 Good morning, and welcome to the 15th meeting in 2021 of the Finance and Public Administration Committee, and I'd like to thank Daniel for clearing the pre-briefing session. We're meeting remotely today and have a single item on our agenda, which involves taking evidence from two panels of witnesses as part of our scrutiny of the Scottish budget 2022-23. First of all, we hear from the Scottish Parliamentary Corporate Body on its own budget bid, and then we'll take evidence on the Scottish budget 2022-23, the state force, the Cabinet Secretary for Finance and the Economy. I'll move to our first panel of witnesses, Jackson Callow MSP, the SPCB lead on governance issues, who is joined today by Scottish Parliamentary officials, Stephen McGill, chief executive, Michelle Heigarty, the deputy chief executive, and Sarah Glass, group head of financial governance. We've around an hour for this discussion, and we should direct questions to Mr Callow in the first instance, and where he'd prefer for an efficient to respond to a question, and ask that he makes us clear to the broadcasting team to operate the microphones. Our main members at broadcasting will also operate their mics, and that they should order a few moments before speaking to ensure that they'll be heard. I plan to bring members in to speak in the order that we discussed earlier, but if anyone would like to come in perhaps to follow up on the following up on another member's question, please type R into the chat function. I will now open up the question to members' questions, and I would like to begin by asking Jackson. In terms of the document that we've all been provided with in paragraph 9, it says, and I quote, That to greater scrutiny capacity within the existing committee structure was needed to address a substantial increase in committee work loads arising from the impact of Brexit, and the following paragraph then goes on to say that additional staffing investment in respect to Brexit-related disputes has been provided over the preceding three years. I'm just wondering what the level of this is and the cost implications of that going forward. I would ordinarily have made an opening statement. Were you expecting me to do that? I wasn't expecting me to do that, to be honest, but if you would like to make an opening statement, I would be more than happy to do that. I was quite surprised that there wasn't one, but I would be more than happy to take that step in having an opening statement. Well, thank you, convener, because any time that I've presented before, that's what we've done. I think that it's helpful just to set out the main themes of the budget. Thank you, convener. I thank you for the invitation to us to be here this morning, and as you've said, joined by David McGill, Michelle Hegarty and Sarah Glass as well. In this first budget of the new session, the corporate body is following up its commitment, given in February 21, to the then convener of the Finance and Constitution Committee, that we would undertake a review of staffing resources to ensure a more robust, and sustainable baseline for session 6. This request was echoed in legacy reports from other committees, as well as from a large number of members from across all the parties in the chamber during a debate around this time last year, and it follows on from the review of member staff costs as well. Accordingly, that bid, based on robust analysis and planning, addresses our capability and capacity to support the work of members of Parliament across the session. Following that proposed investment, we intend to steward our resources, managing pressures and uncertainties for the duration of the session. Unfortunately, many uncertainties persist, most notably the ongoing pandemic, which has placed significant challenge on how we operate and on our financial resources. However, the committee can be assured that the SPCB will continue, as it has throughout the last 20 months, to responsibly flex our resources to meet the demands placed upon us, and that remains our Covid assumption for the upcoming budget. Turning into the proposed budget for 2022-23, excluding capital charges and non-cash items, it represents a net 1.4 increase on the current financial years budget, which was itself a higher budget, largely because of the Scottish elections for which the Parliament is responsible. For the committee's purposes, it's a 3.8 per cent increase than the indicative budget that was presented for 2022-23 previously. Now, that is primarily attributable to three factors. One, the strategic review of SPCB staffing baseline for session 6, to which I've just referred, secondly, to anticipated requirements for members' personal security and thirdly, for inflationary increases for the Parliament's running costs. Following the death of Sir David Amos, the corporate body has been reviewing the personal security support provided to members. The corporate body is currently progressing a number of initiatives, but until the requirements and projected uptake from members are clearer, it's our view that a prudent approach is to create provision and contingency for this year, with actual financial amounts being baselineed the following year. The committee will be well aware that inflation is now highly volatile, the third area to which I referred. The forecast is predicting continued high levels in the medium term. Inflation impacts across all aspects of the corporate body cost base and the current levels are driving cost increases ahead of those forecasts when we prepare the indicative budget previously. The additional pressure is also captured in our budget bid for operational costs. For MSPs and ministerial salaries, I can confirm that, following the 0 per cent increase in 2021-22, the SPC's budget bid reflects a 3.4 per cent uplift, consistent with the application of the ASH index as laid out in the member's salary scheme. The staff cost provision uplift, using agreed indices, will be 4.5 per cent. That effectively is a provision of £139,200 per member for employee staff. Turning to running costs, the corporate body proposed to maintain a broadly similar level of investment. That includes projects to sustain our building facilities, infrastructure and services. The pace of change in our operations is faster than it's ever been as illustrated in the last 18 months by the addition of two new technologies. The technology-dependent services, the hybrid parliamentary business platform and remain a remote voting on which you may wish to ask questions. We will continue to develop and support services to provide a secure, effective working environment online at Holyrood and in local offices. If you are agreeable, I would have liked David McGill, the chief executive and Clark just to conclude the opening remarks with a brief overview of the staffing baseline bid that you might then want to ask questions about. I would like to give you a little bit more detail on what has given our response to the request for a review of parliamentary resources to alleviate the pressures on members and Parliament. Members are well aware that the post-EU operating environment has made the devolution settlement hugely more complex. Where as before, there was a relatively readily understandable picture of reserved and devolved matters. Policy is now developed in the context of the UK internal market, common frameworks, the Scottish Government's keeping pace power and the ability or desire to align or diverse from EU policy by either government. Added to that is the increased ability of the UK Government to legislate in the devolved areas and the need for regulation in areas that were previously regulated by the EU. All of that is leading to increased demand from committees for support on legal and procedural aspects of their policy development and scrutiny roles, as was evidenced in a number of committee legacy reports at the end of last session and a chamber debate this time last year. On the wider issue of the effectiveness of our parliamentary committees, we have just established what I would describe as the most ambitious set of committees ever. As this committee is well aware, we have added public administration as an explicit aspect of committee scrutiny. We have also separated out civil and criminal justice, we have added civic participation to Jackson Carlaw's committee and we have retained the Covid-19 committee for the duration of this session. This ambitious framework will be required to be supported by professional expertise in spice, clarking and legal services. Alongside that, the conveners will be taking a more strategic role to parliamentary scrutiny of the Government in relation to matters such as collaboration between the committee's diversity inclusion and committee work and post legislative scrutiny. I am also conscious that the Government that we are tasked with holding to account has grown considerably in size since new powers were given to the Scottish ministers and the Parliament from 2016. We are also keen to deliver a step change in relation to public involvement in the work of committees. Demand from committees for greater public engagement was considerably over session 5. We are committed to making further improvements that will enhance the quality of parliamentary scrutiny. Finally, there are significant expectations around the Parliament's leadership in invading sustainability and progressing our road map to net zero. From a scrutiny perspective, achieving net zero brings huge challenges across all policy areas. The Scottish Government has established a net zero directorate, a justice transition minister, a cabinet sub-committee, all of which require a commensurate response from the Parliament to ensure that we are delivering the scrutiny of increased government activity in this area. All of this is in short what has led to the bid for increased resources that we are presenting to you today. I am happy to expand on any of that in the panel's content to answer questions on the overall SPCB budget bid for 2022-23. I want to repeat the question that I asked earlier on, because it leads on to another similar question, which is paragraph 21. The bid states that the SPCB is committed to enhancing the scrutiny function of Parliament, including promoting citizen participation to enable legislature and amendments to perform the roles. You have talked about the scrutiny challenges of Isaacson Brexit, but you also said that those complex issues will create significant on-going scrutiny challenges for the Parliament and its committees throughout session 6. We now need to move towards a more stable and sustainable staffing structure to best support scrutiny in this new, more complex environment. That is what you yourself and Jackson have touched on. You also went on to talk about the huge challenge of net zero, so just on the record, can you say first of all how long you expect Brexit scrutiny uplift in terms of what will last throughout session 6, but will it peak at any point or will it continue at the same level and go beyond that? And also, how do we quantify the huge challenge of monitoring net zero, and again, how do we quantify that in terms of an additional staff that is required to assist MSPs with that work? Two important areas there. It is, I think, difficult to be, like anything, certain about the long-term requirement in terms of the scrutiny of issues arising from Brexit. We have modelled this as best we can, and David will touch on that as well. On net zero similarly, we have got quite a sustained action plan on net zero. I am not sure whether you are talking about the scrutiny in relation to net zero or our own scrutiny of ourselves in relation to what we are doing to achieve net zero, but Michelle will certainly be able to expand in detail on that. In the first instance of your permission, convener, I would ask David to comment on the Brexit aspect of the question. I would say that, in terms of the peak, we are probably now at the position where we have gone beyond transition clearly, but what we are seeking to do now is to stabilise in this new operating environment. I do not necessarily see that being a peak, which we will then tail off now. We have moved into that post-EU environment, and what we are looking for now is the resources that we are going to have to manage in that environment. To give you one example in relation to scrutiny of subordinate legislation, we are now seeing a sustained level of around about a 50 per cent increase in the number of statutory instruments that the Parliament has required to scrutinise as we did pre-Brexit. That is because of that need for regulation to happen in Scotland and at UK level rather than at EU level. I think that what we are looking at now is that more stable picture, so it has gone beyond peaks and probes when we are entering into that new operating environment. I will hand over to Michelle now to pick up on the issue around about net zero. Good morning, committee members. I was going to pick up on net zero. There are two aspects that Jackson alluded to here. The first is our own staffing capability and support to members and to committees in terms of scrutiny of others and the Government in particular and how it addresses net zero and the ambitions around climate change. Some of that is factored into the staffing bid, particularly in terms of the parliamentary business side of the organisation and what we have made an investment in the environmental skills that we have in the organisation. Some of that is going to support us in our own ambitions around net zero and how we hold ourselves to account on achieving some of those targets. The corporate body has already got a carbon management plan, which sets out how it is going to reduce emissions by 66 per cent by 2026. Some of that is going to be project spend, which features as part of our project budget this year. In addition to that, we are also undertaking a degree of learning and development for ourselves as officials whenever it comes to looking at the sustainability of some of our investment decisions, ways in which we run the parliamentary state and how we undertake projects, contract relets and things like that. There are a number of bodies involved here. The corporate body is going to be responsible for establishing the net zero plan for the Parliament and it will be engaging with that in the new year. Officials have a role in advising members and we also have a role in running the Parliament. The business group also set themselves as a strategic priority around sustainable development, which we will seek to support. Obviously, one of the places where we expect that we will be held to account for the SPCP's plans is also through the net zero energy and transport committee as well. I asked a specific question about how that has been quantified. The budget bid is very specific in terms of the bid, £112.161 million. If additional staff are required to look at net zero or Brexit or committee scrutiny or strength and committees, it would be helpful to know how much it actually was in staff numbers or the budget. I think that we have an understanding of what the increase in staff numbers are. We have had a number of part-time staff in a number of people who have been employed on a temporary basis. If I bring David in, he will be able to give you a detailed view of the actual increase in staffing. I am happy to do that. The overall figure that we are speaking to pursue through this budget bid is a gross increase of 46 members of staff. That includes the 13 temporary staff that we have been operating with for some time now. That figure was sponsored by the corporate body and agreed by the predecessor committee. We are looking at the stabilisation figure of an additional 33 permanent posts above the current year figure. That rates down to about a 6 per cent increase in the staffing budget for the year. To give you a further breakdown, we know exactly where the staff are going. All that 4621, for example, will be in the parliamentary scrutiny group. That is a group that consists of the committee office vice and the participation in communities team. Ten staff will be in BIT, eight staff will be in the parliamentary, the legislation of parliamentary business team. We have done a very detailed exercise about where the actual increase is. That is very helpful. That takes us up to 6.25. Is that correct? We have conducted under pressurty green book rules for the processes for imposing business cases. Each of the areas of the Parliament that is led by a group head was asked to submit a detailed business case with options. That is how we fleshed out exactly where the demands were for individual staff increases. That takes us up to 6.25. Is that correct, David? That is correct. On full-time equivalent, it is around 600, but on head count it is slightly over the 600 mark. The reason that I was asking is so that people can get into perspective. It is always good to have numbers, I believe. Moving on to paragraph 12, staff cost provision increase in session 6 on 93,833,000. Jackson has advised that it has got up to 139,200 in comparison to MPs this current year of £177,500. I am just wondering what the utilisation has been of the increase from 93,000 to 133,000. I realise that I have not completed a financial year, but obviously there must be some indication as to what the uplift of that has been. That is a difficult question to answer at this stage, convener, because in the first year of a new Parliament, particularly with new members, the actual time that it takes to engage staff is quite considerable. There will be new members as members of the committee, possibly who have not yet fulfilled their staff commitment or who took several months to do so. There will probably be an underspend in the first year simply because members will have been recruiting staff and will have had start dates, some of which may only have been in the autumn. We will probably not have a full answer until the following year, but Michelle is obviously monitoring those things and, with your permission, I think that we will be able to give you an indication. I think that we are probably sitting in other parliaments about four-fifths of capacity in terms of utilisation, but Michelle can probably give some further confirmation. Yes, convener, we are about 80 per cent recruitment now, but we do see a little bit of churn in that, obviously, especially where members are setting up their offices. We have still got some members to set up offices, and as Jackson has alluded to, we have still got some members who are seeking to undertake recruitment, but we are about 80 per cent at the moment in terms of recruitment. We will start to see that settled down. One of the things that we have with the corporate body being keeping an eye on is obviously office cost provision, because members are employing more staff, but again, it is too early to tell if there are any issues with that, either. It might be a couple of years before we can really analyse that in any great debt, but Jackson and I would both list MSPs before being elected to constituency MSPs, and I am sure that you will agree that, in terms of workload, there is absolutely no comparison. I am just wondering how much longer will the SPCB pretend that there is no difference in workloads between the list and constituency MSPs, and will future assessments of staffing costs consider that reality? Thank you for that question, convener. Yes, as you say, I have been both a regional and a constituency member, and I noticed a very considerable change in the nature of my workload moving from one of those functions to the other. I also acknowledge that the overall responsibilities of the Parliament have changed significantly since I was a regional member with the additional fiscal powers that the Scottish Government has got, and therefore the additional responsibilities that have devolved on us. I am now maybe less convinced of the variance in the workload between regional and constituency members. I think that there is a variance in the nature of the workload, but I know from the work that we did as a corporate body, liaising with members across the Parliament in the whole Covid period, that the increase in the workload and demands of all members as a result of the pandemic was very considerable. As people discovered Zoom, as people discovered the whole nature of online inquiry, there has been a considerable increase in the way in which people have been approaching us and in the volume of that approach. However, it is also important to say that there is an obligation in that the entire scheme under which we operate has at its heart a principle of equality between all members of the Parliament. It is absolutely, I think, fundamentally important, not withstanding the way in which workloads may have evolved to where they are today, that all members of the Scottish Parliament are equal and are treated as such. I will move on to my last question, which is on the £1 million contingency for enhanced security support to members. I realise that prudent assumptions have been made on that. That works out at just under £8,000 each. I wonder what indications you have of uptake on that. I know that it is relatively early days, but I certainly will not go up to that level. I am just wondering what the SPC information is at this point. We have undertaken an initial survey of members, which is out just now, which will be one of the things that will help to quantify that. However, when we get to a certain stage in the roll-out, it may well be that members will take advantage of the opportunity to have a survey as appropriate undertaken of domestic premises or whatever, with recommendations. Some of the case was the case with office security assessments. They may wish to take up or they may not wish to take up. There are various different streams that we are currently exploring. There are a number of technical challenges, a number of fiscal challenges, taxation challenges that we are just having to liaise with representatives from other parliaments on, but there are a number of different streams that we are investigating in relation to members' security. The best that we can do is to come up with the contingency that we have, which we will have a far better understanding of in the course of the next 12 months, because that will be when those costs quantify. I am not sure if Michelle can add anything further to that. I am pretty sure that that is more or less summing up the position. That is absolutely comprehensive, Jackson, and we expect the corporate body. We are moving at pace with officials on trying to understand, as Jackson said, the need for members and also how that might be resourced. We would expect to return to this in the early new year with the corporate body. As Jackson said, that will help inform what plans need to get taken forward based on members' feedback and how that would be resourced. We will be much better placed. I think that that is a great question. The next budgeting, where I am to really understand how that is baselined. OK, thank you very much for that. I will open out the session to colleagues. The first member to ask questions is to be followed by John. One of which follows on from that last one regarding personal security. Can I get some clarity on the timescale for which the SPCB will be wanting feedback from members, following advice from local visits of police, as we were instructed to do, or requested to do? When do you expect to get a good idea from the members of the Scottish Parliament what home security they might be requiring, what is the timescale for that? Other than, as Michelle Smith says, we are moving at pace. Clearly, we are going to get recommendations made and then requests following that. We are looking, for example, to see whether there should be any national procurement to make those issues easier. That may or may not be the route to go. There are a series of questions that we are currently exploring and investigating, taking advice from others who are going through a similar exercise, whether at Westminster, in Northern Ireland or in Wales. Clearly, there is a sense of urgency in relation to all of that in terms of the reassurance that we want members to have. As and when we are able to make early progress, you can be assured that that is what we will be doing. I think that that would be very helpful, because there are members who want to get a little bit more guidance following. The SPCB has done a very good job on that. It was a very sensible recommendation for the rest of us to contact local police, etc., for home visits. I think that there are a lot of members who would like to be able to feed back on that and ensure that the SPCB can help them with some of those costs, hopefully in the not too distant future. My other question—obviously, you have both highlighted some very considerable extra expenses that the Parliament is having to cope with, whether that staff costs or its security costs or its on-going inflation, etc. There will be some savings, or there are some savings that I can see from the numbers. What processes are there for the SPCB to estimate the changes on savings that will come about because of our changed working practices? For example, our travel expenses over the period of Covid were not as extensive as they had been before because we were able to work at home, etc., the same for our staff. What projections or processes are there for the SPCB to be able to project, whether the change to working practices will actually be quite permanent and therefore some savings will accrue from that? How can that be worked out? I will come to colleagues in a moment, but I fully understand and appreciate the question. Again, it is quite difficult to be absolutely certain about this. Clearly, there has been a requirement for people to work at home for a large part of the pandemic. As we move forward, that may vary in a number of different ways. We are acutely conscious, not just of keeping people safe but of people's mental health and wellbeing. We are aware that it may well be that, although some staff will continue to work remotely, they may choose to work remotely from constituency offices in order that they are with a smaller community but therefore engaging with others. That, in itself, might change the nature of the parliamentary function of constituency offices, requiring them to be a more obvious extension of the parliamentary process in terms of the ability to engage reliably from constituency offices as we go forward. We know that there are clearly a considerable number of members who prefer to be at Parliament if they can be. As I think that we saw in a quite excellent debate in the Parliament last week ahead of a committee inquiry into future working practices on the back of the hybrid arrangements that we have experienced, it may well be that there are members who go forward on a variable basis, which is that they work remotely when they do not need to be in Parliament or are therefore in Parliament more regularly when they have a particular and physical need to be present. I think that we are going to be monitoring all of this as we go along. We are obviously also able to applaud the work that the Parliament has done on the hybrid working that we have. That is not to say that I do not understand the frustrations. I can see my own party's WhatsApp chat line as we navigate our way through the hybrid working process at times. The Parliament is still looking at ways in which we can make that more robust and extend the functionality of that hybrid working, one of the big frustrations being our inability at present to intervene, for example, in hybrid contributions. Michelle again, I think, probably could take forward some of what I am saying in a bit more detail in terms of any process that the officials are monitoring on the things that I have just discussed. There are two parts to the answer. The first is that the last 20 months have taught us a lot in managing Covid within our existing budget. One of the things that the member picked up on was that there may be savings in certain aspects of the corporate body's budget, but that is counteracted by increased costs in other aspects of the budget. For example, travel, for example, we have seen in the last 20 months a drop-off in travel costs. We have also seen, unfortunately, a reduced footfall at Holyrood, which increases other costs, for example, our catering costs. The way that we have had to handle the pandemic has also meant increased cleaning costs at Holyrood as well. We have had to do a very active management of the budget to redirect and repurpose costs. That is what we are planning to do for the new financial year. We have not made any additional Covid-related costs associated with that. On the longer term, we have started to make some assumptions around what we are calling new ways of working, which is the way in which we expect that there will be some continuation of hybrid business for the Parliament and that we need to invest and support that, because it is more rather than less expensive to support that. We have introduced effectively two new services with hybrid business platform and the remote voting. The Parliament is currently discussing that and will be in the next few months, but there is certainly new music that we will need to continue to support. In addition to that, we are obviously seeing more members, staff or staff who may work more flexibly in the future. That will drive up some of our costs around our IT and our technology, in particular, to be able to deliver that and make sure that it is secure wherever people are located. It is also performing well as well. I think that we are at the start of trying to make some assumptions around that. However, there is fatal change and some of that will drive benefits for our environmental and sustainability targets. We are only at the start of understanding over the remainder of the session how some of that is going to get driven forward and will come up in subsequent budgets to the committee over the next few years. I have two areas that I want to touch on. First, I note that the proposal is to give MSPs a 3.4 per cent increase and staff cost provision to go up by 4.5 per cent. Both of those seem quite generous, given that a lot of the other people in the public sector are only getting 1 per cent. I wonder how you would answer a member of the public who said that MSPs and their staff are being treated so generously. I think that I would answer in the first instance by saying that we operate to indices that have been agreed by Parliament and to which we have adhered since we decoupled the member's staffing salary costs from Westminster some years ago. At that point, we agreed to adhere to the Ash index. That would have produced last year an increase of 5.1 per cent in the salaries of MSPs and the corporate body in the circumstances of the year to a view that we would suspend that and cancel that increase. I would point to that in the first instance. In relation to the staff cost provision, again that relates to the indices that we have established. What actual salary costs are passed on to members of staff is, of course, a matter for each individual MSP. However, it protects the integrity of the sum that was agreed was necessary in order for MSPs to fulfil their function and to have the complements of staff at their disposal that they require to achieve that. I believe that it would be wrong to remove ourselves from those two indices without very careful consideration. I accept that indices are important and it is good that it is not just totally subjective every year. Do you not think that we would set out a good example if we just said that we were going to take 1 per cent as well, just like a lot of the rest of the public sector? I am genuinely reluctant, Mr Mason, to have the corporate body start interfering in that way. It was a very considerable decision in our part to take the decision not to take the increase last year. For MSPs, the staff cost provision did increase. I am not sure if the figure that you are using is correct, but I know that Michelle will be able to confirm that for me. I have always been uncomfortable with the fact that the responsibility for establishing matters relating to our own pay rests with us. That is why Parliament quite sensitively took the decision that we would align ourselves with a particular index. There was a discussion last year in the corporate body whether we should change that index. I have to say that I was one of those who was reluctant to do so. Had we changed it, it would have recommended a larger increase for MSPs. If you are requesting a share, Mr Mason, by unintentional consequence, I am afraid that you will have to blame me for that lesser increase than you might otherwise have received. Fair enough. I just wanted to raise that issue. The other issue that I wanted to raise was concerning the Scottish Commission for Human Rights. It seems to be putting in a request, and one of your colleagues can explain where we are with that. I see that there is a figure of 300,000, which is in contingency. If I am understanding the figures, they are getting a 4.9 per cent increase anyway, plus they are looking for this extra 25 per cent. That would be something like a 30 per cent increase, which seems quite a lot. You are quite right. I think that there is a complicated underpinning to all of that, and David, I believe, is the best person to answer that in detail. The question is correct with the figures that you mentioned. This is coming from a number of pressures that the commission has communicated to the corporate body that is operating under. The principle among those is the consultation that the Government is currently running on a human rights bill. That would lead to increased responsibilities for the commission. They are looking ahead to the workload pressures that go down through that. They have also referenced a number of other sources of pressures, including the Convention rights bill, the UNCRC bill, which was the subject of a reference to the Supreme Court recently. The Scottish Government is considering how to bring that back to the Parliament and what form to do that, but that will have increased responsibilities for the commission as well. The corporate body has requested a full business case from the commission that has received that business case, but rather than just accept that from the corporate body's level, it is going to conduct an independent review. That is why the corporate body is suggesting that the money that the commission is looking for is placed into contingency rather than put into the commission's budget line at this stage in order that that independent analysis can take place. The corporate body can have that independent assurance that the increased costs that the commission is anticipating here are fully justified and are played out in terms of the business case that is submitted. I take your point that there are a number of exceptional circumstances. I just feel that there are other parts of the Scottish budget, obviously the NHS, which is facing increased needs and cannot get a 30 per cent increase in their budget. I suspect that some of the other commissioners, such as the Children's Commissioner, could easily spend an extra 30 per cent in their budget. I would just be looking for an assurance that between you you will be very strict and thorough and rigorous in not handing out a 30 per cent increase. I can give you that absolute assurance and that is why the corporate body has gone down the line of an independent review on the business case that has been put to it. OK, thank you, convener. Michelle, on to before my Douglas. Good morning everybody. Thank you very much, first of all, for the very fulsome information. Just going back a little bit, I wanted to understand a wee bit more about the breakdown of where the convener was probing earlier in terms of additional resource implications. You have described how you see that the additional Brexit resource cost has gone down as we have moved out of transition. I wanted to understand a little bit more about your forecasting for the additional costs in terms of headcount, FTE and costs for the internal market at what is triggered by that. More in particular, some of the funds that we have seen where spend is being spent directly in Scotland by the UK Government, perhaps you alluded to that in your sentence. I will just quote where you talk about the UK Government's decisions that have a direct impact on devolved areas. My question is what specific additional headcount triggered by the UK internal market act and any additional funds such as a levelling up fund have you forecast in your budget for this year? Again, Jackson or David, I am not sure who is best to answer that. I would go directly to David for that very specific response. I do not think that that is an absolute figure that I can give to the member there, but what I can say is that it is part of that parcel of pressures that are on the committee structure in the Parliament. I referenced earlier the internal markets act, common frameworks, all the scrutiny that comes with that, the ability of the UK Government to legislate in areas that were previously legislated for, either at the EU level or at the devolved level. The analysis that has been done by that scrutiny group that consists of the committee office, the SPICE office and the participation in communities team has led to an increase bid of 21 posts. The vast majority of the temporary posts that will currently have sit in that group is a net increase of 11 posts, but I think that 10 of the temporary posts are already in that group. That gives you an idea of the scale. That is by far my way where we see the biggest pressures. The rest of the staff increase that we are looking for is spread across four other parts of the organisation. I can say that the bulk of that is coming from the hugely complex nature of the post-EU environment. I do appreciate that it is extremely complex. I absolutely understand that. I thank you for the figures and it is useful to have on the record. Given the uncertainty over that and what looks to be an increased provision going forward, would you see a point where you would seek to charge back the costs incurred by the Scottish Parliament and the UK Government? We are, in accounting terms, in unchartered territory, where this may come to be seen as something beyond and special to our normal operating environment. Is charging back or having that discussion something that you have considered or, if not, is it something that you would consider? It is not something that I have considered and I am not sure that that would fit with the budgetary process. The corporate body's ability to topslice from the consolidated fund gives it the ability to identify the increased pressures on it and to topslice that money from the consolidated fund. That becomes part of the Scottish block, so charging back is not part of the process that we normally deal with when it is not something that I have considered. I know that I have probably asked a question that nobody has thought about, but it may well come to that point if the headcount and the additional cost is deemed to be so significant. Jackson, I wanted to ask you just a wee question. You mentioned tax in the light of the additional security requirements for members. I wondered what assurances you could give that the tax treatment vis-à-vis benefit and kind between members of the Scottish Parliament and members of the Westminster would be completely aligned. You may not have been alluding to that, so apologies if you weren't, but I just wanted to ask. I think that it is important that there is whatever equalities can be achieved and we are actually taking advice from HMRC directly at the present time and all of this is under very active consideration. You can be assured of that point. Thank you very much. That's me, convener. Thank you. Douglas, we follow my Daniel. Thanks, convener, and good morning, everyone. Jackson, you mentioned the debate that took place last week, and I watched that. I was feeling amongst most people that hybrid working of some sort is here to stay. You also mentioned in that debate that the blue jeans had actually failed last week and it's the thoughts whether there should be an alternative backup system in case that happens again and also thoughts about remote voting. Sometimes, in the chamber, that takes quite a while and is frustrating for a number of people. Is there provision in the budget for looking at those two areas to look at ways to improve it or change the systems that we use at present? From a very personal point of perspective, it always occurs to me that a vote in the House of Commons takes about 15 minutes. Sometimes we've got about 10 or 11 of those divisions of the Scottish Parliament and that does occur to me that if we were to follow that process we'd still be there for several hours. I understand the frustrations that some members have experienced. Sometimes, of course, this is the robustness of the IT connection and network where the member is seeking to vote from. I still think that it's a remarkable job that we've managed to do in the time concerned. I might cheekily suggest that I've sometimes seen in the chat line not so much in this Parliament but maybe in the last some familiar faces who were struggling to complete the voting process. I'll say no more than that. We recognise that what might have been thought of as being merely a temporary requirement is now, for the foreseeable future, a requirement that we have to meet. As was said in the debate last week, changes that might never have been contemplated at all in the longer-term working of the Parliament now seem more palatable and beneficial, potentially, than might have been the case if we discussed them in an abstract way prior to the pandemic. That, therefore, requires us to continue to invest in the technology that we have to ensure that that is robust. I'll turn to David, but I'm reassured that we are aware of the difficulties that we've had and are working all the time to improve that. I don't think that we will ever be in an environment that is absolutely 100 per cent secure from any kind of failing. I don't think that there is any other Parliament in that position either. The two offerings that we currently have—the virtual platform and the voting platform—were platforms that we put together at high speed. If that was a planned exercise, we would have given ourselves at least six months, if not longer, to set those platforms up. We just needed to get on and make the best of the situation that we found ourselves in, but we have made adjustments and changes as we go along. I, like you, listened carefully to the debate last Thursday. I think that it was to monitor how members were coping with what their views were. One of the things that I noted there was frustration with the inability for members to intervene in each other if somebody is contributing from a virtual environment. As an example, that is an enhancement that we are actively looking at. At the moment, I have seen a pilot of how that might work. It looks very good to me, so we are currently going into a testing phase. That is an example of an enhancement that we are seeking to make. We are also looking at a replacement of the sound and voting system in the chamber, and that will encompass the remote voting. We have had to pause on that because the market has changed rapidly since the whole world went into lockdown situations. We are waiting to see how the market matures in that front, but we are actively looking to build on the platforms that we already have. Our assumption is that, post-pandemic, when that might be, we will be retaining some element of hybrid proceedings. I think that it is incumbent on us to make sure that those offerings are the best possible that they can be and the ability to present parliamentary proceedings in the best possible light. That is what is driving our support for those on-going platforms. I would just like to point out that I know that we are being critical. I realise that those systems are put together at pace. It is just looking ahead that we realise that we are probably going to have some sort of hybrid working for the future should we be looking at those systems. We have a bit more time, because we have something else in place, and there was no way of being critical of the staff that put those systems together at pace. Is that you, Douglas? I think that my colleagues have covered the major issues. It may seem slightly niche and left-field, but the shopkeeper in me could not help but look over the figures for the Parliament shop. I am just wondering if I can make some observations. At a revenue of £250,000 per year, given the pre-Covid, and given the visitor footfall that year was around 260,000 visitors, that strikes me as being very low revenue. It is important that we ensure that the Parliament maximises not just its ability to control costs but maximise revenue. I would also observe that, in the forecasts that you have made, the gross profit margin is going to jump from 44 per cent to 50 per cent. 50 per cent is a better profit margin for a gift shop, but any forecast that sees a gross profit margin increasing by 5 per cent would make me ask how that is being achieved. I would also observe that it is really not accounting for the true costs of operating the shop. There are no utilities and there is no hypothecated rent. If you added those things on, I would suggest that the shop is probably running at a loss, given that it is only anticipated to make a £17,000 profit. I would ask the question whether it is sensible for the Parliament to be directly managing the shop and whether it might be better to lease and perhaps licence the shop, i.e. let it to a third party but perhaps operating under licence to use the Scottish Parliament branding and so on. It is especially thinking about the other public sector providers who run very successful shops, such as museums and galleries and so on. There is a lot in there, but there is a broader theme about whether we are making the best use of the visitor shop so that we can maybe generate something more than 80p per visitor than we seem to be generating from the existing set-up. Thank you, Mr Johnson. The radical shopkeeper in you is indeed advocating the privatisation of our parliamentary estate. I wouldn't call it that, Mr Carlaw, but you get the broad theme. A very legitimate question. Sarah, who has been with us, is not able to contribute, and Michelle might be able to come in on both separately in relation to that. On some of the numbers in the first instance of Sarah, Michelle, on how we are trying to engage with the use of the parliamentary estate in different ways, which I hope might address the latter part of your question. Hi, can everyone hear me now? I will respond to the question about the margins and the financials and whether it is fully costed or not. We agree that we are not representing the shop as a fully costed entity. That has never been a priority to do so, and we use the staff resource quite flexibly so that the team would support other engagement activities and the likes. You are absolutely right. The nature of having a shop is a different angle. That is a choice that has been made in supporting engagement. It is probably one that Michelle can answer more fully in terms of historic reviews of the purpose of the shop, what it serves and what genuine opportunities we have, given that it is within the ground, access is limited and the likes. Michelle, I do not know if you want to come in on that. I will come in on that. It is obvious that being part of that wider experience for the public who come to Holyrood to engage for a range of reasons in terms of why the shop was there in the first place. It has been looked at over many years. I think that the idea that it has also been looked at should be something that was run by an external provider. One of the challenges that we have with the shop is the course that you have to come into a secure environment and you have to come through security to come in. That naturally constrains the footfall to those around the householders in the building or those who are sticking to engage with the Parliament. That has been a barrier to looking at whether we outsource the shop as a sort of going concern. There has been a gradual drop in Mr Footfall over the last decade for the Parliament. The new group head has been looking at a public engagement strategy to stimulate how we continue to engage with the public. Obviously, there are a lot of new drivers for that because we expect post-pandemic to see new in different ways in which the public might seek to engage with the Parliament, which might not all be about physically being on-site at the Parliament. I think that there is a need to go back and look at our whole offering in the main hall. I know that that is something that has been given active consideration at the moment. I am sure that the shop will be part of the mix in there in looking at the range of what we have provided visitors and how we can assure ourselves that we are seeking to maximise income and keep those things as a going concern as part of that overall offering at Holyrood. Given that this is 2021 and that no items are being sold online, can I just gently suggest that that is an opportunity that should not be overlooked? Likewise, if you were to find an MSP that had particular expertise in retail, you might want to ask them whether they could provide any observations. I will personally take that suggestion back to the corporate body. Mr Johnson, as a former customer of your former shopkeeping empire, I will certainly be very happy to encourage that suggestion that we do exactly that. As long as it is on a non-commissioned basis. Absolutely. It is just out of the sense of public duty. Of course. That concludes our questions from the committee absolutely on time. I thank Jackson Carlaw and his supporting officials for their evidence today. I now suspend the meeting for five minutes to allow final checks to take place before the cabinet sessions. Thank you very much everyone. We are now joined for our second evidence session on the Scottish budget 2223 by Kate Forbes MSP, Cabinet Secretary of Finance and the Economy. This forum is joined by Scottish Government officials Lucille Carroll, director of tax and fiscal sustainability, Douglas McLaren, deputy director of budget paying pensions and Ian Story, head of local government finance. I welcome the cabinet secretary to the meeting. I again remind members of witnesses that broadcasting team will operate the microphones, and that they should pause for a few seconds before speaking to ensure they will be heard. I intend to bring members in to speak in the order that we discussed earlier, but if anyone would like to come in at another point, please take our into the chat function. All questions will be directed to the cabinet secretary in the first instance. Ms Forbes wants an official to respond from a particular point. Please make this clear so broadcasting team can bring them in. We are on to choice for this session before we open up the session. I would like to wish good morning to Ms Forbes and ask her to make a short opening statement. Thank you very much, convener, and thanks to the committee for allowing me to come and give evidence quickly after the publication of the budget. Obviously, events over the past two weeks have almost overtaken the budget that was published, so this scrutiny session is hugely important. That is another challenging budget, probably the most fiscally challenging that I have ever been involved with over the last few years. It should now, I hope, be beyond debate that our overall funding for next year from the UK Government is falling. On the other hand, I recognise that our funding is greater than its pre-Covid levels. I hope that we can get into some of the numbers and data in the course of our scrutiny session. I am keen to provide as much transparency as possible around the budget, given the extreme levels of volatility and uncertainty that we are seeing right now, particularly in our fiscal outlook. I have set out clearly where we have had to make assumptions about our funding and also some of the difficult choices. Even before Omicron hit, it was clear that public services' response to Covid would continue beyond the end of this financial year. Over and above the impact of Covid, it is important, as part of our recovery, that we push ourselves to be as ambitious as possible within our fiscal constraints. It is very much a budget of choices and it is a transitional budget, too. It should continue to address immediate pressures on the NHS and support the recovery effort. It should be seen as a stepping stone on the road to our resource spending review for the longer term. The choices that we have made are all informed by the priority themes of tackling inequality, supporting economic recovery and fulfilling our net zero obligations. As I close, I appreciate that the committee will have been busy this morning, but I know that the committee has, in the past, been interested in not just where budgets are spent but how budgets operate. I commend the report that I have just seen this morning from David Bell, David Eiser and David Phillips on budgets, which underlines the need for fiscal flexibilities and guarantees at a time of volatility, like just now, which, hopefully, is in line with much of the committee's discussions in the past. On that, I look forward to your questions. Thank you very much, cabinet secretary. I am sure that the committee will look forward to looking at the report from the three Davids. Cabinet secretary, I should be aware that there has been conflicting advice and information given to the committee with regard to the size of the Scottish budget from the Scottish Fiscal Commission, the Scottish Government itself and the Fraser of Arlanda. If we take the Scottish Fiscal Commission as being the one that we are looking at today and the implications of that, it says that the Scottish Government's budget next year will be 2.6 per cent lower than in 2021-22. After accounting for inflation, the reduction is 5.2 per cent. At the same time, spending on the Scottish Government's largest social security payments, including new payments, is forecast to be £764 million more than forecast by the funding available through the UK's grant adjustment in 2024-25, which reduces the funding available for other spending priorities. Given that the latest SFC forecast shows that we are lagging behind the UK economic performance and income tax receipts falling behind the block grant adjustment and social security spending exceeding the block grant adjustment, how do we ensure fiscal sustainability? I will answer that question if I might in different parts. First, just on the size of the budget, you are right that the Scottish Fiscal Commission is the one to prioritise, because ultimately I cannot spend a penny more than the SFC's forecast. In terms of the overall size of the budget, that matters. The Treasury figures are useful too, because as set out in its own block grant transparency publication, that indicates that the block grant is less than the current aggregate for 2021-22 in every year of the spending review. For resource, £2.6 billion in real-term reduction for next year and capital is £0.5 billion in real-terms reduction in 2022-23. On the forecast deficits that you referenced, one of the keys is to use the forthcoming resource spending review to plan the future years. When it comes to social security in particular, but also income tax as well, we know that the Scottish Government needs to manage that. The choices that we make have a direct impact on the level of funding that is available. I think that there is an argument to be made, which I have made in the past and will continue to do so, about income tax and the methodologies that are used for block grant adjustments, but you will know about the forthcoming review of the fiscal framework and I hope that that will feature. When it comes to social security, the level of uncertainty, the level of a demand-led budget needs to be managed within a fixed budget. I think that that is where the multi-year spending plans are absolutely essential. They will be the first time that we have been able to do that for a number of years and they will inevitably require us to make some very difficult decisions. At the end of the day, they will allow us to plot out and plan how to best allocate available funding to meet our evolving priorities over the course of subsequent years. Thanks, cabinet secretary. He said that the north spending review would evolve to meet coming needs, but surely finding £764 million, which I understand having questioned the SFC on it last week, is likely to be a conservative estimate, notwithstanding the fact that some people will be lifted out of poverty and hopefully will require such benefits. The number one priority should be to go to the Scottish economy faster than the UK economy, because the whole purpose of having devolved taxation was to allow Scotland to benefit from the powers that all will be limited to a growing economy greater than the UK economy, allowing for additional funding to be available to Scotland, rather than trying to move the court into a new economy. That is important, but I haven't tried to find £764 million from a fair place. Absolutely. My objective is to grow the Scottish economy, ideally at a faster rate, but to ensure that people are in work, well-paid jobs and secure employment, that we are more productive as a country. That is where the budget needs to be seen alongside some of the other work that we are doing from an economic perspective. It is not just money that drives economic improvements. It is a wider policy landscape that enables businesses to take risks that enables entrepreneurs to flourish and to prosper. You cannot get away from what some of the drivers are, for example, on income tax performance. We know that the Scottish economy is disproportionately exposed to the oil and gas sector as one example. That is not my passing judgment, it is just a fact. In terms of the volatility in oil and gas, irrespective of what any politician around the committee table thinks, or irrespective of what people think about the future of oil and gas, having been exposed to the oil and gas sector, we know that that means that higher redundancies lead to a knock-on impact on income tax. We need to understand what some of the key drivers are for the economic exposure that leads to income tax performance. There are two ways of resolving that. One is through the fiscal framework, because I am pressing to ensure that the fiscal framework mirrors more of the Welsh fiscal framework. In terms of taking into account the nature of the Scottish tax base. The second thing is to ensure that all sectors in Scotland are prospering. We have recently heard of Lloyds banking group PwC saying that Scotland is already and will continue to be the place in the UK for green jobs. We need to create jobs to ensure that we attract talent to Scotland. That talent contributes to public coffers and, overall, we see a net benefit to the Scottish budget. I absolutely agree that we cannot look at the budget independently of our economic aspirations for Scotland. Felly, on the 9th of December, although the budget lays a groundwork for a green economic recovery from Covid-19, it must be clear that the UK government spending review has hindered rather than helped us on that mission. I wonder if you can highlight that a little bit. In terms of four of the 11 portfolios, four of the 11 portfolios fall in both cash and real terms. Of those four, one is net zero energy and transport. Surely, if the priority is to try and boost the economy and take on the challenges that we face, we will be able to do that. Why, among four portfolios with funding that is falling in real terms in the budget, according to SPACE, is net zero energy and transport? Why are those two portfolios having reductions in their funding? In terms of your first answer, the spending review, I think that I probably answered that in terms of the fact that our budget is falling in every year of the spending review period. This, as it were, is a challenging outlook for Scotland and underlines the challenging choices that we have had to make. The second element to that is, in terms of investment opportunities, investment in infrastructure or investment in the transition to net zero. From a capital perspective, the UK government can do that through borrowing, but ultimately I am constrained by what is allocated to us in the spending review. In terms of the overall budgets, I can go through the detail of the net zero and the finance and economy budget. This has not been an easy budget. I guess that the bottom line for me is that on one hand you have headlines saying record funding for Scotland, but on the other hand the hard choices that we have to make is to determine where that funding is spent. Certainly within the net zero energy and transport portfolio, we have absolutely prioritised that investment in net zero, in that transition to net zero. You can see that in the budget itself, where there is significant investment in some of the climate change initiatives, huge investment in energy, ramping up the delivery of the heat and buildings programme, doubling home energy to Scotland's budget in terms of energy efficiency, investing in hydrogen and carbon capture and storage via the emerging energy technologies fund. There is significant investment. I go back to where I started. This is a budget of choices. We have chosen, as one of our three key themes, to invest in that transition to net zero and you see that in the infrastructure portfolio. On the finance and economy one, the choices that I have made there are to prioritise our enterprise agencies. To prioritise Scottish Enterprise, Highlands Islands Enterprise and the South of Scotland Enterprise as well as the Scottish National Investment Bank as key levers and agents of economic growth. There will be views and opinions on how they can do their job better and I am engaging with them. Ultimately, from a budget perspective, that is what I have prioritised. I go back to your statement on the 9th of December. You said again that, I quote, an income tax that Government's priorities need to make the tax system fairer and more progressive and to protect low and middle tax payers. Again, if we look at page 18 of the base report, it says that, I quote, Scottish tax rates are early between the proposed Scottish higher rate threshold of £43,672, which has not increased by inflation, but that is indeed the UK one hasn't, and that our UK higher rate threshold, £50,770, will pay 41 per cent income tax and 12 per cent national income tax distribution and early income tax between these two amounts. That means that, in fact, people in Scotland are earning between £43,500 and £52,500, but they will be paying more in tax than people who earn more than that, so someone in £51,000 of a marginal rate of taxation of 43 per cent because of the 10 per cent reduction in national shelter. How can that be deemed to be progressive, given that that includes a lot of people who have families and large mortgages? The issue with the higher rate taxpayers paying the marginal tax rate of 53 per cent on income between the Scottish and the UK higher rate thresholds is, to my mind, another sign of the inadequacy of the devolution settlement. That issue is exacerbated by the decision to introduce the health and social care levy next year, which means that those taxpayers are facing a combined marginal rate of 54.25 per cent. I recently wrote to the chief secretary to the Treasury to request that the national insurance upper earnings limit for Scottish taxpayers should be aligned with the Scottish higher rate threshold, but that has not been granted. My sense of it is that if we believe in full devolution of income tax or even if we believe in full devolution of non-savings, non-dividends income tax, which is what has happened, then we also need to have a voice about the other areas of tax policy that interact with that. You have talked to me just there about the interaction with national insurance contributions. There are also interactions with pensions. There are also interactions with some of the allowances that are available. It is just that often the national insurance contribution issue dominates. I think that, taking a step back, we have chosen, and I think that it is quite clear, to make income tax fader and more progressive. The majority, 54 per cent of taxpayers, will pay less income tax next year than they would have lived elsewhere in the UK. That is balanced by the fact that we are asking those who can afford it to contribute a little bit more. I think that, in return, those living in Scotland continue to have access to a wider and better-funded range of access to public services in the UK, whether that is prescriptions or tuition fees. I cannot stand your argument with regard to the UK, and that is something that I agree to. Surely, if people are earning more than £43,662, we are going to be confronted by a 54.25 per cent marginal weight of tax, perhaps the threshold should have been increased rather than allowing fiscal drag to ensnare more people in that tax net? We have frozen the higher and top-rate thresholds. We have increased the starter and basic rate bans. We have echoed largely what the UK Government has done in freezing bans. I recognise that decisions made in prior years mean that that gap has remained frozen this year. One of the areas that we have borne contention with is that every year is local government. When we look at the four portfolios that have a deduction in cash, one of them is social justice housing and local government, according to 8.11.6.4. Over the last night, I received a copy of the local government finance 2020 with the whole revenue support. It looks overall to be reassuring. Across Scotland, the budget, according to that, increases from £11,043 million to £11,853 million, which is an £810 million at 7.3 per cent increase. A £390 million of that is undistributed. I wonder if there may be ever some information about when it will be distributed and how it will be distributed. I will look at the local authorities and their increase in funding. I was disappointed to know that the welfare of more prosperous areas such as Aberdeenshire in East Renfrewshire and Edinburgh has a significant increase of 4.3, 4.8 and 4.9 per cent. If we look at the poorer areas of Scotland, for example, what we see is that the Western Isles is going to have a 2.1 per cent increase, West Bartonshire 2.9, 3.3 per cent for Edinburgh, Clyde and Glasgow, Dundee 3.1 and North Ayrshire, which I represent, 3.5 per cent. I am aware of the local government funding formula, but surely we can have a challenging funding situation in areas of highest poverty and unemployment, and the ageing population, including many of the younger people who are moving out with Scotland, or to the more prosperous areas such as Edinburgh, East Renfrewshire and Aberdeenshire, are getting lower local government settlements. There are several questions in there that I will try to take in turn. The first is on the undistributed sums that you reference. Undistributed sums like that are all considered by the settlement and distribution group, and their next meeting is on January 18, I believe. That is how undistributed sums will then be distributed. In terms of the overall settlement, and I know that there have been a lot of conflicting views about the settlement itself, can I again say that I am not here to deny challenging decisions that have had to be made in this budget? I have had to make them. There are challenging decisions in the budget. What I would distinguish between the core budget and the overall settlement is that we have protected the core budget in cash terms and there has also been a real terms growth to the overall settlement. In terms of the wider settlement, Scottish Government priorities are by and large shared priorities. Most local authorities will tell you, for example, that there are acute challenges within social care, acute challenges when it comes to recruit and the funding position, which is where that additional £200 million to support investment in health and social care is so important as part of the overall consequentials that have come. On your last question, I think that that is a very, very pertinent question, which is ultimately a question about methodology. I will repeat what I have said in previous years, which is that I am completely open to considering any changes to the funding methodology. You will appreciate that that needs to come from COSLA as much as it comes from me, and there needs to be agreement in COSLA about reviewing that funding methodology. I think that we should review the methodology, but I cannot do that without a request from COSLA to do so. On this meeting, 18 January, is there an opportunity with a £380 million, a £19.4 million story of unallocated resources, to reallocate some of that to some of these poorer local authorities? If I could bring in Ian's story, if that is possible, to speak to what the settlement and distribution group does, it is a fairly standardised process. The settlement distribution group is a joint group between COSLA and local government officials. It decisions on the distribution of funding on the basis of the most appropriate metrics for the particular sums. If the sums are based on poverty alleviation or something, that would typically benefit the poorer local authorities. For example, teacher numbers might be based on pupils, numbers of schools and things like that. The distribution methodology is applied separately to each of those individual lines on the basis of the formula and methodology that COSLA and the Scottish Government both think is most appropriate for that funding line. The settlement and distribution group consists of the Scottish Government, local authorities and directors of finance. All decisions of the settlement and distribution group are then endorsed by COSLA leaders. I give back to Ms Forbes' point that, ultimately, all those decisions are taken jointly with COSLA on distribution. I want to ask more questions, but I want to move on because I want to let colleagues in in a couple of minutes. It is just a couple of words for me. In developing its budget, the Scottish Government assumed that it would receive extra income of £620. The resource budget in 2022-23, from a number of sources, is still a matter of negotiation between the Scottish and UK Governments. Can I impress the Scottish Fiscal Commission and the Economist last week for details of that? They weren't really able to solve the mystery of what those sources are and how much they will be. The likelihood of them coming to Scotland, so I'm just wondering, Cabinet Secretary, if you can enlighten us to believe that. Yes, happily. I could perhaps remind the committee of our position last year. The budget last year included £500 million of additional permanent consequentials, which had not been confirmed, but an assessment was made. It was highly likely for that funding to come, and those assumptions were ultimately exceeded in aggregate. We try to take decisions in the budget based on the best available evidence because of the way that the funding position works. You will all know that, in year, we often have additional announcements that are being made, which, if they had been baked into the budget from the beginning, might have led to more efficient use of funding. In this next year's budget, we've made similar assumptions surrounding likely sources of income. Those include, firstly, income from the next round of offshore wind leasing. The precise scale and profile of that income is expected to be confirmed early in the new year. If the budget perhaps had been later, as it has been in the past two years, then that would have been factored in. The second is a resolution of a long-standing disagreement with Treasury on the effect of personal allowance adjustments to the block grant. The methodology was finally confirmed this summer, but it is still part of a live discussion and negotiation. The last one is further Barnett consequentials, including some that, despite being linked to UK spending announcements, were not included in the 2021-22 funding position. In other words, announcements that were made but the funding hasn't yet been drawn down in this year. For my perspective, if the budget was later, let's say that we were passing it in March, it's quite likely that we would have been in a position to factor all of those things in. We have considered all of those sources individually and collectively to arrive at a prudent risk assessed figure of £620 million of additional expected resource funding. It's important to lastly say that we have not made any assumption on the availability of resource funding from the Scotland reserve, but we will see how this year pans out. Obviously, the additional Omicron challenges are putting extreme pressure on this year's budget, so it's quite unlikely that there will be much to carry forward into next year. There has been a lot of debate and discussion on the resources available to the Scottish Government, but it doesn't seem to be much on capital and infrastructure. I think that everyone accepts the figure in the budget page 2. There is a 9.7 per cent reduction in real terms with regard to capital. Indeed, that is also backed by the SPICE report that we received on page 34. Obviously, that has significant implications for Scotland's capital programme, especially as the cost of materials is going much higher than the general rate of inflation. What are the implications? What projects in Scotland do you feel are likely to put on hold from repairing fewer polyhones to building more schools? What would be the implications for Scotland? We had set out, in the interests of you, clear and transparent. We had set out our capital spending review last autumn, which set out where we intended to invest over the coming years. Unfortunately, the capital that was allocated to us in the comprehensive spending review from the UK Government was lower than the conservative and cautious estimates that we had provided in the capital spending review. It may be that some of that capital commitment will need to be managed over a longer time period, but I would still refer the committee to the commitments that we made in that capital spending review, because that has informed the choices that we have made in this year's budget. We have also, of course, chosen to make use of capital borrowing as well. In terms of some of the high-level lines on capital, significant investment in infrastructure, significant investment in decarbonisation efforts, significant investment through the capital regeneration grant fund, there is quite a clear and ambitious willingness in the budget to use as much capital as possible, particularly next year, when economic recovery is still vitally important. I am happy to unpack any particular line, but hopefully that gives a general overview to our capital position. That is a very helpful fact. You talked about choices and, indeed, you have made your choices, and we can agree or disagree with those choices. In discussion with representatives of the Opposition parties, have they provided any choices to you? In other words, rather than simply asking for additional expenditure on a number of areas, have they pointed out where in the Scottish budget reductions can be made or, indeed, where taxes can be raised? In order to fund what they have demands of? It is the hardest part of any budget to identify what must be reduced in order to increase other lines. I have met all the Opposition spokespeople once. I am keen to meet them again. Now that they have seen that the budget, there may be more clarity on changes to approach. However, I have only heard from the Opposition, and I may hear differently over the course of today, where budgets should increase. I am very sympathetic to that. I would love a budget where free decision is easy because we are able to invest at the requisite level in all areas of the public sector. Unfortunately, the nature of budgets does not allow that. Budgets must be informed by choices, and there are some difficult choices in this budget that I am not hiding from. There are areas of criticism that I have heard loud and clear over the past two weeks, but I come back to the position that I have maximised the funding available to us. You have already heard what I have said about the £620 million of assumed additional funding. There is no funding that I am withholding or sitting on, not least because I do not need to negotiate a deal this year. Therefore, with every penny on the face of the budget, it is a question if we are to, for example, increase local government settlement, where should it come from? If we are to, ultimately, agree that health consequentials should go to health, which is something that the UK Government is pushing strongly and that the Scottish Government has incorporated, then it does leave room for manoeuvre. It leaves very little room for manoeuvre for other budgets. Thank you very much for patiently answering my questions. We will now open up the session, and the first of the call to ask whether there will be a list to be formed by Jordan. Thank you very much, convener, and good morning to the cabinet secretary. I know that you are very keen, cabinet secretary, that we stick to the facts that are contained within the Scottish Fiscal Commission. That has informed your budget, and I will try very hard to do that. Just before I come to questions about some of the Scottish Fiscal Commission's comments, I will go to the Scottish Government Consolidated Accounts for 2020-21, page 104, where it shows that there was an underspend of the £580 million that is broken down across portfolios. Some have an underspend that some have a very considerable underspend, big portfolios such as health and sport and transport infrastructure. I will be quite clear, cabinet secretary, about why that underspend exists and what informed the choices when it comes to underspend and underspend. I thank Liz Smith for the way that you have asked that question, because it allows us to perhaps bring a bit more light than heat to the issues. I am very happy to go through the figures one by one to explain that. For the record, I have no issue with Audit Scotland's very important report. Audit Scotland plays a hugely important role. In terms of the figures, and you talked about the page, £580 million is the figure that has been identified on the total Scottish budget. That is not just Covid consequentials, that is the total Scottish budget. Incidentally, that is an overall budget of about £50.7 billion, so it is 1.1 per cent of the total. If we divide that further, £207 million of that is underspend on capital projects. That is primarily because of the impact of the last quarter, which you will recall we were in lockdown. A lot of initiatives were not able to proceed and draw down that capital. There was an appeal, whether it was community groups or local government or otherwise, to try and manage the slippage into this year. All that funding has been allocated on an on-going basis to capital needs, including infrastructure. That is why you see, as one of the key lines where there was an underspend £321 million, that is in transport infrastructure and connectivity. In terms of the resource, I draw your attention to the fact that it is the health line that is seeing a significant underspend. You may wonder why on earth in a pandemic that is the case for health. The key is that, in the first few months of 2021, there are considerable late consequentials, particularly for vaccination programmes. I recall the conversations that I had with health at the time. If I had obliged them to spend all that in the run-up to the end of the financial year, it would not have made for a smooth spending pattern into this financial year. We agreed with health that we would try to manage some of their budgets through the reserve, specifically for health, so that the challenges immediately after the beginning of the new financial year and immediately prior to the end of the financial year. In other words, we would not see strange behaviour as they desperately tried to draw down before the end of the financial year and instead could manage the Covid response over that 31st of March bridge. I realise that I am going on. I want to answer your question where it has gone. The autumn budget revision was passed just a few months ago, and it has formally allocated £560 million of that original £580 million. In terms of where it has been allocated, all the lines are in that autumn budget revision, and it gives a full account for how it has been spent. Again, a lot of it has gone on health, so it is health drawing down on that funding. I ask the question because, obviously, there are people around the country who, if they see that there is an underspend on the Scottish budget and the time that you said yourself that there is a pandemic and there are very serious issues within business, I think it was you yourself last week who said that you had spent absolutely every penny that you had to hand in your budget and that another £100 million appears for business. Do you understand the public concern about that £580 million being there, but not necessarily being spent at a time where people have got really urgent concerns? Absolutely. If I could make two further points, I would strongly advise people to look at the page that you have referenced, and they will see in the economy line the fact that, of all the budget lines, the economy line overspent. In other words, for business support, we considerably spent more than the funding that had been given, such was the importance that I placed on helping businesses through. I would make that point. The second point that I would make is to compare that with previous years. It is well documented every year that there is much complaining about the Scottish Government carrying an underspend, which I agree. We cannot overspend. It is illegal for me to overspend. As we get closer to the end of the financial year, it is a bit like landing a 747 on a postage stamp of coming in under budget. If you compare previous years, the comparison for the previous year was a £669 million underspend, which is 1.7 per cent. The fact that it was £580 million, 1.1 per cent, £392 million was allocated in the budget bill, £168 million in the autumn budget revision. I appreciate that budgets are hugely complex and there are lots of different material. What I can say is that every penny is accounted for and every penny has been spent. I maximise the value of every single penny in a Covid year because I know the needs are outstrip the availability of funding. Cabinet Secretary, you are quite right that you cannot overspend. That is absolutely a legal requirement for the Government. Notwithstanding what you said in answer to my first question, there are choices to be made. What I am trying to drill down on is when it comes to certain underspends, which were large in the health budget. You could explain some of that about future requirements when it comes to vaccines, etc. I absolutely understand that. However, there are issues within infrastructure, transport, etc. People are asking, quite rightly, in a period of urgent economic assistance that is required, exactly what has driven the choices about when you hold some money back for the next set of financial payments and what drives the choices that you have to make. That is what I am trying to ask you. What do you absolutely prioritise when it comes to underspending money? On the infrastructure side, it is capital. Capital cannot be spent for business grants. It cannot be spent on day-to-day services. Capital is allocated, for example, to the building of a new school. Someone comes to me and says that the hospital costs £100 million. That hospital will cost £100 million. They will draw down that £100 million. They may not complete the hospital by the end of the financial year. I cannot turn round and say to them, tough luck, you are not getting the rest of your hospital because it needs to be spent by the end of the financial year. What I say to them is, okay, you have got £20 million worth to build, we will carry that forward for you. When you ask me about choices, I do not hold money back. The only time I have held money back and it was well documented was just before December, when we were given significant additional funding of over £1 billion in the last four months of the financial year. If you recall, I allocated it all and said that I would hold £300 million in case of a wave. What happened on 5 January? We were all locked down and, thankfully, there were £300 million to invest in business. However, I do not hold money back. All of the funding is allocated. The question is whether it can be drawn down by, for example, vaccination teams, by the new hospital that is being built. The choices are determined, particularly during Covid, by a very volatile situation. I would much rather be budgeted intelligently rather than suddenly try to get rid of money at the end of the financial year. My last brief comment is that I remember that, on 24 December last year, we had been pressing the UK Government, the 22nd of the 23rd, whether there would be additional consequentials. We were told that there would be no further consequentials. I think that it was late on on the 23rd of the 24th. Suddenly, there were hundreds of millions of pounds of additional funding. That then had to be spent intelligently on business support in very, very short order. Managing significant additional sums of money late on in the financial year leads to poor decision making if you cannot carry it forward beyond 31 March. I am sure that there will be other consequentials that are just coming, where there is an immediate request from various groups in the economy for that money. I am sure that that will be well spent. Cabinet Secretary, can I just turn attention to two other sets of, I think, very important statistics, one from the Scottish Fiscal Commission, where it has said that tax revenue take is a shortfall of £190 million for 2022-23 projected, and that is possibly rising to £417 million by 26-27. At the same time as we saw yesterday, the report that came out from the CBI and the KPNG with the Productivity Index put these together, the tax take, which in Scotland is not as strong as we would like, refers back to some of the comments that you answered in terms of the convener's questions, that the economic growth in Scotland is not nearly good enough, let's be quite frank about that. The productivity indices that were produced yesterday show some really worrying signs. I want you to give us some idea of what you think has to happen to address some of the really serious issues within the structure of the Scottish economy, which is lagging behind not just other parts of the UK but most other regions as well. You started by talking about income tax, and I could just refer to that quickly. Obviously, when it comes to income tax, the choices that we have made have created additional spending power for the Scottish budget, so I think that there is a misunderstanding often about that. The challenge falls in the relationship with the block grant adjustments and the fiscal framework. A lot of that is to do with unequal growth between the highest and the lower earners. That is accounted for in the Welsh fiscal framework, not in Scotland. That needs to be part of the review of the fiscal framework review. The report was very useful in breaking down the data, particularly on where the challenge is. It is an issue that developed economies all need to grapple with. All developed economies have suffered from an extended period of weak productivity growth over the past decade or so. Tackling the challenge has not made any easier by the fact that we are facing into huge productivity headwinds as a result of labour shortages, supply change disruption and a disruption to our trading relationship with our nearest and largest trading partners and our demographic challenges. What are we doing about it? A number of points. One is that I agree with you that it is a top priority. I am not shying away from the fact that we need to grapple with our productivity challenge. One of the primary ways that we are going to do that is going to be set out in our national strategy for economic transformation, which is obviously our 10-year outlook. There will be core data and key interventions that are recommended on the productivity, which has been informed by the advisory council of about 17 people. I am keen to publish that. You will appreciate that there are some tensions in publishing an economic strategy that is looking 10 years hence when businesses right now, a few days before Christmas, are in severe difficulties. There is a bit of a timing challenge in doing that, but a lot of that will look at the need for public investment in core infrastructure, private investment, how do we incentivise businesses to invest in their businesses and lastly on skills. How do we ensure that the workforce is in the right jobs for the right businesses doing the right things? That would be my three quick recommendations that I think we need to step up our activity on. Thank you very much for my last question, convener, if that is all right. The CBI KPMG report is pretty blunt in certain areas. The good news is that it is flagging up that we have huge educational potential. The skills agenda is something that they are potentially looking at in terms of green jobs, etc. All that is good news. When it comes to the traffic lights that they set out in terms of red, amber and green about how we compare to other parts of the UK, what our short-term basis is and what our long-term basis is, there are some really worrying statistics in there about our weakness in business investment, in exports and in-work training. I suggest, cabinet secretary, that these are really serious issues about the structure within the Scottish economy, so if you could just say a little bit more about how you intend to deal with those concerns. Absolutely. The report highlights that business investment as a share of GDP has increased over the past decade, but it is still low by OECD standards. Since 2018, it has fallen over the two consecutive years. Global capital investment plan, published earlier this year, is what it says on the tin, trying to attract additional capital investment and also the inward investment plan, published in 2020. Those are both key to improving Scotland's business investment performance. We have seen good data tracking against that, but those are not things that you can deliver within a matter of months. We have already set ourselves the target in terms of business investment, but the second part that you talked about was innovation, if I have heard correctly, and the fact that the share of innovation-active businesses in Scotland was about 32.2 per cent, and it has decreased from about 50 per cent in 2015. That area is one of the key elements to the national strategy and looking at how we develop actions to improve Scotland's performance. There are five objectives within the strategy. One is on productivity, one is on entrepreneurship. Both of them are very closely aligned in terms of innovation. I think that it is about us incentivising businesses to do what they want to do, rather than us necessarily making substantial investment. There are a few sectors in particular that are doing exciting things from manufacturing to the green economy, which I think are leading the way when it comes to innovation. I was going to ask you a whole range of questions on the KPMG in the phrase of Alexander productivity dashboard, so Liz has saved the committee from those questions. It is now time for the full man shell. Thank you very much, convener. I have covered quite a lot of ground already, but the convener mentioned this figure of £620 million. That was obviously in the budget. Since then, with the two announcements from Westminster of allegedly £220 million twice, that is going to help us. In addition, I think that the Scottish Government has found £200 million, as I understand it, for business support and for self-isolation. Can you unpack for us how all those figures relate to each other? Is there any overlap? Are some contained in others or are they all completely separate? On the 6.20 million, it is for future years, but it was based on assumptions of funding that had been announced but not allocated. That is all baked into next year. The £220 million, the first £220 million, was not a direct overlap, but there are announcements that had been made that we had already baked into our budget. We had not assumed that we would get funding. For example, the £145 million relating to material change in circumstance, which the UK Government has previously announced for businesses, was included in the £220 million, and it is also included in the £620 million. That illustrates the point that there is considerable overlap between money that has been announced but the UK Government is new, which is already very much factored into our budgets. What the UK Government is saying is that it will come this year, and we have assumed that it will come next year. It is not new money, either way that you look at it. The additional £220 million that was announced on Sunday night appears to contain new funding. I would again remind everybody that we only get funding consequentials from UK Government spend, so the money is based on funding that the UK Government intend to spend between now and the end of the final year, but it has not told us the intent to spend. That means that, if there are any future announcements in the next few months about new UK Government spend that generates consequentials, we have had an advance on future announcements between now and the end of the final year. That is very complicated. I do not know whether you want me to expand further, but I hope that that answers your question. I want to clarify perhaps from my mind and maybe for a few others. You are saying that the £145 million was included in the £620 million and is included in the £220 million, so we obviously cannot use it twice, so the difference is, what, £75 million? I think that I get that. The balance of that initial £220 million was based on health funding that was expected already, so the balance of the £220 million was health funding. We anticipated £120 million of additional health spending, but only £75 million was agreed. Of the second batch of £220 million, automatically, there is a £45 million shortfall that we have used to top up the original expectation on health funding. I am reasonably clear about that. One of the elements of the £620 million was the personal allowance below for dispute. It seems that that has been dragging on for quite some time, yet you say in your response to the committee that you are hopeful of a swift resolution. How solid is our expectation that that money will come in during the coming year? My assumption is that it is rock solid that funding will be allocated. Both Governments have agreed that a transfer is due to the Scottish Government, and they have also agreed that a transfer is due to the methodology. When it comes to the actual transfer, you are right that it dates back to 2017-18. There is some disagreement about the quantum of the funding that should be transferred. Can you even give us a rough idea of what figures we are talking about there? How wide is the disagreement? The disagreement ranges from £400 million to £1.7 billion. That is the range. The range is very significant. I can imagine that that is part of the reason that it has been running for so long, because I believe that the Scottish Government should be properly compensated as per the methodology and as per the agreement with the UK Government that funding should be agreed. The key is that the funding assumption that we have made in the budget should not prejudge the outcome of the dispute resolution process, and we will continue to engage with the UK Government in good faith as we progress that. On the point that Liz Smith was questioning, you have spent all the money in the budget, and yet you were able to find this extra £100 million or perhaps £200 million for business support. Can you explain to us how that happened? In terms of last week? Yes, and where the money is coming from? In terms of that £100 million, that is £200 million for self-isolation, as well as £100 million for business support. That is based on funding that we have gone through the whole budget to identify whether portfolios can contribute or allocate additional funding of anywhere in the budget. For example, my own budget was seeking to identify funding. There has been identified funding from other portfolios, so it is based on looking right across the board and identifying funding on a portfolio by portfolio basis for that £300 million. On that, moving on to a different area in the forecasting and the Scottish Fiscal Commission and so on, making forecasts. Clearly, it is a challenge if the OBR forecast the UK economy to be growing considerably faster and opposite the tax take than the Scottish Fiscal Commission do. Spice gave us some comparisons. The OBR is forecasting 6 per cent and SFC 3.8 per cent. When you look at some of the other forecasts, the Bank of England is at 5 per cent, NIESR 4.7 per cent and Fraser Vallander for Scotland 4.8 per cent. The OBR appears to be a bit of an outlier in being quite optimistic about the growth levels. That could be causing our budget a problem. Do you think that there is a difference that the OBR is being overly optimistic and the SFC is being a bit more cautious? It is for forecasters to determine themselves, obviously, as per the methodology. I would not want to get into the territory of criticising the methodology that any forecaster uses because they are independent of government. I recently met the OBR and I have spoken to the SFC about the need to align their methodologies as far as possible, because that makes it easier for us. If one forecaster is basing it on a far more optimistic scenario and the other one is not, that creates a real challenge for us in terms of block grant adjustments and the overall funding that we have available to us. There are difficulties. This year, we have tried to align the timing as far as possible in order to ensure that that is why we went so quickly after the UK Government budget to ensure that the methodologies were as aligned as possible. You mentioned the Welsh model for the block grant adjustment and that might be a possibility when we go through the fiscal framework review. I am not an expert in the Welsh model, but I understand that each band of income tax gets treated separately. Is there any downside to following the Welsh model in that, for example, say that a year or two where the Scottish economy does better than the UK? Would we lose out in that scenario? I am happy to see if any officials want to come in on that. In terms of methodologies, no methodology is completely risk free, so there are challenges and opportunities with all the models. On balance, our sense right now is that we are penalised as a result of the growing gap between the richest and poorest in the UK, which informs the fiscal framework methodology that is applied to tax. You can see that, because prior to the pandemic, obviously, we were seeing earnings growth and yet there were still challenges in terms of the overall funding that was made available to us. It is overly simplistic to say that earnings have not been growing and therefore there is a disproportionate impact on our block grant. We have seen earnings growth in Scotland and there are still some challenges with the block grant. I do not know if Lucy wants to come in on that, but I might be unfairly putting her on the spot. Cabinet Secretary, to underline what you have already said, the issue of differences in the tax base has perhaps been more powerful in our tax performance than had been anticipated at the time that the original framework was negotiated. Of course, the fiscal framework review is going to contain a range of issues that we will be negotiating with HM Treasury in the UK Government, and the methodology approach will be one of them. Certainly, it makes absolute sense to look at how the approach that has been taken with others works well in this case and to see whether that would be better applied to our situation as well. As one element of the overall fiscal framework review, it is certainly not the only one, but it is certainly one that we will be looking at with the UK Government during 2022. Good morning, everybody. This is a very enjoyable session so far, and I thank you in particular, Cabinet Secretary, for highlighting some of the complexities around the concept of money being allocated, then drawn down and then spent and how that expands over one financial year to the next. Of course, that is all about financial asymmetry, but I also wanted to explore our asymmetry. I did have a chance to very quickly glance through the report from the three Davids that you mentioned earlier—options for reforming the devolved fiscal frameworks. One of the recommendations that they make is that, given that devolved governance cannot really exercise full control over health policy in the absence of appropriate economic support measures, they then go on to recommend a feasibility study into making far-low-type support available on a geographical basis that should be urgently undertaken and published. You also correctly alluded that things are moving very rapidly since some of the data came out very recently. My question is, do you have any indication this far of thinking from UK Treasury in terms of type of financial support that could be available in terms of furlough if and when the anticipated peak of the current Covid crisis hits us potentially mid-January? I think that the IFS report is very helpful in terms of an independent perspective on some of the risks that we have been identifying. Right now, I have no reassurance at all about what the UK Government might do in the way of additional funding or in the way of additional flexibilities or guarantees. We know that the UK Government has made this additional £220 million available, which is not right now based on known announcements but based on what they think might be spent between now and the end of the financial year. If the funding is less than £220 million or less than the overall £440 million, we will still have to repay that funding. We still do not have a minimum guarantee, which is what the report was alluding to. In terms of the furlough point, right now, we would need HMRC to work with us to make sure that anything is specifically available on a geographical basis. That is recommended and suggested by the report out this morning, but there is no sense from my perspective that there is any willingness or openness to do that at all from the UK Government. You are carrying considerable risks, which I am not entirely sure being a new member, that is commonly understood. If I can move on quickly to the medium-term financial strategy, there are a number of risks that you highlight in there. One is quoting again, fundamental changes to the operation of finance and devolved policy making as a result of the UK internal market act. We were hearing earlier this morning from the Scottish Parliament corporate body that it has put provision in for the scrutiny of changes triggered by that of an additional 21 jobs, so there is a real cost implication to that that it has done projections on. In terms of that risk, have you quantified that further than what is in your report in terms of you have highlighted the risk, but the probability of its occurrence and the implications if it occurs because it strikes me that the financial implications are not yet sufficiently understood both in terms of real spend and also in terms of risk? I wonder if you can add some further colour to that. The risks are significant. The risks are exacerbated at a time of Covid, obviously, because the medium-term financial strategy that had just been published would not have taken into account necessarily the specific impact of Omicron. I do not know the extent to which, for example, the SFC, certainly the OBR, would not have taken into account. Forecasts were set pre Omicron, and already we have had to make funding available, and I guess there is some uncertainty as to the extent to which the impact of Omicron will be filled. If it ultimately leads to the need to take drastic measures further down the line, then that will have an economic impact, but it will also require us to manage the financial impact from within our own budgets. That is a challenge. Going back to the point of having the tools to deal with unexpected risks, you cannot—nobody—not even our forecasters have the crystal ball required to figure out precisely how Omicron is going to unravel or other variants. We are in a position where we are absolutely dependent on the UK Government for making additional funding available. If we make that funding available within our own budget, it puts at risk our ability to come to a position of balance by the end of the financial year, and I am required to be in balance by the end of the financial year. There are huge risks without necessarily the tools to manage that risk, which is why the period since the budget was passed has obviously been a hugely difficult and very busy period in terms of trying to figure out how we can squeeze any more funding from our own budget to help businesses. I am going to pause and see if anybody else wants to come in on that point of managing risk. It is probably unlikely, but it was just to add any more flavour. It looks like there are no takers. I have just one more question following on from that risk. You have correctly highlighted some of the implications around resource funding, but you also highlight capital funding for the future and particularly risk to the NIM in terms of local and regional infrastructure. From a risk perspective of that, that directly links into economic growth and productivity through into that pot as well. Have you had a chance to give any more flavour to that risk where there is direct investment by the UK Government in local and regional infrastructure? You may not, but it is just a question off the back of that, since we are focusing on resource. Capital is almost like an opposite risk, which is about capital having to be managed over a longer time period because of the risks of Covid. That is where you get into the territory of trying to figure out how you carry forward funding from year to year. Last year, we saw it quite acutely, where, as I have already said in the last quarter, we saw a lockdown. We then had to figure out how not to breach the limits of the reserve drawdown and ensure that all of that funding was still available to us in subsequent years. Basically, local government can carry forward more funding technically than we can. The risk is to ensure that money can still be managed and still be drawn down. That seems ridiculous, but that concludes my questions, convener. Thank you very much, cabinet secretary. Thanks, convener, and good afternoon now. I want to pick up on a question that John Mason had asked earlier about the £100 million for business support and the £100 million for self-isolation. I think that he said that that came from portfolio underspends. The question that I have is, did you stop at £200 million or was it any more underspends that can be used for other things as well? Thanks, and that allows me to clarify that it is not from underspend, it is from a budget that was allocated. For example, in my own portfolio, a budget that had been allocated for some schemes and initiatives, which we will now need to manage over a longer time period. All the funding was allocated, and the same applies to other portfolios. For example, in the health space, money was allocated. Right now, this year in particular, we are managing a particularly challenging budget, and that is demonstrated by the fact that there is no money in next year's budget based on an assumption of carry-forward. In other words, we do not assume at this point in the financial year to have any underspend that can be carried forward because we are truly maxed out on every budget line. It came from a whole host of different sources, largely where we have had to face things over a longer time period. I guess that, cabinet secretary, did that exercise stop at £200 million or was there more money that could be allocated from that exercise? The First Minister will set out this afternoon alongside the Omicron figures, as well as the next steps. She will set out what more we might be able to do for business. Most of that is informed by a figure that we are using of about £175 million from the UK Government on Sunday night. That is to 220 less than the £45 million that was already factored in. That will be factored in this afternoon. Any other funding that we make available right now is made at some degree of risk because it will need to be managed over the next three or four months, so it is quite late on in the financial year. At this point in the financial year, most of the funding is contractually or legally already agreed. For example, it is for salaries, for local government, for areas that are for legal commitments to do with transport that are very difficult to free up. Anywhere where we have discretion is about phasing it rather than stopping something or delivering underspend. It is quite unlikely that there will be any underspends at this late point in the financial year. I think that you probably expect me to ask about local government. On page 12 of the budget, it says that there is a real-term resource increase of 4.4 per cent to local government. However, when you look at the briefing that we have received from COSLA, they claim a cut of approximately £100 million to the revenue funding for councils compared to 2021-22. Capital renders a 7.2 per cent increase, but COSLA claims that that is a flat cash. It is really just to understand, Government Secretary, who do we believe when it comes to local government finance? Is it COSLA or is it the Scottish Government? How do I always advise people to believe the numbers rather than necessarily anybody else's take on the numbers? What the numbers will show you, and I know that Douglas Thumson will know his way around the local government settlement probably more than anybody else. I would differentiate between the core budget and the overall settlement, because that is what COSLA does. In terms of the core budget, which is protected in cash terms, I do not recognise the £100 million figure that local government is using. It wrote to me recently about that £100 million. I am trying to get underneath it, because my understanding is that it is saying that it is for Scottish Government priorities, but I do not recognise the figure. As far as I am concerned, if you compare last year's core budget to this year's core budget, you will see protection in cash terms. Of course, the argument could then be made that it does not take into account the impact of inflation, and I cannot inflation proof any part of the Scottish Government's budget, such as the nature of inflation right now. The other part is that there is real terms growth to the settlement. I think that Douglas Thumson would probably agree with me, I would hope, that, when it comes to joint priorities, education is a joint priority and social care is a joint priority. There is significant additional funding for health and social care integration, which does not calculate as part of its core budget, but where you see a significant additional spend on health and social care and a significant additional spend on teachers and support staff. Of course, that includes funding for free school meals and curriculum and music tuition charges and expanded school clothing grads. I hope that I try to be as fair as possible in distinguishing the budget as COSLA does, but I certainly do not recognise that £100 million that COSLA references. I am looking at the figures that COSLA has provided. A big piece of that £100 million is the employer's national insurance contribution increase that COSLA has calculated as £70 million. They would complain that they have not been compensated for that, but the potential areas such as the NHS have been compensated. Would that be a fair reflection on that? I have not compensated the NHS for national insurance contributions. What the NHS has chosen to do is to use part of its budget for national insurance contributions. That is an inflationary impact. In terms of the budget that we received, there is not, as it were, a line in the budget that we received, which is for national insurance contributions. I have taken the overall budget, I have allocated it and most all public bodies are expected to absorb the national insurance contributions. I am thinking about the local government budget and what the Deputy First Minister told us at the committee not long ago about the shift to prevention. It is difficult for local governments to see their budget being restricted in that way. I am thinking about the obesity report that we have seen this week. I guess that the inequality that that brings when, potentially, local governments will be closing swimming pools and sports facilities. However, if people can afford it, they can still go to private clubs. I am just trying to think how we address the inequality around that when local government budgets are being squeezed by the amount that we are seeing. I think that it is a very fair question. Again, it is where I go back to what I think is an unfair distinction between core and overall settlement. In the figures that we are seeing from COSLA, they are not factoring in the overall settlement. A lot of what is in the overall settlement is very much in the prevention space. I know that if more money goes into social care, we are relieving pressure in acute health centres, which is why I fought very hard in the budget to ensure that a fair share of the health and social care consequentials—we are going to local government because local government deserves a fair share of the overall health and social care consequentials. It is not just health consequentials, it is health and social care consequentials, and they deserve a fair share. The same goes for let's take something that you talked about obesity, which is a really good example. He takes something like free school meals. Local government, I know, are as committed as we are to ensuring that children growing up in poverty have a nutritious diet. I know that it relieves pressure in other parts of the health system if we do that. That is why it is very difficult. You cannot just ignore the overall settlement. Once you include the overall settlement, including enhanced funding for free school meals, it is a cash increase of about £917.9 million, or 7.9 per cent. That is a real terms increase of 5.1 per cent. As part of the overall settlement, we need to be clear that those are shared priorities. I do not think that it gets away from some of the pressures in the local government settlement, but every single one of my cabinet secretary colleagues and every public body is telling me about the pressures that they face. I do not think that any part of the public sector is cushioned from some of the budget through pressures. I just want to move on to something else. It is on page 115 of the budget. It is a new member of the committee that I might not quite understand, but it says that the city deal funding is shown as a £100 million that has been included in the Scottish Government's spending plans for 2022-23. That figure does not seem to have been included in previous years. I will give an explanation on that, cabinet secretary. I will also ask if anybody wants to come in from officials in terms of whether it has been in previous years or not, which is what you are comparing. Obviously, the city deal funding, for a bit of colour, is quite a unique funding mechanism, because the UK Government gives us a lump sum at the beginning of the financial year. We manage the payments to city deal partners as part of the city deal funding. I do not know if any official wants to come in. I am not aware of how it compares with previous years, because I am not conscious of that. It is just important to identify that city deal funding is outside the Barnett formula, so it is factored in in a different way to other funding, because it is money that comes straight in and goes straight out to partners. I do not see any of you wanting to come in, but that is probably the closest to an answer. Maybe we can get some clarification after, because, as I said in previous years, it is really just to check whether that money is coming in as part of the spending, and I guess that it has to be allocated out. I just could not see in the budget where it has been allocated out, straight out again, to local authorities. It is around the North East and Moray transition fund. We can see from the budget that there is 20 million in capital funding for next year for that. Are you able to give us any more details on what that 20 million is going to be spent on yet? Yes, and it is specifically for the North East, is it not? The North East transition. Yes, the North East and Moray, yes. Right. That £20 million is, I think, part of the £500 million. In terms of how it is being spent, you will appreciate it, and I certainly have it in my inbox. Quite a number of local partners want to have a say on how it is being spent. What we have said is that we are willing to engage with them on the specifics of how it should be spent. It will be spent on helping with the transition. If I go back to last year, when it came to an agreement with the Liberal Democrats at the time for £15 million of additional funding, we then engaged particularly with one North East on how to best allocate that £15 million. I would want to be in a similar position with the transition funding to engage. We have put it on the face of it, and now we are engaging intensively to figure out the best way of deploying it. Do we have any timetable when that plan will come forward? As soon as possible. It needs to be spent in this next financial year. We are about four months away from the end of the financial year. My view is that it has to be determined in order to start being spent fairly soon into the next financial year. One last question, cabinet secretary. It is around the A96. We have heard plans about jewelldown between Inverness and Nearn. Is it still the commitment to fully jewell the A96 by 2030? In terms of the funding in this year's budget, there is funding in this year's budget in order to continue to invest in our key trunk roads. You will appreciate that the current plan is to fully jewell the A96 route between Inverness and Aberdeen. We have agreed to conduct a transparent evidence-based review of the programme. That will be reported by the end of 2022. All road projects, including the A96, are subject to detailed review and assessment. We remain committed to making much-needed improvements to the A96, but we need to let that review run its course. Ross, you have called right, Daniel. I apologise that I had set a way for a couple of moments to take a call. If any of the questions that I am about to ask have already been covered by a colleague, please do just interject and tell me to check the official report later. In response to John Mason's airline question around the initial £220 million that was announced by the UK Government in response to Omicron last week, you clarified that that was money that the Scottish Government had budgeted for in next year's budget. If that was committed to other priorities, or is it all being used for the same Covid-specific purpose? Essentially, it is being spent in exactly the same way. It is just now being spent at an earlier date than it was otherwise going to. Are you asking from the UK Government perspective what the UK Government would normally do is that it would make announcements and then confirm the final allocation in January or February? What it has done is confirm the final allocations in December rather than January or February. In a sense, the spending power is a fundamental difference between cash flow and budgeting. Once the budget is coming, it is our responsibility to manage cash flow. The funding does not come necessarily into our bank account for us to then draw down. That will happen before the end of the financial year. It will probably happen in January or February, but now we know that that budget is definitive. We can then, as part of our overall budget, use how it is spent. The key is that we already thought that it was coming, so we had already budgeted for it in our overall budget plans. I apologise, but I probably did not word that question very well. What I am trying to confirm is that if you are still intending to spend it for the same purpose as you had originally budgeted for just now at an earlier date, or if it is now going to be deployed differently to how you had previously budgeted for it? I do not think that it is going to be deployed differently, because if it is deployed differently, it creates a big hole somewhere else. If I move that money, all it does is give me a headache elsewhere, because it is not new money. Spending it in a new way would create a bigger hole elsewhere. The £200 million that you announced last week for business support and self-isolation support you clarified this morning is being contributed to from across various portfolios. Can you confirm what the breakdown of that is from our portfolios contributing on the basis of underspends that they were projecting, or have other priorities been paused or cancelled so that the money can be redeployed for that purpose? It is certainly not on the basis of underspend, because this year's budget is particularly tight. The funding comes from a whole range of different sources. It is painstakingly built up of funding that was otherwise earmarked for different initiatives and different schemes. In my own budget, there were elements around employability. In the health budget, there were areas around business that they were intending to undertake. Obviously, those things still need to be done, so they will need to be managed over a longer time frame rather than things being stopped completely. However, we will get into the territory of things having to be stopped completely if there is no more funding forthcoming. Is that a breakdown of where the money has been contributed from? Is that available yet anywhere or could that be provided to the committee? No, and it would not be anywhere because it is all to do with our internal management of budgets. The key is the autumn budget revision, which has just passed. Spring budget revision, where there will be a transparent accounting for every penny, particularly around transfers. You will, in that point, see transfers from where the budget was earmarked to where it will be spent. However, at a time of considerable flux, it will just be a snapshot in time. I would point you in the direction of the spring budget revision, not least because there may be additional announcements tonight. As soon as you have published one thing, it is out of date. However, the spring budget revision will be the point at which you can see all the allocations and the transfers. Obviously, hold is accountable for the decisions that we have made. I believe that it was Liz Smith's question about the Auditor General's report, looking into the 2021 underspend that was carried over into 2021-22. You have explained the reasons why and for what purposes. To what extent are you expecting a similar level of underspend being carried forward from this year into the 2022-23 budget? I am discovering that, in Covid times, an hour is a very long time. Therefore, anything could happen. I go back to this time last year, when the UK Government told us that there would be no additional pennies. From memory, it was about £400 million. There are no guarantees at this point in time, but I find it very difficult to believe that there will be much, if any, resource underspend based on what I know of the budget right now. If there was to be, we would have factored it into the carry-forward and would have baked it into the assumptions for next year's budget, which we have not done for the first time in probably two years. Turning to a completely different issue, the public sector pay policy. For the first time this year, that includes a commitment to pilot the four-day working week, which I know will be welcomed by a number of unions. On the face of it, there is not a significant immediate financial impact of that. The principle of the four-day working week or reductions in the working week is on the basis of reducing the number of hours' work for a similar level of pay. How are you accounting for those pilot projects as part of the coming year's pay policy? Those pilot projects will require to be funded, so they will have a financial impact. We had previously set out in our manifesto an overall quantum of about £10 million over the course of the Parliament for pilots. I am taking forward the process. This year, obviously, working with public bodies will be dependent on the nature of the pilots. Obviously, public bodies will vary in size and the average wage. We need to work with them to understand what the financial implications will be, but we are committed to taking forward trials this year. That is all for me at the moment, convener. Daniel, you are on. Thank you very much, convener. I am almost tempted to start by asking questions as to what text messages the cabinet secretary has had, if she is saying that an hour is a very long time at the moment, but I will not ask her to divulge. I would be quite interested in going back to some of the points that the convener and the Smith were raising about the fiscal commission's report, and maybe just asking to extrapolate. This is a question that I asked the fiscal commission when they were in front of us, looking at figures 2.3 and 2.4 in their report. I would not expect the cabinet secretary to recall what they say, but they set out the tax net position and also forecasting social security. If you combine the numbers in 26 and 27 for both of those lines, the net tax position is a deficit of £355 million and social security is £764 million in additional commitments and spend. That would indicate a £1.1 billion, £1.2 billion sum that would need to be found within other budgets if you accept those projections. I am just wondering whether the cabinet secretary accepts those projections. I accept that this is beyond the spending review in the new year, but it is certainly within the horizon of this Parliament. That would suggest some quite difficult changes between budget lines in the coming years. Is that a fair analysis of those forecasts? If I start with income tax, I have no choice but to accept SFC forecasts and figures. I am obliged to spend only within SFC forecasts. In a sense, whether I accept or don't is almost moot. When it comes to income tax, the final position on the performance of income tax revenues next year—for the year that we are setting the budget for—will only be known once outturned date is published in 2024. My issue in next year's budget is to manage the reconciliation from two years ago, which is certainly one of the lowest reconcilations that we have had to manage. I think that this goes back to two points that I have already made. One is that managing budgets over a long-term period requires you to set multi-year spending reviews. The spending review will need to factor that in, so the spending review will only be able to send what funding we expect to receive. That includes grants from the UK Government as well as income tax forecasts. We will need to spend. Once outturned date is published, we will need to manage any reconcilations. In the past, forecasts of what those reconcilations are have nearly always been revised multiple times. The best way of dealing with reconcilations is through resource borrowing for forecast error. It confirms the point that we have been making through the fiscal framework discussions that we need to recognise the levels of volatility in which, in one year, you can have £309 million, in another year you can have £14 million of forecast error, and you need to manage both of them. The borrowing powers are designed to smooth that trajectory and to avoid having to use real spending power for forecast error, because that is what it is. It is forecast error when it comes to reconcilations. The last point on social security is another challenge, because it is a demand-led budget, so we need to manage that. We have taken a slightly different approach in Scotland, which is to, as far as possible, promote uptake of social security benefits, because we think that people have a right to social security benefits. We will need to manage that. Finally, you will tell me—and I will agree with it—that the best way of dealing with all of this is economic growth, shared prosperity, fairness, and that will not single-handedly be delivered through a budget. A budget is a list of spending commitments, but this is as much about policy as it is about spend. I will come on to that point in a moment, but let me agree with it that what we should all be focused on is, essentially, getting more people earning money and those people are already earning money earning more. I think that that is something that we can all agree on and that happening as fairly as possible. I understand the complexity of the reconciliations that the mechanism block grant adjustments are simple when you see it on a flowchart, but looking at the different time lags is complicated. However, what you answered, I felt, was more about what happens within a given year. What I am asking is the broad trend and the broad envelope that will need to be addressed over the next three, four or five years. I recognise that you cannot predict the precise numbers that will drop out of those streams, but the overall picture painted by the Fiscal Commission is one that will place downward pressure on budget lines that are essentially not social security, does it not? We will need to manage that. I suppose that there is not really any other answer, but we will need to manage that within our resource spending review. Come back to me if I am misunderstanding, but the nature of social security is very different from income tax because social security is demand led, so I need to meet that demand. I cannot say halfway through the year, sorry, I have run out of money and therefore I will need to manage the demand. We will need to take intelligent decisions about the nature of social security to meet that. I fear from your face that perhaps we will understand the question. No, I agree. Basically, your income tax and your social security bills are things that are in some manner or means outwith your control, and if they are putting pressure on your budget, they are going to force you to manage budget lines elsewhere that are in your control, and that is going to be the dominant feature of the comprehensive spending review and, indeed, the budgets through this Parliament. That is what I am trying to get at. Absolutely. You have hit the nail on the head. We cannot get away from how important the resource spending review is. I have got to manage a trajectory of spending. In each budget, I can almost manage a snapshot of spending. This year, to get from A to Z, how do we plan? The spending review will allow us to do two things. One, it will allow us to spend over multiple years, which can drive reform as well as manage budgets. I do not think that it is very difficult to drive reform over a year-to-year basis. You end up budgeting for the immediate challenges in front of you, rather than budgeting for the challenges in three years' time, but it will also require us to say that, in two years' time, we expect, or the SFC or forecasting, social security spending to be this figure. Therefore, we need to manage other budget lines on that trajectory of getting them to a position where we are not dealing with, for example, huge cuts. We are dealing with a plan that gets us there, but it is not going to be easy. I would rather suspect that, if Douglas Slumson was coming after me in his questions, he would reflect that multi-year budgets and predictability are something that local government would like just as much as the Scottish Government, but I will move on. On that point around growth and especially looking at income tax with that, in a sense, the big surprise from the fiscal commission is that the reconciliations were not more detrimental than we were. Many of us were expecting them to be positive rather than negative. On the fiscal commission's report, in figures 3.1.6, 3.1.8 and 3.1.9, looking at income tax change, I think that that was touched on by Liz Smith, but it is worthy of further interrogation. Looking at the change in PAYE, both in terms of mean pay but also total pay, it strikes me that there is more going on than has been alluded to. First of all, some of the analysis that was presented by the Government was that, as ever, Scotland is lagging pine London in the south-east. That analysis would suggest that it is significantly worse than that. It is not just London in the south-east. Critically, on some of the points that you were mentioning in terms of upper pay bands, those are points that just as equally would apply to or one would expect would apply other regions such as the north-east of England, such as the north-west, such as Wales, and yet, on most of those measures, Scotland is lagging. I would be interested in your analysis of that. Critically, one of the things that was highlighted by Professor Graham Roy, among others, were labour participation rates, both among the younger cohorts and older cohorts. Is that not a big problem? Do we not need to pay much more attention to labour participation and to make sure that we are putting people into the right things, especially at a time when there are labour shortages, which is a half full version or view of that? Is that almost an opportunity to get people into better pay jobs? I will also flag Lucy O'Carroll to come in at some point. We need to get beyond the headlines of what that means and what it does not mean. One of the things that you would automatically think that it might mean is that earnings are growing in Scotland, but earnings have grown in Scotland every year since tax devaluation prior to the pandemic. There is quite clearly a challenge around the fiscal framework. Let's park that, because I have already talked about it, and I think that it has been made clear already. Where you see stronger earnings growth elsewhere, it still means that our budget is being reduced. You talked about the Northeast of England. They, of course, do not have tax devaluation, even though there will be an impact on their position. We know that, more generally, there are some inequalities. We also know that there are particular sectors in Scotland that have been hit hard by Covid. I have already talked about oil and gas, where some of the highest earners are in the oil and gas sector in Scotland. The oil and gas sector has been through an incredibly tumultuous time, and we have seen big challenges. We need to understand more about that. Let me come on to the solutions, because you talked about things such as labour participation. That is where I am going to bring in Lucy. One of the keys in all of that is to understand precisely where the challenges are in the Scottish economy and where the challenges are not. You talked about participation. There are some difficulties in economic activity, which we are looking at in terms of how we get more people into work. There are good reasons why many people are classified as economically inactive. They are either carers, stay-at-home parents or students, but there is also another cohort who are long-term sick or otherwise. One of the reasons that we have invested quite intensively in things that no one left behind is to try to bring those people closer to the labour market. However, it is an incredibly expensive process because individuals need a lot of wraparound help and care. However, I am going to stop, if you do not mind, and invite Lucy in, because she is the expert on all things tax-related, particularly getting to the nub of this problem. On the issue of labour market participation and its implications for our tax take, as the cabinet secretary has already referred to, there are a variety of reasons for people not participating in the labour market. Neither is seeking work more classifying themselves as having a job, and when it is at the younger end of the age spectrum, that would not be a problem economically because it is young people who are studying and, arguably, they will come into more productive work as a result and deal with our productivity issues that have been discussed already in the committee. The older end of the age range seems to have been, for many years in Scotland, more of a challenge, particularly in males aged over 55, having health problems and exiting the labour force early relative to their counterparts in the rest of the UK. That could be partly a legacy of deindustrialisation in Scotland. Those things take many years to work through the data. The efforts that are being made by the Government to address those issues, particularly in the older age group, take time to develop, to enact and to bear fruit. When you operate in a fiscal framework that tends to run on annual terms rather than multi-year terms, there is a challenge in a time inconsistency between the budget process in which you are operating and the outcomes that you wish to attain. Overall, that means for our income tax take that in order to build, to be enforced, to improve on the tax base in Scotland, we need to be addressing those longer-term problems and that we have that challenge there of managing within the short-term fiscal framework. That is why the multi-year spending review will help us to frame this in a more effective multi-year context and to address the issues in the labour market and the issues in income tax. In a sense, in the response to that, we have just continued the description of the problem rather than providing analysis. If we look at figure 3.19, we see the particular problem in northeastern Scotland. That is very understandable in terms of oil and gas. We are just directing this more at the cabinet secretary rather than Lucy Frisco. The issue that we have is that no Scottish region is performing better than the UK average. No Scottish region is performing better than Wales or Northern Ireland. Those are devolved administrations. Given that we have the levers here, one would hope that Scotland as a whole would perform better than the UK average, but at the very least, one would hope that at least some Scottish regions would perform better than the UK average, but they do not. Many of the regions that I am identifying here have exactly the same demographic problems that we do, precisely the same issues with de-industrialisation and the legacy of that. Why is Scotland lagging and, more important, why is every single Scottish region lagging the UK average and, indeed, the other devolved nations? Is that not a really critical question that the Scottish Government has to have a handle on? When you say lagging, can you tell me what metric you are using? Are you talking about the same thing? Three for nine. This is a crude aggregate picture of total pay growth between February 2020 and September 2021. That is basically earnings growth. Frankly, you can look at the other cuts as well, so there are two other perspectives and it is roughly the same picture. In terms of earnings growth, earnings growth has increased in Scotland every year since tax devaluation prior to the pandemic. I am sure that I do not have the analysis to hand, but in previous budgets, the analysis that we have been able to share as part of the budget, in terms of earnings growth. In some cases, tax is growing at a faster rate. There are three things that I would point to. You will say that this is describing the problem, but you cannot find solutions unless you describe the problem. The first is the way in which certain sectors have been hit by Covid. The second is the way in which particularly higher earners have been affected by downturn in oil and gas. The third is participation and economic activity, which is a legacy issue. How do we solve all that? Here are three answers. We bring people closer to the labour market. We need to get them into work in the first place. I would point to initiatives that no-one left behind to try to get them in. Those are relatively recent initiatives. Those are not initiatives that have been running for many years and failed to deliver. Those are relatively new initiatives that are specifically targeting the problems that we are talking about. Secondly, from an economic perspective, we invest in high growth sectors. Where are our high growth sectors? What are the sectors that are going to create those high-paid wages or at least ensure that everybody is paid the real living wage and above? That is particularly in the green economy, but it is also in tech, in life sciences, in the areas where we have strengths. The third thing is to make sure that we are doing the analysis on a regional basis. There are quite clearly areas in Scotland where wage growth is higher, where we have seen more higher-rate taxpayers than elsewhere. How do we ensure that areas like the area that the convener represents and who is at pains to regularly tell me about the need to invest in the west of Scotland? How do we ensure that those areas are not left behind and that we only focus on the Edinburgh and Aberdeens? How are we creating jobs there? Those are three examples. They are works in progress. We have not nailed it yet, but I think that we all have an interest in ensuring that they work. Indeed, which is the only reason why I pressed the point. It is highly important. I am very conscious of time, but if I can ask one last question, if I may, and it is a relatively broad one, I would like to get the cabinet secretary's response to Stephen Boyd's comments that were issued with the Audited Accounts last week, where he said, in reference to the Covid funding in 2021, while there are some high-level details about how this money was used, the Government needs to be more proactive, open and transparent with the provision of this important detail. I ask the cabinet secretary for a response to that. Critically, it strikes me that this is a balancing act between businesses' usual immediate response to Covid and recovery. That is difficult, but to do that effectively, you need transparency, not just in terms of what you have spent in the past, but on an on-going basis. In addition to a response to Stephen Boyd's comments, how is the Government going to track the Covid spend between those three polls? I heard the comments that reminded me of previous exchanges that we have had. It is worth saying, but you will indulge me, that the accounts did attract again an unqualified audit opinion from the Auditor General. That is a sign of strength when it comes to the accounts. How do we track it? It is really difficult. I will be open and honest with you about how difficult it is when it comes to the moving parts. We have seen a perfect example in the past two weeks of how complex this is. Funding announcement is being made. The Scottish Government is saying that it is not new spending power. New announcements are being made. The Scottish Government is saying, well, some of it is new spending power, and then us setting out how we are going to spend it. The nature of our budgets at the moment are incredibly fluid. I would love if we had a bit more of a mature debate in the Parliament about the nature of our budgets. As soon as I made the announcement about additional funding, the first polls were, well, what have you cut with people ready to lump-bast what we had cut? The nature of a budget is that things go up and things go down. We had a more mature discussion about it. I am open to ideas and recommendations of what we should publish. Last week, on budget day, we published a five-year outlook on medium-term financial strategy. We published public sector pay policy. We published our ambitions for tax. We also published the budget document. That is all proactive. That is ahead of time. We published the accounts. This year, the accounts have received far more attention than they nearly ever do. The out-turn statement very seldom receives much attention, if anything, but the out-turn statement tells you what we actually spent, not just what we said we were going to spend. I think that there are a lot of documents out there. Unfortunately, headlines emerge, which are not always based on the hard fact within the documents that perhaps on political takes. I am not targeting at the member who asked me the question, because I always know that he does that in a very intelligent and carefully considered way. If there is more that we can publish, that is fine, but anything more we will publish is not permanent. It is a snapshot that will be out of date by the time of the next announcement because that is the nature of budgets. I would not want to draw links with being a shopkeeper, but unexpected things happen. Your budgets are only as strong as their ability to forecast perfectly, and none of us can forecast perfectly. Long story short, if there is more that I can publish, I will happily publish, but in terms of our on-going budget management, that is really difficult. It is why we have two points in time—the spring budget revision, where we nail down where the budgets are at rather than where they are running commentary on the nature of the budgets internally. I think that there is also a question mark about the timings of some of those things. That could help the maturity of the debate, and I am happy to discuss that in the future, but that is helpful. I could go on, but in the interests of time, I will finish there. Thank you very much, Deputy convener. I did say that members could come in a second time, but we have got no one to ask them questions. The current secretary has given us more than two hours of your time, which we greatly appreciate. I am going to thank you for your evidence today. I would like to wish the current secretary and the team and all the committee a Merry Christmas and have a new year where it comes. Our next meeting is scheduled for Tuesday 11 January. As that was the final item, I will now close this meeting. Thank you very much, everyone. See you on the other side.