 Felly, wrth gyrdiiddio i gyd, ddwynton ar gyfaint o ddenwladau ar fynd i gyfaint o'r ddwelluniau a ddweud yn y cyfaint cyfaint. Rwyf yn ymgyrchu'r Plynedd Gaelian Macci ac yn gydag i'r ddweud yn gydag i gydag i ddweud i gyffaint icinwyr i'r gaelian. A mae'r ddweud i gyd, Gaelian, o beth credu i gaeliaethu ddweud. Rhyo gyd yn ddweud hynny, rydym ni'n godio'r cyffaint? Rhaid faeth hynny ydy, dymr summerfawr yn y gwasanaeth hefyd o'r session with the Minister for Community Wealth and Public Finance on the Budget Scotland Act 2023, amendment regulations 2024 draft. Mr Rath has joined today by Scottish Government officials, Scott Mackay, head of finance co-ordination and Craig Maidment, senior finance manager. I welcome our witnesses to the meeting and invite the minister to make a short opening statement. Thank you, convener. Good morning to the committee. As the committee will be aware, we continue to face challenging economic circumstances. Continued inflationary pressures, particularly around public sector pay, have put real pressure on the Scottish budget over the course of the financial year. Despite some improvement in the overall funding position since the autumn budget revision, managing the impact of pay deals within the overall position has been challenging. Reprioritisation of budgets has been necessary due to continued inflationary pressures, including on public sector pay, and to support priority areas such as the on-going funding for Ukrainian displaced people. In her letter to the committee in November, ahead of the UK autumn fiscal event, the Deputy First Minister set out the tough choices that the Scottish Government has been required to make to ensure that we can achieve a balanced budget. The String budget revision shows the outcome of those tough choices being actioned. The String budget revision provides the final opportunity to formally amend the Scottish budget for 2023-24 and contains the usual four categories of changes. The net funding changes increase the budget by £546.8 million. Those changes include providing £750.8 million to health to support services, fund pay rises and support as it continues to recover from the Covid-19 pandemic, £134 million to police and fire pensions, £51.8 million net to social security benefit expenditure and £41.2 million to the Ukrainian resettlement. To help fund these priority areas, it has been necessary to reprioritise budgets in the manner that the Deputy First Minister outlined. The technical, whitehall and internal transfers are presented in the document in the usual way. There are some extremely large technical adjustments that are included in the String budget revision. These include a £3.1 billion decrease in the AME budget requirement for NHS and teachers pensions and a £735 million increase in the non-cash budget cover required for student loans. I know from our previous discussions at the committee that the changes do not impact the Scottish Government's discretionary spending power. Those adjustments reflect latest estimates and are used to set the final budgets that the outturn is reported against in the annual accounts. Those are required to limit material differences being reported against the budget totals in the accounts and try to avoid the confusion around underspends that has emerged in previous discussions in Parliament. The supporting document to the String budget revision and the finance update prepared by my officials provide further background on the net changes, as well as updates on information requested by the committee. In that, convener, I will be put. I thank you very much. In time of fashion, we will go through some of the changes to try and get further information and elaboration on how decisions have been made and what the impact will be. The first one is probably to start off with the NHS recovery health and social care portfolio. The additional funding includes £514 million of resource and £235 million of capital. Will you be a bit coy about what that will be spent on? I wonder if you can give us a bit more information. As I touched on in my opening remarks, there is no part of the public sector that has been immune to the significant pressures that we have seen arising from inflation, the general cost of living crisis conditions that have been impacting every aspect of society. The additional funding for health is there to support the in-year position that is, of course, within this financial year. It is to support our health services in addressing those pressures in-year. For example, that includes elements around public sector pay, as was touched on in my earlier remarks. Indeed, there are £235 million of capital interest in me, because, as we know, there has been a two-year moratorium in terms of new capital projects in the NHS. Of course, there is still money being spent in terms of care maintenance, but I am just wondering that £235 million represents a share of the capital allocated to the NHS. What is it being invested in? In terms of what it has been invested in, it will cover a range of areas that you would imagine of capital expenditure. As I touched on a moment ago, it is broadly reflected across the autumn budget revision. We are operating in an environment where capital budgets are under significant pressure. Of course, the position that we are moving into in the next financial year is compounded by the reduction of the medium term and the capital that we will receive from the UK Government, with regard to the capital position in relation to the overall NHS capital allocation. Craig, do you have the figures at hand? I do not have that exact figure at hand, but I would have to follow up on that. The question specifically was with regard to what does the £235 million represent as a share of the overall capital allocation to what's health? If you think about it, Minister, the total capital budgeted spend will be £5.845 billion, so £235 million is quite a significant slice of that in one particular portfolio, so that's why I was quite intrigued as to what that money is actually going to be spent on. As I touched on, it will cover a range of capital expenditures across the health portfolio, and as we touched on, I recognise the interest in the capital position going forward, but this is to support the in-year position, recognising the range of pressures that the health portfolio is facing. All I can say is that it is broadly supporting capital expenditure across the health portfolio. It would be good to get further detail on that. Given the pressures that you have talked about, there is £108.9 million that has been unallocated in terms of capital, so one would have thought that if it was given the pressures that you would have tried to allocate, well, virtually all of it. With regards to unallocated funds, that ultimately arises from the fact that we do not have certainty over what our final position will be this year. There can be material movements up to the end and indeed beyond the end of the financial year, so that is just a reflection of the inherent uncertainty with regard to how our fiscal framework operates. We got some surprises at the supplementary estimate in terms of additional funding. We have additional capital funding where we have been modelling on the basis of negative consequentials based on our discussions with Treasury. In the run-up to the spring budget revision, we were anticipating less funding than materialised, so that is a key contributing factor to us having that position. Obviously, you are well aware of the pressures in 24-25. As the minister said, we are still finalising the position for this year, but should things come in on forecast, Ben, we would have some additional capital carried forward through the reserve to subject to that final position. Is that going to be fully allocated in 24-25? We are going to end up a year from now with another situation where we have got £100 million on allocating. As Scott touched on, he has referenced in the guide that we provided to the committee. When we have a scenario where, through the way in which the UK cycle of fiscal events operates with supplementary estimates has only been confirmed at the end of February, scenarios and situations can arise where we receive funding that was not anticipated, so we have to manage that funding now. Clearly, we still have to get towards to get to complete this financial year, but any funding that is not allocated and spent within this year would of course be carried forward to support the position in 24-25. More broadly speaking, that is something that we have consistently been able to do to ensure that any funding that we receive, discretionary funding, is spent in year. If it is not spent in year, it is carried forward. We have not lost any discretionary spend as a consequence of late consequentials. That speaks to the important role that the Scotland reserve plays in allowing that flexibility. We thank you for that clarification. One of the issues that we have discussed at this committee is the long-term financial sustainability of the public finances. We see that Social Security has increased £284.2 million on a budget that is already growing very dramatically. I wonder whether you can talk us through that and why there is such a huge differential between what was anticipated and what is now having to be spent. It is not a mad laid budget, but it seems to be a huge difference. Of course, the net position when you look at it in the round is less than that. We monitor carefully the position on Social Security to spend and are cognisant of the need for long-term sustainability. We monitor that position very carefully. I am conscious that we have provided some more up-to-date information, which we have brought to bear in our understanding of the current position. Is that something that you are able to comment on, Scott? What I would add is that this is based on updated forecasts from the SFC and subsequent information from the Social Security policy team on demand. Those are demand-led budgets. Clearly, we establish the policy position and the qualification criteria, and there is a limit to the extent to which you can actively manage those budgets within those criteria. It is demand-led and we need to manage the movements in year. We have some flexibility within the fiscal frameworks and borrowing capability that is linked to helping us to smooth the management of volatility so that we can borrow against forecast changes. It is one of the challenges of managing a budget of that scale when demand-led is the level of volatility that we see. It is demand-led, but there must have been a vague idea, a rough idea and a pretty good idea of what it would be given the fact that it is not something that has been started from scratch. There is a baseline from the DWP and there might be people on the fringes of that who do not qualify under some of the DWP regulations but will qualify for some of the new benefits that the Scottish Government has introduced. It seems quite a significant over underestimation of what was required. Obviously, it is a big number, but in the context of the relatively small percentage differences, there can be big figures. Obviously, the social society team is developing the modelling continually, but you see volatility. It is a continual challenge within the narrow limits of the flexibilities that we have. Managing £6 billion worth of social security expenditure that is demand-led is challenging within those limits. Will the education and skills portfolios receive an additional £54.1 million? The largest element of that relates to £29.8 million being provided to the Scottish qualifications of the latter two, and I quote, support its on-going activities. What are those on-going activities that we haven't previously anticipated? This reflects and pay awards of pointy costs following the introduction of the curriculum for excellence and to ensure a limit for the over-living wage, inflation and other operational costs as well. Will it not be better to say that rather than just on-going activities that are a bit vague? I think that the point of this is to try and ascertain where money has gone either up or down. If we are just giving that information a little easier, some on-going activities, you are bound to get a question on something like that because it is so vague and we are talking nearly £30 million. I appreciate that position, convener, and it is something that will take away. What if you can, Minister, talk me through the transport net zero and just transition portfolio? My understanding is that, on one hand, it is receiving additional funding of £81.6 million. The vast majority of that is being provided as additional borrowing capacity for Scottish Water, but, at the same time, the overall Scottish Government portfolio figures show a reduction from £4,307.8 million to £4,068.7 million, which is a decrease of nearly £240 million, a bit below 5 per cent decrease. I wonder if you can talk us through that because, obviously, those figures do not seem to add up to me. There are areas where, for example, it has not been possible to deliver the spend in-year, for example, in the Heans building programme. There are other elements where there has been work that is still on going in business cases, for example, which is meant that money could not be spent in-year. On the specific point around the Scottish Water Borrowing, Scot, to come in on that element. Justice in the Home Affairs has had funding reductions of £65.5 million. Of this, £41 million relates to capital funding for the HMP Highland and HMP Glasgow project should be reprofiled into future years. When you say reprofiled, you mean delayed, do you? In those areas, that reflects the challenges within the construction sector on those particular capital projects. Those are macro factors that are not within our control, so we have to be able to respond to the economic environment within them. Scot, you asked a specific question about the Scottish Water. We are obviously trying to show the gross funding movement, so that is why we are showing increases and decreases, rather than the net position. On Scottish Water specifically, there is a five-year regulatory period. We engage with Scottish Water on its capital requirements over the regulatory period and the borrowing necessary to support that. That is profiled. Where capacity allows, we can adjust that profile in response to the needs of Scottish Water. It is part of a planned investment programme. There are movements in that across the regulatory period. In terms of the technical adjustments, I will not go through all of those, but the additional budget coverage has been provided for private finance initiative projects and NHS recovery health and social care for £48.1 million. This technical change falls out of UK budget limits, which is provided to align the Scottish budget with the accounting requirements. What does that really mean? What accounting requirements are we actually talking about? Just again, this is obviously not something that impacts upon discretionary spending, but it is giving us a technical aspect. There is a difference with the way some PPP projects are budgeted and accounted for, where it is off-balance sheet in terms of budgeting. We score in budgetary terms only the unitary payments, but, in accounting terms, we recognise the full value of the underlying asset in the accounts. The budget adjustment is reflecting movements in those accounting values, so it needs to be shown so that we have a budgetary aggregate that reflects what we are going to show in the accounts in Scottish budgetary terms, but it does not impact on those treasury budgets. It is indicative of that difference between the budgeting for those off-balance sheet PFI projects and the accounting for them. Is that helpful? It is certainly helpful to Michelle, because she has been nodding away. One of the important aspects of the budget is, of course, the House's agreement now, the interaction there. It is part of the budget document that £1 billion of rent-based funding has previously been held within portfolios that are baselined into local government settlement. I know that that has been welcomed in local government. We have a breakdown of all that information here, but how much remains ring-fenced? The elements that are ring-fenced have been set out as they routinely are. What I want to say is that we have that commitment through the very to house agreement to establishing a fiscal framework with local government. That is what we are committed to seeing through and working at pace to deliver. In terms of where we are within the process of baselining, what we have arrived at for 24-25 represents a point on this journey, but I know that there is an interest in the Parliament and an interest in this committee. It is certainly from local government to continue discussions about what further progress we can make going forward. I would not want to pre-empt the outcome of those discussions. Clearly, it covers a range of different portfolios in ministerial interests. The direction of travel is to reduce ring-fencing further? That is where we have achieved so far. I know that there is a strong interest from local government to explore how we can take that further. It is part of that very to house process and the commitment around the fiscal framework. We are committed to having that engagement in those discussions. In terms of supplementary estimates, I mean that Scott touched on those earlier on. Additional funding is classed as expected from the UK Government, but it is not clear why those are included if they are only expected as opposed to confirmed. I know that there is a number of exasperation in the Scottish Government and that sometimes the UK Government will say that it will hint that money is coming and it might come and it might not come, etc. I wonder whether you can tell us when you decide to include or not include figures in those estimates. I think that we have provided some commentary on that in the guide that we have provided to the committee. There is informal information that can be shared at official level. There is engagement that would take place between the Deputy First Minister and the CST through the FISC forum. Those can provide opportunities, but, as was touched on earlier with what our earlier assumptions have been around capital and negative consequences, that has not ultimately been what has prevailed. There is inherent in the process a degree of uncertainty. That reflects ultimately the way in which the wider UK fiscal framework operates. There is a process of supplementary estimates where we find out very late in the financial year what our final allocations from the UK Government are going to be. What we are seeking to do is to provide as much information as possible to ensure that the budget act, as amended for the financial year, is as reflective of the position as we understand it. Of course, the position does not finalise until not just even at the end of the financial year, but beyond that as well. It is challenging and what we are seeking to do is to provide that balance. I recognise that there are judgments that have to be made, but is that ultimately just reflected of the way in which the UK fiscal framework operates? Was there anything that you were wanting to ask about? It is a persistent timing issue. The supplementary estimate has finalised pretty late in recent years. We need to complete the spring budget revision. We have got a lead time associated with that that we need to hit. We need to reflect the funding changes within the document. We needed that to balance the position. We engage on a regular basis with Treasury officials. We have some indication of a likely position that is what we have incorporated into the document. As you will see from the subsequent information, that did vary quite significantly from those indicative figures, particularly on resource. I thank you for providing detail on the reserves in the public corporations. That was not something that the finance committee had a detail on before. It is interesting to note that you have outlined half a dozen corporations and where they stand individually and where they sit within the whole issue of public reserves. I had imagined that there were dozens of those organisations, all with pots of money, but I think that it is great to see the clarification that there are only half a dozen. We will open up now with the first questions to come from Liz, to be followed by Michelle. Minister, notwithstanding the difficulties with timescales and the uncertainty, which I think that we all acknowledge as a finance committee, can I take you back to the comments that you mentioned in reply to the convener's question about the unallocated sums in the health budget, the capital budget. You were very clear that you gave a broad spectrum that this was to do with a range of capital projects, but you did not give us any details to what they are. The reason that I am asking is that, obviously, the public has seen in recent weeks that certain building projects have been paused. I wonder whether you could tell us a bit more detail about what that money is being held back for. Just to clarify, its capital has not been allocated through the spring budget revision that you are referring to. Indeed, but it is being held over. It has been allocated in the year that this money is part of the spring budget revision for 2023-24. As I said, it covers capital expenditure, so in terms of what would classify as capital expenditure, that will be wide-ranging within the health portfolio. Those will be supporting the existing variety of work that would classify as capital expenditure within the health portfolio. In terms of providing a list of line-by-line of all the various expenditure that is classed as capital expenditure within the health service, I cannot provide you with that. I am not asking for a full list, minister, it is just that in terms of the public perception of this, they see that certain building projects have had to be stalled. If there is some unallocated money, the question in the mind of the public will be what is the reason behind that money not being spent when there is obviously a very considerable tightening in the public purse? Clearly, at a touch on earlier, we are going to have an exceptionally challenging set of circumstances around capital going forward over the medium term, which is something that the committee appreciates. That, in itself, forms the context in which the decisions around future capital projects, not just in the health service but more widely, are considered. That relates to the current financial year, so in terms of the on-going activity that is part of the capital expenditure of the health service at this classic stage. I can appreciate the matter around perception with this being allocated, but it is important to make that distinction between what is happening within this financial year and supporting that on-going capital expenditure within the NHS. I am sure that the committee appreciates whatever a range of areas is something distinct from where we are looking in 24, 25 going forward and in the context of the capital constraints that we will be operating under. I understand that, minister, but I think that it was you and yourself that we mentioned earlier that we always have this argument about an underspend, and there is not always a good understanding about that. In this specific case, I think that there will be questions asked about that, because there is money there that has yet not been marked for any particular projects. The transparency about that is, shall we say, not entirely full. That is the difficulty that we have when we are trying to explain that to the public. I would just as well make a point that, in regard to allocation budgets at the outset, allocate full amounts, but clearly there is developments as the year progresses. There can be underspends, slippage or targeted savings, which can free additional capacity. That applies both to resource and capital, reflecting just the usual routine in-year budget management. The challenges that were faced were set out by the Deputy First Minister in the letter that she sent to the committee in advance of the UK autumn fiscal event. It is important to make that distinction. We are not in a situation where budgets are being set with some sitting unallocated, but as the progress through the financial year is owing to the dynamics of what I have referred to, we will always seek to respond where resource or capital does become available to ensure that it is effectively allocated to support the in-year position across the public sector. I am sure that it is a timescale issue. It is difficult in terms of increasing the transparency over how budgets work, just to make it very clear that, if there are specific projects awaiting that money, we know what they are. That is the key issue. In recent years, we have had a big argument about underspends at the end of the year. It is not always clear exactly what the reason for that is. I will move on to the question about the revised fiscal framework, which has obviously increased the flexibility that the Scottish Government has when it comes to its borrowing powers. Has that had an important effect in helping you to address some of the constraints that you face? Again, we refer to that in the guide that we are providing for the committee, which is that the additional flexibility around the deserve is welcome now. I appreciate that we are obviously operating in a situation right now where we are in a very challenging environment for the public finances. However, as we highlight that greater flexibility is something that will be of considerable value in future years. Of course, with now that growth that will happen in terms of the capital borrowing powers, for example, that will have an effect over the medium to longer term. Over time, that will increase our scope to borrow. Of course, active borrow will sustainably work capital, but it will increase our scope over time to do it. Do you think that that will give a little bit of greater certainty to the planning process for that capital spend in the future? Is that going to be beneficial to the Scottish Government to work on that increased flexibility? It certainly can be beneficial, but of course, the availability of capital is only one element. There are many other factors that will determine the viability of capital projection. We recognised in recent years with all the challenges around supply, change, shortages, inflation and pressures within the construction sector. That can all have an impact as well. Even just having the capital resource available in itself is not necessarily a guarantee that any project or organisation can progress at the pace that it would want. Broadly speaking, given that the challenge that we have right now is a lack of capital, which is constraining what we want to do, the additional flexibilities are welcome. As we have seen them grow over coming years, that will be of benefit. When it comes to capital investment, one of the difficulties that the UK and for Scotland recently have been the fact that there has been real pressure on supply chains and that there has been greater sense of inflation in the construction industry, for example, which has made things very difficult. Does the Scottish Government see that as easing a little bit in planning for big projects on a capital basis in the future? We are certainly all this has been changes compared to the position that we were in two years ago, but, of course, those challenges persist. We have having to contend with the higher costs and the challenges that come with that as a consequence of the period of high inflation that we have seen. Of course, inflation is still high by historic standards, so those provide on-going challenges as to the other factors that we have touched on, but what we are committed to doing is working within the limited flexibilities that we have to ensure that we can work constructively and collaboratively to deliver on these capital projects. We have to set out very clearly the challenges that we are facing and what the consequences of those challenges are for the delivery of the timescales of various projects. Thank you very much. Thank you, convener, and good morning, minister, and supporting staff. Just following up on a point that Liz Smith was making, a question that I raised with the Deputy First Minister was given the inefficiency of the budgetary process on an annual basis, plus the significant in-year changes, that seems to me like it must incur a significant amount of sunk cost in effect of redoing, repositioning and so on. Am I right in having a sense of that in others as a perception you have as well? Would I never start from this position? I do not think so. Clearly, we are operating within, as I have touched, that broader UK fiscal framework. I cannot say if I set out here and give you a prescription for what a revised approach would be for the whole of the UK, but that does present significant challenges. I think that an approach that was by the UK Government that was more cognisant of the impact that has on devolved administrations and the significant responsibilities that they have would be in everyone's interests. This is not a political point, it is just a technical point about how we do these things. I think that it could be improved. Clearly, it creates challenges when we are in a situation where we are getting towards the end of the year. On the one hand, we are anticipating negative capital consequences, so what do you do if you are anticipating negative capital consequences with a requirement to balance the budget? Unless we are not a member, we cannot spend a penny over and we have very limited capacity to carry forward budget through the Scotland, which is barely more than 1 per cent. I have characterised that the FOV is trying to land a jungle jet in a postage stamp, so that does create challenges. I think that there are various ways in which I am sure that the committee would have various views on that as well about how that could be improved. Ultimately, it is the case more broadly for every aspect of the public finances in Scotland. It is still largely driven by decisions that the UK Government takes, and indeed, which to me does not get as much attention considering this morning, the process and the process creates challenges as well. Ultimately, when there is that asymmetry of information between the UK Government and what we have, we are having to often make decisions based on assessment of risk. We have to take a cautious, prudential approach. We have that need to ensure that the budget balances at the end of the year, so that does create challenges. I do not think that there is anything that is inevitable about the need for those particular challenges through a devolved process within the UK. I do think that those things could be addressed. It is worthy of consideration, and certainly if the committee has any particular views on this matter that they would want to engage with ourselves or with the UK Government on, it would be very interesting to have those discussions. You have set out what I thought very clearly. I suppose that the point that I am making is that there is a cost to the inefficiency. If you were working in a law firm, you would be itemising every hour that you spend to say, right, well, that goes to that client, that goes to that client. Have you ever considered starting to collect the cost of this inefficiency as these fiscal events occur or late notification of things because putting a number on that inefficiency, I think, could very well be quite compelling? That is interesting, because one of the things that has emerged in previous years around provisional outturn is the question that gets put, well, why was it not spent in the previous year? Well, it is going to be spent as being carried forward. If you were to just, for the sake of, I do not know, spending something in March rather than April, that would lead to quite inefficient where it would be allocation of capital or resource spend simply just for presentational purposes once the accounts are published. That is something that we obviously avoid, but we have only had particularly in the period during the pandemic when we were significant funding coming through consequentials and sometimes late on that could pose challenges and we saw, for example, higher amounts in the reserve being carried forward. All of that was discretionary spend and all of it was applied and there was no discretionary spend lost. Even with the point that you make around not having that stability, of course, that is going to lead to challenges. I recognise particular interest from a point around public service reform, I know that committee is very much engaged on. I do not look at this and think that is this an optimal, efficient and effective way in which to manage the wider UK finances between UKG and devolved Administrations. I do not commit here to simply criticise, I think, if something is worthy of further consideration and the committee has views on this, as I say, I would be very keen to engage. I feel that there must be a better way in which we could do things. I recognise that there can be trade-offs and there has to be, there can be benefits to other approaches that also come with particular challenges, but I think the particular points around having to manage our in-year position with the tight constraints around what we can carry forward and the late provision of information, and that is not obvious, of course, just for the Scottish Government. That is going to be further devolved Administrations in terms of the relationship between Treasury and other Whitehall departments as well. It is a broader question, but ultimately I just reflect that we are still in the position where process will be driven by the UK Government's approach. I will finish on this point by noting that some of the examples that you have given, like post-Covid at these additional sums, were exceptional. I think that we all appreciate that, but now we have a more bedded down fiscal framework with the recent changes, actually what we have done is baked in some of these inefficiencies, so it is trying to understand what that might look like. Just to follow on one other point from that, in terms of the fiscal framework for the Verity House agreement, to what extent will in reality the complexities, uncertainties and inefficiencies in the Scottish Government to UK Government fiscal framework be reflected in the developed fiscal framework for local councils? In other words, are they then going to add to it an even deeper level than they might say before by saying, well, this is no use to us because we can't plan, do you anticipate that being in effect replicated as a result of what you have to deal with as a Government? I think that those things in the progress that we are making towards the fiscal framework which has been reflected around baselining where there is that opportunity in terms of the direct relationship between the Scottish Government and the local Government. However, the broader context that we operate in, as we have touched on, is determined by the UK Government. Issues around multi-year funding settlements, which I know is an issue that is routinely raised by committees and members across the Parliament. Again, the challenges that can come from that, the challenges that we face are ultimately what decisions of the UK Government are going to take. We have been through an economically and ffiscally volatile period, but we have been through in the context of the UK Parliament and UK Government politically quite a volatile period in terms of the changes of personnel at the most senior levels. Again, that creates challenges. There will always have to be a degree of realism about what can be achieved. It is important to remember notwithstanding the aspirations that the Government has around Scotland's constitutional future, Scotland is ultimately a devolved Government within the United Kingdom. The decisions that the UK Government takes are still going to be predominant in the context in which we operate. Any of the work that we are seeking to achieve in terms of our relationship with local government and indeed with other partners has to be cognisant of that context in which we operate. The level of discretion autonomy that is available to an independent state is not one that is available to the Scottish Government as a devolved administration. That is not a political point, it is just stating what the facts of the matter are. If there are ways in which we can prove the operation of the way in which decisions are taken within the United Kingdom and the amount of information that is provided in the timelines, I think that that would be in the interests of the Scottish Government and, indeed, our counterpart devolved administrations. I will watch that with interest. My last point concerns a question that I raised before regarding police pensions, and I thank you for your reply back to what extent had the increase and, therefore, the provision for that being as a result of Covid-19. I thank you for your reply, which, without paraphrasing, pointed out that it was not due to that and gave an explanation about moving from the final salary to a career-average pension scheme. My follow-on question is that, given that legal change that is within the legal challenge, that also applies to other public sector professions such as teachers. They had the same issue, but we have seen a difference from police officers retiring—the rate at which, rather, they are for the provision that they need to make as compared to teachers. It does not necessarily mean that it was entirely due to the change to their pensions arrangements if it did not equally apply to teachers. Do we have any reflections on that? If you let me take that away and I will speak with pensions officials, I do not want to give you an off-the-cut tough answer to that, Ms Thomson. I will consider it in more detail, but I will speak with pensions officials and, if you are happy, I will write back to you directly and copy the committee in. Okay, thank you. Thank you. Should we now have any more final questions now? Michael The Belfordd by John. Thank you, convener. Can I come back, Minister, to the NHS capital budget? I look forward to seeing the detail that you can provide us in terms of those listed projects. Do you have any indication that you mentioned it in one of your early answers on the amount of that money that is being taken up by inflation of the £235 million? Is that a figure that is coping with construction inflation? Do you have an idea about the proportion of that? I cannot give you a specific analysis of what that would relate to in terms of its time value of that resource compared to 12 months ago or 18 months ago or 24 months ago. However, there will be broader statistical analysis in terms of the overall impact of inflation in the construction sector and that impact on capital projects, which I will be happy to source and provide to you. I suppose that our questions are related to the pipeline of work. We have heard ministers and I think that you yourself included talking about 10 per cent cut, as you call it in capital expenditure, which seems to have resulted in a 100 per cent cut in capital projects going forward in the NHS. A full pause is waiting for further clarity. Getting an idea in terms of how much of that is about legacy spend that is committed that has to be coped with and across that point would be very useful. Can you contrast that a little bit to your approach in net zero and just transition so that the NHS has gone up by £235 million in capital spend? The net zero and just transition has net decrease of £217.9 million. Is that a decision that you have taken, as ministers? Is that just the reality of where the projects find themselves? You touched on it yourself around always with capital spend, where there are existing commitments, for example, in requirements to be met. I know that that has been of some interest in terms of the capital allocations for the 24-25 budget. The example is in the net zero portfolio, where it is not possible to deliver particular projects or in terms of the profile of projects that will fall on another financial year. There can be that movement, given the horizons over which capital projects are developed and actioned can go across multiple financial years. There is a reflection of a number of different factors and there can be occasions more broadly across the budget, including in resource, where we have demand-led schemes, where demand has not been as anticipated at forecast. What we have sought to do, particularly, is to identify as early as possible where that may emerge so that we can see effective reallocation of the resource. In situations in net zero, for example, in some areas where it is not possible to deploy the resource in the year. As part of that in-year management, the capital has been reallocated. It is quite a striking contrast. You are right in terms of the detail that you have provided to us. Lots of delayed capital spend, heat and building projects, vessels, piers, programmes, portworks at Buog, Ardrossan, Gwric, none of these. Is this portfolio worse at delivering capital expenditure and capital programmes done by NHS? I think that it reflects the particular circumstances that are attending to those particular projects. As I said, there are commitments there, but in terms of the actual timeline for delivery, as it touched on earlier with capital, there are various different aspects and different factors that can have a bearing on the timeline of delivery for capital projects. Elements of that and what we have touched on around business cases as well, that is reflected in some of the decisions that have been taken there in that particular portfolio. When you are taking the education side of this as well, there is a net decrease of £98.8 million in terms of the expenditure in that area. It feels a little bit like we can spend on short-term coping investment, but we are really struggling to do some of those longer-term projects, investing in the economy, net zero education. Is that representative of your feeling about how we are delivering this capital expenditure? In general terms, I think that you touched on a very important point, which is in any programme of public service reform or spend-to-save or investment. When budgets become constrained—this is one of the effects that we are still willing from the austerity that we have had at various points over the past 14 years—there is a need for any Government to focus on the key mission critical tasks on a day-to-day basis. Often, the challenge that we have with reform is a need to identify that parallel funding to support that change and to support that transformation. That is something that is just a general point that all some Governments have to contend with. What we are seeing feeding through in terms of particularly next year's budget around capital is the consequences of the decisions that have been taken by the UK Government, which predominantly still impacts the discretionary fund that we have available. We are trying to manage that in a way that is consistent with the principles and values that the Government has articulated and recognising the key central role that the NHS plays, not just in terms of its deliveries of public service, but as a key economic actor within the wider Scottish economy as well, and the key expectations that both Parliament and the public have that it is resourced adequately—that, again, is what has been reflected in the decisions that we have taken. Is not really the case around the capital that we have a very under-delivered programme that has huge backlogs in it already? What you are doing is pausing all new developments in order to try to bring the backlog of programmes in the capital development plan forward? With regard to the work on capital, capital, of course, projects have been impacted by what we have been through over the last four years now since the outset of the pandemic, and we have come out of the pandemic into a cost crisis. It is remarkable that we think about the last four years a global pandemic of the worst in the century. A cost of living crisis and inflation is at the highest level since we saw it since the 1970s, major conflict in the European continent, and—correct me if I'm wrong—the Prime Minister, with the shortest tenure of any in British history and a catastrophic money budget, is the environment of Europe. Some of those factors are global or macroeconomic, but they are not in the gift of anyone. Governments, some of them are a consequence of being exacerbated or directly attributable to decisions that the UK Government has taken. That is a context for all capital projects and investment decisions that have been taken over the last four years. It is extremely challenging, but we are seeking to work our way through that and to be very transparent about how we are doing it. The last one on the education side of things. I noted that there was a £29.8 million increase to the SQA to support its on-going activities. Can you tell us what that is for? This is an organisation that, in 2021, we were told was not fit for purpose in how to be scrapped and the leadership was failing. Should we be giving them £29.8 million to spend on something that the minister has already decided that they are not capable of running their own organisation properly? It was just to clarify, I sought to provide an answer to the convener earlier on, but this increases as a result of pay awards, increased to appointee costs, inflation elements and other operational costs. It is paying operational expenditure. Can I finish on the area around the social security side when you have touched on some of those already? The £284.2 million increase in the demand-led side of this is the net impact across the two. There are other provisions about £50 million, and I understand that. There has been an extraordinary rise in out-of-work benefits since the pandemic, which is a huge challenge across the UK and internationally. Is that something that ministers are discussing in terms of your talk about a demand-led budget? That must be a real concern for ministers in terms of our ability within resources to cope with that, if that trend continues. It is something that we monitor carefully. The forecast is obviously produced by the SFC, but we monitor that position carefully both in terms of the in-year management, but also in terms of the longer-term trends. On the broader point, in terms of those who are not in work due to health, there has been coverage in the press today. It was also something that the Cabinet Secretary for the Economy, Mary McCall, touched on recently in a speech that she delivered, recognising that particular challenge and considering the role that we all have to play right across the Government and being able to support more people back into the workplace. In terms of the social security aspect and monitoring in the year, that is something that we, of course, pay very careful attention to. We have that focus as well upon what the longer-term trends are, and on the broader point, around labour market and activity, it is something that we are. I know that the Cabinet Secretary is keen to engage on that. There are clear economic effects around that in terms of people not being participant in the workforce. I think that that would be concerned to us in terms of the taxation take available. Is this something that has been discussed? Maybe you are not there, but at the Cabinet, because it feels to me that we have this trend that appears to be more pronounced in Scotland, although it is significant across the whole of the UK, but we also have a unit cost of this, which is higher in Scotland in terms of the decisions taken by the Government in the way that they are spending money on social security payments. We are more exposed in the country and we already know that the £1.3 billion of shortfall against the grant allocations by £27.28 against the social security budget. Is it something that you think that the Government is getting a grip of in terms of understanding its exposure in this position, and has it got a plan to do something about it? I know that you are saying that you are aware of it, but what is the Government actually going to do to try and deal with it? To say that we are aware of it, I think that we are just addressing the point that we recognise that issue. Of course, we are giving consideration around how that is, how Government responds to those trends going forward. This is still quite a young system that we have in Scotland. Of course, collectively, we will develop an understanding that the longer this system is in place, the further it embeds. However, we are appreciative of the points that we articulate around long-term sustainability and resource. Again, it is something that we are giving very careful consideration to that will inform decisions that we take around the budget. It is important to recognise that the support that is being provided through the system, the social security system, is invaluable to the individuals who receive it. It is an investment in the people of Scotland, as well. It is important that, in terms of discussing the matter, we recognise the impact for the individuals who receive that support and do not ever allow that to be lost in talking at a high level about numbers. Ultimately, the point that you make is that there is a need to be able to meet this expenditure, a need to meet it on an on-going basis, and that is something that we take very seriously, both from the perspective of public finances and from the perspective of the administration of the social security system directly. Thank you, John. Just perhaps touching going back to some of the stuff that has already been touched on. I was interested in Mr Mackay's earlier statement about, based on discussions with the Treasury, because I had imagined, obviously, wrongly that in England they spent £100 million on the NHS and then we get £8.1 million as a consequential. It is all quite factual, the figures are there and it is just kind of automatic. Based on discussions with the Treasury suggests that it is a lot more subjective than that. Is that because the Treasury themselves do not know what the spending in England is? So they actually do not know if the NHS is going to maybe overspend a bit or underspend a bit and that in itself would impact on us. Is that part of the problem? I do not want to risk in any way being perceived as speaking to speak on behalf of the Treasury, but perhaps ask Scott if he can offer some reflections from the official experience. The final figures are firmly based on the allocations to the changes in funding for UK departments. Obviously, as we go through the supplementary estimate process, there is a negotiation between the individual Treasury teams and the equivalent UK departments as they refine what the requirement is for the supplementary estimate. It is a developing position and what we obviously try to do is engage with our Treasury team to try to get a sense of how that position is going to pan out. As we have said already, we have this requirement that they know that we need to deliver our budget revision to a certain timetable and there is a commitment from them that they will give us an emerging picture as early as they can as we move into January, so we have an idea of how things are developing and then we take a judgment on what we can put in the SBR in terms of funding in advance of having that final sign-off. That final sign-off is absolutely Barnett-based. It is all related to—there is a line-by-line analysis of the individual changes for UK departments that we get. The timescale for that will be well after the year-end? That is what the Minister was referring to earlier. We got that by the end of February, but that is too late for us to incorporate all that detail into that. It sounds like it is not a lack of willingness in their part, but that is also there a wee bit in the dark. Sometimes we get announcements at Westminster that we are going to spend £100 million on X, and I think it came up during Covid quite a lot. We do not know if that is new money, in which case we get a share or its reallocation of existing money. Is that part of the problem as well? Before you commit, I have got just a point. We are five days into work. Four weeks are still before the end of the year. We start the next financial year, and we will get a UK fiscal event tomorrow. Everything that we know about in Government and around this table is based on what speculation we would have read in the newspapers. In terms of that overall process, you can understand the challenges. That is reflective of some of the broader challenges that can emerge in terms of knowing what the UK Government is going to do. Treasury is usually pretty good at giving us an indication as to whether it is new money or from existing budgets. The default is usually always that it is going to be from existing budgets. Funding can be announced, and Treasury will say that that is new money, but the amount can be refined over the course of the year, or it can turn out that we do not actually get confirmation of that amount until supplementary estimate. They only do a main estimate and one supplementary estimate, so there is limited opportunity for those updates of the in-year position. Sometimes you can have a situation where we could talk about the local Government money, the £500 million that was announced. Treasury has said that that is new money. It might be that that is confirmed in the budget tomorrow. We do not get that till the main estimate. It might even be that we do not get it confirmed until supplementary estimate, because all the time there will be a dialogue between the Treasury team and the spending department on what their actual requirement is. The UK Government has rehearsed publicly the pressures that are on public spending and that additional funding is only given on the basis of absolute need. Often things can be left right to supplementary estimates because that is when they are getting the final position from a UK department on what their actual funding requirement is. There has been pressure on all UK departments to contain spending, and that is what filters through at the end of the year. It is helpful that it helps us to understand the position that you are in as well. When we get to the end of the year and there is no overspender or underspend, I can look at if it is around 1 per cent. If it is around 1 per cent, I have to say that that is very good. I know that the number is very big, so 1 per cent is quite a big number, but I think that for most of us, our own personal spending, we would never get it within 1 per cent. Most businesses would not get it within 1 per cent, so that is just by way of comment. If we did land it slightly more than 1 per cent, but if we could not land it within that space, we would have to work to affect the target, almost some underspend, so we do not go over. If we went beyond that 1 per cent, slightly more than 1 per cent in terms of the reserve represents as a carry-forward, that would be a resource or a calendar that would be lost. It is a challenge. I hope that, collectively, as a Parliament, we are getting a bit more accustomed to that particular reality and that, when underspends are reported as part of the provision of the outermit, it is actually just part of the routine operation of the fiscal framework, rather than some suggestion that there has been resource that could and should have been allocated that it was not. I fully agree with that. If I can just move on to some specifics, and I am going through the guide really so, hopefully, the paragraphs match. Not every paragraph. That is good. I will stay within the 22 minutes that you took. A paragraph 18 talks about some overspends or additional funding for children's reporter, social services council, children's hearings Scotland. I do not know if that is just strictly a pay increase or if there are other factors, because, as you think, the committee has been concerned about the number of commissions and commissioners and semi-separate organisations. I would be concerned if the costs were slipping on that. Let me see if we can bring up the details if we can. We will follow up. On the specific points, are you getting the information? This is largely pay and inflationary pressures that are having to be funded. As long as it is, I have not checked back to see what the percentages were. Obviously, pay is getting up to 7 per cent of their abouts. Some of those are quite small amounts, but it is principles. I am thinking about paragraph 26 that talks about the Covid inquiry and £4.75 million. It does concern me a little bit with some of those inquiries that costs can run away, and that happened with the Edinburgh trams. Is there a real control on those, or is it very much up to the person leading the inquiry what the costs end up being? We are all familiar with the rules that govern those inquiries and the autonomy and independence in that matter. We have to, when inquiries are established and trained, we, perhaps, of course, will be comply with the legislative requirements around that. We have already mentioned the prisons at paragraph 47 of the Justice and Home Affairs portfolio, and it talks about the reprofiling of capital for HMP Highland HMP Glasgow. Is your anticipation that there has been such high inflation with construction costs that might come down so that we could save money in the long run, or is it the case that, if we reprofile, the costs are inevitably going to go up? The environment that we are operating in right now is reflective of that sustained inflation that we have seen and touched on earlier, and inflation is still, would have been regarded, probably, quite high, had it not been for the context that we have just emerged from. We have set out what we touched on earlier, but the reasoning and rationale there is, as well as that there are broader challenges within the construction sector and capacity. It is reflective of a number of different factors. Costs could go up further, or they could come down a bit, actually. Given the various factors that can impact upon capital projects, including some of them geopolitical, as we have touched on, I would not be in a position to say where I think things will be a year from now, two years, five years from now. I would defer to the broad suite of independent forecasts and assumptions that are freely and publicly available in these matters. We have talked about the capital expenditure and the borrowing, so I note in paragraph 89 that it says that the improved position has allowed the capital borrowing requirement to be reduced by £150 million from £450 million. That means that the plan is to borrow £300 million, although that could presumably still vary by the end of the year. The decisions around borrowing are one of the few flexibilities that we have, and those decisions are taken at the end of the year. The capital position has allowed us to move to the position that you have outlined. Although the target is to borrow the £450 million, which I think is the maximum, we are allowed, it is likely, year by year, that we will end up slightly below that. On the financial transactions money, that is £53 million deferred to £24.25 million. Can you explain to us what impact that has? I think that some of that was used for housing in the past, if I am not mistaken. I appreciate that that has been a matter of some interest in terms of the role that the financial transaction is budget. Correct me if I am not wrong, but this was a fairly late notification around financial transaction reduction and we got agreement with Treasury to defer that into the following year, given the lateness of the notice. There was a very late upswing in the negative consequential, so we have been allowed to defer it. On your question about the use of financial transactions, it is essentially the two largest users of financial transactions that have been housing and the national investment. Obviously, the squeeze on FT budgets generally, because the profile of the budget available is going down, means that there is less available and that is compounded by that. That could mean that there is a little bit of leeway next year in the two areas of SNP and housing. Specifically, on the financial transactions money, where Mr Mackay has just told us that it mainly goes to SNP and housing, that could mean that there is a bit more leeway next year or is that already built into the budget? We will set out the position for 24-25, but, as we are reflecting on today, what the final budget for 24-25 will be determined by decisions that the UK Government takes. I made a reference that there will be a fiscal event tomorrow. I do not know what is going to be within that. Then there will be the process of mains and supplementary estimates. Of course, there is a schedule that is anticipated to be a general election this year, so there are a number of factors that can impact on the Scottish budget position over the course of the year. We have a position that we have set out on the face of the budget document and any changes that materialise over the course of the year via UK Government fiscal events. Of course, we will reflect on normal way through the budget revision process. My final point in paragraph 101 under the Scotland Reserve is that, over time, the Scotland Reserve could become more of a genuine reserve for funds, so we save a bit. At the moment, as the Government points out, there is just not the leeway to do that. Do you anticipate that, at some point in the future, we might actually be able to put money aside or do you think that the pressure to always spend as much as we can is too great? I think that we have seen the Scotland Reserve operate in different ways. Clearly, given the way in which we have to balance our budgets, it is unavoidable that there will be some underspend generating, and sometimes that underspend will emerge after the end of the year. We also saw it play an important role when we received light consequentials, particularly coming out of the pandemic period, where we have been able to, which has allowed us to ensure that the resources are better aligned with the optimal time to spend. We have seen the Reserve operate in these two particular ways. As to whether it does develop into something that can be more of a reserve, rather than a function for allowing money to go from one year to the next, that will depend on a number of factors, most probably being the fiscal settlements that we receive from the UK Government going forward, as well as, of course, the demand, commitments, policies and so on. The forward projection on the tax position currently shows quite significant positive reconciliation impacts on income tax. The scale of those is such that they would be taken up if you were depositing—one of the things that has floated is that we would deposit positive reconciliation in the reserve against future negative reconciliation impacts. However, the scale of those could be so significant that it is taking up quite a significant chunk of the reserve, even with the additional flexibility and the growth that we will see in future following the fiscal framework re-negotiations. If you think that a couple of reconciliations of £400 million would exceed the limit, and we need that flexibility, as the minister says, for year on year. That is helpful. I think that something will return to you. Thank you, convener. Thank you, Jamie, to floor by Gillian. Thank you, convener. Morning, minister and colleagues. Just to go back, Liz Smith and Michael Marra covered a lot on the additional capital spending in the NHS. I did want to just check—I mean, you said you will provide further information. Will that include a breakdown of obviously projects, but also where the cost increases are inflationary, but also perhaps non-inflationary cost increases, and also where they come from new capital projects and also where there are refurbishment issues, et cetera? The reason why I ask that is because, obviously, with the concern that has been raised a number of times with myself, in terms of where we have seen this moratorium on new bills, that means that our NHS boards are going to have to invest more heavily in refurbishment, or likely to have to invest more in refurbishment, because they are not going to be able to have the new hospitals or new facilities. Will that information be provided in your contribution back to the committee? In terms of a high-level impact of inflation upon capital projects and pressure within the construction sector, certainly we can incorporate that into the response to the committee. I am also interested in now where it is not just in the issues of inflation, where there are just simple cost overruns as well, so if that could be included as well. Certainly we will endeavour to provide as much information as we can to reflect what the asks of the committee have been. Can I just ask on a technical process point of view? Obviously, you have identified areas where you can invest more or put more capital spending in, or need to put more capital spending in. How does that process happen in terms of how are those areas, how are those individual projects identified, what kind of timescales are they identified through? In terms of the capital projects within the public? In terms of those revisions? We are happy to come back and see if we can cover some of that in terms of our correspondence, but the allocations, again, this is expenditure that is capital within year as opposed to the next financial year. It is rare to support the existing position in the on-going cost pressures that we are finding within the health portfolio, so the capital is allocated to support the existing capital activity taking place within this financial year. However, in that broader point that you asked about with regards to what those pressures are, and indeed in terms of the way in different ways in which capital is used, whether it be new projects or maintenance, for example, that relation of capital expenditure in regards to construction and maintenance to be, I have to try to pick up some more detail on that. I suppose what I am asking is when do you first become aware, or is it going to confirm that this project is going to need additional support in the current financial year and how does that process work through? Maybe I want to touch on the engagement that takes place within government in terms of identifying whether to spend the areas. Obviously, we have well-established monitoring processes that all portfolio areas feed into with spending projections on both resource and capital. They are signalling as early as they become aware of additional funding requirements over the course of the year. Part of what we have been talking about is the challenge of juggling those with the funding uncertainty that we have. You have got in-year monitoring. We also have well-established programmes and an awareness of the overall capital portfolio projects across each portfolio. The scope to vary the profile of those over the course of the year. There is active management of that programme in the year, where, if we know that there is slippage in one area, there is scope to advance some expenditure in other areas. There is a dialogue over the course of the year about what capacity exists in individual portfolio areas to take redeployed. Would some projects, for example, use your terms to be reprofiled to allow additional capital to be moved for other projects that are under difficulty? We would actively manage that over the course of the year. It is important to recognise that, across portfolio, it is easy to think of infrastructure or capital budgets supporting new infrastructure projects. However, there are other elements. Research and development expenditure is capitalised and funded from capital budgets. Some of the equipment in the NHS, for example, is a key area for investment. Obviously, that kind of thing can bring forward more easily than building a new medical centre or whatever. Those kind of judgments on what is available and how we can deploy that there are areas that are more easily switched on than others, I guess. This is what I am just trying to clarify, the kind of process behind it. There are, as you say, areas where decisions are made to prioritise one over the other. That might be perfectly reasonable priorities, but it could be that there are projects that are reprofiled, put on hold, slowed down, whatever, to deliver in other areas, to deliver areas where there is, say, an overspend or inflationary issues. Just very quickly, sorry. It is on the issue around the vessels and piers in ferry services budgets. Of the £75 million and of the £41 million, how much of that is capital and how much of that is resource? Are you able to say? Sorry, I should have given you a little bit more notice on that one. So the £75 million is entirely capital, and what was the £40 million? Oh, sorry, that was for the small vessels replacement programme, phase 1. Yep, entirely capital. They are both entirely capital. Okay, there are any reason why I was going to ask you in how that sits rep funding, but also if they are capital budgets, that wouldn't work. Okay, thank you. Thank you very much, and I also thank Gillian. She was going to ask some questions, but we've just been informed the last couple of minutes that you're supposed to be due to another committee, which we did not know before we started the process. Otherwise, we might have been a bit tighter on our time. I was also going to ask incidentally about the small vessels, given my own constituency interests, but we have a statement this afternoon on Ferguson. It may come up there. With that, we will end our questions with regard to the instrument, and what we'll do is now move to formal consideration of the motion on it. I now invite the minister to speak to and move motion S6M-12053 that the Finance and Public Administration Committee recommends that the Budget Scotland Act 2023 amendment regulations 2024 draft be approved. Members of any further comments? They do not. I now put the question on the motion. The question is that motion S6M-12053 be agreed. Are we all agreed? We are all agreed. I like to thank the minister and his officials for their evidence. We'll publish a short response to the Parliament, setting out a decision on the regulations in due course. I'll now suspend the meeting briefly for a couple of minutes to allow a change of officials before we move on to the next agenda item. We will now take evidence from the Minister for Community Wealth and Public Finance on the Scottish landfill tax standard rate and lower rate order 2024 for this item. Mr Arthur is joined by Robert Sutter, senior tax policy adviser at the Scottish Government. I welcome Mr Sutter to the meeting and invite Mr Arthur to make a short opening statement. Thank you, convener. The Scottish landfill tax standard rate and lower rate order 2024 specifies the standard rate and lower rates for Scottish landfill tax, which would apply from 1 April. They are consistent with the rates set out in the Scottish budget 2425, published on 19 December 2023. The order sets out that the standard rate will increase from 102 pounds and 10 pence per ton to 103 pounds and 70 pence per ton. A lower rate for less polluting inert materials will increase from 3 pounds 25 pence per ton to 3 pounds 30 pence per ton. Committee members will wish to note that they matched landfill tax rates in the rest of the UK for the financial year 2425, as confirmed in the UK and Welsh budgets. The Scottish Government is continuing to act to avoid any potential for what is referred to as waste tourism to emerge as a result of material differences between the tax rates north and south of the border. The increased rate provides appropriate financial incentives to support delivery of our ambitious waste and circular economy targets. I will conclude there, convener. I have noticed that, over the past 89 years, the inflation rate has been 31.5 per cent in the UK. However, the standard rate is up by 23.6 per cent and the inert rate by 25 per cent. I am just wondering why I realise that you have been effectively mirroring UK rates, but why it has increased by the lower rate of inflation, given that the whole purpose is to try to reduce the amount of landfill. Over the past decade, there has been a significant reduction in the revenue from that, despite the cost going up. Indeed, the revenue has declined as forecast. It has continued to decline as the per the policy intent and objectives. The rationale for the rate being what it is in terms of that consistency with UK and Wales is, as I set out in my opening statement, to avoid the risk of so-called waste tourism from emerging. Is the rationale underpinning the approach that we are taking with the tax? There has never been any divergence, but has there been any look at what the actual cost of shipping a ton of waste is, for example, 100 miles? If it is £3 a ton, it does not, for an air waste, for example, it does not seem very much. To save £3 a ton, you are really going to ship a ton of waste from Edinburgh or Newcastle or wherever? I appreciate that there will be a range of views, but along with seeking to mitigate that risk, we have always wanted to provide a degree of certainty and stability for the sector, as well. Given that we have that clear target towards the end of 2025, we have taken an approach around tax policy that is consistent with that. I understand now that the proportion of inert waste is now about 35 to 40 per cent. Is that a significant increase in where it was a decade ago? On that particular point, Robert, do you have any information that you are able to share? Yes, as the share of inert waste as part of the total amount going into landfill increased over the last decade has remained fairly stable. I do not have the exact numbers, but it has increased slightly, as a result of non-inert waste producing more quickly. Why do you think that inert waste is not reducing quite so quickly? Is that because there is no tax incentive to change, for example? For non-inert waste, why should we talk about household waste, black bin bag waste, increases in recycling and a shift towards incineration? That is because we are having an evidence session after this on not a dissimilar issue. The £102.10 that we have in the current financial year seems quite a disincentive, but the £3.25 does not, as well, as I was wondering why that has impacted significantly on the level of inert waste going up relative to non-inert waste. An important observation is that the policy around landfill tax is part of a broader suite of objectives around achieving a circular economy. I know that the committee has been taking a keen interest and, indeed, I am conscious that, more broadly, the committee will be beginning at scrutiny of the aggregate tax bill, which I am looking forward to engaging with the committee on. Just one last question. Across the UK, there has been a significant increase in fly tipping. Do you know what the level of increase of fly tipping is in Scotland and whether or not the tax on non-inert waste has impacted on that? There are suggestions that that may have had an impact. On the specific interaction between the lower rate and the quantity of fly tipping that we are saying, I do not have any direct data analysis that I can share in the correlation at this point, but I am happy to— Sorry, it is not the lower rate, the higher rate. If it is over £100 a ton, the revenue to the Scottish Government is decreasing because less is going into landfill, but is that because there is a genuine change in behaviour at a significant degree, or is fly tipping going up or more likely both? I cannot speak to what the particular factors are in terms of influencing that behaviour and to be able to isolate what element the relevant tax rate is on that particular behaviour. Clearly, SIPA works with a range of partners to address this issue, and it sits more broadly within the environment and circular economy policy areas. However, if there is a particular interest in any analysis that has been undertaken around the interaction between the higher rate and the propensity for fly tipping in particular areas, I am happy to go and take that away to find out if there is any further information that we can provide. I would, of course, know that the rate that we have is on par with the rest of the UK. Do you want to come in, Robert? Of course, it is on par with the rest of the UK, but if someone gets 20 tonnes of stuff, they might pay £500 to dump it in a field as opposed to £2,000 in tax, that is the issue. My concern is perhaps that an air waste is not taxed at a high enough rate to change behaviour, and the other rate is perhaps taxed higher than it might be, despite the fact that it is increased by a lower level of inflation to encourage more responsible dumping. I am happy to take that away. As I have touched on my opening statement, that was a long-standing position that we have adopted with regard to landfill tax, consistent with the other Administrations in the UK. As we are seeing these forecasts reductions in revenue over the coming period, I think that that reflects the policy objective in terms of the biological municipal waste ban at the end of 2025, that the direction of travel is consistent with meeting these ambitions. Private companies and local authorities are very responsible for how they deal with waste, and they follow the regulations that are applied. Have there been any prosecutions of unlicensed and unregulated dumpers, so to speak? I do not have that information available, convener. Again, there is a anecdotal BBC programme about this, which was about England, but I do not think that it will be much different to Scotland because of the increase in fly tipping. People feel that some businesses feel that they are very highly regulated, whereas CEPA turns almost a blind eye to those who are not. Therefore, the money that is coming in in revenue is decreasing not just because less is going into landfill, but more is going to be thrown over hedges in dumped in fields. I think that you have made a broader suite of questions around enforcement and the role of other partners who are playing that. Of course, in terms of the collection of administration and enforcement around the actual collection of the tax, that is obviously a matter for revenue Scotland to operate independently as a relevant tax authority, but in terms of the specific questions that you raised around the interaction of tax policy with specific behaviours, I am happy to take that away and come back to the committee just to establish what, if any, analysis has been undertaken on those specific points and to ensure that the committee is furnished with any relevant information that we hold. I think that it is the issue that the convener is on just now about whether the measures that we have just now to deal with the problem are effective. I think that I am correct in saying that there have been a couple of prosecutions in Scotland about that. However, it is about the deterrent factor and I just wonder what modelling has been done about that very point as to whether that is going to have a really big effect on the deterrent. Okay, so this is, I think, clearly issues around broader behaviour in regards to complying with environmental regulations and goes beyond just tax policy in the ministry of colleagues who lead in those particular areas. So I would not want to be speaking in an area where I do not have a direct policy lead, but recognising the role that tax plays, I think there are important points that have been raised and what I would want to be able to do is to have an opportunity to take that away and come back to the committee just to speak what element that factors into the considerations around race. As I have set out, there is a broad underpinning principle that has been that consistency with the rest of the UK in terms of the rationale, but in terms of the points that the committee is raising, has consideration been given, well implicit I think, in the points that the committee has raised and correct me if I am wrong, has consideration been given to changing the way to incentivise other particular behaviours and how would that be balanced again, any potential risk of weight tourism? Would that be a fair summation of...? Absolutely, I think it's a very difficult area, I have to say, because I think it's very hard to pick up a lot of the bad behaviour as well. That's a really big issue, but any modelling that could be done I think would be very helpful when it came to behavioural change, because that's by and large what it's all about. I mean I'm convinced that people will ship a ton of waste across the border to save a pound or whatever it would be in a different tax differential than much more likely just to dump it in a field on my upper roads. Okay, that being said, any other questions from colleagues round the table? There don't appear to be, so the next item involves formal consideration of the motion of the instrument, so I'd write the minister to speak and move motion S6M-12277 that the Finance and Public Administration Committee recommends that the Scottish landfill tax standard rate and lower rate, order 2024, SSI 2024-60 be approved. Formal moved. Do members have any further comments? Nope. The question is that motion S6M-12277 be agreed to. Are we all agreed? Yes. We are all agreed. I thank the minister and his officials for their evidence today. I'll now suspend the meeting briefly to allow for a change of witnesses before we move on to the next agenda item. The next item on our agenda is to take evidence on the Aggregates Tax and Devolved Tax Administration Scotland Bill. Therefore, welcome to the meeting Jonathan Sharmer, policy manager, local government finance, COSLA, Alan Dope, director of Mineral Products Association Scotland, and Dougineal, group general manager, NWH group, representing the Scottish Environment Services Association. Ten to allow up to 90 minutes for this session. If witnesses would like to be brought into discussion at any point, please indicate to clerks and I can then call you. Rather than have an opening statement, I'm going to move straight to questions. Mr Dope, the policy memorandum states that the proposed SAT retains a fundamental structure of UKAL, which offers, I quote, a degree of continuity for taxpayers, while also ensuring that devolved tax can evolve over time to support Scottish Government circular economy objectives. How does £2 a ton of tax deliver that? Thank you. It's fair to say that the £2 rate of taxation has been in place for quite a considerable number of years into the UK Aggregates levy. As part of that process, we have seen continued growth in recycled materials and secondary aggregates being used. Current research from Scottish Government has indicated that, I think, there's something about 89 per cent of secondary and recycled aggregates being used within the market. With 89 per cent, we're almost, and you've mentioned this throughout your submission, that we're effectively reaching the optimum in terms of what can be recycled. Therefore, any additional taxation that's imposed should the Scottish Government plan to diverge, and it doesn't, at this point, as far as I'm aware, in terms of the bill. Won't actually deliver any further recycling? Well, just in terms of the bill, I don't think that the bill stipulates at clearly a rate or rates. No, but that's the Government's indicated that. I think that one point that I suspect I would want to make is in respect of the issue regarding the on-going extraction of what you might call virgin aggregate. You have a position at the moment whereby, I say, you have 87 to 89 per cent. I think that the figure has faded over the last couple of years in terms of the documentation that's been produced, but you have restrictions and limitations on the ability of certain materials to meet the criteria that they would be required from virgin aggregate and to meet the specifications, whether that be for roads or for other projects. I think that there's a limit to how much recycled or secondary aggregate can be used. I don't think that there's been any fundamental research on what availability is of further markets or, indeed, further availability of construction and demolition waste within Scotland. I think that that's one of the key points that I would like to try to get over in terms of whilst we may be an objective in terms of the tax in order to drive towards greater use of recycled materials, there is perhaps a restriction or an unknown put in that way in terms of what that availability of material might be and its consistency. I mean, I'm going to bring Mr Neil in a wee minute here, but last week we visited a recycling facility and they basically said that there is, there can be on occasion, limitations in terms of feedstock provision, which is something again that you've mentioned in your own submission, but they also said that there's something like four million tonnes of waste that could be recycled that's actually being dumped into a landfill. You know, 35 to 40 per cent of landfill is said to be waste that could be recycled. Is that a figure that you would recognise? It's not a figure that's contained, for example, within the initial consultation document that came out in terms of breaking new ground. That's not the figure that's quoted within there. I say that I don't think that there's been any detailed research on that level of figure in terms of its availability, and I say not only in terms of the availability of the quantity of material but in terms of the quality of material. Another thing I should say at the outset is that I represent the Mineral Products Association Scotland. Members are not just interested in the extraction of virgin agria. I've got members who are clearly involved in recycling. It's both aspects. It's not just one and the other. There are combined businesses who combine both facets of it and seek to utilise and maximise the amount of recycled materials that they can do. When we as a trade association do similarly, we also have, for example, written fairly recent letter of transport of Scotland on the issue about the greater use of recycled materials within TS 2010, as an example. We are mindful, as an organisation, of a trade body about the use of recycled and secondary materials, and our members are as well. You have said in your submission that the production of recycled virgin aggregates currently benefits from the UK aggregates levy. It's therefore essential that levy in Scotland, the Scottish aggregates tax, is maintained and also increased to ensure that recycled and secondary aggregates are competitive with priming aggregates in line with Scotland's resource efficiency aims, which I think is laudable. I'm just wondering what about the issue that has been raised by Mr Doke in terms of the availability of these materials. If there is optimum utilisation or near enough at the moment, would increasing levy have the impact that you would desire, i.e., a greater incentive to do more recycling? Is the resource available to do that? I think that the resource rise and falls, depending on the construction and demolition markets right at this moment in time, were in a little bit of a lull in terms of new builds or build being taken down to allow the material to be extracted from building sites. I would also caveat that and say that you touched on it in the previous, and apologies for going back to this, but when I was sitting and listening to the previous meeting about the inert landfill tax, maybe not being too high. If we have a stock of what we call feedstock, we can turn that into recycled aggregates, but if there's not a market at the other end of that, it encourages more to go into landfill, especially with a lower rate tax of £3. There's not a financial incentive there to bring that back to be recycled, just to turn a bigger pile into an even bigger pile. I think that there is more that we can be doing, and what I would say as well is that the recycling equipment available has come in leaps and bounds in the last 10, 15 years since I've been involved in the market. We are able to recycle more materials that we had previously went to landfill but it's a little bit more intensive and a little bit more costly to do so, so the financial argument needs to be there for to divert more from landfill. What you're saying there for is it to make that to enable great investment in these new technologies that will upgrade the quality of secondary materials? You're looking for an increase in the levy, would you be right in saying that? Yes, and to put that in the context, I've said this as an organisation for many years, so I know that there is further down in the paper about making sure we talked about waste tourism before, but this is kind of on the other side of the spectrum of that, to say important stuff that may be or cross-border stuff, that would become very separated and divorced from what the rest of the UK are doing, which could lead to complexities and application of the rates. I understand the consistency and the bill sets out to be consistent, but if we're going to pull a lever here to change behaviours, then that is an opportunity that we have. You've talked about secondary aggregates, and in particular incinerator bottom-ash aggregate being strongly reliant upon the aggregates tax to remain competitive in a challenging market, allowing large-scale landfill diversion and avoids of raw material extraction. One of the issues that was raised last week on our visit was the fact that there are certain, although the quality of recycled materials is improving all the time, there's still a certain view that they're never going to be as good as primary aggregates in certain areas. To touch on the IBA, the incinerated bottom-ash aggregate, obviously the push towards the landfill barn and the increase of what we call energy from waste plants, where we incinerate the residual waste to power the national grid, that's led to a material that comes out the other end, basically the ash. I know that this is probably crossing over different departments here. We've failed to receive a waste classification for this material type, which makes it particularly difficult to get into applications to be able to really have a market for this material, so what you're finding is a lot of this material is just getting piled up in landfill sites just now. There is a challenge around that, and what it can be used for. SIPA has issued, as you see in our submission, what they call a position statement, which means that it can be used in a very narrow series of applications, so it can't be near to a water table, close to a river, it can only go down to a certain depth, so it is very, very narrow. If we look at our example of other countries, which are maybe a bit more progressive on this, in the Netherlands they build runways and roads and weakland land with this material, so there is a use for it, but I appreciate this committee here is not advising SIPA on this, but there is a challenge that if the aggregate levee is not maintained or increased, that all that will happen is this good work that we're doing and diverting waste from landfill will end up with a secondary problem, which is incinerated bottom ash, taking its place from the landfill that we're diverting. Cozzler, in your paper you've said that, should the intention be to increase incentive to move away from sourcing primary aggregates to secondary recycle aggregates, then how might this impact on councils' ability to procure at reasonable cost? I take it you'd be looking for a kind of rate whereby local authorities or other public authorities were buying secondary or other aggregates. Well, primary aggregates would have the tax and secondary would not, so how would that have an adverse impact on Cozzler if there was a bigger shift to secondary aggregates, recycle aggregates? I think the point has already been made that it's not necessarily a completely open market for being able to access secondary recycled aggregates. The point that was being made there was similar to other points being made in the Cozzler submission around the fact that councils are substantial procurers of aggregate, they also do wrong quarries, and within that I suppose the point being made is that if the cost per ton, the aggregate tax rate goes up significantly, there's the issue about how would councils be able to continue to afford to do the kind of work that they have to do that require aggregates, and particularly roads maintenance and roads network. The question there comes back to how aggregates tax can work with encouraging and increasing the supply of recycling. That's what you're looking to do in Cozzler is that in one breath you're not really keen on the aggregate tax going up because it would impact on local authorities the cost base because there would be purchases in large quantities of those primary aggregates, but at the same time you want to encourage greater use of recycled aggregates. Are those not contradictory objectives given the fact that the levy is really required to create a differential cost so that more money can be invested in and equipment to recycle by companies? I think we recognize the existing aggregates levy and how we see the aggregates tax coming in, at least initially, suggests that it is seen as a lever, it's part of the kind of, I suppose, if you like, a suite of things that can be done, and I don't think we oppose the fact that councils have to pay the tax along with any other procurer. I think the point is if we're going to have an aggregates tax in Scotland then that is a bit different from the aggregates levy then what we should be doing is focusing that more in terms of that kind of suite of measures, if you like, or things that could be done. Certainly heard from our Cozzler's Environment Economy Board last Friday that there is a willingness, for instance, for councils to be able to produce more material from secondary, building materials, et cetera, and to be able to use those, but you need investment in that as well. I think that the point is about bringing a tax in like this. There's an opportunity here to, and I think that point was made earlier about if we're going to respond to the challenges more effectively with a dimension that perhaps recognises the circumstances more closely here, then here's the opportunity to do that. We're not saying that we don't anticipate the potential that the actual tax rate could go up, that's obviously up for ministers to determine, but you could be looking at that in a different way and perhaps increasing the recycling could be part of that. If, as Mr Neil says, they can build runways in Netherlands with recycled materials, there's no reason why roads in Scotland can't be resurfaced using recycled materials assuming the regulations can be adapted to allow that to happen. I'm not an expert in the roads field, but certainly the sense that I got from the board members on Friday was that road services are the ones that are going to, if there's any significant increase in the tax rate, then they're the ones that are going to potentially experience that the most, but also equally there are opportunities, I think that they're putting forward about how recycling could be looked at and using secondary aggregates in a different way, and that's what we should be trying to encourage here alongside the incentivisation, if you like, of what the tax is itself. Mr Doke, you've said in paragraph 16 that English producers may be keen to exploit any substantial increase in the tax rates in Scotland, so it depends what you mean by substantial, what would you describe as substantial? For example, say that the Scottish Government, and I understand that I don't intend to, but say that they decided to put up to £3 from £2 and £3, which is going to be from April. Given the cost of shipping, trucking aggregates, as a pound a tonne, people are going to be shipping vast quantities of aggregates into Scotland, because I would have thought that the actual cost of those shipments would be much higher than a pound a tonne when the time you pay the fuel and the lorry and the driver and all the rest of it, and there's not many populated areas in the close, in the Scottish side of the border, indeed, in the English side of the border. Most of the cities that would use aggregates are really fuller to the south, so would that actually have a real impact? In other words, what's the elasticity of demand? Conversely, if the Scottish Government reduced the tax to a pound, would there suddenly be a huge demand for Scottish aggregates in England? It just seems to me a bit unrealistic. We're talking about a pound a tonne here. It just seems either way. I just am struggling to find out how that would make a major impact in either direction. I think you're right, the chairman, and so far as in terms of the elasticity of the pricing, as you say, we're commenting on a bill that doesn't have a rate stated within it. We are trying to draw the point that, as I said, we've heard calls for significant increases in the tax. I think that depending on the quality of the product will depend on how far it can travel and the implications, therefore, for the actual transport costs. So your correct and so far, if it's a low-value product, is it likely to travel further as a consequence? If it's a low differential, perhaps not. If it's a higher-value product, then there will be more likelihood of it to travel. In terms of high value, I think that red gravel stones is one thing that appears to be high value. There are other high-value primary aggregates that could be impacted by this, either way, by lowering it or increasing it. There are a variety of products that are produced at quarries, depending on the geology. Something that we shouldn't ignore is that, even in the production of a higher-value product from a site, you will still potentially have a lower-value product that you still have to remove in order to get to the higher-value product. That lower-value product is in competing with, perhaps, secondary and recycled materials. That can be a knock-on effect from that side of it. I think that the point that I was trying to get across is that if we are focused on recycling and secondary materials and aggregates, I would say that the point that I was trying to make is that the figures that we have already seen out from the Scottish Government are suggesting that 87 or 89 per cent of construction demolition waste is already recycled. If there is potential, we don't know, because we don't have that research, I would argue, to say what those other uses might be. Mr Neil referred to bottom ash as one, but there is an example where you are restrained by the quality aspects of the product, as recognised by CEPA, in terms of the restrictions that they have placed on it. You won't always get secondary or recycled materials to replace virgin aggregate in terms of the quality requirements that are stipulated for various projects. I think that is the point that I was trying to get across in terms of both volume and quality. I think that you have got that across. I think that we will accept that there are some areas. I think that what Mr Neil said, and I ought to put words in his mouth, is that the quality of recycling improves. The differential between virgin aggregate and recycled is narrowing in some areas. It is marginal. Would that be right in saying that, Mr Neil? Yes, I would agree with that. You see that in the marketplace at the present time. As I said, there has been for a number of years even dry recycling in terms of crushing and straining of materials returned to sites. You have then seen investment in wash plants, where materials are going through a secondary process, so there is greater use of recovery of materials. You are seeing that flow at the present time with the tax at the current rate. That is one of the points that I was trying to get across. I think that there is probably more to do with the landfill tax than there is to do with the aggregate tax. Incidentally, Gillian Mackay has had to leave because she is in the parliamentary bureau and she has had to go to a meeting there. She just gives her apologies. Just one further question, Mr Dope, before I open out to colleagues around the table. In your very first paragraph, you talked about the extraction of aggregates in Scotland as the rest of the UK is well managed and heavily regulated. With a strong environmental track record, I think that we recognise that. However, we have had concerns raised about unregulated couriers and so on. How big of a problem is that issue? Would you like to see something in this bill that tackles that? I think that if I can jump back a small step, the approach that we have taken in terms of our engagement and response to the bill is to be asking for the establishment of the technical advisory group, which was subsequently set up. In terms of being distinctive in terms of a tax that is different potentially to the UK Ags Levy, we were calling for greater transparency in terms of the register of sites and how your sites are monitored, pleased, even to the point of suggesting that there is a role beyond the implementation of the tax in terms of a working group with Revenue Scotland in order to ensure that it is almost self-policing. Our members are keen that whatever rate of tax it is that it is sure that that is a level playing field across the sector and that it is well enforced and ensured that those who should be paying their tax are paying their tax. We would agree whether it is £1, £2 or £3. We want to make sure that everybody is paying it and that your members are not being disadvantaged by paying it well. A competitor is maybe 10 miles up the road, but I am not regulated and not licensed in their undercutting. I am going to open it up to colleagues around the table now. John, before by Michael. Thanks very much, convener. On the question of definitions and what commercial exploitation means and all of that side of things, where sticking very closely appears to the UK rules, are you all comfortable with that? You are all happy with that. There was a suggestion from at least some people who had written in to us that it could be wider that there is products being missed which are not being taxed according to these definitions. Do any of you feel that that would be the case, Mr Neil? No, we chose to only—we are not a taxpayer as per this bill. I remember that we chose to only answer a few of the questions that were posed. We are not seeing anything or I cannot recall anything that would say that that should definitely be included in the taxable element of this bill, so I do not have anything. Mr Dock, you are not all that enthusiastic about the tax anyway, so presumably you do not want anything. I think our position has been that the UK—I think that Levy has been in operation for 20 years—the exemptions, the reliefs, the process and we have seen a drive towards recycling whilst that has been in post. From that point of view, is business as usual as much for our members? So you are not arguing that a particular product will be taken out or anything like that? No, that is right. Mr Shama, you are arguing or Cosla was arguing that there should be certain exemptions for local authorities? Yes, I suppose I was going to mention a couple of things. One is that we were on the expert group that was looking at the options for devolving the tax, so we certainly understood around the table why we would probably want to see this come in as something that was stable and was not going to cause huge disruption initially. However, I think that the discussions involved quite a range of points being made, some of which could be about what is the definitions, but the other—certainly one thing that I did raise in that group was where local authorities are having to—and we talked about the availability of the recycled and secondary aggregates, if they are having to use virgin aggregate for roads maintenance etc. A lot of that, widely it is public benefit, but secondly it is also about other environmental measures that are being undertaken within the circular economy, principles and priorities, so active travel for instance. If that is going to become more expensive for councils to be able to put in those projects, there is some more funding that comes from the Scottish Government to—there is obviously quite a substantial amount of capital investment coming from Scottish Government even as we speak around active travel, councils also having to put their own resource in. I put the argument forward that maybe there was some scope to look at not necessarily removing the tax, but it could be about some sort of recognition, if you like, that that is why the primary aggregate is having to be used. Would you go as far as saying that we could have different rates? Say in the Western Isles you have got to use a virgin material, there could be a lower rate, whereas in the central belt when you have got a choice it should be a higher rate? I think that is those sort of discussions, I think, of merit being had and I think bringing the tax in will be the first thing to do, but we are already engaging with the Scottish Government and officers and with the other stakeholders as well, so one of the things that we plan to do is to have a local authority workshop to talk some of these through. So you have not got a position yet as to whether you would want a national rate or local rates? We do not have that sort of position at this point. Another question that I think I was initially surprised about, but maybe I am understanding it now, I thought the tax would have been on the point of production or at the quarry rather than when it is put into use. Obviously that would cause a huge problem with the rest of the UK if we had different systems, but what is the actual logic of having it at the point of use or commercial exploitation rather than at the source? The tax has been in post for 20 years under the commercial exploitation point. If you are looking at it from the point of view of production, then you are going to cause cash flow issues, and you are going to be looking to tax materials perhaps sitting within the quarry or sitting on the deck that is not yet being sold. Potentially materials, you get into the whole debate as to whether materials are actually going to go out the gate or not because it might be lower quality material that might actually end up being left as part of the restoration of the site, because you would be paying tax on the material that is not actually being exploited. I can see why, for 20 years, it has been on exploitation in terms of the point of sale. Has the experience been that any of it has gone missing between the point of production and the point of exploitation? I am an accountant. It seems neater to me because you know where the quarry is. If something is leaving the quarry, it is easy to measure, but goodness knows where it might go for exploitation. Not to my knowledge. I do not think that there has been any investigations. I am not certain. I am not aware of any investigations from each of our scene in terms of that particular issue. I do not have any views on that, Mr Neil. I could see why you would ask the question, but we are not taxpayers, as I say, for the aggregate levy at this moment in time. I agree with Mr Dock that the taxation at the point of sale is very important for the reasons that Mr Dock gave. I start from the position of wanting to make this and make sure that it is as simple as possible for business across the board and that we should differentiate things as little as possible. The point that is in my head around this is that we want to, at the same time, maximise the recycling rate. That is probably the kind of attention that we are trying to investigate for various questions around it. Strikes between the evidence so far is probably in two different areas. One is about expanding the marketplace, and that might be through price competition, so that a recycled aggregate is more competitive on the basis of price that is cheaper because you do not have to pay the tax, or through broadening the use in terms of the classification of the aggregate and where it might be used in those different places. I want to push you a little bit further on where the convener was going with in the start. How much more could we achieve, and understanding that those are both variables within it, how much more is out there for us to then try and put in place a policy regime to advance that cause of the maximising recycling? You said that we were in a lull at the moment, but is that an infinite process that, as long as the price conditions are there, we could just keep finding it? Or is what realistic in terms of how much we could push up a recycling rate and get the environmental benefits of that? I think that what I said when I said we were in a little bit of a lull. Obviously, to recycle material, you need to feed the stock material there, and there is a significant amount of that, as I said previously, going into landfill at this moment in time. I will speak from my own company's perspective right at this moment in time. We are currently producing three days a week, so we have got an extra 40 per cent capacity there to produce more aggregates, but there is not a financial reason. The market is a little bit depressed in terms of sales available there, and it is obviously hotly contested by not just the recycled market, but the primary aggregate market as well. When there is less available, prices come down and the competition increases, but from my point of view in a recycling market, there is feed stock available to us if the financial conditions are right, there is capacity within the system to produce more, and I hope that I answered your question. Is the question for you more about demand rather than the supply side of your business? If the market places there, then you will be able to get more of the supply in and you will be able to sell it. There are a couple of things in that. The classification of the waste when we look at the incinerated bottom ashes is quite a big topic. How SIPA plays a role in all of this and the applications that the material can be used in. There is more that we can do to broaden the scope for using recycled materials that will help to push on our sustainability and circular economy aspirations. I also think that, as I said, the increasing sophistication of the technology being used, bearing in mind that this is multimillion-pound investments that companies have to make to achieve that, we need to set the foundation stone for a market that first looks at the secondary aggregate market before it looks at primary. Just to challenge a little bit on Mr Sharma and what he had said, we are actually having direct engagement with some local authorities who are not that many miles from where we actually produce this material and who are taking the view that primary aggregate is not much different, so we will just use that because we know that it is safe. We are currently trying to open negotiations to say, come and see the plant, I know that you visited a plant previously, and see the quality that is being produced because there is a stigma attached sometimes to 20 years ago someone on site saying that that recycled material is not of the quality is what we would expect, but things have come on so much that we need to change the perception of the industry that is using this material will create new opportunities for to really drive that number up and I suppose that this is a lever that we can pull in order to try and push that. We saw some excellent sand last week, I think. I have got that much, I am selling it. I suppose that what we also heard in that visit though was about that distance and so much of the carbon impact in this is about the transport. Mr Sharma, do you respond to that in terms of the balance between where you source the material versus the kind of material and how your local authority is balancing that in terms of its own carbon impact? Obviously, I cannot speak for the specific circumstances, but the feedback that I got from our board, the Environment, Economy Board, Members just last Friday was that councils are actively looking at alternatives and I heard about that they were looking at how can they make better use of their own building materials, for instance. I think the message is that, and I think that was the point I was making before, is that if the tax is coming in, that is one lever if you like, but let us not bring it in just as one thing. How do we encourage that, if that is the case, if there are blockers there as well in terms of what councils feel legally they can do? Let us explore that and see where we can go because I think there is a willingness. Mr Dope, can I bring you back to my original question? That was a little bit of a segue to the back and forward, but around that capacity or the potential, do you have a sense of the scale for the growth in this area? I think that the very outset of the point that I was making about secondary and recycled materials is the lack of research that has been done in terms of the availability of that material. As I have said myself, 87%-89% of construction demolition waste are secondary materials that we are touching on, but without a full understanding or knowledge of what the availability is of that material potentially to be used, both from an availability point of view and also from a quality point of view as we have touched on. If you think in Scotland we are producing of the order of conveyor, depending on the market, somewhere between 20 to 30 million tonnes per annum of aggregate, I think that some of the figures that I have seen in terms of construction demolition waste are touching, even the consultation document on this particular proposed tax was suggesting just over 1 million tonnes. I think that the chairs referred to a slightly higher figure. It is not anywhere near the 20 to 30 million tonnes. Please do not get the impression that I am suggesting that we should not be recycling or that we should not have the tax. I am just trying to pull, we are looking very much in the bill from one side, but we do not have the information on the other side from the point of availability of alternative materials, and that is the point that I am trying to make. From my perspective, as a 20 to 30 million tonnes of material, we have a list of them within the country of potential objectives or through the national planning framework, offshore wind hydro schemes with a potentially huge demand for aggregate. If the bill is designed to see a minimisation or a reduction in terms of aggregate and the revenue that is derived from it, that seems to be counterintuitive as to what the potential future demand for the materials might actually be and for the economy. That is useful. I mean, it feels like there is a reasonable amount of consensus around that the question here is more about classification rather than in use cases rather than price point. But it feels to me. I want a question around this in terms of differentiated by it. It feels to me that there is lots of different products in this, and with some of the virgin aggregates that we are talking about that maybe have a greater export value and that frankly it is worth shipping long distances, for instance, to neighbouring areas, whether it be red chips or specific, as you put it, to the geology of Scotland. There is an aggregate that we can export that there is a higher price value for. Do you think that there is any case to say that we should be having a more direct intervention around protecting those export or long distance markets versus something that is more localised? I know that that is partly the price elasticity around transport that is within that, but should we be making this more pronounced? The use of Scottish red chip that we should be saying that is a high price point is something that we can use, but we should be making a differentiation in the bill between some of those classifications. Put aside how difficult that would be, but do you think that there is a case to say that there should be a more direct differentiation in that? In terms of answering that question, our position has always been in terms of the one tax and one tax rate. Even in terms of consultation, in terms of the possibility of different tax rates within different geographical areas, I think that we see that as being difficult and open to potential exploitation perhaps. My last area was about the capital investment around the user case side of things. I find it a little bit difficult to understand that the more capital investment around the kind of facilities and technology that you would want to put in that would increase the quality level and give assurance to the marketplace that you had a really high quality product that would open up new possibilities, but that would require additional investment from the industry in those areas. I wonder if, at the moment, your model for that is that if you are able to sell more, then you can invest back. It feels to me that it is not necessarily that we will do that at pace. I wonder whether there is more case to say that it would be better off with a kind of a tax credit against landfill tax that might be against the residual, unprocessed part of that waste. The quarry that we visited last week was talking about the very significant amount of money that they have to pay to put the very last residual amount of waste into landfill. Would a tax credit against that not allow you to increase the quality of—I am just thinking that there is a different mechanism that we could advocate for. I know that it would necessarily be in this bill, per se, or maybe it could be, but that actually is a different mechanism to help you to get that capital investment that might be quicker. That is a really good question and not an answer that I can quickly form. Where we have been is that the company I work for very recently spent £4.5 million on a new plant. At this point in time, it was the largest plant in Europe for recycling materials. What we have seen is that the other parts of our business that supported the generation of feedstock allowed us to do more, because what we were doing is the plant that we had previously had a certain capacity per hour to produce aggregates. As soon as we got the pile so big that it made no sense to bring it into the recycling, we just took it to the local landfill tips that they could take it. By increasing the capacity there and putting that investment in, but not all members of CESAR have that level of capital expenditure available to them. I think that when the market improves and people can see the return on investment for spending that kind of money, then anything that is going to encourage and support investment in this technology should be encouraged, whether that be a credit system or I'm not sure if you're suggesting to offset the aggregate tax or if this is an additional to that or what it might be, but we're more than happy to engage with whatever that may look like in order to really keep the foot pressed on the gas pedal in this area. It's just an opportunity for us to put these things to the Government and ask them what their thinking is around how we make sure that the acceleration is there and taking on board colleagues' points about, and my own probably, I have predilection within this, to make sure that it's as simple a system as possible across border and it makes it clean, but actually what can we do to accelerate it? That's my convener, thank you very much. Thank you convener. It's just one small question which arguably follows on from the convener and Michael Marra as well. Mr Doak, in your submission, noted that significant behaviour change is unlikely unless the Scottish Government decides to change the rate drastically, and even then there isn't an obvious supply of alternative materials available. I know Mr Marra has been kind of touching on this but I'm still not sure that I've got a sense of that clearly enough when I thought Mr Marra made a very good point about aggregates that are specific to Scotland in terms of red chips, but I'm still not clear the detail of different aggregate types, what price increase they could stand in order to sum up to what overall potential price increase, although, as everyone said, there's no plans for that on the table. I wonder if you could just help me understand a wee bit any more. Of course, and as you pointed me correct, English producers may be keen to exploit any substantial increase in rates in Scotland, and I think we all understand that, but the devil surely must be in the detail. I know we've danced around this issue a bit with two separate questions, but if you could help me understand a bit more that would be helpful. I'm not sure perhaps if we're mixing up two points in terms of the issue about is there more to go at that was referring to recycling and secondary aggregates. I think the position that we've adopted is that in terms of taxation that should be consistent across all products in terms of primary aggregates. The point that I was trying to make in terms of not knowing what to go at is in terms of the point that I've made a few times now about what is, at the moment, we're looking at primary aggregates in terms of taxation and a suggestion that perhaps we increase recycled and secondary without having that detailed knowledge about what that pot actually looks like and what that pot can actually satisfy in terms of quality and availability and consistency. That's the point in terms of what more can you go at in terms of increasing the tax. Does that change that pot on this side? I don't know if it does in terms of quality and availability. You're correctly and I understand introducing another kind of complexity in terms of the enactment of the bill, but that's good because that's the sort of thing that we want to tease out. Have we got the data that we can draw to arrive at some of these decisions? I'm not sure what data your members will routinely gather and submit as part of the existing processes that teases out all of those different areas that the Scottish Government will have. I don't want to give the misapprention that we are not encouraging recycling. I'll look at the MPA website. We'll give you a list of recycled materials and our estimates of the figures of those. I say that our members are heavily involved in recycling as well as virgin aggregate extraction. We, as a trade association, will seek to encourage recycling and try to do that through influencing in terms of British standards or influencing in terms of Transport Scotland. We will try to do that. I'm not sure if that answers the… Yes, it does. I'm genuinely not trying to get to any slam dunker and I'm genuinely trying to understand, so no, it gives me more insight, although I suspect I personally have got further to go to kind of bottom out some of this stuff, but it's helpful, thank you. So can I make a slightly other wee point? Forgive me if I've gone off tangent. One of our things that we are suggesting, not necessarily in response to this particular bill, but is establishment of a Scottish minerals forum, which we think would be useful. Particularly when we listen to the point that I touched on earlier in terms of the potential demand for aggregates going forward. I think that there's a real need, not just in terms of the national planning guidance, in terms of regulation. We talked about maintaining the land banks of 10 years. We would like to see a strategic thought process beyond that. In terms of, we're talking about 2045 in terms of NPF4. There's nothing to stop that type of forum, including, as I would like to see, bodies like Heads of Planning, likes of Scots, likes of COSLA, likes of SIPA. The issues in terms of recycled materials could be brought to the fore and discussed in that type of forum in order to ensure that, as a country we are, we are looking at a circular economy. That links back into the consultations that are out on the circular economy, which we again have made representations on. That makes similar points. No, that's helpful, thank you. Thank you very much and thanks to the colleagues for their questions. Sir Sharma, just one last question to you. You're a member of the expert group, which began in January last year and has met in five occasions, can I ask you who else is, which other organisations are on that expert group? Off the top of my head, I probably couldn't. It's a whole range of people from the business community and, obviously, ones that are working in this area. I can provide a list, if that's helpful, from the last minute. Do you consider it quite a balanced group in terms of all points of view? I would say that we were invited on to that group. We were obviously coming from a local government point of view. Primarily, the group was a consultation entity with a range of stakeholders and that probably did reflect the business community to quite a significant extent, but it didn't mean that we weren't able to get our points across and they have heard some of these before, so I don't know if you can sit down or think once. No, I've just got a copy of the last minute, well, on the recess of minutes. You had the Chartered Institute of Taxation, British Ceramic Confederation, MP Scotland, Chartered Institute of Building, CESA, BGS, British Geological Survey, COSLA, British Glass, Transport Scotland, British Agrits Association, Institute of Chartered Accountants, SEPA, Zero Waste Scotland and, obviously, Revenue Scotland and the Scottish Government. Well, that's just the list of who we are. I was just feeling comprehensively, and that's really what I was looking to to to take in from them. That's, like, no wonder you couldn't remember them. Okay, well, thank you very much for your evidence today. I think we've got a pretty open mind on this committee, you know, and settling this bill, so we'll see where it takes, as with the evidence that we're going to be taking in future sessions, the next one being next Tuesday, so thank you very much for your time in that ends the public session and indeed the committee deliberations today. So, now close the meeting. Thank you all.