Meeting of the Parliament 03 February 2016
Last week, I introduced the Budget (Scotland) (No 5) Bill for 2016-17, which will implement the draft budget that I set out in December. I welcome the report of the Finance Committee, and I will formally respond to it in advance of stage 3, as agreed with the committee.
The budget that is before Parliament today is a budget that will promote growth in the economy and reform public services. It will ensure that the maximum impact is generated from our expenditure and that decisions on revenues raised reflect our principles-based approach to taxation.
Public spending in Scotland continues to face significant challenges, as another real-terms reduction has been applied to our total departmental expenditure limit for 2016-17. Looking ahead, the settlement that we received in the United Kingdom spending review will mean that the Scottish budget will continue to fall in real terms in every year until the end of this decade.
The financial context is also set by the continued pressure on household incomes. Since its election, the Government has been determined to protect household incomes, particularly for low earners. Our longer-term financial decisions are influenced by the expectation that we will get further powers from what will be the Scotland Act 2016. In December, I said that the Government would set out its longer-term intentions on use of those new powers before Parliament is dissolved for the election. To use those powers, we need a fiscal framework that delivers on the Smith commission; it must be a framework that is faithful to that agreement and fair to Scotland.
I met the Chief Secretary to the Treasury again this week, and work is going on, as I speak, to try to reach an agreement, but I must make it clear to Parliament that there is a long way to go; there is significant difference between our respective views and time is short to reach an agreement. On one point, I want to be absolutely definitive: I will sign only a deal that is fair to Scotland and is consistent with the principles that were agreed by the Smith commission. I will not sign a deal that is harmful to the interests of the people of Scotland.
The budget provides the resources that are necessary to deliver a strong and sustainable economy while tackling economic inequality. It delivers an extensive capital programme that will support our economy, enhance our social infrastructure and help to address climate change. It takes forward a bold and ambitious programme of public sector reform, together with our delivery partners, to ensure the sustainability and quality of our services, and it delivers on our commitments to the people of Scotland at a time of continued pressure on household incomes.
In the December budget statement, the Government proposed a Scottish rate of income tax for the first time. The limited nature of the income tax power that is currently available to the Scottish Parliament allows only for a single rate to be set and then applied to all three income tax bands, which means that any increase on the wealthiest taxpayers would also apply to those on the lowest incomes. The proposals from other parties to increase income tax by 1p next year would hit the taxpayers who are least able to pay.