Chamber and committees

We considered a combination of those things. In essence, the earlier budget estimates assumed a greater recovery in public transport patronage post-pandemic than has materialised. I again stress that it is an entitlement, so if it translates into more costs, I will have to address the issue in the course of further judgments that are made during this financial year, which would simply add to the pressures that I wrestle with at a different stage in the financial year.

We looked at the comparison between pre-Covid levels, Covid levels and, to use this terminology, Covid recovery levels in order to form the best estimate. I am not going to sit in front of the committee this morning and say that I am 100 per cent confident that we have that absolutely precise. We will continue to monitor it as the year progresses and, if there is a need to put in further financial support, of course, we will do that.

That sums it up in a nutshell. I have a long track record in this Parliament and as a minister. I served for nine years as finance minister and now find myself—very surprisingly—back in the finance area of activity. I have never seen financial strain and pressure like that which I am seeing and wrestling with just now. I do not use those words lightly. I managed through the financial crash and the years of austerity under George Osborne and Danny Alexander. I left the finance brief in 2016 thinking that we had perhaps managed to mitigate the worst of austerity, but that was as nothing compared with what we are now wrestling with.

The fundamental point that Emma Roddick has put to me is that a centre-left Government that believes in progressive values and wishes to secure a fairer and a greener future for our fellow human beings in our community finds that ever more difficult with the agenda that is being pursued. I would actually not accuse the UK Government of being “conservative”, because certain protections of core values are associated with conservatism, but I did not recognise that happening in the financial statement last Friday.

In relation to the choices that we face, it is important that I re-emphasise a point that I made in my opening statement. At this stage in the financial year, the range of options that are available to me is really rather limited because of the contractual and legal commitments that are made, in any circumstance, during the financial year. When we get to the mid-point in the financial year, significant programmes have already been allocated and undertaken, so room for manoeuvre and our choices are quite limited once we reach that stage.

My second point is on the employability budget, which will increase in this financial year—if my memory serves me right, it will be of the order of a move from about £56 million to about £71 million. It is just that the scale of the increase will not be as great as we had originally planned, which was that it would go from about £56 million to about £120 million. Regrettably, I have had to remove £53 million from that budget. Since that expenditure was not legally committed to any organisations, and given the growth in the budget and the fact that we are experiencing persistently low unemployment at this stage, I felt that I could afford to make such a budget saving, on the balance of risk. Ultimately, I have to take such decisions. Although I would have wanted to avoid that one, it is a necessity that we must confront.

My point to Pam Duncan-Glancy was that the existing provision of services is maintained. For example, the work that is undertaken in the employability and workforce skills programmes—such as the no one left behind scheme and the employability fair start Scotland work—all remains in place. It is just that a planned increase in expenditure is not taking place as a consequence of the pressures that we face. The employability budget lines were projected to increase from £56 million to £125 million. Instead, they will increase from £56 million to £71 million. It is simply that an expansion of capacity has not been undertaken.

The plan was for us to try to make greater inroads in supporting people who are currently economically inactive to become economically active. I take the view, which is not universally held, that people who are economically inactive require significant holistic support to assist them into employment, because it is unlikely that it will be a straightforward journey. There is plenty of opportunity in the labour market just now so, if people are economically inactive, there is likely to be a wider contextual challenge. We had been planning to expand some of that support—which, by its nature, is likely, per capita, to be a more expensive degree of intervention—to try to make greater inroads into the economically inactive population. The budget restrictions that I have had to put in place are likely to mean that we will not be able to do as much of that as we wanted to do.

Essentially, I have made two decisions on demand-led budgets: education maintenance allowances and concessionary travel. I do not have any evidence that allows me to make judgments about any other programmes at this stage. However, as I said in my last answer to Pam Duncan-Glancy, these issues are being monitored daily on my behalf and I will make further judgments on these points.

In the normal sequence of events, these are the type of fairly regular changes that are made by Government in either the autumn or the spring budget revisions, as we assess the demand for particular programmes. Those formal opportunities will be available to the Parliament so that it can consider the implications of any changes in demand.

Essentially, the money does not come in with an intended purpose; it comes in as a consequential and the Government decides how it will be spent. For completeness, I have set out that, in order to meet the financial pressures that we face, we are allocating this within the wider budget management of the Scottish Government, which, of course, deals with a range of requirements, such as tackling child poverty, dealing with the cost of living and supporting individuals with their energy costs through the fuel security fund and various other measures of that type.

It does not really operate in that fashion, because, as Mr Balfour said earlier in his questions, the money comes into the wider pot of public finance and, from that pot, I have to support a range of programmes. We would not be able to afford the budget provisions that we have if I was not allocating the £82 million towards the range of programmes that are supported across the Scottish Government. It does not come in badged in a particular fashion that enables me to say that £10 million of that £82 million has gone towards this or that. It is part of the general financing of the Scottish Government’s budget. All these issues are reconciled in the annual budget, the autumn budget revision and the spring budget revision.

The two points that I will address on energy costs and welfare were made powerfully by the statement from the International Monetary Fund on Tuesday evening. In essence, the International Monetary Fund argued for targeted intervention. One of the weaknesses in what the United Kingdom Government is doing is that the measures are not sufficiently or specifically targeted so, as a consequence, they contribute to the financial volatility that we are experiencing.

People on low incomes are at a significant disadvantage in terms of their ability to cope with significant increases in energy bills, when compared with people who are more financially secure. Therefore, we would have liked the energy cost provisions to have been much more firmly targeted at people who are in fuel poverty. We are now seeing extensive growth in levels of fuel poverty in Scotland as a consequence of the situation.

On the wider questions about household income, a straightforward and effective measure—for which there is precedent—to tackle the issue would be an expansion of universal credit. That is an intensely targeted measure. The Scottish child payment, which is a product of our intervention, is intensely targeted at people who face financial challenges.

Those are areas in which we could use more focused intervention by the UK Government, which would create much better-targeted benefit for people who suffer the most.

I am increasingly worried about spending constraints, and I am even more worried having heard what the Treasury was briefing last night about them.

The consequence of last Friday’s mini-budget has been a loosening of fiscal policy. I disagree with a large number of the measures in it and the approach that has been taken. The way in which it has been done is disastrous. Fiscal policy has been loosened and there has been no explanation of how it will be delivered in a sustainable way. I am not in any way surprised that the markets have responded as they have, because that is the height of fiscal irresponsibility. If the UK Government wants to recover from its fiscal irresponsibility, it will have to fiscally tighten. That will come down on spending. That is a disaster for us, because the block grant pays for the child payment. If the UK Government decides to tighten budgets that affect English departments, that will tighten the budget in Scotland.

The point that Natalie Don has put to me is 100 per cent correct. The fiscally irresponsible decisions that were taken by the UK Government last Friday will have to be rectified if it is to avoid a financial crash. In doing what it has done, it will tighten the budgets in Scotland. What we face, as a consequence of raging inflation—which, again, is the product of fiscal irresponsibility—is going to become a much graver problem in years to come, as a consequence of those decisions.

I certainly agree with one part of the statement, which is that mitigation comes at a price. The Scottish Government is meeting the costs of mitigating a number of United Kingdom Government measures.

I am not sure that I quite accept the point that mitigation is not sustainable, because I view it as my duty to make it sustainable—because I want to protect people as much as I can from the hardship that is inflicted on them. However, I accept that there are limits to fiscal sustainability. I find myself quite close to that, at this moment.

I have had to come to the Parliament, and I am here at committee, to explain the rationale for that. If I do not address now the current level of financial pressure, I will be in danger of not being able to balance the budget, this year. I have a record of fiscal responsibility; I believe in fiscal responsibility. That is why we are doing what we are doing.

I am working to ensure that we operate in a sustainable fashion because measures such as the Scottish child payment, which I have just discussed with Natalie Don, are absolutely fundamental to the commitments that we can make to the most vulnerable people in our society to support them through a difficult period. The Scottish child payment is a fantastic intervention. However, it would not be necessary if universal credit was at a credible level; we would not have to face such things in our budget if universal credit was at a more credible level.

When it comes to quantifying the effects of mitigation, it is probably safer to write to the committee with an estimate of that calculation. However, measures that are being applied by the Scottish Government, such as the child payment, total very close to £200 million. Actually, the updated forecast on the Scottish child payment is £219 million for this financial year. That is partly because we have accelerated payment and have brought the increase forward to 14 November. That is one element.

Ms Roddick will be familiar with the fact that the Government mitigates the bedroom tax, which is a critical measure in alleviating one of the more pernicious aspects of the UK welfare regime. A range of other measures are in place. For completeness, I should probably write to the committee with a detailed answer on that point.