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As I said earlier, public sector pay and negotiations are the art of the possible. Pay policy seeks to provide a guide to negotiators to constrain and set expectations as far as possible. It cannot predict the outcomes of pay review bodies, however—and we have no input into that. Those are UK pay review bodies, and they tend to drive pay.

There is an issue there in terms of how pay review bodies operate. We have no way of inputting into them, and we often find out what the recommendation is just as it is announced. That drives pay, because it is then very difficult to say, “Well, we’re going to ignore the independent pay review body down south,” when it is essentially a driver for pay. The UK Government is in exactly the same position. It is far from ideal. We need to look at how that operates in practice.

We said very clearly that if it was going to be a single year deal it could not be more than 3 per cent. That was very important as it drove multiyear deals. The unions on the staff side recognised that if they wanted to have a higher first year, it had to be part of a multiyear deal. That enables—

Let me finish this point. Having that three-year horizon enables two things. First, as I said earlier, it enabled us to buy some peace and predictability. Secondly, it enables space for reform. When you are not back in the room negotiating pay again, you can actually look at some of the reforms in terms of who does what, changes to roles and so on. That is really important in the reform space that we have just been talking about.

I think that the multiyear deals have really helped. We built in a bit of contingency to help portfolios with their pay deals, but, at the end of the day, a judgment has to be applied that the cost of industrial action on a day-to-day basis is really expensive and disruptive. I think that we have got to quite a reasonable place in this round of pay deals—we are not quite out of the woods yet, but I think that the multiyear landscape has been really helpful.

We need the right policies. There is not one single policy that we can put in place here—it is a mix of policies. The measures that I have described—which include the drug consumption room and other forms of practice such as ensuring that people are seen quickly when they ask for help, and the medication assisted treatment standards—are all having an impact. There is no one solution here. However, the things that have an evidence base showing that they work need to be properly funded, and that is why there has been an increase in funding.

You have just been asking me about our spending choices—

The point that I was making—and it is not just in defence; it relates to other areas as well—is that the notional figures that are attributed to spend in Scotland do not always accord to the actual spend on the ground. Those two things do not equate. There is a notional allocation and then there is the reality on the ground, and there is a mismatch there.

We are not starting from the point of view of saying that everything is on the table but 1 per cent might be at issue. Everything should be challenged. The principle is that we have to challenge each other. If everything is committed, there is no room for change. However, there are clearly key priorities that are big spending areas. Health, local government and social security are the three big spending areas that constrain spending on everything else to a much smaller spend.

The work on health and social care reform will be important to ensure that the £21 billion that was allocated to health and social care for 2025-26 is spent in such a way as to reshape and do things differently. It will not be a great surprise that we have a commitment to maintain health spending and to pass on all consequentials, so there are some certainties in that big spending area. We need to manage expectations: we are not going to massively reduce health spending; the question mark is over how that money is spent and what it delivers. Richard McCallum, do you want to say more about process?

It is a very small number.

Each cabinet secretary will have a duty to point out areas in their portfolios where it might be difficult to deliver savings, change the culture and bring public bodies round to a different way of thinking. We need to ensure that programmes are being developed and delivered in an intelligent way—not through a salami-slicing approach—so that those things can happen. The administrative function is important, but it has to be streamlined and delivered in a sustainable way; otherwise, we cannot invest in our public services.

Quite rightly, and as you would expect, those cabinet secretaries will have highlighted things that will be challenging to deliver in their portfolios. The outcome of those discussions will be to find a route forward to ensure that any concerns are addressed as far as they can be. Change is difficult.

Let me be clear: the 0.5 per cent annual reduction absolutely has to be delivered and it will be. Ivan McKee, the minister leading on that, is looking at the plans for all parts of the public sector and what is required. Public bodies have a level of independence, but they are required to deliver the same targets. Within that, there is a 20 per cent reduction in admin costs, which will drive reform and the sharing of services, including corporate services in particular, and that work is moving forward at pace.

The reduction is not a nice-to-do question mark or a case of saying, “If you can get around it, please do,” but a requirement that we have to deliver on. However, within all that, we want to prioritise the front line, so there will still need to be recruitment in some front-line services, particularly in the health service. What is important is to deliver reductions in the right places in a managed, proper way.

On your point on compulsory redundancies, to be clear, we want to avoid those. However, as part of the process, if an organisation has gone through all the steps that are required, and looked at every possibility for voluntary severance and redeployment, but it cannot finish the job because people either cannot be redeployed or do not want to take voluntary severance, compulsory redundancy is a backstop option.

You will have seen from some of the coverage that VisitScotland has been in that situation. It has been working on that with the unions. When it became obvious that compulsory redundancy was the backstop, a lot of people who had not previously applied for voluntary severance did so.

It is important that organisations understand that that is the last resort. However, through the tools of voluntary severance and redeployment, I am confident that we can meet the targets in a way that avoids compulsory redundancy, if the process is carried out in the right way, through the work that organisations are required to undertake.

We have discussed that issue previously in the committee. First, I would say that investing in the next generation to try to eradicate child poverty is an investment in the cohesion of our society. The fact that we are the only part of the UK with falling child poverty rates tells me that it is an investment that is worth making. We are investing £649 million in this financial year in the package of seven benefits and payments that are available only in Scotland.

Analysis by the chief economic adviser shows that our additional spending on social security could deliver a £300 million boost to GDP in Scotland’s economy in the short term. I guess that people spend locally, particularly when they are on fixed incomes and low incomes. That analysis has been undertaken.

Going forward, we absolutely need to ensure that what we do is sustainable. That is why the fiscal sustainability delivery plan sets out the steps that we will need to take to continue to afford our priorities. We see social security as an important investment. We need to continue to challenge ourselves on the delivery and ensure that, for example, Social Security Scotland is delivering in an efficient way. Work is going on in relation to the adult disability payment to assure ourselves that the assessment processes are correct. I am happy to share more information on that with the committee. The starting point, however, is that we believe that this is not just an investment that is essential for the future cohesion of our society but one that has an economic benefit as well.