Seòmar agus comataidhean

We cannot underestimate the scale of the challenge that has been presented to my portfolio and others across the Scottish Government. As a result of the United Kingdom Government’s spending review last December and the inflationary pressures that you have mentioned, we have seen a £1.7 billion shortfall. The review came when inflation was sitting at about 3 per cent—but just look at the rates that we are experiencing now.

The situation has been particularly challenging. In my portfolio, we are trying to give people as much stability and clarity as we can. We want to protect the work that is being delivered through the islands programme and ensure that we are continuing to deliver across the strategic objectives.

Looking at the Government’s overall objectives, we have to try to tackle poverty and help people through the cost of living crisis. The Deputy First Minister will be making more announcements on that as a result of the emergency budget review, but my priority in all of this has been to look out for the communities in our rural and island areas, and, when it comes to agriculture in particular, to do what we can to ensure cash flow, which we know has been of huge concern to the industry.

For example, there were calls to bring forward payments, and this year we brought them forward to their earliest-ever position and we have since made payments of nearly £330 million to more than 14,000 businesses. We have tried to do what we can within the parameters that we have to ease any existing cash flow worries and to deliver on the priorities for our rural and island communities.

Yes, that is built into the programme. I am sure that Erica Clarkson will correct me if I am wrong about the figures, but I believe that nearly £200,000 was set aside for contingencies in this year’s islands programme. I see that Erica is nodding, so I am glad to know that my figures are not off. We have built that in, and I recognise the difficulties you have alluded to.

I would like to be an optimist and say that maybe—hopefully—the figures will improve in the coming years, but, from the way things are heading, I do not think that that will be the case.

The allocations are indicative. They are the overall funding envelopes that we believe we might have, and our work is based on that. However, as committee members will be aware from the budget process that we went through last year, we go through the detail and allocate the budget to our proposals in the normal fashion in relation to the legislation.

You will have seen the impact in the figures that have been published and in the statement that the Deputy First Minister provided to Parliament. It has been incumbent on us all to identify the savings that are possible within our portfolios, so that we can help with the cost of living crisis across Government.

As I said in my response to Alasdair Allan, we know that one of the key issues for the agriculture sector is cash flow, and that is why we listened and did what we could to bring forward the payments to as early a date as possible. That cash should help provide some security to the industry, but of course those pressures have not gone away. After all, all input prices, right across the piece, have risen. We know that people are struggling, which is why we have done what we can within the powers that we have to ease some of those issues. Again, however, when it comes to the meaningful interventions that can be made, we need to see action at UK Government level, too.

What you say about the situation is absolutely right. Of course, that is a concern. We are in the process of implementing the recommendations of our food security and supply task force, and we are doing what we can in that regard.

As I highlighted earlier, not all the levers to affect that are in Scottish Government control. That is particularly the case with regard to fuel and energy. Therefore, first of all, we continually make representations to the UK Government to see what other interventions can be made. However, I realise that, for some businesses, the situation is particularly acute, and I agree that, if we are unable to offer appropriate support, the viability of some businesses will be threatened, which will threaten our overall food security.

We also have a number of other forums in place. With the UK Government, we have the seafood industry action group, which enables us to meet industry representatives to try to address some of the challenges that we face. Some of the challenges predate the situation that we are in, but they have only been exacerbated by everything that has happened. For example, we know that the workforce is a massive issue. We need to ensure that, across the piece, we are taking action where we can to help businesses.

I would not want anyone to think that the work that has been undertaken in relation to those projects has been wasted. I do not underestimate for a moment how much work goes into preparing and submitting such bids. There were various issues around that, which the committee heard about last week.

One of the key aspects of our work with the SFT has been ensuring that there is on-going dialogue to see how we can get bids that were not successful this time into a position whereby they could potentially be successful in future rounds of the programme. It is important that we continue that work and that dialogue.

I absolutely recognise the issue. Whenever I have been out and about on visits, I have not found one area, whether it relates to my portfolio, the wider economy or society, that is not struggling at the moment. The issue is felt particularly acutely in rural and island areas, given some of the challenges that we have talked about—particularly energy costs. The cost of living crisis is affecting everyone, but I think that it affects our rural communities more because of some of the factors that we have talked about.

We have tried to help as much as possible. I have talked about what we have done through agriculture payments to try to ensure that there is at least cash flow to aid businesses as much as possible. We have continued to develop and deliver other schemes, which will have a positive impact. Funding of more than £14 million is available through the marine fund Scotland this year. There is also the food processing, marketing and co-operation grant scheme, on which announcements will be made soon, I believe.

We know how critical such projects are. I hear all the time about what they have delivered in the past. It is important that we have been able to continue schemes, to ease the burden on businesses and communities as best we can with the resources that are available to us.

Some of that budget had been allocated to this year, and we are taking what we have learned from the islands bond consultation and engagement to see what progress we can make. We will be working through the process with regard to any future budget decisions—no doubt, the committee will be interrogating those decisions in more detail.

As far as the reduction is concerned, however, it is important to remember that our capital allocations have been significantly restrained; indeed, we received £175 million less than we had expected as a result of the United Kingdom Government’s spending review towards the tail end of last year. The capital allocations that we are getting are flat and they will fall over the course of the next few years. We have to prioritise as best we can within that context.

It is important not to forget that we have allocated resource funding to the islands programme and the islands plan, in particular. We have allocated an additional £10 million of resource to various projects, such as the appointment of six heritage and culture officers across the different areas and islands and the appointment of an innovation officer in the University of the Highlands and Islands. Those are just a couple of examples of how we are using that money. We are trying to use the funds that are available to us to deliver for our island communities.

I think that I alluded to that point in some of my responses to the initial questions. We cannot just consider my portfolio spend in isolation, because of the wider work that is happening across Government to help with the cost of living crisis. The budget for those interventions—whether those are through discretionary housing payments or what we are doing in relation to fuel poverty—will come from different portfolios. However, those interventions will still have an impact across rural Scotland and in our island communities and we are trying to deliver them as best we can.

There were a number of factors in that regard, some of which we discussed, I think, with the committee in my first appearance before you to talk about the budget. Around £20 million of funding was financial transactions and loans, and we had not been able to use financial transactions—I am sure that Sheetal Mehra will keep me right. If the Government is to offer loans, we need to do so on a commercial basis, and it simply was not possible to spend that funding. I cannot draw down allocations that I am not able to spend.

I have outlined the significant constraints that we face in relation to capital. I know that it was of great concern to the industry that the capital budget that was available for agriculture transformation was lower than it had been in previous years. There were all sorts of issues tied into that. For example, there were huge delays in getting equipment. There were huge backlogs. Those were not anyone’s fault—they were not the fault of industry or Government. We had to ensure that we used the resource that we had as best we could.