Chamber and committees

We have allocated more than £307 million to the enterprise agencies in 2024-25. We have been clear that, because of the challenging funding position, we will have to be really clear about what the priorities are, and we will have to be clear that the agencies will need to focus on the things that are absolutely critical. I guess that it comes back—

The biggest reduction is in financial transactions. The capital reduction is about 13 per cent. As I said, a priority is to re-establish the capital element. It is difficult to do that for financial transactions, and it is more difficult now that we have a further reduction in financial transactions to manage in 2024-25. That affects areas that have been a priority for the committee—the SNIB and the affordable housing supply programme. Reductions in FTs are absolutely the worst thing that could happen.

I will carefully examine the position after 6 March. We have called for additional capital. If you translate the percentage reduction into cash, you will see that it is £1.6 billion less to spend by 2027-28, which is about £540 million a year. That is a lot of investment in affordable housing, health infrastructure and anything else. It is a lot to absorb, so we need the position to be reversed.

We will also consider our position once we get to the end of this financial year, and we will look at our borrowing position. We need to look at all that in the round. I will want to come back to Parliament in the light of all that and consider whether any of the positions can be changed in-year.

You have to decide whether you are saying that you want more money or not; you cannot just describe a problem.

The detail of what we ask our enterprise agencies to do will form part of the discussions and the correspondence around the priorities that are agreed with the Cabinet Secretary for Wellbeing Economy, Net Zero and Energy. The point that I was making is that, as ministers, we have a responsibility not to ask organisations to do more with less. That is a fair principle. In order for them to focus on what is key, we would expect them to look at, for example, the key objectives of the national strategy for economic transformation, supporting the growth of local businesses in their area and all the other key priorities.

There are some things that may take longer for them to do and may have to be done over a longer timeframe, and they may have to pause or stop doing some things. The detail of that will be for local partners to discuss and the Cabinet Secretary for Wellbeing Economy, Net Zero and Energy will be involved in setting the strategic direction of travel. It is not for me, as the Cabinet Secretary for Finance, to say what they should not do. I am just making the point that we recognise that, with constrained resources, we cannot ask them to do more with less.

What I am saying is that they will have to focus what they are doing on key priorities, and they might have to do less of some of the things that they are or have been doing so that they can focus their resources on key objectives.

The brutal truth is that our strategic priority is to invest as much as we can of the limited resources that we have in front-line public services. That means difficult decisions having to be taken elsewhere. If you have fewer resources, you cannot give everybody the same amount of money—you have to prioritise, and I have made it very clear throughout this evidence session that I have prioritised public services. That has meant having to make difficult decisions, whether on the enterprise agencies or on universities, because otherwise I would have had to cut front-line public services.

Those are the difficult choices that we have had to make. We need to be clear on the priorities that we expect the enterprise agencies to deliver within the resource that they have. There might be things that we would have liked them to do, but they might have to take longer or be paused or stopped.

We would expect that to be done through the normal monitoring arrangements for our enterprise agencies. We would expect them to be prioritising economic growth and support for businesses, including new-start growth, so there are other areas where they might need to reduce the work that they do. We would expect enterprise agencies to be clear about the objectives that they are setting in the discussions about what they are doing and how they will be monitored by normal civil service processes of oversight as well as ministerial oversight, and to be measured against those objectives.

Earlier, I referred to business leaders whom I met and who mentioned a six-page letter that an enterprise agency had received from ministers at the time. They pointed out that it should have been one or two pages and that it should have set out key elements rather than a whole list of things. It is a fair point; after all, when resources are tight, they need to focus on doing fewer things well, to the best of their ability. Their key objectives are economic growth and support to local businesses—all I am saying is that other things might have to be less of a priority.

The easy—and straightforward—answer is that we can avoid that if we do not see real-terms cuts to the Scottish budget of the type that we saw at the autumn statement. If we see a better fiscal position emerge from the spring budget, if the Treasury allows us to use that rather than the autumn statement as the basis of our forecast and if we see an enhanced fiscal position at the next autumn statement, we will be able to address all these points. With less money, however, we cannot give every part of the public sector and all our agencies the same amounts of money, because that money just does not exist. We can salami slice and say that there needs to be less money for health or for the police and fire services, but I suspect that, if I had done that, the committee’s questions today would have centred on those public services.

The easy answer is that, the more money we have available to us and the bigger the cake, the more we can address the enterprise agencies and higher and further education institutions. When there is less money, we have to make these really difficult decisions.

I am afraid that I do not have that level of detail with me, but I will absolutely come back to you with it at the earliest opportunity.

I have a lot of respect for Sandy Begbie, and we should of course listen to all voices on this matter. We have tried through our tax decisions, not just in the budget that we are discussing but for a number of years now, to develop a tax system that is progressive and which is based on those with the broadest shoulders paying a bit more. The result is that we have £1.5 billion of additional revenues that we would not have had, had we followed the UK Government’s tax position. If we did not have that £1.5 billion, we would have even less for the enterprise agencies and for universities and colleges. Our tax decisions have led to significant additional revenues for the Scottish budget.

These are choices that have to be made. I do not think that the proposition of lower taxes and higher spend has much merit—I do not understand how it would work. If taxes are reduced, you have less money to spend. Those choices are also facing the Chancellor of the Exchequer for the spring budget on 6 March, and I really hope that he prioritises investment in public services rather than tax cuts, because that would enable us to make the investments in our enterprise agencies and our universities and colleges.

Those are the two sides of the budget, and those are the issues that we have to grapple with at each budget.

No, that is not the case, because that funding will come back and will be used for that purpose. The ring fencing remains—the issue is the profiling of the funding. There is no question about the funding. It will be returned; the issue is its profiling.

There is a danger of the funding not being spent if the sector is not prepared and ready to use it for the reform and transformation that it wants to use it for. The money must be returned in such a way that the profiling meets the sector’s needs; in other words, it must come in to help the sector do X in the right year when it is ready to do that. I suspect that there will be an element of back loading, because a lot of preparatory work is still being done on reform and transformation.

That money has been ring fenced for that purpose. It will be returned. We are talking to the sector about when that will happen; £15 million has already been committed for 2024-25, and the remainder will be returned thereafter. The split and the profiling will be negotiated.