Hansard

Parliament approved the general principles of the Budget (Scotland) (No 5) Bill in last month’s stage 1 debate. Since then, I have continued to hold extensive discussions with all parties to build consensus around our spending proposals. I begin by recording my thanks to my counterparts in the other parties and to Margo MacDonald for their contributions to those discussions.

Since the stage 1 debate, I have also provided an early response to the Finance Committee’s report on the draft budget. The committee asked me to consider whether more measures could be taken to increase the impact of our decisions on economic recovery. I have set out to the committee the strength of our original proposals, but I have also considered what more can be done. My comments today will demonstrate that I have listened to Parliament. At a time when the financial resources available to Scotland are due to fall by £1.3 billion next year compared with this year, it is incumbent on all parties to work together to agree a balanced budget. Only by doing so can we provide certainty to public sector partners and the people of Scotland about spending in 2011-12.

As members are aware, the financial context for the budget places constraints on my ability to support additional expenditure. Parliament’s decision to reject the proposed large retail supplement has added to those constraints and I have had to take steps in order to offset the loss of estimated income of around £30 million. In the past few days, I have received updated forecasts of estimated income from non-domestic rates in 2011-12. As a result of those forecasts, which take account of estimates of losses from revaluation appeals and a considered assessment of growth, I believe that it is reasonable to assume a net increase in non-domestic rates income of £11.5 million in 2011-12 compared with the forecasts that underpinned the draft budget after taking into account the loss of projected income from the large retail supplement.

I have advised Parliament previously that my in-year financial management in 2010-11 would be focused on identifying ways of smoothing the scale of the reduction in public spending into the next financial year. My plan had been to carry over £100 million from this year to next year. Due to steps that I have taken to reduce expenditure this year, I have, in fact, made a carry-over provision of £130 million with Her Majesty’s Treasury, as set out in the spring budget revision. I have also been able to reprofile other spending programmes in 2010-11 and 2011-12 to free up resources. As a consequence of those decisions, I am able to support some new priorities today and to fulfil my statutory duty to balance our budget.

I wish to present a number of measures to Parliament today. First, I have reflected on the representations made by the Transport, Infrastructure and Climate Change Committee and the road haulage industry about provision for the freight facilities grant. I confirm today that I will increase by £2 million the funding for the freight facilities grant in next year’s budget. That will be funded through adjustments to the existing Transport Scotland budget for 2011-12.

One of the issues that has arisen in the local government settlement has been a negative implication for a limited number of local authorities—principally and significantly Argyll and Bute Council—arising from an updating of indicators agreed with local government that drive the distribution of supporting people funding. In order to temper the effect of that change, I intend to allocate £5 million to tackling the problem and have invited the Convention of Scottish Local Authorities to match that amount. The distribution will be agreed and undertaken in the local government finance amendment order in March.

In 2007, I introduced a capital city supplement for the city of Edinburgh. It has not been uprated since and I propose to increase the level by £400,000.

Last year, the Liberal Democrats suggested the establishment of a post office diversification scheme. That was a successful initiative and I have agreed to their proposal that we operate in 2011-12 a further round of that scheme at a cost of £1 million.

I have also reflected on concerns expressed about funding for urban regeneration companies. The chairman and board of Scottish Enterprise have made the fair point to me that their reduced budget is under significant pressure to support existing commitments and to address the need to support new priorities such as investment in the renewables industry. I confirm today that, by making use of an emerging underspend on the regional selective assistance budget this year and by Scottish Enterprise making some adjustments to the profiling of other areas of its planned expenditure in 2010-11 and 2011-12, we will enable Scottish Enterprise to increase its funding for the urban regeneration companies to £12.5 million in 2011-12. That is an increase of around £6 million compared with the plans in the draft budget. That will increase funding to the Clyde Gateway, Riverside Inverclyde, Irvine Bay and Clydebank Re-built urban regeneration companies. I fully recognise the constraints facing Scottish Enterprise and I appreciate the flexibility that it has shown.

I have received a range of calls for additional expenditure in the areas of learning, skills, training and employment, and I propose to respond in several ways. The Scottish Government has already put forward a substantial package of support for higher and further education and for skills and training. The draft budget that was published in November provided the resources to preserve university and college places while upholding our commitment not to raise university tuition fees or college charges. It supported the continuation of education maintenance allowances and it provided funding for 34,500 training places, including modern apprenticeships.

However, I acknowledge that we must create new opportunities, particularly for young people. I have agreed proposals that have been put to me by the Liberal Democrats that will provide for an additional 1,500 modern apprenticeships in 2011-12. We will make available an additional £15 million across 2010-11 and 2011-12 in funding for college bursaries and we will provide a further £8 million in funding to support an additional 1,200 college places in 2011-12. That funding covers teaching and student support costs. The Government will also support the provision of 7,000 flexible training opportunities in 2011-12—2,000 more than originally planned in the draft budget.

On the issue of employment creation, the Conservatives have been keen to maximise initiatives to support employment growth in the private sector. I am therefore pleased to announce a further £10 million in support for employment creation, focused on new starts and on encouraging sole traders and small firms to take on new employees by assisting with their employment and recruitment costs and with exporting opportunities.

More generally, I have considered representations made by the Conservatives—and others, including the Finance Committee—on the economic impact of investment in housing. As I have already confirmed in discussions with the Conservatives and through the publication last Friday of the Government’s strategy and action plan for housing in the next decade, we will take forward a range of measures to stimulate greater private investment in housing development in Scotland, including through the £50 million investment and innovation fund.

The Conservatives have proposed that the Government provide additional investment in the sector, and I can confirm today that we will invest a further £16 million in housing programmes in 2011-12. That will be delivered by expanding the open-market shared equity scheme, by introducing an infrastructure loans fund to ensure that stalled developments can take their course, and by developing the new supply shared equity scheme.

I have also considered what scope exists to generate additional efficiency and effectiveness across the public sector during the next financial year. I set out within the draft budget a package of measures including an efficiency target for next year of 3 per cent and the setting of a public sector pay policy for 2011-12 that will help to sustain public services and employment by bearing down on pay increases—including a complete freeze on pay for chief executives—while seeking also to protect the lowest paid.

However, I confirm today that the Scottish Government will examine carefully the Conservatives’ proposals for tackling absenteeism, to determine what additional interventions can be made to add to our work in this area. [Interruption.]