Chamber and committees

I appreciate Colin Beattie’s question. We have had to take very difficult decisions, because of the fiscal context within which we are operating. It is widely appreciated by most reasonable commentators that this is one of the most challenging budgets in the devolution era. Rampant inflation and constrained public sector investment from the UK Government has passed on to us a very challenging budget situation, and as a result, we have been looking to ensure that all public bodies are as efficient as possible. There has been an ask to achieve savings almost universally across the board, and enterprise agencies are not immune from that. Obviously, I am working with all three to ensure that the challenging budget situation can be navigated and that the economic activity and transformation that they help and support us to achieve can be achieved.

I point Mr Beattie, as I did Mr Stewart, to the launch of Scottish Enterprise’s new corporate plan, in which its activities have been refocused on the energy transformation that we are required to see, on ensuring increased capital investment and greater productivity in our business community, and on innovation and seeing businesses continue to innovate. Those are the areas where I would expect to see continued investment from enterprise agencies.

It is undeniable that the reduction in the capital allocation that the Scottish Government has received and is receiving—that is, the projected 10 per cent cut to our capital budget over the coming five years—will have an impact, particularly when set against rising inflation and supply chain pressures. We have allocated almost all of the financial transactions budget to the Scottish National Investment Bank, and the reduction is directly attributable to the reduction in the financial transactions taken by the UK Government.

In both areas, you can see a direct correlation between UK Government decisions and their impact on our budget and on the decision-making possibilities that are available to us. It is undeniable that it will have an impact. As far as the energy and enterprise agency spaces are concerned, I would far rather see an increase in capital expenditure, particularly given the opportunities that we have with the energy transition. However, realising our potential to do that at a time when our capital budget is being squeezed so hard by the UK Government will be more than challenging.

We established South of Scotland Enterprise only a few years ago, because we recognised that we wanted to take greater advantage of the economic potential of the south of Scotland, and I am very pleased with the work that Russel Griggs and his team have been doing on exactly that issue. As for the area that Mr Smyth highlighted, the agency has been well engaged in supporting the real living wage campaign in the south of Scotland and is seeing great results off the back of that. I will continue to support it in that respect.

I more than appreciate that there will be challenges for our enterprise agencies, as there will be for others across Scotland, as a result of the budget. However, there are major opportunities available. There are, for example, big economic opportunities coming through not just from the energy transition but from innovation and the digital sector. The investment that we are making to increase the digital budget will have a disproportionate impact on rural communities and will see broadband being rolled out through the reaching 100 per cent programme, making up for the shortfall in funding for what is a reserved area.

We will continue to do what we can to invest while recognising not just the challenges but the economic opportunities in more rural areas, including in the south of Scotland. I will continue to work with Russel Griggs and his team, with whom I have a very good working relationship, to ensure that the opportunities that they are working towards can be met.

I hope so on both counts. As I said in response to Mr Beattie, there could be a direct correlation with regard to financial transactions, for instance, between the cut that the UK Government has taken and our ability to allocate. We have allocated almost all the financial transactions available to us to the Scottish National Investment Bank, but the bank is also hugely reliant on capital funding, and our capital budget is going down by 10 per cent over the next five years. Decisions at UK level have direct consequences for our decision-making opportunities in Scotland.

I would by far prefer that we saw those problems cut off at source, with investment coming from the UK Government. However, I do not see that coming from this Tory UK Government—or, I am sad to say, from an incoming Labour Government. If we cannot have that, it makes the argument for Scottish independence all the greater.

First, in response to Mr Smyth’s point about growth, we have, of course, seen 10 per cent per capita growth in Scotland’s economy since 2007, compared with 6 per cent in the rest of the UK. His assertion that we are not seeing growth in Scotland is wrong. I continue to support economic growth for a purpose, which is to invest in a wellbeing economy.

As for Mr Smyth’s point about SNIB, we will continue to discuss the asks of the chair and the chief executive with regard to financial flexibilities as things continue to grow and develop. In a meeting only two weeks ago, I think it was, we gave them a commitment to exploring that this year. Those discussions are on-going, and we are looking at what we can do to ensure that the bank is able to operate in the way that Mr Smyth has outlined on those asks and on others, too.

That is to ensure that we continue to roll out the broadband capability that is part of the R100 programme. It is about providing that infrastructure to ensure that we are able to match the digitisation and innovation aspirations of our business community. As I said in response to Colin Smyth, that will be, by its nature, disproportionately beneficial to rural and island communities, which is where the roll-out is needed most. I look forward to continued expansion of the R100 programme in this financial year off the back of the 50 per cent budget increase. It is also, I hope, a good investment in the supply chain and the business opportunities that will be available for our companies across Scotland.

Given your background, you will understand the fact that supply-chain price inflation has an impact on our spending power and our ability to deliver with the budget that we have available to us. However, we are working with our suppliers and doing what we can to ensure that that is mitigated as far as possible. It will not always be possible; in some cases, we will have to spend more in order to get less. That is the nature of inflation. Again, as part of the response that I give to the committee regarding the progress of R100, I will set out more in answer to your inquiry.

That comes from our national strategy for economic transformation, which sets out our long-term economic aspirations. The green industrial strategy is coming up, and the innovation strategy was published last year. There are various plans and strategies that we have available to us.

I assume that you, like Murdo Fraser, continue to support UK Government spending plans, and you must understand that those plans have an impact, which would have been greater if we had not taken the tax decisions that we took, on our ability to spend in those areas. We are allocating our resource as best we can to ensure that we maximise the economic opportunities before us, but UK spending decisions have an impact. In reality, they have a direct consequence for us, and that has meant that there have been some difficult spending decisions. However, if we had replicated UK spending plans, we would have had a real-terms cut to our NHS, which, at this time and given your interest in a healthier nation, could not be comprehended. Although it is, admittedly, a difficult spending decision for some of the reasons that you highlight, we are working with our enterprise agencies, the SNIB and others to ensure that we are getting the maximum possible from that investment and taking maximum advantage of the opportunities that are available to us.

I recognise what you have just said. We have been faced with a real-terms cut to our budget—the block grant allocation is down, as confirmed by the Scottish Fiscal Commission—so we have had to take very challenging decisions. However, as I said in my introduction, we are focused on areas where we think that we can generate the most economic activity and see the economic transformation developing a green and growing wellbeing economy. That is where the decisions that are relevant for my portfolio have been focused.

The SFC’s analysis of our economic performance is fair. Of course, we are tied to a UK economy that is underperforming. When we compare ourselves with many of our European neighbours, we see that we have lower GDP growth, lower productivity and lower fairness than those countries and that they have lower rates of poverty. My aspiration is for us to match those countries.

The GDP figures out this morning show that, for the most recent quarter for which figures are available—quarter 3 of 2023—we had higher GDP growth than elsewhere in the UK, although I accept that that is still low growth and is not in the areas where we want to see it. We have also seen over the recent period that the Scottish productivity rate is growing faster than that in the rest of the UK, although admittedly it is still slow, and we have lower rates of unemployment.

In the areas where we can make a difference, we are investing to do so and seeing results off the back of that. The problem is that we do not have the full levers of control over the wider economy, and we are tied to a UK economy that is grossly underperforming.

Yes, I saw that evidence. I more than understand the challenges that the retail, hospitality and leisure sectors face, not least because the Deputy First Minister, Tom Arthur and I met industry representatives last week to discuss them.

The Deputy First Minister set out the challenge that is before us in this budget, which is that, if we passed on the rates relief consequentials that came from the UK Government’s decision, not only would those consequentials not fully cover a similar discount in Scotland but we would have no potential to further increase investment in our national health service and other public services. A difficult decision was taken, and the decision that was—