Chamber and committees

Of course, convener. As a consequence of our decisions on tax alone, £519 million is available to be spent in the Scottish public finances that would not have been there had we not taken those decisions. According to the Fiscal Commission, in this financial year, the budget benefits to the tune of about £1 billion as a consequence of the cumulative effect of the decisions that I and my predecessors in the role have taken over the past few years.

Convener, you are correct that the philosophy behind all of this is that we must take a balanced approach to ending child poverty. We take into account direct financial support to families and efforts to maximise families’ income, and, crucially, we emphasise the move into employability and employment for individuals and families. It is essential that those three elements are kept in proper balance because, as you correctly put to me, convener, if there is an imbalance in those measures, there is a danger and a risk of creating a disincentive for people to enter employment. For example, there could be and is pressure on me to increase the child payment to a higher level than it currently sits at, but that would not be an appropriate step because it would risk disincentivising employment. A properly calibrated balance has to be established in that respect, and I think that we have found that balance in our proposals.

In relation to the timescale, we are obviously anxious to make as much progress as we can, and we have statutory targets to meet in that respect. The statutory targets are essentially the milestones that we have to achieve, but the Government is working to make progress within an earlier timescale. Given that, comparatively speaking, we have a lower level of child poverty in Scotland than exists in other parts of the United Kingdom, I am optimistic that the measures that we are taking are working effectively in that direction.

Any budget has to balance all those factors. We are—correctly, I believe—taking steps to support people who face significant vulnerability and hardship; equally, we are investing to increase the productive capacity of the economy. For example, the commitments that have been made to sustaining investment in the Scottish National Investment Bank demonstrate the Government’s support of exactly the agenda that you are talking about. I have made specific provision in the budget to fund the Techscaler programme. The enterprise agencies have had budgets that provide them with stronger resource settlements than they would have anticipated in the resource spending review. The expanded investment in our university sector is designed to assist in that respect, too.

The medicines manufacturing innovation centre venture that you talked about will be a collaboration involving universities, private companies and various other organisations. In the nature of that collaboration can be found some of the most substantial opportunities to enhance the productive capacity of the economy.

If you look at the totality of the budget measures, whether it is the support that we are providing to assist new ventures, the investment through the SNIB or the investment to support employability that is about broadening participation in the labour market, you will see that we are taking a range of measures to ensure that Scotland is an attractive place for investment. The data speaks for itself in the sense that, outwith the south-east of England and London, Scotland remains the most attractive and successful destination for inward investment of any other part of the UK.

Discussions on the local governance review are part of the invitation that I have made to local government to work with us on constructing what I have described as a new partnership between national and local government to work collaboratively on shared endeavours, which is what we did on the Covid recovery strategy. Inevitably, that will be part of those discussions.

We will simply have to look at that on a project-by-project basis. We need to see what price estimates are coming in for projects and make a judgment on the nature of the sustainability of those projects. That will be an on-going consideration during the year, but it is important that I flag up to the committee at the outset that that is a material consideration in how we proceed through this period.

I am mindful of the fact that there will be wider considerations to be borne in mind—a point that Michelle Thomson has made—about the importance of constant attention to the affordable housing challenge. It is an important point, and one that will weigh heavily in decision making and determination on these points. As we speak, commitments are being made in relation to affordable housing projects in the current financial year, despite the fact that we face enormous external pressures.

Those are technical challenges. My officials wrestle with such questions, as does the Fiscal Commission. We depend on the commission’s final view on behaviour change—as I said to the convener, it is right and appropriate that I depend on the commission’s conclusion.

I was finance minister for many years and have come back into the area after a bit of a gap, and I make the observation that the arrangements are a great deal more complex than they were when I left the role in 2016. The issue that you put to me is just one example of an area where there is a need for a more sophisticated understanding of the choices and decisions that people make. That issue is being constantly addressed, to try to ensure that the work is of the highest possible quality.

Of course, we are talking about predictions and assessments. There will be outturns, and we will see the validity of some of those judgments in due course.

I have not built assumptions on pay into the budget. I have undertaken—using the most careful judgment that I can deploy, by looking at the challenges and pressures that exist across the public sector—to look at what the best distribution of public resources is and, obviously, judgments about pay have to be made within the parameters that are set by those judgments.

That depends on where we end up in this financial year, because I have an expectation—or, perhaps, a prediction—about where we might end up during this financial year, and as I have said to the committee a couple of times today, I am not in a position to see that in balance, so part of the sum that I have not yet been able to reconcile will involve an assumption on certain pay deals. For example, the difference between 2 per cent and 5 per cent for the teachers’ pay deal will be in my contingency element, which I have not yet resolved. If I get to the end of the financial year and have an underspend, and there is the difference between 2 per cent and 5 per cent for a teachers’ pay deal, then that that will go into the carry-over, but if I have not been able to balance this year’s budget, then that money does not exist.

The current Prime Minister.

Michael Gove—I think; it was either him or John Glenn, the Chief Secretary to the Treasury—made it clear to me that they were not pursuing the plethora of investment zones. It was going to be a much more focused proposition. That dialogue is under way between us. We are not in a position to share any details about where that dialogue has reached; it is in the very early stages.

What I am certain about is that the proposition that was available in September is no longer available and it will be a much more focused proposition.

However, it would be fair to say that the sum varies, depending on the assumptions, from about £200 million to £500 million.