Environment, Climate Change and Land Reform Committee

Meeting date: Monday, February 15, 2021

Official Report 630KB pdf

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Budget 2021-22

The next item is an evidence session on the Scottish Government’s budget 2021-22. We welcome back the Cabinet Secretary for Environment, Climate Change and Land Reform, Roseanna Cunningham, who is joined by the Cabinet Secretary for Finance, Kate Forbes. Also present are some officials from the Scottish Government: Helena Gray, deputy director, climate change, domestic division; Simon Fuller, deputy director, rural and environment science and analytical services; Mike Palmer, deputy director, marine planning and policy; Dougie McLaren, deputy director, public spending; and Kat White, joint head of infrastructure strategy.

I would like to address the first question to Kate Forbes. Obviously, the budget is responding to the demands of Covid-19, but it must also be directed at funding for a green, just and resilient recovery. Could you talk about the high-level budget decisions that have been made in order to address those twin challenges?

Good morning from Dingwall. As you have just said, the budget is trying to do a number of things. One of the dangers when you are trying to do a number of things—in this case, responding to the immediate crisis while also setting the groundwork for recovery—is that you might lose sight of your objectives. Running through this budget are three clear objectives to try to ensure that we do not lose sight of what we are trying to achieve. Those are responding to the health pandemic, tackling inequalities and—importantly for this committee—rebuilding the economy. I see this moment in time as a crossroads and an opportunity for Scotland to transition to a green recovery.

We have options before us. The option that we have chosen is to try to accelerate the transition and the shift. You can see that in a number of areas. For example, we have intentionally chosen to inject confidence into our economy by investing substantially in infrastructure. However, the type of infrastructure that we have chosen is focused on that transition and on low-carbon solutions. For example, you can see in the budget an increase in low-carbon capital investment to more than £1.9 billion. Low-carbon investment now comprises 36 per cent of overall capital spend. You can also see the first £165 million of our low-carbon fund, an increase of £30 million in heat in buildings investment, an increase of £26.9 million in forestry investment and so on.

That is the first point. The second point relates to job creation and retention. If we are going to see that transition, we need to do all that we can to save and create jobs, so we need to ensure that there is a pipeline of skills. In the budget, we have chosen to ensure that all of our employability, upskilling and reskilling programmes are aligned with the future direction of our economy.

On employability, you will see, for example, the green jobs fund to develop, grow and create good green jobs; and there is £25 million for bus priority infrastructure and £15 million for zero emissions buses—that is all part of our low-carbon fund. Alongside and within that is the approach to ensuring that we have the pipeline of talent and skills that we need when it comes to that investment.

That is just two short answers in a long answer around what our objectives are, how we ensure that the recovery takes advantage of the opportunities to transition, and how we ensure that there is money for reskilling as well as for infrastructure itself.

As you mentioned, the green recovery and the climate change ambitions touch on a lot of areas of Government in terms of policy decisions, but they will have to attract the budget spending that goes along with that.

That is right. When it comes to building the budget, Roseanna Cunningham is probably one of the few alongside me who has a portfolio that touches on everybody else’s portfolio. I have overall oversight of the budget to ensure that everything that we are doing contributes towards the three objectives that I just outlined. Roseanna Cunningham’s job is to ensure that, right across Government, we are investing to meet our challenging climate change ambitions.

I am clear that public money alone will not meet our climate change ambitions; private investment has to be leveraged in as well. We need to look at the budget alongside other policy areas. Taking the Scottish National Investment Bank as an example, there is public money there, but there is a view to leveraging in private investment as well. Some of our other more substantial investments are done alongside community groups, voluntary groups and the third sector, as well as the private sector.

I want to bring in Roseanna Cunningham, because one of the areas where Scotland has benefited from EU funding is that of environment and climate change. I know that, for example, the EU has a big fund for the just transition that we will no longer be able to apply for because we are no longer an EU member. How much has not being in the EU impacted on the budget for environment and climate change?

It is already impacting on some of the thinking and decisions. The current uncertainty about what might replace EU funding is impacting on what we have to think about doing, so it is a real concern. On the impacts on my portfolio, the existing European regional development fund programmes, such as the circular economy programme and the green infrastructure investment fund, will continue to conclusion in 2022-23, but we do not know yet what the UK Government is committing to replacing the ERDF with. That is a headache for our decision making and for Kate Forbes’ forward budget planning, because the degree of uncertainty is significant.

We discussed in the earlier evidence session the United Kingdom Internal Market Act 2020, which includes provisions that presume Whitehall control over the delivery of replacements for EU programme funding that has been delivered successfully in Scotland by Scottish ministers of different Administration colours for decades. If EU programme funding replacements are not delivered in line with Scottish priorities, there will be the problem of policy not matching funding. That would be a big issue in and of itself, even if we leave aside the principal issue of what that might mean. We are having to make decisions while there are huge uncertainties.

In the earlier session, the committee discussed issues for which longer-term decision making is vital, but some of those decisions are impacted by the uncertainties about how we will be able to provide funding. If the UK Government, which might have different priorities, chooses to be in control of the funding, can we rely on it to consider our priorities in any way? That is a big issue. We are doing the best that we can with our current powers to mitigate the worst impacts of EU exit, but we have been absolutely blunt with everybody that we will not be able to mitigate them all completely. That is just an unfortunate truth.

I can flag up the specific example of marine policy. As a result of EU exit, 86 new powers relating to marine policy and about 500 obligations that were previously undertaken by the European Commission or member states have been transferred to the Scottish ministers. That is the other side of the coin. The new statutory and non-statutory obligations could not be met from within the existing baseline without that impacting on the delivery of Marine Scotland’s existing statutory responsibilities. It has been essential to allocate adequate additional resources in order to ensure delivery of that business-critical work. That is an example of what has already happened having a direct impact on my portfolio’s existing budget.

The impacts are profound and the impact of the Internal Market Act 2020 could be profound. At the moment, we are dealing with an unprecedented degree of uncertainty in the area, which is quite separate from the impact of uncertainty about budgets in relation to the pandemic. We have two huge areas of concern.

Kate Forbes is right to point out that my portfolio touches on just about every other portfolio. I certainly do not envy her her job, and I doubt that she envies me mine.

Finlay Carson has questions on the draft climate change plan update.

The committee is scrutinising the draft climate change plan update, as we have heard. Through that process, we have repeatedly called on the Scottish Government to align its budget with our climate change ambitions. The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 does not require the costs and benefits to be tied up. How can the Scottish Government demonstrate that the budget aligns with the climate change plan update, so that we can see whether there is the chance that it will deliver our climate change targets for 2030?

[Inaudible.]—questions that we face. In my opening remarks, I said that we have to be clear about our objectives when designing the budget. I am under no illusions about how challenging our climate change plan is. Therefore, we need to design the budget so that it goes hand in glove with the climate change plan, or else it will not be credible. We have to use every penny at our disposal to meet the targets in the plan along with our other objectives—not least, responding to the pandemic.

The issue of green recovery, including the proposals in last year’s programme for government and those in the climate change plan, is right at the heart of this year’s budget. It definitely builds on previous commitments, which is a theme that can be seen running through it. It also lays the foundations for rebuilding, including through the implementation of the climate change plan update.

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I will give specific examples. There are initial allocations for the low-carbon fund, which I mentioned in my opening remarks. There are also complementary investments such as those on active travel, peatlands, biodiversity and skills, all of which we have discussed at length at previous meetings of the committee. On the example of peatlands, last year we announced a landmark £250 million 10-year commitment to supporting restoration, including large-scale multiyear restoration programmes. In this year’s budget you will see that £22 million is included as part of that £250 million target. You will also see a substantial increase in forestry investment. All that aligns with our broader support for business and trying to revitalise the economy, which I have already mentioned. We also see that approach through measures such as our increased funding for enterprise agencies and the development of the green jobs fund. However, alongside that, the budget has been designed hand in glove with our climate change plan.

The timescales for this year’s budget have been really uncertain and challenging. Ordinarily, it would have been delivered in December. Roseanna Cunningham and I meet regularly, as we also did in advance of both the climate change plan update and the budget to ensure that we and our teams of officials were joined up. Unfortunately the timetable meant that the budget went later than expected, otherwise it might have been published on the same day. We therefore try to build our approaches hand in glove, but if there is more that we can do to draw out the way in which that is done or the way in which the budget aligns with the climate change plan, I am up for that.

As I have already said, we cannot meet our climate change ambitions through public money alone. It is increasingly clear that the policies that we have designed will need to draw in additional private investment on top of the public money that is in the budget. That will mean using innovative financing mechanisms, considering regulation and signalling clear pathways for the transition. I have quite regular meetings with businesses and investors about how we can ensure that, as a regulatory environment, Scotland can attract such private investment to ensure that private money is working with public money to meet our ambitions.

You have said that you are talking to businesses, however that does not appear to be working in practice. In its written evidence to the Economy, Energy and Fair Work Committee on the CCPU, Scottish Carbon Capture & Storage expressed significant concerns that the infrastructure plan might not be fit for purpose and did not consider industrial decarbonisation. It said:

“Consequently, the plan does not adequately consider infrastructure needs relating to CCS and hydrogen, and risks hampering their deployment.”

How will the Scottish Government ensure that NETs will remove nearly 25 per cent of gross emissions from Scotland’s 2032 total without a plan that includes infrastructure to enable us to do so?

I will answer that, but Roseanna Cunningham can come in at any point. The CCPU committed us to setting up a bioenergy expert working group this year. It will advise on the most appropriate and sustainable use of resources, the volume of resources that we can produce in Scotland and the level of importation that we believe is compatible with a sustainable global trade in bioenergy.

The CCPU laid out a plan to respond to the risk by 2023, however it also includes clear actions to continually review our progress on developing NETs. The principle there is that engagement has not stopped—it needs to continue. There will be lots of challenges in the months and years ahead, and none of us is dismissing how challenging the situation is. However, to face those alongside industry and to work regularly with it will be important, as will reviewing our progress. It is easy to set targets, tick a box and say, “Here is money to do X, Y or Z”; it is far more challenging to review progress every step of the way and to work collaboratively with industry and others.

Roseanna Cunningham might have more to say on NETs but, from my perspective, the way that we do that is, yes, to put the money in place but, more importantly, to make sure that we work collaboratively with industry and review the progress, so that we can come in front of the committee with those reviews, and you can challenge me on whether we are meeting the targets every step of the way.

I have to go back to Finlay Carson’s challenge around industrial decarbonisation, which he specifically referenced. It is really important to remember that that is not wholly in the Scottish Government’s gift. It is part and parcel of one of the issues that we grapple with in the split between devolved and reserved powers. Quite separately, I am in regular discussions with the four nations net zero group which, among other things, wants to press for industrial decarbonisation. The discussions that took place about the setting up of the UK emissions trading system, to replace the EU ETS—which the committee knows was a final decision that was taken almost at the 11th hour—also included significant conversations about industrial decarbonisation because, in some respects, the decision around industrial decarbonisation will have to be taken at a UK level. We have those conversations on a regular basis but, unless those UK decisions are made, Scotland will always be left with trying to implement solutions in the absence of that wholesale decarbonisation. That is just one of the realities of where we currently are. Is there a valid criticism to be made about the lack of wholesale decarbonisation? Of course there is, but the Scottish Government cannot step in and provide complete answers to those issues.

I take on board that the UK Government might make decisions that influence the outcomes but what will the funds that you propose deliver? Do you think that they are adequate to put the decarbonisation infrastructure in place? Looking just at the bit that you are responsible for, will the funds deliver?

With the greatest of respect, until we know what the UK Government is going to commit to, it is very difficult to know what will be necessary for us. There are dangers in us making decisions that put money into places where the UK Government does not make decisions and not putting money into places where the UK Government does. What we are doing has to work across the UK and Scottish Government, which is why I wanted to flag up those on-going conversations and the fact that we are mindful of the real gain to be had there, as well as the danger of missteps if we do not do it properly. I can point to things and say what we think would be a helpful intervention but, without clear commitment from elsewhere as well, we will not know whether the decisions we have made about where to put money will, in the long term, turn out to have been the right decisions.

For example, if the UK Government decides to decarbonise the gas grid, that would make a significant difference to some of the choices that we might have to make. If we have to make decisions without knowing what that final outcome is going to be, we might put money into places and thereby design workarounds for something that would be more simply be delivered on that UK-wide level.

I do not want that to be seen always as a criticism. It is one of the difficulties that arise when there is a mismatch in conversations and timing and, in some cases, the eye is not as much on the ball as it might have been. However, those conversations are being had for precisely the reason that Finlay Carson raises.

I presume that your ambitions and the amount of money that you are investing here are based on positive discussions and positive interaction with the UK Government. That is what you have based your assumptions on.

No. We are basing our assumptions on our best estimate of what we can do and achieve within the powers that are available to us. There is a great deal more that can be unlocked that will deliver the wholesale decarbonisation that we all want. However, that requires decisions to be made at the UK Government level—for as long as they are made at that level. That is threaded through the CCPU, as we have flagged up. The CCC recognises that, too. It has challenged us to use our powers to the maximum to achieve what we can achieve, but it recognises that there is a requirement on another Government to use its powers to the maximum, too.

I will ask some questions about nature-based solutions for recovery and tackling the ecological crisis. My colleague Mark Ruskell will come in on some of these points, too.

I direct my two questions to Roseanna Cunningham, but if Kate Forbes feels that it is appropriate to come in, I am sure that she will do so.

To what extent does the infrastructure investment plan reflect recommendations to incorporate natural infrastructure? Many of us were very pleased that green and blue infrastructure was recognised in the plan. What opportunities are there to deliver nature-based solutions through financial commitments in the areas that you are working on?

I preface my response by pointing out that delivery is not done through my portfolio, so, as always, I have to tread carefully.

The Infrastructure Commission recognised the role of infrastructure beyond the economy, with its support for social and environmental policy outcomes. The discussions go back quite a long way when it comes to how things are classified, and there are lots of technical issues. We took the commission’s views on board, and we consulted on the draft infrastructure plan to get the right final approach. The inclusion of natural infrastructure got almost universal support. We confirmed our new definition in the plan that was published last Thursday.

We believe—not for the first time—that Scotland is something of a world leader here. We think that we now have one of the widest definitions of infrastructure in use internationally. That means that we can take a more holistic view of our infrastructure assets—and people will know about all the benefits that that might have. Many of the programmes in areas such as flood management, water, waste water, regeneration and housing already integrate nature-based solutions into their delivery .

The budget also supports investment in green networks, in partnership with the green infrastructure strategic intervention fund, for example, which is managed by NatureScot. I also would not want to miss out the new £50 million vacant and derelict land fund.

Those investments might not have been included under an older, narrower definition, but they are included now. The committee should note that the communities portfolio wants to take over the vacant and derelict land fund, even though it has come out of my portfolio. There is a bit of vying for interest in it, which is a very good thing, as it shows the cross-portfolio importance of many such decisions.

The answer to Claudia Beamish’s question is that, to a very great extent, the infrastructure investment plan delivers a lot of opportunities. It will also attract significant interest internationally—as did our financial commitment to nature-based solutions at the beginning of last year.

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Was the possibility of front-loading investments in nature-based solutions explored as part of the budget? You have highlighted one or two examples, but other examples include broader, landscape-scale ecological programmes and the use of multi-annual contracts for peatland restoration. Were those issues explored?

They were. Kate Forbes spoke about the frequent meetings that she and I have. I reassure members that those issues were the subject of many of our conversations. Peatland restoration is an obvious example. There has been a massive financial uplift in the budget for that this year, as there will be in the years to come.

We just have to make sure, particularly in that area, that we match short-term investment to industry capacity. We do not want to outrun capacity. We hope that, at the same time as it delivers for peatland restoration, the investment will deliver capacity growth, which is important.

We are very much encouraging multi-annual landscape-scale proposals in order for the measures to be game changing.

If front-loading investment can be done effectively, that is a good thing. However, we have to be careful that we do not simply overburden a particular sector or industry with something that is unachievable in the very short term if they need a longer time to build capacity.

I want to ask about the agri-environment climate scheme—AECS—which is central to what we are trying to do to tackle the nature and climate emergencies. In this year’s budget, that scheme appears to be cut by 20 per cent. I understand that about 1,300 agreements with farmers and crofters are coming to an end this year. The last thing that we want is for farmers to come out of organic conversion and to be unable to continue with habitat restoration as a result of that cut. Why was that decision made? Was there any assessment of the impact on biodiversity and the climate of cutting the budget?

I understand that AECS is not directly part of either of your portfolios, so I am asking why Government has made that decision.

It kind of is part of my portfolio. I suppose that you could put that question to Fergus Ewing and me jointly and severally. There were an enormous number of meetings and discussions about what to do with AECS in the current circumstances, and there are huge issues surrounding the decision making.

We have a situation in which farmers, crofters and land managers are getting support to cut emissions, address climate change and do all those things. About a third of that support is from common agricultural policy schemes, including greening, AECS, the beef efficiency scheme and the forestry grant scheme.

As things stand, Scotland is losing out on £170.1 million of funding through to 2025 that should rightly be spent on our producers in rural communities. We have not been able to engage substantively on what is a demonstrable funding shortfall. All the devolved Administrations are currently struggling with that and are, in effect, making the same points to the UK Government.

Domestically, we are trying to continue to support the Scottish rural development programme and to pilot some new approaches between 2021 and 2024, but one of the difficulties with making longer-term commitments is that fixed financial commitments in the absence of any understanding of what money will be available is going to be extremely difficult for us to manage.

There were many conversations about how we would square that circle. In the absence of an unlimited pot of money—everybody accepts that there is no such pot—no solution would have been an ideal one, but we thought that the solution that we came up with was the best adjustment to the situation over the next few years, until we have a far better understanding of what, if any, money will become available via the presumed new UK replacement funding. However, as yet, we do not have any certainty about that, and the absence of that certainty makes longer-term planning extremely difficult. Obviously, that has been a theme of some of the conversations that we have had this morning.

We made a decision about how to roll out a scheme that we could deal with financially in this period of uncertainty. Given the conversations that were had and the involvement in the discussions of people across the board and across Government—the discussions with NatureScot and so on—what we have come up with, without our being able to envisage what moneys will be available to us in the future, is the best solution for the next few years.

Is the £170 million shortfall not a disproportionate hit on the AECS compared with other parts of the agricultural subsidy and diversification—[Inaudible.]

With the greatest respect, a £170 million shortfall has to be made up from somewhere. We have to be able to deal with that, and we have to make decisions about it. There are some things that we need to do. We need to have the farmer-led working groups to get agriculture emissions down. We need to do a lot of work, and money has to be available to do it. We made what we considered to be, in our judgment, the best possible decision for the next few years. I am sure that there will be people who will argue that we could have done something differently—of course there will be—but, ultimately, we are where we are financially, and we have to know that we can cope with the expenditure that we are committing to.

Okay. I turn to the infrastructure investment plan. Obviously, there is now a renewed focus on net zero emissions and sustainability through that plan. I am interested in how the investments are now being reprioritised as a result of that and how that comes through the budget. In particular, it is obvious that there will be a lot of capital underspend this year, given the Covid pandemic. Does that offer an opportunity to look again at major infrastructure projects such as the A9, and to rethink them in light of sustainability, net zero emissions and the emerging priorities?

Kate Forbes might want to talk about the massive capital underspend, which I am not entirely certain I was aware of.

In a sense, there are three timetables attached to Mark Ruskell’s question: there is the immediate impacts of Covid on this year’s budget; there is next year’s budget; and there is the capital spending review or infrastructure investment plan, which is over the next five years.

I will deal briefly with the A9. We are still committed to the A9 project. As somebody who goes up and down that road far too often, I think that it remains absolutely essential that the road is invested in and upgraded, particularly from a safety perspective, considering that the road has a high number of fatalities.

On the infrastructure investment plan, Mark Ruskell is right that we have a particular pot of money. We should remember that, in the UK Government spending review in November, capital took a hit of about 5 per cent. With the pool that we have, we have to make choices. Given that 36.9 per cent of the capital budget is classed as low carbon and that the figure has risen from 29 per cent in 2018-19, the proportion of low-carbon investment has increased. By extension, that means that some things that we might have liked to do cannot go ahead.

The infrastructure investment plan looks ahead to the next five years. It is a robust pipeline of work that meets our commitment on the £2 billion low-carbon fund. The plan involves investing substantially in decarbonising heat and energy. Everything that we have done in the low-carbon space is money that we have not used in carbon-intensive infrastructure. This might sound obvious but, as you would imagine, in the capital spending review, there are always more bids than there is money available. Every portfolio will have a number of projects that it would like to progress but which cannot progress because there is not sufficient money. The fact that we have protected the budget and increased the capital budget for low-carbon projects suggests to me that the transition that we have made to low-carbon investment is backed up by the figures in the capital spending review.

My question is for Kate Forbes. She rightly mentioned earlier, as did Roseanna Cunningham, that the issue is all about taking a cross-portfolio approach and joined-up thinking in policy making. Earlier, we looked at the effects on transport. What is your thinking behind the proposed £33 million cut in the budget for rail infrastructure? I would have thought that improving that infrastructure would be very much in line with Scottish Government policy on greener transport.

The member asked me the same question earlier in the week, and I took it away and spoke to officials about it. I do not want to put Katherine White on the spot, but I wonder whether she wants to answer that from the perspective of our rail infrastructure. Rail is a very cross-Government area, in that it covers devolved and reserved matters.

I will come at that from the perspective of the infrastructure plan overall, and we might follow up on some of the specifics. The rail infrastructure money is allocated through three different budgets, and a big proportion of it is determined by the Office of Rail and Road. The regulated element is judged on the infrastructure needs of the rail network, which is done with the regulator, so we do not have full control over that. That is the profile that shows a slight decline over the period, if that is what is being referred to.

Some rail elements are not fully within our gift, but the infrastructure investment plan shows significant investment in rail projects. We are pleased that around £550 million of the spending that is set out in the investment plan will go directly to the rail decarbonisation plan. There are lots of elements of rail spending but, within that profile, we are again prioritising funding towards decarbonisation.

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Earlier this morning, we talked a lot about behavioural change and trying to get people out of their cars and on to greener transport. I am concerned that some of the rail network in Scotland is not seen as an efficient alternative to people driving their cars. Is the Scottish Government prioritising the rail network as a major encouragement of behaviour change? As the budget stands, I am not convinced that there is that priority when it comes to the necessary rail infrastructure to make the change.

On the general principle, I whole-heartedly agree that investing in public transport is essential to changing behaviour. I am happy to follow up with any specific points on rail. In your earlier question to me, you specified links in your region, so I would be happy to come back to you on that in writing.

On the wider point, there is substantial investment in decarbonising rail and buses, as well as making sure that buses, in particular, are viable and that we maintain local services as far as we can.

I agree that the more that we can do to make rail more attractive to people, the better. If you think that we can do more, I am open to suggestions, not least because one of the railway lines that is a good example of what you are saying about making rail more attractive than driving is the one that goes right across the Highlands. If the timetable works and the service is frequent enough, people will be more inclined to use rail.

That is helpful and we can perhaps follow it up in future. Some particular parts of the network in the Highlands and the Edinburgh to Perth line are in need of upgrading. Given the demographics of Dunfermline, Kinross, Milnathort and so on, there is scope for far more people to use rail rather than their cars. I want to ensure that the Scottish Government is effectively doing a cost benefit analysis when it comes to the budget spend to consider what would bring about the necessary change in behaviour. However, perhaps I can follow that up with the cabinet secretary offline.

I will certainly be following up with a letter to the cabinet secretary about the fact that vast swathes of the north-east have no railway infrastructure whatsoever, and I imagine that Stewart Stevenson is nodding along as I say that.

Angus MacDonald has questions on funding for public services.

The cabinet secretaries will be aware that the committee’s pre-budget report recommended that

“the revenue budgets of public organisations considered key to responding to the global climate emergency and biodiversity loss are protected in real terms.”

We see subsequently that Marine Scotland will receive a 21.1 per cent real-terms increase, NatureScot has received no additional fiscal resource, and SEPA has had a slight uplift. Why has the committee’s recommendation to protect the budgets of public organisations that are

“considered key to responding to the global climate emergency and biodiversity loss”

not been fully met?

There is no cash freeze on NatureScot; there is an increase in the capital budget for NatureScot that is a key driver of the decarbonising and biodiversity work that it does. For example, the increased capital budget for NatureScot will enable it to deliver electric fleet vehicles, charging points, essential infrastructure and property maintenance, and work on the national nature reserves and other protected areas. I refer the member to the capital budget for NatureScot.

As I have said to the committee previously, grant in aid budgets are not always a good litmus test of the Government’s commitment on biodiversity and nature-based solutions. NatureScot’s budget includes £1 million that is ring fenced for the biodiversity challenge fund. That is retained from the increase in its budget last year. There is also an increase to £5 million from the £3 million that was committed in the programme for government, in dedicated biodiversity funding. Our funding for biodiversity compensates, to an extent, for the UK Government’s failure to provide clarity on a replacement for the EU LIFE programme.

My three short responses on NatureScot’s budget are, first, look at the overall budget, where there is a capital increase; secondly, look at the substance of the budget, where there is a real prioritisation of biodiversity work; and thirdly, looking at the wider context, understand where we have had to find replacement funding for funding that has been removed. Therefore, there is an overall package that demonstrates the importance that we place on biodiversity in the work of our public bodies in ensuring that we meet our targets.

That is a helpful clarification.

With regard to SEPA, the on-going cyberattack is likely to have budgetary implications in relation to things such as rebuilding its online systems. Will that be an issue, and will it have budgetary implications?

How will funding for strategic research programmes change in the coming round for 2022-27? How will the capital budget for research be deployed, and how will future programmes support the green recovery? Those questions are for Kate Forbes initially.

Roseanna Cunningham might want to come in on the substance of the SEPA attack. The financial impact of the attack is still unclear. We are working closely with SEPA to assess and manage pressures that arise from that, in the form of revenue costs and the capital costs of any work on a replacement system. SEPA is working through the various priority areas, and specialists are analysing the event to establish what the costs might be. SEPA’s information technology systems have been compromised, which has had a substantial impact. It anticipates that its systems will need to be built from scratch, and not just rebuilt. Therefore, there are on-going revenue costs of support, but there will also be capital costs.

I will move on to the matter of strategic research, unless Roseanna wants to come in on the impact of the attack on SEPA.

In fairness, it is a question to which we still do not have a precise answer. Obviously, I have flagged the issue to Kate Forbes, and we are having discussions about it. I have asked that, as soon as even an estimated cost figure is available, it be communicated as quickly as possible. However, as yet, we do not have that, because the financial impact of the attack is still unclear. In managing the situation, SEPA is working through a variety of priority areas, and it is waiting for reports from specialists to allow it to better understand the cost of recovery.

The attack was significant and will have a financial impact but, at this point, it is difficult to see what that will be. Kate Forbes is right to flag up that there might be a resource and a capital impact. As yet, deciding the balance of that is extremely difficult. It is anticipated that the systems will require to be built from scratch rather than rebuilt, so we are talking about a significant potential piece of work. At the same time, SEPA must be able to continue to deliver core public services. There will be a financial impact, but it is almost impossible to gauge what that will be until we get the analysis.

I am still unable to ascertain how the impact will be balanced between resource and capital. There is therefore a bit of a question mark on that for both of us. However, rest assured that conversations are continuing on the matter.

On research, the capital spending review allocated around £171 million to the programmes of research. Importantly, that provides a longer-term commitment to investment in capacity building in the work that is led by each of our main research providers. That longer-term pipeline is important and will clearly support innovation, which we know is essential for green jobs and supporting work to reduce greenhouse gas emissions in agricultural livestock and crops. New areas that will be funded through the 2022-27 programme will include the circular economy and waste.

I hope that the multiyear outlook will also help confidence. The draft research strategy for the programmes of research was published last year for consultation and we are currently finalising it in response to the feedback. It sets out the pathway for a significant multimillion-pound investment that we will make over the next five years.

That will certainly be music to the ears of research organisations, because the issue has come up year after year recently. The longer-term commitment will definitely be welcome.

My final question is directed at both cabinet secretaries. What threats and opportunities have the end of EU funding streams, such as structural funds and CAP payments, and the creation of their domestic replacements brought?

I will start. Obviously, we have had some exchanges already in the meeting that directly pertain to this part of the conversation, so I do not want simply to retread those exchanges. The threat at the moment is the continuing significant uncertainty about what will replace EU funding streams and how that replacement will be administered. That is the significant uncertainty right now for the two linked portfolios—my portfolio and the rural economy portfolio—particularly given that some schemes span both portfolios. That uncertainty is therefore a big issue.

I suppose that the opportunities might be harder to identify, given the disproportionately large benefits that Scotland received from EU money in the past. We benefited immensely from EU funding streams. The question is whether we would expect that same proportion of benefit to continue. If it was argued that it should not continue, that would mean a hit to our funding in whatever shape or form that future replacement might take.

I know that the UK Government is currently seeking to secure participation in a number of programmes, but several of them are excluded, including EU Life, which has been incredibly important. The programme for government promise of £3 million funding for biodiversity, which was increased to £5 million in the budget, is partly to compensate for the loss of access to the EU Life scheme. It is important that we continue discussions over issues such as the UK ETS. At the moment, I find it hard to talk about opportunities given the level of uncertainty. Until there is a level of certainty about what will replace that funding, it is extremely difficult to establish what the opportunities might be.

11:45  

I see it from a wider perspective; we can get into the nitty-gritty of each funding stream and debate and discuss but, looking at it more holistically, I think that the lack of full replacement has an impact right across the Scottish Government’s budget, because where a funding stream has not been replaced, funding has to be found for it and there is therefore an impact on other budget lines or it remains unfunded.

We await the UK Government’s budget on 3 March, but the spending review last November provided insufficient allocations for rural and fisheries and very little clarity on the proposed UK shared prosperity fund or the replacement funding for other EU programmes. We have since had a commitment that the shared prosperity fund will be managed by the UK Government and not us.

Any attempt by a UK Government to distribute replacement EU programme funding in areas of devolved competence, aside from the debate as to whether it is an assault on our devolved Administration, disrupts the budget process and the productive relationships that we have forged with stakeholders. It is clear that, where funding has been committed, it is not sufficient. Fisheries are a good example of that. We have already talked about CAP and the £14 million to support fisheries in Scotland. That amount is based on the amounts received by each Administration, but it will not be available in April 2021 and fails to recognise that payments due to be made by the Scottish Government are not represented in that £14 million. To cut a long story short, it does not cover the funding that we need to continue to support fisheries, it is for only one year rather than multiple years and it is based on allocations from 2014 and does not take inflation into account. Therefore, it has an impact on all those who would normally be recipients of that EU funding and, if the Scottish Government deems it appropriate to top that up, that would come from another budget line. It is clear that, without full replacement of EU funding, there will be a detrimental budget impact across the Scottish Government and nowhere will that be more clearly seen than in rural and environmental schemes.

Cabinet secretaries, we are running over time, but we have two more questions to ask, so if you forgive me, we will let the session run for another five minutes.

I am sure that the cabinet secretary would be disappointed if, at what could be one of her last appearances at the committee, I did not ask a question on national parks. I am pleased that there is a 20 per cent uplift in the budget for national parks, which suggests that they are a great vehicle to deliver environmental improvements and so on. It is stated that one of the reasons for the increase is to meet

“costs related to managing visitor pressures”.

What measures could the cabinet secretary put in place for the likes of Galloway, which saw a massive increase in the number of visitors due to the staycation message, and why does she continue to rule out the tiny, insignificant amount of money that would be involved in doing a feasibility study into the creation of a national park there?

There are no small and insignificant amounts of money when it comes to budgets and there is an enormous amount of competition for money. The question mark over the longer term will always remain; there is always a longer-term commitment to consider the establishment of other national parks. That does not mean to say that there can be only one other proposal, but the member will clearly see from the budget the amounts of money that are required to be spent on national parks. It would be extremely difficult to see how a third pot of money could be levered in for a third national park, regardless of where that was.

As I always do, and always will do, I point to the numerous other designated attractions in the south-west of Scotland, including the successful Galloway and southern Ayrshire biosphere, which I signed off on as one of my very first ever ministerial decisions in 2009.

We have had some constructive discussions over the past couple of years about the need to climate proof budgets and understand the long-term implications of some of the planning decisions that are made. There was a commitment between Government and Parliament to put in place a joint process to give us all the tools to understand how budgets are impacting on climate—positively, negatively or otherwise. What is the next phase of work on that? How does that proceed into to the next session of Parliament, so that we always have a transparent budget and are always aware of what the climate implications are, even if some economic trade-offs have to be made by the Government?

The joint budget review working group met last year. Officials are currently working hard on an agreed work plan so that improvements can be delivered for the 2022-23 budget and built on after that. I can reassure Mark Russell that, in the immediate term, work is happening. We are in the process of commissioning supporting research that we hope will allow the joint budget review to provide initial insights during the course of this parliamentary session. I am conscious that this session does not have long to run, of course. Kate Forbes might have something to add on that point.

We have considered proposals from colleagues to make improvements to this year’s budget assessment. Therefore, we have added additional information to the budget document. The intention is to continue working on the review, seeking to improve budget information on climate change, not just in terms of the 2022-23 budget but also in terms of the development of the proper tools that are necessary to work towards a costed climate change plan in 2024. That is important, because the next session of Parliament will also have to renew the entire climate change plan.

I can reassure the member that a lot of work is going on.

I think that that was quite a comprehensive answer, and I support all those efforts. As Roseanna Cunningham said, we have added additional information to this budget, including taxonomy assessments of tax spend. Improvements are being made year on year. I agree with Mark Russell that the conversation has moved on quite substantially. There is some evidence of tangible changes being made. There is a wee way to go in terms of getting the joint budget review proposing recommendations that we then implement. From a finance perspective, I am supportive of working with parliamentary committee colleagues to make further improvements to the budget assessment.

We have run out of time. I thank both cabinet secretaries for their time this morning, and the officials for giving their support.

At our next meeting, which takes place tomorrow, the committee will take evidence from experts, stakeholders and regulators on the environmental implications of the exit from the European Union, and we also expect to hear from the cabinet secretary on the Single Use Carrier Bags Charge (Scotland) Amendment Regulations 2021.

That concludes the public part of our meeting today.

11:54 Meeting continued in private until 12:10.