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Your question highlights the point that some things can be actioned in budgets from year to year; you asked about council tax. A fuller conversation about the right mix of powers and flexibilities is—I think, rightly—for the fiscal framework discussions, in collaboration with the Convention of Scottish Local Authorities. The discussions have, largely because of Covid, perhaps not moved at the speed at which I think either party would have liked them to move. I am committed to getting them back on track.

Our position on council tax, specifically, will be set out in the upcoming budget. I assure you that that budget will be set only after extensive consultation with COSLA’s finance spokesperson, Gail Macgregor.

That is an important context-setting question because, as I said the last time I appeared before the committee, next year’s budget feels like one of the most challenging in devolution. I think that every finance secretary has said that since the beginning of devolution, but next year’s budget is particularly challenging for three reasons.

First, the costs of mitigating Covid continue, as do the associated volatility and uncertainty. Therefore, we need to manage those when it comes to self-isolation payments or the national health service. Secondly, we are trying to remobilise all our public services. Remobilising the health service, social care and the justice system requires financial support, as does economic recovery.

Over and above that, the final challenge is the funding settlement that we are receiving. Although they were significantly less, there were still Covid consequentials this year. I think it highly unlikely that we will see such additional funding from the United Kingdom Government to deal with the additional pressures next year. Indeed, the UK Government is already pulling back significantly, with the removal of the £20-a-week uplift to universal credit and the end of the furlough scheme.

All in all, the cost and the need will continue but the funding that is available to us will significantly decrease.

You asked what the Scottish Government’s priorities are. Our priorities are set out in the programme for government. They are simply to continue to support families in need who are dealing with the consequences of Covid and some of the inequalities that it has exacerbated, to remobilise our public services and to drive economic recovery. Those are our three main priorities.

You talked about the Scottish child payment. The First Minister said in the programme for government that we would double the payment to £20 as soon as possible. We will outline plans in the budget for how we will do that.

I am sorry; I did not catch that.

If I were to summarise what you are saying, it is that our budget choices need to be aligned to the national performance framework. Sometimes, that will require difficult decisions as to where we put the money. For example, in the big debate about preventative spend, putting more investment upstream to change the outcomes is important. There is an opportunity to do that in a significant way with the resource spending review, because that will be multiyear. Most of the outcomes that we are talking about will not be delivered in the space of a year. For example, changing health and social care outcomes is a multiyear initiative and the resource spending review will allow us to look at how the compounding effect of multiple years delivers that change.

The challenge that I would put to you in return—I cannot recall whether I have spoken about this previously in this committee, or whether it was in the Local Government, Housing and Planning Committee—is that the nature of our debate in Parliament needs to reflect the magnitude of the choices. If we are to spend more money on active travel, it has to come from somewhere. If we want to recycle money from acute healthcare to spend on active travel—I am just using that as an example—we must have a mature debate. It is in that fashion that the Opposition must scrutinise, and the Government must present, where that penny is best spent.

We all know that funding supplies are not unlimited. If we think that it is important to invest in prevention rather than cure, that will require money to be shifted. Every time I stand up to present a budget that displays any reductions at all, those are immediately latched on to and criticised, so we need a mature debate. The Government certainly needs to be pushed by the Opposition to contend with those issues, and the Opposition needs to reflect that, too.

It is a difficult problem to solve, because we cannot force people into particular occupations, but we can make those jobs more attractive, and there was a real focus on that in the tourism recovery task force’s work. Previously, I referenced some of the short term urgent work that we were happy to do with the tourism industry, which was specifically to help recruit to those roles, by presenting tourism as an attractive industry to work in. A lot of the tourism recovery task force’s work looked at how to make it a more attractive career option. Rather than assuming that it is just a filler job until people get something else, we need to think about how we make it more attractive. The tourism recovery task force—which, again, is predominantly industry based—had a number of suggestions on how to do that, and we have provided initial support, particularly around skills and training. I know that I am talking about skills and training, but that is also part of the attractive package within the tourism industry because we hope that, if people feel like they are being invested in, they will have a greater sense of loyalty and responsibility to the job. Terms and conditions and pay go alongside that, so trying to ensure that the living wage is being paid is one small example. It is a huge area and, where we can provide support, we will do so, whether that is financial support or working with the industry to implement its recommendations. However, that work is very much industry led and that is important.

At the very least, but basing limits on affordability rather than arbitrary caps would be my default position.

As you can imagine, over the past few years in particular, local government has looked extensively at ways of generating income. For the most part, local authorities have developed their own schemes. We saw that impact acutely during Covid, when some local authorities were more exposed to income reduction than others. You will recall that I put in place funding to cover the fact that some local authorities were no longer generating income during Covid.

On additional taxation powers, prior to the pandemic, we were in discussion with local government about a number of different local taxes, including the tourism levy, on which members, the Parliament and people beyond the Parliament have different views. We were considering the most comprehensive devolution of additional tax-raising powers to local authorities since the advent of devolution. Covid has put a temporary stop to some of that.

However, I am sympathetic to allowing additional fiscal flexibilities for local government. If we call for fiscal flexibilities for the Scottish Government, it is only right that those be passed on to local authorities. We have managed to secure some temporary additional fiscal flexibilities for local government; in fact, we have been more successful in securing temporary fiscal flexibilities for local government during the pandemic with the support of the Treasury than we have been for ourselves. I am very happy to continue to explore with local government what additional powers it needs, but I stress that different authorities have different balances of income from different taxes, other fees, charges or income, or from the Scottish Government. That is how it should be. Local authorities should be able to tailor their income generation approach to local circumstances.

I do not know whether it is just my connection. I am struggling to hear committee members.

I should say at the outset that we of course track Scotland’s economic performance very closely, not only because of its implications for our revenue position but because it is important that we track our performance in relation to that of the rest of the UK, given the operation of the fiscal framework.

Although Scotland’s gross domestic product is still below pre-pandemic levels, it is gradually recovering and it is continuing to broadly track that of the UK as a whole. As you said, convener, the pace of recovery is different across not just geographies but sectors, and it is clear that some sectors are more exposed to the bottlenecks in supply chain and recruitment. Food and drink, for example, which is a particularly important Scottish industry, is facing severe challenges as a result of rising prices and labour market shortages.

The Scottish Government stands ready to do whatever we need to do and can do. That includes close engagement with the UK Government. Richard Lochhead is leading on the labour market shortages and is working hand in glove with industry to intervene where we can. One of the most obvious interventions that we can make is in the skills system.

However, I strongly emphasise that I do not believe that the shortages and challenges that we are talking about can in any way be resolved through the Scottish Government’s budget alone. We have a role to play, and we play it and take our responsibilities seriously, but it is well documented that the acute labour shortages that we face right now are largely to do with immigration policy, over which we have no control.

We can intervene. Some of those interventions might look small, but we are doing what we can, for example by funding a marketing campaign to try to recruit more people to the hospitality industry. I am sure that industry will say that that is small fry compared to what it really needs, which is the ability to access visas and bring in far more people to work in the sectors that we are talking about.

The same goes for supply chains. We engage closely with our UK Government counterparts—I have regular meetings—not least on the challenges to do with gas prices and the CO₂ shortage, which has been temporarily fixed but not resolved for the long term. Those are acute issues.

I guess that what I am trying to say is that, where we can intervene, we absolutely will do, but I do not think that anyone is suggesting that the Scottish Government can resolve the issues. Certainly, from a budget perspective, financial support will go only so far: the issues are much bigger.

Again, that is an important question. Last year, we had a guarantee. Where money was announced, it was guaranteed to come. However, prior to the pandemic, the way in which the UK Government funded the Scottish Government was by making announcements and confirming the funding at key points in the financial year.

On our funding position, we have allocated £980 million of the £1 billion of Covid consequentials in the budget revision, which I imagine the committee will take evidence on over the next month. The Minister for Public Finance, Planning and Community Wealth will lead on that. On top of that, we have drawn down £168 million of balances from the Scotland reserve to support the health service and farming in particular. The balance that is left for formal allocation following the budget revision, which the committee will take evidence on, is £328 million, of which £250 million relates to capital and financial transactions that are being deployed across a range of pressures for capital budgets, such as in health, transport, energy and education.

Obviously, there is a difference between funding that is allocated formally through the budget revision and our on-going internal budget management in the Scottish Government. Every single penny has been earmarked or allocated, and the money is supporting our in-year budget position. Where we have not formally allocated funding, we will do so once we have had reassurances from the UK Government at the supplementary estimate.

In short, I cannot confidently allocate every penny without the Barnett guarantee until that funding has been formally guaranteed for me by the UK Government. We expect the Treasury to provide an update on additional funding for 2021-22 alongside the spending review in late October. Formal confirmation from the UK Government often happens in the days after the spending review. We will be in discussion with it to get that formal confirmation of our spending so that we can ensure that the Parliament, through the budget revision, has a formal allocation of every penny.