Official Report 968KB pdf
Deputy First Minister Responsibilities, Economy and Gaelic
Good afternoon. The first item of business this afternoon is portfolio questions. The first portfolio is Deputy First Minister responsibilities, economy and Gaelic.
I remind members who wish to ask a supplementary question to press their request-to-speak buttons during the relevant question. We are incredibly tight for time across the afternoon, so I would appreciate succinct questions and indeed answers more than ever.
British Chambers of Commerce Quarterly Economic Survey
To ask the Scottish Government what its response is to the British Chambers of Commerce quarterly economic survey, which has suggested that business confidence has fallen to its lowest level for two years, including in Scotland, because of issues such as the United Kingdom Government’s decision to raise employer national insurance contributions. (S6O-04185)
We recognise that conditions for businesses remain challenging, and it is regrettable that the Chancellor of the Exchequer’s policy changes will disadvantage and place additional pressures on Scottish businesses. The majority of taxation powers, including over national insurance contributions, remain reserved to the UK Government.
Through the Scottish budget, we are supporting those businesses that sustain our communities and will help to create the wider economic conditions that will allow Scotland’s businesses to grow. The budget provides £321 million for our enterprise agencies, £200 million for the Scottish National Investment Bank to invest in Scotland and £15 million to help start-ups to grow, to give some examples.
The increase in employer national insurance contributions is a tax on jobs. Along with other measures in the UK budget, it has led to real concerns in the business community and the markets. Has the Scottish Government relayed its concerns to the UK Government about the latter’s misguided tax on jobs? What can the minister and the Scottish Government do within the limited powers of devolution to instil confidence and create stability for businesses in Scotland?
Kevin Stewart raises an important issue. Clearly, the national insurance contributions increase has gone down like a bucket of sick with the Scottish business community, and there is a lot of concern. From some of the illustrations that I have heard, some of the increases for individual businesses are pretty eye-watering and will be very difficult for them to cope with.
The Scottish Government has made representations to the UK Government about the matter, and we will continue to do so. Indeed, a letter went off again just in the past few days reiterating our concerns. In the meantime, we urge Parliament to pass the draft budget because, as I illustrated in my initial answer, there are a number of measures in it that we believe will support Scottish business to get through this.
We have a couple of brief supplementaries.
There is a record budget settlement for Scotland, with £5.2 billion extra coming to the Government. We hear a lot about what that is spent on, but does the minister recognise that the money has to be raised? What is his solution to the problem of how to raise the money that needs to be spent?
The member would be better off making representations to his bosses in London about the impact of the budget on the Scottish economy and the Scottish business community in particular. The irony is that the member often says in the chamber that he stands up for creating Scottish jobs, but businesses in Scotland are saying that the national insurance contribution increase means that they will have to lay people off, that it is a jobs tax, that it will be very difficult to cope with and that it will hit profits and jobs. I urge the member to make representations to the UK Chancellor of the Exchequer about that.
The minister will be aware of the real-life implications that the increase in national insurance contributions has for employers. Alexander Dennis, which is based in my constituency, went through a redundancy programme towards the end of last year. In December, it announced a further redundancy programme, with the primary reason for a second batch of redundancies being the employer national insurance contributions increase. The issue is starting to have a real-life impact on people’s jobs. Will the minister ensure that the Scottish Government and its agencies will continue to work with critical employers such as Alexander Dennis to support them in this challenging economic environment?
I thank Michael Matheson for giving a real-life illustration of the impact that UK Government policies are having on businesses in Scotland, and I give him an assurance that we will continue to make the strongest possible representations to the UK Government. I am sorry to hear about the example in Mr Matheson’s constituency, which is yet another illustration of the short-sightedness of the UK Government’s policy and some of the measures in its budget.
Enterprise Agencies (Assessment of Performance)
To ask the Scottish Government what assessment it has made of the performance of enterprise agencies in supporting business growth and inward investment. (S6O-04186)
In the past financial year, Scottish Enterprise secured or safeguarded more than 16,700 jobs. It helped businesses to unlock £1.9 billion of planned capital investment spend and £449 million of planned innovation spend. In the same period, Highlands and Islands Enterprise supported 1,248 jobs and helped businesses to unlock £412.8 million of capital investment, and South of Scotland Enterprise supported 1,706 jobs across its region. All of that happened while Scotland maintained its position as top-performing place in the United Kingdom outside London for foreign direct investment projects for the ninth year in a row.
It is encouraging to note Scottish Enterprise’s recent successes in supporting indigenous business growth for larger companies and the continuing strong performance as regards foreign direct investment. However, has the Deputy First Minister reflected on what more could be done to help smaller businesses that are looking to scale up, and whether the Scottish Government’s current approach is the best fit in that regard?
The member makes an important point, because small and medium-sized businesses are the backbone of the Scottish economy and they are often anchors in their local economies. I know that that will be the case in Annabelle Ewing’s constituency.
The enterprise agencies are not the only source of support for businesses. Businesses of all sizes and types can access support from a wide range of public sector organisations. One of those is Business Gateway, and more support is listed on the Find Business Support website. I am happy to hear from Annabelle Ewing about any specific businesses that are struggling to get support, and which we could help.
There is a lot of interest in this issue. I will try to get in as many supplementary questions as I can, but they will need to be brief.
The Scottish Government’s budget for the coming financial year delivers a real-terms cut in the funding of the enterprise networks compared with the previous financial year. Indeed, if we look over the past decade, we see that the funding for the enterprise networks is a fraction of what it was a decade ago. If the enterprise networks are as important as the cabinet secretary says they are, can she say how continually cutting their budgets helps to grow the economy?
That would be a good question for the Conservatives in relation to the overall size of their budget settlements to the Scottish Government.
I have to pick up Murdo Fraser on a number of points. We have had exchanges on these matters in committee as well as in writing. Adjustments that are required for the implementation of international financial reporting standard 16 have to be taken into account when comparing the two budgets. The bottom line is that we have increased Scottish Enterprise’s total budget by 5 per cent, we have maintained Highlands and Islands Enterprise’s resource budget and increased its capital budget by 9 per cent, and we have maintained South of Scotland Enterprise’s resource budget and increased its capital budget by 8 per cent. It is the capital budget that is distributable and is of most interest to businesses.
The cabinet secretary referenced her appearance at the Economy and Fair Work Committee last week. At that meeting, she said:
“I want distributable funding in the economy portfolio. I do not want just to create public service jobs”.
She added:
“the fact is that a public sector organisation might need to change and adapt”.—[Official Report, Economy and Fair Work Committee, 8 January 2025; c 12.]
She seemed to be suggesting that the focus and configuration of the enterprise agencies need to change. Is that an area of work that the Scottish Government is undertaking? Will she outline what steps she is taking to reform the enterprise agencies?
On that point, the enterprise agencies have been at the front of the queue to adapt and make sure that their focus is far more targeted and streamlined.
The performance figures that I outlined in my first answer to Annabelle Ewing, on the numbers of jobs that have been safeguarded or protected and the amount of capital that can be invested as a result of the agencies’ work, have not come about by chance. Because Scottish Enterprise, Highlands and Islands Enterprise and South of Scotland Enterprise have been so targeted and focused on what they are trying to do, they have excelled, and they have never been in a stronger position.
I absolutely stand by the point that, from a business support perspective, business cares about what is coming to it in support, and not how many jobs we are creating in the public sector.
I call Willie Rennie. Please be very brief, Mr Rennie.
Liberty Steel, which is owned by Sanjeev Gupta, has failed to submit audited accounts for the past four years. Given her discussions with Scottish Enterprise, is the cabinet secretary aware of whether that company has breached the loan agreement with the Scottish Government?
I am happy to ask one of my colleagues to pick that up. I am, rightly, entirely and completely recused from the issue because of the constituency interest that I hold in it. I will ask a colleague to pick the matter up with the member.
I apologise to those members whom I could not call to ask supplementaries.
Contact Scotland BSL
To ask the Scottish Government whether it will provide an update on the plans for the contract for Contact Scotland BSL, which provides free services to British Sign Language users. (S6O-04187)
The Scottish Government wrote to the supplier of Contact Scotland BSL on 4 December to notify it that its contract will come to an end on 31 March 2025, in accordance with the contract’s terms. In December, the First Minister reiterated our commitment to re-tendering for a free service and said that there should be no break in service for users of Contact Scotland BSL. Officials and I are engaging with the deaf and deafblind communities in Scotland to learn what they want from the service, so that it best meets their needs.
I am grateful to the Deputy First Minister for her answer and to the First Minister for doubling down on the answer that he gave me at First Minister’s question time last month. We all know that Contact Scotland BSL is a vital lifeline service for BSL users. However, in my opinion, the Government’s answer is not entirely complete. The letter that was issued to the supplier said very clearly that the Government’s intention, which was signed off by ministers, was to terminate the Contact Scotland BSL service. Why did ministers think that it was a good idea to terminate the service completely in the first place? Why did they go through all that stramash, which caused such unnecessary stress to the deaf community?
I know that Stephen Kerr has an interest in the issue, but there are legal restrictions to extending the contract again, because it has already been extended.
My focus is on engaging with BSL users to ensure that the service that we provide gives them what they need. Based on the figures, it is my impression that there are far more BSL users than people who currently use the service. I want the new service to go beyond the current provision and embed the advances in technology that are being used by BSL users in their daily lives. We need to test the market to identify the best services that are available for BSL users to utilise. I made the point about the service being free, and that will continue to be the case.
Women in Entrepreneurship
To ask the Scottish Government how it plans to transform participation rates for women in entrepreneurship. (S6O-04188)
We are allocating record levels of funding to support women’s enterprise, with £2.6 million allocated in the current financial year and £4 million allocated for next year, which I am very excited about. We are taking forward all the recommendations in Ana Stewart’s “Pathways” report and are working to address the causes of female underparticipation in entrepreneurship in Scotland. I am leading the Government’s work in that area to support more women to start, grow and scale up their businesses.
I commend Ana Stewart and Mark Logan for their work on the “Pathways” report and Kate Forbes for commissioning it. The recommendations cover infrastructure, entrepreneurial access, investment and education. I am keen for the Parliament to have the opportunity to scrutinise action and debate those issues, so will the Deputy First Minister agree to a statement and/or a debate on progress in achieving those recommendations?
Parliamentary scrutiny is critical in this area, because, over and above the financial support that we can provide, a cultural shift is needed. It is key that there is funding not only from the public sector but from the private sector. A lot of activity is going on in the area, and it would be brilliant if we could raise the profile of what some of the banks are doing, alongside what we are doing, and elevate the issues that Ana Stewart’s report highlights.
My constituent Bayile Adeoti is the founder and managing director of the social enterprise Dechomai Ltd, which recently published a report, funded by the Scottish Government’s ecosystem fund, that looked at key barriers that prevent ethnic minority social entrepreneurs, including women, from accessing investment. What consideration has the Scottish Government given to the report’s recommendations?
We welcome the 2024 “Access Report” and its recommendations, and the Minister for Employment and Investment met Dechomai last year to discuss the report. The social enterprise action plan, which was published in November, makes clear our commitment to support a review of current social enterprise funding and investment mechanisms. The action plan is clear that that should build on the work that was involved in Dechomai’s report.
Global Capital Investment
To ask the Scottish Government what steps it is taking to encourage and maximise levels of global capital investment in Scotland, to benefit the economy and communities. (S6O-04189)
As part of a programme to attract capital investment at scale, we are focusing on three priority areas: net zero; housing; and public economic infrastructure.
Working with public and private partners, we are developing a national project pipeline of investment opportunities and ensuring that policy and funding programmes maximise the opportunities to crowd in private sector investment.
I am pleased to hear the Deputy First Minister talk about private investment. Leveraging private sector investment will be vital to growing Scotland’s green economy and building on the success of recent significant projects, such as the major development in Coalburn, which will boost economic growth and prevent around 1.6 million tonnes of CO2 emissions over 35 years. How can the draft Scottish budget support the leveraging of more such investments?
Our budget is aligned to that programme. For example, the tripling of the funding that we have made available for the offshore wind supply chain makes it clear that we want to attract private investment in the supply chain, which will be of benefit to so many of Scotland’s communities. That is a big focus. We are making clear, through our budget and other means, that Scotland is open for business, that we believe in the importance of attracting private investment and that we want to ensure that the opportunities are realised for all of Scotland.
Economy (Plans for Growth)
To ask the Scottish Government what strategy it plans to implement to grow the Scottish economy at a level that is in line with countries with similarly sized populations, such as Norway. (S6O-04190)
We are taking action to boost economic growth, including the roll-out of our internationally recognised Techscaler programme for high-growth start-ups; a £500 million commitment to leverage private investment in offshore wind; and the connection of tens of thousands of households and businesses to gigabit-capable broadband. The progress that we have seen lays the foundations for Scotland’s long-term success.
As Ash Regan will know—I hope that she will agree with this—we are tied to the United Kingdom Government’s economic model and are seeing some of the consequences thereof even in the most recent days. Independence will allow us to take economic powers into our own hands and build greater economic equality and wellbeing.
Economic stability and resource security are pressing priorities in a world of increasing volatility. I believe that Scotland is crying out for an industrial strategy that complements the need for inward investment and ensures a profit from Scotland’s resources that meaningfully benefits inwards and does not simply flow straight outwards, and is underpinned by a north star of serious commitment to nurturing success at all levels of Scottish business. The Government must ensure that economic benefits flow throughout Scotland to support world-class infrastructure, public services and community wellbeing. Will it now act like the independent nation that we want to be by committing fully to delivering a real plan of economic ambition for an independent Scotland?
I agree that profit needs to benefit our communities and that we need to nurture success at every level. Just this morning, I met Wilkie, which is a Scottish business organisation with 160 years behind it that is based in Kirriemuir. It is expanding, creating hundreds of new jobs and attracting investment of £50 million. It is moving into the Michelin Scotland Innovation Parc in Dundee, which will restore the number of jobs that were lost when the Michelin factory closed down almost 25 years ago. That is an example of a Scottish business that has been highly successful on an international stage and is now growing, developing, putting us on the map and restoring jobs that have been lost.
This question is about growing the economy. The Deputy First Minister will be aware of the concerns for Elgin’s economy, with the imminent closure of the St Giles shopping centre. On Monday, I attended a meeting organised by the Elgin business improvement district, which Richard Lochhead was also at, to discuss that issue. What can the Deputy First Minister do about that unprecedented and unacceptable closure, which could potentially see more than 100 jobs lost and businesses given less than two weeks’ notice to vacate?
I understand and share Douglas Ross’s concern; Richard Lochhead has also raised that issue on a number of occasions with ministers. The Minister for Employment and Investment met Richard Lochhead, the member for Moray, last night to discuss those concerns and the council is keeping us informed of efforts. Notwithstanding that, I fully understand how much of a concern the situation is and would be happy to progress any actions that would reduce and alleviate the potential impact on the local community and businesses, and to find a solution.
Grangemouth Oil Refinery
I remind members of my entry relating to trade unions in the register of members’ interests.
To ask the Scottish Government what recent discussions the economy secretary has had with ministerial colleagues regarding the potential impact on the Scottish economy of the closure of the Grangemouth oil refinery. (S6O-04191)
In full recognition of the far-reaching impact that the refinery’s closure will have, we have engaged extensively across portfolios and with stakeholders to understand not only that impact—which we appreciate will be profound—but what can be done in order to alleviate it.
The stakeholders that we have engaged with regarding the site’s future include Unite the union, the United Kingdom Government and Petroineos. At the moment, all our focus is on trying to reduce the impact and to find a long-term solution for the site.
A report on sustainable aviation fuel and other biofuels production was handed to the First Minister by Sharon Graham, the general secretary of Unite, back in November. A 2023 report commissioned by Scottish Enterprise concluded that Grangemouth was key to Scotland’s transition to sustainable aviation fuel. It is much more cost effective to convert an existing refinery to sustainable fuel than to build a new plant from scratch, and Grangemouth has the customer networks, the support of the community and the skilled workforce to make that work.
Will the cabinet secretary tell the Parliament and those workers—who are now weeks away from redundancy—what the Government is doing to turn that plan into a reality?
I know that the member is joined in raising the issue today by his member of Parliament colleague Brian Leishman, who is making the same point in the House of Commons. The point is a critical one, and we have said that we are willing to work with the UK Government on the issue.
Richard Leonard mentioned sustainable aviation fuel, which is one of a number of options that are actively being explored for the future. Sustainable aviation fuel may be more of a medium to long-term solution, and the Government needs to be clear on the options that we have to safeguard the site in the short term.
I assure the member that all parts of the Scottish public sector, from Scottish Enterprise through to the Scottish Government, are invested in finding a solution and that we are keen to see the UK Government work with us to find that short-term solution.
The Falkirk and Grangemouth growth deal is designed to boost the region and create vital jobs. Will the Deputy First Minister say more about the plans for the funding package and how that will help to grow the regional economy?
I was very pleased to sign that growth deal last November. We have committed £50 million to support the region to deliver the objectives that David Torrance has just set out. Obviously, that was signed after the announcement about Grangemouth, so support is available for skills transition as well. Meanwhile, we continue to work on the future for the site.
What discussions did ministers have with Ineos prior to its announcement that it will close its ethanol plant, which will result in the loss of 80 direct jobs and 500 indirect jobs? What economic assessment has been made of the impact of the closure, which comes ahead of the closure of the refinery?
There has been quite a lot of engagement with Ineos, which has spanned the past few years. Conversations are on-going right now.
We know that job losses will always have a detrimental impact on a local economy. I know from my conversations with Ineos that it has a number of businesses on the site, which creates opportunities for jobs. However, right now, our big focus is on the region more generally and on how we create a long-term future for the skilled workers who work in the various Ineos businesses.
Ferguson Marine Port Glasgow Shipyard
To ask the Scottish Government what its response is to comments made by the Auditor General for Scotland that the “future of the Ferguson Marine Port Glasgow shipyard remains uncertain”. (S6O-04192)
I noted the Auditor General’s report, and I expect the Ferguson Marine board to carefully consider the points that the Auditor General raises. We are committed to supporting Ferguson Marine to reach a position where it can competitively bid for a range of projects and build a sustainable future. We have been working with the board to explore options to improve productivity. The member will already know about our commitment to invest up to £14.2 million in improving productivity, subject to due diligence.
The Auditor General’s report was a stark reality check about the future of the yard. The reality is that, once the Glen Rosa has set sail from Greenock, the long-term contractual pipeline for the future of the yard is absolutely zero—it is zilch. Without a pipeline of work, the yard cannot see a long-term future.
Beyond the contracts that we currently know of, what is the Government doing to ensure that the yard secures the much-needed future contracts? The business plan was announced in July last year and a long time has passed since, but we are yet to see any real progress in securing more business for the yard. What is the cabinet secretary’s message to the workers of the yard, given that it is a strategic national asset?
I hope that Jamie Greene will join me in this first message to the yard. He mentioned the Glen Rosa, and it would be fitting to acknowledge that the Glen Sannox has been in service this week. The skills and talent of the workforce were never in question, and the workforce is to be commended for its diligent work in getting that boat to sail this week.
I have been very clear regarding the yard’s long-term future, and I am afraid that I am not going to deviate from this point: Ferguson Marine’s long-term future relies on it being able to competitively bid for work on the open market. To do that, it must be able to compete with other shipyards, and that is where the offer of investing in improving the yard’s productivity comes in. I see that as the means of enabling it to competitively bid.
There is some work available in the pipeline, and Jamie Greene will understand that I would not want to divulge that in the chamber, as much of it is commercially sensitive, but all eyes and all focus are on this issue.
I know that we are over time, but I will squeeze in one supplementary.
Does the Deputy First Minister agree that the Scottish Government’s proposed £14.2 million investment in the yard in the 2025-26 budget provides an opportunity for the yard to attract new work from both the public and private sectors, given the aspects that she has just spoken about?
The short answer is yes. Provided that Parliament votes for it, the budget allocates the funds that are needed to deliver the Glen Rosa and to resource a range of initiatives to improve the productivity of the yard.
That concludes portfolio questions on Deputy First Minister responsibilities, economy and Gaelic.
Finance and Local Government
We now move on to the next portfolio, which is finance and local government. Question 1 is from Emma Roddick.
Affordable Housing Funding
To ask the Scottish Government whether it prioritised funding for affordable housing when drafting its budget for 2025-26. (S6O-04193) [Interruption.]
I apologise. I saw that the ministers on the front bench were already assembled; I did not realise that they wanted to shift seats.
I call the Cabinet Secretary for Finance and Local Government to answer question 1.
The draft budget includes investment of £768 million for the affordable housing supply programme in 2025-26. That will help to tackle the housing emergency while contributing to our target of 110,000 affordable homes by 2032.
The budget prioritised capital spending to eliminate child poverty, grasp the opportunities of net zero, boost economic growth and maintain high-quality public services and infrastructure. Therefore, delivering more affordable homes for families with children living below the poverty line was very much a priority.
I apologise again, cabinet secretary.
That is all right.
As someone who has always stressed the importance of ensuring that sufficient funding is allocated to affordable housing, I strongly welcome the fact that total spending for the coming year is set to return to where it was two years ago. Does the cabinet secretary agree with me on the importance of MSPs—especially those who represent communities that are experiencing depopulation—backing the budget to unlock that vital housing investment?
Yes. We very much recognise that good-quality affordable housing is essential to retaining and attracting people to Scotland’s rural communities. Since March 2016, we have delivered more than 12,000 affordable homes in rural communities. We know that even a small number of additional homes in rural and island communities can have a significant and generational impact.
Our commitment to deliver 110,000 affordable homes, of which at least 70 per cent will be for social rent and 10 per cent will be in our rural and island communities, is supported by our rural and islands housing action plan.
Yesterday, I asked the housing minister about the Scottish Government’s affordable homes target of providing 110,000 homes by 2032. To achieve that target, there would need to be, on average, 10,700 homes built per year; however, as it stands, only 21 per cent of that overall target has been delivered.
To build more houses, there needs to be confidence in the market and long-term planning. However, over the past three years, the affordable housing budget has been committed, cut and restored. Does the cabinet secretary recognise that that has damaged market confidence? Why should investors have confidence that the Government will not cut the budget again next year?
I will start on a point of agreement with Meghan Gallacher, which is that confidence in the market in the longer term is important. That is why, post the United Kingdom Government’s spending review in June, should our capital allocations show a sustained upward trajectory, which we understand will be the case, I want to give longer-term certainty to the housing sector to boost confidence and have a line of sight of investment.
However, the £768 million for the affordable housing supply programme would not be available if we had listened to Meghan Gallacher’s colleagues, who want to cut the budget by £1 billion. Tax cuts worth £1 billion would eradicate not only the £768 million for affordable housing, but funding for many other good things. [Interruption.] Meghan Gallacher should not come here asking for more money when her party wants to cut £1 billion from the budget.
Let us listen to the questions and the answers.
Does the cabinet secretary agree that the financial model that has been pioneered by Lar Housing Trust over the past decade shows great promise? It uses loan-based finance—rather than the traditional grant-based financing model—which could significantly increase the country’s capacity to build affordable housing.
I agree very much with Paul Sweeney on that point. Lar Housing Trust has shown an innovative way of delivering affordable housing. I have visited a number of its innovative sites, where it utilises buildings that have been derelict for some time and are unpurposed, as well as having new-build sites. I am keen to support that model and am happy to work with Paul Sweeney and others in doing so.
East Dunbartonshire and West Dunbartonshire Councils (Local Government Settlement 2025-26)
To ask the Scottish Government how it plans to support East Dunbartonshire and West Dunbartonshire councils, as part of the local government settlement for 2025-26. (S6O-04194)
If Parliament works together to pass the 2025-26 budget, councils will receive their formula share of the more than £1 billion of additional funding for local government—the largest increase in recent times. That would deliver an increase of £22.9 million for East Dunbartonshire Council and an increase of £14.3 million for West Dunbartonshire Council, compared with 2024-25. It is then for locally elected councillors to make decisions on how best to utilise the additional funding available and to deliver services to their communities based on local needs and priorities.
Does the cabinet secretary agree that, despite increased funding from the Scottish Government to local authorities, Labour’s public-private partnership repayments and the national insurance hike are having a significant impact on councils’ ability to balance their budgets?
I certainly agree that any additional employer national insurance contribution costs that are not fully funded by the United Kingdom Government will deprive front-line services of vital funding, to the detriment of local communities. I confirm that the First Minister and the president of the Convention of Scottish Local Authorities, supported by a range of organisations, wrote jointly to the Chancellor of the Exchequer on 3 January.
On the issue of PPP repayments, the Scottish Futures Trust continues to work with authorities to assist them in making savings and improving performance across private finance initiative and PPP contracts, while ensuring that contractual obligations are delivered and that contracts are affordable and provide best value for money for the taxpayer. However, that is a legacy from the previous Labour Administration that we could well have done without.
Question 3 is not lodged.
“Fiscal Sustainability and Reform in Scotland”
To ask the Scottish Government what its response is to the Auditor General for Scotland’s November 2024 report, “Fiscal sustainability and reform in Scotland”, which states that
“the Scottish Government has not been sufficiently transparent with the Scottish Parliament or the public about the current fiscal situation”. (S6O-04196)
The Government has been crystal clear with the Parliament and the public—first with the 2023 medium-term financial strategy and 2023-24 budget, then through the fiscal statement in September and 2025-26 budget—about the challenges and risks that the public finances face.
We will continue to be open about the actions that are required to ensure fiscal sustainability when we publish the updated medium-term financial strategy and fiscal sustainability delivery plan later this year. The Government remains committed to improving our fiscal transparency and we are actively considering Audit Scotland’s recommendations.
In the light of the Scottish Fiscal Commission’s most recent forecast about the projected increases in the size of Scotland’s social security budgets, I asked the Cabinet Secretary for Social Justice last Thursday at committee, and the Cabinet Secretary for Finance and the Economy yesterday at committee, to explain where the money is coming from to pay for the increased social security expenditures.
All that I got back was that those are increased investments as part of the Government’s social contract with the people of Scotland. I will try again. Where is the money coming from to fund social security budget increases for the next two years?
The Government recognises the importance of supporting all our citizens. As the First Minister outlined in his speech this morning, our commitment to invest in the people of Scotland through delivery of social security is a critical part of that agenda. The Government will continue to focus on ensuring that we deliver financial stability and sustainability, and the work that we are taking forward will be articulated in our fiscal sustainability delivery plan.
Members can rest assured that the Scottish Government has balanced our books every year for the past 17 years, and we intend to continue doing that. We will meet our commitment to deliver for the people of Scotland by ensuring that the budget is fiscally sustainable.
The Audit Scotland report, which is the fifth in just 15 months, calls on the Scottish Government to urgently deliver public sector reform and put the public finances on a sustainable footing.
Scottish Labour welcomes the idea of a fiscal sustainability delivery plan, but can the minister assure us that it will not just be about back-office functions but proper public service reform in Scotland?
We are clear that “back-office functions”, as Michael Marra calls them, are a critical part of ensuring that we free up resources to the front line. In the interest of transparency, the cost of those back-office functions across the public sector is around £5 billion, which he will know from reading the work that we have published.
We will continue to bear down on those costs; we have saved hundreds of millions through the measures that we have already taken. Alongside that, we will continue to shift resources in the wider system to ensure that there is a continued and increasing focus on activities that drive prevention. Michael Marra can rest assured that the work that I am taking forward on public service reform is addressing all those matters, and we will continue to communicate to the Parliament about the progress that we are making.
Audit Scotland’s report was very critical of the failure to lead and invest in digital for the longer term. That is certainly the view of James Blackwood, the artificial intelligence lead at NHS Forth Valley, who has said that patients are missing out on advances in artificial intelligence. Why is the Government failing to lead in that important area?
The Government is very focused on that. Only this morning, I had a call to engage with our digital directorate on the work that is being taken forward in Government and across the wider public sector to roll out digital solutions and to ensure that we make increasing use of artificial intelligence.
Willie Rennie will be well aware that that technology is moving very fast, but we are very focused on making sure that the Government and wider public services avail themselves of the advantages to efficient public service delivery that digital technologies and AI can offer.
Local Government Finance
To ask the Scottish Government what assessment it has made of the state of local government finance. (S6O-04197)
The independent Accounts Commission has confirmed that the Scottish Government provided a real-terms funding increase to local government this year and in 2023-24 and 2022-23.
The 2025-26 Scottish budget will provide local government in Scotland with record funding of more than £15 billion. If Opposition parties support the budget, the local government settlement will increase by more than £1 billion, which represents a real-terms increase of 4.7 per cent compared with 2024-25.
A report from the Local Government Information Unit has shown that seven in 10 councils believe that they will be
“unable to pass a balanced budget within the next five years”.
Council chief executives from my region, West Scotland, have also expressed concerns over the state of their council finances and indicated that they will have to take difficult decisions in the upcoming council budgets, such as increasing council tax. Does the cabinet secretary therefore not recognise that 18 years of Scottish National Party mismanagement have left council finances in an absolutely terrible state?
The independent Accounts Commission would disagree with Pam Gosal’s assessment; it showed that we provided a real-terms funding increase to local government last year, which was 2023-24, and the year before that, which was 2022-23.
Pam Gosal has the same problem as Meghan Gallacher, in coming to the chamber to ask, apparently, for more money for local government—which, I have to add, was not raised by her party’s finance spokesperson in our meetings—when the leader of her party in this place wants there to be £1 billion less in the budget. She cannot have more money for local government—or anything else, for that matter—if her party is proposing £1 billion less in the budget because it wants to provide unaffordable and uncosted tax cuts. Tory back benchers have to address that problem before they come here asking for more money.
Under the Tories between 2018 and 2023, seven English local authorities, including the largest—Birmingham City Council—had to issue section 114 notices of bankruptcy. Not a single council in Scotland has gone bankrupt under this SNP Government. Given the Tories’ abysmal record on local government, does the cabinet secretary agree that they are the last people from whom we should take lessons?
I agree with every word of that. A decade of Conservative Party austerity measures left public services with very little resilience, and the facts about what has happened to English local authorities speak for themselves. The Scottish Government had to take very difficult decisions to protect local services and ensure that communities across Scotland continued to receive high-quality public front-line services. Although those were difficult decisions, the independent Accounts Commission confirmed, as I said in my previous answer to Pam Gosal, that the Scottish Government has provided a real-terms funding increase to local government in the past three years. Tory members might not like facts, but those are the facts.
I ask Collette Stevenson to be very brief.
Will the cabinet secretary outline the real-terms change in the budget that will be available to councils for day-to-day spending across Scotland in 2025-26, and will she confirm whether South Lanarkshire Council will have more cash to spend on the local priorities that it has identified, based on the Scottish Government’s draft budget?
I ask the cabinet secretary to be as brief as possible.
As I said earlier, if the budget is supported, the local government settlement will increase by more than £1 billion—a real-terms increase of 4.7 per cent compared with 2024-25. For South Lanarkshire Council, that would deliver an increase of £63.2 million to support vital day-to-day services, which is an additional 8.5 per cent compared with the 2024-25 budget.
Budget 2025-26 (Support for Rural Communities)
To ask the Scottish Government how its draft budget 2025-26 will support local authorities to better serve rural communities, such as those in Aberdeenshire and Angus Council areas in the North East Scotland region. (S6O-04198)
In 2025-26, local authorities in the north-east of Scotland will receive £1.79 billion, as part of our record £15 billion settlement to fund local services and meet local needs. That equates to an extra £125.5 million, which is an additional 7.5 per cent compared with the funding that was provided in 2024-25.
I have been contacted by Aberdeenshire constituents who are very concerned about the low per capita funding that the council receives. Maintenance of transport and connectivity, including gritting roads and pavements and preserving the authority’s more than 1,100 bridges, is vital for many rural communities. The shire also has an ageing population, with a projected 28 per cent increase in the number of those over the age of 65 by 2029. Those people will require additional funding for the services that they should be able to rely on.
Given the well-evidenced nature of rural inequality, can the cabinet secretary outline any plans to review the funding formula, and specify what is being done to ensure that rural communities are not cut off, further marginalised and facing worsening inequality?
First, the funding formula is agreed with the Convention of Scottish Local Authorities and the 32 organisations that compose local government. Therein lies the rather big challenge in relation to changes to any funding formula.
I would note, however, that the funding floor provides an opportunity to address and recognise changes to census data, for example. I took the decision to amend the funding floor for 2025-26 in recognition of that.
In 2025-26, Aberdeenshire Council will receive £615.3 million to fund local services, which is an extra £42.5 million, or an additional 7.4 per cent, compared with 2024-25. All councils are also getting additional capital funding. I am always keen to talk to local authorities—
Briefly.
—about any reforms and changes that they want to make, and I would be happy to have that discussion with Aberdeenshire Council.
I will take a brief supplementary from Alexander Burnett.
Scottish National Party cuts have now created an eye-watering £26 million black hole for Aberdeenshire Council, which is part of what Audit Scotland calls a “significant increase” in the local authority “funding gap”. That has impacted on every aspect of local services: schools, libraries, bins, bridges, roads, and much more.
Across a large rural area, 16,500 street lights—
Question.
—now need to be replaced, which councils simply cannot afford.
Huntly is even looking to put lamp posts—
I need a question, Mr Burnett.
—into community ownership.
Will the cabinet secretary today promise to fight for a fair settlement for councils, or is she happy to see communities plunged into darkness?
Local government is getting a fair settlement of £1 billion of extra funding—which is exactly the same figure that Alexander Burnett and his party would cut from the budget. If we listened to the Tories in this place, local government would not be getting any extra money, because there would be £1 billion less because of unfunded, unaffordable tax cuts.
I say to Alexander Burnett, and to any other Tory members, that they cannot come and ask for more money in this place when they want to cut the budget; let alone that they will not support this budget, which will provide £1 billion of extra support for local government.
Child Poverty Funding
To ask the Scottish Government whether it prioritised funding for its mission to tackle child poverty when drafting its budget for 2025-2026. (S6O-04199)
Yes, we absolutely did. The Scottish budget for 2025-26 prioritises action to eradicate child poverty, outlining wide-ranging investment to support the priorities for the national mission, as set out in our programme for government. That includes continued investment in measures such as the Scottish child payment and increased investment to deliver more affordable homes and to expand the provision of free school meals to an additional 25,000 pupils.
Importantly, we have also committed £3 million in 2025-26 to develop the systems required to mitigate the two-child limit, whose scrapping the Child Poverty Action Group estimates could lift around 15,000 children out of poverty in Scotland.
As the minister may be aware, Save the Children has urged MSPs to back the Scottish budget for 2025-26 so that
“children can benefit from the positive steps taken”,
such as mitigating the cruel two-child cap.
Does the minister agree that Opposition members across the chamber should listen to Save the Children and join us in voting through the budget so that we can continue this vital work to eradicate child poverty from Scotland?
Yes, I absolutely agree with the member. The Scottish budget for 2025-26 is one of delivery and hope and continues to allocate more than £3 billion to actions that tackle poverty and the cost of living for households. The Scottish Government will continue to do all that we can within our powers, leaving no stone unturned, as we seek to eradicate child poverty. However, we must recognise that collective action is needed, including across this Parliament.
We all have a duty to end child poverty, and I urge members to support the budget to ensure that measures are in place to achieve that.
I will take a very brief supplementary from Brian Whittle.
Education is a significant battleground in tackling child poverty, and it used to be a priority of the Government. However, inequality of opportunity in the broader education sector—such as in sport, art, music and drama—has exacerbated the problem. Since 2011, the number of physical education specialists in our primary schools has been cut by 44 per cent. Why has the Scottish Government continually eroded investment into our education system so that opportunities are not there for all our pupils, which disproportionately affects those in the most deprived areas according to the Scottish index of multiple deprivation?
We are increasing the budget allocation across those portfolios. I have outlined the significant amounts of money that we are investing as part of the Government’s overriding mission to tackle child poverty. The member should reflect on other calls from those on the Conservative benches that would lead to £1 billion-worth of cuts to public service provision, and he should reflect on the lack of credibility and the incoherence that is emanating from those on the Conservative benches on such matters.
That concludes portfolio questions. There will be a brief pause to allow front-bench teams to swap.
Air adhart
Business Motion