 The next item of business is a statement by Derek Mackay on the 2018-19 Scottish Government provisional outturn. The cabinet secretary will take questions at the end of his statement so that there should be no interventions or interruptions. I call on Derek Mackay for up to 10 minutes, please, cabinet secretary. Presiding Officer, I welcome the opportunity to update Parliament on the provisional budget outturn for the 2018-19 financial year. The provisional outturn results show that, once again, this Government has prudently and competently managed Scotland's finances. The results are in spite of the on-going uncertainty created by the disastrous decision to leave the EU, the needless continuation of UK austerity and Tory mismanagement of the economy. The provisional figures—I thought that it would start off in a consensual note—are set against an extended period of economic turbulence. The global economy is going through a sustained period of weakness and, for Scotland, that is compounded by the continuing uncertainty around the UK's exit from the EU. Whilst leaving the EU without a deal is the worst possible outcome, even a Brexit with an exit deal will result in significant economic loss compared to remaining within the EU. The UK Government's decision to take us out of the EU single market in Customs Union, the largest market in the world, presents a risk to economic growth, which in turn has an impact on forecast revenues to support our public services for investment to fund our programmes, migration or population. Hence, the Scottish Fiscal Commission has downgraded their growth forecast for 2019, citing continued Brexit uncertainty as the cause. The Scottish Government is using the limited powers at our disposal to mitigate as best we can the economic and employment impacts and to prepare for Brexit measures such as committing over £1 billion to support our cities and regions through the city region deals, increasing capital investment by £1.5 billion per year by the end of the next Parliament and a wide range of other economic and social initiatives. Despite the exceptional political uncertainty, Scotland's economy enjoyed a positive year in 2018. GDP growth was 1.3 per cent surpassing earlier lower SFC forecasts, continuing a pattern of stronger growth compared to both 2016 and 2017. For 2019, the SFC predicted that our economy will grow by 0.8 per cent as it explicitly points to Brexit uncertainty as the reason for their more pessimistic outlook. I am sure that all members will welcome the 0.5 per cent growth in quarter one of this year. Scotland's labour market has continued to perform well in the first quarter of 2019, with unemployment falling to a record low of 3.2 per cent. Outperforming the UK unemployment rate of 3.8 per cent alongside this, labour productivity grew by 3.8 per cent. In 2018, it is at its fastest pace since 2010. Despite the challenging environment, we are taking positive action to transform Scotland's future through the economic action plan. Transformational projects include delivering the National Manufacturing Institute and the Scottish National Investment Bank. Scotland's future budgets will, of course, be determined by a combination of Scottish and UK Government fiscal decisions, and our funding outlook for the medium term continues to be dominated by austerity at a UK level. The UK Government's macroeconomic policy stance since 2010 has been characterised by austerity. In Scotland, we have protected key services despite austerity causing a real-terms reduction of £2 billion in the resource block grant between 2010-11 and 2019-20, even Murdo Fraser now concedes that point. The Scottish Government's second medium term financial strategy, MTFS, published on 30 May, explains the fiscal framework and funding arrangements that the Scottish Government operates within. It outlines its approach to the financial management and the fiscal rules. It sets out a range of possible funding scenarios for the Scottish budget over the next five years. It sets out a responsible approach to financial planning and the fiscal rules, which will allow us to invest in the economy and protect our essential public services. Turning specifically to the provisional outturn, under the current devolution settlement, the Scottish Parliament, of course, is not permitted to overspend its budget. As a consequence, we have consistently controlled public expenditure to ensure that we live within the budget control limits that apply. I can report that the provisional fiscal outturn for 2018-19 is £32 billion against a fiscal budget of £32.5 billion, resulting in an overall cash variance of £449 million. That variance includes £148 million of Barnett consequentials. That funding was provided very late in the financial year, so Treasury has confirmed that the Scottish Government is not required to carry that funding forward through the Scotland reserve. Rather, that funding will be held within UK reserves and reallocated to the Scottish Government in the current financial year, 2019-20. The remaining cash variance of £301 million includes £5 million of additional income for devolved taxis secured over and above initial budget forecasts. I can inform Parliament today that the total provisional income from land and building transaction tax and the Scottish landfill tax is £699 million, and a surplus of £5 million will now be added to the Scotland reserve. The variance also includes £3 million relating to the fees and respect of the financial guarantee, which we will also add to the reserve. Of the £293 million variance remaining, £171 million is resource funding, all of which has already been committed in the 2019-20 budget. £1 million in respect of capital and £121 million of financial transactions. Of course, financial transactions funding can only be used for loans and equity investments and entities outside the public sector. Overall, the cash variance of £293 million represents less than 1 per cent of the total fiscal cash budget. All of that funding is carried forward and full through the Scotland reserve. None of it is handed back to the UK Government, so there is no loss of spending power to the Scottish Government. The £1 million fiscal capital underspend has been achieved, while prudently borrowing less than originally planned, the 2018-19 drawdown of £250 million is lower than the £450 million initially planned within the published 2018-19 budget. It has followed a full assessment of a range of influencing factors, including additional capital funding, confirmed and year, and only making funding available to match the actual demand from the projects confirmed in the original 2018-19 budget. In finalising arrangements, it also gave very careful consideration to building a staggered debt maturity profile. The borrowing in 2018-19 has been undertaken over 10 years in contrast with the 25 years in 2017-18, while the shorter repayment period pushes up the annual repayment. That is balanced by the lower amount that was borrowed at a lower interest rate, a lower cost of borrowing overall, and is affordable in the context of the sum set aside for repayment in the 2019-20 Scottish budget. It also ensures greater borrowing capacity will be available when it is needed to support the national infrastructure mission. 2018-19 was the first year of the Social Security Scotland Agency operation, which provided more than £185 million of support to the people of Scotland. That included more than £35 million of additional support, as the first payments of the carers allowance supplement and the best start grant pregnancy and baby payments were made. This year, four new benefits will be implemented to help young carers and low-income families. Finally, and in addition to the above, there is a provisional non-cash underspend of £142 million, the non-cash budget is used for technical accounting adjustments such as depreciation and payments and cannot be used to fund public services. That represents no loss of spending power to the Government. In conclusion, the cash underspend is entirely retained by the Scottish Government, is less than 1 per cent of the budget, makes a contribution that was planned for the 2019-20 budget and contributes to the reserve, which is prudent, particularly in light of the SFC income tax reconciliation forecast that is detailed in the MTFS. The figures that I am reporting to you today remain provisional, as they are subject to change pending completion of the 2018-19 audits. Finalised figures will of course be reported as usual in the annual Scottish Government consolidated accounts and a statement of total outturn for the financial year 2018-19 later this year, and I commend today's figures to Parliament. The cabinet secretary will now take questions on the issues raised in the statement, and I will allow up to 20 minutes for that. Will those members who wish to ask a question please press their request-to-speak buttons? I call Murdo Fraser. I thank the finance secretary for advance sight of his statement, although we had the customary five minutes of blaming everybody else for the state of the Scottish economy and the public finances, before he got to the substance of the matter. The finance secretary is always complaining about not having enough money to spend, but today we learn that there is an underspend from last year's budget of nearly half a billion pounds. A very substantial proportion of the overall sum. In the meantime, the finance secretary has been hiking taxes on Scottish families. Today we learned from the Fraser of Allander Institute that the £500 million extra taxes that he has taken from Scottish families has been completely offset by the relatively weaker performance in the Scottish tax base, so there has been no net benefit to the Scottish public services from the extra taxes that everybody is having to pay. I am surprised that, in the statement that we have just heard, there was only passing mention of the Scottish Fiscal Commission's income tax recognitions, the projected £1 billion black hole in the public finances, which will hit over the next three years. In light of that, can the finance secretary clarify, firstly, how much of the underspend is in total being put into the Scotland reserve, and secondly, at what level will the Scotland reserve now stand up? Derek Mackay. The answer to the one question and that statement, I suppose, was what is the level of resource reserve, the fiscal resource reserve, which is what could be deployed to address income tax reconciliation, albeit at £135 million. That is the figure that is published. Essentially, what happened there is that Murdo Fraser, of course, said that I was bemoaning about the state of the Scottish economy and blaming others. I was actually trying to take the credit for the very positive state of the Scottish economy, which is enjoying growth, record high exports, record low unemployment, record high employment. That is all because of the actions of this Government, why we are enjoying those strong economic indicators. However, I sound this alarm and this warning. I am sure that all members will look forward to the state of the economy report of the chief economist tomorrow about the threat that Brexit poses to this country and our public finances. The resource figure is £135 million. In terms of income tax reconciliation, Murdo Fraser said that it is not terrible that the finance secretary has an underspend and then goes on to say that why does not the finance secretary put more money aside to address the medium-term financial strategy, the income tax reconciliation? It is totally inconsistent, even in the questions that are posed. In truth, we cannot overspend our budget. Actually, if we discount the last minute Barnett consequentials, the variance is less than 1 per cent. It is actually 0.6 per cent of an underspend, which has been deployed for this year's budget, with a modest amount set aside to address the very issues that were raised at the finance committee, which is the responsible thing to do. James Kelly I thank the cabinet secretary for advance sight of the statement. Three hours ago, in exactly the same spot where Derek Mackay is now, the First Minister in response to a reasonable request from Richard Leonard for proper funding for the Scottish welfare fund told us that every penny in the Scottish budget was accounted for. What the First Minister did not tell us was that £449 million was held back in a Scottish Government slush fund. The public will find it absolutely astonishing when we find trail poverty rising to scandalous levels, NHS patients in pain, languishing on waiting lists and rail passengers stuck on platforms suffering multiple cancellations and delays of train services. That money has been kept back in the Scottish Government bank account. Can I ask the cabinet secretary specifically when faced with the prospect of the hideous Tory 2 child cap, why did he not use the powers in the finance city's disposal to use £69 million to alleviate that policy and bring much relief to many families across Scotland? Derek Mackay I appreciate that James Kelly does not need to be consistent. He is in the Opposition, not the Government, and that is probably going to be the case for some time, I suspect. I think that the Parliament needs to be more mature and responsible when it comes to those finance debates. Only last week at the finance committee I was rightly asked what the plan was to address the potential income tax reconciliations. One of the ways of addressing that is to put a modest amount aside to be able to address those income tax reconciliations. To ask me that question last week and then criticise me for doing so this week is absurd. Non-cash depreciation or financial adjustments cannot be deployed to front-line services. That is clear to anyone who reads the briefing, the paperwork and understands how Scotland's public finances are funded. Financial transactions, part of the £0.5 billion figure that James Kelly has referenced, cannot be deployed to front-line public services. It is only the fiscal resource and the capital resource that can be deployed. In that regard, I have explained that the variance is 0.6 per cent if you exclude the last minute, burning consequentials. Largely, the underspend is being deployed from last financial year into this financial year to protect our public services and deliver the policy commitments for Scotland. Finally, James Kelly said that there was a reasonable request from the Labour Party today on a yet another fiscal ask. The Labour Party changes their fiscal ask as often as they change their socks. I cannot keep up with their fiscal demands, but I can deliver a balanced budget for Scotland. I will move to the open questions. There are a lot of them and the front-bench questions and answers have taken far too long, so if we could be a bit more concise. Patrick Harvie followed by Willie Rennie. I do not think that phrases like black hole or slush fund elevate the debate at all, but there are serious questions that the cabinet secretary is going to have to answer, such as if the Scotland reserve is depleted down to £135 million, it is clearly inadequate, even with the previous year's underspend, to meet the fiscal commission's projections. If they are accurate, can he tell us, and when will he tell us, what is his plan for dealing with those? Is it through borrowing, taxation, spending, what are the mechanisms? Here is the nature of Scottish politics. James Kelly says that I have put too much in the reserve, Patrick Harvie says that I have put too little in the reserve, but it is also Patrick Harvie that fairly and quite rightly at budget negotiations demands that we spend more to secure those concessions and then complains about the level of resources that are being deployed to deliver commitments that the Green Party and the SNP have happened to share. I will of course set out my proposition as to how we deal with the income tax reconciliations as part of the budget process that I went over in detail, and over two hours, if I remember correctly, at finance committee, and I am happy to return to finance committee. However, as I explained at that point in time, there is a range of moving parts, a complex system, a range of factors and not least what the UK's fiscal position is on spending, on austerity and on taxation that then impacts the decision that this Parliament and this Government takes. Willie Rennie, followed by John Mason. Given the poor daily performance on ScotRail and the abandonment of the target for cycling last week, does the cabinet secretary understand how frustrated people will be that it is the transport department that has left its resources underspent by the most? Does he understand people's frustration with that? Well, in terms of the areas that were cited, ScotRail and Rail is not an area where there has been that, but I am just for awareness. Willie Rennie has quite rightly raised issues around rail, but for completeness that is not around expenditure on railways or the rail franchise. Clearly there has been issues around financial penalties that have been carved because of performance issues that should be addressed by Ibello. Some of the matters within the transport underspend, particularly—I think that it is right to focus on that—is due to the delivery of some projects, some of which will be regulatory, some of which will be the nature of contracts, particularly around some of those road infrastructure projects. However, overall, as I say, the variance on capital overall is £1 million. That is a pretty substantial achievement in terms of the variance at outturn. I am correct in saying that the only two taxes that we have complete control over are land and buildings transaction tax and Scottish landfill tax, which are the devolved taxes. Can the cabinet secretary just spell out exactly how they did in comparison to budget? We raised £5 million more than was forecast for the budget. The cabinet secretary refers to Tory mismanagement of the economy. Can he therefore explain why economic growth in Scotland was 1.4 per cent year-to-date compared to 1.8 per cent for the UK economy as a whole, and why Scotland has underperformed the UK economy for the full 12 years of his government? Does he take responsibility for that? I take responsibility for record high employment in Scotland right now, GDP growth at 0.5 per cent in the first quarter. In many quarters, the GDP growth in Scotland outperformed the rest of the United Kingdom. Export is outperforming the rest of the United Kingdom. Unemployment is lower than the rest of the United Kingdom. Productivity is going faster than the rest of the United Kingdom. Investment in research and development is doing better proportionately than the rest of the United Kingdom. On form direct investment, we are second only to London and the southeast of England. There are two key reasons why Scotland's economy in some measures could be seen as underperforming. One is that the UK Government puts all the economic attention that it used to into London and the southeast of England, but Brexit will destroy the Conservatives' economic credibility. The second reason is migration. Migration is an issue in Scotland's working-age population. In terms of the economic growth overall, who controls that? The UK Government, who is trying to end the freedom of movement, who is trying to create a hostile environment for migrants is having an impact on our economy. When it comes to GDP growth, per head, we are reaching convergence and, in fact, we are raising more per head, which is the success story that Scotland is. The cabinet secretary will be well aware that many of our constituents and people across Scotland are struggling with the cost of living. Increasing the welfare fund, freezing rail fares and giving young people free bus travel are just free policies that could help. Does the minister agree that the Government shouldn't be sitting on significant sums of money when people are struggling? Will he commit to looking at ways to using available money to help people with the cost of living crisis? In the last budget, we committed £42.5 billion. The Labour Party voted against all that record investment in education, the economy, the environment, the national health service, extending policies, including social security payments and many other things. Therefore, the Labour Party has failed to put across competent alternative budgets. It has a list of demands but not a clue as to how they fund them. Despite all the predictable doom and gloom being perled by the opposition, would the cabinet secretary confirm that income tax take in Scotland is increasing, that Scotland's economy has strong growth, that unemployment is at a record low, that we have record high employment and, in many other areas, the Scottish economy is outperforming the rest of the UK? I would like to hear Derek Mackay repeat some of the excellent things that he told us about earlier. For brevity, Presiding Officer, I won't repeat them, but I confirm every word that Bruce Crawford has said is true. Bill Bowman followed by Tom Arthur. Given Derek Mackay's income tax changes raised £500 million and the underspend is £449 million, why is it necessary for my hardworking constituents in Dundee in the north-east to have their income tax increased at all? I don't know what accountancy courses some members have been on, but income tax is resource. Well, he should know that resource is different from capital and he should know that depreciation, for example, cannot be deployed on front-line services, whereas what he raised on income tax is absolutely resource, which he absolutely spends on day-to-day services. Murdoff Fraser asked in an earlier question, and Bill Bowman has just followed up. What is the point in Scotland having income tax powers? We wanted to have those powers to make our own decisions and make decisions that are right for Scotland. That includes a fairer, more progressive income tax system that helps those at the bottom rather than giving constant tax cuts to the rich, which is the trend of the right-wing Tory party about to be compounded with the election of Boris Johnson as the Brexit-crazy potential new Prime Minister. In the interests of context, can the cabinet secretary set out for the chamber how this stated underspend compares with previous years? Derek Mackay compares well, which is an achievement when you consider how the Scottish Government's budget is growing. There is increased complexity as well, so if you exclude the last-minute Barnett consequentials that came from the UK Government, an underspend of about 0.6 per cent, where every penny is retained, and of course it is part funding the 2020 budget as well, I think shows competence prudence and forward thinking on the part of this Government, if I do say so myself. Alex Rowley, followed by David Torbs. The Cabinet Secretary for Finance will be aware that across councils in Scotland the reserves are fast running out, because they are using them to offset some of the worst of Tory austerity and cuts passed on from himself. Will he look at services such as education, health and social care, where we are heading towards crisis unless we get more resources into those services? When will he start to engage other parties in the budget preparations for next year? I think that that is a strange question coming from Alex Rowley, who was actually the only Labour member who approached me with a budget proposition, which was to cut everything else by 3 per cent to give money to local government, which was a fair proposition, but it was not when it was supported by the rest of the Labour Party, never mind the Parliament. Mr Rowley also complained that local government is having to use the reserves, but the front-bench finance spokesperson just said moments ago that we should not hold any reserves and we should spend it all immediately. What is strange contrast from the Labour Party? For completeness, I have outlined those figures, and it is also in the MSP briefing that is being published. The reserves in terms of the Scotland reserve are £233 million, which is £135 million in resource and £98 million in financial transactions. Local government reserves are far greater than that figure, but when it comes to setting budgets, of course, it is only this Government that has been delivering real-term increases to local government because of the decisions that we have taken against the Opposition from the Labour Party, who has failed to give any sort of credible alternative. If David Torrance has concise, I will manage to get the last question in. Could the cabinet secretary set out to a chamber why he borrowed less in capital and was originally envisaged? Derek Mackay. Essentially, we were able to see through the capital projects that we had committed to. There were last-minute Barnett consequentials on capital that was able to be deployed, and I took decisions around interest payments and other factors to ensure that we can get on with our capital programme, but do so in a prudent way. That gives us further financial flexibility for future years, and I am sure that the whole chamber will welcome that. The last question is from Gil Paterson. Thank you very much, Presiding Officer. Cabinet Secretary, you will not be quite surprised just how many members of the changes think that we can just increase the budget at a stroke. Therefore, could the cabinet secretary confirm that, under the current devolution settlement in the Scottish Parliament, it is not permitted to overspend its budget and that his statement today demonstrated a consequence of that being a position of controlling budget expenditure to ensure that we live within the budget control limits that apply? Derek Mackay. Yes, I can confirm that. The reason that it is important is that previous Labour Liberal executives handed money back to the Treasury—that is something that I am not proposing ever to do. We will fully allocate the resources, we will carry forward any underspend to fund current year's budgets and prepare for the income tax reconciliation. We will stay within the parameters that have been set out and we will engage with the UK Government on further flexibility on the fiscal framework, because I have already recognised that it is not absolutely adequate for the financial complexity that we face. That concludes questions from the cabinet secretary's statement, and we will move on to the next item of business. Once everyone is in their place on the front benches.