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.

There is, of course, a huge, quite magnificent vacant site with a deepwater port that has good grid, road and rail connections at Hunterston, which I am sure would be excellent for manufacturing turbines

I refer you to paragraphs 67 and 68 of our report. In paragraph 67, we state that the Government

“faces challenges in managing its budget where there is a limit on the funds that can be carried forward”.

You have already touched on that in some depth. In your response to the committee’s report, you said that you

“agree with the Committee’s assessment on the challenge in balancing the Budget within a reserve limit which represents less than 2% of our funding, and which falls every year in real terms.”

Will you explain the claustrophobic impact that that has on the Scottish Government when trying to develop an effective long-term budget, given the reducing effect of that reserve because of inflation?

I will not probe any further on that. However, I am sure that I speak on behalf of colleagues around the table when I say that we will be really interested in reading the Official Report of this meeting, given the recent discussions back and forward on the £120 million.

Daniel Johnson has a question about unallocated business support.

Those are all the questions from the committee.

I have a question that follows on from those asked by Ross Greer and John Mason and from the heavy criticism that was made of the cabinet secretary’s choices during the stage 1 budget debate. During your discussions with the opposition parties, did they come forward with fully costed alternative budget proposals suggesting where budget lines should increase or decrease to fund their demands, or did they just ask for increased spending, regardless of the limitations set by the Scottish Fiscal Commission?

She said:

“I shared them with her last year and we have shared them with her again this year.”—[Official Report, 27 January 2022; c 91.]

Were those alternative proposals permissible within the funding package allowed by the Scottish Fiscal Commission? If that was not the case, how far outside the margin were they?