 Good morning, colleagues, and welcome to the 22nd meeting in 2016 of the Finance and Stitution Committee, I have apologies from Tom Arthur. I have one of you members of the committee who is convening a private bill committee this morning, but I welcome George Adam who is attending as his substitute. For item 1, I want to invite Angela Constance. Welcome Angela to the committee, I hope that you enjoy our time on it to declare any relative interest she may have. I thank you very much, convener. I'm very pleased to join the committee. I refer members to my register of interests. I have no known interests that are relevant to the remit of this committee. Although the interests of transparency in terms of our later agenda item in terms of the Winshborough development, it's not in my constituency, but it is in the neighbouring West Lothian constituency, so I am very much aware of it. I invite George Adam, who is substituting for Tom Arthur. I welcome to your first appearance to substitute here, Tom. George, to declare any relevant interests. Thank you, convener. I have just rechecked my published statement and I have no interests that affect the committee, one way or another. Okay, there's nothing to do with sitting on the agenda of the day. No, I don't think so. I should remind the people at the beginning to also switch off their mobile phones. I put them in a mode that doesn't interfere. I thank you for those who have just declared their interests. The next item on the agenda is to decide whether to take item 6 in private. Are we all agreed? Members are agreed. The third item on the agenda today is to take evidence on the European withdrawal bill from the Cabinet Secretary. This session follows on from the evidence last week with the Secretary of State for Scotland. I welcome our witnesses to the meeting. Michael Russell, the Cabinet Secretary for Government Business and Constitutional Relations, Gerald Byrne, who is the team leader for constitutional policy, and Stephen McGregor, the head of the parliamentary legislation unit in the Scottish Government. Before we move to questions for the committee, I invite the Cabinet Secretary, so I wish to make some short opening remarks, please. Thank you, convener, and thank you for the invitation to be here today. I think that it's worth reminding ourselves at the outset of how central the Sewell Convention is to the position of this Parliament in the constitutional arrangements in the United Kingdom. Essentially, for as long as Westminster claims unlimited parliamentary sovereignty, the existence of this Parliament and the Scottish Government is always contingent at Westminster's will. Westminster can legislate in devolved areas or change the powers of this Parliament or Scottish ministers without us being able to do anything about it legally. Recognising this, the Sewell Convention was established in 1998, as the original Scotland bill was going through, to provide protection for this Parliament from Westminster, undermining our legislation or interfering in our powers. The convention has operated since 1999, impeccably observed by both Government and parliaments, respecting devolved competence and devolved decision making. As David Mundell said last week, that has included matters in which there has been a good deal of potential controversy, not least the independence referendum, until now. We are all familiar with the events of the withdrawal bill. I want to emphasise two points, both of which appear in the Secretary of State's evidence last week. First, in answer to Mr Tomkins, Mr Mundell said that the Sewell Convention had been in quotes adhered to. For the avoidance of doubt, the Scottish Government does not believe that that is the case. We believe that the Sewell Convention was breached in the passage of the act. Consent was properly sought. It was denied by this Parliament, but the bill nevertheless proceeded. Nothing happened between the seeking of consent and its refusal to make those circumstances in inverted commas not normal. By contrast, in Northern Ireland, the UK Government made clear on the introduction of bills that circumstances were not normal, for reasons that we understand. The difference is clear. The Sewell Convention is of no value if the UK Government can decide at the end of the process that consent is not, after all, required, particularly if it is not forthcoming, that the UK Government considered that it was a legitimate approach for the withdrawal act should concern all of us. Secondly, the Secretary of State said that it was very clear back in 1998, when the convention emerged, that the Westminster Parliament would always be able to legislate on devolved matters. He said to the Commons in June this year that, while the devolution settlements did not predict EU exit, they did explicitly provide that in situations of disagreement, the UK Parliament may be required to legislate without the consent of devolved legislatures. In my view, those statements stand the Sewell Convention on its head. Indeed, the Scotland Act made clear that legal right of Westminster to legislate in devolved areas. It could not do anything else in our system. However, the point of the convention is that the legal right to legislate in devolved areas will not be used except with the consent of this Parliament, most decidedly not in situations of disagreement. I think that there is grave cause for concern about the future of the Sewell Convention under this Government. It appears to think that it has adhered to the convention, but only by emptying it of any meaning or value in protecting this Parliament. This is not an absolutist position, as the Secretary of State contends. It is simple recognition of the purpose of the convention and practice over 20 years. There is therefore a problem that needs to be fixed. It has also been identified by the Commons Public Administration and Constitutional Affairs Committee in its report on these matters published in July. The Scottish Government has made various suggestions to address the problem for discussion with the UK Government. Those include revisiting the statutory provisions in the Scotland Act, which were extensively considered by past committees under you as convener. I am writing today again to David Lidington to set such discussion in motion, and a copy of that letter will be provided to you. I hope he will respond positively to that request. I also look forward to discussing these matters with parties here in the Parliament, both later today and subsequently. In the meantime, as I said to the committee last week, the Government will work with the UK Government to develop Brexit legislation to ensure that Scottish ministers are protected as far as we can. However, we cannot in all conscience invite the Parliament to consider the issue of legislative consent if the UK Government reserves the right to set aside its view for all Brexit-related bills. Thank you, cabinet secretary. I had intended to start in this conversation this morning with a question from myself on common frameworks, but you have, for your own understandable reasons, you have concentrated on issues to do with sue and consent. Patrick Harvie had questions in that area, so Patrick, I am going to come to you first on this occasion. Thank you. Good morning. I had expected this to come up a little later as well. It is a question about a statement that you gave or comments that you made before the summer recess, the second half of June this year, saying that, in relation to the embedding of consent mechanism into legislation, you intended to provide detail of legislation at an early stage in the new session, and I expect the legislative process to get under way shortly thereafter. There was no suggestion of that in the programme for government. In fact, it suggested that the Scottish Government would wait until the end of the negotiations to set out our judgment on the best way forward at that time. Does that earlier intention to set out specific proposals still stand and when would we expect to hear back? Sue, sorry, could you propose about Sue? My understanding is that that would comment about the embedding of the consent mechanism into legislation. We cannot ourselves embed it in our own legislation. Clearly, this is a matter for legislation that will cover devolution as a whole. What I am saying today is that I believe that I am putting ideas, or a set of ideas, to David Littington to the UK Government about what change would free up this situation in order to allow us to operate the convention again. This lies, as I have indicated in my opening remarks, in the area of ensuring that there is a clarity about what is being asked for and how it is being asked for. You cannot ask for legislative consent for any point of a bill. Get to the stage where that legislative consent is refused and then say that it did not matter because we are going to do it anyway. We need to have embedded in legislation a process that both defines when and when not legislative consent is required. In the circumstances that it is required, make sure that it is then binding. If consent is not given, then that is final. That is the proposal that we are making. We hope to discuss that with parties here, including yourself. We have a meeting this afternoon to look at some issues, and I hope to be one of them. I have written or I am in the process of writing that letter will be provided today. I hope to discuss that tomorrow. If Mr Littington or the UK Government do not respond positively to that and do not intend to legislate on this in the near future, would the Scottish Government's intention be to publish legislation and seek the support of members of either House of Westminster to debate specific proposals? It is a good point. I am certainly prepared to consider that. At present, there is an ongoing process about looking at intergovernmental relations. At the last JMC plenary, and I think that members of the committee know this, I think that this has been referred to, there was an agreement that the intergovernmental relations would be reviewed. I was agreed by the Prime Minister, so I find it surprising that there did not seem to be that indication to the Secretary of State for Scotland last week. Nothing really much has happened as the official who was with me last week at the Europe Committee confirmed. I think that officials have met to discuss it once. There is a view from the Welsh Government and from ourselves that that needs to be given some push and urgency. Welsh Government have published proposals. We published proposals on devolution in Scotland's place in Europe in December 2016. We have got more proposals here. So, an issue that will undoubtedly arise tomorrow and will continue to arise is for the UK Government to put some urgency and push behind us. Indeed, the PAC Act report pushes that as well. So, let's try and see whether we can move on that, but I am entirely open to publishing drawing up legislation if that was an effective way of moving forward. I'm just trying to understand, Minister, exactly where we are in terms of the disagreement between the two Governments about the extent to which the SEAL Convention was adhered to in the passing of the withdrawal act. I don't yet fully understand why. I understand that you are disappointed that the legislation was passed without the consent of the Scottish Parliament. I am also disappointed that the consent of this Parliament was not given to the passing of that legislation, but I don't yet really understand the constitutional and legal basis for your position, Minister, that the SEAL Convention was not adhered to. So, can I just walk you through it so that I can perhaps begin to understand it? Now, the starting point is section 28 of the Scotland Act. Section 28 of the Scotland Act provides in subsection 7 that this legislation does not affect the power of the Parliament of the United Kingdom to make laws for Scotland. You referred to that in your opening remarks. It is then added in subsection 8 that it is recognised that the Parliament of the United Kingdom will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament. That is the statutory recognition of what has been called the SEAL Convention. I just don't understand, I'm afraid, what in the process of the enactment of the withdrawal act was not compliant with both the letter and the spirit of those statutory provisions that are the statutory provisions that govern all of us? Let me give you an illustration of why I think that it was not adhered to. In the Northern Ireland budget bill, there was a declaration by the UK Government, at the very start of the process, that these were not normal circumstances and therefore it would legislate without the consent of the Northern Ireland Assembly. If there had been, at the start of the process in the withdrawal bill, a declaration by the UK Government that it was not intending to seek legislative consent because these circumstances were not normal, then I would reluctantly agree with you. I think that this is one of these circumstances where there needs a substantial reexamination. For example, I heard Carwin Jones say, if you'd allow me to finish, I heard Carwin Jones say on Saturday that he thought the myth of Westminster parliamentary sovereignty should be set aside forever, so this is not a view only held by ourselves. But in those circumstances what happened was the Westminster Government decided that it would request consent, so, therefore, quite clearly, it believed that these were normal circumstances. It requested consent and only when that consent was refused that it said that these were not normal circumstances. So, it was the refusal of consent that created the lack of normality. I think that that interpretation is very far from what any of us would have expected. Okay, so, are you really saying to us that there were no intervening incidents in the—we're talking about legislation that took a year to be passed, right? The withdrawal bill was published in, I think, late June of 2017 and was enacted, I think, in early June of 2018. So, we're talking about a legislative process that took a year and during the course of that year a number of things happened. One of the things that happened was that you introduced legislation into this Parliament, which you then asked this Parliament to enact under emergency procedure and you said in your statement in the chamber here, seeking the support of the Parliament, which was given to you, to enact that legislation under emergency procedure, that these are not normal times. So, there was a recognition, I think, by that point in the process—we're talking now—was this February of 2018, that whatever one could say about the enactment of the legislation that is necessary in order to ensure that our statute books are coherent after exit day, that this was no longer normal. You said it yourself three times in that statement that these are not normal circumstances. This is what I don't understand. I don't understand how now the position that seems to be adopting is that everything is normal unless the United Kingdom Government says at the beginning of the process that something isn't normal. When we're talking about legislative processes which take months and months and months in which there are many actors, including yourself, and you said in this Parliament these are not normal circumstances and we reluctantly agreed with you. They weren't normal circumstances. You may have reluctantly agreed with me, but, of course, the Secretary of State for Scotland and the Secretary of State for Exiting the EU and the Chancellor of the Dutch Lancaster didn't agree with me because they didn't use those words specifically about their own bill. The statute indicates that those words apply to the bill. So, if at any stage David Mundell or David Green and subsequent David Lidington or David Davis have said, we now believe in the light of what Mr Russell has said, and I didn't know that I was that influential, that this bill, this bill, the EU withdrawal bill, is therefore not normal, the circumstances, and therefore we are not seeking legislative consent, which is going to do it. That would have been understandable, but it didn't do so. So, I have to say the fact that I said it about a different bill does not apply to the bill in question. So, that is a basic disagreement between us on that issue. Last question for me about this. Do you think that the process of enacting the withdrawal act and the continuity bill counts as normal legislative process? It doesn't matter whether that is what I think at all. The question is, it doesn't matter what I think in terms of the west bank, this is a bill and you've quoted the Scotland Act and you've quoted it quite accurately, very accurately, because you've quoted the statute and what it normality means is applied to that bill. That is what we are addressing on our proposal to David Lidington, because you have to say in that piece of legislation that we are not seeking legislative consent because this is not normal circumstances, just as the UK Government did in the Northern Ireland budget bill. That cannot be ignored and they did not do so and they didn't attempt to do so. So, to do it at the end of the process was clearly wrong and did not observe the spirit or the letter of the sole process. Right. Patrick Stewart, you've got another supplementary. Is it a short supplementary? Just very briefly, is it your position looking forward, not just thinking back about the EU withdrawal bill, that in the absence of that upfront comment that circumstances are not normal and consent will not be sought, the problem is that this Parliament will never know when it is asked for consent whether that consent will be respected? Of course, because the definition of consent, as you know, is given as both consent, as we understand it, withholding consent or doing nothing at all. So, of course, we would be unable to know it. Now, there could be the mother and father of all disputes at the moment at which the UK Government says we're not seeking legislative consent for this bill at the outset, but that would be better than a situation to allow the whole process to go through. At no stage to indicate there's any other intention, indeed, I believe the Secretary of State for Scotland kept saying that he didn't envisage circumstances in which the legislation would be overruled and then overruling it. That is against the spirit of sole. I believe it's against the letter of sole and it's against democratic respect from the institutions. I know Angela Constance wanted to raise issues to do with IGR and the cabinet secretary introduced that into his narrative there. Do you want to deal with that subject as now, Angela? I do. I think it would be quite timely, convener. Good morning, cabinet secretary. I'm very interested in inter-governmental relations and how they could be improved in a spirit of respect and reciprocity. You mentioned that the GMC has began to at least mute the subject, although there's a need for further progress. You also mentioned the Public Administration, Constitutional Affairs Committee report that was published in July, that specifically said that, after 20 years, Whitehall still doesn't understand devolution and that that goes against the principles of devolution, but significantly it's also bad governance. What I would like to ask you specifically is what needs to change? You have mentioned aspects of the legislative consent motion process, but in terms of structures, cultures, inter-government agreements and perhaps even reciprocal political commitments? You wouldn't disagree with me. I know that the best relationship is one of equality, which comes from independence. Short of independence, we have to look for solutions. One of the barriers for those solutions is this view of absolute Westminster sovereignty, and that needs to be challenged. But even within that circumstance, we need to remember that there is no hierarchy of governments in devolution, there's a hierarchy of Parliament. The first thing is that the UK government must operate with the Scottish Government, with the Welsh Government, the Northern Ireland Executive when it's present, as equals and recognise the roles that each have. Therefore, the frameworks and we'll come on to those are anathome in those circumstances if they're imposed, but quite understandable if they're negotiated and agreed. So it is that relationship of equality. But then I think you have to look at devolution and say, as I've said often, the weight of Brexit on devolution has shown that there are deficiencies and difficulties that need to be changed, and we had this conversation last week about where devolution would be going, and the Welsh Government have published on this and we've published on this in the original spy document at the end of 2016, in chapter 5, I think, chapter 4, chapter 4. See, I don't keep it by my bed every night. In chapter 4, we looked at a range of issues and they really divided into three. There were a set of rights which people have, which we wanted to protect, which we are concerned that the UK government may not protect them in future, employment rights, human rights, environmental rights. So we want to make sure that we have the ability to deal with those. There are a number of powers that we would need to have in order to operate effectively in the new regime, and trade was one which we've outlined in the trade paper, but there are a range of others. And then there's a third area, which has not been greatly discussed but needs to be thought of, and that's legal personality. Because ensuring that Scotland and the Scottish Parliament has legal personality would allow us to enter into agreements in the way that the devolved parliaments in Belgium have that responsibility. So there are a range of proposals which we can put on the table. There are a range of ideas from Wales. They're very keen on the idea of a council of ministers, again of equals, mirroring in a sense the council of ministers exists in the EU, but post Brexit having a council of ministers that dealt with areas which would be covered by frameworks. And that's worth discussing. They go into some detail about voting and qualified majority voting and all sort of ways to deal with it. What really I think is concerning, and they have the PAC Act report saying it doesn't work, there are no ideas coming from the UK, none whatsoever. And actually the impetus for this is all coming from the devolved administrations. Now that indicates to me two things. One is, I think it was true what David Cameron said, that the UK government devolved and forgot. There are whole swathes of the UK government, there are whole groups of ministers who've never dealt with devolution and don't understand it. Some of us are long in the tooth. We grew up with the ideas 21 years ago yesterday, there was the devolution referendum, we're still around, we understand how it works. We want to move on, but we understand how it works. There actually aren't very many people in the UK government and not many people in the civil service actually who understand it and respect it. So that needs to change. The second thing that needs to happen is that there needs to be an understanding of equality. Again, I note that four years ago, at this time when the independence campaign was on, there were many assurances given about powers and about equality and particularly about partnership and those need to be honoured and are not being honoured at the present moment. You mentioned common frameworks, I think we'll go on to that ground now Cabinet Secretary. Secretary of State gave evidence last week to this committee that despite a number of invitations to do so, he was unable to confirm that common frameworks will not be imposed on the Scottish Parliament before your record to have your response to that. Also, Mr Mundell indicated that good progress has been made on common frameworks again for the record, can we have your response to that please? Yes, I made it very clear, I think I did it again at this committee last week, on the basis of working together then we will work on frameworks and indeed the work of the civil servants, officials on both sides and those frameworks proceeds. There is clearly understanding of what is needed to be done but where there is imposition then we will not cooperate because that does not respect the partnership. It assumes a hierarchy of devolution in terms of governments which does not exist. I'm very happy to continue with discussions that are going on. I've made absolutely clear that we will do so but imposition will be something that we cannot accept. No, I'm sorry that Mr Mundell could not commit himself about that matter but I'm very clear about it. As long as there's no imposition then the discussion will continue. And he also said, as I said, that good progress has been made in terms of discussions around common frameworks. What's your perspective on that? Yes, I mean that there is continued discussion and there is progress on frameworks and we are able to put in place frameworks effectively as things go on. Where frameworks move into legislation, there will be greater difficulties, we are committed not to giving legislative consent as you know because of the circumstances we're in. There are also issues that will arise as bills are published, the agriculture bill will be published today, issues have arisen there but we are continuing to try and make sure that the voluntary discussion works. All voluntary discussion works on the basis that nobody has a veto but everybody is trying to get a solution and that's what we're trying to do. Thank you cabinet secretary. Did you still have some outstanding question on common frameworks? Just one or two specifics and it might be that the cabinet secretary would want to write to us after if he's not able to give specific answers just now but obviously environmental governance is one of the areas where common frameworks will be discussed and decisions need to be reached about to what extent those matters are dealt with on a common basis across the UK and to what extent they're dealt with separately. There have been calls for either a UK-wide regulator or environmental watchdog agency or for individual country level bodies to be established within the countries of the UK to take on some of the functions that are currently held at European level. Also proposals for the UK to seek continued membership of the European Environment Agency which includes some non-EU states. Can you give us an update on to what extent agreement has been reached on those issues because I'm aware of people, stakeholders in the field of environmental policy who are not yet seeing any clarity on that? I would like to write to you about that. I think it's appropriate that I seek information from the relevant officials and from the cabinet secretary but we will write to you with detail on that. At one point I would make however in terms of membership of the European Environment Agency and it's a general point not a specific point. We are interested in ensuring continued presence and continued involvement in a range of agencies as those opportunities arise and obviously we look at that positively if we can but I think it'll be far better to get you the latest position and we will write to the committee. Thank you. I know that I'm going to exhaust as many issues as I can on the bill and we'll go to wider issues cabinet secretary. Emma, is that the part of the bill? I'm there now. Okay, thank you convener. Good morning. My question is about protected geographical indicator status of our produce in Scotland and actually wider in the UK. Last week the trade minister George Hollingbury said that some countries regard those PGI indications as non-tariff barriers to trade and he said that there was no question that Scott Swiskey would carry some sort of GI because they are easily counterfeited and need to be protected and then he went on to talk about Japanese and South Korean markets which was interesting because I was focusing on EU protected GI status which we currently have agreement over but he said that he talked about market penetration and different issues so it was kind of interesting how his information was different than David Mundell who gave us information on the the following day basically said the intention was that GI status would remain exactly as they are and that we would have such arrangements in any future trade deals so I'm interested in the differing opinions, the information that's coming out and even a reluctance from the UK government to give assurances over the future of GI status but can you cabinet secretary tell us about any discussions you've had about protecting our GI status? I was concerned I saw the trade minister's evidence and I was concerned he seemed very down on airshare cheese for example apparently wasn't penetrating the Japanese market enough speaking as somebody was brought up in airshare I regret that I think the Japanese are missing out on a treat. I was concerned about the the dichotomy in view my understanding is that there has been a strong commitment made to the food and drink industry that PGI status will be maintained however I did note yesterday some concern from James Withers the chief executive of Scottish Food and Drink that that would not be the case it is really important that the PGI status is maintained the simplest way to do so apart from staying in the EU which would clearly still be the logical thing to do would be to make sure that in any exit agreement and future relationship agreement there was an understanding of the continuation of a PGI scheme that worked for both sides now I think I would hope that sense would prevail upon this the risks of getting this wrong are very great and if the trade minister himself is not committed to PGI status across the board then I do think we have a very serious problem so we will continue to argue for PGI status not just for Scottish whisky not just for Scottish beef and Scottish lamb but for the other things that are of extreme importance I mean the cheeses and also if I may mention at the Stornoway black pudding the arboroth smokies which are very important and which need to be recognised and if the trade minister won't we will there's even a PGI process that's in place right now for Scottish wild venison yes and so that was me this year so I'm assuming that will be delayed as I think it's unlikely I mean I can't speak for for the absolute veracity of this whether or not that would be completed or not but it would seem unlikely to me that it will be completed at the stage but it may it may well be and I commend the Scottish wild venison because you know Argyll is a strong producer of Scottish wild venison it's very important okay we've strayed into the trade bill I know there's one other question my way that someone's got in the trade ball and I'm going to come back and finish bill issues with Adam Tomkins on the you withdraw bill before we move on to the wider issues George you're a question I think on LCMs on the trade bill no no we've moved on anyway we've moved on okay for apologies if I missed an opportunity to bring in Adam Tomkins thanks community minister I wanted to ask you what you meant in your statement yesterday when you said of the EU withdrawal act and I quote that this government will have nothing to do with that legislation that's what you said this government will have nothing to do with the EU withdrawal act well I say with reference to the question can I ask the question the EU withdrawal act is the law of the land whether we'd like it or not so what did you mean when you said that this government will have nothing to do with the law of the land just what I've been saying about section 12 section 12 orders if they are operated we will not cooperate with them because we do we believe that framework should voluntary and not enforced upon us okay and just for the record is it in your view or is it not normal for a government in this country to say that it will have nothing to do with the law of the land I think in the context of my statement it was not only normal and necessary but well understood obviously with exceptions I don't understand what that means can you clarify that please I think it's clear what I mean okay we move on to impact on the budget in general terms of the of the exit the European Union James okay thank you convener so well lesson 200 days from exit date and also lesson 200 days from the start of the 2019-20 financial year you know where the budget will kick in we're weeks away from the publication of the Scottish budget and you've rightly warned in a number of speeches and interventions about the impact on Brexit on the Scottish economy on public services so can I repeat the question asked you in the chamber yesterday what assessment has the Scottish Government made of the impact of Brexit in relation to the 2019-20 draft budget well mr kelly I'm going to repeat my answer more or less but I want to expand upon a little because I'm not being difficult about this in any sense I understand the question I understand it will have an impact we have published for example figures that show the impact on the Scottish economy of the various types of brexit going forward so those figures are in the public domain they're both in Scotland's place in Europe one and in the second version we published earlier this year and we will continue to update that so there is a sort of macro publication that indicates what the impact would be on Scotland and what we're doing but there are also the issue of consequentials to the budget for the additional costs that we are meeting and I addressed that in the statement yesterday I gave a clear indication of where that money was being spent and I indicated that further information had become now we don't have knowledge of future consequentials obviously but that would be of impact on the third issue just to focus on the narrow consequence of the actual impact on the coming years budget I cannot say what that situation will be that is properly for the cabinet secretary to say I can give you an assurance that he is looking at that that will be an issue within the budget but just as we are not absolutely clear yet about the legislative impact there are a huge range of issues which would produce an impact from any scenario of brexit let me give you an example if you were to have a no deal brexit then clearly there would be a range of immediate costs which would be very difficult to quantify in in the short term if there was to be a softest of brexit in terms of the customs union and the single market then there would be a very much reduced cost to that but it would still be impact because you would have to quantify for example issues such as labour shortage and how that would impact on the budget so I can give you a commitment that that work continues it is very difficult to estimate but it continues I can give you a commitment that the cabinet secretary will address that in his both in I presume in his budget itself but also in his discussions with opposition parties and I would draw your attention to the published papers which contain information upon the impact upon Scotland just to be clear in terms of the scenarios that you've outlined are you saying that the Scottish government has assessed them directly in terms of the impact on the Scottish budget in relation to revenues and spending what I'm saying is that the scenarios that we've outlined are quantified within Scotland's place in Europe both publications indicated what's the effects what they will be and the Scottish government will undoubtedly report upon that as time passes and we know what is going to take place upon the impact on the budget okay that's what I'm saying but bear in mind the budget is going to be published before the end of the year are you able to detail what work has carried out has been carried out directly in relation to the publication of that budget and the impact on the various spending I am quite sure Mr Mackay will want to be as comprehensive as he can be about the work that's being done and its implications I'm not trying to avoid this but this is Mr Mackay's responsibility he is the person bringing the budget forward you as a budget spokesperson will be in negotiation with him about these matters that is the right way to do it I can't go into the details of all the impacts on the budget here and now that has to be done by Mr Mackay we move on to a different area now and willy I think you wanted to have a discussion about the checkers deal yeah thanks very much convener good morning cabinet secretary last week mr mendale told us in the checkers deal was still in the table and shortly after this we heard Boris Johnson and he's ranting describing it as a suicide vest where he we hand the detonator to to bristles and then shortly after that a former Brexit minister said missies may faced a tremendous amount of political crisis and rupture if she doesn't ditch the checkers plan now with that kind of loyal support within her own party do you know think it's time that the Tories stopped their internal civil war and started applying their attention to getting to avoiding a no deal scenario for for brexit well I think to be charitable to all the sides of the civil war it's been going on for 40 years it's not like to come to an end this week you know but that's where we are there is a civil war we are to sense collateral damage in that civil war everybody is you're while it's going on and it's very very damaging indeed and very irresponsible I think what we have to do in looking at the checkers deal is try and understand where it is now and where it might go and you know there's two conflicting views of the checkers deal that exists there's one from you know the prime minister and various others who have spoken public about it which it is essentially fully formed that's it you know it's on the table this will be accepted and that's going to go forward now nobody believe apart from the prime minister and those around her believe that that is a case you know I've heard civil servants and others talk about evolving and this deal evolving and that's where the crucial question is seriously how can this deal evolve into something which can produce a high level agreement a sort of blind brexit and remember this is about exit right you know this is not the end it isn't if I may be allowed this it's not even the beginning of the end it is might be the end of the beginning you know because once this exit has been agreed there is then the whole question of the future relationship to be decided and that's actually the hard thing so the really depressing thing I have said this morning and I know Mr Thompson accused me of going around spreading gloom is actually there are years of this ahead because we're only trying to deal with the exit now when we actually start to try and deal with the reality of the future relationship this is going to be even worse but where we are at the moment is can checkers produce the high level the blind brexit agreement that will allow the Tory present Tory government off the hook even with their own supporters and get them through until next year and the question is can they move to that or will it be stopped moving to that by the Brexiteers those people who were appearing and presenting a completely half baked report yesterday in the House of Commons and the answer is we don't know because the answer to that lies in the internal Tory party shenanigans it doesn't lie in anything to do with brexit or anything to do with negotiation it lies to whether she is able to move now last night robert pestin was reporting on a group of Tory MPs openly talking about getting rid of her so how can we have any confidence in this process at all yesterday afternoon while I was reviewing my statement there were members of the Tory front bench shouting about something michelle barnier is alleged to have said yesterday michelle barnier was saying something else last night you know so clutching at straws is what most of the toys are doing presently what they should be doing and you're not wrong about this is actually sorting out their own house and then looking and actually being ashamed of the mess they've made of this I mean last week mr windell also said mr barnier wasn't to be believed about dismissing the checkers deal but we know he said and in the last few days that a deal might be possible in six to eight weeks but do we know what whether he actually meant the checkers deal well I think really quite fascinatingly barnier's number two said something quite fascinating last week in the midst of a row as to what he had actually said to the EU exit committee and in which language he had said it he indicated I think rather interestingly that this told you not much about what mr barnier had said but a lot about the current state of British politics and it is it is just constant obsession with every statement it swings one way swings the other way there might have been there just might have been a good way to do this I don't think so because I think leaving the EU is the wrong thing to do there might have been a good way to do this but this is the worst possible most incompetent way you could possibly imagine and the responsibility for that lies fairly and squarely with the current UK government and the Conservative party okay mordo thank you community well maybe we can cut through the party politics and get back to talking about the business of government we've we've heard over the last few days some commentary around the checkers deal from various stakeholders the national farmers union for scotland said on monday and there's a direct quote it is important that politicians of all parties put their shoulder to the wheel and secure something as close to the checkers agreement as possible if we step away from that it will be detrimental to the UK and Scotland we heard similar comments last week from the cbi in scotland about the checkers deal on obviously other stakeholders like the fisherman's federation have been supportive of what the UK government are trying to achieve so why is the the Scottish government not listening to these important stakeholders in the Scottish economy and Scottish society and instead carrying on this post during what we've heard this morning well let me start on the business of government with the greatest respect mr Fraser if the UK government was doing the business of government we wouldn't be in this mess on the issue of the checkers agreement the words close to are interesting the cbi by the way i'm quite happy that people read the cbi president's statement last week it does not endorse the checkers deal by any manner of means but in terms of the position close to the sink close to the checkers agreement you know the closest you could get would be to have that would be acceptable would be single market and customs union membership now customs union membership is halfway in there single market membership is not in there except possibly in goods in a totally false split what i want to see is the best possible deal for scotland and that's what i'm going to continue to argue for and i'm not going to you know hide the fact that the checkers agreement it will not fly it won't fly we know it won't fly so how can it change no and the and the and if you has not said it will fly so how can it change to provide the basis for a solution and that's the issue how can it change and and you know until that is agreed and until there is an agreement to change it to get to the stage where its agreement then there's no point in having this discussion it has to change so is it evolving or is it settled that's the issue that needs to be resolved and presently there are two sides Mae'r fawr fel y trafnodd yn ddod, rydyn ni'n gwybod i'ch gweithio'r gorffing oherwydd yng Nghymru yn y warchfeyr. Mae'n credu ei fod yn ymgyrch. Rydyn ni'n gweithio'r gweithio ar y gwybodaeth yn gweithio'r gweithio'i gwybodaeth i'r ddad lleidog, ond mae'r drosbryd yng Nghymru yn agnithlwyntiaethol yn ei ddweud y gweithio. Rydyn ni'n gweithio'r gweithio'r Gweithio'r gweithio i'r gweithio,ött unrhyw gweithio yn gweithiau ddiffieithio I150 bobwn er mwyn fydda i'r lawr er mwyn meditation. If there is a vote in the House of Commons on the checkers deal, what do you expect your Westminster colleagues to do? Will they vote it down? As I said yesterday, in my statement, I am happy to repeat it, it is a false distinction— Is a very simple question and it is a yes or no answer. No, it does not go. If there is a vote in the House of Commons on the checkers deal, will your SNP MPs support it or vote it down? The reality is that there are a range of possible options that will take place. The much more likely vote will be between a blind Brexit which we do not know what is going to happen, a high-level statement that goes nowhere or the madness of just opting out. The reality is that everybody should be supporting and we'll go on arguing for it as my colleagues in the Commons have gone on arguing for it, is at the very very least there should be single market and customs union membership. ond we are not going to be put in the position of backing a Prime Minister whose actions upon these matters have been disgraceful, nor we will be in a position of betraying the people of Scotland who voted to stay in the EU. In all those circumstances we will do the best thing for Scotland. It is not being the midwife of Brexit. Brexit is a disaster for Scotland and Mr Fraser, you know that. It's about time you will vote it down, thank you. We're through that a little bit, Neil. The Secretary of State for Scotland last week was reluctant to share with the committee details on the specific sectors of the Scottish economy that the UK Government believe will be hardest hit by a no-deal Brexit. Has the UK Government provided details of that to the Scottish Government? The publication of information from the UK Government includes the analysis that it made, which is similar to our analysis, slightly gloomier. In terms of specific areas of the economy, I don't know whether that information exists, it certainly hasn't been shared with us. There's a difference in the analysis between the Scottish Government and the UK Government. Yesterday you referred to the no-deal technical notes. What areas, if any, are there a difference of opinion on the details that sit out in the technical notes between the Scottish Government and the UK Government? The technical notes deal with what you might call often wishful thinking. There are whole areas in the technical notes which say that this is what we will need to do. It's very contingent on the EU saying that they would do this. The technical notes are often like small deals. Within an overall no-deal scenario there would be small deals. An example would be rolling over the aviation agreements. As you know yesterday, Dominic Raab got a bit of a tongue lashing for having tried to set that up with all the 27 without going through the negotiating process. A lot of those are small-scale deals that require European agreement. Now there is no such agreement. At the very least we should be sceptical as to whether these can stick. We've agreed that we will fact-check those in terms of Scots law and any information that relates to Scotland. We've tried to do so. We haven't seen all of them and therefore we can't fact-check them all. We're not endorsing this policy view. We're passing it on and we're saying it's important that this stuff exists. As to whether these arrangements would work, I don't think anybody knows. Some of them, and clearly some of them probably wouldn't. That's the difficulty of the situation. The no-deal scenario, and this needs to be understood, should be ruled out. It can be ruled out in two different ways. It can be ruled out by simply saying in the event of a no-deal scenario we will seek to continue single market and customs union membership for the foreseeable future. That's one way. The other way it can be ruled out is by seeking an extension of the article 50 process. That actually making that an automatic trigger. That if you couldn't come to a deal, you would say we want to suspend the article 50 process while we work this out. Both of those things are quite legitimate and could be said. Why they are not being said, I don't understand. Instead the Prime Minister keeps saying that it wouldn't be the end of the world. It wouldn't be a disaster. It wouldn't be the end of the world, but it would be a difficult set of circumstances. Very difficult. Further detail on the Scottish Government's response to those technical notes in terms of the fact-checking and other comments on the technical notes would be welcome. I'll certainly note that. I'm not adverse to providing that. You said you've published Scotland's Place in Europe and other statements. Can I just ask, in terms of transparency, will you publish all papers that you've commissioned on the impact of Brexit and the preparations that are being made by the Scottish Government? I'm not going to make a commitment to that because I'm not sure what that list is. I mean, we will publish what we write and we've prepared, I think, 16 papers up until now, one sort or another. I need to give you a lift. I'll provide the list here. We have an extensive list of papers that we've published, and we will continue doing so when we're planning to publish more in the weeks and months ahead. The next item on today's agenda is to take evidence from the Scottish Fiscal Commission on the forecast evaluation report. This session forms part of our 2019-20 pre-budget scrutiny. Thank you very much for sending us the report and also the very useful summary that was with it. I welcome to the meeting Dame Susan Rice, who is the chair of the Scottish Fiscal Commission, Professor Alistair Smith, Commissioner John Irland, who is the chief executive. Before we move to questions, I wonder if Dame Susan Rice would like to make any opening remarks. Thank you very much. Good morning. Once again, I thank the committee for inviting us. It feels like just yesterday that we were last here talking to you about our summer forecast. We hope that you've all had a good summer as we have. Last Wednesday, we published three reports. The first was our annual forecast evaluation. The second, a paper on our approach to forecasting, assigned revenue from VAT. The third, our statement of data needs. Yesterday, we also published our first costing to accompany the Social Security Secondary legislation for the best start grant. I'll focus my comments just now on income tax, the economy forecast and our data needs. We're required by legislation to produce an annual evaluation of our forecast. This is something that we do anyway because looking back at forecasts and how they performed against outturned data is one of the best ways in which forecasters can improve. As we state in our report, there are many reasons for differences or errors. Forecasting is not an exact science. This is especially the case when we're dealing with economic statistics that are often revised. As some of the newly devolved taxes where the tax authorities are still establishing the baselines for receipts in Scotland, it's even more dynamic as we observe data and trends often for the first time because things are still forming here. We've tried to be fair and self-critical of our work and transparent about the way that we've evaluated it. We've also compared our forecast errors to those of similar organisations such as the OBR. We find that overall our forecast errors are within the ranges that we would expect by looking at the track record of others. This evaluation was the first opportunity that we've had to compare our own forecasts produced in December and May this year against the economic and fiscal data. The relatively short period since we produced them means that we're only looking at our in-year forecast. This means that we're talking about forecasts for the fiscal year 1718. Next year we'll be able to revisit these forecasts looking at the track record for the current year as well, meaning 1819. One exception to this timing however is that income tax is the most recent data released in July is for the earlier fiscal year of 1617 and we've all have to just keep that difference in mind. You may recall that there's an 18-month lag as a result of self-assessment. This is the first ever release of Scottish non-savings, non-dividend income tax, out-turn data and it follows HMRC's Scottish taxpayer identification exercise and actually represents something of a milestone in the devolution story. When we produced our forecast in May, the survey of personal incomes was the best available source of information on income tax liabilities in Scotland. This survey is based on a sample of UK administrative records held by HMRC with postal addresses used to infer who would be a Scottish taxpayer. The most recent version of the survey is for 1516. In May, in our forecast, we projected income tax liabilities from the fiscal year 1617 through to 2324. Now that we have the new data, which were released in July, we can see that our survey-based projection for 1617 had a £550 million overestimate of receipts. Our analysis suggests that this is primarily driven by the actual number of higher and additional rate taxpayers being lower, so the number of that group of taxpayers being lower than the survey of personal incomes had suggested. As these numbers date from before any changes were made to Scottish income tax bans and rates, we believe that differences are driven by data rather than by a behavioural response by taxpayers. I know you'll be concerned about the potential impact of this new information on the Scottish Government's budget. The new receipts data referred to the fiscal year 1617, as I've said. This is the baseline year under the fiscal framework and will change the initial deduction for the block grant adjustment for income tax. Therefore, there should be no direct impact on the budget. We can discuss that more if you'd like. You'll see that we've also evaluated our forecast of the other taxes in our remit, including non-domestic rates, Scottish landfill tax, LBTT. I won't say any more about those now. Turning next to our economic forecast, the official statistics were revised significantly following our May forecast. Economic growth for the fiscal year, 1718, was revised up from 0.8 to 1.3%. This was mainly due to some very large revisions in the estimates of construction activity. Our May forecast of the year 1718 was 0.7%, and this now looks too low. At that point, we had three quarters of official data quite consistent with each other, and those data suggested only modest growth. While we were aware that revisions to these data were likely, we held the view that the statisticians in the Scottish Government, whose job it is to produce the statistics, were best placed to measure and revise their estimates of economic growth. While the revised data shows stronger growth in the year 1718 than previously thought, the average growth since the beginning of the decade, since 1011 and beyond, has fallen slightly. Our view is that there's no evidence from this revision to suggest that we should change our analysis of our underlying view of subdued trends in the economy. I shall finish by saying a few words about data more generally. Following its inquiry, the Economy, Jobs and Fair Work Committee recommended earlier this year that we publish an annual statement of our data needs. As my comments above illustrate, good data are fundamental to good forecasts. On balance, we've seen progress in the provision of data, although there's more that can be done. We are concerned, though, about our access to data from the UK Department for Work and Pensions. We don't currently have an agreed way of obtaining access to the data that we require, and our most recent request for information, public body to public body, was treated as a freedom of information request. While we received that information just in time for us to be able to examine it, it places us in an uncertain situation with regard to future data requests. That, I hope, has been a helpful overview of our work, which made for us a busy, as well as a good summer. We're very happy to answer any questions that you have. Thank you very much for your opening statement. Can I just pick up on that last point that you made about data and not being able to secure that from the DWP? You said that they treated your request as a freedom of information request. That seems to me somewhat surprising, given that we're trying to get the data to ensure that we have our own new social security system and the payments around it in as secure a position as possible. Have you raised those matters with any other committee in the Scottish Parliament, such as the Social Security Committee, in terms of trying to make sure that they're aware of that? That seems to me quite a significant challenge that you just told us about. It is, and it was a significant challenge. This has happened in recent weeks, so the committee, I don't believe, has met. We have, however, been very active, both in working with colleagues in the Government and directly ourselves, talking to others in DWP, trying to help them understand our needs, our senses that they, like all of big agencies, they have more and more work to do and probably not more people to do it, but they would prefer to take all requests from Scotland, from the Scottish Government. The commission, as you all know, acts independently and we have both a right and a need to request our own data. We've raised this word in conversations, but we do need to get this resolved. We need an agreement, a memorandum of understanding about how we work together, as we have with the other UK and Scottish agencies. I know that this is not our primary responsibility in terms of this committee around the social security issue, but this is not like any other circumstance. I know that departments are busy, but this is a primary requirement for the Scottish Government and the Scottish Parliament. It's not for me to say to you how to do your work. By the way, I thought, certainly, writing to the committee here to let them know what's going on and also to the Scottish Government to seek their help to secure an outcome as early as possible, I think would be a reasonable way forward for you. I'll leave that with you yet. That's not for this committee to deal with, so forgive me for getting straying into that, but you did raise it. You rightly said, Dame Susan Rice, that you and you explained that ChMRC have now published their Scottish income tax outturned data for £1617, and that shows that there's some £515 million below the Scottish Fiscal Commission forecast for £1617. You also said that that would have no impact on the budget. For the record, I just think that it would be useful for everyone to understand why, while that shortfall or that forecast number has changed, no impact on the budget would be a useful thing for people to understand. 1617 is the baseline within the fiscal framework, so that's the base from which we start. Really what the new data and we hope is more accurate, more reflective data will do, as we all incorporate it, is to give us a new baseline that will carry forward. Because it's the baseline, it's also the time when the initial block grant adjustment will be made, so as one number changes, the other number changes and it nets out without an actual impact on the budget. That's great. It's useful for the record just so that we have that at the beginning. Alex? My register of interest. Good morning, Dame Susan. A couple of questions if I could start on one on construction. As you mentioned in your opening statement and in the report, there were significant revisions around the construction industry activity, mostly resulting in problems in the measurement of that. You go on further in the report to say that these are by no means settled, so we can maybe expect further changes in that. My view is that this is symptomatic of a larger failure to understand the pipeline of the construction sector, which happens across Parliament with infrastructure projects and the like. I just wonder how your analysis in that sector is improving and how that might interact with other parliamentary analysis. Oh, so that's an illustrious, I've been talking, you can take that one. I'm not sure it's right, it's helpful to refer to our analysis of the construction sector data. We were aware, as other forecasters were, and indeed as the Scottish Government's statisticians were, that there were problems in the construction sector data. It was hard to believe that they were quite accurate because they were jumping around so much. But there are some in here in difficulties in counting what's going on in that sector from quarter to quarter. It's really for the Scottish Government statisticians to do the best job that they can of producing the most accurate statistics. What we've seen in this quarter is that, having done that, they have decided that it's appropriate to have an unusually large revision to bring the statistics into better line with what they think is reality. We have decided in that process that it's not really for us, even though we might have some doubts about the credibility of a set of statistics, not really for us to get into the business of second guessing the Government statisticians and trying to do a job in parallel with them or trying to do their job for them. It's sensible for us to take account of the uncertainties in the data, which indeed we did do in the sense that in looking at our longer run projections in our report last December, we decided to smooth the construction industry statistics so that their jumping around didn't affect our long run view. In doing our short run forecasts, we really had no better alternative than to take the statistics as we were given and make our best forecasts on that basis. Obviously, we welcome the fact that there are now hopefully more reliable statistics and we will in our next forecast be taking that into account. When you do see uncertainties in some of those statistics, which you then cater for in providing your analysis, is there a process where you feedback that back to the Government statisticians so that they can maybe improve their statistics coming forward in future? The Government statisticians knew that everyone concerned with those statistics knew that there were puzzles about the construction industry statistics, if only because they were jumping around in a way that was hard to understand. So there's no need for us somehow to tell the Scottish Government statisticians what they already knew. The second question concerns non-domestic rates in chapter 3 paragraph 39. The uncertainty around some of the resolution of appeals from re-evaluations that took place before 2017. I have a number of constituency cases where appeals have been on-going for longer than a year. I wonder if you could elaborate maybe a little on your assessment of that further uncertainty. Is it around the quantum of appeals or the quantum of results or do you have anything to add to that? I'm not sure that we have much to add beyond what is in the report except that this is an area where the numbers are quite volatile. Things happen at different points in the year. It's a complicated suite of measures that are fed in. It's not just about buoyancy, it's about a number of different things. We've seen even in the old days of the non-statutory fiscal commission numbers jumping around, so these will always move a lot. I'm not sure there's a way to address that. Sometimes there are revisions in these data. There was a large wind farm where the basis changed and that made a three million difference. These data are also affected by often a very small number of properties or entities that have a large value. John, I don't know if you want to add some detail to that. I think that's about as far as we can go in terms of the nitty gritty of this. We work very closely with the Scottish Government statisticians and also the assessors who compiled the role. Susan has been saying that, during the course of the year, there will be a number of appeals. We track those. We speak to the assessors to get their sense of where things are going. It's a very lumpy process and we try to keep on top of it, but there are limits to what we can do. One point is worth emphasising that, although there are a number of inherently volatile elements in the non-domestic rates total, as Susan and John have just said, there are limits to what we can do to forecast and we just have to accept that those elements are a bit difficult to forecast. Nevertheless, the overall total of non-domestic rates is a pretty stable number. We're talking about a bit of volatility on the top of a very big number. Numerically, it's not a huge issue as a forecasting issue. On the income tax issue, Dame Susan, do you remember a couple of years ago that HMRC failed to identify about 400,000 Scottish taxpayers? That led to some debate, certainly to this committee and others, about their failure to even identify people who were liable to pay the Scottish rate of income tax. Now that circumstances emerge here where there's quite a discrepancy between the two data sets leading to that issue of about £500 million below forecast. Who's got the real data here and how can we know which one of the data sets we can believe to be accurate? The previous data set was taking UK-wide data and then inferring by address that this cohort of these people must be because of the address Scottish rate taxpayers. They've now taken a different look and a more sophisticated look at who might make up that pool. That is the reason for the change now. This is a one-time change. This isn't a number that should flip back next year or the year after. It's a completely different methodology now and they've narrowed down who would be, remember, savings non-dividend, NSND income tax payers in Scotland. Some people will pay other kinds of tax as well and they've narrowed that down. The out-turn data, which was published in July, is based on the S code. You remember on your pay as you earn, you think you have a little S. In the sense that that's the definitive data. The issue in terms of the forecast evaluation was the mismatch between a statistical sampling of an earlier approach and that hard data about the S codes. Of course, there's another issue, which might be are all the Scottish taxpayers correctly identified with S codes, but that's separate from the issue that we're talking about here. How can the public get any sense of comfort that you're dealing with? I mean, I don't envy your task here at all, but how in earth can we get any comfort that we're dealing with is in any sense reliable because it's huge variations from time to time we're dealing with here, it seems? I think I'll just emphasise what John has already said, that we're not looking at two competing sources of data that are to be treated equally. Until this new data came from HMRC, we and others were working with data derived from a survey of partial incomes. A survey is just a survey. The data that we now have is the HMRC's classification of their taxpayers by S codes, and that's got a different kind of status. Now, as John said, it may still have some imperfections in it, but that is the definitive data. It's not that we're somehow jumping around between one and the other. The new data source is the one that we will be using as the base of our focus from now on. It's the one that OBR will be using. It's the one that Susan was saying earlier that will underpin the block grant assessment, so it is the definitive data source. I don't see any of these crazy fluctuations in the future. We won't see the introduction of this new data source as a step change in the availability of data that's a one-off step change. From the perspective of making good forecasts, it's a very welcome one-off change. Just to pick up one specific issue, one of the reasons for the change in the income tax forecast is quite a high proportion of income tax revenue comes from high-rate taxpayers. For various reasons that are set out in our report, the survey of partial incomes is not very good at identifying accurately the number of high-rate taxpayers in Scotland, because, for confidentiality reasons, there has to be a bit of aggregation of high-rate taxpayers in the survey data, whereas the new source, the HMRC, is identifying the high-rate taxpayers with S codes, so it's a more definitive source. For the purposes of forecasting income tax revenue, it's particularly important that we have a good handle on the number of high-rate taxpayers, and we now do have a much better handle on that. I think that the HMRC will come in front of the committee on 3 October, so we'll get a chance to ask them a bit more detail about how they came to that final out-turn data description. There is an interesting issue about the number of addresses identified in the survey process being much greater than the number of actual taxpayers, so I think that there's an issue for the HMRC to be picking up with that really for them. James, you're a supplementary in this area. I mean, to the extent that I can understand how the discrepancy has happened, because the survey data that you were using was based on a very small sample of just 1 to 2 per cent, and obviously the HMRC is the actual out-turn data based on all the data on their system. I suppose that the issue is going forward at the minute that we've identified that there have been nearly 30,000 less taxpayers than was in the original forecast, and there's a lag between when we'll get the next HMRC out-turn report for 2017-18. My question is, in terms of the future forecasts that you're going to be doing later this year, for example, how are you going to track changes in the number of taxpayers? How are you going to forecast that? We will take the out-turn data from 2016-17, and that gives us a very clear handle of the taxpayers there, and we'll project that forward. We'll readjust our forecasting models, so they use that as a baseline. We'll know more in early next year when the SPI of the survey is produced for the same year as the out-turn data, so we can get an even better handle then. But certainly for the December forecast, what we'll be doing is rebasing the forecasts and the number of taxpayers using that out-turn data for 2016-17, so that should give us a far better and more accurate forecast. So, what you're going to do is you're going to take the number of taxpayers from the HMRC-16-17 out-turn report, and you're going to fix that in terms of 2017-18. You're not going to make any adjustments to that. We will make some adjustments, so we'll try and sort of project that forward. At the moment, we're just working through the details of that because our tax forecasting model has a very detailed demographic split, and we're just trying to work through how we'll actually use the... The relatively limited data we have from the out-turn data, which is just by tax band, and how we'll fix that and merge that with our sort of quite rich demographic modelling. What would be your basis of making some adjustments and changes? Because this is obviously quite sensitive, bearing in mind the discrepancy that have been in the additional and higher rate bands. So, we will take those numbers and those tax bands as a pretty hard piece of data, and as I say, we just need to work through now the quite intricate details of our modelling, which is broken down by gender and by age band, and do our best to calibrate it that way. We're going to lean very heavily on this out-turn data in terms of taxpayer numbers, because that's the really hard piece of information that we have. We'll give it a very high weight. There has been a 8.1 per cent SFC forecast error relating to landfill tax revenues being 11 million higher than forecast. There are higher than the OBRs, which was 5.7 per cent, and that made by the Scottish Government in 2016 of 0.5 per cent. Do you see any need to revise your approach to forecasting at landfill tax at this stage? So, landfill tax is interesting. It's a combination of how much waste is destined for landfill with all the programmes encouraging other routes for a lot of waste and also the development of incineration capacity. We look at when we think incinerators will be coming online and be able to what capacity they have and so forth. So we will take the data that we have, and all of the most up-to-date data feeds into our ongoing forecasts, and we'll see where that comes out. Can I just add to that that this is an in-year forecast, so what it does is we had some available data for the first quarter, and then we used the previous seasonal pattern of previous four quarters, and we used that to extrapolate that first quarter's data forward. So what we're going to be doing is exactly as you say, we're going to have a look at that seasonal pattern and make sure that what we're using reflects sort of the distribution in between quarters as it currently is rather than as it was in the past. So there's a little bit of work for us to do that and just recognise that we got that seasonal pattern slightly wrong last year. Can I also ask you about LBTT? On LBTT there was an overall forecast error of zero, but within that there was a 5.1 per cent error in residential LBTT and a minus 5.3 per cent error for non-residential LBTT. So, with that in mind, are you planning to make any revisions to your forecast methodology within LBTT? That was a similar but slightly different issue. Again, it was an in-year forecast and the principal forecast error in residential was driven by the fact that transactions in the lower end of the market, the lower half of the market, were much lower than we'd had estimated from the data. So we're just going to have another look at that again and just make sure that we're on top of how that transaction is data. I think the housing market is more tricky to forecast than landfill in the sense that it's not just a mechanistic approach of applying a seasonal pattern. So there's some things that we need to just look at and do a bit more digging on that. Again, it's a difficulty of doing an in-year forecast here, which is the issue about how we use the data that we have for one quarter and extrapolate that forward. Angela, I know you'd access to data issues that you want to raise. I hope I didn't get into some of your territory in the area earlier on. I was very interested in your difficulties with the Department of Work and Pensions, which, for the record, I find truly shocking, given that, until Social Security Scotland is administering all the Scottish benefits, you're going to be particularly reliant on their data. The conveners covered that point adequately and I look forward to reading your correspondence about that. More broadly, I would be interested to know what your experience with other UK Government departments and bodies is. Are there examples of that working well that could be replicated with the DWP? Or, if there's a broader issue, I'm aware, as committee will be aware, that the OBR has the right to access information data from UK and Scottish bodies, whereas you only have the right to access information from Scottish bodies and not UK bodies? I'd be grateful if you could share some of your experiences and reflections on that. If you had any ideas that could rectify matters, I'm sure that committee would have an ear to help if we could. I think I'll start simply by saying that this is, necessarily, because this is all new that we're doing. It's an evolving landscape. What you said about our legal right to access is exactly correct, the way you've explained that. Things move on and can still move on. If I take Revenue Scotland as an example in Scotland, initially, we were asking for data that they didn't necessarily produce and publish and so forth. Now, some of the data that we require, they do produce and they do make public. Things have moved on. We've worked well with Revenue Scotland. We have some further interest and further developments there, so it's not just about UK and Scotland. It's about all of the agencies and all of us learning what to do. Revenue Scotland uses different accounting bases for different numbers, and it would be helpful to have some public clarification of what that is and so forth. With the UK bodies, we have had, really, from the beginning a very good working relationship with the OBR, but they're in a similar kind of business to us, and that is different from the other bodies there. We have a memorandum of understanding with HMRC, and again, that's been a developing relationship and needs to continue to develop, but we feel that good progress has been made there. We would be looking to enhance that memorandum of understanding, and that reflects what we can expect from each other to be requested to be provided when, how we interact. It's very helpful to have those guidelines laid out. We understand from some of the UK agencies that, as I said in my earlier, they have a lot of requests for information, and they may feel they don't have enough staff where we come in the pecking order is an issue. It's up to us to develop relationships as well. It isn't just about a method. It's about working together with other bodies, and we're working hard to do that with all of them. I don't know if either of you wants to say more on that. I can't say there is a particular cudgel we can use to get what we need. We need to have people understand who we are fully, what we are, that we are independent from the Scottish Government, and therefore have a right to ask for the data that we're asking for, and that needs to be respected. We are a public body in our own right. I'm fully understanding of the fact that some of this is a two-way process. It will indeed depend on relationships, and it's a journey that involves all partners. It requires everybody to come and go, but it appears to me that—and people understand that some of these UK departments are very big departments. They have many demands upon them, but I wonder what your thoughts were in terms of ensuring the visibility of the fiscal commission to ensure you're a wee bit higher up the pecking order. Is this just about a series of memorandums and agreements, or is there something more fundamental like the legislative right of access to information that would diminish the need for layer upon layer of agreement? We're going in at lots of different levels, and through others and ourselves, particularly with the DWP, to try to escalate this and enhance their understanding and responsiveness. Alistair, do you want to say something? It's perhaps helpful to think about the timing of different elements of devolution in this, because, as Susan said, our relationship with HMRC has developed in a positive direction. There were things that we needed from them, and we developed a memorandum of understanding, and in the way that's set out in our report, that relationship is currently developing in a way that is very important. The income tax story started sooner than the devolution of social security story. Not to be too negative about it, DWP are coming to the devolution issues a bit later on than HMRC. It's not unduly surprising that a big UK agency with its own administrative budget priorities and its budget tightness should be cautious about how it handles devolution and the initial desire to work entirely through the Scottish Government is an understandable response. Being positive about it, we would hope that, as the devolution of social security expenditure evolves, the DWP will acquire the kind of understanding of the independence of the fiscal commission from the Scottish Government that HMRC has, and develop the kind of understanding of our needs that HMRC is developing. I don't think that we should, at this stage, be too negative about it. Yes, there are problems, as the convener has noted. It's sensible at this stage to try and walk these through and hope that we will get the kind of evolution of relationships that we've had with HMRC. In response to the less part of your question, any interest in legislative agreements would be a matter for ex-checkers from Scotland and from Treasury to have conversations on that, beyond us. I'm interested in what you said in your opening statement, Dame Susan, about the forecast, which is not an exact science. In our briefing papers, it says that there was revisions to the estimate of GDP growth in August. That's just one example of revisions to GDP, and it's not unusual that revisions are made. In our papers, it says that, given the uncertainties and errors around measuring GDP and the uncertain link between GDP and the size of the tax basis in the short run, are the resources that you devote to forecasting GDP justifiable, and would it be better to focus forecasting in other methods using fiscal forecasts, for instance? I'd make a couple of different responses to that. Yes, there are inherent uncertainties about forecasting the economy, but the issue that we've had this year with the construction industry data that we've already discussed is of an unusual magnitude, so this shouldn't be taken as symptomatic of the kind of problem that we're going to face with every one of our forecasts. Addressing your main question, I don't think the right response would be to step back from attempting to do the best forecast we have of the economy. The government needs forecasts of the economy. We are the official forecaster for the government. It's very hard for the government to make economic policy, not just in the tax area, but across a wider range, without access to proper macroeconomic forecasts. Someone has to do it, and it's our job to do it, and we think that this evaluation report shows that notwithstanding the challenges, we're doing a pretty good job of it. So we're not ready to hoist the white flag and say, sorry, this is just too difficult for us to do, and you've got to find someone else to pick it up. It has to be done, we're doing it, we think we're doing it well, notwithstanding the challenges. There are important links between the economy forecast and the fiscal forecast. At the last meeting with you, we had a long discussion, and I recall virtually the whole of the hearing was devoted to changes in our income tax forecast that, incidentally, now seems to be going on. A small beer compared with the revision of income taxes that we were talking about today. But that income tax forecast that we were discussing at last meeting was driven by a change in the economy forecast. And in forecasting income taxes, in forecasting the AT, which is a task that is coming onto our agenda now, you need a forecast of the economy because you're not going to be able to produce good income tax forecasts without as good a picture as you can have of what's going on in the broader economy. Can I just sort of go around that we have a formal legislative remit and it is to do forecasting, fiscal forecasting for devolved taxes. We also are now required to forecast assigned sort of revenue streams such as from VAT, looking at the cost of benefits such as the social security benefits which will come to Scotland. And it's also a requirement that we forecast onshore GDP for Scotland, so we need to do all of those. Alistair's given you good reasons why we would want to do those. And I think for many of those, all of them really, what we try to do is bring a Scottish lens, and this is for the economy and other forecasts, a Scottish lens, Scottish data, what is happening here, it's not just a 12th or whatever the fraction is of the UK. So with the economy forecast, the economy forecasts always have revisions and there will be more to this one, but I think we're still in a better place bringing that lens to it and doing that work ourselves. James Kelly asked about tax forecasts and I'm just wondering when you're forecasting and you're making associations with GDP and there's errors, are there knock-on implications then when you're trying to make it accurate when you're doing tax forecasting? One of the reasons for doing a forecast evaluation on an annual basis is to look back and see the source of errors. So forecasts all have errors, even the ones where the numbers match. You can see that underneath that, as we've stated, there are errors in this or that element. So what we do, it's a constant iterative process and as we learn from how we approach things, decisions we made in the past or new data that have come in, we bring that to bear on future forecasts. So the job is not to let one error just sit there forever and grow and grow in magnitude in terms of the future. There is one very significant knock-on implication, just sticking with the income tax example, that when we have, when the governments, the two governments have income tax outturns for this fiscal year 2018-19, there will be a reconciliation of the actual budget allocations that were made for this year with the income tax and other tax outturns. And it's desirable for everybody that those reconciliations, which happened two years down the line, are as small as possible so that the initial budget allocations made to the Scottish Government are as close as possible to the final budget allocations. That's one importance of having income tax forecasts as accurate as possible, because you want those knock-on implications in the reconciliation two years down the line to be as small as possible. I think it's difficult getting forecasts right on income tax. Just wait till we get to assignment of the VAT. That's going to be a real interesting situation when there's no actual definitive information available to make these forecasts on. But never mind. Murdoch, I'm sure that's not what you're going to come with. No, it wasn't. I'm just going to follow up Emma Harper's questions about your estimates, sorry, forecasts around GDP growth. And you say quite a lot in your paper around how the 2017-18 figure has been revised upwards, but you revised downwards the figures for the previous years. There's also mentioned in your report that the forecast post 2017-18 is looking subdued, I think, is the word you used. Just so we're clear, are you saying therefore that 2017-18 is a blip? Are we expecting post 2017-18 longer-term GDP growth to revert to where it was before that, below the UK trend figure? Or do we know? It's a good question, because I think it's one that a lot of people might ask. The 17-18 change, primarily related to a different understanding of the construction industry, is that point in time? It's for that one year. We, as Alistair explained before, and I think John as well, and the report, knew there was something funny about the construction data. So for 17-18, we didn't know what the new numbers would be, but we thought something might change. So for the long-term forecast, it's sort of a rough explanation, is our colleagues extracted the construction data, because we just weren't too comfortable, looked at all of the other data, got their trends, their averages, looked at that, and then looked at the construction data and got some trends and averages there. That kind of, you know, merged it back in, the term used, and we're talking to a colleague yesterday, was stitched that back into all of the other. So the economy forecast, the GDP forecast, is made up of lots of elements. And for that reason, we can comfortably say that the 17-18 numbers were in essence flattened out in our long-term view, and that long-term view hasn't changed much. And if anything, it's slightly weaker than it was even a few months ago. So subjewd isn't a new word for us. I'm afraid it's one we've been using for a little while. OK, so just where you're clear, you expect going forward that Scottish economic growth will still lag behind UK economic growth? I'd like to say two things. One, we haven't made a new forecast. This is a forecast evaluation. So when we're talking about it's not changing our long-run view, I should really say, it's not likely to change our long-run view because the changes in the data over the last three or four years give us a higher growth rate in the last year, but not a higher growth rate overall. So it's unlikely when we come to doing our next forecast in December that that's going to change our view. And as Susan said, all the indications are that we'll still have a subjewd long-run forecast. The other point to make in response to your question is that, yes, this past year's growth rate has been higher than we had anticipated. Is it a blip? Well, we will consider these things properly in our December forecast. A one-year growth rate of 1.3 per cent is not an exceptionally high number if you thought that the long-run growth rate was somewhere between half and 1 per cent. So one-year's number of 1.3 per cent isn't the kind of number that's going to knock you off a forecast that is lower than 1.3 per cent but not way above it. It's not an earth-shattering thing. So we shouldn't get too excited about it, is what you're saying? That's what we're saying. Well, fair enough. If this is the stage where you see it. James. The forecasters never get over excited. James. You said, Dame Susan, in response to Murdo Fraser that, if anything, you felt that the forecast going forward, if then, would now be weaker than it was a few months ago. What led you to say that? Only marginally so, and as Alasdair just said, we haven't re-forecast everything, but we would ask ourselves the same question that we were just asked about the impact of this change in the 17-18 number and have given that some thought. It's really looking at our whole methodology that we don't see that impacting very much. John, is there anything that would cause us to be even more conservative long-term? I think it's right. It's just a matter of a very small degree, and the remark is based on the fact that if you look at the growth rates and the revised data since 2010, they're marginally lower than they were before the revisions. So it's just that. If it happened to have our summary report to hand, then figure one on page nine illustrates the issue in that the actual number is higher for 2017 than our forecast number, but if you look across the full range, the actuals are below the forecast numbers more of the time than they were above it. So that's a slightly long-winded way of saying that the overall economic growth picture on the actuals is just slightly below what it was in the forecast, even though it's higher right at the end of the period. Thank you very much to our colleagues from the Scottish Fiscal Commission for coming along today. That concludes this particular session this morning. I now suspend to tell you a changeover for the witnesses. Thank you very much. Very grateful for you being here. Colleagues, the last item on public business today is to take evidence from the Cabinet Secretary on the proposed contingency liability relating to a standby loan facility for a development site at Winchborough. I welcome to the meeting there at Mackay, the Cabinet Secretary for Finance, Economy and Fair Work. Will Quinn is the Guaranteam Scheme Manager and Michael Walker, the finance business partner. Members have received copies of the letter from the Cabinet Secretary setting out the background to the request. The committee will consider the response to request in private later in the meeting and then we'll write to the cabinet secretary to confirm the decision. Felly dydych gan dwylo y cyfrifoedd, yw'r new iawn i'w mfodol iawn i chi ddefnyddio'r cerddweud o'r ddyddau? Rydw яr Sherryl Aberch Ùr. Rydw eu cyfrifoedd y gallwn astudio i nhw'n credu digwm am 50 mln pwn. Feenio a'r llai amynnogol i'n f régriol y maes ar y Cardsf Bandwyr yn Cymru, yw Winsbaraeth, westlothian. Ac mae'n darparu astudio i gyd yn y cyf moleis o'r ddalwedd, ac mae'n rhan i readodol i'r cerddweidol yng nghymwys. I am gael i chi i gynnig i ddiogelio i'r cyfrifoclwyr cwmwysgol a chyfeolgwyr i gael llwyffaeth. Felly mae'n cael ei gael ei gael eu cyfrifoclwyr i'r cyfrifoclwyr sy'n gallu cyfrifoclwyr sy'n cael ei gael eu cyfrifoclwyr i gael ei cilyt i'r holl. Fy nesaf yng nghymru o'r ddigon i'r lleidiau cystiolaeth a'r cael ei gael ei gael i'r lleidiau. cyffredinio'r studiad yng Nghymru will oesoddiadolion ar gyfer y byddur nhw gyffredin ni, gyda ddechrau Llyf o'r cyffredin wedi'i blynnag ddechrau twffordd y cyffredin ni. Yn y peth, o ddod 3,450 oed, 25% dw i'r rai sprin yw'r ffordd ym ohol, o'r cyfun eu reidiol i ar y cyfnod rhagorau i'r hyffredin ni. Aeth y rysg-bannogau ar gyfer y gysylltu ymweld i gyfnod o'r cydwyr a i gyd-fathrydd athletesive due diligence and is the right type of intervention by government." She urged the right level to demonstrate our commitment to provide an economic stimulus, whilst limiting our exposure to financial risk. We would ask the committee to ensure significant economic benefits. The Islamic públic will be delivered to Central Scotland through the approval of an essential contingent liability. The leader states that the developer has been unable to secure affordable market rate financing to forward fund all the infrastructure needed to develop the site. It made me wonder why the situation has been arrived at and what happened with the initial financing of the nad ydynt o'u gweld? Mae'n rhoi'r回erthau i'r confracellau i'r cwm hyffrach a'r amser i'r ffordd os y capital investment yw'r gweld, ac allan oes yna ddysgu a'r hoffiwn ar y teisio, oherwydd y cyffredin sy'n gweithio i'r ysgol ar y ddylch chi gweld amddangos i gael gysylltu. stewill g��세요 ond listednau of the costs and what comes through the negotiation of what would be required by way of planning, consent and ultimately how that same delivers and why that financial tool would be required. That's my understanding, might be officials could give you more of the history about what's changed from the original inception. Yes, thank you that's absolutely correct what really comes down to the scale of of the development and the infrastructure that is required up front. In terms of the package that is being asked for here, the delivery of the school is a planning requirement. As is stated in the papers, the developer is unable to secure that affordable finance to front fund. West Lothian Council are engaged in the wider infrastructure that is required and are carrying the maximum risk that is allowed under their governance arrangements. I think that we are all quite grateful that the Scottish Government is able to help to deliver this sort of output, but the question is, was this not at the beginning of this process, was it anticipated that there would be a requirement for government to be involved, or did they think that between West Lothian Council and the developer that they could put together the package that would release this site and make it work? How did the government get involved? I think that the answer to that is that the developer in West Lothian Council have been engaged in negotiations for quite a number of years, so they have been developing how they might take this site forward given the scale. So it's a nitter process is what you're saying, it's an evolving process that you've come to where you've come, but why the government has been involved. I can understand that. I suppose what would happen are circumstances. This is exceptional of course because of the scale here and it is a useful instrument and model to say if we can intervene to help with the infrastructure to unlock development, find a financial tool to do that, what would ordinarily happen of course is developers would be negotiating with the planning authority and if it doesn't work out, people just walk away and it doesn't happen, but a council has been so keen to see this through, they've looked at how they can be really innovative in delivering the infrastructure element because of the public benefits it brings as well, so there's the economic benefit of the units, but the infrastructure, the schools, the education and the public transport elements, I think have encouraged the council to try and find other ways to make sure that the development can happen in recognition of the benefits and the need, the population demands in that area. Government, of course, we have commissioned officials across government to support sustainable economic growth whilst limiting our exposure and fundamentally rather than see it all fall apart, our role here is to put that final piece of the jigsaw in place so that the council and the developers can see their mutually agreed aims delivered rather than us being involved at the start to say how can we plan in an intervention, it's more how can we help steal the deal, I suppose. It's a very helpful contribution, Alex. Thank you, convener, and can I note my register of interests in the development sector? A couple of questions. The first one's following on from the convener's point, yet do you think that this has come about because banks are becoming more restricted by variability to lend to different sectors and the development sector being one of them? And if that is the case, do you think that this is going to be the first of several requests to Scottish Government to act as a lender of last resort? When I speak to the banks, they tell me there's plenty capital. When I speak to other business interests seeking financial support, they give me a slightly different perspective on things. That is as much, I suppose, about simply the up-front infrastructure spend that is required to unlock the rest of the development, which is a welcome, as it has its planning approval, which then takes me to the point around, is this the kind of model that we would want to deploy. There's a range of measures in our toolbox, essentially, to support appropriate development, tax incremental finance, growth accelerator model, how we use financial transactions, we've got other infrastructure loan funds, so there's a range of different financial products that we can use to support development that's worthy of support. Of course, the interest in element here is the use of contingent liability, essentially, that we're offering that financial support to the local authority, which in itself is doing quite an innovative thing in how they are delivering the infrastructure investment to unlock the development, because, again, of all the benefits it brings. Although this feels exceptional because of scale and some of the factors involved, I do think it is a useful financial tool that is at Government, and, frankly, because of committee's approval, at your disposal as well to say, is this the right kind of intervention, which has such support, it feels worthy of that intervention. Hopefully, of course, that risk never materialises for the Government, that's why there's many safeguards in place, but it gives that final security, in a sense, to allow the product, if you like, to be used to support the objectives of the development. Thank you. My second question is more about the detail of some of it. You talk about a commitment fee or arrangement fee, I wonder how much that is, and you talk about any funds drawn down will be repairable of interest. I wonder if you can clarify what rate that will be at, and then one item, which doesn't seem to be mentioned, is that is overage. If the returns exceed the model being financed here, what will the Scottish Government recover? I mean, obviously, sharing the risk is one thing, but if there's reward beyond what is expected, how will the Scottish Government facilitate this whole development? How will the Scottish Government benefit from this? Although the Government is always keen to get credit for things, this is a financial product that gives a backstop in a sense. I wouldn't want to be portrays if we've then got a financial share in the overall development. That would be quite a different proposition. The detail of rate—of course, it has to be stated, compliant as well—has gone through all that due diligence. Do we have further information on the arrangement fee? I can answer that. The interest rates on the commitment fee is 2 per cent and on top of any drawings are 2 per cent plus a 1.1 per cent margin. As the cabinet secretary has mentioned, those have been scaled as a result of state aid due diligence. That's why they've come up with that. We had our advisers, Grant Thornton, look at similar interventions in the market compared to how private sector providers would act in this scenario, and that's how they've determined an appropriate rate. I shared with my colleagues earlier that I'm aware of the Winshborough Proposition. It's not in my constituency, but it is in the neighbouring west-lothian constituency, and it will obviously have, when it comes to fruition, an impact locally in west-lothian in terms of economic development, but also in the wider region. As it's part of the city deal, and the whole of the residential city deals is, of course, to promote economic development and growth in house-building, not just in cities but in the regions that surround the cities. I'm conscious, because of my local knowledge, that the genesis of identifying the project in this area for development would not have rested with the Government, and that would have been with other partners, be it the local authority or the developers. It is important to understand more about when and why the Scottish Government got involved, what were the particular challenges. If there were particular points of learning, it is entirely appropriate that people should not just be building houses without the infrastructure, but the planning consent in this instance has been a barrier. Is there learning for developers and local authorities, in particular, in terms of taking forward, hopefully, future projects of this magnitude and scale? I think that those are helpful comments and questions within that as well. I suppose that the financial element would have been under negotiation between the council and the developers to arrive at finally what was the proposition in the package, and then the question was what is Government willing to do as part of it. We would have taken a proactive approach in trying to make sure that the development happens by offering that support, which is essentially, as we have described, the council is using its borrowing regime to make sure that the infrastructure development happens to unlock the development, and then, of course, the council gets the enhanced infrastructure for the area, but they get the financial return as well, based on the units that are being developed. That is not the immediate role of the Scottish Government to have done that, but we would have been there to participate to see what we can do to support in the end, having come this far, that this is the final financial element that makes the work our understanding. We were always co-operative, but we would try to minimise essentially the public sector risk, but the Government's risk within that. If it crystallises, the resources have to be returned to Government. I entirely take on board the comments around planning and the local authorities' lead role in housing provision, and we are trying to be supportive of that objective. Good morning. If the facility is ultimately drawn down, if it is used, can you give clarity that no part of the developer's contribution ultimately will be borne by the taxpayer as a result of this mechanism? Yes, and they are still absolutely liable for that. Can I maybe express how it might crystallise in terms of how it would impact on Government if that was materialised? If there was failure to the extent that it was called upon, there is a range of which you have in your pack the security that we have over it, the other calls and resources before it finally comes to Government, and if it crystallises for us, we would have advanced notice of that, and we would be able to plan it into a budget, because it would not happen within a week or a month. We would have a period of at least a year forecast to be able to build it into a budget and the maximum exposure would be up to about £850,000 a year, so that would be manageable for us to understand, but no, the burden would still be on the developers to absolutely fulfil their condition obligations. As you have set out for this being needed, the developer was not able to access the finance that they had hoped. What gives you confidence that they will have the money ultimately? Well, there would be security on the land, so we would hold them to account for that, and the income is to derive from the units that have been sold as well. It is an absolute worst case, almost an unforeseeable scenario that the units would not be developed out, and that liability would still rest with the developer. In terms of how we are comfortable that the developer has the financing required to put toward the school infrastructure in this case, the council will be forward funding it, so that risk is taken away from the developer to that extent. However, the development contributions will still need to return from the units that have been sold to the council, and that is how we are comfortable that the financing is there and in approval. Cabinet Secretary, in your papers that you provided to the committee for this matter, you identified that the Winchborough development is identified in the Edinburgh city deal as a priority site for development. Is this risk-sharing, involving or not involving the contingent liabilities that we are talking about this morning, in your view likely to become a feature of city and regional growth deals as they are being unfolded and developed across Scotland? We know that a number is still in various forms of negotiations in Stirling and Clackmannanshire, Tayside, Esher and elsewhere in Scotland. Is this likely to become a feature of city and growth deals as we look forward? I should say for completeness to Mr Tomkins that I do not want to encroach in other cabinet secretary's portfolios that Mr Matheson will lead on city deal negotiations as the infrastructure secretary, but from my point of view as finance secretary, that if it is contributing to the economy, I think that we should look at a range of financial tools that the Government is disposal to support that sustainable economic growth. Members of the committee will be well aware of other contingent liabilities where we have set out how we are trying to be supportive of industry in the economy to help to stimulate appropriate development. It could be exceptional by its nature, but it could be used in future arrangements in partnership with local authorities where they might want to set out how they want infrastructure to be delivered and they might want to use the same or similar model. We are open to that financially, but on every occasion we would want to understand the business case, and that could feature within city deals. Equally, it could be out with city deals as well. It so happens that this was part of the overall Government's support for the site and the region, part of that dialogue and that engagement because it was supported by the local authority, the wider region and the Government. For that matter, because of the nature of city deals, the UK Government would have had an overall view as well. I will engage with the Secretary of State on future city deals so that we can try to ensure that city deals cover the whole country. Yes, in essence is the answer to the question. We are open to using this financial model, but not exclusively to city deals where appropriate to support development and put in place the necessary infrastructure that can unlock wider benefits. In the programme for government last week—I do not have it in front of me, but in the programme for government last week I recalled the First Minister talking in her statement to the Parliament about new infrastructure funding. I hear what he said about Michael Matheson and his portfolio responsibilities, but as Cabinet Secretary, he will, in due course, be proposing a budget to the Parliament. Do you foresee that those kinds of risk-sharing arrangements might be a part of the Scottish Government's new investment in infrastructure in Scotland? I think that it can be part of the infrastructure drive that we are trying to undertake, because it may well turn out to be a very useful financial tool, but the specific commitment that the First Minister gave around infrastructure spend as a proportion of GDP—this financial model is quite separate to that figure, because that figure will be about what we are able to invest by way of direct infrastructure spend, and what that is about, of course, is the contingent liability that we are creating because of the financial model that we are using in this instance. I think that the vision is absolutely clear. Of course, we will be returning to Parliament with all the detail on that infrastructure spend, but to be absolutely clear to give the most accurate answer possible to that question, this financial tool is different from that infrastructure announcement that was made by the First Minister's programme for government. I am trying to understand the relationship between the various pots of money that are on the table. We have city deal money, we have new announcements of infrastructure investment in the programme for government last week and we have contingent liabilities. I am just trying to understand what the relationship is between the contingent liability and the other two broader pots of money that you have been helpful on that. All of us, of course, have to make sure that all of it is affordable, and that is why understanding the liabilities that we are taking on is critical in terms of affordability and understanding the risk. I am just being clear that the headline commitment is about actual spend, whereas, of course, this financial tool is about the risk that we are taking on to ensure that infrastructure spend happens. I thank the cabinet secretary and officials for coming today. At the start of the meeting, the committee agreed to take the next item in private. The committee will meet again on 26 September to continue to take evidence as part of our inquiry into the 2019-20 pre-budget scrutiny, and therefore now close this public part of the meeting.