Scottish Budget: Is Robison putting business over homeless?

When Shona Robison delivered her first budget last month, she said at the outset that it was built on “values”.

It would protect people in tough times, sustain public services, support the economy and address the climate emergency. It would also jack up tax on the better off.

So keen was the SNP finance secretary to make the point, she used the word 11 times in her speech to Holyrood. Independence chalked up two mentions.

Now, as the Scottish Parliament’s committees comb through the fine print, you can see what those values mean in practice, and ponder whether they are vaguely coherent.

On Tuesday, after a journalist unearthed the line in a spreadsheet, Ms Robison belatedly conceded the budget involved cutting 1200 tuition-free university places.

Places which, as The Herald’s James McEnaney pointed out, the government was told to safeguard in 2021 by the Commissioner for Fair Access. It didn’t.

The Herald’s Catriona Stewart also reported on Wednesday about the worsening of Scotland’s homelessness crisis and the shortage of affordable housing.

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Ms Robison’s budget cut £196m from the Affordable Housing Supply Programme for 2024/25, a real-terms drop of 27%.

There has been lots of criticism of this from housing groups and anti-poverty campaigners.

But in light of developments this week it’s worth looking deeper at the arithmetic involved. 

According to Holyrood researchers, £75m of the cut comes from the capital grants given to councils and housing associations to build new homes, a 14% real-terms reduction.

But the lion’s share comes from so-called “financial transactions”, which are down £121m or a colossal 72% in real terms from April.

Financial transactions (FTs) are a form of loan funding. They’re calculated using the Barnett formula that determines changes in Holyrood’s annual block grant from Westminster.

They result primarily from the UK Government housing-related equity and loan schemes, like the old Help to Buy scheme. When the UK Government invests in these (in devolved areas), Holyrood gets a proportional share of the investment.

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Unlike most funding the Scottish Government gets, there are strings attached. FTs can’t be used for day-to-day spending or to fund capital projects like new schools or hospitals. 

They can only be used to support equity and loan schemes beyond the public sector, such as investing in private business, loans to farmers, and loans to homeowners and landlords.

The money also has to be repaid to the Treasury, generally over 30 years.

In May 2022, the Scottish Government predicted it would have £376m of FTs to deploy in 2024/25. This was based on an “anticipated” £400m arriving from the Treasury in two lots of £200m in 2023/24 and 2024/25 to make good miscalculations in previous years’ figures. 

But that didn’t happen. While the Treasury did pony up £188m of extra FTs in 2023/24, the “balancing amount remains subject to discussion”, according to a line in the budget. 

The FT figure for 2024/25 is therefore not the anticipated £376m but £176m.

Which brings us back to the affordable housing scheme.

In evidence to Holyrood’s finance committee on Tuesday, Ms Robison revealed that housing had been slashed to maintain funding for the Scottish National Investment Bank (SNIB). 

“Because they [FTs] have gone off a cliff… the housing budget has been disproportionately impacted,” she told MSPs.

“We had to make a decision on the Scottish National Investment Bank, which is the other recipient of financial transactions. To keep SNIB sustained, we made the difficult decision to deploy the £176m in FTs to SNIB.”

In other words, instead of using the £176m to build houses for desperate families, ministers gave it to a state-owned bank to take a punt on the companies of the future. 

That’s not to say that the Bank is a bad idea or that its investments flakey. It has recently sunk public cash into commendable schemes involving renewable energy, electric car charging, cancer treatment and broadband for rural homes (for those who can afford rural homes). 

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It was a legitimate choice for ministers to make. But what values was it based on? Business before the homeless? Shareholders before housing associations?

Ms Robison didn’t mention any of this when she delivered her budget. In fact, she didn’t spell out any of the cuts she was making while in the Holyrood chamber last month.

It is only now, through the media and parliament’s committees, that details are emerging and questions being asked. A shame those values don’t include transparency.