Chamber and committees

There is a difference between means testing and targeting, so let me take them in turn. We are looking in great detail at what the options are in relation to targeting. The Scottish child payment, which has lifted 90,000 children out of poverty, could not have been afforded on a universal basis. That measure was targeted to help us to meet the targets that were set out in the child poverty legislation. We had to look at measures and take a credible path to meeting those targets. The Scottish child payment is a lever that could only have been a targeted measure.

There may be other areas of policy and existing spend that, if money were no object, there would probably be a good argument for continuing to provide on a universal basis. However, when money is really tight, how do you deliver services that will make a difference? Let us look at the options on the childcare offer. Some aspects of that offer will work for everyone, but how do we make sure that it really works for those parents who face blockages in getting into employment, being able to take additional hours or finding better-paid employment? Clearly, childcare is one of the big levers there. We are having a lot of discussions about what our childcare offer will look like in future.

When it comes to means testing, that is a different discussion, which involves discussing whether there are areas of public spend in which services are currently free but that might have to change. That is more complex, because a whole system would have to be set up for that. Prescription charges are a good example. I will not get into a long discussion about that, because I sat through all the committee discussions when those debates took place back in the day. The argument was made that we could have a means-tested system in which we exempted people with chronic conditions. However, the long list of chronic conditions grew even longer and reached a tipping point where the number of people who would have had to pay—those who did not have a long-term condition and were not below a certain income threshold—was so small that setting up and administering the system for them to pay became uneconomical. We constantly need to look at whether that is still the case, but that was the fundamental argument at that time. Value for money, purpose and impact all need to be looked at, but our focus is definitely on better targeting.

Let me tell you about the programme that is under way. We have a programme that will support public bodies to work together to achieve improvements in property data for strategic planning. There will be location-based reviews, with support to set short, medium and longer-term property key performance indicators and actions, and support to work across silos and organisational boundaries. The first governance meetings of the advisory board and programme delivery board took place this month, with very positive responses. Further stakeholder engagement is due to take place next month. The first meeting of the public sector property forum is on 19 October, and the senior stakeholder group, which is chaired by Tom Arthur, is due to meet on 26 October, so we will be really getting in and about some of the opportunities, with people working in a different way.

We also need to think about the net zero decarbonisation of buildings. It will be difficult for some buildings to meet those energy efficiency standards, so it makes absolute sense for all those reasons to work through one single estate strategy.

That will not happen a week on Tuesday; it will take a number of years to get to the optimum point. However, I have no doubt that that will drive cost savings and help with our net zero ambitions. All those are definitely worth while, and I am happy to keep the committee updated on the progress of the board.

It will impact on this budget, but it might not be the full, all-singing, all-dancing product of the fiscal framework. The work that is being done on the fiscal framework will impact on how we have discussions with local government about the budget, but areas will still be worked through beyond this budget. We will have quite a different discussion with local government about this budget than we have had in previous years, but the development of the fiscal framework will be an iterative process.

Your first question was about the Verity house agreement. A lot of the negotiation with the Scottish Government on the fiscal framework is being led by COSLA on behalf of local government. In the midst of that, COSLA has been working with trade unions to resolve some of their pay disputes. COSLA is quite a small organisation, and we ask a lot of it. COSLA being pulled in different directions is not a new issue; we need to understand that. That said, increasing the pace to conclude the fiscal framework discussions is a key priority for us both. All I am saying is that there has been an impact from COSLA having to deal with other matters, and we will work to conclude as much as we can to help with the budget process this year.

On the second area, yes, all those issues are part of the wicked problems with which the Scottish Government is wrestling. It is not just about the gap in finance and revenues that is projected through the MTFS, because layered on to that are the pay deals, which, owing to inflation, have exacerbated that situation. As I said, I do not resent a penny of it, but spending £0.5 billion more on pay than was budgeted for will clearly have an impact.

On top of that, we have targets for child poverty and climate change, both of which are statutory targets and key priorities for budget spend. Trying to navigate all that means that we have to be more targeted and will have to prioritise within the collective spending envelope. That work was done over the summer, and we continue to look at what we might have to do differently or stop doing. That is not necessarily comfortable territory, but it is the territory that we are undoubtedly in. We have to make sure that the key priorities receive the funding, and we need to continue to be clear about that. We have said this over and over again. I am not sure whether everybody understands the severity of the finances. Sometimes that may not be the case, but those are the difficult decisions that we will have to make.

I have talked about some of the levers that we have, but there are constraints on those levers, given some of the discussions that we have had about potential behavioural change and the limitations of our tax levers. It is a set of wicked problems, and there are no magic answers that no one has thought about before that we can pull out of the sky. The levers are the levers, and, at the end of the process, we will make our proposition and say, “These are the best decisions that, we think, can be made, given the constraints and the financial outlook”. If others think differently, they are always welcome to come to us with different propositions, as long as they tell us where the funding is to come from.

I could respond by saying that recent debates around whether a certain railway is going to end up in Manchester at a cost overrun of over £100 billion—

A £100 billion overspend on a railway that is now not going to go to Manchester just shows that all Governments have challenges with infrastructure projects. It is not an issue unique to the Scottish Government.

We have been clear, and Neil Gray has been clear, to the Ferguson’s management team—in which, of course, there have been leadership changes in recent times—about the requirement to constrain costs, the requirement to deliver on the timescales set out and the fact that not doing so does not do the reputation of Ferguson’s any good at a time when, clearly, that is important for future contracts and the future of the yard. I want to see a good, positive future for that yard, because I want shipbuilding to be retained in Scotland, so it is really important that we make progress there.

The point that I made to Michael Marra was that one of the reasons for the cost overrun is the same reason why many infrastructure projects have had cost overruns, which is construction inflation running at 25 per cent at the height of last summer. That is not to make excuses; it is to give some context as to why some of the costs are overrunning. There are other complexities at Ferguson’s that the committee will be well aware of.

I am not sure that taking everything on the basis of what the country can afford, in its bluntest sense, is the best starting point. The starting point needs to be what priority is being given in a difficult financial environment. I can say that social care is a key priority. You made the point about unlocking some of our systems: you could not find a better example of where that needs to happen than the money that is tied up in health. People are in hospital when they do not need to be there, are going into hospital when they do not need to go or sometimes end up in long-term care when they could have remained at home for longer.

It is also important that we do not lose housing to second homes and short-term lets. That is one of the issues that came up at the travelling Cabinet. People are concerned about the loss of homes for local people.

On the block grant, you will excuse me if my time and focus are more tied up with the immediate term. Next year, we will be wrestling with a real-terms decrease in the block grant. The forecast beyond that is that we will begin to see a bit of improvement by 2027-28, but, in capital, we will see a real-terms reduction right the way through to 2027-28. I need to focus on the here and now of what that looks like in terms of the extremely difficult and challenging decisions that we have to make.

We have just had a travelling Cabinet—it was the first one since the pandemic—over in Argyll and Bute, where we met a lot of local organisations and businesses. There is no doubt that there are challenges around infrastructure investment, digital connectivity, housing and jobs, and in making sure that the west and rural Scotland get a fair crack of the whip in migration and people coming. How do you attract people to live and work in areas that would otherwise suffer depopulation?

Some really good things are happening. I visited an affordable housing project in Dunbeg, where 300 affordable homes have been built for the local population. That will enable people to remain living in the area in homes that they can afford. The people to whom I spoke were previously in the private rented sector, paying costs that they struggled to afford. That makes a huge difference, because they are able to remain working in the local area. Those homes are energy efficient, so they are also able to afford their fuel bills, which is important. We need to see more of that.

We have put money aside for the key worker housing scheme through the affordable housing supply programme, in which we work with local businesses. Perhaps they are trying to recruit labour, whether they are a fish farm or in the hospitality sector, and are finding it difficult, partly because of the housing situation. How can we work with local businesses to look for available land and joint solutions, to make sure that we do not lose people from rural communities and that we get people to live and work there as well? There is not one solution; all those things will be important in addressing that very live and important issue.

Yes, but it would have covered the vast bulk of it. It will not surprise you to hear that we asked for more borrowing capacity. However, it was a negotiation, so there had to be compromise. It is really important that we will be able to cover whatever negative tax reconciliation there will be. We asked for a longer repayment term and, again, we had to give ground, because we did not win that particular argument, but we won the argument on the use of the index per capita methodology. That is quite important for our budget, given the issue of population.

There are areas that we still need to work on, such as VAT assignment. We agreed that those areas would take longer to work through because of the potential unintended consequences of having responsibility but no levers. That was a worry for us.