Budget Stage 3 2022-2023: statement by the Finance Secretary - 10 February 2022.

Presiding Officer,

Throughout this Budget process, I have been open and transparent about the challenges that we face.

As we approach the end of this financial year, we are still awaiting the finalised position from the UK Government in terms of this year’s Budget. Prior to Christmas, we were told we might have to pay back consequentials. In mid-January, the message changed positively - the £440 million was confirmed and there would be further consequential funding.

And so, in recognition of my commitment to Parliament to provide as much transparency as possible, the fast approaching deadline of year end and the requirement to finalise our Budget position to give certainty particularly to the Health service and Local Government I announced a further £120 million for Local Government and we published the Spring Budget Revision just last week with the latest figures.

Presiding Officer, last week’s announcement of funding for the cost of living crisis has changed the position again – not by increasing the expected consequentials but by decreasing the funding and it means that the Spring Budget Revision will need to be updated at the first available opportunity.

Frustratingly, as I stand here at Stage 3 of the Budget, with about six weeks to go until the end of the financial year, the position is yet to be formally and finally confirmed. 

Presiding Officer, why does it matter? Well, it matters because Parliament often presses me for greater transparency, which is what I am giving in this statement.

It matters because this is real money, it affects all of our lives.

And ultimately it matters because it demonstrates the extreme constraints of the devolution settlement within which we operate.

Due to the arbitrary and strict limits on carry forward – i.e. being able to use funding on either side of the 31 March cut off – if consequentials are to be used meaningfully this year, then I need to give certainty now, today.

The changes to date, in a very short space of time, are significant. They will impact our assumptions on next year’s Scottish Budget and I will update Parliament once we receive the final position, at the UK Supplementary Estimate outcome later this month.

Presiding Officer, despite all of this, I want to move on to the most important issue affecting households across Scotland right now: the rapidly increasing cost of living.

Large rises in energy bills, increased costs on every day essentials, rising interest rates and the UK Government’s new National Insurance hike are causing huge concern and worry, and people are struggling.

Those additional costs will hit the most vulnerable in our society.

The additional energy costs alone will place significant burdens on many. Estimates suggest that this could move a further 211,000 households into fuel poverty, and around 235,000 households who were already fuel poor into extreme fuel poverty. 

This would result in a total of 874,000 fuel poor households – an increase of 43% on most recent 2019 published statistics – and 593,000 households in extreme fuel poverty.

The extent and the depth of the need is stark. And that, Presiding Officer, is why we will honour our commitment, whatever other Budget challenges that we face, to pass on the full £290 million to help families now.

This additional support will be the latest in our efforts to target funding to help those most in need.  We are already using the powers available to us to support hard-pressed households, including targeted assistance for those on the lowest incomes. 

• Delivering the unique Scottish Child Payment
• Awarding £76.7 million this year and last to low income families through the Bridging Payments
• Paying 530,000 Low Income Pandemic Payments last year
• Funding Discretionary Housing Payments
• An additional carers allowance supplement in 2020 and again in 2021
• Delivering the Winter Support Fund to help people heat their homes and meet rising food costs.
• And the continued £41 million investment in the Scottish Welfare Fund

With this £290 million we can go further, I want to be clear at the outset, that we have explored a range of options and routes, and I have heard the calls from Age Scotland, the Poverty and Inequality Commission, and the Joseph Rowntree Foundation to ensure that is targeted.

And it’s frustrating that we do not have all of the levers I wish to have, such as a full social security or tax system, to be able to best target and deliver that support.

And so I am therefore today announcing that there will be three elements to the package of support today.

Firstly, we will provide £150 to every household in receipt of Council Tax Reduction in all Council Tax bands.  The Council Tax Reduction Scheme already identifies households in greatest need and will allow us to target this intervention.

Secondly, I will provide local authorities with funding to pass on £150 to other occupied household in Bands A to D in Scotland.

In total, combining these elements, 1.85 million, or 73% of all households, will receive £150 of support.

I have discussed this matter directly with COSLA, as recently as last night, indicating my preference for this to be distributed as a payment rather than as a Council Tax credit. However, due to the urgency of mobilising this funding quickly, Councils will have a choice – they can either deliver a direct payment or a credit to Council Tax accounts, as long as it can be done in April.

This is clearly an imperfect scheme, it will reach some households who may not need it, but it is the only route we have to make sure that we reach those for whom it will make a difference, quickly and simply.

I know that the cost of living crisis is affecting households who are not in receipt of benefits as well, who are not claiming a Council Tax Reduction. And they are facing hardship too. We need to do what we can to prevent those households and families on the edge of the poverty line, from falling over it.

So, the third element of the package, is that I am also announcing £10 million to continue our Fuel Insecurity Fund to help households at risk of self-disconnection, or self-rationing their energy use, due to unaffordable fuel costs.

This package today is in addition to the further £120 million I announced previously for local government next year, to ease their pressures and help prevent inflation busting Council Tax rises.

In terms of going further to help Councils have as much discretion, I am also announcing today that I will allow any existing underspent Discretionary Housing Payment funding to be redistributed between Councils and carried forward next year to allow them to provide targeted, discretionary support.

And I will also allow any existing underspend of the Scottish Welfare Fund to be carried over by local authorities for the same purpose.

Finally, I want to say honestly and openly that this is not enough. Households across Scotland, across the UK, are struggling with the wide range of rising costs and many of the macro levers, for example, around energy regulation reside with the UK Government.

And so in that spirit, I will be writing to the Chief Secretary to the Treasury, again highlighting that we do need to work together urgently to use our joint powers to do more to tackle the cost of living.

I hope that this chamber can unite in that bid.

Presiding Officer, there is one further update I wish to share with the Parliament because one of our key objectives in the Budget was economic recovery –and if households are struggling then businesses are identifying with some of the challenges that they face as well.

As the Chamber will be aware, the Government committed to maximising our COVID recovery support for businesses and as part of this I previously announced the allocation of £276 million of Omicron business support funding for the current financial year.

Following consultation with business, who asked for support to now focus on economic recovery, I am pleased to announce today, the allocation of further funding to support business sector recovery, including some of the sectors that have been hardest hit, like the events sector and the travel sector, as well as city and town centres.

This includes an additional £16 million for culture and major events that have faced cancellations.

For tourism there is additional funding to support inbound tour operators of £7.5 million. We know that international tourists spend more when they visit, so supporting this sector helps drive recovery in retail and tourism right across Scotland.  

We will also provide £3.5 million for outbound travel agents that have been impacted by near-continuous restrictions on international travel throughout the pandemic.

And coming onto the important issue that has been raised a number of times about supporting city centres to recover, we will make an additional £3 million specifically available for city centre recovery to improve footfall and help those businesses that have been affected by for example, office closures.

Presiding Officer, we will also be providing additional support for the childcare sector because a fully-functioning childcare sector is a pivotal part of our national economic infrastructure and we are providing £6.5 million for that sector.

And then last but not least, we understand that many SMEs have already adapted but more are keen to invest in digital adaptations and so we are providing additional funding of £3 million to help SMEs continue their digital journey.

And so, Presiding Officer, as I close, all of these grants will provide a bridge from resilience to recovery.

And as I move the motion today and as we open Stage 3 today, I think we can all agree that we are still in unprecedented times. It requires a quick and a flexible response from Government, which we have demonstrated today, but it also requires unity across Parliament and I hope all Members can vote to support the Budget at Stage 3 tonight.