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We have recognised the issue of wealth inequalities for as long as I can remember and have been very clear on the principle that those who have the broadest shoulders should contribute more. The difficulty has related to our powers to address that. If this exchange is heading in the direction of wealth taxes, for example, I note that I am in favour of them, but they are very difficult to deliver. Looking around Europe, many have tried to implement them, but not many have succeeded and, recently, the Norwegians have had to rein them back. In principle, I am in favour of wealth taxes, but the question is how they are delivered. I believe that the contribution that people with large assets make should be recognised, but finding mechanisms to do so is the hard bit. As you will be aware, the Scottish Land Commission is in the early days of its work on land valuation and all of that.

It is not that we are not interested and are not looking at those areas, but there are a lot of process issues. You know that the ability to move forward with any additional taxation would require huge negotiations with the UK Government and there would be a whole process to go through, on the presumption that the UK Government agreed in principle—although, I am not sure that it would agree in a lot of this space. Something might appear in the autumn budget that could surprise us—who knows? There is a difference between principle and practice and being able to do something that would work and would bring in resources any time soon. I am pragmatic; you could spend a lot of money pursuing something in that area, but it would produce no funding any time soon. I am quite thoughtful about that.

I was involved in meetings on a daily basis with Ivan McKee and colleagues in the run-up to the publication of the MTFS and the fiscal sustainability delivery plan. Those discussions had already taken place and had gone into great detail, and they are on-going in relation to the collective responsibility to deliver savings, which is not just my job or Ivan’s job, but everybody’s job.

Those discussions happened and went into great detail in advance of the publication of the plan. In the end, however, it is the Government’s plan, and it is everybody’s responsibility to deliver it. That is what will happen.

There is risk with everything. There is a risk in getting up in the morning. However, if we do not make change and are not ambitious, we will not be able to deliver what needs to be delivered.

We have already made progress, which gives me confidence that that level of ambition will be delivered. For example, the programmes that have already been working have saved just over £320 million over the two-year period to the end of 2024-25, with projected savings of nearly £300 million over the following two years. We are focused on the single Scottish estate, the national collaborative for procurement and digital programmes, and on securing commercial value for money, cost avoidance and cash-releasing savings. We have a track record. We are not starting from scratch. A lot of that has been driven by the work that Ivan McKee and his predecessors have undertaken.

As I said, the reduction in costs is not optional or simply something that will be nice to do if we can get round to it. It is a requirement, and each part of the public sector, whether it is the civil service or a public body, will have to set out how it is going to contribute.

I reassure members that Ivan McKee is monitoring progress weekly and that returns are scrutinised. I am sure that he would be happy to come to the committee and set out some of the detail to provide assurance on those processes—he is keen to talk to the committee about that. Nevertheless, the process has to happen, because the outcomes will mean that we can sustain investment in our public services on the front line.

Yes—it gets harder.

I do not wish to be cheeky, Mr Hoy, but your party’s press releases, and your lines of inquiry, have often been about admin and corporate costs. If we all agree that there is space to reduce those costs, that obviously has to be done in a way that enables transformation. I will give an example. We met with the Scottish Government’s digital team, who are rolling out a lot of excellent work to help their colleagues in many parts of the public sector to do things differently using automation and smart technology in order to save money. It would make no sense for us to reduce the Scottish Government’s digital capacity in the areas where the team is doing that.

However, the truth is that, in the long run, without a doubt, it is not sustainable across our public sector for each public body—the number of public bodies is quoted to me regularly, including in this committee—to have a human resources department, a payroll department and so on. Our default assumption, therefore, is that we need to move to shared services. Some front-line services can be shared, and we want to encourage that as well. However, with regard to the corporate costs, there is without a doubt the ability to make savings there.

The Oracle investment that we have made in the Scottish Government enables a range of public bodies to be onboarded so that they can be provided with that service rather than having to invest in new up-to-date systems.

There is a lot happening in this space—it has to happen, and it is being monitored within an inch of its life. I suggest that the committee invites Ivan McKee to tell members in great detail about the work that he is undertaking, because I think that that will provide further reassurance.

As I said in my opening statement, we will be setting out a lot of the material in and around the budget periods. It is fair to say that we have been disappointed with the spending review on a number of levels, with the capital position in the block grant growing by 0.3 per cent compared with 1.8 per cent for all UK departments. Essentially, that means that we will have a declining level of capital available to us.

Bearing in mind, too, the point that you have just made about the costs of construction going up, all of that means that we will be required to prioritise the pipeline that we bring forward. We will not be able to do everything now. Clearly, we have already made some commitments and priorities around, for example, affordable housing—indeed, the Cabinet Secretary for Housing will be making a statement later today on that—but we will have to make some difficult decisions. We are looking at the options that might be available to us; for example, we are looking at how we might use revenue-based finance in an appropriate way to fund projects that would otherwise not be funded.

The capital outlook is disappointing. There has been a bit of growth in financial transactions, which is welcome—we use them for housing and the Scottish National Investment Bank—but the overall direction of capital is disappointing, to say the least.

One reason for the major increase in head count has been the increase in responsibilities that came from the devolution of large areas of welfare and the growth of Social Security Scotland. There are other areas too. There has not been growth across the board: the big growth has come from areas—

You are right—it is a bigger public sector, but we have things in public ownership that are not in public ownership down south, which I would argue is a good thing. There are major differences in what is under public ownership: for example, Scottish Water and ScotRail. If you strip all those things out, there is a closer comparison. However, the point is that we need to address issues in a way that prioritises and protects the front line. Similar to the UK Government, we have placed a particular focus on corporate costs, admin costs and savings, which the delivery plan goes into in detail.

There is a balance to be struck when it comes to pay and industrial peace. We set out a 9 per cent rise over three years, and the requirement is that any pay deal that goes beyond 3 per cent in year 1 has to be multiyear. A lot of the deals that have been secured have been multiyear, which is good. I accept that many of them are over two years rather than three, but it buys peace for two years in many front-line services, which is a good thing. I have looked at the position of the UK Government, which has a pay policy of 2.8 per cent, but the pay review bodies are recommending rises well in excess of that. Either you accept the pay review body recommendations or you do not. If you do not, you are straight into facing industrial action and difficulties.

There is always a balance to be struck, and we have a very tight set of arrangements across the Government. Proposals for pay offers are put through a system: we check for contagion effects and fairness, and we ensure that they will not have a negative effect elsewhere. In the light of inflation not coming down as quickly as was projected, we have also included commitments to reopen discussions on some of those deals should inflation spike beyond what is predicted. Some of those commitments have helped to get deals across the line. To be honest, those deals are more of an art than a science. Having been in the room for deals several times, I know that it is about getting to the best place that you can in order to avoid costly industrial action.

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.