Scottish Budget 2024-2025: Ministerial statement

Presiding Officer, I recognise the importance of today’s debate as part of the Parliament's scrutiny of the Scottish Budget.

I thank the Finance and Public Administration Committee for its recognition of the Budget challenges faced and I would like to record my thanks for the scrutiny undertaken by all Parliamentary Committees and of course the support the clerks give to that process.

This Budget has been extremely challenging in its development, set in the most turbulent of circumstances.

November’s Autumn Statement by the UK Government was as I said before a worst-case scenario for Scotland. As the Institute for Fiscal Studies has noted, the tax cuts announced by the Chancellor in November will be paid for by real terms cuts in public service spending. 

One of the particular challenges of the Autumn Statement is that the need for Agenda for Change pay consequentials not being recognised and I would urge the UK Government to use the Spring Budget in March as an opportunity to rectify this critical misjudgement. A call I have to say echoed by comments of the IMF when they said this week that the UK Government needs to be investing in public services not cutting taxes for the wealthy.

The UK Government did not deliver for Scotland’s Budget, resulting in a real terms reduction in our total block grant and a settlement which falls far short of what is required.

And that is why I continue to press the UK Government to use the Spring Budget to prioritise investment in public services over offering tax cuts, to deliver much needed increased capital investment, and to provide the support that households deserve during the ongoing cost of living crisis.

As I stated to Parliament in December, the UK Government’s fiscal settlement for Scotland does has serious consequences for the delivery of our public services. That is the reality we must manage for this Budget. It is essential that we strike a balance between the funding available for Scotland and what can be delivered within it. That means difficult choices. With Scotland’s limited fiscal powers, there has been no choice but to reduce our spending to match the available funding.

As I indicated to the Committee on 16 January, these cuts to the capital funding are causing real issues for the Scottish Budget particularly our health and housing capital budgets in particular and I fully understand the difficulties that this creates. These are top priorities to be addressed, as I said at the committee, should additional capital become available. And we emphasised that point to the Chief Secretary to the Treasury at our meeting last week as I mentioned earlier on. That is why our fair and progressive approach to taxation is so important. Because it does enable the Scottish Government to increase the funding available for the Scottish Budget which means in 2024-25, we will have an estimated £1.5 billion of additional funding to support Scotland - compared to what we would have had if we had followed UK Government tax policies.

I thank the Finance and Public Administration Committee for its report on the Budget and will respond fully of course to it ahead of Stage 2.

As indicated to the Committee, further work is underway to update the Infrastructure and Investment Pipeline (IIP), to ensure that it is affordable, deliverable and provides best value for money.

We are planning to publish this alongside the next Medium Term Financial Strategy as it is important that future investment plans are embedded in our wider thinking on fiscal sustainability.

And, of course, this will be post the Spring Budget when we will have a better idea of what that fiscal event means for our Budget. I would also like to recognise the Committee’s desire for genuine public service reform and that is why we have laid out broader goals and a programme of action.

This is complex and it is difficult. We have set out objectives, our approach and our structure and we are now working across government on a critical path to delivery. I think it is also important that we take our workforce with us in this process, and I met with the Civil Service trade unions again this morning and we discussed this matter alongside other issues.

For the 2024-25 Scottish Budget I have carefully balanced the growing asks against the available funding. I have made decisions against our key missions of tackling poverty, addressing net zero, sustaining public services and of course economic growth.

The Budget next year gives our NHS the protection of an uplift, above real terms and we are investing over half a billion in our frontline boards – taking total investment to £13.2 billion in the year ahead.

This means that our resource funding for health and social care has more than doubled since 2006-07.

I recognise too of course our vital local government services and that they of course - as the rest of the public sector - face significant budget challenges and I am pleased that despite the challenge, our local government revenue funding is now 2.6 per cent higher in real terms than it was back in 2013-14 – as confirmed in the recent Accounts Commission report.

I don’t underestimate the challenges faced by local government which is why this budget is providing record funding of over £14 billion, including £144 million of funding for a Council Tax Freeze – helping to provide that certainty and support for households across Scotland.

I also do appreciate the interest from local government in the new funding, estimated as £45 million, which is anticipated as a result of the new local government social care funding, announced for England on 24 January. I am very sympathetic to local government’s interest in this new funding, obviously it is not confirmed as yet, we have to wait for the UK to confirm this - the earliest this can occur is the Spring Statement on 6 March.   

I wholly support the Parliament's recognition of the importance of supporting the economy. That is why this Budget is supporting a fair, green and growing economy with £5 billion of investment across the government.

Enterprise agencies are important in this matter and help us deliver more widely on the Scottish Government’s three missions. In recognition of their role, we are providing over £307 million to our enterprise agencies in 2024-25.

This funding will support their work to create jobs and business growth, fundamental in our efforts to tackle poverty and generate the investment required to improve our public services.

The Scottish Budget represents distinct choices, including our largest single investment of £6.3 billion in social security benefits and payments - an increase of over £1 billion compared to 2023-24.

This supports people with disabilities to live full and independent lives, helps older people to heat their homes in winter and aids low-income families with their living costs.

The 2024-25 Budget also prioritises support for our young people with nearly £2 billion of funding for universities and colleges – supporting the delivery of high-quality education, training and research.

And in terms of delivering on our Net Zero ambition, £4.7 billion is being spent on ‘climate positive’ activity. 

I appreciate that the interest in the £200 million of ScotWind funding that is used in this Budget to help support climate change activity and of course the delivery of vital public services. This government also values the contributions made by our remote and rural communities and we are providing £4.3 million of capital investment to support the delivery of our National Islands Plan and our Carbon Neutral Islands project which is helping to tackle the climate crisis.

In addition, £15 million is being restored to the Rural Affairs Portfolio Budget in 2024-25, which will be used to support our farmers, land managers, rural communities and rural businesses, across a range of programmes.

The positive impacts that Culture has on our nation’s health and wellbeing also cannot be overstated and by recognising the transformational power of culture and the value of the contribution it makes the Scottish Government will deliver significant benefits for the people of Scotland.

We are able to confirm that we are increasing funding next year for the culture sector to £196.6 million – an increase of nearly £16 million.

And underpinning our support for communities, is the financial investment we are delivering in our justice systems. We are investing £3.8 billion across the justice system. This represents an 11% increase in resource funding compared to the current year.

Presiding Officer, I will conclude by recognising the work of the Equalities, Human Rights and Social Justice Committees. The Equality and Fairer Scotland Budget Statement, published alongside the Budget, looks at the impact the Scottish Budget will have on the people of Scotland.

Presiding Officer, I thank the Committees for their constructive engagement, and I look forward to further discussion not just this afternoon but in the weeks to come.