Meeting of the Parliament 31 January 2018
I am delighted to lead this debate on the principles of the Budget (Scotland) (No 2) Bill. I welcome the Finance and Constitution Committee’s report on the draft budget, and I will respond fully to the report before stage 3, as agreed.
We all know that the bill is of huge importance to Scotland, which represents the maturity of our Parliament. We are a Parliament of minorities and must work across the chamber to find compromise and consensus so that we can give support, sustainability and stimulus to our economy and our public services. Reaching consensus is a task for us all, and I thank those members who have engaged properly and constructively.
The bill seeks approval for spending plans that will use the powers of this Parliament to build a fairer, more prosperous country and put the progressive values of this Government into action. The budget will invest in our public services, in our people and in our businesses to enable them to develop and thrive. We set out a bold and ambitious agenda in the programme for government, and the budget provides the resources that are necessary to deliver that vision.
Our public services require a strong economy. Equally, the most successful economies in Europe are built on the firm foundation of strong public services and inclusive societies. We must support our economy to keep pace with changing technology and access new markets in the most challenging economic and fiscal environment of any budget of the devolution era. That is why we have prioritised measures that will bring stability and stimulate growth.
The budget invests almost £2.4 billion in enterprise and skills, through our enterprise agencies and further and higher education bodies. That includes a 64 per cent increase in the economy, jobs and fair work portfolio, an initial £10 million to support the new south of Scotland enterprise agency and £18 million for the new national manufacturing institute. It also doubles, to £122 million, the funding that is allocated to city region deals.
In total, we are investing £4 billion in infrastructure, with £1.2 billion for our transport system, which will include turning the A9 into an electric highway and delivering new railway investments such as the electric trains between Edinburgh and Glasgow.
Knowing the views of the Parliament, I am sure that all members will welcome the news that I have reached a deal with the leaders of the northern isles councils on the support for internal ferries for the northern isles. In the light of that agreement, and as part of a wider agreement with the Scottish Green Party on the budget, I will allocate an additional £10.5 million to the Shetland Islands and Orkney Islands councils in 2018-19 while we continue to explore a long-term model of fair funding.
Scotland has a world-leading reputation for our efforts to tackle climate change. To support our transition to a low-carbon economy, the budget delivers £137 million for energy efficiency and heat decarbonisation, and it confirms £600 million of investment in our reaching 100 per cent programme to make superfast broadband available to every home and business premises in Scotland. The budget allocates £60 million for a low-carbon innovation fund and £20 million to support the transition to electric vehicles and more green buses, and it doubles investment in active and sustainable travel.
The proportion of the Scottish Government capital budget that is spent on low carbon is increasing from 21 per cent to 29 per cent. As part of my agreement with the Scottish Green Party, we will continue to increase, year on year, the proportion of our capital budget that is spent on low-carbon projects beyond this year’s budget. I also intend to provide an additional £2 million of capital to the home energy efficiency programme and a further £2 million to explore a proposal for a pipeline fund for local rail projects, and I intend to provide the funding necessary to accelerate the delivery of the four marine protected areas.
If we are to achieve our full potential, we must do more to address the inequalities that exist in our society. Regrettably, we do not have many of the levers that are necessary to do that, but we will do all that we can to mitigate the worst impacts of the United Kingdom Government’s welfare reform, with £100 million of support. The attainment Scotland fund will increase to £179 million, including £10 million to provide support to children and young people with complex additional support needs, and a total investment of £243 million will support the expansion of publicly funded early learning and childcare entitlement. In 2018-19, we will invest £10 million in an ending homelessness together fund and the first investment in a new £50 million tackling child poverty fund, which will address the underlying social and economic causes of poverty.
Alongside the draft budget, we have published a fair and progressive public sector pay policy. We were already the only Government in the UK to lift the pay cap and offer a real pay rise to our public sector staff. Today, I can confirm that we will go further. I will increase the threshold for the 3 per cent uplift to £36,500, which will increase the proportion of staff groups that receive the inflationary pay increase from 51 per cent to 75 per cent. That will include nearly 80 per cent of national health service staff and the vast majority of our teachers. The policy also provides for an increase of up to 2 per cent on the pay bill for people who earn between £36,500 and £80,000. I again urge the UK Government and the Welsh Assembly to follow our lead and recognise public sector staff.
In our draft budget, I set out proposals for progressive taxation that offers significant protection to the lower paid. Under my proposal to introduce new starter and intermediate rates and to increase the personal allowance, no one who earns less than £33,000 will pay more than they did last year. More than half of taxpayers will pay less than if they lived in the rest of the UK. Those changes, combined with an increase in the higher rate threshold and changes to the personal allowance, created an anomaly by which a small number of higher rate taxpayers would have seen their bills reduce. I can confirm today that I will act to remove that anomaly. Rather than pursue my initial proposal, I will instead increase the higher rate threshold by 1 per cent to £43,430. That will raise around £55 million over and above the draft budget proposal, with final costings to be determined by the Scottish Fiscal Commission.
Overall, our tax decisions will deliver an additional £420 million to protect the NHS, to invest in Scotland’s public services and to support our economy.