 Good morning and welcome to our 25th meeting in 2023 of the Finance and Public Administration Committee. We have one public item on the agenda today, which is an evidence session with the Deputy First Minister and Cabinet Secretary for Finance on the sustainability of Scotland's finances as part of our pre-budget scrutiny. This session will also cover the evidence we heard深ly in the year with regard to public service reform. Ms Robison is joined by Scottish Government officials today, Dr Alison Cumming, director Dr Andrew Scott, director of tax and revenues and the in-storey head of local government finance. I welcome you all to the meeting and invite the cabinet secretary to make a short opening statement. Thanks very much, convener. I will be short and thank you for the invitation to join the committee today and I welcome the opportunity to discuss the preparations for the 2024-25 budget. I'm very aware of the committee's long-standing interest in transparency and recognise the importance of my appearance here to engage with the committee in advance of the budget. The 2024-25 budget, the Scottish Government within that will be looking to deliver the vision set out by the First Minister in both policy, prospectus and programme for government. We will be clear and anti-poverty, pro fair and green growth and focused on delivering high-quality public services. We also need to recognise the challenges facing Scotland's public finances, including the economic shocks that we have faced over the past three years, sustained high inflation, war in Ukraine, the fallout from the UK Government's many budget last year, Brexit and the on-going impact of the Covid pandemic. This will be a budget of difficult decisions and we will, in making those decisions, require to address the scale of the challenges facing our public finances. I recently met the chief secretary of the treasury at the finance inter-ministerial standing committee on 20 September. We had a frank conversation discussing the current economic and fiscal context alongside the Welsh Minister for Finance and Officials from the Northern Ireland Executive. It was made clear to the chief secretary the need for the UK Government to provide sufficient support to the devolved Governments to ensure that we can adequately manage the pressures arising from those challenges. I can confirm that the Government's intention to publish the draft budget is on 19 December and I would like to reiterate the reasons behind that decision. We are restricted in our planning for the budget by the timings of the UK Government's autumn statement and the accompanying office for budget responsibility forecasts. The agreement between the Scottish Government and Parliament to deliver a budget within three weeks of a UK Government fiscal event was made at a time when there were fewer options available to the Government in terms of policy and tax options. As such, the forecasting produced by the Scottish Fiscal Commission is now significantly more complex, as are the associated decisions to be made by ministers. Therefore, adhering to the three-week timeline is no longer practically possible, unfortunately. However, I am keen to deliver a December budget. The date that we have proposed of 19 December ensures that we will lose only one sitting date of Parliament. I hope that you will agree that this is a reasonable compromise that will provide sufficient time for scrutiny and the passage of the budget bill once Parliament returns from recess. I look forward to answering your questions today and I am happy to confirm that I will make myself available to the committee throughout the budget bill process. Thank you very much, Deputy First Minister, for that very helpful opening statement and good morning to you. Obviously, we have taken a lot of evidence so far in terms of this. Most of the questions that I will be answering will reflect on the kind of responses that we had. You talked about the challenges that are facing us and, indeed, the difficult decisions that are being made and, indeed, your discussions with the UK Treasury and Government. I am just wondering in terms of discussions within Scotland itself, as well as those wider discussions. In evidence, Fraser Vallander said that there will have to be discussions and decisions made about whether increases in tax, reductions in spending or prioritisation across different programmes. Where are we at this stage in terms of those discussions? You are right that we are obviously looking at all of those issues and will continue to do so right up to the budget. I think that the last time I was in front of the committee, I talked to you about some of the work that was on-going around looking at all of our programme spend, around whether or not all of it delivers on the priorities that have been set out. First Minister clearly set out the policy prospectus that followed through into programme for government around the three key missions of community equality and opportunity and asking ourselves whether some of those programmes, some of which have been around for quite some time, meet the test of those and we are continuing with that work. In terms of the other levers open to us, clearly the limited tax lever that we have, we have to consider very carefully. We need to consider the consequences of any further changes to the changes that we have already made. I would make the point that, as a consequence of the changes that we made in terms of last year's budget, generated £520 million from income tax as a consequence of those changes. That has been critical in helping us this year, not least that we have had an almost equivalent figure of over £500 million of additional pay pressures beyond what was budgeted for. All of those things have to be taken in the round. Of course, we are looking at workforce in terms of what the needs are of our own organisation but also across the public sector in terms of reform. How can our public services work better and more efficiently? That work has been going on for some time. The digital programme across the public sector has been working well in terms of generating opportunities for more efficient services. We will continue to look at how we can address what is a very challenging set of circumstances next year, where the budget is going to reduce in real terms. We will have to look at using all of those levers and making some very challenging decisions. We will try to be as open and transparent about that as we can, and we will set out our conclusions of all that work as we get to the budget itself. I am very happy to make sure that I try as best I can to keep the committee updated of that work as it proceeds. Thank you for that. The whole theme of the budget is about fiscal sustainability. I realise that you have two major issues to address. One is the budget for the forth coming year. You are also trying to put the Scottish fiscal sustainability on a long-term track. Professor David Heald, in his evidence to us, said that, the UK tax system is a total mess in the Scottish Parliament and has made the tax system in Scotland worse. We are in a nonsensical situation, and he goes on to talk about how the tax system in Scotland is not particularly progressive. For example, the marginal rate on someone earning £43,662 is higher than it is for someone earning £10,000, more because of the interaction of national insurance. How will the Government address that matter? In terms of the outlook, you are right. It goes beyond the next budget. When I set out the TFS, it was quite clear about that in terms of the projections going forward of the gap that had to be addressed and the levers that we would use in order to do that. In terms of ensuring that we make decisions that are prioritising, targeting, that we grow the economy and grow the tax take from that and that we take the decisions that we need to take in order to close that gap. It is very challenging given the headwinds that are here and coming at us next year and beyond. I cannot underestimate the impact of inflation in all of that. The impact of inflation is profound in every single part of the public sector. In terms of the tax system, no tax system is perfect. I think that would just be it. Let's just put that out there as a point of agreement. When the Parliament was established and the tax powers were established, of course, the starting point was the UK tax system, so we weren't starting from a blank sheet of paper. What we have done with the additional tax bans is to try and bring some fairness and more progressivity to our system in recognising that it is not fair to have such a wide-ranging income band within the UK tax system that is tax the same rate. That is very difficult to defend. What we have done by bringing those additional bans is to try and make it fair and progressive. We continue to look at what needs to be done. One of the reasons why we established the expert group that has met twice now is to look at a number of issues around the longer-term view of the tax system. What does that look like? Taking a more strategic approach to tax, which I do not think that any UK has certainly not done and we are at the foothills of trying to do. To try to get a more transparency around people understanding what the tax system does, there is still a level of confusion about the interaction with the UK Scottish tax systems. There is a genuine attempt to try to make that more visible and to be quite frank about some of the decisions and the consequences of those decisions around what we do with our tax system. As I started off by saying, the revenues generated by taking different decisions from the UK Government have been important in really difficult financial times. If we had not done that, we would have had to have made even more difficult decisions than we have. Both Scottish financial enterprise and Professor Bell and Evans committee said that if Scotland does end up with higher tax rates in other parts of the UK, that will be seized upon by other parts of the UK whenever potential inward investment opportunities arise and an attempt to ensure that they do not come to Scotland. Professor Bell is on to say that it is the impression that is given not just to tax rates themselves. That matters quite a lot too. What is your view on that? If you look at the levels of inward investment to Scotland, the latest inward investment figures show that we are second to London and the south-east in terms of attracting inward investment. That is testament to the SDI and the work that it does in being very effective in bringing inward investment to Scotland, the skills of the workforce. Investors will look at a whole range of issues and matters around our country. They will look at where it has strengths in terms of the strength of key pillars of our economy, the sectors that we are known for, our universities and the skillsets there. Investors will look at a whole range. The fact that we are continuing as a country to do well in terms of inward investment gives a perspective that there is always improvements to make. However, in those investment decisions of coming here to Scotland, I think that they tell a very strong story. Thank you. You touched on universities, so I will just ask about that next time. Universities Scotland and there everyone said that we still punch well above our weight in Scotland. For example, about 13.25 per cent of research and development spend is in Scotland and, of course, we only have about 8.2 per cent of the UK's population. However, that has declined from about 15.4 per cent in recent years. Universities Scotland are of the view that if we want to continue to outperform the rest of the UK and indeed encourage new business startups, which will lead, of course, to more people being in work and highly skilled jobs and paying more of the taxes that we require to fund our public services, we need to invest more in research and development startups and innovation. I am aware, convener, of course, of life sciences, for example of a significant company that moved from Dundee to Cambridge, because there was not, for example, enough investment in lab space. I am aware of issues in relation to Harriet Watt looking for similar investments in order to advance the AI, again because they are threatened with competition from Cambridge. They are doing well against Cambridge and other parts of the UK, but they want to continue for us to have that advantage. We win some, we lose some. We have actually attracted businesses, I have to say, from Cambridge, so it is not a one-way street. However, how are we going to ensure that investment continues public sector investment? I am just leaving it all to the private sector, because what universities have said is their research, and I am sure that the Scottish Government has access to it. They said that for every pound that is actually spent in R&D, it creates a further £8 of investment in the sector. What we are going to do is continue to leave that and increase that, because all economists who are speaking to us are saying that if we broaden the tax base, we will have more people paying with higher salaries, paying more tax, and that will fund the public services that we all want to see. There is a lot in that, clearly. In the MTFS, we talked about needing to focus on seizing opportunities in areas where Scotland has a competitive advantage. Supporting entrepreneurs, start-ups, scale-ups and helping businesses to raise productivity, boosting labour market participation. One of the important things in the programme for government around that was our enhanced childcare offer, but the university sector has a hugely important role in all that. We need to listen to that. That is the first thing. We need to make sure that we are maintaining Scotland's competitive advantage. You are right, it is a two-way street. Sometimes we have been successful in not just retaining key research and development opportunities and businesses, but we have attracted some to Scotland, but that has not always been the case. We need to pay attention where it is not the case of what have been the issues that have either attracted that company to go elsewhere and what can we do to try to avoid that happening in the future. There are huge opportunities for us. For example, in terms of the tech scaler, we have invested £42 million in our national tech scaler network to support the next generation of Scottish start-ups over five years. A codebase, which I visited quite recently, was awarded the contract and will act as a service provider for the tech scaler. It is very excited about the opportunities for Scotland within that sector, but we must not be complacent. I do not want anybody on the committee to think that we are in any way because it is a very competitive world and Scotland needs to compete on global stage. We need to make sure that, where we deploy public money to lever in private finance, it is in a strategic way. We cannot pay for everything and we need to use our public investment wisely in order to lever in private investment that we can into Scotland, particularly in those key sectors. The small business, for example, welcomed the £15 million that is going to be committed to helping entrepreneurs. However, when one thinks of the size of the Scottish budget, that is not even one tenth of one percent of the Scottish budget. It is about the issue of balance if we are actually going to retain and attract the people who are going to pay the taxes. It is not necessarily about increasing taxes, which came over strongly from witnesses, but broadening the tax basis is more people earning more and therefore paying more. Will the Government look again at the balance of public resources going into boost these sectors? We will get a disproportionate return on the economy going forward. Enset is still the right economic plan. It was developed with business and with sectors, the key sectors that we have referred to. It absolutely focuses on those areas that are the areas with the strongest opportunity for growth. Then we have decisions about, with that public investment, where do we put it, because we cannot put it everywhere, as you have just alluded to. We have to be strategic on how we can utilise public funds in order to lever in that private investment. That is the key. Enset sets out some of those priorities. That was followed up by some of the investments that you have referred to, one in terms of the £15 million for entrepreneurs, but there were many others as well. We should absolutely continue to listen and we will be talking to, for example, the investor panel. The First Minister has met the investor panel on two or three occasions where there is an appetite to come and invest in Scotland. Clearly, there is an appetite, but we have to make sure that that can land because investors want a return for their investment. The Government's role is to reduce risk to incentivise, to show leadership and to provide that seed-corn investment for private investment to follow. A lot of discussions are going on in that space. About income tax, I am sure that we will get into some of that later in the session. The recent evidence that we have is that income tax performance is improving and is outperforming the rest of the UK from the risk tax receipts that we are seeing coming through the system. There is cause for optimism. We are seeing more revenues being generated through tax system. There is a whole range of reasons for that in terms of the post-pandemic recovery and many other reasons. I am happy to get into that at some point, but I do not want to leave the impression that we are not seeing progress there. I think that we are, but there is always more that we need to do. I would suggest that in the UK and Scotland most of the additional revenues from fiscal drag, rather than anything else, caused by high inflation. Capital is an area of critical importance. I raised it at first months, as I said last Thursday. The UK Government is going to cut in real terms according to the order of general Scotland's capital allocation by 7 per cent over the next four years, which is a major issue because our witnesses, for example, Scottish Financial Enterprise, talked about how critical it is to improve Scotland's infrastructure, for example, not just on the ground in bridges, harbours and roads but also in the digital space. Last year, when your predecessor, John Swinney, looked again at the budget and the commitments that had to be made due to the need to meet wage increases, some money was taken out of capital. Clearly, capital is essential, as all our witnesses have suggested, for economic growth. Given that the fact that capital is likely to be public sector capital, should say, is likely to be more scarce in forthcoming years, will the Government commit to ensuring that capital is not switched to resource and is not invested exactly as it should be? I know that the Government went to the Treasury to get permission to do that, but I would hope that the Government will continue to invest as it should be invested. You are right. The capital investments that we make are important for economic growth, and that is why I think that it is extremely concerning. First of all, UK Government did not inflation proof their capital budget, which has resulted in a 7 per cent real terms fall in our Barnett capital funding over the medium term between this year, 23, 24 and 27, 28, and that has significantly impacted on our ability to deliver on the capital infrastructure commitments, and it will impact going forward. Clearly, we are looking at the choices that we have to make. Also, if you think about that alone, plus construction inflation was running at 25 per cent last summer, all of that has an impact on the money that we have and what it can purchase, what it can build, and how far it goes. It is a double whammy of less capital, and that capital is not going as far as it once did. That is a huge issue for us. On what we do about it, as I have set out in MTFS, we are revisiting our capital budget and our infrastructure investment plan, and we will set that out alongside the budget for 24.25. We are also looking at how we might be able to lever in some of that private finance that we talked about earlier on in terms of additional capital availability through other sources. We will leave no stone unturned to be able to continue to make progress on the infrastructure that we have. The Audit Scotland paper on investing in Scotland's infrastructure identified all the issues and the challenges that it leaves in terms of the decisions that we have to make. We will, as I say, have to take those in a way that prioritises those projects, so that we will have the biggest impact and slow down the delivery of others over the next few years, without getting away from that. It is understandable that there will be a reprioritisation of capital spend. It is important that economic growth can come out of that, leading to increased tax revenues for public services. It is going to be very important. Although the Scottish Government has a growth strategy, it is perhaps not being as clear as it should be, and that is something that we need to show going forward. Obviously, an issue that came up significantly is that it touched on the Government's three priorities. The Scottish Fiscal Commission has said that, by 27.20, Scottish Social Security benefits will cost about £1.4 billion more than the Scottish Government receives in positive block grant adjustments. The difficulty is that that money has largely had to be diverted from core public services such as health, education and local government when you have a more or less fixed budget and that, paradoxically, those being impacted most are the poorest people in our society because they are the ones that rely mostly on those services. Those who depend on them are those that have been impacted. Do you accept that? What I would accept is that the Scottish Government has made active choices around where to invest in terms of social security spend. A good example is Scottish child payment. I would hope that everyone would agree that, particularly when you think what we have just been through or are going through in terms of the cost of living crisis, that the fact that that will have lifted 50,000 children out of poverty who would otherwise, families that would otherwise be struggling even more than they are, is an investment that is the right investment. Of course, deciding to invest in social security supports that go beyond the block grant adjustment means that we have to raise that money somehow. The key pillars of spend are social security, the NHS and health more generally and, of course, the other key pillar is local government. All of which, of course, has been impacted by inflation and the need to pay for inflation-busting pay deals, none of which is resented, but it has had an impact on the budget. I think that a lot of headwinds are impacting on the budget, not just social security spend, all coming at the same time and all putting pressure beyond what was budgeted for when the last budget was set. In terms of how we have been trying to manage that, we have tried to do that in a way that focuses on how we keep people's heads above water in a cost of living crisis. We have prioritised spend on what is absolutely critical and that has meant difficult decisions elsewhere. The local government budget did rise in real terms by 3 per cent, but it will not feel like that because inflation was running at 11 per cent at its peak, but we did not have an 11 per cent inflation proofed budget to be able to pass on that funding to local government or to health. Although we have tried to protect the health budget within the decisions that we have made, the 11 per cent inflation has had an impact on health as well. There is no getting away from those very difficult challenges, but we have tried to make the best choices with the resources that we have available in a very difficult context. Those choices are pretty clear for everyone to see. I thought that the Scottish Chell payment had lifted 90,000 children out of poverty, but it certainly had a very positive impact. Yes, it has lifted 90,000 children out of poverty, so it has lifted 90,000 children. I was underselling the impact, convener, so thank you for the correction. Indeed. That is less than a third of the increase in the social security spend. Do you not accept, though, that if you are reducing money in other areas of public expenditure, given that people who are in the lowest quintile in terms of their household income are the most likely to depend on those services that have paradoxically well impacted the pandemic? I hear the point that you are making, and it is not lost on me. In normal times, a 3 per cent real terms increase to local government budget plus the resources that we have put into local government for pay would have been able to support local government in terms of its pay deals that it is trying to negotiate at the moment. However, inflation has meant that the pay settlements that we have seen across the public sector are way beyond what any part of the public sector had budgeted for. I just make that point because it cannot get away from the fact that that is an absolutely critical driver of some of the problems that we have. In terms of social security spend, you are right. It is not just about Scottish child payment. If you look at the adult disability payment, for example, we absolutely need to be on top of what that looks like going forward. We have been under pressure from cross-party representation in Parliament to make the system more generous, but that comes with a cost to social security spend by making it a less more dignified progressive system based on dignity and respect, which means that it costs more. That is not the wrong choice, but it does cost more. Therefore, social security spend is set to rise and we need to make decisions elsewhere, whether it is on spending decisions or whether it is on revenue raising decisions in order to make sure that, going forward, we have a ffiscally sustainable budget. The Scottish Government has a more diverse position in the UK Government because it deals with the demand-led programmes such as social security through annual managed expenditure because we have to fit it within a more or less set budget. To finish off, I will open out to colleagues around the table. Transparency obviously came up a wee bit, so I am just going to ask about that very briefly. One is whether the Scottish Government will do more to highlight within the budget the money spending on mitigating UK, the parts of the reserved areas that the Scottish Government is paying for, the bedroom tax is the obvious example. Secondly, that also came up from evidence, and it said from the Fraser Valland Institute that we have reinforced that we think that it will be important to have more information about in-year execution and about comparing plans with actual outcomes because we might be missing some important information on how much of the allocation of capital is being spent in-year might also be that a 10 per cent cut in in-year allocation is a different percentage in actual execution. Briefly, that is just about—we all go into the debates in January for the usual budget knock-about, but I think that what is important is that we are all speaking the same language, at least in terms of figures, so that we are not—the Scottish Government is not talking about apples in the Opposition Oranges. That is about trying to ensure that the information that we actually detail in terms of last year's expenditure—this year's expenditure in next year's—is measured in the same way and can be compared to each other so that we are all talking the same numbers. On your first point about transparency and mitigation, that is an important point. There are some obvious areas of mitigation around DHPs, around the Scottish welfare fund, but there are also probably more discrete areas of mitigation of areas where we are having to support, spend because of decisions being made elsewhere. We obviously made the decision to up-rate the welfare supports that we have with inflation because we recognised that it would be incredibly difficult in the cost of living crisis to see real terms cuts to benefit support, but all of those issues come at a cost. If there are ways of giving more transparency to what that growing mitigation calls for us often in this place to mitigate further and further and further, that becomes very difficult on a fixed budget. On the transparency point and a bit more detail, I think that this was contained in your letter in essence about the in-year execution, the actual outturn. It is fair to say that we have some very difficult in-year pressures that we manage. We are managing at the moment, trying to help to get to a balanced budget, and we have to, of course, balance our budget. We have every single year, but it is very, very challenging with the levers that we have. Not just us saying that, incidentally, the Welsh and Northern Irish are probably, if anything, in a very more difficult position because they do not have some of the levers that we do have. That process is an on-going process, and it is quite difficult because you set a budget but then quite quickly get into a situation because of all the pressures and headwinds that you are immediately having to look at in your savings. Following the money through all of that can be quite complex. It is not an easy process, but there is work going on that maybe Alison could reference that might bring more transparency to the process. Thank you, Deputy First Minister. We are carefully considering the letter that came in from the committee last week and the recommendations that you made there to see how we can better join up the spending plans with the historic spending. To manage expectations, it is not something that we can do. I suspect that we will have a staged process as to how we improve that transparency and how we work with the committee to build that up, recognising that we have been making improvements over the past couple of years, including starting last year to publish the classification of functions of government co-fog data, which I appreciate is on the budgetary plans, but provides that extra ability to follow through and compare between years how the budget is being applied. Also in the transparency space, we are developing an online portal to bring together and present our fiscal data in a more accessible, open and understandable way. We are looking at how we can benchmark our performance on openness and transparency against the IMF's fiscal transparency code and the open budget index. We recognise that there is more that we can do in this space and that it will be, as I say, iterative over a number of budgets. As we work towards the next spending review, what can we be putting in place in a single year and a multi-year basis? I will open up the session to colleagues around the table first to ask a question to Michelle, to be followed by Liz. Good morning, panel. Thank you for attending today. I have a further set of questions, even in addition to the conveners, because part of our challenge is the breadth of what we have got to cover. You have already outlined eloquently the fiscal challenges. Off the back of that, have you had discussions with other political parties and have they approached you thus far, indicating what would be their preference for policy decisions? In particular, given the shortfall, which is often talked about in the chamber, have they set out their plans for their ideas of what should be cut? Not yet, but interestingly, Michael Marra was present at a COSLA political panel just last Friday. Of course, local government audience has challenges in the same way as every other part of the public sector, so I made an offer to all those on the panel from all the parties. That was, first of all, that my door is open to hear any constructive suggestions around different choices. We will set out very clearly our choices, but if there are particular choices that others want to make and they want to come with the suggestion of where they think the money could be redirected from, then I made that offer to all of them there last Friday. Genuinely, when you look at the position that we are in, there might be some attempt to somehow make this out to be a particular or peculiar Scottish problem in terms of Scottish budget. I can say categorically that it is not. I sat in the room with the Welsh, with the Northern Irish and we are facing exactly the same position. If anything, we have levers at our disposal that the Welsh and the Northern Irish do not, and the Northern Irish do not have politicians to be able to articulate some of those issues, so they are in a particularly difficult position. We stand absolutely together in saying that the ability of devolved administrations to manage the headwinds with the constraints that we have is exactly the same whether we are in Scotland, Northern Ireland or Wales. That was the point that we collectively made to the chief secretary to the Treasury. There are no easy answers here. There is nothing that is sitting there as an obvious tool that we have not deployed. We are deploying all the tools that we have. However, as I said, my door is open. If there are parties that want to have a genuine, serious discussion about the choices that we have to make, I am very much up for that. I am sure that you, like me, will welcome any costed proposals and alternatives, because we all need to own the issues of the constraints on a fixed budget. One of the things that has been discussed this week with a helpful intervention from the Fraser of Allander was some of the suggestions around tax rises and the effect on so-called behavioural changes. The two areas that the Fraser of Allander modelled both showed different percentages and numbers that it would wipe off any tax raises varying from 56 million to 161 million, or 30 per cent to 36 per cent, based on the STUC model and IPPR. I appreciate that it cannot be exact. The only time that the numbers can ever be exact is after the event. I think that we all understand that. To what extent are you considering those behavioural changes? What would mark the tipping point on a no-go decision for you? Those are all really important questions. Considering taxpayer behaviour is a vital part of our tax policy decisions, I would say that you have pointed to some of the academic and empirical research. There is quite a lot of uncertainty when it comes to estimating taxpayers' behavioural responses, but the important thing to say is that the Scottish Fiscal Commission is responsible for producing independent forecasts for the Scottish budget, and that includes taking a judgment about the scale of the behavioural responses. That is already built in to its forecasts, but we absolutely need to be very cognisant of that. With limited levers, we have to deploy them very carefully. The decisions that we have made to date have taken all of that into account. Of course, the issues and decisions that people make about where to locate and why are quite complex. It is not all about tax. For a lot of people, it will not be about some of the other supports that they may get in Scotland that they would not get elsewhere, but also the many other issues that they would take into account. As I say, the NRS data shows that we have a net and migration position from elsewhere in the UK. Some of that is working-age population, but it is a net and migration position. We have to look at all of the empirical evidence and then we have to make judgments in the round, but it is absolutely a key issue, particularly in the midst of pressures on household budgets, at the cost of living that we are looking at very carefully. I can understand that. I suppose that the Fraser Valander paper sets out anticipated effects and the methodology that they are using, as you say, will be the same one as the Scottish Fiscal Commission. My wider concern is around perception, which is not extraordinarily difficult, probably completely impossible to properly work out some scenarios. Perception, linked to my view, is a relatively low committed spend at this stage, although, of course, we have not seen the budget in around, for example, entrepreneurs, which is only £15 million, so it is a wider picture. On the same question, what reflections have you made on the perception of people who are thinking that business investors, even though I accept the FDI stats, are very strong? We agree with that, but we are trying to predict how behaviours might change as a result of policy decisions. We have to compare apples with apples, as the convener said. So, do you think that the perception, rightly or wrongly, that Scotland is a higher tax environment will play into investment decisions and how you are reflecting on that perception in your decisions about tax rises? The new deal for business has been important in wanting to have and making sure that businesses are around the table as a key stakeholder on an on-going basis, not just in terms of budget decisions but on an on-going basis around decisions more generally, around perception, around what we say. Programme for government was very explicit about economic growth for a purpose in terms of the benefit that that can bring to all our citizens and as well as the economy. Perception is important. Investors will primarily look for what the return on their investment is going to be. One of the important elements at the moment with the investor panel and others not just the investor panel but other potential investors into Scotland, one of the things that they are looking for is certainty around what the priorities are for the investment of strategic decision making and clarity around things like net zero, for example. A lot of interest in private investment of coming to Scotland and investing, but they need certainty and continuity of what the proposition is, which is why it is really important to be clear that we see Scotland in terms of our renewable energy future of our net zero investments, whether that is in district heating systems, whether it is in the decarbonisation of buildings, whether it is in the EV infrastructure and so on and so forth. A lot of investors are very interested in some of those opportunities and getting a return on the investment that they are making. I should also say that businesses are very much involved in some of those pre-budget discussions. If you look at the New Deal for Business subgroup on things such as NDR, for example, Tom Arthur chairs a lot of honest discussions about the choices. Within business, there are differing views of where support should go in terms of whether it is by sector or by size and the scale of business, and those discussions are being had in that subgroup. I get the point that you are making, and we need to make sure that Scotland is seen as a good place to come and invest. Those judgments are based on a whole range of factors. We need to make sure that we pay attention to each and every one of those. There are a couple more areas that I want to ask, but I am conscious that other colleagues will want to come in as well. I am already picking up that some in the renewable sector are rattled by the Prime Minister's recent cooling or apparent cooling, perhaps modelling for his conference on renewables and the effect that will have on global capital flows. The money will go where there is real political certainty, and that probably will affect Scotland as well, although it is constrained within the UK where that kind of sentiment is expressed. I am not particularly looking to answer that as a question, but I suppose further reflections on how that might affect or limit our ambitions might be helpful. I want to ask a couple of questions about reforming the public services. Obviously, I know that that is a stated aim. In particular, I am interested in the public sector in a property management area, which is obviously huge, and we all understand how the landscape is totally different post Covid. However, I was very interested in a commentary in the recent Audit Scotland report. At the moment, it seems as though we are operating at ground zero. We do not have robust data, I am quoting, on the entire existing state. The report comments that it is difficult for the Scottish Government and public bodies to decide whether this estate will meet future needs. My understanding from a previous live is that it is incredibly complex and time consuming, where you have complex FRI leases that the Government will be bedded into. Can you give us an update on where you are with that? Critically, what kind of timescales do you think that the Government is working to? To my mind, there must be a huge amount of money that is being tied up here that could be used elsewhere because things have changed. On your first question, I think that it is a big concern. I am going back to your point about perception in terms of global capital flows. The danger for Scotland is that whether the differential is understood in terms of different approaches in the UK and Scotland, I am not sure that that is totally understood in a global context. All they will hear is that particular message. It is really important that we use all the levers and all the communication channels to make sure that we are giving a very clear steering direction around our ambitions in terms of renewable energy and that Scotland remains absolutely committed to our net zero ambitions. We need to continue to do that. It will have an impact on our net zero plans. That is being worked through at the moment and we need to work through that in due course and then, of course, update Parliament. Your point about the reform of public services, I think that Audit Scotland's comments on the single Scottish estate programme were helpful. If I tell you that there are 30,000 public buildings in Scotland, I do not know whether that will surprise you or not, but there are a lot of buildings now. From a number of perspectives, there has to be a strategy delivered to make better sense of all that. Some of that will lie in local government, some will be with public bodies, but there is no doubt that we can get a number of wins from taking a more strategic approach to the estate. One is shared locations. In communities, there are great examples of where services have come together working out of one building, providing a better service that is digitally enabled to the public, and it is more efficient and is a better service. I suspect what you are going to say that I will strongly agree with. I suppose that my question, if I had not been clear, was that, given the scale that you have outlined, do you have a worked up programme within the Government to address that? I think that we are all agreed the scale of the challenge and the benefits therein. I fully understand your position, but it is moving to having a substantive, at least framework for operating. Let me tell you about the programme that is under way. We have a programme that is going to support public bodies to work together to achieve improvements in property data for strategic planning, location-based reviews, setting short, medium and longer-term property KPIs and actions, and working across silos and organisational boundaries. The first governance meetings of the advisory board and programme delivery board took place this month with very positive responses. Further stakeholder engagement is due to take place next month. The first meeting of the Public Sector Property Forum is on 19 October, and the senior stakeholder group chaired by Tom Arthur is on 26 October. It is getting in and about some of the opportunities that people are working in a different way. We need to think about the net zero decarbonisation of buildings. Some buildings will be very difficult to meet those energy efficiency standards, so it makes absolute sense for all those reasons to work through one single estate strategy. That is not going to happen a week on Tuesday. It will take time to get the optimum, and it will take a number of years to get to the optimum point, but I have no doubt whatsoever that it will drive out cost savings. It will help with our net zero ambitions, and all of those are definitely worthwhile. I am happy to keep the committee updated about the progress of the board. I am conscious of time, so I will ask my last question, which is about the Verity House agreement. I think that there was an expectation that there would be more meat on the bones around the fiscal framework by the end of September of this year. I wonder if you can give us an update on that and, to the principles from a fiscal framework point of view of how specifically it will work with no ring fencing or directing of funding in terms of how the actual financial flows will work. Work on the fiscal framework is continuing, and it is quite complex, because there are pros and cons to every way of doing things differently. If we had a rules-based framework, that was essentially the money's start of the year and that's it, there are also cons for local government in that position when you look at where inflation is and the need for us to offer that in your support beyond the budget in terms of pay. I guess that local government is working through some of their own challenges around what is—there's no perfect system, so the framework, a lot of work is really gathering pace now around where does that land us. I don't think that it will be the finished product for this budget because, by its definition, it's quite difficult and quite complex, but the principles around it are local by default, national by agreement, so any further ring fencing has to be by agreement rather than us saying, right, well, that's for that and that's for it. Then the removal of ring fencing happening as a process rather than the event, so there's some easier areas of removing ring fencing that are not as contentious. There are others that are a bit more contentious to be frank, so if you look in the education space around attainment monies, PEF, all of those, much of which goes to schools direct, so we need to work through these things. I think where a very good house has the opportunity in it, though, is that everybody understands the fiscal position is very, very challenging, so carrying on as we are is not an option, and therefore one of the levers we can support local government with is having more flexibility around the money that they have to be able to meet some of those local priorities and make decisions that will be around those local decision making. We are also really keen to look at whether there is additional revenue raising opportunities for local government, clearly there are some that have already gone like the empty property relief, the transit or levy and so on and so forth, but there may be others, and we are really keen to look at what that is. Now that is a lack of time with some of that because it takes time to develop those, but the principle of more revenue raising within local government is one that I absolutely support. Okay, I'll leave the field clear here. I feel as though I've asked enough, thank you very much. It's biggie, thanks. I'll list to be followed by Ross. Deputy First Minister, just a bit of clarification on Michelle Thomson's question about the end of September. Now that's obviously been moved and you say it's probably not going to happen for this budget. When do you expect that Verity House agreement to be in play? So it will impact on this budget, but it might not be the full, all singing, all dancing product of the fiscal framework, so the work that's going on with the fiscal framework will impact on how we have the discussions with local government around this budget, but it's not going to be, there'll be still areas that are being worked through beyond this budget, but we will be having quite a different discussion with local government around this budget than we've had in previous years, but it will be an iterative process of the development of the fiscal framework. Has it proved more complicated than you were expecting, given that you've had to shift? Everything's more complicated than you, but mainly from the point of view that local government are working through some of that themselves. Initially, for example, there was quite a keen interest in a rules-based framework, but when they then worked through the detail of what that would mean from a local government perspective, there was then further discussion within local government around whether there are advantages and disadvantages to that, not least in terms of in-year support. I don't know if Ian might want to come in on some of this or Alison, but let me caveat that by saying that a lot of detailed work is on-going around what the principles have been agreed in the very house around what I was just talking about around ring fencing, but the actual financial triggers around what does the fiscal framework look like and some of those complexities around a rules-based framework, for example. I think that has caused local government to say, well, hang on a minute, we need to look at the advantages and disadvantages of going down a particular route. I think that we are asking the question because, again, it comes back to this issue of scrutiny, that the more information that we can have in terms of scrutinising the agreement and what local government funding will look like, the better, so to be but concerning just to hear that the time is going to be moved on a bit. We'll furnish you with what we can furnish you with, but it is a negotiation at the end of the day, and a negotiation is a two-way street. Getting it right is really important. Rushing in or local government rushing into something that may have disadvantages to them, depending on the fiscal arrangement, depending on pay deals, inflation, where that sits, is not something to be considered quite carefully. Taking the time to get it right is important, but that means that how we approach the budget will probably need to be quite a complex set of discussions that refer to those principles that lean into what the work that has been done on the fiscal framework might not be the finished agreement. Do they have another date? It was clear that the Scottish Government said that information would be available by end of September. Do you have any other date in mind as to whether you hope to complete this? As soon as possible, I think that it would be, but I can come back to the committee with firmer timeframes, but we want to conclude this as quickly as we can. Can I go back to your opening remarks when you said that you want to see a strategic objective when it comes to tax policy and that you have tasked your special tax group with focusing on that? What components would make a successful strategic overview of the tax system? I will bring Andrew in for some further detail in a second. First of all, there is an issue about public awareness here. Some research that has been carried out, which was presented to the strategic group, the expert group, was showing that the awareness of fact that there are two tax systems is not entirely understood. There is an issue around what people get for the taxes that they pay. There have been attempts by the Scottish Government to lay out clearer terms around your taxes, but that research showed that there is an appetite for people to know more about how their taxes are spent and that that is something that we would want to take on board. There is a question for the UK Government as well. Our tax position tends to go from budget to budget. Part of that is because we do not have those multi-year projections. We have the MTFS, but we do not know from year to year what the actual budget allocation will be. Therefore, the tax decisions that we have to make are seen through that pretty short-term lens. There is a need for us to take a bit of a step back from that and to look across the range of taxes in Scotland, not just income tax. What does that medium-to-long-term view look like? That is not about trying to get people in the room who incidentally have very differing views of what the actual tax decisions of the Government should be. It is more about what is the strategic look of taxes going forward, what is the balance, what are the issues that we need to take into account, what are the limitations of the current system. Again, not just income tax but the basket of taxes across the board. It is something that the UK has never done. It does not have any strategic approach to tax. It is not an easy thing to do, but we have to, in my view anyway, which is one of the reasons that this group has been set up. We need to try to look beyond the horizon of budget to budget to budget. The impact of behavioural change will be one of those issues that we look at. The fiscal outlook is that we are using tax leavers in a way that does not have unintended consequences, but what other leavers in the future might we wish to discuss with the UK Government in terms of expanding those leavers? It is complex and I am not going to defend all aspects of the UK tax system because I think that there are clearly problems in that as well. Having said that, I think that it is the Scottish Government's job to look at the efficacy of different taxes and how well it will be able to bring in the required revenue over the years ahead. How well it can expand the tax base in relation to the public spending that, obviously, the Scottish Fiscal Commission has set out in very considerable detail. You are confirming, correct me if I am wrong, that your tax group will be looking at the ability of the different types of tax in Scotland and the different thresholds as to how well they will serve the revenue that you require to proceed with what is very heavy Government expenditure. Is that correct? That is correct, but not just to look at income tax in isolation because there are a whole range of other taxes that need to be looked at in the round, whether it is local taxes or whether it is business taxes and how all of those interplay around that longer-term strategic view of where a sustainable system that we can optimise getting to that sustainable system delivers for the public person. I go back to the point that I made about some of those decisions that we made generating over half a billion pounds of tax revenues that we would not otherwise have, but setting that up against making sure that we look at the research and the evidence around potential behaviour change and other taxes that might impact on the same groups of people in terms of that wider look at tax. It is not a piece of work that is going to produce a report in a few months time. That is quite detailed and quite complex. A very wide range of views around the table, some of which may not be entirely in agreement with one another. Where we land in terms of the advice—incidentally, it is not a group that is there for the short term. It is a group that I would like to see use their collective knowledge to look at going beyond the current system that we have at the moment. As one of the earlier questions was, our starting point was amending the UK system, because that was the only starting point that we could have, but looking beyond that, what differences would we make? What other taxes might we look at and how might those be able to come to fruition? I do not know, Andrew, if there is anything that you want to add that is a bit more detailed or technical. Well, it is. The strategy of the context for the new group is set by the MTFS, the work of the SFC, the publications of the OBR, the IFS and the IPPR most recently this week. That sets the general context for taxation in the UK and in Scotland, too. It is for the group to decide what subjects it includes. I would expect that, in any strategy that the Government produces, it will talk about. The burden of taxation is distribution, the interaction between taxes, the performance of various taxes, the effects of population on the tax base, the effects of an ageing population on the tax base, prospects for economic growth, international evidence, the ability to tax wealth in a more general sense and inheritance tax has been under discussion in the UK again recently. Finally, taxes that can bring about some kind of behavioural change and possibly the most significant issue is the prospect of environmental taxes in our carbon footprint. I think that all of those things will figure to some extent, will be blended together in some kind of long-term tax strategy. Now, there are big trade-offs between those things and some taxes have greater symbolic importance than others to people, but they are all there, I think. Helpful, Dr Scott. It is not the first tax group that has run into difficulties over several years of the Scottish Parliament trying to look at this question of how well we can get the necessary revenue in from tax that we are placing on both businesses and the public. Can I finish on the point about the modelling, which you have mentioned several times, because the modelling matters and it is the facts. I think that Michelle Thomson raised the issue about when we come to the budget debate. We will obviously have different political views, but the facts matter. I think that we are in a difficult place on this committee at the moment, because some of the facts seem to be very nebulous and up in the air. For example, I just quote you what Sandy Begby told us last week at committee. He said that young graduates and professionals are the people that we desperately need. To quote, he said, that is the type of population that we want to attract to Scotland, so we should be doing everything that we can to attract them. Bluntly, free tuition, free university tuition and free prescription are all great, but that population does not really mean anything to them and does not have any value. I think that that is an interesting reflection about a cohort of people that we are trying desperately to attract into Scotland. However, some of the advantages that we might like to talk about do not mean so much to them. I would be interested in how you think that you can model the behavioural changes from the different groups within Scottish society and, hopefully, ones that we can attract in the future, because we need that data if we are going to be successful with that. That is a good question. First, let me reiterate that the role of the Scottish Fiscal Commission here is an independent body for producing those independent forecasts. Of course, it does, as I said earlier, take a judgment about the scale of the behavioural responses, so we have that external look. I know that there is lots of different evidence provided, but I think that that external independent look is important. However, you make a good point about how we attract more people to come and live and work in Scotland with the limited powers that we have. I am sure that you have agreed with us, Liz Smith, on the need for, for example, the rural visa pilot has gained cross-party support, but I have not agreed at the moment. I would also make the point that the evidence that we have in front of us so far shows a net in migration to Scotland, including the working age population. It is not as big as I would like, but it is there from NRS figures, and it is important that we keep a very close eye on that. We are not resting on our laurels, so the work of the population task force is really important here. Next year, we will see the launch of the talent attraction and migration service to support two things, international workers in the migration and relocation process. Basically, we will come to Scotland and work wherever you are from, and that will be targeted obviously not just internationally but elsewhere in the UK as well with the opportunities for people to utilise their skills and the job opportunities here, but it will also help employers to try and target more effectively and navigate through what is a very complex system in terms of attracting people to come and work in Scotland from elsewhere outside of the UK. That service will be helpful. I assume that it will target sectors very clearly that are requiring to bring particular skillsets to Scotland, and it will do that in a more effective, coordinated way. Again, I am happy to come back to the committee with more information once that is launched, but we are not resting on our laurels. We do not have control over migration, so what can we do? That is one thing that we can do and work with the agencies that we already have established around—not just in Scotland but internationally—to work through this new service to target and get that message out there around the opportunities here in Scotland. I am still not completely clear on what we should expect the impact to be on the coming budget, and the impact that has on our ability to scrutinise the coming budget. If there is anything to expand on that, that would be useful. However, the main line of questioning is around the deficit—the billion pound that we are looking at in the immediate future rising to 2 billion. That is a deficit that we need to close just to meet existing commitments, growing demand but with existing commitments. Once we factor in the statutory targets that we have to, for example, reduce child poverty and tackle the climate emergency, both of those require really significant levels of additional spending on top of that. Has the Government done any work to—and I recognise that there will be a broad-range significant margin of error here—to quantify just how much additional spending is going to be required on top of the difficult decisions that we are going to need to make to close the gap, meet existing commitments, rising demand, et cetera, but just how much more we are going to need to meet targets that we have in law. I recognise that there are other targets that are set in policy, but not in legislation. However, we do have some really significant targets in legislation. I am concerned that there are not at the moment really any figures attached to how we meet those targets. On your first question about the very house agreement, a lot of the negotiation around the fiscal framework is obviously being led by COSLA on behalf of local government with the Scottish Government. However, in the midst of all that, COSLA has also been trying to tackle and deal with and work with trade unions to resolve some of their paid disputes. COSLA is quite a small organisation and we ask a lot of it, not a new issue, but we ask a lot of COSLA in its being pulled in a number of different directions. We need to understand that. Having said that, getting pace and concluding fiscal framework discussions is a key priority for both. All I am saying is that there has been an impact on them having to deal with other matters. We will work to try and conclude as much as we can to help with the budget process this year. On the second area, yes, all of these are part of the wicked problems that the Scottish Government is wrestling with. Not just the gap in finance and revenues that are projected through MTFS, but the pay deals that have exacerbated that situation due to inflation. As I said, I do not resent a single penny of it, but to have half a billion more on pay than was budgeted for is clearly an impact. On top of that, we have targets such as the child poverty targets, climate change targets, all of which are statutory targets and our key priorities in terms of budget spend. Trying to navigate all of that means that we have to be more targeted, prioritised within that collective spending envelope. That is the work that is going on over the summer that continues to look at what things we might have to do differently or stop doing, not something that is necessarily comfortable territory, but is the territory that we are undoubtedly in to be able to make sure that those key priorities are the ones that receive the funding. I think that we need to continue to be clear about that. I think that we have said this over and over and over again. Whether everybody understands the severity of the finances, I am not sure. Sometimes that might not be the case, but those are the very difficult decisions that we will have to make. I have talked about some of the levers that we have, but there are constraints on those levers, given some of the discussions that we have had around potential behavioural change and the limitations of the tax levers that we have. A set of wicked problems with no there is not magic answers that we can pull out of the sky that no one has thought about before. The levers are the levers, and those are the ones that we will, at the end of the process, put forward our proposition of the best decisions that can be made, given the constraints and the financial outlook. If others think differently, they are always welcome to come with different propositions, as long as they tell us where the funding is to come from. I will go back to the community's question about the capital budget and the really severe pressures that you laid out there. What impact do the revised capital borrowing powers from the fiscal framework revision have on that? I will expand on that a little bit. How do you approach decisions as to whether a capital project receives funding directly from the capital budget allocation versus where it would be funded from borrowing? On the first point, the changes to the fiscal framework were helpful, but I would not want to overemphasise or overrego the pudding. They are quite technical, and the extra borrowing powers are only to enable us to deal with negative tax reconciliations, which actually is very important next year, given the negative tax reconciliation. It is not of the extent that we first thought it would be, but it is about half of that. Being able to have those increased borrowing powers up to £600 million means that we can then smooth out that negative tax reconciliation and smooth it out over the next few years, which helps. It is not a fundamental change. I know that we have a different session on the fiscal framework review, so I do not want to go into any more detail here, but I will just on that point. How to prioritise? Clearly, those capital projects that are going to have the biggest impact on economic growth and net zero ambitions are going to have the biggest impact on sustainable public services. All of those things are absolutely key in terms of the decisions that we then make, but we cannot fit all those into the reduced size of the capital budget that we now have in front of us. Some of that will mean that it will take longer to deliver some. As I said, we are looking at alternatives in terms of being able to lever in private finance into looking at those options and how we might be able to have other options that would enable us to take forward certain projects in a different way. I suppose that what I am looking for is clarity as to whether, on a project by project basis, it ultimately makes any difference whether that project has been funded directly from the capital budget allocation or through borrowing. If so, what approach does the Government take to deciding whether each project is funded from one or the other? Traditional capital is obviously cheaper than borrowing and other options, but in the absence of being able to do projects or not do projects, the questions are different and therefore we need to take those in the round. Some of that will also be about what is the length of the project, how long will it take to deliver, how complex is the project, what is the nature of it and all those things need to be put through the process of so where does that leave us in terms of the revision to the capital spending review that we will bring forward as part of the budget process, but we will lay out why we have come to some of those decisions. Alice, I could see you wanted to come in. In terms of the point around how we use the borrowing effectively, we use the borrowing to set the overall capital funding envelope, so we do not distinguish on a project or programme basis as to what the borrowing that we draw down under the fiscal framework, which assets and projects it goes towards. We set out our approach to how we use the capital borrowing powers in a sustainable way in the medium-term financial strategy, but I am happy to pick up any further detail on that. On budget timeline, you mentioned this in your statement. The impact of when the UK Government is now consistently setting its budget is significant both on the Scottish budget, which then has a knock-on impact on every other organisation funded by the Scottish and Welsh Northern Irish Governments, particularly local government. I know that you have made representation to the UK Government on a consistent basis in recent years about that. I note, though, that Rachel Reeves has set out proposals that an incoming Labour Government would also aim to set their budgets at the end of November. Given that, on a Government-to-Government basis, it is legitimate to speak to the UK Government, has the Scottish Government—not the SNP and ourselves as political parties—made any representation to the Labour Party as a potential incoming UK Government as to the impact that setting UK budgets at the end of November has on devolved finances? No, not explicitly, but it is fair to say that the Welsh Labour Government will be making those points through their own channels, but there is absolutely no difference in position between the Welsh Government and ourselves that it really constrains the time that not just the Government but the Parliament has to scrutinise budget. On top of that, the fact that the Scottish Fiscal Commission needs that time in terms of doing their forecasts and the information that it draws on just leads to a very complicated landscape with very little time. I do not think that it is sustainable in the long term to have that constraint. We will continue to make those representations, as will the Welsh, to try to come up with perhaps a better set of arrangements. One of the asks that we have made is to get earlier sight of some of the decisions beyond the formality of the autumn statement itself. It is fair to say that we have had limited success on that. Some of that is the theatre of keeping some of that information to the—but it would be really helpful to know the direction of travel in advance. Sometimes we are literally picking stuff up as it comes into the public domain and trying to work out what that means for our budgets. It is not ideal. We have continued to make those representations, and we will see where we get. Thank you, Ross. I take the point that we are going to have another session on the fiscal framework, but I did, if you do not mind, ask you just a few things on that. If you want to come back to us later, that would be okay. I think that the first point would be to make that we were all a bit surprised about how quickly it all happened. I think that we had thought that there was going to be the previous report published, then there would be outlines for a review and then backwards and forwards. I was certainly personally caught by surprise when it was all agreed. The previous time I remember, I think that it was John Swinney at the time, was negotiating and it came to Parliament, and the Conservatives said that we should accept a poor deal, but he carried on arguing and we ended up with a better deal. Can you just explain what happened around the timeline? First of all, on the independent reports, both Governments drew from the independent reports, so it is important to say that they were important, and both Governments drew from them. We both agreed that it would make sense to publish those independent reports on the same day as the outcome of the review, because it would then make more sense of why the conclusions that we had come to. I know that that constrains, I guess, whether there would be any great public or media debate around the independent reports. I do not know, because they are quite technical, but I think that that was the logic, and rightly or wrongly both Governments agreed that that made sense. On where we got to, we had asked at the beginning that we wanted it to be a more expansive review, but it became clear that that was not on the table, so there was no point in pursuing something that just was not on the table. It then became very much around the increase in borrowing and reserve capacity and securing the usage of the index per capita methodology, which is really important for us, given the issue of population, which is different for Wales, but is really important for us. To be blunt, it was a negotiation around where we could get to, and some things were easier to settle than others. Where we got to was a bit of give and take on both sides, and a landing space that I think is pragmatic. I will probably say something that I will not say very often. I found John Glenn, the chief secretary of the Treasury, one of the easiest UK Government ministers to deal with that I have ever experienced in all my years in Government. I do not know what his views and reflections would be, but we allowed our officials to get on with the job, so the Treasury officials and our fantastic officials here in The Shjekker were allowed to get on with some solutions without political interference to make that process difficult. What came out was then an opportunity for John Glenn and myself to agree the bits that we could agree, and then we had a bit of negotiation around some of the other bits. We came to a pragmatic solution. I will spare his blushes, but that is not always the case when you are dealing with the UK Government, and you think that you have got something agreed, and it turns out that it is not. I did not find that during that process. What was agreed was agreed. Others will come to the committee and explain some of those to us, because we have been having difficulty with that. I hope that he will, and I hope that I will have not the similar reflections on the process, otherwise it will be quite embarrassing. I think that I would hope that he will. We had to give a bit, and I am sure that we will get into some of the detail of that at the committee session. The important thing for us was that the borrowing and reserve capacity make such a difference next year. You are saying that the borrowing capacity is increased, which it is, but we thought that we were going to have a £700 million adjustment. If we had had that £700 million, the borrowing limit would not have covered it. Is that correct? Yes, but it would have covered the vast bulk of it, and that would have made any increase. We asked for more in terms of the borrowing capacity. It would surprise you to hear, but it was a negotiation, so there had to be compromise. However, the importance of being able to cover what there will be in terms of negative tax reconciliation is really important. We asked for a longer term for a free payment of that. Again, we had to give ground because we did not win that particular argument, but we did in terms of the index per capita methodology. That is quite important for our budget, given the issue of population. There are areas that we still need to work on in terms of VAT assignments and so on and so forth, but we both agreed that those would take longer to work through because of the potential unintended consequences of having responsibility, but no levers. That was a worry for us. Has worried the committee previously and I think that we are going to look at it. Is there any kind of update at the moment or timelines or anything about that? We agreed to consider the approach at a later date and that we would progress the matter at a future meeting of the joint extractor committee. I am happy to keep the committee informed of when we get to that. However, there was a recognition of the complexity and the dangers of not having responsibility but not the levers that would put us in a very vulnerable position. We got to a position that, as a point of time now, we got probably the best outcome that we could get, given that it was a negotiation. We will undoubtedly revisit the fiscal framework on a number of occasions, but, as a moment in time, it draws a point at which we have got some substantial gains. It is not in cash terms that the budget has not grown in that respect, because any borrowing obviously has to be paid back, but smoothing those peaks and troughs is really important. I certainly accept that that is positive. It still does worry me that certain things were not on the table and that a wider review was not on the table. I just feel that there is a fundamental problem with the index per capita method, that we are, a, our population is struggling because Westminster will not allow us to have extra immigration into Scotland, and, b, we compete pretty well with all the other regions of England apart from London and the South East. You yourself said earlier that when it comes to inward investment, we are second only to London and the South East, but we are always second to London and the South East. It seems to me that, when we compare our economic growth with England, that means that we are comparing with a country that is dominated by London and the South East. Call me pessimistic, but I just struggle to see that we are ever going to be able to compete with them, and, therefore, financially, we are always going to be disadvantaged. Of course, the northern regions of England do not compete either. Absolutely, that is true. Let me just be clear. It was limited, and nobody is going to put bells and whistles on it to say otherwise. However, for the headwinds of the next immediate financial term, those are important agreements to get because it helps, particularly with next year's budget. Your point about population growth is an important one. Of course, you have heard me say here today and I will say in other forums that having control over migration, for example, would be hugely important in being able to attract folk with the right skills to come and live and work here and contribute here in Scotland. If we have those levers, I have no doubt that we would be able to use them to great effect. That is a debate about the powers of this Parliament. It is a wider debate than we were ever going to be able to reconcile through this negotiation on the fiscal framework. We had to deal with what was in front of us. I think that we have probably got the best deal that we could have in those circumstances. I can move on to other points. We had in a wady in Largs, and I found it very useful when we were listening to different local people and their ideas about the budget. Everyone was accepting that we faced very difficult financial times. There was a kind of openness in the group that I was in about a little bit more means testing and a little bit less universal benefits. Now, when we pressed them, they certainly were not suggesting means testing for the NHS or for schools. I wonder what you are thinking and the Government is thinking as we go forward about how we get the balance there between, because currently some things are means tested, some things are universal. How do we get the balance right on that? I guess that there is a difference between means testing and targeting. Let me take them in turn on targeting. That is where clearly we are looking in great detail at what the options are. If you take Scottish child payment, lifting 90,000 children of poverty, I think that it is a measure that we certainly could not have afforded on a universal basis. I think that it was targeted very clearly to help to meet and take forward the targets set out in the child poverty legislation where we had to look at measures and get a credible path to meeting those targets. It is a lever that could only have ever been a targeted measure in order to do that. Now, there may be other areas of policy existing spend where actually if money was no objects, there is probably a good argument for continuing to provide on a new universal basis, but where money is really tight, then how do you deliver services that will make a difference? If you look at the options on the childcare offer, how do we make sure that that childcare offer, some of it will work for everyone, but how do we make sure that it really works for those parents who have blockages getting into employment or blockages being able to take additional hours or blockages of being able to find better paid employment? Child care is clearly one of the big levers there, so we are having a lot of discussions about what does our childcare offer look like going forward. In terms of means testing, that is a different discussion in terms of whether or not there are areas of public spend that currently are free that may have to change. I think that those are more complex because then you have to set up a whole system. If prescription charges are a good example, I am not going to get into a big long thing about it because I sat through the whole committee at the time when those debates were had way back in the day. I think that what transpired was that there was an argument that you could have a means-tested system where you exempted people with chronic conditions, but the long list of chronic conditions, which was growing even longer, got to a tipping point that the number of people who were then going to pay who did not have a long-term condition and were not below a certain income threshold was so small that the administration of the system to set up for those people to pay just became uneconomical. We need to constantly have a look at whether that is still the case, but that was the fundamental argument at that time. Value for money tests, purpose impact—all of those things need to be looked at. I think that our focus is definitely on better targeting. My final point was around that. We have heard from a number of witnesses that they feel that the public sector landscape is quite cluttered, the number of organisations, and that came up in LARGs as well from some of the organisations and individuals there. We have also had the consideration that individual organisations can make savings, but that is not really reform. Things like the police would never have combined into one organisation without central government push. How much is the Government thinking of pushing for that kind of reform whereby we reduce the number of bodies? Public sector reform is first of all really, really important. I lead that across the Government to try and bring a bit of a strategic view across the whole of Government to that. First of all, there are some low-hanging fruit that all public sector bodies should be doing around efficiency, around digital and digitisation. There are some great examples of organisations that have become far more efficient, and in difficult financial times that is important. They are able to deliver a better and improved service to the public, but for less money. All of those things should absolutely happen. You are then into more complicated territory of potential mergers, amalgamations, whether people can share services, whether they can share buildings. It brings us back to the discussion earlier on. All of those things are on the table. The workforce levels at each public sector body requires and, frankly, a bit of a presumption against new public bodies. We now have a system of explicit ministerial approval that needs to be had for the creation of any new public bodies. There are still some in the pipeline because parliamentary decisions are not pushing back on parliamentary decisions being right or wrong, but they lead to the creation of new public bodies. There is a role for Parliament at taking a step back as well and looking at the multitude of public bodies that we have that are in the Parliament space—the number of commissioners, for example—and some overlapping. There is a bit of a need not pushed by Government but for Parliament to look at what makes sense in that landscape. We all have to be acutely aware of the need to leave no stone unturned of how we can extract better value for every public pound, for every public sector body, for every commissioner's office, given that the finances are so constrained. It is a responsibility on all of us—not just the Government but on all of us—to consider those Thank you very much. Michael Russell, to be followed by Jamie. There have been some emerging themes through our budget scrutiny. It has come up several times today about the longer term—in your own words—that we have to look beyond the horizon. The issue of prevention has come up on many occasions the lack of implementation of Christi and the opportunities that might have afforded us as a country if we had done more around prevention. Demos has produced a report saying that we should have a third demarcation of public spending instead of capital and revenue, which should have a preventative departmental expenditure limit. Do you have your thoughts on that? I have some sympathy for that, but it would certainly need to be in the longer term, because what happens in the here and now of services are running in a particular way. You want to move from where they are and how they work here to over here, but that takes funding to make that change happen. That is quite challenging when funding is difficult, but prevention will get no argument from me around the value of every pound that is spent in prevention. I will give a couple of examples. We have implemented some of the Christi principles. If you think about youth justice, for example, where a very different pattern of service provision has reduced the number of young people going to prison and enabled young people to find alternative ways to address harmful behaviour and so on and so forth. I am really excited about the pathfinders that are going on at the moment in Glasgow and Dundee around that very principle of how you develop and go from an as-is system of social work to the system that you want to have. What Glasgow has done with a bit of Scottish Government funding is turning around its childcare system and its social work support for children to the point of a huge reduction in children coming into care and being able to remain living with their parents. Whether it is from the point of view of the family, the point of view of the children, the point of view of the budget of being able to maintain and keep families together in a safe way, obviously, and reducing the number of children coming in and the outcomes for those children. It ticks so many positive boxes that it is indisputable that that is a model that could work and could work well beyond Glasgow. Dundee's Pathfinder and Lynn Lath is more about agencies getting out of their silos and working together, literally engaging with people without a badge of I'm from the DWP or I'm from the council or whatever, and asking people what they need in terms of making a difference. Some of the answers are quite surprising of what makes a difference to families or not what statutory services might think. Should we do more and could we develop something around that preventive spend as part of the budget? I think that we're at the foothills. I'd like to do more, but trying to carve out the funding, I think that the Pathfinder show that it can be done by using modest amounts of money to unlock that big spend, because we sometimes focus on bits of programme spend, but think about the billions that are tied up in systems that are working at the moment. If we can unlock that and change the way that those systems work, we could be a lot more impactful in the outcomes. I suppose that the biggest wins for Scotland are in the health space in terms of treating the health. Obviously that's the biggest portion of our budget as well in terms of where the savings could be. I do have sympathy in terms of the times when it's easier if there's an increase in spending envelope rather than a time when there's a decrease in spending envelope, but I think that that's actually the point of this work. Perhaps as we continue to talk about transparency, it's something that the officials might reflect on in terms of how we might account for preventive spend differently than limits. I want to move on to a different area if I can. Last week, we had the minister responsible for the national care service in front of us. I was asking questions about the amount of money to be allocated in the longer run to the national care service. Marie Todd said that I will be candid and say that the cabinet secretary has not set a ceiling on expenditure. Is that correct? As you'll be aware, the national care service has been fundamentally reviewed in terms of how it's going to be done and when it's going to be done. That has an impact on the profile of spend going forward from where we were in terms of the requirement for funding to be available more quickly into the system for the change that was required to a process now of a more gradual process of delivering the change in terms of the national care service. The fact is that we have met the local government's key ask in that the delivery of the staff within the national care service will not move to a central agency but will be retained within local government. It does change the way that the service will be funded. What we have made are some clear commitments around moving through programme for government to £12 an hour for social care staff, which clearly is a key part of recruitment and retention of social care workers, and that will be delivered from April next year. In terms of the wider funding for the national care service, the budget will inevitably be part of the negotiation with local government to make sure that we can see a line of sight from where we are at the moment to where the national care service will be able to have the biggest impact, which will be through consistency of standards, consistency of quality, and that national board will have representation from all the key parties on it. We will be able to drive forward some of those improvements that need to be made, and the funding needs to follow through on that. Given the long-term commitment to the shift that the Government still retains, you must have an idea about what the country can afford. If we took everything on the basis of what the country can afford in its bluntest sense, I am not sure that that is the best starting point. The starting point needs to be what is the priority being given within a difficult financial environment. I can say that social care is a key priority. You made the point earlier on about unlocking some of our systems. You could not find a better example of unlocking some of that money tied up in health because people are in hospital when they do not need to be there, or are going into hospital when they do not need to go, or are sometimes ending up in long-term care when they could have remained living at home for longer. How do we shift? That is the question. I need to work out with colleagues and local government on what is the trajectory of spend that needs to happen to make the difference. The priority being given next year is on recruitment and retention of social care staff. If we do not get that right, we will not get all the other bits of the system right. We had headlines in the last week regarding the ferries, and the on-going cost increases are an additional £24 million. Where is the ceiling for that? At what point is it too expensive? First of all, I am concerned, as Neil Gray has expressed, about the cost increase. As I understand, Neil Gray had stated in his letter to the NZ Committee, which is the lead here, that officials are preparing to undertake due diligence drawing on the value for money assessment that was completed earlier this year. That will provide both inset and pack with further information on that when the assessment is complete. Those are difficult decisions. Obviously, the rationale and the focus of keeping shipbuilding in Scotland remains the key objective here. As we have said, getting the two ferries delivered again is the key objective, but the future of the yard being secured going forward in a private sector environment is a clear objective. I am not going to give some artificial ceiling of there and no further. We have said very clearly to the Ferguson's management team and to the chief executive and the chair directly that they have to constrain costs. They have to be acutely aware of their responsibility around constraining any further rises. They need to deliver both ferries as quickly as possible. They have had some challenges around inflation and the impact of that on construction costs, availability of labour, subcontractors, prices coming in way above what was expected. You can ask any sector operating in Scotland or elsewhere and they will tell you the same of the impact on costs. It does not excuse it, but there are clear reasons for those increases in costs. However, if you are asking me if I am concerned, yes, I am. I share the concerns that Neil Gray has. I was not the first question. Is there a point at which we reach affordability and the Government takes a view as to whether we have enough money to pay for this? The value for money test continues to be important. What I said in my opening is that the due diligence that is being done upon the value for money assessment completed this year will essentially be an update of that, and that will then be furnished to the committees. That is the proper process to be going through. However, the value for money test in terms of alternatives was in terms of how quickly both ferries could be delivered compared to alternative routes forward. You came to see us on 13 June, Deputy First Minister, and I asked at that point the resource spending review that the Government had. I asked specifically whether the policy had been dropped and I quote you and said yes. On 14 June, I asked in the chamber a very similar question, and I asked whether the review had been killed off and you said no. I was quoting from the official record on that basis. We might quibble about some of the detail, but I am just wondering about the question of cost control in part. You have talked about the number of public bodies. One of the key areas of growth in the public sector reform agenda is in your core civil service, and there was a commitment previously to return that level to pre-pandemic levels. I am not sure, but I think that you have now resiled from as a Government, so maybe you could clarify that. Is it no? Is it yes? Is this not another area where costs have got badly out of control? Let me say two things about this. If we applied that across the board, then you would not see any more folk coming into the NHS, or into social care, or into Social Security Scotland where they are still expanding their services. What I was imparting to you was that there needed to be a recognition that there are still some areas of growth. That does not mean that all areas of the public sector grow. I will come on to the figures in the core civil service in a second, but what it does mean is that that more nuanced approach needs to recognise that there are some areas that need to continue to grow in social care in the areas of the health service in Social Security Scotland. However, on a point of agreement, if I can be helpful, is that part of the constraint of costs going forward is clearly that part of that needs to be that the workforce in whatever part of the public sector needs to be affordable. We cannot afford a workforce that there is not the money for, and that is clearly a key element going forward. Civil service numbers have dropped marginally over the last period of reporting. Workforce recruitment controls are in place and are applying across the civil service, and in recognition of the need in some areas where there are new developments and new policy areas, that that may need to be treated differently from other parts of the core civil service. If you are asking me bluntly whether the size of the workforce needs to reduce over time, then yes, it will. However, in that, there will still be areas that are not reducing for all the reasons that I have just set out. For clarity on that basis, it was not the resource spending review that was my policy, it was the Government's policy and it was your stated intent, or your predecessor stated intent, to reduce the size of that workforce. I think that I can tyre sympathy in terms of areas that have to increase and others that have to reduce. I suppose that my overall point in that is that you say that we face the similar or the same headwinds as other parts of the UK. Is part of this key issue not about your Government's ability to control its expenditure and costs and the real difference between what you say you are going to do and the money that we have coming in, and that there has to be more discipline on your part, as the person who holds the purse strings for the taxpayers' money, to make sure that we control the costs in Government and reduce the amount of waste? Those are several areas where costs are, by your own admission, out of control. First of all, that is part of the discipline. At my very core, I am someone who absolutely wants to make sure that we get maximum value for the public purse of every pound that we spend. However, just for a point of absolute fact, when we talk about overrun of costs in Ferguson's or anywhere else, I have made very clear that it is not acceptable. However, it is not made out that that is money that could pay for, that is baselined into budgets going forward, that has to be there as a part of the resource budget. We cannot compare projects spend with resource budgets that pays for wages. The two things are very different, even though I am not saying that it is acceptable, but that is not to conflate the two, because they are two very different things. If I was sitting here as the Welsh Finance Minister, I would say to you that the problems in Wales are, if anything, even greater than the problems in Scotland, not because the Welsh Government has been profligate with the money that it is spending, or that it has made mistakes, but because the levers that we have at our disposal dealing with headwinds around rampant inflation, economic shocks, all of which impact on our budgets, we do not have the levers, whether it is in Wales here or Northern Ireland, to be able to deal with those. In Scotland, we have some additional levers at our disposal to help us to balance our budget, even though that is proving to be extremely challenging this year, that the Welsh and Northern Irish do not have. If they were sitting where I am sitting now, they would be telling you that the prospect of being able to balance budgets is getting increasingly difficult, and they have told the Treasury that over and over and over again. So there is an issue there that has been brought into stark contrast by all of the headwinds that we have discussed. To date, that has not been heeded and has not been listened to. This year, I think, we will expose very clearly some of those limitations of those levers. From Scotland's perspective, as I said, we have levers at our disposal, thankfully, that they do not have. We will have to use those levers and we will use those levers, but it is becoming increasingly difficult to do the thing that we are legally required to do. That is to balance our budget because of those headwinds and the limited levers that we have. I cannot put any gloss on it, and those are the same messages that were put to the Treasury sitting in a room, not dissimilar to that by our Welsh and Northern Irish colleagues. Thank you, Jamie. I thank the cabinet secretary and her colleagues. Just to go briefly on the subject of Seaman and the boats and Ferguson's. You said that Ferguson has been asked to constrain costs and to get the boats built as quickly as possible. Clearly, they failed at doing that. We have talked about value for money. Clearly, they have not been value for money. While there is an approach going forward, it will be interesting to see the responses of that. You have talked about the impacts of flation. While flation in Turkey has been over 80 per cent, it is currently over 61 per cent at the moment, and yet they look like they are going to be delivering boats on time on budget before the boats are being built at Ferguson's. Neil Gray said that there is not a blank check in terms of these boats, but the simple fact is that there is like to be a blank check, because there is so much political capital invested in the boats, in Seaman, in Ferguson's yard, that there will never be enough as enough with those boats that you will keep finding the money to make sure that they are delivered. I could respond to recent debates around whether a certain railway is going to end up in Manchester at a cost overrun of £100 billion, overspend on a railway that is not going to go to Manchester. It shows that all Governments have challenges with infrastructure projects. It is not a unique issue to the Scottish Government. We have been clear, and Neil Gray has been clear, to the Ferguson's management team, of which, of course, there have been changes in recent times around some of that leadership, of the requirement to constrain costs, of the requirement to deliver on the timescales set out, and that not doing so does not do the reputation of Ferguson's any good at a time where, clearly, that is important in terms of future contracts and the future of the yard. I want to see a really good positive future for that yard, because I want to see shipbuilding retained in Scotland. It is really important that we make progress there. The point that I was making to Michael Marra was that one of the reasons for the cost overrun, of course, are some of the same reasons that many infrastructure projects have had cost overruns, and that is construction inflation running at 25 per cent in the height of last summer. That is not to make excuses, but it is to give some context to why some of those costs are overrunning, and there are other complexities at Ferguson's that the committee will be well… Finished well before now, before the issue around inflation came forward. I am well aware of the delays. Can I ask, because I am conscious of time, that you are not ruling out further payments to Ferguson and further increasing costs? Well, as I said earlier, to be clear, what Neil Gray has said in his letter to the NSET committee, is that the officials are preparing to undertake due diligence drawing upon the value for money assessment completed earlier this year, and provide both that committee and PAC with further information on this when the assessment is complete. We have made very clear our expectations to Ferguson's, and I have been pretty clear with the committee about what those expectations are. Those two committees in particular will get that additional updated information that I hope people will find helpful. Can I look a little bit to the longer term now? The national records of Scotland suggested or projected that Scotland's population will fall by 400,000 over the next 50 years. A Fiscal Sustainability report by the SFC showed that the proportion of Scots aged 65, over 65, is expected to increase from 22 per cent in 2026-27 to 31 per cent by 2072-73. Obviously, that will have an impact on demand for public services. It will also have an impact in terms of participation rates, productivity and labour supply. What expectations do you have? Do you accept those projections from Scottish Fiscal Commission, and what expectations do you have on how that will impact on spending and on tax? First of all, on the figures in the shorter term on NRS, which I think are important, that we are still seeing a net in migration to Scotland from the rest of the UK, but you are absolutely right that— On that point, you talked about net inward migration. Who are those people? Are they people over the age of 65, largely? How have they made up that? The net in migration was around 10,000 people, so I think that there was something like about 25,000 people. Net in migration was 10, and half of that 5,000 people are of working-age population. I would like it to be bigger, frankly, but it shows that there are still people who are of working-age to come and live here and work in Scotland. That is good, but we need more of them to do so. You are right to highlight the longer-term challenges, and I know that there is an appetite to have a wider debate on those issues in the chamber, and I am keen to do likewise. Here, the issue is population size and population balance. We are not unique. If you were to look at other areas of the UK, you would be facing a similar ageing population, and that is a concern. In terms of population size, you talked earlier about how we, with the limited powers that we have, attract more people to come and live and work in Scotland. I would like powers over migration. In the absence of that, we are doing things like the talent migration and attraction scheme, making it easier for employers to bring people in, such as the key worker housing in rural areas, where we can link employers and businesses to try to ensure that, when people come, they do not just come to one place, they do not just come to Edinburgh, but they are encouraged to go to other parts of Scotland, which is important. I want to avoid that population shift to an older population by all the levers that we are talking about, but we have to prepare for the fact that we will most likely still, even if we stem that to some degree, we will still have more people who are older than we have to support. Guess some key things about that. We need to make sure that, where we can, that that older population is as healthy as possible for as long as possible, and they live in their own homes for as long as possible, and that they use the NHS as less, if possible, by supporting them in other ways. That means going back to public sector reform, where our services need to look and feel different in how they do that. Social care needs to—we need to make all the changes that we have talked about to be able to maximise people's independence and then provide the support when people need it in a way that keeps them in their own home. It is not rocket science that we have been talking about that for quite some time, and most other countries are looking at very similar models of how we make that happen, the use of technology. We are scratching at the surface of the opportunities to use technology and AI in the space of keeping people safely in their own home for as long as possible and then making sure that our health services are sustainable for those who need it in terms of being able to do that. There is a huge purpose there of not just the Scottish Government but local government, our public services and our third sector organisations in being able to try to sustain and prepare for that ageing population. Ageing population is obviously one very important part of it, and I certainly recognise that. One of the projections from the Scottish Fiscal Commission was the depopulation, particularly in rural areas and in the Highlands and Islands. All Highlands and Islands council areas are going to see population fall projections over to 2043-2044. That is a midterm approach, but there are already concerns at the moment. Things like lack of investment in infrastructure like the A9, like in ferries, and people feeling very much distant from services. If you want to have population stay within rural areas, you need maternity services. We have had a number of debates recently in the Parliament on providing things like that. How can you, over the next few years, reverse that feeling, certainly within our remote areas and the Highlands and Islands, that services are being further away from them than have been previously? Cabinet just had a travelling Cabinet first one since the pandemic over to our Gael and Butes, and we met a lot of local organisations, a lot of local businesses. There are no doubt about infrastructure investment, digital connectivity, housing jobs and making sure that the west and rural Scotland get a fair crack at the whip in terms of migration and people coming. How do you attract them to go and live and work in areas that otherwise are going to suffer depopulation? There are some really good things happening, so I visited an affordable housing project in Dumbbeg, where 300 affordable homes have been built for the local population, enabling people to remain living in the area in homes that can afford them. The people that I spoke to previously remain in the private rented sector at costs that they were struggling to afford, and that makes a huge difference because they are then able to remain working in the local area. Those homes are energy efficient incidentally, so they are able to also afford their fuel bills, which is also important. We need to see more of that, and things such as the key worker housing that we have put money aside through the affordable housing supply programme to work with local businesses around how we work. Your needs, whether you are a fish farm, whether you are a hospitality sector, trying to recruit Labour and finding it difficult partly because of the housing situation. How can we work with local businesses to look for land availability, to look at solutions where jointly we can find solutions and support that to be able to make sure that we do not lose people from rural communities, but we also get people to go and live and work there. I think that all of those things—there is not one solution here—will be important to address what is a very live and important issue. I certainly would agree with regard to housing, but the picture across the region that I represent is still very mixed in terms of what is available. I would certainly agree that not only is it a question of building housing, but it could quality a housing to reduce some of the cost. My last point or question was about the Scottish Federal Commission's projections on funding. The funding is increasing from £54 billion in 2728 to £177 billion, with the role or the block grant increasing considerably as part of that. Do you recognise that? How can you make sure that, where there are new taxes being delivered, etc., they work to complement that increase in the block grant as well? Let me just say that, in housing, it is also important that we do not lose homes to secondary second homes and short-term lets. That is one of the issues that came up travelling cabinet that people were concerned about the loss of homes for local people. On the block grant, I will excuse me if my time and focus is more tied up with the immediate term. The immediate term, particularly next year, shows a real-terms decrease in the block grant that we are wrestling with. Beyond that, we begin to see a bit of improvement by 2728, but, in capital, we see real-terms reduction right the way through to 2728. I need to focus on the here and now in terms of what that looks like and the decisions that we have to make. Those will be extremely difficult and challenging. Thank you very much. The Scottish Fiscal Commission's sustainability report was where we would be by 2072 if things did not change, rather than what allocations might be. Jamie had a point about displacement of population, and I think that you touched on it in yourself. It is a real issue. Arna and Mike are saying that there is a demographic profile that the SFC is predicting for 2072 for the whole of Scotland. It is important that we look at Scotland not just as one unit, but we look at island and rural Scotland differently. I would say that it would be helpful if the rural funding allocations for housing were spent and, indeed, deliberations over those did not take three years to progress, as they have done in the situation with my constituency. John Mason and one or two others have touched on the issue of decluttering, but I will read out that we have Westminster, Holyrood, local Government, health boards, joint integration boards, community planning partnerships, three enterprise agencies, regional and city deals, 150 non-departmental public bodies, an increasing number of commissioners, and a national care service board is going to be established. You have mentioned a presumption against new public bodies, but surely the Scottish Government has to be much more ambitious in terms of decluttering the public sector. You talked about overlap, but there must be overlap, duplication and confusion. I do not think that anyone in Scotland, I would be surprised if there is anyone, knows how all those fit together and work. I would suggest that the Scottish Government do address that. Is that something that the Scottish Government is going to give greater priority to? Let me end on a point of consensus. Yes, the points that you make are legitimate. Doing it is sometimes a little bit more complex. When you think of some of the reforms that we took forward, I am sure that there will be a debate around those matters. However, the formulation of Police Scotland in terms of the resources that have been able to be used more effectively and in terms of serious crime-solving. For me, that has been a success, not without its challenges, I accept, but it was difficult. It took a long time, and it is only after a period of time that you begin to see some of the benefits roll out from quite a painful process. I am up for a public service reform, a structural reform. However, when you sometimes get into the weeds of the changes that need to be made, you then begin to get opposition, growing, or what about this? You have vested interests in saying that this is going to be to the detriment of A, B and C. However, you have my assurance that I am keen to push to the maximum the opportunities for public sector reform. That includes how organisations deliver their services, how they work together, the landscape, and how we make that make more sense. Not in a detrimental way, but in a way that is more effective. On that point, you will not get any pushback from me. The only point that I am making is that making it happen is sometimes more complex. I want to thank the Deputy First Minister for her responses today. It has been a real shift, almost two and a half hours, so I congratulate you on your stamina. Unfortunately, despite the myriad questions, we did not touch on non-domestic rates, we did not get into AI or data, we did not talk about public procurement, or, indeed, council tax reform. I hope that, given the evidence that was submitted by our witnesses, your officials will look at those and deliberate as we move forward. I want to thank you once again for your answers, which we are greatly appreciated by the community. That concludes the public part of today's meeting. We will consider a report on the sustainability of Scotland's finances and public service reform in private after a meeting on 31 October. I will now move into private session to consider a work programme. I will have a two-minute break to allow the Deputy First Minister, her officials and the official report to leave.