Scottish Budget 2024 to 2025: Deputy First Minister statement

Presiding Officer, it is an enormous privilege to present my first budget.

One that is built on our values. Setting out, in tough times, to protect people, sustain public services, support a growing, sustainable economy, and address the climate and nature emergencies.

Our values - equality, opportunity, and community - are missions that should be at the core of any social democratic government.

They are our guiding lights in difficult times.

This is a government committed to equality through tackling poverty and protecting people from harm.

At the heart of this budget is our social contract with the people of Scotland where those with the broadest shoulders are asked to contribute a little more.

Where everyone can have access to universal services and entitlements - and those in need of an extra helping hand, will receive targeted additional support.

This is what we mean when, in the face of Westminster austerity, we say we will always stand up for Scotland.

This budget is set in turbulent circumstances. At the global level the impacts of inflation, the war in Ukraine, and the after-effects of the pandemic continue to create instability.

In the UK the combined effects of Brexit and disastrous Westminster policies mean that we are uniquely vulnerable to these international shocks.

Recent research by the Resolution Foundation concluded that the UK is now defined by the toxic combination of low growth and high inequality - a “stagnation nation”.

Despite this, our economy has been resilient. Unemployment is low at 3.8%, and average earnings in Scotland are growing faster than the UK.

Scotland is the top performing economic area outside London and the South East - it is the third highest in terms of wages and gross value added per person in 2021.

A record number of Foreign Direct Investment projects were secured in Scotland last year.

Devolution has brought many benefits, but it has also exposed quite how beholden we are to the decisions of Westminster. We are fighting Westminster austerity with one hand tied behind our back.

In today’s budget the Scottish Government has:

No say on corporation tax;

No powers to mandate the real living wage for all;

No ability to consider windfall levies on excess profits;

And no options on wealth taxes like capital gains tax.

Last month’s Autumn Statement was a worst case scenario for Scotland. A fiscal settlement from the UK Government that undermines the viability of public services across the whole of the UK, including here in Scotland.

Our block grant funding for this budget, derived from UK Government spending decisions, has fallen by 1.2% in real terms since 2022-23.

Our capital spending power is due to contract by almost 10% in real terms over 5 years.

Under his own fiscal rules, the Chancellor could have invested £27 billion more in core services and critical national infrastructure. But he didn’t.

Instead, he prioritised tax cuts at the expense of public services. For example, members of Parliament will receive a £754 tax cut, at the expense of funding the NHS and other vital public services. That can’t be right Presiding Officer.

Be in no doubt, while Scotland remains in this union we will continue to pay the price of Westminster austerity.

Given this turbulent economic environment we are publishing single-year spending plans for 2024-25 in this Budget.

I recognise the merit of multi-year budgets, but the Autumn Statement and the OBR’s forecasts make future prospects more volatile. I will revisit the multi-year outlook in our 2024 Medium-Term Financial Strategy. 

Presiding Officer, I am grateful to both the Scottish Fiscal Commission and the Office for Budget Responsibility for their engagement in this Budget process. I have, of course, used the tax and social security forecasts prepared by the Scottish Fiscal Commission.

We have also worked with our Scottish Green Party colleagues to present a Budget that is true to our shared priorities.

The latest Scottish Fiscal Commission forecasts show a significant improvement in our tax performance - driven by higher earnings growth in Scotland , with Scottish Income Tax receipts forecast to increase by £1.5 billion between this year and next.

This is positive news and has also contributed to Scotland’s improved Income Tax position for 2024-25.

On Income Tax, we will make no changes to the Starter, Basic, Intermediate and Higher rates of 19 per cent, 20 per cent, 21 per cent and 42 per cent.

We will increase the Starter and Basic rate bands by inflation to £14,876 and £26,561 respectively.

I will maintain the Higher rate and Top rate thresholds at their current levels of £43,662 and £125,140.

Maintaining the Higher rate threshold in 2024-25 will add an additional £307 million to the Income Tax forecast as estimated by the Scottish Government.

We do not believe that those people who are the backbone of our public service – our teachers, our police officers, our nurses – should see their tax rate increase.

Taking the police as an example, constables, sergeants, inspectors and even chief inspectors will not see their tax rate rise.

But, when public services need investment and protection from UK Government cuts - this government does believe that those with the broadest shoulders should pay a higher tax rate.

And, to be clear, by the broadest shoulders, I mean the top earning taxpayers.

We will therefore add a new Income Tax band to the Scottish system – the Advanced rate - which will be set at 45 pence and will apply on incomes between £75,000 and £125,140.

In addition, I will also increase the Top rate by 1 pence to 48 pence in 2024-25.

The Scottish Fiscal Commission estimate that these policy decisions will raise a further £82 million in revenue next year.

We have chosen to create the new band at a threshold above the top of the unpromoted teacher salary scale, above a Police Chief Inspector, and above a band 8b nurse.

The threshold is set so high, it does not even capture MSPs.

But because they get  paid more than £86,000, MPs will have to pay a little more tax.

Combined, the Income tax policy I have outlined will grow our much needed revenues by £389 million.

On income tax, only top earners, around 5% of taxpayers will be impacted by these rate changes.

And of course, no one in Scotland will pay more in Council Tax for their main home.

Overall, taking a different, progressive, course on Income Tax in Scotland means that in 2024-25, we estimate we will have around £1.5 billion of additional revenues, compared to if we have followed UK Government’s tax policies.

Presiding Officer, asking those with more to pay more is the right choice.

It is a choice rooted in our values. And it is in stark contrast to the tax and service cuts of the UK Government.

In making these choices, however, we are supporting public services – including those delivered by councils.

So, let me be clear,  that this Government will fully fund the Council Tax freeze.

This year, 2023-24,  councils set their average Council Tax increases below the level of inflation.

The OBR projection for CPI inflation in the coming year is 3%.

Of course, I could fund an inflation proof 3% Council Tax freeze.

But I want to help support services, so I will go further than that.

That’s why I will fund an above inflation 5% council tax freeze - delivering over £140 million of additional investment for local services.

Combined with the other support being provided to local government, this will increase their overall funding by 6% since the last budget, taking Local Government funding to a new record high of over £14 billion. 

Helping household budgets during tough times and supporting our Local Authorities to deliver services.

Presiding Officer, I can confirm on other devolved taxes that I intend to make no changes to Land and Buildings Transaction Tax rates or bands, and that we will introduce legislation to increase the Scottish Landfill Tax rates in line with planned UK Landfill Tax increases.

On Non-Domestic Rates, I have considered very carefully the steps that I can take that support business – while ensuring that we have the funding necessary to protect public services.

While the UK Government may be happy to provide tax cuts on the back of real terms cuts to their NHS, I am not.

Because let us be clear, if I spent every penny of consequentials on business relief and tax cuts, that would mean a real terms cut to our NHS and other vital public services – just as the UK Government has done.

However, I have also been clear that I will take a balanced approach through this budget – and that includes on how we can support businesses through Non-Domestic Rates.

The number one ask we’ve heard on NDR have been calls to freeze the poundage.

I am therefore happy to announce that we will freeze the poundage on the Basic Property Rate, protecting businesses with a rateable value up to and including £51,000 from the impact of inflation by freezing the poundage. 

This is forecast to save ratepayers £37 million compared to an inflationary increase.

Alongside inflationary increases in both the Intermediate and Higher Property Rates, this will still ensure that Scotland has the lowest rate for all but the largest properties for the sixth year in a row.

I am pleased to confirm that in this budget we will maintain the Small Business Bonus Scheme - ensuring that 100,000 properties are taken out of rates altogether.

For the hospitality sector, we recognise the pressures they face. That’s why, this year, we’re going to work through the New Deal for Business group to take forward two actions to be implemented in our budget for 2025-26.

First, we will work with the sector to explore longer-term targeted solutions, and better promotion of existing reliefs - rather than relying on short-term steps that do little for their future sustainability.

And second, to examine with the Scottish Assessors the valuation methodology for the hospitality sector to address the concerns that have been raised that it is not truly reflective of the experiences of these businesses.

In addition, in recognition of the unique challenges faced by the hospitality sector in our island communities we will, in this budget, introduce 100% relief for hospitality properties in our islands, capped at £110,000 per business.

Presiding Officer, we will prioritise tackling poverty and protecting people from harm.

One child or household in poverty is one too many.

This Budget prioritises support for low-income households – centred around a cash-first approach.

So, it is here, driven by our priorities – by our values – that we will make our largest single investment.

We will invest £6.3 billion in social security benefits and payments, an increase of over £1 billion compared to 2023-24.

Supporting disabled people to live full and independent lives, helping older people to heat their homes in winter, and aiding low-income families with their living costs. All in all, supporting more than 1 in 5 people of Scotland. 

We are supporting those most in need by uprating all Scottish benefits by 6.7% in line with the CPI rate of inflation at September 2023; this includes increasing the weekly amount for our game-changing Scottish Child Payment to £26.70 from April 2024.

The Scottish Child Payment lifts children out of poverty - and stands as an example for anyone looking to form the next UK Government of the action that can be taken if you are true to your values.

Presiding Officer, we will continue to deliver free school meals for all children in Primary 1 – 5 and special schools. And we will invest £43 million in estate upgrades to support the delivery and expansion of free school meals.

This includes extending the roll-out of Free School Meals for Primary 6 and Primary 7 children in receipt of the Scottish Child Payment, providing more children with access to healthy meals during the school day.

Presiding Officer, due to Westminster mismanagement of our economy, too many households are worrying about debt. With our limited powers there is only so much we can do. However, where we can step in, we will.

That is why I am pleased to confirm we will provide Local Authorities with £1.5 million to cancel school meal debt, removing a worry hanging over families up and down the country who are struggling to make ends meet.

I can also confirm that through this budget we will keep The Promise to Scotland’s care-experienced children and young people, providing £50 million through the Whole Family Wellbeing funding for holistic family support.

Presiding Officer, we recognise the importance of high quality childcare.

That’s why in 2024-25 we will continue to invest in a more flexible childcare system which offers families access to more local options, and we will expand our innovative childminder recruitment and retention pilots to grow this essential part of the childcare workforce by 1,000 more by 2026-27.

Affordable Housing is a key area for supporting many to find a home. That’s why we will invest over £550 million in the Supply Programme.

Helping deliver homes for social rent, mid-market rent, and low-cost home ownership in communities across Scotland.

Presiding Officer, I have said throughout this budget that it is a statement of our values. Unlike some, this Government does not think homelessness is a ‘lifestyle choice’. We know that those who are homeless need support not just with housing but often with other complex challenges they are facing.

That is why, in 2024-25, we will commit  over £90 million in Discretionary Housing Payments and £35 million of additional funding for specific action to end homelessness and reduce the number of households living in temporary accommodation - which is over and above the homelessness funding provided through the local government settlement.

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

Our ability to ensure employment opportunities are available, and provide the support required to tackle poverty, is reliant on us seizing the huge opportunities that exist in Scotland to build a fair, sustainable and growing economy.

Businesses are critical to creating good jobs, delivering fair wages, expanding Scotland’s tax base to help tackle poverty and improve our public services.

This Budget and the New Deal for Business support our National Strategy for Economic Transformation.

Only yesterday the Fraser of Allander Institute published a study showing that the renewable energy sector supported more than 42,000 jobs across the Scottish economy and generated over £10.1 billion of output in 2021.

This is yet another illustration of the significant opportunity to develop the renewables supply chain and maximise the economic benefits from Scotland’s renewables potential.

That is why we will invest nearly £67 million to kickstart our commitment of up to £500 million over five years to leverage private investment in the infrastructure and manufacturing facilities critical to the growth of the offshore wind sector.

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

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

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

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

Presiding Officer, our aim for opportunity is about more than economic opportunity. It is also the opportunity for individuals and organisations to realise their potential – and that is especially true of our nation’s culture.

The transformational power of our culture is immense, attracting people from all over the world who want to come here and experience it first-hand.

As the first instalment of delivering the First Minister’s commitment to double arts and culture funding, we will increase funding for culture in 2024-25 by £15.8 million. Restoring funding to Creative Scotland for utilising their reserves this year, and more.

This is only the first step on the route to investing at least £100 million more in arts and culture by 2028-29. And our aim is to increase arts and culture investment in 2025-26 by at least a further £25 million.

Presiding Officer, perhaps the biggest opportunity before us – and one of the most pressing dangers the world faces – is in the climate emergency, and our actions to address it.

While the UK Government rolls back, we will take action.

We will invest nearly £2.5 billion on public transport, to support our bus, rail and ferry networks - ensuring there is a viable alternative to car use for those who need it, and to allow people to make sustainable choices.

This includes investing more than £425 million in bus services through our Network Support Grant, and our concessionary travel schemes for under-22s, and Older, and Disabled people.

Our investment in public transport also includes £434 million to support our Island communities through provision of Ferry, Port and Harbour services.

ScotRail and the Caledonian Sleeper are now in public hands and through this budget we’re providing £1.6 billion for rail to support passenger rail services, as well as the operation, maintenance, and renewal of our rail infrastructure.

We will invest £220 million in Active Travel as we continue increasing our investment in walking, wheeling and cycling.

We also need a step change in how we heat our homes, so we are providing £358 million to continue to accelerate energy efficiency upgrades and installation of clean heating systems.

Investing £49 million to make progress in Scotland's transition to a circular economy.

Effective support for nature can bring a substantial impact in sequestering carbon. That’s why we’re investing £129 million to maintain and restore peatlands and increase woodland creation.

We recognise the vital role agriculture plays in the rural economy and the opportunity to become more productive and sustainable. I can confirm that we will provide the same level of support through direct payments to farmers and crofters that was available pre-Brexit.

We are currently providing farmers and crofters with the most generous package of support anywhere in the UK. We will also provide additional funding to support them to transition to a new support framework. In November, I wrote to the NFU Scotland President to reiterate my commitment that the funds that had been released to support the cost of living crisis would be returned in full, to be spent on the right agricultural priorities at the appropriate time. 

Agricultural Scotland has taken the hit for a Brexit we did not vote for, this budget demonstrates the Scottish Government is resolute in our support for our farmers and crofters right across Scotland.

Presiding Officer, while the UK Government have chosen to prioritise tax cuts at the expense of the NHS and Public Services - our values, and therefore our choices, are very different.

We recognise that we cannot address the financial challenges before us through tax alone, or by delivering public services in traditional ways.

Our approach must be investment and reform.

Working in partnership with Scotland’s trade unions, we will take action to ensure our services remain sustainable, improve outcomes, and support the people and communities who need them most.

This approach will be underpinned by our continued commitment to our policy of no compulsory redundancies.

Reform takes time, and so we are also taking decisive steps today.

Presiding Officer, investing in Scotland’s NHS is a non-negotiable for this government.

Health consequentials from the Autumn Statement from the UK Government to Scotland amount to a total of £10.8 million. That is equivalent to 5 hours of NHS Scotland activity.

It is evident from the Autumn Statement, the UK Government have no intention of funding pay uplifts for staff in England. Instead, as many independent analysts have said, we are looking at deep, real terms cuts to public services across Scotland.

We choose to take different choices in Scotland.

That is why we are delivering an increase of over £550 million to NHS frontline Boards - a 4.3% uplift, taking their total investment to over £13.2 billion.

That’s above real terms protection for the NHS in Scotland, in the face of UK Government austerity and real terms cut to the NHS in England.

This investment will help the NHS continue to evolve its delivery of services and work to improve waiting times. New services and innovations will need a step-change in our reform programme – and that’s why we will take forward a National Conversation to help shape the NHS for the future.

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

We know that one of the keys to a successful NHS is the successful provision of social care, so that everyone has access to consistently high quality care, whenever they need it.

We are investing £2 billion in health and social care integration meaning that we are already exceeding our commitment to increase social care investment by 25% by the end of this Parliament – 2 years early.

We are supporting hard-working social care and early learning and childcare workers in the private, third and independent sectors by providing over £200 million additional funding to raise pay to at least £12 per hour from April 2024.

That’s equivalent of a rise of £2,000 for full time workers a year – a pay rise of over 10% in a year.

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

One of our key partners in the delivery of services is Local Government.

Through our partnership with Local Government under the Verity House Agreement, we will work with COSLA to empower Councils through a new fiscal framework which also increases discretion to determine and set fees and charges locally.

Through the fiscal framework we will also seek to ensure that distribution arrangements continue to meet the needs of our remotest communities and changing population.

One of the key services that councils deliver is schools.

Delivering excellence and equity in Scottish education remains a top priority for the Scottish Government.

This requires meaningful engagement with the students, teachers, families, support staff, and communities that rely on our education system.

We remain committed to investing £1 billion over the course of this parliament to tackle the poverty-related attainment gap.

This long-term targeted investment improves outcomes for children and young people, and helps break the cycle of poverty - with recent statistics showing record levels of literacy and numeracy attainment at primary school level and improvements in secondary.

As part of this, £130 million Pupil Equity Funding will continue to empower headteachers across Scotland to invest in the best approaches to improving literacy, numeracy, and health and wellbeing of the children and young people in their schools.

We will continue to provide £145.5 million to councils to maintain teachers in the system and enable councils to offer permanent contracts to our education workforce.

And we are taking action to support our colleges, universities and skills system with over £2.4 billion of investment - including protecting free tuition and driving forward our commitment to Widening Access.

Presiding Officer, the safety and security of the public is one of the most important duties of any government.

That is why we will invest £1.55 billion in policing in 2024-25, increasing the Scottish Police Authority resource budget by 5.6% - an additional £75.7 million, a real terms increase for Police Scotland. Providing the resources needed to support frontline service delivery.

We are also increasing the police core capital funding by 12.4% to £64.5 million, for investment in the police estate, technology and fleet.

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

For the Scottish Prison Service we are committing an additional £38.6 million to their resource budget, an additional 10%, to meet their rising costs.

We will also invest in the modernisation of the prison estate, providing £167 million in capital funding, progressing much-needed replacements for HMP Inverness and HMP Barlinnie.

Presiding Officer, I know there will be members who want us to go further in different areas in this budget.

I would remind them that we are in the situation because of the constraints placed upon us by a UK Government that does not share our values, our principles, or our commitment to public services.

Quite simply we cannot spend money that we do not have, and we cannot mitigate every cut made by the UK Government.

We are at the upper limit of the mitigation that can be provided within the devolved settlement.

We will always do our best with the powers that we have, but they are simply no substitute for independence.

We have always said that to truly transform our economy, society, and public services, and to reap the benefits of Scotland’s resources for current and future generations, we need the full powers of independence and to retake our place in the European Union.

The Autumn Statement and its impact on services was just the latest example of why Scotland must walk a different path. Through the choices we have made in this Budget we have been true to our values and rigorous in prioritising our investment where it will have the most impact.

Our social contract with the people of Scotland is at the core of this budget, and shines through every funding decision contained within it.

We choose investment in our people and public services.

This is a budget that reflects our shared values as a nation and speaks to the kind of Scotland that we want to be.

Presiding Officer, I am proud to commend it to Parliament.