Scotland's Budget: Draft Budget 2017-2018

Foreword by the Cabinet Secretary for Finance and the Constitution

This is my first budget as Cabinet Secretary for Finance, and it is also the first budget in which the Scottish Government is making use of the powers devolved through the Scotland Act 2016 - including powers over income tax.

It marks a historic moment in the evolution of our budget process and the responsibilities vested in the Scottish Government and Scottish Parliament by the people of Scotland.

It means that more of the money we spend in Scotland next year will be funded from revenues collected in Scotland, through a combination of national and local taxation.

These are fundamental changes, which will require government, Parliament, the business community and civic Scotland to work together in new and different ways to support our economy and to maximise the benefit of Scotland's public finances.

For our part, the Scottish Government will use these new powers responsibly, in order to give certainty and stability at a time of economic and political challenge.

Our plans for income tax reflect the principles-based approach we have taken in other areas of tax policy, particularly that tax should be proportionate to the ability to pay. I am grateful to the Scottish Fiscal Commission for the work it has done to scrutinise and provide assurance about our tax forecasts.

The budget also reflects the Government's determination to drive inclusive economic growth, particularly through the priority we attach to education and learning, supporting business, investing in and reforming our public services and empowering communities across Scotland.

These proposals are rooted in the priorities expressed in the 'Programme for Government' published in September and the direction provided by 'Scotland's Economic Strategy' and the National Performance Framework.

Supported by our approach to taxation, this budget will deliver our commitments on healthcare, policing, educational attainment and the expansion of early learning and childcare. It provides investment in key drivers of growth, such as transport, higher and further education, digital infrastructure, housing and energy. It also ensures that Scotland has a highly competitive business rates regime.

The sharp constraint that the UK Government continues to apply to total public spending, exacerbated by the emerging implications of the EU Referendum and the Chancellor's indications of significant further budget reductions in 2019-20, requires us to make some difficult choices within our overall spending proposals, while ensuring that key commitments are funded, economic growth is supported and public services are protected.

Our plans have been shaped by our desire to take a different course in the belief that investment in our economy and public services brings stability and can help us create a fairer society with greater equality of economic opportunity.

Inclusive economic growth

Scotland has a strong economy and great potential for future growth. However, the impact of the EU Referendum and continuing uncertainty about the approach the UK Government will take in response mean that we need to take steps now to provide stability in our economy and to support our businesses, foster innovation and maintain investment.

This budget provides over £1.6 billion of support for higher and further education, substantial funding for strategic transport projects and City Deals for Glasgow, Aberdeen and Inverness and for investment in affordable housing.

We will provide funding to establish new Innovation and Investment Hubs, launch our £500 million Scottish Growth Scheme and engage directly with the private sector to support innovation, internationalisation and entrepreneurship.

We will ensure that Scotland's businesses benefit from an expanded Small Business Bonus Scheme and from a reduction in the business rates poundage to maintain our competitiveness.

We will support Scotland's rural economy through the Scottish Rural Development Programme including increased support for the food and drink industry and funding to progress our target of 100 per cent superfast broadband access by 2021.

It is essential that we build on the economic opportunities presented by Scotland's international reputation and attractiveness. This budget provides funding for our vibrant culture sector and national events strategy.

The choices we make are intended not just to support growth, but to make sure that there are opportunities for all to participate in our economy. A fair and inclusive approach is essential if we are to build a resilient economy. We are providing the resources for our 'Opportunities for All' initiative, our Labour Market Strategy and to build on the outcomes of the Fair Work Convention, underpinned by the Scottish Business Pledge.

Strong public services

This budget renews the Scottish Government's commitment to public service reform, guided by the recommendations of the Christie Commission on the future delivery of public services, and upholds much-valued commitments to free education, free personal care and healthcare free at the point of delivery.

It provides a real terms uplift to the NHS budget, additional funding for mental health services and continued support for the integration of adult health and social care, the largest reform of healthcare in Scotland since the establishment of the National Health Service.

Local authorities are key partners, and this budget proposes a fair settlement for local government, based on shared priorities and supported by reforms to council tax that will increase the local revenues and flexibility available to authorities.

Additional funding has been provided centrally both to support educational attainment in our schools and to expand the provision of early learning and childcare, as we take forward our commitment to 1,140 hours per year of funded provision by 2020-21.

The budget also delivers real terms protection for frontline policing and provides support for the transformational reform we need to equip our police service for the future.

These and other measures confirmed in this budget will help reform and improve our public services, but the challenging financial position also means that we must continue to drive efficiencies and value for money in service delivery.

I have published a public sector pay policy alongside the budget that I believe is fair and affordable, targeting support at the lowest paid and maintaining our commitment to a no compulsory redundancy policy and the Scottish Living Wage.

Empowering communities and protecting our environment

Sustainability, equality and community empowerment are fundamental objectives for the Scottish Government. They underpin our policies, programmes and our allocation of public resources.

This budget provides an increase in funding for energy efficiency, reflecting the national priority status we attach to Scotland's Energy Efficiency Programme and the contribution it can make to addressing fuel poverty in Scotland.

Funding for sustainable and active travel and the zero waste programme has also been protected, underlining our commitment to meet the stretching climate change targets we believe are appropriate for Scotland.

We are investing to deliver 50,000 affordable homes over this Parliament, 35,000 of which will be social housing, and we will continue to help people buy an affordable home through our shared equity programmes.

We are providing the funding needed to progress the Fairer Scotland Action Plan and to deliver our commitment to a £10 million Scottish Land Fund.

The Scottish Government will also continue to do all it can to mitigate the worst effects of UK Government welfare reform, including the impact of the bedroom tax, while using the new powers in the Scotland Act 2016 to develop a devolved social security system for Scotland based on dignity and respect.

Conclusion

Taken together, the Scottish Government's tax and spending proposals provide the resources needed to build a resilient and inclusive economy, provide high quality public services, protect the environment, and empower people and communities across the country.

At a challenging time for our economy, and as we take the next significant step in Scotland's journey towards greater responsibility for our public finances, I commend this Draft Budget to the Scottish Parliament and to the people of Scotland.

Derek Mackay MSP
Cabinet Secretary for Finance and the Constitution