Autumn Budget Revision: Finance Secretary statement

Statement given to Parliament by Finance Secretary Kate Forbes on Tuesday 29 September 2020.

Presiding Officer, this is a welcome opportunity to provide an update linked to publication of the Autumn Budget Revision, which was laid on Thursday 24 September, and related budget matters. It continues my commitment to engage Parliament on the Budget process and on the funding provided to support the COVID-19 response.

I will also take the opportunity to offer some thoughts in response to the Chancellor’s statement last week, and his decision to scrap the autumn budget for the UK Government.

The Autumn Budget Revision is the second of three formal in-year amendments planned to the Scottish Budget for 2020-21, reflecting the Scottish Government’s financial response to COVID-19.

It remains a snapshot of a dynamic funding position but brings the total Scottish Government financial response to COVID-19 to over £6.5 billion (that was around £4 billion at Summer Budget Revision and £2.5 billion here), with final allocations planned to be set out in February in the Spring Budget Revision.

The ABR allocates £2.55 billion of COVID-19 and other funding changes. It is being funded through deploying £2.4 billion of Barnett Consequentials, £142 million of reprioritisation of existing expenditure, and £30 million of Scotland Reserve drawdowns for Capital expenditure.

The largest element - £1.84 billion of Barnett consequentials - is allocated to Health and Social Care, bringing total health funding on COVID-19 to over £2.4 billion and reflecting that this crisis is first and foremost a health crisis.

£222 million of resource consequentials are allocated to transport, £190 million is for business, employment and cultural support and £119 million is for Education and Skills.

The ABR also allocates the majority of capital expenditure from the £230 million Economic Stimulus package announced in June.

This leaves just over £500 million of COVID-19 resource consequentials formally unallocated, but I can remind opposition members who appear to be confused about the nature of a budget revision, that this funding is fully committed to the COVID-19 response. It will be formally allocated through the spring budget revision – a budget revision is a retrospective, budget process.

The residual Scotland Reserve position is currently £220 million in total.

Although not formally allocated here the remaining consequentials are already being re-deployed against existing, high-priority commitments, and there is no available headroom.

For example, our commitment to provide funding for those on lower incomes who are required to self-isolate, and essential support we know is required in sustaining our transport networks.

We all want to do more and I am facing calls to fund additional measures from all parties. In the absence of any further UK consequential funding, the only way of supporting additional commitments is through further reprioritisation of existing funding – funding that we know is required to support vital public services.

That is why I continue to press the case for additional borrowing powers and other fiscal flexibilities with the UK government. Powers that are essential in enabling this Government do more, to maintain a Scottish approach to supporting the COVID-19 response, and to assist in the management of the overall budget position.

We are not waiting for the UK Government, but instead have got on with the business of investing in the economy, with a view to providing clarity to businesses and supporting economic recovery. Just last week, we published draft Infrastructure Investment Plan, as well as a Capital Spending Review Framework document.

Together those publications provide detail of future capital spending plans, which will aid our response to the economic fallout from the COVID-19 pandemic, and give much-needed confidence to key sectors of the Scottish economy.

The draft Infrastructure Investment Plan sets out a clear vision - to support and to enable an inclusive net zero emissions economy. It includes the details of around £24 billion of major projects and national programmes that we can confirm now – with more to be added in future years.

Infrastructure has a vital role to play in supporting jobs, and in helping businesses and communities to adapt and recover from the impact of COVID-19. Moreover, the package of investments set out in the draft responds to Scotland’s economic, social and environmental needs, and it supports sustainable and inclusive growth for all.

The Framework gives the basis for publishing a full Capital Spending Review later this year, which will provide multi-year capital budget allocations for the Scottish Government, and other public sector bodies.

We have done this despite continuing uncertainty about the UK Government’s own forward spending plans.

And coming on to that, the Chancellor’s decision to scrap this autumn’s UK Budget is extremely concerning news. The Scottish Budget envelope still depends heavily on the Block Grant set by the UK Budget, and on UK tax policy.

Without that tax policy and the other announcements of a UK Budget, the Scottish Budget for next year on which vital public services depend, will be based on provisional and partial figures – and therefore subject to unnecessary uncertainty and risk. That is no way to set a multi-billion pound budget, on which the communities and businesses of this country rely.

We faced a similar situation this year when the UK Budget was not set until March and members across the chamber, no matter how much they might defend the UK Government today, know full well that last year’s delay was deeply problematic for our budget setting and scrutiny processes. The situation we now face is far, far worse - compounded by the financial challenges of COVID-19, the potential for the UK Government to make substantial changes to tax and spending and the uncertainty surrounding Brexit.

I think it is completely unacceptable that Scotland, and the other devolved governments, are being put in this position once again.

Together with the Finance Ministers of Wales and Northern Ireland I have written to the Chancellor to register our concerns about this delay and the prolonged uncertainty about the scope and content of the UK Comprehensive Spending Review.

This again underlines the real need for us to have full financial powers, to ensure we are not adversely affected by UK budgetary decisions, or indeed non-decisions.

Whether it is Brexit uncertainty, the lack of clarity on COVID funding or scrapping the autumn’s UK Budget - our whole Budget process is at the mercy of the dysfunction of Westminster.

And the Chancellor’s Winter Economy statement provided helpful clarity on his next steps – I welcome the extension of support for some individuals and businesses.

But it was clear weeks ago to nearly everybody else – business leaders, manufacturers, trade unions and political parties across this chamber – that either an extension of the existing measures or successor arrangements were essential, to prevent unnecessary economic damage and protect livelihoods. And while the Chancellor has dithered, many businesses have already issued redundancy notices.

The Job Support Scheme is a poor and a narrow substitute for the Job Retention Scheme – the Treasury’s own illustration makes clear that the scale of their contribution to supporting individuals has plummeted, with the burden falling on hard-pressed employers to provide the majority of the support.

To quote the Institute for Fiscal Studies: “this is significantly less generous than the furlough scheme. A lot of those workers who are not working at all are likely now to lose their jobs.”

The Scottish Tourism Alliance has also stated that employers cannot afford to pay staff when there is no work, so we can still expect to see mass redundancies.

So I’m under no illusions, despite these announcements, jobs will be lost, the economy will be more fragile and the recovery is going to be challenging.

And so Presiding Officer, as I conclude I will continue to seek to engage Parliament at every step of our fiscal response to COVID-19. This Autumn Budget Revision and the draft Infrastructure Investment Plan is part of that transparent process.

However, I believe the Chancellor’s statement on Thursday was a missed opportunity and I also believe that we need the clarity that an autumn budget would provide.

The measures so far don’t allow us to tailor our response to COVID’s impact on the economy.

The UK Government’s continued failure to provide proportionate fiscal flexibility such as borrowing powers, prevents this government - and indeed this parliament - from acting in a way to deliver the support that we all believe is necessary.

Our ambition remains to eliminate COVID-19 in Scotland, and for the Scottish economy to return to delivering prosperity and growth.

Unfortunately, under the current arrangements imposed on our budget approach and timetable, our response to this crisis is overly dependent on that of the UK Government.

So the lack of an Autumn UK Budget increases the funding uncertainty for our decision-making, at a time when our taxpayers, communities and our public services most need clarity.

Like all governments, we are facing pressures to act now, to go further, to provide additional support, but we do not have the tools that allow us to do that. We don’t have the clarity we need on UK Tax and Spending to support our budget planning into next year.

And it does not seem credible to me that the UK Government refuses to accept the case for these routine basic fiscal powers given these exceptional times. Powers this Parliament has overwhelmingly supported in the past.

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