I am pleased to open, on behalf of the Finance and Public Administration Committee, this committee debate on pre-budget scrutiny. The debate is an important part of the full-year budget process, and it is intended to enable conveners to set out how their committees have sought to influence the budget and to give the Government an opportunity to respond.
Having greater influence in the formulation of the Scottish Government budget proposals is one of the four core objectives of the budget process, as recommended by the budget process review group back in June 2017. The others are: to improve transparency and raise public understanding and awareness of the budget; to respond effectively to new fiscal and wider policy challenges; and, to lead to better outputs and outcomes.
Due to time constraints in the budget process in recent years, this is only the second time that the Parliament has held this committee debate, so I very much look forward to listening to all the contributions from colleagues and hearing about the pre-budget scrutiny that their committees have undertaken.
However, first I wish to thank the Finance and Public Administration Committee’s clerking team: Alan Hunter, Chris Hynd, Joanne McNaughton, Sarah Robertson and Jane Williams, who work so diligently and provide such sound advice and support to me and my committee colleagues, as well as excellent briefing papers and notes. I also want to thank Ross Burnside of the Scottish Parliament information centre’s financial scrutiny unit, our committee adviser, Mairi Spowage, Eric MacLeod in media, and my six committee colleagues: Ross Greer, deputy convener Daniel Johnson, Douglas Lumsden, John Mason, Liz Smith and Michelle Thomson. All of them have worked hard and contributed significantly to our work, despite the often steep learning curve that is initially faced, particularly by members who are new to Holyrood.
The Covid-19 pandemic required public investment at an unprecedented scale and speed, and its devastating impact will be felt for years to come. That is why we in the Finance and Public Administration Committee decided to look at the impact of the pandemic on Scotland’s public finances as part of our pre-budget scrutiny. I shared some of our findings about the short-term impacts of Covid-19 during a recent committee debate on Covid recovery. Today, I want to explore some other aspects of our report and to look at the longer-term challenges ahead and some cross-cutting measures that could help to support fiscal sustainability. Our deputy convener, Daniel Johnson, will return to some of our findings on the impact of Covid-19 in his closing speech.
The pandemic has exacerbated pre-existing inequalities and moved more people into poverty and debt, and we received specific calls for funding to address those issues. Age Scotland, for example, argued that the budget should include measures to assist with pensioner poverty, citing the fact that more people than ever have been pushed into fuel poverty and loneliness during the pandemic. At the other end of the age spectrum, we heard from the Child Poverty Action Group that the top priority in this year’s budget should be the doubling of the child payment, which the Scottish Government is taking forward in the 2022-23 budget.
Public finances will be under significant pressure in the years to come, and the Scottish ministers will continue to face difficult decisions on how to prioritise spend and raise revenue. We have therefore asked that the Government explores which policy interventions would have the greatest impact on cross-cutting issues, such as addressing inequalities and poverty. Both the upcoming resource spending review and the annual medium-term financial strategy provide timely opportunities for the Scottish Government to prioritise that approach, and we look forward to hearing more about that work from the cabinet secretary in due course.
We believe that multiyear budgets are crucial in securing certainty for Scotland’s public finances, including for local government, the third sector and other key bodies. It can, of course, be more difficult to deliver that approach in situations in which the Scottish Government does not have confirmed multiyear block grant funding from the United Kingdom Government. We therefore recommend that the UK and Scottish Governments consider how multiyear budgets can be achieved more routinely as part of the upcoming review of the fiscal framework.
The fiscal framework review also presents an opportunity to consider how communication and transparency between the UK and Scottish Governments can be improved, with witnesses describing a decline in intergovernmental relations and suggesting that the tension seems to be increasing in the light of the UK Government’s spending in devolved areas.
In future years, we will seek to widen the pool of individuals and organisations that provide evidence to the committee and to expand the focus of that evidence. For example, when stakeholders give evidence on their asks, it would be helpful if they specified the extent of the additional resources that they sought, should such resources be available, and how the provision of those resources could be funded. We need to move on from witnesses simply asking for more money, which they often do with a clear idea of how such resources would be utilised, but without knowing how much money is required or suggesting from where such resources could be found in anything but the vaguest fashion.
Following Brexit, we consider that managing replacement European Union funds requires greater communication and sharing of information to enable effective public spending in areas where there may be a common interest. We look forward to exploring the evidence that we have received from local authorities on how the funds are operating with the Secretary of State for Levelling Up, Housing and Communities, Michael Gove MP, when he appears before the committee next month. A time and date have still to be finalised, despite our clerks pressing for that since last October.
When we reported back in November, concerns were raised about a lack of clarity on whether the Scottish public sector would incur additional costs as a result of the proposed increase in employer national insurance contributions under the UK Government’s health and social care levy. In its response, the Scottish Government told us that the public sector in Scotland would incur additional costs of around £150 million per annum through increased national insurance contributions. I asked a written question on that matter. The Treasury has confirmed that the Scottish Government will receive Barnett consequentials, but the exact breakdown was not available at the time of its response. It would therefore be helpful to know whether the cabinet secretary has an update on that important matter. Local government is concerned that such consequentials are not being passed on.
Before Christmas, the committee took evidence on the position 10 years on from the Christie commission and revisited the commission’s priorities of prevention, people, partnership and performance. In our report, we said that we could see economic and societal benefits from prioritising expenditure on preventative measures, whether they were to protect the environment or to protect the nation’s health in future years.
The Scottish Government’s resource spending review provides an opportunity to introduce bold preventative measures to protect funds and create a wellbeing economy for the longer term. We look forward to hearing more from the Government on how it is prioritising preventative spend and how that approach has resulted in a shift in policy direction and expenditure.
The committee felt that more efficiency could be achieved by streamlining and linking up the various strategies and plans that have an impact on growing the economy and fiscal sustainability, as we move out of the pandemic. We asked the Scottish Government to outline how it would progress that; that recommendation has not yet been addressed in the Scottish Government’s response.
The upcoming statutory review of national outcomes provides an opportunity to reposition the national performance framework at the heart of the Government, and all priorities and plans should flow from that. We have asked the Government to look at how the NPF can be more closely linked to budget planning, and we await the response to that recommendation.
When we reported back in November, we noted that the declining working-age population and the increasing number of over-65s present what we described as a
“double ‘whammy’ to fiscal sustainability”.
We argued that, in that scenario, the provision of public services and welfare payments would need to be funded from a smaller and more productive working population and that reversing those trends would require a focused and sustained approach to policy making over a number of years. We would appreciate details of how Scottish ministers will address that vital and pressing issue.
Latest forecasts from the Scottish Fiscal Commission show weaker income tax revenues in Scotland than in the rest of the UK, along with higher levels of social security spending, at a time when the fiscal resource that is available to the Scottish Government is in decline. That suggests that pressures will soon be even more acute than we warned back in November that they would be. Our report on the Scottish budget 2022-23, which was published last week, explores in more detail the trends that are behind the data. I look forward to speaking more about the issues in the stage 1 debate on the Budget (Scotland) Bill tomorrow.
In the meantime, I move,
That the Parliament notes the pre-budget scrutiny undertaken by the Finance and Public Administration Committee, and other parliamentary committees.