Yes, I'm here with Chancellor Osborne. We're talking about an idea from you. Mr. Chancellor, thank you for joining us. Thank you very much for having me. Good to see you. So let's first talk about some of the news events that you and your colleagues have been making this week. The Prime Minister, of course, in a major speech discussed the referendum that he has pledged to hold on whether or not the UK should remain in the EU. Do you think that there is a likelihood that the UK would leave the EU? What is the likelihood? Well, our argument is a positive argument that Europe needs to change to meet the aspirations of all its peoples, whichever country they live in. But obviously, we're also making the argument on behalf of the British people that Europe has to become a competitive place where companies can succeed and jobs are created and young people have careers. And that's the change we want to see in the European Union. Now, we want to get that change, and we want to seek democratic consent for a new settlement in Europe, and we want to seek democratic consent from the British people. And we think one of the issues in Europe has been the detachment from the people of the institutions. And a referendum is a way of, as I say, bringing that certainty. And what I want to do is make the argument at the time of the referendum for Britain being in Europe in a reformed and competitive Europe. And we have every confidence that we're going to be able to get there. How do we get there? Talk to us about some of the changes you'd like to see implemented in terms of having a comfort feeling about all of this. Well, I've just been at an event with lots of prime ministers and finance ministers from European countries. We've all got the same issue, which is how can we make sure that we are creating competitive economies in Europe? And so I think the changes that are needed to make Europe the place where innovation happens, where companies grow, are actually relatively straightforward. We need to make sure that we get the institutions of the European Union working to our best advantage, completing that single market, which is perhaps Europe's greatest economic advantage, concluding free trade agreements with the United States and Japan and India, great other trading blocks. Use those institutions of the European Union and in our own countries put our own houses in order, not just in terms of our public finances, but also in terms of having very competitive tax systems and getting the balance right between social protection and having a country where a company can actually hire people and have confidence that they want to grow their workforce. Having the balance, of course, is the critical part of this because many people would say we're waiting on a GDP report tomorrow and we're waiting on more news that perhaps the economy is in an anemic state. And at this anemic moment in time, the austerity may very well worsen things. Now, there was the chief economist of the IMF just yesterday calling for you to slow down the austerity and the spending cuts because things will deteriorate further. What is your response to that? When do you believe it's time to slow up on some of these issues and wait to try to see if we can see growth rather than perhaps putting more pressure on the situation? Well, Britain still has a high budget deficit. I wish it were not the case, but the truth was that like some other countries, in the good years, we borrowed too much and we're having to deal with that overhang. This government, this new government is having to deal with this in the United Kingdom. And we have legislated for and we've put in place what I think is a credible deficit reduction plan. It is credible and it is flexible. And we've already exercised that flexibility. So before Christmas, you know, I made it clear that I would extend the horizon of our debt ambitions in terms of getting debt falling as a percentage of GDP. So you know, I've been prepared to let the automatic stabilizers operate in the UK. But I don't think it's right to abandon a credible deficit plan. The credible deficit plan had that flexibility built into it. And I think the credibility we have, which is evident by the fact that I am able to borrow money more cheaply on global markets than pretty much anyone who's ever done my job before me, that credibility is very hard won and easily lost. And I think it would be a huge mistake to put that at risk. Part of it is really communicating this message to the people so that folks understand why this is the priority now as opposed to the priority being easing up on spending cuts so that perhaps people would not feel as pressured. For example, this is an issue that's going on around the world. You and I spoke on the telephone before this interview and you called it a race to the bottom. Whereas we're seeing this debate about pushing stimulus forward versus spending cuts. So explain what the ramifications are for the UK, for the people, if in fact you don't get your arms around the dead. Well, I would actually, I call it a global race and actually a race to the top, not a race to the bottom, a race to the top of being competitive and an economy where innovation takes place. And you can't do that if people question your ability to pay your way in the world. And I think actually the British public, and I think this is true in other countries, but but I'll speak for Britain, I think the British public understand that too much was borrowed, that we've bought the deficit is too high that has to be dealt with. But that is not the only part of our economic agenda. And and we've never claimed it is we've got other things going on in Britain, we are aggressively reducing our corporate tax. So we have one of the lowest corporate taxes of any country in the developed world. We have taken a difficult and controversial decision to cut our top rate of income tax because actually at 50% our top rate of income tax was uncompetitive, was not raising revenue. That's a difficult political decision, but economically absolutely essential. So we are undertaking pension reform, welfare reform, education reform, higher education reform, all the structural changes that don't yield a benefit overnight, but over a period of years, will transform I think the competitiveness of the British economy to win that global race to be a winner in the global race. And bluntly, I think Western nations face a choice. They're going to either be able to keep up with these extraordinary success stories elsewhere in the world, or they're not. And if they don't keep up and some countries will not keep up, then they are going to see declining living standards, their population is getting poorer and their political system will have failed them. And generations to come will be actually feeling the impact. The generations to come will be feeling the impact. I think it's the crisis of the last five years has accelerated a structural change in the world economy that was taking place and brought it home. And you see it here in the World Economic Forum, the excitement about what's going on in Asia, indeed now in Africa, in Southern America. It's important that Europe, and indeed I would extend this to North America, that our economies respond to that, that we seek to out compete and out innovate and be the best. And there is some good evidence that in Britain we are becoming a more competitive economy. And in the league tables that this organization, the World Economic Forum, produced, we are going into the top ten, we're becoming a more competitive economy. I'd like to talk more about the evidence there, as well as the reception that you're seeing from some of these moves, including the drop-off in corporate taxes. But let's go back in the beginning of your tenure yourself and the Prime Minister, the people bought into your ideas and the people agreed that what your plan was, the goals of your plan, was the path to take. But when the cuts start taking effect and when the people start seeing things that they expected gone, that's when the debate begins. So where are you in the cuts specifically? How much more is to come? How much more pain should the people feel? Well, we do have to go on making reductions in public expenditure and we set out a path to do that over the coming years. A lot of it is now legislated for, so the very difficult political arguments have been had in our parliament. For example, just this week we passed through the House of Commons, a welfare bill, which is going to mean that welfare entitlements only go up by 1% instead of the rate of inflation. That's a difficult measure, but it's going to save a lot of money for the taxpayer. But we've got that through our parliament. And by the way, a parliament where for the first time in 50 years there is not a single party government. So more than 50 years. So I think we've been able to demonstrate that we can do the heavy lifting, get the political agreement. And I would say, of course, if you came to Britain today, there is always going to be on any week a fierce debate about which bits of government should be cut. But I would say there is a broad agreement amongst the public and actually in quite large parts of the political system that wherever you make your choices, the choice has to be made. Savings have to be made. The size of government has to be reduced. The size of the public sector has to be scaled back. And actually that is happening. And by the way, as it's happening, jobs are being created in the private sector. And this week we had a very good jobs report in the UK. So people see that rebalancing is taking place. Let's talk about what the economy feels like right now. You mentioned the jobs report. How would you characterize the economy in the UK right now? Well, let me let me use them since we have a GDP number tomorrow. And, you know, not to give anything away. So I will stick with the language that I used in the autumn statement in December. You know, what I said then and what I've been saying for a couple of years is this, we are walking a difficult road, but we are heading in the right direction. We are making the necessary changes to rebalance our economy. Jobs are being created. Over a million jobs in the private sector, the fastest rate of job creation for over 20 years in the UK. So and indeed the governor of our central bank this week was saying something similar. So, you know, we have still got like many Western economies, plenty of difficult decisions to make to keep the reforms going in our economy. But I think we're heading in the right direction. So you're feeling like it's already taking effect that this is working? Well, I would say the rebalancing is taking place. Look, it's many many Western economies, the US, the UK, alone many continental European economies. You know, we became very unbalanced. And in the end, we were running deficits that gave rise to questions about our ability to pay our way in the world. We had, in certainly the case of the UK, public expenditure was approaching 50% of national income. We had welfare entitlements that the tax-paying public couldn't afford. And actually, you know, our business environment was becoming less competitive. Now, all of those things are changing, and they're all, you know, changing in the right way. What is the timing on seeing substantial numbers in terms of growth? I mean, we know that the IMF cut the 2013 forecast for economic growth to 1%. You instructed your cabinet ministers this week to find further ways to do more with less. And it's understandable. I understand what you're saying. You need to get your arms around the debt in order to truly get back to growth. But people, they want to see it happen and they want to feel like the vision, they understand the vision. So what would you say in terms of the timing to really see some serious numbers in terms of growth in the economy? Well, even on those IMF forecasts, you know, the UK economy, the IMF forecast is for the UK economy to grow this year and next. And indeed, not that it's a cause of celebration, but it's, I would note that we are forecast to grow more than Germany or France. Now, we have a tough situation with our neighborhood, where we have the Eurozone in recession. And that is a major trading partner of the UK. 40% of our exports go to the Eurozone. The good news is that the turbulence in the financial markets has abated a great deal since before Christmas. But we still have a real economic situation in many of these Eurozone countries and that these are, as I say, important export markets for us. But in terms of progress, as I say, the rebalancing is happening, the jobs are being created. And actually, also another encouraging sign is that the rate of new company creation in the UK is at its highest rate on record. So you're also seeing, hopefully, the great success stories of the future being born out of the difficult times of the present. In terms of the programs, is everything on the table, what would be more impactful than others? What programs? In terms of spending? Yeah, spending cuts. We made some decisions to prioritize certain things. I have prioritized the education budget. I have prioritized science spending. So I've made some judgment calls about what are the kind of investments that are going to support the economy. We're also putting more money into infrastructure and roads and the like. But we've taken tough decisions on, as I've just explained, on welfare entitlements and some other areas of government spending. Now, you know, the way this works in the UK is that over the next few months, I'm going to have that collective discussion with other people sitting around the British cabinet table. But everyone knows that we've got to do this. Everyone is signed up to a path of deficit reduction that is collectively agreed across the government. There was always going to be a healthy debate about where exactly you make the savings. But no one doubts that the savings have to be made. And in the meantime, you are faced, as you say, a tough neighborhood faced with an environment, which is also troubling and perhaps uncertain. So, well, first of all, you must feel somewhat vindicated the fact that you did not join the Euro. Well, yeah, I'm relieved, I think, is the way I would put it. There was a big argument in Britain. I think we forget that over a decade ago, there was a whole wealth of opinion that wanted Britain to join the Euro. The Prime Minister at the time, Tony Blair wanted to join the Euro. A lot of the industry bodies, particularly the Confederation British Industry wanted to join, the trade union movement wanted to join. And actually, it was those who stood out against it felt at the time like minority voices. And it only emerged over time that actually, the business community was, there were many more people in the business community who were skeptical about joining the currency. And fun enough, I think you see something similar happening today coming back to your opening question about what we're saying about Europe. A lot of British businesses coming out over the last couple of days, big international businesses saying actually David Cameron and George Osborne and the government are absolutely right to argue for economic change in Europe and seeking consent to that change. So the single currency reminds us that actually Britain can lead in Europe, can make the right decisions for Britain. And a lot of the arguments we made about the single currency at the time, which is fine to join, but if you join, you're going to have to end up having a fiscal union, a financial union, a budget union, all of those things many years later have turned out to be true. And the argument we want to lead in Europe now is another positive one, which is we can make this continental success, but that has to be changed. But is there a downside risk? That's what I was getting at. I mean, we see now what has gone on in terms of the interconnectedness of being a part of the Europe. But if the UK were to leave the EU, is there a downside risk of that independence not having the connectedness and the open trade that comes with the unity of the EU? Well, I'm arguing for reform in Europe and Britain being part of a reformed Europe. That's what I want to see is the outcome of this process. And I think we can deliver that. But in the end, you can't ignore the growing gap between the governed and those who claim to govern. And that has happened in many European countries and in the UK referendums were promised time and again by all political parties and not delivered. And that's one of the things that has contributed to a concern about that democratic deficit. So I think we are right to confront this. And as I say, there's a lot of business support. There's a lot of public support for that as well. What do you think the British people want to see in terms of remaining in the EU? Well, I think Britain wants... Britain is a European country. Of course, we are. We, you know, our entire history has been tied up with the continent of Europe. But we want the institutions of the European Union to work for us and our economy and for all of the economies of Europe. You know, we we cooperate in the European Union. Let me give you a very good specific example, which is not doesn't feature the World Economic Forum, but it certainly features in discussions at the moment of the European Union. In Mali, the French have had to act very quickly to deal with the threat of Islamist rebels in the north of Mali. Now, which was the first country in the world to step in and offer logistical support and get aircraft out there to help the French? That was Britain. And on foreign and security matters, I would say the leading countries in the European Union, the ones who don't have a problem about getting involved to confront an issue are France and Britain. So there is a relationship which works very well and you see in practice today. We're not, however, part of the single currency. And we are skeptical about the ever closer union that we were asked to be part of. We say, look, you've created your currency. You have to do a number of things, which we suggested you might have to do and we would have to do if we joined to make that currency work. But we don't want to be part of it because we're not tied to your currency. And and so this was precisely the point that David Cameron was raising in his speech this week that you can have a European Union of flexible member states and nation states working together and cooperating in different ways. So we cooperate more closely with the French on defense than the Germans do. But clearly the French and the Germans work more closely on their currency than we do with them. But I mean, on the other side of the coin, I mean, what happens to the engines of the UK economy? If, in fact, the UK is now part of the EU. Well, as I say, we are making the argument for Britain being in a reformed European Union. And the single market is the enormous is enormously beneficial, not just to Britain, but to many other European states. I mean, you know, Germany is Germany is sells its BMW cars into Britain and is going to want to want to go on doing that. And and and in fact, one of the striking things about the British economy, I think some somewhat sets it apart from other Western economies. I think we are very, very open to external investment. We've had a Chinese sovereign wealth fund investing in the London water supply. Now, you're an American. I've been an interesting question, at least, to pose what would happen if the Chinese sovereign wealth fund want to do invest in the New York water supply.  Our airports, our utilities are often owned and operated by foreign companies. You know, I think that is one of the great benefits of the UK to any investor watching this. You know you can come to the UK. It's a completely open economy. You will be treated completely fairly. There is an absolute level playing field with any domestic competitor. So in that sense, you know, and London has become, in many ways, the most international city in the world and has very large numbers of people from continental Europe living in it. So, you know, I think, you know, we can demonstrate the kind of flexible, competitive Europe that we want to be part of. And we should point out that you're seeing this foreign direct investment and foreign investment coming in as a result of some of the changes that you've put in place to make it to make it more attractive. I want to ask you about the banking sector. And again, this is something that is going on all around the world. The structure of the banks and this push to separate investment banking type activities from plain vanilla banking. Where are we in that? And do you think that there should be a global standard or can the UK or even the EU do this to the banks there and not necessarily see the same change overseas, for example, in the United States? Well, financial services is an incredibly important industry for the UK. It's the largest private sector employer in Britain. And it's not just the city of London. If you went across the UK, you'd find that banking and other forms of financial services are big employers across the whole country. So it's a very important industry for us. And London, I think, is the preeminent global financial centre and leads the league tables that are produced that suggest that. But of course, if you're the finance minister and particularly after all we've been through in the last five years, where we have the biggest single bank bailout of anywhere in the world, including the US, you've got to have a banking system that, when it falls over, does not bring down the British economy with it. And we are still dealing five years on with the consequences for the real economy and for people who didn't ever work anywhere near the city of London with what went wrong. So I want a competitive banking sector and a competitive financial sector, which includes a whole load of industries that don't get a huge amount of coverage, like insurance and the like. But I also want to make sure that there are protections. So we are changing this year. The regulator, the Bank of England, is going to come in as the prudential regulator of our banking system. We are asking the Parliament to approve structural changes to our banks, so that we ring fence the retail banking operation. That makes it much easier to resolve if one of these large banks fails and doesn't mean that the person doing my job, you know, hopefully never, but maybe in years to come has to bail out an entire universal bank all across the world in order to save the British economy, which is what my predecessor had to do with the Royal Bank of Scotland. So the retail ring fencing allows us to protect the essential payment services and the essential banking system without standing behind the entirety of the investment banking operation and gives the person doing my job, you know, on that weekend where they have to make that terrible decision about whether or not to bail out the bank. You know, some options, which sadly my predecessor didn't have. So, you know, I think these reforms, these structural reforms, they come out of a lot of work done by someone called John Vickers, an eminent economist. He was supported by people like Bill Winters, who had real practical experience at JP Morgan. So we were, you know, we were using industry experience. We've come up with these reforms. And the final point I make is that actually what's striking is that the European Union and the Finnish central bank governor was asked to look at reforms for the whole of Europe has come up with a very similar idea for the rest of Europe. So we would certainly be encouraging the rest of Europe to take on those reforms. The subject of bank reform and splitting the activities has been a big topic of discussion here in Davos. And I just wonder, is there a point that the regulatory environment becomes too onerous? This is obviously what the bankers will say, that having so many different regulations and so many different regulators is hampering their ability to grow and their ability to lend. It also seems to me that if the financial services industry is so important to the UK and to Europe, the way it is to, for example, New York, you would expect the leadership to want to boost that sector, speak well of that sector. Now, no argument that the banks have made tremendous mistakes and the population is upset and bringing down entire economies is obviously something to discuss. But it would seem to me that you would want to protect that position rather than having sort of an anti-business sentiment. Well, I certainly agree with you. An anti-business sentiment would be a bad thing for Britain and a bad thing for any Western democracy. And we have to, of course, fight those who use the excuse of what happened over the last five years as an argument that actually we should have a much bigger public sector and a much smaller private sector and to beat up on profit-making and corporate success. I completely agree with you about that. When it comes specifically to financial services, I think it's perfectly reasonable to say, and indeed a very, very free market and capitalist thing to say, that when you make mistakes, you have to pay for those mistakes and you can't expect that the government and the taxpayers are going to come in and bail you out. Now, I want to get to the situation where those are real options for the government. And we are making all these changes to bail in, to the regulatory regime, to the ring fencing of the retail bank to precisely give us those options to do the very free market thing, which is let the market punish failure. Now, when it comes to the rest of the financial services, you know, I go out of my way and the government goes out of its way to encourage businesses to come to the UK. A lot of insurance businesses are moving to London at the moment. A, on a big Chicago-based insurer, has just moved to the UK. The RMB market, offshore market, is flourishing in London and the very first Chinese bonds have been issued outside of Hong Kong and China in London. So, you know, I see that the city of London is more than the four or five large domestic banks we have. Those domestic banks are incredibly important and I want to get them into a state where they're super competitive and safe for the UK. So you're seeing signs, you're seeing signs already that these moves have been having an impact. You're seeing the jobs numbers improve. You're seeing foreigners come in and invest in the country. What do you need to see in order to have a comfort feeling that you are, in fact, almost done with the cuts? Well, I'm afraid that is, you know, we're not about to bring that program to an end. So, you know, we have set out, to the year 2017, you know, a program of deficit reduction. I've got to fill in very specific departmental spending plans, you know, between the different government departments for the year 2015. So, you know, we still got work to do on that front. But in term, you know, it all fits within a framework of credibility and, you know, a confidence, actually, that the UK, and I would apply this, I hope, to the rest of Europe and indeed the west of the western world, that, you know, to use a phrase from America that, when you look at what's going on in China and India and Indonesia and Malaysia and all these other exciting places in Latin America, you know, and we see them doing those things, we don't sit there and say, that used to be us. We actually say, that can be us again. And that's what I said, you know, I have young children, that is what I want to say to my children, that you don't feel that this is the place where the future isn't happening. And, you know, I'm excited about a lot of the innovation happening in Britain, a lot of the, you know, we have a fantastic tech business growing in Britain. I'm excited that Europe is the place where a lot of scientific discovery is happening. I was reminded at lunch by someone today that the Higgs-Boson passcode was discovered in Europe, not in some other part of the world. So, I mean, you know, I'm excited by all of that. But, you know, government and the European Union has to get behind that and help it, not hinder it. Where would you say the job opportunities and the growth is in the UK right now? Recognizing that the numbers are not where you want them to be. Where is the growth? Where are the job opportunities? Well, I think we are seeing some sectors that are emerging as, you know, real world beaters. I mean, we talked about financial services, that's always going to remain really important for the UK. But, you know, probably even in this audience, people wouldn't know that we have the second largest aerospace industry in the world. And that aerospace is something where we absolutely are world beaters. And there, because you're dealing often with very large companies and contracts with governments, actually there is a role for the state and for the government. And, you know, I've been able to put money behind research and development in aerospace. In pharmaceuticals, we have from April this year a new tax regime that's going to make it really competitive to innovate and create patents in the UK. And I'd say our creative industry, we're doing a media show here, you know, our creative industry is incredibly successful. A lot of films now, a lot of Hollywood movies are now being made in Britain. And again, from April, we've got new tax breaks to take the success in films to scripted television production. So, you know, I'm not afraid, I mean, this is a British debate that's been had for many years, which is governments shouldn't pick winners. And it is certainly true that Britain got itself in a mess in the 1970s when it tried to support companies that were fundamentally, you know, not making things that the world wanted. But I think it's perfectly right in the world of today for government to back sectors that we know we have a lead in. Now, that doesn't mean we're not also open to new disruptive technologies, but they don't tend to, you know, that'd be probably a mistake for government to try and spot those. But everyone's going to be wanting to fly on planes for the foreseeable future. So, you know, that's an industry that we will get behind in the same as true of the others I mentioned. As a final note, if there is a skeptic who is out there watching and uneasy with some of the spending cuts, is there a final message that you would like to convey in terms of why this is so critical to put deficit and debt reduction as a priority over the priority of more stimulus in an anemic growth story? Well, I wouldn't, I don't see it as two sides, I see it as two sides of the same coin from, you know, competing tensions. You cannot have a successful competitive economy which people want to come and invest in if they think you can't pay your way. You know, that is the bottom line. And by the way, we have learned that the very hard way in on the continent of Europe over the last two years. So, you know, my neighbors have demonstrated or some of them have demonstrated that that is the case. So, you know, I think that is part of a program of making Britain competitive. But what I hope I've shown you today is that with tax reform and welfare reform and education reform, actually there's a lot else going on in the UK and we're the place to come and do business. Mr. Chancellor, thank you very much for this exclusive CNBC interview. Thank you. We appreciate your time. Thanks everyone. Thank you.


Rwy'n gweithio i'r next item of business, ac mae'n dweud i Dirk Mackay o'r UK spring statement—implications for economy and public spending. The cabinet secretary will, of course, take questions after his statement, so I would encourage all members who wish to ask a question to press their request to speak buttons as soon as possible. I call on Dirk Mackay, the cabinet secretary, for finance. Last week, the UK Government delivered its 2019 spring statement, which provided us with the latest economic outlook for the UK. The Office for Budget Responsibility has downgraded its forecast of UK GDP growth for 2019 from 1.6 per cent to 1.2 per cent, representing the slowest annual growth since the end of the financial crisis. The OBR cites falling levels of business investment as underpinning much of the downgrade, noting that the UK has performed the worst on non-housing-related investment compared to any other G7 nation since the EU referendum in 2016. Those already downbeat forecasts do assume that there will be an orderly withdrawal from the EU on 29 March, with a transition period lasting until December 2020. That means that, in reality, the economic outlook could be even weaker. The UK Government's chaotic approach to Brexit has already caused investment to fall, and the next phase of uncertainty will mean further damage. The OBR has stated that uncertainty related to the Brexit process sees business investment fall for the second calendar year in 2019, its weakest performance since the financial crisis. I am clear that all forms of EU exit will harm Scotland's economy, but leaving the EU without a deal could lead to a potential shrinking of Scotland's economy by up to 7 per cent, a drop in exports by up to 20 per cent and reduced business investment by £1 billion in 2019. Such profound economic impact could result in an increase in unemployment of around 100,000 in Scotland, more than doubling the current record low unemployment rate, and push the Scottish economy into a deep recession similar in scale to the financial crash of 2008. However, we do not need to await the final outcome on Brexit. We already know that Brexit has damaged our economy. The Institute for Financial Fiscal Studies has said that there is a consensus that the economy would have been about 2 per cent bigger had the Brexit vote not occurred, meaning that, without Brexit, the deficit would have been smaller, jobs and investment would have been higher, and there would have been more funding available for public services. Amid Dybring's uncertainty, the Chancellor should have used the spring statement to provide stimulus to the economy and clarity on future funding. Sadly, he did neither. So, he navigated a period of economic uncertainty. It is vital that we take bold action to support the Scottish economy to grow. A significant milestone in the establishment of the Scottish national investment bank was reached three weeks ago with the introduction of the legislation that will underpin it. The introduction of the bank will help to transform and grow Scotland's economy and help to protect Scotland from the consequences of the UK's exit from the EU. However, I continue to await confirmation from HM Treasury that it will provide the bank with similar dispensations enjoyed by the British Business Bank and Green Investment Bank, which would allow it to hold modest reserves and operate at the level of ambition that we would expect. It is equally disappointing that the Chancellor failed to guarantee all future EU funding to Scotland, worth over £5 billion in this current EU budget round. Due to the UK's chosen route for exiting the EU, the UK will lose access to much of this funding. To date, there has been no certainty that those funding streams will be replaced, with commitments on agriculture, fisheries and structural funding all remaining unclear. It is crucial that the UK Government urgently commits to replacing all EU funding streams in full and ensure that funding decisions that have been taken by Scottish ministers continue to be taken by Scottish ministers in the future. There must be no power grab from Westminster. The Chancellor's 2018 autumn budget promised an end to austerity, but last week's spring statement confirmed that the UK Government has once again failed to deliver on this pledge and to properly invest in public services. Despite the Chancellor boasting that he had £26.6 billion worth of fiscal headroom up from £15.4 billion in the autumn budget in October to increase spending and end austerity in 2020-21, while still meeting his fiscal rules, he has chosen not to invest any of that money in vital public services. Instead, the Chancellor has chosen to hold that money back willfully, depriving our public services of resources and compounding the economic harm of the self-inflicted mess of Brexit. The spring statement takes us no further forward in our understanding of the financial outlook for public spending in Scotland. The Chancellor referenced his forthcoming 2019 spending review, but only committed to proceeding with it if a deal on Brexit can be secured. The Chancellor talks of the end to austerity but offers only vague references to future real-terms growth and resource budgets that are no more than the reiterating the same tired lines that we have heard before. That offers nothing more than the funding that is already committed to health and no expected real-terms growth and wider resource budgets to address the decade of near 7 per cent real-terms cuts to the Scottish block grant. We know the scale of financial challenge that the years of austerity have brought, and we know that our public services are seeking additional investment, and we know that the Chancellor has had room available, and yet he still does not commit. There is no doubt that the Scottish budget will face very challenging decisions as part of the spending review, and if there is no real growth in our budgets beyond health consequentials, even where funding has been announced from which Scotland might benefit, it is scant regard for a right to expect clarity on the implications for us. The announcement of £1.6 billion of funding for stronger towns was made with the details of allocations by regions across England, but I have been unable to ascertain how that proposal is to be funded and what that means for Scotland, if anything. We will continue to push for our share of funding and will resist in the strongest possible terms any attempts by the Tories to bypass the Scottish Parliament and undermine the devolved settlement. Last week, I received no clarity on the impact of the UK Government's spending announcements from the spring statement on the Scottish budget, and we continue to see decisions from the UK Government which undermine and discredit the existing UK funding framework. In 2017, the UK Government provided an additional £1 billion to Northern Ireland as part of the confidence supply agreement between the Conservative Party and the DUP. Recently, it allocated another £140 million in Northern Ireland's 2019-20 budget, and this weekend, the Chancellor indicated that he could not rule out more money for Northern Ireland as part of the Brexit negotiations. Those funds were allocated directly to devolved matters, and it is completely unacceptable that those decisions did not result in additional consequentials for Scotland. The UK Government's actions mean that Scotland has lost out on equivalent funding of more than £3.3 billion. Although I do not be drugged, Northern Ireland, the exemption from austerity, Northern Ireland is not alone in facing fiscal challenges. Perhaps the Tories in this chamber will explain why their party is exempting Northern Ireland from austerity but not Scotland. With only two weeks until the new financial year, we also still await confirmation from the UK Government on the detail and extent of the additional funding that we will receive to meet the increased employer's pension contribution costs across public sector pension schemes. That does not allow public sector employers in Scotland adequate time to plan and manage the implications of that change effectively. Those changes are a direct result of UK Government policy, and any shortfall will effectively be a further cut to the Scottish budget. The uncertainty around the outlook for Scotland's public finances and economy remain no clearer following last week's spring statement. It is clear that the views and interests of the devolved administrations are not a primary consideration in the UK Government's management of public finances or in its management of Brexit. We cannot completely protect Scotland from the recklessness of the UK Government, but the decisions that this Government has taken and will continue to take ensure that we protect what matters most to Scotland. That is why the people of Scotland have entrusted us to focus on the delivery of our public services and the economy. I thank the finance secretary for advance sight of his statement. Despite the miserable picture that has just been painted, what the spring statement actually told us is that the UK public finances are in much better shape than anyone previously predicted, with tax receipts up and deficit reduction well ahead of target. For years, the SNP told us that the Government would fail in its financial strategy. It is not about time that the financial secretary admitted that he got this wrong and he congratulated the chancellor on the success of the UK public finances. The finance secretary refers to the issue of Brexit. Is it not the case that the way to remove uncertainty for the future is for members of the House of Commons to vote for the withdrawal agreement? That is the advice coming from senior figures in his own party. His former deputy leader, Jim Sillers, and his former cabinet colleague, Alex Neil, who I do not see in the chamber this afternoon, should he not be listening to the good advice of the elder statesmen in his party and getting behind the Prime Minister? Finally, what the spring statement tells us is that there are Barnett consequentials of £68.5 million coming to the Scottish budget. That is on top of £148 million in Barnett consequentials, which came just in January. If he cannot tell us today how that additional money will be allocated, when is he going to tell us? First of all, I have had no confirmation in relation to the Barnett consequentials, because he could offset elsewhere. We are still waiting in the detail for that. Of course, I will inform Parliament in the usual channels. In terms of the UK Government's performance of the UK economy, hasn't Murdo Fraser realised that the economic forecast on GDP has been downgrading for the UK economy? That is before we even get to the chaos of Brexit at the hands of the UK Government. In relation to vote for the Prime Minister's deal, are you allowed to vote for the deal? Is it returning to the House of Commons, as the Speaker changed his mind? In relation to support for the Prime Minister's deal, even the people sitting behind her do not support the Prime Minister's deal, never mind asking anyone else to support for that. In essence, what the spring statement has led to is a clarity that the UK's economic performance is subdued, has been downgraded and is absolutely at extreme risk from a no-deal Brexit. Any Brexit is damaging to Scotland's economy, and it is clear that the UK Government is damaging to Scotland overall, ignoring our voice, undermining us, giving other parts of the UK a competitive advantage, and, all at the same time, a short-changing and ripping-off Scotland. On that subject, the Scottish Tories are totally silent. James Kerlates will be filled by Patrick Harvie. Thank you, Presiding Officer, and I thank the cabinet secretary for advance sight of his statement. I agree with the cabinet secretary about the aspect of a chaotic Brexit. It is a scandal of gigantic proportions stemming from a failure of leadership from the Prime Minister that 10 days from exit day there is absolutely no clarity about what is going to happen around Brexit. Previously, the cabinet secretary has indicated that a no-deal Brexit would mean that the Scottish budget would have to be changed. That would have dramatic consequences to spending lines agreed by the Scottish Parliament. Will the cabinet secretary publish Scottish Government analysis of different Brexit scenarios in order that people are fully aware of the potential impact on the Scottish budget? Mr Kerlates asked a very fair question. It is my understanding that we have published the range of scenarios in terms of the positioning from the Prime Minister's deal in terms of the long-term impacts, economic impacts of that and the impact on his fiscally in terms of no-deal Brexit. We have published short, medium and long-term impacts of that. I am happy to look and see what further information the Labour Party might find useful. All forms of Brexit harm our economy. We have expressed how the Prime Minister's deal would harm our economy. We have shown very clearly how no-deal harms Scotland's economy. Is it not worth considering that, as we enjoy record low unemployment in Scotland today at a record low of 3.4 per cent, I am sure that the Labour Party would welcome that. Unemployment would more than double in terms of a no-deal Brexit. I will look at what further information we have that the Labour Party might be interested in, but I know that James Kelly is united with us in trying to ensure that the people have their say that we can avert Brexit and take the mishandling out the hands of the Conservatives. I am sure that Mr Kerlates needs no further convincing. I am still struggling to figure out what the point of last week's spring statement was, buried as it was under the news of yet another cycle of Brexit chaos at Westminster. The cabinet secretary tells us that it takes us no further forward in terms of understanding Scottish public finances. Even the chancellor himself does not have any clarity about how much fiscal headroom he is going to have, because he does not know what is going to happen in the coming weeks. Given that the OBR has warned that the outcome of the next few weeks will determine whether there is a major or a catastrophic shock to the UK economy. Arn't we just going to be here again in a few more weeks time once we know whether it's revoke, delay, no-deal cliff edge or whatever the other options are? Aren't we going to be back here in a few weeks time with the UK Government having to produce an emergency budget or an update to their budget and the Scottish Government having to respond to that? That rather depressing analysis from Patrick Harvie is probably correct and true that the UK Government is in a chaotic mode right now and will probably have to return with an emergency budget if there is a no-deal Brexit. So they don't know what they're going to be. What clarity we've got from the spring statement is that the DUP is probably heading for another bung. The chancellor has fiscal headroom that he could use to invest in public services now, that the financial and the fiscal and the economic outlook is subdued and whilst other parts of the UK are being bought off in terms of the Prime Minister's vote, Scotland is being sold out. Willie Rennie is to be followed by Angela Constance. The finance secretary rightly complains that Scotland has not received funds to match those for English towns and Northern Ireland, but with 35 MPs and the heft of the Scottish Government surely this begs a crucial question. Why has the finance secretary been so ineffective at lobbying the UK Government on the behalf of Scotland? Because of unionists like Willie Rennie, our futures in the hand of such Conservatives in London, which we would rather was not the case, having to go with a bedding bowl to Westminster, we would rather be making the decisions here in relation to our finances, our economy, grow our economy, our fairer social security system and stay within the European Union. So yes, I would rather not have to plead with a right-wing chancellor but make the decisions here in Scotland, but it's a unionist that has put us in that position, nobody else. Angela Constance is to be followed by Dean Lockhart. The cabinet secretary has outlined the various bungs that the DUP has received from an increasingly desperate Tory Government. Does he agree with me that it is utterly shameful for Ruth Davidson's Tory MPs to back money for Northern Ireland to keep themselves in office but repeatedly vote to deprive Scotland's public services of the funding that they have received? I certainly do agree with that and for absolute clarity, the figure that we would be entitled to if the formula had been used properly, the equivalent funding that we would gain is around £3.3 billion to Scotland, a substantial amount, and that's by how much Scotland is being ripped off. Dean Lockhart is to be followed by Stuart McMillan. In his statement, the cabinet secretary mentions cuts to public services and an uncertain future for Scotland's economy. If he gets his wish of independence, he will have to cut spending in Scotland by £13 billion a year. For the sake of certainty, can you confirm where the spending cuts of £13 billion will come from? The growth commission, of which I was a member, has shown how we can stimulate and grow our economy if we had all the levers of an independent country, and there would be reductions in certain places such as trident nuclear missiles. Yes, this Government would not choose to spend resources in that fashion. We have set out a comprehensive paper on how, with the powers of independence, we can grow our economy and ensure that we enjoy the benefits that other independent countries have. The Tories do not even know how they will get through next week. Never mind the prospects of an independent Scotland. We can deliver those advantages for Scotland and, even within the devolved settlement, try and stimulate our economy, provide stability and certainty as well. This has all been undermined by the UK Government mismanaging the finances and putting our economy at risk through the way that they have handled Brexit that led us up the garden path, shortchanging Scotland, ripping off Scotland while deploying bungs for everybody else. Stuart McMillan is followed by Pauline McNeill. According to the OBR, the UK Government is deliberately delaying moving people on to universal credit through managed migration in order to avoid costs associated with transitional protection. As a cabinet secretary, I think that forcing people to move over to universal credit through natural migration is a DWP cost saving exercise at the expense of low-income families. That analysis is correct. I understand that it will save the UK Government around £200 million over the next five years, clearly harming many of the most vulnerable in our society. Of course, that money should have been invested in supporting low-income families in the fashion that Stuart McMillan has suggested. Pauline McNeill is followed by Emma Harper. The Equality and Human Rights Commission published new research showing the combined impact of changes to tax social security and local authority services will result in an increase of child poverty by 80,000 by 2021. With only 0.1 per cent of the budget targeted at low-income families, what is the Scottish Government's big idea to prevent this further rise in child poverty? We are using the tax system in a more progressive way. The report that Pauline McNeill refers to acknowledges that the Government and the Parliament has been trying to mitigate the decisions coming from Westminster. There has been mitigation in terms of tax policy and social security policy as well. My point is that we could go further in building that fairer society if we weren't beholden to the UK Conservatives, who I've just pointed out are not giving us the necessary extra resources but in essence deploying the resources to buy off others for the vote in the House of Commons. We have a range of policies that are tackling child poverty, including expanding childcare, investing in housing. There's real terms increase for local government. We're building that social security system and we've got a fairer progressive tax system as well. We didn't pass on tax cuts for the richest in society and there's a range of specific measures around low-income families. That's a package of support that shows that we can mitigate so far but we can't completely mitigate against the UK Government's ravages of those most vulnerable in our society because we have neither the resources or the competence in some areas to do it. That's why we need full competence over tax and social security to be able to protect the most vulnerable in our society. Emma Harper, to be followed by Bill Bowman. I've written to those involved with the Borderlands growth deal of discussions, the funding for which was announced in the spring statement to ensure that Galloway and West and Frees area of my South Scotland region is not left behind and actually benefits from this inclusive growth deal. Therefore, I ask the Scottish Government for a commitment that the Galloway and West and Frees area has been part of the discussions for projects outwith the principle 5 projects such as the Waterfront redevelopment in Srinrar. As was discussed earlier, it would certainly be welcome if the UK Government was allocating more for the Scottish end of the Borderlands growth deal. The infrastructure secretary leads on that issue, but I understand that there are on-going discussions for local partners to take forward the very specific proposals to get to the signing of the Heads and Terms by late June, early July. I think that there is still room for further discussion to ensure that projects are included. Bill Bowman, to be followed by Kenneth Gibson. The cabinet secretary says that the spring statement offers no expected real terms growth in wider resource budgets to address the decade of near 7 per cent real term cuts to the Scottish block grant. Is this correct, as Spice has confirmed, that the UK block grant for Scotland has gone up by £1 billion since 2010? Does the cabinet secretary accept that his figures are wrong and acknowledge that the block grant for Scotland has in fact been increasing over the past decade? It might not surprise Bill Bowman for me to say that my figures are absolutely accurate and correct. It is true to say that Scotland's resource discretionary block grant has been reduced by £2 billion. There has been that rip-off to Scotland. It has been expressed time and time again. Even recently, I have welcomed the increase in NHS Barnett consequentials. That is to be welcomed, but the truth is that it has been offset in terms of reductions in other portfolios, which gives us the challenge of funding other services within Scotland. My figures are absolutely correct and I would ask Bill Bowman to visit the figures and to start to lobby his masters in London to ensure that Scotland gets a fair deal for this country. Kenneth Gibson is to be followed by Neil Bibby. Can the cabinet secretary set out what Barnett consequentials the UK Government should deliver and will deliver in relation to the stronger towns fund? How much comparable EU funding, which the Tories are desperately trying to end, is currently invested in Scotland? First of all, it is important to say that the UK commitment for those towns that will benefit is to somehow compensate them for leaving the European Union and the structural funds that they would have joined, which I have to say is substantially more than the sums that the UK Government is committing to those areas that are beneficiaries. I can confirm that we have had no detail of any consequentials coming to Scotland from the stronger towns fund and we would want to see that detail to ensure that Barnett has not been bypassed, that we get our fair share, but as it stands right now, I have confirmation of nothing in terms of the stronger towns fund. As I say, looking at the UK context, it is already far less than areas that would have enjoyed through the structural funding that came from the EU. That is a matter that I will continue to press the UK Government for clarity for and to ensure that Scotland gets a fair share of resources. Neil Bibby is to be followed by John Mason. The Fraser of Allander Institute in its Scotland in 2050 report today pointed to positives in the economy, but it has also warned that Scotland will continue to lag behind competitors unless we focus more on exports and infrastructure investment. It has also rightly identified that action is required to address low productivity and the skills gap. It wants to see a national strategy focusing resource and investment on activities with potential growth and a policy at all levels that is longer term in its objectives. Does the cabinet secretary agree with the report and what will the Scottish Government do to address the issues that it raises? I agree with those individual themes, and that is exactly why we are taking them together. We are focusing on exports, but we are about to launch our export strategy. On infrastructure, we have made a commitment about raising the levels of infrastructure spend. Even in the budget, of course, we committed to record sums around infrastructure spending, housing, transportation and connectivity. On productivity, for example, I have set out a range of actions that will support progress on productivity, such as working with the private sector around productivity clubs. Many of those are features of the economic action plan that I want to absolutely get on with, and that is why there was dedicated funding in the budget that was approved just recently. John Mason I wonder whether the cabinet secretary agrees with the Joseph Rowntree foundation that the spring statement has really failed in the area of continuing the benefits freeze, which is leaving children and families some £560 worse off on average, equivalent to three months of food shopping for an average low-income family. Cabinet secretary I think that it's unfair that, again, the most vulnerable in society are paying the price for the economic mismanagement by the UK Government. Therefore, the benefits cap and the freeze is unnecessary when you know, as announced at the spring statement, that the chancellor actually has the financial headroom to lift the cap. It's a pernicious policy to continue with it. It's damaging communities, and it's very hurtful to those who are facing the household pressures of having benefits frozen. This is now a willful choice at the hands of the chancellor rather than a fiscal necessity, and he can change course. Thank you very much to all members for their contributions. That concludes our statement on the UK spring statement.