Chamber and committees

When I look at the way in which Government engages, there is extensive engagement with organisations in the formulation of our plans. At a personal level, I am involved in some of those discussions, but my colleagues—principally, the Cabinet Secretary for Social Justice, Housing and Local Government, as well as the Minister for Just Transition, Employment and Fair Work—take forward a range of discussions with organisations that have an interest in the sphere of employability.

Generally, the Government has every opportunity to hear and understand the perspectives of different organisations in that respect. Obviously, we will continue that dialogue. I will be talking to a range of interested parties as I finalise issues around the emergency budget review. We have had a number of submissions from organisations about what resources should be available to assist with cost of living challenges and where they would be best deployed. The committee will be familiar with the range of propositions that have come forward from organisations, and we will certainly undertake further dialogue on that.

In response to the questions about equality impact assessments, those are carried out in relation to budget statements and programmes and we will continue to do exactly that.

I am grateful to the committee for the opportunity to discuss the emergency budget review and the underlying savings that are of interest to the committee.

As the convener said, on 7 September, I set out to Parliament the hard prioritisation choices that the Government has had to take, with the pressures of inflation placing a significant new burden on our budgets; a burden that was not planned for when the spending review was undertaken by the United Kingdom Government last autumn. People and businesses have been deeply impacted by the cost of living crisis, and the Government has vowed to do everything that we can to mitigate the crisis as far as possible. We must do that while meeting the increased costs of public sector pay and balancing our public finances.

My letter to the Finance and Public Administration Committee highlighted over £500 million in savings and reforecasting that we have had to take forward. The options are challenging, but we must do that in order to move to balance our budget and do everything that we can to help people in need. That is, of course, the harsh reality of having a fixed budget and limited fiscal powers. In addition, the majority of our spend cannot be changed at this stage of the financial year due to contractual and legal commitments. Therefore, there are limited options to make savings.

I should note that the 2022-23 element of our emergency budget review is part of normal financial management practices, with a number of savings arising as a result of natural demand. Formal scrutiny of budget changes will be undertaken through our normal budget revisions process, and impact assessments will, of course, continue to be taken forward as part of the annual budgetary process.

Notwithstanding the financial challenges that we face, the Government remains firmly focused on tackling and reducing child poverty and supporting strong and sustainable growth as part of the national strategy for economic transformation.

Our 2022-23 budget continues to take forward key programmes and policies, such as the increase in the Scottish child payment to £25 per eligible child per week from 14 November, the fuel insecurity fund and widening access to the warmer homes fuel poverty programme.

Finally, I note that I intend to publish the outcome of the emergency budget review in the week beginning 24 October. Further savings are likely to be required to balance the budget. I look forward to this morning’s discussion, and I am very happy to answer questions from the committee.

I do not think that that will be the case, because, as I said to Pam Duncan-Glancy, there remains capacity in our programmes to support individuals and deal with referrals.

Mr Balfour is correct in saying that good progress is being made on narrowing the employability gap among disabled people. That progress has been made in the aftermath of Covid. In addition to that, other existing programmes that remain unaffected by the changes still have capacity to support individuals. I have to concede that, as a consequence of the reduction, the rate of progress in reducing the employability gap might not be as fast as I would like it to be. However, as I set out to the committee, I am faced with some very difficult choices in trying to balance the budget in this financial year. Choices of the type that we are discussing are the ones that remain open to me.

It means that a range of programmes are being funded that, ordinarily, would not have been able to be funded had we not allocated the money in the way that I am allocating priorities today within the Scottish Government’s budget.

On the current financial situation and the issues with which I am wrestling, the Cabinet Secretary for Finance and the Economy, Kate Forbes, and I have written to UK ministers and various Chancellors of the Exchequer. There have been a few in the past few weeks, and we might have more. We have done so to make the case that the effect of inflation has been to erode the value of our budget, and to make an appeal, which I have done with my counterparts from Wales and Northern Ireland, for an uplift in budgets to deal with public sector pay pressures and the pressures of inflation. That is necessary: our budget will not change unless there is a positive change in English public expenditure during our financial year.

Essentially, we have a fixed budget once the tax year starts. I am required by law to set a tax rate, which cannot be changed during the financial year, so tax cannot change. I characterise our powers as cash-management resource borrowing powers. They do not allow us to accumulate a resource borrowing capacity. Therefore, we are, essentially, dependent on any changes to budgets that are made in England.

We have written a series of letters to chancellors and Prime Ministers, but we have received no responses. On Friday, I spoke to the Chief Secretary to the Treasury in the aftermath of the mini budget. The chief secretary made it clear to me then that he is insisting on application of the current comprehensive spending review, which means that there will be no uplift to budgets.

I notice from overnight news information that the chief secretary has now written to—or is in the process of writing to—Whitehall departments to require reductions in expenditure. That is not an encouraging sign for what lies ahead in relation to expenditure in future years.

As I have said to Parliament already, the pay deals that we are having to put in place because of the effect of inflation should be looked at. Members of staff and public servants are concerned about their financial situation, and they want some protection from inflation. I was extensively involved in the local government pay settlement dialogue, and I am glad that we got to a conclusion on that. We estimate that we will have to find, from the public purse, £700 million more for pay than we had anticipated. I am having to make many changes to ensure that we can afford things. The local government pay deal significantly enhances the position for staff on low incomes: there are significant increases—in excess of 10 per cent—in the pay of low-income members of staff, which I very much welcome.

That still does not amount to an awful lot of money for those individuals and it is nothing like what some affluent people will get through the tax cuts that were announced last Friday, but it is welcome progress, nonetheless. Those decisions put financial strain on our budget, and the concerns have been echoed by my counterparts in Wales and Northern Ireland, who operate within exactly the same constraints.

They are two slightly different numbers. The £1.7 billion is, in essence, the erosion of the value of our expenditure. The £700 million is hard money; it is money that has to be found.

On Pam Duncan-Glancy’s first observation, I take a very different view about the constitutional arguments, because I think that they are central to the dilemmas that I face. The analysis that Emma Roddick put to me about the ability of the Scottish Parliament to exercise the full range of powers is absolutely correct—for example, yesterday the Irish Government set out a diametrically different budget—

I was not talking about those organisations; I was talking about members of the Scottish Parliament. Members of the Scottish Parliament have hard choices to make, and it is, frankly, not much use for members to complain about the choices that I have made without giving me alternatives.

I have been completely transparent with Parliament. There was, for example, no obligation on me to come to Parliament on 7 September with a statement about the financial position and setting out the range of changes: I could have just done it all in the background, in an autumn budget revision. There is very little public commentary about autumn budget revisions, so I could have just done that, but I did not. I came to Parliament openly and transparently and shared the problem and my view of the solution. It is then incumbent on members, if they do not like the solutions that I have come up with, to tell me how I should do it differently.

In the process, I will engage with all manner of groups, and I am very happy to listen to them, but, with respect, I have not seen a scintilla of an alternative in terms of what I should be doing.

Obviously, we carry out a great deal of discussion with organisations about the formulation of our budget priorities, so that we have a good awareness of the issues. For example, when we were taking decisions about setting out plans for expanding the range of employability services as part of the formulation of our wider programmes, we engaged with a range of organisations so that the Government had knowledge of what was involved in such programmes.

We have strong monitoring information on the capacity of existing programmes that will be untouched by the changes, which shows that there is still adequate capacity in those programmes to enable them to deal with referrals of individuals. In our existing programmes that are untouched by the changes, there remains capacity to support individuals who require employability assistance. On the basis of those assessments, I came to the conclusion that the Government could make the saving and that we would be able to manage the implications, because we still had capacity within our existing programmes.