 folg. Welcome to the fourth meeting in 2022 of the Finance and Public Administration Committee. Daniel Johnson is joining us remotely today and should indicate that he wishes to join the discussion by typing R into the chat function in BlueJeans. We will consider the budget bill at stage 2 today, but before we turn to formal stage 2 proceedings, we will take evidence on the Scottish Government's response to a report on the Scottish budget 2022-23. We are joined today by Kate Forbes, Cabinet Secretary of Finance and Economy. Ms Forbes is accompanied by Scottish Government officials, Drugie McLean, deputy director, budget paying pensions and Ian Story, head of local government finance. I welcome our witnesses to the meeting. Members received copies of the Scottish Government response yesterday and before we move to questions on the committee, I invite Ms Forbes to make a short opening statement. Thank you very much, convener. As you said, I was pleased to respond to the committee's report yesterday and I thank the committee for its very comprehensive and very helpful report. Convener, today's amendments have one broad purpose and that is to increase the local government budget next year by £120 million. As I confirmed to the Parliament during the stage 1 debate, due to the changing position last week on this year's budget and this year's funding from the UK Government, it is my intention to utilise the Scotland reserve to carry forward sufficient funding from this year to next year to allow me to allocate a further £120 million to local government for next year. As members may be aware, any plan to carry forward a funding requires the Government to use the Scotland reserve, which will therefore be presented as an underspend on this year's funding when the final outturn is published later this calendar year. I hope that we can all recall our conversation at today's committee when it comes to scrutinising that position later on this year. Those amendments to the budget bill deliver on the commitment to give local government an additional £120 million, and there are three amendments required to achieve this change. I will not proceed to moving the amendments right now, but I am happy to take any questions. The £120 million that you have detailed on a letter to myself on 28 January was only possible following an update in recent days from the UK Treasury regarding our 2021-22 funding. You have said that the £120 million has not been allocated in 2021-22. I appreciate that contingence in the UK fiscal cycle is challenging for scrutiny of the Scottish budget, but it is no less challenging for the Scottish Government's own financial and policy planning. Can you confirm whether or not that is new money? We think that it is new money, but the key here is that, as you will know every year in either late January or early February, we have the supplementary estimates. Those are the point at which the UK Government confirms the finalised budget position for this year. The challenge with going earlier on our budget, as we did this year on 9 December, means that we cannot factor in any late movements to our budget. Those late movements usually happen in February. Last year, there were very substantial movements of £1 billion and more in the last few weeks of the financial year. We are in a position right now where the supplementary estimates are the formal point at which our budget is fixed and does not really move any further. That is still to happen, but the impression that we are getting from the UK Government through informal channels, official to official, as well as formal channels, me speaking directly to the chief secretary, is that there are two new pieces of information. The first is that, having been told multiple times that we would probably need to pay back the £440 million or some of the £440 million, they think that it is unlikely because they think that there will be sufficient spend by the UK Government that generates sufficient consequentials to cover that £440 million. That obviously gives us a bit more leeway and a bit more flexibility this year, because otherwise I would have been thinking about how I might be in a position to pay back funding. The second piece of information is that there might be additional funding. The quantum of that I cannot confirm until the UK Government confirms that to me. What I am trying to do is give the Parliament as much information as possible while stressing that those positions have not been finalised yet by the UK Government and will be done in a very public fashion when the supplementary estimates are confirmed. My last little point, which is important here, is that normally one would, in my shoes, wait until that position is formally announced by the UK Government, but I am conscious that local government has decisions to make and I am also conscious that we have a budget process here. As always in those decisions, there is an element of risk where I am conscious of a bit more flexibility and new information emerging. Ultimately, I will have to manage the budget in advance of that formalised position. I hope that that is a fair and comprehensive overview of where we are at. We seem to be playing this dance increasingly as the years go by. I do not think that it is really satisfactory for anyone concerned. Obviously, it must be really difficult for them to put together a budget when it is a possibly a maybe, but not a definite until more or less the last minute. I am going to refer now to your joint statement on 12 January from all three devolved Governments. We say that finance ministers in Scotland, Wales and non-Island have called on the Treasury to guarantee that money allocated to support Covid response will be provided in full following a meeting with the chief secretary to the Treasury. It goes on to say that the devolved Governments are concerned that it may not be granted permission to carry over into next year's budget any late consequential payments, despite the flexibility being provided in 2021-22. You have said that, along with other devolved administrations, the Scottish Government remains concerned that additional funding that we have received to mitigate the impact of Omicron may be subject to future deductions and more fundamentally this situation highlights once again that it is not tenable for funding only to be triggered by public health decisions in England. Just to support that, the Welsh finance minister, Rebecca Evans, said that the Treasury hesitated before providing Wales with funding to meet the challenges. When funding did come, we received no guarantee that it would not need to be returned. Connor Murphy, your Irish equivalent, said that the uncertainty surrounding Covid funding provided by the Treasury is unhelpful. It is hugely concerning that the Treasury may not permit funding to be carried into next year and that additional funding is confirmed at such a late stage that it prevents it being used most effectively. What has been the response to that joint statement from the Treasury in the three weeks that have elapsed? We are going to be, in the future, on a more firm footing, do you believe? No, it is a short answer, but we need to get there. As you outline, this is a position that is echoed by my Welsh counterpart and my Northern Irish counterpart. It should be echoed by anybody who cares about effective budgeting across financial years. Remember that this is only an issue for the devolved Governments because of limits in our fiscal framework about carry-forward. In other words, when we approach the end of the financial year, we have budgeted throughout the year to manage the overall funding that is available for the purposes that we deem necessary with a view to getting into balance by the end of the financial year, because I have severe limits on carrying forward. What I have sought to avoid with great advice from officials is a position in which we have funding that is not being used effectively because it happens to fall on either side of the 31st of March. We all know that businesses will continue to need support on the 31st of March and on the 1st of April. We will need to continue to fund vaccines on the 31st of March and the 1st of April. We will need to continue to fund public services on the 31st of March and the 1st of April. The arbitrary cut-off that we are used to dealing with in terms of the end of the financial year becomes a challenging cut-off if, in the past few weeks of the financial year, we receive additional consequentials that were not factored in, and our effective budgeting basically gets undermined because of those late consequentials. Do not hear me incorrectly. I am not saying that we are not incredibly grateful for our additional funding. The problem is that, when you have messaging for weeks on end that say, A, there will be no more money and B, we are probably going to need to claw some back, and then, within a matter of days, that flips to actually is going to be more money. It is just a question about effective budgeting. For the Welsh and Northern Irish, it is the same. They want to budget effectively, carefully, so that there is sufficient funding. There has been no change in terms of the mechanisms, and it looks like we might be in a position again this financial year where there is additional money that we were not expecting, and no-one is complaining about that. It is about the management. I guess that my last point is that I would invite the committee to reflect on the most effective means of budgeting across financial years. It really comes back to the fiscal framework, the ability to carry forward and the ability to use the reserve. If we can use the reserve, then great, but if there is not enough capacity in the reserve, that creates a problem. Obviously, the position right now is that, if there was not enough capacity in the reserve, the UK Government would say, pay it back. I could not possibly do that, because I know that there is need out there for that funding. Obviously, it makes the argument for multi-year funding and multi-year budgeting to a large extent. You talked about the fiscal framework there. With regard to the independent report and review, again referring to your letter of 29 January, you say that the Scottish Government and UK treasure officials continue to work closely to finalise the details for commissioning the report, including on the terms of reference and authorship for the report. When does cabinet secretary expect this to be concluded? The cabinet secretary hopes that it will be concluded very soon, but I am speaking to my counterpart in the UK Government Chief Secretary on Thursday this week. I am due to have conversation with him about the next part of the fiscal framework review. I do not have a date in mind that there are final details being confirmed. We are quite clear what we would like to see from it, and it is just a case of negotiating a position. My sincere hope is that the conversation on Thursday is fruitful, constructive and moves us forward. There has certainly been a lot of work going on between the officials in both sides, but it does come down to a finalised agreement between myself and the UK Government. Certainly, it is not anything on our side that is holding things up. It is just a case of getting a finalised agreement with the UK Government. Yesterday, you wrote to me on an update on the Covid-19 omicron and business support, and you also answered a written question from me on that issue. You said in that letter that you outlined all the money that has been allocated across a whole range of areas, from hospitality businesses to museums, gallows and heritage to even the wedding sector. You know more than a dozen different sectors were outlined, but you said that decisions on the allocation of the remaining funds will be confirmed shortly following analysis and consultation with affected sectors and how it can best be targeted, particularly in the light of requests for funding, to focus now on recovery work. I thank you for that letter yesterday, and I am just wondering when that can be expected. As you said, we have allocated the bulk of the funding, and that funding is largely being paid out to bank accounts or application forums are open. The feedback that we have had from quite a number of sectors—I suppose that one of the most obvious ones is the tourism sector—is that the initial funding was useful and helpful once it gets into business bank accounts in terms of the immediate challenge, but what they would very much like to see is us investing in a programme of economic recovery. The retail sector has also been clear about that, and I think that there has been some news reports over the weekend. We are well advanced in developing those proposals with different sectors, and I would hope to be in a position to confirm what we are doing as quickly as possible. Obviously, there are some sectors that would have additional funding, but I think that most sectors are largely open or largely trading, even with some restrictions. We should be investing in a programme of recovery. In terms of timescales, I would hope to do that as quickly as possible. Yes, some sectors were doing very badly only a few weeks ago and are almost booming at this stage, but the difficulty is that they have accrued a lot of debt and some have had to shed staff etc over that time, so they need to be able to replace their reserves as much as anything else. Moving on to the specifics of the report, one of the things that we raised in our report in paragraph 4546 was the Scottish Government's assumption that it would receive £620 million of additional sources of income from the resource budget. You talked about that in detail, but one of the things that you mentioned and that was touched on in the debate last week was the Scotland resource. On 18 January, you will recall the Cabinet Secretary for Energy and Transport updated Parliament and said that it would deliver around £700 million in revenues to the public purse for initial awards alone. He then went on to say that, in addition to those revenues, Scotland promises to deliver billions more in rental revenues once projects become operational. What we are really trying to pin down here is basically over what kind of timescale is this money going to get. Billions is a kind of amorphous amount of money. Billions could mean £2 billion and it could mean £20 billion. It is really how much the Scottish Government is expecting to accrue from Scotland over which time period and whether that will come into our budget in the next financial year or will it be some time before that really has an impact on our budgeting. If I could divide that question into two, because the £25 billion spend on the supply chain is slightly different from the direct revenue benefit from the options fees. What we did in this budget was approximately £700 million over a period of 10 years. What we did in this next year's budget was because the budget was again going earlier than normal and was going in advance of Scotland is that we identified a prudent estimate of Scotland fees for next year that we included in the budget. As you say, that is included in the £620 million of additional funding for next year's budget. Obviously, that £620 million includes other elements as well, which I can unpack if that is of interest. That is slightly different from the £25 billion, which is a figure that is based on supply chain investment. As you will know, what we have intentionally done with Scotland is to ensure that there is a legacy from Scotland, arguably unlike the legacy from other significant industries that have operated in Scotland over the past five decades in terms of building up our supply chain. For example, if we take offshore wind, we still know that there has been a lot of scrutiny about the fact that manufacturing is largely overseas and we import. With Scotland, we want to do things differently. We want to make sure that we are leaving a legacy of a Scottish-based supply chain, and that means that there are requirements built into the Scotland process for winning bids to invest in the supply chain. Commitments to date are approximately £1 billion per gigawatt of energy generated. That will be slightly more uneven, because you can imagine a significant investment up front in the supply chain in order to be able to, for the developers, to then go and build the infrastructure that is required. However, the option fees will be a lot more stable over that 10-year period, and that is approximately £700 million. There is, of course, a huge, quite magnificent vacant site with a deep water port, good grid road and rail connections at Hunterston, which I am sure would be excellent for the manufacture of those turbines. In paragraph 67.68, we talked about the Government's challenges in managing its budget with a limit on the funds that can be carried forward. You have touched on that in some depth already today. However, you have said that you have talked about agreeing with the committee's assessment on the challenge in balancing the budget with a reserve limit, which represents less than 2 per cent of our funding and which falls every year in real terms. Can you explain the claustrophobic impact that that has on the Scottish Government in terms of trying to develop an effective long-term budget, given the reducing effect of that reserve because of inflation? It has probably been described by others better than I could describe it. I remember one business organisation describing it as trying to land a 747 on a postage stamp as we arrive at the end of the financial year. Remember that the Scottish Government cannot overspend its budget, and that means that I have to deliver a small and underspend as possible, because I cannot overspend. It would be a remarkable Government that gets to the penny of spend, not least in a period of emergencies and urgent responses that are required. In terms of managing that position, it means that any, for example, capital that has been delayed for projects needs to be managed through that carry-forward through the reserve. Any financial transactions that perhaps have not been able to be drawn down by either businesses or organisations that are using it, and we essentially take the risk of managing the budget on behalf of various infrastructure projects in Scotland and so on. We need to leave some room for that management of capital and financial transactions, and resource that is already built into the budget is an assumption of some carry-forward. You can see how that £700 million starts getting eaten away. As we approach the end of the financial year, we need to make sure that there is sufficient capacity in the reserve so that we do not breach the reserve. Last time I spoke to the committee, I said that there was no forecast underspend on revenue, which was true, but at the time I was trying to factor in potentially having to pay back some of the 440 and no additional consequentials coming. Things have changed quite quickly. You can see how, if you look back to last financial year, we in the last few weeks had an additional billion pounds from the UK Government, which again is not a complaint about additional funding. It is just purely about effective management of budgets, which then exceeds the carry-forward. Last year, we managed to secure an agreement with the UK Government to carry forward some outwith the reserve, and that is certainly a position that I am keen to seek right now. Ultimately, I hope that we are all agreed on this, that we need to protect our spending power, because there is a lot of need out there, and I am sure that we can all detail the need for additional funding. We must know if snow buts protect the spending power, and if the flaws of the fiscal framework undermine or erode that, the problem is with the fiscal framework and not with budget management. You talked about the size of the budget with £520 million. The SFC said that there was a 5.2 per cent reduction in real-time to the Scottish budget. That £120 million represents what, about 0.2 or 0.3 per cent of the budget? Is that correct? I will leave it to your calculations and maths to determine the percentage. In terms of the overall value of the £120 million, that is what you said. In paragraph 83.84, on income tax policy, what you said in response to the committee was that it is clear from the SFC's latest forecast that wider economic factors continue to affect income tax receipts, but you have not really outlined those. I am just wondering if you can give us a couple of examples. I was interested in the evidence that you took from, I am sure that they seem to have been offended by the three Davids, David Iser, David Phillips and David Bell's report, and from the experts on the Welsh fiscal framework. I note some comments about the fact that Scotland is disproportionately impacted by fluctuations in oil and gas. It always has been, largely because northeastern oil and gas have seen quite a number of well-paid jobs. When, of course, as we know, higher and additional rate payers account for a significant proportion of overall income tax revenues, if one sector like that is affected and leads to jobs being affected in that area, it means that Scotland has a disproportionate impact, which feeds through to tax revenues. The second part is the comparison with the way in which the fiscal framework operates in Wales versus the way in which it operates in Scotland. We have two different forecasters, and we also have a situation in which the fiscal framework does not take into account right now the unique circumstances for the Scottish tax base. You need to remember that, pre-pandemic, earnings were growing in Scotland year on year, since income tax was devolved. There is growth there. The question is the relative growth. As I have said, there are two issues that impact that. One is exposure to particular industries, and the second is the fact that the fiscal framework does not take into account the faster growth in higher wages in London and the south-east, as an example. Thank you. I mean, that was one good thing about renewables. There were many good things about renewables, but the tax base should be more predictable in terms of that it is not a commodity. It is something that will be much more reliable in terms of that issue. One of the things that you have said in response to paragraphs 9600, which is where we look to issues relating to, for example, productivity, was your response was quite robust with regard to that. You talked about the fact that it will shortly publish the national strategy for economic transformation, and you go on to say that full control of economic policy and immigration, that you do not have all the powers needed to address demographic issues and drive growth and economy in the tax base. You also go on to say that, in the latest date of Scotland's GDP per capita is the fourth highest of UK nations and regions, that is the 12 nations and regions, and that Scotland's product outlook is increased by more than any other national region of the UK between 2000 and 2007 and 2019, with Scotland being the top destination in the UK for foreign direct investment that we saw in London for the last six years. That will be the EY annual report that we see. In fact, I thought that it would not go back longer than that. You have also added that under fiscal frameworks, strong earnings go for London South East means that our budget is being reduced, even while earnings growth in Scotland recover strongly from the pandemic. That is quite a strong response. You have obviously been a lot more positive in your response than our witnesses. Is it not the case that productivity may have improved with regard to the United Kingdom in relation to other areas and nations of the United Kingdom? Is it lagging behind other countries in Europe? I think that there is definitely a comparison that needs to be drawn not just between Scotland and the rest of the UK, which I certainly do not believe is ambitious enough if you look at the UK's economic performance versus other countries, not least European countries. I think that we need to lift our eyes and our ambitions beyond just comparisons with the rest of the UK. You have cited the figures in terms of, for example, Scotland's productivity growth between 2007 and 2019. Have you looked over the period of the pandemic? Last week, we reflected on the fact that Scotland was now back to pre-pandemic levels when it comes to GDP growth. We have now exceeded, in November's GDP estimates, February 2020. We have broadly tracked the rest of the UK throughout those pandemic years. If you look at unemployment, of course, unemployment is lower in Scotland than the rest of the UK. Although there are very legitimate debates that we all need to have about how we are even more ambitious and more aspirational for the Scottish economy, which I completely back, I think that, too, we cannot dismiss the strong fundamentals in the Scottish economy. There is huge potential, but, in particular, over the past two years, we have demonstrated that, even though health decisions were taken at slightly different times, we have broadly tracked the rest of the UK. We are back to pre-pandemic levels. We did that in the same month as the rest of the UK. Unemployment is lower. We have made good progress over the past 10 years or so in terms of productivity, foreign direct investment. Many of us will speak to international businesses who have chosen to relocate to Scotland because of the talent pool, because of the reputation of our universities and colleges, because it is a good place to do business. We need to build on those strengths rather than dismissing them and losing sight of them. What is interesting about Scotland in economic terms is that it is disparity, although there are some areas of Scotland that are just doing phenomenally well in other areas that are not clearly. I wonder whether the national strategy for economic transformation will focus specifically on trying to level up to use another phrase, areas of Scotland that are not doing as well as the best areas of Scotland. We do not want some areas of Scotland to lag significantly behind, because there are all sorts of demographic challenges in Scotland. For example, with the poorer areas, large numbers of young and educated people leaving to the areas that already have high pressure in terms of housing and leaving a kind of imbalance, so will the strategy focus on that? It will. It intentionally makes a point of projecting a UK regional economic model by which London and the south-east essentially powers the rest of the country, which is completely unsustainable and I do not think is defensible. The danger in Scotland is that we adopt a similar approach, which I fundamentally reject. We need to ensure that all parts of Scotland, regionally, can both participate in economic opportunities and also contribute. You can obviously boost your national figures by focusing on a few areas, but that is to the detriment of the rest of Scotland. If you believe in a wellbeing economy model, in other words, by which I mean growth or prosperity as a means to an end, a means of lifting people out of poverty, of reducing child poverty, of trying to deal with some of the health and social outcomes in Scotland, then you absolutely need to take a fairer approach that looks at the strengths in the highlands, that looks at the strengths in Ayrshire, that looks at the strengths in the north-east and says, how can we back those fundamental strengths? Aberdeen and the north-east has a very proud, rich history when it comes to energy. Parts of the highlands have a proud and rich history when it comes to acting as a supply chain. Let's back those strengths, but what else can we do, for example, in Ayrshire? Where are the opportunities and really be intentional about supporting communities there to maximise the benefits of the assets, the resources that are on their doorsteps? In paragraph 108, we talked about the cost of social security, and your response said that difficult decisions will have to be made regarding any new policies ensuring that they are affordable and deliver value for money for the public parts. The Scottish Government has deliberately made its social security payments more generous than the UK, and it has also encouraged uptake. On difficult decisions being made, I wonder how that has actually assessed. For example, when you are looking at a pound of public money, do you look at the gearing effect, for example? As to how every pound being spent will have a greater impact on the rest of the economy, I wonder how those assessments are made. I guess three quick points. The first is that you are right. We have taken a policy approach to social security that is fairer and puts dignity at its heart and encourages uptake of benefit and welfare support, because we think that there is an inherent right to access that support. That means that we have baked into the budget a prioritisation, that we must accommodate and account for social security payments, and they fluctuate. It is the nature of demand-led payments that will fluctuate, and we need to be able to absorb it, which comes back to the issue that I keep coming back to, which is whether we have all the tools that we need to manage risk. That is the first thing. The second thing, in terms of value for money, is an issue that I am particularly exercised about. I think that the only way to do that effectively is through multi-year budgeting, if you want to drive reform, and it comes through the resource spending review. My question is, for example, for every pound that ends up in somebody's pocket. How much does it take to get there? I would far rather, as many of those pounds end up in people's pockets who need it, pay for jobs along the way. We have looked at, and we will be doing quite a number of deep dives as part of the resource spending review, with stakeholders, as well as internally, at looking at that issue of value for money. We are starting with outcomes. In other words, we are not trying to determine budgets on the basis of affordability initially, but we are looking at outcomes. If the outcome is to ensure that a social security system is caring for those who need it, there is an imperative on us to make sure that we are maximising the funding that is going directly to them. That is through the resource spending review. I think that that was only two points, but I think that I have rolled all three of them into two. I am glad that you mentioned outcomes, because when I asked the SFC about the £764 million likely overspend within three years with regard to social security, I said, would that resource being spent in social security not actually have an impact on reducing poverty? They did not seem to think that it would have much of an impact on reducing poverty. That is something that the outcome needs to be focused on. If we are spending all that money on social security, then surely it is about trying to lift people out of poverty and, of course, back into work. I have taken up quite a bit of time. I would like to have been able to take more, but I realise that colleagues are keen to come in. It is just one last thing, and it is preventative spending. We have obviously covered that in Pagars 126 and 130. I have to say that you have given a very detailed and robust response to that, which I am sure that members of the committee appreciate that I certainly do. You have talked about areas of preventive spend from youth justice and developing the young workforce and national care service, keeping the promise. You have talked about long-standing and deep-rooted inequalities being tackled. You have talked about investing at least £500 million over the life of this Parliament to create a whole family wellbeing fund, and £200 million in added upskilling in a number of other areas of expenditure. I want to ask a question that we have often asked over many years. John O'Ramon, we asked that in the 11 to 16 Parliament of your predecessor, John Swinney. In what areas is disinvestment going to take place in order to fund this? If we are looking at outcomes in quite clearly, some outcomes are not what we would desire. Some areas of public expenditure are not delivering as we would wish. Are there any less effective programmes that are being effectively discontinued, put to one side, in order that the funding that I have mentioned and more that is detailed in your response to the report can be invested as you have suggested? It is probably one of the most important questions. Obviously, I will answer with trefidation because the moment I say in a public place what I am going to reduce spending on with no offence intended to the opposition, I can see the press release has written already in terms of how outrageous this is. I go back to a comment that I made in the chamber, which requires a genuine mature debate across the Parliament about looking at outcomes and making decisions about shifting funding. I know that everybody will look at that budget document. They will compare last year to this year. Anything that sees a decrease is instantly jumped on and politicians rightly asked to justify it. That is why this whole discussion sounds laudable, but it is a very difficult conversation to have. The example that I would probably say is within the health budget. This year, what we have chosen to do is to allocate more of the health and social care consequentials to social care. In the past, there has been a tendency for health consequentials to go straight into front-line health. Recognising the preventative element, there is more funding that we have allocated from that health and social care consequential to social care. The equal and opposite effect is that it means that health consequentials that would otherwise be spent on health are now being spent on social care. There is a very justifiable argument that, if you are looking after those who need it and providing social care, there is less pressure on our hospitals, so it requires that shift. That is an example that I would give you from next year's budget, which is a very real example. I thank you very much for that, cabinet secretary. I am now going to open out the session to colleagues and the first person to ask questions will be a list to be followed by Ross. I will pursue a couple of the themes from the convener and one of my own as well. As you know, the frustration—you gave us an answer about this frustration for the committee—is that it is quite difficult for us when we are scrutinising the budget to be able to do so because there are doubts about what is new money, what is all money, what trans goes across and you gave your answer on that. Part of the concern is that it is very difficult for us to measure the transparency about where that money is going. You have just cited the example of health and social care. Obviously, there is a lot of chat about, for example, setting up a national social care system and the expense that that might be. As a committee, I think that we are interested to know what your thoughts are about how we can improve the scrutiny of the outcomes and where the spending is actually going, particularly if it has budget lines at levels 3 and 4, where it is obviously going to local government to improve it. Can you give some thoughts on that? Yes, absolutely. There are a lot of questions in there. Just on the point about measuring transparency, I think that it is a very legitimate point. One example that I would cite this year, where I think that it has been very difficult for committee and for Parliament to scrutinise and for me to draw lines, is that in a spending review year, the UK Government provides us with essentially a block net position. In normal years, is it where, we get the breakdown, so you can actually see to a greater extent what, for example, has been generated by consequentials elsewhere and then what should come to Scotland. You can probably argue for how it should be spent or how it should be spent. I think that that is where the national insurance contribution debate has kind of struggled because it is not disaggregated. The other element to that, of course, is consequential. I am sitting in front of you right now not actually knowing my final budget position for this year because that is still to come. I absolutely accept that more transparency is needed the more I get, the more I can pass on. I am always open to committee detailing where they need more transparency. On to improving outcomes, because I think that that is fundamentally important. Perhaps one of the ways that we should not do it is one of the ways that operates in which certainly local government and local government colleagues are around the table and they can probably speak to this more effectively than I can, is where we have so many reporting requirements for example for local government that they are having to report on outcomes or delivery for every single pot of funding that is allocated and that is burdensome and onerous on them and it is certainly something that I have committed to them to try and reduce as part of the resource spending review so there is not so many different reporting requirements. The reason we have those reporting requirements is to try and measure outcomes. For example, if there is investment made in employability and skills, I want to know that it has been spent on employability and skills but more than that I do not want to know that it has just been spent on it. I want to know that at the end of the day there are people perhaps who are closer to the job market than would otherwise have been or we are reducing the levels of economic connectivity. What we are actually reporting on requires clarity. In terms of outcomes, I think that we can only do that by doing these deep dives on specific areas. The area that I am looking forward to getting in and about over the resource spending review is employability and skills because we know that right now we spend substantial sums of funding on employability and skills. Nobody can argue that we are not spending the funding but I know that businesses say that there is a mismatch between skills. There are all sorts of other issues in terms of immigration and our reliance on overseas workers, but at the end of the day there are significant funds that we are spending on colleges, universities and no-one left behind on the additional programmes. Is it delivering a net result right now for businesses? They would certainly say that we could do more. If we are going to do more, that cannot just be me spending more money. That means improving the effectiveness of those programmes within the funding. My last comment because this is a really long answer for which I apologise. I think that the national care service will be a really good example because at the moment there is a very different pattern, let's take delayed discharge, across Scotland. Yet the funding theoretically going to each part of Scotland is proportionally the same, but there are very different outcomes and very different results. I think that there is a question there about what the local circumstances are that prove challenging. In Perthshire and the Highlands you are going to have more challenges in terms of recruitment, but how do we create a national service that actually delivers improved outcomes rather than just shifts one pot of money from here to there? Thank you cabinet secretary for a very full answer. Can I just come back on a couple of points? One relates very much to a question that the convener asked you just saying that you know the relationships between the Scottish Government and the Westminster Government have not been great in terms of each other knowing what's on the table, what's not on the table and it's the same with Scottish Government and local government. The convener asked about whether you feel that there is a case to be made for longer term budgets rather than just year on year because I think we had several colleagues in the debate stage one last week who were pointing to the fact that we're here every year with exactly the same argument. Would it help in your opinion if we had projections that were three years perhaps rather than one year, especially for things like university finance would be a good example where research funding is something that can't really be done on a one-year basis and you need an understanding of how long that would be there for. In short, absolutely 100 per cent yes. It can't just be multi-year projections though, it goes back to your first question, which is multi-year outcomes. I think it's very difficult to deliver reform within a one-year period. We've just stopped one budget and we're starting the next year's budget. To deliver reform it needs to be on a multi-year basis and I think we could have a better conversation about outcomes say over a three-year period rather than schemes having to prove their worth within a year by the time the funding is allocated, by the time they've set up we're into another budget. Yes, 100 per cent, but also we need to think running in parallel what are the reforms that we want to see over multi years. My last question is very much about the longer term predictions for the Scottish economy, which as you know from the witnesses who've come to the committee are not good. I heard you say in answer to the convener that one of the concerns when it comes to tax take, the revenue, is because we have issues regarding population and those who are tax payers. You referred to the north-east, which as we know has been one of the instances where perhaps there is greater variability, but it's also an area where there is a highly educated workforce on balance and one that is obviously earning higher incomes and therefore you can argue that they are able to produce more when it comes to the tax take. If the Scottish Government's intention is to reduce that industry in terms of oil and gas, can I ask what effect you think this will have on the tax take, which we are all desperate to try to increase because it's got substantial repercussions for what the Scottish Fiscal Commission is telling us about deficits? I was quoting David Bell, who just got the quote here in front of me, who talked about when asked about some of these issues, talked about the fluctuations, particularly in oil and gas, over the last two years. The point that I would make is that we all know that it's a vitally important industry to Scotland, but it is one that fluctuates in line with oil prices and industry makes decisions. Scotland is disproportionately affected by that because of the importance of the industry to Scotland. I think that there's an argument, and I was having a conversation with some very well-known representatives of the north-east oil and gas industry just last week. There's a very important argument that they are making and that I would support, which is the need for further diversification. The whole excitement with let's take Scotland as an example and the supply chain there is that you've got great talent, great resources, great investment potential already there in the north-east that can start investing in that transition. That's already happening. Almost irrespective of what the Scottish Government is doing or has done, industry is already diversifying, industry is looking at new opportunities on the horizon. That's not an argument, and I'm not making the argument, and I've never backed the argument that it's anything other than a just transition, but industry is already ahead of us in terms of that transition. My ambition is to grow the tax space, to grow the percentage of tax that's taken as it were by each of the thresholds when it comes to tax and to make sure that we are not as exposed because we have diversified, because we've invested, because we've identified our strengths and because we've backed them. I'm not saying anything that the industry doesn't see. This is about creating more well-paid, secure jobs, not reducing the number of secure, well-paid jobs in Scotland. That's helpful. I think that the committee will want evidence that these Scottish Government policy changes will in fact benefit the tax take because that's what the really serious issue is for Scotland in the future. Thank you, Liz. We now move on to Ross to be followed by Daniel. Thanks, convener. I've just got one point of clarification from your conversation with the convener, cabinet secretary, and then I'll move on to a more substantive line of question. It's about the additional £120 million that's been allocated for local government, and your explanation that that was largely on the basis of being confident that the previous instalment of £440 million won't have to be paid back. That immediately leads me to the kind of obvious question of reconciling two figures, one of which is almost three times as large as the other. I presume that you were confident in the allocation of £120 million this year because the previous understanding was that the £440 million would be paid back over a number of financial years. If that's the case, does that then leave us in a situation where that £120 million can be baselined in for future years because you were making an assumption that there would be some more amounts of money needed to be paid back in the years 23, 24, 24, 25? A lot of the £440 million was already factored into budgets. For example, it includes funding that we had identified for next year's budget but has been paid in this year's budget. It is a complex picture and I think that it's difficult to draw a line directly from that £440 million. The other point that I would make is that pretty much all is hard to say at this point in advance of supplementary estimates, but I can be corrected. I would envisage that any additional consequentials are generated by health and social care. I would put that caveat in terms of additional funding being generated by more spend south of the border when it comes to health with an element of transport as well because, in the same way that we've invested in transport here, we've been affected over the past few weeks, so it also has the UK Government, as my understanding is. In terms of baselining budgets, we have the conversation every year and hopefully the way to get away from that conversation is through the resource spending review but I have heard the calls from local government. Unless Ian Story has anything to add from a local government finance perspective, that £120 million is not ring fenced, it can be spent for reasons that they determine. Things such as national insurance contributions will need to be paid technically year-on-year, pay will need to be paid year-on-year. I'm very conscious of the rolling budgets. Without wanting to pre-empt next year's budget, I sincerely hope that we're in a position long in advance of that through the resource spending review of what local government actually needs and we won't be having this sort of Groundhog Day discussion about whether or not things are baselined. One of my frustrations with the wider debate in Parliament this year is excluding the high level scrutiny provided by the committee, but the wider debate in Parliament has yet again focused almost entirely on questions of spending rather than where and how we raise money. I compare that to, certainly from my experience in Parliament, what I thought was that the highest quality of debate in any year was ahead of the 2018-19 financial year, because that was the first time that we as a Parliament collectively seriously considered what we would do with new powers over income tax. The Government took the approach at that point of asking all Opposition parties to provide proposals that were submitted to the Fiscal Commission and then projections were worked up on the basis of that. For memory, we could have had five different options and then there were four submitted. That resulted in a much more informed debate in Parliament, one that I think is in some ways more comparable to the system that a lot of local authorities take, where Opposition parties are obliged to produce their own alternative budget rather than just vote for or against the one that the council administration submitted. Do you think that there are options for opening up the budget process to a higher level of a greater quality of parliamentary debate if Opposition parties or other parties are provided with the opportunity to come up with alternative taxation proposals, not just alternative proposals for spending? Absolutly. I think that you are right in saying that the quality of the debate was higher when we were all basically being pushed to a position of ideologically considering what was the best tax options for Scotland balanced with the need to ensure a sustainable revenue stream, because ultimately I need to ensure that there is funding there to pay for the NHS or whatever. I think that that is true. I would certainly be open to that. I am always open for ways of improving the budget process. This year, one might argue that there was less need to engage with Opposition spokespeople because, in a sense, passage of the bill was perhaps more secure than it had been in previous years. However, I was very keen to still have those cross-party conversations that I have had with all parties on several occasions prior to and since the introduction of the budget. If there are ways in which we can strengthen that, particularly looking at tax, that would be fine. For example, there is a constant, very live debate on non-domestic rates. Are non-domestic rates fit for purpose? Do they reflect the Scottish economy as it currently operates? I am sure that all of us around the table would have a very different view on that. There is a fair point where many people raise the question, but I guess that the question that I would pose in return is about what replaces non-domestic rates. That is a point that I would welcome further discussion amongst the committee in the future. Turning then to a couple of points that you made around the resource spending review this morning and in your response to the committee's report, what is the language that is used around the resource spending reviews in the context of the need to make difficult decisions? The committee would acknowledge that, given our report, it makes a point of the challenging public finance situation over the coming years. I am trying to get a sense, though, of exactly what is meant by difficult decisions. We would all acknowledge that, if we are to hit the Government's three strategic targets around tackling child poverty, climate and economic recovery, those are three areas that all five parties in this Parliament agree on. We might mean different things when it comes to economic recovery, but we all broadly agree that we all agree absolutely on the climate and child poverty objectives. To hit those objectives, we all acknowledge that it will require greater spending in those areas, which leads us to difficult decisions either being made about savings in other areas or difficult decisions about where else to raise revenue from or a combination of both. What is your expectation, what is your intention in relation to the resource spending review and the balance of difficult decisions? Is this purely a focus on areas of spending to be disinvested from, as was mentioned previously, or is this a wider discussion about where the money to hit those targets actually comes from? Does it come from other areas of the budget as it is, or does it come elsewhere from revenue raising options that have not been explored yet? My priority for the resource spending review is that we improve outcomes. Yes, it is a budget process. Yes, it is based on affordability, but more than anything else, what we need to achieve through it are programmes of investment that improve outcomes. Why is it difficult? The committee is well versed in some of the challenges that we face. It is difficult because of the challenges facing the Scottish economy, ageing demographics, a changing economic mix in Scotland and a number of other points, which I will not go into that committee is well versed on, and the disruption of the pandemic, the disruption of Brexit, et cetera. On the other side, I think that across parties, dare I say it, we agree on more than we disagree. You cannot ignore those elements. For example, I think that, unless anybody corrects me, we all agree on passing on health consequentials to health spend. That means, in this year's next year's budget, £18 billion out of £41 billion give or take. That is a substantial part of the overall budget. On top of that, you have local government £12.6 billion. Within just two budget lines, you have pretty much used a considerable amount of your £41 billion. The question is not necessarily where we spend and how we spend, and whether the numbers are big enough. The question is, are we actually delivering the outcomes to respond to the challenges that all of us are well versed in? That is where it is difficult, not just for reasons of affordability that we need to grapple with. It is difficult because it asks us to question whether or not the funding that we are spending is actually delivering the most effective outcomes. It goes back to Liz Smith's question about outcomes. That is where the difficulty lies. There are difficulties around affordability that we need to contend with, not least because of what I have just said, around health and local government. However, the bigger question is, I would like to see, over that spending review, as being in a position by the end where we can reflect on the fact that outcomes are better than they were because of difficult decisions that we have made. My last really brief point is calling for a mature debate, because that will inevitably require some numbers to decrease as numbers increase in order to improve outcomes, not just for straight money reasons, but in order to improve outcomes. Thank you. That is all from me for now. We are keen to come back in later on, but I want to make sure that other members get the chance first. Thank you very much, Ross. The next speaker will be our next question. I will be Daniel to be followed by John. I apologise again for being remote for yet another week, but we are still dealing with Omicron and my household at the moment. I have a number of things that I would like to ask, not all connected, but I would like to start with a broad question about the approach in the budget. For obvious reasons, there is a huge focus on numbers and on the quantum of funding, but the structure of the budget and the disciplines that surround it are almost just as important. In fact, I would argue that they are more important. If we look at the comprehensive spending review from the UK Government, the block grant increases to £40.6 billion in 2022-23, but then thereafter, the increases are very small, which means that, in effect, they are real terms cut. That is juxtaposed with the fact that we know that we are carrying significant Covid costs. I am cash versus recovery costs, but none the less they are there. Last year, at level 2, we could see the Covid consequentials in the various budget lines. This year—I understand the rationale—those costs are essentially lumped in with the regular costs. In order to manage the budget in 2022-23, 2024-25, we will surely have to be able to identify those things that are Covid-related that we can stop doing because we have recovered or the response to the longer required. Given that they are not in that level of detail or they are not specified in the budget, what is the Scottish Government doing to maintain focus on those things so that it can essentially switch things off when they can be switched off so that it can actually manage its money and resources in the years 2 and 3 of the compound suspended review, because they will be difficult? It is a really good question. I think that Daniel Johnson has already answered his own question as to why it is not identified separately. That is because it is all part of the overall bloc round. There are a few points to make. One is that I do not think that a lot of that Covid-related spend will be able to be, in your words, switched off in the near term. If we take justice, for example, and the recovery work going on in justice to deal with a backlog of cases—some of them are hugely challenging cases—and, obviously, while justice seeks to deal with the backlog, there are new cases all the time. That will be a very challenging situation to get through a backlog that is increasing every few weeks. I cannot see that being switched off in Daniel Johnson's words in the near term. The justice portfolio has a very good grasp on precisely what is required in order to get through that backlog. I have had a number of conversations with not just the Lord Advocate, the Lord President and Keith Brown on that. I think that recovery is going to take some time if we want to see better outcomes at the end of that recovery work. I think that we are in a place now where Covid-related funding is not exceptional one-off. It is not just about emergency grants on a one-off basis, where we can clearly determine that that spending is the result of, for example, Omicron. We are in a place now where Covid-related funding has become business as usual for many portfolios. The other part of that is going back to the resource spending review. If this is going to be a multi-year spending, we need to make sure that it is affordable. It is a challenging envelope, and that is why I am going back to Ross Greer's question that is very difficult decisions ahead, because the spending envelope is not getting any bigger in terms of accommodating that additional Covid-related spend. We need to get better at ensuring that our funding is delivering the right outcomes. I could ask lots more follow-ups on that, but I would like to ask some other things. What I would say is that there is an on-going need to identify those things and keep them under review. Again, I think that that is why some of the points raised by Audit Scotland around transparency and being able to follow money from budget through to consolidates can be hugely important, but I will move on. I just want to pick up some of the points around Scotland raised by the convener. While we recognise the good news about the sites being developed, there are rather large sums of money being offered. I think that there are two fundamental questions. One is that there is a lot of discussion about the £1 billion of supply chain per gigawatt, but that is very vague. I was wondering if more detail could be given of precisely what that will look like, whether that is contractually locked into the leases. Secondly, there is the point around how the Government has assessed whether or not the price that it has obtained is of good value. If you assume a 40 per cent yield from a £70,000 price per gigawatt, those companies will generate around £6 billion a year from those sites, and the rent will be around £225 million. In total, I recognise those accrued calculations. That is just 5 per cent that the public parts will receive from those very lucrative sites. I recognise that you will not be able to precise numbers, but has an assessment been made? Is there an MPV that has been identified? How has the Government assessed whether or not it has received good value for money for the public parts from the sale of those 10-year leases for those sites? There are three aims through Scotland and three interests. I have a financial interest in funding available for the Scottish budget, and you will know that we have said that we will want to use Scotland's revenues for action, which specifically tackles the crises that we face. There is a massive economic interest in Scotland, and I have already gone through the details in terms of the legacy of the supply chain. We consciously and intentionally built into the bidding process this requirement, which was not available to the best of my knowledge in England and Wales, to leave a legacy on supply chain. We had the supply chain development statement mechanism to ensure that bidders were required to make commitments on supply chain. Yes, there are contractual, as it were, lock-ins to ensure that they deliver on those commitments. My financial interest is, of course, from a tax perspective, if you have very healthy, robust, thriving supply chains that are creating good-quality, well-paid jobs, the overall revenue that is being generated by a much broader view on investing in the supply chain is far better than if you just took a very narrow view. Then there is a third interest, which is around energy transition and net zero. The point that I would make in all of this is that, obviously, Michael Matheson has been leading on this, so I have been interested from an economic perspective, from a financial perspective, but ultimately Michael Matheson has been leading on it. In terms of questions around process, those are ones that I probably would rather take away and ensure that we come back to you with robust and comprehensive written advice, but, obviously, my finance officials have been involved in looking at that value-for-money question. Has an NPV been calculated, both in terms of what the value is, for the companies that purchase the lease, and have you benchmarked what will be received by the Scottish Government, by the public parts, as a comparison to that? We have done significant analysis in terms of value for money throughout the process. I am happy to come back with additional information. He will also know that there are two other elements that need to be factored into all of this. One is the additional costs of developing in Scottish waters, the additional costs of developing in the deeper Scottish waters, the additional costs of energy, grid connections in Scotland, but the other element to all of this is in terms of the alternatives to the process that we have undertaken. Michael Matheson leads on that. He leads on the process. He has been heavily involved. My officials have been involved in the revenues and the budget process, but in terms of any comprehensive conversation, discussions or questions about Scotland, I would rather ensure that he has the opportunity to respond. I look forward to that information. Of course, as you will know, and I certainly know, net present value factors in those costs that that has defined. I would like to ask a follow-up question about business support funding. As of two weeks ago, I think that there were still £113 million that had yet to be allocated, just wondering if you could just confirm what the quantum of funding to yet to be allocated still is or whether it has all been allocated. Furthermore, I was just wondering if you could explain to the committee what work is being done to assess impact by sector. I am certainly very aware that the impact on retail was very significant, but it did not receive support, certainly in the initial announcements. The convener described many sectors as booming. That is very relative. The importance of the Christmas trading period for retail and hospitality cannot be overstated. Has an impact assessment now been carried out about what the potential consequences of the restrictions may be in terms of business survival and business closures in the coming months? In terms of the overall impact, we have emerging data. There are a number of sources for that emerging data in terms of business confidence. It is still a bit early to get a comprehensive grasp on precisely what the sectoral impacts have been, but the chief economist, particularly in the Scottish Government, is trying to ensure that we have that sectoral understanding as far as possible. Throughout, we have had quite extensive anecdotal and survey data in terms of the impact, but it is still a bit early to look at the overall economic impact. I wrote to all MSPs yesterday—I am looking for nodding faces. The member should have a breakdown on a line-by-line basis of how much funding has been allocated, how much funding is unallocated and in terms of where we go next. I had started answering the convener's question on that. There are a number of options in terms of recovery spend. There is tourism and retail. Most sectors are saying that they would rather be open and trading, and the more we can do to assist in them being open and trading, it helps. I was looking quickly for that letter on my emails to make sure that I had gone out, but if members are nodding, I will assume that it has. I apologise for not being on top of my email as I should be and not having spotted that. Thank you for that, Daniel. I probably should have used the word rebounding rather than booming, but that was a quote from a constituent who runs a business that I received yesterday. The next member to ask questions will be, I always think, Constituents. The next member to ask a question will be joined to be followed by Douglas. Thank you, convener. I should point out that I live in my own constituency, so I'm certainly not your constituent. Yes, we've covered a lot of areas. One of the things that Liz Smith pointed out was that we've got a relationship with Westminster and then local government has a relationship with us, so there are certain parallels and lessons that we can learn from each other. I'm just thinking about the year end, and I'm just wondering if we can learn lessons from local government, because, as I understand it, they have reserves and they can broadly keep money in reserves. Some of it is for a particular purpose, some of it is just for general reserves, and that helps them even out their year end balances better. I wonder if you think that there are lessons that we could learn from that relationship that would improve the relationship with our reserves that we are allowed to keep in relation to Westminster. I mean, a link to that then on capital spending, we have this, what I feel is quite an artificial limit of the £3 billion, whereas local government has this prudential borrowing opportunity, which I think seems to work quite well. So, as a general sense, do you think that we could learn from that these relationships for improving the fiscal framework? Absolutely, your answer is yes, and I would go further on that. I actually cite the powers that local government in Scotland has when making the case for increasing our powers, because local government is able to determine on the basis of affordability and local needs what to carry forward through reserves and what to borrow, and the decision is theirs. That decision is not ours. That was a nice short answer. Do you think that there is any openness on the part of the Westminster folk to move down that route? I think that it is quite a powerful argument that if local government and they do can effectively manage their budgets with highly skilled and trained directors of finance through this process, then it surely is not so unthinkable that the Scottish Government couldn't. We've had conversations with Opposition spokespeople on this. At the very least, there's an argument for indexing some of these arbitrary limits and ensuring that as a Scottish Government budget grows, not quite in line with inflation, but grows year on year, so also we need to make sure that the limits grow. At the end of the day, any form of borrowing has got to be affordable. I've got to factor in the revenue costs for borrowing. It's not that we make decisions purely on the basis of a target or an arbitrary cap. I have to factor in the revenue costs, which I do on an annual basis. In terms of reserves, it would allow us to just make decisions I don't like. I don't think that anybody likes this constant debate and discussion about me going to the UK Government with new requests, for example, to carry forward out with the reserve or otherwise. If those additional powers were granted, which would not cause any concern to the UK Government as far as I can see, we could just make those decisions on an annual basis. On the £620 million that has been mentioned already and the uncertainty around it, one of the elements is the personal allowance spillover. I realise that that's been going on for quite some time. I think that it did say in your response that you were hoping that that would be resolved this year, and I wonder if that meant by March, which is only two months ahead, or if it meant during 2022? Given that it has been going on for so long, should we be a little bit pessimistic and assume that it won't be resolved soon? You will know that the principle has been accepted by both Governments. The principle that the Scottish Government is due compensatory payments has been accepted by both the UK Government and the Scottish Government. What is in dispute is the quantum, and the different approaches lead to very different outcomes. I cited the scale of that divergence last time that I was at the committee. I also have that on the agenda on Thursday when I discussed it with the Chief Secretary to the Treasury. The two very substantial issues that we intend to try to resolve within the course of that meeting are the physical framework review and the spillover dispute. You can wish me luck and wish me well that my negotiating skills will lead us to a conclusion on both matters that lead to a positive result for the Scottish budget. I am sure that the committee unanimously wishes you well in that. Moving on to another area that has been touched on, is the question of when there is an announcement of spending at a UK level what the impact is on us. We accept that last year was exceptional, there were huge Barnett consequentials and some of those were guaranteed during the year. I follow the logic that they cannot do that on-going, but we could probably argue on that. You will have a better understanding of myself as to how Westminster thinks about that, but if they announce new money for a care service in England or for health or anything, should they not at the time of announcing it have an idea as to how much of that money is new money and how much of that money is being reallocated? I assume that you have to make that kind of thought. If you are making a spending announcement, is some of it reallocated from somewhere else? You have said that recently with the extra support that was given and how much of it is new money coming from somewhere. Could Westminster not be doing more in that regard, giving an indication? You have said that, in a few days, effectively, the position has completely changed. If there was a little bit more openness from them, or do they just not have those figures? I think that they do not have the figures. From their perspective, what goes to Scotland is the net position in final consequentials. From a UK Government perspective, they make an announcement. When that announcement is made, they will inevitably want to see if there is any departmental underspend that could be redeployed to that new announcement. Then there will also perhaps be new money that is required. The difficulty whenever they announce additional consequentials is that we know that we will only get the net impact, not the absolute figure that they have announced. It will not all be additional. That is where there is the real challenge between what is new and what is not new. That is one big issue. That is why, if you recall, last year they had implemented the Barnett guarantee. That guarantee meant that all funding that they announced was indeed additional. The guarantee was removed this year and the only reason that I can see for it not being reinstated is that the risk to the UK Government is too significant in a year when they want departmental underspends to be used to manage some of the new announcements. The other part to this is—I guess that the most recent discussions over the last two weeks might have been informative in this regard—what you will see is that we talked to the UK Government on a daily basis. I do not know how often Dougie and Coe are engaging with the UK Government to try and get as much intel as possible about where we might end up. The difficulty is that that intel might be out of date within a matter of hours. Although I want to be as transparent as possible, I cannot then go public and say, right, last hour we got this update, next hour we get another update. We cannot keep a running commentary on what we are receiving. That is where it is really difficult for Parliament to scrutinise, because we know the shifting goalposts, but it is a point in time. Figures are moving all the time, so we are trying to make decisions based on the flexibility that we think we might have or the financial position that we might have. We might then make a decision on that, like I have done last week in terms of £120 million. Next week, I might get told that we were told that there was additional funding and we have determined that that is not the case. They are budgeting on a Government-wide basis. I do not dispute the challenges for them, but there is a substantial Government with multiple departments, with multiple spending lines. We get the net benefit of all that. It is no wonder that it is challenging to get to a position, but, in a sense, that challenge is off-shore to us to deal with. I do not have that answer to your question, but I do not have Dougie who wants to say anything more on that. The current year in the past year has obviously been pretty exceptional in terms of the flows of money and the volatility of the changing through the year. I suppose that the question of how quickly and fully would return to normal in terms of the usual treasury cycle, because then we get far fewer and far lower-level changes through the year, so having that volatility right through to supplementary estimates is very challenging. That is helpful. I do not want to be too sympathetic to Westminster, but it is helpful to understand how the process works. The letter that you gave, which we certainly did get yesterday, about the business support, was interesting. I have a lot of taxi drivers in my constituency, and they are always on at me about wanting more business support. When I saw the figures, I was struck by how much the taxi sector, and I am not arguing that they should get less, but £28 million for the taxi and private hire sector is a considerable amount when we look at other sectors. I wonder if you could say something about your thinking as to why they got £28 million. That probably illustrates why it is dangerous to look at the overall quantum without knowing perhaps what is going on underneath. There are a lot of taxi drivers in Scotland that are proportionately substantially more than, for example, in England and Wales. I do not precisely know why, but that £28 million will probably deliver about £750 for each taxi driver. If I could quickly get the figures from last year—we are at the top of my mind last year, but we are no longer—in terms of the funding that we allocated for taxi drivers, you will recall that they were unhappy with the quantum that they received, but it was in the region of about £77 million, so it is substantially more because there are so many. I did ask John Swinney previously, so I thought that I would ask him as well. I did ask him when he was Cabinet Secretary how many times an MSP or an opposition party had asked him to reduce current and reactive spending in order to put more into preventative spending, and I wondered whether he had had many approaches from parties or individuals along those lines. Funnily enough, it does not really feature in the conversations that I have. Funnily enough, reducing spend does not really make the agenda of the conversations that I have, with one exception. I do not mean to call them out, but the Greens have always been very good at coming with proposals of increasing spend and identifying reduction spend in previous years. I think that we can have guessed what it was. I just want to follow up from Ross Greer's point about the extra £120 million to local government that you will not be surprised to know. That was obviously coming from a £440 million amount that the UK Government will not be clawed back. Ross Greer asked about if it is not being clawed back, it is in the base budget for following years. My question is why is that £120 million for local government not being baselined? I think that you said yourself, Cabinet Secretary, that things such as national insurance increase will be there year on year. Why is it not in the base budget? Just to clarify, the £440 million is a one-off, so it is certainly not in our baseline. I think that the UK Government would classify it as Covid consequentials, as far as I know, but it is certainly largely one-offs, if I cannot think of anything that is baselined in that £440. That does feature, because it is an important premise to your question. I would certainly like to baseline it. The reason why I am slightly more hesitant than I might have been in previous years is because we are about to embark on a resource spending review. I sincerely hope that we are not talking about what has been baselined through the resource spending review. We are starting with a position. What local governments need, what budget do they need? The previous year's conversations of what should be baselined and what should not be will become redundant. I was asked repeatedly this time last year for baselining figures, and I think that I said at the time that I am very happy to return to those conversations. I am very sympathetic, so it is not for want of, I could say, it will be baselined. That £440 million is not baselined, so we will need to identify funding at this time next year, but it will need to cover the costs that they have identified. Just to help my understanding, I thought that the £440 million was a potential claw-back, so it would just be one year. Is that not correct? Yes, so Dougie can come back in. By claw-back, what I mean is remember that when the £440 million was identified, they said that they did not think that there was enough spending in the UK Government to generate the consequentials to cover it, and so if the consequentials they generated was less than the £440 million, we would have to pay some back. That is a very different conversation from baselining. It is still one-off spending. It is not baselined spending, but it is one-off Covid consequentials that do not feature in our block grant. I do not know if Dougie wants to add anything. It is Covid consequentials, so the £440 million was a provisional notification from Treasury that they said, well, here you go, and if we get to supplementary estimates and it actually transpires to be lower, then we are in paying-back territory. However, we have now had this new information from Treasury last week that it is actually going to be higher, and that gave us enough assurance to commit the £120 million to local government. It is £2122, one-off money, so the £120 million for local government is going through the reserve. That is assurance that we have had over and above the £440 million, so from the information that we have had, we are not looking at paying back at anything at all. Stay on that £440 million then. Is there a guarantee of just the £120 million of it, or are there guarantees for more of it? There is no guarantees yet for anything until the supplementary estimates hopefully next week, but, Dougie... We will say that the spring budget revision will be published this week on Thursday, so we will be saying a bit more then on what we think. Of course, we are out of sync with UK government. We are trying to sort of do a spring budget revision and conclude that while we are awaiting the UK supplementary estimate. We will say more about the envelope, I suppose. I guess that the best case is that all of that £440 million could be available for you to sit in your final budget, not just 120 of it. That £440 million is available, but a lot of that £440 million was for business support, so that is out the door. A lot of that £440 million was already factored down. Remember when there was a dispute about whether it was new or not? A lot of that £440 million was, for example, that the UK Government had announced £165 million for material change in circumstance in non-division rates. I could list it, but a lot of that £440 million was either already factored in, so that £440 million is not new. It is just the fact that we do not have to pay it back gives us a bit of flexibility. That £120 million must have not been factored in, because you have now used that for a little longer. No. As we approach the end of the financial year, I am always looking at how much flexibility we have as we get to the end of the financial year. The fact that I do not have to pay back any of that £440 million back, even though that £440 million is allocated, gives me a bit of leeway. What the UK Government is saying is that there could well be more. That flexibility, which I think I have as a result of the £440 million not being paid back, could also be increased. That increase will be largely driven by health consequentials, with a little bit of transport. If it is all for health, we need to pass it on for health. I realise that those are quite tricky conversations. A lot of it will be clarified in two things. One, as Dougie said in the spring budget revision, which is our finalised accounts, as it were, for this financial year, for this budget. There will be more to come, because there are quite a lot of late movements. Secondly, there will be spring estimates. If we had already had both of those formalised, I could sit here and tell you specific figures. However, we are in a territory right now where, because it is ahead of the UK Government announcement, it is very difficult for me to say precise figures, because I am getting a very moving feast. The bottom line is that there is sufficient flexibility for me to allocate that £120 million, because I do not have to pay back the £440 million, because I think that there is going to be a little bit more room in terms of additional funding, and because we are getting to the end of the financial year and I am seeing where there might be underspends that we could generate or things that we could move into next year. That might be ties into my next question, which is about the £620 million. You mentioned earlier, cabinet secretary, that you could unpack that for us as a committee, if we wanted. Could you maybe give us a bit more detail on the breakdown at £620 million? Absolutely. The £620 million in terms of additional funding that we expect to receive, and incidentally all of that has been passed through the Scottish Fiscal Commission, but it includes the personal allowance adjustments. That is the spillover dispute that I am speaking to the UK Government about on Thursday. It includes Scotland. It includes two consequentials that we knew were coming but had not been finalised. That includes the £145 million that is just mentioned in terms of non-domestic rates. The slight complication, just to make this even more confusing than it was already, is that that £145 million is now part of the £440 million. That has been allocated this year rather than next year. We were expecting it next year, not this year. That is largely it. That is largely the breakdown. If it was allocated this year, does that not have an impact on the money that you had set aside or allocated for the business support money? Are there two separate pots of cash here? That £145 million is part of the £440 million. We have used the £440 million for our business support and self-isolation grants. Do you want to say more about self-isolation grants? It is not part of the 620 for our next year's budget. It was part of the 620. The difficulty is that, on 9 December, when I announced my budget, I announced it to reflect the reality of the time. The reality of the time allowed us to draw down 620. Scotland winded £145 million, which we thought was 620 for next year, and all the things that I have said. The big change—two things have changed since the budget was drafted—is that the £145 million that we were expecting next year has come this year. It is part of the £440 million, and I have funded business support from that £440 million, as well as some self-isolation grants. We have also had the finalised position on Scotland wind. We have taken a prudent decision on Scotland wind, because we have to be prudent. Does that not leave a hole in that 620, or is it a case that, as you mentioned, Scotland winded more than you anticipated, and that has filled that gap potentially that would have been in that 620 million? Yes, of sorts, and it probably demonstrates why some of this is quite challenging, because it is such a moving feast. Obviously, within next year's financial year, I am going to have to manage the spending commitments within the budget. Putting in additional funding such as that 620 is something that we did in previous years, it is not ideal, but it allows us to say that we think that we are going to be able to get a particular amount of funding. It is a prudent estimate, but that estimate is going to be subject to change. It allows us to maximise the spending decisions, and it may well be that, in year next year, quite likely, there might be additional one-off consequentials. That is why managing the budget is very much—obviously, when we publish our budget, that is a point in time, and it is fixed in time. Obviously, budget management is happening almost on an hourly basis in terms of shifts, and even since the 9th of December, there are shifts. You are right to say that, since that 620, there have been significant shifts. Some things have got better this year, which have allowed us to carry forward through the reserve. Some things have got more challenging next year, but I imagine that, if I came back to speak to you in a week's time, there would be other things that have changed. If I can ask another question about the business sport, there is a pot of cash being allocated, and we have seen the breakdown, maybe Daniel has it, but the rest of us have. I guess that it is difficult. I allocate money in that process that people would bid into. If there is underspens in those lines, will that be clawed back by the Government, or will that be reinvested back for more business support schemes? I think that we have seen some of that last year. I know that there was a discretionary scheme, for example, that the local government had access to. Is it going to be a case of that, or will it come back to the central pot? The commitment that we made last year—what I have done in previous years, as you say, is that, as soon as there was any funding identified, I redeployed it into new schemes for financial support. I think that where I would very much like to focus is on this economic recovery work. We have committed to spend £375 million, and my commitment is to spend £375 million on business support. Some of that will be around the emergency grants that are being paid out, but most businesses have not all—even those that I have been through a challenging time—would far rather be supported to trade and operate fully than to depend on emergency grants. The commitment is that any unallocated funding will be redeployed into economic recovery. That is good to hear, cabinet secretary. The final question that I had, convener, was around the preventative spend. Obviously, there are difficulties in reallocating the allocations between local government and health, for example. The local government's review was meant to tackle some of those things. Will that still be the case in what we see this year? Yes, it will. It is the case that it will tackle these things. I am leading on the fiscal framework for local government, and Tom Arthur will be taking a lead role in that. My hope is that it will sit alongside the resource spending review quite neatly. My intention is to engage with COSLA as comprehensively as possible, even in the run-up to an election. I have a commitment to work with Gail MacGregor on the fiscal framework review, but also on the resource spending review. Okay, so that will come this year, Tom. Thank you just before I let Michelle in. The £120 million is announced right at the start of the stage 1 debate. Given the fact that what you said about the spring budget estimates and review, can we expect to have an announcement at the start of the stage 3 budget? I sincerely hope not. Okay, thank you. I will not probe any further on that. Although I have to say that, as I am sure I speak on behalf of colleagues around the table, we will really be interested in reading the official report of this meeting, given what the recent discussions have been back and forward on the £120 million. You will be pleased to know that, coming last, I only have a very few questions because it has been such a comprehensive session. First of all, we have talked a lot about outcome, and of course, everybody is focused on outcome and efficient and effective spend of public money. Going back to your points about the carry-forward, do the limits in carry-forward ultimately lead to less effective use of public money? In other words, we are talking about the complexities of a budget process, but I am trying to sum it up about why we should care if we are focused on efficient and effective use. If you agree that that is the case, it would be useful to have some examples of where that has affected decision making, from the point of view of effective use of public money, particularly in Capex. We work tirelessly to ensure that our spending is effective, but it makes it really challenging. With six weeks to go, no, two months to go, to the end of the financial year, if my conversation with Douglas Lumson is anything to go by, you see how movable the parts are, and yet I need to land a £40 billion plus budget within extraordinarily tight parameters. I think that there are more effective decisions that we could take if we were not trying to shoehorn them into arbitrary limits that do not make sense. In my old world, consultants say that I would be adding up the hours that are spent on the touring and froing and coming up with some of that because it seems extraordinarily inefficient, and that in effect is a waste of public funds with all this complexity. I will go back to the fiscal commission. The committee's comment under 49 in the committee accepts that there may always be a degree of political spin about how the level of UK Government funding affects the Scottish budget. You have come back and you make the point that there is no difference between the totality of funding, the Scottish budget document and the Scottish fiscal commission. The issue centres around comparison with previous years. You make the point that the Scottish fiscal commission uses estimates of 2021 funding. My simple question is that, given the complexity in the latest figures of merging, surely it is better to compare actuals because the only time a budget is accurate is when it is actuals. Again, there are some reflections on that because it seems that we are trying to balance spin plates here and that it is not assisting our job. I appreciate a bit more flavour on that. I think that that is a fair point in comparing actuals. That is the bottom line for Barnett consequentials. We do not receive what is announced, we receive what is actually spent and therefore you have to wait for the UK Government to know what it is actually spent, which is very near the end of the financial year, to know what we will actually receive. By that point, we had to make the decisions weeks ago or months ago on what we will announce and actually spend. I absolutely agree with you that what matters is comparing actuals. You were talking about this financial year. I suppose that the Scottish fiscal commission ultimately has a final say on what we are allowed to actually spend. The Scottish Fiscal Commission's view on what is actually available is really the most important one. Dougie was nodding, so I do not know if he has anything to add. I suppose that this is something that we are trying to broach in the open government partnership and elsewhere. It is not just about putting out more and more information, it is about putting out meaningful information. Certainly in the budget document that we publish every year, we use comparability, so we tend to show figures lined up against the figures in the previous year's budget, rather than the updated figure. That is also available in the plan of play of the materials. It is absolutely open to views as to how we can do this better. You have mentioned the term prudent assessment of a potential scale of additional funds. Prudent has a particular meaning. Given your assessment of prudent, what is the margin of error that you have built in? The margin of error is, I suppose, what we think is the bare minimum that we are due to receive. In the spillover dispute, for example, we have identified the funding that we think is sort of the baseline. The Scottish Fiscal Commission are ultimately arbiters on whether it is sufficiently prudent or not, and they determine whether it is right for us to assume additional funding. That is probably the process that we undergo. Last year, in the run-up to the end of the financial year, we kept being told that there would be no more money and that there was additional funding. That year, we decided that it was highly likely that there would be at least £500 million of additional funding. In all eventualities, it is actually £1 billion or more. That gives the illustration of how we do it. Daniel MacDonald wants to come in with a question on unallocated business support. To correct my oversight from the essay, can I just clarify the quantum of unallocated funds? I have just quickly added up the confirmed amounts in your letter, which seemed to come to £276 million. Is that correct? Does that therefore lead to £99 million of unallocated funds, just a point of clarification? Because there is a little bit of additional funding that was factored in from, for example, Visit Scotland, the figure is that we are operating to £103 million of funding that we could allocate for economic recovery. Thank you for that. That is exhausted questions from the committee, but following on from Ross and John's questions, the heavy criticism of the choices made of the Cabinet Secretary's budget at stage 1. Did each opposition party come forward with alternative fully-costed budget proposals in your discussions with them? Were budget lines should increase and others decrease to fund their demands, rather than just ask for increased spending, regardless of the limitations set by the Scottish Fiscal Commission? All parties came forward with additional requests for funding. They can correct me live on air as to whether they suggested areas to reduce. I do not recall hearing areas to reduce funding. And all the spending asks were substantial. Not all of them would I disagree with. I think that all of us would like to see increased spend, but certainly in our engagement there were areas that other parties would like to see us spend more on, but I certainly do not know where the funding would come from. That was the last point that I was going to make. In the stage 1 debate, Jackie Baillie said in reference to her party's asks that and I quote, we have done the costings in the Cabinet Secretary, and those of my shared them with her last year and we have shared them again this year. Those proposals have not been widely shared. I certainly have not seen them. Have they been shared by anyone? Did you actually see those costings? I do not recall seeing costings. I think that Jackie Baillie referred to last year, where social care was fully costed and fully costed in the region between £1.5 billion and £2 billion. I shared them with her last year and we have shared them again with her this year. The point that I am making is that did those alternative proposals meet within the funding package as permissible by the Scottish Fiscal Commission? What was the margin outwith that? If that was the case? If you take social care alone, and I am referring to last year's figures, rather than this year's figures, because I have not seen updated figures from the Labour party, last year was in the region of approximately £1.5 billion. I do not have a headroom of £1.5 billion for social care alone. Daniel Wharton wants to come back on that. I feel that it is required. To be fair, the cabinet secretary fairly reflected the conversation last year. The costings were produced by both sides, if I recall. We presented our assessment of those costs. That was a useful constructive dialogue, but there were certainly costings shared on both sides. I would be more than happy to share them. Indeed, they were widely publicised both this year and last. Just to provide some balance to that, the context for the budget was one where there was a fiscal envelope and proposals were presented within that. There is a point of perspective about what that envelope was and what the carry-over for Covid funding in previous years was. The final point that I would make is that the other element to that is that the proposals are not necessarily just for a current fund but also alternative approaches to what Covid recovery is. That is just a point of clarification. I am happy to sit down with the convener at any point and go through my costings and how that compared to the fiscal envelope that was available as set out in the fiscal framework. I would be happy to help them if that would be helpful for them. I would be delighted by that. That is a very helpful suggestion. Can I make one point? Just on the £15 per hour that Labour was keen for with a staged approach to £12 per hour initially, our calculation was that £15 per hour would cost around £1.8 billion. That was based on Labour Party, if I am being fair, had identified the additional Covid consequentials to cover that, but of course pay is recurring, so that would have impacted this year's budget as well. There certainly is no capacity for anything in the region of £1.8 billion. Unless, of course, other lines of the budget were reduced in order to meet those, is that the case? That is right. I repeat for comparison. The overall health budget is £18 billion, the local government is £12.6 billion and the overall budget is about £40 billion. You will be pleased to see that it is not on this matter. That was a very interesting conversation. I just realised that I missed a note that I said earlier. You made a point when Daniel was probing about the net present value of the Scotland additional costs of grid connections, so just so that I am clear that you are saying that they are historically skewed the cost of grid connections—I mean, I know that that has been subject to a long-run dispute—but that has been in effect baked into the Scotland estimates going forward. That could probably run for another 50 years or even if they are subsequently changed, but you have had to factor that into the figures that you mentioned—additional costs of grid connections. Am I correct in that assumption? Obviously, the options fees will reflect the market's willingness to compete. What we need to factor in in Scotland, which is not factored in England and Wales, where it was an open option, is generally shallower water. It is off the coast. Scottish conditions are far more challenging. Projects are more costly to develop. They are often further out to sea, they are in deeper waters and they are probably going to require the deployment of floating technology, which is still at an early stage of development and there are higher grid connection costs, so they are relatively more expensive to develop. All those additional costs need to be—it is not being factored in by me, it is being factored in by the developers who are bidding for those sites. Thank you very much. It has been a long session this morning and I thank the cabinet secretary for her contributions. I would now like to suspend the session until 5 past 12 to all those members to have and indeed the cabinet secretary's official to have a natural break before I move on to our second agenda item. I remind people to wear face masks when moving around the room and the wider parliamentary campus. We now move to our second agenda item, which is to consider the budget bill at stage 2. We are joined again for this session by the cabinet secretary for finance and the economy. Her officials remain present for this session but are unable to participate in formal stage 2 proceedings. Members will be aware that three amendments have been lodged to the bill. They should have in front of them the groupings and martial lists, which were circulated directly by the legislation team. The question is that section 1 be agreed to. Are we all agreed? Yes. We are all agreed. I call amendment 1 in the name of the cabinet secretary group with amendments 2 and 3. Cabinet secretary, move amendment 1 and speak to all amendments in the group. Amendment 1 increases the social justice housing and local government portfolio authorisation in schedule 1 of the bill by £120 million. Amendment 2 increases the total amount of resources for the Scottish administration in schedule 1 to take account of that additional £120 million. Amendment 3 increases the overall cash authorisation for the Scottish administration under section 4.2 of the bill by £120 million. In other words, those amendments give us the authorisation to drop down cash and the authority to spend it. Okay, thank you. Do any members wish to contribute at this stage? No members have indicated that they wish to speak. Cabinet secretary, to wind up? No, not necessary. Okay, thank you for that. The question is that amendment 1 be agreed to. Are we all agreed? Members have indicated their agreement. I call amendment 2 in the name of the cabinet secretary, already debated with amendment 1. Cabinet secretary, to move formally. I move amendment 2. Thank you. The question is that amendment 2 be agreed. Are we all agreed? Yes. We are all agreed. The question is that schedule 1 be agreed to. Are we all agreed? Yes. We are all agreed. The question is that section 2, schedule 2, section 3 and schedule 3 be agreed to. Are we all agreed? Yes. We are all agreed. I call amendment 3 in the name of the cabinet secretary, already debated with amendment 1. Cabinet secretary, to move formally. The question is that amendment 3 be agreed to. Are we all agreed? We are all agreed. The question is that section 4 be agreed to? Are we all agreed? And the question is that the long title be agreed to, are we all agreed? I will agree. That ends stage 2 consideration of the bill. I want to thank the cabinet secretary once again for her involvement this morning at answering all her questions. Thank you. Thanks very much. That end today's meeting of the finance committee.