To ask the First Minister what assessment the Scottish Government has undertaken of the impact of the UK Government budget on Scotland. (S6F-03477)

I called on the United Kingdom Government to prioritise increased investment in public services, infrastructure and tackling poverty. Although the measures announced by the Chancellor yesterday are a step in the right direction, we still face significant future cost pressures, which is hardly surprising after 14 years of underinvestment by the previous United Kingdom Government.

We are assessing what the UK budget means for Scotland’s public finances and, in particular, whether the increased cost of up to £500 million for higher national insurance contributions in the public sector will be fully funded and when we might receive reimbursement. There is a danger that we will not have that certainty in time for the 2025-26 Scottish budget process. It is clear that we will need to see continued investment in the coming years to provide the funding that our public services need.

Does the First Minister agree that the UK budget fails to deliver the transformative change that the people of Scotland were promised and that, in fact, it continues the same broken austerity ideology of the Tories—[Interruption.]

Let us hear Mr Brown.

—especially for those who are losing their winter fuel allowance—[Interruption.]

Let us hear Mr Brown.

—and for those suffering under the hated two-child cap?

In particular, does the First Minister agree that the UK Government’s decision to increase national insurance contributions could have a severe financial impact on Scotland’s public sector, potentially costing the Government, the national health service, schools and the police and fire services hundreds of millions of pounds? Does he agree that the UK Government must, at the very least, fully mitigate any negative impact on the Scottish Government and on public services in Scotland and that any mitigation must be provided in addition to, not as a substitute for, increases to Scotland’s block grant?

Mr Brown used a couple of examples that illustrate some of the many remaining challenges that we face. Pensioners have lost their winter fuel payment as a consequence of a decision by the United Kingdom Labour Government, and the persisting maintenance of the two-child cap is forcing more and more children and families into poverty. It is beyond me to understand why, when there is a projected budget surplus in a three-year period, the two-child cap has not been lifted immediately by the UK Government. We were told in the summer to be patient until the UK budget, but we have been patient and the Labour Government has not delivered what people expected.

I recognise the need to increase taxation in the budget and, during the election campaign, I argued that that issue had to be confronted. However, I believe that some of that increase could have come from the UK Government following the Scottish Government’s tax approach in asking people on higher incomes to pay more in taxation, which could have generated about £20 billion in increased revenue and avoided some of the punishing business taxes that have been applied, particularly to the Scotch whisky industry and other sectors of the Scottish—[ Interruption .]

First Minister, I am aware that, as I try to listen to your response, a conversation is carrying on across the benches. I ask members to stop.

The point that I was making is that there are tax choices to be made, and I am one who has argued for taxes to increase. We have actually increased taxes, and there was a way in which the UK Government could have done that, by asking people on higher incomes to pay more in taxation. That would have generated about £20 billion of revenue and would have avoided some of the damaging tax increases, such as the one that is going to undermine the competitiveness of the Scotch whisky industry. I understand why the Scotch whisky industry and business are aggrieved at the Labour Government, because they were promised economic stability, but they are not getting that from the Labour Government.

Michelle Thomson has a brief supplementary question.

After the budget, the Office for Budget Responsibility significantly downgraded its economic growth forecasts, and the Institute for Fiscal Studies warned that the vast Majority of the national insurance tax hike will hit working people through lower pay. To what extent will the UK budget usher in the new era of growth that the Secretary of State for Scotland promised?

Some of the data that has been published is illustrative of the economic impact of the budget. The information from the Resolution Foundation indicates that, over the course of the UK parliamentary session, there is likely to be about half a per cent increase in average household incomes as a consequence of the measures that have been taken in the budget. That will leave a lot of people feeling that their living standards have not increased in any meaningful fashion over the course of the parliamentary session. That reinforces the point that Michelle Thomson made, and the Labour Government will have to explain that to the public.