Chamber and committees

You raise a good example. Research, development and innovation is, of course, one of the five core themes in the data-driven innovation initiative deal. It gets £60 million of Scottish Government funding and £290 million of UK Government funding. That is a good example of where we can align funding between the UK Government and the Scottish Government.

I am interested in how, for example, the UK Infrastructure Bank and the Scottish National Investment Bank could work together on those critical investments, as well as having core Scottish Government funding. When there is investment from the UK Infrastructure Bank and SNIB in important areas of growth, there is scope to do more. We have the development of the Edinburgh innovation hub and the investment in business infrastructure in the Fife industrial innovation investment programme, the Borders innovation park and the five data-driven innovation hubs, which you referred to.

We are investing strategically. It is legitimate to ask whether we could do more, and we will reflect on that. I would expect some of those issues to emerge in the bilateral meetings that I have with my cabinet secretary colleagues, so that we can consider the importance of investing strategically in research in Scotland’s growth areas by aligning our funding with UK funds that are more extensive than ours. It will be important to lever some of those funds into Scotland.

I recognise your point about value-added growth. We must invest strategically in the areas that will give the best return.

I will provide enough information for the Scottish Fiscal Commission.

I am mindful about setting a single-year pay policy in the context of the opportunities that the spending review, which is coming shortly, provides. I want to put the context of 2025-26 in the multiyear space.

I also want to reflect on how we manage some of that in a year in which we will not put a pay policy out that becomes the floor and the negotiation is, therefore, above that. The SFC’s work was based on 4.5 per cent, but the UK pay review body recommendation was 5.5 per cent. All those factors play into where pay actually lands, so we need to construct something better.

There is also a point of principle. If the UK Government is going to accept UK pay review body recommendations, it needs to fund them. The problem that I had was that it said that it would not, and would fund only two thirds of them. If the UK Government had said that it would fund 100 per cent of the pay review body’s recommendations, I would have known what headroom I had, but it did not.

I could not wait to see whether we were going to see that being funded in supplementary estimates in the spring: I had to take action, which is why I do not regard the situation as “chaos”, as you described it. It would have been chaotic to wait until the spring to see whether the money emerged. I could not do that. I had to create some headroom in expectation of one third being funded by departmental savings. Our equivalent of that is what I had to bring to Parliament.

Let me be clear. I thought that I had been clear, Michael—

Let me be clear again, because we always like to be clear, do we not? I will produce the information that the Scottish Fiscal Commission requires. However, I am saying that I want to learn the lessons of single-year pay policy and to do something that is more meaningful, so—

I will come back to that specifically in a second. I have had a lot of meetings on the tax strategy with the Deputy First Minister. As well as the certainty and stability, aligning our economic and tax strategies has been a focus of the work, including more regular and systematic engagement to improve how we approach evidence and evaluation and the administration and delivery of the current system and future priorities. Although the approach is at a high level, it seeks to align objectives.

On the specifics and the evidence, I point Liz Smith to my earlier comments. We have engaged HMRC and others on the evidential base. We have the evidence, albeit that it takes a period of time to get the latest available evidence, and there will be future evidence at a future point. However, for the period of time that the evidence looks at, there is net positive migration across all tax bands to Scotland, and there has been very strong growth in earnings.

If you are asking me whether there is evidence of population flight that I should be worried about or of disincentives that are putting people off coming here, I would say that, on balance, people are still coming to live and work in Scotland, and their choice to do so will be for a whole variety of reasons. However, I am not complacent about that, which is why continuing to improve the evidence and evaluation is important. With HMRC and others, we will continue to ensure that we monitor all that and, importantly, respond.

A lot of that evidence is already in the public domain. I have referred to the HMRC work. I will bring in Lucy O’Carroll on that in a second, but that evidence shows that there is net migration and there is growth, even among our top-rate payers. Many of our sectors, such as financial services, are booming in Scotland. That is not to dismiss anecdotal evidence or concerns that are raised, because we have to listen to those. All I am saying is that the evidence so far should give us some confidence, but we have to be vigilant.

I bring Lucy in on that point.

Yes.

They are twofold. One of our priorities is to make sure that, through our continued success on inward investment, we are able to grow in key sectors, such as green energy. That growth is funded partly through our priorities with the Scottish National Investment Bank and others, such as the commitment to provide £500 million over five years to help to lever in private investment, which is very successful. There is a lot happening in that sphere. We also have the other key sectors, such as financial services, life sciences and artificial intelligence, in relation to which we would expect our economic institutions and SNIB to align to ensure that we continue our success in growing those areas.

Essentially, we want not only to create opportunities for people here, but to bring people to live and work in Scotland. Some of that will be in our more remote and rural communities. The growth in such areas is great to see. For example, the work around the Cromarty Firth green freeport, with the potential transformation, the housing development and so on, is amazing.

The other end of the spectrum is about getting more people into work. Indeed, I have already mentioned some of our work on employability and on getting parents into work. That is important, because it has the added benefit of reducing the need for the supports that we provide, at a UK level and in Scotland.

In a nutshell, we want to grow the economy in those key sectors and to keep people here and living in Scotland, but we also expect net in-migration, particularly in highly skilled areas. For example, Western Isles Council said to me that it could employ every young person in the work on offshore wind developments, but it will still need people to come and live and work in the islands. That is really important for repopulation and so on.

There is nothing that I have seen that says that the new UK Government does not agree with that—our assumption is that it is, in principle, in agreement. It is all about how we get on with it. I have no intelligence that tells me otherwise or that there has been any shift away from that principle—it is our working assumption that there is agreement on that. I should say that I am not the person who has been closest to the dialogue with the new UK Government on some of the detail in this area, but we can follow up with the committee on what exchanges of correspondence there have been.

The visitor levy is a local levy that councils can choose to deploy or not to deploy. We are either in agreement that councils should have fiscal powers—given their desire for more fiscal autonomy and flexibility to grow the quantum that they have at their disposal—or we are not.