Hansard

That would not have made any difference to the fact that emergency controls had to be put in place because of the additional pressures from pay as a result of the UK Government’s accepting the pay review body recommendations. That added another £800 million of pressure to the 2024-25 financial year, so we could not wait to take action. Having a debate about long-term financial sustainability at that time, whenever that was, would not have had an impact on the decisions that we had to make in-year. Those decisions had to be made, difficult though they were.

However, actions in the short term will not be enough. The Scottish Government has already taken decisions to improve financial sustainability and, through the medium-term financial strategy, has set out the areas that need to be tackled over the medium term. Those include demand-led challenges in health and social care as a result of an ageing population; pressures on public sector pay and the public sector workforce; and social security expenditure. That is why we have put in place a three-pillar strategy that focuses efforts on addressing the drivers of public spending growth; taking a strategic approach to taxation; and increasing tax revenues by delivering economic growth.

On public spending, Audit Scotland, in its report on “The Scottish Government’s workforce challenges” last October, noted that significant reform to the public sector workforce will be needed to ensure fiscal sustainability while protecting front-line services. I am clear that our public sector workforce will need to change size and shape. Members will be aware of the emergency spending controls that we have enacted this year, including a freeze on recruitment. I will set out more detail on our approach to the public sector workforce in the 2025-26 budget.

Alongside the budget, I will publish our tax strategy, which will set out our ambitions for the tax system over the medium term, providing strategic direction on the role of tax in supporting the delivery of our Government priorities in a fiscally sustainable way.

The strategy will also outline how the economic priorities that were set out in the programme for government will support growth in the tax base and revenues. Boosting economic growth remains a top priority for this Government. We will continue to support businesses and increase productivity in order to achieve national prosperity with a strong, green wellbeing economy and to attract the global talent that was mentioned earlier.

However, it is my intention to go further. Today, I am pleased to announce the Scottish Government’s intention to publish a five-year sustainability delivery plan in 2025. That document will set out the Government’s plan to achieve and deliver sustainable public finances within the overall approach that is set out in the medium-term financial strategy. It will bring together and present, in one place, the action that the Scottish Government is taking to put our public finances on an ever more sustainable path. Such work has been going on for some time in areas such as workforce, pay, public service reform, growing the population, and economic growth. We will bring the various strands together, in one central document, to give further clarity and transparency to that work.

The delivery plan will build on the opportunity that we have in the upcoming UK spending review to move to a multiyear approach, and it will support a future Scottish Government spending review. I look forward to engaging with Parliament on the delivery plan and would be happy to discuss it further with members across the chamber in due course.

However, our actions will only go so far. As I said earlier, many levers continue to sit with the UK Government.

I have already referred to migration. Scotland’s distinct demographic and economic needs require a tailored approach to migration. Scotland needs to have access to international talent and skills at all levels of the economy, including in our tourism and hospitality sectors, to name just two. The Scottish ministers are committed to working closely with the UK Government to deliver an immigration system that supports the prosperity of Scotland’s economy and communities.

Furthermore, it is simply a statement of fact that the vast majority of revenue-raising powers, from taxation to borrowing, are not available for the Scottish Government to explore. That significantly limits our options for funding capital spending projects and makes the goal of achieving greater financial sustainability that much harder.

As the First Minister set out last week, part of the solution to our sustainability challenges must come from the UK Government’s committing to increase public sector investment. Greater investment would improve productivity, which in turn would both support our public services to run more efficiently and generate more revenue from taxation.

Sustainability must also come from stability. Our public finances will be more sustainable if they are predictable, so that we can plan on a reasonable medium-term basis. Shifting the dialogue from considering Scotland’s future public finances on a routine, year-by-year basis to instead looking to the medium to long term will therefore need a greater level of financial certainty to come from the UK Government.

In advance of the outcome of the UK budget and the spending review for 2024-25 and 2025-26, there is considerable uncertainty on the level of block grant that the Scottish Government will receive. It is also unclear how UK funding decisions for 2024-25 will feed through into 2025-26. Such uncertainty only contributes to the challenges that the Scottish Government faces on our path to fiscal sustainability. That is why we have called on the UK Government to set out three-year spending plans, to allow the devolved Administrations to invest with certainty over the funding position.

I welcome the chancellor’s intention to move to multiyear spending reviews. If the UK Government follows through on that in tomorrow’s budget and in the spending review in the spring, the conditions might be in place for the Scottish Government to perform a spending review next year. I will update Parliament on that at an appropriate point.

We understand that the chancellor also intends to revise the UK Government’s fiscal rules. With that in mind, I repeat our call for the UK Government to immediately grant the Scottish Government increased capital, alongside further borrowing and investment powers that are commensurate with those in the rest of the UK. That would allow for greater investment to renew and enhance public infrastructure and to deliver projects that support the transition to net zero.

Alongside greater funding certainty, devolved Governments also require greater fiscal flexibility in order to manage and respond to changes in circumstances. I will continue to work with my counterparts in Wales and Northern Ireland, and with the Chief Secretary to the Treasury, to secure changes that strengthen devolved financial management powers.

As has previously been noted in the chamber, I will present the Scottish budget on 4 December. I have been clear that the budget will be challenging. Unless we receive increased capital borrowing powers or a higher level of funding from the new UK Government, the Scottish Government will have to continue to make tough decisions to reprioritise our infrastructure projects pipeline to ensure that we spend within our means. In modernising and reforming public services, the importance of capital investment to transformation, particularly in areas such as digital, cannot be overestimated.

The Scottish Government recognises the significant challenges to the medium and long-term sustainability of Scotland’s public finances. Fiscal sustainability will continue to be an integral focus of the Scottish Government, and it will act as the bedrock for achieving the First Minister’s key priorities of eradicating child poverty, improving our public services, raising living standards by growing the economy and tackling the climate emergency through infrastructure delivery.

We do not deny for a moment the scale of the challenges that we face. Therefore, in order to address those challenges as far as is possible, we ask for cross-party collaboration, both between the Scottish Government and other members in the chamber and between Holyrood and Westminster. In the spirit of that consensus and what I hope will be a constructive debate, I urge all members to support the motion.

I move,

That the Parliament recognises that continued and further action is needed to address the sustainability of Scotland’s public finances; supports the creation of a five-year Fiscal Sustainable Delivery Plan, to be delivered alongside the forthcoming Medium-Term Financial Strategy; believes that tackling the social, economic and environmental challenges that Scotland faces is only possible through the delivery of sustainable funding for public services; supports the exploration of all avenues to deliver fiscal sustainability to ensure delivery of the core missions of tackling child poverty and the climate emergency, and agrees that the UK Government’s revision of fiscal rules means that it should immediately grant the Scottish Government increased capital, alongside additional borrowing and investment powers, to allow for greater investment to renew and enhance public infrastructure and deliver projects that support the transition to net zero.