Chamber and committees

The detail of what we ask our enterprise agencies to do will form part of the discussions and the correspondence around the priorities that are agreed with the Cabinet Secretary for Wellbeing Economy, Net Zero and Energy. The point that I was making is that, as ministers, we have a responsibility not to ask organisations to do more with less. That is a fair principle. In order for them to focus on what is key, we would expect them to look at, for example, the key objectives of the national strategy for economic transformation, supporting the growth of local businesses in their area and all the other key priorities.

There are some things that may take longer for them to do and may have to be done over a longer timeframe, and they may have to pause or stop doing some things. The detail of that will be for local partners to discuss and the Cabinet Secretary for Wellbeing Economy, Net Zero and Energy will be involved in setting the strategic direction of travel. It is not for me, as the Cabinet Secretary for Finance, to say what they should not do. I am just making the point that we recognise that, with constrained resources, we cannot ask them to do more with less.

What I am saying is that they will have to focus what they are doing on key priorities, and they might have to do less of some of the things that they are or have been doing so that they can focus their resources on key objectives.

The brutal truth is that our strategic priority is to invest as much as we can of the limited resources that we have in front-line public services. That means difficult decisions having to be taken elsewhere. If you have fewer resources, you cannot give everybody the same amount of money—you have to prioritise, and I have made it very clear throughout this evidence session that I have prioritised public services. That has meant having to make difficult decisions, whether on the enterprise agencies or on universities, because otherwise I would have had to cut front-line public services.

Those are the difficult choices that we have had to make. We need to be clear on the priorities that we expect the enterprise agencies to deliver within the resource that they have. There might be things that we would have liked them to do, but they might have to take longer or be paused or stopped.

We would expect that to be done through the normal monitoring arrangements for our enterprise agencies. We would expect them to be prioritising economic growth and support for businesses, including new-start growth, so there are other areas where they might need to reduce the work that they do. We would expect enterprise agencies to be clear about the objectives that they are setting in the discussions about what they are doing and how they will be monitored by normal civil service processes of oversight as well as ministerial oversight, and to be measured against those objectives.

Earlier, I referred to business leaders whom I met and who mentioned a six-page letter that an enterprise agency had received from ministers at the time. They pointed out that it should have been one or two pages and that it should have set out key elements rather than a whole list of things. It is a fair point; after all, when resources are tight, they need to focus on doing fewer things well, to the best of their ability. Their key objectives are economic growth and support to local businesses—all I am saying is that other things might have to be less of a priority.

The easy—and straightforward—answer is that we can avoid that if we do not see real-terms cuts to the Scottish budget of the type that we saw at the autumn statement. If we see a better fiscal position emerge from the spring budget, if the Treasury allows us to use that rather than the autumn statement as the basis of our forecast and if we see an enhanced fiscal position at the next autumn statement, we will be able to address all these points. With less money, however, we cannot give every part of the public sector and all our agencies the same amounts of money, because that money just does not exist. We can salami slice and say that there needs to be less money for health or for the police and fire services, but I suspect that, if I had done that, the committee’s questions today would have centred on those public services.

The easy answer is that, the more money we have available to us and the bigger the cake, the more we can address the enterprise agencies and higher and further education institutions. When there is less money, we have to make these really difficult decisions.

I am afraid that I do not have that level of detail with me, but I will absolutely come back to you with it at the earliest opportunity.

I have a lot of respect for Sandy Begbie, and we should of course listen to all voices on this matter. We have tried through our tax decisions, not just in the budget that we are discussing but for a number of years now, to develop a tax system that is progressive and which is based on those with the broadest shoulders paying a bit more. The result is that we have £1.5 billion of additional revenues that we would not have had, had we followed the UK Government’s tax position. If we did not have that £1.5 billion, we would have even less for the enterprise agencies and for universities and colleges. Our tax decisions have led to significant additional revenues for the Scottish budget.

These are choices that have to be made. I do not think that the proposition of lower taxes and higher spend has much merit—I do not understand how it would work. If taxes are reduced, you have less money to spend. Those choices are also facing the Chancellor of the Exchequer for the spring budget on 6 March, and I really hope that he prioritises investment in public services rather than tax cuts, because that would enable us to make the investments in our enterprise agencies and our universities and colleges.

Those are the two sides of the budget, and those are the issues that we have to grapple with at each budget.

No, that is not the case, because that funding will come back and will be used for that purpose. The ring fencing remains—the issue is the profiling of the funding. There is no question about the funding. It will be returned; the issue is its profiling.

There is a danger of the funding not being spent if the sector is not prepared and ready to use it for the reform and transformation that it wants to use it for. The money must be returned in such a way that the profiling meets the sector’s needs; in other words, it must come in to help the sector do X in the right year when it is ready to do that. I suspect that there will be an element of back loading, because a lot of preparatory work is still being done on reform and transformation.

That money has been ring fenced for that purpose. It will be returned. We are talking to the sector about when that will happen; £15 million has already been committed for 2024-25, and the remainder will be returned thereafter. The split and the profiling will be negotiated.

For the coming year, we have removed ring fencing from almost £1 billion of local government funding. In other words, there will be flexibility on nearly £1 billion that was previously ring fenced, which shows the direction of travel with local government. However, we want to do more. We have the Verity house agreement, which is a key element of an on-going journey.

The remaining areas of ring fencing are a bit trickier. We talked earlier about the need for us to move cautiously on teacher numbers, because we do not want those to go off a cliff. If that happened, questions would be asked about what the education secretary had done to avoid teacher numbers going off a cliff, when they are fundamentally important to reducing the poverty-related attainment gap.

We are on a journey to remove ring fencing and we have made good progress, but there are remaining areas on which we will have to move cautiously as we work with local government to achieve our joint aim, which is to further remove ring fencing.

It is an important point, and I will make it again: if there is less capital money, there is less money for NHS buildings, infrastructure or anything else. Reversing that cut is the solution.

In the meantime, we have said two things. First, we have said that the priority for the capital that the NHS has available needs to be essential maintenance. Secondly, we have said that, after 6 March, we will consider what the resources look like. We will look at the 6 March capital position, in relation to the UK Government and anything that we can do, depending on where we end up at the year end, to revisit that in the infrastructure investment plan.

Therefore, the current position is not the end of the story, but we could not have projects starting that might not be able to be taken forward. Using money to start projects that could not then be completed is not a good use of public money. We have therefore had to pause until we get that picture. In the meantime, we expect boards to take forward essential maintenance as a key priority.

I will come back to the council tax in a second, but I make the point that, in a budget where there is less money and the size of the cake is reduced, local government literally has a bigger slice of it, with an increase from 31 per cent to 32 per cent. That tells me that, within a difficult financial environment and settlement, local government has been treated reasonably fairly.

If you are talking about the council tax freeze in particular, or teacher numbers, I guess that there is a judgment to make. Local government will say that the £145 million for teachers should not be ring fenced and that it should be able to spend that money on whatever it wants. However, I suspect that your colleagues in the education portfolio would be the first to ask in Parliament why the Scottish Government had allowed teacher numbers to reduce and why we had removed the ring fencing from the money for teachers. Teachers are a really important part of reducing and eliminating the poverty-related attainment gap. They are not the whole story, as the convener pointed out earlier, but they are an important part of the story. If we put in £145 million to have more teachers, we expect local government to make sure that the teacher workforce is of such a size that it can help to deliver that closing of the poverty-related attainment gap.

The same applies to the council tax freeze. We have put £147 million into helping local government to deliver that. That money is for the council tax freeze, and I do not think that it would be acceptable to council tax payers for us to say to councils, “You can have the money and you can put the council tax up as well.” I do not think that that would wash with council tax payers. The money is on the table and it is for councils to decide. We have already seen a number of councils of all political colours make the decision to freeze the council tax. I know that it is also a policy of UK Labour for a council tax freeze to be supported.

In difficult financial times, we have been fair to local government, but it is a tough budget for the whole of the public sector.