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The feedback that we have had from that has been really positive. We obviously want to take any learning from that example and share it as best we can. Officials are looking at that work and at how we can share good practice with other authorities that, as you say, cover a mixture of the mainland and islands—Argyll and Bute Council and Highland Council, in particular. We are actively looking at that.

I say again that it is really difficult. The budget is an annual process, so we do not have that certainty until the budget is passed and we receive the annual allocation. What we have seen through the resource spending review and the capital spending review is the overall funding envelopes that we might hope to receive over the period, which give an indication as to what allocations we might look to have.

We have been through a couple of iterations of the islands programme. I hope that, with the changes that we are proposing for this year, we will get the balance right in how the scheme runs and we will see that continue, which will help to resolve some of the issues.

It probably is not too much of a simple answer. All members of the committee will be aware of the impact—which we all see, across our constituencies—that the cost crisis is having on our communities, particularly the rural and island communities that members represent. The impact that that has had on our budget is huge. As I said in my opening statement, how we then allocate between our different priorities is an increasingly difficult challenge as our budgets become more stretched.

Let us look at the overall figures and some of what we are dealing with here. We had an increase in overall funding of £1.7 billion from the Barnett funding, but, when we look at what that means in real terms, we are actually seeing a reduction of 4.8 per cent since 2021. That means that there is huge pressure not just on my budget and what I am able to do across the rural and islands portfolio, but right across the Scottish Government.

Looking particularly at my portfolio and what that equates to, since we left the European Union, we have seen the EU replacement funding fall by 1.7 per cent over this past year since the start of 2022-23. However, that has decreased by 12.7 per cent since 2021, so obviously we do not have the spending power that we would previously have had. All of that has an impact.

As I said in my opening statement, those are the priorities that I set out to the committee in October and what we continue to provide in relation to that cash injection of £650 million, which impacts our agriculture and marine. Maintaining those payments is absolutely vital in trying to provide some of that stability too.

Thank you very much, convener. When I appeared before the committee in October, I set out the priorities for the rural affairs and islands portfolio, and I am pleased to come back today to set out how the 2023-24 Scottish budget, presented by the Deputy First Minister to Parliament in December, supports those priorities.

The budget takes place in the most turbulent economic and financial context that most people can remember. It therefore demands a response from Government that supports the most vulnerable and, ultimately, helps to build a sustainable economy. That is why we have chosen a progressive path for this budget, investing in our people, our economy and our public services. The resource and capital spending reviews set out, as best we could at the time, the spending priorities of the Government and the high-level financial parameters for portfolio envelopes. However, a lot has changed in the months since those reviews were published. We have had two fiscal events from the United Kingdom Government, which have both had a direct impact on Scotland and its economy. The autumn statement in November fell short of the interventions that Scotland needs to guide us through this cost crisis. That means that we continue to feel the impacts of the most severe economic upheaval in our generation, and we will continue to do so for some time.

Despite that, our spending reviews, our programme for government, the emergency budget review and the 2023-24 budget all show that this Government is determined to act. We are focused on eradicating child poverty, creating sustainable public services and transforming our economy to net zero. We do not view those as three competing objectives; we view them as priorities that are linked. Although it is true that the Government has not been able to do everything that we would have wanted to do at the pace that we would have wanted, we have taken action to support those priorities.

In relation to the rural affairs and islands budget, the spend of the portfolio supports some of our most fragile communities, businesses and sectors at a time when they are feeling the effects of multiple shocks: Brexit, recovering from the pandemic and, of course, dealing with the significant challenges of the cost crisis.

As I did in 2022-23, I will prioritise the direct cash injection that my portfolio makes in rural and island areas and across the agriculture and marine sectors. Some £650 million will continue to be invested across those sectors, providing much-needed economic stability. Our commitment to supporting the ambitions for our islands has been strong, with £8.5 million allocated from the portfolio for the islands programme and the carbon neutral islands project.

We are living in a global climate and nature emergency, with climate change and a loss of biodiversity among the greatest threats faced by people and our planet, so we are dedicated to our critical work with the agriculture sector to co-develop and deliver on our vision for agriculture, which includes an investment of more than £44 million over 2023-24 to help Scotland become a global leader in sustainable and regenerative agriculture. We are also delivering a new round of agri-environment support, with more than £36 million of planned investment over the coming year.

The blue economy vision for Scotland sets out the long-term outcomes that we want to see for our marine environment, our people and our economy. That work, together with the £14 million increase in Marine Scotland’s budget, is representative of this Government’s commitment to net zero and to enhancing biodiversity through the expansion of offshore renewables, climate-related research and environmental protection.

We are, of course, living in extremely difficult times, and, as we look ahead, there are still many challenges to overcome. That makes the budget and allocating funding between priorities extremely and increasingly difficult, but I am confident that the balance that the Government has achieved is the right one, and I will continue working across the Scottish Government and with our partners across Scotland to deliver for our rural, coastal and island communities.

I am happy to take any questions that the committee might have.

We have seen some of the issues that you have raised particularly in our agriculture sector, where energy, fuel and feed costs have absolutely spiralled. Against the backdrop of the turbulence that we have experienced, we have tried to provide stability. I talked about the direct cash injection of £650 million that we have been making in agriculture and marine. In the current financial year, as the committee will be aware, we made direct payments at the earliest ever stage. We commenced those payments in September. I think, from the latest figures that I have had, that we have paid more than £411 million to more than 17,000 businesses, so more than 98 per cent of businesses have received that vital cash injection.

What I have set out in the budget shows that we are trying to maintain that stability. We are giving farmers the message about what they will receive, being clear about those figures and trying to maintain them and keep them as consistent as possible. Hopefully, that will help to provide some of that certainty and stability.

I would be happy to provide that to the committee.

Our focus is on the capital grant scheme, but, as you mentioned, not all businesses are the same, which is why our other funds are really important. Businesses vary across Scotland, so the support that we offer needs to be flexible in response to that.

That particular fund had to be targeted for the reasons that I have outlined. The other schemes that we have are really important in enabling transformation and allowing people to take part in that, as you have outlined.

AECS is an example of that. As I mentioned, we have £36 million for that for the coming financial year. Through those funds and through our work on the national test programme, we are encouraging people to take part in soil testing, as George Burgess outlined, and to undertake carbon audits. We are looking to incentivise people to undertake those practices as much as we possibly can and to fund that where we can. However, AECS is one scheme that we have to target where we think that it will have the biggest effect.

I will write to outline where the different supports lie and what each fund does.

That support falls not within the national test programme but within the agri-environment climate scheme that we support. We have £36 million for that in the budget for the coming financial year.

That is not the only work that we are doing on organics. We have funded a post in Scotland Food & Drink to look at organics, and I have been engaging with stakeholders to look at an action plan on organics, because we need to do more work in that space.

The support that is available at the moment is through the agri-environment climate scheme.

The ultimate ambition is to expand the programme. The carbon audits and soil testing were the first part of the programme. We have been looking at animal health and welfare measures that could be added to the programme, and, in coming years, we will be looking to include biodiversity audits. We have received strong feedback from ARIOB about introducing biodiversity audits, but they are not yet ready to be rolled out on a national scale. When we are ready to do so, we will look to include them as part of the programme.

As I said, the uptake has been disappointing, but it is the first year of the programme. When we were budgeting for the scheme, because it is demand led, we did not know how big the uptake would be. Obviously, we want to be better prepared. It is better for us to be in that situation rather than to be in the opposite situation, in which we overspend a fund and are then not able to fund all the claims that we receive as part of that.

All that said, I provided some of the figures in the letter to the committee. The forecast for the first part is £2 million; we expect a lot of claims to come through at the tail end. George Burgess might want to expand on some of the discussions that we have had about the feedback that we are hearing from agents.

The overall picture on carbon audits is that the uptake this year has been really positive. We also fund carbon audits through the Farm Advisory Service. Its budget for that was exhausted last summer because there had been such a high uptake. The fact that we have seen that increase in demand has been really positive, and I think that we will see more follow.

I will hand over to George, who will be able to provide some more information.

That is what I was coming to. We are getting a variety of feedback, based on some of what George Burgess touched on in his previous response. From what we hear, people are planning to undertake the work but have not done it yet and may do it in the coming year. It is to do with capacity as well—for some, carrying out that work has been an issue.

George, do you want to come in on the feedback that we are receiving?