Chamber and committees

I would not want to be drawn into giving as specific a response as that on an individual sector. What I can say is that organisations and sectors should draw from my original remarks the conclusion that, to be frank, 2023-24 and 2024-25 will be the buoyant years and the two years after that will be much more difficult as a consequence, and that that will have to play through into all sectors of the public finances.

No. A pay policy would never include that type of detail. That is essentially a consequence of the budget settlement that we are able to put in place and the degree to which we can configure services to deliver against those budgets.

The Government has a long track record of preserving public sector employment. We believe that it is important that our public services are well supported by strong levels of employment, although I acknowledge the challenges in recruitment to aspects of public sector employment, which are fairly extensive and which would be helped if we had a different approach to migration policy. I completed my response to one of the points that Liz Smith made to me by noting that I remain concerned about that issue.

I continue to consider the most appropriate time to set out a pay policy. There are a number of variables, not the least of which is the pattern of inflation. I made the point earlier that we set the budget for the current financial year when the inflation climate was benign and we then found ourselves wrestling with pay claims when the inflation level was far from benign. That will be one of the factors that I consider in determining the most appropriate point at which to set a pay policy.

Having said that, there is absolutely nothing to stop open dialogue with trade unions about the agreement of pay levels for 2023-24 at this moment. The absence of a pay policy is not an impediment to that dialogue being advanced. Obviously, we have the mechanisms available in Government to resolve any of those questions should they come to a point where they require a decision.

The point that I was making in explaining the difficulty in which we found ourselves in this financial year was that, having set a pay policy at 2 per cent when inflation was benign, we then found ourselves in a completely different situation.

I question the value of having a pay policy, because I do not think that it actually provides much guidance. The 2 per cent policy provided zero guidance to people as to how they were to navigate this. During the financial year, we put a lot of arrangements in place within Government. I chaired a regular discussion between ministers across the Government to consider the current negotiations and give guidance as to what we considered acceptable in relation to resolving these questions.

Given the volatility that we have, I do not think that a pay policy would help to shape the context. However, I reinforce the point that its absence is not an impediment to dialogue. I really would not want anybody to think that we cannot embark on discussions with trade unions because we do not have a pay policy. That is completely the opposite of my intention.

I am not certain that we will show assessments for the prior year. If we were to do so, they would have to use budget act provisions. The like-for-like comparison that we always undertake involves the budget act provision versus the budget proposal. There is significant variability thereafter, but that approach gives us a valid comparison at one moment in time. I will confirm that point to the committee in writing.

We need to do a range of things, which are set out in the national strategy for economic transformation. First, we have to have clear and effective regional economic strategies and measures in Scotland, so that all parts of the country have distinctive approaches that best address the needs and circumstances in different localities. The investment that the Government has made in funds in the north-east of Scotland to support the transition of the oil and gas sector is an important example of that. It is an indication of us taking tangible, practical steps to put in place regional economic strategy mechanisms.

In the south of Scotland, we have a distinctive south of Scotland economic strategy, which is led or supported by South of Scotland Enterprise and with which the Government actively engages. That is about enhancing some of the opportunities in tourism and the leisure environment and in the productive capacity of the food and drink sector. Those are just some examples relating to regional economies.

Secondly, we have to invest in the activity on tech development in Scotland. For example, we have the investment in the tech scalers programme, which has been commissioned from CodeBase and has now been rolled out in different parts of the country. The convener referred to that in his initial question. Investment in the capacity of the tech sector is important.

Thirdly, we have to engage substantially with and enhance the already developing collaborations between the university research sector and the business community. We are in a much stronger position today than we were five or 10 years ago, as a consequence of that approach. Universities have responded magnificently to the challenge, and they have opened their doors much more effectively to the business community, which has been much more engaged. I am optimistic that that work will be undertaken and will be effective.

My final point is about the Fiscal Commission’s assessment of what lies ahead. Obviously, this is an annual budget process, so we look at snapshots of information for this financial year and the next financial year. The Fiscal Commission has to do something slightly different; it has to look at the individual year-by-year performances, but it also has to give a sense of its expectations on the direction of travel. Its expectations about the direction of travel on earnings growth in Scotland are very different for the period going forward as compared with the period that we have just gone through. That is an indication of the progress that we can expect to make on productivity.

The first thing that I would say is that I do not consider our position to have a discernible effect on middle-income earners in Scotland. Essentially, the steps that we are taking are affecting individuals who are in the top two quartiles of the population in terms of earnings. We are concentrating the measures that we are taking on the top two quartiles—we are not discernibly affecting middle-income earners. [John Swinney has corrected this contribution. See end of report.]

My second point is one that I made in response to questions from the convener, I think. When people choose to live in Scotland, they know that they are gaining access to a much wider range of public service provision and opportunities than would be the case if they lived in other parts of the United Kingdom. I will not rehearse all the details, but we have the policies on free personal care, tuition fees, early learning and childcare and prescription charges. We have made certain choices that are available to members of the public in Scotland, and I think that that will feature in the judgments and decisions that individuals take.

Lastly, I think that people make judgments about a range of factors relating to where they live and work. From a variety of different perspectives—whether the social contract that I talked about, quality of life or access to facilities and services—Scotland is a very attractive place for people to live and work in and that will be reflected in the judgments that individuals make.

The total uplift for the health and social care portfolio is approximately £1 billion. My recollection is that the Barnett consequential that arose was of the order of £300 million. The Scottish Government is passing that on in full, but we are going much further in the allocation of resources that we are making.

There are three key points there, convener. First, the way in which I have presented the economic argument in the budget document is essentially to say that our economic ambitions must be realised through the delivery of a just transition to net zero. That will involve the channelling of our economic activity to ensure that, out of the transition to net zero, Scotland realises the economic opportunities that will be available to us principally through the delivery of the national strategy for economic transformation. As the committee can see in the detail in the budget document, I have set out clearly the measures through which we are depending on the success of the national strategy for economic transformation to realise that economic transformation.

Secondly, social security expenditure, which you raised, is a matter of political choice. The Government has opted to make political choices on welfare that are in stark contrast to the decisions of the United Kingdom Government. We have decided to take measures to support individuals who face significant challenges. A particular illustration of that is the Scottish child payment, which accounts for a substantial part of the divergence in expenditure to which you have referred. That is an active political choice.

Thirdly, we will have to pay for all that from our success in boosting productivity and earnings within the Scottish economy, which is the focus of the national strategy for economic transformation. The Scottish Fiscal Commission’s estimate of earnings growth in the next few years indicates that it has a level of confidence that the measures and priorities that have been put in place will provide the foundations for achieving the increase in earnings growth that the Fiscal Commission has predicted and which underpins the budget announcements that I have made.

I reiterate to the committee what I said to the convener: steps are being taken constantly to reform public services. I want to debunk for the committee the idea that we are waiting for something to happen to undertake public sector reform, because we are constantly changing the way in which public services are delivered in order to live within the financial restraints that we all face.

The Government agreed with local government an approach to public service reform through the Covid recovery strategy work, which laid heavy emphasis on the design of person-centred public services. That is about learning some of the important lessons of Covid and applying them to the delivery of public services. For example, we undertake less transactional activity between different aspects of public service, and undertake more delivery of services around individuals to assist them in meeting the challenges that we face.

Work that is under way in the Dundee pathfinder project, with which Mr Lumsden may be familiar from his constituency interest, is exploring how that can be best undertaken by a collaboration involving Social Security Scotland, the Department for Work and Pensions, Dundee City Council and a variety of other organisations, including those in the third sector, to better meet the needs of individuals and support them. Reform work is under way.

The challenge that public organisations face is that they have to live within the reality of the financial settlements that I can make available to them. We have provided, in the Covid recovery strategy, for example, the means and mechanisms by which organisations can do that.

Inevitably, as a consequence of the budget, there will be a need to put into practice some of the provisions that were set out in the resource spending review. For example, the size of the public sector workforce will be affected by the scale of the budget. Organisations will be taking those decisions based on the financial settlement that the Government has made available.

Yes.