Official Report 1092KB pdf
The next item of business is a debate on motion S6M-16239, in the name of Kenneth Gibson, on behalf of the Finance and Public Administration Committee, on the Scottish budget 2025-26. I invite members who wish to speak in the debate to press their request-to-speak button. I call Kenneth Gibson to speak to and move the motion on behalf of the committee.
14:57
I am pleased to open the debate on behalf of the Finance and Public Administration Committee. I thank my parliamentary colleagues, our excellent clerking team and all of the witnesses who gave evidence to the committee to aid our deliberations.
Today’s debate provides a welcome opportunity to discuss pre-budget findings from Parliament’s committees and how their reports have influenced the Scottish budget 2025-26.
This year’s context for pre-budget scrutiny was one of uncertainty, with no medium-term financial strategy in 2024, due to the imminent United Kingdom general election and emergency in-year budget controls that were in place for a third year running. Key strategic documents, including the infrastructure investment plan pipeline reset and multiyear plans that were expected in late 2023, were again delayed in view of the forthcoming UK Government spending review. In late July, the UK Government announced £8.1 billion of spending cuts and warned of a difficult UK autumn budget ahead.
Most committees reported their findings before or just after the UK budget was published on 30 October and were therefore unable to fully consider ways in which the consequential increases in resource and capital spending for the Scottish budget should be spent, or the potential impact of UK-wide decisions on the Scottish budget, including increases to employer national insurance contributions and how those were funded—an issue that still remains unclear.
Nevertheless, there was much for committees to consider. Before I focus my remarks on the Finance and Public Administration Committee’s findings, I again touch on the common themes across our pre-budget work, as identified by the Scottish Parliament information centre.
Perhaps unsurprisingly, many of the same overarching themes that we explored last year continued throughout our scrutiny this year. Those include: transparency and accountability; the need for multiyear plans and preventative spend; calls for a more strategic, long-term outlook; clearer links between spending decisions and Scottish Government priorities; and properly evidenced decision making. However, this year, SPICe also notes:
“The increasingly strong language used by committees in their pre-Budget reports may reflect their impatience and frustration at seeing little progress in some areas, and the overwhelming message was that committees are looking to the Scottish Government to show leadership and a clear strategic direction.”
Both the Finance and Public Administration Committee’s pre-budget report and our budget report that was published yesterday included elements of frustration, particularly regarding: the lack of medium and long-term financial planning, notwithstanding external factors; repeated delays to publishing key strategic documents; and the need to reiterate recommendations before clear responses are provided.
I will point to some of our more positive reflections, including on transparency. We have encouraged and welcomed the Scottish Government’s efforts to improve the transparency of budgetary information in recent years. That has included, for example, publishing more detailed information with in-year budget revisions, and providing budget data by classification of functions of government—COFOG—to enable comparisons over time, even when ministerial portfolios change.
At the committee’s request, this year’s Scottish budget also includes a comparison with actual spending this year, rather than a comparison with the 2024-25 budget as passed. Importantly, that allows more accurate comparisons of spend, particularly in those years where in-year changes have been substantive. Along with the committee, the Scottish Fiscal Commission and the Fraser of Allander Institute welcomed that development. Nevertheless, both organisations point to where improvements can still be made, and we continue to pursue those with the Scottish Government. For example, we have asked that significant in-year transfers that occur regularly, such as moving social care funding from health to local government, be baselined in the budget for transparency, and that public-private partnership costs included in budget lines are consistently presented across portfolios.
A key focus of our pre-budget scrutiny was the Scottish Government’s approach to growing the economy with a view to increasing Scotland’s overall tax base. To inform our scrutiny, last August, we visited the life sciences department at the University of Dundee, which generates £10 of gross value added for every £1 of investment from the Scottish Government. The university’s regius professor, Sir Mike Ferguson, informed us that £5 million from the Scottish Government for proof of concept investment would generate a return of £200 million.
In response to our recommendations, the Cabinet Secretary for Finance and Local Government committed to supporting research and development, recognising the important role that our universities play in attracting investment, supporting world-leading sectors and building a highly skilled workforce.
We note that the Scottish Government recently set up a Cabinet sub-committee on investment and the economy that will
“help create a business environment that drives investment and growth.”
We have therefore requested regular updates on progress and outcomes of the sub-committee’s new strands of work.
Building on that scrutiny, our budget report repeats our disappointment that the Scottish Government
“continues to hold back from publishing its Infrastructure Investment Plan pipeline refresh until after the UK spending review.”
We strongly agree with the Scottish Fiscal Commission’s position that the 12 per cent increase in capital spending in 2025-26 allows the Scottish Government to
“restart paused capital projects and make some new commitments.”
Although available capital will then slowly decline to 2029-30, the committee has “strongly urged” the Government to set out its priority commitments to ensure that it is in the best position to “hit the ground running” and invest in infrastructure projects at the start of the next financial year.
Next year, alongside the medium-term financial strategy in May, the Scottish Government also plans to publish a fiscal sustainability delivery plan. It would be helpful if the cabinet secretary could provide more detail on the purpose of that new document, the time period that it will cover and how it fits into the wider budget process.
The Scottish Government has also committed to publishing a new public service reform strategy. In light of the announcement of those additional documents, we asked for a progress update regarding the First Minister’s intention to provide
“more concrete actions and fewer strategy documents”,
including any reduction in numbers achieved to date. Disappointingly, the Scottish Government responded that
“There is no central information held on reporting of the number of strategy documents, as decisions of this nature are made by individual cabinet secretaries.”
We therefore ask the Government to conduct an exercise across portfolios to identify the number of live strategies in place, to provide a baseline for numbers to be monitored and reduced wherever possible. Outcomes of that work should be reported back to the committee by the end of June 2025.
More broadly, the committee has also repeatedly asked that the Scottish Government take a longer-term approach to financial planning. We were therefore disappointed at its decision not to publish an MTFS in 2024. Regardless of the context that I mentioned earlier, that made it more difficult for committees to consider how budget priorities sit within the longer-term context.
The Scottish Government’s fiscal update last September, although welcome, focused primarily on the current budget and did not provide the anticipated long-term outlook. We seek assurances that that situation will not be repeated in future years.
The Scottish Fiscal Commission’s first fiscal update, which was published in August 2024, filled in some of the blanks and provided welcome longer-term context for our pre-budget scrutiny. We have asked the SFC to consider publishing a similar update in future years to provide an up-to-date Government funding position and commentary on in-year spending changes. Those have been substantial in recent years.
Another area of our focus in both our pre-budget and budget reports is the sustainability of spending on social security payments and public sector pay. I will focus on social security spending, and the deputy convener of the Finance and Public Administration Committee will return to public sector pay in his closing speech on behalf of the committee.
SPICe explained that
“Scottish Government decisions on social security have cumulatively added significant cost pressures to its budget.”
That is largely because of the introduction of benefits that are unavailable in the rest of the UK, such as the Scottish child payment. Therefore, the Scottish Government is spending more on benefits than it would have done if those benefits had not been devolved. The SFC forecasts that social security payments in 2025-26 will cost £1,334 million more than they would be if benefits remained at UK levels. That figure will rise to £1,463 million in 2029-30, not accounting for inflation.
The rising social security bill reduces the funding that is available for other spending priorities in the Scottish budget, so the committee previously asked the Scottish Government how it would
“assess the long-term affordability and sustainability of its social security policies and their impact on other areas of spend”.
In response, the Scottish Government said that it will
“continue to take a responsible and capable approach to Scotland’s finances as new budget pressures emerge”,
including by
“monitoring all areas of expenditure during the year, prioritising spend, and maximising efficiencies.”
The committee did not consider that to be an adequate response. It asked the Scottish Government to carry out that full assessment, with outcomes included in the MTFS 2025 to inform future budget planning.
The committee considers that more certainty around the timing of UK fiscal events and of the UK spending review that is on the horizon brings welcome opportunities for the Scottish Government to adopt a much-needed strategic approach to budget planning. It would therefore be helpful if the cabinet secretary could update Parliament on when we might expect the next Scottish spending review.
I commend the Parliament’s collective pre-budget work. SPICe has noted that it is growing in strength and involves more engagement activities, more evidence received and fewer but more targeted recommendations.
I move,
That the Parliament notes the pre-budget scrutiny undertaken by the Finance and Public Administration Committee, and other parliamentary committees.
I remind members who wish to speak but have not yet pressed their request-to-speak buttons to press them now.
15:07
I begin by recognising the importance of the role of Parliament’s committees in scrutinising the Scottish budget. I thank the Finance and Public Administration Committee for its budget report, which was published yesterday. I will respond to it in detail formally ahead of stage 2.
In my statement to Parliament on 4 December 2024, I spoke of how we can deliver progress for the people of Scotland only if there is a willingness to work together across the chamber. That is how Parliament is designed to work: as a Parliament of minorities improving the budget, as the people of Scotland would expect. The agreements that were reached with the Scottish Liberal Democrats and the Scottish Green Party demonstrate what can be achieved in that collaborative space, and I welcome that constructive engagement.
The Government recognises the importance of longer-term financial planning and fiscal sustainability. In looking ahead to the new financial year, and given the clear view of the Finance and Public Administration Committee, I have instructed officials to begin planning for a Scottish spending review that will identify opportunities to optimise the use of Scottish Government funding over the longer term. I will engage with the committee and the Scottish Fiscal Commission on those plans.
On the infrastructure investment plan pipeline refresh, multiyear certainty on capital budgets is essential to determine what projects and programmes can be delivered over the medium term. For that reason, the UK spending review is essential to support that process.
Even without knowing the detailed finances, would it not be possible to prioritise projects so that there would be high-priority ones that would be our first choice, then medium and lower ones, or something like that?
We have already set out a number of priority projects in the budget. A number of capital projects were identified and named, giving a clear sense of priority to those projects. However, I will set out the longer pipeline as soon as I can after the UK spending review is concluded.
I thank the committee for its recognition that the Scottish Government has taken steps to improve the transparency of the new budget, and I appreciate the point that the committee has raised on the new approach on budget comparators and in-year budget revisions. There are complexities in the Scottish budget, where policy responsibility can sit in one area with delivery elsewhere. However, I will reflect on that to consider whether we can do more to simplify the presentation of the next budget beyond what we have already done.
I appreciate the committee’s support for the Government’s tax strategy, including our commitment to further develop evidence and evaluate tax policy. We will continue to closely monitor the impact of our tax policy decisions using a range of evidence, and we will publish further research on the impacts of that later this year.
On council tax reform, the joint working group met yesterday and agreed to begin a process of engagement and consultation this year. As part of that process, the Scottish Government and the Convention of Scottish Local Authorities will jointly seek to build consensus across local government and the Scottish Parliament on potential areas of reform. Together, we will engage with Opposition spokespeople and council leaders. I also welcome the Local Government, Housing and Planning Committee’s inquiry into council tax reform.
The Minister for Public Finance will speak more about public service reform during the debate, but I can confirm to the committee that the Government will continue to report progress to the Parliament at six-monthly intervals.
I am grateful to the cabinet secretary, and I am sure that the committee members are, too. One of the fundamental points that the convener raised in his opening speech was the fact that, time and again, the committee is having to repeat its request for important information about public sector reform. This is not the first year that we have had that—it is probably the fourth year that we have been asking for it. One of the committee’s disappointments is that it takes such a long time to get answers. Does the cabinet secretary accept that?
We take any issues that are raised by the committee seriously, and we will seek to respond to them in as positive a way as we can. However, I am aware that the Minister for Public Finance has had quite deep engagement with the committee on his work on public service reform, and I know that he is keen to continue that engagement on the detail of that work.
On the PSR invest to save fund, I am pleased to confirm that we have written to public bodies to provide guidance and an application form to invite funding bids. I am happy to write separately to the committee to share that information.
I want to move on to recognise some key points that were raised by the other committees in their budget scrutiny. Eradicating child poverty, which is the Government’s top priority, has been of interest to a number of committees. The Joseph Rowntree Foundation’s report “UK Poverty 2025” is clear that only Scotland is expected to see child poverty rates fall by 2029, with rates forecast to rise in England, Wales and Northern Ireland. That is recognition that the action that is being taken in Scotland is reducing child poverty, but more work has to be done.
The budget invests significantly to reduce the pressure on household budgets by allocating more than £3 billion a year to policies that tackle poverty and the cost of living. The Government is going further to prioritise action to develop the systems to mitigate the two-child limit, which could lift 15,000 children out of poverty. More widely, the new budget will invest £768 million in the affordable housing supply programme next year, an investment that was welcomed by the Economy and Fair Work Committee, which highlighted the lack of affordable housing supply.
It is a sad fact that poverty leads to lower achievement at school and beyond. That is why the Government will invest more than £1 billion in high-quality funded early learning and childcare as part of the budget. The new budget also includes £186.5 million for local authorities to maintain teacher numbers and £29 million for additional support needs to support the recruitment and retention of the ASN workforce, the latter of which is of particular interest to the Education, Children and Young People Committee.
Growing the economy and delivering on our net zero ambition are strategic priorities for the Government and are of interest to multiple committees. We are almost tripling our investment in offshore wind to £150 million, which will support the economy and help to deliver on our net zero ambitions.
To deliver our programme of support for Scotland’s businesses, the 2025-26 budget provides £321 million for our enterprise agencies, which is an increase of £14 million from 2024-25.
More broadly, in 2025-26, the budget commits £4.9 billion of investment with a positive benefit for climate. Our strong focus on sustainable transport means that nearly £2.9 billion will be invested in public transport infrastructure and green initiatives.
Delivering and supporting high-quality sustainable public services is a priority for all of us across the chamber, which is why the budget provides a record £21.7 billion for health and social care. That investment will increase capacity as well as focusing on driving productivity and optimising existing resources.
The budget recognises the importance of local government and will provide local authorities with a funding package of more than £15 billion in 2025-26. The Local Government, Housing and Planning Committee has called for a reduction in ring-fenced funding, and I am pleased to say that the 2025-26 budget baselines a further £524.9 million of local government funding.
I appreciate that all budgets in the public sector are under pressure. I intend to give guidance on employer national insurance contributions to all public sector organisations, including local government, as soon as possible.
Will the cabinet secretary take an intervention?
I am sorry, but I do not have time.
The cabinet secretary is concluding.
As committees will be aware, the Government has called on the UK Treasury to fully fund those additional costs. On 24 January, the Treasury advised that Scotland will receive only a Barnett share of the available funding, which is deeply concerning because it will create a shortfall of £300 million.
Cabinet secretary, you need to conclude.
The Treasury’s decision fails to take into account Scotland’s larger public sector per person than those in the rest of the UK.
This is a balanced and fair budget package for Scotland and I encourage all members in the chamber to support it.
We are a little tight for time—there is a bit of leeway, but not much.
I call Clare Adamson to speak on behalf of the Constitution, Europe, External Affairs and Culture Committee.
15:17
As convener of the Constitution, Europe, External Affairs and Culture Committee, I am pleased to speak on its behalf today. As always, I thank our committee clerks and the Scottish Parliament information centre for their support of the committee’s budget scrutiny.
At the start of this session, the committee set its priority for budget scrutiny as being the culture sector spend. I thank those in the sector who spoke to us, including Culture Counts, Historic Environment Scotland, Wigtown Festival Company, and the National Galleries of Scotland.
In evidence, the National Galleries reported that
“going to visit an art gallery for 30 minutes once a month can extend a person’s lifespan by 10 years”
and that
“Art is not a luxury; art is essential to our culture thriving and surviving.”—[Official Report, Constitution, Europe, External Affairs and Culture Committee, 9 January 2025; c 14.]
I have spoken many times in the chamber about how culture is integral to who we are as individuals, as communities and as a country. Just as the incoming artistic director of Pitlochry Festival Theatre was inspired by its motto to
“share Pitlochry with the world and the world with Pitlochry”,
we should all be inspired that culture allows us to share Scotland with the world and the world with Scotland.
The committee welcomes the commitment to increase investment in culture by £100 million annually by 2028-29, as well as the additional funding that is the first step towards the £100 million increase. That is good news and it is warmly welcomed by the sector.
This has not been an easy time for the sector. Confidence was knocked by the regrettable temporary closure last August of Creative Scotland’s open fund for individuals. It would be helpful for the cabinet secretary to update us on the lessons that were learned from that and on how such a scenario might be avoided in future, particularly because the funding was confirmed after the pre-budget fiscal update, a fortnight after Creative Scotland had announced the closure of the fund.
The committee’s view is that we need to substantially improve the relationship between Creative Scotland and the Scottish Government. It is regrettable that the multiyear funding programme announcements were postponed, although I note the statement of the Cabinet Secretary for Constitution, External Affairs and Culture today on the outcomes of the application process for multiyear funding. It is important to strengthen the relationship between the Government and Creative Scotland to prevent further uncertainty in the sector.
We agree with the culture secretary that Creative Scotland’s budgetary process, and that of the wider sector, might benefit from being in sync with the Scottish budget timetable—I would welcome the finance secretary’s thoughts on that point.
The culture secretary has just updated the Parliament on the results of the £20 million multiyear funding awards. We strongly encourage Creative Scotland to listen to those applying for the multiyear funding programme, who commented that the process
“drew major resources across many months”
and that it was
“onerous and took considerable time away from core activity”,
and who outlined
“a level of needless bureaucratic complexity”.
The challenge remains as to how the sector maximises the impact of multiyear and increased funding. The committee welcomes the forthcoming independent review of how the culture sector is supported and the review of Creative Scotland, under the leadership of Dame Sue Bruce. It is timely that we should ensure the effective distribution and investment of that additional spend.
The committee has undertaken a good deal of work in session 6 on funding for the sector, and the review could benefit by taking account of the substantial evidence base and of our report recommendations over the session, which include working on innovative funding solutions. We need much greater urgency if we are to make progress in the areas of cross-portfolio funding—some of the many possible options include a percentage for the arts scheme and the possible leveraging of private investment.
We need to engage with those delivering community-based activities as well as the bigger cultural organisations. We welcome last week’s publication of the survey on how culture and the arts are currently supported, which will inform the scope of the sectoral review that the Government has announced. As the sectoral review and the review of Creative Scotland are happening in parallel, it would be interesting to understand how the two reviews will interact and address the concerns that the committee has had over this session, such as the handling of the Rein project after the funding decision was publicly challenged and the extent to which Creative Scotland was open and transparent in addressing that matter.
More generally, and as I have mentioned, we heard from the sector that Creative Scotland’s funding process is very difficult to complete. It would be helpful if the independent chair could quickly lay out the scope of the independent review of Creative Scotland, so that we could avoid some of those concerns. The committee’s view is that we should consider operational issues as well as Creative Scotland in general.
Our culture is our lifeblood, and we look forward to seeing how those things develop. We note that the sector is very welcoming of the developments in this area.
I call Audrey Nicoll, on behalf of the Criminal Justice Committee, to speak for around six minutes.
15:23
I am pleased to speak in this budget debate on behalf of the Criminal Justice Committee. I thank committee members, the clerking team and SPICe and comms colleagues for their support in our budget scrutiny, as well as the many stakeholders who provided evidence to the committee.
This year, our focus was again a broad one as we scrutinised the financial pressures that policing, fire and rescue services, prisons, prosecution services and courts, community justice, criminal justice social work and the third sector face. Without exception, every organisation that gave evidence told us the same story—that there was no scope for further cuts and that meaningful investment was long overdue.
We heard stark evidence from the Scottish Fire and Rescue Service that a lack of capital and resource budget was preventing important work from happening in response to firefighters’ exposure to fire contaminants and also preventing the provision of dignified facilities from progressing. That concerned many members, who saw that as essential provision, given that the role of the Scottish Fire and Rescue Service continues to evolve.
Similarly, we heard from Police Scotland that the situation was “critical” and that it was vital that the organisation moved towards new funding arrangements, namely
“multi-year funding commitments from Scottish Government, the exercise of statutory borrowing powers and the establishment of a facility to enable the carry forward of financial reserves.”
The Scottish Police Authority said that the impact of the United Kingdom Government’s national insurance increase, which was announced during our scrutiny, was that an additional £25.3 million of revenue would be required next year.
The Scottish Prison Service told the committee that a significant proportion of its budget is
“exposed to inflation and to public sector pay policy”,—[Official Report, Criminal Justice Committee, 6 November 2024; c 30.]
which limits its options for mitigating cost pressures from emerging challenges such as a population that has grown by around 10 per cent and that is far more complex, thereby creating significant additional budgetary challenges. We also heard of the pressures arising from the ageing prison estate—in particular, the urgent need to replace HMP Barlinnie with a new facility at HMP Glasgow. The committee welcomes the fact that HMP Glasgow is a key priority for major infrastructure improvements in the prison estate.
That is just a flavour of the evidence that the committee took; more is set out in our report, which was unanimously agreed.
Of particular interest to the committee was the pressure on capital budgets and investment right across the sector, and the ways in which relatively small sums of money invested using a spend-to-save approach in individual parts of the sector can bring wider benefits elsewhere across it. One example was the investment in the summary case management system, which has seen the number of police witness citations fall to around half in some areas of Scotland, thereby releasing officers for front-line duties. Other examples that should result in budget savings over the longer term are the investments in body-worn video cameras for police and the new digital evidence-sharing capability, or DESC. The benefits of DESC include fewer victims and witnesses having to attend court, which reduces the time it takes for cases to come to court and reach a conclusion, and, importantly, saves police time. During a pilot of the programme in Dundee, around 19,500 pieces of evidence were handled through DESC, which freed up almost 550 hours of police officers’ time.
As the committee said last year, it also wants to see reform of the criminal justice sector continue. It urges the Scottish Government and others to invest in relatively low-cost schemes in which investments have clear cost savings but significant benefit. In short, the spend-to-invest approach is one that we want to see adopted further.
I welcome the response of the Cabinet Secretary for Justice and Home Affairs to the committee that she had been able to secure an increase of £400 million, or 10.5 per cent, compared with the opening 2024-25 budget that was presented to Parliament in December 2023. It is important to note, however, that that increase does not account for the in-year adjustments to budgets that were made in 2024-25. The committee considers that in-year payments should be more transparent in order to provide the committee with a more accurate picture of the funding situation of the organisations that it holds to account—not just the sums provided at the start of each financial year. We also said that the financial memoranda that are presented to the Parliament on Government bills must be as accurate as possible and that proposed legislation must be accompanied by appropriate resources. As members will know, in this session our committee has scrutinised several significant bills, all of which have significant associated costs outlined in their financial memoranda.
I welcome the resource and capital increases for the criminal justice sector for 2025-26. The committee looks forward to scrutinising whether those extra sums have been invested wisely using a spend-to-save approach. We will continue to keep the pressure on and will work with the cabinet secretary to improve the way in which our criminal justice sector works.
I call Douglas Ross, on behalf of the Education, Children and Young People Committee. You have around six minutes, Mr Ross.
15:29
I welcome the opportunity to speak in today’s debate on behalf of the Education, Children and Young People Committee. For our budget scrutiny, we focused on the long-term sustainability of funding for colleges and universities.
First, I turn to the college sector, which has been a considerable focus for the committee throughout this session. We have repeatedly raised concerns about the extent and impact of the financial challenges that our colleges face.
In gathering evidence ahead of this year’s budget, the committee heard more about the on-going pressures on colleges. Following flat cash settlements in 2021-22 and 2022-23, the resource budget decreased from £675.7 million to £643 million between 2023-24 and 2024-25. Although the net capital budget for colleges increased from £82.4 million to £84.9 million, that was set against the existence of a considerable maintenance backlog at Scottish colleges.
In its 2022 report on Scotland’s colleges, Audit Scotland identified a £321 million shortfall in funding for lifestyle and backlog maintenance. In its 2023 report, it stated that the £4.7 million fund that was available in 2023-24 from the Scottish Funding Council for urgent repairs was in high demand—bids with a total value of £20 million were received from the sector for that £4.7 million fund.
In its 2024 report, Audit Scotland said that the financial health of the sector had deteriorated and that there had been a 17 per cent real-terms reduction in resource funding since 2021-22.
In June, the Scottish Funding Council told the committee that four colleges were experiencing significant cash-flow issues and that the SFC was supporting recovery plans, which included options such as rescheduling grants, funding voluntary exit schemes and deferring loan repayments.
In the 2025-26 budget, the resource budget for colleges has remained largely static. It has increased in cash terms by £13 million, but, according to SPICe’s budget day calculations, that represents a decrease of 0.33 per cent in real terms. The capital budget has decreased in cash terms by £20 million, to £65 million.
The director of the Fraser of Allander Institute, Mairi Spowage, warned that cutting the funding for colleges was likely to affect the generation in the economy of long-term productivity benefits from upskilling the population; the economic activity that is generated by the goods and services that are bought by colleges; and the contribution that colleges make to the goals that are set out in the Scottish Government’s national strategy for economic transformation.
Colleges are classified as public bodies. As such, they must balance their budgets every year, and they are restricted in the scope that they have to build up financial reserves. Their classification as public bodies also means that they are largely reliant on public funds—78 per cent of their income comes from the SFC grant.
In our pre-budget letter to the minister and the cabinet secretary, we reiterated our call for as many financial and operational flexibilities as possible to be made available to improve colleges’ ability to deliver, but we acknowledged that such flexibilities alone will not address the financial issues that they face.
In his response to the committee, the minister stated that the SFC plans to revamp the college funding model for future sustainability, and when he gave evidence to the committee earlier this month, he highlighted the work that is under way to support colleges to grow their commercial income so that they can become less dependent on public sources. The committee is keen to hear more about the SFC’s plans, as well as what support for colleges could look like.
In her letter to the Finance and Public Administration Committee this week, the Cabinet Secretary for Finance and Local Government announced £3.5 million for the creation of an offshore wind skills programme and a college care skills programme, as well as the provision of £700,000 to support the continuation of Corseford College. It would be helpful if we could be provided with more information about those funds and how they will be allocated.
I now turn to the university sector. The university resource budget for 2024-25 was £760.7 million, which was a decrease from £789.2 million in 2023-24. The capital budget increased from £340.7 million in 2023-24 to £356.9 million in 2024-25.
In its final allocations for universities in 2024-25, the SFC noted that, across all institutions, there was a 3.6 per cent reduction in teaching funding and a 4.2 per cent increase in research and innovation funding, that upskilling funding that had been worth £7 million in 2023-24 was being removed, and that digital poverty funding that had been worth £1.6 million in 2023-24 was being removed.
The higher education resource budget for 2025-26 has been set at £774 million, which represents a 1.7 per cent cash increase compared to 2024-25 but a 0.68 per cent decrease in real terms. The higher education budget has increased from £357 million in 2024-25 to £368 million, a rise of 3.2 per cent in cash terms but, in real terms, a 0.9 per cent decrease.
The committee will continue questioning the Government on many issues that it has heard about during its deliberations, but we welcome the support that we have had from committee members and from the cabinet secretary, the minister and their officials. Given the financial challenges that universities and colleges are facing, we hope that we can continue to look at those and find some solutions for these important sectors.
I call Colin Smyth to speak on behalf of the Economy and Fair Work Committee.
15:35
I am grateful to the Deputy Presiding Officer for giving me permission to leave the debate early in order to attend a business event. I apologise to members, because that means that I will miss some contributions in this important debate.
Scotland’s economy, like that in the rest of the UK, has seen a sustained period of low growth and low productivity against a backdrop of rising costs in recent years. When the First Minister assumed office in May, he said that economic growth would be a priority for his Government. Effectively supporting Scotland’s businesses will be key to delivering that ambition.
The Economy and Fair Work Committee’s pre-budget scrutiny had a particular focus on our enterprise agencies, the Scottish National Investment Bank and VisitScotland, which together account for the majority of the spend that our committee scrutinises.
That economic development landscape has been described as cluttered, and the committee has heard repeated calls for a more seamless and focused support mechanism for businesses that still recognises the distinctive needs of different sectors, businesses of different sizes and different parts of Scotland. We know that the Withers review recommended that enterprise agencies should take responsibility for supporting businesses with skills and workforce planning, which will require those agencies to broaden their approaches. The committee notes that that will be considered as part of the reform programme for post-school education and skills and intends to take evidence shortly that will feed into that.
In our pre-budget letter to the Government, we sought further clarity about its wider plans to reform the economic development landscape. Although the Government outlined its three broad priorities, there was no detail about reform, such as progress to date, future plans, expected timelines or measurable outcomes. At a time of challenging budgets and growing demand, delivering public sector reform has never been more important.
It was also clear from the evidence that we took that concerns remain about funding for the current model, with a 30 per cent real-terms reduction in Scottish Enterprise resource budgets in the past two years. In evidence to the committee, the agency made clear that it might have to consider
“stopping doing some things that we are legally obliged to do”.—[Official Report, Economy and Fair Work Committee, 25 September 2024; c 25.]
The committee also heard concerns about reductions in capital funding for our enterprise agencies and for the Scottish National Investment Bank in recent years, and about the fact that short-term funding decisions had caused uncertainty and hampered some of their work.
Funding reductions for VisitScotland in recent years led to a strategic change programme that included disposal of the iCentre network, ending the quality assurance schemes for tourism and business events, and pivoting towards a digital first approach. VisitScotland has also had to scale back activity in growth markets to focus on core markets. We know how vital tourism is to Scotland’s economy and that the Scottish Government has identified sustainable tourism as a growth sector.
Our hospitality sector is a key part of that tourism offer. The UK budget provided 40 per cent business rates relief to retail, hospitality and leisure businesses across the rest of the UK, which resulted in £147 million in consequentials for Scotland. In recent years, the Scottish Government has chosen not to pass those consequentials on to retail, hospitality and leisure businesses, and the Economy and Fair Work Committee has repeatedly heard that those sectors feel that they are now at a competitive disadvantage in Scotland, compared with the rest of the UK.
Will the member give way?
Yes, if I have time.
Is it the member’s argument that where money is being spent on one subject in England we should automatically spend the consequentials on the same subject?
It is not my argument; I am repeating evidence that the committee heard from those in the business sector who believe that those different decisions put them at a competitive disadvantage.
The Scottish Government’s budget for next year proposes a 40 per cent business rates relief, which is welcome, but it is restricted to hospitality businesses—it does not cover retail—and it is only for those with a rateable value of up to £51,000. Many businesses have expressed concern that that will lead to a cliff edge for them. When I asked the Deputy First Minister about that at committee, she pointed to, among other things, the commitment to review the methodology for non-domestic rates assessments for hospitality businesses. That is welcome because they have, understandably, expressed concern about the focus on turnover when it comes to that assessment. However, we still do not have clarity on when any further review will be completed.
The main strategy that underpins the Government’s priority of economic growth is the national strategy for economic transformation. The Economy and Fair Work Committee, the Finance and Public Administration Committee and the Public Audit Committee have all highlighted concerns that were raised in last year’s Audit Scotland report on NSET, including the
“gap in collective political leadership”,
the fact that there is no information on
“how much investment is needed to deliver the NSET”,
the fact that there is little detail on
“how directorates are working together to agree funding priorities”
and the
“lack of transparency about directorate decisions on allocation of funding for NSET actions.”
Audit Scotland said:
“there is a risk that NSET objectives are not given the same priority by all directorates when it comes to funding decisions.”
I raised Audit Scotland’s report with the Deputy First Minister during her two appearances before the Economy and Fair Work Committee last year. The committee strongly believes that there should be a clearer link between NSET and the budget, with NSET driving budget decisions across Government departments and more coherence across portfolios. The ability to evidence spend on strategies and what it achieves is vital for measuring the success of NSET or, indeed, any Government strategy.
As we have heard from a number of other conveners, the budget presentation has made year-to-year comparisons of spending plans that bit more complicated. The committees’ role is to scrutinise and hold the Scottish Government to account, and that requires information that we know exists to be made available at a much earlier stage in the budget process.
Following the Deputy First Minister’s most recent attendance at committee, we received a helpful letter that sets out spending plans in her portfolio and how they have evolved over the past two years from the budget bills, detailing in-year transfers and providing the latest spending figures for each year. However, the committee should not have had to ask for that information; it should be contained in the budget when it is published.
The budget has a key role to play in driving economic growth, which will raise living standards, give people more freedom in their lives and help to revitalise and rejuvenate communities. I hope that the Government will act on some of the points that the Economy and Fair Work Committee has raised about how we support Scotland’s businesses to help to deliver that important growth.
I call Karen Adam to speak on behalf of the Equalities, Human Rights and Civil Justice Committee.
15:42
I am happy to contribute to the debate as convener of the Equalities, Human Rights and Civil Justice Committee.
I take this opportunity to remind members of the three principles of human rights budgeting, which are participation, transparency and accountability. As members may recall, our 2024-25 pre-budget scrutiny saw us set out a three-year plan to look at each of those principles in turn. We started with participation in 2024-25, under the convenership of our now Minister for Equalities. For our 2026-27 pre-budget scrutiny, we will look at the principle of accountability. This year, however, we focused our work on the principle of transparency.
We were particularly interested in transparency in the context of human rights budgeting and the role of national outcomes in supporting transparent and data-driven decision making and mainstreaming equalities across portfolios. Alongside that, we explored the Scottish Government’s progress in implementing the recommendations that the equality and human rights budget advisory group made in 2021. The minister will recall that the committee adopted that approach for our 2024-25 pre-budget scrutiny during her time as convener. We worked with the whole family equality project, which is supported by the Capital City Partnership, to learn how people view and understand the budget process and how it impacts their lives. That allowed citizens the opportunity to express to us and the Government the areas that they felt should be prioritised and how they could feed into the process to help them to understand the rationale behind spending decisions.
We hoped to expand on that approach for the 2025-26 scrutiny process through an equalities mainstreaming workshop involving stakeholders, a citizens group and representatives from the Scottish Government. However, due to the UK election, the programme for government timetable and the changes that have taken place, we have reconsidered our timetable for that work, although we hope to return to it this year.
I referred to the role of national outcomes in supporting transparent and data-driven decision making and mainstreaming equalities across portfolios. Several areas of interest and relevance to the committee came out of responses to the Finance and Public Administration Committee’s call for views on the proposed revisions to national outcomes. Those included gender equality as a link to gender budgeting and understanding the impact of spending decisions on women and girls; the importance of continued monitoring and data collection to track trends in inequalities; challenges in defining and measuring inequality, which can impact the evaluation of any budget decision aimed at tackling inequality; and efforts focused towards reducing specific inequalities, including in rural healthcare and housing policy. Throughout our work in several areas, the issue of rurality as an additional barrier to equality has been raised with us, and we will look to do further work and investigation in that regard.
We look forward to welcoming the Minister for Equalities to the committee next month, when we will explore further how work on areas that are identified for improvement is progressing. One such area is policy coherence. In evidence, stakeholders highlighted that the national performance framework’s effectiveness could be undermined by a lack of coherence with other initiatives, particularly the equally safe strategy. For example, greater integration of primary prevention of violence against women and girls across relevant outcomes, such as those on communities and education, was seen as essential.
Alison Hosie of the Scottish Human Rights Commission addressed the issue of policy coherence in her oral evidence. She welcomed significant improvements in the equality and fairer Scotland budget statement and said that a lot of work had been done to make it more coherent with policy decisions. However, she told us that there remains an issue with the EFSBS being published at the same time as the budget, as that does not support the public in knowing what discussions have happened and what has fed into decision making. She suggested that capacity building is needed across all policy areas to ensure that all departments in the Government are consistently practising human rights-based approaches.
Our predecessor committees have encouraged more mainstreaming of equalities and human rights throughout the scrutiny of the budget by all the Parliament’s committees. We reiterate the point today and will continue to do so. That was driven home to us through our work with the whole family equality project, which gave us the added impetus that it would improve cross-portfolio working.
There are opportunities to be creative and innovative. For example, there are opportunities for joint committee working to ensure that the fullest scrutiny is applied. We can make recommendations to the Scottish Government or we can ask what it is going to do, but there is nothing to stop us coming up with solutions, especially if we work in partnership with real people in citizens panels.
Looking ahead, as I touched on earlier, our focus next year will be on the third principle of human rights budgeting, which is accountability. We will then aim to have a review of our session-long focus on human rights budgeting, during which we anticipate taking a look back at progress towards the Scottish Government’s commitments to move towards a human rights budget.
I call Edward Mountain, on behalf of the Net Zero, Energy and Transport Committee. Mr Mountain, you have around six minutes.
15:48
The budget theme pursued by the Net Zero, Energy and Transport Committee this past year has been on whether major public spending decisions are in line with the balanced pathway to net zero modelled by the Climate Change Committee. Our scrutiny has been of the big-picture variety in many big spending areas of energy and transport. Budgets are about tough choices; given that I have six minutes, that applies to this speech, too, so I can run through only the main areas that the committee discussed.
Turning to the energy portfolio, one of the headline commitments is the increase in offshore wind supply chain funding from £10 million to £163 million. We have seen genuinely impressive progress in offshore wind in recent years, but there is still a feeling that it is an opportunity partly missed, with not enough value added domestically, especially in manufacturing.
We would like to know what Scotland’s percentage return on that investment is. If that investment is good news, the other side of the coin is the use of ScotWind revenues for general spending. I will not use this speech to enter into the debate on whether the Scottish Government had no choice but to dip into the fund. I will simply say—I hope that I am being objective—that it was not good news. It communicated a skittishness rather than consistency in the Government’s long-term financial commitment to growing the green energy sector. In January, the acting cabinet secretary expressed what I understood to be a commitment to replenish that funding source. The committee will be watching to see what that actually means.
This session of Parliament began in 2021 with big questions about the roles of industrial-scale electrolysis and carbon capture technology in the energy transition. Four years on, we are no wiser, which I have to say is frustrating. On the Acorn project, I recognise that decisive movement is needed on the UK side. However, the £80 million publicly committed by the Scottish Government remains unspent. The cabinet secretary gave us the reasons for that, so I will just leave that there.
As for green hydrogen, the Scottish Government must ensure that its commitments match up to the ambitious rhetoric. There are indeed technical challenges in scaling up production and establishing network capacity in the area, in respect of which seed funding could make a real difference. The Scottish Government’s announcement earlier in the parliamentary session of £100 million of support for the sector sounded impressive, but the vast majority of it is still unspent. That raises questions. Are the obligations in respect of the strings attached to the funding too onerous? Is there a problem with finding projects worthy of funding? I am keen to understand better what the blockers are, given that we all want a flourishing green energy industry. I hope that the committee can consider that further before the end of the session.
Transport accounts for more than a third of Scotland’s emissions. There is a job of work to be done to accelerate the switch over to electric vehicles and to get people in their hundreds of thousands to exercise a positive choice to use buses, trains, bikes and, indeed, their own two legs. Does the budget communicate that urgency? To take one strand, the Bute house agreement promised that 10 per cent of the transport budget would be allocated for active travel by 2024-25. That would translate to £320 million in the 2025-26 budget, but the amount this year is only £188.7 million.
On public transport, this financial year has seen the end of reduced fares for peak travel. Buses remain Scotland’s most used public transport, but uptake has declined by 25 per cent since 2006. The Government has allocated £440 million to concessionary travel, but there is less than £50 million for the network support grant that helps to keep less-used services running—we risk losing more routes.
On electric vehicles, the Scottish Government has committed to 24,000 new public charging points by 2030. The number of charging points currently stands at somewhat more than 6,000, so, as anyone can see, meeting that target will be particularly challenging.
A recent SPICe blog on the budget highlighted that, across its responses to committees, the Government had described itself as “committed” no fewer than 56 times, but that details on delivery were sometimes very sparse. That echoes the Climate Change Committee’s comments last year that the Scottish Government lacks a credible delivery plan for its climate ambitions.
I understand that money is tight, and that is true across the UK. Barring economic growth and a bigger tax base, all budget decisions look big and tough. That is a daunting and difficult backdrop for a just and fair transition to net zero. The forthcoming climate change plan, which we will finally see in September 2025, presents an opportunity for serious thinking about how the Government can deliver the change more smartly and bridge the gap between ambition and delivery; it will need to make sure that it puts enough financial resources into the plan to ensure that that happens.
I call Ariane Burgess on behalf of the Local Government, Housing and Planning Committee.
15:54
I am pleased to speak in the debate on behalf of the Local Government, Housing and Planning Committee. Our pre-budget scrutiny focused on the sustainability of local government finance; however, the Verity house agreement and its vision of a more collaborative approach to delivering shared priorities for the people of Scotland has remained a constant thread throughout our work. I intend to reflect on progress on that in relation to the budget.
The committee has monitored developments on the new deal for local government throughout the parliamentary session, and we are pleased that the Verity house agreement was published in June 2023. However, although we very much welcomed the agreement, in many ways, it was just a starting point. As the cabinet secretary said, it represents
“a journey, not a destination.” —[Official Report, Local Government, Housing and Planning Committee, 21 January 2025; c 2.]
Its efficacy could only become apparent when there was clear evidence of a new collaborative approach between the two spheres of government. There can be little doubt that its ambitions had yet to be fully realised during last year’s budget process. Indeed, in my contribution to the debate in the chamber last year, I spoke of the importance of significant further progress being made in the coming year. The committee has repeatedly stressed the importance of agreeing to a fiscal framework for local government and I concluded my remarks in the debate last year by stating:
“We cannot be here again, next year, saying the same things.”
Although the fiscal framework has not been agreed to in time to fully inform this year’s budget process, we were delighted to hear from the cabinet secretary that she hopes to publish it next month. We very much look forward to discussing it with the cabinet secretary and COSLA.
I turn to our pre-budget letter and the cabinet secretary’s response to it. The UK Government stated in its autumn budget that the Scottish Government would receive an additional £3.4 billion through the operation of the Barnett formula. It is pleasing to see that some of that increase has been passed to councils, representing a 4.7 per cent real-terms increase compared with last year’s budget. However, although any increase to Scotland’s budget is to be welcomed, we are mindful of concerns about potential costs to the Scottish public sector of the increase in employer national insurance contributions. We would welcome further updates from the cabinet secretary once the Treasury has provided final figures.
It is pleasing to see that, after years of disagreement between the Government and COSLA about the interpretation of budgetary figures, COSLA’s response to this year’s budget has been relatively positive. There appears to be greater consensus between local and central government about what the figures actually mean. I stated last year that the different spheres of government
“must agree a common understanding of the figures and how best to present them, so that we can focus on outcomes for our communities, not debate different interpretations of figures.” —[Official Report, 1 February 2024; c 72 and 73.]
It is pleasing that there is evidence of such progress.
Ring fencing and directive spend has also previously been the subject of disagreement between COSLA and the Scottish Government. Therefore, the committee welcomes the cabinet secretary’s confirmation that, since the Verity house agreement, £1.5 billion of funding has been de-ring fenced. We hope that that will afford councils greater flexibility to deliver on key priorities for their distinct communities across the country.
The Verity house agreement also expresses an ambition, wherever possible, to provide multiyear certainty to councils. The committee recognises the challenge, as the Scottish Government receives only single-year settlements from the Treasury. Therefore, we welcome the UK Government’s plans to reinstate the spring spending review this year, which will trigger multiyear funding and three-year funding to be reviewed every two years. The committee looks forward to receiving a further update from the Scottish Government on its plans after the spending review. We also await the publication of the 2025 medium-term financial strategy with interest.
We are interested in the opportunities for councils to raise more of their own revenue, notably through our consideration of what became the visitor levy. The committee welcomes the legislation, but recognises that it is unlikely that all councils will benefit equally. Some may decide not to introduce a levy at all. We look forward to considering the findings of the planned consultation on the potential cruise ship levy.
We also note the recently published consultation on a general power of competence for councils. That is, again, a long-standing request from COSLA. We look forward to discussing the plans for that with the cabinet secretary in due course.
The committee is agreed on the urgent need for transformational change in councils. We must move towards a preventative approach to deliver on outcomes. We regret the slow pace of change over the 13 years since the Christie commission reported. We recognise the challenges that councils face, and we are frustrated that although the need for such change is widely accepted, there is limited evidence, with few exceptions, of such a shift happening. Effective political leadership is needed to achieve a decisive shift towards preventing poor outcomes instead of having to deal with their consequences. We welcome the Government’s recognition of that. However, that recognition can be only a first step, and we hope that there will be more evidence of concrete actions being taken over the coming year.
I welcome the improved degree of progress in the past year between the Scottish Government and COSLA. It is my sincere hope that, by this time next year, we will be able to reflect on further progress having been made on this important work.
I call Finlay Carson on behalf of the Rural Affairs and Islands Committee.
16:01
I apologise for, potentially, having to leave the debate early because of a committee commitment.
I welcome the opportunity to speak on behalf of the Rural Affairs and Islands Committee. I will reflect on our pre-budget scrutiny, including our evidence session with the cabinet secretary last week.
I begin by observing that this is a very disappointing budget for our rural businesses and communities. Based on independent analysis by the Scottish Parliament information centre, the rural affairs and islands portfolio is the only portfolio that has seen a decrease in its resource budget from the previous year—a fall in real terms of 2.1 per cent. From that observation alone, it is not clear how the budget will support the Scottish Government’s stated ambitions when it comes to supporting rural and island communities, especially given the need to transition to the new agriculture support schemes this year.
I appreciate what the committee convener is saying, but it is important to put on the record that the substantial increase in capital funding was in response to the sector saying that it would rather have the transformation money in capital funding than in resource funding. We have to look at funding in the round.
I will provide more clarity as I make my contribution.
On the presentation of the budget, in previous years, the baseline for comparison was the figure from the previous budget, but, for this year’s budget, the 2024-25 baseline figure is presented after the autumn budget revision adjustments, which presents a challenge in scrutinising budget trends. Nevertheless, it is notable that the resource budget for the rural affairs and islands portfolio shows a cut regardless of the baseline that is used.
I am sure that other committees have experienced how challenging the year-round approach to financial scrutiny is, given the pressures of bills and other legislation on committee time. For that reason, and after hearing stakeholders’ concerns about several fisheries-related statutory instruments, the committee decided to focus on the budget allocations for marine management by the marine directorate.
The marine directorate’s budget for 2025-26 has decreased by £3.4 million in cash terms. That follows a cut of £4.8 million last year. The committee heard from fisheries stakeholders that the cuts are having a negative impact on the directorate’s capacity to undertake scientific research and that, due to decreased resources, fisheries research has declined over the past decade, which is in contrast to the position of equivalent institutions in the UK and internationally. Some stakeholders felt that the organisational status of the directorate had impacted its ability to provide objective, impartial advice and limited its capacity to leverage additional funding through commissioned research.
The committee saw for itself the condition of the directorate’s laboratories in Aberdeen, which was far from ideal and was potentially having an impact on scientists’ ability to conduct research effectively. Stakeholders also raised concerns about the inadequate resources for the directorate to conduct effective enforcement, ensure compliance and develop co-managed structures with stakeholders through regional inshore fisheries groups.
The Cabinet Secretary for Rural Affairs, Land Reform and Islands informed the committee that greater co-management of fisheries policy with stakeholders would be driven by the Scottish Government inshore fisheries management improvement programme. The committee will take evidence on that programme next week and will monitor those developments.
I turn to other budget lines. Regarding agriculture funding, the committee echoed calls from stakeholders for multiyear funding from the Scottish Government for farmers and crofters. The UK Government no longer ring fences agriculture funding. That change could give the Scottish Government scope to look at multiyear funding commitments, especially as the rural support plan takes a multiyear approach.
The cabinet secretary told the committee:
“there is a spending review coming up, and, if that were to result in more multiyear certainty, I would look to provide the same as soon as we were in a position to do so.”—[Official Report, Rural Affairs and Islands Committee, 22 January 2025; c 27.]
The committee also asked about the status of the £46 million that is owed to the agriculture budget from previous years, as well as the additional funding that the Bew review recommended. The committee understands that the funding that is owed will be used through the agricultural transformation fund over two years. The committee will follow up with the cabinet secretary and the minister on how that funding has been spent as we scrutinise the implementation of the new agriculture support schemes.
After the massive cut to the forestry budget in last year’s budget, the committee sought reassurance that the comparatively modest increases to the woodland grants budget would restore confidence in the sector and help to meet tree-planting targets.
At a round-table session with forestry stakeholders earlier this month, Scottish Woodlands told the committee:
“We need certainty from targets that do not shift and budgets that do not change”,
and that
“strong Government targets and strong Government support for the sector are things that drive people here to deploy capital.”—[Official Report, Rural Affairs and Islands Committee, 15 January 2025; c 6.]
The cabinet secretary responded:
“now that there has been an increase in funding, we can continue on a positive trajectory and rebuild confidence in the sector, so that it can continue to plan and invest.”—[Official Report, Rural Affairs and Islands Committee, 22 January 2025; c 38.]
The committee will look to next year’s budget for evidence that the Scottish Government will deliver a positive trajectory of funding for the sector and, indeed, for the portfolio as a whole.
I call Clare Haughey on behalf of the Health, Social Care and Sport Committee.
16:07
I welcome the opportunity to contribute to the debate on behalf of the Health, Social Care and Sport Committee.
I thank the cabinet secretary, supporting officials, all the stakeholders who have engaged throughout the committee’s budget scrutiny process, and the committee clerks for supporting the committee in all its work.
As members will be aware, the health and social care portfolio is, again, a budget priority. Its budget is increasing by £2 billion in cash terms, which takes overall health and social care investment to £21 billion. The committee notes that that increase reflects the Government’s commitment to pass on health-related Barnett consequentials that were received as a result of the UK October budget, which amount to an additional £1.7 billion for Scotland in 2025-26.
It is anticipated that much of that funding will benefit national health service board budgets. Given the on-going challenges that health and social care services face, as highlighted in the committee’s pre-budget scrutiny, that additional funding is most welcome.
Similarly, the committee welcomes the planned £200 million investment to reduce waiting times and improve capacity, with the commitment that, by March 2026, nobody will wait longer than 12 months for a new out-patient appointment, or in-patient or day-case treatment.
The committee also welcomes the additional support for general practitioners to address pressures that are related to waiting times and lack of prevention, as well as expansion of the hospital at home service, which will, I hope, alleviate pressure on front-line acute services.
Throughout the budget scrutiny process, the committee has heard extensive evidence on the current state of health and social care services. It is no secret that health and social care staff are under immense pressure across the sector, particularly as our population ages and as a result of the recent spike in flu cases and subsequent hospital admissions. Therefore, additional funding in key areas will be necessary to mitigate those challenges.
However, I reiterate a core theme that has stood out throughout the budget scrutiny process and has, indeed, been echoed by my colleagues from the Finance and Public Administration Committee. Budget transparency through improving links between the budget and agreed outcomes is crucial in order to assess whether spending has been effective in the areas that it needs to be.
Despite increased investment, significant questions remain about the level of detail contained in budget documentation and the level of transparency around health spending. As highlighted by the Scottish Parliament information centre, previous responses to the committee from the Scottish Government acknowledge that
“it is important that there is a clear link between spending plans and commitments.”
The committee argues that that acknowledgement has yet to be reflected in the health and social care portfolio. Specifically, changes to the presentation of budget numbers this year mean that the 2024-25 baseline is now presented after the autumn budget revision. Given that substantial transfers and additions to other portfolios occur at the time of the ABR and that one could reasonably expect similar transfers in the future, that could have particular consequences for the planned increase in the health and social care budget and the extent of that increase in real terms.
As highlighted as part of the committee’s pre-budget scrutiny, which focused on the financial position of integration joint boards, in-year adjustments to the 2024-25 budget have meant that a growing number of IJBs are having to rely on funding reserves to bridge the funding gap. That is having a negative impact on the long-term sustainability of budgets. Given the challenges that the sector faces, I strongly encourage the Scottish Government to do more to ensure that service providers are given the utmost clarity regarding funding in a way that is conducive to long-term planning.
Similarly, the committee is disappointed that, despite calls to align the budget with the national performance framework, that has not been reflected in the presentation of the budget or accompanying documents. Although the committee notes that the Government has stated that it is working to align the budget with strategic priorities, it is the committee’s view that more must be done in that area. If the NPF is to be the Scottish Government’s “north star”, it is essential that it provides a clear overview of how specific budget allocations align with progress towards corresponding national outcomes. Without that, it is difficult to measure the effectiveness of spending on health and social care and the extent to which any additional funding is contributing positively to the overall health and wellbeing of people in Scotland.
Although it is almost impossible to cover everything in such a large portfolio during the debate, I conclude by reiterating that the increased funding packages and various commitments that are contained in the budget are most welcome. However, more must be done to measure and track the effectiveness of any additional spending and to ensure that the budget for health and social care is properly aligned with national outcomes and the NPF.
The committee looks forward to seeing further progress in those areas as we look forward to scrutinising next year’s budget. It is only by making such progress that we will ensure that we are making the best use of the Scottish budget to tackle the challenges that the health and social care sector faces and to improve health and wellbeing outcomes for all the people of Scotland.
Finally, I refer members to my entry in the register of members’ interests, as I have a bank nurse contract with NHS Greater Glasgow and Clyde.
I call Collette Stevenson to speak on behalf of the Social Justice and Social Security Committee.
16:12
I am delighted to speak on behalf of the Social Justice and Social Security Committee in today’s debate on the Scottish budget.
We focused our pre-budget scrutiny on the topic of third sector funding principles. The third sector has faced unprecedented challenges in recent years. The Covid-19 pandemic increased demand for services, as has the cost of living crisis, with more households seeking help, while inflation has driven up voluntary organisations’ operational costs.
With the recent UK Government announcement of increased employer national insurance contributions, the impact on the sector is yet to be understood. According to the Scottish Council for Voluntary Organisations, 88 per cent of organisations have reported taking actions to mitigate financial challenges since December 2023, with 60 per cent of those using their reserves, which they believe is unsustainable.
Many of those organisations deliver services that would otherwise be delivered by the public sector or which contribute to prevention activities that result in savings to the public purse. When we spoke with representatives from more than 30 local and national organisations, we heard the sector being described as the “essential sector”.
We thank those who participated in the inquiry. More than 200 submissions were received, and the responses ensured that the voices of those who are directly impacted by funding decisions were heard. Their evidence was unequivocal: more needs to be done to support this vital sector.
Most grants are awarded by statutory funders including the Scottish Government and local authorities. Many of the structural issues that exist could be addressed through robust funding principles, which would create efficiency savings for organisations and free up more money for delivery.
One of the most pressing principles that we scrutinised was multiyear funding. Voluntary Action Shetland told us that such funding is
“paramount in offering sustainability and continuity of service.”—[Official Report, Social Security and Social Justice Committee, 12 September 2024; c 2.]
We recommend increasing the number of multiyear grants and, ideally, providing funding for a minimum of three years. We acknowledge the challenges of multiyear funding, particularly related to the Scottish Government’s ability to set longer-term funding priorities in conjunction with spending decisions that are made at UK level.
Poorly managed multiyear funding can create dependency and limit new entrants, thereby disrupting the third sector ecosystem. Implementation of staggered multiyear funding would avoid new entrants being locked out of bidding rounds for long periods of time. Where awards roll on, building in anticipated increased costs over the multiyear period would help to address the power imbalance that deters organisations from requesting additional funds in those circumstances.
The Cabinet Secretary for Social Justice said in her response that the Government remains
“committed to increasing the number of multi-year funding agreements by 2026 and are focused on deliverability and scalability given that the Scottish Government continues to face the most challenging financial situation since devolution.”
She said that lessons would be learned “from existing funding arrangements” and that good practice would be embedded in the Government’s grant making. Following the publication of the budget, the cabinet secretary advised that the Government would have a pilot programme focusing on organisations that provide essential services or which deliver on reducing child poverty. We welcome that news.
The committee called for more flexible unrestricted core funding. Although the Government has not addressed that point directly, the cabinet secretary has said that the Government will “review grant spending”, which will include
“developing effective reporting mechanisms to monitor the effectiveness of spend, identifying the wider social benefits of grants and providing commercial scrutiny of costs to ensure clarity on where we are spending money.”
Voluntary organisations mentioned the administrative burden of completing funding applications and reporting. The Scottish Government’s response states that guidance will be developed and “areas of poor practice” will be identified to inform further improvements. We are pleased to note that it says it will also look at developments in technology to
“improve the transparency of Scottish Government grant giving and to standardise the application process”.
Timeliness in funding decisions and payments is vital. Delays can have severe consequences for organisations—especially those that operate with tight margins. Our report underlined that the Scottish Government must prioritise resolving delays in funding notifications to support the sector’s stability. The cabinet secretary’s written response advised that budget difficulties had led to only 58 per cent of awards being notified on time. That figure provides a baseline on grant performance for the first time.
Funding principles need to be more than aspirations—they need to produce concrete results. It is imperative that statutory funders support third sector organisations through fair, efficient and sustainable funding practices. The Scottish Government is making some progress. The committee hopes that it will continue to ensure that we have a sustainable third sector, which is essential for the wellbeing of our communities.
I call Colin Beattie to speak on behalf of the Scottish Commission for Public Audit.
16:19
I welcome the opportunity to contribute to the debate as chair of the Scottish Commission for Public Audit. One of the commission’s main roles is to scrutinise Audit Scotland’s budget proposals and report to Parliament on them. Last Friday, we published our report on Audit Scotland's budget proposal for 2025-26, and I thank the committee clerks and staff for their support on that.
Audit Scotland’s budget comes from two sources. For 2025-26, it estimates that the fees that it charges to audited bodies will provide 63 per cent of its budget. The remaining 37 per cent will be funded from the Scottish consolidated fund, totalling £14.983 million.
We noted that Audit Scotland’s budget proposal represents a 10.3 per cent increase in the funding that is required from the Scottish consolidated fund, which equates to an additional £1.394 million. When the commission met in December last year to examine the budget proposal, we heard that the majority of the 10.3 per cent proposed increase comes from a £672,000 investment in its audit modernisation project. The other substantive cost is funding to cover increased employer national insurance contributions arising from the 2024 UK autumn budget, which is estimated at £520,000.
To aid our scrutiny, we sought a breakdown of the audit modernisation project costs, given that £592,000 is allocated to people costs. Audit Scotland clarified that £250,000 is for project management, legal services, procurement, external assurance and other specialist skills; another £275,000 would be for implementation; and the rest will be used for hosting and analytics.
It also pointed to the assurance arrangements that are in place, including undertaking of an internal audit of the arrangements. The commission is conscious that some public sector information technology projects have been subject to significant delays and cost increases. We have therefore requested detailed progress updates as part of our scrutiny of annual reports and budget proposals.
We also wanted to know why Audit Scotland decided not to share the project cost requirement across the public bodies that it audits—in particular, because they would benefit from its successful roll-out. Audit Scotland told us that the project costs are ring fenced for greater transparency and accountability, because they would otherwise have to be distributed across 200-plus public bodies, a number of which are non-chargeable bodies, which would, in effect, result in cross-subsidisation. The commission is satisfied with its approach to the start-up cost, but it expects future running, maintenance and licensing costs to be recovered from all audited bodies proportionately.
A similar point arose in relation to increased employer national insurance contributions and whether that cost should be borne by an increase in the auditing fee. The Auditor General, as accountable officer, advised that he had given that careful thought, but because of the cross-subsidy issue and the degree of uncertainty about how much of the additional costs will be funded by the UK Government, the preferred approach is to ring fence those costs. The commission accepted that, given the timing of the UK announcement, but we expect those costs to be baselined in future years and to be recovered from audit fees levied on all audited bodies.
There is a pressing need for all public bodies to look for efficiency savings. Last year, we asked Audit Scotland to set out more information on savings. We are pleased to see the additional evidence that was provided this year on how Audit Scotland achieved £2 million of savings. It has made progress with its productivity activities, such as moving to a 35-hour week as well as increasing its vacancy factor from 2 per cent to 5 per cent. However, the budget proposal recognises that those savings pose a higher level of operational and financial risk, and we have asked to be updated, should any of those risks materialise.
To conclude, I note that the final budget allocation for Audit Scotland is a matter for the Scottish Government, but I draw the attention of the Parliament to the conclusions that are set out in our report.
We move to the open debate. I advise members that there is no time in hand.
16:23
This is the open debate, so I get to be a little more free with my comments than everyone thus far. In my opinion, this is a good and clever budget, and it reorientates John Swinney and Kate Forbes’s Government with the right priorities, including tangible steps to ameliorate child poverty, a much more realistic spend figure for housing, the protection of Scotland’s funds for the originally intended use and so on.
However, growing the economy is a key part of the budget, and that must include growing the tax base to fund vital public services. As an aside—if you will indulge me, Presiding Officer—this is not a Scottish Government responsibility, but it could have a clear impact on our economy, I want to raise my concern about reports of an aggressive takeover bid of the Edinburgh Worldwide Investment Trust by Saba Capital, a hedge fund based in New York.
Scottish investment trusts established a crucial tradition that can still be seen in the DNA of successful Scottish investment firms: a long-term approach.
Saba Capital declared its intent just before the Christmas break, and it requires an extraordinary general meeting in early February. That deliberately left little time for organisation to ensure that all sides of the debate could be heard. My concern is that many retail investors may not vote, perhaps because they do not realise that the proposed takeover represents a fundamental risk to Scottish jobs and our financial ecosystem.
I appreciate that the Scottish Government cannot and should not take a stand on legitimate commercial activity. However, it can and should take a stand to value Scotland’s important professional services. Will the minister join me in encouraging all investors to register to vote now and make their voices heard to protect that vital sector?
Ms Thomson, I encourage you to keep your remarks to the subject of the debate.
I will move on to my other remarks—I have finished that section.
During the budget process, I always enjoy this particular debate, which I feel brings out the best of the Parliament. Ideas are shared in a calm and rational manner, away from the hurly-burly of political posturing. I am struck by the fact that all the committees that have reported have, invariably, agreed on their reports without division. That is certainly the case for the Finance and Public Administration Committee, which is heartening.
Many points have been brought out ably in the debate. Zero-based budgeting is still an area of interest to me. During our trip to Estonia, the FPA Committee heard evidence of its use in the public realm. It has its critics but—perhaps because my previous experience in the commercial world had a sharpness around budgeting—I think that it has merit.
I add my voice to the calls to publish a variety of forecast information in a form that is described as a strategic approach. In the FPAC’s report, there are multiple calls for that, as either an MTFS—a medium-term financial strategy—or a fiscal sustainability delivery plan. There has been considerable uncertainty due to various events but, as the old mantra says: if you fail to plan, you plan to fail.
I have a thought about the issuance of bonds, which I am aware continues to be actively looked at. As well as a best-value test, bonds also have the benefit of embedding skin in the Scottish game. Investing in worthy public-realm projects can also provide an emotional commitment and be a draw for bodies run by affinity Scots or our global diaspora.
My final point is about reviewing how the fiscal framework operates. I draw members’ attention to the SFC’s report “Fiscal Sustainability Perspectives: Climate Change”, which makes clear that in no way can the framework be considered adequate for the scale of investment needed to get to net zero. Any further review must bear that in mind.
16:27
In an episode of “The West Wing”, a priest attending the President recalls a story about a religious man whose village is flooding. The man rejects a public radio broadcast warning him to leave, turns away a boat that is sent to save him and dismisses a third attempt to save his life. He then drowns. Standing at the gates of St Peter, the man demands an audience with God. “Lord,” he says, “I’m a religious man. I pray. I thought you loved me. Why did this happen?” God says, “I sent you a radio report and a guy in a rowing boat, and then we tried to save you a final time. What the hell are you doing here?”
We might ask the same of the Scottish Government, because it has found itself in this vulnerable financial position despite record financial settlements. Like the man in the story, it has been warned repeatedly: by Audit Scotland, the Scottish Fiscal Commission and, now, the Parliament’s finance committee. It has been warned about transparency, sustainability and the affordability of its tax and spending plans.
The committee report sets out a number of areas that the Government must address urgently and it—correctly—criticises past inaction. The report states:
“The Committee should not be in the position of having to repeat and reiterate some recommendations before they are clearly responded to. The quality of future Government responses to our reports must improve”.
I echo that call. The report criticises the lack of
“medium- and longer-term financial planning”.
It warns against any slippage in the medium-term financial strategy and urges the Government to identify and monitor
“the number of ‘live’ strategies”
and to reduce them
“wherever possible.”
The Government is often accused of using smoke and mirrors, so I urge ministers to accept the committee’s call to ensure that very significant in-year transfers, most notably between health and local government, are baselined in the Scottish budget. If the Government does not do that, it leaves itself—quite rightly—open to the accusation that it is massaging the figures for political purposes.
Ministers must heed significant warnings and be alert to significant risks, which the report highlights and which include the on-going financial pressures and the potential of a £701 million negative reconciliation in the 2027-28 budget. Although the report welcomes the publication of the Government’s tax strategy, I put on the record that I strongly question whether it is robust and detailed enough to address the structural concerns that we have about the Scottish National Party’s high tax agenda. The report correctly identifies the need for a comprehensive assessment of behavioural responses to the SNP’s decision to make Scotland the highest-taxed part of the UK.
The Government must also look at the cost of its workforce and at the cost, scale and scope of its social security policies—both of which are identified in the committee’s report. I accept that Labour’s national insurance increase will put pressure on the Government and on Scotland’s councils, but we should not forget that firms and companies across Scotland, which will have to make internal efficiencies to be able to pay those additional costs, are in a similar position.
The report rightly identifies the need for the Scottish Government to set out an urgent plan as to how it will fund any shortfall for its employer national insurance liabilities. When he closes, it will be interesting to hear from the minister what progress, if any, the Government has made with the UK Treasury and what insight it can give local councils as they set their own budgets in that respect.
On welfare, the Scottish Government rushed to announce mitigation of the two-child limit—effectively, to gain headlines and political advantage. Ministers must now urgently and transparently explain how they will fund it.
I started with a rather vivid account of what happens when one ignores repeated warnings. I hope that the Government neither dismisses the report nor sets aside the constructive criticism from independent bodies that have engaged positively with the budget process.
16:32
As much as I look forward to next week’s stage 1 debate—which I am sure will be much more partisan and party political—given that the agreement on the budget between my party, the Liberal Democrats and the Government was announced this week, I want to take a moment as the Greens’ finance spokesperson to thank the Government for its constructive engagement throughout the budget process, particularly after Labour’s decision to abstain made the engagement with us and the Lib Dems somewhat less than essential.
Such engagement is exactly what the Parliament was intended for. A journalist asked me on Tuesday why I did not simply try to bring the budget down and give the SNP what they described as a bloody nose, but that approach to politics does not feed a single child, make buses cheaper, create jobs or protect nature. Co-operation between parties, while holding on to our distinct values, is what the Parliament was intended for. It is what we have proven ourselves capable of, and it is exactly what the public want from us. I am proud of the process that led to the agreement this year.
I will focus my remarks on our Finance and Public Administration Committee recommendation on council tax reform and the Scottish Government’s response to it. Last year, the cabinet secretary said to the committee that, for us to move forward on council tax reform, there was a need for “cross-party consensus.” That is a reasonable point, but the committee put it back to the Government that the Government must be the one to facilitate that. If the Government does not create the space for it and open up those discussions, who will?
I was disappointed by the Government’s initial response to that recommendation. There was no commitment to new action. To remind members of the need for council tax reform, I note that that tax system is based on valuations from 1991—before I was born. Most people pay the wrong rate of council tax. We would not tolerate that for our income tax system, and yet we are still here on council tax.
The UK overall—and particularly Scotland—is an outlier, in European terms, in relation to how small a share of local governments’ budgets they are able to raise for themselves. The need for reform is urgent, and I welcome the cabinet secretary’s commitment to embark on more cross-party engagement through the joint working group, at national and parliamentary levels, and with our local government colleagues.
This process is difficult because, as our committee’s report acknowledges, there will be winners and losers. However, I feel that it is one of the clearer failures of the devolution era so far that we have failed to do that work already. We should be honest that there will be winners and losers, but we all have a pretty clear idea of who the losers would probably be and of who would end up paying a bit more—that would be people who live in larger houses, who tend to be much wealthier and who have more social and political capital. It would be hard for us to create a process for reforming the system in a way that is even more regressive than our current one.
I was disappointed in the Government’s written response to the committee, which is to the effect that it no longer intends to legislate, in the remainder of this parliamentary session, to allow for council tax increases for second and holiday homes at an equivalent level to the Welsh Government’s policy. Allowing such increases would be a win-win situation. It would raise more money for local services, assist first-time buyers and help communities such as the ones that I represent on Arran and up the west side of Loch Lomond, where the housing crisis is massively exacerbated by second and holiday home ownership.
I have good news for the cabinet secretary on that, though. I believe that it would be within the scope of the current Housing (Scotland) Bill to legislate for that change to council tax. So far I have spoken to the cabinet secretary with responsibility for communities, but I would welcome engagement with the finance secretary on that. The Government’s consultation has shown very strong support for such a change, and a recommendation could be implemented in the remainder of this parliamentary session.
I will close on a slightly negative note that contrasts somewhat with Michelle Thomson’s remarks. Much as I have enjoyed this debate, I note that the chamber is not exactly packed or bouncing. Collectively, we need to rethink whether the current format works effectively to relay committee reports to the wider Parliament. We already have a system whereby committee conveners can use decision time to make announcements to the chamber. Using that opportunity over a couple of weeks, to allow all members to hear the results of committee budget scrutiny, would be a much more effective way of delivering the initial intention behind the format for this debate. That being said, I am grateful to members for sharing the details of all the work that they have undertaken as part of the budget process.
16:36
I am pleased to take part in the debate as a member of the Finance and Public Administration Committee.
In every year’s budget there are difficult choices to make, and probably no two members of the Parliament have exactly the same priorities. One theme of the work of the Scottish Fiscal Commission and the committee has been the need for more medium and long-term financial planning. However, I have some sympathy for the Scottish Government on that point. If we receive very late decisions from the UK Government—as happened this year with higher-than-expected pay increases and still no certainty about the reimbursement of national insurance contribution costs for 2025-26—it is well-nigh impossible for Scotland to plan far ahead. At the same time, we could have at least a list of priorities—for example, for capital expenditure, which could be categorised as high, medium or low so that at least everyone knew which projects would go ahead if and when the funding became available, even if we did not know what the exact timescales would be.
Speaking of the longer term, I remain convinced that the fiscal framework is weighted against Scotland. It is true that we currently get more money per head than England does, but the Barnett formula is designed gradually to squeeze that difference and so reduce our spending. On top of that, we are expected to match UK economic growth, which means in effect that we have to compete with London and south-east England. No part of the UK has been able to do that. It could be argued that no part of Europe has been able to do so without having really serious economic powers, such as those on corporation tax, which Ireland has used to huge effect. More specifically, paragraph 47 of our report notes that there could be a negative reconciliation in 2027-28 that is greater than the resource borrowing limit. In my opinion, the fiscal framework needs a fundamental rethink. John Swinney did his best to get a good deal for Scotland, although, if my memory serves me correctly, both Labour and the Tories wanted us to settle for a substantially poorer deal.
In 2023, Shona Robison told us that a major review from the previous Conservative Government at Westminster was not on the table. I am glad that the Scottish Government seems to have a better relationship with the current UK Government, but it is disappointing that that Government does not seem keen on a more fundamental look at the framework. Therefore, I very much agree with the recommendation in paragraph 79 for a wider review of the fiscal framework.
Moving on to more specific areas—for example, the tax strategy—we note the Government’s intention to have no new bands or increases in rates of income tax before 2026. Nevertheless, we face a relatively simple choice, both in the UK and in Scotland: do we want to keep taxes low, with the inevitable consequence of NHS waiting lists, bed blocking, local government struggling and other poor public services, or do we want to follow the example of countries such as Denmark, which have higher taxes and, consequently, better public services?
I do not believe that growth in the economy, in itself, is the answer. I am not against growth, as we want everyone in Scotland to be doing better, but the question is how the benefits of growth will be shared out. Will those benefits all go to those who already have a lot, or will they be shared around more fairly? There continues to be a trend of very high salaries for people at the top in the public and private sectors. If those people will not restrict the level of their salaries, we need to increase taxes in order for poorer people to benefit, too.
The process of finding a replacement for council tax has dragged on for far too long, as Ross Greer said. Of course, a new tax is likely to be unpopular, as there will be losers as well as winners. I bought my current flat in 1990, at the age of 32. The council tax valuation took place the following year, in 1991. I plan to retire next year, but the valuation has not changed in all that time. Something is very far wrong. That state of affairs is increasingly unfair for poorer areas, where house values have not gone up as much since 1991 as they have in richer areas.
In paragraph 91 of its report, the committee noted the cabinet secretary’s view that cross-party consensus was necessary for progress to be made on the issue. I wonder what “consensus” actually means. Does it mean all five main parties agreeing on the way forward, four of them doing so, three of them doing so, or what?
I could go on, but suffice it to say that I will support the Budget (Scotland) (No 4) Bill at stage 1. I think that the committees have done a fair bit of good work on the budget, and I commend them for that.
I call Liz Smith, who will be the final speaker in the open debate.
16:41
I, too, thank the convener of the Finance and Public Administration Committee, and my colleagues on the committee, because I think that we have had a fairly level-headed focus on the task in hand. Budgets are always important, for obvious reasons, but the 2025-26 budget is particularly important because of the questions about fiscal sustainability for the future and all the uncertainties that that brings. Our budget consideration is set in the context of our facing some very worrying global trends, which are affecting world supply chains.
Ross Greer rightly said that, next week, we will all have our political hats on for the debate on the Budget (Scotland) (No 4) Bill, but what is important today is that we consider the scrutiny issues and the other significant issues that the committee has raised in relation to the budget.
At the end of his speech, Ross Greer said that he felt that the format for today’s debate is not the right format. I concur, and I think that several colleagues around the chamber do, too. The Parliament needs to have a finance bill—that is certainly an idea that the Finance and Public Administration Committee would like to consider—as that would enable much more effective scrutiny to be conducted across the board in Parliament, on a consistent basis. If we had a finance bill, that would make it much easier for members to come to conclusions.
For me, there are three main issues. Michelle Thomson spoke about the need to widen the tax base—she is right about that. We must have the ability to raise sufficient revenue to ensure that we can do many of the things that we would like to do in Scotland, while improving productivity and economic growth.
The second most important issue is that of public sector reform. I think that the Government is trying its best to go down that road, but the committee is saying to it that, at the moment, it is more of a concept, as the Government is not able, in practical terms, to prove to us that it is actually happening. I refer the Minister for Public Finance, who I think will be summing up the debate for the Government, to the paragraph in the committee’s report in which we ask for regular, six-monthly updates on the up-front costs of, and the cumulative benefits from, such reform. That is key, because, at the moment, the evidence on public sector reform is simply not there.
The most important issue that emerges from our report is the fact that there is a lack of longer-term planning for fiscal sustainability. That is the committee’s greatest concern. Our concern is all the greater, given that this is not the first time that we have had to make that point to the Scottish Government. For all the time that I have been on the Finance and Public Administration Committee, we have been saying the same thing.
In that context, the convener rightly made the point that, given the expansion in health and social care budgets and social security budgets, we will have to do something about that, because, at the moment, the increases in those budgets are significantly higher than we can afford. The politics of that aside, from the committee’s point of view, that is an issue of fiscal sustainability.
Obviously, budget choices are political choices, and those will be made next week, but the Finance and Public Administration Committee is demonstrating that there are some underlying principles on which we must base our scrutiny of financial decisions within this Parliament for that to be effective. The committee is pretty unanimous on that. Indeed, having all the parties that are represented on the committee to be consistently unanimous on that point tells us something. The Government should consider the issue because, in my opinion, the committee is absolutely right to take that approach to scrutiny.
We move to winding up speeches and I call Ivan McKee, who has six minutes.
16:45
I will do my best to address as many issues as possible in those six minutes.
Clearly, this is an important debate, for which I thank the Finance and Public Administration Committee. I also thank the committee conveners, a number of whom have raised detailed issues that will be picked up separately by the Government, as appropriate.
Some broad themes have come out of the discussion. I think that all conveners who spoke mentioned the public service reform agenda and, as the cabinet secretary indicated earlier, I will focus my remarks on that.
I recognise the budget’s focus on the Government’s four priorities of eradicating child poverty, growing the economy, tackling the climate emergency and ensuring that there are high-quality public services. Government does all that within fixed fiscal parameters and with limited borrowing powers, and it does, of course, balance its budget. Craig Hoy would do well to recognise that point when he talks about the challenges that we face. My gentle advice to him is not to give up the day job, because I do not think that he is cut out for a career in comedy. It is also important to recognise his comment about tax behaviour, which is factored into the SFC forecast and is something that the Government considers when we bring forward our fiscal proposals.
We operate within fixed budgets, but we can, of course, ensure that we get best value and maximum impact from our spending. That point was made by Colin Beattie, and the public service reform programme very much plays into that space.
Liz Smith and others have asked for more information about how that programme is progressing. It is important to recognise that the public service reform programme is a process, not an event, and that there is a wide range of activities within that programme. We are focusing on the efficiency levers that we can pull, including more effective procurement, more effective use of estates, the use of digital and automation, shared services and so on, and significant savings of more than £200 million have already been delivered in the past two years due to the application of those principles.
Will the minister give way?
I am probably very tight for time, so please be quick.
Does the minister agree with the committee’s recommendation of six-monthly updates on costs and on the savings that can be made? Our key point is that we are looking for evidence.
Absolutely. I am very happy to engage further with the committee on that.
The work on efficiency continues. There will be enhanced recruitment controls within Government and across the wider public body landscape and more detailed scrutiny of public body budgets this year to understand and identify back-office costs and the potential for savings.
However, the PSR programme is wider than that. Audit Scotland has called for more leadership and direction from Government. We take that seriously and are engaging extensively with public body leaders, as we will do on 17 February when we bring all the public body leaders together for a summit that will help to inform the PSR strategy that we will publish later this spring.
The programme requires more joined-up services, removing duplication and making services more efficient and effective for service users and for the people of Scotland. A number of major programmes are already under way, including the Promise and the whole-family wellbeing activity that Karen Adam referenced; programmes in justice, which Audrey Nicoll referenced; and programmes in many other portfolios.
Structural change has been called for. Colin Smyth spoke about how public bodies work together across the landscape and whether that is the most effective and efficient way to organise. We recognise that there might be a place for structural change, but we are very conscious that a big-bang approach to that can consume a lot of time, effort and resource and might not be the most efficient way to proceed. We will continue to work constructively with public bodies to identify ways for them to co-operate more closely and be able to deliver more effectively for the people of Scotland as a consequence.
Part of the work that we are taking forward is the invest to save fund. Audrey Nicoll commented on the effectiveness of such approaches in the justice portfolio. The details of that work will be provided shortly, but it will allow public bodies to co-operate, ideally across portfolios and with local government taking part in the programme, to spur on some of the initiatives that can shift spending to more preventative measures further upstream and allow the whole system to be more effective as a consequence.
In the structural space, we will also take forward further work on the single authority model and the democracy matters programme. We are working very closely with our colleagues in local government on those programmes, which address how organisations across the public sector can work more efficiently and effectively together. We will continue to provide regular updates on that work to Parliament and the committees as we take it forward, as Liz Smith and others called for.
I want to pick up on one or two other points very briefly. Edward Mountain referenced ScotWind. I reinforce the message that we are not using any ScotWind revenues to support this year’s spending. Those funds will be used only to support long-term net zero investments.
On the issue of council tax reform—
I must ask you to conclude, minister.
I will conclude, Presiding Officer.
We believe that this is a balanced and fair budget that will deliver on this Government’s priorities across all ministerial portfolios. I am confident that the budget will deliver for Scotland and I encourage all members across the chamber to support it next week.
I call Michael Marra to wind up the debate on behalf of the Finance and Public Administration Committee.
16:52
I am pleased to close the debate on behalf of the Finance and Public Administration Committee. I thank members for their contributions and I thank all the committees and the clerking staff for the work that they have done in the budget scrutiny process.
I certainly enjoyed Mr Hoy’s speech. He compared the regular utterances of our committee to the word of God.
I also concur with some of Mr Greer’s points. If we are not to continue to be the resounding gongs or clanging cymbals that are often ignored, we should perhaps find a slightly different format for imparting reports to Parliament.
There was a common theme in the various conveners’ reports on their committees’ budget scrutiny. What came through most strongly was the desire for multiyear budgeting. It is not a new theme, but one that has been raised before. I know that the cabinet secretary is positively effusive in her view that multiyear budgeting should be forthcoming, and the FPAC shares that view. We all hope that an end to the domestic political instability of recent years will help with that, although global economic instability is still challenging.
That said, the key question is how the spending review will be treated, as a number of the conveners said. When the UK spending review is published, we will need to see a detailed approach as to how the Scottish Government is going to set that in train. Waiting until after the 2026 election to have a full response to that is, to be frank, not going to deal with the problem. At that point, we could be in the third year of the three-year spending review and there would never be a process of real synchronicity in relation to how the budgets match up. We need to make sure that there is a structured response that gives the Parliament the information that it requires, and which the committee conveners are demanding.
As our committee’s convener mentioned, a big part of our scrutiny this year focused on the social security and public sector pay budgets. We know that, with the increase in spending on social security, every pound that goes into that area is money that is not being spent on the core functions of the Scottish Government, whether it be our hospitals or education. As was highlighted by the Scottish Fiscal Commission, the increase in that area is a concern not just for our committee but for everyone.
I want to say a little more about public sector pay. According to the SFC, the total public sector pay bill in Scotland for 2023-24 was around £25 billion. That represents more than half of Government resource spending. The SFC also highlighted that the public sector in Scotland accounts for 22.5 per cent of total Scottish employment, compared with 17.6 per cent in the UK overall. That is a significant difference.
It is therefore essential that there be transparency around pay assumptions and their wider impact on the Scottish budget. Despite a written agreement with the SFC, the Scottish Government failed to supply a public sector pay policy for 2023-24 and 2024-25. That left the SFC in the dark, guessing what the policy would be, with no steer from Government.
The Government finally published its pay policy on 30 May 2024, which was more than six months after the original deadline and three months after the budget had been voted on by Parliament. That document included what turned out to be an assumption of public sector pay growth of 3 per cent. The cabinet secretary told the committee that a pay growth assumption of 3 per cent was factored into the Scottish budget for 2024-25 in December 2023 and was based on—I quote—“affordability”. The committee was extremely disappointed with that information. It was not shared with the Scottish Parliament or published more widely until the end of May 2024. The fact that it was the underlying assumption came out much later, and only under questioning from the committee. We have been told by some witnesses, including the Fraser of Allander Institute, that that lacked sufficient transparency.
The Scottish Government later announced emergency in-year spending controls for 2024-25, and blamed higher pay than it had anticipated in its budget. The committee strongly urged the Scottish Government to publish its pay policy document alongside the Scottish budget whenever possible, to allow scrutiny of how pay assumptions might impact on other areas of the budget forecast.
We also asked the Government to set out more realistic pay growth assumptions in the future. In our budget report, which was published yesterday, we welcome the Scottish Government’s return to publishing its public sector pay information alongside the budget.
I will use the last couple of minutes to talk about public sector and public service reform. The committee has a long-standing interest in that area. We undertook a stand-alone inquiry on the topic in 2023 and subsumed that scrutiny into our annual budget work. As part of our investigation, we visited Estonia to learn from its successful approach to digitalisation and e-governance. We made a series of recommendations to the Government based on that work in Estonia.
I will highlight a couple of examples that require a clearer response from the Government. For example, the committee asked the Government to consider whether Scotland should create for information technology a permanent spending commitment that can endure beyond political cycles. In Estonia, 1 per cent of gross domestic product has been earmarked as a stable state fund for IT. That has been in place since 2018 and gives some security in relation to investment and commitment in IT by the Estonian Government. The committee remains unclear about what the Scottish Government’s response is to that recommendation.
We also asked the Government to work with the private sector to encourage staff exchanges on a more informal basis before adopting a more structured approach to meaningful collaboration with the private sector. We have not had a response on that, either.
We remain concerned about the lack of pace or drive for public sector reform from the Scottish Government. Reports from the Auditor General for Scotland—five in the past 15 months—have demonstrated that the Scottish Government is not delivering public service reform on the scale that is required, with Government intransigence being most clearly seen in the multiple crises, which are now acknowledged by the First Minister, that are engulfing Scotland’s NHS.
The committee shares the view of the Auditor General that, in order for real progress to be made, including in relation to changing models of public service delivery, the Scottish Government needs to demonstrate stronger leadership and to bring an overall vision to the public service reform programme. In the budget, the Scottish Government set out some aims for public service reform, but those aims must be matched by genuine and tangible actions to make a difference to services on the ground. More of the same will not suffice.
Along with the Auditor General, the committee will be watching carefully over the next 12 months and scrutinising the Government on the outcomes of reform programmes.
I thank all members for their contributions to the debate.
That concludes the debate on the Scottish budget 2025-26.