Hansard

It is an enormous privilege to present my first budget, which is built on our values and sets out, in tough times, to protect people, sustain public services, support a growing sustainable economy, and address the climate and nature emergencies.

Our values of equality, opportunity and community are missions that should be at the core of any social democratic Government. They are our guiding lights in difficult times. This Government is committed to achieving equality through tackling poverty and protecting people from harm. At the heart of the budget is our social contract with the people of Scotland, whereby those with the broadest shoulders are asked to contribute a little more, where everyone can access universal services and entitlements, and where those who are in need of an extra helping hand will receive targeted additional support. That is what we mean when, in the face of Westminster austerity, we say that we will always stand up for Scotland.

This budget is set in turbulent circumstances. At the global level, the impacts of inflation and the war in Ukraine and the after-effects of the pandemic continue to create instability. In the United Kingdom, the combined effects of Brexit and disastrous Westminster policies mean that we are uniquely vulnerable to such international shocks. Recent research by the Resolution Foundation concluded that the UK is now defined by the toxic combination of low growth and high inequality and is therefore “a stagnation nation”.

Despite that, our economy has been resilient. Unemployment is low, at 3.8 per cent, and average earnings in Scotland are growing faster than those elsewhere in the UK. Scotland is the top-performing economic area outside London and the south-east, and it is the third largest as regards wages and gross value added per person in 2021. A record number of foreign direct investment projects were secured in Scotland last year.

Devolution has brought many benefits, but it has also exposed quite how beholden we are to the decisions of Westminster. We are fighting Westminster austerity with one hand tied behind our back. In today’s budget, the Scottish Government has no say on corporation tax, no powers to mandate the real living wage for all, no ability to consider windfall levies on excess profits, and no options on wealth taxes such as capital gains tax.

Last month’s autumn statement was the worst-case scenario for Scotland. It contained a fiscal settlement from the UK Government that undermines the viability of public services across the whole UK, including here in Scotland. Our block grant funding for this budget, which is derived from the UK Government’s spending decisions, has fallen by 1.2 per cent in real terms since 2022-23. Our capital spending power is due to contract by almost 10 per cent in real terms over five years.

Under his own fiscal rules, the Chancellor of the Exchequer could have invested £27 billion more in core services and critical national infrastructure, but he did not. Instead, he prioritised tax cuts at the expense of public services. For example, members of Parliament will receive a £754 tax cut at the expense of funding the national health service and other vital public services. That cannot be right, Presiding Officer. Disgracefully, the motivation for that choice is not the national interest but the electoral interest of the Tory party ahead of the coming general election. We should be in no doubt that, while Scotland remains in the union, we will continue to pay the price of Westminster austerity.

Given the current turbulent economic environment, we are publishing single-year spending plans for 2024-25 in this budget. I recognise the merit of multiyear budgets, but the autumn statement and the forecasts from the Office for Budget Responsibility make future prospects more volatile. I will revisit the multiyear outlook in our 2024 medium-term financial strategy.

I am very grateful to both the Scottish Fiscal Commission and the Office for Budget Responsibility for their engagement in the budget process, and I have of course used the tax and social security forecasts prepared by the Scottish Fiscal Commission. We have worked with our Scottish Green Party colleagues to present a budget that is true to our shared priorities. The latest Scottish Fiscal Commission forecasts show a significant improvement in our tax performance, driven by higher earnings growth in Scotland, with Scottish income tax receipts forecast to increase by £1.5 billion between this year and next. That is positive news, and it has contributed to Scotland’s improved income tax position for 2024-25.

On income tax, we will make no changes to the starter, basic, intermediate and higher rates of 19 per cent, 20 per cent, 21 per cent and 42 per cent. We will increase the starter and basic rate bands by inflation to £14,876 and £26,561 respectively. I will maintain the higher-rate and top-rate thresholds at their current levels of £43,662 and £125,140. Maintaining the higher-rate threshold in 2024-25 will add £307 million to the income tax forecast, as estimated by the Scottish Government.

We do not believe that those people who are the backbone of our public services—our teachers, police officers and nurses—should see their tax rate increase. Taking the police as an example, constables, sergeants, inspectors and even chief inspectors will not see their tax rate rise. However, this Government believes that, when public services need investment and protection from Tory cuts, those with the broadest shoulders should pay a higher rate of tax. To be clear, by “the broadest shoulders” I mean the top-earning taxpayers. We will therefore add a new income tax band to the Scottish system—the advanced rate—which will be set at 45p and will apply on incomes between £75,000 and £125,140. In addition, I will increase the top rate by 1p to 48p in 2024-25.

The Scottish Fiscal Commission estimates that those policy decisions will raise a further £82 million in revenue next year. We have chosen to create the new band at a threshold above the top of the unpromoted teacher salary scale, and above those of a police chief inspector and a band 8b nurse. The threshold is set so high that it does not even capture MSPs. However, in case Mr Ross is wondering, MPs will have to pay a little more tax, because they get paid more than £86,000. Combined, the income tax policy that I have outlined will grow our much-needed revenues by £389 million. On income tax, only top earners—around 5 per cent of taxpayers—will be impacted by the rate changes. Of course, no one in Scotland will pay more in council tax for their main home.

Overall, taking a different progressive course on income tax in Scotland means that, in 2024-25, we will have an estimated £1.5 billion of additional revenues compared with what we would have if we followed UK Government tax policies.

Asking those with more to pay more is the right choice. It is a choice rooted in our values, and it is in stark contrast to the tax and service cuts of the Tory party. In making our choices, we are supporting public services, including those delivered by councils. Let me be clear that the Government will fully fund the council tax freeze. This year, in 2023-24, councils set their average council tax increases below the level of inflation. The OBR projection for inflation in the coming year based on the consumer prices index is 3 per cent. Of course, I could fund an inflation-proof 3 per cent council tax freeze, but I want to help support services, so I will go further than that. I will fund an above-inflation 5 per cent council tax freeze, delivering more than £140 million of additional investment for local services. Combined with the other support that is being provided to local government, that will increase councils’ overall funding by 6 per cent since the last budget, taking local government funding to a new record high of more than £14 billion. That will help household budgets during tough times, and it will support our local authorities to deliver services.

On other devolved taxes, I can confirm that I intend to make no changes to land and buildings transaction tax rates or bands, and we will introduce legislation to increase the Scottish landfill tax rates, in line with planned UK landfill tax increases.

I have considered very carefully the steps that I can take on non-domestic rates that support business while ensuring that we have the necessary funding to protect public services. Although the UK Government may be happy to provide tax cuts on the back of real-terms cuts to the NHS, I am not, because—let us be clear—if I spent every penny of consequentials on business relief and tax cuts, that would mean making a real-terms cut to our NHS and other vital public services, just as the UK Government has done.

However, I must also be clear that I will take a balanced approach to this budget, including how we can support businesses through non-domestic rates. The number 1 ask that we have heard on NDR has been to freeze the poundage. I am therefore happy to announce that we will freeze the poundage on the basic property rate, thereby protecting businesses with a rateable value of up to and including £51,000 from the impact of inflation. That is forecast to save ratepayers £37 million compared with an inflationary increase. Alongside inflationary increases in the intermediate and higher property rates, that will still ensure that Scotland has the lowest rate for all but the largest properties for the sixth year in a row.

I am pleased to confirm that we will maintain the small business bonus scheme in the budget, ensuring that 100,000 properties are taken out of rates altogether. We recognise the pressures that the hospitality sector faces, which is why, this year, we will work through the new deal for business group to take forward two actions to be implemented in our budget for next year. First, we will work with the sector to explore long-term targeted solutions and better promotion of existing reliefs, rather than relying on short-term steps that do little for future sustainability. Secondly, we will examine with the Scottish assessors the valuation methodology for the hospitality sector, to address concerns that have been raised that the methodology is not truly reflective of the experiences of those businesses.

In addition, in recognition of the unique challenges that the hospitality sector in our island communities faces, we will, in this budget, introduce 100 per cent relief for hospitality properties in our islands, capped at £110,000 per business. We will take forward the two actions that I mentioned earlier in our budget for 2025-26.

We will prioritise tackling poverty and protecting people from harm. One child or household in poverty is one too many. This budget prioritises support for low-income households, centred around a cash-first approach. It is here, driven by our priorities and values, that we will make our largest single investment. We will invest £6.3 billion in social security benefits and payments—an increase of more than £1 billion compared with 2023-24. That will support disabled people to live full and independent lives, help older people to heat their homes in winter and aid low-income families with their living costs. All in all, it will support more than one in five people in Scotland.

We will support those who are most in need by uprating all Scottish benefits by 6.7 per cent, in line with the consumer prices index rate of inflation at September 2023. That includes increasing the weekly amount for our game-changing Scottish child payment to £26.70 from April 2024. The Scottish child payment lifts children out of poverty and stands as an example for anyone looking to form the next UK Government of the action that can be taken if one is true to one’s values.

We will continue to deliver free school meals for all children in primaries 1 to 5 and special schools, and we will invest £43 million in estate upgrades to support the delivery and expansion of free school meals. That includes extending the roll-out of free school meals for primary 6 and primary 7 children who are in receipt of the Scottish child payment, providing more children with access to healthy meals during the school day.

Due to Westminster mismanagement of our economy, too many households worry about debt. With our limited powers, there is only so much that we can do, but, where we can step in, we will. That is why I am pleased to confirm that we will provide local authorities with £1.5 million to cancel school meal debt, removing a worry that hangs over families up and down the country who struggle to make ends meet.

I also confirm that, through this budget, we will keep the Promise to Scotland’s care-experienced children and young people, providing £50 million through the whole family wellbeing fund for holistic family support.

We recognise the importance of high-quality childcare. That is why, in 2024-25, we will continue to invest in a more flexible childcare system that offers families access to more local options and expand our innovative childminder recruitment and retention pilots to grow that essential part of the childcare workforce by 1,000 more by 2026-27.

Affordable housing is a key area for supporting many people to find a home. That is why we will invest over £550 million in the supply programme. That will help to deliver homes for social rent, homes for mid-market rent and low-cost home ownership in communities throughout Scotland.

I have said throughout this budget that it is a statement of our values. Unlike some, the Scottish Government does not think that homelessness is a “lifestyle choice”. We know that those who are homeless need support not just with housing but often with other complex challenges that they face. That is why, in 2024-25, we will commit over £90 million in discretionary housing payments and £35 million of additional funding for specific action to end homelessness and reduce the number of households living in temporary accommodation. That is over and above the homelessness funding that is provided through the local government settlement.

It is because we follow our values that we are providing direct support to people, tackling poverty, and working to achieve a more equal Scotland.

Our ability to ensure that employment opportunities are available and to provide the support that is required to tackle poverty is reliant on our seizing the huge opportunities that exist in Scotland to build a fair, sustainable and growing economy. Businesses are critical to creating good jobs, delivering fair wages and expanding Scotland’s tax base in order to tackle poverty and improve our public services. This budget and the new deal for business support our national strategy for economic transformation.

Only yesterday, the Fraser of Allander Institute published a study that showed that the renewable energy sector supported more than 42,000 jobs across the Scottish economy and generated over £10.1 billion of output in 2021. That is yet another illustration of the significant opportunity to develop the renewables supply chain and maximise the economic benefits from Scotland’s renewables potential. That is why we will invest nearly £67 million to kick-start our commitment of up to £500 million over five years to leverage private investment in the infrastructure and manufacturing facilities that are critical to the growth of the offshore wind sector.

Delivering the critical infrastructure for a green and growing economy requires investment. That is why we are boosting funding for digital connectivity from £93 million to £140 million in this budget.

Recognising the importance of planning to a growing economy, we will work with local authorities, business organisations and the development sector and will set out options to accelerate the planning system in a consultation paper that will be published in early 2024.

To tackle structural barriers to employment, we will invest up to £90 million in devolved employability services in 2024-25 to provide support to people who are keen to re-enter the workforce but need help when taking the final steps.

Recognising the needs of the Highland economy, we will progress the next phase of the A9 dualling programme in 2024-25, including commencing construction on the Tomatin to Moy section and advancing procurement and land acquisition for further sections. The Cabinet Secretary for Transport, Net Zero and Just Transition will make a statement on the details to Parliament tomorrow.

Our aim for opportunity is about more than economic opportunity; it is also about the opportunity for individuals and organisations to realise their potential. That is especially true of our nation’s culture. The transformational power of our culture is immense. It attracts people from all over the world who want to come here and experience it at first hand.

As the first instalment of delivering the First Minister’s commitment to double arts and culture funding, we will increase funding for culture in 2024-25 by £15.8 million. We will restore funding to Creative Scotland for utilising its reserves this year, and more. That is only the first step on the route to investing at least £100 million more in the arts and culture by 2028-29. Our aim is to increase arts and culture investment in 2025-26 by at least a further £25 million.

Perhaps the biggest opportunity before us and one of the most pressing dangers that the world faces is the climate emergency and our actions to address it. While the UK Government rolls back, we will take action. We will invest nearly £2.5 billion in public transport to support our bus, rail and ferry networks, ensure that there is a viable alternative to car use for those who need it, and allow people to make sustainable choices.

That includes investing more than £425 million in bus services through our network support grant and concessionary travel schemes for under-22s and for older and disabled people. Our investment in public transport includes £434 million to support our island communities through the provision of ferry, port and harbour services.

ScotRail and the Caledonian sleeper are now in public hands, and, through this budget, we are providing £1.6 billion to support passenger rail services, as well as for the operation, maintenance and renewal of our rail infrastructure. We will invest £220 million in active travel as we continue increasing our investment in walking, wheeling and cycling.

We need a step change in how we heat our homes, so we are providing £358 million to continue to accelerate energy efficiency upgrades and the installation of clean heating systems. We are investing £49 million to make progress in Scotland’s transition to a circular economy.

Effective support for nature can bring a substantial impact in sequestering carbon, which is why we are investing £129 million to maintain and restore peatlands and to increase woodland creation.

We recognise the vital role that agriculture plays in the rural economy, and we recognise the opportunity to become more productive and sustainable. I confirm that we will provide the same level of support through direct payments to farmers and crofters that was available before Brexit. We are currently providing farmers and crofters with the most generous package of support anywhere in the UK. We will provide additional funding to support them to transition to a new support framework. In November, I wrote to the National Farmers Union Scotland president to reiterate my commitment that the funds that had been released to support the cost of living crisis would be returned in full, to be spent on the right agricultural priorities at the appropriate time. Agricultural Scotland has taken the hit for a Brexit that we did not vote for, but this budget demonstrates that the Scottish Government is resolute in our support for farmers and crofters right across Scotland.

While the UK Government has chosen to prioritise tax cuts at the expense of the NHS and other public services, our values—and therefore our choices—are very different. We recognise that we cannot address the financial challenges that are before us through tax alone or by delivering public services in traditional ways. Our approach must be investment and reform. Working in partnership with Scotland’s trade unions, we will take action to ensure that our services remain sustainable, improve outcomes and support the people and communities that need them most. That approach will be underpinned by our continued commitment to our policy of no compulsory redundancies. Reform takes time, so we are taking decisive steps today.

Investing in Scotland’s NHS is a non-negotiable position for this Government. Health consequentials to Scotland from the UK Government’s autumn statement amount to a total of £10.8 million, which is equivalent to five hours of NHS Scotland activity. It is evident from the autumn statement that the UK Government has no intention of funding pay uplifts for staff in England. Instead, as many independent analysts have said, we are looking at deep real-terms cuts to public services across Scotland.

We choose to take different choices in Scotland, which is why we are delivering an increase of more than £550 million to front-line NHS boards. That is a 4.3 per cent uplift that takes the total investment in them to more than £13.2 billion. That is above real-terms protection for the NHS in Scotland, in the face of UK Government austerity and a real-terms cut to the NHS in England.

The investment will help the NHS to continue to evolve its delivery of services and work to improve waiting times. New services and innovations will need a step change in our reform programme, which is why we will take forward a national conversation to help to shape the NHS for the future.

In stark contrast to others who, in their words, are keeping “the door wide open” for the private sector in our NHS, we remain absolutely committed to keeping our NHS publicly owned, publicly operated and free at the point of need.

We know that one of the keys to a successful NHS is the successful provision of social care, so that everyone has access to consistently high-quality care, whenever they need it. We are investing £2 billion in health and social care integration, meaning that we are already exceeding our commitment to increase social care investment by 25 per cent by the end of this parliamentary session—two years early.

We are supporting hard-working social care and early learning and childcare workers in the private, third and independent sectors by providing more than £200 million additional funding to raise pay to at least £12 an hour from April 2024. That is the equivalent of a rise of £2,000 a year for full-time workers, which is a pay rise of more than 10 per cent in a year.

We recognise that disabled people living in Scotland face particularly difficult barriers, and that is why we are reopening the independent living fund. That will enable up to 1,000 disabled people in Scotland to access the support that they need and deserve to live independent lives.

One of our key partners in the delivery of services is, of course, local government. Through our partnership with local government under the Verity house agreement, we will work with the Convention of Scottish Local Authorities to empower councils through a new fiscal framework that will also increase discretion to determine and set fees and charges locally. Through the fiscal framework, we will also seek to ensure that distribution arrangements continue to meet the needs of our remotest communities and changing population.

One of the key services that councils deliver is, of course, schools. Delivering excellence and equity in Scottish education remains a top priority for the Scottish Government. That requires meaningful engagement with the students, teachers, families, support staff and communities that rely on our education system.

We remain committed to investing £1 billion during this session of Parliament to tackle the poverty-related attainment gap. That long-term targeted investment improves outcomes for children and young people and helps to break the cycle of poverty, with recent statistics showing record levels of literacy and numeracy attainment at primary school level and improvements in secondary.

As part of that, £130 million of pupil equity funding will continue to empower headteachers across Scotland to invest in the best approaches to improving the literacy, numeracy and health and wellbeing of children and young people in their schools.

We will continue to provide £145.5 million to councils to maintain teachers in the system and enable councils to offer permanent contracts to our education workforce. In addition, we are taking action to support our colleges, universities and skills system with more than £2.4 billion of investment, which includes protecting free tuition and driving forward our commitment to widening access.

The safety and security of the public is one of the most important duties of any Government. That is why we will invest £1.55 billion in policing in 2024-25, increasing the Scottish Police Authority resource budget by 5.6 per cent, which is an additional £75.7 million, and giving Police Scotland a real-terms increase, providing the resources that are needed to support front-line service delivery. We are also increasing the police core capital funding by 12.4 per cent to £64.5 million for investment in the police estate, technology and fleet.

Another key blue-light service is the Scottish Fire and Rescue Service. We have listened to and engaged with the SFRS. That is why, next year, we will provide it with a resource uplift of £13.5 million, and increased capital investment of £10.3 million, enabling the service to improve its facilities.

For the Scottish Prison Service, we are committing an additional £38.6 million to its resource budget, which is an additional 10 per cent, to meet its rising costs. We will also invest in the modernisation of the prison estate, providing £167 million in capital funding, progressing much-needed replacements for HMP Inverness and HMP Barlinnie.

I know that there will be members who want us to go further in different areas in the budget. I would remind them that we are in this situation because of the constraints that have been placed upon us by a United Kingdom Government that does not share our values, our principles or our commitment to public services. [Interruption.]