I welcome this opportunity to update Parliament on a package of measures that the Scottish Government intends to take to support Scotland’s economy.
I intend to allocate the consequential funding arising from the UK budget for our 2014-15 budget, along with some identified underspend from this year that I will carry forward. That package will support jobs, skills development and children and families, adding to the decisive steps that the Government is taking to help Scotland’s economic recovery and build for the future.
We do so against the backdrop of the UK Government’s continuing cuts to public spending, which were confirmed again in last month’s UK budget. Published alongside the budget were economic forecasts from the Office for Budget Responsibility. Its latest growth forecasts simply serve to remind us of how badly the UK Government mismanaged the recovery in the first place. The UK had one of the deepest and longest recessions among the G7 partners, and its average growth throughout the recovery has been weaker than the average growth of the United States, Canada and Germany. That has resulted in the UK economy being further away from its pre-crisis levels of output than the economy of any country in the G7, with the exception of Italy.
Despite the damaging approach that is being taken by the UK Government, Scotland’s economy continues to overcome those obstacles and we should be optimistic that we have put in place the foundations of longer-term recovery. Scotland continues to outperform the UK across all headline labour market indicators, with a lower unemployment rate, a higher employment rate and a lower economic inactivity rate. Although the economic data is encouraging, we must reinforce our focus on delivering recovery.
The fact that the peak-to-trough recession in Scotland was shallower than in the UK is due in no small part to our consistent and sustained investment in growth and in capital infrastructure in particular. This week, confidence in the construction sector in Scotland reached its highest level since the start of the recession. Our approach has, to date, mitigated the impact of the downturn on the Scottish economy.
Whenever there has been an opportunity to invest further in our economy, the Government has taken it. I am pleased to announce today a number of measures that will boost our economy, create jobs, support skills development and strengthen Scotland’s infrastructure.
First, I announce to Parliament that the Scottish Government will develop plans to extend our current programme of non-profit-distributing investment, with additional investment taking us through to 2019-20. That programme will build on the successes of our current investments, delivering colleges, schools, roads, hospitals and community health facilities throughout Scotland. It will provide the construction sector with the long-term certainty of a future pipeline of work. It is also affordable within the headroom of the 5 per cent limit that we chose to put in place to ensure that we can deliver now for the economy without overconstraining future budget choices.
The current revenue-funded programme is now delivering strongly. Projects worth £650 million started construction in 2013-14, and we expect all the other major NPD projects to follow suit in the coming financial year. The procurement of the M8/M73/M74 improvements took only 23 months from Official Journal of the European Union stage to financial close, which is much quicker than the average time of 36 months. There has been significant investor interest in financing the programme, and we continue to secure good value for money.
Our schools programme to deliver 67 schools for the original price of 55 continues on track, and the first of our new community health facilities is now in operation in the city of Aberdeen.
We are keen to maintain that positive momentum and to extend the programme further. We know that every additional £100 million of construction activity is estimated to support more than 1,300 jobs. We also get the long-term benefits of using those assets. I have therefore asked the Scottish Futures Trust to explore with a range of public bodies the development of robust business cases for individual projects. I will come back to Parliament with the details of the programme of investments in the draft budget in the autumn, which will total additional NPD investment in the Scottish economy of a further £1 billion.
In addition, I announce a further allocation of £10.3 million in financial transactions funding to provide shared equity capital support to the help to buy scheme in 2014-15. That will bring our overall investment in the help to buy (Scotland) scheme to £235 million over three years. In making that announcement, I recognise the benefits that the scheme has for the construction sector and the wider economy, and the important role that it plays in supporting aspiring home owners throughout Scotland. The announcement does not preclude further decisions about financial transactions. We will continue to listen to the industry and to explore opportunities to build on the already significant package of support that we have put in place.
I am pleased to confirm to Parliament that the Scottish Government will make an exceptional one-off contribution of £500,000 to Dumfries and Galloway Council to deal with the aftermath of recent flooding in the local area. I fully understand the extreme situation that the local authority has faced since the turn of the year, and the grant will allow it to carry out the required essential repairs to the affected infrastructure.
While the Chancellor of the Exchequer failed in the budget to reverse the capital budget cuts, he took the opportunity to reiterate the UK Government’s approach, which will see further public spending reductions until 2018-19. Indeed, based on the UK Government’s projections, we have so far seen less than half the chancellor’s cuts—some 60 per cent of them are yet to come.
The brunt of the austerity agenda is borne by some of the most vulnerable groups in our society. Earlier this year, we provided much-needed support to some of those vulnerable groups through our welfare reform mitigation and early years commitments. Today, I plan to go further in providing support to those vulnerable groups.
Despite the progress that we are making in the labour market, the Government remains deeply concerned about the levels of youth unemployment. In the Budget (Scotland) Bill, I committed to bringing forward swift measures and appropriate resources to implement the recommendations of the Wood commission on developing Scotland’s young workforce. I reaffirm that commitment and will ensure that the implications of the final report, which is due to be published in May, will be taken forward as part of the 2015-16 draft budget later this year.
In the meantime, I take the opportunity to announce the allocation of £12 million this year to begin the implementation of the Wood commission’s recommendations and to further enhance our existing measures to support youth employment in programmes such as the modern apprenticeship scheme. Our young people deserve our best efforts, and we will do everything in our powers to improve their vocational pathways and to provide employment opportunities.
As the First Minister announced in January, we will further expand the provision of early learning and childcare to make it available to more of our most vulnerable two-year-olds. As well as benefiting the children, that will open up employment opportunities for their families by removing lack of childcare as a barrier to work. To ensure that we have the physical capacity to meet our commitment to expand childcare, I have decided to allocate all the capital consequentials from the UK Government’s budget to local government.
We will continue to work with our partners at the Convention of Scottish Local Authorities to fully understand the capital cost implications of the expansion of childcare services, but the initial investment of £23.5 million in 2014-15 and £7.7 million in 2015-16 will emphasise our determination to properly resource our early learning and childcare services within the constraints of devolution.
The Government has made it clear that we will allocate a full-year cost of £42 million to local authorities to fund the expansion of free school meal eligibility. Recent discussions with COSLA have persuaded me to allocate a further £12 million of resources to local government on a full-year basis to replace the elements of subsidy that local authorities apply to the provision of school meals across Scotland. The allocations for 2014-15 will be adjusted to reflect the January 2015 start date of free school meal provision.
Access to a nutritious meal not only delivers better outcomes for our youngest learners, but provides very welcome financial support to hard-pressed families, many of whom have been badly affected by the austerity agenda. We also know that disabled people and those with health conditions are likely to be negatively affected by a number of the welfare reforms and changes that are being introduced, such as the personal independence payment, which is replacing disability living allowance for working-age people. On-going issues with the work capability assessment, which is used to determine entitlement to health-related benefits, also continue to cause concern, with many people wrongly deemed fit for work. I therefore want to ensure that more support and advice are available for those affected by the welfare reforms and benefit cuts, and I announce today a further £1 million in both this financial year and the next to mitigate the impacts of welfare reform.
We cannot undo all the damage of welfare reform, the austerity agenda or the consequences of Westminster’s economic mismanagement, but the actions of this Government demonstrate our determination to take the initiative where we can. In its analysis, which accompanied the budget, the Treasury admitted that the average household will already be the equivalent of £757 worse off as a consequence of the cuts that have been announced to date, but in the poorest households that rises to £814. We should genuinely worry about the damage that could be caused to our people and communities by the time we reach 2018-19. However, under the current constitutional arrangements championed by the other political parties, Scotland would have no option but to accept funding decisions taken by Westminster.
This Government will continue to argue that Scotland deserves better. We deserve real control over our finances, and our people deserve the right to take their own decisions about the economy, taxation, public spending and public services.