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They are users of public services as well, of course, and I think that they recognise the importance of investing in public services.

Yes. I confirmed in a letter to local government a couple of weeks ago that the council tax freeze will be baselined into the settlement.

I go back to the point that, fundamentally, the marginal rate thresholds arise because of the incomplete devolution of tax powers. There are two systems. The powers of the Scottish Parliament and the Scottish Government to vary tax rates have been set for quite some time, but the interaction with the UK Government’s tax position has not been properly resolved. There is a need to do that, but it has to be a two-way street. We are up for having that discussion on how we can take those matters forward, but we have not been able to engage in a way that is helpful or constructive.

You noted the Fraser of Allander Institute’s view on the need for significant increases to the basic and intermediate rates. I do not think that that would be appropriate, given the pressure on household budgets. The solution would be a tax system that is fully devolved to Scotland, so that we can drive out the anomalies that arise.

The marginal rates are a concern and we will continue to pay attention to them. We will look to resolve that issue over the longer term, if we can, but finding the funding to do so and the implications of that in these constrained financial times would be difficult to justify. We recognise that the situation is far from ideal, but resolving it in the short term would not be affordable.

We have allocated more than £307 million to the enterprise agencies in 2024-25. We have been clear that, because of the challenging funding position, we will have to be really clear about what the priorities are, and we will have to be clear that the agencies will need to focus on the things that are absolutely critical. I guess that it comes back—

The biggest reduction is in financial transactions. The capital reduction is about 13 per cent. As I said, a priority is to re-establish the capital element. It is difficult to do that for financial transactions, and it is more difficult now that we have a further reduction in financial transactions to manage in 2024-25. That affects areas that have been a priority for the committee—the SNIB and the affordable housing supply programme. Reductions in FTs are absolutely the worst thing that could happen.

I will carefully examine the position after 6 March. We have called for additional capital. If you translate the percentage reduction into cash, you will see that it is £1.6 billion less to spend by 2027-28, which is about £540 million a year. That is a lot of investment in affordable housing, health infrastructure and anything else. It is a lot to absorb, so we need the position to be reversed.

We will also consider our position once we get to the end of this financial year, and we will look at our borrowing position. We need to look at all that in the round. I will want to come back to Parliament in the light of all that and consider whether any of the positions can be changed in-year.

You have to decide whether you are saying that you want more money or not; you cannot just describe a problem.

The detail of what we ask our enterprise agencies to do will form part of the discussions and the correspondence around the priorities that are agreed with the Cabinet Secretary for Wellbeing Economy, Net Zero and Energy. The point that I was making is that, as ministers, we have a responsibility not to ask organisations to do more with less. That is a fair principle. In order for them to focus on what is key, we would expect them to look at, for example, the key objectives of the national strategy for economic transformation, supporting the growth of local businesses in their area and all the other key priorities.

There are some things that may take longer for them to do and may have to be done over a longer timeframe, and they may have to pause or stop doing some things. The detail of that will be for local partners to discuss and the Cabinet Secretary for Wellbeing Economy, Net Zero and Energy will be involved in setting the strategic direction of travel. It is not for me, as the Cabinet Secretary for Finance, to say what they should not do. I am just making the point that we recognise that, with constrained resources, we cannot ask them to do more with less.

What I am saying is that they will have to focus what they are doing on key priorities, and they might have to do less of some of the things that they are or have been doing so that they can focus their resources on key objectives.

The brutal truth is that our strategic priority is to invest as much as we can of the limited resources that we have in front-line public services. That means difficult decisions having to be taken elsewhere. If you have fewer resources, you cannot give everybody the same amount of money—you have to prioritise, and I have made it very clear throughout this evidence session that I have prioritised public services. That has meant having to make difficult decisions, whether on the enterprise agencies or on universities, because otherwise I would have had to cut front-line public services.

Those are the difficult choices that we have had to make. We need to be clear on the priorities that we expect the enterprise agencies to deliver within the resource that they have. There might be things that we would have liked them to do, but they might have to take longer or be paused or stopped.

We would expect that to be done through the normal monitoring arrangements for our enterprise agencies. We would expect them to be prioritising economic growth and support for businesses, including new-start growth, so there are other areas where they might need to reduce the work that they do. We would expect enterprise agencies to be clear about the objectives that they are setting in the discussions about what they are doing and how they will be monitored by normal civil service processes of oversight as well as ministerial oversight, and to be measured against those objectives.

Earlier, I referred to business leaders whom I met and who mentioned a six-page letter that an enterprise agency had received from ministers at the time. They pointed out that it should have been one or two pages and that it should have set out key elements rather than a whole list of things. It is a fair point; after all, when resources are tight, they need to focus on doing fewer things well, to the best of their ability. Their key objectives are economic growth and support to local businesses—all I am saying is that other things might have to be less of a priority.

The easy—and straightforward—answer is that we can avoid that if we do not see real-terms cuts to the Scottish budget of the type that we saw at the autumn statement. If we see a better fiscal position emerge from the spring budget, if the Treasury allows us to use that rather than the autumn statement as the basis of our forecast and if we see an enhanced fiscal position at the next autumn statement, we will be able to address all these points. With less money, however, we cannot give every part of the public sector and all our agencies the same amounts of money, because that money just does not exist. We can salami slice and say that there needs to be less money for health or for the police and fire services, but I suspect that, if I had done that, the committee’s questions today would have centred on those public services.

The easy answer is that, the more money we have available to us and the bigger the cake, the more we can address the enterprise agencies and higher and further education institutions. When there is less money, we have to make these really difficult decisions.