Chamber and committees

Thank you very much, convener.

The challenges facing Scotland’s public finances will be well known to the committee. The pressures on the 2024-25 budget cannot be overstated and, as I have said before, represent in my view the greatest challenge to any Scottish Government since devolution. We are continuing to manage a wide range of pressures due to volatility from global factors such as the Ukraine resettlement, the impact of inflation, the cost of living crisis and, of course, the on-going legacy of Covid-19.

The United Kingdom Government’s autumn statement delivered the worst-case scenario for Scotland with a fiscal settlement that challenges the viability of public services across the whole of the UK. Our block grant funding for the budget, which is derived from the UK Government’s spending decisions, has fallen by 1.2 per cent in real terms since 2022-23, and our capital spending power is due to contract by almost 10 per cent in real terms over five years.

As I set out in December, we cannot mitigate every cut that the UK Government makes, and we are at the upper limit of the mitigation that can be provided within our devolved settlement and competence. The UK Government has chosen to prioritise tax cuts over investment in public services, but we have made different choices.

At the heart of our budget is our social contract with the people of Scotland, whereby those who earn more are asked to contribute a little more, everyone can access universal services and entitlements, and those who need an extra helping hand will receive targeted additional support. We have chosen to act to do everything in our power to protect public services, including through a £6.3 billion investment in social security and more than £19.5 billion for health and social care, alongside record funding for local authorities and front-line police and fire services. Importantly for this committee, in 2024-25, we are committing £4.7 billion in capital and resource for activities that will have a positive impact on the delivery of our climate change goals. I look forward to the committee’s questions.

Across all portfolios, each cabinet secretary has led work to focus on what will make the biggest difference. We will also take into account the budget allocations and the reserves that organisations might have.

On nature, forestry and landscape restoration, we will invest more than £158 million to maximise the power of forests and land to help tackle climate change and protect nature. That funding will increase woodland creation and further protect and restore peatland. In relation to the biodiversity landscape and the investments that we have chosen, through the evidence base of the advice on what will make the biggest impact, we are also investing £500 million in our natural environment to drive landscape-scale change.

I will bring in Philip Raines to address the key issue of planting.

I am sorry—did you say £54 million?

Any money that is drawn down from ScotWind is used to support the budget, so, in essence, it is used to support public services. The drawdown in 2023-24 will do the same, and the drawdown in 2024-25, which was originally estimated to be about £350 million, will support the budget and public services.

The issue that I am raising about 2023-24 is that, because of our challenges with our path to balance due to budget constraints and all the pressures on the 2023-24 budget, we will potentially have to draw down some of the ScotWind money for this financial year. That is the position with ScotWind for this year and next year. I assume that the drawdown for 2022-23 would have been for the same purpose, but we can come back to the committee to clarify that if that would help.

From ScotWind?

The ScotWind money relates to the whole budget. Even if you had the £350 million in its entirety from ScotWind for 2024-25, the £4.7 billion of capital and resource that will have a positive impact on climate change goals goes well beyond the ScotWind money that is being invested in the budget. We are going way beyond what the ScotWind money would allow us to invest in climate change objectives. We are putting a lot of Scottish Government capital and resource into tackling climate change—well beyond the £350 million.

If you are asking whether, when we set out the budget, we allocate that £350 million only as part of the £4.7 billion, the answer is no—it is allocated to the budget per se in terms of presentation. I do not have it as an element that makes up the £4.7 billion, but you could argue that it is part of the overall resource that allows us to put the £4.7 billion into our climate change action.

As I say, the Scottish Forestry budget takes into account some of the reserves that it has, and we have had that discussion with a number of organisations to make sure—

In summary, there might not be an even or straight road of investment each year for organisations, with investment continuing to grow; the position will fluctuate. The availability of capital funding will be constrained, so we need to think carefully about how we might be able to lever in external funding to support some of our objectives, given that we will have less capital funding available.

However, the ambition remains, and we will ensure that we are able to show, as we have done in annex J, how our investment for 2024-25 will be focused. That has to be set in the context of future years, with investment going to ensure that we are on track to meet the targets that you alluded to.

I set out at the beginning of this evidence session that we are investing £4.7 billion of capital and resource in positive action in the 2024-25 budget to meet our climate change goals. One could argue that, if whatever amount of the up to £350 million of ScotWind moneys is part of supporting the budget, it is also part of supporting that £4.7 billion of the budget that is tackling climate change.

My dilemma is that in an ideal world—with funding not being so constrained—we would indeed want to create a different fund, almost a sovereign wealth fund or something that would be specifically geared to future action on climate, but, given budget constraints, I would face questions across Parliament were I sitting with £350 million that was either unallocated or being kept for tough times. These times are the toughest, and I am having to use that money to support the budget. Because it is not aligned to a particular part of the budget, the point that I am making about the £4.7 billion is that it supports the budget as much as investment in the national health service or Social Security Scotland. It supports the budget in general and, without it, we would frankly have to make even more difficult decisions than we have to make at present.