Seòmar agus comataidhean

Thanks very much, convener. I welcome everyone back after the summer recess; I hope that everyone had the opportunity for rest and reflection. I look forward to engaging with the committee not just today but through the rest of the new parliamentary term.

I thank the Scottish Fiscal Commission for its continued work, including its independent forecasts and the recent fiscal update, which provides valuable context and supports effective scrutiny of our financial planning.

This evidence session marks an important moment in our fiscal calendar, and I welcome the opportunity to discuss the Scottish Government’s 2025 medium-term financial strategy and the accompanying fiscal sustainability delivery plan. Together, the documents set out how we will manage Scotland’s public finances responsibly and sustainably over the next five years. Our approach is designed to support the delivery of the Government’s four key priorities. That means making choices that focus spending where it has the greatest impact, supporting inclusive economic growth and ensuring a fair and strategic approach to taxation.

The delivery plan sets out the actions that we are taking to deliver on the four priorities, including how we will improve efficiency, how we will reform services and how we will maximise the value that we get from every pound of public spending.

We are taking decisive action to close the projected £2.6 billion resource gap and £2.1 billion capital gap by 2029-30. That action includes a managed reduction in the public sector workforce of 0.5 per cent a year, service delivery reform and investment in preventative measures to reduce long-term demand. We are preparing for a multiyear Scottish spending review to accompany the 2026-27 budget, which will provide greater certainty and transparency for public bodies and stakeholders and will support more impactful spending decisions.

On economic growth, we continue to deliver on our national strategy for economic transformation, with tangible progress in, for example, broadband connectivity, job creation and investment.

Our tax strategy remains focused on fairness and sustainability, with income tax decisions generating £1.7 billion more than if we had followed UK tax rates.

Looking ahead, we will publish the Scottish spending review, the infrastructure investment plan and the infrastructure delivery pipeline alongside the 2026-27 budget, which will provide further clarity on our priorities as a Government. I emphasise our commitment to working collaboratively with the committee, the Parliament and stakeholders across Scotland as we develop our approach. Subject to confirmation of the UK Government autumn budget date, I hope to be in a position in the very near future to discuss with the committee the proposed publication date for the 2026-27 Scottish budget.

Although the fiscal challenges ahead remain considerable, the actions that we have already taken, alongside the upcoming fiscal events later this year, give me confidence that we are taking the necessary steps to ensure that Scotland’s public finances remain resilient and sustainable. I look forward to the committee’s questions.

I know that there have been discussions with the UK Government to make sure that we can minimise any knock-on effect on other supports, as we did previously with the Scottish child payment, because we do not want a payment to be made on the one hand and for people to lose on the other—that is not right. Those discussions are on-going.

You are right about the wider point of mitigation. Frankly, I would much prefer that the bedroom tax went at source and that we could deploy discretionary housing payments in a different way, or that the two-child cap was mitigated by the UK Government, as we have been calling for, and so on. We have been calling for the UK Government to take those steps for that reason.

I should add that we welcomed the U-turn on the winter fuel payment. That will have a positive material impact on the block grant adjustment, which we will have confirmed in the autumn, but it will significantly reduce the £2.6 billion in spending cuts that we set out, because that predated the announcement. There will be an amendment to the projection, because it was projected to reduce by £440 million by 2029-30, I think it was.

On simplification of the tax system and ensuring that people can understand it, including the different tax bands as well as what is devolved and what is reserved, the tax advisory group discussed that issue on more than one occasion. Obviously, in Scotland, we have a different bands system. I would argue strongly that the system here is more progressive, but I accept that it is more complex. Therefore, it is even more important that people are made aware of the fact that it is a different system. As I said earlier, greater awareness is likely to ensure closer compliance.

It is no secret that I, along with my Government colleagues, believe that Scotland would be better served if we were able to make decisions on all aspects here, because we would have levers that we do not currently control and would be able to make decisions that we cannot currently make. That is a point of principle. Our position for more than a decade has been that that is what we would pursue, short of independence.

On the idea of incremental gains, one reason why I was keen to have a more fundamental review of the fiscal framework was to recognise the limitations. We are unable to respond to headwinds and events, such as a global pandemic or a war in Europe, as we would want to, because we are very constrained by the current fiscal framework. My assertion, and the Government’s, is that we would be better served by having a full range of fiscal levers at our disposal. The point that I made to Michael Marra was that the detail of what that might look like would be the result of the work that we would do as part of any review of the fiscal framework, but that door is not open at the moment.

None of that takes account of the use of levers; it is all predicated on the current constitutional arrangements. The GERS position is, in essence, a failure of the current system when we should be looking at having a different system and at how those levers could be used. We can debate that—

I am not in a position to sack anyone, because that is not what ministers do—

When you use the term “spin doctors”, I think that it is in reference to the entire communications staff across every public sector organisation. I will write back to the committee on that. The special advisers take up a couple of desks in the office on the fourth floor of the Parliament. The idea that there is an army of hundreds of them is not the case—no way. I think that that figure captures every communication officer in every public body in every part of the public sector, including every NHS board and probably local government, too, in order to make it a big figure. If your question to me is about what the value of those roles is, I think that it is important that there is communication from our public organisations, not least the NHS. Public organisations must have an effective way of communicating, and that is what the people concerned are tasked with doing.

There is a challenge in making sure that we are able to sustain our public services and that we prioritise and make our front-line public services sustainable. Without getting too far ahead of what will be set out regarding the workforce and the public sector in the reform programme, that will inevitably mean changes to how things are delivered. The use of technology and digital will help us in our ambitions to make those changes, but some support functions will look different over the next few years. That will all be set out in due course as part of those plans.

We do not collect the costs in that way, but it is clearly inefficient to have to go backwards and forwards to extract information. The protocol was probably an attempt to streamline the process and have an agreement that could help to move that forward. We are pleased that we got that, but it is then about the custom and practice. You would have thought that it would have been good for the same time, effort and priority to be given to a sit-down negotiation with each of the devolved Administrations, rather than our having to negotiate and spend all that time with Whitehall departments. By and large, our budget will be set by the fallout from that.

It is inefficient, and I will tell you about another thing that is inefficient. We offered to work with the UK Government around some of the economic opportunities. At the meeting that was not the FISC, I made the point that, if we aligned our economic energies and efforts—and, sometimes, our funding—so that they faced in the same direction, we could get a lot more out of that. For example, the Scottish National Investment Bank should be able to access the National Wealth Fund, rather than being the recipient of decisions that are made elsewhere. How could we align and agree to get more bang for the bucks from the investments that we are making? That was our offer.

I am always up for discussion about how further progress can be made and am keen to engage further on the detail of some of the areas that you have raised.

The only point that I would make about in-year transfers is one that I have made before. Policy direction quite often sits in one area while delivery sits in another so that, say, a policy could be set by education but delivered by local government. That is one example—there are many others. There is then a tension between the policy and its delivery. If all the money is transferred at the start, where does that leave policy decisions in that area of Government?