Derek Mackay speech on the Scottish budget

Below is Derek Mackay’s speech in the Stage 1 debate of the Scottish budget 2018-19. Check against delivery.

Presiding Officer, I am delighted to lead this debate on the principles of the Budget Bill.  I welcome the Finance Committee’s report on the Draft Budget and will respond fully to the report before Stage 3 as agreed.

We all know this is a Bill of huge importance to Scotland representing the maturity of our parliament.  We are a parliament of minorities and must work across the chamber to find compromise and consensus in order to give support, sustainability and stimulus to our economy and to our public services.

Reaching a consensus is indeed a task for us all.  I thank those members who have engaged properly and constructively.

This Bill seeks approval for spending plans that will use the powers of this Parliament to build a fairer, more prosperous country and put the progressive values of this Government into action. The budget will invest in our public services, in our people and in our businesses to enable them to develop and thrive.

We set out a bold and ambitious agenda in the Programme for Government and this Budget provides the resources necessary to deliver that vision.

Our public services require a strong economy  – but equally the most successful economies in Europe are built upon the firm foundation of strong public services and inclusive societies.

We must support our economy to keep pace with changing technology and access new markets in the most challenging economic and fiscal environment of any budget in the devolution era.

That is why we have prioritised measures that will bring stability and stimulate growth.

The Budget invests almost £2.4 billion in enterprise and skills through our Enterprise Agencies and our Further and Higher education bodies. This includes a 64 per cent increase in the Economy, Jobs and Fair Work Portfolio, an initial £10 million to support the new South of Scotland Enterprise Agency, £18 million for the new National Manufacturing Institute– and it doubles, to £122 million, the funding allocated to City Region Deals.

In total, we are investing £4 billion in infrastructure with £1.2 billion for our transport system including turning the A9 into an electric highway and delivering new railway investments such as the electric trains between Edinburgh and Glasgow.

Knowing the views of the Parliament, I am sure all will welcome the news that I have reached a deal with the NI Council Leaders on the support for internal ferries for the Northern Isles.

In light of that agreement, and as part of a wider agreement with the Scottish Green Party on the budget, I will allocate an additional £10.5 million to Shetland and Orkney Island Councils in 18/19, while we continue to explore a long term model of fair funding.

Presiding Officer, Scotland has a world leading reputation for our efforts to tackle climate change.

To support our transition to a low carbon economy, this budget delivers £137 million for energy efficiency and heat decarbonisation and confirms £600m of investment in our R100 programme to make superfast broadband available to every home and business premise in Scotland.  It allocates £60 million for a Low Carbon Innovation fund, £20 million to support the transition to electric vehicles and support more green buses and doubles investment in active and sustainable travel.

The proportion of the Scottish Government capital budget spent on low carbon is increasing from 21 per cent to 29 per cent.  As part of my agreement with the Scottish Green party, we will continue to increase, year on year, the proportion of our capital budget that is spent on low carbon projects beyond this year’s budget.

I also intend to provide an additional £2 million of capital to the Home Energy Efficiency Programme, a further £2 million to explore a proposal for a pipeline fund for local rail projects and to provide the funding necessary to accelerate the delivery of the four Marine Protected Areas.

Presiding Officer, if we are to achieve our full potential we must do more to address the inequalities  that exist in our society.

Regrettably, we do not control many of the levers necessary to do this,  but we will do all we can to mitigate the worst impacts of UK Government welfare reform with £100 million of support.

The Attainment Scotland fund will increase to £179 million including £10 million to provide support to children and young people with complex additional support needs and total investment of £243 million will support the expansion of publicly funded early learning and childcare entitlement.

In 18/19, we will invest £10 million in an ending homelessness together fund plus the first investment in a new £50 million tackling child poverty fund, which will help to address the underlying social and economic causes of poverty.

Alongside the Draft Budget we published a fair and progressive public sector pay policy. We are already the only government in the UK to lift the pay cap and offer a real pay rise to our public sector staff.

Today I can confirm that we will go further.  I will increase the threshold for the 3 per cent uplift to £36,500 increasing the proportion of staff groups receiving the inflationary pay increase from 51 per cent to 75 per cent,  that will include nearly 80 per cent of NHS staff and a vast majority of our teachers. This policy also provides for an increase of up to 2 per cent on the pay bill for those earning between  £36,500 and £80,000. Again I urge the UK Government and the Welsh Assembly to follow our lead and recognise our public sector staff.

In our draft budget I also set out proposals for progressive taxation that offers significant protection to the lower paid.  Under my proposal to introduce new starter and intermediate rates, as well as the increase in the Personal Allowance, no one earning less that 33,000 will pay any more than they did last year  – and more than half of all taxpayers will pay less than if they lived elsewhere in the UK.

Those changes, combined with an increase in the Higher Rate Threshold and changes to the Personal allowance created an anomaly where a small number of higher rate taxpayers would have seen their bills reduce.  I can confirm today that I will act to remove that anomaly.

Rather than my initial proposal, I will instead increase the Higher Rate threshold by 1 per cent to £43,430.  This will raise around £55 million over and above the Draft Budget proposal, with final costings to be determined by the Scottish Fiscal Commission.  Overall our tax decisions deliver an additional £420 million to protect the NHS, invest in Scotland’s public services and support our economy.

Presiding Officer, I have previously set out in detail why the local government settlement we proposed was a fair one.


However, I have also consistently said that I am willing to compromise and find common ground. Through constructive discussions I have been able to do so.

I intend to use the additional £55m of tax revenues to underpin the delivery of local services.

I also plan to utilise an element of the funding available in the Scotland Reserve and a level of  additional underspend from 17-18 to further support Local Government.

Those decisions have enabled me to identify an additional £159.5 million of funding to add to the Local Government settlement to ensure that the revenue settlement, along with the capital settlement, receives real terms growth.

Local authorities are also able to raise an additional £77 million from council tax.

£34.5 million of this additional money will be allocated in 17-18 to local authorities and the balance of £125 million will be allocated as an amendment to the Budget Bill at Stage Two.

Presiding Officer, we will return in three weeks to debate the Scottish Rate Resolution that underpins these spending plans.

Our tax proposals safeguarded the lowest earning taxpayers and, coupled with our spending decisions, will protect and grow the economy.

They ensure that 70 per cent of individuals will not pay any more in tax than they do now for given incomes.  55 per cent of taxpayers will pay marginally less tax than they would if they lived elsewhere in the UK.  Our business rates package provides a boost of almost £100 million.  We still have lower average council tax bills and no one in Scotland pays a tax on their ill health through prescription charges or on their ability to learn through tuition fees.

Those decisions on tax have therefore enabled me to reverse the real-terms cut that Westminster has imposed on our resource budget next year, while ensuring that Scotland is not just the fairest-taxed part of the UK but, for the majority of taxpayers, the lowest-taxed part of the UK.

And yet Scottish taxpayers will continue to benefit from:

  • protection of public services that are free at the point of use – including free prescriptions;
  • free personal care;
  • free higher education;
  • no business rates for 100,000 properties;
  • reducing the attainment gap;
  • the doubling of free childcare;
  • the delivery of 50,000 new affordable homes;
  • above inflation investment in police;
  • above inflation investment in our universities and colleges; and
  • above inflation investment in local government services the length and breadth of Scotland.

And perhaps most importantly – as a result of our actions we are able to deliver on all of our commitments and invest an additional £400m in Scotland’s National Health Service.

Presiding Officer, with all of this investment, this government is delivering the best deal for taxpayers in the whole of the UK.

For our economy, our communities and the well-being of our nation I commend the principles of this Budget Bill to Parliament.