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I suggest that, in the UK and Scotland, most of the additional revenue comes from fiscal drag caused by high inflation rather than anything else.

Capital is a critical area. At First Minister’s question time last Thursday, I raised the issue that, according to the Auditor General, the UK Government is going to cut Scotland’s capital allocation by 7 per cent in real terms over the next four years. That is obviously a major issue. Our witnesses—for example, Scottish Financial Enterprise—talked about how critical it is to improve Scotland’s infrastructure not just on the ground, with bridges, harbours, roads and railways, but in the digital space. Last year, when your predecessor, John Swinney, looked again at the budget and the commitments that had to be made due to the need to meet wage increases, some money was actually taken out of capital. As all witnesses have suggested, capital is essential for economic growth. Given that public sector capital is likely to be scarcer in forthcoming years, will the Government commit to ensuring that capital is not switched to resource but is invested exactly as it should be? The Government went to the Treasury to get permission to do that, but I hope that it will continue to invest capital as it should be invested.

Thank you very much for that very helpful opening statement, and good morning to you.

We have taken a lot of evidence on the matter so far. Most of the questions that I will ask will reflect the responses that we have had.

You talked about the challenges that we face, the difficult decisions that are being made, and your discussions with the United Kingdom Treasury and Government. On the discussions in Scotland, as well as those wider discussions, the Fraser of Allander Institute said in its evidence:

“There will have to be discussions and decisions made about whether there will be increases in tax, reductions in spending or prioritisation across different programmes.” —[Official Report, Finance and Public Administration Committee, 19 September 2023, c 1.]

Where are we in those discussions?

That is big of you. Thanks.

The Federation of Small Businesses welcomed the £15 million that is going to be committed to help entrepreneurs. However, that is not even one tenth of 1 per cent of the Scottish budget. There is an issue of balance if we are going to retain and attract the people who will pay the taxes. What came over strongly from witnesses was that it is not necessarily about increasing taxes; it is about broadening the tax base. If more people earn more, they will, therefore, pay more. Will the Government look again at the balance in the public resources that are going in to boost those sectors where we will get a disproportionate return in the economy?

It is understandable that there will be a reprioritisation of capital spend. Where economic growth can come out of that and lead to increased tax revenues for public services, that will be important. Some of the witnesses have said that, although the Scottish Government has a growth strategy, it has not been as clear as it perhaps should have been. We need to show that clarity going forward.

There was an issue that came up significantly. You touched on the Government’s three priorities. The Scottish Fiscal Commission has said that, by 2027-28, Scottish social security benefits will cost about £1.4 billion more than the Scottish Government receives in positive block grant adjustments. The difficulty is that that money has largely had to be diverted from core public services such as health, education and local government when you have a more or less fixed budget. Paradoxically, the poorest people in our society are impacted the most, because they are mostly the ones who rely on those services. Those who depend on those services are those who are being impacted. Do you accept that?

I thought that the Scottish child payment had lifted 90,000 children out of poverty. It has certainly had a very positive impact.

The Scottish Government is in a more difficult position than the UK Government, because the UK Government deals with demand-led programmes such as social security through annually managed expenditure, whereas the Scottish Government has to fit it within a more or less set budget.

To finish off my questions before I open it out to colleagues around the table, because transparency came up a wee bit, I am going to ask about that very briefly. First, will the Scottish Government do more to highlight what it is spending in the budget on mitigating those parts of the UK’s reserved areas that the Scottish Government is paying for? The bedroom tax is the obvious example of that.

Secondly, when the representative of the Fraser of Allander Institute gave evidence, he said:

“We have reinforced that we think that it will be important to have more information about in-year execution and about comparing plans with actual outturns, because we might be missing some important information on, say, how much of the allocation of capital is being spent in-year. It might be that the 10 per cent cut in the in-year allocation is a different percentage in actual execution.” —[Official Report, Finance and Public Administration Committee, 19 September 2023; c 31.]

We all go into the debates in January for the usual budget knockabout, but it is important that we are all speaking the same language, at least on figures, so that the Scottish Government is not talking about apples while the Opposition is talking about oranges. This is about trying to ensure that the information that we detail on last year’s, this year’s and next year’s expenditure is measured in the same way and the figures can be compared with each other, so that we are all talking the same numbers.

The Scottish Fiscal Commission’s sustainability report was about where we would be by 2072 if things did not change, rather than what the allocations might be.

Jamie Halcro Johnston made a point about population displacement, and I think that you touched on it as well, cabinet secretary. It is a real issue. Arran, in my constituency, has the demographic profile that the SFC predicts for the whole of Scotland by 2072. It is important that we do not look at Scotland as one unit; we need to look at island and rural Scotland differently. It would be helpful if rural funding allocations for housing were spent and, indeed, if deliberations over them did not take three years to progress, as they have done in my constituency.

I have one further question. John Mason and one or two others touched on the issue of decluttering. We have Westminster, Holyrood, local government, health boards, integration joint boards, community planning partnerships, three enterprise agencies, region and city deals, 150 non-departmental public bodies and an increasing number of commissioners. A national care service board is also going to be established. You mentioned a presumption against new public bodies, but, surely, the Scottish Government has to be much more ambitious about decluttering the public sector. You talked about overlap, but there must be overlap, duplication and confusion. I do not think that there is anyone in Scotland—I would be surprised if there was anyone—who knows how all of those fit together and work. I suggest that the Scottish Government address that. Will the Scottish Government give greater priority to that?

Good morning, and welcome to the 25th meeting in 2023 of the Finance and Public Administration Committee.

There is one item in public on the agenda, which is an evidence session with the Deputy First Minister and Cabinet Secretary for Finance on the sustainability of Scotland’s finances, as part of our pre-budget scrutiny. The session will also cover evidence that we heard earlier in the year on public service reform.

Ms Robison is joined by Scottish Government officials. Dr Alison Cumming is director of budget and public spending; Dr Andrew Scott is director of tax and revenues; and Ian Storrie is head of local government finance. I welcome all of you to the meeting, and I invite the cabinet secretary to make a short opening statement.

Thank you. I thank the Deputy First Minister for her responses. It has been a real shift—almost two and a half hours. I congratulate you on your stamina. Unfortunately, despite the myriad questions, we did not touch on non-domestic rates, we did not really get into AI or data, and we did not really talk about public procurement or, indeed, council tax reform. I hope that you and your officials will look at the evidence that has been submitted by witnesses and deliberate on it as we move forward. I thank you once again for your answers, which are greatly appreciated by the committee.

That concludes the public part of the meeting. We will consider a report on the sustainability of Scotland’s finances and public service reform in private at our meeting on 31 October. We will now move into private session to consider our work programme. We will have a two-minute break to allow the Deputy First Minister, her officials and the official report to leave.