 Good afternoon, and welcome to the seventh meeting in 2020 of the Finance and Public Administration Committee. We have one item on today's agenda and that's to take evidence on the replacement of EU structural funds and a living up from the sector of state for live, housing and communities, and the mince of intergovernmental relations, the right honourable Michael Gove MP. We have up to 90 minutes for this evidence session and I therefore like to welcome the sector of state very warmly to the committee. Good afternoon Mr Gove, Do appreciate that you do not wish to make any opening remarks and we will move it straight to questions if that is okay with you. You very much have the invitation. I will of course open up and then our colleagues will come in subsequently. UK ministers and the Conservative manifesto pledged to provide a fair and equal share of funding that fully replaces EU support in Scotland that would amount to around £183 ond y Cynffinio Cymru, ac mae'r deunyddion yn iawn i'r gwbl goesyrolion yn fwy oredig. Mae'r rei'r gwleithant i'r gwleithwyr yn y cyffredin yn cymdeithasol collif yn unedig sy'n wneud i'r leithreddau yn y teimlo gwirioneddach uwch dros fe wneud i'w gwbl cyffredin yr uneddynt sy'n frechafio'r ddisgwysig oherwydd hwn dafnog o'r $2420, diwrnod diwrnod i llunio cyffredin yn mynd wedi'u ffordd. Siaradau cydnodd, dweud. Can you comment on those figures and what steps will be taking to ensure that manifesto pledge is honoured? Thank you very much, convener. First, I stress that the UK share prosperity found ramps up over time as EU legacy funding diminishes over time. Of course, that is the case that, as part of the multi-annual financial framework that Iewe had in place. Funds were committed and indeed funds are being spent on projects in Scotland and across the United Kingdom, as those funds wind down, so the UK shared prosperity fund ramps up to fill that gap until eventually all EU funding or legacy EU funding, I should say, of projects ends, but it's also the case that the community renewal fund, the shared prosperity fund, they're not the only ways in which the UK government provides additional funding above and beyond the block grant to replace the types of funding that the EU provided in order to ensure that we address productivity and other challenges across the UK, so the levelling-up fund as well is another means by which the UK government can provide support to local government and other actors in Scotland and elsewhere. Iewe, you're suggesting that there's not going to be any gap in funding, would that be correct? Yes. Our manifesto pledge was to ensure that, for Scotland, Wales, Northern Ireland and Cornwall, we maintain the level of funding that would have been the case if EU funding had continued. Indeed, I hope that it will be the case that, by the end of this Parliament, we can look at the shared prosperity fund and also the levelling-up fund and other funds and see that that manifesto pledge has, at the very least, been met if not exceeded. I'm just wondering why, then, that the committee expressed such great concerns. They seem to be of the view that that wasn't going to be happening, that there was going to be significant reduction in funding and that was backed by the Welsh Government in terms of their analysis also. I think that the inference of a draw is that it's a perfectly legitimate misunderstanding to conflate the UK shared prosperity fund money with previous EU funding and to either ignore or overlook or put to one side the legacy of EU funding. Of course it diminishes, but it's still there and also other funds like the levelling-up fund or the community ownership fund as well. If we're looking at money that is devoted to the types of projects that the EU used to fund, as I say, some of that money is still there from the EU and is declining. The shared prosperity fund will ramp up, but if you take UK SPF plus legacy EU funding together, you get to, I believe, the manifesto commitment and the levelling-up fund and other funds take us, I hope, beyond that. Colleagues, I want to explore that a bit further, but just to move on, the UK Government's shared prosperity fund is intended to replace EU structural funds losses as a Brexit from April. However, the Scottish Government has yet to receive any detail of how much funding will be allocated to Scotland and the reality is that the Scottish Government has not been consulted nor have Scottish ministers had any role in investment proposals or decisions devolved to the Scottish Parliament. A new guidance in the shared prosperity fund offers no evidence of respecting the evolution or acknowledging the Scottish Government as an equal partner. I would politely disagree. The first thing to say is that the UK shared prosperity fund and the other funds that the UK Government disperses are dispersed on the basis of objective criteria, which are there for assessment. It is also the case that we work in partnership with the actors in local government and in the Scottish Government. It is explicitly the case that for the UK shared prosperity fund what we want to do is to make sure that there is intensive dialogue between ourselves and the Scottish Government and its ministers over the basis in which the money should be distributed. In England, we have been clear that the money will go either to mayoral combined authorities or whether there are no MCAs to the lower tier of local government, the borough or district councils. Obviously, in Scotland there is a different local government structure. It seems to us sensible that that money should be distributed on the basis of city and local growth deal geographies, but we want to discuss with the Scottish Government how that is done. We also believe that we want to ensure that money is allocated as it will be in England on the basis of a set of objective criteria that people can debate and judge and question. What I would like to do is to make sure that the Scottish Government is satisfied that the objective criteria that we set for the allocation of the funds meet with their approval. At the end of February, when the fund is going to set up and start from April, the Scottish Government is still saying that there has been no consultation on the meaning of the engagement. That is echoed by their devolved administrations. Why would they be saying that and why, if there is going to be constructive engagement, is it being left to such a late 12th hour, if you like? I think that we need to look at the level of engagement that we have had in the context of other conversations that we have had with elected representatives who represent Scotland, those in local government and also MPs and Westminster as well. We will shortly be publishing our prospectus, which will outline how we believe that funding should be allocated. At the moment, we are just making sure that we have adequate resource with the manifesto agreement that you alluded to earlier, which is met and full. You personally will be speaking to the Scottish ministers. Absolutely. Your visit has created a way about the stir beyond Holyrood, Mr Gove. Earlier this week, I was contacted by the European Marine Energy Centre based in Orkney. It is the first and only accredited wave and tidal test centre for marine energy in the world. Over 16 years, it has contributed £306 million to the UK economy, supporting almost 200 jobs. Between 2016 and 2020, MEC received more than £17.4 million from Europe, which was some 52 per cent of its total funding, in fact. However, MEC are deeply concerned because they say that you are levelling up white paper published on 2 February, suggesting that the UK shared prosperity fund will be allocated entirely through local authorities. That creates a real risk that MEC and other unique organisations are so crucial in terms of innovation and dealing with net zero miss out on crucial funding. How will the shared prosperity fund, or indeed any other mechanism, work to ensure that that does not happen? You touched earlier that there may be other funding streams, but if that is the case, it is not being communicated to organisations such as this. Well, I am grateful to you for drawing my attention to that particular project and the admirable work that it does and the reliance that it has had on partnership funding. As I mentioned right at the beginning, as well as the shared prosperity fund, and I am sure that any allocation to Orkney Island Council would be prioritised by Orkney's local elected representatives in a way that enhances the performance of precisely the initiative that you mentioned. However, it is also the case that, as well as that, there are funds not just through the levelling up fund but through some of the other work that Bayes, for example, does in ensuring that we can have a more diverse and secure base of energy supply. Again, I would be more than happy to talk directly to Orkney's elected representatives and to the leaders of that project in order to ensure that we can have continuity of funding through the different streams that the UK Government is responsible for. I hope that they will be reassured by that. As you can understand, what has made so many organisations nervous is that, up until this meeting, they have not had any communication, understand that they have tried to communicate with your department and have not been able to receive the kind of assurances that you have given me just now, which is obviously why they have contacted myself as a convenant of this committee. Scotland's Council of Volunteer Organisations says that it remains, and I quote, in the dark over how the UK's shared prosperity fund will reach a sector that has benefited greatly from European funding over the years. So how does your department intend to engage with Scotland's voluntary sector at both a strategic and delivery level to maximise the impact of the UK's shared prosperity fund for the voluntary sector? My department is expanding its footprint in Scotland. We have a dedicated team of deluk officials whose job it is to work, not just with local government but also with civil society in order to ensure that the funding that they need and they have a right to expect is delivered in a timely and in an as unburocratic a way as possible. Now, of course, it may well be the case that people from the voluntary sector have had access to support from ESF funding, which DWP, which of course has a UK-wide footprint, has been responsible for. I've been talking to my colleagues in DWP and indeed in the territorial offices about the relationships that they've had with organisations that have benefited from this funding. One of the benefits of this committee hearing is that I can say through you, convener, that elected representatives across Scotland who are either concerned about the future funding of worthwhile organisations or who see an opportunity in the funds that we have for support for new initiatives, I'd urge them to contact me and my department in order to make sure that we benefit from the intelligence on the ground that you and other elected representatives can bring. Yes, again, I find your answer very positive, but the concern has been that up until this date, with this UK-shared property fund about to launch in a matter of weeks, that these organisations still have not been kept up-to-date. Obviously, they have to be able to fund projects and they worry that there's going to be gaps and breaks in terms of that funding, so can you assure us that that will not happen? I think that, depending on the individual project, it might be the case with some of the voluntary sector projects that are still in receipt of ESF funding, which will be tailing off, but we will do everything in our power to ensure that worthwhile projects that have been successful as a result of EU or other funds continue to deliver for people in Scotland. A question that has been brought to me by a local authority chief executive who is keen to know how you anticipate that levelling up will influence other local authority investment decisions outwith the levelling up funds in UK shared prosperity fund. It concerns me and expresses that, unless living up becomes a cross-cutting policy, regional inequality will not, in fact, be addressed. For example, if two or three UK sites were deemed suitable for a specific type of investment, and I was giving the example, but I'm not going to mention it now unless you specifically asked me, what weighting would levelling up carry? So, for example, would a priority one area always be approved over priority two? The first levelling up to investment funds five out of eight were in priority one areas, but then three weren't, so it's about how we ensure that the money goes where it's most needed. Yes, there are several very, very good points there. The first is that we look at a set of criteria, so a priority one area is fast and line, but we also need to assess the deliverability of particular projects. One thing that I would say is that Aberdeen City Council came forward with a particular bid for the levelling up fund. Aberdeen is not a priority one area, but the bid was prepared in an outstanding and effective way by Aberdeen civic leaders, so it deservedly and meritoriously secured that funding. But it's also the case in North Ayrshire, a priority one area, that we were able to provide our funding rather for a particular project and quite right to do. One of the things that we want to do is to work with local government in Scotland and the Scottish Government to address regional inequalities. The whole levelling up white paper was designed to acknowledge fairly that there are inequalities between the different nations and regions of the United Kingdom and within them and that we wanted to work with every willing partner in order to address precisely those inequalities. Of course, there are some areas where the Scottish Government rightly takes the lead because it has the devolved responsibility and it will have the knowledge of the delivery of public services, but it will also be the case that there will be a granular knowledge that people in local government and in civil society have, and then sometimes there will be a strategic element as well. If we're thinking about transport and connectivity, then, as Sir Peter Hendy's UK connectivity review underlined, sometimes you need to think about investment in those areas in a way that improves connectivity within Scotland and also between Scotland and the rest of the UK and indeed beyond. The short answer is to the chief executive of the local authority that you mentioned. We publish objective criteria. Being a priority one area means you're first in the queue, but it's not automatic that you will receive funding from the levelling up fund, so, with respect to the shared prosperity fund, every part of Scotland will receive funding. When the levelling up fund was effectively launched only a few months ago, less than a year ago, there was a very short window given to local authorities to prepare bids, and I know in my one area there was a big panic to get it all together, and I was a meeting with the chief executive myself in the MP. The MP happens to be my wife, so there wasn't really any difficult in terms of getting the co-operation. Although the local authority has a different political tint to ourselves, we all agreed absolutely on the priority for our area, and we secured significant funding for which we're very grateful. First of all, if the MP had taken a completely different view from myself in the local authority, there is a suspicion within the documents surrounding the process that MPs have in effect a veto, so I want you to address that specifically. The second thing is that giving local authorities only three or four months to prepare bids makes it very difficult for some smaller authorities, and I know that they can share resources across boundaries, but sometimes they might want to invest only in their own area. They might not have that in-house capacity, which puts them at a disadvantage, and smaller, poorer authorities could obviously struggle in such cases. Was the timescale that was given for the first allocation of Leiling funding, in all sincerity, to believe that that was really adequate to ensure that the best possible bids were put together in that space of time? Obviously, it may be that in future you would want to rethink that. You'd need to give more time available. Subsequent to that, ironically, since the award was made last October, I spoke to chief executive for just four months of a lapse, and he says, there's no money yet, I quote, there are a number of hoops to jump through, including a final business case. One of the issues with the funding is the amount of bureaucracy, which ironically, the whole purpose of this is to try and minimise it. I realise that's a fairly convoluted question in the sector of state, but I wonder if you can... I think those are very fair points. It was the case that it was done under Fairlake, yes, but to try and deal with all of the points in order. Firstly, no MPs or MSPs do not have a veto on the plan. It's a requirement, and it's an important one, I think, that MPs or MSPs are consulted, and their support is, of course, a powerful additional force to be reckoned with. However, if there is a local authority that, for whatever reason, puts forward a good bid, and for whatever reason it doesn't secure the MP endorsement, the bid will be looked at in its own terms and on its own merits, but it was great that, in the case of North Ayrshire, there was an alignment there. In terms of timing, yes, I think that the timing was not as extensive as it might have been, but we're now giving more time for the successive two more tranches of funding to be allocated. I hope that more local authorities in Scotland will come forward. In terms of capacity funding, we gave capacity funding, I think, to every local authority in Scotland, but we recognise that there's a difference in resource between Glasgow Sey and North Ayrshire or East Lothian, and one of the things that we want to do, and I was talking to COSLA about this earlier today, is to ensure that we can support local authorities to learn from one another, and that my department can also help local authorities to prepare their bid and to let them know whether or not something is likely to succeed by taking them through the criteria on which any allocation, will be made. So, yes, we are learning from round one, and we can do better, but I do think that the £172 million that was allocated, that was money that I think has been welcomed, and it's broadly in line with, so the levelling up fund is going to be, you know, led and determined by the quality of the bids. It's broadly in line with Barnett allocations, so it's just over 9 per cent of the total amount that was spent. In terms of the capacity funding that you mentioned, £125,000 for local authorities, I was advised that that did not go anywhere near the real cost of the bid and the work beyond that, and I know that there's a second round of that. I would not agree, though, that there are some concerns, particularly in smaller local authorities and don't have the resources. You might have to buy in expertise, if you like, to be able to prepare bids, which again takes longer, et cetera, that that could be a disadvantage. As indeed, if local authorities are saying, well, do you know what, 32 local authorities, in 2021 there were only eight awards, is it really worth our well-being down this track if we're not going to perhaps get anywhere near an award, and we may be significantly out of pocket, which could impact on obviously our councillor taxpayers and service provisioners? It's my ambition to make sure that those in local government have the resources that they need in order to make appropriate bids. That was one of the reasons why I was pleased to be able to talk to COSLA earlier today. One of the advantages of this committee hearing is that I can say direct again to election representatives, including those in local government in Scotland, that if they feel that they need additional support from my department in order to prepare bids, we stand ready to provide that support. I hope that, if there are individual local authorities that are worried that they may be shooting into the air, then please do, without prejudice, get in touch with my department and we will work to make sure that we can give you a fair assessment of the likelihood of success. Thank you for that. I'm now going to open up the session to colleagues around the table. The first colleague to ask questions will be Liz Smith, to be followed by Daniel Johnson. You'll be very aware that this committee has recently published its report into the budget scrutiny for 2022-23. It was a unanimous report and not only did it flag up quite a lot of concerns about the Scottish economy but also about the budget process. One of the conclusions that we made in that report was that there isn't sufficient transparency between both the UK Government and the Scottish Government about where the income streams are coming from and just as importantly about where they're being spent. I have to say that that was some of the points that were given to us by people who were giving evidence to the committee during our scrutiny sessions. Can I just ask, in terms of the three new funds that we're discussing here, are you confident that both Governments are absolutely clear about the amounts of money that are available and just as importantly in specific timescales they know what those timescales are? Yes, I think that there's not yet perfect information but we hope very quickly that there will be all the information that this committee and other committees would need and outside bodies to scrutinise effectively whether or not the resource being allocated is fair, predictable and being spent effectively. With respect to the levelling-up fund, as I said, it will be allocated according to objective criteria. It's a fund for which people, as we know, compete but my aim is to ensure that in any given round of the levelling-up fund that Scotland should get some which are no less than would be allocated on to Barnett as a work. For the community ownership fund, it's a smaller fund, but again that's bid-led. For the UK shared prosperity fund, what we want to do is to publish objective criteria, say, this is the amount that we believe that Scotland is entitled to as a result of our manifesto commitment. As the convener has done, people can judge whether or not those figures add up and then we'll say within that envelope this is how we believe it should be allocated to local authority areas. Of course at the moment one of the things that I have to do again that the convener brought out is to talk to Scottish ministers to say is this funding allocation doesn't make sense to you or is it defensible? Final thing is I do think that scrutiny over the effectiveness of spend is important as well. One of the things that I welcomed was work by the National Audit Office and the Public Accounts Committee in Westminster over how some of our other funds had been spent. They made the point that we hadn't necessarily done all of the valuations as rigorously as we should. One of the ideas that we put forward in the Levelling Up White Paper is the idea of a UK policy laboratory so that we have a freestanding body independent of all governments which can help to scrutinise how effectively funds are being spent and can compare policies so that the Scottish Government can, if it's delivering money more effectively for particular ends, show up other administrations but similarly so that there is an objective and independent assessment of Scottish Government spend so that parliamentarians here can also say hold on a moment, surely we should be doing as well as say well, sir. That's very helpful, Secretary of State. Is your understanding that that would be done on an independent basis for all the spending right across the UK? Exactly, that's our aim. That's very helpful. Can I just refer to your very helpful letter to the committee on 21 February when you speak about the engagement with the devolved nations about the three new funds? I just wonder if you can expand on that in relation to some of the concerns that the convener hinted about in relation to some investment. There have been concerns expressed that the UK Government was choosing to engage much more with local authorities and with stakeholders in local communities rather than with the Scottish Government in the prime instance. I just want to ask you about the process of that, because obviously the Scottish Government develops a lot of its policy ambitions through what's called the national performance framework. It's obviously vital that, if this is all to work, there's got to be some articulation between the aims and objectives of the UK Government and the aims and objectives of the Scottish Government. I just wonder if you could expand a little bit on how you see that engagement taking place, particularly in relation to the aims and objectives of the Scottish Government? It's through discussion with ministers that we can come to that shared understanding. I take one step back. When I was in my previous role in the Cabinet Office, we were charged with concluding and then in my current role we successfully concluded the review of intergovernmental relations. That meant that there are specific intergovernmental committees that meet to cover particular areas, so DEFRA, Secretary of State and the Rural Affairs Cabinet Secretary and the Scottish Government will meet ideally monthly. We're setting one up that will cover precisely those areas, so it will mean that not just in advance of, but continuing after the establishment of the funding prospectus, I or my successors will be talking to our counterparts in the Scottish Government and the Welsh Government and the Northern Ireland Executive in order to make sure that policies are aligned. It may be from time to time that there will be disagreements, but those disagreements, I hope, will only come after there's been a process of trying properly to understand each other's point of view, the shared priorities and so on. If the UK Government is spending in a way that is foolish or wrong or counterproductive, then we can be fairly held to account, challenged and face any democratic consequences. What I want to do is to co-operate and what I would say is that there's been a recent example of that in the way in which we approached the new green free ports that we are pledged to deliver together. I think that the committee will be aware that there was an initial difference in approach between the UK Government and the Scottish Government, but thanks to the Scottish Government's finance minister's approach we've been able to reach an agreement. That's meant that there is additional UK Government funding coming to Scotland above and beyond Barnett. It also means that the Scottish Government's strategic priorities when it comes to fair work and to net zero are respected. Obviously, that's a model that we would want to replicate because notwithstanding the fact that obviously the Scottish Government and the UK Government are composed of ministers from different political parties, nevertheless wherever possible we can find agreement and that seems to me to be a good example in benchmark to set. Can I just reference the fact that I think that the understanding and co-operation of things like the taste city deals for example were absolutely first class because everybody was on the same page, the UK Government, the Scottish Government and local authorities and local interest groups were very much on the same page about what the ambitions were for that particular project. I think that was true of the other city deals too. I just wonder what the situation would be where there was a slight difference in the priorities that were being held up by the Scottish Government through the national performance framework and the UK Government. How that would be resolved to the satisfaction of both Governments? Ideally, through open dialogue, open regular dialogue and honesty on our part where we might diverge. I want to try to find unity wherever possible, but one area where there might be a slight divergence and a sensitive issue is potentially future energy policy. My own view is that there is a reason why Bayes exists as it does as a UK department. Energy security for somber reasons of which we are aware really matters. There are legitimate divergent views about how to achieve that, but I think that the emphasis on future investment in the oil and gas sector in the North Sea, there is a difference there. It may well be in the future—in fact, I know that it will almost certainly be in the future—that the UK Government will want to continue significant investment in the oil and gas sector, continued investment in the north-east, in Orkney and in Shetland in order to secure the future of the oil and gas sector as part of a transition. I am sure that there will be ministers in the Scottish Government who would argue that some of that investment might be better prioritised elsewhere. That would be a fair disagreement on which people can conclude, but I think that in almost every other area we could reach a constructive approach and agreement. I have one more question, if I may. This question is much more technical, and I apologise for that in one sense, but I think that it is an important one. You said in your letter, and it is on the UK Government website, setting out the methodology that is being used to measure the areas that you believe are most in need. I think that that is largely based on the indices that have been produced by the ONS. When the Scottish Government makes an assessment of the areas that it thinks are most in need, it uses the formal Scottish Fiscal Commission budget analysis and estimates, some of which are based on ONS input, but others are not. I just wanted to ask you to check that the UK Government's assessment of the areas that are most in need, i.e. the methodology that you are using, is not using different data from what is being used about the Scottish economy. Obviously, if there was different data, there could be different interpretations. Another conclusion from our budget report was the fact that the Scottish economy sometimes suffers from having the Scottish Fiscal Commission and the Office for Budget responsibility having different timescales. Are you confident that the methodology that is being used to decide which areas are most in need is an agreed formula for both sets of Government? I am absolutely confident that our assessment is objective. If there is any difference in the baseline set of assumptions and statistics, I am more than happy to come back to the committee in detail to explain why we have made a particular judgment and where the Scottish Government might have a different view. To my mind, the most important thing is that the more we can have an agreed statistical base that is set across the UK, the better. I am a great advocate for sharing data. I want to share as much data as possible about how we operate with the Scottish Parliament and the Scottish Government. If the Scottish Government has concerns about the basis on which we are making these calculations, we will take an open book approach. If some of our assumptions are out of kilter with the most up-to-date data, we will update that. We have nothing to hide in that regard. When we talk about economic resilience, one of the things is that more sparsely populated areas have less economic resilience. That is an assumption. To take English examples, you find that there are places like North Yorkshire, which are sparsely populated, and therefore have low economic resilience. They are relatively well off if you look at the individual wealth of people because they have a higher proportion of retirees and second homes and so on. You could look at places in Scotland and say that they are relatively sparsely populated. No-one would say that that was one of the areas that had slightly lower economic resilience, but no-one would say that it was an area of deprivation. Of course, there are objective figures and there is sometimes a way of saying that we will use a slightly different set of objective criteria because this is a sharper way of getting the people in need. That is helpful, Secretary of State, because it is crucial that the data that is being used to make those decisions is agreed because, as I say, it could come up in our budget report if it was different. That makes policy making all that more troublesome. I begin by welcoming the Secretary of State, which is refreshing to have a UK minister. I encourage him to go back and encourage his colleagues to do likewise. I think that it is important for devolution's sake that that does happen. I want to focus on levelling up fund and following on from some of the issues raised by Liz Smith and Kenny Gibson. I want to begin by a contextual point. If we look at productivity in Scotland, output per hour varies in Scotland by about 40 per cent. It is said that it is highest per hour in Edinburgh at around £40 per hour and it is lowest in the western isles by £28 per hour. You do not even need to go as far as the western isles. If you look at Glasgow or Dundee, it is about £31. There are huge disparities in relatively short spaces. There are two points that I wanted to ask you about. First of all, that requires a thesis as to why that has occurred in the first place. There is a huge wealth of information about looking at best value and impact. You have six forms of capital set-up in the white paper. I do not see that thesis of why that has occurred. What work is going into that? Is there a danger by focusing on local authority areas that you can invest within an area? Some of those points, if you think about Edinburgh vs Dundee in Glasgow, are about how those connections are made and that it is important that those decisions are not made in isolation. Are those contextual points areas of work within this space? Yes, I think that you are spot on. Quite a lot of the work in the leveling up white paper in the analysis was commissioned and led by Andy Haldane, when he was chief economist at the Bank of England, who was looking at this in detail. It is something that my department has been looking at. Again, it is in the nature of my department that the information that we have about the situation in England is richer, so we can draw some conclusions from that. I think that the conclusions that we have drawn about regional disparities and productivity in England apply in Scotland, Wales and Northern Ireland more or less in the same way. It is not quite exact, but Edinburgh is to Scotland as London is to England. It is not just the case that it is the financial services and political capital. It is also the magnet for talent and it benefits from what the economists call an agglomeration effect or what is sometimes called the Matthew effect to them that shall be given. It is in the nature of Edinburgh that you have a level of educational institutions, prestige employers and, although not every Edinburgh system would say so, transport links, which enable people to get quickly to places of work. It is also the case that Edinburgh has a rich cultural environment as well, which makes it a very attractive place to live and work, due to London. Other cities have suffered as a result of some of their major industries disappearing, so both Dundee and Glasgow historically, if you look back at the manufacturing and engineering industries that were at the heart of their economic success and they were doing better comparatively, they have suffered as a result of that. It is also the case that within Glasgow and Dundee you also have some of the other problems that have characterised places like Sheffield and Bradford in the past. Therefore, when you are thinking about how to improve productivity in those areas, you have to think how can we attract new industries? We cannot direct investment in the way that we did in the past. The shadow of Ravenscrave and Lindwood show that if you absolutely direct investment and you do not have everything else around it to sustain that when chill economic winds blow that you do not get the long-term sustainable investment and economy that you need. Glasgow needs more investment in higher and further education, more investment in science and technology, but we also need to look at some of the challenges that Glasgow faces in terms of crime, drug and alcohol abuse and resilience. The communities that have had an incredibly tough time economically, so you need to look at a range of areas in order to ensure that you can get that productivity up. The final thing that I would say is that, as you quite rightly point out, distance is an issue as well, so Shetland and the Orkney Isles have benefited from oil and gas and also from strong local leadership. It is a very difficult situation and connectivity is critical there. When I was visiting the West Nile last year, one of the things that was reinforced is that the Scottish Government and the UK Government can work together on everything from ferries to digital connectivity to thinking about investment in hydrogen and in renewables in order to meet the most of that community's potential. That has to be part of the whole approach. Thank you very much. With that in mind, I would like to dig into the methodology a little bit more. My understanding in terms of the way that ZEP funds are allocated, first of all, is the indexation based on productivity, unemployment and qualification levels, all of which were given an equal weighting in that indexation. The assessment was made on a scoring system using value for money impact and looking at the distribution across the three core themes of regeneration, transport and culture. I have two key questions. First of all, we are talking about the complexity of the issues that you have just been discussing and I would agree with the entangled nature. Those are quite narrow measures to be using to capture those things in terms of the first indexation, likewise weighting them on an equal basis. My first question is, is this the methodology forever and for all time, or is there work looking at actually trying to embed some of these more complex issues such as geography or other issues into the assessment? Finally, you have stated a number of times already that there is an objective decision making process. My reading of it was that the final decision, once that scoring was taken place, was a ministerial one. Perhaps it needs to be, but that cannot be entirely objective, can it? Is there going to be more work to open up that final round of decision makers? I think that there is anxiety as to precisely what was used to make those final decisions once that scoring had taken place. Totally. Those are all very, very fair points. On the first, yes, necessarily, when you are making an assessment about how to allocate funds, you do not have to, but if you want to try to make it objective, you have to see these are the scores that we assign to certain things. This is how we come to those scores and these are the factors that we are taking into account. I think way back when to when I was education secretary in the UK government, we were thinking when we launched the people premium about how to give more money to students in disadvantaged backgrounds. We used eligibility for free school meals. It is not perfect, but it was a simple proxy measure which helped us to get the cash out of the door relatively quickly to those more or less in need. That is what we have got here, a set of measures which we think are not perfect, but enable us to be judged fairly. What I am keen to do, building on what you said and what Liz said, is have the maximum amount of analysis. People say, well, this is more or less well intentioned, but actually the cash is going to the wrong places in the wrong way and you need to refine your formula and completely open to that. I think that the basis in which the judgments have been set is reasonable for the moment, but it is not to answer your question directly set for all time and path at the open to considering how in the future we can refine the allocation of these funds completely. On the second point you raised about the element of ministerial discretion, yes, I think it always has to be there because sometimes you can get all the data, you can put things in, but as I mentioned earlier you start off by thinking, okay, productivity or economic resilience, throw it in and then suddenly you find that Richmond in North Yorkshire or Ballater come out as the areas which statistically you would think, oh, we deserve the money and you think that can't be right. We've got to revisit that, but one of the things also that's in our mind is we need to be able to show that this process has been objective because all of these decisions are subject to judicial review and should someone wants to challenge the basis we have to be able to show how those decisions were made. I think that it's a good thing because it also means that we can get more value for money for the taxpayer because if the aim is to improve productivity and an additional pound somewhere where productivity is already high isn't going to get you that extra gain, then the taxpayer is losing out as well as the community that should have got the money losing out, so the greater the transparency the better. Just on a very practical level for local authorities looking at the bids for the next round of funding, so on one level you've got local authorities such as Angus or North Lanarkshire who made bids but were unsuccessful, especially thinking about North Lanarkshire they were category 1. Will their success or indeed whether or not there are other local authorities that didn't submit at all, will that be taken into consideration? Likewise, there are other bids such as I believe in the convener's constituency there is the idea project which is part of the North Ayrshire bid. That's a project looking at nuclear fusion that has energy, security implications but much wider externalities potentially. That doesn't seem to be captured within the current methodology. Are those sorts of things potentially up for consideration in future funding rents? Yes. Very helpful. My final question is this. The common thread through my questions is that productivity, ensuring quality are big issues. They are complicated and they cost money. The levelling up funders are worth £800 million in Scotland over the coming years but that's set against a Scottish economy which is worth £150 billion give or take a year. So what at a system level do you expect the outcomes to be from the levelling up fund in financial or indeed other measures? I think the levelling up fund is only one of the ingredients at our disposal because there are other ingredients as well like the separate funding that's come from research and development. 100 million pounds of which will go towards the three innovation accelerations one of which as I mentioned earlier will be in Glasgow. The shift in research and development spend is going to be part of it too as will I hope the way in which we continue to support all sorts of increased competitiveness through export orientation of business. I think the judgment will have to be how much do we succeed in the missions that we've put forward in the levelling up white paper and these missions are UK wide. It's perfectly possible that devolved administrations may take issue with the aspect of the missions. They may regard them as insufficiently ambitious that's fair enough but one of the things that we wanted to do was to say that the productivity gaps between the different parts of the United Kingdom would narrow and that wage differentials between different parts of the United Kingdom would narrow. The way in which we're measuring it in our missions it should be the case that the productivity gap between for example London and Northern Ireland or London and Scotland should narrow. Within Scotland when it comes to narrowing inequality and improving productivity we don't have a metric that we've set ourselves but if it was something that the Scottish Government wanted to do with us we would very much welcome that. I understand that 800 million covers all three devolved nations combined and 450 million is for Scotland. Ross to be followed by Douglas. I should apologise now, Secretary. I'll probably have to leave the meeting slightly before the formal close of the session. I'd like to stick with questions around the methodology. The first one's not Scotland specific. I'm just wondering if you could explain a little bit more of the rationale for using common constituencies as a unit of measurement to cap the number of beds that can be made because it strikes me that it leaves the whole process more open to suspicion of accusations of it being used potentially as a system of patronage for MPs that the Government of the day would like to keep on site for electoral reasons. Can you explain a little bit about why, despite those concerns that have been made before about other systems of funding, you felt was appropriate to use constituencies for the capping of the number of beds? Yes, because the vital role that elected representatives play in being champions for their communities. Again, I know that the people have suggested that there might be an element of the pork barrel in it, but as some of the principal beneficiaries of some of these funds have been the computer of this committee and the deputy leader of the Labour Party, I can see why people can be sceptical and cynical on politics, but then my argument will be, we'll just look where the money has gone and look at the objective criteria that have been used. Obviously, if the convener of this committee is re-elected with an even bigger majority in the next Scottish Parliament elections, that will be for many reasons, but if it's as a result of him benefiting from UK Government funding then that is something that I will have to take on the chin. I'm sure that you'll have your endorsement on the next leaflet going out in a few months' time. Moving into some Scotland-specific concerns and the methodology, which I'm sure you're probably already aware of, but without trying to put words into your mouth, I was taking your initial response to the convener's line of questioning as essentially saying that you're operating the equivalent of a no detriment policy for the amount of funding that Scotland's to receive compared to what it would have from if we were still within the European Union. Bringing that down to a more regional or local level, there are concerns being raised particularly by Highland Council that, as the Highlands and Islands were considered a transition region under European arrangements, they were eligible for more funding, certainly disproportionate to their population share. However, the Highlands were not a priority for the CRF and were ranked lowest on the scale for the levelling up fund. Could you perhaps defend the place that we've got to where it appears? Certainly, are Highland, Nile and local authorities feel that they are now being put at a significant disadvantage compared to if we were still within the European Union? Yes. You're right that, if you look at the priority 1, 2 and 3 areas, there are places that one would automatically assume to be priority 1 areas, like Glasgow and North Ayrshire. However, I think that some people might raise their eyes around thinking that Highland is a priority 3 area. That is a fair point. That's why, in response to other questions, we need to keep these judgments under review. With respect to the Highlands and Islands, it was the case that one of the successful levelling up fund bins was a successful bid from Highland, from Enverness. The second thing is that I'm very conscious of the fact that, for a host of reasons, we need to do more to support the Highland and Island economy. That's why I deliberately chose to visit the West Nile last summer to talk to councillors and to business people there. We're thinking hard in my department about how the specific needs of the Highlands and Islands, for the reasons that you mentioned, can be addressed. Again, going back to some of my answers to Daniel's questions, there are a range of tools. We have the UK Shared Prosperity Fund, the levelling up fund, but there are other things that we can do in partnership with those local authorities and the Scottish Government to deal with those unique situations. One of the things that I would like to do is use UK Government funding to directly provide improved ferry services for people from the Western Isles, Orkney and Shetland. Transport is a devolved responsibility. I respect that. My door is open to working with the Scottish Government in order to do just that. One of the reasons why we've set up a UK-wide islands forum is that there are issues, even though the Isle of Wight is a very different place from Anglesey, which is a very different place from Lewis, which is a very different place from the Orkney Islands, there are common issues that they all have that we believe we should bring together and work on. On that point, on transport and particularly relevant to the Western Isles ferry services that you mentioned, they submitted some evidence raising their concerns about the differences between methodology for Scotland and England. Transport connectivity being a much more straightforward part of the process in England is 25 per cent waiting for it. The argument that they make, which I'm sure everyone around the table agrees with, is that transport connectivity means lifeline services for those communities in a way that it doesn't for many other communities across the UK. Transport is important to everyone, but for some folk, lifeline barely begins to scratch the surface of how important it is. Can you explain a little bit why there is that significant difference in the methodology between Scotland and England and respond to the concerns that have been raised with us? Essentially, that puts some of the least connected communities at a disadvantage because their lack of connectivity is not being taken into account in the methodology whereas, if they were in England, it would be. That's entirely fair, and I think that one of the things that we do need to address are precisely those connectivity questions that you raise. One of the reasons for publishing objective criteria to begin with is so that precisely those concerns can be addressed. Again, it goes back to the point that I made in response to Daniel and to Liz that you can never or you can very rarely have a perfect set of objective criteria that capture every level of need. You can put forward a proposition, you can put forward a set of rules, say that's the basis of which we're allocating money and then people say, hold on a moment, as a result of that, we're losing at them and unfairly so. That gives Governments an opportunity to say, okay, right, yes, actually you do have a point. There may be additional funding or changes to methodology or both, which can help to address that concern. Part of the purpose of the original union connectivity review that the Prime Minister commissioned from Sir Peter Hendy was to help to inform some of those decisions better. For all the reasons that you rightly raise, I am concerned about the fragility in particular of the Western Isles economy and the need therefore to ensure that it has not just the ferry but also the other transport connections that it deserves. I understand entirely that there are differences in methodology between the different nations to recognise different local contexts, but can you explain why the transport connectivity methodology is different given the particularly acute transport connectivity issues that we have in some areas of Scotland? It's a consequence of the policy advice that we will have received from officials about what the best and most equitable way would be of allocating resource. As I mentioned earlier, we can look at a range of different factors and we can be conscious, as you rightly pointed out, that considering some of the productivity challenges that Scotland has faced, we may not have given all the weight that we should to connectivity, but that's because there are other productivity challenges that Scotland faces or Wales or Northern Ireland faces that we've put front and centre, but the whole process of policy evolution and input from colleagues like yourself is designed to address that. I have just one final brief question that, going back to this point of no detriment overall to Scotland from funding, would you be willing to confirm now to an extension of that to the Highlands and Islands specifically that your intention is to ensure that the region as a whole is no worse off in terms of the funding through these arrangements than it would have been if we were still within the European Union? I want the Highlands and Islands to be better funded. Thank you. I look forward to seeing that. That's MSP. That would be a great effect if it was. Douglass to be followed by Michelle. Thank you, convener. The Secretary of State mentioned earlier that meetings are still on-going with the devolved Scottish Government. As a local authority, former leader, one of the things that I liked about the level and up fund is that we could go direct to the UK Government. For me that was true devolution. Will that be up for negotiation with the Scottish Government or is that something that is always going to be reserved to the UK Government? The level and up fund will always be reserved to the UK Government. The ultimate decision will be the UK Government. We want, wherever possible, to work with the Scottish Government, but ultimately these are UK-wide funds. I should say that my colleague Neil O'Brien is talking to Minister Richard Lochhead tomorrow about the UK shared prosperity fund. We always want to reach agreement, but ultimately it's a reserved matter. I guess that it was mentioned earlier in our conflict. Local authorities have their own priorities, the local outcome improvement plan. The Scottish Government has its own priorities, the national performance framework. It will always be the local outcome improvement plan that will determine if a bid is successful and not really the devolved Government's performance framework. Would that be correct? Yes. Again, we will take it into account. We want to reach agreement wherever possible. However, as you will know better than anyone, the bid that was put forward by Aberdeen City for the level and up fund was the fruit of a huge amount of work that was done by the local council, with the local business community, taking into account the views of everyone who cares about the city. With a bid like that, we had to say yes. Even if the Scottish Government had said, hold on, that's not our priority, it would seem to me wrong for the reasons that you are lying, wrong that Aberdeen's civic leaders aren't rewarded for their efforts and their hard work and their leadership. The whole thing about devolution is that you work with every tier of government. When I was talking to COSLA earlier, I was able to quote from Lord Smith of Kelvin, Smith's commission report. That commission report, as well as giving additional powers to the Scottish Parliament, also said that he hoped that Holyrood would give additional powers to local government in Scotland. It is a devolved matter, and that is for the Scottish Government to decide. I think that that is right. One of the things that we are trying to do in England at the moment is to give more power to local government in England. I think that it will be great to see local government in Scotland assume more powers because, as your own example shows, Aberdeen has been enhanced by great civic leaders. I really do look forward to seeing that whole project coming to life. I think that it will completely change the city centre of Aberdeen. One of the other groups that we have in Aberdeen and the north-east region is, of course, the regional economic partnership between the City Council, Shire Council and Opportunity North East. I guess that, from the level and up funds, there is scope for them to be involved also. A lot of the thing that they do is trying to get private money as well to match some of the public money that we have. I guess that there is scope for stadium wood to be involved also when we are putting new beds together for future funding. Again, last year, when I was meeting with Sir Ian and Kate Forbes at an Opportunity North East initiative in Forrester Hill, a life science and healthcare initiative, one of the things that Minister for Cabinet Secretary Forbes and Ian Wood were clear about is that working together across geographies in the interests of the north-east is critically important. I mentioned briefly earlier our view about the future of the oil and gas sector. Aberdeen and the north-east still relatively prosperous compared to other parts of Scotland and the United Kingdom, but prosperity can diminish as well as grow. It is absolutely vital that we think of the north-east, Aberdeen, Aberdeenshire and beyond, when we are thinking about the future of energy, absolutely vital that we secure additional investment in the oil and gas sector as part of a fair transition. We can only do that by using the UK Government's influence and funding alongside strong local leaders and I hope in partnership with the Scottish Government. For the reasons that we both know, safeguarding jobs and prosperity in the north-east depends on investment in the oil and gas sector. Also, for all the somber reasons of which we are aware, energy security in the long term depends on maintaining oil and gas as part of the energy mix in the future. That is something that we are committed to doing and it is a key part of uniting and levelling up. I absolutely agree. Although we still have that demand for oil and gas in this country, it is best that we still produce it ourselves, especially what we are seeing happening in Ukraine in terms of what that might mean to energy security. It is absolutely vital. One last question was, what more can the UK Government do so that local government does not feel disenfranchised by the Scottish Government? It is by having a three-cornered conversation. I was delighted to be invited to speak to the conference earlier today. I outlined the approach that the UK Government is taking in England and the partnership that we want to have. I think that the Scottish Government will be able sometimes to highlight some of the funding and other challenges that parts of Scotland face, quite right to two, but we can also stress that there are things that the UK Government does that are part of the reserved space, which will mean that we will be in conversations with people in local government and in business. We can talk to the Scottish Government about that. It is quite right that Kwazi Kwarteng or Greg Hans are in Aberdeen talking about the future of energy. As a result of those conversations, they can discuss with Kate Forbes or the First Minister everything from land use planning to investment in hydrogen to how we ensure that the oil and gas sector play a part in the transition. It is quite right, too, that people are working together to respect their own responsibilities, but they are recognising that there are particular needs for that level of investment. I think that that is the way to go. We have talked a lot about the specific methodology that is used for the levelling up fund, and you mentioned objective criteria and so on. Despite that, we have ended up in a position where the failure, as you yourself said, to integrate connectivity data from Scotland has contributed to Orkney, Shetland and the Highlands being a part of that. It is being placed in the category that is least likely to benefit from the fund, alongside areas such as the city of London. How confident are you now in the methodology that was adopted? The methodology helps us to make that decision, but it is also the case that, as I pointed out, on the one hand, about two thirds of the funding allocated was allocated to priority one areas, where the level of deprivation is greatest. It is also the case that Ireland benefited. It is also the case that we are working specifically with island authorities through the islands forum in order to ensure that they can have the best possible bids. The basis on which the funding is allocated, as Daniel pointed out earlier, is according to a set of criteria. Priority areas are identified according to a particular methodology that can be critiqued. While you can be front of the queue as a result of being in priority one, it does not mean that priority two or priority three areas lose out, because, as I say, one priority two and two priority three areas receive funding from the levelling-up fund. I have to admit that I am no clearer. We have ended up in the position. Orkney, Shetland and Highland were placed in the category least likely to benefit from the fund, alongside the city of London. How on earth did that happen? I suggest that, had you consulted with the Scottish Government, it might have been able to inform you that that was a ridiculous outcome. I am asking you, with the benefit of hindsight, would you like to reflect on the methodology used that arrived at that position? It is only one part of the methodology. Is it the right part? Is it a good outcome when that happens? The outcome was £20 million going to Highland and three projects in and around Inverness being funded. It is also the case that that was simply the first of three rounds of funding. The conclusion about whether or not funding has been distributed equitably will come at the end of the process. It is a bit like saying that before you know how a play is going to turn out on the basis of which character appears first, you know who the hero or the heroine is going to be. We will have to wait until the curtain falls at the end of the allocation of all of those three rounds. If, as I say, we find out that priority 1, 2 and 3 have been important but not completely determinant factors, then I hope that we can both consider what has worked and why hasn't. I think that that is a rather heroic attempt to talk away that, but let's carry on just now. I wanted to ask you what has your engagement been with Audit Scotland. We have bounced around here around governance, which is of course very important and you yourself have said, scrutiny over effective spending. What agreements have you made with Audit Scotland and what is in the public domain that you can share today as to how you will be accountable to them for the spend that you make in Scotland? I am accountable to the UK Parliament, Audit Scotland and to anybody that you would like to suggest on how the spending is designed, allocated and what the evaluation framework is. What agreement have you made with Audit Scotland in that respect? I am waiting for Audit Scotland to make any suggestion to me about what it would like to do, the information that it would like to have, the evaluation that it would like to make. The same would apply to any independent body or academic institution. We are creating, in the levelling up white paper, for the first time a UK policy lab that will allow policy outcomes across Scotland, Wales, Northern Ireland and England to be compared. One of the difficulties that we face is that we have, for example, a richer data set about educational outcomes in England than we do in other parts of the United Kingdom. That means that comparisons between Scotland and England in educational and skills terms are simply more difficult. A decision by the Scottish Government—understandable, devolved decision—to withdraw even from some international educational assessments means that Scottish citizens are in a data-poorer position. We want to change that. I would welcome any partner in Scotland or elsewhere that wants to ensure that we can have effective and comparable data about public sector performance and governmental performance. I cannot compel Audit Scotland or any other independent body to do anything other than its leadership wishes. Given that Scotland has a different education system, as you well know, I would not be entirely confident in terms of methodology given what we have seen with transport connectivity. Of course, Scotland has a different education system, but one of the things that we cannot know reliably is the extent to which curriculum for excellence has been working or not, because we have much more objective data about what happens in schools in England than we do in Scotland. The English education system competes and participates in more international tests and measures of performance than Scotland. We do not even have that objective basis on which to judge. I would love it for all sorts of reasons if we were in a position to identify what is working in Scotland's education system, both so that those bits of the Scottish education system that are doing less well can emulate the very best and so that those bits of the English education system that are doing less well can learn from high-performing schools and local authorities in Scotland. The moment that we cannot do that because we do not have the data. I sense, Mr Grove, that this is breaking news that not only do you want to take some powers away from the Scottish Parliament in some of the areas that previously resided with the EU, now there are some areas within education that are totally and utterly devolved. No, no, I do not want to take any power away. I just want people to be able to make more meaningful comparisons because, as you quite rightly point out, we all have a responsibility to ensure that some of the judgments that we have made about policy are held to account in our open and transparent. My argument is to bring it on. Anyone who wants to assess or analyse the effectiveness of UK Government spend, whatever the means is, is absolutely delighted. In assessing the effectiveness of UK Government spend, we also need to be able to look at objective data about the effectiveness of Scottish Government spending, and we have less objective data about that. It is not for me to determine the policy, but I think that voters everywhere will then be in a position to make a judgment about the relative merits of individual policies in the jurisdictions that they inhabit and of the Governments for which they vote. Only if you can compare apples with apples, and that is precisely my point about methodology, which was called so wrong in terms of transport connectivity, and I make the point again that you could have spoken to the Scottish Government in the first place and they would have pointed it out. I do not want to quote from my own local council, which was Falkirk, in terms of the delays. They note that the delays, there was increasing concern over damage to the reputation of the applicants, the council and the UK Government, such was the lack of engagement by the UK Government. A local council, whom you were probably aware, did win some money, although it commented that it felt that it was cherry-picking a small number of high-profile projects. What are you going to do specifically to engage effectively, first of all, with the Scottish Government and primarily with the Scottish Government here today in the Scottish Parliament? I mentioned earlier that we concluded the intergovernmental relations review. That means that all UK Government ministers and the departments where they have particular responsibilities will be meeting with their counterparts in the Scottish Government, the Welsh Government and the Northern Ireland. At what point, after it is a done deal? On a regular rhythm. It obviously depends on what each of those jurisdictions want. In the first instance, I speak nearly weekly, sometimes more often than that, to the First Ministers of Scotland and Wales and when they were imposed to the First Ministers and the Deputy First Ministers of Northern Ireland. Most of the conversations recently, for understandable reasons, have been about Covid, but in those conversations any issue can be raised. In advance of the publication of the levelling up white paper, I held a specific call again with all of the First Ministers to outline the additional investment that we were making. It will also be the case that I will be meeting whoever is nominated from the Scottish Government on a monthly basis to discuss specific housing and local government issues. It is also the case that I have spoken to COSLA and addressed their conference today. I have visited and will visit any local authority in Scotland that would like me to visit, whether that is Glasgow, Falkirk, Edinburgh or has been in the case in the past, Aberdeen, Highlands, Western Isles and so on, in order to ensure that we work for them. My department has increased the number of UK Government civil servants working in Scotland in order to ensure that. The more the UK Government can work with every elected representative in Scotland, including in Falkirk, the happier I will be. That is the neediest area, which I realise other colleagues have touched on already. In your letter back to us, which was helpful, you say that 60 per cent of the bids have gone to category 1 in Scotland. I suppose that, to some extent, I find that a little bit surprising if we are really levelling up should it not be 100 per cent. We have a cross-party group here, which is on industrial communities, which tends to focus on former coalfields and other industrial areas. They work closely with the industrial communities alliance. They did a analysis of the 105 successful bids. They were making the point that of the 94 successful bids in England, Scotland and Wales, only 42 are in the poorest third of subregions going by GVA per head and 14 of the successful bids are in subregions where GVA per head is above the UK average, including six in London. Based on that, some people might think that the money is not really going to just the poorest areas? I think again, in a way, your question is part of a debate with Ross and Michelle as well, in that the priority 1 areas were identified in a particular way. It is perfectly fair to say that the process by which we arrived at those priority 1 areas could be improved. The thrust of your question entirely fairly is if we are trying to deal with low productivity and poverty and inequality, surely it should only be priority 1 areas, but Michelle and Ross's view would be well actually priority 1 areas miss out on some of the subtleties of sets of challenges that some communities face. I think that it is also the case that even within some of the wealthiest regions or cities of the United Kingdom, there is inequality as well. Any representative of Edinburgh or Glasgow would say that the wealth of the morning site is the poverty of Wester Hills. Alongside the wealth of the west end of Glasgow is the reality of life and drum chapel. You can have geographies that fall into category 2 or category 3 and within that you can have areas that really need help. Your broader point about Caulfield communities is a very fair one. One of the things that I am very conscious of is the legacy of industrial scarring in parts of central Scotland that we need to take account of. That is a factor, but those are not the only communities in Scotland where there are economic challenges. I take your point that there are poorer people in communities and I have been in Aberdeen and seen poorer areas in Aberdeen, for example. It would also be said that generally a poorer person in a richer area will do better than a poorer person in a poorer area. I do not know if you would accept that. Overall, yes, but there will always be exceptions to rules, but yes, I have a fair point. I take your point, too. It was an answer to Michelle Thompson that the first bed that appears is not necessarily typical of what is going to come thereafter. The first one in Glasgow that I am aware of is £13 million for the Pollock Stables. I am all for horses and I am all for a bit of culture. Some people would feel that that was not the top priority if we are trying to get the poorest communities in Glasgow levelled up. Presumably we could have built 130 houses for that. What is your answer to that? That has sent out a bit of a strange signal, I would have thought. There are two things. One is that this was a bit that came from Glasgow City Council itself. Great City, Great Council and Great Council leader. If you as an elective representative in Glasgow think that the City Council should be taking a slightly different approach towards its bids, that is fair enough, and we will assess them. The other thing that I would say is that poorer parts of Great Cities can also benefit from investments that make the city overall a magnet for additional investment. We can legitimately argue whether investment might have been better targeted in the east end rather than in the south side of Glasgow. It is also the case that investment that makes Glasgow overall more successful should benefit all its citizens. I am very much in favour of the borough collection, for example, as being upgraded, as you probably know as well. By that argument you could all say that any expenditure is going to have a bit of a boost and it needs to be targeted to some extent. If I could go back to your letter, one of the questions was about what happens if, during the bid process or actually spending the money, something untoward happens. You answered that to some extent, but specifically on inflation. I think that inflation is a little bit higher and looks likely to be a little bit more persistent than we had most of us had expected. What does happen if a bid comes in? Can there be any extra money if inflation takes off? I would not want to at this stage say that I would not want to have people think that they can come in, bid at some x and then return and say that costs of risen can have an extra amount. By definition, if it is a good bid, well-funded, good business case, things proceed and then right at the very end there is a need for some additional finance just in order to make sure that things can be delivered, then we will always look sympathetically. Again, it should be the case, as bids come forward and they are fairly assessed, that a business case will take account of potential inflationary or other pressures. All sorts of things are going to happen. The unexpected can hit economies and can particularly hit individual communities. I would not want to be insensitive, but it is important that there is a degree of budget discipline when bids are put forward as well. I am all for budget discipline. Your letter said, help troubleshoot delivery issues, which I did feel was a little bit vague, but I am encouraged by what you have just said, which is look sympathetically, which I think is a little bit stronger and probably will reassure some people a bit more. To change it to a bit different subject, we have a very long title there, which I was reading, but it is an intergovernmental relationship. The whole budget process, Liz Smith touched on budget earlier on about transparency and things like that, but I was thinking about the timing of it. Clearly, the last few years have been strange years, so we can leave them aside in a sense, but even before that, the ideal to me is that, first of all, the UK sets its budget and then Scotland, Wales and Northern Ireland sets their budgets and then local government sets its budget. That would seem to be the kind of logical process, but we have not really been there recently. I do not know if that falls within your remit at all. I am sure that the chancellor and people are a part of that too. Do you think that in the longer run we can get to that kind of place where first the UK sets its budget, then the devolved parliaments and then local government? Unideally, but one of the things that I have found is that finance ministers in any government tend to make decisions and the rest of us find out about them afterwards. That is a fair answer. That is quite a good answer. I will leave it at that. That is the exhausted questions of the committee. I have a few more to wind up, but not too many. I will be giving you the final word, Secretary of State. It was to follow on really from what John asked with regard to inflation, because the prospectus for the levelling-up fund published in March 2021 explained that, and I quote, "...once funding awards are decided, relevant local institutions are responsible for their delivery, further contributions from the fund will not be provided to meet cost overruns after funding has been agreed." Obviously, that was in March last year. I am just wondering if there is an update in that position, because you seem to hint in your answer that there is a possibility of flexibility, because we are now at a situation whereby we could be facing inflation at 7 per cent. I am concerned about sustainability, but we do not want its projects to be 80 per cent, 90 per cent that we have completed, and then they end up being a white elephant because there is not the money available to finish it. I do not think that that would help the UK Government, the local authorities, the Scottish Government or whoever if that was to be the case. Are you telling us now that that position is softened? You did talk about fiscal discipline, which I think we all accept is important. Are you saying that that is no longer the kind of tablets of stone that appears to have been in March last year? The inflationary situation, I appreciate, would not have been envisaged possibly a year ago. If there is a 2 per cent inflation, you will have to manage that, but when we are getting 7 per cent, who knows what the impact of today's conflict will be on that going forward? How is that going to be managed? I do not think that the Chancellor of the Exchequer would thank me for saying that people can automatically add 5 per cent or 7 per cent to the cost of a project like that. As you rightly pointed out, we would all expect a degree of budget discipline. I also think that you point about a project being close to completion and then not wanting to spoil the ship for a heap of tar. I do take that point. The position as outlined is the position, but of course ministers always exercise discretion and flexibility in order to make sure that successful projects can be delivered. I think that that is important caveat, because what you are saying is that you will look at an individual project by project basis to see whether an increase is justified in certain processes. Yes, exactly. The whole point is that we want to work closely with local government and delivery partners in order to make sure that projects are successful. From today's discussions, you have touched on things such as education, ferries and local government, all of which are devolved. In fact, education, along with the legal system, as you know, is part of the active union preserving Scotland's unique education system. We know that, for example, a £559 million adult numeracy fund will be managed by the Department of Education across the United Kingdom. Is that a first since 1707? I am not really aware of it, but I understand that such matters might allocate funding to Scotland, but it would really be a decision to be made here in Scotland. Yes, the decisions would be made in Scotland about how that funding would be allocated, but with that wanting to quibble with your essential point, manifest it in the case that both before devolution and since 1707 Scotland set its own distinctive education system, but it has also been the case that Scotland's universities, which, of course, four of them predate the active union, also benefit from UK Government funding. The funding is managed, not the funding allocation, because it is about the funding being managed by the UK Government, not the funding being allocated. There are two things there. One is that some of what we will be doing in adult numeracy and, indeed, in education overall is providing digital resources for people across the United Kingdom. Anyone can turn them on and off, as it were, but the money, the adult numeracy funding, we will talk to the Scottish Government about how it will be distributed, but ultimately it will be for the Scottish Government to decide. The kind of levelling up funding white paper explains that UK Government is to embark on, and I quote, a process of sustained and systemic engagement and consultation with a wide range of stakeholders that, including devolved administration of the white paper, will set out further detail on a number of these policy commitments and future publications. In addition, we will introduce legislation to Parliament to underpin and statute the changes fundamental to levelling up alongside where the planning measures appreciate that. In terms of Audit Scotland, which has been touched on, will there be a formal role in that legislation for Audit Scotland in order to look at how funds are being effectively spent in Scotland? I am completely open to that. That is very positive. We are up to 30 seconds from our 90 minutes, so what I would like to do is allow yourself, Secretary of State, to make any further points that you wish to make before we conclude this meeting. I just want to say thank you very much to you and all of the members of the committee. As was indicated earlier, the more UK Government ministers can appear in the Scottish Parliament to answer your questions, the more that is a demonstration of how devolution can and should work. On behalf of the committee, I stress to all my colleagues in the UK Government that a warm welcome and tough questions await them when they come to Holyrood, but it is both a duty and a pleasure to come here. We are all pussy cats really up here. I just want to thank you formally for coming along in person, which I think is really important to this committee. We really appreciate people taking the effort. I know you could have spoken to us virtually, but you should have not had the same impact, I believe. We would not have been able to scrutinise quite as effectively, so thank you for that. We do have an important role to play in scrutinising this committee and we certainly look forward to working with you and your colleagues in the months and years ahead. On that note, I wish to close this meeting.