Chamber and committees

Net in-migration was around 10,000 people. Out of something like 25,000 people, net in-migration was 10,000, and half of that—5,000 people—was people of working age. I would like that number to be bigger, frankly, but it shows that there are still people of working age coming to live and work in Scotland. That is good, but we need more of them to do so.

You are right to highlight the longer-term challenges. There is an appetite to have a wider debate on those issues in the chamber, and I am keen to do likewise. Here, the issue is population size and population balance, but we are not unique—other areas of the UK face a similarly ageing population, and that is a concern.

In respect of population size, I talked earlier about how, with the limited powers that we have, we can attract more people to live and work in Scotland. I would like powers over migration. In the absence of that, we are introducing things like the talent attraction and migration scheme, which makes it easier for employers to bring people in, and key worker housing in rural areas where we can link to employers and businesses to make sure that, when people come, they do not just come to Edinburgh but are encouraged to go to other parts of Scotland, which is important.

I want to avoid the shift to an older population by using all those levers that we are talking about, but we have to prepare for the fact that, even if we stem that to some degree, we will still have to support more older people. Key to that is the need to make sure that, where we can, we keep the older population as healthy as possible for as long as possible, that they live in their own homes for as long as possible and that they use the NHS as little as possible because of the provision of support for them in other ways. That means going back to public sector reform. Our services need to look and feel different in how they do that. We need to make all the changes to social care that we have talked about in order to maximise people’s independence and then provide the support when people need it in a way that keeps them in their own home.

It is not rocket science. We have been talking about it for some time, and most other countries are looking at very similar models to make that happen. We are scratching the surface of the opportunities to use technology and artificial intelligence in the space of keeping people safe in their own home for as long as possible and making our health services sustainable for those who need them. There is a huge purpose there, not just for the Scottish Government but for local government, our public services and our third sector organisations, in being able to sustain and prepare for that ageing population.

I hope that he will, and I hope that he will have not dissimilar reflections to make on the process, otherwise it will be embarrassing. We had to give a bit, and I am sure that we will get into some of the detail of that at the relevant committee session. The important thing for us was to increase the borrowing and reserve capacity, which will make such a difference next year. The process was not about—

I hear the point that you are making, and it is not lost on me. In normal times, a 3 per cent real-terms increase in the local government budget, plus the resources that we have put into local government for pay, would have been able to support the pay deals that local government is trying to negotiate. However, inflation has meant that the pay settlements that we have seen across the public sector are way beyond what any part of the public sector had budgeted for. I make that point because we cannot get away from the fact that that is an absolutely critical driver of some of our problems.

You are right that the social security spend is not just about the Scottish child payment. We also need to be on top of what the adult disability payment, for example, looks like going forward. We have been under pressure from cross-party representation in Parliament to make the system more generous. That, however, comes with a cost to social security spend: making it a more dignified and progressive system that is based on dignity and respect means that it costs more. That is not the wrong choice, but it costs more. Social security spend is set to rise and, therefore, we need to make decisions elsewhere, whether those are spending decisions or revenue-raising decisions, in order to make sure that, going forward, we have a fiscally sustainable budget.

I will furnish you with what I can, but, at the end of the day, it is a negotiation and negotiation is a two-way street. Getting it right is really important. Local government rushing into something that might have disadvantages, depending on the fiscal arrangement, pay deals and inflation and where that all sits, is something to be considered quite carefully. Taking the time to get it right is important, but we will probably need to approach the budget with a complex set of discussions that refer to the principles that lean into the work that has been done on the fiscal framework, although it might not be the finished agreement.

Both Governments drew from the independent reports. It is important to say that those were important reports. We agreed to publish them on the same day as the outcome of the review because we thought that that would help people to make sense of why we had come to the conclusions that we had come to. I guess that that constrained things. I do not know whether there would have been any great public or media debate on the independent reports, because they are quite technical, but that was the logic. Rightly or wrongly, both Governments agreed that that made sense.

At the beginning, we had said that we wanted it to be a more expansive review, but it became clear that that was not on the table. There was no point in pursuing something that was not on the table, so the process became about increasing our borrowing and reserve capacity and securing the use of the index per capita methodology. That is really important for us, given the issue of population—the position is different for Wales, but that is really important for us. To be blunt, it was a negotiation that involved seeing where we could get to, and some things were easier to settle than others. With a bit of give and take on both sides, we got to a landing space that I think is pragmatic. I will probably not say this very often, but I found John Glen, the Chief Secretary to the Treasury, to be one of the easiest UK Government ministers I have ever had to deal with in all my years in government. [Interruption.]

I do not know what his views and reflections would be, but we allowed our officials to get on with the job. Treasury officials and our fantastic officials here in the Scottish exchequer were allowed to get on with finding solutions without political interference to make that process difficult. John Glen and I then had an opportunity to agree the bits that we could agree. We had a bit of negotiation around some of the other bits, and we came to a pragmatic solution. I will spare his blushes, but that is not always the case when dealing with the UK Government—sometimes, you might think that you have agreed something, but that turns out not to be the case. I did not find that during this process: what was agreed was agreed.

Basically, we agreed to consider the approach at a later date and that we would progress the matter at a future meeting of the Joint Exchequer Committee. I am happy to keep the committee informed when we get to that. There was a recognition of the complexity and the dangers of having responsibility but not having levers, which would put us in a very vulnerable position.

As I said, we got to a position in which we probably obtained the best outcome that we could get, given that it was a negotiation. We will undoubtedly revisit the fiscal framework on a number of occasions, but, at this moment in time, we have made some substantial gains. We have not made gains in cash terms—the budget has not grown, because any borrowing has to be paid back—but having the ability to smooth the peaks and troughs is really important.

Of course, the northern regions of England do not compete with London and the south-east, either.

I am well aware of the delays—

The national strategy for economic transformation—NSET—is still the right economic plan. It was developed with business and with the key sectors that we have referred to. It absolutely focuses on the areas with the strongest opportunity for growth. We then have decisions to make about where we put that public investment, because, as you have just said, we cannot put it everywhere. So, we have to be strategic in how we utilise public funds in order to lever in private investment. That is the key. NSET set out some of the priorities, and that was followed up by some of the investments. You referred to one—the £15 million for entrepreneurs—but there were many others as well.

We should, absolutely, continue to listen. For example, we will be talking to the investor panel. The First Minister has met the investor panel on two or three occasions to discuss where there is an appetite to come and invest in Scotland. Clearly, there is an appetite, but we have to make sure that that can land, because investors obviously want a return for their investment. The Government’s role there is to reduce risk, to incentivise, to show leadership and to provide seedcorn investment for private investment to follow. A lot of discussions are going on in that space.

I will just mention income tax. I am sure that we will get into some of this later in the session. Recent evidence from the tax receipts that are coming through the system is that income tax performance is improving and we are outperforming the rest of the UK. There is cause for optimism that more revenues are being generated through the tax system. There are a whole range of reasons for that, including the post-pandemic recovery and many others. I will be happy to get into that at some point, but I do not want to leave the impression that we are not seeing progress there; we are, but we always need to do more.

Your first point, about the transparency of mitigation, is important. There are obvious areas of mitigation around discretionary housing payments and the Scottish welfare fund, but there are also probably more discreet areas of mitigation in areas where we have to support spend because of decisions being made elsewhere.

We decided to uprate our welfare supports in line with inflation, because we recognise that, in a cost of living crisis, it would be incredibly difficult to see real-terms cuts to benefits support, and all of those issues come at a cost. There may be ways of giving more transparency to that growing mitigation. Of course, in this place, there are often calls for us to mitigate further and further, but that becomes very difficult on a fixed budget.

I will ask Alison to come in on the transparency point in a bit more detail. Your letter contained a point about the in-year execution and the actual outturn. It is fair to say that we manage some difficult in-year pressures. We are managing them at the moment and trying to get a balanced budget. We have to balance our budget, of course. We have done so every year, but it is very challenging with the levers that we have. Incidentally, it is not just us saying that; the Welsh and the Northern Irish are probably, if anything, in a more difficult situation, because they do not have some of the levers that we have.

That is an on-going process. It is difficult: you set a budget, but, quite quickly, get into a situation where you immediately have to look at in-year savings because of all the pressures and headwinds. Following the money through all of that can be complex. It is not an easy process. There is work going on?Alison may be able to reference it?that might bring more transparency to the process.