Chamber and committees

Without a doubt, there is a balance to be struck in how we tackle poverty. The child poverty plan has a number of pillars. One is about direct support to families, which encompasses some of the areas that you talked about, such as the Scottish child payment. However, the plan also talks about services, including those that help to move and support people out of poverty.

Employability services are one of those areas. For example, there have been positive trends in the number of parents who access support. Since the publication of “Best Start, Bright Futures: Tackling Child Poverty Delivery Plan 2022-2026” back in 2022, the proportion of parents who access no one left behind support has increased from 26 per cent to about 48 per cent. Services such as supporting parents into employment are absolutely critical.

However, the pillars of tackling poverty have to do everything. Putting money into families’ pockets is important. In our ambitions to meet our statutory child poverty interim targets, the approach that is taken by the plan has three prongs: support to people directly; services that wrap around, such as childcare; and employability, because work is one of the main ways out of poverty. In my view, it is not either/or. As the child poverty plan recognises, we have to make sure that supports are provided in all those ways.

In my constituency experience, I am told time and again by families who face real hardship that having money in their pockets literally puts food on the table. I therefore push back against any idea that we should somehow diminish our support such as the Scottish child payment in particular.

To anticipate your next remark, we need to make sure that the other services that support families are also sustained. That means difficult choices, potentially, in other areas.

Those issues are raised with me frequently, as you are aware. Through negotiation, close to £1 billion of resources were baselined for local government in 2024-25, which were previously ring fenced. That was in advance of the agreement around the accountability framework and the fiscal framework, which are now at an advanced stage. There was a bit of a risk for the Scottish Government in de-ring fencing and baselining without the accountability framework in place, but it was what you might describe as a goodwill gesture, while recognising that some areas remain to be discussed.

On teacher numbers, mitigations are in place against the £145 million allocation for areas where local authorities are seeing falling rolls, or where other issues exist such as recruitment challenges and so on. However, the blunt question that is being asked is, given that we want to close the poverty-related attainment gap, can we do that with fewer teachers? Teachers have an important role to play. Teaching is not the only important role—getting kids to school in the morning and wraparound services are important, too—but teachers are core to that goal. We need to get the right balance. We also need to have teachers in the right place—as you have highlighted, there are issues with falling rolls in some areas and rising rolls in others.

Those discussions are on-going. We want a compromise solution that we can all live with, but, ultimately, what is important is closing the poverty-related attainment gap, and teachers are an important part of that.

Again, I am open minded about any ideas that we can take from international examples in relation to how we construct our budget. However, through this process, I am focused on aligning the budget priorities that are set out in the programme for government with the resources that we have available to us, and how we shape a budget that prioritises that. That, in turn, requires some discussion about deprioritising, which is always the difficult part, and that we create a budget that can command support across Parliament.

I am more than happy to consider ideas, but in the here and now, my focus is on 2025-26. There are opportunities to think a bit differently about the budget on a multiyear basis. Having a single-year budget makes it very difficult to be creative and do things differently because there is a fixed position and you are not able to deliver reform and change over a number of financial years in the resource space or the capital space.

Through multiyear budgeting, we have an opportunity to look at how we do things differently—for example, on pay and on other areas—so that we can take a line of sight on our priorities, and so that we are able to deliver that on a multiyear budget rather than a single-year budget.

You raise a good example. Research, development and innovation is, of course, one of the five core themes in the data-driven innovation initiative deal. It gets £60 million of Scottish Government funding and £290 million of UK Government funding. That is a good example of where we can align funding between the UK Government and the Scottish Government.

I am interested in how, for example, the UK Infrastructure Bank and the Scottish National Investment Bank could work together on those critical investments, as well as having core Scottish Government funding. When there is investment from the UK Infrastructure Bank and SNIB in important areas of growth, there is scope to do more. We have the development of the Edinburgh innovation hub and the investment in business infrastructure in the Fife industrial innovation investment programme, the Borders innovation park and the five data-driven innovation hubs, which you referred to.

We are investing strategically. It is legitimate to ask whether we could do more, and we will reflect on that. I would expect some of those issues to emerge in the bilateral meetings that I have with my cabinet secretary colleagues, so that we can consider the importance of investing strategically in research in Scotland’s growth areas by aligning our funding with UK funds that are more extensive than ours. It will be important to lever some of those funds into Scotland.

I recognise your point about value-added growth. We must invest strategically in the areas that will give the best return.

I will provide enough information for the Scottish Fiscal Commission.

I am mindful about setting a single-year pay policy in the context of the opportunities that the spending review, which is coming shortly, provides. I want to put the context of 2025-26 in the multiyear space.

I also want to reflect on how we manage some of that in a year in which we will not put a pay policy out that becomes the floor and the negotiation is, therefore, above that. The SFC’s work was based on 4.5 per cent, but the UK pay review body recommendation was 5.5 per cent. All those factors play into where pay actually lands, so we need to construct something better.

There is also a point of principle. If the UK Government is going to accept UK pay review body recommendations, it needs to fund them. The problem that I had was that it said that it would not, and would fund only two thirds of them. If the UK Government had said that it would fund 100 per cent of the pay review body’s recommendations, I would have known what headroom I had, but it did not.

I could not wait to see whether we were going to see that being funded in supplementary estimates in the spring: I had to take action, which is why I do not regard the situation as “chaos”, as you described it. It would have been chaotic to wait until the spring to see whether the money emerged. I could not do that. I had to create some headroom in expectation of one third being funded by departmental savings. Our equivalent of that is what I had to bring to Parliament.

Let me be clear. I thought that I had been clear, Michael—

Let me be clear again, because we always like to be clear, do we not? I will produce the information that the Scottish Fiscal Commission requires. However, I am saying that I want to learn the lessons of single-year pay policy and to do something that is more meaningful, so—

I will come back to that specifically in a second. I have had a lot of meetings on the tax strategy with the Deputy First Minister. As well as the certainty and stability, aligning our economic and tax strategies has been a focus of the work, including more regular and systematic engagement to improve how we approach evidence and evaluation and the administration and delivery of the current system and future priorities. Although the approach is at a high level, it seeks to align objectives.

On the specifics and the evidence, I point Liz Smith to my earlier comments. We have engaged HMRC and others on the evidential base. We have the evidence, albeit that it takes a period of time to get the latest available evidence, and there will be future evidence at a future point. However, for the period of time that the evidence looks at, there is net positive migration across all tax bands to Scotland, and there has been very strong growth in earnings.

If you are asking me whether there is evidence of population flight that I should be worried about or of disincentives that are putting people off coming here, I would say that, on balance, people are still coming to live and work in Scotland, and their choice to do so will be for a whole variety of reasons. However, I am not complacent about that, which is why continuing to improve the evidence and evaluation is important. With HMRC and others, we will continue to ensure that we monitor all that and, importantly, respond.

A lot of that evidence is already in the public domain. I have referred to the HMRC work. I will bring in Lucy O’Carroll on that in a second, but that evidence shows that there is net migration and there is growth, even among our top-rate payers. Many of our sectors, such as financial services, are booming in Scotland. That is not to dismiss anecdotal evidence or concerns that are raised, because we have to listen to those. All I am saying is that the evidence so far should give us some confidence, but we have to be vigilant.

I bring Lucy in on that point.

Yes.