indeed, the Deputy First Minister, Kate Forbes, recently admitted that the situation is being “kept under review” and acknowledges how easy it is for taxpayers to shift.
As I said in my original answer, data shows that the net migration of taxpayers across all tax bands was positive on the number of people coming to Scotland, which has increased taxable income by £200 million.
The real-time, pay-as-you-earn tax data for 2023-24 suggests that growth in PAYE income tax receipts in Scotland outperformed that in the rest of the UK, with tax receipt per head figures growing at the fastest rate since data has been available. On top of that, as I mentioned earlier, the Royal Bank of Scotland’s growth tracker reported Scottish business confidence at an 18-month high.
Those are figures and facts that the Scottish Tories do not like to hear, because they do not seem to ever want to hear or say anything positive about the Scottish economy. That does the Scottish economy, our businesses and our hard-working workforce a great disservice.
The SNP Government’s decisions on income tax since the devolution of powers are estimated to have raised around £1.5 billion more in 2024-25 than would have been raised if we had had UK rates and bands. That vital funding can be used to support our public services and deliver the Scottish child payment. Does the cabinet secretary share my concerns about the impact that it would have on our ability to support our public services and tackle child poverty if we were to follow the Tories’ ill-judged plans for tax cuts?
The simple fact is that, if the Tories—or Labour members, for that matter—want the rates and bands of the UK Government to be matched, they need to set out where the £1.5 billion of cuts in current spending would fall. Modelling that was published in February estimates that the Scottish Government’s policies will keep 100,000 children out of relative poverty in 2024-25—policies such as the Scottish child payment, which are possible because of our progressive income tax model. It is incumbent on Opposition parties that are calling for lower taxes and, at the same time, higher spending to explain how slashing social security spending and investment in public services will make Scotland a better place.
That concludes portfolio questions on finance and local government.