Chamber and committees

Absolutely. My entire objective is to grow the Scottish economy, ideally faster than the UK’s, to ensure that people are in work and have well-paid and secure employment, and to ensure that we are more productive as a country. In that, from an economic perspective the budget needs to be seen alongside our other work. It is not just money that drives economic improvements: a wider policy landscape enables businesses to take risks and entrepreneurs to flourish and prosper.

However, we cannot get away from what the drivers are of, for example, income tax performance. We know that the Scottish economy is disproportionately exposed to the oil and gas sector. I am not passing judgment on that; it is just a fact. On volatility in the oil and gas sector, we know—irrespective of what any politician around the committee table or anyone else thinks about the future of oil and gas—from having been exposed to the sector that there being more redundancies has a knock-on impact on income tax. We need to understand the key drivers in such economic exposure, which, in turn, affects income tax performance.

There are two ways of resolving that. One way is the fiscal framework. I am pressing to ensure that the framework better mirrors the Welsh fiscal framework so that it takes into account the nature of the Scottish tax base.

The second way is to ensure that all sectors in Scotland are prospering. Lloyds Banking Group and PwC recently said that Scotland is already, and will continue to be, the place in the UK for green jobs. If we create green jobs and ensure that we attract talent to Scotland, that talent will contribute to the public coffers, which will result in an overall net benefit to the Scottish budget.

I reinforce that I absolutely agree that we cannot look at the budget independent of our economic aspirations for Scotland.

I will bring in Ian Storrie, if that is possible, to speak to what the settlement and distribution group does. It is a fairly standardised process.

The risks are significant and are exacerbated by Covid. The medium-term financial strategy that has just been published would not necessarily have taken into account the specific impacts of the omicron variant. The OBR would certainly not have taken that into account; I do not know to what extent the SFC would have done so. The forecasts were made pre-omicron. We have already had to make new funding available, and there is uncertainty about the extent of the impact of omicron. If it leads to a need for drastic measures further down the line, that will have an economic and financial impact that we will have to manage from within our own budget. That is a challenge.

That takes us back to my point about having the tools to deal with unexpected risks. No one—not even our forecasters—has the crystal ball that would be required to figure out precisely how omicron or other variants might unravel. We are absolutely dependent on the UK Government for additional funding. If we make that funding available from within our own budget, that puts at risk our ability to come to a position of balance by the end of the financial year, and I am required to be in balance by the end of the financial year.

There are huge risks, without our necessarily having the tools to manage them, which is why the period since the budget was passed has been hugely difficult and very busy as we have tried to figure out how we can squeeze any more funding out of our own budget to help businesses.

Again, I will pause and see whether anybody else wants to come in on the point about managing risk. It is probably unlikely, but one of my officials might want to add a little more flavour.

That is a very fair question. I return to what I think is an unfair distinction between the core and overall settlements. The figures from COSLA do not factor in the overall settlement. A lot of what is in the overall settlement is very much in the prevention space. I know that, if more money goes on social care, we are relieving pressure in acute health settings. I fought very hard in this budget to ensure that a fair share of the health and social care consequentials go to local government, because it deserves a fair share of those consequentials—they are not just health consequentials; they are health and social care consequentials.

You mentioned obesity, which is a good example. Take free school meals. I know that local government is as committed as we are to ensuring that children growing up in poverty have a nutritious diet. Doing that relieves pressure on parts of the health system.

You cannot just ignore the overall settlement. Once things such as enhanced funding for free school meals are included, we are talking about a cash increase of about £917.9 million, or 7.9 per cent, which is a real-terms increase of 5.1 per cent.

As part of the overall settlement, we need to be clear that those are shared priorities. That does not take away from some of the pressures that are in the local government settlement, but every one of my cabinet secretary colleagues and every public body is telling me about the pressures that they face. I do not think that any part of the public sector is cushioned from the budgetary pressures.

Yes, and, in doing so, I will also ask whether any of my officials wants to comment on whether a figure for that funding has been included in previous years, which is what you are comparing the 2022-23 figure with.

I will provide a bit of colour. City deal funding is a unique funding mechanism. The UK Government basically gives us a lump sum at the beginning of the financial year and we then manage payments to city deal partners. I am not aware of how the funding for 2022-23 compares with previous years. However, it is important to identify that city deal funding sits outside the Barnett formula; it is factored in differently from other funding, because the money comes straight to us and we then send it straight out to partners.

I do not see that any of the officials wants to come in, so that is probably the closest to an answer that can be given.

You are asking specifically about the money for the north-east transition—is that right?

Do you mean in terms of last week?

This afternoon, the First Minister will set out, alongside the omicron figures and the next steps, what more we might be able to do for business. Most of that is informed by a figure of approximately £175 million that came from the UK Government on Sunday night. That is the £220 million, less the £45 million that was already factored in. That will be factored in this afternoon.

Any other funding that we make available right now is made available at some degree of risk, because it will need to be managed over the next three or four months. It is quite late in the financial year. At this point in the financial year, most of the funding is either contractually or legally already agreed. For example, it is for salaries, local government or legal commitments to do with transport, and it is very difficult to free up. Anywhere that we have discretion, it is about phasing it rather than either stopping something or delivering underspend. It is quite unlikely that there will be any underspends at this late point in the financial year.

That £20 million is part of the £500 million for the just transition fund, obviously. You will appreciate that quite a number of local partners want to have a say on how it is spent—my inbox certainly shows that. We have said that we are willing to engage with them on the specifics of how it should be spent, although, of course, it will be spent on helping with the transition.

Last year, in an agreement with the Liberal Democrats for £15 million of additional funding, we engaged particularly with Opportunity North East on how to allocate that money and I would want to engage similarly on how to deploy the transition funding. We have put the money in the budget and we are now engaging intensively to figure out the best way of deploying it.

It will be as soon as possible. The money needs to be spent in the next financial year, and we are now three months away from the end of this financial year, so the plans have to be determined fairly soon to enable the money to start being spent early in the next financial year.