21/09/2011 Newsnight Scotland

Tonight on Newsnight Scotland: A fair deal budget doing an

excellent job in difficult circumstances? Or savage cuts and

financial sleight of hand? John Swinney's announcements made

one thing absolutely clear - public sector pay will be frozen for

another year. He has promised rises after that. I will be asking him

whether that means real rises that compensate for inflation.

Good evening. So, Scotland has a budget and a spending plan, and

this year there will be no squabbling or horse trading to make

sure it gets passed by Parliament. But that doesn't make it

uncontroversial. The frozen pay in your pocket will continue to lose

value, if you work for the public sector, and some public services

are set to take a direct hit. But there's no change to free

prescriptions, personal care or bus travel, and council tax remains

frozen too. So who suffers, and who gains? We will hear from John

Swinney shortly. The message from the streets

outside the Scottish Parliament was crystal clear: The back granted

today's Budget announcement was beyond doubt. The SNP says

Westminster is imposing a budget cut of 3.3 billion over the next

three years. The Finance Secretary wants to switch �750 million away

from the day-to-day spending to fund capital investment. The road

improvements budget is to fall from 24 million to �14 million. While

the SNP insists they a protection the NHS budget, nursing costs are

set to fall. -- they are protecting. Mr Swinney said careful stewardship

had delivered efficiency savings of �2.2 billion since the SNP came to

power in 2007. Many areas lay For the purposes... For the

purposes of this spending review, we must work within the existing

financial and constitutional framework. The Finance Secretary

would extend the public sector pay freeze for another year. With

additional resources to maintain teaching employment, we will need a

programme of public service reform. It will reshape, integrate and

deliver better services to those who use them. Ministers will also

be freezing their own pay in 2012- 13. My aim is that 20 top-13 will

be the last of a pay freeze, -- 2012-13. I propose that the

business rates paid by large retailers of tobacco and alcohol

will be increased by a supplement from 1st April, 2012. This is the

first SNP budget as majority government. Commitments made at the

election were made at a full mortgage of what they budget would

be. This is their responsibility, and the Scottish government cannot

pass the buck for the decision they have made today. There has been no

rabbit out of the hat today for Mr Swinney, and there is a great deal

of pain for our economy and many people in our society. Others were

looking for sleight of hand, not least in local authority funding

and the council tax free is. maintains that level of funding,

but Ed one looks in the Scottish government's own document, it does

not maintain it at all. -- but if one. If the funding is constant, in

cash terms, that is what I said to Parliament a few moments ago. He

had showed it would draw that rubbish he has just communicated! -

- we can draw. One thing you cannot said that the UK government is that

they're taking a short-term approach. They are looking to the

long-term, to get public services in a sustainable shape for the

future. I think it is unfortunate that the SNP government have sought

to dodge and delay, endlessly, over the last period. And even today, we

don't know the detail of how it will impact. It is already clear

public service workers are paying a high price. Public sector workers

will be rightly angry at the scene at their paying conditions

undermined. -- at seeing. These difficult times offered a chance

for society to have a rethink. Spending is essential, to reduce

the harsh effects of the spending cuts, and in the longer terms, read

calibrate the expectations of our citizens as regards how much the

country will do for them. -- re calibrate.

The Scottish government's proposal is not as detailed as the Red Book

of the UK equivalent. However, there are two under and 67 pages

here, -- 267 pages. They will be comparing what it says in here with

the draft budget. The Earlier this evening, the Finance

Secretary came into our Dundee studio. I put it to him that he

planned to freeze public sector pay next year, but not the year after

that. So what would happen then? What I have made clear it is that

my aim is to move the modest pay increases from 2013 onwards. By

stress they would have to be modest pay increases, because the public

spending position it does not improve over the spending review.

But it does improve enough to recognise the public sector workers

have suffered a quite some time. We need to start to increase public

sector pay in general. What does modest mien? When it comes to

allocations of funds you get from London, you are quick to point out

that an increase below inflation is in fact a cut? Argues saying he

will guarantee that public sector workers will get a pay increase? --

argues saying. I couldn't give that guarantee, no. What I am saying is

that my aim is to get us away from the pay freeze situation at the end

of 2012-13. I can't give you a definitive answer today as to what

a modest pay increase looks like, but it is my aim to move in that

direction. Not equivalent to inflation is not a pay increase.

appreciate the pressures of inflation. I said my concern over

some decisions we have had to take in the face of the UK government's

position, particularly on pension contributions. We have to move

forward in this question in a sustainable way, and the government

has signalled that we have a period of more constrained, but we want to

move with flexibility. If you are to get your staff to go along with

this, they might be prepared if they had some prospect of at least

a pay increase of some sort above- inflation in 2013-14. But you are

saying they will be a pay freeze this year and next, and will give

you some cash increases, but not enough to avoid that being another

pay cut in the year after that. Who knows what will happen to

inflation? This should be looked at in the current context. Members of

staff and the public sector are experiencing a freeze in their

basic pay. I do not see public sector workers failing to co-

operate in some of the reforms that were taken forward and in the

delivery of public services. People expect, reluctantly, that this is

not the direction I would like to take. We need to constrain the

public sector pay bill. It strikes me that members of staff are co-

operating very effectively. There is a question of fairness here. For

example, public sector workers, or a public sector worker whose job is

to process council tax forms. Why is it fair that they should have to

pay... Have their pay cut? While the rich person in a large house,

whose council tax bills is being processed, does not pay any extra

tax at all? The biggest impact of the council tax freeze is

disproportionate on those on low income is. But you could have

banded it. You could have put up council tax on higher bands. But is

rather simplistic. You will find people on low incomes living in

higher bandied houses. You will also find other well-off people

living in very big houses, and effectively paying no extra tax,

what you are asking other people to take pay cuts. But that is one of

the unfairness is of the council tax system. The more general

question after all of this is that the government has set out an

approach which we call the social wage, about recognising a time of

pay constraint. There are other things the government puts in place,

whether the council tax freeze, or prescription charges, or the free

access to higher education, which we have reaffirmed. These are all

part of the social wage we put in place to ensure that those who are

making sacrifices have access to some benefits on the other. The �70

million a year for councils, if they agree, that appears to be part

of the fast cash settlement again. They are facing a cut of about 3%,

I reckon. What you are saying to councils is, we will cut your

budgets, but we will cut the more if you do not go along with the

council tax freeze. That is right, isn't it? We are saying to councils

that the availability of the �70 million is conditional. It is a �70

-- �70 million sum of money councils are prepared to freeze.

There are constraints in public expenditure, Gordon. And what the

government is doing, is provide a local government with a larger

share of the revenue budget. Comparatively speaking, it is a

very fair settlement. But the money you allocated was supposed to make

sure that council tax payers did not suffer. But in fact, whether or

not councils put up council tax, council services will get worse

because you are cutting their No, because one of the other aspect

of the budget is dramatically shifting the emphasis of public

expenditure in favour of preventative spending. There are

new channels of funding which will be available which are about

encouraging institutional co- operation in public service

delivery in the area of preventative spending, and that

clearly is going to involve local authorities in some of that work.

So it is not enough to look at the local government settlement in

itself. There are a variety of other streams of funding that make

a real difference. Are you still arguing seriously that given the

cuts, I take no point about other money, but the budgets are being

cut this year, that local authorities can make pledges of no

compulsory redundancies given what you have done today? I think there

are local authorities that have been commitments are no compulsory

redundancies, the Scottish borders Council is one that comes to mind,

and we would certainly encourage that dialogue at local level. I

cannot impose that, and it would be wrong for me to impose it. I

certainly would encourage local authorities to embark on that

course of action. They will say, we cannot do it now. We might have

been able to do it yesterday, but we cannot commit to it today.

funding settlement we have put in place for local government is a

fair settlement which takes into account the access that we are

providing to a range of different funding streams to develop new

preventative interventions in the delivery of public services. When

you look at the fact that the local government settlement over the

whole of the last spending review and in the 2010-11 settlement were

better than most other areas of the public sector, I think we have

created a very strong platform from which local authorities can take

decisions in the current period. The efficiency savings which she

claimed yesterday to have surpassed yet again. Would you agree to an

independent audit to determine whether these are real savings of

just cuts? For example, asking ordered Scotland to look at these

and then publish the years. Audit Scotland have looked at the

programmes in the past, and I think the questions that arise out of all

of that analysis is whether or not we should spend ever-more time

producing ever more detail to assess the efficiency programme

that we have undertaken. They said they could not tell whether these

were real efficiency savings or not. There are some pretty strict rules

about what can be constituted as an efficiency saving, and essentially

the role is this, that you have to be able to provide the same service

for a lesser amount of money by a reform process, and that is the

approach that categorises and efficiency saving, and that is the

one the Government has done on for the duration of the programme. I

think the achievement of the last four years has been to deliver

efficiency savings that have really enabled us to invest in public

services and to reform the structure and operation of those

public services. Now, this tax on supermarkets, I'm not clear if it

is just on supermarkets, but it seems to be just on supermarkets.

You'll forgive them for thinking, given you had a similar proposal

last year for different reasons, you have just got it in for them.

What I Want To do is to make sure that the government opens up new

streams of funding to enable us to support the preventative spending

agenda properly. This is not intended to achieve anything other

than to get youth money. You're not suggesting that supermarkets will

stop selling cigarettes and booze, are you? Why I am assuming is that

as a consequence of the revenue that is raised from the public

health supplement that we are proposing on non-domestic rates is

that we will be able to raise revenue that will enable us to

invest in preventative spending projects within Scotland. The

challenge that I faced in his spending round, you know, everyone

has been banging on about preventative spending being the

right way to proceed for years and years and years, and I faced a very

tough spending settlement this time around, but I was determined to use

the advantage of the Government's majority in parliament and a five-

year parliamentary term to reshape public expenditure in Scotland so

that we tackle some of these long- term social Kells that we have in

our country. -- social ills. This is what the supplement is intended

to do, to focus on investing and changing the course of some of the

social ills that have affected Scotland for far too long. We will

have to leave it there. I'm drive from Edinburgh by three of Mr

Swinney's political opponents, Lewis MacDonald speaks our

infrastructure and investment for Labour, Gavin Brown is the

Conservative spokesman for the economy, and Willie Rennie leaves

the Scottish Liberal Democrats. Lewis MacDonald, a pretty poor hand

played quite well. Well, what he has done, he has certainly put a

fine gloss on what are very, very serious cuts, and I think what many

people will find objectionable is not just the services that he has

cut and the budgets he has dreamt but the way he has tried to present

it as if there is nothing terribly wrong here. Take housing as one

example. In the SNP manifesto, they promised 6,000 new social rented

homes every year. As soon as the election was passed, that target

changed to include mid-market renting. They have today cut by 50%

the funding available for new housing supply. How have they

squared that circle? They are saying they want to be judged not

by the number of houses they approve, but by the number they

complete, and what that means is they will be able to count next

year as completions some of the new homes that were counted last year

as approvals. It is the fact that they are not being honest and

straightforward about the cuts that they have made that will Hirst as

much as the cuts themselves. Labour is in favour of cut but not

dishonest ones? Is that what you are saying? You wouldn't like to

say, hey, we're going to slash the social housing budget, because we

are honest! Labour is in favour of honest government across the board.

If a party is elected to government same, we will build 6,000 houses

every year, we expect them to do that, not to produce a Budget in

which they move away from that but try to disguise the fact. You're

getting very exercised about cuts to local authorities, would you?

That is a bit rich given what your government in England has done to

local authorities there? The point I made today is that what the

Cabinet Secretary said was not correct. The impression was given

that there was a flat settlement for local government and they're

actually would be the same result of the course of the spending

review. The Scottish government's own figures showed pretty clearly

that over the course of the spending review, they would be �1

billion down from 8.4 billion down to 7.4 billion. You think that is a

bad thing or a good thing? It does seem as if they are taking a larger

share of the hit than others, but the specific point I made today was

the impression was given that actually... So you do not mind cuts,

you just want our as cuts. points I would like to make. One is

this, the UK government had the spending review at the tail-end of

last year, so the SNP knew exactly what they would have to spend over

the course of the next four years when they wrote their manifesto.

What they also said was that they wanted to make the economy the

priority of priorities. My concern is that the number of measures that

would help the economy, whether enterprise agencies, the innovation

budgets, skills for next year, housing and regeneration, as you

have just heard, all of those received fairly sizable cuts, and

I'm just not convinced that what they have done is prioritising the

economy. Willie Rennie, I will listen to your critique of this,

which frankly I did not understand. Perhaps you will tell us again.

main concerns we had about the Budget was that they did not make

the right decisions on council tax, on capital infrastructure, but also

on making sure that we have created the right conditions for growth in

Scotland. Those, we think, should have been prioritised. But they

have decided not to take the options are. For instance, we were

in favour of the �1.5 billion Scottish Water Futures Fund, which

would have invested in science, insulation and making sure we had

an early intervention programme, which I think John Swinney had made

some progress on. But I think they should have invested in the fund

for that, the council tax free should have been abandoned, but we

also think that they should have... Hang on... You think the council

tax freeze should be abandoned this coming financial year? We recognise

that there should be a two-year freeze, but not a five-year freeze.

Right, OK, what is the Labour position on that? We would take the

same view that the prospect of five years of council tax Freezes going

forward, given the 7% cut in council tax budgets, given the

intention to take �200 million away from council capital budgets, that

is clearly putting enormous pressure on those services, are

enormous pressure on the people working in them. What about the

Tories? In terms of council tax freeze, in our manifesto we would

have had a council tax freeze for next year, 2012-13. We did not

budget for a council tax raised after that because we were not sure

whether it would be affordable. We favour low-tax as much as possible.

In terms of the manifesto, we had one for next year, but not for the

years after that. I am still not clear, Lewis MacDonald, other than

not liking the way John Swinney, in your view, was being dishonest,

what exactly are you proposing he should have done other than what he

did? Well, government has to be... Failing to address the promises you

have made in an election is actually a pretty serious issue.

And what we are saying here is that cuts across some of the key

services, which all the rhetoric of the SNP would lead you to believe

they were actually committed to increasing, so for example if you

take the position of further education colleges, which clearly

have a particular challenge facing them, given the number of young

people currently unemployed and looking for new skills and new

opportunities, you would expect on the basis of their rhetoric that

they would be expanding that. But they are cutting it and cutting it

again, and the principles of these colleges are saying they cannot be

expected to absorb those cuts without an impact on learners, so

those are the key issues. Where would you have found the savings,

then? Well, we are now in the 5th year, the 5th time John Swinney has

stood up to present a budget. It is for him to bring forward a budget

and to explain and justify his choices. These are his choices.

you don't have any proposals? Clearly, there are things we would

have done differently. We outlined a range of improvements in terms of

public service reform which would produce savings, but the key thing

here is that John Swinney has made his choices, but he has not

presented them in a clear way, and people will be surprised and

disappointed at the kind of cuts that he has chosen to make. I think

Alex Salmond will find that difficult to justify, cutting

further education, cutting local Poti services and the housing

budget. Taxing supermarkets, Willie Rennie, a great idea? It sounds

very similar to the last proposal which we are opposed, but they have

taken our public health attempts are on alcohol, and if the money

goes into health, that is something we should look at, but Gavin Brown.

Last year we had a similar proposal, it was only going to hit out-of-

town supermarkets, and within a couple of days the entire policy

unravelled as it was clear that most high streets damaged the

retail sector. We have not committed either way, but we are

extremely keen to see the detail, to see what is involved in it.

business about efficiency savings, I am curious, in all party

manifestos, not just the SNP, it is a constant, stuck in there to make

the numbers add up. You were much in favour of efficiency savings,

Lewis MacDonald. Do think it is reasonable that the public should

be able to go to war that Scotland and say, well, is this really

efficiency savings or not? Why should we take his word for it?

Indeed, that is its purpose in life, to ensure we get value for public

money, and I was interested... is not formally incorporated in

this process. No, it is not, but I was interested in the fact that

John Swinney seemed to be reluctant to go down that road will

commission some kind of formal review war monitoring of the

efficiency savings he is claiming to make, because clearly there is a

difference between efficiency savings, which we all aspire to,

and cuts, which can damage public services. So would you like to, in

the unlikely event of Labour sweeping to power any time soon,

committal party to having efficiency savings independently

audited? -- commit your party. can see a lot of merit in that

proposal, and if I get the opportunity to put it into practice,

I would be delighted. Willie Rennie? I think that sounds

reasonable, but we need to be real about this. The cuts from

Westminster are quite significant, and John Swinney would have a

difficult budgets to set, no doubt about that, but it is about the

choices that the Scottish government has to make, and they

criticise Westminster for not prioritising the economy, but today

they ducked on three significant areas of the economy, on the

council tax, on the capital infrastructure and on the Scottish

Water Fund that be promoted. I just think they cannot claim any more to

be trying to promote the economy when they duck those three issues.

The same point I put to Lewis MacDonald, what would you cut

instead? Lewis MacDonald says, we do not have to do anything, it is

not our job. I have just in the three examples, Scottish Water,

�1.5 billion, �250 million Cavell infrastructure budget, and the

council tax freeze, which we do not think is appropriate to continue.

Gavin Brown, going back a second, will you commit... Efficiency

savings? It is possible the Tories or whatever the Tories are called

will sweep to an outright majority in the next Scottish elections!

Will you commit to your efficiency savings being independently

I it agree very much with what John Swinney said in two dozen and six.

Your chance to nominate some cuts. What I do all ideas? In terms of

Scottish water, if you neutralise it, we could save about �150

million a year from the capital budget. We also have to look at

some of the universal provisions. Prescriptions, for example, we

don't think should be free for everybody. If you kept them, you

would save �37 million a year. I think we have to look at something

like concessionary travel. If you put in some restrictions, you could