Chamber and committees

Good morning, minister. Clear policy is important to support emerging markets such as the hydrogen market, which is important to my constituency. What policy measures need to be in place over the coming years in order to ensure that our businesses are equipped to be successful in those markets?

I will move on to a slightly different issue. We all know what is happening with energy markets and about the extraordinary increases in prices and the consequent increases in fuel poverty. I believe that prices are expected to continue to increase through 2023.

Has any assessment been done of the impact of the risk of fuel poverty with regard to inequality in Scotland? Specifically, will that limit the ability of those impacted to secure improvements in energy efficiency methods or greener heating systems? Do you have any feel for what the impact will be?

Good morning, Auditor General. Public sector wages is obviously a big issue at the moment. There are many demands out there. Some have been met and settled; with others, we have no idea what the end result will be. What is clear is that inflation has wiped something like £1.9 billion in purchasing power off the Scottish Government’s budget. Even if all the Barnett consequentials come through and are available to the Scottish Government, they will barely offset that.

It seems logical that money will have to be found somewhere to meet those wage demands either in part or in full. There are only two ways to do that: either we cut the budget in different places or taxes go up. Those seem to be, fairly starkly, the two available options, because, as you say, the Scottish Government has to balance its budget; it does not have any leeway in that.

The tax base is shrinking. People will have less disposable income because of increased energy costs and the cost of living crisis, so there will be less VAT spent because people will not be making the purchases that they would in normal times. For the UK, corporate taxes will go down as well, so there will be pressure there, too.

Wages are about £22 billion across the public sector, and funding for those deals will have to come out of the 2022-23 budget. What are the implications of that, including for budgets in future years? Your briefing is basically a red flag to remind everybody of the pressures that are coming through and to make sure that they are met. What will be the implications for future years?

Let me move on to something slightly different. Exhibit 1 in your briefing states:

“Councils currently spend around £86 million on food each year”,

mainly for school meals and in care settings. It is estimated that food costs will increase by 5 per cent over the next two years. Where did that figure come from? Given what we are seeing in the press, it seems a bit unlikely that it will be only 5 per cent.

Already, we understand, there is a joint letter from COSLA, SOLACE, CIPFA and the Finance and Public Administration Committee saying that that money no longer reflects the actual cost of delivery. We have heard about the challenges that children living in poverty already have. We know that a huge percentage—25 per cent or thereabouts—go to bed hungry every night, so school meals are vital for those who fall into that category. What priority has been given to ensuring that the funding stays sufficient in that area, given what we have said about 5 per cent over the next two years sounding a bit light and the fact that already those organisations are saying that the money does not really cover it?

You have touched on the fact that the Government and councils will be looking to provide some sort of safety net for those who are most vulnerable and will be most impacted by what is happening around us. I will broaden out the discussion beyond school meals. Your briefing talks about how the costs of supporting people through the crisis have increased. You say:

“Social security spending is a key channel through which the Scottish Government provides support to individuals, and in 2022/23 accounts for approximately ten per cent of the Scottish Government budget.”

New support is being given by the Scottish Government, which, I think, you also touched on, and, obviously, more costs will be attributed to that. Are you able to give a little more information on how you see that developing? With such a tight and fixed budget that must always be balanced, the inability to borrow and the fact that we are reliant on private sector taxes to support the whole public sector and the whole of this effort, the anxiety is about how it comes together. How are that support and the costs related to it being handled?

I think that everybody would agree about the difficult fiscal environment. At this point, there is no reason to believe—tell me if you think otherwise—that the Scottish Government will not have a balanced budget. The budget has been balanced every year since 1999, so there is no reason to think that it will not take steps, however unpleasant those steps are. It has no choice: it has to balance that budget. There is no other option for the Government and no reason to think that it will not do that.

It is certainly an area that could threaten the effective delivery of the transition if we do not have the right people with the right skills in the right numbers.

I have a couple of related questions. We are all aware that Scotland has an ageing population. The latest projections seem to indicate that the working age population will shrink over the medium to long term. What additional challenges does that bring to achieving the upskilling and reskilling that we need in the workforce? Is it ready to take new jobs and learn new market skills to support the transition? How will it work?

I think that it would be unwise to assume that older workers will come back to the workforce to make up the shortage. I realise that the cost of living crisis is forcing many to continue beyond retirement age, but that might not prevail in the future. It is not something that we can plan.

Again, all the projections show that we have a shrinking working-age population. That will have a direct impact on the jobs and so on around the transition. How will that work? How will the workforce be managed?