 Welcome to the fourth meeting in 2019 of the Finance and Constitution Committee, the first item on agenda this morning is evidence on the budget bill at stage 2. This is intended to allow the committee the opportunity to put questions on the bill and the amendments that are made to the bill, and to the Cabinet Secretary and his officials before we turn to formal proceedings. We are joined by Derek Mackay, who is the Cabinet Secretary Ffarnanthe economy and fair work. The Cabinet Secretary is joined for this item by Scottish Government officials John Nicholson, Deputy Director of Public Spending, Graham Loneson, who is the head of local government finance, and Aiden Grieswood, who is the head of tax division in the Scottish Government. I welcome our witnesses to the meeting this morning, and, Cabinet Secretary, I invite you to make an opening statement. Okay, thank you, convener. In relation to stage 2 amendments that the committee is considering today gives effect to the spending plans that are announced in Parliament during stage 1 of the budget process. As I have announced, I will be providing an uplift of £90 million to local government as part of the budget deal agreed with the Greens. The amendments that I am proposing today allocate an additional £90 million to local government and an additional £4 million to the health portfolio in 2019-20. In addition, there are two further amendments that are necessary to increase the total size of the resources that are available in the Scottish budget and to increase the cash authorisation level, both increasing by £94 million, figure to accommodate the changes that I have just mentioned. Those increases are being funded from additional consequentials provided by HM Treasury as part of the UK supplementary estimate process, which, early last week, the Scottish Government received confirmation of the quantum of those consequentials and the flexibility to carry them forward into 2019-20. I hope that that is helpful for the committee. I thank you, cabinet secretary. Can I take you to the financial constitution committee's budget report, in particular what we have said in regard to the Scotland reserve? The committee recommends that the Parliament needs to give thoughtful consideration in relation to both this budget and future budgets about whether it may be prudent to begin building up the Scotland reserve to deal with potential forecast error and where that money would come from. For example, whether building up the Scotland reserve should be a priority in allocating any underspends. Cabinet secretary, our committee's budget adviser told us that in the budget you are planning to draw down more from the Scotland reserve than is currently in the reserve. Can you explain how that is possible, please? Because the underspend that will be achieved in the current financial year transfers into the reserve, so I anticipate that they will be more available at the end of the process. That is only fully determined after the closure of the budget and is presented to Parliament in the usual way, so I anticipate generating an underspend that goes into the reserve, so that will not be the case. Do you have a number that you can put in that, cabinet secretary? Not right now, because it is always a fluid position in terms of the underspend as you work your way through the financial year, but the final number is presented to Parliament in the usual fashion. Thank you. Murdoff? Thank you, convener. Good morning. Cabinet secretary, I would like to ask a question about the additional £148 million in barat consequentials that you built into your budget when you announced it in Parliament on Thursday last week. When you came to the committee on 16 January, you were very clear at that stage that all the funds at your disposal were allocated. There were then budget discussions that took place with other parties, including the Greens, and then you were able to find an additional £90 million for local government in order to do your budget deal with the Greens. Have you phoned Philip Hammond to thank him for getting you out of a hole by giving you this extra money? No, but I will say that the chief secretary to the Treasury in February will raise a range of matters of interest. I think that I heard Adam Tomkins say raid. I would like to raid the Treasury, that is certainly true, but I will raise a number of matters of interest to Scotland, including the general financial position, preparations for Brexit, a whole host of other issues that I will raise with the Treasury. When did you learn that you had an extra £148 million? Thursday, as it happens, was Friday 25 January that was first notified by officials that there may be the prospect of extra Barnett consequentials. The following Monday, my officials sought clarification for the Treasury. Of course, that was the week of stage 1 of the budget. We required the detail, because it is important to know where the resources are derived from, because that may have an impact on where they can be allocated to. That was on Friday 25 January, and I am sure that Murdo Fraser wel appreciates that. That was after my committee evidence when I had said that I had allocated every penny in the Scottish budget. Those resources were not anticipated. Why did you not tell Parliament that you had this extra money? I did tell Parliament on stage 1 of the budget when I addressed the chamber. Why did you not tell Parliament when you heard that you had the extra money? Given that we were in a situation where there were on-going budget discussions taking place with the Green Party and other parties, why did you not inform other parties that Parliament is a whole that you had these extra resources at your disposal? That is a ludicrous question, as Murdo Fraser well knows, because of the update of Parliament and all the expectations around transparency. Officials look into the detail of the Barnett consequentials. That is what they did, to ensure that we were in a sound place to be able to allocate those resources in the fashion that I did. I have engaged with all political parties in relation to the budget compromise that was necessary to be found to ensure that the £42.5 billion budget could be approved. As it happens, the Greens were the most constructive party in this Parliament in terms of the opposition engaging with the Government. As soon as I was able to, I informed Parliament and as it happens that was stage 1 of the budget. You could, of course, have informed Parliament as soon as you became aware of the extra money. You could have had an inspired parliamentary written question that you could have answered on Monday 28 January. What that would have done is allow all the other parties who were involved in budget discussions to be fully aware of the envelope of money available to you. It may be that Mr Harvey, on behalf of the Greens, has a very good deal as a result of his negotiation, because he got an extra £90 million for local government. It turns out that you had much more money than that. It turns out that you may have much short changed Mr Harvey and the Greens if he had negotiated harder. He could have got perhaps a bit more money, but you did not tell the opposition parties that you had the extra money available. How can we expect to have constructive and transparent negotiations around the budget when you are concealing from Parliament as a whole and from the opposition parties the fact that you have the additional resources at your disposal? First of all, Patrick Harvie, the Greens managed to secure a deal that was better than any other opposition party that it was trying to secure, including the Conservative party that achieved zero, the Labour party that achieved meltdown, and the Liberals that achieved zero. In fact, I think that there has been a constructive outcome from the budget, and, of course, the alternative is that a budget does not pass at all. In relation to transparency around the resources, I think that it is quite effective government. We hear about the potential consequentials. Officials probe it in a presented to Parliament within a matter of days. If I had received a parliamentary question, I would have answered honestly. I think that process would have taken much longer than the process that was undertaken, which, as I reported it to Parliament and explained it, how the budget concession was funded. Incidentally, I have seen some press coverage at the weekend, which is factually incorrect. I have proposed to use the health consequentials, of course, for the Scottish Government, but I have also earmarked resources for a teacher's pay deal, so it is not true to say that resources will not be used. Actually, resources have been earmarked for the teachers' pay deal, if that is agreed. In relation to the parliamentary process and budget negotiations, it is up to other opposition parties what they bring to me, and I would contest that parties should maybe drop their ideological obtuseness when they approach the budget. If other parties want to engage constructively, they can help to decide how we allocate resources. I think that it is probably Murdo Fraser kicking himself on behalf of the Tories for not engaging in the process more constructively than otherwise could have done. Surely the opposition parties would be a bit more constructive in terms of the budget. If you, as cabinet secretary, were not being essentially dishonest about the resources at your disposal and concealing from them and concealing from Parliament, the extent of the spending envelope might be available. In this committee, we have discussed, as part of the budget review process many times, the whole question of transparency of the budget process. This is a Government that is anything but transparent. It is a Government that is concealing from Parliament and concealing from those who are in good faith trying to negotiate the budget, the fact of the availability of funds to this Government that might be able to be spent on the things that matter to everybody. It is surely that you need to reflect on that, cabinet secretary. We can watch a language when we are going about it as well. I think that that would be helpful. I am happy. I think that I have set out very clearly the timeline in terms of officials hearing of the Barnett consequentials and how they have been deployed. How they are being deployed is now a matter for Parliament. I could equally throw back the question, for how long did Treasury know about the consequentials, that the Scottish Government was entitled to, that that information was not forwarded to me as part of the supplementary estimate of Barnett consequentials? I have no idea for how long they knew about those consequentials. When I was here at the committee, I was asked, did I have any extra resources at my disposal as part of a budget deal, and I answered honestly. That position changed as consequentials came to light. They have been deployed in the fashion that I have quite clearly set out to the committee this morning to Parliament last week and in response to any inquiry that has been forthcoming. Many other parts of the budget deal are down to flexibility or policy concessions that have been made. I have been honest, transparent and clear throughout. I will ensure that Scotland gets every penny that it is entitled to and that it is spent to ensure that this country has stability, stimulus and the sustainability of our public services in the face of chaos and adversity that is coming from Westminster. Could I therefore make a formal request, cabinet secretary, that in future, when you are informed of Barnett consequentials from the Treasury to the Scottish Government, that you immediately inform Parliament in this committee of the Barnett consequentials? Why would the committee only be interested in some aspects of the budget process? When we carry out the autumn budget revision, the spring budget revision and the medium-term financial strategy, the budget-full scrutiny process—I remember not reading those documents because that is actually where I cover—the revenue that the Scottish Government receives and raises and the expenditure, this information is all presented to Parliament. Maybe the member should read the documents that I present to this committee. Very briefly, I understand from what you have said, cabinet secretary, that the additional Barnett consequentials would represent not 0.005 per cent of the total £42.5 billion. Was there any sense that you had from the negotiations with other parties that what was stopping you getting over the line with a deal was not 0.005 per cent of the total spend? I do not reveal the position from other parties because I do not think that the right thing to do is to deal with what was said in the private budget negotiations, but most parties—indeed, all parties—went public with their budget ass. In terms of the Conservative party, it was drop independence. The same goes for the Liberal Democrats and the Labour Party put forward the proposition that changed and it depended on what I was speaking to in the Labour party as to what the proposition was. That is why I have arrived at a deal with the Greens who engaged constructively. In the end, that change of Barnett consequentials is a tiny part of the overall budget. Parliament has to bear in mind what we are being asked to approve overall in the budget process is £42.5 billion of expenditure, and then, of course, the necessary revenue-raising elements. What stage 2 is looking at is essentially that figure around the allocation to local government of £90 million in health, the additional £4 million. It is fair to say that I would not get into the detail of the spending requests from the other Opposition parties because they could not get past their constitutional obsession. I want another supplementary in this area before we move on to the other area. Thanks, Bruce. We should not forget that Barnett consequentials are essentially Scottish tax pairs of money coming back to Scotland. It is not some gift or largesse from the UK Tory Government. However, has Mr Hammond ever phoned you, Cabinet Secretary, to thank you or thank Scotland for the billions that they rake in through tax revenues and things like whisky or oil and gas for decades? It is fair to say that I am getting a pretty cordial relationship with Treasury ministers. It is somewhere easier to deal with than others. I deal with Liz Truss, she is the chief secretary to Treasury. We have got something in common. We are both born in Paisley, which is of interest. Miles Stride is another financial minister in the Treasury. He is from Kilbarkin or Kilmachome, and he is from West Remfrewshire. You can see the Remfrewshire link in both Treasury and Scottish Finance. In seriousness, I missed Adam Tomkins' commentary there. I agree, convener. We have a pretty cordial relationship. We get on with business. I have asked UK Government, but I have never had a phone call thanking Scotland for its largesse contribution to the Treasury. Equally, I do not see Barnett consequentials as some sort of gift from a benevolent chancellor. The chancellor has wrecked austerity and impending economic self-harm upon the UK and Scotland. We have got nothing to thank them for right now. We move on to another area on council funding, James Kelly. Thanks, convener. The deal that you have announced in relation to the £90 million basically still leaves councils in our position of a cuts budget. The overall position in relation to core funding is that council budgets will still be cut by £230 million. That is correct, is it not? No, it is not correct. No. The budget analysis produced by Spice shows that. That would pick a council. You say that Spice is wrong. I am saying that I have my own statistics. I am allocating real-terms resource increases for Scottish local government. If you want to pick a council, we can look at the increased spending power for individual local authorities. Are you saying that the Spice figures are wrong? I am saying that if you discount the Spice figures as we have described before at both the local government committee and the finance committee. If you take out actual cash, if you take out subjects of funding, childcare for example, £210 million invested in childcare, I see childcare as a core function of local government. But only if you start excluding actual cash, actual resources to local government, could you possibly come at a figure that says that local government is getting less money? In fact, and Spice says this, local government is getting more money in resource and in capital. That was at draft budget in December. I can go through council by council the increase that each council will enjoy as a consequence of this budget. In fact, local authorities are receiving more money from Scottish Government. In fact, local authorities are enjoying a real-terms increase. In fact, local authorities are getting a capital increase. I do not know how to say it any other way, convener. I put it to you, cabinet secretary, that you are living in a fantasy because the reality is on the ground. If you speak to any local councillors, including SNP ones, the reality is that they are facing a situation where they are setting budgets, where they are having to look at hard choices such as cutting jobs, cutting services, closing leisure facilities. To sit there and say that councils have got more money is just their sheer fallacy. That is absolutely true. Would Mr Kelly wish to name a council, and I will tell you how much extra money they are getting? The reality is that this is a cuts budget for councils. That is what is happening on the ground. Alphabetically, if not even on the ground? Moving on, convener. Can you explain why you choose to take £54 million and stuff it down the ministerial sofa, as opposed to allocate it to councils to alleviate the cuts? That is a pretty unkiherent question, but if what is meant by that is, are any of the bach's Barnett consequentials been held in reserves for an unknown reason or not? I have said that we are allocating resources for the teachers' pay deal, which I expect will be a substantial amount. That pay deal is still to be agreed by the teaching trade unions. You said earlier that you expected an underspend this year. In fact, last year, we know that the underspend was £454 million, so you expect additional monies to come into reserves on top of that £54 million. In the previous financial year, the underspend was allocated to local government in the current financial year. I have outlined in the draft budget document that I am fully allocating the resources from the underspend to expenditure in 2019-20. What I am anticipating is that there will be further underspend generating this year. Partly because of the last-minute Barnett consequentials, and that is why HM Treasuries has given me the agreement to relax the limits around the fiscal framework and what can be carried forward. However, I fully intend to allocate the resources. Simultaneously, although it has been accused of not putting resources into the underspend, I have been asked into the reserve why I am not putting more resources into the reserve to prepare for any potential tax reconciliation that might come. Again, I will have to look at those figures once we are at the point of publishing them, but I am very mindful of what the committee has suggested to me in your budget scrutiny evidence. Of course, I will respond to the committee's report before stage 3, convener. It is nice to be talked about so much this morning in the committee already. Inevitably, the stage 2 discussion that we have involves a little bit of posturing and a little bit of positioning, and some people want to say that the budget is terrible and the worst it could possibly be, and maybe you want to say that it is perfect and the best it could possibly be, and the truth is probably somewhere in between. However, what we have got to in the process is a situation where, in the final days and even hours before the stage 1 debate, local government did not really know what position it was going to be in. They welcomed the changes that have been announced at stage 1, but they have been left in a great deal of uncertainty in the run-up to that while they were trying to start to prepare their own draft budgets at council level. You might wish that everyone agreed with your analysis that ring-fence funds should all be counted as part of the same pot. You might wish that other political parties all engaged with constructive, costed proposals, but what does the Scottish Government need to do differently in future to ensure that the process is a bit better managed, gives a bit more clarity and does not go down to the wire in this kind of last-minute, breakneck process that is no good for local government? I think that there is some validity in that point. I would say first of all, convener, that everyone who is familiar with the process will know from the point of the UK budget to the figures that we are running, the modelling that we are doing and the pressures that we are faced with. We have to move at breakneck speed to be able to produce our own budget, and that is a consequence of when the chancellor's budget is moving to presenting the Scottish budget. There is an issue about timing generally that I have raised with the committee before. I think that the budget process review group has given us a lot of recommendations and a helpful timetable for the budget process itself. However, let's not lose sight of the fact that, from the chancellor's budget to the Scottish budget, a great deal of work is being done—comprehensive work—there are many moving parts to the budget through that process. Those figures change, and they can change in a substantial way. Of course, there are the figures that we provide to the fiscal commission to give us the researched position from our potential tax policy. There are many moving parts. Where I think there is room for improvement is that I have engaged with Opposition political parties, even earlier than my predecessor. If members recall what happened before, the draft budget was published, and then there was the negotiations. The negotiations carried between stage 1 and stage 3, and sometimes—convener, you will remember this very well in a previous capacity—the budget deal was done at stage 3 in the previous minority government. For as long as I have been finance secretary, the deal has been done in advance of stage 1. There is the first difference. What I have also done that is different is to engage with political parties well in advance of stage 1. Where I think there is room for improvement is that if we have that discussion about genuinely what are parties looking for, what are their interests? We now have an improved committee process, where committees are giving recommendations on year-round budget scrutiny. If parties wish to bring earlier their positions, their views, their options, then I think that that could be an improvement to the process. However, I am afraid that what I have been dealt with is almost trying to drag out of politicians from the Opposition parties what their position is, post-publication of the budget. However, I think that we can engage earlier. I would welcome on that engaging earlier, and that may well convener return to the point about what information could be shared at an earlier point. However, I do say that it is a very fast-moving situation right up to the publication of the Scottish budget because of the timescales that I have described. You have made about the UK timescales that you do not control. However, you have also acknowledged that there is some validity in the question and that we need to be looking at what we can all do to improve the process. It might be that, if you look at the UK Government's approach to those things, perhaps Murdo Fraser is right and that the chancellor lets all Opposition parties at Westminster know immediately that any kind of change in financial context is known to him. I suspect not, but we can all look at how we might do those things better. One of the changes that you agreed in the stage 1 debate was a move to multi-year funding for local government. Would you agree that that discussion with political parties and with local government and others who may have a view on it needs to begin well ahead of the next budget? If we are in a position next year of trying to agree a three-year funding settlement in the same breakneck way that the last-minute budget discussions happened this year, that will be an intolerable situation for local government to be in. Would you commit to beginning that discussion with local government and political parties as soon as the summer recess is over so that the overall shape of that three-year settlement can begin to be negotiated and discussed well in advance of the publication of the budget? I could go further than that. I think that with the Government's current local governance review, it is an important part of that local governance review right now in terms of the fiscal arrangements and the multi-year budget setting that we have described. Essentially, it will be a rules-based, principles-based approach, so I see no reason that we cannot begin that discussion as part of the local governance review. I've got a supplementary from Angela Constance. Thanks, Bruce. I wonder if I could go back to the spice paper that was raised by James Kelly there, cabinet secretary. I presume that it's the same paper that we're reading from, but it says here in black and white that this is the spice paper. Finally, one solely above when the capital budget has included the total funding for local government now increases by 2.8 per cent in real terms. That's up 298.9 million pounds. That's not a cut in my reading of it. Did you clarify that? That element of that line in the spice paper is absolutely correct. I've said before that you only get to a cuts figure if you reduce actual cash going to local government. Again, I have a table that will show the full spending power of each local authority, including other elements. That line shows a real-terms increase to local government. Maybe Willie Coffey has put it more eloquently than I have tried to explain it to Mr Kelly. I would like to ask an invite to show me the East Ayrshire figures. East Ayrshire's total council spending power increases by 4.91 per cent, and that's an increase support of £12.1 million. Thank you, convener. Good morning, cabinet secretary. Like other members of this committee, I received a copy of the letter that you sent to Councillor Evison, the cosla president, dated 31 January. It's a fairly lengthy, detailed letter in which you set out a fair and balanced characterisation of the opportunities and the challenges facing local government. If I can read out one sentence that encapsulates that, it says, as a result of the continuing UK austerity cuts forced upon us, I know that local authorities, along with the rest of the public sector, are still facing some difficult financial challenges. The cabinet secretary will be familiar with the phrase divide and conquer. I wonder what opportunities does the cabinet secretary think there are for the two spheres of local government and the Scottish Government to present a more united front to overcome and oppose austerity? Where are the opportunities for the two spheres of government to work together on those longer-term priorities? In terms of the political opposition, I think that we should speak with one voice in opposing the continuation of UK austerity. I think that that's very important and that's very powerful. The committee is aware, as I have described before, that, excluding the health consequentials, there has still been a real-terms reduction in resource to the Scottish Government between 1819 and 1920. Certainly, what has been given doesn't undo the £2 billion reduction over the 10-year period. Speaking with one voice to oppose that on-going austerity is significant. In the major threat to our economy and our people right now is undoubtedly Brexit. Again, we should work together in both opposing Brexit and opposing the worst-case scenario of Brexit, which is no deal Brexit, and work with local government to oppose all of that. Then, if we are continuing to mitigate, we need to do two things, I think. First of all, is in absolutely growing our economy and working on the economy so that we can have that economic growth whilst tackling inequality at the same time and work with our partners and local government so to do. Secondly, around that provision of services and mitigation, continuing to work together in areas such as housing and welfare, welfare fund and the interventions that will make a difference at the local level, and for some of the most vulnerable people in our society as well, whether that is around early years expansion of childcare or some of the other interventions that we make. We are focused on both the political charge against the UK Government, but mitigating and managing the situation as best we can with the powers that we have, but also being able to have that empowering relationship as well, where we can genuinely work together to achieve those outcomes. Do you want to do that just now? I would be keen to hear from the cabinet secretary the examples in this year's budget where there are sound choices made with an eye to the future taking that longer term view on childcare. Housing would be another example, but you could perhaps say more about the long-term multiplier impacts of those choices, but looking at where are the opportunities to work with local government and others with a view to the longer term that we have touched on and what the annual funding is as well? There are the investments that we are making in partnership with local government. Housing is a good example because it is £826 million. When I just looked at the statistics for my own area and infrastructure, 1,000 new homes will be built as a consequence of some of that investment, so that is good news and welcome investment. Direct investment in infrastructure with local government is a delivery partner, and key stakeholders are important. That is around housing and childcare, making sure that we have the necessary buildings, staffing and capacity to deliver on that commitment. The investment that we are making today is building for the future in both economic growth and a fairer society, giving children and young people the best possible start in life. Some of those resources are targeted through the pupil equity fund, which empowers not just local authorities but other spheres of government but headteachers. The empowerment agenda is just not about handing power to politicians but to people as well. The investment that the budget makes is absolutely investing in our capacity, the sustainability of today's services and the opportunities of the future. A further example would be around the growth deals, which are sitting next to Willie Coffey. Of course, Ayrshire growth deal has been approved at long last £100 million from the UK Government and the Scottish Government. It is unlocking the economic potential, but it is absolutely focused on the opportunities that that creates. I want to see his work more closely with local government on local economic development. I have watched the economy committee, and I have been a witness to the economy committee on Business Gateway, and more on city deals in other areas. I think that there should be further joint working with local government in areas such as economic development that I am happy to take forward as economy secretary. Although there is a range of other specific investments that are part of the budget, sometimes forgotten about such as the expansion of social security support in the next financial year as well, free sanitary products, a continuation of the baby box, and other grants that are administered by local authorities, but will make a real difference to people. There is a range of areas that can work together. I think that it is fair to say that, in welcoming the budget progress and the empowerment agenda, there are further opportunities to work with local government going forward in some of this territory. I also just have a final question. You touched upon mitigation. The Social Security Committee this morning published some work where they said that it is not realistic or feasible for the Scottish Government to continue to mitigate the UN rapture on extreme poverty, which is something to say about this as well. How do the decisions that are made about the budget, how do they support lifting people out of poverty as opposed to mitigating, to hold people, to keep people where they are? Social security is about entitlement and a safety net. It is about providing resources at people's time and need. I will tell you what drives me finance and economy secretary. It is actually growing the economy. It is growing the economy because if we create meaningful purposeful, properly remunerated employment, I think that that is the best social and economic policy that exists. That is what I happen to believe. That economic growth is materially significant and is the antidote to that social exclusion. I believe that the range of measures that we have put in place to support the economy as well as the sustainability of public services is absolutely about improving the life chances of our people as well as all the other programmes. 100 per cent support childcare, early intervention and family nurse partnerships. All of that healthcare, health improvement, and the preventative approach are all wonderful, but for me, growing the economy in an inclusive way is a fantastic way to address outcomes and to champion inequality. Within the budget, £5 billion for infrastructure is 826 million pounds of that housing. There is more money to stimulate the economy. We are taking forward the national investment bank. There is the most competitive package of rates relief anywhere in the United Kingdom, and there is investment in innovation, education and business growth as well. All of that is to help to drive our economy to achieve the outcomes of both empowering people, improving life chances and providing the necessary safeguards and safety net that comes along with a social security system. Finally, our ability to protect Scotland from the ravages of a right wing, Brexit-mad Government continuing austerity is at its limits. Investment decisions in Scotland are looked at through the lens of what will actually work to lift people out of poverty. Absolutely. The national performance framework in the purpose of our country is absolutely about the life chances of our people. Alexander Stewart Thank you convener. I will talk about the car park tax that you have brought in. I should in the absence of any detail on it, as an employee and as an employer, and as someone with a car and as someone who uses off-site parking, I should probably declare an interest, so I did not catch that. And as a Tory, I am sure that you will take the conservative perspective on it. Will you get on with the questions, please? I do not know if other members will have similar interests. I am sure that with everything else in the news, the cabinet secretary must be thrilled how much attention this particular budget item is receiving. Suddenly, the diversity of my inbox is concerning many constituents from rural teachers to students attending college in Aberdeen, for instance. It is primarily a workplace tax and a couple of business questions, which I would be grateful if the cabinet secretary could provide some clarity on. One is that, if employers are paying this workplace levy on behalf of employees and this counts as a benefit in kind or P11D, there will be some record of parking spaces and use required. Has he given any thought to that and who might have the dubious pleasure of maintaining a record or register of every parking place in Scotland? Secondly, if a business property is attracting a large parking levy, that will affect the rateable value. Is he anticipating another round of business rates appeals? Will he provide some clarity or have he given any thought at all to some of the implications of what he has agreed? I refer members to the published correspondence with the Greens on what has actually been agreed. Of course, the power exists south of the border in Tory run England, of course. I do not hear the Conservatives arguing to scrap the ability for local authorities to have this levy south of the border, but since we are focusing on this issue, I can only advise the committee that this is at an early stage. There is the agreement that an amendment will come forward in relation to this levy, and it will be considered there. I understand that the committee will take evidence on it as well. I do not propose to offer up any more detail, because it is at an early stage with agreed and principle to accept an amendment that introduces the power for local authorities to take this forward. There will be consultation by that committee, as I understand it, and then the detail will be forthcoming. Michael Mathes and the Transport Minister will lead it on this issue. In relation to the budget, there is an agreement that will accept the amendment from the Greens at stage 2. I will happily share more information at that point in time, but this is at an early stage. Mr Burnett wishes that he should advise some of the correspondence that he has had in that matter, rather than scare monger on who or may not be paying this levy. The Scottish Government did, of course, have one proviso that the NHS and hospitals would be exempt from this. If there are other exemptions or matters for local authorities to be considered, that will be considered in due course, but I think that maybe members should not scare monger on this, should work with Parliament in a constructive and collaborative fashion to ensure that we get a scheme that is right for the country, right for local authorities and right for local people. I know that the cabinet secretary likes to peek across the border every time he is looking for a covering excuse, but I am sure that he is aware that the levy down south was brought in nearly 20 years ago by a Labour Government. It has only been implemented once in a Labour council, and that was in conjunction with a tram scheme that I believe had been brought in, so I am not quite sure of how useful a comparison the levy being utilised down south is. It is the truth not that in Scotland when businesses need to be focusing on productivity, you are just going to bring in an unworkable measure, which even the majority of your colleagues do not support, just to buy off for greens. If you were really serious about this proposal, you would have brought in something more than just an amendment to a planning bill. There seems to be an absence and facts from many members of committee, I must say, convener, this morning. I should add that I think that you will find that the budget deal that I have taken forward has full support of the Scottish Government and members of my own party. In relation to the engagement and consultation, I think that that will be helpful in taking forward the right policy. In relation to business growth as it happens, I met business representative organisations yesterday, which I am sure that the member would welcome. We did focus on a number of matters in relation to the budget and also growing our economy. It is true to say whatever people think about the workplace levy, but it is as nothing compared to the financial catastrophe that is coming our way as a consequence of Brexit. We can dismiss that, but it is a major threat to Scotland's economy, and that is what businesses are talking about and want clarity on right now. I will follow on the questions from Mr Burnett. You have just talked about the importance of growing the economy and how it is your top priority. You have said that policy is at an early stage. Could you confirm that you have not done any economic modelling or economic impact assessment of this policy? You have talked about the absence of facts. Would it not be beneficial for you to carry out an economic modelling and impact assessment on that policy, given what you are saying about your number one priority? I am familiar with the fact that Opposition amendments feature at stage 2 and even stage 3 of the parliamentary process. That is the purpose of legislation working its way through Parliament. Of course, that precipitates consultation and engagement. That is the parliamentary process. No, I have not undertaken any individual economic analysis. The Transport Minister will take that forward, Michael Matheson, as that is appropriate for that committee in that power. However, it is now working its way through the parliamentary process. Convener, what important point here is that this is about—not a Scottish Government scheme, but this is about empowerment of local government. It was a necessary budget concession, because if there was no budget, the consequences were that a £42.5 billion budget for Scotland would have gone down. Ultimately, that is about empowering local authorities. I wonder why it is that some members who were apparently previously for local government empowerment in letting local councils decide in consultation with local people, local businesses, for local circumstances, accusing this Government of being a big bad centralising Government, are now against localism when it is supported by a majority in the Scottish Parliament. I encourage you to carry out an economic assessment of this policy. You have said that it is a matter for councils to decide whether they are going to use it or not. Of course, they may be forced to use it because of the poor budgets that they are receiving. In addition to not carrying out an economic modelling or impact assessment, I take it that you have not done an estimate of how much money would be raised by local authorities if they are not taking a model that was applied across Scotland. However, Mr Bibby has no evidence to conclude that the scheme would be used by all 32 local authorities or the Nottingham model. I am hearing Mr Bibby say the words could be, well, we can model and scenario plan and do an economic analysis of a range of things that could be. I agree with the need to consult and to engage, and that is something that I would certainly encourage both the Parliament and local authorities to do before deploying any power that may transpire. This is the beginning of the parliamentary process, and there will be that necessary engagement. Again, Neil Bibby repeats the charge, as James Kelly has done, in relation to budget settlements. I would simply argue that Renfrewshire Council's spending power will increase by 4.59 per cent, which is an increase of £15.1 million. That is an increase to local government resources in that area. That would be encouraging to hear if we do not see the cuts in the ground, Cabinet Secretary, and there is a whole series of cuts happening in Renfrewshire that you are aware of that are a result of your budget cuts. I want to go back to the Park and Charles levy. What is your rationale for support being contingent on exempting NHS workers, but not other workers? What is your response to the EIS's call for schools to be exempt? What about police? What about firefighters? What about people on low incomes? What about apprenticeships? What about workplaces with poor transport, for example? Workers in your constituency at the Leatherworks in Bridgywea have to start their shift at six o'clock long before the first bus arrives to that community. Do you not think that there is a case for looking at all those issues before pressing ahead with your amendment? Yes, I do, convener. I happen to think that there is a case for further exemptions, and I do happen to think that local authorities should look very closely at local circumstances when taking this forward. That will be a matter for local authorities. That is the point of local empowerment. Surely Neil Bibby is demanding that Scottish Government empowers local authorities, passes powers to local authorities, and the very second that it is proposed, Neil Bibby and the Labour Party, opposes it. However, I think that there are further cases for local authorities. It is certainly a good case for local authorities to look at exemptions and local circumstances. Of course, all of that should be taken into account. Teachers are a very good example. If it is local authorities making the decisions, then surely those councils will think about schools. There is an important issue to address here, convener, that the charge is not for individuals, but the charge would ultimately be for the employer. There is a question about which employers pass that on, but we must not immediately conclude that it is the individual staff member that pays the charge when, in fact, the scheme should be about the employer, the property owner, but those are circumstances that the decision makers and local government will take into account, subject to the safeguards that we have insisted upon. I wonder if we could take a little bit of the unnecessary party political heat out of this and have a slightly more mature conversation about it. This is the finance committee, and we are interested in trying to understand tax proposals and trying to understand the relation between tax proposals and other extant taxes in Scotland. You have been asked at least two, quite detailed and intelligent questions about the tax implications of the proposal, both for benefits in kind with regard to income tax and business rates and rateable values. You have not answered either of those questions. It might be that you do not have answers to those questions today, but if you do not have answers to those questions today, could you write to the committee in advance of stage 3 of the budget bill with answers to those questions? I think that they are honest questions that are seeking to understand the tax implications for other taxes that this committee has spent a long time looking at of this proposal for what is, to all intents and purposes, a new tax in Scotland. That is not a party political question, and I do not really want a party political answer to it. It is a finance committee question, and I would like a cabinet secretary to answer to it, if I may. I am sure that I have some sympathies with what Adam Tomkins is saying, and I would ask him to reflect on the opening commentary from his colleagues if he wants to look at the language that has been deployed this morning, if you check the record. However, I will say that, in relation to the committee that will take that forward, it will be the Rural Environment and Connectivity Committee, and that is appropriate. The way that this Parliament does its business is that lead committees take forward the subject matter that is relevant to them, and that committee will take forward this particular levy, because it is a transport matter by the relevant cabinet secretary. In relation to the tax outcomes, of course, I will engage with this committee, but I have tried to express to the committee that it is at early stages of legislative development. Stage 2 amendment is to be brought forward on the basis of that detailed information. We will have more information to work with, and of course I am happy to come back to the committee with those questions. However, some members seem not to be listening to me when I say that this is at an early stage. There has to be due consultation on the structure that has been taken forward so that we can actually analyse what is being proposed, as opposed to the scaremongering that I am reading about in the press. I want to give Mr Tomkins the information that he seeks, but he will understand the parliamentary process that he takes. I am grateful to the cabinet secretary for that answer and for his tone. Could we have that information before stage 3 of the budget bill, please? It is dependent on the stage 2 amendment, but I will certainly endeavour to get that absolutely as quickly as possible. Before stage 3, thank you. If there is enough progress at the other committee, and that then allows us to have that detail, then yes, I think that that would be helpful. Willie, you have got a supplementary area as well. It is on the same issue, convener. Before we throw our hands up in horror at the workplace parking levy, could you confirm, cabinet secretary, that COSLA's president, Councillor Everson, said that she welcomed the commitment today to introduce that levy. It is right that local authorities across Scotland should be able to raise revenue locally to address local issues. Councillor Everson is a Labour member, I believe. Well, even more interesting than that, Councillor Everson has welcomed the progress in the budget. I know that Mr Tomkins does not want me to be partisan, but I just want to show that this is not always down to party colours. Gail McGregor is the COSLA resource spokesperson who has also welcomed this, and she is a Tory. It just goes to show that it is not just your partisan position and the determination of you on that subject. I am glad that there are substantive questions about how those schemes might be designed at local level rather than just a knee-jerk reaction. Given that there will be the opportunity for not just consultation on how those schemes are designed, but other potential exemptions beyond the NHS that the Government has mentioned—for example, the potential to exempt employers who might choose to invest in subsidised public transport or in other facilities that encourage behaviour change and that that is all about the necessary change in the way that we move about, that needs to be brought about and the incentives around that. However, surely the question for Parliament in considering whether a passed legislation like that is very much the same as the transient visitor levy. It is not whether one single model should be imposed across all of Scotland, because absolutely nobody has suggested that. The question for Parliament is should local councils be, as they are now, effectively forbidden from even considering whether they can design a scheme that suits their own local circumstances or should they be given the flexibility? Yeah, the convener, I think that that is a fair analysis of the argument between the Parliament determining the framework and how much flexibility a local authority has. Scottish Government set out our position in principle and, as I have described, we will work through what local authorities may well propose. I think that there is an accurate description there about what the dichotomy we face about parliamentary control versus local discretion. Good morning, cabinet secretary. I am interested in health and health budget and our main committee that I am a nurse although I am not practicing right now. I am interested in whether the cabinet secretary could provide some information about what the budget means for health spending and perhaps the £55 million of additional funding that was to be provided to make up for the shortfall of the Barnett consequential from what had been promised previously by the UK Government. The cabinet secretary said in chamber that the UK Government has now confirmed further unexpected funding in Barnett consequentials this year, so perhaps he could set out how much that is and if that makes up for the initial shortfall and how much of an increase in the NHS funding can we see for the Scottish Health Service previously too when you mentioned in December? The Barnett consequentials are £59 million. Of course, we pass every penny on to the health service in terms of resource consequentials, so that is indeed the case. That makes up for the £55 million shortfall that had previously identified that was committed to the NHS by the UK Government. If you like, it reinstates that amount and, based on my December budget, increases the health line by £4 million. That is what I am asking committee to approve today at stage 2. In terms of overall funding to the national health service, it will be an increase in health resource funding by £729 million in 2019-20. That is a £754 million more than inflation since 2016-17. Funding for front-line NHS boards will be increased by £430 million, which is 4.2 per cent. As I say, all resource consequentials will be passed on to the health service, the total resource spending on health and sport will now be £13.9 billion. Over £700 million of investment in social care and integration, increasing investment in health and social care partnerships to over £9 billion. We have been increased direct in mental health services by a further £27 million, taking overall funding in mental health to £1.1 billion and will invest a quarter of a billion pounds to support mental health measures for children and young people. Incidentally, the sport Scotland budget will be increased by £1 million to £32.7 million. I was going to ask you how the detail for the delivery was, but I think that you have answered my question. Thank you, convener and good morning, cabinet secretary. In a little over 50 days, the UK is set to leave the European Union. One of the important lessons of history over the past century is how disasters and catastrophes can happen, how we can be warned that they could happen, but there is a cosy consensus and a belief that it is impossible that such an event could prevail and we sleepwalk into such circumstances. In recent days, it has been reported that members of the UK Cabinet believe that there should be daily warnings in public media about the dangers of no deal. Plans have been formulated in the Cold War to evacuate the Queen and have been dusted off in the event where there is civil unrest in London. Your previous mention, cabinet secretary, that this budget might have to be revisited in the event of a no deal, giving it this as a growing danger and is now moving from the realm of the speculative to the possible and perhaps even the probable. Can you outline exactly what the consequences would be of a no deal following this budget and the fiscal position of Scotland? I have a great deal of information in this regard, but to sum it up, the chancellor set out that his budget, so the block grant consequentials that come to Scotland, so that that element of the budget indeed detects decisions or relative elements. The chancellor's budget was contingent on an orderly Brexit, so my budget is also contingent on an orderly Brexit. We know that, overall, any form of Brexit harms the economy, means lower living standards, means less GDP growth than we otherwise would have had for a range of reasons. If there is a no deal Brexit, that is pretty catastrophic because we know that there is short, medium and long-term economic and social impacts of a no deal Brexit. It would have a detrimental impact on the UK and Scotland's finances, a detrimental impact on our economy, a detrimental impact on our population. It would require us to revisit the Scottish budget, because the £42.5 billion budget could not just continue in its current form following a no deal Brexit because of the impact in the economy, the turbulence that would be, the impact in society, the increasing demand in our services. I would characterise it, so there is the Scottish Government's resilience forum meets every week. It will meet again this week. I am focusing economy ministers on our actions to mitigate some of this damage. Hopefully, it can be averted, but unfortunately it feels as if the likelihood of a no deal Brexit is increasing as a consequence of the Prime Minister and our cabinet's mishandling of the situation. We would need to revisit the budget, but I have to say that it will not be with good news, it will be with necessary reprioritisation to try and manage the catastrophic economic and social consequences that will come from that outcome. I appreciate that, cabinet secretary. I wonder if you agree with me that such an outcome would disproportionately disadvantage the most vulnerable in our communities. Yes, it will absolutely. It is all right for some of the elite at the top who have been driving the propaganda around Brexit. They have feathered their own nest, they are sorted, and they are the people who are most exposed, who are most vulnerable, maybe on lower salaries, who are struggling to balance the books, who will be impacted as well as many other citizens. It will have a profound impact. My concerns about it include the fiscal impact, employment, productivity, the general wealth and wellbeing of our economy will all be impacted by a no deal Brexit. You can see publicly parts of the public sector pursue additional resources, even because of the threat of Brexit. I am referring to the police, for example. We are concerned about public disorder in the event of Brexit. I do not think that we should underestimate the serious impacts that might inevitably be heading away because of the handling of the UK Government. It is catastrophic. We want to avert it. There is still a way out of this mess that has been explained by the First Minister, Michael Russell, in his position. However, we are looking at how we best mitigate this situation, but, as I say, I am very closely involved in it as a finance and economy secretary. Cabinet Secretary, two weeks ago, we had in the chamber what I thought was a very useful, perhaps worthy, debate on the budget as a result of one of the recommendations of the budget process review group in which committee conveners talked about their committee's priorities for the budget. I thought that it was a useful contribution to the budget process. Of course, that revised budget process is infused with a value of transparency. I want to ask you, in the same spirit as my earlier question, a couple of questions about transparency and the transparency of the budget process this year. First, it has been claimed in the press—I do not know if that is true or not, because it has been claimed in the press—that some £92 million has been made available to the Scottish Government to help Brexit preparations, but that these have not been spent on Brexit preparations but have been absorbed into the Scottish Government's overall budget. A contrast has been drawn with the way that money has been spent south of the border, where local authorities and the police have been handed money for Brexit preparations, but that has not apparently happened in Scotland. In the light of the principle of transparency of the budget process, is there any light that you can shed on that? The current position is that any Barnett consequentials that I have received have been allocated as I have described earlier in the budget. I think that I have been quite clear about that. There are workstreams on going about Brexit preparedness, and Michael Russell leads on that work. I have not created a separate fund, so I have not carved out a separate fund for the police or for local authorities. They engage in the resilience meetings that we are convening at the moment. As I say, if there is a no-deal Brexit, we have to revisit the budget, but there have been allocations of civil service resources to deal with Brexit. However, in full transparency, I have not separated out a fund to say that there is a pot for one service and there is a pot for local government. The resources are fully allocated by the budget that I am proposing. If members have a contrary review to proposing it in this fashion, they can certainly put that forward. What is the reason for taking a different approach with that funding from the approach that you have taken with regard to bonnet consequentials for health? You very clearly said it again this morning that health consequentials will pass to health. Why are, as it were, Brexit consequentials not passing to Brexit? Health consequentials are a manifesto commitment that will pass on all resource NHS consequentials to health. Brexit does not have such a manifesto commitment because of the chronology events, but I do not hypothecate, I do not ring fence, I do not generally photocopy the chancellor's budget in terms of allocations or bonnet consequentials that would come our way. We have that flexibility to allocate as we see fit. We are working on our Brexit preparations right now, as I say Michael Russell is leading that piece of work, and that includes partnership with local authorities and police who are involved in our resilience meetings. On the same theme of transparency, as I understand it, there was no deal to pass the budget at stage 1 until the day of the stage 1 debate, which was Thursday of last week. You knew from the beginning of that week about the £148 million of bonnet consequentials, additional bonnet consequentials that the chancellor had made available to you. Do you agree that it is not consistent with the principle of transparency that underpins the work of the budget process review for negotiations about budget to proceed with any cabinet secretary knowing that he or she has £150 million of public money in his pocket that he has not disclosed to Parliament? I disagree. There are many moving parts to the budget. The numbers clearly change into part of a £42.5 billion budget that the numbers on many areas change day by day. I report to Parliament more in a more comprehensive fashion than previous finance secretaries, because we have now built in further elements of accountability. The medium-term financial strategy is to name one new development in the process. If Opposition parties engage with me constructively, I can have that dialogue with them about choices, available resources, funding and flexibility and work on the art of the possible. I totally disagree that I have been anything other than transparent, upfront and constructive in trying to get a budget through. When the parliamentary opportunities come, I present the fiscal position to Parliament. The transparency is a value that can be trumped by experience? Not at all. I think that that concludes that part of the process. I will now turn to agenda item 2, the formal proceedings of stage 2 of the budget Scotland bill. The question is that section 1 be agreed to. Are we all agreed? We are agreed. I call amendment 1 in the name of the cabinet secretary, grouped with amendments 2, 3 and 4. Cabinet secretary, to move amendment 1 and to speak to all amendments in the group. Move. I have nothing further to add, convener. You members wish to contribute to the stage. James Kelly. I indicate clearly that the amendments bring additional money into the budget. I am not going to oppose them. I understand the process in that we cannot take a vote on the overall position of the budget stage 2, but the place on record that Scottish Labour continues to oppose the budget on four counts. Councils face, as I said earlier, cuts in the reality of that. Mr Mackay looks to the ground. He can see the choices that they are having to make. I also believe that, in terms of poverty, as a Fraser of Allander Institute blog pointed out, the budget only allocates £27 million directly to help low-income families. It is short on that. Additionally, on rail services, as we saw yesterday, over the past year, thousands of services have been cancelled, and the budget does nothing in terms of addressing the fears increase that rail passengers saw earlier in the month. Finally, on the point of fair taxation, Mr Mackay mentioned earlier in a previous contribution that he spoke about, the elite at the top. I think that a proper progressive fair taxation policy should be asking the elite at the top to make more of a contribution to face the scale of the crisis that the country faces. We are in formal process, cabinet secretary, so you will get the chance to wind up a bit of other members in first, Patrick. Thank you convener, just to put a few comments on the record. Those amendments together with the additional flexibility that is being provided in local government spending do not achieve perfection, but they are substantial changes that have been welcomed by local government in Scotland. I have already spoken to colleagues in local government from a number of different political parties who are clear that they will be able to prevent extremely damaging cuts that were under contemplation as a result of those changes. I only wish that all political parties were focused on the actual amendments that they can secure, the changes that they can secure in the budget process. I think that if all political parties did that, we would see a better outcome for Scotland, and we would see a Parliament that asserts its wealth more effectively. Angela Constance Thank you convener. There is no silver bullet to addressing poverty or improving the life chances, but I can just mention what I consider to be the biggest piece of the jigsaw in terms of lifting children out of poverty. That is the sustained investment in housing, which for this year alone, or for the forthcoming budget, is £826 million. We have also seen multi-annual funding of resource planning assumptions to local authorities of £1.75 billion, and that investment in housing is hard and fast. It can be demonstrated that it is good for the economy, it will grow the economy, it will support employment, it will create warm and affordable homes for families, and it is an all-round good thing. convener, first of all it is wrong to say that this is anything other than a real terms growth budget for local government. Actually the spending power, I will give you the figure, the spending power in total for local government, including the amendments now. The total spending power for local government is up by £620 million in financial year 1920. That is an increase and as I say, there is a real terms increase in resource and capital. On the issue of poverty, because I think it is important and reference has been made to the budget lines that target poverty, you have to look at all interventions as to how they support increased equality. That includes the Scottish welfare fund, fair start Scotland, powering communities fund, fair food fund, digital skills training, educational maintenance allowance, affordable homes, childcare carers allowance, concessory fares, bus services grant, home energy efficiency programmes, carers allowance supplement, baby box and free sanitary products. Just some of the examples that this budget provides in terms of supporting poverty and inequality. Convener, this was about stage 2 amendments of the £94 million increase, the £90 million to local government and £4 million to NHS, which adds to the figures that I announced in the December budget presentation, but Parliament did indeed have a choice, a choice on revenue raising as well. Some party, the Labour party, asked me to increase income tax. I did not get a costly proposition, but asked me to increase higher rate and top rate. A top rate would have lost money. It had to increase a higher rate, as I say, by about 6 per cent, 6 per cent percentage points. The Greens asked me to raise income tax on non-domestic rates. I have not done so. I found an alternative way to meet the necessary budget requests of the Greens and the concessions that they are in. The Conservative party asked me to cut tax for the highest earners in society. I think that I have the balance right in revenue raising and spending commitments to stimulate our economy, provide stability and sustainability for our public services. In the face of adversity, austerity and Brexit, I think that it is a budget that is very strong and very good for Scotland. With the added amendments, I think that it strengthens it further, so I would ask the committee to support those amendments. The question is that amendment 1 will be agreed or well agreed. We are agreed. The question is that amendment 2 will be agreed or well agreed. The question is that amendment 3 or well agreed. We are agreed. The question is that That question is at section 2, schedule 2, section 3 and schedule 3 be agreed to? Are we all agreed? We are agreed. I call amendment 4 and in the name of the cabinet secretary, I already debated with amendment 1. Cabinet secretary to move formally. The question is that amendment 4 be agreed to or we all agreed. We are agreed. The question is that section 4 be agreed to, are we all agreed? We are agreed. The question is that section 5 to 11 be agreed to, are we all agreed? We are agreed. The question is that long title be agreed to, are we all agreed? We are agreed that that ends stage 2 consideration of the bill. I thank the witnesses for the session this morning. I now move into private session.