Seòmar agus comataidhean

Good morning and welcome to the 18th meeting in 2022 of the Finance and Public Administration Committee.

Agenda item 1 is evidence taking from the Scottish Fiscal Commission and then the Cabinet Secretary for Finance and the Economy on “Scotland’s Economic and Fiscal Forecasts—May 2022” and the Government’s resource spending review and medium-term financial strategy. For our first evidence-taking session, I welcome to the meeting Dame Susan Rice DBE, chair, Professor Francis Breedon, commissioner, Professor David Ulph, commissioner, and John Ireland, chief executive, Scottish Fiscal Commission.

Before we move to questions, I ask Dame Susan Rice to make some opening remarks. Good morning, Susan—over to you.

In that regard, the Government is caught in a wee bit of a squeeze, in that fiscal drag is not bringing in as much money as it might have anticipated, because pay is not keeping up. At the same time, the Government is faced with significant pay demands.

I have one final question, which I hope is on an optimistic note. Section 2.4 of the spending review document is titled “A Stronger, Fairer, Greener Economy”, and there are a lot of positives in there. Again, you talk about the national strategy for economic transformation

“stimulating entrepreneurship; building new markets; increasing productivity ... developing ... skills”

and “embedding entrepreneurship”. You also talk about an investor panel, an inward investment plan and an export growth plan, which are all very positive.

What kind of impact do you believe that the strategy will have by the end of the period up to 2026-27, which we have been discussing, in relation to increasing investment, jobs and job retention? Many businesses, when they get to a certain level, move outside Scotland. What impact will that new cultural change have on Scotland and our revenue base?

We continue our evidence taking on “Scotland’s Economic and Fiscal Forecasts—May 2022” and the Scottish Government’s resource spending review and medium-term financial strategy. I welcome to the meeting the Cabinet Secretary for Finance and the Economy, Kate Forbes MSP, who is accompanied by the following Scottish Government officials: Andrew Watson, director for budget and public spending; Gary Gillespie, chief economist; and Andrew Scott, director of tax and revenues.

I invite Ms Forbes to make a short opening statement. Good morning, Kate.

However, at a time of chronic labour shortages and skills shortages, surely trying to get more people into work is the ultimate cure for poverty, because people need a good wage. There is an issue about people who are on the cusp of these benefits—people who are working who earn just over the amount to claim certain benefits and therefore do not receive as many benefits. There is a real issue with regard to the relative tax burden that they face. What we are looking at, from the figure of £1.8 billion, is an extra £500 a year for every taxpayer in Scotland, if you were to even it out. Clearly, people who pay a higher tax rate will bear a higher share of that. That is an issue for some people: some people who are on fairly low pay and have to work long hours will wonder whether that is the right priority.

I completely agree with that. However, it is not about focusing public sector workers in Edinburgh—as you said—but about the distribution of capital receipts. My concern is that you are unable to sell buildings in some parts of the country while there is a higher demand in other areas and a higher price per square foot is received for them. Would the Scottish Government look to balance that?

The funding formulas that we have at the moment are quite rigid and I feel that some of the poorer local authorities might be left behind unless the Scottish Government looks at a way of redistributing, because they will not be able to generate capital receipts. Of course, if you do that, you will have the other problem in that some councils will say, “Well, there’s no incentive for us to sell this building if the money is gonnae go to another council.” There will therefore have to be a way to square that circle. I will leave that hanging. We need to move on, because there is a lot to cover.

The Government has significant climate change ambitions and we have requested further detailed information from the cabinet secretary in recent weeks. However, I still think that there is a frustration that we do not have all the information that we require. Page 22 of the report mentions the decarbonisation of more than 1 million homes and 50,000 non-domestic buildings by 2030. There is also reference to supporting our commitment to cut car kilometres by 20 per cent by 2030 and loads of other commitments. Even if the money is made available for that, one question is where the workforce will come from. I have asked that question directly of the First Minister as well.

If we look at the level 2 detail in relation to training and skills, we see that there seems to be a significant reduction in that area. I am sorry—funding for employability and training is, in fact, going to be stagnating for a year or two, and we then have an 80 per cent increase up to 2027. However, funding for enterprise, tourism and trade—which one would have thought would go hand in hand with that—will have a 9 per cent reduction over the four years, and that is before we even look at inflation. It therefore seems that, although you are trying to encourage enterprise and innovation, the budget is being slashed significantly and training is not really kicking in at this stage, despite those huge ambitions and a skills and labour shortage.

Right, but you can deliver only if you have, A, the money and, B, the personnel.

Yesterday, I had a meeting with representatives of Stakis Forestry LLP—it had funded a bridge that I opened in my constituency—and they said that one of the drawbacks, which makes them tear their hair out, is the sclerotic way in which the public sector deals with developments and planning applications and so on.

One example from my constituency is a road junction that was agreed to way back in 2020. For 18 months, I have chased Transport Scotland for a start date on site, or even the date that it will go out to tender, and all I get back is that Government processes and procedures are taking place—it has been 18 months. Transport Scotland does not even tell me what those processes and procedures are, even though I have asked and have raised the issue in the chamber. There is still no start date.

If people are going to invest in Scotland, they need to have a structure in place that not only welcomes investment but processes it. Years ago, I read an article by the former chief executive of West Lothian Council, who went from coffee boy up to chief executive. He was asked how he had turned things round—obviously, proximity to Edinburgh helped—and he said that the council turned all planning applications round within a month indicatively, whether it said yes or no, and then it went into further detail if necessary. That meant that people knew that West Lothian was a place where they could invest.

Clearly, there is a shortage of planners that has to be addressed, but surely, in this day and age, we must be able to approve projects much more expeditiously. I had a project in the zero-carbon area that involved 900 jobs, and the company considered moving to Teesside because the planning committee put back its deliberations for 11 weeks. I contacted the chief executive of the council and he brought the date forward so that that did not happen, but that happens all the time.

I know that this is a long-winded question, but I feel passionate about this issue, as do many people. What are we going to do about that?

From my reading of the situation, it appears that you have been very cautious in your spending proposals. I imagine that you hope to be able to add some resources to the figures that are outlined.

To start with the level 1 figures, in your statement to Parliament last week, you said:

“We have prioritised spending on health, social security, education and tackling climate change”.—[Official Report, 31 May 2022; c 11.]

However, if we look at the education and skills resource, we see that, during the first four years of the spending envelope, from this year onwards, there appears to be virtually no increase—there is just a 1 per cent increase in cash terms over the next three years. It is interesting that there is then—in 2026-27—a huge jump of about 17 per cent. There are a number of other areas in which we see significant changes in that last year. Why is that the case? If the decision is that education is to be prioritised, why has the funding for it been kept very tight over the next few years before there is suddenly a significant jump in 2026-27?

Yes, inflation and earnings.

That was because I am trying to allow other people a chance to come in. Therefore, I do not want to ask about too much.