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11/09/13 14:52

Speech about Budget 2014-15

John Swinney, Cabinet Secretary for Finance, Employment and Sustainable Growth
Scottish Parliament
September 11th 2013

I am pleased to set out today the Scottish Government’s Draft Budget for 2014-15 and indicative spending plans for 2015-16.

This is a Budget focused on delivering investment, protecting household incomes and creating jobs.

It is a budget that values our public services, the people that work for them and what they achieve.

It is a budget that provides opportunities for our young people and security of care for our older people.

And, most of all, it is a budget that demonstrates the benefits of decisions being made here, by those who care most about the future of Scotland.

Economic Context

Scotland is a wealthy and a productive nation.

We have paid more in tax per head in each of the last 30 years than the rest of the UK.

Excluding oil, our national income is on a par with the UK. Including oil, our GDP per head is 18% higher than for the UK.

When compared with the OECD countries, our GDP per head would be the 8th highest.

We have a highly-skilled workforce, a long-standing reputation for innovation, a respected and recognisable brand, world class universities and sectors and companies competing at the highest level across international markets.

With the full decision making powers of independence I should, today, be able to present a budget that puts all of that economic strength to use in building a more prosperous and a more just Scotland.

Instead, as a result of Westminster’s decisions, I must today present a budget constrained by significant cuts.

The UK Spending Round reduced the Scottish Government’s Fiscal DEL by 10.9% in real terms over the period 2010-11 to 2015-16 and with further cuts expected for 2016-17 and 2017-18.

Within that, our conventional Capital budget will be reduced by 26.6%.

Westminster’s programme of welfare cuts is taking money out of the Scottish economy, adding to the burden on our public services and hitting household budgets.

Despite this, the decisive and distinctive measures we have taken in Scotland are delivering results.

Since my last budget -

• Scottish GDP statistics have shown growth in each quarter, with annual growth of 1.2% compared to just 0.3% for the UK as a whole.

• Employment has risen by 45,000 over the year and our employment rate of 72.4% is higher than the UK’s of 71.6%.

• Unemployment is down 19,000 and our unemployment rate at 7.4% is lower than the UK’s of 7.7%.

• Youth unemployment is down 12,000 over the year and our youth employment rate of 57.2% is higher than the UK equivalent at 49.8%.

• The Bank of Scotland PMI for August indicated that private sector output has expanded for the eleventh month and is rising at the fastest rate since the survey began.

Scotland’s recovery is not happening because of austerity, as the Chancellor claims. Recovery is taking place in spite of austerity.

We cannot, however, take recovery for granted and must be focused on addressing real challenges in the economy.

Financial assumptions

We will face these challenges from a position of strong financial management and responsibility.

I have brought a balanced budget to Parliament each year since 2007, meeting our commitments and delivering value for money for the taxpayer.

We continue to drive efficiency, with the Scottish Futures Trust helping deliver savings in our capital programme and public bodies expected to deliver annual efficiencies of 3 per cent.

In 2015-16, we will use our capital borrowing powers of up to £296 million to support our investment programme.

We will apply the Land and Buildings Transaction Tax , and the Landfill Tax which I hope Parliament agrees this session.

In 2014-15, I have made provision for the costs of the Referendum on Independence and the costs of implementing the Scotland Act 2012.

Presiding Officer, I will now set out for Parliament the actions we are taking to deliver economic recovery; reform our public services; and support Scotland’s people, businesses and communities.

Economic recovery

Our spending plans are focused on accelerating economic recovery through investment.

To tackle Westminster’s cuts to capital spending, we are switching funding from resource to capital, utilising capital receipts and pursuing revenue funded investment through the NPD programme and the Regulatory Asset Base rail enhancements.

We do so while committing no more than 5 per cent of our future total DEL budget on the costs of our revenue funded investment programme.

I have published today an update on these projects and expected investment this year through to 2022-23.

In the short term, NPD investment is lower than originally forecast. This is for two reasons. Firstly, some NPD projects are being concluded at less cost. Secondly, some projects are taking longer to be prepared and planned.

The benefit of taking time to properly prepare projects is clear from the example of the Queensferry Crossing, which will be delivered on time and within a cost estimate that since 2011 has reduced by £145 million.

Work continues on time and on budget on the £842 million New South Glasgow Hospitals project and major refurbishment programmes across the health service.

The Schools for the Future programme will deliver 67 new schools across Scotland, 11 of which are already complete and operational.

Construction is underway on Glasgow and Inverness colleges.

Almost £2 billion of projects are in procurement and, of these, over £500 million of projects are expected to begin construction this financial year: Ayrshire College, M8/M73/M74 bundle and a range of schools and community health projects.

The effects of the recession are still being felt in the housing market, and the Government is determined to do all that we can to help.
We will support the construction industry and private house building through a range of schemes, including the MI New Home Mortgage Indemnity Scheme and through our £120 million Help to Buy (Scotland) scheme, providing access to affordable mortgages for home buyers.

And we are on track to deliver 30,000 affordable homes by 2016, of which at least 20,000 will be for social rent.

When Parliament approved the Budget Bill in February this year, I set out plans to invest £859 million in affordable housing over the period 2012-13 to 2014-15.

I intend to revise those provisions today.

Over the three years to 2014-15, we now plan to invest £970 million. And in 2015-16 we will invest a further £390 million.

I can therefore confirm to Parliament that over the four year period to 2015-16, this Government will drive investment in affordable housing of more than £1.35 billion.

Presiding Officer, together with the other elements of our programme, we will secure total investment of more than £8 billion in Scotland’s infrastructure over the next two years.

Support for business

This Budget takes action to boost employment, create economic opportunities and enhance business confidence.

Our plans are supported by the unique opportunities presented next year, when Scotland will welcome visitors from around the world to the Commonwealth Games, the Ryder Cup and the second year of Homecoming.

We will invest £24 million in 2015-16 to establish a National Performance Centre, to help us sustain the legacy of the Games.

These events will benefit from Scottish business. We are taking significant steps to support private sector growth and ensure that we offer the most business friendly environment in the UK.

All of our communities benefit from the Small Business Bonus Scheme and the most generous set of business rates relief in the UK, worth over £560 million each year.

Our enterprise bodies will support business growth, including through the Scottish Investment Bank and the SME Growth Fund, and we will resource innovative measures to encourage a new age of entrepreneurship across Scotland.

Digital and Low Carbon

Digital technologies offer huge potential to improve productivity and to open up new markets.

This Draft Budget confirms a range of investment in digital technologies, including more than £280 million in two major contracts with BT to ensure 95 per cent of premises in Scotland have access to superfast broadband by the end of 2017-18, exceeding our target.

The transition to a low carbon economy is a key theme of our Economic Strategy.

We will provide £200 million over the next two years for schemes such as the National Renewables Infrastructure Fund among others.

And, given the impact on investment of uncertainty over UK energy policy, I will extend the Renewable Energy Investment Fund by a further year to 2015-16.

In launching the second Report on Proposals and Policies in June, the Minister for the Environment told Parliament that we would use the Budget to boost investment in meeting our world-leading climate change targets.

This budget confirms we will

• maintain the Sustainable Action Fund for the next two years,
• invest an additional £15 million in peatland restoration.
• deliver our £50 million investment in the Warm Homes Fund a full year ahead of previous plans, enabling faster progress in delivering greater energy efficiency and,
• work with the private sector, to secure around £200 million for measures to tackle fuel poverty.

This Budget also confirms that we will deliver around £40 million of investment in sustainable transport through the Future Transport Fund over the next 2 years.

We will increase funding to support active travel. This will see an additional £20 million invested in cycling compared to the last Budget. And in total, our support for active travel over the next two years compared to the last two will rise from around £40 million to around £60 million.

Employability, Skills and Learning

A focus on education and training is fundamental to our efforts to support the economy and create the conditions for growth.

We will extend funding for the 25,000 Modern Apprenticeships per year into 2015-16.

We will continue to fund Opportunities for All, guaranteeing support for all of Scotland’s 16 to 19 year olds not currently in education, employment or training.

Free higher education will continue for Scottish students, as part of annual investment of more than £1 billion in the sector.

And this budget secures the position of our colleges for the remainder of this Parliament.

In February, I confirmed to Parliament that we would provide resource funding of £522 million for colleges in 2013-14 and maintain that level in 2014-15.
This budget delivers on that commitment. However, it also goes further.

I confirm today that the colleges resource budget will increase to £526 million in 2015-16, supporting full time courses and equipping Scotland’s students for the world of work.

We will also act to remove barriers to the labour market, particularly for women.

We will invest over £190 million in the next two years to fund the Children and Young People Bill.

This will provide an additional 125 hours of early learning and childcare for all three and four year olds, and looked after two year olds, worth around £700 to a family. Real practical help for hard pressed families making their way in the world.

Supporting people and communities

Presiding Officer, our support for households is an integral part of our support for the economy.

It is an approach that is in line with the values of people across Scotland and demonstrates the priority we attach to helping the most vulnerable.

Despite the financial pressures we face, I can give a clear and unequivocal commitment that NHS prescriptions, eye tests and personal care will remain free, the concessionary bus travel scheme will be maintained, the Education Maintenance Allowance and, from 2014-15, a minimum income for students will be available, and access to higher education will remain based firmly on the ability to learn, not the ability to pay.

Health and Local Government

Our public services are vital to the people of Scotland. We value the NHS, just as we believe that local government should be properly funded to deliver local services.

This Draft Budget delivers in full the Barnett consequentials for the NHS revenue budget in both 2014-15 and 2015-16, securing continuing improvement in the quality of service the NHS provides.

In England the Chancellor’s austerity drive has seen the local government settlement hit with a real terms cut of 18.6% since 2012-13. That reduction is passed on to Scotland through the Barnett formula.

In contrast, local authorities will see their resource funding from the Scottish Government maintained in 2014-15 and 2015-16, enabling them to maintain teacher numbers in line with pupil numbers and deliver the Council Tax Freeze. Just as this Government promised it would do.

Public Service Reform

Along with protecting our vital public services, we are also intensifying our approach to public service reform.

Alongside this Draft Budget I am publishing an Agreement on Joint Working, which places clear expectations on the public sector to work together to ensure that resourcing decisions are focused on the local priorities of each community planning partnership and that budgets are shared.

We will fully fund in 2014-15 the three change funds announced in the Spending Review, supporting efforts to reshape care for older people, drive progress in early years and reduce reoffending.

We will support the crucial role the third sector can play in these areas.

Next year we will invest £8.5m in the fourth year of the Early Years Change Fund and we will extend for a further year the Reducing Reoffending Change Fund that is helping to deliver the lowest reconviction rate in 14 years.

We will build on the Reshaping Care for Older People Fund by allocating £100 million through NHS Boards, accessible to local authorities, the third sector and others, to drive the shift towards prevention.

£20 million will also be deployed to support national initiatives, meaning we will invest £120 million in 2015-16 to assist the integration of adult health and social care services.

Pay Policy

Our public services and reform programme depend on the hard work of public sector workers. Since 2010 they have been subject to pay restraint.

I am publishing today a pay policy for 2014-15 and 2015-16 which sets out distinct differences with the approach taken by Westminster, particularly in relation to low paid workers.

We will implement the Scottish Living Wage and up-rate it annually.

We will increase the minimum uplift in basic pay for employees earning less than £21,000 from £250 to £300 each year. As a result some staff will receive increases of up to 2%.

And we flatly reject the Chancellor’s threat to end pay progression.

The Scottish Government will retain our existing policy leaving public sector employers with the discretion to reach their own agreement with staff and trade unions and to do so outside the 1% cap that will apply to basic pay increases.

Welfare Reform

The costs of Westminster’s approach to public finances are increasingly borne by the most vulnerable.

From 2010 to 2015 their cuts to welfare benefits will take an estimated £4.5 billion out of the Scottish economy, widening the gap between rich and poor.

This Scottish Government has neither the legal powers nor the financial resources to meet every cut or mitigate all the damage done by Westminster.

Last year I announced that, working with our partners in local government, we would act to protect over 500,000 people in receipt of council tax benefit who would otherwise have struggled to pay their bills each month as a result of a Westminster decision to cut funding for successor arrangements by 10%.

In 2014/15, the Scottish Government will again contribute £23 million to mitigate the funding gap and we propose to continue to work with our partners in local government to bring that support to £40 million. This will ensure we are able to maintain support for vulnerable groups through our Council Tax Reduction scheme.

In 2013-14, we set up the Scottish Welfare Fund and provided funding for one year. As people continue to struggle I can confirm that we will maintain the Fund at £33 million in both 2014-15 and 2015-16.

We have already provided funding of £7.9 million for advice services to meet the additional demand Westminster’s cuts have caused, with £2.5 million to help social landlords provide support to those affected by the Bedroom Tax. And we will provide a further £2.5 million to build the capacity of local communities and the voluntary sector to respond to the worst effects of welfare reform.

This government will use the resources we have - resources intended for devolved public services - to invest £68 million in each of the next two years to limit the damage of Westminster’s welfare cuts.

Today the United Nations Special Rapporteur, who is investigating housing in the UK, has called for the bedroom tax to be abolished “in light of its dire impacts”.

We agree and with independence we will abolish the Bedroom Tax.

In the interim, we will continue to press the UK Government to abolish this tax and to increase the support for those hardest hit.

We do not have legal or financial powers over welfare benefits. But neither are we a government that will walk by on the other side.

Last week Shelter Scotland put forward a proposition that focussed on the problems people are facing as a result of the bedroom tax. To wait until the start of next year’s budget would be too late for many of those currently struggling to make ends meet.

I intend to take immediate steps to deal with the iniquitous effect of the bedroom tax.

I have considered Shelter’s proposal and I have looked at what capacity there is in this year’s budget to meet that need.

Using resources from my own portfolio and underspend on home energy efficiency from within the fuel poverty budget caused by delays with UK energy schemes, I can confirm that the Scottish government will invest up to £20 million this financial year, to help those struggling the most with the costs of the bedroom tax.

This funding will enable local authorities to add to their own provisions to increase discretionary housing payments to meet some of the implications of the Bedroom Tax.

Presiding Officer, our action on the bedroom tax shows the values and priorities that matter in this parliament.

Where Westminster decisions have cut spending this budget supports investment and job creation.

Where Westminster decisions have reduced incomes this budget delivers a social wage that supports our people.

Where Westminster decisions are driving the privatisation of public services this budget protects our NHS.

And when Westminster targets the most vulnerable as part of its austerity drive, we will do all we can to protect them.

This Budget makes clear the benefits of decisions being made in Scotland, by those who care most about its future.

That is the opportunity on offer to the people of Scotland in 2014.

I commend this Budget to the Parliament.