 Gw うw ngeiddiwch cymhysgwyd y ddechrau o gyhoeddwyddon nhw ymarfer jei cyflawor a'i f sponsorship iawn. ystod o'r llefyn yn ei ddysgu'r gwenn أنwyd agen nhw er mwyn gweld o'r boedden ni, a'r gweld o'r boedden nhw e又 yr MC yng Nghaerffordd, unig yw hyffordd a'r boedden nhw i'r boedden nhw gyda'r boedden nhw, ond ar y guflawor yng nghydflant a'r boedden nhw'n hyffordd a'r boedden nhw i'r gwiyllawogau. I move to the first panel of witnesses, Jackson Callaw MSP, member of the Scottish Parliamentary Corporate Body, who is joined today by Scottish Parliament officials David McGill, Clark, Chief Executive and Sarah Glass, group head of financial governance at Scottish Parliament. I would like to welcome you all to the meeting this morning and tend to allow an hour for this session and I invite Mr Callaw to make a short opening statement. Thank you very much, convener, and it's a pleasure to be with you again. I'd like to take a brief opportunity to set the context for the Scottish Parliament Corporate Body's 24-25 budget bid and set out some key points. This is the third of our medium-term financial plan for session 6 and is aligned with the commitments made in 2020-23 submission which focused on setting up Scottish parliamentary services for the challenges of session 6. As with the 23-24 bid, the key challenges that we face in the 24-25 bid centre around inflationary pressures and establishing a budget that is fair and affordable and takes account of continued high inflation. In summary, the total proposed budget for 24-25 is £126.5 million and that represents an £8.9 million or a 7.6% increase on the current financial years budget and is £6 million or a 5% increase on the indicative 24-25 budget, which was previously advised to the Finance and Public Administration Committee last year. This overall increase of 7.6% is primarily driven by inflation, by electricity prices at rates well above inflation and increases in office holder costs due to anticipated inflationary staff costs. Unlike the 23-24 budget, when we were able to partially offset inflationary impacts with just a 4.5 increase at a time of double-digit price inflation, with more than 70% of our cost-based being staffing, Scottish parliamentary services MSPs, MSPs staff and office holders, which you recall has been the subject to recent reviews, there really are no additional material efficiency opportunities available for the 24-25 budget that would not compromise our operational abilities, particularly the operational abilities of MSPs, to hold the Government to account. However, we are about to consider whether we need to adopt any services contracts at Holyrood in light of changes of footfall and usage post-pandemic to ensure that we are operating efficiently, and that will be considered a high level by the SPCB during the course of this year. For MSPs and ministerial salaries, I confirm that, since we broke the pay link with Westminster in 2015, we have consistently used ash as our index as set out in the scheme. Last year, that resulted in an increase of 1.5%, which was substantially lower than general inflation and all other wage inflation indices applied here in the Parliament and elsewhere. The scheme allows the corporate body to use the ash index or such other index as the SPCB may, from time to time, consider or deem appropriate. This year, we intend to apply the average weekly earnings index at 6.7%, as it would appear to us that the ash index has become misaligned with other wage inflation indices over the past few years for reasons that we cannot properly understand and are investigating, so we may return to it. However, that means that an MSP salary of £72,195 in 24.25, prior to breaking a linking MSP salaries with Westminster, MSP salaries equated to 87.5% of an MP salary, as of 23.24, which equated to 78.1%. It is worth noting that Ipsa, the independent body that recommends salary increases at Westminster, has recommended an increase of 7.1% for MPs in 24.25. Following the last triennial review of the member's pension scheme, Government Actuaries Department, the GAD, recommended an increase in the sponsor contributions to the scheme, and the corporate body accepted this advice and this is reflected in the 24.25 member's budget. Turning to staff cost provision, for last year's budget, 23.24, the corporate body chose to use the AWE, the average weekly earnings, to uplift the staff cost provision in a move away from the basket approach of indexing staff cost provision annually using a mix of AWE and the ash index to which I referred a moment ago and which appears to be slightly out of alignment. This had been adopted since 21.22. General inflation was 10%, the basket was 4.1% and the AWE was 5.6% at the time. In selecting the 24.25 operating index, the corporate body has expressed a preference to continue with the AWE for one further year and to avoid the greater volatility reflected by the ash index during this continued period of inflationary volatility and therefore applying the AWE for staff cost provision is consistent with the index selected for members at a rate of 6.7%. That would mean a rate of £156,900 per member and the budget submission includes this assumption. SPS staff budget maintains the staffing baseline as agreed in the 22.23, with the 24.25 budget uprated to take account of anticipated inflationary wage pressures. We have also reflected revised increased my civil service pension contribution rates within our costs for 24.25. Following a prioritisation exercise, the total amount incorporated in the 24.25 budget for revenue and capital projects is £5.3 million, which is a marginal inflationary increase in 23.24. In our submission, we highlight a number of major projects in schedule 3, which are under way or due to commence in 24.25, such as the on-going building energy management system, which is driven partly by green issues and also obsolescence issues, or BEMS, which I referred to last year. The corporate systems programme encompassing the business critical applications for finance, people's services and payroll, which, as well as being fundamental, the systems are also organisation-wide. Official report digital transformation, which is the replacement of the system used to produce the official report and aims to address technical obsolescence, improve edit production and publishing processes, and deliver efficiencies in the operation and maintenance of the IT system, business bulletin replacement, with the aim of delivering a new streamlined business bulletin production process and supporting application, and Windows 10 replacement, with support for our current Windows 10 operating system, ending in October next year. The office holder's 24.25 budget submissions total £18.3 million, which is £1.7 million, or 10 per cent higher than the current year. As the committee knows, the corporate body carefully scrutinises the office holder budget bids and challenge if no clear justification for increase has been given. Above inflation increases in 24.25 are driven by anticipated staff costs across all the office holders, and additional functions added to the remit of the Scottish Public Services ombudsman. We continue to include a contingency provision, but we have reduced it this year back to the 22.23 level of £1 million to reflect widespread expectation of reduced inflationary volatility during the course of the budget year, which was the reason why we built the extra contingency in last year. That concludes my remarks. I am sure that some of it is always quite technical, some of it is for the record, but I thank you for your patience. Thank you very much. I will try to keep my questions fairly short and not too long, given the fact that we have only a bit an hour and other members will wish no doubt to come in. You talked about, and it is in your submission, about having a submission that is fair and affordable. Do you think that it is fair and affordable for the Scottish Parliament's budget to go up by 7.6 per cent when the Scottish Government's budget for everything that the Scottish Government and the Scottish Parliament are responsible for is only going up by 2.6 per cent in resource over the next financial year? I think that, as we have identified, a significant 80 per cent of our budget is actually driven by the staff costs that operate within the Parliament. We took critical decisions in the last Parliament, driven by the requests of this committee and MSPs to increase the resource that was made available to MSPs to run their offices and to the overall structure of the Parliament, because we felt and committees felt that it was important that the resource existed to allow them to hold the Government to account. If we were to take account of these other matters—and we obviously apply as rigid a discipline as we can—the principle that we have operated from is that it is this Parliament's responsibility and the corporate body's responsibility to ensure that this Parliament can operate to maximum capacity in its ability to support members and to hold the Scottish Government to account, I think that the only way that it would be open to us to do anything differently would be to compromise that ability. The corporate body is not prepared to submit a budget that would do that. We will have a session in the previous two hours of the deputy First Minister, on which lots of other areas of the Scottish Government's responsibility are going to have to do just that. It seems that the Scottish corporate body is somewhat out of kilter. When we look at the staff pay budget of 7.7 per cent, what is the differential between basic pay going up and grade inflation, as you might call it? The same number of staff understands that there will not be any additions to staff. Can a staff increase in numbers that we had last year has been consolidated? Where are we in terms of that? We have looked across the staff profile. There is no evidence of any grade inflation at all. We have looked at the job evaluation factors that decide what grades sit where in the organisation, and that was independently assessed in the past few years. We were given a clean bill of health on that one. The profile that we have from 2018 has barely changed. If anything, there has been a very minor reduction in the proportion of jobs at the very senior level, so we do not have any evidence of grade inflation. That reflects the fact that the corporate body's approach has always been one of fairness and equity, ensuring that salaries are proportionate for the jobs that we have. Again, that is evidenced by the fact that more than 90 per cent of our jobs are filled at any one time. We have low turnover rates. We have managed to eliminate the gender pay gap this year. All of the evidence is that the pay structure that the corporate body has as a strategy means that the pressures that can lead in other organisations to grade inflation do not exist in the Scottish Parliament pay scales. In terms of the allocation that MSPs are given in order to employ their own staff, that is going to go up to £156,900 per member. What kind of utilisation do we have of that? Where are we at in terms of the average for both lists and constituency members in terms of how much that budget is being used? In terms of the utilisation, you will remember this time last year when setting the budget, we increased the vacancy gap, as it were. We previously had an uptake of 95 per cent, and we reduced that to 93 per cent, so we have kept that same utilisation rate for this current year's budget. In the current year, with the first time being at that lower rate, we are very close to that being maximised across the total. We are not anticipating having much to understand at the end of this financial year for staff cost provision. Is that for MSP staff cost provision? Yes, I suppose that is fair enough then. One of the things that you have just talked about is that you are going to consider whether or not you need to adapt any service contracts at the whole route in light of changes to footfall and usage post-pandemic to ensure operating efficiency. Why is it taking so long to do that? It seems to be quite a long process. I thought that that had been implemented long before now. I do not think that there is ever a year zero in terms of us examining and looking at these issues. It is an on-going process, but very often the changes that we have made lead to consequential opportunities. David, would you like to expand? Yes, it is very much that case. This is the next phase, if you like, so we have spent the previous couple of years since we started to come back into the building, looking at the ways that the building can be used in responding to the demands for increased flexibility by members, member staff and parliamentary staff. You will see around about the organisation. We have created touchdown desk spaces, bookable desk spaces and collaboration areas. Pre-pandemic, we had something like four offices in the building that could be used for hybrid working. We have increased that to 60 over the past two years. We have also created areas that are quiet spaces for people to work, principally the hub area on the garden lobby. That is what we have spent the last two years doing. That is where the focus has been. We are now turning to looking at the information that we have gathered in that time about footfall and the building, about what can then be done, and some of those might require changes to contracts. At this stage, we would need to wait until those contracts expired anyway. It is not the case that we have not been doing anything. We have been building the evidence space that we would need to make changes to contract renewal when that comes up. The cost of running up by 13 per cent to just over £9.8 million, what is the reason for that? Which property costs? There are a number of key cost categories within the property costs. The most material being rates, maintenance, utilities and cleaning. Of those rates, utilities and cleaning are all increasing at rates ahead of inflation. There are a number of drivers for that. Utilities is the biggest increase. Within that, it is electricity. For electricity, pricing is not usage. Our electricity is purchased through Scottish Government contracts and the endeavour to have significant pre-bought ahead of the year. When we put the budget together this time last year, we understood that, as is normally the case, there would be about 80 per cent pre-bought, but in reality that turned out not to be the case. We only had 60 per cent pre-bought, but because of the whole of the prior year had been fully bought at prices from, I guess, pre-Ukrainian War, what we saw on the 1st of April this year is that pricing went from £12 per kilowatt hour to £23 per kilowatt hour, so it almost doubled. For the element that was not pre-bought, we then had that full pricing exposure. The impact, while we are showing it for next year's budget, has been realised in a significant amount in this current financial year, which has been covered by contingencies. The assumed rate increase for next year is quite minimal, but the bulk of the issue has been in this current financial year. That is a big part of the increase. In terms of cleaning, the current year costs are ahead of what we had assumed in the budget, and that is the big increase from budget to budget. Essentially, we missed the inflationary increase in this current year's budget, so we have that catch-up for next year. That is the other area where we have a material increase as well. Again, that crystallised during the year. The district value re-assessed the rateable value of the Holyrood campus during the year. That was not something that we could have anticipated what that would have turned out at. That has driven an extra about £170,000 into the current year, which, of course, rolls forward. We have assumed a relatively modest increase in the rates for the upcoming year, but that is under inflation levels. It is the issue that crystallised in the current year. Those are the three key factors that are taking us, but electricity pricing is the really big headline in the year. I am only going to touch on two further points. I look at the IT in the land bills during giving the £3 million that, in my view, squandered on a not particularly great alleged improvement in the website, which we have discussed at some length in previous years. I say that improving the billet is going to cost £300,000 to £500,000, which seems to me a rather high and excessive amount of money. The business billet is £245,000 to £370,000. I am struggling to understand where the demand is for those changes and why it is going to cost so much. Ironically, the windows 10 replacement of 1,600 devices seems to be costing £143,000 to £96,000. That looks almost a modest figure when you think of the work involved. I am just trying to get my head around why, and I wonder if you can explain why the changes to the official report and the business bulletin are so expensive. As somebody who is IT blind, I share your astonishment at all those matters. The corporate body, which I am unsharatably saying, is like-minded to itself in those matters. Those are matters to which we, obviously, expect some comprehensive understanding and briefing. On the official report, those are estimates that, at the moment, the business case at a strategic level has been approved and the team is going out to tender, so the figures could be different. The range is the current estimate. There is a proportion of that more than £100,000, which is the backfill, the staffing, so we can release staff to work on it. Our staffing levels are such that we do not resource to a level that would support that. The reason for the staff time to upgrade the official report or the bulletin is that I do not understand why those tasks are necessary, frankly. To me, it is £100,000 if it is nothing. That is a lot of money to work on upgrading a business bulletin. That figure is for the official report. Essentially, that is the time that the staff need, both in the design phase and the early preparation stage, the testing and the implementation in order to build. In the past, perhaps, where projects have not been as successful and delivered the change and the benefits that we would have expected is because we have not fully resourced it. We have assumed that people can do it on top of their— The £3 million spent on a website was not enough to deliver a quality website, is that what you are trying to say? I did not specifically reference the web. Any strategic change in the past could fall into that category. The one thing to say—when the previous editor of the official report system was implemented in 2010—was that cost £475,000. In today's money, that would be more than £700, so the estimate for this particular piece of work is lower than that. The business cases come to the strategic resources board, and the projects and programmes are also shared with the corporate body, so they are heavily scrutinised in the process of being approved. For some assurance that we do challenge the figures and make sure that the assumptions are robust but equally that, on an on-going basis, the budgets that are allocated are closely monitored and challenged. I am not sure why they are obsolete. What is it that they need to deliver? The bulletin? I am not expert. As I understand of the bulletin, it is extremely complex to produce and involves lots of data and lots of information from lots of different parts of the organisation. It is cumbersome and possibly not as user friendly as it could be. I can assure you that we did have a presentation on this, which was extremely persuasive. I am sure that we can facilitate your engagement with that presentation if that would be helpful. Since we are a couple of old school stalwarts, the official report is now sent to everybody at all members at the start of each day. That was at my request because it is my underlying prejudice that when it was a physically produced official report in hard copy on paper that it would regularly be the case that members in the chamber would pick up a copy and could be seen perusing the wider discourse of parliamentary debate. I wonder the extent to which members now that it is only available digitally spend any time looking at the official report to see what has been discussed in Parliament beyond their own involvement in a particular debate. I think that the corporate body is continuing to think of ways in which we can ensure that there is a wider engagement with the official report by members, because it is a valuable source of updating members on the wider portfolio of issues that are being discussed in Parliament. I absolutely agree with that. I remember when Jim Eadie was next to me, he had a mountain of every official report that there had been since he had been elected. I think that it is an invaluable resource for actually ensuring that we get it every day. I know that when a new website came in that we were still able to access it on the old website. It is also important to cross-check what people said in previous debates. I am just not sure why it needs to be updated. We will move on, because the last thing that I want to talk about is inevitably the issue with regard to office holders. The reason for that is that although you have talked about a 10 per cent increase, which is very significant again when we look at where other areas of the Scottish budget are under severe pressure, but when you look at the eight office holders, I looked at them in some detail because the 10 per cent hides a multitude of synns. For example, if you look at staffing costs in the Scottish public sector, it is up 12.8 per cent. The Scottish information commission is 9.8 per cent. The commissioner for children and young people in Scotland is 17.5 per cent. The Scottish human rights commission is 11 per cent. The commissioner for ethical standards in public life in Scotland is 14.2 per cent. I remember that I had a big jump last year as well. The standards commissioner for Scotland is 13.2 per cent. Biometrics is 16.3 per cent. The electric commission is only four per cent. You mentioned earlier on, Jackson. You know the careful scrutiny that the SPCB has on that. You also mentioned that, for example, the ombudsman is increasing functions, but the ombudsman's staff budget is now over £6 million, which is equivalent of the staff budget of 40 MSPs. I am not convinced that the public sector ombudsman's office does the work of 40 MSP offices. I mean, I would be shocked if it did, given the amount of work that goes into my office, I am sure, and many others. I am just wondering how can those colossal increases in salary for all but the electoral commission be justified at this difficult time? Thank you for that trenchantly put sequence of observations. I think the first thing to say—I will come to David in a moment—is that percentage increases can look quite sensational in relation to some relatively small budgets, the vast majority of the cost of the office holders. As you know, the corporate body has discussed with you, and we are grateful for the inquiry that you now have under way, the overall expansion and principle understanding of what office holders are doing. The corporate body's responsibility is not to editorialise but to enact the will of Parliament, which is why our responsibility is that Parliament, having decided that the office holders shall exist, is able to undertake and dispose of their functions effectively. Some of them have had additional responsibilities applied to them. Some of them have made budget submissions, which Hugh and Janice, who operate with the office holders on a daily basis, have interrogated and which the corporate body has declined to accept. It is not the case that the budget that you are seeing before you is one that has not been scrutinised, analysed, interrogated and, in some cases, declined. However, some of those office holders are still relatively low in overall costs so that, when you apply a percentage, it can look quite significant, but it could in fact just be one additional employee or partial employee who has been added to it, but I will allow David to expand. That is an area of concern, and the corporate body is concerned about the growing proportion of its overall budget that is consumed by office holders and their very engaged with the work that the committee has announced that it is going to undertake. In terms of the staffing costs, looking across the piece, in the opening remarks, Jackson Caller talked about how the Parliament's budget has 70 per cent of it as staffing. That goes out to 80 per cent when you look at the office holders, so their flexibility in terms of non-staffing costs is much reduced. If every other cost is fixed and you increase the staff budget, as the Scottish Ombudsman has done by £700,000, it is going to increase the percentage of the budget that goes in staff. This year, if you look across the piece, there is only a proposal for one extra member of staff across all of the office holders, and that is almost entirely funded from within existing budgets. The cost pressures this year have come from the inflationary increases that we have talked about. There has been a recent change in pensions legislation, which has added another £100,000 to the staffing budget. Lots of the staff—we talked last year about the ethical standards commissioner employing more staff. Those staff are moving through progressions. Commissioners are entitled to pay progressions as well, so those add over and above salary increases. I think that that has been a feature of those budgets. Last year, the ethical standards commissioner got an additional, let's see if I can remember, 7.4 members of staff. This is from memory and an average salary of £57,000. It has gone up to 14.2 per cent. All those folk that we have started last year are all getting promoted, are they? They would have started at the bottom of the scale. Those costs would not all be salary costs. They would include pension costs and employers' national insurance costs as well, so it is not all about salary. The point that you made about the ombudsman is that those office holders that are responsible for investigations and complaints require to go through a statutory process, so the comparison with MSP officers might not be quite the same. In some cases, we know that MSPs do signpost constituents to the office holders. The ombudsman is the national whistleblower officer for the NHS, and she also oversees the welfare fund, so there are a variety of functions in there that go beyond just the investigation of complaints. Yes, it just sticks out because we are looking at all the other areas of the Scottish budget that has to fund a 2.6 per cent increase in resource, and that just looks way out of kill turning, and I am sure that you must see that now. I said earlier on the time that there are some people who have said yet too in terms of who have you basically said not hold on, we do not actually think that that salary, a budget increase, is justified. I think that we mentioned last year that we had done that with the Scottish Human Rights Commission, they had a bid for a significant increase of staff. Will there be no staff bids that we have rejected this year? No increases in proposals for increasing the staff base? We have interrogated requests for additional monies to fund a particular project, some of which we have asked to be deferred or to be looked at again. I will continue, because colleagues are keen to come in, and the first one to come in will be listed before by John. Mr Carlaw, you made a very interesting remark in response to the convener earlier when you said that, as the SPCB sets its budget, one of the underlying principles is that this budget has to ensure that this Parliament is holding the Government to account and that it is proper on scrutiny. In relation to the question about the office holders and the commissioners moving forward, do you think that that is the appropriate principle by which we judge whether we have the correct number of office holders and commissioners, or do you think that there are other underlying principles that we should be looking at? There is a temptation to answer this on a personal basis and there is a temptation to answer this on behalf of the corporate body. I return to the point that the corporate body's responsibility is to enact the will of Parliament. The Presiding Officer has, obviously, as a matter of public record, raised with the Scottish Government the issue of office holders. Last year, I made a particular point of raising it here with this committee because, as a corporate body and as a long-standing member of the Scottish Parliament myself, who was on in my first session in 2007-11, a committee whose responsibility charged by Parliament was to rationalise the number of office holders that we had at that time, for which there was an unabated enthusiasm amongst members in the Parliament. I am struck in this session of Parliament at the—I think that my colleagues in the corporate body watching this unfold—struck by the attraction to colleagues of embracing campaigns that will lead to the creation of additional commissioners, which has almost become now a de facto go-to. The reason that we raised it last year in particular is because we feel or can see—respecting still the will of the Parliament—that the areas that we are beginning to generate commissioners for, if accepted by Parliament, would make it harder for Parliament to justify not creating commissioners in other areas where one could say that there was a similarity either in the responsibility or the function and that you could see an exponential growth of commissioners. There is a question of democratic accountability, in my view, as to why, as a Parliament, we were set up in the first place and are we devolving from ourselves to others' responsibility for matters. My working knowledge is an individual and whatever walk of life I have been, that when institutions of this character are created, they invariably grow both in terms of remit and in terms of size. That appears to be—the example and part of that is as the public become more aware of where more inquiries are made of and therefore the responsibility grows or, as is also the case with initiatives currently being progressed by Members of Parliament, in relation to things such as freedom of information, we could, as a Parliament, take decisions that will significantly grow the responsibility of the commissioner to whom that responsibility has been devolved. I think that there is a big question for MSPs in all of this as we look to the future. You will see, in the indicative budget for next year, with the addition of the patient safety commissioner, who was approved by Parliament just in the last couple of months or so, the increase in the office holder provision in the indicative budget for next year is significantly ahead of the inflationary increase that we are expecting to apply to the rest of the Parliament. Incrementally, the overall cost of office holders as part of our overall parliamentary budget is increasing, so there is a financial aspect and there is an accountability aspect. Sorry, that was quite a long answer, but I hope that it was helpful. It is a very helpful answer, if I may say so, and I think that it ties in largely with a lot of the feelings of this particular committee. Obviously, the SPCB has a limited role. As you rightly say, to put in the will of Parliament, it is not for you to make decisions about what should happen. When we have taken evidence from civil servants or Scottish Government officials, there seems to be a bit of a lack of clarity about who should make the decision over how many commissioners we might have and in what respect they would be held accountable to the SPCB. I think that there is a bit of a lack of clarity, and that is not the SPCB's fault. However, as we look at the issue, there are two things that we have to pick up, first of all, to ensure that whatever structure we come out with enhances the scrutiny of this Parliament. Secondly, we are very clear about the process of decision making as to how many commissioners we have. I am just seeking your agreement that those are the two main issues that the SPCB will consider as you obviously have to put another budget in train this time next year. I think that you identified the two key issues. I think that the latter one is the one that I wrestle with because it is not clear to me that there is any overarching body who is looking holistically at the office holder landscape. The corporate body's responsibility is to enact the will of Parliament. The Scottish Government can propose the establishment of commissioners. The members of Parliament can propose, through private members' bills, the establishment of commissioners. In my experience, every one of those proposals has been considered in isolation in relation to the actual proposal before Parliament, but never in terms of an overall landscape. In the most recent debate personally, but on behalf of the corporate body, I tried to introduce that into the discussion on the patients' rights commissioners. However, it becomes very difficult when you are in a debate progressing legislation and respect of a particular commissioner when everything in that debate is about the merits of the position in question, to have a wider discussion about what it is that Parliament is in the round doing or seeking to do, or even prioritising. Even if you were to argue that there is an argument for commissioners, we are considering those not in any structured way but on the basis of who is proposing what at any given moment in time. Is the unanimous view of the SPCB that we need more clarity on this whole issue and therefore greater accountability? It would be fair to say that that is the view of the corporate body. Further, it would be fair to say that we would be of the view that this is something that this session of Parliament should try to wrestle with and resolve, because the difficulty could be that a new cohort of MSPs might accept the landscape as they find it and simply seek to expand it further without these considerations and longer-term perspectives being reflected. I will leave the commissioners with a good airing and we are looking forward to the inquiry that we are having. I will follow up some of the points that the convener raised. I think that using the AWE is a reasonable way forward for MSPs and MSPs staff. I was working out for the four-year average for the MSP increase. It is 2.9 per cent for the past four years, which I think is pretty easy to sell or reasonable, because the public obviously does not want us to have any increase, or some of them do not. I think that he said that we are going to do more work on the ash figures and the word volatility was used. Do you have any clarity as to why they are volatile or more volatile than other measures? No. I think that we are looking into that. For as long as we went through a sustained period of very low inflation, which is frankly what we have done until the most recent issues became prevalent, it did not seem to be something that mattered. I would say that we may well return to the ash index. We did not move away from it lightly, but I think that, convener, when I came to you last year with the ash index recommending an increase of 1.5 per cent, I did say at that point that we were not trying to be virtue signalling. It was that we believed that there was a lagging factor in the ash index, which would be reflected this year. We were surprised to find that that did not happen. We do not know why it did happen. It is obviously a matter that we want to investigate. It has an impact both on the salary increase of MSPs and on the staff cost provision. The average weekly earnings index is a more reliable one for us to look at while we investigate that issue. You are right. Over a period of time, as you suggest, there was a year when we did not take the ash increase of 5.1 per cent, but took nothing because we reflected the stresses and strains of the pandemic in that particular year. Some of the projects that are coming up, and you mentioned already some of the hybrid working more, and so you have more spaces that people can work in. I was going to ask you how successful the hub has been. I mean, I do pass it. We all pass it regularly. It does not appear to be very busy, but maybe it is well used. I have linked to that that there is a heading office space planning and moves £200,000. I just wonder what that is for. I will maybe start and I think he may then. In relation to the success of the hub, the information that I have is that it has been very successful. It has perhaps been a bit surprisingly successful in relation to MSP staff. I understand that where accommodation can be quite constrained in the MSP bloc that lots of MSP staff have chosen to use it. I would stress that it is available to all pass holders. It is not just available to parliamentary staff. On the other question that you had, I think that I will pass over to Sarah, who might be able to answer that better than I can. I have got a breakdown of the £200,000 in terms of what that is allocated to. There is a review of the upper basement that is planned. There is work in the MSP bloc to provide phone booths for privacy calls, teams meetings for members' staff. There are new signage blocs on all the MSP bloc and ministerial tower to simplify changing of text. UB24 is going to convert that room into an additional rest area for security. They do not have anywhere at the moment, as I understand. There is some office reconfiguration, consolidation in one of the areas. Similarly, there is consolidation of office base to create capacity in another area. There is an allocated at the moment balance. There appears to be a problem with the open plan aspect of the MSP staff that they can all hear each other when they are having discussions. That is a downside of open plan system. I guess that the hub is used sometimes for that purpose as well to try to some of the spaces that are a little bit more private. However, to do more in the MSP bloc is in the plan for the £200,000. Another one was net zero scrutiny, £415,000. I thought that we are doing net zero anyway. Other projects include embedding, sustainable development, thinking and support to members' committees on net zero. Is it more aimed at the committees? The net zero funding in the current year includes the BEMS spend. I do not think that number that you are describing will be—we are doing work on improving the scrutiny from the sustainable development perspective. However, I would be surprised if the value is as significant as that. Slightly at a sea. We could take this away and look at it and come back to you if that would be helpful. I was not pulling it off your papers directly. It is a bigger page. It is on our page 17, but I do not know where that comes in years, but it is under projects to be funded in 24-25 budget. The final one is other, £415,000. Part of which is probably embedding, sustainable development. Yes, there are several projects in which embedding, sustainable development is one of them, but there are at least five or six in there. I take your point that MSPs are taking up about 93 per cent of their staffing allocation. Is that just wishful thinking, or is there any way—by encouraging MSPs to keep their spending down voluntarily, even though they are allowed to spend up to the limit? We have this problem and it is a problem in the public sector that you have a budget for x, and therefore there is this feeling that you have to spend x. We see that in many areas. I have heard colleagues discussing this, that I must spend my full budget. I wonder if there is any space for encouraging MSPs to save money, because if they save money, that will help someone else. We certainly do not have a window sticker that says that you must spend your budget. It is obviously open to members to determine that. The uptake is often because of in-year changes that staff can leave and it can then take quite a period of time for them to be replaced. In my own office, for example, a highly paid member of staff left unexpectedly, there is a period of time where I am reassessing whether or not I want to replace that individual in quite the same way. That therefore means that, in this particular year, my own utilisation of the staff provision will be less than it has been in other years. I think that that kind of reality applies across most parliamentary offices, which leads to the fact that it is unlikely that you would ever have a year in which there would be a 100 per cent utilisation of the overall budget. That 93 per cent is where we have worked out looking at experience over years, particularly mid-years of the Parliament. Obviously, in the first year of the Parliament, it is usually less than that because you have a lot of new members who do not have staff at all who are in the business of recruiting them. However, as you go through the mid-years of the Parliament, that seems to be a relatively reasonable way of pitch at the level that is required. I assume that you are always looking at ways of perhaps saving money and doing things more efficiently and all that kind of thing. Efficiency has been mentioned already. For example, I do not know how often the MSPs' offices are cleaned, but I get the impression that every day someone goes in every night to all the offices. I do not think that that is necessary. My office, I think, is fairly tidy. People do not tidy it anyway, they are just clean, but a pier or my desk is rearranged every night. I wonder whether something like that could be reduced to once a week or something. Let me take that away and see what the arrangement is there. As it happens, I think that whoever is in charge of cleaning swung by my office this morning to ask if I was completely satisfied with the cleaning to which I said that I was. However, I take your point that it is not a case of tidying some offices, I think that that would be beyond the ability of anyone having visited some colleagues' offices. The final question that I just had was about the shop. It has not been mentioned so far. It was just a thought that came to me that there is a bit of a challenge that people might want to buy something from the shop, but they have to come through the whole security system to get there, members of the public, I am thinking. Have you thought about some of those products being available in another shop in the Royal Miles site on a kind of franchise basis so that we could boost sales and maybe make a bit more profit on the shop? Can you illustrate that with perhaps a product that you have in mind? There are lots of things that are attractive, such as the chocolate in the Parliament, wrapping the scarfs and the ties in Parliament, which presumably are not available anywhere else, I assume, unless it is online. There were six sales, literally. I think that it is an interesting concept. The question really is how attractive are these things to the wider public? It was something of a surprise, I think, to me when I was looking at this, to see how little purchasing there is online of Scottish Parliamentary branded material. We have not looked at that. As with all suggestions, I will go back and allow them to give some consideration to it, but I am slightly mystified as to whether there is the wider appeal for these products that we might hope. I think that some of the products are very attractive. I buy scarves regularly for raffle prizes and things like that, and people are generally very positive about them. The slate placemats are very good as well. Positive is he bought a bottle of whiskey, John. Michelle, do you follow by Michael? I will be very quick, because most of the areas that I wanted to cover have come up already. If we can bear it, just one more little question about the commissioners and office holders. Obviously, you have commented that your figures are heavily caveated with continued uncertainties and the associated costs of new commissioners, but have you estimated, assuming that all the proposed commissioners were put in place, what impact that would have on the budget? I appreciate that it is not in here, but have you done that work? We have not looked across the piece. We have tried to be proportionate as to the point at which we start to do that. We have input to the creation of the financial memoranda when it gets to that point. For example, the patient safety commissioner, which has now been passed by the Parliament, we know that the projected costs there are £644,000 a year. Victim's commissioner is at stage 1, and that is about £615,000 a year. In relation to other proposals, at the draft stage at this point, the human rights bill that the Government is going to bring forward will understand as provision in the draft financial memorandum there for more legal support of around £150,000. We try to work with Government as it is developing its proposals and, similarly, with the non-Government bills unit when it is developing proposals on behalf of members, to have input in that and to gather information to see what that cumulative impact would be. There is obviously the set-up cost but also building in the on-going funding year-on-year basis. Another question is that—I suppose it alludes to what the convener opened with, given that some of the Scottish Government's constraints—have you ever thought of volunteering that the Scottish Parliament should put place itself on a fixed budget similar to what the Scottish Government is? Can you explain a little further what you imagine that might involve? Well, whilst politically I am as capable as anyone of complaining about the nature of a fixed budget of the Scottish Government, from a financial perspective, it does bring some discipline and hard choices that are required to be made. I suppose that what I am exploring with yourself is—perhaps picking up in the opening comment—have you ever considered advising that your budget should be put on a fixed basis? Well, as someone who has sat in the corporate body through more than one Parliament and has also sat in the corporate body when we went through some very difficult financial times as a country, I know that we applied some very rigorous controls to our budget, which led to significant reductions at one point in the overall cost in terms of the provision and staff that we had at that given moment. I will turn to David, but I come back to the fact that, in this Parliament in particular, we have been consolidating the views of the last Parliament that we were under resourced both in terms of the support that was given to committees and also the very strong representation from Parliamentarians themselves that they felt that their own offices were under resourced, which, in comparison with other Parliaments elsewhere in the UK, was a reasonable case that was being made. Embracing those changes was a significant increase financially, and I think that I should say correct the record. I think that I might have said that 80 per cent of our cost is a Parliament when I was thinking of office holders at that point. 70 per cent of our cost is the staff cost. I think that when that is the case, it is difficult to see what would anything other than a negative consequential impact on our ability to operate as a Parliament if we were simply to unilaterally adopt that principle. It is an interesting concept, and I have to say that it is not one that I have considered before, so I might give that a bit of further thought. The loss of flexibility that Jackson has talked about there would be a major challenge, and I am thinking in recent years of the additional powers that the Parliament got through the 2016 Scotland Act, the seismic change in leaving the European Union, and how we would respond to that. Last year, Sarah alluded to the fact that when inflation was running at 11 per cent, we brought forward a budget that was about 4.5 per cent, so our ability to flex in different circumstances, giving that up for the perceived benefits of a fixed budget, I think would be a particular challenge. It made a very compelling argument against fixed budgets. Thank you very much. Just one last final question. It was concerning the cleaning budget. I just wasn't clear. You noted the increase, but it said that the contract price increase for the 2324 budget was omitted, and I just wasn't clear. Having read it out, I think I understand what that means that we didn't have the base price. I think that that's clear. I'm just checking my notes. I don't have anything else. Everything else has been covered. Briefly returning to the office holders. We have had some conversations ahead of an inquiry that they are about to undertake about the capacity of the corporate body to scrutinise office holders. You said that there has been a significant challenge given back to the office holders in the budget process and the bids that they have put in. Does that stretch the capacity of the corporate body to do that work? I think that as we have come to appreciate the concerns around the growth of office holders, we questioned among ourselves the ability of the corporate body to look at and properly scrutinise those matters. I think that it's fair, so we did a piece of work ourselves on whether there were other structures that were open to us, but we looked carefully at the legislative framework with which we operate. The corporate body cannot devolve the responsibility for its scrutiny of office holders. It is a requirement under the legislation that the corporate body is responsible for those matters. We have sought within the time that we meet on our agenda to expand the scope that we have for proper scrutiny of the office holders. At this time, we have been going through a sustained period of having each one of the office holders into the corporate body to explain and justify their budget, but also to talk more generally about the work that we are doing so that we are increasing, if you like, the interest and scrutiny that we are bringing to the task. I do not diminish the reality that, from a corporate body that at one time had to scrutinise two, a corporate body that is now having to scrutinise, is it the eighth, the patient safety commissioner, out of eight, to a corporate body that might then be invited to scrutinise even more, moreover, scrutinise office holders whose own responsibilities, in some instances, are increasing as well, becomes something of a challenge. That is our responsibility from a governance point of view, from the perspective of the actual performance of those office holders. That is a responsibility for parliamentary committees and, in some cases, one or two parliamentary committees have a responsibility for several office holders themselves. I think that accommodating that into their ability to take forward work that they might wish to do to scrutinise legislation and to hold the Government to account is equally a significant challenge. David. Can I just add that, on the staffing side, the pressure remains as well? I mean, we basically have one full-time member of staff who oversees a whole office holder landscape for us. She has the ability to call on other people on an ad hoc basis, but I really do not think that that is sustainable either. I think that as well as the additional office holders that we talked about, there are other sources of increased pressures. For example, the UNCRC bill that the Parliament passed just before the Christmas recess. That gives two of the office holders the ability to raise legal action on behalf of the people that they represent. We are not clear on what course that might add. I talked earlier on about the human rights bill that is coming forward. That will not create a new office holder, but that is likely to significantly increase the remit of the commission there. We also have a member's bill that is looking to make radical changes to the FOI regime. Again, that is bound to bring with it additional costs for the information commissioner. All of those expansions put incredible pressure on the member of staff that we have. I will look to existing budgets to see what can be done there, but it is not against the realms of possibility that might be sitting in front of this committee looking for an increase in the parliamentary capacity in order to continue to oversee the governance of this increasing office holder landscape. If you are allowing me, I would very much like to pay tribute to both Hugh Williams and Janice Creeror, who are the members of staff who are hugely experienced and whose experience we fundamentally rely on as the commissioner landscape grows, because they have done a first class job, I believe, on behalf of the Parliament, liaising with the various commissioners and assisting in informing the corporate body. Thank you for those answers. I am reasonably satisfied with the answers and the detail that you have all given today regarding the commissioners and the office holders. It just feels to me that a further four commissioners added to that workload feels like a gun antenna. I know that we will see much more of that in the inquiry. I made this comment earlier. At my own group, I find that there is a general acceptance of the principle that we have a growing office or landscape, but when it comes to, oh, but, do not stand in the way of the commission and I want to create, there is an individual conflict in those two on that proposition, and I think that that is one of the things that we have to wrestle with. Just very quickly, one of the things that I noticed was that the contingency budget has decreased by 33 per cent. I just wonder if you could explain that, is that a question that we have been in higher in previous years perhaps than it needed to be or just circumstance? It is back to where it has been. We had a higher budget last year, which I seem to remember I might actually have been responsible for advocating because we were in a year where we were uncertain about inflation. It is worth remembering that at the start of, when we presented our budget last year, the forecast of the external bodies was that we would be a negative inflation by April this year, which has proved to be somewhat ambitious. I think that the corporate body was slightly cautious at that point about accepting that, and therefore chose to have a higher contingency just to meet what looked to be a much more volatile position in our view than was necessarily being presented. This year, I think, we felt that it would be wrong simply to maintain that higher level of contingency, so we brought it back to a figure that is more typical with the one that we have had previously. Okay, that is great as well. Thank you. Okay, thanks. I am just going to finish on the issue of cleaning, only because it has been brought by both Joan and Michelle. The cleaning budget will increase by 23.7 per cent, so I am just wondering why, to £804,000, that is not in itself a huge figure, but I am just wondering why it is such a large percentage increase in one year. That is simply because we missed—when setting last year's budget, we missed the contract inflationary increase in the budget. It was just missing, so we have been paying it in the current year. Essentially, what you have got from budget to budget is two years' worth of contractual increases, rather than just the one. That is fine. Thank you for that clarification. I want to thank our witnesses for their evidence today. We will continue with our budget scrutiny, but first we will call a five-minute break until 10.24. Okay, Ross is not back, but I intend just to say that. For the second part of our evidence session on the Scottish budget, 2020-24-25, I would like to welcome to the meeting Shona Robison, Deputy First Minister and Cabinet Secretary for Finance, who is joined by Scottish Government officials, Dr Alison Cumming, director of budget and public spending, Ellen Lever, deputy director of local government and analytical services, and Dr Andrew Scott, director of tax and revenues, Scottish Government. We have just over two hours for this session, and before I open up the discussion, I would like to invite Ms Robison to make a short opening statement. Thank you very much, convener. I would like to begin by thanking the committee for its work in the pre-budget scrutiny phase, and I look forward to working with you on the budget bill. The challenges facing Scotland's public finances are well known to the committee. When we met on 3 October last year, I said that this would be a budget of difficult decisions. The pressures on the 2024-25 Scottish budget cannot be overstated and, in my view, represent the greatest challenge to any Scottish Government since devolution. We are continuing to manage a wide range of pressures due to volatility from global factors such as the Ukraine's resettlement, the impact of inflation, and the cost of living crisis and, of course, the on-going legacy of Covid-19. I will say again that the UK Government's autumn statement delivered the worst-case scenario for Scotland. It contained a fiscal settlement that undermines the viability of public services across the whole of the UK. Our block grant funding for this budget, which is derived from UK Government spending decisions, has fallen by 1.2 per cent in real terms since 2022-23. Our capital spending power is due to contract by 10 per cent in real terms over five years. As I set out in December, we cannot mitigate every cuts that the UK Government makes, and we are at the upper limit of the mitigation that can be provided within our devolved settlement and competence. Although the UK Government has chosen to prioritise tax cuts at the expense of the NHS and other public services, our values and, therefore, our choices are very different. Our emissions and values of equality, opportunity and community were the guiding principles of this budget to protect people as best we can to sustain public services, to support a growing sustainable economy and to address the climate and natural emergencies. At the heart of the budget is our social contract with the people of Scotland whereby those who earn more are asked to contribute a bit more where everyone can access universal services and entitlements and where those who need an extra helping hand will receive targeted additional support. We have chosen to act to do everything in our power to protect Scotland's public services and deliver for the people of Scotland. That includes a £6.3 billion investment in social security and more than £19.5 billion for health and social care, alongside record funding for local authorities and front-line police and fire services. I welcome the opportunity to meet the committee to discuss the 2024-25 Scottish budget in more detail and to assist in the scrutiny process. Okay, thank you very much for that very helpful opening statement. Although again you've said that there's a 10% reduction in capital over the next five years but the Scottish Fiscal Commission has said that it's 20% and in page five of your own of chapter one of your own budget document it says and I quote SFC analysis shows that by 20% to 8% to 29% capital funding is set to fall by 20% in real terms in comparison to 23% to 24%. So do you accept that it's a 20% reduction rather than a 10% reduction? So I'm just let me address that directly. So the analysis from both the SFC and the Scottish Government forecast a significant reduction to our available capital funding over the medium term. The figures cover different time periods and include different assumptions. So the SFC analysis forecasts up to 2829 in comparison to the 2728 for the Scottish Government and the SFC analysis includes assumptions around our capital borrowing policy and financial transactions which are not included in the Scottish Government analysis. So it depends on what you include and essentially that is the difference between the figures and I'm happy to provide more info on that if it would be helpful. If we use using the same assumptions as the Scottish Government the SFC analysis shows an 11% real terms reduction in our capital block grant over six years as opposed to almost 10% over five years and then if you take into account the capital borrowing policy and the FTs that is the difference. So it will depend on future decisions of course which haven't been made around capital borrowing. They are making assumptions of course which may well change when we get to that position. So if the situation is not as bad as we thought then why has the housing budget been cut by a third to £375.8 million in the forthcoming year? The housing budget is very challenging and the capital budget is a large cut whether or not I take your point about the 20 per cent versus 10, 11 per cent but actually that sustained cut in capital budgets is extremely challenging for the housing budget. If you take into account all of the other challenges that are facing with construction inflation all of the other challenges it is a very difficult outlook for housing. Having said that the investment that we will be making in our housing budget we believe will help to lever in private sector investment. The housing minister is working with partners, investors and the private sector to look at how we can lever in additional private investment. If you take the figure on the public capital investment it is about a 13 per cent decrease. One of the main drivers of course has been the reduction in financial transactions. They are down to £176 million. The housing budget has been traditionally the recipient of financial transactions but they have dramatically reduced and we have had to deploy the financial transactions that we have, the £176 million, to the Scottish National Investment Bank in order to maintain its capability. Those decisions are not easy. It would be fair to say one of the most difficult decisions. I would also say that if the capital availability of funding changes it would certainly be the key priority for additional capital availability, should that position change over the coming weeks and months. Assist that housing has a particularly serious reduction. We have to work with what we have in front of us. The Scottish Government's budget is £24.25 on page 53. It shows that the more homes budget is decreased from £740.1 million in 2023 to £564.6375.8 million. That is an almost halving over two years at a time of a housing emergency. At the same time, what we have seen is that the Scottish Government has invested very significantly in other areas with regard to capital. As we know, a 12.4 per cent increase for Police Scotland is 49 per cent, for example, in digital connectivity. I am going to mention one or two other increases in a moment when we move on to other areas. I am just wondering why that choice has been made. What the Scottish Government has said quite rightly is that it is about choices. One of the things that I find weird is that nobody really makes choices other than the Scottish Government. Everyone says that there should be more money for everything, no reductions in anything. I just want to know why the Government has decided that, given that the situation in capital is decreasing, that is a fact of life. In particular, why has housing had this done relative to other areas of the Scottish budget? Partly because of the fall in financial transactions. If you look at Cdell alone, it is a 13 per cent reduction, which is not great, but given the reduction in the capital budget of 10 per cent, that is one of the major challenges. The falling of financial transactions, which have traditionally bolstered the housing budget, has been an additional difficulty. Of course, there are very few areas where you can deploy financial transactions. Housing has traditionally been one. Of course, you cannot use FTs in other areas of capital investment in the same way, so because they have gone off a cliff in many ways, the housing budget has been disproportionately impacted on that. We then had a decision around the Scottish National Investment Bank, which is the other recipient of financial transactions. In order to keep SNP sustained, we have had the difficult decision to deploy the 176 million FTs to SNP. As I say, convener, it would be the area that should we find ourselves in a better position with capital budgets going forward, or if we manage to get a better position through the spring statement, which is the spring budget. Of course, the housing budget would be the number one priority. Some of the other investments that you have referred to have been particular to projects that have been required in policing and the digital connectivity area. We all understand the importance to a number of areas of government of public life investing in that digital capability. Given that the budgets are available to us and are reduced on the resource and capital side, the easy part is finding areas of budget impact. That is the easy bit and the more difficult bit is to put forward a different set of propositions and choices. We have tried to prioritise on the basis of the budgets that are available. We have had to make difficult choices in order to do that, but part of the budget scrutiny process is to hear alternative propositions coming forward. I am not sure that we have heard many alternatives, to be honest. You talked about leaving in private resources to housing. Are we on track to still deliver 110,000 houses that the Scottish Government has pledged? Is private finance keeping up with the demand, filling the gap that has been left by the reduction in public finance? I should say that, for context, we have a good track record of delivering on affordable housing. We have delivered more than 126,000 affordable homes so far. That is 40 per cent more than per head of population in England, 70 per cent more than Wales. There is a context to that that shows a good track record. In terms of the 110,000 by 2032, we have delivered over 14 per cent of that target so far. The figures available to the end of September last year show almost 16,000 affordable homes being delivered towards the 110,000 target. Clearly, there is further to go. Because of the really challenging financial position on capital, not just this year but for the foreseeable future, we have had to really turn our attention to innovative finance solutions. The housing minister will come forward with some further detail on that, but he has been engaged with investors in the private sector where there is clearly an appetite to invest, particularly in the mid-market rent, for example. We need to leave it in more of that in order to help us to deliver that target. Sticking with capital has been some interesting figures bandied around. I am looking at page 62 of the Scottish budget and there are a couple of issues that I want to raise with regard to the level 3 figures in relation to the trunk road network. There was an article in the Sunday Times that said that the collapse of infrastructure spending to appease the greens is a national disgrace. It alleges a 4,000 per cent decrease in spending. I am not sure how you can have a 4,000 per cent decrease. I thought that 100 was the maximum decrease that you could have, so it is a somewhat enumerate article. However, it claims that there is only £12.4 million being invested in a trunk road routes. When I look at the figures on page 62, it says that critical safety maintenance and infrastructure spending is increasing to £524.7 million, which is a 41 per cent increase. I wonder whether you can tell us a wee bit about those figures and why there is a 41 per cent increase over one year in that particular budget. That relates to critical infrastructure. We continue to support Scotland's trunk road network, providing over a billion for critical safety adaptation maintenance and improvement priorities. That will come in waves in terms of where investments are required. If you look at the commitments that are made on the A9 dualling programme, including Tomatyn Tomoi, the A83 at the Rest and Be Thankful, the operation of the MA Woodside Viaduct, there are at the moment a number of projects that require that investment. Will Ebbon flow, depending on what is critical? I recognise a figure of £12.4 million, do you? No. I cannot account for journalists picking up particular figures. I cannot reconcile that with the budget figures themselves. I am not clear where that has come from, to be honest. One thing about the level 3 figures on the road budget, which I found interesting because it is a transparency issue, is that trunk road network PPP payments will rise by 3 per cent to £133.9 million. We know that there are PPP expenditures all over the place, such as the Maloney area for schools in Edinburgh for hospitals. I do not see PPP payments anywhere else in this document unless I have not read it properly. I am just wondering why it is on this page but does not seem to be elsewhere. It is almost as if the Scottish Government in compiling this document had to be done in a rush because of the open statement in the Scottish First Commission forecast and negotiations between parties. I wonder why that figure appears here but does not seem to appear anywhere else in the PPP repayment? That is a fair question. We will certainly reflect on that. If you look at the NHS line, there could well have been a PPP cost associated with that if it was disaggregated, but Alison, I do not know whether there is anything that you could add around why the presentation is different. We are aware that there are long-standing inconsistencies differences in presentation between portfolios that are difficult for us to make a lot of changes to level 3 budget presentation from one year to the next in a way that maintains that line of sight. It is certainly something that it would be legitimate for us to consider ahead of the next spending review as to whether we have the balance right in terms of the presentation of what constitutes a level 3. You just have to look down these tables to see that the values vary very significantly and it will always be a question of judgment, but that is certainly something that we would be happy to work with the committee on whether we have the right level of disaggregation at level 3 and level 4 and what changes to that disaggregation would enhance Parliament's scrutiny of the budget. Transparency is fundamental. We cannot be comparing apples with pears. We need to be able to have confidence in what we are looking at when we are making comparisons. One of the issues that a number of people gave evidence to the committee, particularly in their pre-budget report, was the need to grow the tax base. It has to be said that it is fair to say that there is a level of disappointment with regard to some of the decisions that have been made. I am going to ask about some of those decisions. For example, in wellbeing, economy and fair work, there is a 15 per cent reduction to £348.7 million in the enterprise trade investment budget. You have already touched on the Scottish National Investment Bank, but its budget is down 28 per cent now. At a time when we need to grow the tax base, improve productivity and create the economic growth, we need to provide the tax revenues to pay for so much else. Why are those decisions being made to reduce, for example, the enterprise budgets? Again, those are difficult decisions that, with falling budgets, difficult decisions will have to be made. To be blunt, we have had to prioritise front-line services, particularly investment in the NHS. That has made some very difficult decisions elsewhere. What I would say is that it is also against a backdrop of average earnings in Scotland now growing faster than in the UK. We have seen record income tax receipts with Scottish income tax alone, which is now forecast to raise about £18.8 billion in 24-25 to help fund services. There are a number of indicators that show on productivity that the Scottish economy is improving in its performance. On where we are supporting investment specifically, it will not surprise you that we are looking at our investment in net zero particularly. We are working with business investors to launch a new green industrial strategy. We have tried to ensure that when it comes to our enterprise agencies that they will be focused on the key priorities, they will not be able to do everything and they will need to do fewer things but to prioritise where they deliver their support services. In an ideal world with budgets not reducing, we would not have had to make any of those decisions, but we have. The prioritisation for all of our public bodies will mean that they will not be able to do the range of things that we have previously asked them to do, but they will have to focus on key priorities. If you look at the figures on page 88 for enterprise, which includes Highlands and Islands, innovation industry, South of Scotland, it is £348.7 million, which is about 0.6 per cent of the entire Scottish budget. However, the reason that I am quite confused about the prioritisation that has been involved is that if we look at some of the other figures that the Scottish Government has brought in, we will see that student support has increased from 925.1 to 1,484.6 million, which is a 60.4 per cent increase in a single-year in student support. That can be right, surely, but if you look at page 72, it is sitting there in the level 3 figures, so that increase in student support alone is almost twice what the entire enterprise budget is to try to help grow the economy. That also includes the UK-funded AME, which is student debt, which is something that we do not have control over. That would be included in the figure, Alison. There is a significant increase in the UK-funded AME, which is based in the main on actuarial valuations on the student loan book and changes in assumptions year on year. We tend to see quite significant variability, which is why that spends classed as AME. We are not allowed to use that budget for other purposes, so that was the increase from 420.8 million to 804.1 million in the bottom row of table A5.06. It is not us putting additional money into student support, albeit that would in itself be a bad thing to do. It is because of that AME. When you are putting together those budgets, it looks as if that is a decision made by the Scottish Government. I mean, I look at UK and AME, but there are all those other figures on top of that. It looks as if that is almost a figure that you have to play with. Should that not be separated out from the Scottish budget to give a much more rational and reasonable view of the budget so that you can do appropriate comparisons? I think that that is not an unreasonable suggestion that if we were able to give some kind of explanation as to why that is not part of the purchasing power, if you like, of the budget given to higher education student support, but is it really an accounting issue, perhaps a kind of note to try and explain that it may not be a bad idea going forward? I think that we want to look at those figures three-dimensionally or two-dimensionally wherever possible. I will go back to choices. You talked about preserving and protecting the NHS. The resources are up 4.3 per cent, the police are up 5.6 per cent, and the support for ferry services is up 23.3 per cent. There are a number of areas where they have went up, but why did you decide what those percentages were? Why did you decide, for example, 4.3 per cent for NHS but 5.6 per cent for policing? What was the decision in terms of that? Some of it will relate to particular areas of delivery that are required at a particular time. I will turn to Alison for the detail, but I think that part of that will be police pensions and the requirement for us to support police pensions, which are reflected in the budget for police. Again, some of that will relate to particular cycles of requirement of investment and the police budget is reflective of that. I do not know if you want to say any more. As the Deputy First Minister has said, there are matters of judgment for ministers and for cabinet recognising that public services are often starting at a very different place in terms of their reform journey and the pressures that are facing them in the years ahead. There has been that increase in the resource budget for the Scottish Police Authority to support their front-line service delivery, recognising that policing has made a number of reductions in recent years. We have seen that reduction in police officer numbers, for example, through previous budgets. That was about allowing a positive budget decision to support the sustainability of policing in Scotland and to allow investment in new technologies such as body-worn video cameras that will bring further reform and efficiency opportunities in the future. The UK autumn statement heightened the trade-offs between some of those decisions as to exactly what percentage uplift that different services have received. It is clear that there will be reform challenges across all public services, but we do not apply a single formula to the number that should be applied to all public services. It is through considering the evidence and the analysis and the evidence that comes through from the sectors to the pre-budget scrutiny all comes to bear when the final decisions are being taken on those allocative choices. One of the things that we discussed with Tom Arthur when he came to the autumn revisions was we looked at budget moving in-year. He talked about reductions from the forestry and land Scotland budget. We also talked about creative Scotland having reductions in their budget in year. Of course, it turned out that, in actual fact, they were not really getting reductions in year in terms of their spending power because creative Scotland had £17 million reserves. I am not sure how much the forestry and land Scotland had, but they were able to find £6 million reserves in of course. I asked Mr Arthur at the time whether the Scottish Government would look to see how much money all those bodies have caught in reserve across the piece because if that is two bodies and there is like 131 or something, there must be hundreds of millions of pounds stashed in all those organisations. Has that work begun? Is there any likelihood that additional resources will be found? Local authorities in the Scottish Government itself do not have huge amounts of cash reserves. We want to look at authorities might, but most of them are down to the bare bones on that. The Scottish Government does not have much of a reserve. Is it appropriate that all those bodies up to, for example, three months, equivalent to three months of its revenue, kept in reserve while at the same time front-line services have been squeezed? I think that it is a good point. I think that we cannot ignore reserves when we are looking at the financial position of an organisation. For example, for example, the point of very significant reserves was taken into account when it came to looking at their budget settlement. Money is money. If organisations are sitting on large reserves, then that should be seen as part of the public purse. I guess that we would be sympathetic to an organisation that has built up reserves for a purpose. If an organisation is going to be taking forward a considerable period and piece of work of reform and they are going to use reserves for that purpose or they have an investment plan that is going to spike and they have reserves that are going to be part of their investment plan for that particular period of time, all those things will be taken into consideration when it comes to whether they should be required to use reserves. I guess that you could consider the point of, if you look at the need to deploy reserves in times of budgetary constraint, then this is a time where reserves need to be brought in to the picture. The short answer is yes, they are. Those individual discussions with public bodies around their size and shape, their function, their investment plans and the level of their reserve will be part of that discussion. One of the issues that come to the fore in evidence and in submissions is the impact of the income tax changes. For example, the Scottish Retail Consortium said that the tax changes that have a marginal rate of 69.5 per cent, which I understand from Dresdenbell last week, is the highest marginal rate in Europe for people who will be paying the new 75,000-pound rate of tax. It said that it is potentially more expensive and challenging for employers in Scotland to attract and retain the specialist senior talent that they need. The Scottish Fiscal Commission has said that it expects about £144 million on paper to be collected from that £75,000 to £125,140 band, but of that £144 million it expects about £70 million, nearly half, to be lost by a two-behavioural change. In the rate above £125,140, it says that only £8 million will be collected in reality out of the £56 million because of behavioural change. A couple of things. Is there more focus on raising the best-paid people in our society than on broadening the tax base? What is the impact on what messages it is sending to people outside Scotland about coming to Scotland and Scotland being a place in which to live, work and invest? Those decisions are carefully considered. I would point out that the new advanced rate is estimated to impact only the highest, earning 5 per cent of taxpayers. Nevertheless, it is a decision that was not taken lightly. We have, of course, looked very carefully at the assessment from the Scottish Fiscal Commission on any behavioural change, and that has factored in to the net gain benefit from those tax changes. The estimate of £82 million will be raised from that advanced rate change, which is not insignificant. We also have the analysis that is being worked on by HMRC that will be made publicly available later this year. That builds on the evaluation of the 2018-19 income tax reforms, which found very limited evidence of Scottish tax fairs lowering their declared income, for example, in response to increasing tax rates. It is important to note that we still see net migration of working-age people from the rest of the UK to Scotland in a net gain position that is averaged about 7,000 per year. That adds significantly to Scotland's workforce and is important in terms of growing the economy, but we absolutely should not be complacent about those matters, and we keep them very much under review. Taken as a whole, the tax changes that we have made over a period of time compared to the rest of the UK SFC now estimate are worth about £1.5 billion, so a significant contribution to public services. You started off talking about marginal rate, which again we have to be very cognisant of. In terms of the top rate, the marginal rate of earnings between 100,000 and 125,140 is mainly due to the personal allowance taper rate, which of course is entirely reserved, and the marginal rate of taxpayers in the rest of the UK is also significant. We are not complacent, and we do not take those decisions lightly, but in the most challenging of budgetary circumstances, if we had not made that decision, that would have meant even less money available for public services at a time of constraint. The Scottish tax system is clearly progressive, but when you add it on top, you layer it on top with the UK system, with all the anomalies there, for example, which you have touched on, for example, national insurance going down from 10 to 2 per cent, the impact of child benefits, etc. There are also people who, in the first 14,800, are taking away as well, and that tax-free element is also taking away. It almost seems that the Scottish Government is saying that this is a progressive system and that we are not going to take into account the UK system at all, because it seems that it is just added on top, but it does not say that people in Scotland earning X should pay Y in tax, and there are going to be any attempts to try to smooth that out. For example, someone at the moment who earns £44,000 a year will pay a marginal tax rate of 52 per cent when you add up Scotland with a higher rate in national insurance, but if they earn £54,000, they will have a marginal rate of 44 per cent. I guess that this is part of the challenge of having a hybrid system in the incomplete devolution of tax powers. You are going to have anomalies that exist. I think that Fraser Valander had said that addressing the specific point that you have made would require significant changes to the basic and intermediate rates. The process around this, let alone the impact, is going to be brought into very sharp focus if there are further tax changes made at the spring budget, for example, at a very advanced point in our budget process that inevitably impacts on the tax and spend decisions of this place. To say that it is not an ideal system is probably the understatement of the year, but it is far from ideal. Amongst all that complexity, we have tried to try to carve out a more progressive system, but there are areas in which it rubs up against the UK system in a way that is not ideal. There is no getting away from that. Lots of areas still to cover, but I know that colleagues will want to dip their toes into those, so I am going to open up the session. First, we will be micled before by Michelle. There are some reports, Deputy First Minister, at the weekend about the funding that was allocated to the Clyde Gateway regeneration project, which appears to have been a typographical error in the budget. Is there any more errors in the budget that you would like to bring to committees and Parliament's attention at the moment, or is that an isolated one? There are always some errors that occur. It is regrettable. The discussions have taken place with Clyde Gateway over the Christmas new year period to make sure that it understands the budgetary position. I think that there is the volume of information and changes that inevitably are made can sometimes lead to errors like that. There is no widespread error. That is one that has been picked up. We are not aware of any other. We have also had evidence from the Scottish Fiscal Commission on the lack of a public pay policy provided to them under the protocol to which the Government and the SFC are signatories. You and I have exchanged letters on that issue. Perhaps you set out to committee why the Government failed, despite the extension to deadlines that was set out in evidence that we have received, that you did not provide that public pay policy to the SFC? That is not dissimilar to what happened in the last budget when pay policy was set out in the march of last year. The budget is because of the difficulty in being able to predict the outlook in the light of the spring budget that is coming. That could potentially make some significant changes to our fiscal outlook. It is important to understand what that will look like as part of the issue of pay metrics. To do so now with that level of uncertainty would not be the right thing to do. That is why the timeframes are what they are. I accept that we would want in an ideal world to align that with the budget. Given all the difficulties in forecasts, that is proven to be very difficult. We will set out our plans for public sector pay following the spring budget, which will provide an update on the fiscal outlook and, most importantly, on the UK Government's public spending policy, which could impact on our budgets. Given that pay is such a large part of our budget, as I set out my letter to you, it is prudent to do that. Those are key figures for the SFC to be able to put in place the forecasts upon which your budget is based. It was pretty clear from the fiscal commission's evidence to us that they want to see that policy. It is in the protocol that you have laid out. Are you saying that the Government has two years in a row now that the Government has not provided that information to the fiscal commission? Do you not intend to provide it in the future? Is that a decision that you just made the last? The protocol sets out the information sharing that is expected to take place in the lead-up to the budget. We have provided the SFC with the latest position on public sector pay costs for 2020-23 and 2023-24. We commented on the pay-award assumptions being made for future years. On the metrics, it would be prudent, given that we have the unusual position of a spring-budget coming that could potentially have a major impact on the spending available, even though our assumptions are made on the autumn budget. We have a spring-budget coming that could potentially change significantly. That is pretty unusual. A UK budget would change the amount of money that we would have? I think that the extent potentially of the changes in the spring budget, given that it is an election year and some of the noises being made through the media of what could happen vis-à-vis income tax changes that have a profound impact on our budget, is an unusual set of circumstances of some of the extent of some of the changes that might be made in the spring budget? On education and universities, there is press coverage this morning regarding the cut made to 28.5 million pounds to universities and your stated aim, I think, that the universities let me quote, additional savings to be made in the HE sector, including from reducing first-year university places. How many university places for Scottish students are you looking for universities to cut? First of all, let me say that the investment in HE and FE is £2 billion, which is still a substantial investment. The media discussion has centered around the position of 1,200 places, so if you go back to the origins of this, essentially during Covid, due to the assessment processes put in place for assessing hires at the time of Covid, if you remember, they became a different process of continual assessment, and therefore there was a big spike in those who were gaining university entrance. We used some of the Covid monies to fund those additional 1,200 places for universities in order to address that spike. We have maintained those places for two years without the Covid funding available, so that Covid funding ended from the UK Government and we have managed to keep those places going for two years, but the position is not a sustainable one, so that spike in places due to Covid is going to have to return to the pre-Covid levels of university places. That would account for between £4 million and £5 million of the £28.5 million, so that roughly 1,200 to 1,300 students, as that bubble in the student placements, runs through the system. Using the same metrics, I would reckon that that is about 3,800 student places in the £28.5 million. Is that what you are asking universities to cut? That is not a number that I am familiar with. There is not a number as such, because the Scottish funding council is still to have those discussions with the university sector around the places that will be available. The point that I am making is that the 1,200 has been the figure that has been referred to, and I am explaining to you why that bubble is there and the legacy of it. Going forward in terms of the number of places that will be settled is a discussion that the funding council is having with the universities in order to land in a place that is affordable and sustainable. That comes at the same time as there has been a collapse in the West African market. Nigerian students, in particular, are not coming to the UK. It is a difficult challenge in time for all universities in Scotland as a result of that, so a double hit to the budget. In your equality statement in the budget, you said that there is a significant risk to learners from poorer backgrounds as a result of the measure that you have taken. Do you want to explain what that significant risk is? First of all, on the international students, that is a risk because of the UK Government's counting of those students in terms of trying to get the numbers down of people coming to the UK. I do not think that that is the right thing to do. I think that it is going to put pressure on our university sector. In terms of the position of students from a more deprived background, actually, we have seen increasing numbers of students from more deprived backgrounds being able to access university places. That is something that we want to see continuing and we want to see that trend continuing and that attainment gap and the opportunity gap continuing to be addressed. That is something that we will continue to pursue as a very clear policy objective. That is in your own equality statement published with the budget. You said that you have said under your name that there is a significant risk to learners from poorer backgrounds as a result of the measure that you have taken. What is that significant risk, as you understand it? It is in recognition that, if there are less places for university students, that could pose a risk to those from less well-off backgrounds, which is why, through things such as access opportunities to university and the non-traditional routes that support students from less well-off backgrounds, it is important that we maintain those supports in order to make sure that that does not happen. Risks identified do not necessarily come to fruition because of the policies that we will take. It is really because non-research intensive universities are more reliant on the teaching grant than research intensive universities. Modern universities are more reliant on the money that you are cutting, but you cannot tell us today how that money, how that cut is going to be distributed across those universities. Well, no, because the Scottish funding household has not completed their discussions with the sector. I take the point that those universities that are more reliant on the teaching grant are, in particular, smaller universities, in a different financial position to some of the larger universities that are sitting with large reserves that we were talking about earlier on. I know that they are in a different position. That will be taken into account in terms of those discussions going forward. As I said to the convener earlier on, the easy bit is to point to areas of the budget where, with falling resources, challenges are there. The more difficult bit is to put forward the proposition of what other, what different decisions would be made. Can you tell the committee what the budget for FE will be for their education? Essentially, the SFC will be discussing with the sector again. I think that what is fair to say is that the funds available to colleges at the start of 24-25 are expected to be very similar to the funds invested by colleges in the 23-24 financial year. A number of in-year savings were taken in demand-led areas of spend that were lower than had been anticipated. We anticipate that the allocations will be very similar to the core funding that colleges received and are investing in 23-24. The careful management of demand-led spend, including a continuation of savings delivered this financial year, is what the college sector is already working on and delivering. That is what the SFC would support them to do. I will give you a quote from a very senior member of the college sector that I spoke to this week. I think that we have had four or five different figures—flat cash, 8.4 per cent reduction, 4.7 per cent reduction and 1.5 per cent reduction. We have even been told by some Scottish Government officials that it is slightly up on this year to honestly pick a number, any number. That is the level of confusion in the college sector—a sector that, frankly, is getting applications now for next year. When will they know what their budget is for the coming year? As I said, the funds available to colleges are expected to be very similar to the funds invested by colleges in the 23-24 financial year. It is about making sure that looking at the in-year savings that were made because of demand-led budgets is factored into what colleges will actually require to spend. Those discussions will continue with SFC to make sure that the college sector has the resources that it requires to be able to deliver what we would particularly on the demand-led expenditure that is required. I do not know Alison Hill, if you have anything to add. I would add to you, First Minister, that this is the normal process that is undertaken between the Scottish Funding Council and institutions, colleges and universities around how the budgets are deployed and how that comes through into numbers. Obviously, the position with colleges and some of the evidence that you received last week has referred to some of the in-year budgetary changes. That would be the reason for the different numbers that you were quoting there, which would be around against the opening budget position for 23-24, as opposed to taking account of changes that were made in year to the funding, which, as the Deputy First Minister has already set out, was in large part driven by changes in demand-led programmes in the overall envelope, but also decisions that were taken. I do not, from an overall budgetary perspective, as we see it. The normal process is being followed, and while we may be four weeks onwards, there has been a Christmas period in that that the education sector would take as well, so we know that those discussions are progressing in the normal way. It has not been described to me as the normal or the usual position, I have to say, Dr Cummings. It has been described in a quote here as a shambles that there is far less information available to the college sector this year than there has been in previous years at this point. You will understand that budgets are set and courses are advertised and people apply for what they do, and those applications are coming in. Colleges do not know whether they can run the courses because they do not know what their budget is. Other things are said to me by college leaders that the current situation is so destroying that we are staring into the abyss. No direction, no leadership, no clarity, no empathy, no solutions and no clue. Dr Cummings, what would you say to college leaders that are telling MSPs that that is the situation that they find themselves in? As I have set out, the financial position across the board is really challenging and the easy thing is to point to where it is challenging, but the harder thing is to come up with solutions. Every part of the public sector is impacted here. When will they know what their budget is? There is no difference to the process that is being deployed here and the process with the Scottish Funding Council with the college sector will continue. The position will be clarified as quickly as possible. The final position will take into account some of the demand-led expenditure to make sure that the landing position of colleges is what is required in order to make sure that they can deliver the services that they are required to deliver. However, there is no part of the public sector here that is not going to be impacted in terms of the quantum, but the process is no different this year than it has been in other years. It is challenging in terms of the quantum except, but the process is no different. I would not accept any of that. It is challenging for every part of the public sector. The easy bit is to find examples of that, the harder bit is to come up with alternatives. Everybody around this table is able to do that. All of those areas—regeneration funding, university funding, college funding, vital issues about skills and regeneration—are vital for growth. We have talked a lot of evidence in the committee about how important it is that we get growth. You have said that that budget is about growth. How would you react to the comments that we have had from the Fraser Vallander committee on 9 January? I would not say that the budget is particularly focused on growth. David Bell on the same day said that it does not look like the budget particularly favours economic growth. It is meant to be one of the key missions. Those are a variety of examples that are by your own qualification, by your own target and what you are intending to do. You are not meeting them and people do not believe that you are meeting them. First of all, growth is a priority. Earlier on, I set out some of the economic indicators in the Scottish economy that show an improving position. The investments that we are making, particularly in net zero and green energy, are strategic investments that are the right investments that are encouraged by the investor panel to make strategic investments. However, there is no getting away from the fact that, with less money, both on the resource side and particularly on the capital side, we are making the same investments that we would have wanted to have made with less money. We cannot do that because there is less money. We have had to make some very difficult decisions around where we make those investments. For our enterprise agencies, for example, we need them to focus on the priorities. There will be things that they are not able to do, but they need to focus on key priorities. Our capital investment is geared to try to use public capital in a way that is strategic and that will also leave us in private sector investment. All of those will be critical to continuing to see the improvements in economic performance that I laid out earlier in the committee session. I come back to the point that, with less money, we have had to make difficult decisions. That has impacted on areas where we would rather have not had to make those decisions, but there is no escaping that decisions had to be made somewhere in the budget. Those are the decisions and priorities that we have made. Just to put something on the record in last week's Education, Children and Young People's Committee, Minister Graham Day pointed out that the starting point for colleges next year will be slightly better, and I am quoting only slightly better I stress than the finishing point for this year. My first kind of rapid fire question is picking up on a point that you made there. Did the Opposition parties put forward budget proposals this year for what they would like to see cut in the nature of the very difficult budget that we have set out? I want to pick up on a theme that the convener opened around housing. We have seen really quite difficult and challenging operating environment. Obviously, we have seen the issue with Stuart Millen but also merchant homes partnership have gone into liquidation. Harbour homes are stopping development of the folder of housing. Springfield have already stopped development of affordable housing and build-to-rent, and they are now selling some of its land bank. In the main, they are all citing very challenging trading conditions with inflation, a higher cost space, buyer uncertainty and so on. However, the challenge then of what extent now are given that you are confident of the commitment to build 110,000 affordable homes by 2032 in the light of that. How confident are you about that now and do you fully anticipate that that will need to slip being realistic? First of all, you are right to identify some of the very big challenges on the construction sector more widely and the housing construction sector more specifically. All that has led to some of the difficult decisions of particular companies that you mentioned earlier on. That is the backdrop. We then have what we can do in terms of the investment that we are making and the £556 million investment that we will make. How do we make that deliver the biggest impact? I mentioned earlier on the housing minister's discussions with the private sector about how we can potentially lever in more investment into mid-market rent opportunities. There is an appetite there within the investment sector to invest in housing and we need to harness that in a way that can provide a business model to do so. The housing minister is working on that in terms of the target. It is fair to say that the profiling of the target will need to change. It is never a straight road on a target anyway. There are always bumps and peaks and troughs of delivery. It is fair to say that we would be looking at back-end peaks while we have a very difficult outlook at the moment with capital. That might change, but at the moment that is the outlook on our capital budget reduction. We have to look at alternatives. We cannot rely on public capital. It makes the delivery of the target very challenging indeed. Having said that, we are already over 14 per cent into the delivery of that specific target, but there is still a long way to go. I have noted what you have said about leaving in additional private investment. That is the money coming, but we have to have the companies who are actually effectively trading. I take it from what you are describing. Those are long-term investments, most likely pension companies. I would suggest that there is probably a high demand and that it will take a long time to get those kind of things structured. The other area that has been noted with concern is the rent freeze. That is why some companies, such as Springfield Properties, have moved away at the present time from a bill to rent. A bill to rent is realistically the only way that we can get to the scale of the bill that we need or one of the critical ways. I think that business is accepting of rent caps, but it is rent freezes that make for a perception of a less benign operating environment than elsewhere. I would ask how the juggling recognising that dynamic for businesses to actually come back into the market, particularly around a bill to rent against what I fully understand has been protecting people through some very difficult times, but it is, in a function itself, a chronic issue with supply. That is why rents were going up, because it is a cyclical problem. Does the cabinet secretary recognise that rent freezes have given a perception and certainly introduced a cooling in people wanting to proceed with the likes of bill to rent? Given the current climate, it is a little bit more challenging to disaggregate what the factors are. Some of them have stated that that is a factor. The very clear two companies that I have mentioned today have made that clear. If you look, I will come back to Springfield in a second. The likes of Stuart Milne did very little in affordable housing. It was not the main area of focus. Springfield accepts that that is one of the bigger areas of focus, but it has also got all the other pressures that have been very challenging for them. We have to keep a careful eye on any of our Government policies and monitor and evaluate any impact that they have. Clearly, the protection of tenants' rights and trying to keep rents affordable were, in order to try to ensure that some of the huge challenges around cost of living were not impacting on tenants' ability to afford their rent. The reasons were well set out, but we have to monitor and be very careful around any unintended consequences. That is something that we are listening to the sector over and we are keeping a very close eye on. Carrying on, one of the other areas of interest that you may have already been brought to your attention was the use of the money of Scotland to fund day-to-day revenue expenditure. Professor Bell made a comment of that. He said that the Scotland money can be thought of as equivalent to a sovereign wealth fund, and a sovereign wealth fund should be used to support future generations because it is a sort of one-off payment. I wondered what thinking the Scottish Government had given to the use and that breaching, if you like, of the sovereign wealth fund principle. I know that we have often commented that the arbitrary waste would appear of money from the UK Government of the benefit of oil for future generations. I would appreciate hearing more about your thinking that it made you consider, despite that, to still spend it on day-to-day revenue. I take your point. In an ideal world, with the ability to not have to plug gaps in day-to-day spend, I can see the appeal of building a sovereign wealth fund with Scotland. The Scottish Government raised £756 million through the Scotland auction, and that is not an unsubstantial amount of money. However, in order to sustain public services, we had no option but to use all the tools at our disposal, including deploying funding available for Scotland revenues. Had our budgets been in a different position, perhaps different decisions could have been made. However, the resource spending review allocates £310 million for use in £23.24 million and £350 million to be used in £24.25 million. There are some requirements to bring forward some of that funding into £23.24 million because of the budgetary position. Some of the difficult decisions that we would have had to have made beyond the ones that we have would have been even more profound. It shows the limitations perhaps of devolved fiscal powers that we are having to utilise those resources in that way. We do absolutely recognise the importance of offshore wind, which is why the budget itself kick-starts the commitment up to £500 million to anchor a new offshore wind supply chain in Scotland. We recognise that there is a potential longevity of benefit from those investments, but because of the position of public finances we have had very little option other than to utilise it. The outlook for public sector finances is not going to get any better. We have got that guaranteed from the Conservatives, and we certainly move further offerings from the Labour Party should the Government change. Would the cabinet secretary consider in future years setting fiscal rules around that money to protect it? I am pretty confident that that had various UK Governments being challenged over not building any kind of fund with the oil money would have cited public sector pressures in exactly the same way. Will the cabinet secretary consider developing and sticking to fiscal rules otherwise we are embedding ourselves into a financially dependent situation rather than the opposite? If you look at what Norway has managed to do, I ask whether the cabinet secretary will consider that. Of course we will continue to consider the difficulty. If I was sitting here in this evidence session and I had £350 million unallocated in whatever fund you want to call it, I can imagine that there would be calls for that money to be deployed in order to avoid some of the difficult decisions, understandably. Because of the constraints and the lack of fiscal levers, it essentially means that, because of the tightness of the fiscal position that we are having to draw on that, if that position changes going forward and we are able to build a reserve and a fund that could help to build a capacity for future years for infrastructure investment or particular projects, of course that would be the preference. I cannot guarantee that, given the outlook that you have described yourself, whether it is the on-going fiscal priorities of the current UK Government or it looks like similar spending plans of an alternative Government being stuck to, it does not bode well for the Scottish budget being anything other than ffiscally tight for some time to come. In principle, I do not disagree. I wanted to move on and talk a little about public sector reform. I have seen the phases that have been set out at the moment, but I am aware that the committee did not get a financial strategy to accompany that, which was a commitment that was made by the former Deputy First Minister in March 2023. Is the intention to, at an appropriate point, once these early scoping phases are out of the way to provide an updated financial strategy? If so, what sort of timescales are we working to? Yes, that would be the intention. The problem at the moment is that the level of uncertainty is very challenging in being able to set out the position that is then not going to potentially be buffeted and changed by ffiscal events that are forthcoming. I think that the MTFS in May will be an opportunity to be able to look at that longer term. I have provided just before Christmas an updated report on some of the reform programme, which is an absolutely critical part of the financial outlook. Even setting aside the fiscal decisions made in the autumn statement, the outlook is likely to remain challenging for all the reasons that I set out in the previous MTFS. So, being able to give you regular updates of the work that is on-going to get to a more sustainable position would be my intention on a six-monthly basis of giving you updates, particularly focused on the reforms that we are taking forward in order to get to a more sustainable position in terms of public sector size and function? On that, I note that you have stated that you require all the Scottish Government portfolios to set out savings reform plans. If I were cynical, which of course I am, I would suggest that turkeys do not tend to vote for Christmas, so whilst asking them to consider really tightening up reform or even suggesting that perhaps they do not need to exist. I think that it is 129 bodies rather than 131, convener. It seems optimistic, because the problem is that when you create a body, it takes on a life of its own that develops a vested interest. That is a question that I asked a former Deputy First Minister, because this is just my experience that turkeys do not vote for Christmas. They may suggest some tinkering type reforms, but they will be unwilling—for very obvious reasons—to make the scope and scale reforms that are needed to bring forward some savings. I appreciate your thoughts on that, and that is my last question. I do not think that your cynicism is totally misplaced, and every organisation takes on a life of its own. First of all, in terms of the growth of public bodies, we have been very clear that the controls and assumptions and presumptions need to change, so there should be a presumption against forming a new body as a solution to a problem. Cabinet will now require to give its approval to any suggestion or proposal for a new public body. In the past, it has become the default of whether it is a new piece of legislation or a new function. It has to have a new public body, which, of course, does not necessarily, given that there are already existing public bodies that could potentially take on the functions. The question is, what do we do with the landscape that exists? There are a number of aspects to that. One is some rapid work around controls over the size and function of those existing public bodies. Without a doubt, the workforce controls that we are putting in place are going to impact on all public bodies. They may not impact to the same extent on each public body, but they will impact because some public bodies are in a different position than others in terms of their growth of role and function as opposed to others. There are then areas that are de minimis of what you would expect public bodies to be doing, so looking at shared services, for example, is a must. Does every public body need its own HR payroll? That is one of the reasons why investment in digital is important, because some of the investment in digital capability can provide potentially a one door for all the kind of reliant support functions for public bodies, rather than them having their own systems, which brings a huge benefit in terms of cost and sustainability. That investment by Scottish Government in providing a digital system to support payroll and HR. It has many other additional benefits for the avoidance of using up more time. I will not go into any detail, but I am happy to maintain a dialogue with the committee about the detail of that going forward. The more challenging question is beyond just government. A lot of the public bodies and roles that have emerged, commissioners and so on, is also in the parliamentary space. I think that we have to perhaps take a step back and ask ourselves a question with a population size. Is that the right landscape that is required going forward as part of the sustainability and public sector efficiency that we need to be quite rigorous about? After my questions, I will have to pop next door for about five minutes to substitute in health committee and then come back in. I apologise if I finish my questions and then just get up and leave. I will follow on from Michelle Thomson's question on public sector reform and on the disposal of public sector assets and touching on some of the discussion in last week's debate around the state. You mentioned shared services between different public bodies, but I wonder how much co-ordination there is when it comes to reducing the size of the public sector state. I think in particular of Glasgow city centre. I realise that most of the Scottish Government's office space there is rented rather than owned, but there is a lot of owned property in the public sector there. The city council has an objective to significantly increase the city centre population. Glasgow city centre does not particularly need more office space. Is there an active discussion on going in an instance like that with the city council around what is currently office space and what is the potential to have this converted into housing to meet the city council's objectives? I am not asking very specifically about that, but as an example of co-ordination across the public sector, sharing services is one thing, but when we are looking at things like reducing the size of the public sector state, is that level of co-ordination on-going or is it a siloed approach where the Government simply needs to get this property out of its portfolio, if anybody is willing to buy it? Some of it will be about Scottish Government making decisions about the requirements for its state and some of that will be more rapid because decisions need to be made around extension of leases and so on and so forth. Without a doubt, there is a sharp focus now on looking at the need for buildings and the light of people working in different ways, in the light of needing to meet net zero criteria. What are the buildings that are going to be required over the next five to ten years and beyond? There is then a further opportunity of where are the opportunities for co-location and where are the opportunities for repurposing. Those discussions are taking place, particularly in our city environments, and I think that the local authorities have a key role in that, given their asset base as well and their requirements to meet the same net zero targets and the changes to working patterns. I think that there is a prize here that can save money but can also provide a more appropriate and efficient set of buildings and assets that can deliver a better service, a better environment for the staff working in them but also a better service to the public. I look at the spending side. There is, I believe, a total cross-party agreement that we should wherever possible focus on outcome-based budgeting rather than focus on input, but that is pretty hard when ultimately your primary obligation here is to produce a balanced budget and then, within the confines of that, try to do things like outcome-based budgeting. However, taking that approach, there is a billion pound more going into the social security budget, which is a significant increase in cash terms and as a percentage of that overall budget. What are the outcomes of that in terms of meeting our statutory commitments around child poverty reduction, for example? Does that billion pounds of additional spending just prevent poverty and inequality from getting worse in the light of the cost of living crisis? Or is that going to take us further forward on the objectives that both are in statute in terms of child poverty target but also some of the objectives in the Government's broader missions, particularly around equality? I think that it is always the way with budgets that the focus, whether it is of committee sessions or plenary sessions, is always going to be on the areas of the budget where it is more constrained and it is more challenging rather than the areas that are seeing additional investment. Social security additional investment is absolutely focused on reducing poverty and supporting those who are most vulnerable. 6.3 billion investment is now one of the areas of the Scottish Government that has become one of the key pillars of spend. It will undoubtedly help to support those who are most vulnerable. We have been able to give an inflation uplift to the supports, which has led to an increase in Scottish child payment, which is going to be welcomed by many families, particularly at these difficult times. I would see this very much as an investment in people and I think that it is one of the areas that has been a conscious decision and political choice. Can I press you a wee bit on that? I agree with you absolutely that operating social security payments in line with inflation would be widely welcome, particularly by those in receipt of them who really need them. Operating in line with inflation is not going to lift anybody out of poverty, it is just going to obviously prevent them from falling further into it. I am not saying that clearly that is not a bad thing in and of itself. What I am trying to understand though is that for a billion pounds of additional spending, which I am clearly welcome, is that taking us any further forward? Are we reducing poverty and inequality as a result or is a billion pounds simply what we need to spend to mitigate the decisions of the UK Government and the context of the cost of living crisis? Partly it is mitigation but, of course, our investment in social security has always gone beyond for a number of years now the block grant adjustments. That additional investment is investment beyond the consequentials that flow to social security, which I would argue show an additional investment in reducing poverty. You can see through the investment in whether it is Scottish child payment or the additional investment in adult disability payment, for example, the importance of trying to support people who are the most vulnerable in our society. It is a bit of both, partly mitigation. If you look at the wider spend, whether it is on discretionary housing payments, whether it is on Scottish welfare fund, some of that is clearly mitigating UK Government welfare policies without which people would not be able to sustain their tenancies or they would not be able to manage in a cost of living crisis. We have also taken decisions, for example, to re-establish the independent living fund, which is again going to help to support people living independently in their own home, hopefully avoid people losing their independence and will help to support people in work, for example, who are maintaining employment of people who have disabilities. It is a balance. If I could take a similar line of questioning around spending on climate net zero, but looking specifically at the offshore wind supply chain money, you mentioned that it is 69 million or thereabouts. Quite recently, towards the end of last year, we had a very positive report from the Fraser of Allander Institute on 50 per cent job growth in the sector in just one year. I think it is somewhere between 12,000 and 17,000 additional jobs. I cannot remember the exact number. What are you expecting to be the benefit of that 69 million? Has there been any attempt to quantify that in terms of expected jobs created, return to the public purse in terms of tax revenue, etc.? How can we measure the value for money of that 69 million? I can forward that on to the committee. I do not have that in front of me, but there has been an analysis of the impact of the 500 million investment of 69 million as the first trunch of that. I am very explicitly recommended by the investor panel. The one key investment that the Scottish Government can make is in that sector that will have a return that is substantial for the Scottish economy. We talked earlier on about constrained capital resources, and you have got to be pretty strategic about where you can invest, given that there is less money to invest. That is an area that we have identified as important. The Fraser of Allander figures that you referred to show that Scotland is seen as a good place to invest because of that certainty of objective, of very clear, no ifs, no buts. That is an area of the economy that will continue to see investment, and that speaks to international investors who are looking to make choices about where they invest. I can see that just in the number of planning applications in my region, various elements of the renewable energy economy. If I could jump to the text for a moment and behaviour change following up on some of the convener's questions, I would be interested to understand a little bit better how much in-house analysis the Government does of potential behaviour change versus the work that the SFC does for the Government. For example, some of the concerns that have been raised around avoidance of the new income tax rate around people simply putting more money into their pension pot, for example. Does the Government conduct any analysis, even within the public sector, of how many of the higher-paid public servants have increased pension contributions, given that we are now five years into income tax divergence? It would just be good to get an understanding of how much of this analysis takes place in-house within Government versus SFC work. Where it is SFC work, are there questions that you specifically pose to the SFC, points of data that you would like to have? Part of it is the work of the SFC, which, of course, is important. They put that through their analysis before giving us the figures for any tax take, as it is already based on the potential for behaviour change, and that is important. However, it is not just the SFC, so the work that HMRC is doing is going to be important in that external analysis. They are looking at two separate pieces of analysis. The first one is a dataset covering the incomes and location of UK taxpayers over a 12-year period up to 2021-22. That would look at historic trends of intra-UK migration of taxpayers at different income levels and whether there have been any obvious factors impacting trends. The second one expands on their 2021 empirical study on taxable income elasticity by considering responses in labour market participation and intra-UK migration to the 2018-19 income tax reform. Both pieces will make an important contribution to the debate. The law will always be an element of uncertainty about the impact that past policy changes have had. We have not had any evidence presented to us of substantial behavioural change, but that is why this work is important to make sure that we are able to have that independent analysis. We still see, as I mentioned earlier, that net in migration of taxpayers to Scotland from elsewhere in the UK is positive. What we need is a bit more drilling down whether there is any differential in terms of what level of earnings people have. We will keep that very much under review and we look forward to HMRC publishing. As you said, it is independent analysis whether it is HMRC or SFC, but does the Scottish Government ever pose questions to them? Do you ever know that HMRC is about to undertake ex-exercise? Does the Government ever say that we would particularly value having why point of data is that it is something that you are going to collect and analyse? Both of the studies that the DFM referred to were initiated by the Scottish Government in consultation with others. They are overseen by HMRC, the OBR, the SFC, the Welsh Assembly Government and the Fraser of Allender Institute. It is a collective that is ensuring technical rigor, but the work was paid for by the Scottish Government. That is useful. Thanks for our agenda. Deputy First Minister, you said in your budget speech on 19 December that you have reiterated again that this was a budget for growth. When it comes to growth in terms of improving skills and addressing economic activity, which your predecessor John Swinney had said at one time was one of the biggest challenges, why have you made substantial cuts to every area of the budget that would help improving skills and economic activity? You have cut the Scottish funding council budget, you have cut the employability budget, you have cut the enterprise budget, you have cut the SNIB budget and you have increased tax on those whose high-level skills we desperately need in Scotland. Leading people like Sandy Begby to say, and I quote, it is likely to inhibit the ability of our sector to create jobs and retain and attract the talent we need. Very similar comments from Tracy Black of the CBI, Sarah Theam from Prosper, David Ovens from Archangel Group, Alexandra Docherty and Johnston Carmichael, David Lonsdale. They are all saying the same things that this budget will not do anything to improve the situation with skills. David Bell told us last week that it is not really a budget as far as opportunity is concerned. He is right, cabinet secretary, isn't he? I think that this budget in very, very difficult circumstances is trying to invest in as many areas as possible to deliver on the Government's objectives. However, there is less money to be invested, so if we were to have increased all of the areas that you have referred to, that would have meant reductions in budgets elsewhere. When you have to make choices to deliver a balanced budget, those choices are not easy, but, in consultation with Neil Gray and other ministers, what we will do is to make sure that, for example, our enterprise agencies are focused on the key things that absolutely matter, that the skills review that Wither's has delivered challenge to us, or that it is to make sure that our skills delivery landscape, which has a huge multibillion investment, delivers better impact for the economy, that our apprenticeships, for example, and Graham Day has taken forward some very important work to make sure that our apprenticeship system and what it delivers and through to our college offerings as well is more aligned to what businesses actually say they need in terms of the skills gap that they have within their sectors. Taken, of course, with some of the strategic investments that we are making in green energy and renewables, we have tried to align a declining amount of resources, particularly on the capital side, to the best impact that we can. Those decisions are not easy, and, if you are asking me, I would have preferred not to have had to make them. Of course, that would be my conclusion as well, but in the light of falling budgets, we have had to be clear and are being clear with our agencies of what the focus needs to be on delivery. The response from the business community is very damming. In fact, it is excoriating in some of its comments. The particular focus is on skills and trying to address the economic inactivity issue. I cannot understand why, if that is seen as the major priority for the Government, you would seek to put pressure on colleges who do so much work to try not just to ensure that students have the right skills but they are actually involved in retraining, which is just as important in terms of the employment in the economy. Cutting things like employability and enterprise are absolutely critical, surely, to the success of the economy. What I find difficult to understand is that Neil Gray has been very upfront by saying that there is a new deal between the Scottish Government and business, and that there will be no surprises when it comes to that new deal. That is not the view of the business community, is it? First of all, the issue of employability. Since 2018, the devolved employability services have reached over 100,000 people. They continue to do some very important work. There is a move towards a system that is trying to make it easier for users to navigate and focus and more focused. Local employability partnerships are being given responsibility to deliver services in their areas that meet the needs of their users and local labour markets, so that is where the focus of employability services will be. However, there is no doubt that, whether it is the in-year savings this year or last year, where employability funding was reduced, that has been an unfortunate consequence of the pressure on Scottish Government budgets. Had we made decisions elsewhere and not in employability, I am sure that those issues would be being raised with me today in terms of the position of business. On NDR, for example, I know that businesses that are in those sectors would have preferred the Scottish Government to have passed on the NDR business tax cuts. Had we done that, there would have been substantially less funding for the NHS and public services. Those ultimately come down to choices that we have had to make that have been difficult, but I could not in all conscience cut business taxes at the expense of investment in the NHS. When you are sitting with the choices in front of us of having to balance a budget and having to make those decisions around business tax cuts or NHS funding, then I have been really clear that there was only ever going to be one answer to that question and it had to be prioritising the investment in the NHS over business tax cuts at this time anyway. Would one of the choices then have been to scrap the national care service situation that money could be deployed elsewhere? The national care service is going to be an important reform that will lead to more consistency and improvement in the quality of care services. Having worked in the sector for many years, I can tell Liz Smith and others that that consistency and the requirement for consistent quality is something that users of services will tell you is a priority. Users of services are very keen that we may progress with the national care service. The building blocks and infrastructure for the national care service are being put in place. We are working with local government to make the progress that needs to be made. It is going to take longer to establish, but it is a very important reform that in the longer term will deliver huge benefits for those who receive care services. The investment in the team that is supporting the delivery of this is a fraction of the cost of the delivery of social care. If we were not investing in a team to deliver it, questions would be asked around whether we were putting in place the building blocks that were necessary to make sure that the national care service is going to be delivered. That is what we are doing in order to make sure that there is a successful delivery of the NCS. Those are questions that are already being asked by nursing unions, by local government, by many people on the front line, but no doubt we will come to that as we go to stage 1. Can I go back to seek some clarity, please, about the education situation? Again, when it comes to improving skills and addressing the economic inactivity, the education budget is crucial. Mr Marr asked you—he quoted, I think, I'm correct in saying that your budget says that additional savings are to be made in the higher education sector, including from reducing first-year university places. He asked you how many would be removed, and he offered the view that that, using the Government's own statistics, might be 3,700. Can you just clarify that that is the number that is likely to be the decision from the Government and Scottish Funding Council? No, there is no number or figure that I am aware of that relates to that figure. Is there any number at all? The only number that I am aware of is the one that I spoke about earlier on, which is the 1,200 Covid places, which are the bubble that we have sustained funding for an additional two years out of Scottish Government resources. Covid money was stopped by the UK Government that funded those places initially. Scottish Government kept those places going with Scottish Government funding for two years, but we are no longer going to be able to sustain that. Beyond that, there is no figure that has been agreed with the university sector because those discussions are on-going around what will the university sector deliver, so those discussions are not concluded. Just for clarity, have you asked the Scottish Funding Council to go back to the number of places that existed pre-Covid? Is that what you are trying to tell us? The 1,200 is the Covid and pre-Covid number. The 1,200 places can no longer be sustained. We have sustained them for two years in order to try to prevent them ending earlier than that. If we would essentially follow the UK Government Covid funding, then it would have ended two years ago because that funding ended. What I am saying to you is that we kept those extra places going for another two years, but we are not going to be able to sustain that going forward. There will be a reduction in the number of Scottish domiciled places in first year? The 1,200 will return that bubble back to the pre-bubble position. Can I ask what you expect to happen when it comes to universities offering places to foreign students? Will that increase? The position with international students is constrained by the UK Government's position on the decisions that it has made that make it more difficult for international students to come to university in the UK, particularly around the ability to bring in families. I think that that is a very short-sighted policy from the UK Government. I think that the universities are pretty clear that it will impact on the numbers of international students to the UK, not just to Scotland but elsewhere in the islands. I think that that is unfortunate and not a policy that is helpful to the university sector going forward. However, it is your understanding that, with a reduction in the number of places for domiciled Scots that will happen, there will be pressure for universities to take more foreign students as a result of that financial pressure. Is that correct? The modelling of the balance between domestic students and international students is something that they continue to develop and will continue to develop. The 1200 places that I described in terms of pre-Covid and Covid will not be a surprise to the university because those places were never going to be sustained in the long term. I think that the university should be more than aware of that. As I said, we have kept it going with Scottish Government resources beyond the time of that money being removed by the UK Government. That will return the numbers to to that pre-Covid level. The universities should have been anticipating that that would be the case going forward. The Scottish Government has always made the case that Scottish domiciled students are extremely important in university education, which I would agree with. One of the reasons that are so important is because their likelihood of staying in Scotland to work beyond when they graduate is exceptionally important. We desperately need well-qualified graduates to stay in Scotland. Is the policies that you are enacting just now not undermining our ability to keep many of our best qualified student graduates in Scotland? It is very important that we try to encourage those who come to study here or Scottish domiciled and those who come to study here to remain living and working in Scotland. We try to encourage that. If you are talking about the 1200 places specifically, had that money continued to be invested, as we called for at the time, that the Covid money should not go off a cliff, we may have been able to make different decisions, but that was never going to be a position that was going to be able to be sustained going forward, because it was a mechanism that was deployed to take account of that spike in university applicants that was due to that Covid period. It was a short-term intervention, which we have actually delivered for two years beyond which the Covid money is covered. The position with Scottish domiciled students in support is that we want to see the universities continue to provide and deliver opportunities for Scottish domiciled students, but we cannot continue to fund the Covid 1200 bubble that was funded previously. The resources are simply not there to do so. Has this made the Scottish Government think about reforming the funding process in higher education? We always keep the position under review. If you are talking about tuition fees, the importance of having free tuition is not having a barrier to those entering into higher education. We talked earlier on about those from a more deprived background going to university, that the gap has closed. There are more students from more deprived communities going to university. That is partly due to the fact that we have free tuition and people are not going to be taking on those levels of debt seen elsewhere in those islands. If you are asking me, are we reviewing the position of free tuition, then no, that is not something that we are reviewing. I was not asking about that. I was just asking about whether you are going to review the whole process of higher education funding, because I think that this budget has clarified some of the difficulties that we are facing in the future. I will finish with another point of clarification. We have had various discussions about how the Government models behavioural change when it comes to tax, which is an issue that is bothering so many people in the business community. We have discussed statistics that have come from the Fraser Valander Institute and also SPICE. The convener gave you some statistics at the beginning. The economists are saying that for incomes over the £125,000, the behavioural change might be as little as £8 million. For those incomes between £75,000 and £125,000, it would probably be about £74 million. Are those the numbers that the Scottish Government's own analysis arrived at? We base our figures on the Scottish Fiscal Commission's analysis that take into account behavioural change. We recognise that it is something that we require to have more evidence around, which is why I earlier on talked about the work that the HMRC is doing. I would say that the evidence in front of us is that there is not any widespread concern about behavioural impact. We still see net immigration, but the reason that the HMRC work is important is to be able to drill further into that in terms of whether we can establish within various income bans, whether there is any change or behavioural change that the HMRC research is going to show. That is right. Next year, when the budget is presented, it will have the benefit of the two new studies that have been completed now. That will be the point at which the Fiscal Commission reviews its judgments about the extent of behavioural change that is likely. It might take the studies and decide to increase the adjustments that it makes for behaviours, or it might leave them alone. It takes a wide range of international evidence as it forms a view, but always we have tended to follow its judgments about the extent of behavioural change and putting forward our estimates. Thank you, convener. Thank you very much, John, to be followed by Jamie. Thanks, convener. If I can maybe start just picking up one or two points that have been touched on already. I mean concerning the housing budget and the numbers of affordable houses to be built, and you said or it has been suggested that there might be more private investment coming in, would that include giving lower grants? Obviously, the Government money is housing association grant mainly. Are you thinking of reducing the level of grants so that there is more borrowing? The work that the HMRC is taking forward is looking at what the business model might be for leaving in additional investment. It might look a bit different from the traditional delivery that housing associations will continue to deliver. Of course, they raise private investment as well to deliver on their targets. I think that what we are looking at here is whether or not there is in addition to that scope to leaving in additional investment that we can underpin with the Scottish Government investment that we can help to leave it into particular delivery models, such as the mid-market rent market. The housing minister has been working on that for some time. Once that work has come to a conclusion, he will be able to set out in more detail what that might look like. It seems to me that the key difference is how much is grant and how much is other investment. That can be called private investment and so on, but it is really a loan or whether it came for a pension fund or a bank. In a sense, that does not matter because you have got to have interest and so on and that has got to be covered by the rent. I am just seeking some reassurance that there will not be a big change between the grant and borrowing. The models that are being used by the housing associations and local authorities in terms of their delivery models do not foresee much change in terms of how their business model works. What we are talking about here is in addition to that how we might be able to leave it in private investment by looking at a business model that is attractive enough and has a guaranteed revenue stream that de-risks to some extent, but we will be able to add value to the delivery of our social housing delivery partners in terms of what they will be delivering. That is what is being looked at at the moment. Michael Marr mentioned the pay policy. I just wanted to press you a little bit on the figures. The Scottish Fiscal Commission has assumed 4.5 per cent. We have already had the SPCB this morning and they are looking at a 6.7 per cent increase. Can you give us any indication of what kind of increases we are talking about for pay? I cannot give you a figure because those are the metrics that are being looked at at the moment. Trying to do that without knowing what the spring budget is going to bring is very difficult because of the potential impact that that might have on our spending assumptions. Given that pay is the large part of the spending assumptions, it is material to what can be delivered. We also need to take inflation into account. The prediction of inflation is that it will get at or below 3 per cent. We would take cognisant of those factors. I think that it is not a disputed fact that we have, through the very high inflation and cost of living pressures, supported pay deals to a larger extent than anywhere else in the islands in terms of trying to settle and avoid costly industrial action, which has come at cost to the budget in year compared to the published budget last year and the year before. It has been a substantial £900 million beyond what was budgeted for. It is a huge cost. In the year of constrained finance, getting the pay metrics right is going to be critical to the affordability of our budget. Inflation could end up higher than we were hoping if, for example, all the shipping has to go around South Africa instead of going through the Suez canal. All those external factors are concerning about where inflation ends up. We can only make the assumptions that are based on the best estimates that are made by the key organisations that are projecting where inflation will land, but it is not guaranteed and it is material to where pay ends up landing in terms of the pay metrics. Can you tell us what the aim of the council tax freeze is? Is it to help people in most poverty? There is obviously a bit of debate over the £144 million, if that is enough, but whether it is enough or not, it depletes the public purse as a whole, does it not? The council tax freeze was designed, I guess, as a lever to try and help household budgets that continue to be under pressure. It is an attempt to try to do that. I said at the outset that it was important to try to deliver a balanced budget that recognised the needs of households, the needs of public services and the needs of businesses. We have the lowest poundage in the UK again for the six-year running, so I would contend that, in difficult circumstances, we have delivered a budget that is balanced and is intent very different from the UK Government budget, which is almost exclusively in favour of tax cuts at the expense of public services. The council tax freeze is one lever where we can help to support household budgets. The figure is based on a 5 per cent increase, so looking at what the projected increases were and taking an average, it lands us in that space. It is not far off the Fraser of Allander institute analysis once you have taken out of their analysis the multiplier effect, which was about £188 million of their analysis, which we are not pursuing in the light of lack of support for it among local government, apart from anything else. Once you take that out of the figure, the figure left by Fraser of Allander Institute is not far off the £144 million, I think it was at £148 million. I am continuing to discuss with COSLA what the process will be in order for local government to access that £144 million, and we will continue to do that over the next few weeks. I can just press you a little bit. Other people have argued that it would have been better to use the money for the Scottish child payment to boost it further, because that would really have targeted the poorest people. I would not be right in saying that the poorest people are not really paying council tax. A lot of ordinary people have had a 5, 6, 7 per cent increase in their pension, in their wages, and they are paying that kind of increase for most things, albeit more for energy. I just did a constituent yesterday who came to my surgery and said, I am happy to pay a bit more council tax. First of all, the intention would be that the council tax freeze is a one-year intervention, so it would be difficult to make comparisons of funding something that would be an on-going cost to increase the Scottish child payment, which, given that it is increasing in line with inflation to £26.70. Of course, when you think back to where Scottish child payment started, it is considerably higher than it was and has estimated that it has a substantial impact on child poverty and reducing child poverty levels by five percentage points. Our investment in Scottish child payment is there for all to see. On the point about the impact of the council tax, those on lower incomes pay a larger percentage of their income on council tax, so you could argue that the benefit will be felt most keenly by those on lower to medium incomes because it is a higher proportion of their income, which is one of the reasons that a multiplier was mooted in the first place because of that differential in the proportion of people's income that they pay in the higher council tax bands. It has probably a larger impact on those on lower to medium incomes. On a different point, I have recently joined the social justice and social security committee, so they are delighted at the increase in spending on social security. Five billion up to six billion is quite a jump compared to other parts of the budget. Do you have any concern that this is getting a little bit out of control? We need to be cognisant of sustainability and it is an area that has seen continued growth from the inception of Social Security Scotland and the move of benefits and supports from the DWP and the development of new supports here in Scotland. It is a growing part of the budget and £1 billion of investment to £6.3 billion is substantial. It is a right investment for the right reasons, but we need to make sure that, as part of the fiscal sustainability going forward, the investment in social security is also sustainable. It is something that we are very aware of. I set out at the MTFS last year that looking at the financial sustainability that the growing share in investment in social security Scotland was a considerable element of that, so it is something that we are very cognisant of. I have a fair bit of interaction with the hospitality sector recently, and they have been going on and on about how they wanted the kind of relief that was given in England. Now, I think that England made a mistake in making it across the board, because it seems to me that some hospitality businesses are doing incredibly well. I agree with your principles that I understand of targeting some of the NDR relief at a specific sector, and you have chosen the islands. Can you just say something about why the islands and if there are any other sectors that you think need it as well? I think that it is fair to say that, had money been available in a way that did not lead to absolutely hard choices between NDR relief for funding the health service, I would have wanted to have done more for hospitality, given that there are in post-Covid environment challenges for the sector. I am not unsympathetic to that, but, as I laid out earlier on, those are stark choices that have to be made. When you put into context the out of the 310 million of consequentials for 2425, 260 million were for business tax cuts, and 10.8 was for the NHS, we could not possibly have followed through with those spending priorities, because I would be sitting here being asked about the funding for the NHS quite rightly. We looked at what we could do, and, of course, the freezing of the lowest poundage for the six-year running is not unsubstantial, the small business bonus goes further than anywhere else in the islands, so the reliefs are targeted. We are in recognition of the particular challenges that hospitality in our island communities have suffered. Some of the transport interruptions, I think, are in recognition of some of that. I think that it will give us some good evidence of what difference supports do make to the hospitality sector, because I am aware that, even with some of the reliefs that have been provided down south, we are still seeing quite a challenging environment for the hospitality sector. It is quite a mix. Some businesses are doing well, others are not so well. There will be various reasons for that. We have committed to continuing discussions with the hospitality sector about whether there is something that should resources allow that we could do that is more focused on supporting hospitality outside of the reliefs structure that exists at the moment, and we will continue to look at that. I am very sympathetic to doing more in the future should resources become available. Thank you. A different subject. Back to capital expenditure. Some of those are quite small amounts in the scheme of things, but just over the last couple of days there has been concern raised. One was SPT. You said that SPT of considerable reserves had a quick look at their accounts. I think that they have only got £12 million on what they call non-earmarked reserves, so it is not a huge amount for an organisation with a turnover of £74 million. However, there were suggestions raised that, for example, East Kilbride station might have to be delayed if they do not get SPT and do not have funding to put in. Another example, which affects my areas, is Clyde Gateway, where I think that they are losing their core capital funding of £5 million, which again could put a project at Shelfield in jeopardy. Do you think that those projects can still go ahead? I would anticipate that they can. The time frame of delivery of them might need to reflect the very challenging financial environment and the capital budget challenges, but we will continue to work with SPT and Clyde Gateway to look at how the profiling of the delivery of those projects remains important, and we want to work with them to look at how they can continue to deliver on those commitments. There have been a number of suggestions about the national outcomes and how they have informed the budget and the national performance framework, so can you clarify whether they have taken to the starting point for the budget or whether they have come in at the end? The tax advisory group, was it part of forming the budget? On the last point, the tax advisory group is more about the long-term position of our tax policies in terms of the strategic nature of them and the longer-term plan for our tax position in Scotland in looking beyond year-to-year budget horizons. It was never intended to be an input to each individual budget. Apart from anything else, the divergence of views around the table at the tax advisory group would probably not land in a space of collective agreement. That is why we have those divergent views for that rigor and challenge about the strategic position of tax policy going forward. In terms of the performance framework, it remains really important for priorities and for delivery on those priorities. I can overlay that with First Minister's key missions of honing down on what is really important and how can we focus and prioritise, given that we have less to go around? How can we prioritise and focus on the things that matter and how we constructed the budget, had that as a starting point? First Minister, can I draw members' attention to my registered interest as a partner in the farming business? As Ileons and Ileons MSP, if somebody lives in a rural community, I am going to focus my first few questions on that area. Agricultural support has been cut by £33 million. A similar amount has been cut from the forestry budget, £7 million lost from the marine budget, land reform funding by £3.5 million. It is around about £80 million in total from the rural affairs land reform and islands budget. That is a bad budget for rural Scotland. When you were considering the budget, what concerns did you have over the impact of those cuts on rural areas? Again, in a tough financial environment, we have had to look at the priorities given within the Raleigh budget. We will continue to provide farmers, crofters and land managers with the most generous package of direct support in the UK worth over £600 million in 2024-25. We will continue to support people farming and crofting in our most remote and fragile areas through £65 million for the less favoured area scheme in 2024-25. We are the only country in the UK providing that vital support, and we have committed to delivering a new round of agri-environment investment as part of the overall £30 million budget. I would contend that, in a tough financial round, we have prioritised what we are able to invest in. We have also prioritised things such as people in restoration investing £26.9 million to help to achieve the targets. We have worked with Scottish Forestry to utilise some of their reserves but to ensure that that is done in partnership with them and to ensure that they continue to deliver on their tree planting targets. It is tough budgets, but we have tried to prioritise what the priorities are in the sector. I am not sure that Scotland's farmers and crofters will feel very prioritised by a £33 million budget cut, but one of the issues that has come up and came up at last week's meeting was the lack of clarity of how decisions have made and perhaps a lack of consistency, too. I mentioned forestry and you and talked about tree planting there. The forestry budget went up £10 million for this year. It was then cut by over £30 million for next year. What is the rationale behind that? The forestry budget will look at the resources that it had, so the reserves that I mentioned earlier on, and looking at the targets that it has and how it can continue to deliver on those. However, those are difficult decisions that have had to be made. If those decisions had not been made, then the reductions in budget would need to be made elsewhere. We are going to work with whether it is forestry Scotland or any other organisation to make sure that it can deliver on the core ambitions that it has set out and that work continues. Would you accept that, for stakeholders, for those who apply for grants, for those who, obviously, forestry is vitally important, it is quite difficult to have confidence that this is a consistent and considered response where there is investment one year and then swinging cuts the following year? If you look at the funding for woodland creation, for example, which has been prioritised, then it will facilitate around 9,000 hectares of new planting and will contribute to climate change targets and net zero delivery. Scottish Forestry has a good track record of approving more new woodland applications, which is a record that they have done. The work that they will be able to do will be focused on some of the key areas of delivery. They will not be able to do everything, and it is the same with any public organisation. We expect them to prioritise the investments that they have to make. I come back to the point that I have made throughout this session. If we have less money to go around, we have had to be clear with organisations about the priorities. We cannot expect them to deliver everything if they do not have the resources to do that, so prioritisation is critical. That is what we would expect Scottish Forestry to do, along with all the other organisations that are helping to deliver in rural Scotland. I will look at two other organisations that are vitally important to rural Scotland. We have touched upon economic growth earlier. Highlands Islands Enterprise's budget has continued to fall cut by another £8 million next year. The South of Scotland Enterprise Agency will lose £7 million. You said earlier that Enterprise Agencies will be focused on key things that matter. What will those things be? What have they been doing over the past few years that have not been key things that matter? The key things that matter will be prioritised along with their partners and the Scottish Government in terms of delivery, of supporting business, of investment, of making sure that they align with the key priorities for delivery. We have recognised that sometimes we ask our Enterprise Agencies to do 101 things. We cannot ask them to do 101 things if resources are constrained. As ministers, we need to be clear about what are the key things of delivery in terms of their core functions to avoid duplication of things that perhaps other organisations are doing and to ensure that they are focused on the key interventions that their organisation can bring to the table working with others that will help to ensure that there is investment in the key sectors for growth, whether that is in Highlands and Islands or in South of Scotland, that they support business start-up and expansion in the key sectors that they are focused on. However, sometimes, as ministers, we can be guilty of asking them to do a myriad of things, and that is where we need to be really clear that the priorities that we set for our Enterprise Agencies or, indeed, any other public organisation takes account of the resources that are available at their disposal. Will you accept that you are asking them to do less and probably fewer businesses will be helped? We are asking them to focus on the key things that will make a difference, and perhaps some of the other things that we have traditionally asked them to do will need to happen in slower time. Those will be garnered in the letters that will issue to each Enterprise Agency around the key things that will be asked to deliver over 24-25, and some of the things that are not going to be key priorities will have to either not happen or happen in slower time. Economy committee, when we did an inquiry into business support, which obviously included the Enterprise bodies and business gateway, I would be interested to know what the things that they have been that have not been priorities. Just for clarification, can I touch on business gateway, because it is not mentioned in the budget at all, previously it was mentioned, although funding has been cut? Is there any government support going into business gateway for next year? I would also make the point around whether it is Enterprise Agencies or, indeed, business gateway, that when you ask businesses themselves what makes a difference and how our Enterprise Agencies can best assist, they are not always aligned to the same priorities. I think that there is a discussion to be had around what is the evidence to tell us of what has the biggest impact. In times of constrained resource, it is really important that we prioritise. In terms of the business gateway, we will have to come back to you on that, if that is okay. We will write to the committee specifically with business gateway. Just a couple of other quick areas, I wanted to have a look at. We have talked about the council tax freeze, and you said that it is looking at an average of around about 5 per cent. I take it except then that there will be winners and losers in terms of the councils, because councils like Courtney Islands Council, where I am from, are looking at a 10 per cent increase, and they will be substantially underfunded, given that if you are looking at a 5 per cent figure. There will be winners and losers. It would not have been viable to have a funding arrangement for the council tax freeze that was based on what each individual local authority said that it was going to put their council tax up. I do not think that COSLA, or indeed the 32 leaders of local authorities, would have agreed with one authority getting 10 per cent, another authority getting 3 per cent, depending on the projection. I think that there would have probably been an outcry, to be honest, if that had been the proposition. There was always going to have to be an averaging of where does that land in terms of the quantum. The quantum, as I said earlier, is not out of line with Fraser Valander's analysis. I recognise that there are some particular issues with Take Orkney, for example. I am well aware, through my discussions, with the leader of Orkney Council that there are some structural issues around their funding through SINA. In actual fact, there are some distributional issues for rural authorities more generally, but Orkney has some particular issues that we need to look to see how we can support that going forward. That will be something that you will be looking at. I understand what you are saying that COSLA would not necessarily be supported of different, differentiate deals, but each council has different circumstances. They have to deliver their public services as rural and island communities have particular challenges. I know that COSLA are looking at some work around the distributional, but may I, Ellen and I said, around the distribution of resources. It is very difficult, and I can remember the decades of COSLA trying to agree within itself distributional changes, because trying to get 32 leaders with their own particular interests from their own council's position to agree to a position that perhaps does not benefit them is incredibly difficult. However, COSLA's operation of course, in terms of its distribution, is by agreement. It makes it very difficult to make change. You are obviously introducing the council. You have made this commitment to the council tax freeze. Is there a responsibility for you to make it work? The issues for Orkney go well beyond the council tax freeze. It is one example of their difficulty, but the issues go well beyond that. They are involved with SENA and how the distribution more generally works or does not work for individual local authorities. We continue to discuss with Orkney how we can help to resolve some of that in the short, medium and longer term. Ellen, I do not know whether you want to come in on that specifically. On the distribution formula in relation to the local government settlement, so separate to the council tax freeze, as the Deputy First Minister has said, there is a clear mechanism and joint work that happens between the Scottish Government and local government through COSLA to keep the distribution formula under review. However, any changes to that formula require the agreement of COSLA primarily. There is a set governance procedure in place there. As the Deputy First Minister has said, there is a piece of work that COSLA has asked the improvement service and others to lean in on in relation to the islands and the particular needs of the islands as they are represented in the distribution formula. That would be at the earliest for the next budget, that that piece of work would conclude. However, there are other matters on which we have on-going discussion with individual councils as well as with COSLA as a whole in relation to distribution. However, that would be a separate matter to the council tax freeze. Just one very quick one more thing. The convener highlighted earlier and you have mentioned about reserves. Do you know how much money is held by public bodies in reserve across Scotland? Yes. I do not have that at the top of my head, but we have that information. Not all organisations are public bodies. Universities are not public bodies, so I do not have insight into what each of them has in terms of reserves. However, in terms of public bodies, yes, and local government, we know the level of reserves, which has increased. You are taking public bodies, taking universities and local councils out of it and looking at those that you have more direct control over. What are we talking about, tens, hundreds of millions? I can certainly write to the committee with that. There will be such huge differences between the level of reserves. Of course, the creative Scotland reserves have been pretty well discussed in the public domain. There will be others that have perhaps had less scrutiny around the reserves. The point that I would make is that we should not necessarily see it as a negative. It might be very pertinent to investment plans and the reforms that are going to be undertaken, but we cannot ignore it either. It has to be part of the picture of how we get through to a more sustainable position with some of the reforms that need to be made and how reserves are utilised in the short medium term. I can say that we are expecting details of that in the next week or so. It has been a bit of a marathon session. I want to thank colleagues and particularly our Deputy Deputy First Minister for your input. I will ask two or three quick questions. One is when we can expect the updated infrastructure investment plan. We will give an update on the capital delivery of the existing infrastructure at the end of January, and then the infrastructure investment plan will be in this spring. Once we know what the spring budget is delivering, which could end up impacting positively or negatively on capital, it is important to see what that looks like before we bring forward the IIP revisions. The committee recommended that the Scottish Government produce a full response to the Scottish Fiscal Commission's fiscal sustainability report, setting out the actions that it will take to start addressing the longer-term challenges ahead. We have not yet received that. When can we expect that? I would say that, after the spring budget, I am happy to furnish the committee with that longer-term plan. MTFS, in May, is going to be a key point that I wish I could set out in the light of what we do at that point. The point that you are looking at goes a bit beyond that into the longer-term. I know that that is something that the committee is taking an interest in, so I will try to furnish the committee with as much info at the earliest opportunity. Finally, with regard to non-domestic rates, £685 million of reliefs are in this budget. I certainly appreciate, as do island hospitality businesses, £110,000 limit, which has been set on rates. That has been extremely helpful at non-OP rates up to 110,000 a year. However, I am just wondering whether the Scottish Government has given the kind of disgust that we have had earlier on, if the Scottish Government has done any work looking at the economic impact of reliefs positive relative to the sector. For example, a lot of people lobbying is on that particular issue, so I want to know not necessarily now, but whether or not the Scottish Government is looking to see how effective those reliefs are in terms of the sustainability of businesses and the growth of businesses and the overall economic impact. Yeah, and that information and evidence will be important for the interventions that we are making. Obviously, reliefs are changed over time, so some cease and then new ones are introduced, and gathering an evidence base around the impact of each is important and that work is on-going. I am happy to keep the committee appraised of information that we get back in the analysis of that. Thank you very much. I realise how exhausting it must be to have to answer questions for two and a half hours. I am now going to call a break for one minute, and then we will have two minutes in a private work session only, because I realise we are well over time.