Finance Secretary John Swinney
Draft Scottish Budget 2010-11
September 17, 2009
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Presiding Officer, I present to Parliament today the Scottish Government's draft Budget for 2010-11, for consultation and debate, over the coming months.
The budget document sets out a package of spending proposals designed to build on the achievements this Government has delivered in the last two years and to set the course for further achievement.
Our spending plans continue to be shaped by the Government's Purpose of delivering sustainable economic growth, our framework of national outcomes and our commitment to first class public services in Scotland. Our plans contribute to advancing greater equality and for the first time we will be providing an Equality Statement on the budget.
I am pleased to say that we are also publishing today a carbon assessment of the Draft Budget which provides, for the first time, an understanding of the carbon impact of Government spending.
Our spending plans are, of course, framed by the current economic climate. At a time when many businesses and families are facing the challenges brought by the recession, it is imperative for government to respond effectively and decisively to support them.
Financial context
I present this draft budget to Parliament against the backdrop of a significant squeeze on public spending. The Scottish Government's Departmental Expenditure Limit Budget - the money over which we have direct control - will reduce in real terms by 0.9 per cent compared to this year. This is the first real terms cut in the Scottish Budget since devolution. This is happening for two reasons.
Firstly, we have taken decisions - supported across this Parliament - to accelerate capital expenditure to counter the effects of the recession. This step has helped to boost the economy but the Treasury requirement to repay that resource at such a critical point at the start of economic recovery poses a threat to that recovery.
Secondly, the Scottish Government has had to consider the impact of the Chancellor's decision to reduce the Budgets available to Whitehall Departments which imposes upon us a consequential reduction of £392 million in the planned resource budget. His decision to reduce the Department of Health baseline brings a further reduction of £129 million in the Scottish Government's planned capital budget - offset by some minor consequentials. This leaves a reduction of around £500 million.
These pressures in 2010-11 are the first part of a sequence of pressures on the public finances which are well known, with a range of forecasters predicting significant real terms cuts to the Scottish budget, of up to 8.5 per cent between this year and the end of 2013-14*. Reductions of that size would bring substantial challenges, and our decisions in this Budget must take account of the medium term outlook.
We believe there is a compelling case for the Chancellor to assist economic recovery by further accelerating capital budgets into 2010-11 to go on supporting thousands of jobs across Scotland in these tough economic times. Without further acceleration of capital expenditure, we will see steep falls in the resources available for housing, transport and other infrastructure activity that are essential to safeguard jobs and recovery.
Indeed the housing organisations in Scotland have commended the Scottish Government for its actions in accelerating housing investment and have made a plea for further such actions. I encourage those in Scotland who share our view that such further investment is required, to make the case to the Chancellor before the pre-Budget report in November to ensure we can act in this way. And I make the point, that as we operate within a fixed Budget, without the consent of the Chancellor, we cannot stretch that Budget to meet the essential investment objectives that we all share and wish to see delivered.
*see CPPR report dated 28 April 2009-Scenario B
Budget Pressures
We have also had to consider a range of additional pressures that have arisen, for example the unitary charge payments in respect of Schools PPP projects for which contracts were signed some years ago for which funding was not allocated at the time, increased teacher pension costs and increased costs of police and fire pensions due to valuation decisions and court rulings.
In the light of the different financial climate that we face, as a responsible Government we have therefore had to face difficult choices about where to reduce planned spending next year. We will meet this challenge while continuing to work with our partners to achieve our priorities.
Capital spending
I will now explain the approach we are taking specifically to Capital spending. The Chancellor has cut the Department of Health capital baseline, which results in a cut in our capital budget of £129 million. I do not believe it would serve the interests of the people of Scotland to pass on the Chancellor's cut to the Department of Health baseline to the NHS in Scotland and the Scottish Government has taken the decision not to do this.
We will therefore be drawing down all of our unspent end-year flexibility balances held by HM Treasury. This will enable us to ensure that the Health budget bears no part of the £129 million reduction.
But we can only draw down End Year Flexibility for one year and the Government must act now to ensure the capital budget is sustainable in the years to come. To do this we have reluctantly decided to cancel the Glasgow Airport Rail Link (GARL) project. This is a project that will incur capital costs for several years and the Government has been concerned at the rise in costs associated with the project due to significantly higher estimates of the cost of the need to relocate existing infrastructure compared to the figures shared with Parliament at the time of the legislation. We will however be continuing to support the capacity and signalling improvements on the rail line between Glasgow and Paisley which will improve services to the travelling public in this area. And I can announce today that we will support financially other measures to improve public transport in Glasgow and the west of Scotland as part of the Fastlink initiative to address connections to the New Southern General Hospital and the Commonwealth Games to which this Government continues to attach the highest priority.
Increased resources have been allocated to continue the preparation for a Forth Replacement Crossing. Other elements of the Government's capital programme will continue as they have been planned.
Resource Budget
The UK government's cuts have also put pressure on our resource budgets. In dealing with this, I have been determined to act in a way that protects jobs, supports families and communities and keeps our investment in skills, innovation and our industries of the future. That is why this Budget delivers increased resources for all core portfolios, focusing first on frontline services and the economy.
However, the reduced total budget that is available to the Scottish Government means that each portfolio has also been asked to bear down on its Resource budget in ways that do not impact on the government's priorities and our frontline services. There are three additional actions we will take:
First, our core Scottish Government Administration budget will be cut by £14 million in 2010-11, because we recognise in asking others to save money we should be prepared to rein back our own spending.
Second, we are asking local government to take their pro-rata share of the Chancellor's cuts. Scottish local authorities have indicated that they are prepared to manage within these reduced spending totals, and to approach the resultant challenges - which will be significant - in a spirit of partnership. We welcome local government's approach of placing the welfare of service users in Scotland at the heart of the agenda.
Third, additional resource savings will be found by reducing spending on a number of projects and programmes. These have been selected to minimise their impact on our immediate priorities. They include £20 million set aside next year to prepare for the introduction of a local income tax, real terms cuts in administration and running costs across other budgets and a 54 per cent reduction in our Strategic Communications (formerly Advertising and Marketing) budget.
What the budget delivers
Our approach has been to protect programmes that matter most to the people of Scotland:
- spending on frontline public services, such as schools and hospitals
- on our economic recovery plan, including support for skills development and for hard pressed businesses
- on programmes that help protect households at a time of economic hardship
We are therefore maintaining our investment in our Economic Recovery Plan. We will be investing in the new technologies and industries of the future. We will be continuing with the Small Business Bonus Scheme. We will be investing £842.9 million in the rail network in Scotland to encourage greater use of our public transport systems and will be providing free bus travel to over 1 million people. We will be delivering further support to the renewable energy industry to take forward the exciting agenda of developing new power sources across the sector.
We are delivering sustained investment in Scotland's health service, prioritising frontline services and maintaining the fight against Hospital Acquired Infection. We are ensuring that Scotland is well prepared to respond to the flu pandemic, as well as maintaining the delivery of major public health programmes, including on alcohol misuse. We will continue to reduce prescription charges towards complete abolition in 2011.
We are supporting investment in the further and higher education sector and are protecting the essential investment in skills that will enable us to emerge from economic difficulties. The implementation of Curriculum for Excellence will be supported by significant resources and the development of the Early Years Framework will help ensure that every child in Scotland has the best possible start in life.
Capital investment will be delivered to modernise the prisons estate and we will support drug treatment services to assist individuals to recover from addiction.
We are taking forward our £1.25 billion school building programme which will see young Scots in communities across Scotland benefit from the best possible learning environment.
Our partnership with Local Government means that we will both work together to deliver all of the commitments made in the Concordat signed in November 2007 - including increasing police numbers. Already, together with local government and the police, we have exceeded our commitment to deliver 1,000 extra officers on the streets of Scotland. And we are acting to put more money in people's pockets with resources available again to freeze the council tax.
We will be spending over £350 million on affordable housing projects but recognise that we could do more with the benefit of acceleration in capital expenditure as we have pressed for with the United Kingdom Government.
We are maintaining our support for rural communities and will be investing to support our zero waste strategy, while continuing to work with others to protect and enhance our natural environment.
Our approach also ensures that money is available to meet commitments given in previous budgets such as additional investment in Modern Apprenticeships, the on-going development of the home insulation programme and the Edinburgh Capital City Supplement. And we will continue to prioritise spending on action to combat climate change across a range of Government programmes and specifically through the Climate Challenge Fund that is assisting community action to reduce emissions.
And within the tight constraints in which we have had to operate, I know Parliament will welcome the fact that the Government recognises Scotland's international responsibilities and the wider global impact of the recession. The Scottish Government will therefore increase the budget for international development from £6m to £9m next year.
The lower than planned budget uplift for 2010-11 and the new spending climate for Scotland requires all parts of the public sector to reassess how best we can deliver the services the public expect and deserve. We believe that this is a challenge that can be met successfully.
We will work with public bodies, leaders and staff to ensure that we address the task of making these externally-imposed savings with minimum impact on service users and on the people of Scotland.
Conclusion
Presiding Officer, I commend to Parliament the draft Budget we are publishing today. It is designed to deliver maximum benefits to the people of Scotland, at a time of unprecedented economic and financial challenges. It is designed to minimise the impact of the reductions imposed upon us on frontline services and Scotland's economy.
I present this draft Budget in a true spirit of consultation, for the financial challenges we face, next year and beyond, are challenges for both the Scottish Government and for this Parliament.
I recognise that we must work with other parties in Parliament to secure a Budget next spring that commands the support of Parliament. We have made clear our willingness to engage constructively with other parties to secure this agreement and I reiterate that we will do so.
This Government has a strong record of investing in frontline services and in promoting economic recovery. We acknowledge that we are working within a difficult financial climate to achieve these aims. But we pledge to do everything in our power to deliver for the people of Scotland.