 The next item of business is a statement by Shona Robison on medium-term financial strategy. The cabinet secretary will take questions at the end of her statement and so there should be no interventions nor interruptions. I call on Shona Robison, cabinet secretary, around 10 minutes please. Thank you, Deputy Presiding Officer. Today I am publishing the sixth medium-term financial strategy. My first fiscal statement as Deputy First Minister and Cabinet Secretary for Finance is very clear that sound public finances are key to ensuring that we can tackle poverty, build a fair, green and growing economy and improve our public services for the needs of future generations. However, I recognise that our current financial situation is among the most challenging since devolution. Scotland has faced a succession of economic shocks with the Covid pandemic, the war in Ukraine and, of course, soaring inflation. All of those are driving significant pressures on the economy, society and public finances. To some extent, those are global challenges. However, the impact of those challenges is felt more keenly in the UK as a result of the UK Government's damaging decisions, not least a decade of austerity, Brexit and the disastrous autumn mini-budget, which, of course, sent borrowing costs to a 20-year high and led to the Bank of England having to intervene with a £65 billion package to stop pension funds from collapsing. Despite the increasingly challenging context, we have successfully balanced the Scottish budget every year while taking clear, decisive action to protect the most vulnerable. With the Institute for Fiscal Studies having noted that the tax and benefit system in Scotland is considerably more progressive than in the rest of Great Britain. In this statement, I will set out our approach to meeting the challenges ahead. I will turn first to the outlook for the Scottish economy and public finances. I wish to start by extending my warmest thanks to Professor Graham Roy and the commissioners of the Scottish Fiscal Commission for providing the forecast at a company this publication. The use of entirely independently generated forecasts on the economy and the Government's funding outlook is one of the great strengths of the Scottish fiscal landscape. Where independent forecasts are not available, we are transparent and open about the assumptions that we have made. Although the Scottish economy has proven more resilient than expected, the economic outlook remains extremely challenging. Despite both the SFC and OBR forecasts projecting that inflation will fall sharply, reaching 2.9 per cent at the end of 2023, it will still remain high on average at 6.1 per cent across 2023. While I welcomed the announcement yesterday that inflation is now falling, low inflation cannot reverse the increasing pressure on households. Indeed, real disposable income per person is falling cumulatively by minus 4.1 per cent across 2021 to 2023-24. Those record falls in living standards are not set to recover to pre-pandemic levels until around 2026-2027. While resource funding is projected to grow in real terms between 2023-24 and 2027-28, we still face a real-terms reduction in the resource block grant in 2024-25. At the same time, resource spending is projected to grow, and that means that our resource spending requirements could outstrip our funding by £1 billion in 2024-25, rising to £1.9 billion in 2027-28. In addition to inflation, the key drivers for this pressure are in social security, the public sector pay bill and health and social care. It also affects the current budget year. Since the 2023-24 budget was set, we have agreed pay settlements for teachers, firefighters and NHS staff, which of course recognise the impact of the cost of living crisis that is having on our valued public sector workers. That will require us to carefully manage our limited resources with any changes clarified via the autumn and spring budget revisions. The pressures are more severe for capital spending, where the price of infrastructure projects has risen by 14.1 per cent this year, according to the Office of National Statistics. Combined with the UK Government's failure to inflation-proof our capital budget, we are facing a real-terms cut every year up to 2027-28. This challenge is particularly acute in 2024-25, where funding will reduce by 3.7 per cent in real terms. On the current trajectory, we expect the divergence between capital funding and expenditure to grow to around £900 million by 2025-26. That is unsustainable, and we will need to reset our spending for both capital and resource in the 2024-25 budget, to which I will return. The MTFS sets out three pillars to underpin our approach to managing the public finances over the medium term. The first pillar is a laser-like focus on ensuring that spending is focused on achieving three critical missions. I will not back away from the tough choices for the decisions that I can control, but I will point out where the levers available to me are insufficient. I call again on the UK Government to increase the capital funding in line with inflation. I also call again for the UK Government to provide additional funding to cover reasonable pay settlements for our public sector workers, but I cannot rely on the UK Government to take action, so I am fully committed to prioritising our resources towards realising the Government's strategic missions. Our first mission is to tackle poverty, and I am proud of our record here. Our expenditure on social security benefits is expected to grow from 10 per cent of our resource budget in 2022-23 to nearly 15 per cent in 2027-28. In fact, in 2027-28, we are investing £1.3 billion more on social security than we received through the block grant adjustment. This money will support families with their living costs, help older people to heat their homes in winter, and enable disabled people to live full and independent lives. I will ensure the continuation of public sector reform in order to achieve effective and person-centred, ffiscally sustainable public services. In order to prioritise programmes such as early learning and childcare, which will have the greatest impact on delivery of our three missions, we need to de-prioritise programmes that make a less-meadiful contribution to our central missions. Today, I commit to refreshing both our resource and capital multi-year spending envelopes as part of the 24-25 budget through which I will set out this Government's plans to put our public finances on a more sustainable path. Our policy choices and priorities will be set clearly for all to see, and if others disagree with these, they can, of course, bring forward alternative spending plans as part of the budget process. Choices over tax policy and the strength of the Scottish economy are key to our ability to invest in public services, and this is why generating economic growth by supporting businesses to invest and create jobs is the second pillar of our strategy. The Scottish Government has limited powers with which to pursue this objective. Our borrowing powers are constrained and have been further eroded through this period of high inflation. We also lack the powers to tackle Scotland's historically slower population growth relative to the rest of the UK, such as powers over migration policy, which we are trying to mitigate as best we can through the creation of the talent, attraction and migration service. Even with limited powers though, we are already making Scotland wealthier since 2007, whilst GDP per capita has only grown by 5 per cent in the rest of the UK, it has grown by 9 per cent in Scotland. As we deliver our national strategy for economic transformation, we will prioritise those policies and actions with the greatest potential to transform Scotland's economy. For example, we need to help parents to access more and better paid work, so childcare provision has a vital role to play here, particularly when integrated with other local services, ensuring we find the fiscal headroom to expand our childcare offer will be a key part of our approach. That brings me to the third and final pillar, which is maintaining and developing our strategic approach to tax policy. The most recent forecasts show that tax devolution will add an extra £574 million to the Scottish budget in 2023-24, increasing to almost £1.7 billion by 2027-28. The tax policy choices of the Scottish Government are, however, limited by the current devolution settlement. The revenue for the Scottish budget is heavily reliant on Scottish income tax, which of course is only partially devolved. I currently do not hold all the levers necessary to make the Scottish tax system work in the most effective way. There are, however, choices for this Government around who and what to tax and by how much. Scotland already has the most progressive tax system in the UK, ensuring that the burden of taxation is placed on those with the broadest shoulders, and that will continue to be the cornerstone of our approach. I commit today to publishing an updated tax strategy alongside the next MTFS, which will build on the principles that we have set out in the framework for tax in 2021. In order to support this work, I will also chair an external tax advisory group to ensure that our future tax strategy is informed by a broad range of views. Finally, I recognise that this Parliament is at its best when we work together. I therefore wish to take this opportunity, given the scale of the challenge, to invite my colleagues from across the chamber to work with me in identifying how we can advance the three pillars of this strategy. Presiding Officer, these are incredibly challenging times, not helped by the limited levers at my disposal or the actions of the UK Government. I am committed to taking the tough decisions required to deliver focused, ambitious and affordable measures that protect our environment, promote business growth and improve wellbeing through the reduction of poverty for the people of Scotland. The MTFS sets out how we will manage our public finances over the medium term to ensure that we deliver on these key priorities for Scotland's people. In doing so, we will continue to make the very clear and compelling case for Scotland to have the key fiscal levers that other countries have to enable us to meet the fiscal challenges now and into the future. I look forward to taking your question. Thank you, Cabinet Secretary. The Cabinet Secretary will now take questions on the issues raised in her statement. I intend to allow around 20 minutes for questions after which we will move on to the next item of business, and it would be helpful if those members who would wish to ask a question were to press their request-to-speak buttons now, and I call Liz Smith. I thank the cabinet secretary for prior sighting. Just a cursory look at the accompanying document that has come with that statement is further proof, if any, of the very precarious situation that is facing the Scottish economy, most especially the very significant gap between projected expenditure and income. It is yet more proof of the SNP's utter failure when it comes to addressing the really big issues that have been flagged up by economists and forecasters for the whole of the last decade. All we get is an excuse that it is the problems of Westminster, and that is just simply not true. Indeed, measured against what Kate Forbes said in this statement last year, the SNP has been failing to deliver on the imbalances in our labour market on addressing Scotland's persistent low productivity on ensuring that Scotland is far more competitive than is currently the case and, worst of all, on boosting economic growth. I ask the cabinet secretary three questions. Will the cabinet secretary finally acknowledge the widespread concern in the Scottish business community that Scotland is the highest tax part of the UK with the serious detrimental effects that this has had on innovation, jobs and growth? Secondly, the cabinet secretary says that we are commissioning a new tax group to look at the future. Given the urgency of the situation, what is it that the Scottish Government is going to do to address the very serious warnings that are contained within the Scottish Fiscal Commission sustainability report, which is flagging up that we do not have the necessary revenue and will not have the necessary revenue to current fund the projected expenditure for the Scottish Government? Thirdly, with regard to the proposed new tourist tax, which was flagged up in the media this morning, what message the cabinet secretary thinks this sends to the hospitality, tourism and retail sectors, which are still all reeling from the SNP's failure to provide the same business rates relief that is available in the rest of the UK, which is obviously so vital to Scotland's economic recovery? Let me try to take those in turn. First of all, on the visitor levy, I do not know if Liz Smith has seen the comments from the STA, who have actually been very supportive of the levy being introduced. Of course, it is ultimately a choice for local government as to whether to use the levy, and that will be a choice for each council to make that judgment. However, there is a pattern here from the Scottish Conservatives that any leaver, whether it is a leaver here or a policy here or a leaver, an empowerment of local government, they, of course, oppose every single one of them, and that really is incredible in the current financial environment. Let me say to Liz Smith that the situation is very challenging, which is why in the MTFS I have set out very clearly the reasons for that challenge, many of which relate to inflation, which of course relates to some of the decisions and actions taken by her government, and the pillars that I have described in terms of the action that we will take. Yes, we will make sure in terms of our public spending that we absolutely focus on the public spending that will meet the needs of our ambition around reducing poverty and indeed growing the economy and making sure that our tax policy is fair and sustainable, which is why I have and will establish the group, the tax group, that she referred to. I do not accept the characterisation that Liz Smith put forward. If you look at the tax going forward, the SFC have said very clearly that 52 per cent of taxpayers in Scotland will be paying less compared to that of the rest of the UK. That is the SFC's analysis of that. Of course, we have to make sure that the business taxation is fair and she referred to the issue of the non-domestic rates and hospitality, but of course, as Tom Arthur said in the chamber just yesterday, that did not recognise the very extensive package of responding to the number one call, and that was the freeze of the poundage. Of course, the small business bonus scheme is the most generous anywhere in these islands. Finally, on the point about population growth, it is a bit strange that in the week that the Tory UK Government are saying that they want to bear down on legal migration to this country, that Liz Smith would cite population growth. What we want here is to have powers over migration, so we can attract people to come and live and work in Scotland and to pay their taxes here. Of course, that is why we want those levers to be able to do so. In the meantime, my colleague Neil Grahame is taking forward the talent migration attraction scheme, because we want to do what we can even within the powers that we have. I would just point out to everyone that we have around 20 minutes for this. We have already used up nearly six minutes. I call Michael Marra. The most relevant part of this statement today is the recognition that we are set to experience a record fallen living standards in Scotland, average real disposable income fallen by 4.1 per cent. There are far too many people who are seeing their lives diminished in Scotland, the end of the paycheck before the end of the month. In that context, it is disappointing that there is almost nothing in this document about a strategic approach to growing wages and helping household income for the vast majority of the population. There is no answer to the central question of our public finances—the £1.9 billion gap between the tax that we collect and the policy commitments that this Government has made. The cabinet secretary has said in her statement that she will not back away from tough choices for the decisions that she can control, but she is just not going to tell us about any of them today in the strategy that is put in front of us. There is an invitation for other people to come up with those ideas. Part of the job of Government is to set out where that gap is going to be addressed. Businesses and public services have to plan ahead. They have to make decisions for the long term. How are they supposed to do that when the Government will not tell them where their plans are changing? The much-talked tax policies of the new First Minister are, by the looks of this document, at least another year down the line. It is astonishing in the context of the gap that we see. Labour looks forward to that tax consultation. The First Minister might get to the questions, please. I shall present the answer. Who will be in the room and who will ask the questions? Is it little wonder, then, that 58 per cent of Scots feel that things in Scotland are headed in the wrong direction? Do you not agree with them? I recognise the impact on living standards that he outlined. Of course, the main driver of that is the rampant inflation that is due to the UK Tory economic mismanagement. I would say about the focus on the economy and the growing wages. That is exactly what NSET is about. It talks about a 10-year programme of growing the economy, growing wages, growing the sectors that are the sectors that are the most likely and have the biggest opportunity for Scotland to grow. All of that is set out. Michael Marra asked me why I am not setting out the budget today. Well, because this is not a budget. This is a medium-term financial strategy. The plans, policies and what we will spend on what will be set out fully in advance of the 2024-25 budget. In advance of that, we will make the decisions around that targeting. Of course, the tax policy has to be set as part of the budget process, not during the MTFS. I am happy to work with Michael Marra and his colleagues if they want to bring forward ideas. That is not about passing the buck on to anyone else. The responsibility will be with us to bring forward a balanced budget that sets out how we will make the ambitions of our key missions, one of which is about tackling poverty. When you look at the spend on social security here in Scotland, one of the drivers of the financial pressures, I would hope that Michael Marra will not disagree with that. Members, please resume your seat. I do not want all this chit chat and we also need to pick up the pace with all respect because we have 11 minutes and we have 10 more members seeking to ask a question. I do not know if you have anything to add to that answer. Thank you, cabinet secretary. I could make a plea for succinct questions and answers from now on. Otherwise, I will have to drop members from being able to ask any question, which I really do not want to do. I call Alex Cole-Hamilton to be followed by John Mason. It is clear that cuts are coming. There is a £1 billion hole in resource spending next year, £2 billion the year after, but the cabinet secretary has refused twice now to treat this chamber and the general public like adults and tell us where those tough decisions in those cuts are coming from. That is in large part caused by suboptimal GDP growth and low productivity. The Scottish Government, rather, has just cut £46 million from our world-class universities and colleges. They are generators of growth. Can the cabinet secretary understand the anger that is felt at their being deprioritised and now badged today as making, and I quote, a less meaningful contribution to the Government's central missions? I say very clearly on the £46 million that Alex Cole-Hamilton raises that has been made clear time and time again that the reason for that, which was unfortunate and of course no one wants to reduce funding to any area of public spending, was to help to fund the teachers' pay deal. In this chamber, we heard over and over again the need to settle the teachers' pay deal. At the time, the cabinet secretary of education said that there would be implications because that money would have to be found from somewhere. We then set out where that money had to be found from. Unfortunately, that is the reality of having to find money in-year because of pay deals that have been settled. Of course, the pay deals have been driven by inflation and, of course, we do not resent giving pay deals to public sector workers at all in a cost-of-living crisis, but the money has to come from somewhere. In terms of setting out our spending plans, of course we will, in detail in the forthcoming budget, because that is where the spending plans are set out and where the tax policy will be set out in order to help to pay for those spending plans. What we will do in making those decisions is to make sure that we have a laser focus on targeting resources to those who need it most. I would have hoped that that would garner some support across the chamber. I call John Mason to be followed by Douglas Lambson. Thank you very much. Scotland clearly has some very wealthy people and so I very much welcome the updated tax strategy that the cabinet secretary is promising. Can she say any more about the external tax advisory group? For example, would the STUC be part of that? We will set out in the next few weeks who will be involved in that group, but yes, we would want a group that has a range of views clearly on the best way forward for tax, so it will include expertise from the tax profession itself, but also the varying interests within Scottish civic life around how we should go forward with our tax policy and I look forward to working with them over the summer. As can be seen from the strategy, average earnings are growing slower than the rest of the UK and are now less than 92 per cent of the UK average. Does the cabinet secretary not understand that Scotland being the highest tax part of the UK is making this worse? Well, I do not accept that. As I said, 52 per cent of Scottish taxpayers will play slightly less income tax in 2023-24 than if they lived elsewhere in the UK. Of course, we have prioritised a fair and progressive approach to taxation, one that balances the need to raise revenue with the impact on households and the economy. If the Scottish Conservatives want a different set of tax proposals, i.e. they want to cut tax as the list trust's budget wanted to do, then they have to accept the impact on Scotland's public finances. Quite often we hear Tory members coming to this chamber asking for more money to be spent on Scottish public services. You cannot do that and then, on the other hand, want to cut taxes. That just does not stack up. Therefore, we will continue to have a fair and progressive tax system that balances the needs of households with the needs of public finances and the economy. As noted, the Scottish Government has to balance its budget every year. That leads to challenges with demand-led budgets such as social security in-year. What assessment has been made by the Scottish Government of its ability to manage demand-led budgets and what specific fiscal levers would the cabinet secretary ideally want to be able to utilise to make this job easier? The analysis of the funding position set out in the MTFS clearly shows that the volatility that the budget is subject to is greater than the levers that Michelle Thomson spoke about that we have available to manage. The limits on our borrowing and reserve powers are clearly inadequate to deal with the changes in tax and social security forecasts that we need to manage. What is more, those limits are fixed and the value is eroding over time, not least again due to inflation. The upcoming review of the fiscal framework really has to address that and really needs to give us the tools that we have to have to manage that volatility that we see in demand-led areas such as social security and the budget more widely. The ONS data is very clear. In recent years, job growth and wage growth have been slower in Scotland not just in all the other UK nations but also compared to key comparator regions such as the north-west and south-west of England. Does the cabinet secretary have an explanation for that? Given the centrality of growth of per capita income tax receipts in the fiscal framework, why was there no mention of that in her statement whatsoever? Let me say to Daniel Johnson that the recent evidence suggests that economic performance is improving. The latest forecast of the net position for income tax, for example, in 2023-24 has improved, rising from £325 million at the time of the Scottish budget to £411 million in the latest forecast. That is due to a number of factors, but most importantly, significant shifts in the underlying forecast of relative earnings compared to the rest of the UK. Provisional in-year PAYE tax data for the first 11 months of 2022-23 suggests that the Scottish PAYE income tax receipts have outperformed the rest of the UK and that the SFC forecasts that nominal earnings in Scotland will go through a period of higher growth relative to the growth of earnings forecast by the OBR for the rest of the UK over the next five years supporting our tax base. Surely that is something that Daniel Johnson would welcome. Last year, a number of Tory MSPs in this chamber were calling on the Scottish Government to replicate quasi-quartangs catastrophic plans for tax cuts for the rich. Following the UK Government's disastrous mini-budget, which ended up crashing the economy, we are told by some commentators to the tune of £74 billion, Scotland's share of which is around £6 billion, not a word of comment from the Tories about that £6 billion lost to the economy. Can the Deputy First Minister advise what the likely impact would have been if those tax cuts would have been implemented by a Tory administration and what the effect of the Tory spending cuts for Scotland would have been? Keith Brown is absolutely right. If we had matched the Tory calls on tax policy over the past year, we would have been worse off by up to £0.5 billion. Cutting taxes for the wealthiest in society when many vulnerable households are facing hardship would have made no sense, either from an economic or indeed a moral standpoint. For the Tories to explain how their defining mission of slashing taxes and running down our public services is an attractive proposition for this country. Instead, we have continued to take a responsible approach to our tax policy, making it work to support revenues for public services. One, of course, which carefully balances the impact on households and the economy, is the need to raise that revenue to support our vital public services, including our NHS. We know that, since 2014, the Scottish economy has grown on average at around one-half the rate of the UK economy. What assessment has the Scottish Government done of the additional tax revenues that would have been generated for it had we at least matched the UK average growth during that period? As I have set out in my earlier answer, the tax performance is improving and the economic performance is also improving. Murdo Fraser wants to criticise the Scottish Government. The question has been asked and we need to hear the Cabinet Secretary's response. We need to hear the Cabinet Secretary's response. Members have anything else to say? Do not say it from a secretary position. Can I say to Murdo Fraser that the recent GDP growth in Scotland is better than the rest of the UK? It is not something that he might want to hear his shakery say, because he does not like to hear anything positive about the Scottish economy. However, there is this fundamental point. Murdo Fraser comes and asks us questions about what we are doing to grow the Scottish economy, but then refuses to support us in getting the fiscal levers that we need that would help us in our mission to grow the Scottish economy. In the MTFS statement, I have just made one of the key pillars that I have set out is growing the Scottish economy, using inset and the levers that we have at our disposal to grow the Scottish economy and by investing in childcare and other measures, because we know that that will help to grow the tax base that will help the Scottish public revenues. I welcome the comments on public sector reform in the strategy and the DfM's offer to work with others on addressing the challenges that we face, which I will certainly be delighted to take up even if the opposition parties apparently will not. The spend on the non-frontline costs across the public sector are significant, running into billions. The spend on core Scottish Government alone is now in excess of £700 million, with significant increases in recent years. Can I ask what assumptions the Government has made about the value of resources that will be freed up and deployed to front-line services as a result of the public sector and government reform work that the DfM has taken forward? I welcome Avie McKee's offer. I want to work with people across the chamber and to look at any ideas that people have to support taking this work forward. A programme of reform will support all aspects of public services to change within that overall envelope to move to greater sustainability. That means that reform must be more than transferring resources to the front-line of our public services. This is about transformation in both the back office and front-line functions. Our programme of reform includes a laser-like focus on securing the sustainability of public services. There is no particular predetermined savings target because we want public bodies to do what they can to be more efficient, to look at exhausting and testing all options for efficiency savings and to focus on making those savings as soon as possible. That is a vital area. It is one that I will be taking forward on behalf of the whole Government to drive that progress as quickly as we can. We are in a dire financial situation and our options are limited, but I am glad that the Scottish Government acknowledges that it cannot just cut its way out of this situation. Can I ask the Deputy First Minister if she agrees that this is the time to be bold with tax policy to ensure that the wealthiest are paying their fair share, for example, through a new income tax ban for those earning between £75,000 and £125,000? Ross Gray will appreciate that we are at the early stage of looking towards the 2024-25 budget and the tax policy that will underpin that budget. Of course, I have agreed to chair a group over the course of the summer to hear a wider range of views on that direction of travel. I would say that we have strong foundations to build on in terms of progressive taxation. That progressive taxation has made a huge difference to the Scottish budget, without which we would not have the hundreds of millions of pounds to spend on public services. We will make sure that we balance the needs of taxpayers and household incomes with that of our public services. Finally, on the point of taxpayers in Scotland, the social contract is very important here in Scotland that taxpayers get a social contract and public services that are way ahead of what is offered elsewhere in the UK, whether that is free tertiary education, free prescriptions and, of course, a childcare offer much better than anywhere else in the UK. That is something that we should be proud of. That concludes the ministerial statement. I apologise to those few members who had pressed who I was not able to take, but I had already indicated from an early point in the statement that that would happen if the questions and answers remained at the length that they did. I obviously need to protect the time for the next business. There will be a short pause before we move on to the next side of business in order to allow front bench teams to change positions should they so wish.