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There has been an impact from Covid. We should also recognise the fact that we have maintained 100 per cent rates relief for a full year. We are tracking the situation. One reason why our guarantee to local government is so important is the fluctuations in non-domestic rates. South of the border, there has been a dip in revenue from non-domestic rates, and local government has been exposed to that, whereas there has been a guarantee that local government in Scotland will receive the income that we have confirmed.

They are very helpful figures. For the past year, we have been in discussion with the chief economist about the long-term impacts of Covid. Probably as early as last summer, we were very much looking at a K-shaped recovery. In other words—I think that I spoke to the Finance and Constitution Committee about this—some businesses and sectors were doing comparatively well. New businesses were being created. The tech sector, for example, was obviously booming. However, other sectors were really struggling. That could have led to the SFC’s figures, which suggest that there will be less long-term scarring. Some sectors will probably be dealing with that scarring for longer than others. Although the national picture might be more optimistic, some sectors of our economy will probably need help for longer and will have longer-term scarring than others. There is a different picture when we break it down sectorally.

As you can imagine, I have been all over this—for want of a better phrase—to understand the financial implications and consequences. On housing, which you mentioned, we set out the budget for our original target of 100,000 homes in the capital spending review, and as a result of a number of different discussions—and in light of next week’s programme for government, which is a really important consideration—we will be considering that capital requirement. As for the core financial implications on the resource and capital sides, they will be settled in the budget-setting process. We have come to an agreement, and our responsibility now is to fund that part of the budget.

Secondly, I point out that it is a multiyear co-operation agreement, which leads us into the resource spending review. That review is where we had intended to cost and plan for multiyear commitments, and the co-operation agreement will now be factored into it. I am sure that you are all sighted on this, but, just to give you a little bit of history, we had hoped to carry out our multiyear spending review last autumn. However, we could not proceed with it, because the UK Government’s planned resource spending review did not go ahead last year. We are hoping—certainly the hints have been made and the intentions are there—that the UK Government will do its comprehensive spending review this autumn, and that will allow us to publish our own plans for our intended multiyear spending, which will include the co-operation agreement.

Thank you—that is a very good question. The SFC forecasts are cause for optimism. I do not think that we can downplay the difference between the January forecasts’ really tough outlook for the Scottish economy—which I had to base my budget on and which reflected the huge impact of the pandemic—and where we are now. They are but forecasts, which are based on various variables that the SFC would have gone into, such as vaccinations and lockdowns.

In terms of the fiscal impact, from a financial perspective, one of the biggest challenges right now is the fact that there has not been much additional consequential funding from the UK Government in the past few months. Right now, we are trying to remobilise the health service, the justice system and a host of different public services, as well as dealing with the on-going Covid impact, from a budget that has not been supplemented by additional consequentials from the UK Government in the way that it was last year.

At the moment, the pressures on the Scottish budget are such that we really need the structural support for businesses to be in place—furlough and self-employment income support. If we were to find ourselves going into another lockdown—at the moment, that is not what we are discussing; we are talking about trying to maximise the impact of the baseline measures—we have no certainty that furlough would be in place or that self-employment income support would be in place. I have no certainty that there would be any additional funding in place and I am not sitting on funds right now that I could deploy to support businesses. We would need additional help from the UK Government.

There is a bit of déjà vu here from last October, when furlough was due to come to an end and we repeatedly asked for it to be extended. It was extended at the last minute, but the Scottish Government’s resources are just not sufficient to help businesses to the level at which they need to be supported through furlough and self-employment income support. We would need to ask the UK Government for additional help, because funding would be required on a scale that we cannot provide in light of the need to balance and fix our budget. I cannot borrow for those emergencies that you are talking about.

I will take a short detour, as you talk about block grant adjustments. One of the areas of the fiscal framework that needs to be reviewed concerns income tax and the associated methodology. The SFC has detailed that in its own reports. We are conscious that the methodologies that apply to income tax for our tax base are probably not as helpful as they could be, in that we have a different tax base from the rest of the UK. For example, we need to maximise the number of people who are paying, and broaden the tax base at the upper end because of the way in which tax is calculated. There is currently a question around the methodologies that are applied to the tax base and the way that the block grant adjustment is calculated. However, I shall leave that to one side.

With regard to what else we could do, it is clear that we are more exposed to the impact of what happens with oil and gas. The committee will have seen that in the forecast that the SFC published last week.

When there is a reduction in demand for oil and gas, that has implications for individuals who are working in that area, and therefore we are more exposed to the income tax implications of that. My view is that we need to diversify, and that is why the point of the economic strategy is to focus on the opportunities that there are with alternative emerging technologies, renewables and the just transition. Different countries around the world are grappling to get the competitive advantage that new and emerging technologies offer. I want to ensure that it goes to Scotland—that the supply chains in Scotland are creating new jobs as a result of pioneering research and development. That is one area where I think that we can have a competitive advantage, if we get it right. None of this happens automatically, without us intentionally trying to ensure that we capture the opportunities here in Scotland.

On the capital point, we knowingly published our capital spending review last year before the UK Government published its spending review, which is due in the autumn. It would therefore have been the case anyway that we would have had to look at our capital spending review and our multiyear commitment to infrastructure in light of what the UK Government publishes, and that will still be the case.

Clearly, we have to factor in what capital we receive and what our commitments are, but our commitments still stand. We have not rolled back on our published commitments when it comes to capital investment, but they are subject to what capital is allocated to Scotland as part of the spending review. Do you want to come back on that point?

They are extremely important and my commitment to them going ahead is subject to a massive issue over which I do not have control. When we published our spending review last autumn, we said that we were publishing ahead of the UK Government’s spending review and basing those proposals on the best available evidence that we had at the time.

I really hope that the chancellor publishes his multiyear spending review in autumn—it still has to be multiyear, because we cannot lurch from year to year in our capital plans. What we did last year was in good faith and based on the best available evidence. When the chancellor publishes his capital review, I will look to ensure that what we are given can fund what we have committed to. We will need to ensure that there is money coming in for the amount to go out.

May I clarify that you are talking specifically about things like replacing EU funding and levelling up?

The new framework for tax supplements the Scottish approach to taxation, and forms our framework for how we make tax policy. It invites stakeholder views on how we can better design and deliver tax policy in Scotland. The devolution of income tax and other taxes is still relatively new, and tax stakeholders continue to tell me that engagement around and understanding of devolved taxes still need to be built and developed.

The framework is trying to put more flesh on the bones of our approach to taxation. It builds on what we have said before, but views and comments from stakeholders are also being invited on how we improve the design and delivery of tax. I hope that it might also raise broader awareness of those relatively new devolved and local tax powers.

I am fairly confident, in that the SFC is good at its job, but this is clearly a time of huge uncertainty. Earlier, Daniel Johnson asked about whether other issues—such as a further lockdown, for example—need to be factored in. There are a lot of uncertainties right now in relation to the performance of our economy, and that clearly has an impact on tax take. Two years ago, I could not have foreseen that we would be implementing a full year of non-domestic rates relief at 100 per cent. There is quite a lot of volatility right now.

The SFC and others are very good at their jobs, and they produce the best forecasts that they can. I cannot deviate from the SFC’s forecast—I must spend within it, whether I think it is right or wrong. However, from year to year, the forecast will be out. No forecast is perfectly and completely aligned with the outturn, so there will be some addition or reduction.

I am happy to bring in Dougie McLaren if he wants to come in, but that probably—I hope—answers your question. The forecast will never be exactly right, but I have confidence that the SFC knows what it is doing.