 Good morning, and welcome to the 11th meeting in 2018 of the Finance and Constitution Committee. Can we just make sure that our mobile phones are put on to silent, please? The first item or agenda this morning is to decide whether to take items 6 and 7 in private or members agreed. The second item or agenda is to consider a Scottish statutory instrument that seeks to amend the 2017 budget act before we come to the motion seeking our approval at agenda item 3. We will have an evidence-taking session on the order, and I welcome to the meeting the Cabinet Secretary for Finance and Constitution. Mr Mackay is joined for this item by Scott Mackay, who is the head of finance, co-ordination and the Scottish Government. I welcome both our witnesses to the meeting and invite the Cabinet Secretary for Justice to make an opening statement. Thank you, convener, and good morning. The spring budget revision provides the final opportunity to formally amend the Scottish budget for 2017-18. This year's spring budget revision deals with four different types of amendments to the budget. Firstly, a few funding changes. Secondly, a number of technical adjustments that have no impact on spending power. Thirdly, some whitehall transfers. Finally, some budget neutral transfers of resources between portfolio budgets, including a modest budget redirection to ensure that we maximise our available budget. The net impact of all those changes is an increase in the approved budget of £421.4 million. Table 1.1 on page 5 of the supporting document shows the approved budgets following the autumn budget revision, and a change is sought in the spring budget revision. The supporting document to the spring budget revision and the brief guide prepared by my officials provide background on the net changes. The first set of changes increases the budget by £141.7 million and comprises of changes that have been allocated over a number of lines as detailed in the brief guide. The second set of changes comprises a number of technical adjustments to the budget. The technical adjustments are mainly non-cash and therefore budget neutral. If a net positive impact of £271.9 million on the overall aggregate position, it is necessary to reflect those adjustments to ensure that the budget is consistent with the accounting requirements and the final outturn that will be reported in our annual accounts. With regard to the whitehall transfers and allocations from HM Treasury, there is a net positive impact on the budget from a number of small transfers of £7.8 million. The final part of the budget revision concerns the transfer of funds within and between portfolios to better align the budgets with profiled spend. The main transfers between portfolios are noted in the SBIR, supporting document and the guide to the SBIR. As we approach the financial year end, we will continue in line with our normal practice to monitor our forecast outturn against budget and whenever possible we will seek to utilise any emerging underspends to ensure that we make optimum use of the resources available in 2017-18 and manage the necessary carry-forward to meet the additional spending commitments for 18-19, as I disclosed at stage 1 of the budget bill for 2018-19. The additional £34.5 million of funding for local government announced at stage 1 does not appear in the spring budget revision due to the timing issues, but it did appear in the local government finance order and will appear in the outturn statement. In line with the recommendations of the budget process review groups, my officials have included in the brief guide sent to the committee an indication of the forecast outturn position at 31 December that involved a spring budget revision. The brief guide to spring budget revision, prepared by my officials, sets out the background to and the details of the main changes proposed and I hope that colleagues have found this guide helpful. On page 4 of the briefing notes provided to the committee, it explains as an underspent totaling £29 million, which has been surrendered from the Moore Homes housing budget. Can you please explain the reason for that? What impact will it have on the Government's efforts to improve housing supply in Scotland? It is not a lack of spending on housing commitments. It is more around the, in terms of Moore Homes, those who are selling properties, the transactions coming back to us. That might be through, for example, financial transactions. That is where there has been the open market or the help to buy. Ahead of forecast, people have been selling it and the Government gets the share of that. Therefore, it has supplemented income, so there is no detrimental impact on our budgets. Effectively, what you are saying is that £29 million is money that is over and above the allocated amount in the budget for housing. Essentially, yes, just because the properties have been sold, we get the share back in. I have a concern in this area. I note the Cabinet Secretary's explanation. I see in the notes that it relates to Moore Homes, which would seem to indicate to me that it is about supporting housing supply. This is the second year that this has happened. Last year, there was an underspend of £21.5 million on housing. This year, we find that it is £29 million. In the scale of the challenges in relation to housing, where there are thousands on waiting lists, we have people rough-sleeping. It is a real concern that there is an underspend there. Can I maybe try again, convener? I would understand that conclusion if the perception was that we were not spending on housing. If I can put it another way, it is extra income from more people than we had anticipated selling their home and the Government getting back the share of investment that we put in through those financial schemes. It is not that we are not spending enough on housing. It is extra income unforeseen above what we had anticipated that then forms an underspend. On the wider subject of housing, of all years, there is a substantial uplift in funding for affordable homes, investment in new housing and for homeless support, as well as part of the £10 million for the ending homelessness that is now set together fund. I want to reassure Mr Kelly that it is not an underspend on housing. We are investing massively and we are doing more on capital. Is that revenue support for housing specifically? However, that is a very particular issue around those transactions generating more income than was forecast, because you cannot absolutely forecast the properties that will be sold and our share of every turn on that. If there is more money coming into the pot, why is it—let me look at it from another angle. In terms of the £29 million, where has that been allocated to? That is also in all your papers. You can see where the extra resources are allocated to and where the underspends are identified. That is my point about the overall spring budget revision. That is the allocation of those resources. There is not a direct read-over from the £29 million. Surely you must know yourself as a constituency MSP, the scale of the crisis in housing. If you had an extra £29 million, why was it not allocated to housing? We have just approved a budget that takes the level of capital investment to over £700 million to meet the target of 50,000 affordable homes of which we are perfectly on track. Having completed the last target of 30,000, we are on track to deliver 50,000. We are also delivering a new fund to tackle homelessness and we are supporting local authorities. I would argue that there are adequate resources in the housing portfolio. If that was a separate issue of not being able to spend money on housing, I would get the charge against it as we should be doing more. This is about that additional revenue. The answer to where has it been spent in the rest of the document, which is perfectly clear on where the budget revisions are. I did not see a direct read-over. I think that the point is still relevant, that the scale of the challenge means that if you had any extra money, it should have been spent on housing. Even the high newspaper notes this morning that a fifth of people in Scotland with disabilities are living in homes that are not fit for purpose. Some people are not able to wash themselves in the homes that they live in. That is just one example of the crisis that we are facing. I would argue that if you had extra money, it should have been allocated to housing. I understand the point and it is a fair point to make. However, even in Labour's alternative budget that was presented in Parliament, it did not ask me to do any such thing. It certainly laid out other budget priorities, but I am afraid that there was not more money for housing. What has been argued today is a shift from the previously presented position in relation to the Labour budget. However, I am satisfied that those revisions represent priorities. It certainly would not raise any concern that there is a lack of the ability to spend money on housing. I understand the reason that James asked it from the political to technical, because it seems to me that, although I called it an underspender and my additional question to you, there is actually a technical quirk in how we describe this. Is there a better way that, in future, the budget could be described? Although it is appropriate for James to ask the questions about whether, if there are additional monies, we should be spent, why is that being called an underspend? It is not really an underspend. It is not an underspend. It is not an underspend. It is a variation from the published budget. It is a variation from the published budget to make the point that what we support, what we approve as a Parliament, aligns with what is actually happening. Therefore, if there is more income, that is a variation to an underspend. Is it about how we describe this in future, so that people are a bit more clear? It does not make it necessary when the point that James makes, but I think that it would help for the technical understanding of it. Thank you, convener, for following up on those two short points. First, it would therefore be true to say that the fact that you have got that £29 million is a symptom of the fact that the Government policy has been more successful than you anticipated it would be. It depends on your view on buying and selling houses, but arguably, yes, if you think that it is a good thing, the financial support has allowed people to purchase properties, has allowed people to sell them on and Government gets a share of that, a percentage share. It is slightly different from the English scheme, of course, but yes, you could view that as success. Thank you. The second point was also true to say that, as James Kelly suggests, you were to take that £29 million and spend it on housing, you would have to reduce spending elsewhere in the budget. Yes, if you were to hypothecate initially like that, that would be the outcome potentially. But the point that I am making is that this whole revision is the Parliament reallocating resources, essentially. That is what we are doing, but we would not ordinarily say, unless you just confine spending within each line as being as rigid as that. The point of this is to make those transfers. Again, I understand the point, but we have made budget choices, which is massively in favour of housing, particularly on that capital investment, which is a choice that we have made. That is the nature of the underspend. I mean, convener, we will reflect further on how even the brief guide might could further draw that out, but with the quantity and quantum of revisions, to explain each one would be a bit much, but I think that the more significant quantum might be more helpful, so I can give further thought to how we describe that. Alexander, you have got a supplementary in this. Very quick supplementary. This is now the second year. It is unforeseen for a relatively similar amount. Will it be unforeseen next year as well? Probably would, but I have been in party to this committee, where you have described collectively as a committee as the one thing that you know about economic forecasters is that they will all get it wrong. They cannot get it absolutely right. I wish they could. It would resolve a number of issues and variables, but unless we had a crystal ball on exactly what happens in the housing market, yes, it is hard to get it exactly right, so we do not know. It is a good thing the way that the scheme is designed in terms of percentage share, because it means that if the property market is growing, if that is more buoyant than the Government, the taxpayer benefits from that investment as well. It is just hard to predict, as you know, OBR would say in relation to transaction taxes, and I would say the same in terms of our transaction taxes. For all those reasons, it is hard to predict. It is better at least that it is in the more positive territory than in the negative. Neil Hamilton I agree with the points about what has been said about the definition of underspence, that it has rendered more homes, and that £29 million allocated next to it. Obviously, as James Kelly said, that £29 million could have been spent on housing. How many more homes would you have been able to build with that £29 million? That is hard to quantify, especially because it is the capital investment that makes the difference on building homes. It is the capital investment that is over £700 million. Arguably, which of the budget revisions would members not support is the interesting question? Is it health? I was just asking how many more homes could you have got for £29 million? If you would like me to cost such a proposition, I will, but I do not know off the top of my head. That would not surprise you, Mr Bibby. I take it from that. You did not consider spending the £29 million on spending more homes in that case. I have considered spending more than £700 million presenting that to the Parliament to help to build 50,000 new affordable homes, surpassing targets and working in partnership with— I take it as a no. I am not downplaying the importance of housing, but I think that the Government is making a priority of capital investment. Housing is quite a significant investment, and that should be welcomed. Did I think that we need the other amount from this transaction to meet a target? No, I do not. I think that the direction of travel will meet our commitment, and the community secretary believes in that as well. It will require further capital investment year on year, so there is a plan. I have to say that, in relation to the costs per unit, it is something that I want to keep a close scrutiny of. In terms of how it impacts on land supply and all those other matters, it is significant. I am afraid that it is a bit more complex in how many more houses can £29 million get you, because there is a lot in that—land supply, planning, cost of delivery in units, and where they are in the country and how it is distributed, and which local authorities and housing associations can do what with it. The revenue planning assumption that is given to local authorities and on a multi-year basis is what is giving me confidence that, no, I do not need the extra amount from this. You could describe it as over-recovery, if you so wished. There is obviously a lead time associated with the capital programme as well. Stepping that up in the short term is not straightforward, and that larger programme remains fully funded going forward. I thought that we would go to the end of housing, but I think that Ivan has got another supplementary. Given that we have established, cabinet secretary, that this is not money that is sat in a shoebox on where it has already been allocated to another budget line. If you are going to go through the exercise of working on how many houses this is going to provide, can you also go through the exercise of calculating how many nurses or how many fewer teachers you will be able to employ if you had to reallocate that money from another budget headline into housing? This is one of the most exciting debates that I have had at a spring budget revision, but, yes, you would equally, just in the terms of the budget process overall, pick out what you would not want to do in the rest of this. Correct. Let's move on to other areas, please. Neil, you are in another area. It was in relation to Whitehall transfers and, specifically, the £1.1 million of Whitehall transfer in relation to the tampon tax. I just wanted to ask what women's organisations will benefit from this cash and what goals will you set up for the use of that £1 million transfer? I am not sure I have the breakdown here, but you've got to come back to that, so... Yes. That would be helpful. I am not entirely sure, and I want to check this, if that element, because ordinarily it's not hypothecated or ring-faced, so I would want to check that out. Obviously, we've got our own initiatives around this, so I just want to check the line of sight between that and what we are doing. I'll do that in writing. That would be helpful, because I could substantial some of my money. Alexander, you're another question. Thank you, convener. It's on me economy jobs in fair way work section, and I can just note my register of interest relating to renewables. It says that there's a £8 million going to waive energy Scotland. Does the cabinet secretary provide a bit more clarity about what that is? Is that the total budget, and what is he expecting for that? Okay. In terms of the... Yeah, there has been previously not necessarily the progress in the past on waive energy, so my understanding from that portfolio is that it is the development of the technology in North West Coast of Scotland to support that exploration at those jobs, that side of it, and it's to assist with the manufacturing of wave devices. Now, if a member wants more on the specific details of the projects, I can provide that through the economy secretary. But it's essentially within that portfolio to support wave technology, which has not been delivered to our aspirations in the past. Thank you. Morddo. Thank you, convener. Two items that I wanted to ask about. First is that in the funding increases in learning, there's £16 million going into SQA resource pressure. Can you give a little bit more detail as to what that is for? Can I ask Scott Mackay to cover that element? It's essentially covering the cost of additional funding requirements on the national qualifications and curriculum for excellence and changes being made to the assessment processes to ease teacher workload. Is this expected to be a one-off, or would those pressures not be seen to be something that would be on-going into the future? I suspect that there will be on-going pressures, to be honest. Mr Fraser, right across the public sector, I've been trying to ensure that we are efficient and we are driving down costs and that we are not compromising on quality, but I suspect that there will be on-going pressures. The question then for the Government is whether we increase budgets as a response as a matter of course over the budget. I don't see it as a pressure that I'm then responding to mid-year. Okay, thank you. That's helpful. The other one was that there's a £15 million financial transaction against BiFab, which we know is offered loan support to that company. Do you know, as of now, how much of that has been drawn down? I don't have an update. Could I say that this might be a matter that the committee will want more on sooner rather than later, but it's currently quite sensitive, but I think that the committee would appreciate further information sooner rather than later. I think that there are live discussions, so I think that that's an important area to touch upon, is fluid, and I think that you will want to return to it. This might be a wee bit of a tangent as well, but I'm aware that this is the spring budget revisions. When I looked at the papers that said that under the internal transfer section, it states that there's a transfer of £5.3 million from economy jobs and fair work portfolio to rural economy and connectivity to assist funding for highlands and islands enterprise capital projects. That might be a bit of a tangent, but since we are having an exciting spring budget revision today, I'm interested in the South Scotland Enterprise Agency, which is our equivalent to the Highlands and Islands Agency for the South, about capital investment potential for roads and rail infrastructure. Would that be a consideration in future budgets, and what portfolios would that be impacting on then? It would largely come from the economy brief, but Fergus Ewing, in terms of connectivity, would have a role as well. You will probably see both portfolios taking interest in it because of connectivity, as well as Keith Brown's portfolio in economy. I imagine that there will be continued transfers in the future, even when the new body is established. It's important for my knowledge, because there are a lot of local issues around the 75s, 76s and 77s at the moment, so that's helpful. I have a long connectivity. Thank you very much, Bruce. There is a small item on the rural economy and connectivity. Heading there, a C2 transfer is taking place—£1 of £5 million—to support the EU futures IT programme. There is another smaller one there—£700,000—to support the events with the screens at Hamden Park. I wonder if you have any details of those, particularly on the futures IT programme and what that £5 million is doing for you? Can I just check on the budget revision, which paper would you page your on? It's page 74. The space paper refers to it, and it's on the budget page it pays something for you. I think that I will have to follow up on that one, because I don't have any further information on that particular line. The second one, though, you said, so that was futures IT. What was the second one? The second one was a transfer to support events through the big screen developments at Hamden Park. It's £700,000. I wonder if there is a background to that. Do you have the budget revision page? It's also on page 74. Right, okay. I accept that you are coming back to us in that convener. Cabinet Secretary? Yeah, I just wanted to check both. They're not on the same page. On page 74, your specific inquiry on the £700,000 is to fund the purchase of giant screens at Hamden Park in support of UEFA's Euro 2020. I'm not an expert, but I would suggest that that is to fund the purchase of giant screens at Hamden Park in support of UEFA Euro. 2020? That's what it's for. It's a bigger screen TV. I appreciate the new get-in-the-average household, but it is for these big events. There are big screens at Hamden Park, so I was wondering if there are screens there already. I'm hearing Mr Coffey saying that there are screens there already. I can tell you that. I wasn't preparing for that line in the budget revision. Again, if you require further information, I can happily get the portfolio to provide it. Can I just say no and move to James Daly? That's convenient. Let's hope Scotland plays better on these bigger screens that we're getting installed. It's a technical question in relation to the Whitehall— Is that about political? Would I ever? In relation to the Whitehall transfer section, there's an amount in relation to teachers pensions—a £47 million that I was just looking for some background on that. Teachers pensions. I'm actually looking at the space table. It's under Whitehall transfers. It's under the technical changes section. It's in AME expenditure. It's an adjustment to bring the pensions into line with the latest forecasts, and we draw down the budget cover from HM Treasury as part of an annual AME budget process. I was just wondering if you could write to the committee as you're doing the other stuff, just to get some additional information on that. Obviously, university lecturers pensions are a big issue, and I'm just interested as to why such a large amount of £47 million. I'm not trying to make any political point—I'm just interested in the background. Okay. You'll come back to us, cabinet secretary. We'll move on. It's just because we're not seeing any difference other than the normal state of affairs where there is the forecast that's drawn down from AME, and it's covered through those transfers. There's no variation. This is NHS and teachers pension AME. It's due to changes in indexation and equalisation work carried out by Treasury, so it's a technical adjustment to the forecast. That's all you need. That's fine. Thank you. Any other questions? I'm going to move to agenda item 3, which is consideration of the motion on the order. I invite the cabinet secretary to remove S5M10915 that the Finance and Constitution Committee recommends that the Budget Scotland Act 2017 amendment regulations 2018 draft be approved. I move. Members have any other comments? I'm going to put the question on the motion. The question is that motion S5M10915 be agreed to or well agreed. We are agreed. The next item on agenda is to consider a statutory instrument that seeks to revise the landfill tax rates and bans for 2018-19. And we're just about to change officials while I'm doing this, so we'll just continue. I'm not going to stop. Before we come to the motion seeking our approval at agenda item 5, we have an evidence session on the order. Again, we are joined for this session by the Cabinet Secretary for Finance and Constitution. Mr Mackay is joined for this item by David Carucci, policy adviser at the Scottish Government. I just wonder if there's any statement you like to make at this stage, cabinet secretary. Very briefly on this technical matter, convener, the Scottish landfill tax, standard rate and lower rate order 2018, specifies the standard rate and lower rate for the Scottish landfill tax that is set out in the draft budget. Those proposed rates ensure that the tax increases in line with inflation and matches the planned UK landfill tax rates for 2018-19, as provided in the Finance Act 2016. In setting those rates, I'm acting to avoid any potential waste tourism through material differences between the tax rates north and south of the border. In addition, I'm providing appropriate financial incentives to support the delivery of an ambitious waste and circular economy targets, including zero-waste gold, that no more than 5 per cent of the total waste should go to landfill by 2025. Scottish Fiscal Commission forecasts that we will generate revenue of £106 million from the Scottish landfill tax in 2018-19. I have one question that I'd like to ask, cabinet secretary. I recognise, obviously, the order's proposals to match the UK landfill tax rates intended to minimise potential risk from waste tourism. If the UK Government were to change its rates at short notice, how would you be able to respond to that? How would you seek to react if that was to happen? I suppose that we would give it consideration whether we consult or not would be up to government, but I would need to return with a further statutory instrument if I were to propose a change. I don't think that it's been the norm for the UK Government to change this out of sync, so I would expect that continuity to continue. Any other questions? Alexander? Thank you. Whilst we're obviously supportive of the aims of landfill tax and what it's trying to achieve, one of the unfortunate consequences is the increase of flight-hipping, and I was wondering if the cabinet secretary's got anything to add to whether the increased revenue that will come from this will be going to those who have to deal with it, which is mainly councils. We don't hypothesise it. One positive element is the credit that we give around the Scottish landfill communities fund, which is actually slightly more generous than the rest of the UK equivalent, and that rate will continue to be higher. We don't hypothesise it. It contributes to the overall budget, and of course we are doing more around environmental action, zero waste support to local government and those wider objectives, so it's not a hypothecated tax, but I would argue that the range of other interventions that we make is in part funded and supported by the landfill tax. Any other questions? There have been no other questions. We now move to agenda item 5, which is consideration of the motion and the order. I invite the cabinet secretary to remove motion S5M-10850, which the Finance and Constitution Committee recommends at the Scottish landfill tax standard rate and lower rate order 2018 be approved. The question therefore is that motion S5M-10850 be agreed to, if we are all agreed. We are agreed. The committee will now publish a short report to the Parliament in the coming days setting out our decision on both orders. As agreed at the start meeting, we will take the next two items in private, and at this stage, like the cabinet secretary's officials for their attendance, and I'll close the public part of this meeting.