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The ScotWind money relates to the whole budget. Even if you had the £350 million in its entirety from ScotWind for 2024-25, the £4.7 billion of capital and resource that will have a positive impact on climate change goals goes well beyond the ScotWind money that is being invested in the budget. We are going way beyond what the ScotWind money would allow us to invest in climate change objectives. We are putting a lot of Scottish Government capital and resource into tackling climate change—well beyond the £350 million.

If you are asking whether, when we set out the budget, we allocate that £350 million only as part of the £4.7 billion, the answer is no—it is allocated to the budget per se in terms of presentation. I do not have it as an element that makes up the £4.7 billion, but you could argue that it is part of the overall resource that allows us to put the £4.7 billion into our climate change action.

As I say, the Scottish Forestry budget takes into account some of the reserves that it has, and we have had that discussion with a number of organisations to make sure—

Thank you very much, convener.

The challenges facing Scotland’s public finances will be well known to the committee. The pressures on the 2024-25 budget cannot be overstated and, as I have said before, represent in my view the greatest challenge to any Scottish Government since devolution. We are continuing to manage a wide range of pressures due to volatility from global factors such as the Ukraine resettlement, the impact of inflation, the cost of living crisis and, of course, the on-going legacy of Covid-19.

The United Kingdom Government’s autumn statement delivered the worst-case scenario for Scotland with a fiscal settlement that challenges the viability of public services across the whole of the UK. Our block grant funding for the budget, which is derived from the UK Government’s spending decisions, has fallen by 1.2 per cent in real terms since 2022-23, and our capital spending power is due to contract by almost 10 per cent in real terms over five years.

As I set out in December, we cannot mitigate every cut that the UK Government makes, and we are at the upper limit of the mitigation that can be provided within our devolved settlement and competence. The UK Government has chosen to prioritise tax cuts over investment in public services, but we have made different choices.

At the heart of our budget is our social contract with the people of Scotland, whereby those who earn more are asked to contribute a little more, everyone can access universal services and entitlements, and those who need an extra helping hand will receive targeted additional support. We have chosen to act to do everything in our power to protect public services, including through a £6.3 billion investment in social security and more than £19.5 billion for health and social care, alongside record funding for local authorities and front-line police and fire services. Importantly for this committee, in 2024-25, we are committing £4.7 billion in capital and resource for activities that will have a positive impact on the delivery of our climate change goals. I look forward to the committee’s questions.

We always keep the position under review. Free tuition is important so that tuition fees are not a barrier to those entering into higher education. We talked earlier about those from a more deprived background going to university and the gap has closed—there are more students from more deprived communities going to university. That is partly due to the fact that we have free tuition and that people will not be taking on the levels of debt that are seen elsewhere in these islands. If you are asking me whether we are reviewing the position of free tuition, I would say no, that is not something that we are reviewing.

I do not think that your cynicism is totally misplaced. As you say, every organisation takes on a life of its own. In terms of the growth of public bodies, we have been clear that the controls, assumptions and presumptions need to change. There should be a presumption against forming a new body as a solution to a problem, and the Cabinet will be required to give its approval to any suggestion or proposal for a new public body. In the past, it perhaps became the default that there had to be a new public body, whether due to a new piece of legislation or a new function. Of course, that is not necessarily required, given that there are already public bodies that could potentially take on the functions.

Therefore, the question is what we do with the existing landscape. There are a number of aspects to that. One is some rapid work around controls over the size and function of existing public bodies. Without a doubt, the workforce controls that we are putting in place will impact on all public bodies. They might not impact each public body to the same extent, but they will have an impact, because some public bodies are in a different position from others in the growth of their role and functions.

There are areas that are de minimis of what you would expect public bodies to be doing. Looking at shared services, for example, is a must. Does every public body need its own human resources or payroll department? That is one of the reasons why investment in digital capability is important, because it can potentially provide a one-door approach for all the support functions for public bodies instead of them having their own systems. That brings a huge benefit in terms of cost and sustainability. The investment by the Scottish Government in providing a digital system to support payroll and HR has many additional benefits. To avoid using up more time, I will not go into further detail, but I am happy to maintain a dialogue with the committee about the detail.

The more challenging question goes beyond the Government. A lot of the public bodies and roles that have emerged—commissioners and so on—are also in the parliamentary space. We have to take a step back and ask ourselves whether, with our population size, we have the landscape that is required for the sustainability and public sector efficiency that we need to be quite rigorous about.

The housing budget is very challenging and we face a large cut in the capital budget. I take your point about whether the cut is 20 per cent rather than 10 or 11 per cent, but the sustained cut in capital budgets is extremely challenging for the housing budget. If you take into account all the other challenges, including inflation in construction costs, the outlook for housing is very difficult.

Having said that, we believe that the investment that we will make in our housing budget will help to lever in private sector investment. The Minister for Housing is working with partners, investors and the private sector to look at how we can lever in additional private investment.

The figure for public capital investment is a decrease of about 13 per cent. One of the main drivers has been the reduction in financial transactions, which have gone down to £176 million. The housing budget has traditionally been the recipient of financial transactions, but those have dramatically reduced. We have had to deploy the £176 million of financial transactions that we do have to the Scottish National Investment Bank, in order to maintain its capability.

Such decisions are not easy. It would probably be fair to say that that was one of the most difficult decisions. If the availability of capital funding changes in the coming weeks and months, housing would be the key priority for that additional capital.

I should say, for context, that we have a good track record of delivering on affordable housing. We have delivered more than 126,000 affordable homes so far, which is 40 per cent more per head of population than in England and 70 per cent more than in Wales. The context is that good track record.

On the target of 110,000 homes by 2032, we have delivered more than 14 per cent of that so far. The most recent figures, which are to the end of September last year, show that almost 16,000 affordable homes have been delivered towards the 110,000 target. Clearly, there is further to go. Because of the really challenging financial position on capital, not just this year but for the foreseeable future, we have had to turn our attention to innovative finance solutions.

The Minister for Housing will provide further detail on that, but he has been engaged with investors and the private sector, where there is clearly an appetite to invest, particularly in mid-market rent, for example. We need to lever in more of that to help us to deliver that target.

Thank you very much, convener.

I thank the committee for its work in the pre-budget scrutiny phase, and I look forward to working with it on the Budget (Scotland) (No 3) Bill.

The challenges that Scotland’s public finances face are well known to the committee. When we met on 3 October last year, I said:

“The budget will be a budget of difficult decisions.”—[Official Report, Finance and Public Administration Committee, 3 October 2023; c 1.]

The pressures on the 2024-25 Scottish budget cannot be overstated. In my view, they represent the greatest challenge to any Scottish Government since devolution.

We continue to manage a wide range of pressures due to volatility from global factors such as Ukrainian resettlement, the impact of inflation, the cost of living crisis and, of course, the on-going legacy of Covid-19. I say again that the United Kingdom Government’s autumn statement delivered the worst-case scenario for Scotland. It contained a fiscal settlement that undermines the viability of public services across the whole of the UK. Our block grant funding for the budget, which is derived from UK Government spending decisions, has fallen by 1.2 per cent in real terms since 2022-23, and our capital spending power is due to contract by 10 per cent in real terms over five years.

As I said in December, we cannot mitigate every cut that the UK Government makes, and we are at the upper limit of the mitigation that can be provided within our devolved settlement and competence. The UK Government has chosen to prioritise tax cuts at the expense of the national health service and other public services, but our values and, therefore, our choices are very different. Our missions and values of equality, opportunity and community were the guiding principles of the budget, which is a budget to protect people as best we can, to sustain public services, to support a growing and sustainable economy, and to address the climate and nature emergencies.

At the heart of the budget is our social contract with the people of Scotland, whereby those who earn more are asked to contribute a bit more, everyone can access universal services and entitlements, and those who need an extra helping hand will receive targeted additional support. We have chosen to do everything in our power to protect Scotland’s public services and deliver for the people of Scotland. That includes a £6.3 billion investment in social security and more than £19.5 billion for health and social care, alongside record funding for local authorities and front-line police and fire services.

I welcome the opportunity to meet the committee to discuss the 2024-25 Scottish budget in more detail and to assist with the scrutiny process.

First, the intention is for the council tax freeze to be a one-year intervention, so it is difficult to make comparisons with funding something that would have an on-going cost, such as increasing the Scottish child payment, which, of course, is increasing in line with inflation to £26.70. When we think back to where the Scottish child payment started, it is considerably higher than it was and it is estimated to have had a substantial impact, reducing child poverty levels by 5 percentage points. Our investment in the Scottish child payment is there for all to see.

Those on lower incomes pay a larger percentage of their income on council tax. You could argue that the benefit will be most keenly felt by those on lower-to-medium incomes, because they pay a higher proportion of their income on that tax. Of course, one of the reasons why the multiplier was mooted in the first place is the differential in the proportion of people’s income that those in the lower and the higher council tax bands are required to pay. I think that our measure probably has a larger impact on those on lower-to-medium incomes.

It is partly mitigation but, of course, our investment in social security has for a number of years gone beyond the block grant adjustment. That additional investment is beyond the consequentials that flow to social security, and I would argue that it is an additional investment in reducing poverty. You can see from the additional investment, whether it is in the Scottish child payment or the adult disability payment, the importance that we place on trying to support the most vulnerable people in our society.

So, it is a bit of both. It is partly mitigation. Some of the wider spend, whether it is on discretionary housing payments or the Scottish welfare fund, is clearly mitigation of UK Government welfare policies. Without that spend, people would not be able to sustain their tenancies or manage in the cost of living crisis. We have also decided to re-establish the independent living fund, which will support people to live independently in their homes. We hope that that will prevent people from losing their independence and support people who are in work and who have disabilities. It is a balance.