Chamber and committees

My only comment is that a lot of that £3 billion-worth of investment is unique in Scotland. As members will understand, within a fixed budget there are ways in which we can pass on consequentials that come from the UK Government or decisions that we make on what to prioritise within our budget. By definition, if you prioritise one area, you cannot prioritise everything else. We have very intentionally prioritised seeking to support families with the increased costs that they are facing right now and we have tried to be conscious of inflation, despite the fact that our budget is not inflation proofed.

For example, the Scottish child payment has gone up by 100 per cent since April and is due to rise again by 150 per cent in December, in comparison with inflation at around 9 per cent. We have also uprated social security benefits by the rate of inflation at the time of the budget. We are trying to help families as those costs increase, but that is from the position at which our budget was set, when inflation was at about 3 per cent.

Those are conscious choices to help families, but it is an extremely challenging piece of work to manage a budget that is not inflation proofed, despite what families are facing.

I will make just one point on that. It is worth looking at the Scottish Fiscal Commission’s assumptions, which are that more people will be eligible for ADP than were eligible for PIP. I do not know whether you will have the SFC in front of the committee, but it might be worth unpacking why it believes that.

I will make a few comments about that. First, at a time of extreme volatility, costings that we established perhaps a few weeks ago will inevitably rise. We might have forecast that a particular pot of funding would be provided to deal with a certain number of people, but it is highly likely that, in the light of inflation, demand will increase or the support that we require to give will increase. I make that point in relation to project management—additional consequentials do not sit there unused. That is quite important. We have to manage the budget so that I do not get to January and discover that there is still more demand.

The second point on that funding is that things will probably become even more challenging than they are now. Inflation is at 9.1 per cent, and the Bank of England has forecast that it will rise to 11 per cent. I am not being political when I say that the UK Government is adamant that it will not do anything further on the cost of living now because of what it perceives to be the risks of contributing to inflation. I do not foresee any further consequentials coming down the line. We also need to ensure that any funding that we have in hand is used well and used to cover the rest of the year.

Those are the two considerations when it comes to that funding. I do not have much more to add, apart from making the point that every single penny that is for cost of living measures will go on cost of living measures. We have set out today the £3 billion figure; we had been using the figure of £770 million of additional resources to address the cost of living.

My final point is that pay is one of our direct cost of living measures. Right now, we are, quite rightly, engaged in a number of pay negotiations, and we are conscious of other on-going negotiations. We must see pay as a cost of living measure.

I mention those three areas to set the context for how we manage all funding, including the £41 million. That is why I do not have a more definitive answer. It would not be particularly wise to allocate funding without being conscious of those three pressures.

I do not know whether Shona Robison has anything to add.

I will start with borrowing. I have outlined the reasons for borrowing. As a reminder, we can borrow for two main reasons, but resource borrowing is entirely for forecast error—that is what the £300 million relates to. To put that in context, I note that, in a budget of £45 billion—give or take—£300 million is a pretty small figure.

I emphasise that, over the next few years, in order to manage the reconciliation figures, which are the result of forecast error, not of policy decisions, we have to use spending power—actual money that would go to the health service, social security and all the other priorities of members around the Parliament. This is literally just about smoothing budgets.

If a big reconciliation is required, as it will be next year and the year after, there could be a big cliff edge for the health service. We have avoided that through prudent and careful budget management. However, resource borrowing is not an intangible and irrelevant side issue that accountants worry about; it has a direct impact.

You asked me, straight up, what should be required. I think that we should have the same powers as local government—we should be able to borrow according to affordability. That is what grown-up Governments do.

We are engaged in a review of the fiscal framework with the UK Government, and I will be making that case. My compromise position—which I probably should not confess to in public—is that we should at least index the borrowing to the budget, because, as the budget increases inevitably with inflation, that £300 million remains fixed, so it will become an ever-decreasing proportion of the budget.

As Shona Robison said, I could probably bore for Scotland on the fiscal framework, so I will stop there, but I hope that that helps to answer your question.

My point to the Finance and Public Administration Committee was on its line of questioning, commenting on the fact that, essentially, the gap between what the Scottish Government spends on social security and what we receive from the UK Government is set to increase by more than £1 billion over the next few years. That has been an intentional choice. You cannot talk about putting fairness and dignity at the heart of social security and not put your money where your mouth is. In fact, I do not think that any member has ever voted in the chamber against that fairness point when it comes to social security. It is right that that funding is there.

On the other side, however, the reason why we have been intentional about investing in increasing the Scottish child payment, alongside, for example, significant investment in employability support for families—supporting the payment of the living wage and supporting families into work—is because we want to reduce child poverty. Ultimately, to be effective will be to see Scottish child payments, in the round, reducing over the long term.

We all want there to be fewer children in poverty and therefore fewer children who are eligible. I was very clear with the Finance and Public Administration Committee that I am talking about the long term, if we are to be effective in doing that.

We will continue to invest in other areas of social security, such as disability benefits and so on. We have put fairness and dignity at the heart of social security, so those payments will, rightly, continue.

My point was that, ultimately, we want those forms of support to deliver the outcome of reducing the number of children in poverty and, by extension, the number of eligible families, because they no longer need that support.

Shona might have said this already, but the Scottish Fiscal Commission’s forecasts bind us, as it were, to what we spend. They also bind us in terms of having to meet demand-led schemes, which is absolutely right. I know that the committee has expressed an interest in the topic before, but I think that the discussions about the fiscal framework often fixate on taxation and borrowing. However, one of the biggest changes that we have seen in the past few years is trying to manage the volatility in a demand-led scheme.

I have to allow—quite rightly—for sufficient budget to meet demand. I cannot say, in this year of volatility, that we will allocate £4.2 billion—which is the figure that we have allocated for social security—and then get to January only to realise that the demand is £4.6 billion and I need to identify £400 million from within a fixed budget. You cannot do that. You cannot identify £400 million from within a fixed budget in a matter of weeks. That figure is almost the entirety of some portfolios. Therefore, you have to manage the demand-led schemes, but the level of risk is so substantial that I think that we need the tools in the budget to manage that.

If ADP becomes more generous—our schemes are already more generous by a margin of £1.3 billion over the next few years—in my technical world, managing a more generous scheme requires me to have the right tools to meet that demand.

If there is error and the Scottish Fiscal Commission forecasts are wrong—every economist makes errors, because nobody can predict to the precise penny what something will cost, so that is not being wrong but just the nature of the job—in that situation, any other Government would borrow for the shortfall. It would not go digging in other pots of money from other portfolios to take that and scupper those areas to fund the shortfall. I cannot borrow for that shortfall. My borrowing allowance for forecast error is £300 million, and you will already have seen from the tax position that we are forecast to have to meet a gap that is significantly higher than that, and this is before we even talk about social security.

I make that point in answer to Jeremy Balfour’s question because I think that we all have genuine interest in ensuring that we have tools in place to manage demand-led schemes. It might sound technical, dull and irrelevant, but it makes all the difference in the world to the individuals who are eligible for the schemes.

There are a number of lines or portfolios in the resource spending review that all contribute to the wider picture on employability. You can, of course, look at the education and skills line or the employability lines in my portfolio. Prioritising one area means, by extension, not prioritising others. In my portfolio, I have prioritised employability.

I mention that because we must become more flexible in supporting parents if we are going to tackle child poverty. You cannot consider simply the more conventional skills routes. You can rightly scrutinise higher and further education but, in my portfolio, on employability, I am excited about the significant increase in investment in the no one left behind strategy and the significant investment in a new commitment, which is the offer to parents. That brings together a range of services and support, including not only employability but childcare, health, support to access transport and family wellbeing. In other words, it is a wraparound support that focuses on families that are at the greatest risk of experiencing poverty.

This year, we have allocated up to £113 million to employability services. That includes up to £81 million to support delivery of the commitments on the second tackling child poverty delivery plan. That enables you to see the trajectory across the RSR.

I dispute the premise of the question, because we need to think far more flexibly about employability. Therefore, you need to consider the RSR in the round. The four priorities that have been identified, one of which is tackling child poverty, must run through every portfolio. It cannot be just Shona Robison’s job to tackle child poverty; it has to be my job in finance and employability, the Cabinet Secretary for Health and Social Care’s job and the Cabinet Secretary for the Constitution, External Affairs and Culture’s job. It is all of our jobs. We all should prioritise it, which is what you see in my portfolio.

The resource spending review sets out broad parameters and is a lot more strategic than a budget would be. In that regard, the equality and fairer Scotland budget statement is very similar to the resource spending review in its approach—it uses a strategic lens.

I will keep my comments brief. The resource spending review does not replace the budget, so it does not include anything lower than level 2, which is, comparatively, quite a high level. It is difficult to get into the depths of specific lines that would normally be published in a budget at levels 3 and 4, which constrains how detailed an equality and fairer Scotland budget statement can be.

I can pick that up. From memory, the amount to be deployed was more than £200 million, and we chose the quickest way to deploy the full amount. The point that I made about other ways taking from six to nine months is mirrored on the time that it took for the low income payments to be deployed. We worked with COSLA to understand the fastest way to deliver the money. Carers are one group that need additional support and Shona Robison outlined what support was provided to them.

They are not, however, the only group needing support. There are significant groups of pensioners and of households with children and there are groups of people who do not fit into any of those three categories but who also need help and support. At a time like this, there is a huge group of people who need help and support. We will continue trying to deploy funding through the schemes that we already have in place.

You will recall that the announcement that the money was coming was made completely unexpectedly in the middle of February and that we had two or three weeks to not only figure out a way of deploying it quickly, but put it in people’s pockets. Doing that for as many as possible of the people who are struggling required us to move at pace.

There are a number of different schemes that could be identified to create that jigsaw of getting help out. To deploy the full £200 million or more in the round would have taken significant time. That is not to say that the ideas and suggestions about the carers allowance and other things are not still live and pertinent. As Shona Robison said, we absolutely will do more if we can. The fastest way to get that money out in the round without over-complicating the systems was by working with COSLA and responding to its very helpful feedback.

Thank you very much, convener. I will take the opportunity to make some comments about a very important area for Scotland.

Every part of the economy and every part of Government is currently being transformed by digital connectivity and by the data, technologies and applications that it enables. Although, prior to the pandemic, all of us recognised the critical need for reliable digital infrastructure, the pandemic has emphasised that need further still, and it has certainly forced the pace of digital transformation. We are investing substantial Scottish Government resources in a reserved area so that we can deliver improvements in digital infrastructure through unprecedented times. I am certainly proud of what we have achieved, but I am also conscious of the need to make sure that we complete the job and do it well.

We delivered the commitment to ensure that every home and business could access superfast broadband connections by the end of last year through a combination of the R100 contracts, the nationwide voucher scheme and commercial coverage. All remaining connections that are being delivered through the R100 contracts will be full-fibre connections, which will deliver gigabit-capable connectivity on the ground. The R100 programme currently has ships out in the North Sea laying 16 new fibre optic subsea cables to connect 15 Scottish islands. That is quite clearly a transformational investment.

I had seen the United Kingdom Government’s gigabit project—through which £5 billion is available for investment across the UK—as the next opportunity to deliver more targeted investment, and I thought that it could work quite well alongside the R100 programme. However, as things stand, the sort of investment that the Scottish Government is currently making in subsea cables and so on will not be possible via project gigabit, which will, instead, focus on the cheapest non-commercial premises.

Project gigabit has an arbitrary cost cap of £7,000. In other words, if it costs more than £7,000 to connect to a premises anywhere in the UK, the UK Government will not fund that. I hope that the committee will join me in appealing to the UK Government to express the point that connecting the hardest-to-reach areas in Scotland will inevitably cost more than £7,000 per property.

My correspondence with the UK Government Minister of State for Media, Data and Digital Infrastructure has not been fruitful to date. She has said that the Scottish Government is seeking “to have greater spend” in areas such as islands and parts of rural Scotland than that which is going to “parts of England” and that she

“cannot ask people in other parts of the country to suffer”.—[Official Report, House of Commons, 26 May 2022; Vol 715, c 399.]

It is quite clear that all of us have an interest in connecting the hardest-to-reach areas and, even if it costs more than £7,000 per property, we need to complete the job. However, having already invested in a reserved area well over £600 million from the Scottish Government’s budget, we cannot simply keep picking up the tab for the UK Government on broadband. Therefore, it looks like project gigabit is going from a transformational opportunity to a missed opportunity for Scotland. I hope that we can get into a bit more detail on that when it comes to the question-and-answer part of this session.

The Scottish 4G infill programme is working with our project partner, WHP Telecoms, which has activated 28 mobile masts, and we are doing work on 5G through the Scotland 5G Centre. I could talk more about that, but I am conscious of keeping my remarks brief, so I will stop there. I hope that we can get into some of that work in the questions.