 The next item of business is a statement by Derek Mackay on the provisional outturn 2015-16. The cabinet secretary will take questions at the end of his statement, and there should therefore be no interventions or interruptions. I call on Derek Mackay. You have 10 minutes, cabinet secretary. Presiding Officer, I welcome the opportunity to update Parliament on the provisional budget outturn for the 2015-16 financial year. Before I do so, I would like to address the outcome of last week's EU referendum as it relates to public finances. First, no one can deny the significance of last week's events for our economy, our communities and indeed our constitution. At such a time, it is imperative that the Scottish Government and the Scottish Parliament work together to demonstrate to those we serve that we will continue to manage the public finances competently and in their interests. I commit to working with all members, particularly those in the finance committee, to ensure that that is achieved. I welcome the opportunity for discussion at committee this morning. Secondly, we cannot consider the public finances in isolation from the wider economy, particularly in light of the devolution of fiscal powers through the Scotland Act 2016. The First Minister has made clear that it will take all the necessary steps to stabilise and grow Scotland's economy, and that will be a guiding principle in the actions that I will take in managing the Scottish budget. Scotland is a vibrant country that values greatly the contribution that those from other countries bring, and it presents excellent opportunities for investment and to do business both now and in the future. The Scottish Government is already engaging closely with the business community, delivery partners and a range of other stakeholders to underline our commitment to key programmes, particularly around support for the economy and public services. Finally, it can assure Parliament that the Scottish Government will be engaging closely with HM Treasury and counterparts in Wales and Northern Ireland over the coming months. To work together in the interests of our economies and public finances, however, as the First Minister has already said, we will also seek direct engagement with the EU leaders and institutions to further the interests of the people of Scotland. With a forthcoming change of Prime Minister, it is not clear what a future UK Government's fiscal plans will be. The Chancellor has already said that there will not now be an emergency budget, and that is to be welcomed, but we must not be complacent and assume that nothing will change. It will therefore be important to take appropriate time and consider to be ready to respond. I will consequently be urging my counterparts in the UK Government to reflect carefully on the impact of continuing austerity on our economy, our public services and our communities. We have a duty to be prudent and to provide stability at this time. Although there may be no emergency budget, there will inevitably be budget adjustments by the new UK Government. At the scale of those adjustments, we do not know. I will now turn to the provisional outturn for 2015-16. Financial year 2015-16 represented the final year of the 2010 UK spending review settlement, which saw the Scottish Government's discretionary budget fall by almost 10 per cent in real terms, and within that the capital budget fall by almost a quarter. It also represented the first year that the Scottish Parliament became responsible for landfill tax and the land and buildings transaction tax, in being the first finance minister in Scotland for over 300 years to set national taxes, my predecessor adopted a fair and progressive approach to rates and bans. That prudent and principles-based approach to taxation is one that I planned to replicate over the course of this Parliament. Under the current devolution settlement, the Scottish Parliament is not allowed to overspend its budget. As a consequence, we have consistently adopted a position of controlling public expenditure to ensure that we live within the budget caps that apply, but remain able to carry forward some spending power resources for our future year. That prudent strategy has proven to be the right one, particularly in light of last Friday's events. In 2015-16, the Scottish Government therefore has once again demonstrated a sound grip on the public finances, and I can report that within the fiscal departmental expenditure limit, fiscal dell, the resources over which this Parliament has discretion, the provisional outturn for 2015-16 is expenditure of £29,160 million against a limit of £29,275 million. That means that there is a fiscal dell cash underspend of £75 million in resource spending and £40 million in capital spending, which represents just 0.4 per cent of the total fiscal dell budget. Both of those sums are carried forward into 2016-17. There is also a provisional outturn underspend of £40 million in respect of financial transactions, which, through rules set by HM Treasury, are ring-fence for loans and equity investment outside the public sector. Again, that is carried forward into 2016-17. Overall, including financial transactions, that means that we will be carrying forward 0.5 per cent of the total 2015-16 cash budget. Those sums are carried forward using HM's Treasury Budget Exchange Facility agreed in the last spending review. That will ensure that there is no loss of spending power to the Scottish Parliament. Given the considerable uncertainty that has now been created as a result of the EU referendum vote, I do not intend to rush immediate decisions on the deployment of those resources. Instead, I will therefore consider their deployment when it is appropriate to do so, taking account of the prevailing economic conditions and in full consideration of need and spending pressures. Turning to the non-discretionary elements of our budget, the non-cash dell provision, which I remind Parliament once again cannot be used to purchase goods or deliver public services, based on the provisional outturn position, expenditure is lower than budget by £130 million, which is consistent with previous years. As a description suggests, those resources are not cash in nature, rather they provide very specific budget cover for differences between estimated accounting adjustments and the final amounts calculated. Over £80 million of the total relates to a lower than expected write-down of the carrying value of the income contingent repayment student loan book. That is an accounting adjustment and has no cash consequences. Other uses for this budget include the depreciation and impairment of assets, all of which have no cash consequences. Finally, under devolved powers from the 2012 Scotland Act and, as I have already indicated, 2015-16 was the first year in which devolved taxes in respect of land and building transactions have been managed in Scotland. A total of £572 million has been collected, some £74 million, above the initial estimates. Again, recognising the uncertainty that has been created in the economy, I have also decided to take a prudent view of the deployment of those resources. I am mindful in particular of the impact of the EU referendum decision on property transactions and the need to manage potential volatility in future tax revenues. The additional taxes will therefore be placed in the Scottish Cash Reserve, a new facility created by the 2012 act that allows excess tax receipts above forecasts to be held for later deployment. That will allow me to have greater flexibility and carry those resources forward into 2016-17 and potentially beyond if necessary. I set out my thinking on the budget and spending view process earlier today, so I will consider the deployment of those tax receipts as part of that process. That statement of the 2015-16 provisional outturn reflects the position against HM Treasury budgetary controls and will be followed by reporting on final outturn against the 2015-16 budget act limits in a suite of annual accounts that together report on a total Scottish budget approved by the Scottish Parliament. The annual accounts of the Scottish budget and the Scottish Government and of all individual bodies funded from the Scottish budget will report on their expenditure compared to the allocation by budget act. The annual Scottish Government consolidated accounts in a statement of total outturn for the financial year 2015-16 against the final budget for the Scottish Administration as a whole will be provided to the Scottish Parliament later this year. As we enter a period of considerable uncertainty for both individuals and businesses, it is incumbent on the Government and Parliament to demonstrate strong leadership in managing public finances. We have entered a period of considerable financial and economic turbulence in what was already a challenging climate. The continuing competence that this Government has taken to the management of public finances has once again been demonstrated in our management of the 2015-16 budget. That prudent approach has served us well and so we must not make any rash decisions now. To do so would risk our ability to respond to as-yet-unknown events. I therefore commend today's figures to Parliament and very much hope that members will join me in commending the approach that we are taking. The cabinet secretary will now take questions on the issues raised in his statement, and I intend to allow around 20 minutes for that. Then we will move to the next item of business. It would be helpful if those who wish to ask questions could press the request-to-speak buttons now, please. There are a lot of members who wish to ask questions, so again may I ask that questions and answers are succinct. I call Murdo Fraser. Thank you, Presiding Officer. I thank the cabinet secretary for his statement and for advance sight of it. I welcome his comments on the need for stability in the wake of last week's referendum result. The economic fundamentals in the UK are sound, as the Chancellor of the Exchequer made clear earlier this week. Now that a decision has been made, I hope that the cabinet secretary would agree with me that it is important that all politicians avoid whipping up hysteria about the consequences of leaving the EU. I hope that he would accept that, with the rest of the UK accounting for 64 per cent of Scottish exports, while Europe accounts for just 15 per cent, the greater risk to the Scottish economy comes from any plans that his Government might have for a second independence referendum. I have two specific questions for the cabinet secretary. Firstly, one of the largest departmental underspends is in the Government's priority area of education and lifelong learning, some £90 million in cash. Can the cabinet secretary explain how this figure has been arrived at? Secondly, the cabinet secretary refers to LBTT. He will know that the revenues from domestic LBTT are around some £33 million lower than originally estimated, a lower figure not entirely explained by the forestalling that occurred at the start of the year. I ask him this question not merely because I am currently in the process of moving house, but does he agree with me that it is time to look again at LBTT rates to see if a reduction in certain levels might increase the tax take? I thank Murdo Fraser for his questions. I thought that it was quite interesting. I asked me to provide reassurance and calm in this time of uncertainty. Murdo Fraser started whipping up fears and a bit more scaremongering in relation to any other referendum. Can I revert back to what I did at the finance committee this morning? The First Minister has explained our constitutional position and the aims and objectives that we are pursuing, but I want to try to deliver calm and stability. The Government has been very proactive in engaging with stakeholders in trying to not just calm people in terms of the position in Scotland but also seize opportunities that may well exist. In terms of the doom and gloom, the Chancellor himself, George Osborne, outlined a number of the risks to the economy. Some of that is turning out to be accurate, but we all have a shared responsibility now to deliver the best weekend for Scotland and its people and its economy. Specifically on education, as with many of the budget lines in that, there is a detail behind every specific line. Within that, I can give more information to the member or any other member, but I will give an example of part of the underspend within the education that the member cited. 50 million pounds of accumulated Scottish funding council reserves were transferred back to the Scottish Government through cash demand changes. No loss of spending power to either higher or further education sectors, for example. That is quite a substantial figure. It gives a sense of how some of that is the accounting exercise, rather than any loss of spending power. Education continues to be a priority for the Government, and we propose additional resources to education. Secondly, on the point of general tax, surely it is to be welcomed, even by the Conservatives, that we have generated more income than we had forecast. In that respect, I will work on a more consensual basis to look at LBTT rates. I think that the Government had always committed to a review after the first full year. That was welcomed by stakeholders. I am happy to commit to taking an inclusive approach to look at the levels of taxation and the rates to make sure that we have got it right. However, it is fair to say, having exceeded our forecast, that we have done a very effective job so far in those new devolved taxes that have come our way. I welcome the cabinet secretary's words on the impact of the EU referendum, and reassure him that the priority of those benches will be to focus on jobs, the economy and workers' rights and where we can support the Government at we will. In answer to a recent written question, the finance secretary advised me that the Scottish Fiscal Commission would not be producing its own independent forecasts until the summer of 2017 and that, in the meantime, the Government would continue to produce its own forecasts. Can I ask whether the cabinet secretary has any plans to revisit that decision in light of last week's referendum results and whether he is currently confident that he has the data that he needs to assess and, indeed, monitor the impact of Brexit on Scotland's economy? Cabinet secretary? I think that there is now a great deal of uncertainty in the economy that was not there before. For that reason, I outlined to the finance committee this morning why we have to look more closely at budgetary timescales. We are dependent on a number of forecasts, some from UK Government, some from OBR. The Scottish Fiscal Commission will act in an advisory capacity before they take up fuller functions. I also at the finance committee today have addressed the issue of capacity and support for the Fiscal Commission. I am satisfied that I have as much as can be given at this time, but there is now a new level of uncertainty that has been generated. It will work very hard on reciprocal arrangements with UK Government and working with the other devolved Administrations to put ourselves on the strongest possible footing to understand the impact of proposed exit and, therefore, to respond. Michael Russell, to be followed by Alex Johnson. Clearly, the figures show a commendably tight financial management, given that the variation is only 0.5 per cent of total fiscal del, but, as both earlier questions have referred to, there are troubles ahead. It is obviously right that all options are examined. In terms of those options, perhaps the cabinet secretary could say a little more about the cash reserve process. It is encouraging to know that we now have the opportunity to create that reserve. It would be useful to know under what conditions that reserve can be used, and what his own policies and plans are for using that should it become necessary. It is fair to say that I have inherited a strong position from my predecessor. The 0.5 per cent underspend is to be welcomed in that any available resources that have been carried forward can be deployed in a way that we think is appropriate going forward. That is why I am not making any spending announcements today, just days after the Brexit decision and considering the uncertainty that exists. However, the cash reserve allows us, where we have raised more taxes than has been forecast, to put that into that reserve. That is what I am proposing to do. We can draw up on that as and when required. However, the constitutional position and the financial and the fiscal position of the Scottish Government and the Scottish Parliament continues to evolve as full implementation of the last Scotland act is delivered. We have increasingly more flexibility to use the carry forward and the cash reserve. The kind of issues that we would want to consider is if we do not meet any future income targets. That may be possible because of the impact on the property market and the impact on LBTT, or the income tax on which we will be more heavily reliant. I will consider the taxes that are being generated and the pressures on public expenditure and how we respond to the pressure on our country as a consequence of the outcome of the referendum while pursuing the Government's objective. I note in the supporting documents under the heading health, wellbeing and sport an overspend of £128 million. Can the minister explain whether that reflects the growing problem of deficits in a number of Scottish health boards? Furthermore, whether the outstanding high figure in the document indicates a growing problem that may destabilise budgets in coming years? I do not think that that is a fair characterisation at all. As with the education question, I am happy to give more specifically on an almost line-by-line analysis on that particular issue. However, if you take health and the particular spend there, there has been an issue around classification on ONS and other matters in relation to capital. It is very important that we focus on the detail here and understanding the difference between revenue and capital. I am happy to write to the member with a fuller position here and say that I am sure that the health secretary will pay close attention to those matters. However, I do not accept that characterisation. There are specific classification issues that I am happy to give in much fuller detail to the member if that is of assistance. Willie Coffey, followed by James Kelly. The cabinet secretary confirmed that the Scottish cash reserves can and will be used to support our public finances and public services during this period of economic turbulence, which is caused entirely by the shambolic UK Tory Government. I think that it must be reassuring that any underspend we have the ability to carry it forward. That was not always the case. With the specific cash reserves—those are only provisional figures—we will be able to draw up on that, and we have a great deal of flexibility. It is the right thing to do, not to rush to new spending decisions but to take a prudent and cautious approach in light of circumstances and to use the mechanical and financial flexibility that the Government now has. James Kelly, followed by Patrick Harvie. I note from the documentation that there is a £67 million cash underspend in the community portfolio, which includes housing. That comes on the back of yesterday's statistics, showing that over 5,000 children are staying in temporary accommodation. I am sure that me, the cabinet secretary, finds that unacceptable. I would ask that he look at how the cash reserve can be managed to address that situation and ensure that our children are not staying in vulnerable and insecure situations. Let me respond to that. That was the first immediate bid for access to the cash reserve. It was only a matter of time, but we will consider all those issues when we take forward our spending proposals through the budget. If earlier than that is required, we will do that. However, I take seriously the challenge that has been identified. Supporting people through this period of austerity and difficult times will be mindful of the choices that we make with available resources. Patrick Harvie, to be followed by Ivan McKee. Thank you. I thank the cabinet secretary for the advance copy of the statement. Normally, there might be great value in having relatively low level of underspend, but we face the strong possibility in the future not only of further cuts coming from Westminster, but of increased procurement costs right across the public sector as a result of the low value of the pound. Would it be a useful exercise and has the Government begun to undertake it to assess the impact on procurement costs in the public sector as a result of that circumstance? Cabinet secretary. Mr Harvie is right to raise that as one of many issues now of uncertainty that we will have to wrestle with. It will have an impact on procurement at and borrowing costs and will inevitably lead into impacts on the capital plan and other choices that we will be able to make. We are looking at a range of analysis at the moment. Some of the impact is clearly yet unknown as the markets settle, so it is one of the areas that we are actively looking at, as well as a whole host of other funding streams that deliver services. In Scotland, of course, many of them relate to EU funds as well, so we will have to consider all those matters in the round. Ivan McKee, followed by Willie Rennie. I can ask the cabinet secretary what measures the Scottish Government will take to support economic growth and help Scotland whether the economic shocks caused by Brexit. Cabinet secretary. The Government had outlined our economic strategy, which did include a focus on internationalisation, innovation and infrastructure-led recovery, as well. Clearly, they will all be impacted by the outcome of the decision, but we will still focus on delivering the manifesto in which we were elected. We have made some announcements on the review of the enterprise agencies and will continue to enable infrastructure investment. That includes digital as well. We have had a competitive rate scheme and we have delivered on modern apprenticeships. We will look at how we can support the economy and deliver a stability and take advantage of any opportunity that may exist in these uncertain times. Willie Rennie, followed by Dean Lockhart. I thank the cabinet secretary for advance copy of his statement. Can he provide some information as to why the financial transaction arrangements the budget has been underspent more this year than in previous years? He is also rightly warning about the potential cuts as a result of Brexit, so will he reconsider the Government's approach to the use of income tax powers? He talked about using all necessary means in order to deal with the troubles ahead, so will he consider a more expansive use of the income tax powers? On financial transactions, some of that might be to do with the uptake of particular schemes and the complexity of that. Again, I am happy to provide further information. We will have to take a strategic approach to the budget process itself. What I announced and engaged with the finance committee on this morning was my view that we should take a one-year budget to Parliament. I think that a three-year spending review would not be wise in the circumstances, but when I approach that budget process, I will engage with all political parties. Of course, here what each political party has to say in terms of spending choices and tax choices as well. We did outline our position on tax at the Scottish Parliament election. We were elected on that mandate, but with the degree of uncertainty that exists now, we will have to look at the financial pressures that we face with the decisions of a chancellor, whoever that may be. I spoke to the chancellor this morning, so it might be George Osborne's successor, but we will have to look at the autumn statement to see what the UK Government does in terms of their spending decisions and their tax decisions and the impact in Scotland. We aim to see through the manifesto in which we were elected, but I am happy to engage with all political parties to secure the passage of the budget through Parliament. Dean Lockhart, followed by Kate Forbes. Thank you to the cabinet secretary for the advance copy of his statement. The cabinet secretary mentioned the competence of the Government in managing public finances. However, given the significant number of cost overruns that was experienced in recent IT and other projects that were overseen by the Government and Government agencies, including the system for EU farm payments, NHS 24, Police Scotland and in other areas, can the cabinet secretary confirm the total amount of additional expenditure that is spent by the Government and Government agencies as a result of those cost overruns? I do not have such a figure to hand, but we take seriously our duty to look after the public finances, deliver good, solid public services and deliver sound procurement. I am happy to discuss some of the challenges that we have had around some of those schemes. However, where we have had challenges, we have tried to recover the position to deliver the best that we can for Scotland. Fundamentally, we deliver for our people in some of the areas that have been identified. In all areas that have been identified, we are working very hard to recover a position. Kate Forbes, followed by Daniel Johnson. Briefly, before my question, I will mention that the First Minister has appointed me to serve the Scottish Parliament as parliamentary liaison officer for the cabinet secretary. Brexit poses a number of challenges specifically for the forecasting of tax revenues. What steps is the Government taking to ensure that we continue to manage tax volatility during those turbulent times? I have engaged with the Chancellor and the UK Government in HM Treasury so that there is a reciprocal arrangement around information and that degree of pragmatic co-operation, because we are still dependent on a number of UK factors. However, the specific decisions that I have taken that I have brought to Parliament today around the use of underspend and the allocation to the cash reserve shows that we are taking a sound, prudent and cautious approach, but giving ourselves the ability, as a Government and as a Parliament, to respond in due course in terms of the forecast. With that level of uncertainty, a number of things will change. We do not yet know the impact on our devolved taxes, never mind the UK taxes. However, it was the Chancellor who said that he thought that the UK would be poorer as a result and that taxes would be likely to go up and that public spending would be likely to go down. I think that that is very concerning for all of us, knowing that austerity will be prolonged. We will make the best assessment that we can of that. I will come back to Parliament, but I will fundamentally make the right decisions in delivering stability and protection in very challenging circumstances. I note Dean Lockhart's previous question about general cost of overruns of IT projects, but I note that within the rural affairs food and the environment line items, there is £46 million worth of overspend in financial transactions. We have, of course, noted with concern the issues that have been faced with the administration of cap payments. I was wondering if the cabinet secretary had detail of what amount of that figure, or indeed other figures in the line items, are attributable to those issues that are faced by that department. Again, I am happy to engage on the fine detail of that specific issue in terms of the spending. The overspend on £54 on financial transactions reflects the loans in respect of less favoured area support scheme, which will be recouped in 2016-17. I am happy to come back on the detail of that particular portfolio, rather than take even more time to try to explain it across the chamber. Our last question on the statements to Ash Denham. What steps will the Scottish Government take to provide businesses with the reassurance uncertainty during the current precarious economic climate to help to ensure that we continue to attract investment and build a strong and competitive Scottish economy? The first thing that we want to do, of course, is to ensure that our continuing place within the EU and to seek the opportunities that that would bring for Scotland. We will engage with stakeholders and in business. Just hours after the result, cabinet secretaries were engaging in meetings and in dialogue with key stakeholders to provide that stability and reassurance, but also to hear from stakeholders what we could do and what could be done to give further support at this time. Scotland's economy is fundamentally strong, and there are great opportunities ahead, despite the uncertainty that has now been created. We will continue to recalibrate our efforts to deliver that stability, that economic opportunity. Although the climate in which we are operating has changed to deliver on the Government's economic strategy, which has been previously outlined to the Parliament, I will continue to engage with our relevant parties to take forward our agenda. Thank you very much for that questions. On the statement, I will allow a minute or so for the front bench to change over.