Good morning and welcome to the ninth meeting in 2022 of the Finance and Public Administration Committee. The first item on our agenda is our final evidence session on the Scottish Government's Resource Suspending Review Framework. Therefore, welcome to the committee. Emma Congreave, Knowledge Exchange Fellow at the Fraser Valner Institute, and Professor David Heald, Professor of Public Sector Accounting at the Adam Smith Business School University of Glasgow. We are going to move straight to questions. Professor Heald, on your submission, you have said, and I quote, enhancing efficiency of public services, improving relationships with local authorities, and ensuring that financial plans are ffiscally sustainable in light of Covid-19 legacy and demographic challenges should be the focus. What does the Scottish Government need to do in your opinion to enhance the efficiency of our public services? That is a very big question. I am obviously not going to say everything that I would like to say in a brief response, but I would very much commend the Scottish Government for wanting to run a multi-year budgeting system. It is pretty obvious that if you do not give public bodies, NHS, local authorities and the private sector and voluntary sector providers to those bodies sufficient warning of what funding is going to be available, you are going to get inefficiencies built into the system. The most important issue in the context of this inquiry is to go back to multi-year budgeting. To a large extent, that has not been possible in recent years because of the timing of the UK spending reviews. In giving people certainty, my view would be that people find it much easier to adjust to slightly lower spending totals if they know what their year two and year three numbers are going to be. That is by far the most important message. The old point that I would make is that in the kind of background reading I have been doing for you today, I have realised that internationally spending reviews are somewhat different meaning than I attached to it. I could very much think of spending reviews as being the Treasury's periodic multi-year multi-year spending plans. Preferably towards the beginning of a Parliament, so it is setting out the public expenditure environment for that period. However, the European Commission and OECD seem to use the term spending review in terms of doing analytical work on priorities, on the efficiency of existing programmes to try to make savings to build to refocus expenditure. What worries me about the spending review that we are talking about now is that the timescale seems incredibly short. The deadline for public evidence is slightly 27 March and the spending review will be out in May. When the UK Treasury does spending reviews, they basically take six months or a year to do the spending review. It is really quite difficult doing analytical work on a very short timescale. What I am hoping is that behind the scenes, the Scottish Government is already doing a lot of the analytical work that will feed into the spending review. I would certainly hope so and I would be surprised if that is not the case. The framework document never misses an opportunity to complain about financial constraints as if they were wholly attributable to present funding arrangements. The tone diverts attention from constraints that might plausibly be relaxed. What kind of constraints are you talking about? Is this, for example, in local government, or what areas, for example, could restraints perhaps be relaxed? In terms of what can be relaxed, I think that getting a multi-year spending review would actually make things much more straightforward for the devolved demonstrations. In terms of specific things, I do not want to get too involved in fiscal framework issues at the minute, but it is very clear that the resource-borrowing powers, the rules about the reserve, are not appropriate to the level of volatility that we are seeing from tax revenues. I have made the point in print several times that what happened after the Smith commission is that the Scottish Parliament traded funding certainty—very substantial certainty—about what funds will become available for tax discretion. In terms of what is happening in terms of tax revenues, despite the fact that Scotland has a marginally higher income tax than the rest of the UK, revenues have come in below the block grant adjustment. There is a very clear argument that there ought to be more resource-borrowing powers and there ought to be more carry-forward. That is obviously linked to the reserve. There are negotiable things there that are achievable. I think that that is well put. John Mason, for example, last week pointed out that Glasgow universities get more in its reserve than the Scottish Government has permitted to keep in its reserve. What is your view on the points that have been raised so far? On the first question, the points that Professor Heald has made on analysis are very important. I am struck from reading through the framework document that there is not much discussion or much of a framework set out about how the analysis that will underpin the spending review will happen. Although I am also sure that there is a lot happening behind the scenes, it is really important that that analysis and evidence is very transparent and understood by all of us on the outside. It is not being done in a back room and it is not replicable or understandable by those on the outside. There is the analysis of additional spend that may be decided upon during the spending review process, but there will have to be reprioritisation of spend. It is as important to understand the impact of removing spend from certain areas of the budget or having real-time cuts to other areas of the budget as it is to understand the impact of new spend. That is a review of spending in Scotland, and it is really important that all of that comes together. I am not confident from the framework document that that will be done and published and understandable to those who are scrutinising the type of evidence. The framework talks about transparency and how it wants the process to be transparent, but that evidence piece that underlines those decisions is where I feel that we may need a bit more than will be forthcoming from the spending review process. Part of that will come down to the fact that there may not have been time to do this in the way that we would hope it would be. My colleagues at the Fraser of Allentary have talked previously about some of the issues with the fiscal framework and the borrowing rules. It is certainly thinking about the reserve as another part of that. I agree that there will be a need to think about those issues in the negotiation of the future of the fiscal framework. You talked about reprioritisation and removal of existing expenditure. Are there any areas that we think that should be prioritised? Fraser Allentary did not put forward particular positions in terms of policies. We want to see consistency in terms of what the Government is saying. We want to see that come through in terms of budget lines. It is very clear to see those links between the two. The prioritisation that has been put into the spending review framework document provides some of that in terms of the prioritisation in terms of child poverty and climate change. I do think that there may be disagreement on whether they are the right things, but that is not what I will cover. It is more that they represent priorities that are spoken about in many other Government documents and are in legislative targets. That level of prioritisation if we then see that follow through to link it to budget lines and say that this is how much has been allocated to tackling climate change and child poverty, that will be a step forward in transparency. As I said, I recall from evidence last week that if there is less money to go to higher education, that will have implications and there may be unintended consequences that may count against areas such as tackling child poverty. It is understanding all those linkages. There is a standard appraisal process that policies usually go through in order to work all that out via various impact assessments. That is something that we would expect the Government to be doing. It is not necessarily that we have particular views on what should or shouldn't be spent on. It is that consistency across the piece that we are quite keen on seeing. I have to say that no-one ever tells us where we should disinvest. The only other tell us where we should spend additional money. When the Scottish Government says what it thinks it should be spent on, it criticises its expenditure priorities, despite the fact that no-one ever says what else it should spend on. Professor Hill, do you want to go at that scene where we should perhaps disinvest in one area and invest more in another? I think that the important issue now is that the Parliament has been going for more than 20 years. The first decade of devolution, there was a lot of money around. The Northern Ireland Fiscal Council has done an helpful analysis of where Northern Ireland spends above parity with the mainland and where it actually spends below parity with the mainland. Very few instances of the latter. During the 2000s, for some example, because of English priorities on education and health, the Scottish Parliament was getting a lot of extra money. The above parity spending in Scotland is actually quite high. It is not that those priorities are necessarily wrong, it is the fact that they divert spending from other programmes because there are no Barnett consequentials coming in respect of some of those programmes. I think that this is the time that Scotland should be taking stock of where it is. What I would like to see out the spending review is serious data on what the future spend is going to be over five or ten years on the above parity programmes. There are obviously several examples. No student fees, no prescription charges, no bridge tolls, no hospital parking charges. I am not arguing for any of them. I am just saying that we ought to know how much they cost on a consistent basis so that we can actually see the extent to which we are going to have to divert Barnett consequentials to such programmes in the future. It is time to take stock, which goes back to my earlier point. The timescale seems incredibly tight for such an exercise, but I think that the committee should be asking for such an exercise, even if it is not part of the spending review. Obviously, the Scottish child payment being another obvious one. Indeed, some of the reserved areas that the Scottish Government mitigates, such as the bedroom tax and so on, but I will move on a wee bit before I let colleagues in in a minute or two, which is basically, as you say again in your submission, Professor Heald, you talk about the UK public finances being unsustainable on present policies. You talk about the tax measures such as health and social care levy adding to efficiencies and inequities, rather than resolving them.  How do we remove around that in terms of the review? What can we do as a Parliament, given the bigger picture in terms of the UK finances? There is a limit—this is outside the executive powers of the Scottish Parliament—but the UK desperately needs a serious discussion about tax. The Mili's review in 2011, organised by the Institute for Physical Studies, tried that and it basically just fell on fallow ground, austerity dominated that decade. If you look at the interaction of national insurance contributions with income tax, it creates totally perverse incentives. The UK as a whole has to think about how big it wants the public sector to be and then show the willingness to raise the tax revenue to fund that, whatever level that is. However, one of the difficulties that we once got with the Scottish income tax is the interaction of the higher income tax threshold in England becomes the national insurance higher limit, after which the national insurance goes down. You get completely perverse consequences around what I would regard as a very sensitive part of the income distribution. One of the things that we are learning about the Scottish income tax is that Scotland depends very much on basic rate taxpayers and on the lower part of the higher rate tax pann, not having a lot of people on very high incomes paying the Scottish top rates. The national insurance levy is simply a way, pioneered by Gordon Brown in the 2000s, having a tax that is not called a tax because it seems to go down strangely with a public as better PR, but it creates all sorts of complications. Within the devolved settlement there is relationship between what the UK does and what the Scottish Government does. The point in my memorandum is that the national insurance contributions were completely the wrong instrument. I can understand that the Treasury wanted to send out a message that you cannot have higher public spending forever without having higher taxes, and I approve that message, but I think that that tax was the wrong tax. The circumstances since in terms of the growing inflation risk and specifications about energy strengthen my view on that. The national insurance is perceived more favourably because people think it in terms of the old stamp and all that whereby it actually went directly towards your pension. We all say that we are in favour of transparency, but it makes me worried when we exploit public ignorance. Yes, I understand that. That is a good way of putting it. I am going to ask Emma a question, which I will then ask a professor to wind up on, and then I will move on to colleagues around the table. Emma, one of the things that Professor Heald says in his submission is that an important feature of the 1999 devolved fiscal settlement was a relatively clear distinction between functional expenditure, which was devolved, and that which was reserved in the aftermath of Brexit is blurring the distinction, and that weakens the lines of accountability. Is that something that you would agree with? It certainly feels more of a grey area now on some areas than previously was the case. It is difficult at this present moment to know the extent of the threat, I suppose, because it has been relatively small pockets that have bubbled up over the last few years. There have been bits on city deals that have had funding from both the UK Government and the Scottish Government. Since Brexit, as you say, there have been changes to the way some of the funding is distributed directly from Westminster. Part of the problem here is that it becomes very political very quickly when you start looking at this. We need to understand the scale of the issue in terms of the amount of money and keep it in context in that way. It is already a very confusing state of affairs with the way the fiscal framework operates, the way budgets operate, reserved and devolved spend. There are grey areas in the social security world, in terms of what the Scottish Government can do on devolved policy and spillovers into reserved areas. It is becoming a lot more complicated. The move into some more direct funding from Westminster in Scotland is adding to that. All of that threatens the being able to comprehensively understand where all the money is coming from and all the implications of Scottish Government decisions on spending in Scotland. It is an issue that I am not entirely sure if there is an answer to that to make it simpler. We just have to find our way through it and understand that many of those decisions will have a political angle to them. Try and understand it from a fiscal perspective rather than getting too caught up in the politics of it. I will resist the temptation to try and write an answer myself, but Professor Heald, you go on to say in the same paragraph that this encourages games of credit claiming and blame shifting, and it makes it more difficult for the Scottish Government to set priorities. I mean that my political position is quite clear. I have always strongly supported devolution. I thought that the division between reserved and devolved was a sensible one, and I do not think that either politically or in terms of accountability that actually bullying that distinction is a good idea. The other point, of course, is that English local government has been plagued by being part of a bidding culture. Basically, block grant gets taken away and you then have to bid for lots of different pots. On a purely practical issue, the structure of Scottish local authorities of 32 local authorities does not fit well into some of the bidding. The problems that we have in Scotland are not confined within a particular local authority area. There are obviously jokes about putting Union Jacks everywhere rather than EU flags, but it makes it much more difficult in the devolved areas for the Scottish Government to articulate clear priorities and be held accountable for that, because there will be other pots of money. Of course, bidding is expensive. Bidding processes are expensive, but the actual costs of that are often completely submerged. However, there are opportunity costs in terms of diverting attention away from their core activities. Thank you very much. I am now going to widen the question session. First person to ask the question is to be followed by Daniel. Thank you. Can I just stay on this theme, Professor Heal, because I think it is a very interesting debate about whether reserved and devolved should, from a philosophical angle, remain separate, or whether there is an economic case to have a slight blurring in order to boost expenditure? I would like to ask you in relation to what you said in paragraph 10 in your presentation where you are saying that that can affect transparency because it is not so easy to see where the money is being spent and, more important, how well it is being used. You mentioned the blame-shifting or credit-taking, and it becomes too much of a political angle. Do you think that there is a philosophical argument to keep reserved and devolved entirely separate? One of the great strengths of the 1998 settlement that was not generally recognised was the clear division of responsibility. In federal countries, there is often big conflict between the federal government and the state or provincial government because of that kind of issue. For example, the Spanish Government can spend in Barcelona. The Canadian Government can spend in Toronto. That causes intergovernmental conflict. I resist the argument that you are getting more money, because the Treasury starts by having a spending envelope at the very top. If the money gets siphoned off into these programmes for spending across the devolved nations, it will come off the total that we get from Barnett. The Treasury sets a total limit. It looks like extra money for the people receiving the extra money or bidding for the extra money, but there is going to be less money for the devolved administrations because less money is going to come through the Barnett channel. Is there a case in your opinion for revising the Barnett consequential formula? No, because it is not in any sense Barnett-relevant, because it has been top-sliced before you actually get to calculating what is going to be Barnett. Barnett only applies where there is spending in England. When you start getting UK programmes spending across the UK, you are outside the scope of Barnett. Can we just take this a little bit further? If that is correct, as it is, when it comes to the request, particularly in a Covid scenario, where we are obviously wanting to increase the amount of money that is available to get ourselves back on our feet in Scotland, is it your view that there has been additional money that has been drawn from reserves? Is it your view that the process of applying that spending has great difficulties if that is at the behest of the UK Government acting on behalf of Scotland, rather than the Scottish Government having that money to be able to disperse it? In terms of the Covid, I thought that the funding system showed a resilience that people might not have expected. The Barnett guarantee was a very sensible reaction to circumstances that nobody had envisaged. I understand perfectly why the Treasury wants to end the Barnett guarantee as Covid goes away. However, in those circumstances, I think that that was a sensible thing. I go back to my point that, if we do not keep the clear separation of reserved and devolved, we are going to get, for relatively small amounts of money, we are going to obscure accountability lines. One of the things that I would hope the Scottish Government will do in collaboration with the UK Government is make it quite clear, publish quite clear data on where that additional money is going. That is very helpful. Taking that down to the relationship between the Scottish Government spend and local government spend, because the same argument that you have just enunciated between the UK Government and the Scottish Government applies for the Scottish Government and the local authorities, do you feel that there is something better that can be done to increase the transparency, particularly when it comes to budget lines level 3 and level 4, about how well we are spending money in local government? Obviously, local government is responsible for a huge number of areas of public services. I do not, off the cuff, have enough memory of the level 3 and level 4 structure of the budget to answer that question, but the point that I would make about local authorities is that, if you say that to local authority chief executives in Scotland, they look at you. Generally speaking, the Scottish Government treated local authorities better than the UK Government treated English local authorities. There is evidence from the Institute for Fiscal Studies about that. In one of its publications, David Iser has a chapter specifically on Scotland. During the hard austerity period, local authorities were treated better, with some health consequentials going to local authorities. It has passed the point that that can be done. Local authorities, as everybody, will have a very difficult few years. I cannot think of a time when there was actually so much uncertainty. There is political uncertainty about what the UK Government will do in terms of the future direction of tax and spend. There are the consequences of Brexit and of Covid, and now we have Ukraine. It is very difficult to see what the future direction of UK tax policy will be. I think that local authority roles can be made easier if we get the multi-level, multi-year budgeting. I very much agree with that. I raise the point, because I think that it is very important that, if we are to improve, as you said, the outset of your submission, if we are to improve the efficiency of public services, we have to be able to measure how well that money is being spent. That is something that often is quite far down the budget line. To some extent, that is the role of Audit Scotland and Accounts Commissioner. When the devolution legislation was going through Westminster, the then chairman of the Public Accounts Committee wanted the PAC to have control of Holyrood expenditure, and the doldur rightly resisted that. The accountability for devolved expenditure is the responsibility of this Parliament. Audit Scotland is an accounts commission of valuable agencies. Can I begin by thanking Professor Heald for his submission? I think that it is a very useful insight into the context and purpose of the spending review that the Scottish Government is undertaking. My reading of that submission is largely that this is the right thing to do, but that, in terms of the document already published by the Government, it perhaps does not go into sufficient detail, both around the context and dynamics. First of all, is that the correct reading of what you are saying? If so, in particular, what you are saying about Covid, could you elaborate on what you think the context over the period of the review that Covid will be creating and what dynamics it should be addressing in terms of Covid recovery, in terms of both economic scarring and what public services it will be dealing with in terms of Covid recovery? It is still quite early to know how much economic scarring there is going to be. There are different views, but the general consensus seems to be that there is less scarring than people expected. However, it certainly will have effects on the structure of economies. One of the worrying things for Scotland is that, when you look at the income tax data, you see that the decline of North Sea oil and gas has significant effects. If you look at the parliamentary analysis that HMSC produces of which constituencies generate most income tax revenues, it is Aberdeen South, which is capital prosperity and financial services, and Aberdeen South, which is oil and gas. However, in the past few years, you have seen a decline in how much more in the index of per capita income tax revenues that the north-east is suffering very badly. Given the fact that Scotland does not have anything like the number of very, very high income tax payers, as does London and the south-east, we are very dependent on well-paid but not extravagantly well-paid people who are actually paying the higher rate. I think that your initial summary of what my concern is. While I was preparing for this session, I read a whole series of Scottish Government documents, medium-term fiscal framework, long-term capital plan. I think that it might have been better if things had been put in a single document with a longer lead time, but I can imagine the work pressures on the Scottish Government officials in the context ministers in the context of Covid having dominated things for the past year. Following up on the point that you were making about, the structural composition of the income tax base in Scotland. In response to the convener, you were discussing about the particular issues around intermediate rate and how that works. I wonder whether you could point the committee to the research that has been undertaken and where we should be looking, because I think that this is a pivotal but under-examined point. Are there things that we should be looking at in terms of that issue? There is a good discussion in the medium-term fiscal framework about the vulnerability of income tax revenues. There is also a document published by the policy document published by the Scottish Government on the performance of income tax revenues in the first year for which there was good data. There is also a very interesting HMRC study. In the end, the working assumption is that, if Scotland puts any more money on the top rate, the actual proceeds might be positive or negative. We don't know. I think that the big issue that is going to come up in terms of the fiscal framework review is that the composition of the Scottish income tax base is not the same as the composition of the RUK income tax base. Of course, one always has to make the qualification that is driven by London and the south east. It is not representative of what happens elsewhere in England. Again, in a similar area, but I have been again examining the context. The whole committee, in fact, was struck by the Scottish Fiscal Commission forecast, looking at employment growth and wage growth and what that was going to do for the medium-term outlook for the block grant adjustment ultimately by income tax revenues and therefore the block grant adjustment, whereby, within the next five years, it looks as though we will be receiving around £400 million less than we would do under Barnett. Likewise, the other aspect that sometimes gets missed in this commentary is also about our social security commitments, the totality of which looks like a short fall of about £700 million. The question is this. First of all, do you think that the documents produced thus far have sufficient focus on that medium-term issue? Similarly, do you think that there is sufficient analysis of the linkages with those things? That is not just an outcome. There are levers available, potentially, that could impact those things, impact the wage growth number of jobs in the economy. Do you think that those are sufficiently examined in the documentation published so far? If you put all the documentation together, yes, not that specific spending review document, but I can understand the difficulty in the context of working through Covid of doing a major job. It would have been nice to see everything in one place, but I think that what we are now seeing in terms of the numbers that you were citing, we are now seeing that the Smith commission was a rushed undertaking, that people at the time, including myself, thought that Scotland had a pretty good deal by being the index per capita method rather than the comparable method. We now know that it is more complicated than that because of the drivers in the composition of the text base. I would just like to ask Emma Congriev a question about child poverty. Given that that is one of the explicit objectives of the review that is being undertaken, we also have statutory targets as set out in law. Given that that is such an explicit and overarching objective, I just wonder if you could provide some context as to how we are proceeding against those statutory targets and whether, including doubling the child payment, we are on track to meet them. You will be aware that, in the next couple of weeks, I believe that the Scottish Government will be putting forward its next tackling child poverty delivery plan, in which then themselves, I expect, will be making an assessment of whether they feel they are on track to meet in the target. We have been thinking about this quite a lot recently, that has been put to one side Covid, which I welcome back to you. If we look at some of the policy drivers that have happened since the statutory targets were put into place, there have been the Scottish child payment and there has been a change made to universal credit, so there was a £20 top at which was temporary, and now there have been changes to the taper rate. Those two policies together will have made an impact on the trajectory towards the targets, there is no doubt. The question is, and unfortunately, as we are discovering even more so, it depends sometimes which model you are using in order to estimate impact. As with any models, there are a number of assumptions that underpin those models, which can give you slightly different results. Using the models that I have access to, along with Jo's Franchi Foundation and others, our best estimate is that we are not on track to meeting the interim or the final targets. However, it depends on what will be announced in the next tackling child poverty delivery plan, and that assessment of that may change. The interest that I have in the fact that it is invested as a priority in the spending review framework is that, in previous years, when the budget has come out, it has been impossible to understand how much money in that budget has been put towards tackling child poverty. We have asked the question many times and tried to do our own calculations. The Scottish Government has been doing something retrospectively, looking back a couple of years, to say how much did we spend two years ago on child poverty. However, what the spending review framework seems to be suggesting is that it will make those links explicit, so you will be able to look at the spending review and the amount of money that is allocated towards tackling child poverty. That will be able to see that in every budget document in coming years. With that, you can do the assessment of, as Liz Smith was talking about, how effective that spend has been, because you will know what money has gone where and you can start to understand its impact. I think that that is in terms of what we have been complaining about the past couple of years. That could be a good step forward and really help that transparency to see if we are on track and whether the spending priorities are the same as the legislative priorities that are set out in things such as the Child Poverty Scotland Act. That is me, but I also thank Professor Heald for name checking the Merleys report, because I have been recommending it to colleagues in private session. Professor Heald, you mentioned a moment ago the need for a UK-wide discussion around taxation, which I absolutely agree with and accept, obviously, that most national tax powers are reserved. We do not have the power to create new national taxes in Scotland, but we do have powers over income tax, LBTT, non-domestic rates, et cetera. We can also create any new tax that we wish in Scotland provided that is a local taxation. We can create new powers for a local government. Do you think that the resource spending review is an opportunity to have not a discussion as comprehensive as what you are looking for UK-wide, but should we be making an attempt at a discussion on taxation in Scotland in the context of devolved constraints through the spending review? I do not think that this is the time for that. There is nothing to stop Scotland thinking about its own taxes. Non-domestic rates are under great threat from technological change. The growth of online sales versus high streets, the nature of capital in the economy, is changing. The attraction of non-domestic rates is that you have steelworks with big plants that are immobile. Non-domestic rates are an issue. I suspect that it would be quite difficult for Scotland to make radical changes in non-domestic rates without that happening at the UK level as well, but there is nothing to stop Scotland trying to take initiative. I understand the politics of it, but I strongly support having a residential property tax to fund local authorities. I think that that is an important part of their legitimacy and autonomy, but to do it on the basis of 1991 values is utterly ridiculous and brings the system into disrepute. I understand entirely why Governments never want to tackle that thorn, but it does bring the tax system into disrepute. If, in the context of a more dangerous world, Covid, Ukraine, wherever else you want to mention, in that context, if public spending is going to increase, as I suspect it will, under demographic pressures, because the demographic pressures are enormous, we need to have a sensible discussion about tax. Much depends on the UK Government of the day, but I still think that the devolved Administrations can also have a discussion. At that point, I would mention that Wales and Northern Ireland have a slightly better record in terms of domestic property revaluation. On your point about 1991, it reminds me that I am in my second term in this Parliament and any tax system based on a 1991 valuation is based on valuations from a point before I was born, which I hope illustrates the point of how tragically out-of-date it is, because I am not nearly as young as I once was. You are essentially saying that it would be useful for us to have that, but what I took from the first part of your answer was not necessarily as part of or as simultaneous with the spending review. That is a much bigger issue. Because of the political difficulties, clearly that is a long-term project. Emma, do you have any thoughts on how we could take forward a discussion on taxation? I ask that in the context of the challenges that we are going to have to grapple with in the spending review that are significant. I find it very hard to imagine how we can close the gap as such purely through savings, purely through cuts, so that a discussion around taxation, either simultaneous with or perhaps in the immediate aftermath of the spending review, is going to be essential. It is just a question of the scope of it, but I would be interested in your thoughts on that. I was certainly very struck by, I think that it is bigger through, in the framework document, the central projection of a £3.5 billion gap between funding and spending by 26-27, so I agree with what you are saying to deal with that through cuts, would be substantial. That is more than the social care budget at the moment. On local government taxation, I did previously work on that quite extensively, and there are a number of ways in which local government could raise its own taxes. I think that there are additional taxes, but we see the things now with the parking levy, which is the start of a discussion on that. Clearly, it is not a straightforward process, even if it is understood that there is a big gap there. On non-domestic rates, as well as the structure of the non-domestic rate system in terms of how it is valued, there are also a range of reliefs that are—it is income for gone, as opposed to spending. I have not been able to check that because I believe that a report came out at 10 o'clock this morning, which was an evaluation of one of those reliefs to the small business bonus scheme that my colleagues at Strathclyde have been working on. That might give—as I say, I am not entirely sure that it has been published, so I will not say what was in it, but that might offer some areas where thought could be taken on some of that. Income for gone. I wholeheartedly agree on council tax. I think that it has been that question for many years, if not now, when. Something has to be done. I think that a Government does need to bite the bullet, and it probably needs to be a Government within its early stages of parliamentary cycle in order so that changes can go through. We can come out the other side before that. It is politically important. I would ideally like that to be part of the spending review, but I do not believe that it will be. I think that we just have to put up with that. Thank you. Just one final brief question. Professor, there is a line in your written submission that jumped at me that the resource spending review should be a planning not a bidding document. Correct me from wrong, but my understanding that was essential is that the finance secretary should ensure that all of her cabinet colleagues do not come back with a dozen different papers saying, here is why my portfolio cannot be cut and needs more money. If you were giving advice to the finance secretary on how to ensure that that does not happen, what would you be saying to her? Everybody has already said that people only come and ask for more money, nobody ever asks for less. I really made something quite different. There were places in the framework document where it just complained about the constitutional settlement and the fiscal settlement. What you do not want is a spending review that is a bid for more UK Government through Barnett or through some other mechanism. One of the points that I made in my memorandum was that it is really important to think about the timescale of a four-year Scottish spending review. That is going to run beyond the next UK general election and beyond the present UK spending review. In the later years, there will be substantial uncertainty, and that uncertainty grows all the time. Inflation risk is much greater now than it was even when I wrote my memorandum. One of the things that I suggested is that there have been times in the past where the Treasury has kept a very substantial contingency reserve. What you want to be able to do is tell health bodies, tell local authorities and all the other organisations that receive funding that you have pretty good certainty about the numbers for, say, year 1s and years 1s and years 1s and 2s and hopefully three. However, things are going to happen. This has been a period of remarkably unexpected events. It is really quite important that the Cabinet Secretary for Finance has a line in the spending review cycle that has holes back money and does not allocate everything. The great difficulty that we are having—to some extent, Covid—has been a part of that. I was looking at the block grant transparency statement that the Treasury publishes, and there have been nine fiscal events since 2015. Now, what tended to happen in the past in more stable times is that you would get a fiscal event that was the spending review, and then you would get minor top-ups at budgets and autumn statements. However, clearly, it is very difficult for the Cabinet Secretary for Finance to have any idea whatsoever what future money will come or potentially what future cuts will come. So, I think that you need a buffer. Now, I know that it is presentationally difficult because, obviously, the Government will want to say that health spending is going up, education spending is going up, but if you do not keep that buffer at the centre, you are going to find it very difficult to actually cope with shocks and to not start taking money away from people in year. Because if people think that they are going to get money taken off them, they will spend in less efficient ways. I get what you are saying, Professor, but, apart from the political difficulties of putting money away at the time when there is huge pressure on budgets at the moment, what we saw in previous decades from UK Governments, for example, was the tendency to have election bribes whereby Governments would have a couple of years of really difficult and unpalatable policies, and then suddenly they would have a big pot of money at the end of those four or five years, which they would say was because their policies were working and they would blow on a pre-election splurge. I think that the difficulty is that it would be seen perhaps the temptation if you are building up this reserve for our Government to say that we are actually four or five per cent behind the polls or whatever. We need to oil the wheels a bit more and say that all the difficult policies that we have had over the three or four years that have been enacted are now working so fantastically well that they have managed to generate additional funding. There are real difficulties in that, not just from a presentational point of view but from the temptations of Governments. When I was in Glasgow City Council, I looked at rent increases and every single year for 40 years the low straight of increase was election year and the high straight was year after election year. I do not think that Glasgow was alone in that. It was a very eloquent statement in the political cycle, but I still think that the point is that even despite those political difficulties that if you get to a position that you tell local authorities and then it just bodies what their plans for four years are and then have to come back and start taking money off them because of some unexpected events. I think that one of the things that we have learnt in the last few years is that the unexpected will happen, but we do not know which unexpected. We have to think about the areas where we are going to have to take that money, and that is the most difficult of all. Douglas, to perform on that show. Thank you, convener. You are so cynical at times. I just want to go into a little bit more about the linkage between the resource spending review and the national performance framework. It is mentioned in your submission, Professor Heald, that there are 81 indicators and that Government has to prioritise those in terms of the spending review. Do you think that that is too many, or is that the right number? It just needs to be focused a bit more on some of those key indicators. I think that it has to be focused on some of them. There is a distinction between saying that some of the 81 indicators are not worthy. You can have 81 worthy indicators, but within the context of a four-year spending plan, in difficult economic circumstances, you cannot have everyone as a priority, so there has to be prioritisation. You do not feel that there is enough prioritisation on all those 81 indicators that are almost treated equally. Is that what you would feel? It is quite difficult to see the link between budget documents and spending review to the national performance framework. Emma, do you have a view on that? Absolutely. I would echo those comments that it is very difficult to read between the two or three, the spending review budgets and the national performance framework. Whether there are too many indicators in the NPF, I am not sure that I would necessarily have a view on that. I think that because you expect the Government to be working to a range of different priorities, depending on the area in which they are and the area of government that they are within, you need to have a broader range of priorities so that each area of government knows what they are working towards and what are the outcomes that they are delivering. Where we often have problems and why we cannot link between budget documents and NPF is that, in terms of the team that works on the budget and the finance teams, they are not given that responsibility for ensuring that the budget document links to the NPF. That is the policy makers in the individual parts of the Government to ensure. However, when the big decision is being made in the finance team, that link does not work. The finance team needs to, in my opinion, have held to account for ensuring that the decisions that are made in those last few days sometimes running up to budget, that there is a direct link through from them to understand how they link to the national performance framework and will impact. In that, there are also statutory requirements for quality impact assessments and for Scotland impact assessments, which often we see are done after the fact, because it is not considered the role or remit of the finance teams to do that. There is a disconnect between finance and budget processes and the NPF, because it is seen as two separate things when decisions made on finance will ultimately impact on the NPF. What would you advise the Government to do then? Would it be almost to have a document that explains the linkages between the reserve spending review and the NPF? How do we get them better and twine? It is a very interesting question. I sit on the equality budget advisory group, which is set up by the Scottish Government, which is chaired by Angela Hagan. A lot of what we do is try to figure out how those kinds of things can be done better. At the moment, on budget day, there is a document called the equality and fairer Scotland budget statement, which does do a lot of that linkaging in terms of linking to outcomes with that quality mindset. However, we all know and agree that it is an after-the-fact document that does not determine policy decisions within the budget. Some of the recommendations of the budget review group talked about moving to that year-long scrutiny and ensuring that some of the decisions that are made on the budget happen during the year so that the analysis can be done. We come up against the fact that the way budgets and spending reviews are done in a very short space of time, and there is not necessarily the time to do that work that is required. It is an issue about timing, but some of the budget review group recommendations have been taken on, and there is this more of a year-long scrutiny. However, when it comes to the big decisions that are being made on the budget and on the spending review, it is still very compressed and a little bit too siloed in order for that to happen. Would you give the Government any advice on how they might intertwine it better? No, I think that Emma's reply covers everything that I would want to say. Another question that I had was about early intervention and prevention. It is really about how the Government can shift that spend from what you mentioned in your submission at housing, for example. It will have an impact on health outcomes. How does the Government make that shift from inputs into output based on instead? Do you have any ideas on how they can do that? Again, it is part of what we would refer to as a standard policy-making process, where you go through an appraisal stage before you make a decision. You go through an appraisal stage to understand what is the impact of a range of options to meet a problem or to meet an outcome. You do not just have one option that will meet that outcome. There are many different policies in different forms that can do that. The part in which you do that appraisal finds out what the unintended consequences are. Part of the issue with prevention, which it features in pretty much every policy document that you will read in the Scottish Government, is quite rightly because it is a very important issue. Unfortunately, there is a lack of investment in evaluation that would allow that conclusive understanding of what is a preventative spending and what is not. If you invest in, for example, free personal care, do we understand now what the preventative impact might have been in terms of, for example, health spending from that? Part of the issue is that we did not put in place a monitoring and evaluation structure at the time that would allow for that to be assessed over time to understand that preventative impact. We could say that across a large range of policies that, if you want to understand prevention, you have to figure out how to measure it. It is the whole evaluation. It is a presentation of where I spend more money on local government, for example. It can save you a lot on health, for example, later on. Every Government probably wrestles with that difficulty, but it has to be done eventually. Absolutely.  There is evidence that links it to poorer health outcomes, poorer educational outcomes. Investing that money in child poverty should link to lower spend on those areas in the future—maybe within the present, in terms of spending on the attainment gap—in terms of focusing on the child poverty work. You do not see that those processes are put in place that will allow you to look at, okay, so this is what we are doing on reducing child poverty. Let us work out what that impact is having on attainment. You do not necessarily see that structure put in place. Part of that is the issue with silos within Government. The child poverty section is very different from the education section of Government, so there needs to be more joining up. The framework document talks about that in terms of joining up across Government, but it does not say how it is going to do that. That would be a key thing. Good morning. I want to ask you a couple of questions, Professor Heal. Going back to your point about accountability, which I have to say was music to my ears. It is something that I have mentioned a number of times with different witnesses in this committee, not least of all recently, Mr Gove, who appeared from the UK Government. I asked him how he would raise Audit Scotland to check on spend that had come in from the UK Government, and he was less uncertain in his response on how they want a paraphrase along those lines. I think that that is an important area that you touch on. However, following on from that, the other important area is trying to, in efficiency terms, attribute a cost to the bidding war that you allude to. Do you have any sense on the cost to local councils in England with what you refer to bidding for UK-controlled resources in a way that has become dysfunctional in England? Have you got any figures that furnish that a little bit more? No, I cannot think of any specific study on that, but one of the things that has happened in England is that English local authorities got under so much financial stress that some of them started doing totally irresponsible things, such as borrowing from the public works loan board at subsidised rates and investing in commercial property outside the jurisdiction. I think that I am astonished that the Treasury allowed such things to happen. I think that bidding systems for small amounts of money as a general matter can actually consume lots of resources. I think that if you surveyed local authorities in England, they would certainly say that. They often complain about the extent to which they have to bid through separate channels. I am a strong believer in block grants to local authorities. Within a broad framework set by the Scottish Government, I very much think that it is much better generally to fund through block grants than to start lots of bidding. In your session with Mr Gove, he spoke about objective criteria that have not been used. However, the trouble is that there are so many objective criteria that you can make your choice of objective criteria when it comes to allocating money. It strikes me going back to that point about trying to apportion some amount to the loss for that bidding. That might be a useful exercise, because I am concerned that that is happening more frequently. I am just picking up on something. I think that you may be suggesting where the differences lie between the UK to the Scottish Government funding and then the Scottish Government to councils in that the Scottish Government is not subjecting local councils to bidding with their universal policies. It is saying that this is a pot of money that has got to be spent in the same way. We are not actually comparing with like in terms of going back to Liz Smith's point, are we? I am not sure the answer to that question. I am trying to explain that from an accountability perspective, money coming in from UK Government to councils is having to be bid for. We have already agreed that that is inefficient with some public expenditure lost through days of that inefficiency. It is not the same as money set aside with the assistance of how councils should spend it from the Scottish Government because it is done on a universal basis. I am just trying to confirm that my understanding is correct. You are talking about money being earmarked. On the whole, I do not like earmark money, but it is much better than having bidding worse. I am trying to make that distinction that it is not like for like in quite the way that was set out. The other question that I wanted to ask you, which I was interested in, you made in point 13 of your submission, just to get a bit more flavour about disaggregating data in terms of distinguishing employment activities, which are not in the public sector in England, and they are. Can you give us just a bit more flavour, because it strikes me this concept of comparing apples with apples? It is very interesting because it is quite an opaque picture when we look at that per capita spend. That is where one has to be very careful. The framework document for the resource spending review has a diagram showing higher public spending, higher public employment in Scotland than the rest of the UK. However, you have to be careful. The activities in Scotland and the public sector that are not in the public sector in England—water—is an example. There is also the extent of contracting out as well. The English local authorities have probably done more contracting out than the Scottish local authorities, so they do not count as public sector employees. Also, in areas such as health and education, there is higher usage of publicly provided health and education in Scotland than in England, so you will get that effect. I can understand why, because of the public sector pay bill, it is an important strategic issue, but you have to be careful in drawing your comparisons. If the public sector is doing things in-house and is doing it better than if it was contracted out or if it privatised water, that is not a bad thing, but you need to understand what the comparators are. I accept your point, because until you have the data, you cannot start to make that assessment. I do not know whether you get anything to add to both areas, but they were my two main questions. On the inefficiencies of bidding, one area that you could look at is that I am aware that a number of local authorities have put out tender documents for work for people to help them to put together those bids. Those are considerable sums of money. There may be an argument that it is good for local authorities to be doing a review of their evidence and data on some of those things, which might help in other areas, but I do appreciate that it does not come at that cost. I am sorry, but that is the only point. Thanks, convener. I have covered quite a lot of ground already, but I will go back to my overall question and start with you, Ms Congrave. Some of the previous witnesses and so on have suggested that the whole spending review is at too high a level and that it needs to be more detailed. What would your feeling be about that? The framework document misses a lot of crucial information, as I have previously said, in terms of how some of the aspirations set out in that framework will be done. A couple of areas to mention that have not come up so far. What happens when priorities have impacts on each other? Two of the priorities are one on child poverty and the other on climate change. There are times when those two will rub against each other. Tackling fuel poverty is one particular area. In order to get homes better heated, you want to subsidise potentially gas boilers in order to improve energy efficiency in those homes, but that rubs up against aims on climate change. What happens when that happens, when there is that kind of divergence in outcomes from some of the priorities? I think that there are areas where it is laid out that it sounds like there is aspirations on transparency but not detail on how that will come into effect. What data and analysis will be published alongside the spending review? What analysis is being done as we started right at the beginning to understand the impact of spending and the impact of reducing spending from other areas? That is key. Working across Government, how can you make sure that there is collaboration across different areas of Government so that you do not have the silo working? In some of New Zealand's work, two ministers from different areas of Government sign up to policies for budgets in order to show that it meets outcomes in at least two different areas. If that is not the case, they are less likely to go ahead with that spending proposal. That kind of detail is missing, and that is worrying because in the heat of the spending review, if we do not have clarity on a process that is going to be taken forward, it will probably be missed. I welcome the intentions of the framework, but it feels that it might be a wish list and I am worried about what we will see come May. Professor Heald, you were in that area. Certainly, when you look at the framework document, it talks about priorities and objectives. Am I right in saying that you are arguing that those are not the same things? I think that the priorities that are stated are just too high-level to general. In the context of four years, the crucial things are to recover from Covid, to recover from Covid and where Covid has beneficial effects in terms of working patterns and so on, where benefits can be gained from what we have learned technologically, for example, in terms of response to Covid, so that they can be embedded in. Improving relationships between local authorities, even though they are nothing like as bad in Scotland as they have been in England, I still think that it is very important that local authorities are very important delivery bodies for the public sector and important democratically as well. In the context of giving a multi-year settlement with a degree of certainty that is obviously going to be coveted by the things that we have discussed, it is actually very important. Certainly, because of the demographic challenges that we face, the public sector has to become more efficient as everything else has to become more efficient. As Ms Congriff suggested, the three objectives could rub against each other a bit. Do you think that we need to set a priority within those three and say which is the most important, child poverty, climate change or the economy in recovering from Covid? I do not think that there are areas where they support each other and areas where they come into conflict. In terms of the Scottish economy, policy on oil and gas is obviously going to be very important. I have already mentioned the fact that lots of Scottish income tax revenues come from the north-east of Scotland. There is already sign of a decline in revenues per capita generated from those areas. Further development of oil and gas rubs against the issue of climate change, although the point becomes that there is a difference between not using oil and gas and actually depending on foreign sources of oil and gas. On another point, you talked about getting the balance of expenditures right as a challenge for all Governments. Are you arguing that there is a right balance between health and local government, or are those just purely subjective tastes? They are not solely subjective, but political judgements obviously come into it. Right in that sense is a bit colloquial, but the point is that there is always a challenge of how you decide. One of the things that we have not talked much about is about the performance of the Scottish economy, because the performance of the Scottish economy will be vital to future tax revenues. Although the issues that we have with the block grant adjustment have to be technically resolved, there is an underlying issue of the performance of the economy. One of the best ways of dealing with poverty and child poverty is for the economy to perform well. People having well-paid jobs is good for the individuals and households and also good for the Scottish budget. One of the other challenges that you raised, especially in a time of fiscal scarcity, is the question of making new commitments as against funding existing programmes. Given that money is likely to be tight for the next few years, should we be holding back on new developments and emphasising more, keeping existing things going? Or again, how do you think we get the balance right in that area? That is a political judgment. On the technical side, I would say that you need to understand the relationship between programmes and the extent to which they help each other. When we get Barnett consequentials for health, because England spent more money on health, we should not assume that it automatically goes to the health service. Health outcomes, as we have already been discussing, can depend on all sorts of things, such as environmental spend and housing spend. I have always been in favour of more transparency about the way that Barnett formulae operated, and I have tried to contribute to that. However, we must not get fixated on the fact that England decides to spend more money on x, so we have to spend those Barnett consequentials on x. However, you would accept that politically it is very difficult— Politically it is very difficult, but there is an educational task for the Government and the Parliament in trying to persuade the Scottish people that health is not particularly given Scotland's health record. Health is not identical to the NHS, so there are other kinds of policy such as taking children out of poverty and getting rid of bad housing are important in improving the health and employability of citizens. Specifically on the point of, should we be focusing on keeping existing services going, or should we be going into new areas? I do not think that it is right to say that uncertainty should make us stand still in terms of looking towards outcomes that have already been legislated for and have parliamentary consensus on. In terms of where there are understood problems, it is right that new ideas and new policies are developed in order to move those things forward. I do not think that we can stand still on climate change or on child poverty. That does not feel an appropriate response to the levels of uncertainty that we have. It really does have to be about reporotisation and understanding where money is being spent well and where it is being spent badly and taking forward that exercise. Given the scale of the difference between what we are expected to come through in terms of funding and what we are expecting in terms of spending, which I think might get worse rather than better, that is the imperative. Standing still, I do not think that it is necessarily the right response. I am a great believer in the evolution and flexibility of myself. That is a concluded question from the committee. We discussed taxation, but what do you believe is a public appetite for, for example, new local taxes? For example, we discussed in the committee the fact that there is a marginal tax rate for people earning £43,000 to £50,000 of £54.25 per cent from April when we add national insurance income tax. For the remaining some that people have, they have to pay VAT, excise duty, council tax, fuel duty, etc. There is a significant squeeze on incomes and, further down the scale, people are also feeling the pinch. Is it not a case that the Treasury is a bit of a surge in income at the moment because we will get fiscal drag? Inflation is actually bringing additional revenue and I understand that Risky Soonak has got about £18 billion more than he anticipated he would have at this time of year, so that, for example, we could even possibly remove the care levy that is being suggested that would be fundable. Given the inflationary pressures, etc., and how people are feeling the pinch particularly from energy, etc., foods feel, do you feel that this is the right time to consider additional taxation of any kind? I think that you are absolutely right to emphasise that 54 per cent plus marginal tax rate on people of relatively modest incomes. That is a very serious problem that is partly due to the interaction of the national insurance system and income tax thresholds. I do not think that there is ever an appetite for more taxation, but there are some taxes that are better than other taxes. Relying on fiscal drag is a serious mistake. Fiscal drag will bring more people into higher tax rates, and when you get big jumps in the marginal rate, that is extremely undesirable. The political problem is that the public appears to understand tax rates, but they do not understand the effect of thresholds. If the chancellor put up income tax rather than national insurance, people would understand that it was going up. The fact that you freeze personal allowances and the £100,000 for withdrawal of personal allowances, freeze the £150,000 bottom threshold for the additional rate or top rate, people do not necessarily know. I do not think that there is ever an appetite. There has to be a debate about the spending pressure. People want more spending just like the organisations that come and give evidence to their committee. People want more spending, but people do not want to raise the tax revenues and do not want to put forward tax proposals. It is important that, given the external uncertainty and the demographic challenges that we know we have, social care has been a major policy failure across the UK. There could be more demands. That is the central conandrum that you point to. The final word will be with you. It is on the same issue. Do you agree that the issue of fiscal drag with both the UK and Scottish Governments has introduced for next year an effect? I think that this comes back to an earlier point, Professor Heald, that it may be taking advantage of people's ignorance of how those systems work. I would much prefer a situation where we are more straight with people in terms of the implications of decisions being taken. I agree that there is a generally held assumption that people do not want to pay additional tax. If you ask the question like that, I think that it would be the general impression. In terms of understanding why people may need to pay more tax and why different parts of the income distribution are being asked to pay more tax, the cost of living crisis will affect some families to a huge degree, and others will not impact very much at all. We need to understand that there are very different experiences across the income distribution. It is often felt to be quite black and white that putting up taxes is bad for everyone, but the implications of that spending have redistributed benefits. It is a piece about education again. It is about transparency and not trying to hide decisions where they have implications. I think that we would all be a lot better off in the long run if we were all a bit more clear on why we are paying tax and how much. People are always quite happy for other people to pay more tax even though they themselves are never so enthusiastic. With the exception of John, he is always keen to pay more tax. I thank my colleague and Professor Heald for their evidence today. It was extremely helpful. The committee will consider an agree response to the Scottish Government's consultation on the resource spring review framework, our future meeting. We will now take a short break before we move on to our next item of business, which is a consideration of two pieces of subordinate legislation. Therefore, suspend this meeting until 11.21. The next item on our agenda is to take evidence from Minister for Public Finance, Planning and Community Wealth on the Budget Scotland Act 2021, amendment regulations 2022 draft, the so-called spring budget revision. Mr Arthur is joined today by Scottish Government officials, Scott Mackay, head of fiscal management and strategy, and now Caldwell corporate treasurer. I welcome you all to the meeting and invite Mr Arthur to make a short opening statement. Thank you, convener, and good morning to the committee. The spring budget revision provides the final opportunity to formally amend the Scottish budget for 2021-22. The budget revision contains the usual four categories of changes. Firstly, allocation of the remaining Covid-19 consequentials, along with some other funding changes. Secondly, a number of technical adjustments that have no impact on spending power. That is followed by some white-haul transfers, and finally, some budget neutral transfers of resources between portfolio budgets. The supporting document to the spring budget revision and the finance update prepared by my officials provides background on the net changes. The funding changes increase the budget by £1,428.3 million and comprises a majority of the Covid-19 funding that has been allocated over a number of lines as detailed in the finance update. The technical adjustments are mainly non-cash and have a net negative impact of £357.3 million on the overall aggregate position. It is necessary to reflect those adjustments to ensure that the budget is consistent with the accounting requirements and with the final outcome of that will be reported in our annual accounts. White-haul transfers total £151.2 million and largely comprise funding for COP26, along with the second instalment of the Immigration Health Surcharge. The final part of the budget revision concerns the transfer of funds within and between portfolios to better align the budgets with profiled spend. At the time of the publication of the spring budget revision, we did not have final confirmation from HM Treasury on the amount of Barnett consequentials being allocated in the UK supplementary estimates. As a result, we were forced to base the budget revision on the best estimate at that time. There were further developments in the funding position following SPR publication, and my officials have provided additional information in the finance update on the subsequent changes. This information and the background provided is intended to support the scrutiny process and offer the committee members more insight into the challenges in managing the budget position while the funding position is so volatile. As we approach the financial year end, we will continue in line with our normal practice to monitor forecast out-turn against budget and utilise any emerging underspends to ensure that we make optimum use of the resources available in 2021-22 and manage the necessary carry-forward to meet additional spending commitments reflected in the budget agreement reached for 2022-23. In line with previous years, my officials have included in the finance update for the committee an indication of the forecast out-turn position, provisional out-turn figures will be announced in early June. With that, I will conclude, convener, and be happy to take any questions that the committee may have. Thank you very much for that opening statement, minister. I have to say before we go any further that the members of this committee are extremely appreciative of the steps that the minister and his officials have taken to provide so much detail for this spring revision.  I think that it reflects well on the Government listening to what the committee had requested in terms of that additional detail, so I thank you very much for that. Let's review it across the committee. I have a few opening questions, obviously, and then we will move around the table. The first question was just on paragraph 15 under A2.2, which is about £183 million. I have written a funny for police and fire pensions and justice and veterans. I notice that there is a £217.7 million increase in that portfolio. Why is this... This appears not to have been anticipated, but one would have thought that pensions were something that is anticipated well and advancing. It is quite a significant sum, so I just wonder if you can give us a re-explanation on that. Thank you, convener. As you will be aware from previous autumn budget revisions, this has been a routine practice where the budget for the pensions to which the fair has been allocated. I will perhaps ask Scott if he wants to come in and provide some more context in the background. It is a demand-led budget that the forecast varies across the year. Historically, we have always topped up the budget quite significantly as we have had later forecasts emerge across the year. There is an initial flat budget that is set at budget bill, and then it is augmented in line with the latest forecast as we go through the year. I am not sure if pensions are going to retire in advance, surely. If it was a few million here or there, I could understand. Some people retire early or whatever for ill health, you name it. However, £217.7 million is quite a significant sum of money, and one would have thought that some of that amount would have been anticipated well in advance. It is a significant sum, clearly. I think that the numbers that retire can vary quite significantly across the year, but I think that there arguably is a strong case for looking again at the baseline budget. That is one of the things that will be considered in the upcoming spending review. I thank you very much for that. In paragraph 17, it says that £40 million released from the affordable housing supply programme is due to on-going supply issues and the effect that this has had on the pace of delivery. Is that because of difficulties with the pandemic, having made it difficult to construct or whatever? Is that money being put back into affordable housing, you hope, subsequently? As you will be aware, there has obviously been a number of factors. The pandemic has been one that has impacted on availability of materials. Price is one implication of that, but the actual availability of sourcing of materials due to supply chains and logistical challenges has inhibited the deployment of that money. Of course, we have our commitment on housing £110,000 over the next 10 years as part of the Bute House agreement. Obviously, we are consistent with our ambitions within housing to 2040, so we are absolutely committed to delivering the resource that is necessary to realise that ambition. Obviously, the committee would understand that our capacity to build houses and subsequently spend money on building houses is constrained by the availability of materials, which of course is a challenge, not unique to Scotland or the United Kingdom, but is a global challenge. That is an area that we would want to keep an eye on. Obviously, the Government's commitment in terms of the number of houses built, but at the same time, we have very high levels of inflation and construction. Obviously, if there is any budget to reductions in that area, that is going to emit against the reaching of that target. I move on to another area, which a number of members have commented on, which is under A3, which is the Whitehall Transfers Pad, where I have 17. He said that the largest of those relates to a further instalment of the migrant health surcharge is £62.4 million. Can we talk to you a wee bit about the migrant health surcharge? That was something that we discussed at the autumn budget revision session. That is obviously collected in ministers centrally. It is a process and allogues to the Barnett formula, but it is not a Barnett transfer. That is reflected in budget revisions as a means of allocating it to the budget. I do not know if there would be anything that would score. You would want to add beyond that. Only that the level of it has significantly stepped up. It is a much higher level now. Is this something that you think, obviously, when a situation were made by the significant additional number of refugees coming in, et cetera, over the next few months? Is this something that you are looking at that may be increased significantly? Are you looking to have Barnett consequentials on that in the months ahead? Obviously, we will monitor the position very carefully. As I said last week in the chamber, echoing the comments that the First Minister was joining the local government finance order debate, we are ready and willing to play our part in Scotland. Obviously, in the broader context of the crisis that you are creating at the moment, we have been clear with regards to what we would like to see the UK Government do in regard to waiving visas and maximising the number of people who can come to the UK. Clearly, should any funding become available from the UK Government to support, we will, of course, deploy that to a maximum effect to support people coming to Scotland. The minor differences between the Scottish Government underspend as a report on the accounts and discuss in detail about Audit Scotland and underspend against HM Treasury budget aggregates eyes through a number of reasons differing accounting and budgeting treatment of capital expenditure, differences in the scoring of working capital for non-departmental public bodies and different treatment of expected credit losses. Obviously, that makes transparency difficult when you are looking at effectively two different systems. Are there any discussions or work on going to try and smooth over some of those differences so that we can have a uniform method of accounting? It is a fair and reasonable question. We have obviously sought with this not-so-brief guide to the spring budget revision to provide as much context and information as possible as you correctly identify, convener, if you do reflect the respective practices of Treasury in the Scottish Government. However, in regard to the potential for a more unified approach, it is something that I am happy to reflect on. I do not know if there is anything that Scotland would want to add by means of technical commentary. Part of the technical differences between the Treasury budget and the Scottish budget arise as a consequence of the Public Finance and Accountability Act, in the way that specifies how we need to report and how we report on the accounts, which is covered by a different set of standards and separate Government reporting requirements, as opposed to consolidating budget and guidance, in which there are some differences in the way things are treated from an accounting perspective and national accounts in terms of a no-n-s European system of accounting. There are slightly differences in treatment and I recognise that that gives us challenges in transparency and consistency of reporting. However, as the minister said, we are conscious of trying to improve that transparency and thinking about how we can improve the Treasury reporting. There is no getting away from the need to follow those accounting requirements in the Government financial reporting manual, but we can think about additional information that we can perhaps provide on how things are scoring against Treasury budgets and the differences. We are not comparing apples with oranges, which is something that we want to look more at in future revisions, perhaps in the autumn revision. There is only one other area for me before I let colleagues in and I know that I have got some questions. On 3 February, the same-days publication of the spring budget review, the UK Government announced the package of cost of living measures with an associated consequential impact for the Scottish Government of around £290 million. Of course, that was incorporated into the Scottish budget in 10 February, but it seems to have transpired that £290 million will not be coming forward. What are the implications of that for the Scottish budget? Thank you, convener. You are correct to identify that. Our initial indication has been resource supplementaries of £841 million. When the cost of living announcement was made, which, if I recall correctly, was on 3 February, which was the same day that the SBR was published, our expectation had been, and we were likely to believe that that would be additional resource on top of what had been previously announced. Subsequently, resource supplementaries were revised down from £841 million to £827 million. We also learned that there was not going to be an additional money for cost of living. That would come from reductions in that previously announced launch of money, which in itself had been subject to reduction. You are correct to identify that that money has to be found from the money that has been previously announced at supplementary estimates. What we have is an agreement to carry that forward into next year's budget, so it will not impact upon the reserve. We appreciate that the spring budget revision takes place before the end of the financial year. There are issues of timing, and the end of the year picture has not fully crystallised when we have to prepare the spring budget revision, which will come at the end of January. Constantly, in terms of the great deal of uncertainty, however, we are in terms of our monthly internal budget monitoring process and management. I am confident that we are in a position that, through a combination of devolved tax performance and emerging underspends, we will be able to meet the carry forward requirement as set out in the budget. To summarise, you are correct to identify, convener, that the money that was announced was not new money. It was money that had been previously announced, and even that quantum was produced. However, we are in a position that, due to better and expected performance of devolved tax and emerging underspends, we will be able to meet the carry forward requirements going forward. The money that will be allocated for the cost of living to go to local authorities to administer will be part of next year's budget. We have not been allowed to carry that forward out with the reserve. I am interested in what you have to say, because what Spice has said in its briefing before the committee is that, on the resource-stated spending side of the Scottish Government, £98 million must be found by 31 March to meet commitments for the next year's budget starting on 1 April as a result, effectively, of not receiving us £290 million. That is correct. To touch on that point, I am confident that we will be in a position not only to ensure that we are within budget, but we have been able to carry that carry forward into the reserve, which was part of the budget process. That resource will be found from, as I mentioned previously, stronger than forecast performance of devolved taxis and emerging underspends in some demand-led areas. As things stand currently, we are confident that, as I said, we will not only be able to meet our spend within our budget limit, but to have that carry forward in the reserve that is required to meet next year's budget requirements. Is always interesting from a financial finance committee point of view that ministers always say in every budget that every penny is committed in when we end up with these kind of bumps on the roads. I do think that UK Government reneging on £290 million is a significant bump that the money still seems to be able to be found to smooth it over. Again, I think that there is just ultimately an element of every penny that is committed, but, of course, as we just touched on a few moments ago with regards to affordable housing supply, events can take place, there can be slippage in capital projects or in resource, there can be lower than forecast demand if it is a demand-led programme of funding. That is what has ultimately allowed us to manage a particular position, which is obviously challenging being at year-end, but has been compounded by the overall volatility of the late notifications from the UK Government. Indeed, it is complex to be caused by the all-maker and variant initial indications of resource funding, which did not necessarily materialise or was misleading. However, we have got to a position where, as I said, we are confident that, due to those forecasts, under-spends in demand-led areas and increased performance of devolved taxation, we will have the resource not only to make sure that we spend with them on a budget limit, but we have money to deploy their reserve to carry forward. We are four weeks away from the end of the current financial year. As it stands, we have got before us here. I understand what happened. I understand that, with the cost-of-living payments, there was not the funding that was expected, but nonetheless, tables C2.1 set out quite clearly that you are essentially going to overspend against budget in order to meet those commitments by £98 million in the current financial year. However, there is going to be £511 million from this year's budget for next year's budget. I am struggling to understand how those two things square. While I understand at a high level what you are saying about devolved taxes and underspends in other areas, I would accept that statement if we were in quarter two of the financial year when we are four weeks away from year end. Could you just provide a bit more detail so that we can have a bit more confidence because hopefully you know where the £500 million is coming from because it is quite a big sum? Yes, certainly. I may ask Scott to come in if he wants to go and give a further breakdown between the elements of devolved taxation and underspends its emerging in demand-led areas. It is important to realise that expenditure was constrained after the announcement that that £296 million for cost of living was not additional. There had been additional planned expenditure in health that we were going to overspend against the spring budget revision limit. That was in thinking about the profiling of the health spend across this year and next year and trying to relieve some pressures. That had to be constrained to the budget that was added at spring budget revision. Clearly, we were planning for an underspend because there were elements embedded in the £22.23 financial position. There is a combination of that additional constraint on health not overspending against the budget limit. Emerging underspends on areas such as self-isolation support grants, where the demands are now likely to be significantly less than the budget that was allocated. There has been an adjustment to pensions that are a little bit less than the money that was added at spring budget revision on the latest forecasts and a significant uplift in tax receipts. The convener rightly puts me under pressure as an Opposition spokesperson to tell me where the money is coming from. It is a fair challenge, and I genuinely do. Likewise, I would say the same thing to you. We have got numbers saying that you are over committed by almost £100 million in this year's budget. We have got four weeks to go. I hear what you are saying about pensions. Is that pension adjustment £500 million if it is not? Where else in the budget are we going to underspend in order to generate the £500 million? Frankly, why is that not reflected in the spring budget revision itself? Basically, you are saying that the spring budget revision is not right, and we have overestimated the cost of things by £500 million. Where is it? That is why I would like to know. £160 million of health expenditure was constrained as a result of that reduction, although it is not underspending against the limit that is set out in the budget document. The tax receipts are £250 million more than the original forecast. They could have been reflected in the spring budget revision, but there is ultimately a question about how the block grant will change, and there is a reconciliation process that will not be finalised until September. There is a significant underspend on the self-isolation support grant against the estimates that were provided in the run-up to finalising the spring budget revision, which I think from memory is about £60 million. There is a £30 million reduction on the pensions against the figures that we were discussing earlier on. We obviously added a budget adjustment in the spring budget revision based on the forecast that we had in the run-up to finalising that. There has been a subsequent revision to that, but now it looks like there is going to be a £30 million underspend against that. The last round of monitoring in aggregate, there were about £30 million of underspends emerging across that. That is all on resource. Aggregating all of that up is getting to the level of forecast underspend that we are talking about as being necessary to support the 2022-23 budget. The point that I would make as well is three points. One, a lot of underspends are going to emerge towards the end of the financial year. That is just the nature in many respects. Two, Mr Johnson made reference to four weeks at the end of the financial year. That is not a reflection of four weeks. That was not published today with spring budget revision. Again, it is a very intense period. We are talking about eight weeks and a whole quarter. Third, there are significant announcements on demand-led expenditure towards the end of the financial year in response to Omicron, so that has created the particular circumstances. As Scott said, you cannot see the devolved tax forecasts and performance. You can anticipate where it may go, but you cannot be certain because of how subsequent months' performance will outturn and implications around block grant adjustments. I appreciate that this is a complex matter that is perhaps difficult to articulate. I am happy to reflect on that in the next year's spring budget revision, if there is a way in which information can be presented more clearly to the committee. I hope that, given what Scott said and what I try to articulate there, it can give some understanding about how we are in this position, which I appreciate. I think that there are two things to say about that. First of all, I understand how. I do not think that it is about the information that you have provided. It is about how the situation presenting information is being managed and the critical difference. I wonder whether the minister would accept that it is a good illustration of the point that Audit Scotland and others have made, is that it is incredibly difficult to track and manage from budget through to announcements to outturn through to consolidated accounts. I recognise—I am very familiar with somebody who has run a business—that there is a difference between budget forecasts and through to cash management. At the same time, when they are so far apart, that always causes concern and should be investigated. Do you recognise that that reflects that broader point from Audit Scotland? That is the point that needs that follow-through. The level of delta is about £600 million, if you could add £98 million to the £511 million. That is crudely 15 per cent. That is quite a big variance between budget and what you are saying the actuals will be. I think that the broader point that I would seek to make is that we need to spend, as you are aware. We cannot exceed our expenditure limits as set by treasury. We have a reserve that totals £700 million. We look at the quantum of the Scottish budget as a whole. We have that very limited space that we have to land. We cannot go over and we cannot overspend and we cannot underspend beyond what we can take forward in the reserve. I am sure that members would be rightly criticising why there had been resource lost. It is an extremely challenging set of circumstances. The way I and others have articulated it is like trying to land a 747 in a post-each stamp. You then have a situation where you have, as you move into the latter part of the year, fiscal events, autumn budget and potential more in-year funding announced, supplementary estimates and we had a position this year where we did not have confirmation of what the subs were going to be until I think about three weeks after we published the SBR. That creates an incredibly challenging set of circumstances in which to operate. Obviously, in that compound is the existing challenges that we are all aware of would meet any Government or organisation managing its finances towards the end of the year. However, I take the point that you make about the need to provide as much clarity as possible, and it is something that I am happy to reflect on. I hope that the way in which we have presented this information would indicate that I am committed to doing as much as possible to aid in transparency and understanding and recognise the points that have been raised. I do not know if there is anything that you would want to add, Scott. A couple of things. Just to underline the difficulty of the position this year and the volatility of the position this year, if you look across the timeline of the funding position, we were told at one point that we were getting £220 million of guaranteed funding to help support the actions that are necessary in response to Omicron. That then became £440 million, but with a very clear instruction that if that proved to be higher, then the final supplementary estimate position than any surplus would need to be paid back. That was all the narrative before Christmas. Ministers were taking decisions on funding on the basis of that change in funding envelope. Very quickly in January, we come back and we find that the funding position is moving again, it is moving to the S, and then it was stepped up a few times until we reached the 841 position that the minister referred to. The cabinet secretary and cabinet are taking decisions on allocations or balancing it right across and then all of a sudden it has changed again post-cost of living. There is a lot of volatility and a lot of decision making across that time period. I just wanted to point out that the 511 is including capital and FTs of £118.61. I absolutely take the point. One of the reasons in terms of the breadth of stuff that is included in the guide was to try and illustrate how that volatility impacts on the reserve position as we go across the area. I understand how we got here. It is about reconciling the budget from this year into next. Essentially, if we had not got the information that we just provided orally, there was a gap. In future years, we should be aiming not to require that narrative to reconcile the one-year's budget moving into the next year's budget. Is that a fair comment? We are obviously trying to give as much information as we can. The position continues to evolve as we move towards the end of the year. It is a really important discussion and I very much welcome the committee's interest in it. Ultimately, the way to remedy that is to recognise that the current arrangements exist are beyond suboptimal. I do not make that in any sort of partisan point, but it is a constitutional point. I think that there is probably a recognition by any fair-minded person that that is the case. I think that the way to get beyond this and provide that greater transparency is through a revised process. Obviously, there is opportunity through the quadrilateral discussions that take place between the respective finance secretaries across the UK and obviously the fiscal framework review, which I know the committee takes a keen interest in. I echo the comments of the convener. I think that it is extremely helpful minister to have this additional information that we have not had in previous occasions. I can also thank you for the letter that you sent me on 16 November when I asked various questions when it came to the autumn budget revisions, particularly on the education front. Can I just stay on that education theme for a minute? I think that one of my colleagues also wants to ask you a bit more depth about this. Could you just interrogate the figure when it comes to the student loans? It seems to be pretty high. Yeah, that is an important point. I am just going to ask Scott to come in on this. Is this to change in the student loans? Yeah, it is. So the change relates to what is known as the RAB charge, which is a technical assessment of the level of impairment that needs to be applied against student loans. There is quite a complex model that calculates that impairment. It is an assessment of the likely level of future write-offs and the level of subsidy inherent in the loans that needs to be recognised up front when the loans are issued. There is a number of economic determinants, including a discount rate that is applied in establishing that figure. What that adjustment is reflecting is a change to some of those economic determinants that are used in the model that calculates the level of impairment. Are those Covid-related changes outgiven, obviously, that there may be more students who are? Well, to an extent, those are over the lifetime of the loan, so that loan can extend right out to 30 years in Scotland. It is longer term assessments of the likelihood of the full amount being repaid. As I say, I am sure that my colleague will come back in some of the details of this. I am just interested in what the changes are and the economic determinants, because it is quite a the main change. I do not do the detailed modelling myself, but my understanding is that the main reason for the change is the change in the discount factor that Treasury has asked us to apply in the model, which has reduced the level of RAB charge that is applicable in Scotland. That is my understanding. If we are looking for real detail on how that modelling is calculated, we might be testing the limits of my understanding. I think that it would be helpful to the committee. As you say, it is obviously very technical. I am sure that Michelle Thomson probably wants to come in. I have got another couple of questions. There is a bit more detail to be useful to have about how specifically he is working. I am certainly aware that there has been a lot of reworking of the determination of the loan book at UK Government level. It has been through a number of iterations and there is some slights of hand in accounting terms, which I am aware of as well. That is probably a technical term that I should have used. In some respects, that does not matter. What interests me is why we should care. In other words, what specifically has it got to do with the Scottish budget? Why are we having this technical change of £298.7 million appearing for us, given that it is a loan book when we do not have student loans in Scotland? That is what I do not understand. We do have some student loans, but the level in Scotland is significantly lower than the rest of the UK. That change is distinct from the policy changes that have been made at a UK level on student loans. As I say, the way in which we are required to budget for student loans is that we need to recognise upfront the idea that we will not get the full amount of all those loans back. That level of impairment is calculated, as I say, using this model. The level of impairment in Scotland is significantly lower than the rest of the UK, as a result of the fact that the loans are proportionally smaller and that payment is more likely. Part of what has driven the policy change at a UK level is the recognition of the very high levels of write-off that were being reflected against the English loan book. That is not the same in Scotland. Those repayment levels are higher in Scotland. That is what I wanted to explore. I apologise if I used the term slight of hand. What I meant was that my understanding about it is that there is an accounting mechanism to reflect that it is not truly loans in the traditional sense and that the public accounting is slightly different. I do not understand the direct relevance to the Scottish budget for the treatment, which has obviously been done across the board. I would also like to know how specifically it is being applied to the Scottish budget. Are those real numbers, in a technical sense, really based on Scottish loans, or are they in a portion based on population share? In other words, is this number real and what does it really mean for us? It is a specific calculation on the Scottish loan book. It is not an apportionment of a level of impairment across loans. As I said, it is quite a complex model, but it tracks repayment rates in Scotland and factors those in to come to an assessment of what that likely repayment will turn out to be. As I said, that is traditionally higher or historically much higher in Scotland, which is a direct function of the level of loans in Scotland. I get that. Last week's question, because I am aware that my colleague wants to come back in, this is her bet. I know what you are saying about historic Scottish loans. That is just applied to them because it is over a 30-year basis, as I understand it. It does not have any relationship to Scottish students who study in England and have come back and become Scottish taxpayers. That is simply the loan book at a point in time when it was taken out, I am assuming. It is an assessment of the complete loan book for all students who draw down loans. It really is just simply a technical thing. It is a technical recognition of the fact that it is a non-cash estimate. Those loans are not being written off at that point. It is just an assessment of what we think. For what it is worth to finish on this, it is very good to have this. I would see it in the positive that we can get that on the record and the understanding of that. Thank you, convener, and you are quite right, Mr Mackay. It is exactly technical. What I am interested in is the prediction that it is going to be more difficult in years ahead to draw back as much money on student loans, because more people have gone through great difficulties after Covid. Is that really what you are saying? I think that it reflects the latest estimates, but they will change. The modelling changes every year and there is a reassessment of it. If the economic circumstances change, then... I understand that it is very important from the aspect, because it has an effect on the numbers of students, particularly if we are trying to widen access, which we have obviously made good progress on things. It has quite a big implication for future spending. Could I just ask the minister on your very helpful table towards the end of your brief about the differences between the Covid and non-Covid spend on education? We had Mr Simac committee last week, who was making the point that he is concerned that higher education is not sufficiently high up the Scottish Government's priority when it comes to the spend for the future. When it comes to the figure on higher education student support, you have a figure in there of £15 million. Can I just ask again, because that was something that I asked about before? Can I ask what specifically that is? I wanted to move the detail in front of you there for that, Scott. Sorry, it is in your table. It is FPA, it is S62292. Under your figures for education and skills, you have central government grants to local authorities, higher education student support, funding council, learning things. You have a figure in student support, because it is tied up in the support business. I just wondered what that was. If the convener argues that, I am happy for somebody to write to me about it. I think that the broader point, minister, is that what Mr Sim was saying, and we can agree or disagree with Mr Sim about the future spend on higher education. However, there is a serious issue that we have had presented to the committee from a lot of witnesses, which is that higher education really matters in terms of the skills that we are needing to try to address some of the problems in the economy. I think that what is very helpful about the information that you have provided is that we have a better breakdown of some of that spending. I am just interested when it comes to things such as student support, because I think that that is quite an important aspect to encourage younger people into higher education. I appreciate the question. I think that that is a powerful legitimate one. If you are content, the minister will be happy to go and write back to you. Thank you. I will explain the copy to the committee as well. There is maybe just one thing to point out. That is the estimate on a quite conservative basis of the Covid-spent date on that table, I think that you are referring to. There are some examples where we would be fairly sure that the final figure for spent to December or spent for the full-out term would be significantly higher in that. That would be very helpful, because the University of Scotland, one of the briefings that Professor Jerry McCormack and Sally Mapstone had presented not long ago was that they are very concerned about getting over the Covid period in terms of allowing extra student support to help them get over the period. I would be very interested to know what that is for. I would be happy to provide you with an up-to-date picture as well. As Neil said, that is a conservative estimate, and I would be happy in the correspondence as well to make sure to give you a rounded picture of what support has been provided. That would be helpful. Minister, under section C, Scotland reserve and funding positions, you say that despite the continually evolving volatile position, reserve limits remain fixed. Those limits being a cap of £700 million, with annual drawdowns normally restricted to £250 million for resource and £100 million for capital and financial transactions combined, as we are currently within a defined period of Scotland's specific economic shock. I set out in the fiscal framework the annual drawdown limits are waived, but the cap of £700 million remains now. As I mentioned in the previous session, John Mason said that only last week that Glasgow University has got greater reserves than the Scottish Government has allowed to have, so that shows the perspective. Can you tell us, because the previous panel was unsure when they were asked directly, when this three-year period of Scotland's specific economic shock will end? The end of next, so basically April 2023. Can you tell us the difficulties that these reserve limits are having in terms of the Scottish Government being able to deliver on its budget? Perhaps there was a view that one of the functions of the reserve could be to manage forecast error, although there was borrowing powers as well. That is increasingly difficult to play. I made reference earlier to the issue of underspends that emerge. Particularly if we think about capital underspends that can emerge later on, within the reserve we have a total limit of £700 million, but an annual drawdown of combined capital on FT of £100 million. You can see a risk where if you have late slippage in capital over a number of years, how that can start to build up within the reserve, and it becomes more challenging to deploy that in the next financial year because you have the £100 million cap. If you have more capital on FT in the reserve, ultimately it is still £700 million total, which gives you less headroom for resource. Beyond that, the position of the reserve is not finalised until we get to out-term. There has to be a need to maintain headroom there. It creates a number of challenges in the sense that you are limited in how much money you can carry forward. That creates particular problems if you get late allocations supplementary estimates. When the UK Government has agreed to allow that to be carried forward into the next year's budget, that is helpful, but that has been the exception rather than the rule. We can find ourselves in a situation where, if we cannot carry the money forward via the reserve, it does not allow us to deploy that resource most effectively and ensure that we all want to see the best value for money. If we are getting sups coming in very late on, we would obviously want the maximum capacity to deploy that in the immediate term if that is the best use of the resource but otherwise to carry it forward, such as we have done with the £120 million for local government. However, there is also that broader issue in risk of the capital build-up that can constrain the reserve. As you will be aware, it is a fixed amount, and it is an amount that has been calculated in the context of just by doing that inflation, lower Scottish Government budgets. It creates a number of challenges both for end-year management, deploying resource and capital in the most effective way. It is clearly an area that I know the committee has taken interest in, and it will be an important consideration as part of the fiscal framework review. I do not refer to anything additional that you would want to add. No, I think that you captured that very well. To emphasise the point, if any decision to store something in the reserve against a future reconciliation impact, then further constrains the amount of headroom that you have for any end-year volatility. It is a very narrow margin that we have to balance with it. As he said, with inflation rocketing, that becomes ever more restricted, given that what he can do with that reserve reduces every year because of the lack of indexing. We will have Douglas to be followed by Daniel. Thanks, convener. I hope that I will be quick. I will go back to the student loans again, not to flog a dead horse. As a new member, this is new to me. Have we seen this level of impairment in previous years, or is this something that has been unique to this year? We have seen high levels of impairment, but it is relatively much smaller than the rest of the UK. Have we seen this level in Scotland before of impairment? Am I right in thinking that it is following on from what Liz Smith is saying? That is down to the amount of money that we are going to get back in. We predict that it is lower, and is that because of our economic performance that is not as good as what we thought it might have been? Is that fair or not? I would say that there is a lot of determinants in arriving at that estimate. I recognise that there is a significant interest in that area. Is it helpful to maybe write to the committee with further technical information? Obviously, I am happy to range any follow-up sessions that could be useful. Given the considerable interest, it is a highly technical matter in terms of how the economic modelling is devised. If it is something that the committee would be content with, I would be happy to range from that to take place. I am certainly happy, but I am not the one who is asking questions on this area. I would be happy with that. I will move on. The convener has asked to start about the 40 million reduction in affordable homes programme. That programme is done with partners, housing associations and local authorities. Is there a long list of schemes and proposals that they are bringing forward, or have they dried up as well? That is what I am trying to get behind. Of course, we have worked very closely with partners in delivering in that area, which is a broad strategic framework, particularly with regard to the impact on resourcing. We are considering that in the context of the work that the Government is doing with partners to deliver housing, but it is obviously not unique to government, you know, private developers are going to be experiencing the same constraints around supply. I would just want to reassure you, Mr London, that there will be a clear commitment on our support for affordable housing. However, the challenges that we are facing are ultimately with our control role. We certainly do what we can within the Government to help to support and address the issues around supply chains and logistics. However, as I am sure you appreciate, those are broad global issues that are impacting many economies across Europe and North America. Absolutely. I just wanted to check that there are local authorities coming forward with plans that are, you know, the money is there. Yes, but the issue is ultimately not one of having the resource to deploy. It is about having the material to spend the resource on effectively, which is to say that this is a broad reflection of the challenges around supply and source of the materials, which are obviously impacting the construction sector. That resource will be still available in the years to come. Yes, we are absolutely committed to targets in affordable housing. Okay, and if just another couple of things, sorry, I mean a time is an issue, £24 million reduction due to underspends in the young person's guarantee, are you able to give us a bit more information around that? Yes, certainly. This was a combination of reductions in demand-led expenditure, and it was the point that I was making earlier on about demand-led, and there has also been a number of efficiency savings as well within some of the lower lines of the budget for the young person's guarantee, but the largest element was relating to the national transition training fund, and some of the costs are being reprofiled into next year. If it is demand-led, are we not telling people that it is there? Is there something else that we could be doing to make sure that money is spent that is being committed? I think that that is obviously a fair point. We obviously want to see the maximum uptake of any schemes that we do, particularly employability, and that is something that we can continue to reflect on. Some of that has also just been through delivering the scheme more efficiently, and the other aspect that I referred to is through reprofiling into the next financial year. If young people get jobs, they might not need to go on such a scheme. Daniel Johnson, to follow by Michelle. Thank you for bringing me in, convener. I just want to briefly correct myself. I think that I stated that the delta should have been 1.5. I was doing my mental maths too quickly, but the flip side of that is that the Government is doing better by an order of magnitude than I was trying to claim. Thanks for that, Daniel. Again, it's just a quick question. It's come up a number of times in a variety of sessions about the budget process, and I fully accept what you're saying about it. I think that most people would agree that it's somewhat inefficient, but I wanted to explore whether you collect any data about that. When I say inefficient, what I mean is these late changes at the 11th hour, where you think that you have spent, you allocate it and then you need to move it from budget pots or whatever, and there's a whole variety of things. Have you any sense of the additional cost of doing that in terms of ours accrued? That's a real hard figure that you must be collecting days, spread throughout all the departments that are doing this. Have you got any sense of that? I'm sure that Neil Llynsgott would... Apart from loss of air. I think that they would agree with me. It's always a very busy and intense workload within finance, but particularly as we get to this point of the year. I think that it's always going to be challenging just by dint of the fact that we're approaching end of the year, but I think that where we can perhaps remove some of the complexity and maybe at times capricious nature of it is by having a better process in terms of the in terms of how the Treasury and the UK Government engages to provide a bit more certainty. We had a barmint guarantee in the previous year, which was enormously helpful, and it allows us to plan with more certainty. Again, touching on the points around the reserve, increased flexibility there allows us to think about ways in which we can deploy funds more efficiently rather than having to meet what can be an artificial deadline of end of year to make the budget balance and make sure that we've still got enough headroom in the reserve and we're not underspending to any particular degree where we'll lose the funding. It is an intent to process. In terms of quantifying the resource and the operational costs within SGA, I don't have those figures to hand. I don't know if those are figures that we have available. I don't have a figure for the extent to which we've put through a transfer that would subsequently be revised. I can say that we're constantly looking to improve the budget management and forecasting. That's a key effort. Obviously, what's absolutely vital in maximising the effectiveness and decisions on budget management is good quality management information. We spend a lot of time reflecting on the annual process and how we can improve the quality of that forecasting, which feeds through to trying to make this process as efficient as possible. It's hugely complex, though. There are so many budget lines. Obviously, you have staff turnover. You're constantly trying to engage and make sure that people have the right skills to provide the quality of management information that we're looking for. Every single financial decision that we make in the past three and a half months with ministers has to take into account the Scotland reserve. That includes borrowing decisions, for example, which have to be deferred until the very end of the year where possible to make sure that that limit isn't breached because it's a risk with any volatility on funding or spending decisions. That's the key frame that adds a lot of time to the processes that we have. I'm in no way suggesting that the year-end processes are complex at this level across these number of budget lines. That's taken as a given. I suppose what I'm saying is that, given that we get a lot of commentary that it's both the way the fiscal frame or in effect works, it's inefficient, which therefore means that there's a cost to the public purse. I suppose that that's what I'm driving at with these constant changes. Stuff coming in, field left, that is incurring a cost and is inefficient in public sector expenditure, and that's the reason for me asking rather than any other reason. I think that it's a very fair point to make. It's not, as I said earlier, the optimal set of arrangements. I hope that that's something that we can remedy through the fiscal framework review. Okay. Thank you very much to colleagues around the table for their questions. I'd like to thank the minister for his evidence. We now turn to agenda item 3, which involves formal consideration of the motion on the instrument. I invite the minister to move motion S6M-3069, that the Finance and Public Administration Committee recommends that the Budget Scotland Act 2021 amendment regulations 2022 draft be approved. Do members have any further comments? If they do not, so I now put the question on the motion. The question is that motion S6M-3069 be agreed. Are we all agreed? Members are agreed. So I'll now suspend briefly. All agreed, convener, just formally moved. All right, okay, formally moved. Anyway, I now suspend briefly to allow a change over all the officials. Item 1 on our agenda is to take evidence from the Minister for Public Finance, planning and community wealth on the Scottish landfill tax standard rate and low rate order 2022. Mr Arthur is joined by Mr Robert Sutter, senior tax policy adviser from the Scottish Government. I welcome Mr Sutter to the meeting and invite Mr Arthur to make a short opening statement. Thank you, convener. The Scottish landfill tax standard rate and lower rate order 2022 specifies the standard rate and lower rates for Scottish landfill tax, consistent with rates set out in the Scottish budget 2022-23, published on 9 December 2021. The order sets out that the standard rate will increase from £96.70 per ton to £98.60 per ton. The lower rate for less polluting inert materials will increase from £3.10 per ton to £3.15 per ton. Weas proposed rates would come into effect from 1 April 2022. Committee members will wish to note that they match landfill tax rates in the rest of the UK for the financial year 2022-23, as confirmed in the UK and Welsh budgets. The Scottish Government is continuing to act to avoid any potential for what is referred to as waste tourism, to emerge as a result of material differences between the tax rates north and south of the border. The increased rate provides appropriate financial incentives to support delivery of our ambitious waste and circular economy targets. With that, I will conclude and be happy to take any questions. John Lennon will remember that we had quite a number of debates on waste tourism in the previous years, which I cannot imagine we will delve into today, but who knows? I do appreciate the Government's decision to keep rates the same as the UK, but surely it should go up at least the rate of inflation, which would not really have many people trucking over the border. It is a fair point and we will continue to keep those rates under review. However, as I reckon, we are in a journey towards the ban on biodegradable municipal waste by the end of December 2025. We will consider rates in the broader context of our actions to reduce waste and move to circular economy, but, for the reason to set out in my opening statement, we are continuing to ensure parity with rates elsewhere in the UK to avoid that risk of waste tourism emerging. We do not appear to have any further questions from members of the committee. I thank the minister for his evidence. We now turn to agenda item 5, which involves formal consideration of the motion on the instrument. I invite the minister to move motion S6M-3203, that the Finance and Public Administration Committee recommends that the Scottish landfill tax standard rate and lower rate order 2022 be approved. Thank you. Do members have any further comments? They do not. I now put the question on the motion. The question is that motion S6M-3203 be agreed to. Are we all agreed? Members have indicated their agreement, so I thank the minister again for his evidence and that of his officials. We will publish a short report to the Parliament setting out decisions on both the spring budget revision and the landfill regulations in due course. That concludes the public part of today's meeting. The next item on our agenda will be to discuss in private consideration of a work programme. I therefore close this public meeting and, just to have a two-minute recess, we allow broadcasting and the minister is sufficient to leave.