Chamber and committees

That is a fair question, and it was captured in the Fraser of Allander Institute’s pre-RSR publication analysis. I think that the Fraser of Allander Institute asked about the level of granularity that could be published and suggested that we publish just a high-level narrative with priorities.

I thought that it was important that we provide as much granularity as possible. That is why it goes to level 2. Due to the level of volatility in the funding—I can unpack a lot of the assumptions that underlie the available funding—it is extremely difficult to be any more granular than level 2. Even providing level 2 detail was challenging.

The reason for that is partly driven by inflation. As I have already said, much of our spending review is based on the UK Government spending review, as members would expect. Inflation was at 3.1 per cent; it is now at 9 per cent, and it is going to rise. We have to make a judgment about the risk. Being too granular carries its own risk in terms of planning things that might not come to pass.

It is not easy and, at the end of the day, this is not a budget. We will set out our tax rates and our public sector pay policy, for example, in advance of each budget.

You are right to comment that it is a judgment call. We have pushed as hard as possible to be as granular as possible in an extremely volatile situation.

Obviously, many families who will receive the child payment or additional support are already in work, too. You cannot look at, for example, the figure of £1.8 billion for the Scottish child payment in isolation from the employability and training budget line, which is going up by £100 million over the next few years, because those are two sides of the same coin. From a child poverty perspective, Government has a moral obligation to care for children in poverty, because it is not their choice to be in poverty, and those figures need to be grappled with. However, simultaneously, it is about helping parents not just by getting them into work, because many of them are already in work, but by ensuring that they are paid sufficiently, which is where the real living wage comes in, and that their employment is secure.

The child poverty plan captures all of that. The resource spending review comes in behind it and funds it. However, we cannot ignore the issue and we must tackle it. We have made a choice to tackle it through the priorities that we have set out for the resource spending review.

Yes, and I would argue that it is important spend. I would argue that £1.8 billion for the Scottish child payment is an important choice that we have made. However, you are right that it is a choice, and where you choose to prioritise one area of spend, you by necessity deprioritise other areas. We have chosen to make tackling child poverty a core objective. We have backed that up with increased spend on social security. We have reformed social security powers over which we have control, and tackling child poverty must be one of this Government’s missions.

Interestingly, I think—unless I am told otherwise in the next few minutes—that it is pretty much supported by all parties in the Parliament. Therefore, it is a choice. However, ultimately, if we achieve our objective, those figures should decrease. You should not set out to invest in social security over the extreme long term because, if you manage to tackle child poverty and you meet your child poverty targets, you should see that spending figure coming down, because there will be fewer families in need of that additional support.

Yes, it is a choice that we have made. The other difficulty with social security, of course, is that it is demand led. Therefore, the forecasts will inevitably change, because no forecast is 100 per cent aligned with outturn. For that reason, we must ensure that we have the capacity to meet that demand from within our own budget, irrespective of where the demand falls. Therefore, it creates risk and volatility, but it is a choice of this Government, and I think that it is the right choice. With regard to the Scottish child payment, it is not unreasonable to suggest that, if you meet your child poverty targets—the Scottish child payment is one of the levers for doing that—you will see that figure fall.

Absolutely. First, you asked about local government. The question is similar to the question that you asked me about education. I think that that will be a recurring theme in the various questions that are asked this morning. I am not in any way denying the extremely challenging outlook that we face right now with the funding that is available to us, and the job that we have had in trying to be as fair as possible across the public sector.

To go off on a brief tangent, we set out three objectives in our budget: tackling child poverty, transitioning to net zero, and economic recovery. We have intentionally added resilient public services to that list because, if we were to base all our decisions on those first three objectives, core public services would find things very challenging. We have therefore tried to protect those core public services.

I am not in any way saying that the outlook is not extremely difficult. There are no two ways about it. That is why public sector reform—including, for example, the estates—is so important. If we can become as efficient as possible, that will allow us to focus our funding on front-line services and, ultimately, to focus on achieving those objectives.

I have two quick points to make on local government. First, in the most challenging circumstances, we have protected the revenue budget in cash terms, with £100 million in the final year, and we have also protected the baseline of £120 million from this year. That means that local government will receive about £42.6 billion over the resource spending review period.

Secondly, because it is level 2, those figures do not include the funding that is normally allocated to local government from other parts of portfolios, such as the transfers from education and social care. You will therefore see a significant uplift in future budgets, because the resource spending review does not provide the granular detail on the funding that is made available through those transfers.

There is also a point about flexibility, which has to go hand in hand with the fiscal framework. Now that we are through the local government elections, that work is being dusted off again. It has not stopped, but it obviously had to be briefly suspended during the local government elections. The fiscal framework has to look at maximising the flexibility and empowerment of local authorities.

On the estates programme, l note more briefly that it is not about focusing all the Scottish Government workforce in, for example, Edinburgh; it is about the fact that we now have hybrid working across Scotland and therefore it does not make financial sense for me to continue to renew leases—it is largely about leases rather than necessarily outright ownership—when buildings are only half or a quarter occupied. It is about how to ensure that we maximise the use of that estate. If we can save money on estates, for example, I can maximise more money for social security to feed hungry kids or to help front-line workers.

Gary Gillespie might want to comment.

On that point in particular, obviously, funding for employability is going up. It is therefore a choice. I am sure that we will come back to this, but employability and skills are probably the two areas that people most frequently raise with me in relation to the pressures right now—particularly with unemployment at 3.2 per cent—and the need to invest. In the finance and economy portfolio, we therefore see an intentional choice of investing more in employability and skills—and the skills line does go up. We cannot mirror that significant increase across the board because, by nature, a budget cannot prioritise everything.

Enterprise and skills link back to the national strategy for economic transformation and the constant refrain from the economy committee and others about decluttering the landscape. We need to be as efficient as possible. That does not compromise our objectives, but we need to ensure that we are reducing duplication across the various public bodies that operate in the enterprise and skills space. To my mind, we have struck the right balance in the finance and economy portfolio, because it reflects the constant refrain that I hear about the need to invest in skills and to ensure that we are as efficient as possible in supporting businesses.

You asked where the workforce will come from and mentioned the need to invest in training and skills. That is why I have prioritised the budget in the way that I have. That means that the focus will nearly always be on the areas that do not see the more generous uplift; the focus is very seldom on the areas that are seeing an uplift in challenging areas.

On climate change, it is important to say at the outset that, from a capital perspective, we cannot reach net zero without leveraging in private funding; there is no question or dispute about that. The Scottish National Investment Bank has a role to play in leveraging in private investment. We need private investment. We can allocate public funding out of our available capital—bear in mind that that is approximately £5 billion per year, and we have approximately £450 million in borrowing capacity each year—but it will take more than public funding for us to reach net zero, and we should not hide that. I hope that that answers your questions about skills and funding.

It is unlikely that we will see that in the NHS. I have intentionally set out a flexible approach because we know that some parts of the public sector have grown and probably will need to grow further. For example, the national care service will need to be able to employ people and expand in some areas flexibly.

Other parts of the public sector will no longer need to maintain the Covid-related expansion of the workforce. Rather than taking a UK Government approach to this, which is to put arbitrary figures on it—I think that its figure for bringing staff numbers down to 2016 levels is 91,000 full-time equivalent—we have said that we will freeze the pay bill. That does not equate to a freeze in pay levels; we want to work with employers and trade unions during the next few months in advance of the budget to understand how we can manage workforce numbers in a flexible way that will allow some parts of the public sector, such as the health service, to continue to grow where it needs to grow, and other areas to decrease their staff figures when they do not need those post-Brexit, post-pandemic levels of staffing.

No, that is not my position. Those are forecasts from the SFC. I believe that the £3.5 billion is actually our figure, which was published in December and which was based on a number of assumptions. The point that I was making in my answer to you, and which was made in the First Minister’s answer, was that we are now working with a resource spending review that is completely balanced. It is factually inaccurate to suggest that the resource spending review is not balanced, because I must balance it by law.

The gap between spending and funding, based on the RSR framework, which was published in December, has come to the fore again in recent days. That projection was based on, for example, inflation at 3.7 per cent and 2 per cent thereafter, and on social care growth in line with the 2018 medium-term financial strategy. It was based on a whole number of assumptions, and, in a sense, the resource spending review is the answer to a lot of those assumptions, and is based on more accurate information.

I am very clear that the suggestion, based on forecasts in advance of the publication of the resource spending review, that there is a deficit in the resource spending review is inaccurate.

We do not use figures in that way. The SFC updates its forecasts in the weeks in advance of the resource spending review publication, and then we have to balance our spending commitments. There has been so much change between December and the SFC finalising its forecasts a few weeks ago that it is just inaccurate to suggest that we go back to December figures.