Chamber and committees

I hope that things are settling down, although I understand that there is a UK Government reshuffle going on just now, so who knows? We might have more churn before the day is out.

As the person who negotiated the fiscal framework, I recognise its necessity; there has to be a fiscal framework. However, I also accept that it has to be practical in its operation. One of the issues that has been demonstrated to us in the past 10 months is that the fiscal framework does not work when there is an inflationary shock of the type that we are currently facing, requiring me to do some really demanding things that have not gone down well. I have had to cut employability budgets, and I am pretty clear that the Social Justice and Social Security Committee of the Parliament does not think highly of that decision. However, I had very few options in trying to balance the budget.

If we enter the discussions from the perspective of trying to ensure that the framework operates effectively and practically, that will be a helpful way to proceed.

Thank you, convener, and good morning. I thank the committee for its budget scrutiny report, to which I responded last week and which I have carefully considered. As I have highlighted to the committee, the budget has been developed amidst very challenging economic and fiscal circumstances. It focuses substantial resources to support families, businesses and public services in accordance with its three overarching strategic objectives. The committee will be aware that I am not proposing any amendments to the Budget (Scotland) (No 2) Bill today. I am happy to respond to questions from the committee on its report.

The council tax reduction scheme reflects changes that are undertaken in council tax. There is a potential for those issues to be a factor with which we have to wrestle. That is part and parcel of the volatility in income that the Government has to manage annually.

Those are the day-to-day judgements that must be applied to ensure that we can bring the budget into line.

Totally. The Government has to ensure that it is effective in giving policy certainty and direction to the private sector to enable investment to be made. I will give the example of the decarbonisation of electricity.

The Government gave policy certainty that it wanted to decarbonise electricity generation in Scotland. That policy certainty has been given for the entire duration of the Administration—for nearly 16 years—and, as a consequence, we have largely decarbonised our electricity generation means in Scotland. That has not been done by Government investment; it has been done by Government policy certainty and delivered by private investment. That is the type of climate that we must operate.

As for private investment, the other week the First Minister and I took part in a discussion that was arranged by what used to be called the Financial Services Advisory Board. I cannot remember what it is currently called, but it brings together a variety of different interested parties from the financial services community. The lord mayor of the City of London was at that discussion. It was predicated on the significant availability of private sector investment to support a number of opportunities, especially the journey to net zero. We believe that the Scottish Government’s policy direction will help in that respect.

A number of steps have been taken. First, the estimates that are submitted to the central finance team in relation to the expectations about budget performance are constantly revised. As time goes on, risks are addressed and the numbers are revised—the estimates of overspend will be revised down simply because the passage of time is giving us more certainty about the likelihood of the delivery of the budgets in line with our expectations.

Secondly, we apply rigorous scrutiny to any new spending that is undertaken. A detailed scrutiny process is in place, which, if necessary, ultimately comes to me for decisions on whether programmes are approved—so, judgments are made, and certain programmes or items of expenditure are delayed as a consequence.

Thirdly, we look at the performance of individual items of budget volatility—whether tax revenues or social security expenditure, for example—as we assess the likely outturn.

We still have the budget gap that I highlighted to you in the chamber last week. In relation to the further steps that we are taking to address that issue, all that I have described continues to be applied rigorously to get us to a position to balance the budget and I assure the committee, as I have done in writing, of the assiduous efforts that are going on to do so. Every effort will be made to ensure that that is the case before the end of the financial year.

If a project is delayed and is expected to be delivered next year—

There will be variables in cost. At one stage, public bodies expected to have to deal with the factor of increased national insurance contribution costs. However, that has not been the case; it has been reversed. For example, for local government—the finance of which has been a very active issue—that is a saving of about £70 million. That frees up expenditure within local authorities.

On the fundamental point that Mr Johnson has raised, I can best summarise by saying that any employment arrangement that is not direct employment is more expensive than direct employment and so is generally undesirable.

One of the points that we are trying to address in, for example, the discussions with the trade unions in the health service is to get to a position whereby we address some of the underlying issues that might encourage or tempt members of staff to operate in an agency rather than to be employed directly. We try to reshape that balance so that more people are on the employee payroll as opposed to being on agency payroll. If you are running a hospital ward, you must have the requisite number of people. If you do not have those people on direct payroll, you must go to agencies, which will be more costly. Therefore, the more that we can undermine or reduce non-employee payroll costs, the better, and that is the strategic guidance that is being issued.

Liz Smith rightly cautions me about treading too far into private sector management practices, but there are opportunities for employees to continue to be involved in activity while working in a different fashion.

Three years ago, working from home was the exception, not the rule; hardly anyone did it—hardly anyone used Microsoft Teams and all the rest of it. The world has changed and people are now able to live their lives in a slightly less congested fashion. I would encourage employers to be as flexible as they can be with their workforce—I would be surprised if they did not get all the benefits from their workforce that they would expect to get.