Chamber and committees

I was interested in the evidence that the committee took on the report by the three Davids—I am sure that they are probably somewhat offended by being called that; I mean David Eiser, David Phillips and David Bell—and from experts on the Welsh fiscal framework. I noted the comments on two facts in that regard. First, Scotland is disproportionately impacted by fluctuations in the oil and gas sector, and always has been. That is largely because the north-east and the oil and gas sector have quite a number of well-paid jobs. As we know, higher and additional-rate payers account for a significant proportion of overall income tax revenues so, if jobs in a sector such as oil and gas are affected, there is a disproportionate impact in Scotland, which then feeds through to tax revenues.

Secondly, there is the comparison with the way in which the fiscal framework operates in Wales versus the way in which it operates in Scotland. We have two different forecasters, and we also have a situation in which the fiscal framework does not take into account the unique circumstances for the Scottish tax base.

We need to remember that, pre-pandemic, earnings in Scotland had been growing year on year since income tax was devolved. There is growth there; the question is about relative growth. As I said, there are two issues that impact on that. One is the exposure to particular industries, and the second is the fact that the fiscal framework does not take into account the faster growth in higher wages in London and the south-east, for example.

The short answer is yes. I go further than that, as I actually cite the powers that local government in Scotland has when I make the case for increasing our powers. Local government is able to determine on the basis of affordability and local needs what to carry forward from reserves and what to borrow, and that decision is for councils, not the Scottish Government, to make.

That probably illustrates why it is dangerous to look at the overall quantum without knowing what has gone on underneath. There are a lot of taxi drivers in Scotland. I do not know precisely why but, proportionately, there are substantially more here than there are in England and Wales, for example. The £28 million will probably deliver about £750 for each taxi driver. The figure for the funding that we allocated for taxi drivers last year is no longer at the top of my mind, but you will recall that they were unhappy with the quantum that they received—I think that it was in the region of £77 million. The reason for their getting substantially more is because there are so many of them.

There are no guarantees for anything until the supplementary estimates come, which I hope will be next week.

It was part of the £620 million. The difficulty is that, on 9 December 2021, when I announced my budget, that reflected the reality at the time. That reality allowed us to draw down £620 million, which included the ScotWind money, the £145 million that we thought that we had for next year and all the other things that I have mentioned.

The two big things that have changed since the budget was drafted are that the £145 million that we were expecting next year has come this year—it is part of the £440 million; I have funded business support from the £440 million, as well as some self-isolation support grants—and we have had the finalised position on ScotWind. We had taken quite a prudent decision on ScotWind, because we have to be prudent.

The margin of error is what we think is the bare minimum that we are due to receive. For example, in the spillover dispute, we have identified the funding that we think is the baseline. The Scottish Fiscal Commission is the ultimate arbiter of whether that is sufficiently prudent and determines whether it is right for us to assume additional funding.

That is probably the process that we undergo. We did that for the first time last year. In the run-up to the end of the financial year, we kept being told that there would be no more money but then would be given additional funding. We decided last year that it was highly likely that there would be at least £500 million of additional funding. In the event, it was £1 billion or more. That gives an illustration of how we build in a margin of error.

If you take social care alone—I refer to last year’s figures rather than this year’s figures, because I have not seen updated figures from the Labour Party—that costing was in the region of £1.5 billion. I do not have headroom of £1.5 billion for social care alone.

In short, I say absolutely, 100 per cent, yes. There cannot just be multiyear projections, though; to go back to your previous question, it needs also to be about multiyear outcomes.

It is very difficult to deliver reform within one year. We have just finished one budget and are starting the one for next year. In order to deliver reform, budgeting needs to be on a multiyear basis. We could have better conversations about outcomes with a three-year budget, instead of schemes having to prove their worth within a year, in which case by the time funding is allocated and a scheme is set up, we are into another budget. I agree 100 per cent about multiyear budgets, but running parallel to that we need to think about what reforms we want to see over multiple years.

Throughout the process, we significantly analysed value for money. I am happy to come back with additional information.

The member will know that another two elements need to be factored in. The first concerns the additional costs of developing in the deeper Scottish waters and of connecting to the energy grid in Scotland. The second concerns the alternatives to the process that we have undertaken. Michael Matheson leads on the topic. He therefore leads on the process and has been heavily involved. My officials have been involved when it comes to the revenues and the budget process, but, when it comes to any comprehensive conversation, discussion or questions about ScotWind, I would far rather that he has the opportunity to respond.

There are three aims through ScotWind—and, I suppose, three interests. I have a financial interest in the funding that is available for the Scottish budget. As you will know, we have said that we want to use ScotWind revenues for action that specifically tackles the crises that we face.

There is a massive economic interest in ScotWind. I have gone through the details of the legacy of the supply chain. We consciously, intentionally and rightly built in to the bidding process that requirement—which, to the best of my knowledge, was not available in England and Wales—to leave a legacy in the supply chain. We had the supply chain development statement mechanism in order to ensure that bidders were required to make commitments on the supply chain, and, yes, there are contractual lock-ins, as it were, to ensure that they deliver on those commitments. To go back to my financial interest, from a tax perspective, that much broader view, on investing in healthy, robust and thriving supply chains that create good-quality and well-paid jobs generates an overall revenue that is far better than if we had just taken a very narrow view.

The third interest concerns energy transition and net zero. Ultimately, Michael Matheson has been leading, although I have been interested from an economic and a financial perspective. I would therefore rather take away questions on process and come back to you with robust and comprehensive written advice. Obviously, however, my finance officials have been involved in looking at that question of value for money.