Chamber and committees

That is because of the changes to resource borrowing. We can borrow up to £600 million, some of which can be regarded as baked into the normal fiscal framework.

Well, again, it was a negotiation. We would have wanted that borrowing to go further than £600 million but, essentially, that was the landing space and a compromise—we got to where we got to and we had to make a judgment on whether to settle on £600 million. In light of my concerns about the negative tax reconciliation, you can see why progress on that was progress, as it were. We would have wanted to go further if we could have negotiated that.

If your question relates to VAT assignment, that is what we need to resolve with the UK Government. There are choices. Should we continue to try to find a way to mitigate the risk? A lot of work has been done on that, but the conclusion was that that is very difficult. Should we agree that it is just not feasible to have assignment without having the policy levers? An agreement could be reached—although this is highly unlikely—that VAT would be devolved to us, along with those policy levers.

The third option is that we agree that it is not feasible to go forward with VAT assignment on the basis of all the risk that it is agreed exists and that, in the light of the evidence that has been gathered since 2016, which would not have been understood at the time in the way that it is now, we decide that the risk is too great.

That decision has not been made yet, so I want to leave space for the joint Exchequer committee to come to some conclusions on the matter. It will be a joint conclusion.

We are looking for officials to recommend to ministers the conclusions that they have come to on the art of the possible. We are not at that stage yet. We need to let that process go through. The optimum scenario would be that recommendations are made to ministers that we can jointly agree.

I do not think so; we have covered the main points. I thank the committee for the evidence sessions and for the clear steer that it has given us on VAT assignment, which is very helpful. I will do my best to keep the committee as informed as I can.

We would certainly want to test that.

Our having such status would require a whole reset. The sky is the limit on whether we could do things completely differently; of course we could, but we would have to get the people on the other side of the negotiations on the same page, and we do not know what their appetite for that would be.

There are a few issues there. The first is that we cannot escape the fact that capital budgets will decline, unless something changes tomorrow, and that the purchasing power of what can be developed and built with that reducing capital availability is constrained. Therefore, we will need to prioritise. I will set out our proposition in the budget. We recognise very much that modernising and improving the prison estate to ensure that it is fit for purpose is a priority, and we are keen to do that. We know that the pressures on the prison estate at the moment are challenging, to say the least.

You touched on spend to save. That is part of the reform agenda that I am taking forward on behalf of the whole of Government. That is about looking at ways of doing things differently, whether on resource or capital. One of the issues that we are looking at is the public sector estate in its widest sense and what we do where and why. One of the challenges of future investment in the net zero space is the requirement to bring public buildings up to scratch in terms of net zero emissions. With some buildings, it will simply not make sense to do that, given the cost. That will require us to think about co-location and where things are done, taking account of patterns of home and office working, which have changed since Covid. All of that is being looked at in the work on the estate strategy.

Looking more widely at the reform of public bodies and fiscal sustainability, one of the issues is the balance of the workforce and where that sits, as well as affordability, in terms of the size of the workforce and what the workforce does. All that needs to be taken forward carefully, and we need to ensure that what we end up with—this will take time; it is not going to happen in the short term—is a sustainable set of public services that can continue to provide high-quality service, but which might look and feel a bit different from the way that they do at the moment. The prison estate and the justice system are one part of that.

That conclusion is really helpful.

Liz Smith is right to point out the inherent tensions. Clearly, both principles are hugely important. Given the narrowness of the scope of the review and that, in relation to the methodology, we were focusing on the ability to borrow in order to deal with tax reconciliation and the Scotland reserve, it is fair to say that the priority was very much in no-detriment territory. It was about making sure that we protected our position as far as we could, within the limited scope of the review.

As I laid out in my opening remarks, I was very aware that decisions on the methodology would make a huge difference to the quantum in the Scottish budget, taking into account the issues of population growth. The no-detriment principle played into that to a larger extent because of the narrow scope of the review. That is my honest assessment. That might not have been the case had we been looking at a broader range of matters in the review, but in relation to those particular issues, that was foremost in my mind.