Chamber and committees

Thank you for that. I will now open the meeting to colleagues around the table. The first to ask questions will be Liz Smith, followed by Daniel Johnson.

Okay. I am just wondering why the Treasury Committee expressed such great concerns. It seemed to be of the view that that would not happen and that there would be a significant reduction in funding, and the Welsh Government’s analysis backed that view.

I think that colleagues will want to explore that a little further, but I will move on.

The UK Government’s shared prosperity fund is intended to replace, from April, the European Union structural funds that have been lost as a result of Brexit. However, the Scottish Government has yet to receive any detail of how much funding will be allocated to Scotland, and the reality is that the Scottish Government has not been consulted and nor have Scottish ministers had any role in investment proposals or decisions on matters that are devolved to the Scottish Parliament. New guidance on the shared prosperity fund offers no evidence of respecting devolution or acknowledging the Scottish Government as an equal partner. Why?

When the levelling up fund was launched, which was less than a year ago, local authorities were given a very short window in which to prepare bids. I know that there was a big panic in my area to get the bid together. There was a meeting that involved the chief executive, me and the MP—who happens to be my wife, so there was not really any difficulty in getting co-operation. Although the local authority has a different political tint, we all agreed absolutely on the priority for our area, and we secured significant funding, for which we are very grateful. However, what would have happened if the MP had taken a completely different view from mine and that of the local authority, for example? There is a suspicion, given the documents relating to the process, that MPs in effect have a veto. I want you to address that issue specifically.

If you give local authorities only three or four months to prepare bids, it makes things very difficult for some smaller authorities. I know that they can share resources across boundaries, but sometimes they might want to invest only in their own area. They might not have the necessary in-house capacity, which will put them at a disadvantage. Smaller and poorer authorities could struggle in such circumstances. Did you really, in all sincerity, believe that the timescale that was given for the first allocation of the levelling up funding was adequate to ensure that the best possible bids were put together? You might want to rethink that and make more time available in future.

I have spoken to the chief executive since the award was made last October, and he has said that, even though four months have elapsed, there is no money yet. There are a number of hoops to jump through, including a final business case. One of the issues with the funding is the amount of bureaucracy, which is ironic given that the whole purpose is to try to minimise that.

I realise that that was a fairly convoluted question, secretary of state.

Okay. I want to move on to another subject that we have touched on a wee bit. The levelling up funding white paper explains that the UK Government is to embark on

“a process of sustained and systematic engagement and consultation with a wide range of stakeholders, including devolved administrations, on the White Paper.”

It states:

“We will be setting out further detail on a number of these policy commitments in future publications. In addition, we will introduce legislation to Parliament to underpin in statute the changes fundamental to levelling up, alongside wider planning measures.”

We touched on Audit Scotland. In the legislation, will Audit Scotland have a formal role in looking at how effectively funds are spent in Scotland?

We are all pussycats up here, you know.

I thank you formally for coming along in person, which is really important to the committee. We really appreciate people making the effort to do that. I know that you could have spoken to us virtually, but that would not have had the same impact and we would not have been able to scrutinise quite as effectively. The committee has an important role to play in scrutiny, and we look forward to working with you and your colleagues in the months and years ahead. Thank you very much.

I hope that they will be reassured by that. As you will understand, what has made so many organisations nervous is that, up until this meeting, they have not had any communication. I understand that they have tried to communicate with your department but they have not been able to receive the kind of assurances that you have just given me, which is why they have contacted me as convener of the committee.

Moving on, I note that the Scottish Council for Voluntary Organisations says that it remains “in the dark” about how the UK shared prosperity fund will reach its sector, which has benefited greatly from European funding over the years. How does your department intend to engage with Scotland’s voluntary sector at the strategic and delivery level to maximise the impact of the UK shared prosperity fund?

That exhausts questions from members. I have a few more to wind up, but not too many, and I will give you the final word, secretary of state.

Following on from John Mason’s question about inflation, I note that the prospectus for the levelling up fund, which was published in March 2021, explained that

“Once funding awards are decided, relevant local institutions are responsible for their delivery.”

It states:

“Further contributions from the Fund will not be provided to meet cost overruns after funding has been agreed.”

That was in March last year. Is there an update on that position? You seemed to hint in your answer that there is a possibility of flexibility. We are now in a situation in which we could face 7 per cent inflation, and I am concerned about sustainability. We do not want to have projects that are 80 or 90 per cent complete and end up with white elephants because there is no money available to finish them. It would not help the UK Government, local authorities, the Scottish Government or whoever if that was the case.

Are you telling us that that position has softened? You talked about fiscal discipline, which we all accept is important. However, are you saying that that is no longer written in tablets of stone, as it appears to have been in March last year? I appreciate that the inflationary situation may not have been envisaged a year ago. We might say to people that they just have to manage 2 per cent inflation, but we are getting to 7 per cent, and who knows what the impact of today’s conflict will be? How will that be managed?

I think that that is an important caveat. In effect, you are saying that you will look on an individual, project-by-project basis to see whether an increase is justified in certain circumstances.

Welcome to the fourth meeting in 2022 of the Finance and Public Administration Committee. Daniel Johnson joins us remotely and should indicate that he wishes to join the discussion by typing R into the chat function in BlueJeans.

We will consider the Budget (Scotland) Bill at stage 2. Before we turn to formal stage 2 proceedings, however, we will take evidence on the Scottish Government’s response to the report on the Scottish budget 2022-23. We are joined by Kate Forbes, Cabinet Secretary for Finance and the Economy. Ms Forbes is accompanied by Scottish Government officials Dougie McLaren, deputy director, budget, pay and pensions, and Ian Storrie, head of local government finance. I welcome our witnesses to the meeting.

Members received copies of the Scottish Government response yesterday. Before we move to questions from the committee, I invite Ms Forbes to make a short opening statement.