Chamber and committees

Indeed—the basics of a budget or a resource spending review. I do not know how else to explain the absolute basics of Scottish Government budgets or resource spending reviews: I must balance; I can only spend to the penny what I am forecast to either raise or receive. In a resource spending review or a budget, I cannot have a position whereby I am overspending. That is why querying the Scottish Fiscal Commission’s assumptions is so important. The SFC starts with assumptions, it provides us with forecasts, and I can spend only what it enables me to spend.

No, I do not.

We will update all tax policy in advance of every budget. I will not be drawn today on setting tax plans for subsequent budgets.

Obviously, the SFC has to work on the basis of assumptions. The intention here was certainly not to determine tax policy for future years.

Over the next four years—it is important that it is understood that this is over the longer term and not over a one-year period—we will see a reduction in workforce and in head count to pre-pandemic levels.

There are number of ways to do that, including through effective vacancy and recruitment management or redeploying staff. All that has to be done in collaboration and through discussion with trade unions. That is important. We have a policy of no compulsory redundancies, and we will update public sector pay policy in advance of every budget. The key with a resource spending review is that we are not trying to drive reform over the space of 12 months; we are trying to drive reform over the space of four years, so by 2026-27, we want to the total size of the devolved public sector workforce to be at pre-Covid levels.

In relation to the health workforce, a lot of people already work in care, so we have to take that into account for a national care service, which is an example that I used earlier. It is about effective management across the board, rather than setting arbitrary targets over a very short period of time.

Some of that civil service reduction will be in the health service. I am not disputing the sentiment behind your question, which is that I have said that we need to reset the size of the workforce, we will freeze the pay bill and, ultimately, we want to return to pre-Covid levels. The public sector is large; it is approximately 470,000 people in FTE terms, and we need that to return to pre-pandemic levels. That will need to be managed across the board. That is where my concern is with your arbitrary figures, including the 15,000 in the health service. That is putting arbitrary figures on the other side of that argument.

I actually think that prioritising employability and training in the finance and economy portfolio is the right call. However, if spending in one area goes up, the same increase cannot be maintained across the board.

What we require is a flexible training offer. Universities and colleges have an important role to play in that respect, and they have to adapt and be cognisant of future skills demand. With employability training, which, as I have said, is one of the very few budget lines that is going up significantly, we are endeavouring to provide a more flexible retaining and reskilling offer to individuals who need to retrain and reskill.

That said, I go back to my starting position: the outlook is very difficult, given the funding that we have available. I imagine that around this room and across the chamber there will be different asks in terms of where I should be spending more. Indeed, I have already heard some of them today with regard to local government, universities and employability.

If I could spend significantly more on every budget line, I would—of course, every finance secretary would want to do that—but I cannot as I am constrained by a funding envelope, and I have sought to be fair across the board. It is even more challenging because our spending powers have decreased as a result of inflation, which you cannot get away from. What you are counting as real terms cuts is higher because I have less spending power as a result of inflation. We have tried to protect spend, but if you want any line to go up, I am afraid that on the resource spending review—which is different from a budget—I do not really have anywhere to go.

Gary Gillespie might want to come in on earnings more generally, but I will go back to my fundamental point: I cannot overspend by a penny; I can only spend what the SFC thinks it is reasonable for me to receive. Therefore, if you want any part of that resource spending review to increase, that has to come from elsewhere in the pot, because my spending and funding assumptions must be based on as much fact as possible—which they are.

Much of that goes back to the core objectives that I set out, such as tackling child poverty. Much of the spend for that is in the social security line, as members will see, but there is also much of it in the education line, which covers, for example, the roll-out of free school meals and early learning and childcare expansion.

We have tried to ensure that the trajectory of spend in each portfolio matches the plans for the roll-out or expansion of particular initiatives. Someone else might want to come in on the breakdown by year, but that has been our starting position. We have tried to match the funding to the commitments that have been made which are specifically tied in with core objectives.

There is another element to that. The trajectory is quite bumpy over the next few years because of the impact of reconciliations that need to be accommodated. For example, there are larger reconciliations in certain years than there are in others, and that eats into spending power, because there is a limit on borrowing of only £300 million to manage some of those reconciliations. You have to use your core spending power to make up the difference, as it were.

We have also tried to smooth the trajectories so that, for example, we do not have a portfolio that has to deal with a rapid and sudden drop in one year, only to have a climb up in the following year, because that involves employees, or workers. You cannot expect a portfolio such as education to see a drop. Therefore, we have tried to smooth the trajectory over the period across portfolios.

I hope that that answers the macro question as well as the particular question. I do not know whether anyone else wants to add anything.

If we get it right, it will have a huge and hugely positive impact. The resource spending review covers the period that is just short of half way to the national strategy for economic transformation outcomes, which we aim to deliver over 10 years. If we get that right and invest our funding in achieving outcomes and objectives, rather than in maintaining the status quo, we can shift the dial on those things. If we just defend the status quo, we will get the same outcomes, but I think that all of us have an aspiration and ambition to actually deliver what the resource spending review sets out in relation to economic growth, resilient public services and tackling child poverty.

I have been quite open and honest about the need to freeze the pay bill, but not pay levels. I do not think that there is anyone who does not accept that there has been a lot of change in the public sector over the past two, difficult, years. Inevitably, some areas have had significant and rapid increases in head count because of Covid that are no longer required. Indeed, there were initial teething challenges around Brexit that resulted in spikes.

It is about having a general reset rather than setting arbitrary targets, which is what the UK Government has done. Your questions stemmed from a local government perspective. I am saying, loudly and clearly, that I do not tell local government what to do, and nor should I, in the way that I can work more effectively with other public sector employers.