Chamber and committees

It felt challenging enough setting out a four-year spending review at a time like this, so setting out anything longer would be really difficult. However, the four-year period has allowed us not only to set out spending parameters but to have some very important conversations internally. As you can imagine, the process for getting to this publication is not simple.

We took a very different approach to the spending review than the approach that we normally take to budgets. A budget process, internally, is normally a case of telling people what their allocations are—based, presumably, on last year’s allocation plus an inflationary uplift—and asking them how much they can achieve for that budget. With this, we said that before we get to the numbers, let us look at outcomes, at the need for reform, and at the post-Covid, post-Brexit landscape in relation to what we want to achieve. We started with those cross-ministerial discussions about outcomes and then built the budget around that.

There is a limit to that, because you still have to maintain public services. That is why I worked extremely hard to try to protect budget lines—in cash terms, I accept—across the board, but you will also see a particular focus on the core objectives. That is about starting the process. I hope that subsequent budgets will reflect that priority. I hope that future settlements—in other words, in advance of next year’s budget—move in a more positive direction than we think. One would hope so, because we must remember that this spending review is based on the United Kingdom Government’s spending review of autumn last year, when inflation was 3.1 per cent. It is now 9 per cent and, based on Bank of England forecasts, it is going up to 11 per cent.

I assume that the UK Government will have to take inflation into account, so there might be an uplift, although that uplift might not translate into spending power, because it would accommodate just the inflationary uplift. However, in that event, we will continue to invest along the lines of our objectives.

As you have heard more times than you can count, my appeal is that, when we get to that point, we have the sort of intelligent debate in the Parliament that nearly always happens in committees. Let us accept that, if we are serious about preventative spend, that will mean budget lines moving. You might see acute services releasing some funding to elsewhere, because we know that, ultimately, that reduces the pressure on the acute line.

It is great to be able to join the committee. For me, that question goes to the heart of one of the opportunities in the resource spending review.

We have talked at length over the past few years—certainly since the Christie report was published—about the importance of preventative spend. However, preventative spend requires reform. In essence, it requires us to be able to move budget lines over the longer term knowing that, if we invest up front in certain areas—such as culture, the environment and a few other examples—we ultimately relieve pressure at the more acute end. Over an annual budget process, that can be challenging to do. A resource spending review allows us to consider a three or four-year timeframe and try to shift that.

I emphasise that the resource spending review is the beginning of the process. It is not the final budget for subsequent years, but it sets out spending parameters for us. I am sure that we will get into the discussion about some of the challenges that we face right now in the spending review, particularly in the culture budget lines. However, the review allows us multiyear reform. The fact that we have worked extremely hard to protect the culture lines—albeit in cash terms rather than real terms, because there is no way round the fact that inflation is eating our spending power—demonstrates that we are serious about trying to shift the balance.

That is the intention and it is certainly what we are working towards.

I can give you an update on the visitor levy, and Angus Robertson might want to add something on the culture side.

Skye is an excellent example of the point that Sarah Boyack was making about bringing together community, local government and Scottish Government. With a little bit of investment in infrastructure and a requirement to raise revenue from parking facilities and so on, the infrastructure has massively improved, as has the visitor experience and the experience of locals, and there is now a revenue stream for the local community that it can invest in things such as, for example, the community bus that it has bought. That kind of thing is not necessarily covered in the resource spending review, but it is the smaller pots of money that can absolutely unlock community empowerment.

We are committed to introducing a visitor levy, and I set that out in the letter to local authorities about the budget that has just passed. We said that there were two caveats: we need to consult with industry; and we are conscious of the impact on the post-pandemic situation of the tourism industry. The visitor levy has to be a feature of the fiscal framework review that we take forward with local government. We have stated that the levy would be local. Local authorities, communities and businesses could use it to release a bit of funding for greater investment that would improve the experiences.

The bottom line is that we are still committed to introducing the levy along the lines that we have talked about, taking into account those two caveats.

That issue shows why we have the right priorities in the spending review. With regard to our response to the cost of living crisis and the requirement to tackle child poverty, we have, for example, funded a fairer social security system. We are proud of our commitment to increasing the Scottish child payment and we have increased the employability line in my economy and finance portfolio in order to help more people into work. All those things are designed to try to alleviate some of the cost of living pressures—we cannot alleviate all of them, because we do not have control over things such as energy. We know that, if we can raise people out of poverty or prevent them from falling into poverty—that is, essentially, what you are talking about in terms of the cost of living crisis—that will reduce pressure on public services. Further, as I discussed with the Finance and Public Administration Committee on Tuesday, we know that those people will be more likely to spend, too. There is a balance to be struck in relation to targeted funding and the people who are likely to spend as opposed to those who are likely to save.

I am trying to carefully articulate the point that if we target our spending at those who need it the most and who are more likely to spend it, that not only protects them from poverty or takes them out of poverty, which is the intention, it also reduces pressure on public services and has an economic boost, because consumers are spending.

The review is intentionally outcomes focused. We have prioritised certain areas. You have heard me say what they are, but I will repeat them. They are tackling child poverty, transitioning to net zero, resilient public services and economic recovery. Three of those were included in the budget. We added resilient public services to the spending review because when we boil down priorities we see that there are areas in our public landscape that might not obviously lend themselves to being in the other three priorities, but we fund them because they are important.

We already have metrics in place to measure outcomes. The resource spending review is not independent of, for example, the tackling child poverty plan, which sets out clearly what we measure. That runs through the spending review. For example, the employability line in my economy and finance portfolio is going up because it is funding commitments that we have made in the tackling child poverty plan. We know what our metrics are for transitioning to net zero and we have set out measures for economic recovery in the Covid recovery plan.

That is how we measure outcomes. The spending review is about trying to align inputs with the outcomes that we have set out. Normally, in a budget, we start with the inputs—we start with the money that is available and we try to squeeze as many commitments as possible into that funding. In the review, we work backwards from our commitments and priorities.

That requires a lot of innovation. The culture sector has led the way in demonstrating effective innovation: think about commitments and objectives that I have set out on innovation and maximising value to the public from our assets, and think about efficiency. The culture sector can teach the rest of the public sector a lot about how to do that well.

This goes back to the first question on preventative spend. Whenever I set out a budget or a spending review, all the focus is on lines that decrease. However, if we are serious about preventative spend—for example, in relation to what Sarah Boyack touched on and ensuring that we are investing up front with a view to reducing pressure on acute care—it is inevitable that some lines will go down if other lines are going up.

That shift requires much more mature debate among politicians. As I have said in the Rural Affairs, Islands and Natural Environment Committee, members know what the debate would be like if I were to shift budget from, let us say, acute care to investing in parks, our environment or our culture.

This is as much about Government being scrutinised about getting it right as it is about having a more intelligent general debate about the issues that Sarah Boyack has touched on. That is the only way that we will get through the next few years, which will be challenging.

Yes and no. There is a principle there, which I understand. However, on the other hand, right now we are eating into our own budget to a greater extent because the UK Government’s spending plans have not been updated in light of inflation. I think that it is inevitable that inflation will have an impact on UK Government capital initiatives and it might even have an impact on things such as pay policy. There is no avoiding the fact that citizens are struggling with the cost of living and that inflation is having an impact on spending. My difficulty is that our most recent information on UK Government spending plans came last autumn. It would be really helpful if we could have updated spending plans on which I could build a spending review.

We already have a bit of a challenge with different forecasters. The most recent forecast from the Office for Budget Responsibility was in March, which was on the cusp of the war in Ukraine, and the Scottish Fiscal Commission’s most recent forecast, which is what we base our figures on, came out last week. The point that I am getting at involves the different timescales that we are looking at. It is inevitable that the UK Government will have to update its spending plans but, at the moment, all that I have to go on is something that is about nine months old.

I understand and accept the principle that you have touched on, but the UK Government will be contending with the same inflationary impact that we are, and it would be enormously helpful to know how that has changed its spending plans, which it will inevitably have done.

The choice that I have made is to increase employability and skills funding and to protect other budget lines.

No, it is not. However, as I have said, the outlook is very difficult across the public sector. From the local government perspective, we obviously need to do this work hand in hand with the work on the fiscal framework, and we need to recognise that the resource spending review is not a budget. I can well imagine that, in future budgets, local government will, for example, have a significant uplift through the education and social security lines as a bare minimum.