 Good morning and welcome to the first meeting in 2023 of the Finance and Public Administration Committee. I wish you all a happy new year. We have a single item on our agenda, which involves taking evidence on the Scottish budget 2324 from two panels of witnesses. First, we'll hear from the Scottish Parliamentary Corporate Body on its own budget bid and then we'll take evidence from the Deputy First Minister and Cabinet Secretary for Covid Recovery. I now move to the first panel of witnesses, Jackson Carlaw MSP, member of the Scottish Parliament Corporate Body, who is joined today by Scottish Parliament officials David McGill, Clarton Chief Executive, Michelle Higgarty, Deputy Chief Executive and Sarah Glass, group head of financial governance. I welcome you all to the meeting. Mr Carlaw, I understand that you would like to make a short opening statement. Thank you very much, convener, and good morning to members of committee. A happy new year to all of you and it's a pleasure, I think, to be back to present yet another budget on behalf of the corporate body. I'll just take a brief moment to set in context our 2324 budget bid. Core bid reflects commitments already made to this committee in respect of our medium-term financial plan. However, given the volatility of the wider economy, especially inflation, the corporate body has carefully accessed risk to our operations in constructing this year's budget, and accordingly it reflects a few key aspects that I would wish to highlight. Last year, the SPCB advised the committee that in the first budget of the new session we sought to address staffing resources capacity and capability challenges as committed to the convener of the Finance and Constitution Committee in February of 2021, prior to the last election, and confirmed that following this investment, we intended to steward our resources, managing pressures and uncertainties for the duration of this session. The budget bid for 2324 is consistent with that commitment to steward our resources and the staffing baseline is exactly in line with the approved bid from this time last year. We also acknowledged then the emerging volatility in inflation, which has become increasingly so in 2022-23 and is therefore the biggest factor impacting upon the 2324 budget bid. As the committee will appreciate inflation impacts across all aspects of the SPCB cost base and current levels are driving cost increases largely ahead of those forecasts when preparing the indicative budget last year for 2324. Albeit our bid does also reflect efforts to minimise the inflationary impact. The continued inflationary uncertainty remains our biggest financial and therefore operational risk. For MSPs and ministerial salaries, I can confirm that since we broke the link in pay with Westminster in 2016, we have consistently used ASH as our index as set out in advance in the scheme. We have resolved to continue to do so at present. This year it is at 1.5 per cent, and I would like to highlight that this 1.5 per cent increase is not intended as any form of virtue signalling. We are simply applying the ASH index at the published rate and continue to follow this approach. It normally lags behind increases in sector pay, and therefore we would anticipate that it would lead to a higher recommended increase in the forthcoming year where we are using the index. I am happy to discuss any wider questions that arise from this shortly. Turning to staff cost provision, which provides resourcing from member staffing needs, we have chosen to adopt a slightly different approach to indexation this year. Since March 2020, the SPCB has indexed the staff cost provision annually using a mix of average weekly earnings, the AWE and the ASH index. For this budget, applying the same methodology based on the recent ASH publication derived an increase of 4.1 per cent, which was lower than the increase in the previous financial year. However, with general inflation tracking at greater than 11 per cent, when we composed the budget, the corporate body has chosen to adopt only the AWE index, which is 5.6 per cent, and that results in a rate of £147,000 of resource per member for employing staff. Following a thorough prioritisation exercise, the total project expenditure budget of £5.2 million is exactly in line with the indicative budget for projects for £23.24. We have a significant change in profile of spend in this bid, driven by the need to fund the building energy management system, BEMS, which is at the end of its operational life. As well as controlling building services such as heating, ventilation and cooling, the system is also a key enabler in allowing the Parliament to achieve its net zero ambitions. The SPCB was taken on a guided tour of the bowls of the Scottish Parliament complex, and the committee would be very welcome to have a tour arranged for them too if we have any budding plant engineers amongst the committee members to rival those from the retail sector who were challenged in the last year. I hope and ensure that that would allow you to understand the very important need to ensure that the building is operating effectively. But recognising the committee's interest in these projects, you will note the enhancements made to schedule 3, with the inclusion of a new section and multi-year projects. As the committee knows, office holder resourcing is an ongoing SPCB responsibility. This is also a constantly evolving landscape as the Parliament continues to add additional responsibilities or create new office holders. There were only two when the Parliament was established, and clearly we have far more now. The office holder's draft 2324 budget submissions total £16.6 million, which is £1.2 million, 8.1 per cent higher than the 2223 budget, and 0.8 million, 800,000, 5.4 per cent higher than the indicative forecast. The main changes in these budgets from 2223 reflect additional resourcing increases in the ethical standards commissioner, largely arriving from the section 22 order, and the Scottish Human Rights Commission to address business needs. In recognition of the prevailing inflationary challenges and, finally, the associated risk and uncertainty to major spend categories, the budget includes an additional half a million pounds in our contingency provision for 2324. The SPCB have carefully considered where some of these risks might materialised, and we are assured that this modest extra contingency provision affords us the best opportunity to address these potential risks. That, convener, concludes my remarks, highlighting the areas in the budget that I thought I should draw to your attention. Thank you very much. That was very helpful. I'll obviously be starting off asking questions, and what I'll be saying to colleagues is that they can direct all questions to Jackson, and he will then decide whether he answers them or, indeed, whether he takes a fifth and palms them off to one of his colleagues. I think that we'll start near the end, I suppose, which is really in terms of the commissioners' and ombudsman budget bid. As you highlighted, that's quite a significant increase, and, indeed, the money now being spent on commissioners and ombudsman is now £3 million more than, for example, MSPs. MSPs increase £17,000, and, as you pointed out, that increases about £1.2 million in terms of those office holds. You talked about the commission of theoretical standards in Scotland. That budget is increased by 40.5 per cent, and you talked about section 22 order. Salaries are low in the £463,000 increases equivalent to, it says, £7.4 full-time positions, and that's an average of £55,000 each for those positions. I'm just wondering if you can explain to us the necessity of that, because on paper, obviously, it looks particularly at a time of financial challenge, a very significant increase, I think that there are two very important questions arising here. The first is the whole issue of the commissioners, the way that they are managed and the on-going costs associated with them. If you'll allow me, I'll draw to the committee's attention the fact that there are several more commissioners currently envisaged either by government or as a consequence of members' bills progressing through the Parliament. It's not the corporate body's responsibility to comment on the righteousness or otherwise of any of this. It is simply a case that the corporate body is left with a partial function, that is to ensure that they are adequately resourced and that there is a governance structure in place. It is thereafter for the committees of Parliament to interrogate the individual commissioners on the efficiency with which they are undertaking their responsibility. The committee will be aware of the recent history in relation to the ethical standards office with the departure of the previous commissioner after a period of some controversy. As a consequence of that, the very severe report that was prepared by the Audit Scotland into the whole conduct and function of the office. In consequence of that, the standards commission have applied a series of requirements that are quite exhaustive in terms of the burden placed upon the ethical standards commissioner in the way that all complaints—and there have been significantly more of them—have to be investigated. That has a significant effect in terms of the requirement for additional staffing. The corporate body has spent some time interrogating the budget. It's not that we simply rolled over and said, well, this is a lovely idea, not because we are mindful of the additional costs. All the time that I have been in the corporate body in the last session on this, I have never had any commissioner come to me suggesting that they reduce their budget. The corporate body is acutely aware of the increasing budget for commissioners, but given the responsibilities that have been placed upon the ethical standards commissioner, we felt that this was a budget that we had to approve. In saying that, we have written to the standards commission not questioning in any way their right or their authority to make the recommendations that they have, but seeking just to clarify, because we would want to review those budgets on an on-going basis, whether they thought that this would be for a prolonged period of time. They certainly don't think that they will be changing their requirements on the ethical standards commissioner in the current financial year or probably the next. We are anticipating that we will have to maintain—or the ethical standards commissioner will need to maintain that level of staffing in order to be effective in the immediate period ahead. It is not a criticism of the SPCB, because it is a public meeting. It is important for people to be able to understand where their money is going. The other thing that is significant with regard to commissioners and all boardsmen is that every single one of them is increasing by higher than the actual budget that you have bid for for the entire Parliament. What you are bidding for is a 4.8 per cent increase from 128 to 134.2 millen, but every single one of them is increasing above that, the average being 8.1 per cent. If you look at it compared to the draft budget in terms of areas where whether it is justice or transport or local government or whatever it be, one can argue that the budgets of those office bearers are increasing by all of those front-line services. It is important to put on the public record why that is happening. The other one, of course, stands out as the Scottish Commission for Human Rights, which has also had a significant increase of 22 per cent. There has been a big deterioration in human rights in Scotland in the last year, or is it just that they are now dotting more i's and crossing more t's? It is important to emphasise that we do interrogate those budgets carefully. What you see before you is not necessarily reflective of everything that the corporate body has been asked to approve. We have declined to prove certain requests for additional funding and sought to find other ways to achieve the outcome that was desired. The Scottish Human Rights Commissioner made a case in relation to the requirement for two additional full-time staff, which the corporate body in due course accepted. I think that we—I am trying to remember if that was less than the actual bid that we received, I think in that case it was. The bid was in fact for significantly more of an increase than we finally approved, so we did interrogate that quite carefully and declined to accept the full request that we received. I know that you spent a lot of time on this, but £242,000 is an increase, and you talked about two additional members of staff. There must be more to it than that, surely. It includes also general pay increases for those staff that are already there, which, of course, as you know, is running ahead of where it was anticipated that it would be when the budgets were preferred last year. I am just trying to put it into context with the rest of the work where the Scottish Consoldiate Fund is going to be spent. There are not going to be many areas that are going to have that level of increase that each one of those has, so I think that that is something that we should be able to share with you. To follow on the second point, we are also potentially looking at a patient safety commissioner, a victims commissioner, the police investigations and review commissioner, disability commissioner, an older people's commissioner, a future generations commissioner, HM inspectorate for education and a learning disability autism and neurodiversity commissioner. This is for Parliament to decide where to progress all of those commissioners. It is a very considerable additional increase that will be falling into the office-holder responsibility. I should say that, mindful of that, the corporate body, although we have not arrived at any conclusions yet, are also looking at the way we as a corporate body might seek to manage that, because, as those members here—I know that Liz Smith was on the corporate body—will respond, our opportunity to discuss office holders falls within the agenda of our normal business. Clearly, as the number of commissioners is expanding significantly, in order for us to do justice to that, we are going to have to give some further thought to what the implications would be. However, that might be a matter in terms of the additional commissioners that this committee might want to discuss with other committees of the Parliament when they give consideration to the implications and consequences that arise from it. We will move on from there. I think that you have raised really interesting points. I will certainly be taking them up in other places with other people. In terms of the staffing budget, generally, there is a 6.7 per cent increase overall, and you have explained some of that. However, I am just wondering when the document has been provided with, it says that staff pay, including use of contracts, has budgeted at £37.3 million, and that increase of £2.3 million in cash terms. I am just wondering whether the breakdown is between contractors and our own staff. In terms of how we budget, we have a really small budget for contractors. It is £4,000 is all that we budget for, so the bulk of the staffing budget is for our own staff. When needed, we will use contractors to fill those positions on a temporary basis if we find that we cannot recruit the permanent positions. However, in terms of how we budget, it is a very small amount that is in contractors and staff pay. That is absolutely fine. It is just that if you have a £37 million budget and it says including use of contractors, you anticipate that it is going to be a lot more than £4,000, so it might have been easier just to say including £4,000 for contractors. I was going to ask on staffing baselines. In 2020-23, it was increased by £2.7 million. We are told that that is to help to deliver strategic priorities, and they are listed. One of them is to enable enhanced public engagement and participation in committee work. Has that happened and how many staff have been allocated to that? I know that, in general terms, we have filled many of the positions that we identified to you in the budget last year, but at the same time we have seen vacancies arise in other areas of the Parliament. We are not currently employing to full strength, but, Sarah? I think that that is right. A additional 46 positions was what we bid for last year. A net increase of 33 because some were already in temporary support. Right now, we have recruited 40 of those, but that has taken a period of time over the course of this year, so we have had vacancies in those positions throughout the course of the year. In terms of the allocation of those, there were 21 in the scrutiny group, and that is when we are talking about the benefits that you described there. That is where the bulk of the efforts were to be made. Post-Brexit constitutional arrangements? That was part of it, but also the PACT, so the teams that support engagement and bringing more participation to committees is also resourced in that team as well. I think that there were three dedicated posts going into PACT, which have been recruited in the current year. On what developments to envisage from that, in terms of the enhanced public engagement? Sorry, I missed that, convener. Sorry, what developments to expect from that to enhance public engagement? If employing three staff to enhance public engagement, what kind of improvements in public engagement to envisage? As you may be aware, I am wearing a different hat as convener of the Citizens Engagement and Public Petitions Committee. We have been challenged as the lead committee taking forward the whole question of deliberative democracy. We have held an inquiry during the course of 2022. We have produced an interim report with 17 recommendations that are now themselves out to consultation and for discussion with the Government, which would lead to a very considerable change in the whole way in which Parliament engages more widely with the public and, indeed, the way that the public engages with Parliament. Probably, if some of those recommendations were to be accepted, it would lead to some of the biggest changes in our interface and the involvement of the public since the advent of the Parliament. That committee has seen a considerable amount of work done, including an inquiry that saw several—about four or five hundred—responses. It also set up a citizens panel, if you like, who were here on a residential basis for two weekends and through a series of other meetings, meeting officials, MSPs and others, which led to the 17 recommendations. I have always been intrigued by this panel and the whole question of citizens public engagement arose from the former Presiding Officer's Commission on Parliamentary Reform, which was accepted by Parliament in the previous session, and in this session, allowing for the delays that arose as a consequence of the pandemic, has now started to take forward its work. I will be interested, as members who, I think, engage with the idea of public participation, to come face to face with the recommendations that arise as a consequence, as do the Government, as to whether the enthusiasm for all of this follows through into the practical responses of all those who will have to cede some of their own power or time, in fact, in order to make it work. I am optimistic. I have to say that there has been a lot of very positive comments about the work that you are actually doing, Jackson. Obviously, I was asking the question because I think that I am again trying to get things in a public record about where this money has been allocated. Is there going to be reduction in terms of the scrutiny over Brexit? We are now three years into it. Surely there must be a change now in terms of the scrutiny? Is it all winding up or is there more work to still be done? Is it on the same level? Where are we with that? That is probably the most loaded explosive question that is going to be posed in Britain today, if I say so, convener. Is Brexit winding up? David, do you have a view as to whether that will be an on-going concern or not? It will very much be an on-going concern. Obviously, not Brexit itself, which clearly has happened, but the post-EU landscape means that the Parliament's scrutiny of that landscape is much more complex and much more difficult than it was previously, and there are many different aspects to that. There are relationships between the Governments, the relationships between the Parliaments, the interaction of things like the keeping pace powers in the Scottish Parliament and all sorts of different layers that did not exist before Brexit happened, so the resources that we bid for are very much about the longer term, they were not transitional resources. In other words, she goes. In software support and licences, £2.213 million. What is the split between the actual software support and licences? One of the things that we are doing is moving, and we have been talking to the committee for a few years now about moving towards more cloud-based infrastructure applications. There are benefits to that. We will see less of this kind of spiky investment as we are having to reinvest in infrastructure and also maintenance costs as well, because it is a rental model that you pay as you go for the cloud-based services. They offer us a lot of resiliency as well. I think that what the committee has started to see now is a general reduction in our infrastructure-type costs, but we will see more around the licensing costs with the cloud. We do still have some infrastructure that is on site in the Scottish Parliament. We also have a physical disaster recovery facility, and one of the projects that is featured in the budgets for this year is looking at the feasibility of moving. How do we move entirely to a cloud-based system of disaster recovery should anything happen to the systems at Holyrood? I was just looking to see how they could be split up. It was like the contractors and permanent staff thing. I was looking to see where the money is going more directly. Sorry, we have not got an analysis. I can come back to you on the split if you like. We have not got a split in the budget at the moment. That would be great. I am just going to ask you a question in one other area, because I do not think that my colleagues around the table will be queuing up to ask it. It is basically about the MSP salary issue. Funnily enough, I notice that in MSP pay we talk about the 1.5 per cent increase. I will go back to that in a second. On the figures, it goes from £13.482 million to £13.499 million, and I cannot really understand that, because a 1.5 per cent increase would have been, I have talked my head, £190,000 or whatever. That is only £17,000 increase. There are a couple of folk going on, extended, unpaid, leave that we do not know about. I am just wondering how we come to those figures. There are other drivers of the change in there. Part of it is that we had assumed that increase in the national insurance rate, and you will remember that that was announced and then changed. That comes out. Also, when we put the budget together last year, we had assumed two additional cabinet secretary positions, which were more than needed. That has come out in the current year, and it has the role on effect in the next year's budget as well. There are essentially three drivers, rather than just the headline increase on the salary rate for MSPs or those two other things that take it down. I have a reconciliation. That is a sound explanation. I should have thought of the national insurance thing, because you mentioned it in the document in terms of the overall budget, so thanks very much for explaining that. The thing that I am going to ask you about is the annual survey of ours and earnings that Ash index. Given that the GDB deflator is 3.2 per cent and CPI inflation is 10-11 per cent, how has that arrived at? You talk as if I take it as based on a year at a date, is that right? It follows behind, because it is a reflector of what has been happening to public sector pay in the period behind, not the period ahead. You are not going to say to any other group of workers anywhere, including in this Parliament, that we are just going to look at the inflation rate as it was in late 2021 or whatever that is. I am just wondering how that is calculated and why it has been adopted and who has consulted on that. It seems a bit of an anomaly that what you have said is based on the recent Ash publication with regard to staff, that would amount to an index of 4.1 per cent, but recognising current inflation figures, the SPCB has opted to use only the AWE index of 5.6 per cent in order to uplift the general provision for members. Why is that not being used for MSPs, for everybody else? You said that there was no virtue signalling, but it clearly is. I will add one other point. If the Ash index says that because inflation is 10-11 per cent, next year inflation might be 3-4 per cent by this time next year, possibly even lower, and MSPs might get a 5 per cent pay rise, or 3-4 per cent. All you are going to do is end up with loads of headlines about inflation, bust and pay rises. By that time, no one else will be getting in the public sector. It just seems to me daft from a PR point of view and from a practical point of view, from any point of view. These are obviously issues, convener, which the corporate body does reflect upon. First of all, just to be clear, Ash lags because the data is gathered in April each year for the preceding year and is then published in October, November, so there's a six-month difference between the data sets for these two indices. When we broke from Westminster in 2016, it was by a resolution of the Parliament that we adopted the Ash index. It's not a whim of the corporate body, so it is a decision of MSPs collectively in Parliament. Had, in fact, we not refused our increase in 2021-22 as a consequence of the pandemic, which was a 5.1 per cent Ash index, the Parliament declined to take, we would still be ahead of where we would have been had we, throughout this prevailing period since 2016, applied CPI as the basis of our increase. I feel very firmly that there is an independent element to the setting of MSP pay. If the corporate body was simply on an annual basis to say, oh dear, doesn't look like we're getting much this year, which other indices are around that we could adopt that would give us a better hike, I think that the probium that would fall on us and the Parliament who subsequently in approving the budget would be approving that increase would be huge. I argued within the corporate body as the lead on finance that we stick with the Ash index long before I knew what it was even going to be. I said that that may in fact mean that in the following financial year we will have a higher increase, which we will then have to recommend as well. In doing so, we are doing so in accordance with the decision by the Parliament to devolve the increase to the Ash index on an annual basis thereby leaving a degree of independence between any suggestion that we as politicians are setting our own pay and not deferring to that different index. Might we change the index? Might we go to the Parliament to recommend a change? I'm not against potentially considering that, but I have to say I would want to recommend that in a year where there was no material advantage to MSPs as a consequence, I really think that to go to the Parliament and say that we would like to suggest that we change the index this year because it will give you a much bigger increase would be irresponsible and unsupportable. Having said all that, and finally, the responsibilities of MSPs have changed since 2016 following the Smith commission, we have had additional responsibility transferred to the Parliament, so I think that it is potentially therefore worthwhile considering whether once a Parliament or once every two Parliaments there is some independent review of where MSP sits in the wider context of public sector pay and whether it remains appropriate. Again, were that review to take place, it is my opinion that it should be a legacy recommendation from this Parliament to the next Parliament and not a recommendation by us, which would benefit us in this present session, because I think that there would be very little public support for that. First of all, I have to agree with everything that you have actually said. I think that what's important is that there has been an explanation on that. I still think that a system that is a year behind whether you benefit or you don't benefit is just odd because it isn't afflicted anywhere else in the public sector. I don't think that anyone in this committee would be suggesting that a time when everybody else is taking below inflation pay rise is that we don't do the same, but it has to be independent. The reason that I'm asking this, of course, is because other MSP colleagues will talk about it privately, but they'll know actually what you say publicly and that, of course, is itself an issue, frankly, because everybody else feels more than happy to talk about their paying condition regardless of where they work. I think that explanation is really important. I think that it's really helpful. I would have thought, though. I just think that the weakness with ash is not that it's an independent system or anything like that. It's just that it doesn't take into account the actual situation as we are, whether it's good, bad or indifferent. All that will happen, as I mentioned earlier, because it's a year behind. It just looks bad when it's above CPI just as it looks odd when it's below CPI. It's just a rather bizarre system. I fully accept the points that you make, convener. I think that, obviously, what makes this acute at the moment is the prevailing inflation, which has made this increase this year stand out in the way that it has, in many respects. I mean, it is responsible. I should say that ash in Wales has delivered a 7.3% increase. The indices produce different results in different jurisdictions, although in Wales, where they adopt ash, they also have it capped at an annual increase of 3%. The corporate body is mindful of these things. I think that it would have been, as I say, wrong and irresponsible for us to have adopted a different methodology this year. As I say, we agreed to stick with the methodology prior to knowing or having any idea what it was going to even suggest, which I think maintains the integrity of the process and discussion that we as your MSP colleagues have on the corporate body. But I've tried to set in context where we might look to in the future, but mindful of the fact that that shouldn't at any time be something that can be presented as any of us seeking to, if you like, take advantage of the opportunity that might exist, were we to abandon the resolution that we made in 2016 and simply start to adopt another methodology. Whatever, by the way, convener, I think that it must be a methodology. I think simply to say to the corporate body that they should put a finger on the wind and have a guess at what we should be paying ourselves each year would be completely the wrong thing. So I understand the point that you are making. Is it the correct methodology? Should we review that methodology? As I say, I think that that's something we would be prepared to do, but in a year where it was not going to make any material difference to the outcome, so that, again, MSPs could not be pointed at and accused of seeking to feather their own nest at the public expense. No, I don't think it's about that at all. It's about having something which seemed to be fair and realistic, et cetera, et cetera. I think methodology important. I think that the Welsh comparison is an interesting one. If you look at the difference between the salaries that MAs were paid 20 years ago relative to MSPs and now, they were about 17,000 less per capita then, and I think that they are higher now, and they are increasing from 60 to 96. I think that the Welsh thing is interesting. Of course, I've raised before or raised it last year that the corporate body completely ignores the different workload routine list and constituency members. It completely ignores that, both in terms of the allocation for staff and salary, and every one person knows—and I was a list member, as were you—that the workload, there's no comparison, but everyone gets paid the same with the same salary. I know that that's going to be something that you're going to continue to ignore year on year out, but if there is a reassessment, that has to be the situation. It doesn't mean that the salary overall has to increase, but there should perhaps be a reassessment. I know I'm going to be extremely popular with three of my colleagues on the table for saying that, but that's a fact. If I might borrow the phrase, you might think that, convener. I couldn't possibly comment. Yes, indeed, absolutely. Okay, I've taken up more enough time, we've got more questions, but I think it's time to let others in, and Liz will be first to fall by Daniel. Thank you for that, and I just acknowledge that I do very much agree with the previous conversation. I think that it would be irresponsible if we were seen to be feathering our own nests. I turn, however, to the issue about commissioners, because I think that it's absolutely vital that the public has complete transparency on exactly what their money is being used for. You mentioned in your note to us that the additional money that is being sought by the commissioner for human rights is one of a reorganisation in staffing structure, whereas the one for the ethics commissioner is about additional staff 7.4 equivalents. Do we have greater information about exactly what the new structure is for the human rights commissioner, and do we know what the 7.4 full-time equivalents are actually going to be doing? The answer to both those questions is yes. We have a very detailed operational organisational chart that has been submitted to us by each of the commissioners that present their requests and funding requirements to us. I don't have that structure in front of me just now, but if it would be helpful, it's perfectly possible for us to supply that. It certainly is. Just to build on what Jackson has said, the increase in staffing at the ethical standards commissioner was based on a very thorough business case that was produced, and that itself was one of the recommendations that came out of the audit process this time last year, which identified Government's failings, but with very serious concerns with capacity and capability in the office as well. The auditors had recommended that a workforce planning exercise be undertaken. That resulted in a business case that was presented to the corporate body. The corporate body interrogated that, including taking evidence on it from the acting commissioner, and that was all about getting the organisation back to where it needed to be in terms of the role that it plays in the ethics framework in Scotland. Is the fact that it is requiring 7.4 additional full-time equivalent staff because the workload has significantly increased in the commissioner's office? If that is the case, do we know by how much that workload has increased? I think that that is a matter of public record. One of the things that is important about commissioners is that there is public accountability for where that money is being spent, and probably that is the commissioner that has the highest profile in terms of being held to the count by the public. Could you give us just a little bit more detail about that? We certainly have all that information. I do not have it with me today, but I can share that with the committee. I think that the commissioner also included it in his annual report, but there is quite a lot of detail there about the increase in the numbers of complaints, but also about the complexity of the complaints. That was another factor in the workforce planning exercise, not just ensuring that they had the numbers of staff to process that, but that staff capability to manage that increased complexity in the complaints that they are dealing with, but that is information that I would be more than happy to share with the committee. It is also fair to say that the numbers did increase very significantly and peaked as a result of many complaints that were received in respect of one very public matter. They have tailed off again slightly, but are still at a higher level than they previously were. It is also that issue of complexity, which I think is something that has just evolved over time, as the nature of complaints has become more detailed. Just my final point, when it comes to the restructuring of the Human Rights Commission office, what does that restructuring actually involve? I think that we have to come back to you indeed. In my head, I remember the discussion at Ms Smith, but I cannot actually remember what the individuals would do, but the organisational approved chart, we can certainly, operational structure, we can supply, because in this instance, as I said, there were requests for significantly more people than we eventually agreed to employ. I think that some of that additional information is quite important for just getting on the public record of if Mr Carlaw could produce that in due course. I commend Mr Carlaw on prefiguring the exact topic that I was going to ask questions on. Having installed a smart meter in my house over Christmas, I consider this an area of my expertise in addition to retail. The £4 million figure, and I can well understand that you need a robust system to manage the heat ventilation and so on, but it does strike me as being a very large sum. Can I ask what that was actually by the Parliament? Is that just software, or is that a new infrastructure? In particular, I would have thought if this is our 20-year-old system that we are replacing, that those days, those things sit on the network rather than requiring their own dedicated wire. Could you just explain a little bit why £4 million for any single item of software, if that is what it says, would be a large amount? Could you just explain how that happened? I mean, I am sure that my colleagues would explain it, but can I just introduce it by saying that obsolescence is just a reality in terms of plant. On my tour of the bulls of the building, it is like visiting the Britannia or the Queen Mary. What you will see if you take up the offer is quite extraordinary. I did not realise that we went quite so far down or that we sit on a lake and all we pump up water from a historical lake, which in fact flushes all the toilets in the building. However, clearly, as we seek to meet our environmental obligations, the nature of the way in which the building and this room that we sit in just now in every aspect operates is critical. It is not like a domestic situation where I suppose we can wait until the boiler fails and then shiver for a fortnight and have someone come along and do something about it. We simply obviously have to have a plan that ensures that this Parliament will always be functioning and operational. As I say, the corporate body will be very happy to facilitate, and I know that this is not necessarily what you were looking for, but in your new found expertise you might find it revealing. A tour of all of this provided that the convener resists the temptation of some of the colleagues in the corporate body to press the big red button that says, do not press. It is revealing, because to someone like me who has no understanding of these issues, when you see the extent of all of this its way beyond anything that I imagined. However, this is a very carefully established four-year programme. Michelle, do you want to just talk more generally about that? I think that it is working automatically. To answer your question, it is a mixture of infrastructure and software. One of the things that helped to explain it to me, because it is a quite complex and technical project, I guess that it is something that Mr Carlaw has alluded to, is very much about even sitting in this room, the comfort of sitting in this room, it is the ventilation, it is the air conditioning, it is the heating, the cooling, but it is not just the building, it is also carrying out an essential function in actually cooling our communications servers, which are broadcast security and IT, which, as you will appreciate, need to be kept at a certain temperature and certain levels of humidity in order to be able to function in the building. I understand the purpose. It is more just to the split. In particular, given that half of that is being spent in a four-year project but half of it is being spent in this coming year, just understanding that split between what is going to be essentially the cost of the work being done, cost of software, cost of infrastructure would just be helpful just to get an understanding of the split. We can come back to you on the detailed breakdown then, if that would be helpful, but the procurement phase will commence imminently. We would expect, by the time we get into the summer of this year, we will be in a position to be deciding on whether, with the corporate body, whether to award a contract to proceed. As you will see, we have a range of costs at the moment until we go out to the market, and then we will have a much firmer schedule in terms of how much it is specifically going to cost in the sequencing of the work. We have worked up a programme for it at the moment, but until we go to the market and we have the specialists who tell us how they are going to install it, that will be subject to change, but it will become firmer once we get into the summer and we know what the market is returned by way of the investment, because we need specialists to install it in the Parliament. Obviously, this is important because it fundamentally controls the utilities bill that the Parliament receives, which is budgeted to be £1.46 million. First of all, what will the lifespan of the system be? If it is £4 million, we can understand that. If the system is going to last five years, that would raise an eyebrow. If it is for another 20 years to manage £1.5 million to spend, that would make sense. What is the lifespan? Also, what is the split of that utilities bill between the environmental and all other utilities requirements? I will try my best to answer. To give you a sense of, obviously, we are looking for maximum life expectancy out of a new system. That one has been in place for 20 years. We have eaked it out, maintained it with the one supplier, which is obviously a disadvantage. We want a system that is capable of being maintained by more than one supplier. It will also be a more modern resilient system. In terms of what we need to do to reach net zero, we are going to have to make further investments. We need to be able to interface with a more modern building energy management system so that we can get the data in terms of where we are using our gas and electricity, how we might tweak and amend that, how we might reduce consumption, and also to be able to set us up for the longer-term changes around net zero, where we have to reduce our gas or reliance on gas. We have to move to a different way of heating perhaps through heat pumps, but we also have to be prepared for the greening of the grid, which is going to bring us the biggest benefits in terms of reduction of our electricity. There are two rationales behind the system. One is its obsolescence, and it has to be replaced. It is 20 years old and has been in here since 2003-4. It is now a huge risk in terms of business critical system running the building, but the other thing is the huge advantage in terms of our journey to net zero. The other work that we will become to speak to the committee about in probably the next time we are in front of you about the investment that we need to make over the longer-term to reach net zero and the interim target that we have to reduce emissions by 66 per cent by the end of this session. I do not have the specific... Do you want... We can give you our current split in terms of gas and electricity. Of the 1.4 million, the bulk of its electricity, so more than 900,000 in electricity. My final question is this. How safe is that 1.46 billion budget? That is a 39 per cent increase, but currently, if you look at wholesale gas and electricity prices, they are sitting at almost five times higher than they were this time a year ago. Have you already bought the gas and electricity for the coming year? Is that safe? Do we then need to anticipate a quite significantly larger increase in next year's budget if 1.46 has already been contracted for? I can answer that. We have bought about 84 per cent of next year's supply for both gas and electricity. Those contracts were just signed in the final quarter, so they come into effect for the tail end of this year. We will have an overspend in the current financial year of about £150,000, £160,000. We have got 84 per cent contracted for the next budget year that we are essentially discussing just now. We are benefit from the Scottish Government frameworks. We are part of the arrangements with them. The pricing is secured through that. It is hard to know what utility prices are going to do by the time we get to—we are talking about probably at least later than this time next year. The information coming out of the OBR is that they anticipate that utilities pricing will, by 2024, start decreasing. It is hard to anticipate, but the confidence that we have in the numbers that we have is that 84 per cent is purchased for that upcoming period. As I understand it, you are looking for a 4.8 per cent cash increase this year. Some parts of the public sector have been given a flat cash settlement. If the Parliament was to say to you that there is a flat cash settlement, what would that mean in practice? There would be—we have talked about a degree of risk-based assumptions and putting the budget together. I think that Sara has just indicated one of them, which is that yes, we have tried to reduce the risk on utilities, but obviously there is still an element of risk there, which we are going to have to meet within our budgets. It would mean that probably something like the building energy management system would be something that we might not be able to progress. Certainly, we would have to go back and look at all of our project spend again. In terms of our project spend, there is a significant amount of that. If you look at both the building energy management system and the chamber conferencing, those are business critical systems that are obsolescent. We have a variety of other investments that are maintaining the building, keeping it wind and water tight, etc. I think that it would, given that the bulk of our budget is, obviously, across members, their staff, Parliament staff and office holders made up of salaried budgets, that would place a huge pressure on the Parliament to be able to meet increase in progression or salary cost of living awards as well. No, I do understand that. I am not really arguing with that, but I just suppose that other parts of the public sector are under that kind of pressure. Commissioners, we have discussed it at quite some length, but just for clarity, who do you think should be taking—is it this committee—an overview of commissioners? You have made the point that it is not, and I accept that it is not, the corporate body's responsibility to say no. All the individual commissioners, I am sure, are doing and will do good work, but somebody needs to look at the overall picture and say, well, this is money that is not going into front-line services. This is money that is going into commissioners. Who should be taking that overall picture, do you think? Well, I mean, it's twofold. I mean, I don't know if David will have a different view, but I would have said it's for Parliament itself, it's for the committees of this Parliament, and perhaps the fact of all of this needs to be something which this committee shares with other committees in terms of the concerns and consequences. Secondly, it's for the Scottish Government as well, because the Scottish Government is also an advocate for the establishment and creation of a number of commissioners. I've certainly noticed that there has been an increase in the number of my parliamentary colleagues who have identified the opportunity to progress a bill for a commissioner. I do think that Parliament should be interrogating all of these carefully. In my own view, this is a personal opinion. From time to time, I think that we then devolve responsibility and accountability by talking about the creation of a commissioner, which at the moment rests elsewhere and potentially undermines this Parliament's ability to interrogate and pursue that direct accountability. That's a personal comment, not one above the corporate body. I do think that it is, and I identify to you all the potential additional commissioners. When I said when this Parliament established that we had two, the fact that we could be looking at having 14 is a very considerable increase in something that I think in my first Parliament in 2017-11, a hybrid committee was established, or certainly a committee on which I sat, was established because the Parliament took the view that there were too many commissioners then, and that there needed to be a rationalisation. Indeed, I believe that we did reduce slightly, but it became very difficult to put any genie back in the bottle because the outside interest in the work of any commissioner once established leads to a very considerable campaign on that commissioner's behalf, if there's any suggestion that there might be some way to merge their work with another commission. Frankly, back in the 2017-11 Parliament, MSPs balked at the recommendations, and in fact the number of commissioners was maintained at a higher level than was being recommended by the committee that had looked at the potential consolidation. I think that it's a complicated process, but I think that we are moving into a period where it is becoming altogether regarded as a casual thing to suggest, do and implement the establishment of another commissioner. It's an expensive extension of our public sector. I personally do share some of your concerns, and I think that maybe the committee can look at that at some point as an overall picture. Do we need just looks at me like that? I don't make many suggestions. The contingency increase from £1 million to £1.5 million, is that really just to cover in case inflation hits a particular bit harder than we're expecting? I think that it is the case that, as a consequence of inflation this year, we ended up utilising most of the contingency that we had in the previous financial year. In years prior to that, I think that we've used less of the contingency in a number of years, and it struck the corporate body as sensible just to have that additional provision by way of contingency in the budget for next year, given that there are certain factors about which we simply cannot be sure. Is one of those factors pay because there were various figures in the papers, like 6.7 per cent was mentioned, but I think that's an overall figure. I saw the cleaning budget was only going up 3.9 per cent, which presumably we would be giving the cleaners a bit more than 3.9 per cent. You may be negotiating, I don't know, so I don't know what you can say in public, but can you give us any indication about pay increases next year? I would hope that you would understand why we would think it probably best that we don't explore that area this morning. Clearly there are negotiations which are now underway, and I think that we would respect the integrity of that process. I do accept that. I don't know if you can tell us anything privately or send us any private information about that, or at least keep us updated as it moves forward, because that I assume would have a major impact on the budget and in your contingency if you have to settle for slightly more than you're expecting or even slightly less than you're expecting. Contingency is there to meet the potential volatilities and inflation, I think that it's important for me to say. I don't know if there's anything further that you want to add, Michelle. Certainly in the current financial year the pay settlement was above what we had budgeted, and we used about half a million of the current year's contingency to cover that difference. Essentially the contingency is there to cover risk across a number of categories, but a pay settlement would be one. In the salary increase, the salary cost increase, there's also the annualisation effect of the additional posts that were introduced in the current year, because they weren't all in place. They were not assumed to be in place from the start of the financial year, so there is a roll-over impact, which is also reflected in that 6.7. If I could just come in and add that Asara alluded to, we had to use our contingency in the current financial year, but that was exceptional circumstances because obviously when we budgeted inflation was an unknown quantity and it was an exceptional quantity given the pay negotiations for the current year. In fact, the Parliament settled very early. I think that our pay award was in May, well ahead of the rest of the public sector, and we would certainly be hoping with our TUS to begin negotiations early and to settle early so that people had their pay awards in their pockets early in the financial year. However, the inflationary impacts are across all aspects of our running costs, so it's not just projects, for example, in terms of increased costs around cost of components, delays, access to specialist contractors, increased rates for specialist contractors, but it's also within some of our contracts and some of our licensing costs, which have got CPI and RPI built in as the means by which those are uprated, and then obviously other things to do with, for example, utilities where there is a degree of exposure around inflation as well. I would just like to highlight that it's across all aspects of our running costs, and that's why the contingency has been increased to 1.5, which we will, as we always do, be very circumspect in how we use contingency, aware of the wider pressures in the public sector. That's helpful, thank you. Another point, if I'm understanding it correctly, the uptake by MSPs of the staff allowance, I think you were assuming it was 95 per cent, you're now assuming it's 93 per cent. Can you just maybe give me a wee bit explanation around that? I'm not sure, Sarah Khan, but that has been our experience. We have been clearly, obviously, in the first year of the Parliament. It takes some time for MSPs to come to a view as to the staffing requirement that they will require, and we can see that evolving. Obviously, we anticipate a lower uptake in the first year, but it seems that we can now consistently identify that the uptake in terms of overall MSP staff is at a level where we can safely budget at 93 per cent. That's right. We've looked at the six or seven years history excluding the election period, because we know that that's always different from a normal running year. We've concluded that it was reasonable to budget and appropriate, given the context, to budget at 93 per cent instead of at 95 per cent uptake. That's positive. I think that MSPs are good if they keep thinking that, if we save a bit of money in our staffing budgets, it puts money into the NHS or whatever else. But that's an average course. Yes, no, exactly. Some people will go to 100 per cent, I take it. As far as saving money is concerned, can you give us any idea of practical things that we might be doing? Are we cutting the temperature in this building, for example? Michelle, do you want to talk to that? In terms of efficiency, you've obviously just touched on one. We've been looking very keenly at the budget and the remodelling of the uptake as one aspect, which is saving about 400,000 on the budget that we're putting forward for next year. Procurement is another big area where we are able to track savings quite frequently, or we try as much as we can to use the collaborative frameworks, which means that we've got the aggregate bulk of the public sector to pay. We saved in 2021-22 using Scottish procurement's own analysis over half a million in terms of using those collaborative frameworks to procure goods and services for the Parliament. Even where we didn't use that, it was around £400,000 safe in that financial year also through how we procured and got value through procurement as well. We're also looking at trying to bear down on contracts and costs. For example, one of the things that we have done in the current year is renegotiate at the Microsoft Enterprise licence, which is about £70,000 recurring annual saving to the Parliament. We've also managed to reduce some of our cloud hosting costs, which is not only £40,000, which we've managed to save in the budget that we're putting forward. We are currently concluding a project around our telephony. One of the things that we will be doing through that is reducing our telephony costs as well as we move towards a new system, a cloud-based system of telephony in the current financial year. The other thing that we do, which we'll see in our project budget, which we have kept to in terms of the indicative, is that we prioritise our project spend quite closely, taking a risk-based approach on the things that are read, and we actually have to address project spend on versus the things that we can maybe eke out or push out and keep going for a bit longer, so that we're able to maintain a five-year project pipeline, which we don't see big spikes in investment. We try to keep it relatively stable. Those are some of the ways in which we try to introduce efficiency. We've also got, as part of our strategic plan, an entire programme of work, which Sara is leading around operational excellence, which is looking at how we automate, how we introduce AI-clever interrogation of data to be able to improve efficiency and how we, as a staffing group, undertake our work and the services that we provide to members as well. One of the pleasures of being in the corporate body is that the MSPs who sit on it get to meet and work with many of the officials of the Parliament who are otherwise unknown. Michelle there was making reference to procurement. Veronique Malcolm, who is responsible for procurement of the Parliament, is passionate and reports to the corporate body in a very detailed way, and is incredibly proud of the savings that we are able to achieve as a result of the focus that she brings to our procurement within the Parliament. I'm always amazed, really, having been an MSP not on the corporate body, how much of the infrastructure of this Parliament is in the hands of people that MSPs really know nothing about but who really do do a terrific job on our behalf. Good morning, and thank you for attending today. I definitely echo and reflect the comments that you've just made, Jackson, about the staff. I think that the operation of the Parliament is a huge undertaking, and many people don't appreciate that. I'll happily take off a tour of the basement, and I promise to press no red buttons either. The first thing that I want to ask is slightly to take unusually issue with a convener in going back to Brexit. I mean, if I were in a similar position to you, the FTE equivalence required for forthcoming work for Brexit would certainly need to be given careful consideration. I know from anecdotal chats with clerks that the number of LCMs and the complexity in scrutiny over the course of this year has been quite considerable. When I mentioned retained EU law and the kind of back-ending scrutiny of that and then into the year after, to be honest, it's usually greeted by horror by the clerks. I've spoken to such as the extent of the unknown. My question to you is, I'm not certain about what specific additional headcount provision you've made for Brexit in the light of retained EU law that could see circa 4,000 pieces of legislation folding. Sure, it won't come to that, but it's certainly considerable. What's the specific headcount and how confident are you in the provision of that headcount? We'll be keeping it under regular review, but the moment I'm relatively confident—the reason for that is that the increase in the headcount that we promoted—and we were grateful for the committee's support on all of that—was based on very robust business cases that came through from all of the individual parts of the organisation that were going to be affected by changes in the constitutional position in the country. There was lots of analysis of what the future might look like. I think that we referred earlier to the fact that there were 46 additional posts, including translating those that were temporary posts into permanent posts. Almost half of them were in the scrutiny function alone, but an additional eight, I think, from memory were in our legal services department because they are impacted hugely by the complexity. The retained EU law proposed changes there will have a massive impact on our legal colleagues. They'll be looking over the course of this year at the impact that that might have on them, whether those additional resources are going to be enough. I'm sure that they're going to have to marshal them to that absolute limit, even if that is going to be enough, or whether there's going to be some sort of transitional element required in terms of temporary resources to get us through that process of retained EU law, as it is currently proposed. Michelle, it looked like you perhaps wanted to add something at the start of there, just to... Okay, okay. Right, so you're feeling confident. I'm sure that that would be something that we scrutinised. The other day, I wanted to pick up on... You're probably pleased at the outing this morning, Jackson, that we're not talking about the IT system. I did feel more than a little sympathy for you last time because you're accountable as compared to responsible for the operation of these huge outfits. I suppose two questions, it's come to my attention, and you're probably aware that this committee under our public administration is going to be looking at decision making within the Scottish Government as a kind of discipline in of itself. I've seen examples recently where decisions have been made on a risk-assessed basis that look to probability of an adverse outcome, but only look to the impact on one key stakeholder grouping, for example, and that's an obvious example. I suppose what I wanted to explore with you, Jackson, given the fact that you're accountable and there's clearly very professional staff in place, how do you assess yourself in that accountable position that the decision making is as robust as it can be? I appreciate that you're quite exposed and you're doing a very good job on behalf of all parliamentarians, but you're quite exposed. How do you assess that risk to yourself because you get it in the neck if things go slightly awry? I honestly don't know that I do dwell on that aspect of the responsibility in terms of the risk to ourselves. What I am satisfied by, and I think that it's important to say the corporate body requests or requires, is all the information that we think we require in order to be satisfied that the correct decisions are being made and taken. From time to time, that means that items get deferred on the agenda of the corporate body because we feel more information is required around the decisions that are being thought about, progressed or taken. Clearly, the multi-parliamentary extended nature of the IT contract and the slight weaknesses that that exposed to us, which I think we've adjusted our own internal systems to reflect. David, we have done some things differently as a consequence of that. That was one illustration of something that exposed a weakness, but in general terms, for example John Mason was talking about procurement a moment ago, the reports that we get and the opportunity that we have to interface with the team and others responsible for that, satisfy us that we are on the correct path and the correct decisions are being arrived at? I would back up that entirely. The governance process here is that the corporate body delegates to me the day-to-day running of the organisation, and I further delegate that to Michelle and people like Sarah. It then becomes a matter of judgment on my part as to what is escalated to the corporate body and in what form. The kind of examples that Jackson has given there have been examples where the corporate body has said, we need more information on this or we need this type of issue, like the major projects, to be done a bit differently. They need more information from me and my colleagues when they are overseeing that and as you put it, their necks are on the line ultimately. The responsibility for that lies with me, but the ultimate accountability is the corporate body, so that is how the relationship works between the staff and the corporate body in general terms. I utterly appreciate and understand that, based on my previous career, you are describing a norm that I would expect to see in place. I suppose that improving the risk of doing that is that, where you have collaborative bodies who are working well together and people are generally nice and get on well together, it introduces a risk of groupthink, where insufficient challenge creeps in over a period of time just because people are nice and they believe that each side is doing a professional body and a piece of work, and why wouldn't you? I suppose that what I am trying to explore and it may well come up again in our decision making inquiry is how robustly you ensure healthy tension, if you like, as a body, because it is absolutely necessary and, over time, that can diminish in any organisation and actively putting that at the forefront, particularly you, Jackson, when you are accountable and your necks on the line. Thank you for that. I am sure that Maggie Chapman, Claire Baker, Christine Grahame and I will all be flattered to know that we are nice. Obviously, the corporate body is not a committee of the Parliament. The discussions that we have are discussions that there is a published minute of, which gives some flavour of the outcome of the discussions that we have. I do not think that the officials would say—correct me if I am wrong—that we sit there quietly or meekly and are shy to come forward with questions. I mean, some of the issues that you have discussed with me and colleagues this morning have equally been challenged by your colleagues on the corporate body in the progressing of the decisions that have finally been taken. I do not know that I think that groupthink is something that you would not get in the chamber of the Parliament among the same assortment of politicians. Although we have an outcome to arrive at in the corporate body, there is a degree of challenge and a different perspective brought to most of the discussions that we have. My last question concerns disaggregation of data. It is a sort of thematic that I keep following where I ask do organisations—and that includes the SPCB—routinely disaggregate all day to you, collect by sex, because we cannot affect any change unless we have the data. Every time I have asked this question of everybody, I keep finding out that they do not routinely do that and therefore how can you affect change to ensure parity. So, same question to you. I am conscious that there is a biannual item on the agenda, which is very gender-specific in terms of the way in which the Parliament functions, but I do not know, Michelle, that you want to work with. Sorry, do you mind if I just clarify? Do you mean in terms of feedback or research? Every measure where every data item where you are collecting data, do you have that routinely disaggregated, because that follows into things like your procurement policy and so on, but only by collecting the data can you start that moving forward effect? There are things that are regularly collected, which are analysed by the kind of characteristics that you set out in terms of the staffing group of the organisation. We also collect a lot of data around parliamentary business, which can be diced and spliced in lots of different ways. That is possible through that. Yes, SPICE can do that through that as well. I know that members sometimes ask for data sets to be provided on parliamentary data in that way, broken down in that way, and that can be done. I am not aware of anything else that specifically we are doing in this area, but I am happy to take it away and come back to you if it is a particular area of interest. I suppose that my final question would be, if I said to you that this is a gender-friendly Parliament in all facets, you would, of course, I assume say yes, but I would then challenge you to say, how do you know? There is visitor feedback, for example. That would be one of the things that we point to. We also survey our witnesses who come in to give evidence to the Parliament as well. We have a range of facilities in place. We have a range of external advisory bodies, obviously, that also look at various things to do with our access in terms of disability, different genders. There is various feedback that we routinely gather, if that is the kind of thing that you are asking about, which gives us feedback on how inclusive we are, and, obviously, inclusivity is one of the core values of the parliamentary staffing group as well. We pay a lot of attention to looking at diversity and inclusion, not just in our own operations, but also in our operations that we provide to the public as well as, obviously, the services that we are providing to members and their staffing groups. I suppose that what I am asking is almost like turning it on its head what you are describing is some collector, some output, which, if you chose so to do, you could pull into one report or one facet. I suppose that what I am asking is when was the last time you produced or have you ever produced a similar report to what you have done just now or, indeed, in any area where it was done entirely from the point of view of the female population in every single facet? And have you ever considered doing something like that? The piece of work under way at the moment, which one of our colleagues is supporting the Presiding Officer on and aboard on around the gender sensitive audit, you may have heard of this work. I believe that they are at the point where they are about to agree their report and produce it. That is one example where there has been something done very specifically in that context. I will leave it with you for something to think about. The opening question, do you routinely disaggregate every data collector by gender, is a valid question, because it flows through into like procurement. Do you know that you have equitability in your procurement to women-led businesses, for example? That is an issue for many facets of the Parliament, as I am coming across. I just want to say that it is really welcome, the major multi-year project section. It does really help us as a committee. Just on that, the building and energy management system had one follow-up question from what Daniel was asking. That was, I think, you seem to suggest, Michelle, that this would help us towards being a net zero Parliament. Is this a spend to save? Do you have any idea how much of a reduction in our energy consumption can lead to that? It is two things. First of all, it is a replacement, because it absolutely has to be replaced, because it is going to fall over. That means that we would be in a risk position to be able to operate the Parliament. It has to be replaced. There are benefits in replacing it, because it will be a more modern, resilient system. That means that the other investments that we need to make in terms of facilities management to be able to reach net zero are going to be able to interface smartly with the new building energy management system. Somebody explained it to me at the outset, and this was a good analogy. It stuck with me. When this was entered, people were using Nokia phones. You cannot watch YouTube on a Nokia phone in 2003. We are dealing with technology now that is at the very end of its life in terms of what it can smartly do to be able to monitor usage of electricity in the building and gas supply, and to adapt that as the fall of the building adapts and how we use the building adapts as well, but also how other investments that we need to be thinking about investing in to meet net zero in the building are going to interface with it and plug into it, if you like. It will lead to that. What we do not have at the moment is the detail of how that is all going to work, because some of that is going to be dependent on the route map, the critical path to net zero. That work is getting undertaken at the moment. Our expectation is that by the time we get to the end of this financial year we know what we need to do. It is the sequencing of the critical path, it is the investment, so we would expect that by the time we get to the end of the current financial year we will have that kind of road map to net zero, and then that will show us how we are going to meet those ultimate targets by 2038. Is it not then a risk going ahead with this until you have that route map so you know exactly what heat pumps we are going to require, what solar panels we are going to require and how we are solving interface together? It seems a bit strange that we are doing this one piece, because we have an antiquated system just now, but would it not be safer to have the whole route map, the whole plan, before pushing ahead with this little bit? No, it is not a little bit. This is an enabler, it is like a foundational piece, and we have had experts in supporting our facilities management team to scope it and then go out to the market. I would expect to see as part of the specification, obviously, that that ability is an enabler to make sure that whatever else we need to invest and layer on is going to be compliant and be able to interface with it, which you would expect from modern technology at this point in time. I should say that they have also been talked to other organisations who have undertaken a replacement of their built-in energy management system. In fact, in Edinburgh, I believe, the castle has already done it, to look at how others have found the experience and the interface that it is going to work whenever they bolt on other places of future investment, but, of course, we still have to, that is going to be many years, this is to 2038, the net zero path. So when will we see those costs and that pathway then? So we are hoping to have the route map, if you like, the critical path to net zero identified by the time we start to get into the end of this current financial year, and then there will be estimates of what some of those cost packages will be. So that, I think, is something that we'll start to see come through in the next, well, obviously, BEMS is part of the next four years, but then we'll start to see the other investments that we need to make as part of net zero as well. Some of that isn't entirely in our gift, obviously, but some of it around how we can reduce our own consumption is in our gift, but obviously things like the greening of the grid, anything we might do more collaboratively around heating the built-in, for example, is work that requires engagement with others as well. One last question I had was, there's 189,000 in for office space planning and moves in line with our new ways of working strategy. Can we have a bit more information of what that actually is? Yes, you can. Post-pandemic, we've obviously been investing, well, we've got a programme called new ways of working, which is for members and their staff and for our own staff around a more flexible, hybrid way of working between Holyrood and elsewhere. One of the things that we are looking to do is amend the building accordingly. Obviously, we've got a lot of spaces that are not being routinely used all the time, which is inefficient. We're heating and lighting them, for example. We're looking at trialling more collaborative spaces, which means that people don't have a set desk. This is not for all staff that we will be categorising the types of worker, but we will be introduced in collaborative spaces so that people can put their stuff in a locker, choose to sit alongside other colleagues rather than do what they do now, which is go to an office, which is just tended to be their one office that their one team works in. We'll also be introducing more flexible, we've been piloting, booths that you can go into and make a hybrid call one-to-one with some confidentiality. There's a variety of new ways of working, and using the spaces in Holyrood that we're trialling as well, and the other big investment has been the digital meeting rooms. We'll have 30 of those by the end of the current financial year, which means that you can have your meeting in hybrid as well as all virtually as well as all physical. It's not really a way of trying to get more people in the building, it's just a new way of working altogether. We're all just chatting here about why is that cost £189,000, given the fact that all the facilities are already here. The officers are here, the staff are here, the technology is here, the deaths are here. Well, not all of the technology and the facilities we're here, for example, we didn't have all of the technology to be able to do the hybrid meetings. If you've been in the rooms that have been set up for that, you'll see that it's different technology, which zones in on the person as they're speaking. We're still doing that at the moment. That's work that's on-going at the moment. It's way beyond committee rooms. This is the entire building. Obviously, there's a big pressure. We were very aware, except when everybody started to come—well, not everybody, but when people started to resume coming back to Holyrood, that this ability to meet in a hybrid fashion was one of the early pressure points, so we took an early decision to invest in this technology in our meeting rooms. The other thing that we'll be doing in that space, which is part of that cost, is looking at a simple way of being able to book a hybrid room when you make a teams meeting. I'm tempted to ask a whole bar as your questions on this, but time is against us. We have the Deputy First Minister waiting to ask another question on the budget. I have to say that your answers have been very comprehensive to date, although we're on our time quite significantly. I just want to thank you for your contributions and members for their questions. We'll just call a break to 11 o'clock to enable an exchange of witnesses. We'll now continue our evidence-taking on the Scottish budget 2324. Welcome to the meeting John Swinney, the Deputy First Minister and Cabinet Secretary for Covid Recovery. Mr Swinney is joined by Scottish Government officials Alison Cumming, director of budget and public spending, Gary Gillespie, chief economist and Andrew Scott, director of tax and revenues. We have around 90 minutes for this session, and before opening the discussion, I would like to wish Mr Swinney and his colleagues happy new year and ask him if he would like to make an opening statement. Thank you very much, and happy new year to you and to members of the committee and parliamentary staff. When I set out the budget in December, I indicated that this was a particularly challenging budget to construct. We are managing a range of unprecedented circumstances due to volatility from global factors, the impact of inflation and the cost of living crisis, and the consequences of the September fiscal statement from the United Kingdom Government. We have taken difficult decisions across Government through the emergency budget review in this financial year, totaling £1.2 billion in reductions in public expenditure, allowing us to meet the cost of increased public sector pay and provide further help to those most impacted by the cost of living crisis. I am still working to ensure that we can forge a path to balance in this year's budget and have applied the assumption that there will be no carry over of resources into next year's budget from this year. In developing my approach to the 2324 Scottish budget, I have taken the necessary steps to continue to maximise the Scottish Government's support for people in Scotland during the cost of living crisis. The pressures on this budget cannot be overstated and we have chosen to act to do everything in our power to deliver for the people of Scotland. We are confronting the challenges that we face by increasing taxation for those most able to pay to enable additional investment to be made in the national health service at this critical time. This budget is choosing to invest in Scotland and focus on eliminating child poverty, prioritising a just transition to net zero and investing in our public services. I welcome the opportunity to meet with the committee this morning to discuss the budget in more detail and to assist the committee's scrutiny of the Scottish budget. Thank you very much for that opening statement. Obviously, over the next few weeks, we are going to have three debates. We will have a debate with regard to a report on scrutiny and then we will have stage one and stage three in the chamber. I think that one of the important things because we are going to end up having a tussle over this across-the-party divide is to clarify the figures. Let's look where we are. At the very start of the 23-24 budget document, it set against inflation of 11.1 per cent and yet the Scottish block grant has declined by 4.8 per cent in real terms over two years. However, that is using a GDP deflator of 3.2 per cent, which should point out as a usual comparator for analysing real-terms changes in public spending. It is highlighted by the OBR and the Scottish Fiscal Commission. It does not really capture the realities faced by the public sector, whereas if a consumer price index was used as a measure of inflation, it would show UK funding to be 10.8 per cent lower than two years ago. However, although those are the figures in the document, when SPICE have looked at the same figures, they have said, and I quote, that resources are due to increase by 3.7 per cent in real terms in 23-24 and capital to fall by 2.9 per cent in real terms. Do we accept those figures, which appear superficially to be contradictory? Are those figures different because the balance has shifted between the block grant and the taxes being raised? It is not for me to explore or explain the numbers from SPICE. I put forward the Government's numbers and the Government's assessment, and we do that on a transparent basis, which indicates a number of points. First of all, the impact of inflation can be viewed and judged in a variety of different ways. If I recall correctly, when I was last at the committee, the committee asked me if I would be using the GDP deflator, and I indicated that I would be because that was important for the sake of consistency in the way in which budget documentation is presented. Having said that, I think that what the Office for Budget Responsibility and the Fiscal Commission have said to the committee is accurate is that the GDP deflator is a measure of comparative effect from year to year, but the effects of inflation will present themselves in a variety of different ways to different aspects of the public services and the public finances. Although I present the numbers underpinned by the GDP deflator, I cannot ignore the fact that the effect of inflation in reality, in terms of a term that might capture the ability to spend, or the capacity to spend, is eroded by the effect of inflation. On the details on the numbers in the budget, I think that what the budget documentation shows quite clearly is that there has been a real-terms fall between 21, 22 and 2324 of 3.2 per cent in the Barnard resource funding that the Government has available to us. Obviously, we have taken steps in the budget to try to address some of that impact by the decisions that we have taken on tax, to try to overcome some of the effect of the erosion of our financial settlement in terms of the contents of that financial settlement, and then the capacity to spend as a consequence of the effect of inflation. In that, there would be a very severe impact on the budget? Of course, convener. We, as a consequence of the decisions that we have taken on tax alone, there are £519 million available to be spent within the Scottish public finances that would not have been there had we not taken those decisions specifically on tax. In this financial year, if you look at it cumulatively, the budget benefits to the tune of, according to the Fiscal Commission, of about £1 billion being available in this financial year as a consequence of the cumulative effect of decisions that have been taken by me and by my predecessors in this role in the course of the last few years. Okay. I think that colleagues might want to look at the net impact of that, but just to focus on what that tax is going to be used for. Obviously, there are Barnard consequentials, for example, for health. In addition to those Barnard consequentials, how much additional resource is going into the NHS, for example? The total uplift for the health service, the health and social care portfolio, is approximately £1 billion, and the Barnard consequential that arose was of the order of £300 million from recollection. The Scottish Government is deciding that we are passing on in full that Barnard consequential, but we are going much further in terms of the allocation of resources that we are making. In the draft budget, the Scottish Government's priorities were re-emphasised. You mentioned them earlier on ending child poverty, ensuring sustainable public services and accelerating the transition to net zero. What happened to the commitment to sustainable economic growth, which is necessary to pay for it all? There wasn't any mention of it in the draft budget statement, and the draft budget document suggests a national outcome of that. We have a globally competitive, entrepreneurial, inclusive and sustainable economy, but there is no detail on how that will be achieved. Obviously, thanks to the economic turmoil exacerbated by the UK Government's disastrous decisions last autumn, the UK is now in recession. How can the Scottish Government sustain rapidly rising benefits that will be £1.4 billion higher than if it had not been devolved with a shrinking economy following the working-age population and low productivity growth? There are three key points there, convener. First of all, the way in which I have presented the economic argument in the budget document is essentially to say that our economic ambitions must be realised through the delivery of a just transition to net zero. That is essentially the channeling of our economic activity to ensure that, out of the transition to net zero, Scotland realises the economic opportunities that are available to us principally through the delivery of the national strategy on economic transformation. If the committee was to look at the detail of the budget document, I set out very heavily the measures to which we are depending on the success of the national strategy on economic transformation to realise that economic transformation. Secondly, the question that you raised, convener, in relation to social security expenditure is, in a sense, a matter of political choice, that the Government has opted to make political choices. They are in very stark contrast to the decisions made by the United Kingdom Government on the issues of welfare, but we have decided to take measures to support individuals that face significant challenges. One particular illustration of that would be the Scottish child payment, which accounts for a substantial part of the divergence in expenditure to which you referred, convener. That is an active political choice. Thirdly, in terms of paying for all of that, that has to come from the success that we take forward in boosting productivity and earnings within the Scottish economy, which is the focus of the national strategy for economic transformation. I think that the estimation from the fiscal commission of earnings growth in the next few years indicates a level of confidence from the fiscal commission that the measures and priorities that are being put in place will give us the foundations to be able to achieve that increase in earnings growth that the fiscal commission has predicted and which underpin the budget announcements that I have made. I think that the Scottish child payment has been a phenomenally positive impact on the tens of some 400,000 children. The parents are receiving that and I think that it has made a significant difference. Obviously, the whole point about having an anti-poverty strategy is that eventually people come out or lift it out of poverty. I know that the Scottish Government is spending more on employability next year than it originally intended to do, but if we are actually going to be spending more on anti-poverty measures, by what year will the Scottish Government expect that the work to lower child poverty succeeds to the extent that the welfare expenditure actually begins to decline? In terms of the philosophy behind all of this, convener, you are correct that the approach that we are taking to ending child poverty is a balanced approach. We take into account direct financial support to families. We take into account efforts to maximise income amongst families, but we also crucially lay the emphasis on the moves into employability and employment for individuals and families. It is essential that those three elements are kept in proper balance, because you correctly put to me, convener, the danger and the risk that if those measures are imbalanced, the risk is run that there is a disincentive to enter employment. For example, there is pressure for me to increase child payment to a higher level than it currently sits at. I do not think that that would be an appropriate step because it would fall into the position that you are raising, convener, of disincentivising employment. There has to be a proper calibrated balance to be established in that respect. I think that we have found that balance in the proposals that we are putting forward. In relation to timescales, we are anxious to make as early progress as we can and we have statutory targets to meet in that respect. The statutory targets will be essentially the milestones that we have to achieve, but the Government will be working to make progress at an earlier timescale. I am optimistic, given the fact that we have a situation just now where we have, comparatively speaking, a lower level of child poverty in Scotland than in other parts of the United Kingdom, that the measures that we are taking are working effectively in that direction. Raising taxes through fiscal drag impacts adversely on living standards and its anticipated living standards over the next two years across the UK will fall by 7.1 per cent. On Andrew Day, I was privileged to attend the official lockdown of the 88 million pound medicines manufacturing innovation centre in Shennan, which is a world-leading facility, and it has been made possible partly through Scottish Government investment. Given examples of that, is it not time to focus more on the Scottish Government's limited financial resources on boosting tech scalars? I know that there is an element of that in the budget, and I asked about that after your statement, as you know. Start-ups, research and development, innovation, skills and infrastructure to create high-value jobs, driving up private sector confidence and investment in attracting people of working age from across the UK, not just retirees and beyond, and deliver the tax revenue that is needed to pay for the public services that we require. I think that any budget, convener, has got to be a balance of all of these factors. We are correctly taking steps, I believe, to support people who face significant vulnerability and hardship, but equally we are investing to increase the productive capacity of the economy. For example, the commitments that have been made to sustaining investment in the Scottish national investment bank demonstrate that the Government is supporting exactly the agenda that you are talking about. I have made specific provision in the budget to fund the tech scalars programme. The enterprise agencies have had budgets that provide them with stronger resource settlements than they would have anticipated in the resource spending review. The expanded investment in our university sector is designed to assist in that respect. The venture that you talked about, convener, the Medicines Manufacturing Innovation Centre will be a collaboration involving universities, private companies and various other organisations. In the nature of that collaboration, I think, are founded some of the most substantial opportunities to enhance the productive capacity of the economy. I think that if you look at the totality of the budget measures, whether it is the support that we are undertaking to assist new ventures, whether it is the investment through the Scottish National Investment Bank, whether it is the investment to support employability that is about broadening the participation in the labour market, I think that there is a range of measures to ensure that Scotland is an attractive place for investment and, of course, the data speaks for itself in the sense that, outwith the south-east of England in London, Scotland remains the most attractive and successful destination for investment in any other part of the United Kingdom. Professor Rowan and evidence of the committee said that, in terms of sustainability, it is about optimising the use of digital technologies to be efficient in the delivery of public services, but there is a concern that the details of public sector reforms that were expected with the budget will now happen in due course, although they were supposed to be with the budget. When is that likely to be? The work in public sector reform is an on-going priority, and a variety of different public sector organisations will be changing the way in which they deliver public services to ensure that they can be as effective and sustainable as possible. We are actively engaging through this budget process with all public bodies to ensure that steps have been taken to maximise the efficiency, because, as I set out to Parliament quite openly, there are enormous pressures on our public finances and enormous pressures on the demand on public organisations and agencies. We have to ensure that we have appropriate and sustainable methods of delivery in place in all organisations. That work is essentially an on-going task as part of the work in which we deliver the budget priorities. If you look at a range of different areas, for example, we were quoted yesterday by the First Minister in the briefing that she gave on the health service about the way in which organisations such as NHS 24 or the Scottish Ambulance Service are changing their operational practices and have changed them already to ensure that they can handle more cases and more demanding circumstances than has been the case up until now. I assure the committee that the whole question of public service delivery, the reform agenda, is very much an implicit part. Indeed, in part, what I said in my budget statement was that there would be significant emphasis on the principles that are established through the Christie commission on emphasising early intervention and prevention, which would be at the heart of the work that we take forward to deliver person-centred public services. The work was also the subject of a lot of detail that was set out in the autumn of last year in the Covid recovery strategy, in which, by joint agreement with local government, we set out how we would move towards person-centred public services. Those plans were openly shared as part of that process. I take on board what you are saying, but at the time we had the resource spending review last May, we were advised that we were going to get a package of reforms presented with the budget, and it has not happened. We are being presented with an ongoing situation, a kind of maniana approach to how it seems. I think that the committee would prefer if we were going to be told that something is only happening eight months in advance that acts are happening in eight months. If it was not possible, because I realised that there has been huge turmoil in the past year, we were told that we would not be able to present the package of reforms by the budget, but we will do it in March or May or whenever. However, it seems to me that we are now being presented with almost a rolling reform thing, which is very difficult to get a grip of and to be able to get a full grasp and to analyse and scrutinise. The question here comes down to the sustainability of the budget challenge. I was very open with Parliament about the scale of the challenge that we face. I set out a number of different factors that we are going to have to be considered as part of implementing the budget. The budget contains significant fiscal pressure that will have to be wrestled with by public bodies. Public bodies will have to change their way of operation in the course of this financial year to ensure the sustainability of their public services. Those will become apparent as organisations take their decisions to live within the resources that have been made available to them. I assure the committee that that work is actively under way and has been under way for some considerable time. In evidence, Dr Brewer of the Resolution Foundation said that UK Government cuts to Scotland's capital allocation of £185 million was not a sensible action, adding that we are pointing the blame principally at the UK Government, adding that the decision not to enhance capital funding given the high levels of inflation will lead to a steep decline in the purchasing power of Scottish Government investments. That may hamper the Scottish Government's ability to meet its net zero targets and damage economic recovery. To what extent is that the case and how is the Scottish Government trying to mitigate the damage? We obviously have some scope in relation to capital activity to address some of those issues principally through capital borrowing. Obviously we have set out in the budget statement the intention to utilise our borrowing facilities in relation to capital projects to the maximum. Judgments will be made during the course of the financial year, but particularly towards the end of the financial year about the volume of borrowing that is required, because that is a product of the interaction between individual projects, the cost of those projects and the availability of funding. We do not want to borrow if we have no need to borrow to support the projects that we have on their way. Those sensitive judgments will be made, but we have some ability to address those requirements. One of the issues that I have to be particularly mindful of in the current period is the possibility of an implication for our capital programme in this financial year from the United Kingdom Government's supplementary estimates, which we expect to see published sometime over the course of, I would imagine, the next six weeks, I would think. There may be, although there is undoubtedly a risk, that that may restate capital expenditure within the United Kingdom that may have a negative effect. I cannot see when a positive reaction might be neutral or negative. I have to be mindful of that in terms of the decisions that I take in the course of the remainder of the financial year. The point that Dr Brewer makes is an important point, because we want to sustain investment in the capital estate of Scotland. I should put on the record that, in relation to that point, capital projects are significantly affected by the effect of inflation and the effect of input prices, which largely arise out of the global turmoil that we are experiencing as a consequence of the war in Ukraine. We are looking very carefully at the cost of capital projects, because there may, in some circumstances, be an argument for delaying commitment to a capital project because the cost at this particular moment may be so great compared to what we would have ordinarily expected to be the case because of the exceptional pressure of global input prices and inflation on the cost of individual projects. There is a sensitive set of judgments to be made about whether or not all capital projects that we ordinarily would have been committed to taking forward should be taken forward, given the effect of price inflation on those particular projects at this moment in time. That is interesting, because that leads on to my next question. Of course, the issue is that when prices do rise, even if inflation goes back to zero, they are still at a high platform, so that would still be an issue as we move forward. It takes me to a couple of points. I would love to wade through that if we had the time to budget and ask a whole load of questions, but I am not going to do that. My colleagues would lynch me if I did anyway, and time is against us. I do want to ask a question about that, because I notice that more homes will see its budget fall by 24 per cent next year to 567.5 million. I imagine that you are going to respond to that probably because of the issues that you have made about high inflation in terms of materials and the need to build these homes. Local government capital grants will increase next year by 19 per cent to £607.6 million. I am just wondering what is your thinking behind the decisions to reduce capital spend on housing but to increase it significantly in terms of the money allocated to local authorities? We need to bear in mind many of the factors that I have just recounted to you in the judgments that we make. In relation to the more homes housing programme, for example, it is a programme that will, by its nature, be uneven from year to year because of the nature and the timing of particular projects over the course of it. It is a long-term multi-year programme, I think, at least over a five, if not a 10-year programme. Those numbers will vary from year to year depending on the maturity of the programme. In relation to local government, the increase in capital grants to local authorities is a material point to consider in relation to the overall local government financial settlement, in which local authorities have a significant amount of flexibility in how they utilise the resources that are made available from the Scottish Government. I think that considering all those issues in the round is important to consider when we look at the financial capacity of local government decisions that it has got to take. I am sure that others will ask about local government, but I just want to go back to the NHS. You are talking about £1 billion of additional resources for the NHS and social care. How much of that additional funding will go towards the establishment of setting up the national care service? In relation to the national care service, a number of things happening as part of the process. We are investing heavily through the work on the national care service in improving the resources that are available in salaries for social care staff, for example. The national care service expenditure will sit within an overall budget that is in excess of £1.1 billion. A substantial part of that is about increasing pay for social care staff. My recollection is that about £100 million of that overall budget will be used to pay for the uplift in social care pay to £10.90, which builds on the other steps that we have taken to increase pay for social care staff. The committee will be receiving an updated financial memorandum on the logistical arrangements around the national care service in the future, and the point that you have raised, convener, will be addressed as part of that exercise. Thank you for confirming that we are going to get an updated financial memorandum. That is very good news. The second thing that I was going to ask you was that you talked about £100 million extra to go into national care service pay. Again, that is going to be very welcome. For every pound and hourly pay that goes into the wages of care staff, how much is the impact on the Scottish budget? For example, if you say that we were to go up from £10.90 to £11.90, what would that additional impact be on the Scottish budget? That is quite significant, and it is likely to be an issue that comes up over the next few weeks. I would have to write to the committee about that, but I better not give the committee a number off the top of my head, so I better write to the committee about that point. Do you have a particular level in mind, convener, that you would— No, just for every pound and hourly pay. We will give you that figure here. We will be on the Scottish budget, because, obviously, if there are significant increases in that, then the money would have to be found from elsewhere, understandably. Colleagues will be glad to know there are only a couple more questions for me, then we will open out. I am not going to ask all the juicy questions, but I do want to ask one which is an important one, because it is an issue that is going back and forward. In evidence, Professor Roy of the Scottish Fiscal Commission said that, in terms of higher rate and additional taxes, the Government has to be careful when it thinks about how much additional revenue might come in, just because of people's potential behavioural responses, and added that, while on paper the extra penny on the additional rate would bring in a further £30 million of taxation, Professor Roy added, and again I quote, that is without behavioural change. When you add in the behavioural change, we think that the totality of that is only £3 million. Others may have different views on that, but that is what the Scottish Fiscal Commission is basically saying. Is it worth the bother of adding an extra penny in tax if 90 per cent is going to be lost to behavioural change? How concerned are you that that level of behavioural change restricts your room to manoeuvre, and perhaps would take you to a level whereby if tax has been up further, you might end up in a negative tax-raising situation? Just also on taxation while we're at it, is the Scottish Government worried about incorporation and the increase of it in people incorporating to avoid paying taxes, and possibly the image, wrongly in my view, but presented to other parts of the UK that Scotland is a high-tax country? There's a sizable number of points in their convener, and if the committee is keen for urgent progress, I'll try to keep it as brisk as I can. The first thing to say is that I accept the fundamental point that was made by Professor Roy that the Government has to be mindful of those questions. I readily put that on the record, and it's a question that I consider very carefully in relation to the steps that we take. Secondly, when we set out our tax position, we set out a position that is set out technically, but also in terms of the values of the Government and the policies of the Government. We set out technical changes, but we also set out why we are undertaking those technical changes. They are based on the principles that the Government adheres to, that we believe in progressive taxation and that we believe that higher energy contributes more in taxation than has previously been the case. We apply those judgments, and, as I have said to the committee already in response to your questions, convener, the budget would be £519 million without a consequence of the decisions that I have taken to change the tax approach that is inherent in the budget, enabling us to better and more substantively invest in public services and in public priorities. Thirdly, there is obviously a risk that the fiscal commission acknowledges and sets out the arguments that there may be steps taken by people to change their tax affairs to avoid those consequences. Morally, I think that that's wrong to do that, but it's technically possible for people to do so. Morally, I believe that's wrong because people living in Scotland have access to a different set of provisions and services than are available in other parts of the United Kingdom. Somebody may change their tax arrangements to avoid paying certain amounts of tax, but they will be prepared to accept that if their child goes to university in Scotland, they will not pay tuition fees or that they will have access to free prescription charges. If they have young children, they will have a better prospect, a better proposition in the early learning and childcare that is available, they will be available in the rest of the United Kingdom or that they will pay comparatively lower council tax in Scotland than in other parts of the United Kingdom. There's a very strong moral dimension to this whereby people in Scotland are having access to what I called in the budget statement a social contract of provisions, which I think is appropriate that we support in these very tough times through the decisions that we've taken on taxation. There is, of course, an argument, though, that's being made by some people for additional taxation, but the difficulty is that it doesn't seem to take into account at all behavioural change. People seem to think that if you increase tax by x amount, the revenue to the Scottish Government will indeed be x, when in fact that is not the case. I am required by statute, and I don't complain about this, to use the numbers provided to me by the Fiscal Commission. I think that that's the right and proper way to do this, so therefore I can't ignore what the Fiscal Commission says on those numbers. I see commentary into the debate, which suggests material that I couldn't take into account because it's not the view of the Fiscal Commission. The committee has heard the Fiscal Commission's view. I can't ignore that. I have to take that into account. However, there is other analysis that suggests that, if Swinney just went off and did this, there would be so much more money available. Unfortunately, that collides with the reality of the assessment put forward by the Fiscal Commission, which I cannot ignore. I think that that's perhaps the best way to convey that point. No doubt, when we debate the budget in the chamber, we will have the usual demands for vast increases in expenditure across every portfolio, accompanied either by tax cuts or, who knows, possibly tax rises. In the 26 days since your budget statement, which political parties have approached you asking to meet to discuss alternative proposals? Of those that do, will you insist that demands for increased spending in one area of the budget are met by identified reductions elsewhere or by specific tax rises in order to meet them to ensure a balanced budget? Since the budget was set out on 15 December, I have not had any discussions with other political parties on the budget provisions. Opposition spokespeople in finance would have wanted me to be the last person they would want to see over the Christmas break, I would have thought. I think that if it was a choice between Santa and John Swinney arriving for a discussion, I think that Opposition spokespeople would have probably chosen Santa. I did not expect me to turn up in your house in New Year's Day in the first year. I had discussions with all political parties in Parliament prior to the budget being set. I concluded each of those discussions saying that I would resume those discussions once the budget was set out and the dust had settled, and we will have those discussions in the fullness of time. Obviously, the convener makes another important point. That dialogue is important, and I want to make sure that I hear the perspective of other parties, and I will do my best to address it. However, you make the other important point, which is that I have allocated the resources available to me. I have made choices. Therefore, if I am going to reallocate money to address issues that are brought to me by other parties, I have to be confident that they can be funded. That is the requirement that we will have to put on all professions. I want to ask a question on public service reform. Obviously, that was something that was going to be coming to the budget statement in December, and that has been delayed. Are you able to tell us your thinking on that, the direction of travel within the public sector reform, and when we will actually see things coming forward? I would imagine that that is going to have an impact on the coming year's budget, so that the longer it takes for those reforms to come into place, the harder it is going to be to set budgets in future years. I want to reiterate to the committee what I said to the convener that steps have been taken on a constant basis to reform public services. The idea that we are waiting for something to happen to undertake public sector reform, I want to debunk that as an idea in front of the committee. We are constantly changing the way in which public services are being delivered to live within the financial constraints that we are all facing. The Government agreed with local government an approach to public service reform through the Covid recovery strategy work, which laid heavy emphasis on the design of person-centred public services, which are about learning some of the important lessons out of Covid and applying those to the delivery of public services. For example, we undertake less transactional activity between different aspects of public service, but we undertake more delivery services around individuals to assist them in meeting the challenges that we face. Of course, some of the work that is under way in the Dundee Pathfinder, for example, with which Mr Lumsden may be familiar from his constituency interest, is exploring how that can be best undertaken by a collaboration involving Social Security Scotland, the Department for Work and Pensions, Dundee City Council and a variety of other organisations, including the third sector, to better meet the needs of individuals and support them. There is reform work under way. The challenge that public organisations face is that they have to live within the reality of the financial settlements that I can make available to them. We have provided in the Covid recovery strategy, for example, the means and the mechanisms by which individual organisations can take that forward. There will inevitably be, as a consequence of the budget, the need to put into practice some of the provisions that were set out in the resource spending review around, for example, the size of the public sector workforce that will be affected by the scale of the budget, and organisations will be taking those decisions based on the financial settlement that the Government has made available. Will you be coming back to Parliament to present what we would expect in a future public body landscape, or will that not be happening then? There may well be changes to the public body landscape that the Government takes forward, but fundamentally, organisations have to take forward their plans within the resources that the Government has made available and by taking account of the principles that have been set out in the Covid recovery strategy, the resource spending review and what we have set out in the budget document. Will that encompass the local governance review that we were meant to see that last year, that we have not really seen anything on that yet? Will that encompass that? Discussions on the local governance review are part of the invitation that I have set out to local government to work with us on constructing what I have described as a new partnership between national and local government to work collaboratively and shared endeavours, which is what we did on the Covid recovery strategy, so that will be inevitably part of those discussions. I guess that would tie in things like the national care service would be obviously shaping some of that governance review as well, I presume. Other question that I had was when you were talking about end-in-child poverty, you spoke about employability. In your budget document, it says that it is regrettable that there was £54 million that was taken out of that budget. How does that tie in with end-in-child poverty? You have spoken to the committee before about early intervention and prevention. How does that tie in with—must have been a tough decision, but how does that tie in with that decision? We plan to spend more next year on employability than we will be spending this year, so there is an increase in the projected expenditure on employability. However, in the emergency budget review, I removed about £54 million worth of expenditure that was planned to be undertaken in employability in this year. If we had spent that £54 million this year and had set the budget that I have set for next year, there would have been a reduction, but we did not do that. We took the money out this year. For a reason in which I explained to the social justice committee, I certainly explained it to the social justice committee, was that at the moment in the financial year, which was quite advanced where I had to take the emergency budget review decisions, I had a limited range of sources of expenditure that were not legally committed and those were not legally committed. I was having to take a set of pretty difficult and abrupt decisions to free up money to afford increased public sector pay bills during this financial year. What I reassure Mr Lumsden about is that we have incremental growth from this year's actual expenditure into next year on employability programmes to support the child poverty reduction activity. The other factor that allowed me to remove the expenditure that was planned to be undertaken on employability in this financial year was because we still had capacity for individuals on the existing programmes that were left to enter employability activity within the Scottish Government. That money could be removed because there was still capacity and adequate capacity to enable our child poverty measures to be supported. It is just that we were not expanding the programmes to the extent that we had predicted. We have put a slightly different way then. Do you not feel that that is an area where more money could be spent that could reduce a welfare bill going forward as people are less dependent on some of the welfare schemes that there are? That is undeniable. Yes, that could be done, but I have to make a judgment about what resources are available. I am very mindful of the fact that one of the key points about the Dundee pathfinder that we are looking at very closely is what is working about supporting people out of economic inactivity and into productive economic activity. There is some really good learning coming out of that programme so far, which will influence the way in which we deploy employability expenditure in the future. It may well be. If I come back to my point about capacity, those are essentially demand-led programmes. If I find during the course of the next financial year—I hope that the French Secretary who should be here is doing this—there is the need for there to be more investment because the capacity is being used up already, then that is obviously an issue that would be one for substantial consideration. The poundage rates for non-domestic rates has been frozen, but when we look at the budget, the intake from non-domestic rates has increased quite substantially. I presume that because the revaluation has just taken place. Are you able to say what the revaluation role has increased from and to at the recent revaluation? I do not think that I can give you that precise information just now, but I will write to the committee with the best available information that we have. I am not sure that we will be able to give that number, because there will still be appeals under consideration, but I will give the committee the best information that I can at this stage. Even on the estimated new role, that would be helpful. Good morning, Deputy First Minister. I will pick up on a couple of points that are posited by the convener. In terms of capital expenditure, you have given a clear rationale around the global economic considerations and that, therefore, you might seek to delay rather than stop projects. I suppose that that makes me think that every capital project is going to be impacted by what you describe, and therefore every capital project could potentially be delayed. Can you give any more flavour to the type of project that you have in mind? First of all, let me give the assurance that I do not think that it applies universally to all capital projects. For example, if I differentiate between the higher education research expenditure, which is covered by capital expenditure, I do not think that that is affected to the extent that a project that is heavily reliant on input materials will be affected. Construction projects are a significant concern at the present moment because of price inflation on raw materials, and that obviously can affect the judgments. That is not me indicating that that judgment will be applied in all circumstances. We have to be mindful of where and when it is appropriate to make that judgment, but it is a relevant factor to consider. Thank you for that clarification. In that, you mentioned construction. When we know that we have still a chronic undersupply of particularly affordable housing and massive pent-up demand that goes back years, are you able to give any more flavour at this point as to the type of project that you might seek or sector that you might seek to impose a delay for the circumstances that you have outlined? We simply have to look at that on a project basis. We need to see what price estimates are coming in for projects. We need to make a judgment on the nature of the sustainability of those projects. That will be an on-going consideration during the year, but it is important that I flag up to the committee at the outset that this is a material consideration and how we proceed through this period. I am very mindful of the fact that there will be wider considerations to be borne in mind. The point that Michelle Thomson makes about the importance of constant attention to the affordable housing challenge is an important point. We are heavily in decision making and determination on those points. There are commitments that, as we speak, are being made in relation to affordable housing projects in this financial year, despite the fact that we are facing these enormous external pressures. I have every sympathy with the situation that the Deputy First Minister finds himself in operating as a finance secretary. The reason that I am asking for that and clarity is from a business investment point of view that businesses themselves will be determining at what point they too will be seeking to make investment and therefore what the Scottish Government's appetite is given the constraints that you outlined. Do you plan further announcements to give much-needed certainty to various business sectors of which construction is one? I do not think that I can go further than to say that these matters will be considered on a project-by-project basis, but I would make the point that the Government fully intends to deploy £6.3 billion worth of capital expenditure. The point that I am making is, in a sense, a marginal point in relation to the totality of that programme. We will be working to deploy £6.3 billion of capital expenditure within the next financial year, so that business organisations can look at that and see how that is distributed across the range of different portfolio areas and the plans that have been set out in the budget document, and I think that it can take some confidence that the Government is going to be investing heavily in the capital estate of the country, but that there may be certain projects that might not proceed as originally timetabled, but that will be at the margins of that programme. It has been mentioned earlier that the CAPEX figure set to fall by 2.9 per cent in real terms. Are you able to give any update as to—I know that a reference for the fiscal framework review is under way—any increasing urgency for that, given the calls that are probably fairly common for an increase in CAPEX borrowing powers from the Scottish Government? Are you feeling any sense of increased urgency from the UK Government? The discussions with the UK Government on the fiscal framework have essentially taken account of the transactional work around about the evidence review that is being prepared. I have not had any further discussions with the UK Government about the fiscal framework review beyond that, if my memory serves me right, but we have set out some of the issues that we have in relation to the scope of our financial powers and responsibilities, and we will engage with the United Kingdom Government on those points. The theme net zero in terms of CAPEX is a particular concern. We know that it will involve some very difficult decisions, and you yourself have commented that it will have some genuinely difficult decisions for Scotland, which require significant long-term private investment and behaviour change. I wondered what you meant by behaviour change in that context. How do we, as a society, operate and utilise our resources? I am thinking principally in that respect about our use of transport. Transport is a very significant factor in the journey to net zero, so changing the way in which we all undertake our transport activity is a significant factor in that exercise. However, there are wider issues about resource use and the steps that we all take to ensure that we are doing as much as we can to support the net zero agenda. Last week, I was picking up on the point about behavioural change—in fact, I have two more points. It seems to me that it must be increasingly complex to try to model behavioural change in the complexity of the existing fiscal framework and the wider economic environment. Are the models that you are using evolving, or are they fit for a purpose? It seems to be that it must be extremely complex. It is probably a slightly technical question. Those are technical challenges. My officials wrestle with those questions, the fiscal commission wrestles with those questions and, of course, we are dependent on the fiscal commission for its final view on behavioural change. As I said to the convener, it is right and appropriate. I should be dependent on the fiscal commission for that conclusion, but we are—I think the nature—one of the observations I would have, I was the finance minister for nine years. I have also come back into this area of activity after a bit of a gap. My observation would be that the arrangements are a great deal more complex than they were when I left the role in 2016. The particular issue that Michelle Thompson puts to me is just one example of the need for a more sophisticated understanding of the choices and decisions that people make. That work is being constantly addressed to try to ensure that it is of the highest possible quality. Of course, those are predictions and assessments. There will be outturns, and we will see the validity of some of those judgments in due course. The last question has been alluded to, and I am sure that other members may want to pick up on it a bit more. We have huge demands for public sector pay deals, and it must be a massive challenge at the moment. I know that the Government is working extremely hard to reach agreement with various different pay demands, but I want to ask what contingencies have you got in place if no deal can be reached by the end of this fiscal year with any particular sector? We are obviously working hard to resolve outstanding pay deals. We find ourselves in a situation just now where, for example, in the health service, some of the unions have accepted the deal and some are yet to accept the deal. We are obviously continuing those discussions, and we are trying to avoid industrial action to the greatest extent possible. Obviously, there are some other workforces where we are yet to reach agreement. I would simply reassure the committee that we are working actively in dialogue to try to address all those questions. The difficulty that I face in this financial year, as I have reported to Parliament and reinforced to the committee today, is that I am yet to find a path to balance this financial year about which I can be confident. That means that the offers that we have made available for this year, with the resources that are available, are essentially the best that I can make available in this financial year. That is a material factor in those discussions, which we will continue our dialogue with relevant trade unions, but I am significantly constrained. If, for example, I were to offer more money for a particular pay deal in this financial year, I would have to find that money and it would simply add to the total that I am still trying to resolve in this financial year. There is a real cash pressure. The one caveat that I have to say is that the United Kingdom Government is yet to set out its supplementary estimates. I do not know what will come out of that process. As I said, I expect that to be within the next six weeks or so. Obviously, if there are any relevant issues that arise out of that, I would, of course, advise the committee. The final point is that it is difficult to get a man to understand something when his salary depends on him not understanding it. Probably, that is what we are seeing with the fixed budget model. We know in this committee that it is always a concern that, to what extent, the public understands how the framework, the financial framework for the Scottish Parliament operates. I know that you and all your ministers have been at a pains to help people to understand what a fixed budget actually means. However, I still hear whether it is politics or otherwise, but even media representatives blithly ignore the fact that there is a fixed budget and the implications flowing therein. I know that you work very hard to try and get that message out there, but is there anything more that you can do? Indeed, is there anything more that we can do to help to support that? I think that the committee well understands the challenges that I face once a financial year starts. Once I have set tax rates, unless there is a change through the Barnett formula, we are essentially operating in a fixed budget. That is the position that I find myself in at this moment in this financial year. It is a different set of arguments about the next financial year, which I have completely accepted. I have responded to that in the budget statement with the changes to tax position that I have set out. There is, quite literally, a remaining amount of money to be spent between now and 31 March, and I have to live within that limit. As I have said to the committee, I am yet to be confident that I have a path to balance in that. That is a very significant position that I have never found myself in at this stage in the financial year in my nine years when I was a finance secretary. It is an entirely novel situation that I find myself in. I am particularly welcome in a novel situation, but it is a novel situation nonetheless. When I finished this session, I will meet my finance team to take stock on where we are and what further steps we have to take. If I were, for example, to make further commitments beyond what we are already committed to in this financial year, I would have to find the money for that, and that would have to come from not taking forward other programmes that might be there to be taking forward. However, I have to say that I have looked carefully at what is called the remaining spend analysis for this financial year. There is not enough flexibility that remains for me in the next three months. The First Minister wrote in the Financial Times in November that the budget of the Scottish Government, for example, is worth £1.7 billion less than when it was set in December as a result of inflation. That is a figure that I have heard you agree with in the chamber, but she added in a quote, yet we have not received a single additional penny from the UK Government. Do you agree with that second part that you have not received any additional penny from the UK Government? You just explained why you think that that is true when the Scottish Fiscal Commission outlined very extensive Barnett consequentials for the period 2021-22 and for 2022-23. I think that the current ones are something like £447 million. The simple point that the First Minister is making in the article is that the Scottish Government's budget for the financial year 2022-23 was essentially formulated in the autumn of 2021 based on UK numbers in autumn 2021, when inflation was at a pretty consistently low level that it has been for most of the last 30 years. By the start of the financial year, inflation was at 11 per cent and there was no change to the fiscal arrangements being made available in 2022-23 to take account of that. Is it not correct to say that there was not a single penny more from the UK Government? I think that it is. I have just explained why that is the case. Is the Scottish Fiscal Commission wrong to say that the Barnett consequential sums that they have given us? The point that Liz Smith is missing in what I am saying is the point that the First Minister was making, which was that the financial arrangements for the financial year 2022-23 were largely set in a low inflation climate in the autumn of 2021. By the time we started facing the reality of the financial year 2022-23, inflation was galloping away from us, and there was no subsequent adjustment of the financial year 2022-23 financial provisions from the UK Government. I think that we will have to disagree on that point, and I think that some commentators... No, we will stay here all afternoon, convener, because Liz Smith is not accepting the point that I am making, which is the point that the First Minister was making, which was the budget parameters that were set by the UK Government in the autumn of 2021 when inflation was flat as a pancake. By the time the financial year started, the UK Government had not revised its financial estimates, and inflation was galloping like a resource. That is the problem. As I say, I think that we will have to disagree on that point. Over the past five years, it is when Scottish income tax policy was obviously divergent from the rest of the UK tax policy, because of the new powers that the Parliament has had. The Scottish Government has obviously been able to generate additional revenues, but those have partially been offset by weaker growth in income tax per head, and you, earlier this morning, admitted that the potential additional spending power has partly been offset by weaker economic performance in Scotland. Weaker performance in the economy is due in the UK as well, but it is weaker in Scotland. What specific economic policies do you think should be prioritised to ensure that productivity in Scotland is enhanced? I think that there is a range of things that we need to do that are set out in the national strategy for economic transformation. First of all, we have to have very clear and effective regional economic strategies within Scotland and regional economic measures so that in all parts of the country we have distinctive approaches that will best address the needs and circumstances in different localities. An important point in that respect, for example, is the investment that the Government has made in the transition funds in the north-east of Scotland, for example, to support the transition to the oil and gas sector. That is an indication of us tangibly and practically putting in place regional economic strategy mechanisms. The south of Scotland strategy is a distinctive south of Scotland economic strategy, which is supported by South of Scotland Enterprise. The Government actively engages in it, which is about enhancing some of the opportunities within tourism, the leisure environment and the productive capacity of the food and drink sector. Those are some examples of regional economies. Secondly, we have to invest in the activity around tech development within Scotland. The tech scalars investment, for example, has been commissioned from codebase and has now been rolled out in different parts of the country. The convener referred to that in his initial answer, so that investment in the capacity of the tech sector is important. Thirdly, we have to engage very substantially and enhance the already developing collaborations between the university research sector and the business community. We are in a much, much stronger position today than we were five or ten years ago as a consequence of that. I think universities have responded magnificently to the challenge, and they have opened their doors much more effectively to the business community. The business community is much more engaged, so I am very optimistic that that work will be undertaken and will be effective. The last point that I would make in that respect is about the fiscal commission's assessment about what lies ahead. I know that this is an annual budget process, and we obviously look at snapshots of information given this financial year and the next financial year. The fiscal commission has to do something slightly different. It has to look at the individual year by year performances, but it also has to give a sense of what the expectations are about the direction of travel. The expectations about the direction of travel when earnings growth in Scotland are very different from what we have just gone through. That is an indication of some of the progress that we can expect to make on productivity. That is a helpful list. One of the things that you did not mention, and I have heard you mention in the chamber quite rightly, is that there are concerns on a demographic basis. The size of the working population in relation to total population is a major concern, and I think that you are right about that. Can I just ask about taxation policy, particularly for those who are earning £27,850 now, at that level or above? Those people are paying a higher rate of tax than is the case in the rest of the UK. We have talked a little bit this morning about behavioural change. Are you concerned that any of those people who are middle to upper earners will feel that perhaps Scotland is not the most attractive place in which to live, work and invest? First, I do not consider the position that we are taking to have a discernible effect on middle income earners in Scotland. The steps that we are taking are essentially affecting individuals who would be in the top two quartiles of the population in terms of earnings. That is the first point that I would make. I think that we are concentrating the measures that we are taking on the top two quarters, so we are not discernibly affecting middle income earners. The second point that I would make is a point that I made in response to the questions on the convener. When people choose to live in Scotland, they know that they are gaining access to a much wider range of public service provision and opportunities than would be the case if they lived in other parts of the United Kingdom. I will not rehearse all the details but free personal care, tuition fees, early on in childcare, prescription charges. We have made certain choices that are available to members of the public in Scotland, and I think that that would feature in the judgments and decisions that individuals will take. Lastly, I think that people make a judgment about a range of different factors about where they live and where they work. I think that Scotland, from a variety of different perspectives, is the social contract that I talked about or whether it is the quality of life or the access to facilities and services. Scotland is a very attractive place for people to live and to work and would be reflected in the judgments that individuals would make. I take your point about some of that, but notwithstanding the perceived advantages that people in Scotland might have. If they are being asked to pay higher levels of tax than elsewhere, what they are looking for is effective delivery of public service. In the current circumstances, if you look at NHS, schools or transport, and if you listened to some of the commentaries from yesterday, what is it that you feel is additional in terms of the quality of the delivery of public services that merits these higher tax rates? It is pretty clear that every health service in the western world is under colossal pressure just now, so Scotland's services is no different. However, as has been rehearsed on countless occasions—indeed, Liz Smith's colleagues vigorously resist the point that has been made, but I shall make it again—if we look at A and E performance, although Scotland's performance is not as good as we would want it to be, it is better than other parts of the United Kingdom. There is one example of how the delivery of public services is better in Scotland than other parts of the United Kingdom. Let's take schools. When I became a minister, 63 per cent of pupils in Scotland were educated in good or satisfactory school buildings. That figure is now over 90 per cent. I am very proud of the investment that we have made in the school of state. Young people have been educated in much, much better conditions than was the case before, with a higher expenditure per capita in education than in other parts of the country. In my experience—I know that that does not suit the narrative of some people in this building—young people are getting a fabulous education in Scotland. Yes, it is disrupted today because of industrial action, but I cannot spend money on pay claims that I cannot afford, and I have been completely candid about that point. The Government has invested very significantly in expanding the rail network, for example, in expanding electrification programmes. We have put in place concessory travel schemes for older people and for younger people. The use of the younger people's concessory travel card has been phenomenal, giving young people much more mobility and flexibility. Those are some of the things that I think people in Scotland are experiencing, which are all to the good. People are not finding easy to see their GP. They are finding that when it comes to cuts in bus services or in some train services or on services that provide our islands, there are a whole lot of things that I think are adding up to concerns about the delivery of public services. I think that that is reflected in what some comments were being made yesterday. Could I ask you about one other aspect of tax chain? That is about the additional dwelling supplement, because the Scottish Government is forecasting that we get extra revenue from that tax change. Has the Government done any modelling about that extra tax change in light of the number of people who are saying that they might leave the market for additional dwelling supplements as a result of the rent-free situation? Those judgments are not the Scottish Government's judgments. Those judgments are modelled by the Fiscal Commission, and they will take into account behavioural change as we have rehearsed here already. I accept that the additional dwelling supplement is projected to increase the revenue take to the Scottish Government. I accept that that may provide a disincentive for people to acquire an additional property. That may be a consequence, but that will free up that property to be bought by somebody else who may be buying it as the first property from which we are likely to get, or we may will get, a land and buildings transaction tax payment into the bargain. The behavioural factors will be factored into the analysis as a consequence of the work that the Fiscal Commission has undertaken. Thank you. Brief question on this current year's budget, Deputy First Minister, for moving on to the draft budget for next year. At what point should we be expecting the spring budget revision, given the current uncertainties around, for example, public sector pay settlements? At what moment? Yes, it's usually the end of January start of February, but I'm presuming it may be somewhat later than that this time. I can't give a definitive answer, so I'd better write to the committee. I'm obviously looking very carefully at the interaction with the supplementary estimates, because that may well have an effect. I suspect that we will have a better idea of that by the middle of February, which is really quite an advanced stage of the budget scrutiny process here. I think it's unlikely that a spring budget revision will be brought to Parliament before the conclusion of the budget process on stage 3 of this budget bill, but I'll confirm with the committee in writing when I've got a better idea about that position. That would be useful. Turn to the next year's budget, the current draft. What status should we give now to the resource spending review? Obviously, when that was developed and published, it was with an acknowledgement that, as each year covered by the RSR went on, it would almost certainly gradually diverge from it, but we're now in the position where, in year 1, there is immediate and significant diversion, so local government is £550 million more than what was laid out in the RSR. If I were in local government trying to plan ahead for their budgets, should I presume that the 24-25 budget will be flat cash relative to what's proposed for next year? Should I be looking back at the numbers that are still contained in the RSR for that year? I think that the resource spending review remains a very relevant consideration for all stakeholders in the public finances, not necessarily because of the precise details that will be in it, but because of the shape of the way in which the public finances are developing. Essentially, what's happened with what we envisaged when the resource spending review was set out was essentially two early tough years and two latter better years. What we have got from the UK Government's statement in November is two relatively less painful years to begin with and two much more painful years to conclude with. I could draw a couple of lines on paper and try to present a graph of all of that, how that all fits together, but roughly what it says to me is that the next four years are going to be really tough on the public finances, so years one and two are years of adjustment, years three and four are years of consolidation of real difficulty. Some might say, well, there's a lot of water to go under the bridge between now and then. When I listened to the plans of the current United Kingdom Government, when I listened to the comments made the other day by the leader of the opposition, it doesn't give me much sense that there will be much of a departure from the public expenditure outlook that has been suggested by the United... but that has been planned for by the current United Kingdom Government should there be a change of government at the next Westminster general election. In answering Mr Greer's question, I think that the direction of travel of the resource spending review remains absolutely valid while some of the numbers may be different as a consequence. I appreciate that answer but if I'm in local government or say that university sector which local government is somewhat better off than what it was planning for through the RSR, though I acknowledge that it will continue to ask for it to feel that they need more. If I'm to use the RSR for forward planning on what basis should I now do that, given that the specific numbers in it are no longer valid, should I presume the broad trajectory of it, so for example the flat cash trajectory for those sectors we take universities as an example, should I now start assuming flat cash based on what's in the 23-24 budget for 4-5-5-6? I wouldn't want to be drawn on to such a specific response as that in relation to an individual sector. What I would say is that I think organisations and sectors should draw the conclusion from my original remarks that frankly 23-24 and 24-25 are going to be the boing years and the two years after that are going to be much more difficult years as a consequence and that will have to play through into all sectors of the public finances. Just one final question going back to what various committee members have already asked about in relation to behaviour change and tax policy. If we go back to previous relatively significant changes in tax policy, so the 2018 changes to its income tax, the changes to council tax perhaps I think were the same year, perhaps a year before it, was there a significant difference between the outcome of those changes and the eventual revenue raised and the behaviour changes initially assumed by the SFC? I recognise that there are some questions here in terms of methodology which is for the fiscal commission but from your perspective did the behaviour change result in anything significantly different to what had been budgeted for? I don't know if we have information of the granular level that would answer Mr Greer's question but I will take that away and see if there is a way in which we can do that. What I would say is that in terms of reconciliations that have taken place, I don't feel that in terms of my knowledge or awareness of reconciliations that have taken their course that they would indicate much divergence from what was planned. It is probably better if I take the whole question away and give the committee a more substantive answer in writing on that. I acknowledge that it will be very hard to disaggregate the specific behaviour changes as a result of changing tax policy versus wider factors in the economy but if we are looking at scrutinising future direction of tax policy, if it is at all possible to disaggregate that, I think it would be very valuable. I look to give the committee a more considerate view about that. That is all for me. Daniel to be followed by John. The Deputy First Minister has already set out, and it is very clear to everyone that there are challenges, pressures and priorities and choices that are reflected in the budget. Those things are not necessarily in isolation. If we look at the public service sector at the moment, there are huge demands being placed on it, that there are also vacancies and that people very rightly want to protect their levels of pay. It is not a linear problem that the Government has in front of it. With that in mind, I would just like to step through the budget decisions that are made within the NHS in particular. There is £1 billion as a whole being put into the NHS budget, but then breaking that down, around £0.5 billion is going towards territorial boards. My understanding is that around two thirds of the funding allocated to territorial boards goes on pay, so that would appear if my maths is correct that reflects the 7.5 per cent pay offer. That has not been accepted by all parties, so I would be interested to know what happens within that. If the Government has to settle higher than that, or if the total pay awards come in higher than 7.5 per cent, will the territorial boards have to find that and increase themselves, or will there be shifts within the NHS budget overall from the national budget lines into territorial boards? I am asking what the issues, risks and flexibilities within the NHS budget lines in the budget document presented. I think that the first point that I would make just for absolute clarity is that the pay offer that is on the table, which has been accepted by some but not all trade unions, is for this current financial year. We haven't yet negotiated next year's pay award. The type of calculation that Mr Johnson seeks to make involves information that is not yet clear as to what the final cost will be. I would best say in response that I have tried to first maximise the resources available to the health service in the budget settlement by moving substantially beyond the consequentials to provide an uplift to support the health service. Secondly, I have tried to be as mindful as possible within the resources that are available to me about pay demands and pay pressures that will exist. Thirdly, once we get into the financial year, we will be operating within largely a fixed financial envelope given that I have taken the decisions on tax. Parliament has got to decide whether it wishes to endorse those decisions on tax. If Parliament endorses those decisions, that will essentially fix our budget for 2324, and we will have to manage all the range of pressures within that fixed financial envelope. I guess that the simpler way of putting the point is that it strikes me that within the health service budget there is limited flexibility. It is just really why I am clarifying that detail. In response to the convener's question on the national care service, you did outline sums that were included within it for pay itself, and I understand that. What you did not specify is what the sum was that has been allocated to setting up the care service itself. The current financial memorandum stipulates a range between £60 million and £90 million just in set-up costs. I understand that they may change, but is that the order of magnitude of funding within the current budget—if so, where? It is not entirely obvious on the reading of the budget that I have made of where that is. Any costs arising from the establishment of the national care service will be contained within the budget line that includes £1.1 billion in social care support and national care service delivery. As I said earlier, there will be a revised financial memorandum sent to the committee that will reflect the up-to-date assessment about how that is being taken forward, but that budget line involves a range of other items, not least of which is the uplift to social care pay that will be taken forward. Of course, the work on the national care service is about more than just the establishment of the infrastructure of the national care service. It is also about the issues about pay and recruitment that we have talked about on many occasions. The budget line that you just quoted is a level 3 budget line that is quite high-level. Is that £60 million to £90 million contained within that? I think that the best thing that I can say is that the revised financial memorandum will come to the committee that will set out the most up-to-date position on those issues. Of course, overall, we have already highlighted the fact that around £100 million is the figure for the uplift to social care workers. We have already acknowledged the key driver of increased costs in the health services is again pay, all of which underlines the importance of having a national pay policy, which was obviously not published with the budget. I am just wondering when that might be expected and what we might expect to see within it, because we have also had questions around overall size of the public sector workforce alluded to. Will it include that level of information, at least in terms of outlined strategy from the Government? It will not include that type of detail, no, because the pay policy would never include that type of detail. That is essentially a consequence of the budget settlement that we are able to put in place and the degree to which we can configure services to deliver against those budgets. Obviously, the Government has a long track record of preserving public sector employment. We believe that it is important that our public services are well supported by strong levels of employment. Although I acknowledge the challenges in recruitment to aspects of public sector employment, which are fairly extensive, and would be helpful if we had a different approach to migration policy, which, to complete one of the points that Liz Smith made to me, is an issue about which I remain concerned. In terms of pay policy, I continue to consider what is the most appropriate time to set out pay policy. There are a number of variables, not least of which will be the pattern of inflation. I made the point earlier on that we set the budget for this current financial year when the inflation climate was benign, and then we found ourselves wrestling with pay claims when the inflation level was far from benign. That will be one of the factors that I will consider about what is the most appropriate point at which to set out a pay policy. Having said that, there is absolutely nothing to stop open dialogue with trade unions at this moment about the agreement of pay levels for 2023-24. The absence of a pay policy is not an impediment to that dialogue being advanced. Obviously, we have the mechanisms available within the Government to resolve any of those questions should they come to a point where they require a decision. It is not an impediment, but it might be a useful context to those discussions. If all parties understand the broad parameters that the Government is working in, that allows for more constructive negotiations, does it not? I push a little bit further. You have absolutely made no commitment around timetable at all. Do we have at least some indication whether we should expect it within months? At least, would you acknowledge that having that context may be useful? The point that I was making in explaining the difficulty that we found ourselves in this financial year of setting a pay policy at 2 per cent when inflation was benign and then finding ourselves in a completely different situation is that I question the value of having a pay policy, because I do not think that it actually helps to provide much guidance. Two per cent provided zero guidance to people as to how they were to navigate this. During the financial year, which we put in place a lot of arrangements within Government, I chaired a regular discussion of ministers across the Government looking at the current negotiations and giving guidance as to what we consider to be acceptable in relation to resolving those questions. In the volatility that we have, I do not think that the context would help to shape the context, but I want to reinforce the point that I made earlier, that the absence is not an impediment to dialogue. I really would not want anybody to think that we cannot begin to embark on discussions with trade unions because we do not have a pay policy. That is completely the opposite of my intention here. On the one hand, I accept your point. If a pay policy is merely an academic exercise that bears no relation to reality, I quite agree that that is of no use to anyone. However, if we are going to get through this to deal with the challenges that I alluded to in my opening remarks and, indeed, ensure that we have adequate pay for people doing extremely valuable work, you do need, if not a pay policy, a workforce plan to ensure that you have the right people doing the right jobs at the right time at the right pay levels. Does that imply that we need what Audit Scotland called for as a more comprehensive workforce strategy across the public sector? I will set out some facts here, because it is quite interesting. Since quarter one 2020, the total devolved public sector headcount has increased by 31,000. If you look at the split of that, which I think is quite revealing, it is very roughly a third between local government, the NHS, which we can understand in terms of the pressures from Covid, why you need extra people. However, the final third was actually the civil servants. We have seen an increase of around 8,000 in that period. Sorry, slightly less than that. It is around 6,000 in the civil service loan. I just wonder whether or not. I agree with the point that we must protect public service jobs, whether there is a need to look at the balance of where we are allocating resources in the public sector between include-terms front line and non-front line. Would you expect that balance to maybe change perhaps not over the course of this budget but future budgets? Is that what a comprehensive workforce plan needs to think about and reflect? Some of the changes that Mr Johnson puts to me will arise out of the changes in the powers and responsibilities of the Scottish Government. For example, in 2020, we were in the foothills of establishing Social Security Scotland. I am not even sure whether we are in the foothills then. We must have been in Social Security Scotland at that point, so I understand that. There will be significant change arising out of all that activity. There will be legitimate changes that come out of the changes in responsibilities of Government. It is vital that all organisations must have a workforce plan. We set out our financial frameworks, which have a significant influence on the nature of those plans. Organisations need to keep those up-to-date and relevant to meet the challenges of our time. That is exactly the approach that the Government takes on all of those questions. Ultimately, the reason why I am asking those questions is that a statement has been made by your immediate predecessor. Indeed, I think that you have reiterated that public sector headcan will have to return to pre-pandemic levels. As long as it has broadly stated that, I think that there will rightly be a degree of anxiety among those working in the public sector as to whether or not their bit is the one that may come under scrutiny. I would just like to clarify whether that is still the commitment. It strikes me that there needs to be some clarity from the Government about how and when, over what period of time, that might be implemented. Otherwise, I think that it will cause anxiety. Surely the Government needs to clarify what it means by that if it still intends to implement that. That remains the Government's intention. I think that it is largely driven. A number of my responses have been designed to set this out to the committee that there will be consequences of the decisions that are taken in terms of budget arrangements, which will have an impact on the size and the scale of the workforce. To come back to the point that I made in response to Mr Greer's questions to me, that the shape of the financial outlook in the years to come does not encourage a view about expansion because we are facing too comparatively speaking less challenging years in the first two years of the outlook on the spending period against two really tough years at the latter part of the spending period. That is a different shape to what was envisaged in the resource spending review, but it remains relevant in the sense that, previously, we looked like we were going to be facing two acute years of challenge and two easier years that have been reversed, so we will still have to face some of those realities. Budget provision will dictate a large measure of that. That is one final technical question about whether the Government has made the commitment to presenting this budget and providing analysis on the spend on cofog categories. I believe that that is forthcoming. Will it set out the previous year's budget on a similar basis? Will it be done on the past or on the basis of subsequent reviews? Obviously, having that basis of comparison is as important as having that categorisation if we are aiming to do that. I am not certain that we will show prior year assessments, but if we were, it would have to be on the basis of budget act provisions. That is the like-for-like comparison that we always undertake. Budget act versus budget proposal is the comparison that we undertake because, obviously, there is a significant amount of variability thereafter, but that gives us the one-moment-in-time comparison that can be valid. However, I will confirm that point to the committee in writing. Just to pursue a little bit on the pay side of things, if I am understanding things correctly, for the current year there was 2 per cent built into the budget. You indicated during the year that we could cope with up to 5 per cent, but once it went over 5 per cent you really have to make cuts to balance that out and to pay extra. Looking forward to next year, what is built into the budget as an assumption for pay? I have not built assumptions into the budget on pay. What I have done is undertake using the most careful judgment that I can deploy looking at the challenges and pressures that exist across the public sector. What is the best distribution of public resources and, obviously, judgments about pay have to be made within the parameters set by those judgments? To pursue something that Michelle Thomson raised a practical point, if one or more of those pay disputes is not settled by 31 March, presumably then there is money sitting in this year's budget that could have been paid out but would not be until next year. Will that go into the reserve? That depends on where we end up in this financial year. I have an expectation about where we might end up in this financial year. As I have said to the committee already on a couple of occasions today, I am not in a position yet to see that in balance. Part of the resources that I have not yet been able to recognise will involve an assumption on certain pay deals. For example, the difference between 2 per cent and 5 per cent for teachers' pay deal will be in my contingency element that I have not yet resolved. If I get to the end of the financial year and I have an underspend and there is the difference between 2 per cent and 5 per cent on a teacher's pay deal, then yes, that can go into the carryover. However, if I have not been able to balance this year, that money does not exist. Are you looking at another emergency budget review before the end of the year? I am constantly looking at what steps I have got to take. I am not doing another emergency budget review because I have done one already. However, I am constantly looking at how I find a path to balance because it is my legal duty to balance the budget. I have a quite number of variables, so we are not at the end of the financial year or the end of the road yet. I have a long way to go on that. There are a lot of variables, not least of which are the supplementary estimates from the UK Government. However, the point that I make is that I may have a notional allocation of a sum of money to meet a pay deal, but if I do not balance, that money does not exist. If they end up settling with the health workers for more than they are currently offering, that would mean a knock-on benefit for us. Is that right? If that arises out of additional allocation to the Department for Health and Social Care, from which there would be a consequential, for example, if we look at the announcements made yesterday by the United Kingdom Government on the management of NHS pressures, no consequentials arise for us out of that because that was out of existing committed DHSC resources, as I understand it just now. However, if there was to be a cash injection from the Treasury into the Department for Health and Social Care to meet the costs of a pay deal, because, as I understand it, the Department for Health and Social Care cannot offer any more because they do not have the money to offer it. However, if they were given the money by the Treasury, that might give rise to a consequential, but we are in the realms of many uncertainties and unpredictabilities as we rehearse that question. On income tax specifically, I know that Liz Smith and the Conservatives would just like no tax or very little tax, but you are proposing one pence. Other people would have said, well, why not put it up to our three pence? That would just have given us a little bit more money. Can you explain why you chose one pence rather than more or less? I think that it's important to not just consider this as why did I consider one pence, because we've already taken a decision on one pence already. There is where it is important. This is where Professor Roy is absolutely right to say to us that the Government has to make a careful judgment about the degree to which tax divergence happens. I have to make a balanced judgment, which I am confident in about the budget that I have put out to Parliament in December, that the scale of difference in tax, when considered alongside the scale of difference of the delivery of the public propositions in Scotland around the social contract and the attractiveness of Scotland as a place to live and work is in sufficient balance to justify the measure that I took. However, to go further, I think might take us into territory that would create some wider difficulties for the Scottish tax base. I have to be mindful of the importance of sustaining the Scottish tax base of all times. Would you consider a more radical change so that instead of just one or two pence difference, we go like 21, 31, 41, 51, a kind of more bands instead of the kind of jump we have at the moment from 21 to 41? There's obviously a range of options that can be taken forward in connection with taxation. The Government looks at those questions, but it obviously sets out its tax position to Parliament when it comes to the conclusion of that exercise. However, there are many other ways in which we could structure our tax system, and that option exists for Government to consider those points. On that point, I gather that the only plans for a new tax or replacement tax is the aggregate levy, which is due to be devolved at some point. Is that the only new tax that is being looked at or even to raise council tax, which has not really been raised before today? What about a revamp or replacement for council tax? What is the timescale for that? Obviously, we have commitments in the Butehouse agreement to take forward discussions on the reform of the council tax, and we will pursue that. There is, of course, the visitor services levy bill, which is to come into Parliament, but that would relate to a new reform of local taxation. The Government obviously gives consideration to the sources of taxation, but there are a number of points that are relevant to some of the issues that the convener raised with me earlier on. If we were to develop any new taxes, we would have to seek the consent of the United Kingdom Government in taking those forward, so it is not something that we can just take forward under our own steam. I understand that, although I think that there was a Scottish survey—I can't remember what it is called exactly—a social attitude survey that said that the public was open to higher taxes and redistribution. The expert panel also made the point that, on property taxes, generally we are not very progressive at the moment. There is scope for us to explore many of those questions. Part of the call that there was prior to the budget—not all stakeholders—was for the Government to use its powers effectively and comprehensively. I believe that we have done so, and I believe that we have also done so in a context that is credible, deliverable and in balance. Some of the other proposals that I have seen would have had quite a negative effect on the Scottish tax base and on the Scottish economy and Scottish society, and some of them I just quite simply couldn't take forward. They are not at my gift to do so. I am confident that I have taken the steps that are necessary to the maximum of the scope available to me to take those steps. The final point that I wanted to raise in your letter to us of the 20th of December, was that we had mentioned in our report about investment zones and you said that you were waiting to see what the UK Government was going to do, because I think that it had indicated that it was refocusing. Can you say anything about that, or do we just not know what the UK Government is doing on that? Well, if the committee will recall that in the fiscal event minis budget in the one in September, there was to be a plethora of investment zones. When the new Prime Minister came in to office, I cannot remember at which stage it must have been in my conversation with Michael Gove. It would either be Michael Gove or with John Glenn, the chief secretary. I think that it was with Michael Gove that he made it clear to me that they were not pursuing the plethora of investment zones. It was going to be a much more focused proposition. That dialogue is under way between us. We are not in a position to share any details about where that has reached. It is at the very early stages. What I am certain about is that the proposition that was available in September is no longer available, and it will be a much more focused proposition that is brought forward. Thank you. Just one more question from me, and it is just based on what you have been saying with a bit of a glint in your eye over the last few minutes. Talking about expectations and predictions, you talked about the legal requirement to make the books balance, and you talked about contingency elements being unresolved, but in the interests of transparency, what kind of sum of money are we talking about that remains to be unresolved? Obviously, that is on a range, because there are a number of variables that are all being involved, but it would be fair to say that that varies depending on the assumptions from about £200 million to £500 million. On that note, I thank the Deputy First Minister for his evidence and the work of his officials today. I also thank colleagues on the table. That is the meeting ended.