Chamber and committees

I will not come back in on that, but I note that it is an emerging area of scrutiny for committees, as we go forward, to understand the decisions that Governments are making, and how they are made through that prism.

That is helpful.

My only additional question on that relates to how local authorities are key partners here—and three local authorities are involved in the pilot that you mentioned earlier. Local authorities sometimes collect data in different ways. A local authority may make a case to the Government about the particular impact of the just transition in its area. Indeed, 32 local authorities may capture that data in different ways, and it will perhaps be a challenge for the Government to work out where the greatest need is. Will there be consistency in local authority data?

I was trying to put the word “error” in context, which is important. The Scottish Government sets its policies in the context of what it anticipates the next year will be like and on forecasts that are set by the Scottish Fiscal Commission. Any shocks, if you like, to projected income can have massive and speedy implications for the Scottish budget. For example, Justine Riccomini referenced exposure to UK policy changes; I am not seeking to make a constitutional point, because the UK Government should get on and change its policy as it sees fit. Potential deficits increased by £1 billion plus and quickly decreased again because of a UK Government policy turnaround. However, that might not have been the case.

I come to my substantial question. The Fiscal Commission has to project what the effect of potential policy changes might be without having a crystal ball. The Scottish Government has to set its budgets, which are always balanced. That is all within the context of the fiscal framework, which is supposed to allow for a degree of flexibility. A review of the fiscal framework is coming up. Do you think that the time is right to look at it again so that we can ensure that the flexibilities and provisions are appropriate?

That is helpful. I am trying to understand what the Scottish Government can do when it feels that there is a shock to its budget, other than to cut its cloth to achieve a balanced budget, which would mean cuts or tax rises elsewhere.

The Scottish Government has resource borrowing of more than £600 million per annum, which—if my notes are right—is capped at about £1.8 billion in cumulative terms. Once you borrow, if there is a recurring shortfall, there are issues, but can that borrowing be used to make up such shortfalls, or is it only for shortfalls in tax projections?

I appreciate that. Ironically, that would be a forecast error—not a forecast error in taxation, but a forecast error in relation to anticipated block grant revenue. Forecast errors in taxation or social security can be used for resource borrowing, but not forecast errors in block grant adjustments. The fiscal framework could perhaps look at smoothing out such income shocks.

The Scottish Government has a reserve limit of around £700 million—perhaps a bit more—that it can bank for a rainy day, for lack of a better expression. Does that seem like the right sum for the Scottish Government to retain in reserves for such rainy days, or even just to smooth out year-on-year fluctuations? Could that be used to plug funding gaps ahead of taking a more structured view of how you might want to address any structural deficits?

I will put in context why I have been asking these questions. The future committee for social justice and social security will have to get its head around future budgets and budget scrutiny. We are trying to work out what levers are at the Scottish Government’s disposal to plan effectively in relation to future social security spend—the Fiscal Commission has that challenge, too—and whether the fiscal framework can be changed in a way that gives the Scottish Government more certainty in that planning process. Would you like to make any final comments about the fiscal framework that a future social security committee of the Scottish Parliament should absolutely be focused on?

It has been an interesting session. There has been some overlap with the questions that I was going to ask, but I thank Professor Roy for explaining risk in context, because every organisation deals with risk management as a matter of course.

I want to ask about the word “error”. The Scottish Fiscal Commission makes forecasts, and we talk about forecast errors. The Scottish Government’s spend is based on the Scottish Fiscal Commission’s forecasts on taxation and the planned budget is based on forecast demand, and the Government is bound by those numbers. When, in its forecasting, has the Fiscal Commission made an error, in the normal understanding of the word, compared to an error that was made because the rug was pulled from under your feet? That could have been due to a UK policy change or another external factor that could not reasonably have been foreseen within your forecasts.

That is helpful. I should say that I was not seeking to be critical of the Scottish Fiscal Commission—

Thank you.

As Professor Hannon does not want to comment on that, I will push you slightly further, Claire. Are you suggesting that, if the UK Government grants any licences in the future, there should be a clear business case, which should make explicit the impact on the renewables sector, show a clear and direct benefit for the renewables sector, and show how the project would dovetail? If you could elaborate on that, it would be quite helpful.