Chamber and committees

I will make two points. Whether or not I agree with the SFC, the value of its forecasts is that I have to live with them. I have to live within its forecasts, particularly for revenue but also for spend. That is another area in which there are impacts from higher inflation, which goes back to your earlier question, so we are monitoring that. We will continue to provide the support that we are, quite rightly, obliged to provide for demand-led payments.

I do not want to sound like a broken record, but it is precisely because of that volatility that we need the requisite tools to manage it. After all, any demand-led payment creates a risk for the Scottish Government in managing it within our fixed and balanced budget. The SFC is right to say that I cannot increase the size of the cake, and if one slice of it is bigger than was originally intended, that increase needs to come from elsewhere in the Scottish Government. That is the level of risk and volatility that I have to manage within a balanced and fixed budget.

That is right. I agree that it is by nature demand led. We make a big effort to promote uptake, because we believe that it is right for people to get the help that they need, but that clearly impacts on demand and the budget. We will fund that need and demand, because it is important that, as a fair and kind society, we protect the most vulnerable.

Thank you for clarifying the question. There is quite extensive engagement on the banking issue through, for example, the banking forum where we engage with the banks and the UK Government.

With regard to the nitty-gritty of how it happens, I have had quadrilateral meetings with my counterparts in Wales, Northern Ireland and the UK Government. The agenda in the latter meeting included items on access to loan funding and on what the banks were doing or not that we would like them to do. We have direct engagement with the UK Government on banking through active face-to-face conversation.

With regard to access to cash, we have made the point about extending some of the schemes that we think should be extended.

There is a general commitment to work together on supporting businesses. I think that it was the Scottish Financial Enterprise that said that businesses are facing a wall of liabilities right now, and we discussed that point at length with the Chief Secretary to the Treasury and my counterparts in the other devolved Governments in the last quadrilateral meeting.

Everything that relates to the Green deal has now been published and we have not sacrificed our commitments. The A9 is still going to be dualled, and the A96 is referred to in the co-operation agreement in terms of the priorities for the next few years. As far as I am concerned, as someone who represents a rural area, there are no consequences for the projects that I, as a local MSP, am fighting for—I usually lobby myself, which does not work very well. I am fighting for investment in local communities, and that will continue to be the case. What I am trying to say, in a roundabout way, is that what makes the biggest impact is not deals but our having the cash—the actual, hard money—to invest.

I will pause there, because I want to talk about the report about our missing out on funding, about which I was quite confused. There is an irony at the heart of a report about the UK Government, in essence, using the United Kingdom Internal Market Act 2020 to try to spend directly in areas of devolved competence, which then says that we are not engaging sufficiently. It seems ironic that, after having joined the Welsh and Northern Irish in saying that the United Kingdom Internal Market Bill was an attack on devolved competence, we are being accused of not engaging sufficiently.

Our big problem with levelling up, the unionisation of spend and so on is that we are usually kept in the dark. Occasionally we are brought into the light to be told what is happening, but that is a rare experience, as far as I am concerned.

It is really difficult to prioritise our spend when another Government is spending in devolved areas. As far as I can see, all local authorities are considering whether to bid for things such as the levelling-up fund, so there is a big question for us. For example, fair distribution is at the heart of the Convention of Scottish Local Authorities’ methodology, to ensure that every local authority gets a fair share of the capital that is available, so if some areas are getting substantially more, directly from the UK Government, does that mean that we should compensate the other local authorities and give them capital that would otherwise have been shared fairly across local authorities? Where we are already spending on, for example, the key roles that were mentioned in the news report to which you referred, but some areas are now to get money directly from the UK Government, should we use the funding for other priority projects, which have not yet been funded? It is extremely difficult to determine how to use our limited capital funding as far as we can for hospital projects, roads and schools when the UK Government is making decisions about capital spend that we are not sighted on.

I think that it was David Duguid who made the comment about our missing out on money. I have certainly not rejected any money and I am not aware of ever having rejected any money. Scotland needs as much investment as possible. It seems a bit rich that we are being accused of not engaging by people who are trampling over the normal devolved processes for distributing funding.

I will work constructively with the UK Government on every issue of importance to the people of Scotland. On business and other support, the difficulty that we face right now is, to put it bluntly, a complete lack of clarity about what is happening. One example that has a direct impact on local areas is green ports and freeports—and I am saying this just down the road from the Port of Cromarty Firth—and our problem in that respect is not a lack of constructive engagement but the fact that we are just not getting a solution or any resolution. We, like the Welsh and Northern Irish, had been hoping for a resolution of the issue in the March budget, but it did not come. The same applies to the levelling up agenda and any funding that might come through that.

The issue is less to do with constructive engagement and nearly everything to do with a lack of clarity. A newspaper headline last week, I think, suggested that we had rejected millions of pounds, which was news to me. For the most part, there is just a complete lack of clarity or engagement. Indeed, if you have engaged with any local authorities, you will know that they find engaging with the levelling up agenda to be a bit of lottery. They do not know whether they will get money or even what the precise process is. I will engage constructively, but it helps to know precisely what is happening and not to get pulled in at the eleventh hour.

I think that there are three issues in that regard. The first is the lack of clarity, which I mentioned. The lack of clarity on how some schemes are operating or will operate, and on how communities, local government and others will access them, is extremely unhelpful. Even before I get into the territory of saying that the UK Government should not interfere in devolved areas, there is the fact that we are faced with trying to prioritise a lot of infrastructure projects, such as hospitals and roads, which are important to communities, as I have already said.

The lack of clarity means that some of these communities and local authorities do not know whether they will secure capital funding through these alternative routes. I can think of an example with transport infrastructure in my local authority area: the local authority is considering going after the levelling up funding and it is also lobbying us for funding. What do I do? Do I allocate that funding, not knowing whether it will get funding from an alternative source, but knowing that, if it does get funding from an alternative source, that money could be used for another community? That lack of clarity is making our financial decision-making process extremely convoluted, and it is not giving communities and local government the certainty that they need.

The other element of that lack of clarity is about fairness. Again, when it comes to local government, the point about fairness is right at the heart of the methodology. I cannot announce any schemes or funds without COSLA, telling me, rightly, that the money should be shared equally across local authority areas. If one local authority area is getting substantial additional funding through the levelling up fund, and the others are not, do I use the funding that I have to compensate the others, or do I still share it equally? Will those local authorities that have not secured funding be content with that?

The second issue, which is really important, is that, right now, it will not, in any shape or form, compensate for the loss of EU funding. The assumption that it will is totally flawed. I am speaking to you now from the Highlands—an area that has benefited disproportionately from EU funding because of its rurality, deprivation levels and transport distances. Levelling up funding and shared prosperity funding will not compensate for the loss of that EU funding. The additional complex routes to funding, where it is, in essence, a lottery, will make that even worse.

The third point is that I do not believe that that funding will be additional. In the last budget, the UK chancellor talked at length about the additional capital spend on infrastructure across the UK and, in the same breath, announced a budget for Scotland that saw our capital budget cut by 5 per cent. I posed the question—well, my counterpart in Wales posed the question—to the Chief Secretary to the Treasury, of whether all that capital will be additional or whether we will see a net decrease in our budget as it is redeployed to alternative routes. The silence has been deafening, but what we saw in last year’s capital budget was that the increase in UK-wide spend saw a decrease in the Scottish Government’s capital budget. That means that that money will be spent on pet projects or whatever the UK Government chooses to prioritise. There is an actual tangible impact on our capital budget, which we spend on schools, hospitals and roads.

Those are my three primary concerns: first, the convoluted process and lack of clarity are undermining the certainty with which we can make plans, leading to increased unfairness across Scotland; secondly, it is no compensation for EU funding; and thirdly, there will be an equal and opposite decrease in the Scottish Government’s budget, which goes directly on hospitals, roads and so on.

Trying to ensure that we have sufficient budget for commitments is clearly an issue that dominates my attention. Social security is no different. We must try to ensure that we are cutting the cake of funding in a way that is fair.

I do not think that anybody could disagree that, as we emerge from the pandemic, some individuals and sections of society have been more exposed to its impact than others. Inequalities have been exacerbated.

Just as my job is to try to help businesses through this tumultuous time and give them the support that they need, in the same spirit, helping families through is one of the reasons why we wanted to help local government to freeze council tax and ensure that there was more money in people’s pockets. Clearly, the social security system must help people who need help, when they need it, with a view to helping them to get back on their feet or at least to tackling child poverty.

It is not a concern, in that it is important to do, but we ultimately need to ensure that the funding is in place. When it comes to the budget—I am sure that I will be in front of the committee again in the not-too-distant future to talk about it—we have choices about what to prioritise. We cannot create new money, so what do we prioritise within the budget that we have?

I regularly engage with the UK Government, and I firmly believe that one of the most powerful levers that we have when it comes to economic recovery is capital investment in infrastructure. It creates jobs, it supports businesses and it is good for our local communities. It is a triple win as far as I am concerned.

Our primary source of funding is the UK Government. That is the primary means by which I am trying to secure additional capital, and capital is now one of the areas of greatest risk when we look at the future, because of the unionisation of spend under the United Kingdom Internal Market Act 2020. It is an area on which I continue to press for additional security and certainty, with a plea that we invest in infrastructure over the coming years as a way of recovering well and recovering better.

Yes and no, but the most important ingredient is the UK Government’s spending review. Last year, as I said, we proceeded with a capital spending review even though we did not have a capital spending review from the UK Government. There is a lot of inherent risk in that, because the UK Government is our primary source of funding.

When it comes to our own resource spending review, we are undertaking internal work right now to develop a sustainable, multiyear financial plan. I know that it is of great importance to local government as well as other bodies, including the NHS, to be able to plan on a multiyear basis, instead of lurching from year to year. For example, third sector organisations often want multiyear commitments from local authorities and cannot get them.

That internal work is on-going. We have not taken a final view on a publication timeline, because so much depends on whether the UK Government publishes its own comprehensive spending review in the autumn. Once we have more clarity on that, I will fulfil our commitment to set out a framework in advance of a spending review and to engage with the committee, as well as stakeholders more widely, to inform that final document.

There is a lot in that question, so I will take each point in turn. The bottom line is that the primary way of increasing public revenue in order to fund our public services is through broadening and increasing the tax base. In order to do that, we need to maximise the number of people in fair, well-paid secure employment. I am sure that the SFC made that point in relation to its updated forecast.

There are primarily two ways of doing that. My primary concern is an economic subsidy over the next 10 years that deals with the structural challenges of productivity and maximising the number of well-paid jobs. In addition, although we are—I hope—heading for significantly lower unemployment than we perhaps feared, a lot of businesses are saying that they are struggling to recruit. Many of them formerly relied on European Union labour. Without the staff, most businesses cannot grow and develop, and individuals are not earning and are therefore not paying income tax.

First, therefore, we need to ensure that our economic strategy for the next 10 years has a laser-like focus on the areas where we want growth and development and economic recovery, and secondly, we need people. First, we need to focus on ensuring that as many people as possible who are already resident in this country have the right skills for those jobs, but we also need to ensure that we have an attractive immigration policy. So many sectors just cannot recruit right now because of their previous reliance on EU labour, which is no longer materialising.

In terms of what I am actually going to do, those are the answers. First, we need a long-term economic strategy that deals with structural issues such as productivity; that is what I intend to do in the economic strategy that is due to be published in the next few months. The second focus is immigration and attracting to this country a workforce that is able to fill roles in order to allow businesses to trade profitably and to enable people to pay income tax.