Chamber and committees

It is about how we, as a society, operate and utilise our resources. In that respect, I am thinking principally about our use of transport. Transport is a significant factor in the journey to net zero, so changing our activity in that regard is a significant factor in the exercise. There are wider issues to do with resource use and the steps that we all take to ensure that we do as much as we can to support the net zero agenda.

We are working hard to resolve outstanding pay deals. We find ourselves, for example in the context of the health service, in a situation in which some unions have accepted a deal and some are yet to accept a deal. We continue discussions, obviously, and we are trying, to the greatest possible extent, to avoid industrial action. Obviously, there are some other workforces with which we are yet to reach agreement. I simply reassure the committee that we are working actively in dialogue to try to address all those questions.

The difficulty that I face in this financial year is that, as I have reported to Parliament and reinforced to the committee today, I am yet to find a path to balance in this financial year that I can be confident about. That means that the offers that we have made available for this year with the resources that are available are essentially the best that I can make available in this financial year. That is a material factor in those discussions.

Obviously, we will continue our dialogue with the relevant trade unions, but I am significantly constrained. If, for example, I were to offer more money for a particular pay deal in this financial year, I would have to find that money, and that would simply add to the total that I am still trying to resolve in this financial year. There is a real cash pressure.

The one caveat is that the United Kingdom Government has yet to set out its supplementary estimates. I do not know what will come out of that process. As I said, I expect that to be within the next six weeks or so. Obviously, if any relevant issues arise out of that, I will advise the committee of that.

It is pretty clear that every health service in the western world is under colossal pressure. Scotland’s health service is no different but, as has been rehearsed on countless occasions—Liz Smith’s colleagues vigorously resist this point being made but I will make it again—although Scotland’s accident and emergency performance is not as good as we would want it to be, it is better than that in other parts of the United Kingdom. That is one example of how the delivery of public services is better in Scotland than in other parts of the United Kingdom.

Let us take schools as an example. When I became a minister, 63 per cent of pupils in Scotland were educated in good or satisfactory school buildings. That figure is now more than 90 per cent. I am very proud of the investment that we have made in the school estate. Young people are being educated in much better conditions than was the case before with higher expenditure per capita in education than in other parts of the country. I know that this does not suit the narrative of some people in Parliament but, in my experience, young people are getting a fabulous education in Scotland. Yes, it is disrupted because of industrial action, but I cannot spend money that I do not have on pay claims that I cannot afford. I have been candid about that point.

On transport, the Government has invested significantly in expanding the rail network and expanding electrification programmes. We have put in place concessionary travel schemes for older and younger people. The use of the young people’s concessionary travel card has been phenomenal. It has given young people much more mobility and flexibility.

Those are some of the things that people in Scotland are experiencing that are all to the good.

I cannot give a definitive answer, so I had better write to the committee on that. I am obviously looking very carefully at the interaction with the supplementary estimates, which might well have an effect. I suspect that we will have a better idea of the position by the middle of February, when we will be at quite an advanced stage of the budget scrutiny process here. It is unlikely that a spring budget revision will be brought to the Parliament before the conclusion of the budget process—stage 3 of the budget bill—but I will confirm with the committee in writing when I have a better idea of the position.

I am constantly looking at what steps I have to take. I am not doing another emergency budget review, because I have done one already, but I am constantly looking at how to find a path to balance the budget, because it is my legal duty to balance the budget, and I have quite a number of variables to consider. We are not at the end of the financial year or the end of the road yet. We have a long way to go on that, and there are a lot of variables, not least of which is the supplementary estimates from the UK Government.

My point is that I might have a notional allocation of a sum of money to meet a pay deal, but if I do not balance the budget, that money does not exist.

It is important that we do not just consider this as a question about why I chose 1p, because we have already taken a decision on 1p. This is where Professor Roy is absolutely right to say to us that the Government has to make a careful judgment about the degree to which tax divergence happens.

I have to make a balanced judgment—which I am confident in when it comes to the budget that I set out to Parliament in December—that the scale of difference in tax, when considered alongside the scale of difference of the delivery of the public propositions in Scotland around the social contract and the attractiveness of Scotland as a place to live and work, is in sufficient balance to justify the measure that I took.

To go further might take us into territory that would create some wider difficulties for the Scottish tax base and I need to be mindful of the importance of sustaining the Scottish tax base at all times.

We have commitments in the Bute house agreement to take forward discussions on the reform of the council tax, and we will pursue that. There is also the local visitor levy bill, which will come to Parliament, but that relates to an additional form of local taxation.

The Government obviously gives consideration to sources of taxation. However, a point that is relevant to some of the issues that the convener raised with me earlier is that, if we were to develop any new taxes, we would have to seek the consent of the UK Government to introduce them. It is not something that we can just take forward under our own steam.

The committee will recall from the fiscal event or mini-budget—I do not know what to call it—in September that there were to be a plethora of investment zones. When the new Prime Minister came into office, I cannot remember at which stage—

Obviously, that is on a range because a number of variables are involved—

We have some scope in relation to capital activity to address some of those issues, principally through capital borrowing. Obviously, in the budget statement, we set out the intention to utilise our borrowing facilities in relation to capital projects to the maximum. Judgments will be made during the financial year—particularly more towards the end of it—about the volume of actual borrowing that is required, because that is a product of the interaction between individual projects, the cost of those projects, and the availability of funding. We do not want to borrow if we have no need to borrow to support the projects that we have under way. Those sensitive judgments will be made, but we have some ability to address those requirements.

One of the issues that I have to be particularly mindful of in the current period is the possibility of an implication for our capital programme in this financial year from the United Kingdom Government’s supplementary estimates, which we expect to be published some time over the course of the next six weeks. There is undoubtedly a risk that that will restate capital expenditure within the United Kingdom, which could have a negative effect—I cannot see there being a positive reaction, but it could be neutral or negative. I have to be mindful of that in the decisions that I take in the remainder of the financial year.

Dr Brewer made an important point. We want to sustain investment in the capital estate of Scotland.

Another caveat that I should probably put on record in relation to that point is that capital projects are significantly affected by the effects of inflation and the input prices that largely arise from the global turmoil that we are experiencing as a consequence of the war in Ukraine. We are looking very carefully at the cost of capital projects because, in some circumstances, there might be an argument for delaying the commitment to a capital project because the cost at the moment might be so great compared with what we would have ordinarily have expected to be the case, given the exceptional pressure of global input prices and inflation. There is a set of sensitive judgments to be made about whether we should take forward all the capital projects that we would have ordinarily been committed to taking forward, given the effect of price inflation on those projects at this moment in time.