Chamber and committees

Thank you very much—that is a brilliant question. When the NSET was published, I made the comment that, with a 10-year strategy, there were elements of risk, because none of us knew what the next year would hold. When we reflect on the past two years, we can see that there has been quite a lot of turbulence and change. There is an element of risk attached to anything that you put down in the NSET as fact. That is why it was so important, in this year’s programme for government, to refocus on what we will do in the coming year that is in the spirit of NSET.

I will ask whether any of my officials want to come in on the green industrial strategy. By the time that I came into office, the strategy was drafted and ready to go. My main changes to it were about focusing as much as possible on action. That meant taking what the green industrial strategy contained and asking, “So what?” and “What does that mean?”

My understanding of the green industrial strategy was very much that it was a prospectus approach, so its audience is those who are interested in or open to doing business in Scotland and considering making investments. It needs to sit alongside other documents. I see the NSET document as being owned by everyone, whoever you are—whether you are a local councillor, the First Minister or somebody who employs people in Scotland. It is a national document that gives us a northern light for the next 10 years.

Within that approach, we then publish more focused documents or strategies. The green industrial strategy was punchy and pointed. It was written for a potential investor audience rather than for all our other audiences, and it must sit alongside other documents.

I wonder whether somebody else wants to speak to the process or how the strategy evolved, because I was not involved.

My portfolio—perhaps uniquely in Government—is one of the few that can generate revenue. I agree that investing through the enterprise agencies and the Scottish National Investment Bank is a means of, first, generating more medium-term immediate returns and, secondly, supporting a growing and prosperous economy more generally.

I agree with the premise that there is a difference between supporting the enterprise agencies in their current form and giving them the capital for them to be able to invest in other organisations. In recent years, Scottish Enterprise, Highlands and Islands Enterprise and the Scottish National Investment Bank have made a number of extremely good investments that have delivered returns for them. Those returns are immediate but, more generally, they are a means of delivering overall prosperity.

I strongly believe in listening to stakeholders but also in basing policy decisions on evidence. The First Minister has said, and I repeat, that we cannot continually raise tax.

You have raised the issue of the differential, which is key in a devolved context. I point to the evidence. We know from the HMRC figures that there has been net immigration to Scotland of, on average, more than 4,000 every year since tax was devolved. The member will say that the figures do not cover this year, and he will be absolutely right—although, to be fair, he has been saying that the differential will have an impact for all the years for which we have evidence. The evidence matters.

I also point to the data that was released just yesterday on Scotland’s population: it is a matter of great encouragement that it rose faster in the year up to mid-2023 than at any time since the 1940s. National Records of Scotland said that the main driver of population growth over the period was people moving to Scotland from other parts of the UK and abroad, which, again, illustrates the fact that we have net inward migration.

We must balance all the many reasons why someone would choose to live in Scotland. Although tax clearly plays a role, people take much broader decisions in the round about the general cost of living, the resilience of our public services, the support from Government and other parts of the public sector, and the economic activity that is happening here. All those are reasons to celebrate the fact that people are choosing to move to the country.

Michelle Thomson is absolutely right to say that the wider UK environment is a big determinant of what happens in Scotland. We know that there are challenges with productivity, which are linked to private reinvestment and investment in innovation. We want to encourage as much of that investment as possible. That is a UK-wide challenge and a UK-wide trend. How we are perceived internationally has a massive bearing on that.

I know of a number of major corporations that have previously been active in the UK but which left a couple of years ago for various reasons. When we have engaged with those corporations, they have said that they are sympathetic to what the Scottish Government is trying to do, but, at the end of the day, we sit within the wider United Kingdom, which will have a bearing on what they can and cannot do.

What Rachel Reeves does with the budget in October will matter massively in terms of incentivising the reinvestment piece. How she will use the tax system to incentivise reinvestment and how she will ensure that the UK as a whole is considered to be open for business will matter. That will work either in favour of or against what we are trying to achieve.

The other big issue is labour shortages. Today, RBS said that hiring activity has surged and that job creation has reached its highest level since May 2023. That is positive if the workforce is there, but if there are constraints on the labour market, which we know there are, employers will continue to face staff shortages. In September, 24.7 per cent of firms reported experiencing a shortage of workers, although that is lower than the average rate over 2023, which was 33 per cent.

Those macro trends and issues clearly have an impact. There has been a lot of speculation about how Rachel Reeves might adjust debt and accounting rules to allow greater capital and infrastructure investment. I would welcome such a change and the flexibility that it would bring.

Financial transactions grew considerably under the previous Conservative Government. They were a very helpful resource for us in housing, as your neighbour on the committee, Willie Coffey, will know, and they were a means for us to significantly capitalise the Scottish National Investment Bank rapidly.

Financial transactions are a loan mechanism, as you say, so they are not capital; they must be returned to the Treasury at the right point, but they allowed us to extend the reach of our capital. Last year, they were cut—if memory serves—by over 60 per cent, which was a huge hit in one year. Taking on board that hit in one year was a mammoth task for all the housing programmes and the Scottish National Investment Bank programmes that were explicitly reliant on financial transactions. That required us to redivert capital from elsewhere to continue to support those programmes.

We do not know what Labour will do with financial transactions, and we do not know how it feels about financial transactions. It is clear that there will be more consequentials if the UK Government increases what it is doing on housing. At the end of the day, in order to capitalise the Scottish National Investment Bank we want to use capital, but there is a concern about rediverting capital from new schools, hospitals and roads to the Scottish National Investment Bank, so we will have to weigh that up.

I think that we are, but I note that there are two big drivers of the short-term decision making. The first is the nature of the funding. We need, once and for all, to get beyond the year-to-year annual budget setting; I am hopeful that the UK Government might help us in that. Our local authorities need it, and we in Government need it. If we could get a really decent spending review from the UK Government—I think that the review is coming next spring—that could give us long-term certainty on funding and it would be much easier to plan for the longer term.

The second driver has been the number of short-term challenges with which we have been grappling. Emerging from the Covid pandemic, which in itself was a short-term emergency shock, we have then had the cost of living emergency shock and a number of additional pressures that are driven by the inflationary environment, and which have meant that we have had to take immediate decisions.

We have the inputs, which is the funding position, and the outputs, which is the demand. If we can get an element of stability and get through the challenges, and if we can work collaboratively with the UK Government—as we are doing right now—on the longer-term points, that starts to set us up to make those decisions.

I will make another brief point. Shona Robison has had to make very difficult choices, and I know that Michael Marra has been scrutinising those decisions and holding us all to account for them. However, if we can make some of those difficult decisions now, that sets us up to be able to think about funding for the longer term on some of the biggest and most impactful changes that are required to give others longer-term stability with regard to what actually works.

No, because I think that we are making those decisions. That resource spending review was published in 2022, and I still stand by it; I know the amount of work that went into producing it. Nevertheless, it was published immediately prior to the emergence of double-digit levels of inflation and pay deals that mirrored the rocketing cost of living. Good grown-up Governments do not simply make plans and then stick their fingers in their ears and ignore what is happening around them. Good Governments are conscious of what is happening while sticking to the long-term ambitions of their plan.

In the past few months in particular, Shona Robison has made difficult choices to set us up for the long term, which is actually very much in the spirit of the spending review that I published in spring 2022.

Let me take on board the first half of your question, which was on how committed we are. I will come on to that.

I challenge again the idea that the consultation should have been broader—in other words, about our doing more things. That is what sits uncomfortably with me. We should have a streamlined and focused approach, which is ultimately much easier to embed and much easier to measure. The proposed revisions that we have made will enable us to streamline and focus the work that we are doing.

On the consultation itself, we have made changes where there was a strong evidence base of the need for change. We have introduced new outcomes—you will know that there are new outcomes on care, housing and climate—in areas where we had significant support to make changes. On the flipside, some stakeholders have cautioned against increasing the total number of outcomes, which goes back to my point about having a streamlined and focused approach.

You asked at the beginning about the extent to which the NPF is embedded in the Government. In any sort of political cycle, in the tidal waves of politics coming and going, there will always be pressure to lift our eyes off the outcomes that we have set out in the national performance framework. During my time in government I have seen an increasing awareness of the national performance framework and an increasing desire to align our policy work with it.

That has been most visible in finance and is most visible when it comes to the budget. It has meant that there has been very stark conversations about where the national performance framework outcomes clash with one another, because at times they do. At times Government, and indeed Parliament, has to make a conscious choice about what it is going to focus on, and sometimes you see that.

I just talked about two new outcomes on housing and climate. I am in Shetland, so I will use this example. I was told yesterday that the council here has a choice to make. Should it decarbonise the houses that it already has with the money that it has, or should it build more houses? Let us not pretend that all these decisions are easy, and let us not pretend that there are not still further questions to answer when it comes to embedding all the national performance framework in our policy work, because I do not think anyone would disagree with the picture that we are painting with the national performance framework. We would all like to live in a Scotland where all those outcomes are met, but the business of Government requires us to start with those outcomes and then figure out the most effective way of delivering them through policy.

To my mind, economic growth it is not an end in itself. The end is the outcomes that are captured in the national performance framework. When we talk about economic growth, that is about making Scotland more prosperous and fairer, and it is a means of delivering against our environmental ambitions. It is a means to an end.

I would be reluctant to embed economic growth as a national outcome in and of itself, as that would be confusing means and ends. We do not celebrate economic growth as an end in itself. I want to live in communities where there is fairness, where everybody is paid a fair wage, where there is no fuel poverty, where there are better health outcomes and so on. I could go through the whole list, but I will not.

That is what the UN sustainable development goals are about—ensuring that there is fairness and equality across the board. I would far rather that that fairness was a result of people having high-level incomes, and that is where we need more economic growth. However, that is not an end in itself; it is a means to the ends that are captured in the national performance framework.

The general theme of all my comments this morning is that I am not minded to make changes for their own sake. I will make changes that mean that we are better at delivering the national outcomes. To my mind, changing names does not help anybody, so changing the name of the framework, as has been requested, would not be one of my top priorities.

We have got strong branding around the framework, which has been built up since 2007. It is a key part of some of our international work. The engagement that we have had with other Governments, in terms of how we have developed the national performance framework and how we use it for policy work, is aligned with the name as it stands. If I thought that changing the name would deliver more fairness to somebody in the country, I would be more persuaded, but I am not.