Seòmar agus comataidhean

In your update, you talked extensively about forecasting, including issues such as forecasting error. For example, we can consider unemployment and employment, on which the Scottish Fiscal Commission has proved itself to be more accurate than the OBR. You said that that is because your measure is based on real-time information and data, and we know that there are issues with the labour force survey. You said that you are developing a joint approach with the University of Strathclyde to create a new regional model for short-term forecasting. Can you talk more about that?

Under the second part of our public agenda item, we will take evidence from the Scottish Government on “The Scottish Government’s Fiscal Sustainability Delivery Plan 2025” and “Scotland’s Fiscal Outlook: The Scottish Government’s Medium-Term Financial Strategy 2025”. I welcome to the meeting Shona Robison, the Cabinet Secretary for Finance and Local Government. She is joined by Scottish Government officials Jennie Barugh, who is the director of exchequer strategy; Richard McCallum, who is the director of public spending; and Lorraine King, who is the deputy director of tax strategy, engagement and performance. I intend to allow up to two hours for this session. Before opening up the discussion, I invite Ms Robison to make a short opening statement.

Good morning, and welcome to the 23rd meeting in 2025 of the Finance and Public Administration Committee. Our first item is an evidence session with the Scottish Fiscal Commission on its June and August 2025 publications.

I welcome to the meeting Professor Graeme Roy, chair; Francis Breedon, commissioner; Professor David Ulph, commissioner; and Claire Murdoch, head of fiscal sustainability and public funding. I have to say that entire swathes of the Amazon had to be devastated to produce these documents for old lags like me, who have to rely on paper. I will probably drown in it from time to time.

You have an opening statement, so please fire away, Professor Roy.

There are certainly ways to control it, but the issue is more about whether those are politically palatable or indeed desirable. What are the implications likely to be for non-protected areas of the Scottish budget—that is, excluding health and social care?

One of the areas of concern to the committee has been what seems to be the exponential growth of the welfare budget, the majority of which—£151 million—concerns issues relating to the pension age winter heating payment. However, compared to your December 2023 forecast, the provisional outturns are £142 million—or about 2 per cent—less than predicted.

I note that most of the forecasts are correct to within 2 per cent or 3 per cent here or there. However, one area in which there is a significant difference is the child disability payment. The forecast was £450 million but it has come in at £514 million, which is a 14 per cent differential. The other area is the Scottish welfare fund, which has come in at £53 million as opposed to a forecast of £36 million, which is a 49 per cent differential. You explained the reasons for that in paragraphs 4.26 and 4.18 of the forecast evaluation report, but, just for the record, will you talk us through that?

I fully intended to thank David and Francis for their contributions over so many years. It is quite a sad moment for us, but at least you will have the joy of the cuckoo clocks that Professor Roy will present to you when you get back to the office. I wish you well in your continued endeavours in the future months and years, and we look forward to seeing the new commissioners in due course. Thank you very much for all your contributions over the years, including this morning.

I thank all our witnesses, including Claire Murdoch. We will now take a break until 5 past 11.

I appreciate that, but the document says that

“controlling the public sector paybill through managing pay growth and the devolved public sector workforce”

is important, along with “workforce planning”.

Over the past five years, the public sector workforce has increased annually by 1.6 per cent on average, but pay has never really been kept within the set parameters. How can you plan a workforce if you do not have the ability to bring in compulsory redundancies? For example, you might have people whose skills are no longer appropriate, but despite being on redeployment, they might ultimately not even be redeployed. It means that you cannot keep people whom you want to keep, because you have to cut the budget, and they end up getting voluntary redundancy when you do not really want them to. It seems to me that a lot of what is being set out in the plan is laudable, but there is no precedent from recent years of such aims being deliverable, and there is no evidence that they will be.

The public sector still contains more than 22 per cent of the workforce, compared to 17 per cent down south, and salaries are still cumulatively about £1.3 billion higher than the equivalent figure down south.

I will ask about just one more area. Page 4 of the fiscal sustainability delivery plan document says:

“The MTFS sets out a number of significant risks facing the public finances over the medium term, which need to be managed.”

One of the four risks listed is

“persistent inflation, impacting public spending in a number of ways, including on pay, which is exacerbated by a proportionately larger public sector workforce than the rest of the UK”.

Much of that is surely the responsibility of the Scottish Government, which has presided over the increase in that workforce, and comes from the fact that people working in the public sector in Scotland are paid better than their equivalents down south.

You have said that the growth in resources in real terms will be about 0.8 per cent rather than the 1.2 per cent for UK departments. That is a difference of 0.4 percentage points, which is very significant—about £200 million or £300 million a year. What are the long-term implications of that for the budget?