Chamber and committees

Maybe for us both, Mr Halcro Johnston.

I have not discussed that issue with the chief entrepreneur, but I am very happy to do so.

You alight on my greatest worry just now, convener. As I said earlier, and as I shared with the Finance and Public Administration Committee last week, my current estimate of the overspend on resource budgets lies in a range between £200 million and £500 million, and the variability there is about my assessment of the likely financial performance of a lot of organisations and whether they can come in on budget. My current focus is on trying to reduce that number. We go through these arguments often in Parliament, particularly with the provisional outturn statement that Tom Arthur delivers and the publication of the consolidated accounts, and some of the underspends do not translate into resources that the Government can actually spend. For example, last year there was a large underspend in student loan funding but we cannot spend that on other priorities because it is ring-fenced annual managed expenditure.

My priority is to balance the budget between now and the end of March. I am here in a temporary capacity but, in my nine years as finance minister, there is no way that I was dealing with the likely overspend of this magnitude in the middle of January in any financial year; it would be well settled by this time. I am therefore acutely anxious about that position.

Obviously, if we are able to constrain spending between now and the end of the year, or if something comes our way from the supplementary estimates of the UK Government, which we do not yet have sight of but expect to see within the next four to six weeks, the position might change and there might be some resources to carry forward. However, this is the first year that the Government has set a budget without anticipating carrying forward any resources from this year into next year.

We should be able to disaggregate the data to enable all that analysis to be undertaken.

There is also a question here—I appeal to our universities’ sense of community in this regard—about the role of universities in recognising that some of that intellectual property might have a wider societal benefit, and a wider commercial benefit for the Scottish economy. I encourage our universities to be open to that proposition.

There is obviously, as Ms Hyslop correctly said, interaction with the Scottish Funding Council and the allocation of research resources. The more we work collaboratively on this endeavour, the more we will be able to see the benefits of all of that, and Mark Logan is in place to assist us in doing that to the greatest extent possible.

Essentially, that is us responding to the profile of the range of city deals or growth deals, to use the summary title, because they span a number of years. The shortest was 10 years and the longest has been 20 years, and there has been quite a variation in the financial commitments during those years. As projects come forward, they will place varying demands on the public purse.

Some of those projects will also be wrestling with some of the issues that we are facing in our wider capital budget, which are around cost because of the increase in input prices. That might create some challenges for project timescales because, if costs are rising because of rising input prices, there might be an argument for developing a proposed project at a later stage.

I assure the committee that the commitment to such schemes remains in place. We support their delivery in concert with a range of local authorities around the country to reflect the varying timescales that have been put to us.

We want to benefit from the expertise that Mark Logan can bring to help us in meeting the challenges that I have just set out: first, with regard to ensuring that we realise the technology capabilities and opportunities that are available to us, and secondly, in assisting us by advising on how we make the transition to net zero through the encouragement and enhancement of greater entrepreneurial activity within the Scottish economy.

The climate skills action plan will be published as scheduled. If there are any issues or implications that emerge from the James Withers review, we will take those into account in the aftermath of the action plan’s publication. I recognise the necessity of our proceeding with the publication of that document.

If you will forgive me, convener, I fear that this will be a long answer, but I will try to be as quick as I can. Essentially, as the financial year has progressed, the scale of the pressure on our budget has become more apparent as a result of two factors. The first of those is the additional resources that we have had to find for public sector pay. We budgeted on that being 2 per cent; clearly, we are paying more than that to address the legitimate claims of employees. The second is the effect of inflation, for which there has been no change in the resources that are available to the budget.

I have had to take some pretty difficult decisions to balance the budget. As I explained to the Finance and Public Administration Committee last Tuesday, I am still not in a position to be confident that I can balance the resource budget this year. I am still—it is now mid-January—wrestling with the scale of the financial pressure. I need to save between £200 million and £500 million before I can balance the budget.

In trying to get to that position, I had to make reductions in planned expenditure. As you correctly pointed out, one of those reductions was to employability programmes. I removed a projected increase in the budget. I did not take away any spend that was being delivered; rather, I did not put in place a planned increase.

The opportunity cost of that, convener, which I think is the point that you are driving at, is a fair issue to raise. The more we can spend on employability, the more we can erode the levels of economic inactivity in society. That is because the programmes that we work on and fund, as distinct from the programmes that the Department for Work and Pensions funds, relate to the group of individuals who are furthest from the labour market and require much wider and more holistic support to get them back into employment.

I accept that the opportunity cost is that we could have put in place programmes that would have provided opportunities for more people to re-enter the labour market, but I will set out two factors to reassure the committee on the understandable concerns that the convener has put to me.

First, yesterday’s employment data showed a fall in economic inactivity of nearly 1 per cent in the year, which is quite a substantial reduction in economic inactivity levels, given that many people in that category face significant challenges. It is a much higher reduction in economic inactivity than there has been in the rest of the United Kingdom.

Secondly, when I took that decision, there was, and there remains today, capacity in our existing employability programmes to take on new individuals—if an individual wanted to re-enter the labour market and required support, there would still be capacity in our employability programmes for them to do so.

Finally, for completeness, the budget envisages an increase in employability support in the next financial year, so although I have had to take a short-term decision to remove planned expenditure in order to help me to balance the budget, we are increasing the resources available for employability support in the forthcoming financial year.

I am required to give the committee honest answers. I hope that that is the last that we will have to contribute for the construction of vessels 801 and 802.