Budget stage 3 - 2023 to 2024: statement

Presiding Officer,

As we conclude the 2023-24 Scottish Budget Bill, I have reflected carefully on the points raised in Parliament, and by a range of organisations, and recognise the financial challenges faced at this time by individuals, households, businesses, the third sector and the public sector.

I am aware of the challenges faced as we manage our way through this cost crisis and this Budget is designed to do as much as possible to assist at this most difficult moment.

None of this is easy - this is by far the hardest Budget process that I have led - with the effects of raging inflation being felt against the impact of more than a decade of austerity and Barnett funding down 5% in real terms since 2021-22.

I have been open and transparent with Parliament on the budget challenges we are managing – both for this current financial year, and for the forthcoming financial year.

I indicated to the Finance and Public Administration Committee on 7 February, the 2022-23 budgetary position continues to improve, and I am now confident of the path to balance for this financial year.

This is as a result of careful budget management and taking the hard decisions to live within our means despite the ferocious pressures created by high inflation.

I can also report to Parliament two changes to our funding position that enable me to take some further steps to increase commitments made in the draft Budget. The first of these changes is that it has been confirmed by HM Treasury that we will receive £125 million of additional funding as a result of Barnett consequentials arising from the UK Supplementary Estimates.

Secondly, I also expect to receive an additional £21 million for 2023-24 due to the correction of an error in our UK Spending Review allocation.

Given that I am confident in the financial position for 2022-23, I am now able to consider some additional financial commitments for next year.

I would like to begin by fully recognising the budget challenges faced by local government. 

In my Budget statement in December, I outlined the Government’s commitment to work constructively with local government to create an effective partnership to assist in meeting this challenge. I use this debate today to reiterate the Government’s willingness to engage in that process and to work with local government to undertake the reform necessary to achieve that aim.

Along with that commitment to work together effectively, I am committing to provide local government with an additional £100 million to support local authorities and their expenditure. This funding is designed to assist councils in making a meaningful 2023-24 pay offer for non-teaching staff, recognising the critical role that those staff play in delivering front line services.

I hope this will enable a swift agreement in the Scottish Joint Council pay negotiations so that relevant staff receive a pay increase as early as possible in 2023-24.  

Last week we confirmed that we would provide an additional £156 million from Scottish Government funds to support a new pay offer for teachers - £33 million this financial year plus a further £123 million next year. That would see salaries rise by 11.5% from April and I encourage this proposition to be put to teaching staff for consideration.

This additional funding for 2023-24 is on top of the £570 million increase in funding that has already been included in the Local Government settlement and takes the total additional funding for next year for local government to £793 million. Presiding Officer, as a result of the decision in this budget, the total funding available to councils to support local services will be nearly £13.5 billion plus the revenues from any local decisions on council tax. This is equivalent to a 3 per cent real terms increase compared with 2022-23 Budget Bill.

We are providing full discretion over £105 million of funding to allow councils to replace national Empty Property Relief with, for example, more localised schemes and we will also increase the maximum fee levels that a Local Authority can charge for a Penalty Charge Notice for parking infringements.

This represents a comprehensive support package for Local Government within this challenging financial settlement.

It is welcome that progress also has been made in the Agenda for Change pay discussions and the Government is undertaking further work to put in place a Public Sector Pay Policy prior to the start of the new financial year.

I recognise the difficulties being faced by our island authorities in managing the cost increases facing their inter-islands ferry network due to the effects of inflation and rising fuel prices. This particularly applies in Orkney and Shetland but to a lesser extent in Argyll and Bute, and in Highland. The Government gave a commitment some years ago to fully fund those services so the second commitment is that that is a commitment we will honour. We recognise there are increased costs and my officials are engaging with councils specifically on the level of funding required and Parliament will be informed once those decisions have concluded.

In the earlier Committee debate on the Budget, I acknowledged the call from Clare Adamson MSP, Convener of Parliament’s Culture and Constitution Committee, to continue to sustain our investment in culture and the arts. The importance of this funding to the wellbeing of our society has always been passionately championed in Parliament, especially by Fiona Hyslop MSP as a long-serving Culture Secretary in the Scottish Government.

We had asked Creative Scotland to sustain investment next year by utilising £6.6m from their accumulated lottery reserves, in place of a further year of additional grant funding to compensate for generally lower National Lottery income. I am now in a position not to require that and I will provide an uplift of £6.6 million for Creative Scotland for 2023-24 to ensure their reserve funding can supplement rather than replace grant funding. That means there is a substantial increase in the Scottish Government funding for culture and major events in the next financial year at a time when our country requires the inspiration that the culture and arts sector can provide for all of us.

I have judged that this is the absolute limit of the additional funding that I can provide based on the current financial position.

The detail of the budget revisions will be reported to the Parliament as part of the Autumn Budget Revision.

Together with our partners in the Scottish Green Party we offer today a substantial budget package that will help those who need it the most.

The Budget measures that we bring forward are anchored in three major themes. First, our determination to end Child Poverty, second, the need to support the transition of our economy to Net Zero. And third, the requirement for sustainability in our public services.

The Budget strengthens our social contract with every citizen of Scotland who will continue to enjoy many benefits not available throughout the UK.

Parliament has already passed the Scottish Rate Resolution setting the tax rates for next year. The Scottish Government has taken the steps we believe are appropriate to deliver fair and progressive taxation, where we ask those who can afford to contribute more to support investment in our public services to do so. Those principles are reflected in our decision to increase the Top and Higher rates of taxation by 1p each and to levy a higher rate of tax through the Additional Dwellings Supplement. These decisions will mean that the majority of people in Scotland will still pay less in taxation than if they lived in the rest of the United Kingdom.

Our progressive choices on Scottish Income Tax mean that this year this Government will deliver record funding of over £19 billion for the Health and Social Care portfolio - with over £2 billion of funding for Primary Care to deliver and improve primary health care services in the community.

The budget also delivers for businesses. The Government has responded to the biggest ask from business organisations to freeze the non-domestic rates poundage saving ratepayers around £300 million next year.

This package secures the lowest poundage in the UK and supports businesses with a package of reliefs worth around £744 million.

Presiding Officer, delivering support for people most in need, in these difficult times, is the foundation of this Budget. This Government is doing all we can to support individuals and families, which in turn supports a stronger, more resilient sustainable economy

The Budget commits over £5.2 billion for Social Security payments - to provide support to over one million people in Scotland. This represents an increase of over £1 billion on last year’s Budget.

This includes £442 million of investment in the Scottish Child Payment – a key support for eligible families, providing £25 per week per child and only available in Scotland because of the choices this Government has made to give a lifeline to families facing difficulty in our country.

Presiding Officer the decisions in this budget are designed to support those who are facing difficulty, designed to support businesses to make their way through the challenging transition that is required to be made to net zero, and to ensure that our public services can meet the needs of the public.

These are difficult decisions in difficult economic times. The Budget that has been set out to Parliament enables us to invest in our public services, to ensure a strong boost to local authority funding and to ensure that we help those who need it the most. I move the Budget in my name.