Welcome to the first meeting in 2024 of the Finance and Public Administration Committee. I'd like to wish you all a happy new year. I'd also like to congratulate committee member Liz Smith on the award of her well-deserved CBE in the new year's honours list. We have a single item on our agenda, which involves taking evidence on the Scottish budget 2024-2025 from two panels of witnesses. First, we will hear from Joao Sousa, Deputy Director of Fraser Valander Institute, Chris Burt, Associate Director for Scotland of the Joseph Rowntree Foundation and Professor David Bell, Professor of Economics at the University of Stirling. I welcome you all to the meeting and thank you for your written submissions. We'll move straight to questions. First, I should say that if I ask a question, I might ask an individual member of the panel. Others can chip in or it could be to all members of the panel. The Scottish Government said that it would prioritise spending in terms of three missions—equality, the tackling of poverty and protecting people from harm, opportunity, a fair, green and growing economy and community prioritising our public services. In terms of this year's on-going budget, how do you think the Scottish Government is doing it? I think that we'll start with Mr Burt. Thanks, convener. I'll focus, if I may, first on the poverty issue. As reflected in my written submission, I found the budget very disappointing in that regard. While there was welcome protection for some of the schemes that the Scottish Government has already placed, which I have waxed lyrical about many times about the Scottish child payment and so on, I do not see anything else in the budget that will significantly reduce poverty. I think that there is a significant risk with the huge cuts to funding for affordable housing in particular that this budget could lead to a rise in poverty. I think that there are not that many budgets left before the Scottish Parliament's child poverty reduction targets have to be met in 2030-31. Those were unanimously set by every party in this Parliament and I think that every budget that takes by until that time leaves children in this country in poverty. I am concerned by this budget and I think that the Scottish Government could certainly have done more around poverty. I have read your submission in some detail. I notice that it does not set any context of where we are in terms of the finances and the economics of where the Scottish Government finds itself. You talk in your report about the need to, for example, increase the Scottish child payment to £30. You talk about reversing the reduction in the affordable housing supply budget, which you refer to the reduction as being brutal. How would you do that then, given the fact that the Scottish Government has got a £484 million cut in its capital budget next year, and the resource budget has been increased by only 2.6 per cent? For example, the Scottish child payment has been increased by 6.7 per cent, in line with the UK's increases in benefits. How would you square that circle? On the revenue side, ultimately, the Scottish Government's financial pressures are not invented, they are real. I get that. Some of that is about the austerity that the Scottish Government has faced over the past 10 years or so, but also about the choices that it has made. In some ways, it is very positive choices, choices to extend childcare provision, things such as the Scottish child payment, the reforms to add up disability payments. Those put pressure on the budget, absolutely. However, we have heard a lot about the hard choices that the Scottish Government has had to make in that, yet we have had things such as the freeze to council tax, which has had to put aside £140 million to finance on the revenue side to cause that. The rise in the Scottish child payment would have easily been covered by that and could have been much more directly targeted at poverty reduction. That is part of my concern, is that I get that we are in constrained financial circumstances absolutely. That means that we then need to focus and look with precision at how we target additional funding on poverty reduction. I think that that is what was lacking. That is a valid point, and that is a choice that you would have made. You would have preferred that the money that has been spent in the council tax freeze to be spent on child poverty. That is an issue that I, on my own, would have put to the cabinet secretary. However, on the capital front, you are saying that we should reverse the reduction to the cut in affordable housing. How do you do that in the context of a £484 million reduction in capital? Capital spending is too low in the UK as a whole, and that is reflected in the spending in Scotland. Again, I get that. Government has to make choices about how it prioritises investment. This Government also has targets set by this Parliament to reduce child poverty. It is easy to come along and say that you should spend that amount on that or that amount on that. However, if you are using words like brutal reductions in housing budgets and it should be reversed, it is incumbent to say how it can be reversed. What should the Scottish Government not spend capital on in order to fund the housing that you believe should be prioritised? It is brutal in the context of the housing situation that we have in the country. As I say, we need to focus the capital budget on poverty reduction. Housing is a way of doing that. Again, it is entirely up to the Scottish Government to how it prioritises the capital budget as a whole. However, when we look at the mix of our targets to reduce poverty and our climate reduction targets, I think that it is a reasonable question for this Parliament to ask of the Government. It is also a reasonable question to say where would the money come from to reverse that reduction? Where else in this budget? We are scrutinising the Scottish budget. I think that the point that you have made about the council tax is a valid one. We may agree or disagree on that. I am not seeing anything here in capital. All you are saying is that we should reverse that cut. Maybe we should, but where should the money come from to do that? I was just a bit. It is a point that you are making from within the Scottish Government's capital budget. Should it reduce money? For example, it has increased the capital budget for the police by 12.4 per cent. Should it not have done that? As an example, our Scottish Fire and Rescue Service has increased its capital budget, so those have not been done. How should the Scottish Government respond to this polemic, to be honest? I was about to give you an example. When we look at poverty reduction, we will look at our climate reduction targets. Capital investment in roads infrastructure is that the right priority at this current time compared to people who see increases in rough sleeping in our country? The way to fix that is to increase the supply of horrible housing, among other things. You are right to push me on that, convener, but, frankly, those are the priorities that the Scottish Government has set themselves. It is up to them to defend them. Fair enough. What you are saying is that you might take the money from the roads budget. As I say, it is for the Scottish Government to balance their capital budget, but my priorities would be for poverty reduction. Professor Bell, what is your view on the three missions? I agree with what a lot of Chris has said. On poverty reduction, the Scottish Government has made a decision on child payment. For all of the social security payments, what matters is the net position. That is how much a Scotland is spending on the one hand versus how much it gets in compensation from the UK Government on the other, the block grant adjustment in relation to social security. It was known for some time that, because there is no comparator to the child payment south of the border, that that would be an additional pressure on the social security budget. There is also a question of whether Scotland is dealing somewhat differently with disability payments. Nevertheless, all of that was known and it is a decision. I am not saying that that is the wrong way to take policy, but the consequence is that the net position as far as social security is concerned is already negative and that negativity is going to continue to increase to around a billion in 27 to 28 billion. That means, in the great scheme of things, that tough decisions have to be made. We knew that that was going to be the position. We have known it for some time. To take account of that, the Scottish Government has to say that times are tough and that some other budgets have to be trimmed in relation to that. That is really about the resource budget. The capital budget, arguably, has had a… Sorry, what I am saying is that as far as the resource budget was concerned, there were signals already there that changes would have to be made. With the capital budget, it is reasonable to argue that a lot of it was a surprise stemming from the autumn statement. Therefore, rapid adjustments had to be made. Some of them could reasonably be described as brutal, but there was, in the circumstances, not that much in terms of choice for the Scottish Government. Basically, you have said in your paper that Scotland is spending £1,092 million a year in benefits and welfare payments over and above what was effectively devolved. Spice was said by 28-29. That will rise to 1,502 million current projections. How sustainable do you feel that? It is sustainable if you are willing to say that those other programmes are going to have to be cut and you have to be up front, politically, to say what it is that you are going to cut in order to fund those additional social security payments. There is no easy way around that, seems to me. In terms of capital, as David has said, the low investment is acknowledged to be one of the key impediments to growth both at the Scottish and UK levels. Public sector investment helps dearest private investment, therefore cutting public investment and adversal effect. Overall levels of investment in the Scottish economy and consequently growth. What do you feel the long-term implications for Scotland are of the reduction in capital? I do not think that they are good. I think that the resolution foundation has fairly convincingly shown that the UK, in general, under-invests in public infrastructure. They are arguing that that should rise to 3 per cent of GDP as a guiding principle. As far as Scotland is concerned, the capital budget does not have a huge amount of control over that unless it chooses to make decisions about switching resource funding, which it can do. However, in very tight budget parameters, those are going to be very difficult decisions. It seems to me that the evidence from independent sources suggests that the UK and Scottish Governments should be increasing spending on capital infrastructure publicly. The last time I appeared here, that can de-risk private sector investment. We are in a situation where public sector investment, in terms of going further into debt, is becoming more and more difficult. However, for the Scottish Government going forward, thinking about future generations, not just the current generation, unless we increase our capital spend above the fairly poultry levels that we have at the moment, it seems to me that that is not going to be good for incomes. I am not making a point about how they are spread, but income in general will not increase unless you have the infrastructure to support business going about its activities. Also on your paper, you talked a lot about taxation. You talked about the Scottish Government's decision to increase taxation on those who are higher earners. When you look at those earning £100,000 to £125,000 a year, the marginal rate is probably the highest of any OECD country. It is 69.5 per cent. For example, the highest in Denmark is 55.5, France 42.2 and Sweden 55.2 per cent. What do you believe the impact of those high rates would be a positive, negative or a mix of the two? What I described the Scottish income tax structure as a not really progressive, more disjointed issue. That is due to the interaction of national insurance, personal allowance and income tax rates. The first thing to say is that the UK, as a whole, should have addressed the bizarre ways that the rules around the different elements of the overall tax structure do not integrate well together. The particular case is the one between 100 and 125. You ask a well-qualified hospital doctor to take on additional responsibility and offer her an increase in salary from 100 to 125,000 to take on that additional responsibility. They get to keep about 7,000 of that additional money. Now, would you do it? It is the question that people will reasonably ask. We are talking at the top end of the income distribution here, but it is nevertheless true that the top end of the income distribution matters a lot as far as income tax revenues are concerned. They massively disproportionately contribute towards the total tax revenue, whereas a lot of other taxes impinge unfairly on poorer people. One could not say that about the way that the income tax structure works in Scotland. Effectively, your question is getting at the issue of the behavioural response. That is very complicated. I talk about that in the paper. There is the sort of response in terms of people not being willing to take the promotion, working less and so on. There is the migration response, which is about people not coming to Scotland, which is very difficult to calibrate. The third issue that matters as far as income tax is concerned is not how much we are raising, but the net position as far as the block grant adjustment is concerned. Are we ahead or are we behind? That involves a comparison between the growth in income tax revenues on both sides of the border. This is all quite complex and difficult to accurately get a handle on. The Scottish Fiscal Commission has done quite a bit of work, and that is why it came out with the answer that you might mechanically expect to get about £180 million out of that, but you are only likely to get about 80. The figures in your paper are backed up by the Scottish Parliament information centre, as for the highest rate, which is over £125,140, they expect the mechanical rate to be about £56 million, but post-behavioural change is only £8 million, and the amount of £75,000 up to £125,140, £144 million raised on paper, but only £74 million in reality. Are those figures that you recognise, Joelle? Yes, they broadly reflect what the methodologies that the Scottish Fiscal Commission uses to cost this. I mentioned before when I was giving evidence here that it is very uncertain whether things end up, but it is based on what is essentially the best available evidence, and it is something that they have transparently put out in their approach to forecasting income tax. The figures are slightly higher than we thought when we tried to cost it at the Fraser Valendr Institute in large part, because the data that the Scottish Fiscal Commission has asked us to on real-time information turned out, which they used to calibrate their model, turned out to be stronger, and that means that the whole of the income tax system rises a bit more than we thought before. I want to go back to the first question, because you have not had an opportunity to really answer it, so it is supposed to regard to this budget and whether it delivers in view of you in terms of the emissions that the Scottish Government has set itself. You can see how some public services have been protected, for example health is growing more strongly than other areas, you can see how social security has been prioritised, as the rest of the panellists have mentioned, and that has come at a cost. It is for the Scottish Government and the Scottish Parliament to assess whether that is a worthwhile cost or not, but it is definitely a risk in terms of managing a budget that for the UK Government would be what is called annually managed expenditure, and so we will not have fixed limits whereas the Scottish Government's budget does have much more fixed limits, although there is some flex in terms of how much revenue it raises. I think that a question could reasonably and fairly be asked as to whether some of the tax measures have been as a whole focused solely on equality. People who are more have been asked to pay more through income tax, but a lot of people who live in quite valuable properties have not been asked to pay more council tax.  There is a whole other issue as to whether the council tax system itself is fit for purpose and whether there should be a revaluation on that, because there is an implicit tax break for people who live in desirable places now that were not so desirable in 1991. As a whole, there are some people who are in quite a lot who will have benefited on net from the budget and some other people who want to have. There is also a differential effect on families or households with one or two earners, for example. They might have the same combined earnings, but they might have very different results from that, due to the fact that income tax is levied on a personal basis, whereas council tax is levied on a household basis. When the Scottish Government gets a few levers, how easy is it to take into account children that are in a family in all this kind of stuff? I am not saying that it is particularly easy, but that is why the decisions need to be taken on the considerations of who they are targeted at and whether they fit with that intention of emerging equality. In terms of growth, I think I shared the concern about low investment. I think that has been a problem for a long time, but it is not something that is very easy to see how the Scottish Government within its current framework can do loads about other than decide how to allocate the capital budget, because it is already using its borrowing powers quite a lot. It has had some additional flexibilities through the fiscal framework review, but they are not a lot and they only change things at the margin. In most years, it borrowed quite a lot of the allowed limit of around £450 million. It is a difficult situation, and it is one that sadly has potentially quite limiting effects in terms of economic growth going forward, because we know that investment is one of the main and capital per workers, one of the big drivers of economic growth in the long run. David, do you want to come in here? I didn't say much about opportunity, and I think that it's not really a great budget for as far as opportunity is concerned. Cuts to the enterprise agencies, which have already suffered fairly significant cuts, aren't really a good signal as far as inward investment is concerned. Surprisingly, Scotland's record as far as inward investment is concerned has held up, but one of the UK Government agencies has been collecting data on the net investment position, which is inward investment less outward investment, so disinvestment. On that score, Scotland doesn't do or the most recent data that Scotland doesn't do very well at all. Inward investment, again, is an area that for the UK, inward investors tend to set out businesses that have higher productivity per worker than the average, and that has been a big driver of economic growth in the past. We do not see very significant inward investment projects coming to Scotland at the moment. On the back of that, Chris, you have said in the last paragraph of your own statement that I quote, economic growth will not solve poverty, Government decisions to facilitate poverty reduction well, but surely you need economic growth to generate the revenue in order to invest in anti-poverty programmes? A strong economy, a potentially growing economy, is absolutely vital to the health and the well-being of the nation as a whole, completely. The point that I'm making there is that economic growth alone does not guarantee a reduction in poverty. For example, we saw economic growth in the UK during the 1980s, but as we all know, poverty and inequality shot up over that period. The type of growth that you see is crucial. What I'm trying to do there is push, but sometimes we do hear the argument, is that if we generate economic growth within the economy, we'll reduce poverty. We won't. We will generate revenues, hopefully, more to support Government investment. That allows opportunities that we've seen in the past, such as the introduction of the tax credit system and stuff like that, which reduce poverty. However, those are Government choices and they weren't as a result of economic growth. That's just the difference that I'm trying to highlight. All else being equal, economic growth is a positive thing, would you agree? Gail, what do you feel about economic growth in terms of poverty? I agree with a lot of what Chris Smith said. It's not necessarily guaranteed that economic growth reduces poverty. Relative poverty and income inequality can increase and does increase in some positive economic cycles. If you have more economic growth, you're more likely to have more resources to redistribute. The choice has become easier if you have a bigger pot from which to redistribute. Then it's for the Government to decide who it wants to focus its resources on. In terms of that, this will be my last question and others can answer as well. Do you feel that the Scottish Government has done enough to prioritise economic growth in this budget? I wouldn't say that the budget was particularly focused on growth. There was a lot on the choices in a difficult financial situation. The Scottish Government has to balance its budget does mean that you end up in many cases running what is a pro-cyclical policy. That means that if your revenues aren't as strong as you might expect them to be, you might have to cut your spending to balance the budget, which is not necessarily a great position to be in. It's not how you would necessarily run a fiscal authority if you had the choice of how to design it, but those are the constraints that the powers of the Scottish Government and the Scottish Parliament exist in. I would say that, ostensibly, it doesn't look like the budget, particularly favours economic growth. There have been previous budgets that have been more pro-growth. However, it's kind of difficult, and the Scottish Government might need to concentrate more on arguing the case. For example, the increase in the health budget might help people to get back to work. The disability payments that are being made through the social security budget might help people back into some form of employment or contribute to the community in other ways. Remember that it is true and I'm happy to acknowledge that GDP doesn't measure the welfare of the community. There are lots of things that do good that aren't counted towards GDP. Nevertheless, it seems to me that the case for some of the extra spending, if it is to be linked to growth, where it's not clear that that's the case, as in terms of the health spend, then we need a better case being made and that would have to be based on more information than is currently being provided. I should also say that I know that you've been critical of the Scottish Government not increasing child payment to £30, but it's going up to £26.70. Both the SNP and Labour in their manifestos promised £20 by 2026, and it's already going to go up to £26.70. That's much higher than inflation has been over those years. How do you feel about that and the issue of economic growth? I have said that I will continue to say how important the Scottish child payment is, and I think that it is a vindication of the power and the potential of this Parliament. That payment should reduce child poverty, which is being called somewhere between 4 to 6 per cent. That's lifting tens of thousands of children out of poverty. I think that it's also worth reflecting on the context in which that is made. We've heard, for example, from a family who said that the child payment is brilliant, because it means that I put the heating on when the kids get home from school. That's a good thing, obviously, but we shouldn't live in a country where people are making choices as to whether or not they're putting the heating on when the kids get back from school. The child payment, and what David has talked about just about the reason and the defence for additional spending. Disability assistance spending is an interesting example, and I totally get where the Scottish Government might have some frustration in the pressure that is coming on to them. To a large part, they are picking up a deficit that has been created by the policy of the UK Government. For example, we know that a lot of the additional spending built into disability assistance payments is because Social Security Scotland has made the process more accessible in the hope that more people will take up what they are eligible for. That's a good thing, but that's cost in the Scottish Government a lot of money. We have seen—the SFC has talked about it in its projections—that it sees the cost of living crisis contributing towards that increase. I think that when we talk about giving economic growth in the fundamentals of society, which I have come on to on the end of my submission, I think that one of the fundamental weaknesses in our economy in this country is the levels of economic connectivity and the levels of poverty amongst our population. We did a bit of work with IPPR and Save the Children earlier last year and looked at levels of unemployment amongst people who experienced child poverty in their childhood. It's much higher in adulthood, so by not reducing poverty, we're creating economic weaknesses within our society. As Dave has alluded to, the kind of line between a pro-economic growth policy and a not pro-economic growth policy is often a lot more muddy than the debate would suggest. I have a couple of areas that I want to explore, but I want to go back to one of the principles that the convener was outlining in terms of the focus on a greener and growing economy. We've asked quite a lot of questions thus far about growing, but I wanted to just get some views on greener, the greener element of it, perhaps in particular the low focus on CAPEX and the impact, therefore, on net zero goals and just transition. I just ask that as an open question. In other words, to what extent will the budget enable the greener element and the greener and growing because, obviously, we've got supply chain considerations and to what extent it won't, so perhaps Professor Bell would like to go first. If I was being honest, I would say that although, as Chris has pointed out, there are weaknesses in the argument that this has been a budget designed to alleviate poverty. That has been given a higher priority than the green aspects of the budget in this case, and that is partly driven by the capital budget, which the Scottish Government has just in the sense had to deal with. However, because a lot of the additional expenditure to move towards net zero is not resource spending, it is capital spending. There is also the question of things like biodiversity, nature, restoration and so on. The picture there is less buoyant, let us say, than in other areas that we've already been discussing around social security and health and so on. I think that there's definitely been a couple of things that I've noticed that were cut or heavily reduced in the capital budget, as David mentioned, which includes the Just Transition Fund, which is expected to be £50 million a year. It's been cut to £12 million for the coming year, and only four projects that are already on going, as far as I understand from the not very easy to follow description on the right-hand side of a spreadsheet, seven rose down on the budget page. The Scottish Forestry Woodland grants have been cut by a lot, and that was something that was kind of surprising and, again, just hard to tell what exactly the effect of that is going to be. However, if you thought that that was a priority last year, I can't see why that wouldn't be this year otherwise. The other thing that I should note is that thinking about the link between skilling and green jobs in the future, one thing that I was particularly surprised by was the permanent cut that's been made to the Scottish Funding Council, including for university places. Now, in the Institute for Physical Studies, and I think that you might have had some evidence about this last month, as talked about the fact that tuition is free in Scotland if you can get a place, but places are capped and they're not elsewhere in the UK for domiciled students. There's no detail, as far as I can tell, on how much places are going to be reduced by, but it's about five or six per cent in real terms of the cut. You'd expect that there might be a nontrivial number of places cut. If we think that we would like people to train into—I should say it's not just university places because college places as well, funding for colleges, has also been reduced, so you have to think about the fact that training people into higher-skilled occupations for the future growing economy on green jobs should be a priority and there's a question of whether the choices reveal that to be the case or not. I suspect that my colleague Liz Smith will want to come in on that. I know that it's an area of interest of her, but we know that a so-called just transition and the challenges of getting to net zero affects different socioeconomic groupings differently. Given the very real cuts to some of the areas that we've mentioned around ambition towards getting to net zero and enabling a just transition, do you have any specific concerns on how that will affect the people who are most in poverty or help to push them into poverty over the longer term? Do you have any concerns about that? I think that it ties back to my point on housing and on prioritisation, as I think each of the panel reflects on that, but the capital budget is heavily constrained. Where we look at how we're making investments, we want to get the most targeted return for our investment. Frankly, new housing, which is very energy efficient, is a good outcome for all sorts of reasons. It helps to contribute towards our climate targets. It's cheaper for the households involved. We will always face high heating costs in Scotland because of where we are in the world, but we know that, hopefully, we will never see the sort of instability that we've seen in the energy market of the last couple of years again. However, we need to smooth off those bumps, we need to make energy costs much more predictable for people and, in rural areas, we need to act and act quickly. To me, the opportunity to tackle fuel poverty in rural areas in this transition is such an obvious open goal for us to take on, and how we target energy efficiency measures and decarbonisation of heating within those areas, particularly people who are either off-grid or relying on heating fuels. It just seems so obvious to me. I think that there's that mix of new energy efficient homes are a good outcome for all sorts of different outcomes, but how we target fuel-poor households and, in particular, in rural areas is important. I wanted to lead on to something else. Given that, Professor Bell, we were surprised by the £60 million cut to the funding for the Scottish National Investment Bank. Obviously, we all want to get the FCA's regulation so that it can crowd in other sources of funding. We understand that, but what is your view on that £60 million cut and how that might impact on our net zero ambitions and, indeed, in other areas? I guess that this touches on the point that I made earlier and also in my previous appearance at the committee around de-risking and the role that something like the Scottish National Investment Bank can play in and of itself. It can't push us directly towards net zero. We need to have private sector investment and it can support that kind of investment with its directive that it has to support investments in that kind of area. I suspect that that will make some perhaps more speculative investments around new technologies that might accelerate the move towards net zero. I think that it may slow down those kinds of investments. Perhaps there are alternative funding mechanisms, but thus far, the Scottish National Investment Bank seems to be the one institution that is very clearly aimed at this particular issue. I just wanted to move on to one other area, although I appreciate that both the other panellists might have further comments. Were you surprised and perhaps come to you, Dr Susa, about the allegation of the money of Scotland to resource expenditure? Would you ordinarily expect fiscal rules to be applied to that money by Government? I would appreciate your views on that. I have to confess that I haven't looked at that in detail, so I would rather not comment on something. If you think of the Scotland-winning money as equivalent to your sovereign wealth fund, then what you should do with your sovereign wealth fund is use it to support future generations, because it is a one-off payment. To be equitable, you should spread it not just on the generation that has been lucky enough to have the revenue gathered, so to speak. However, it seems like, as with oil, there seems within the British Isles to be a willingness not to think in those more longer-term perspectives. You would expect fiscal rules to be applied to that in effect? I would have thought that that would be advisable. Thank you. John Tooford by Michael Russell. You say in your report that you comment on the fact that the SFC is quite optimistic about Scottish earnings growth—more optimistic than OBR—had been. Are you convinced by their arguments? Do you think that that is convincing? So, there is definitely data regarding 21, 22 and 23 that gives some indication that the earnings in Scotland were growing more quickly. The question is that something that will be sustained. Obviously, they have anchored their judgment on the basis of the pre-2015-16 average and some catch-up of Scottish earnings to UK average earnings. I think it is a real risk. It is a real risk for the 2026-27 budget. It feels like it is a long time away. It will be laid before the next election, but something will happen after the next election. It can feel like it is very far into the future. However, it can compound risks in terms of the reconciliations. There is a reasonable argument that there might be some catch-up of earnings growth, but it is also, in my view, a reasonable argument that, if something has not happened on a sustained basis for seven or eight years, it might not happen that quickly. There is a real risk that the Scottish Government could be facing a worse reconciliation than it might have anticipated back then. Professor Bell, do you want to come? My paper showed that the April 2023 numbers on earnings showed Scotland growing faster than any other part of the UK, but there was a note attached to that. That was partly due to public sector payments that had been made in advance in Scotland. Settlements had been made in Scotland that had not been made in England particularly. It will be very interesting to see the April 2024 figures, which will give us the next accurate indication of where we are as far as earnings are concerned. Dr Seuss has already alluded to that. The position as far as income tax is concerned obviously depends on earnings. Those generate income tax revenues over a period of time, and because we do not know until maybe two years later what the exact figure is, you have this issue of reconciliations that have to be made and can come as very unwelcome surprises. It is interesting to think about. Sorry to interrupt you, but does that mean that if the SFC was over-optimistic by mistake or whatever, that could lead or would lead to a very negative reconciliation? Sure, absolutely. You are then very dependent on the accuracy of the SFC forecast. If you downgrade your view of that accuracy, you set aside funding or you put in place plans that should there be this very negative reconciliation. That is what you will do. People need to be clear about that. One other point that I would make is not exactly what you asked for, but the possibility that there would be an income tax reduction in England in the next budget in March would increase the behavioural effects, because I understand that the First Minister has said that there would be no change in income tax in Scotland. That would potentially increase the behavioural responses but would also slow down the growth in income tax revenues in England relative to Scotland. The block grant adjustment would be smaller, and that would be advantageous to the Scottish budget. We cannot exactly predict what the outcome would be, but if that happened, the gaps in income tax rates would be greater than they already are. I was going to come to you. If you want to comment on any of that, you can, but I was going to move on to the council tax freeze. I picked up all that enthusiastic about it. Is the council tax freeze aiming to achieve some target that you are aware of? Is there anything good that comes out of the council tax freeze? That is a good question. I get it. The bills that everybody is facing are going up. We all see it. Things like car insurance have shot through the roof. The idea of another bill and council tax is often kind of tectonic in these things, not going up, will be a relief for a lot of people. Do not get me wrong. That is absolutely the case. However, the difference that it makes for almost every household concerned depends, as Giao referred to, whether you take into account the potential changes to the bands, etc. The difference is fairly marginal. IPPR Scotland, if I have said that, it would not make any difference to poverty levels in Scotland. That seems right to me. It is also just the revenue for gone, which could have been used for something different. We have talked about the child payment as one of them. We have not talked about it yet, but we are still in the grips of the cost of living crisis. I think that the citizens advice yesterday talked about our quarter of a million people in Scotland using warm banks. Warm banks used to be indoors, and now we have to have a situation in which communities are brilliant, where communities are coming together and providing safe and warm space. That is great. I think that it does not strike me as the right priority at this time now. If you want to say what is the good thing that comes out of a council tax freeze? I would agree with what Chris said for the people who benefited from it. Clearly they will get something out of it, whether that is then worth the total cost. When you then think about the effect on council financing—this is the point that we have been making since it was announced—you need to consider what councils would have done otherwise to then say whether they have been fully compensated or not. Just based on previous years' behaviours, there are some councils, particularly some that deal with their morality, meaning that they have higher costs on delivering some services, for example. I think that Orkney increased their council tax by 10 per cent in the previous year. Now that they are getting compensated for 5 per cent, it does not seem out of the realistic possibility that they would have done the same this coming year. They will not be compensated for that, but some councils that might have increased it by less will gain from it. There is a question of the multipliers as well. I find it difficult to justify the freezing of council tax, because in general it benefits better off households. There are some households that are asset rich in terms of housing assets and income poor that will reasonably benefit from the freeze. However, I would recommend that at some point the Scottish Government might have to wait until there is clarity around the political situation, but the Ross Society of Edinburgh has produced a paper on council tax reform. At some point it seems to me that various Scottish executives and Governments have dodged this bullet for quite a long time. Eventually someone will pick it up. That is a mixed metaphor. I will give you a chance, but I want to touch on another area before my time runs out. The fact that the social security budget is increasing from about £5 billion to £6 billion, which is dramatically more than almost any other sector. I know that it is demand driven and we have been given evidence before that it is therefore harder to control, but are we in a risk that this is running out of control and we need to somehow tack it in? I will come to you first, Mr Burt, because you would like it to go even higher with the Scottish child payment. It is important to separate out the Scottish child payment and the disability payments, because they do very different things. Scottish child payment is a means tested support to families with children to reduce child poverty. The disability payment, the replacement of the DLA and PIP system from down south, does something entirely different. Before I go on to say what I am going to say, anybody who thinks that disabled people in Scotland or across the UK are doing incredibly well out of the social security system and living great lives is having a laugh. We have seen, since the start of this millennium, a deepening of poverty in the UK and in Scotland, and a big chunk of that has been amongst disabled people. Governments of all colours have acted to disadvantage disabled people in our society, so that is the context within which we are working. As I alluded to earlier, the Scottish Government's reforms to that DLA PIP system are entirely welcome in terms of the dehumanising—you will have had a trail of people through this Parliament if we have been dehumanised by the DLA and PIP system. The fact that that has come to an end is a good thing, full stop, absolutely, and it is to the Scottish Government's credit that it took that approach. What we see that means is that demand for things that people are eligible for is going up, because, hopefully, people are less scared of approaching the Government for what they have a right to. The Parliament says that social security is an investment in our people and that people have a right to it. That is what we are seeing coming into fruition now, at least in the SFC projecting that. We also see the negative elements of broader poverty in our society, so we see the SFC projecting that people's anxiety, mental health, decline in their physical health is driving people towards requiring those payments. However, let us be clear, those payments are to cover the additional cost of being disabled. They do not even count towards poverty reduction, because disabled people have other means of obviously working and other social security payments that support their income. None of that should be a surprise to the Scottish Government. None of that uplift that you are talking about is about decisions that they have made in the past year. It is the impact of the positive policy changes that they have made. It is not something like the weather. It is not something that has sprung on us from nowhere. It is the positive impact of policy choices, which means difficult financial decisions, absolutely, and prioritisation. However, that is the right prioritisation from my perspective. You nodded to some of that, but should I be worried about the ballooning social security budget? I agree with a lot of what Chris Scott said, but one thing taking a step back is asking the question about why people need that in the first place. I would hark back to the Christchurch commission and its discussion of the need for prevention and preventative intervention. Again, that is about trying to avoid people getting into difficult situations. Again, I know that prevention—I do quite a lot of work on health—is not an easy area to get into, but it would be better for society if there were fewer people in this situation. If government can invest in preventative interventions, it should be seriously looking at—as you say, the budget is increasing very rapidly. There is also a crisis in mental health, which has come on as a post-pandemic. It does not appear to be going away as fast as the threat from Covid itself has gone away. I agree with a lot of what Chris Scott said. I do not think that he should be described as runaway, the budget increase. It is something that has been projected and runaway implies almost loss of control. I do not think that there has been a loss of control. It has been projected for years now by the Scottish Fiscal Commission, and it is something that the Scottish Government has known about and that it needs to consider in its financial planning. As Chris Scott said before, about being choosing, that is true. It is a very valid priority. It does come with consequences financially, and that is something that the Government needs to consider. I think that this partly reflects in some sense something that we keep banging on about, which is multi-year planning for a lot of these things. I get that it is difficult and that there are difficult decisions to be made in the future. That is not always pleasant, but given that we have multi-year forecasts for social security spending from the SFC, it would be helpful to then have those multi-year plans and showing what the gap is going forward. I know that that is done at an aggregate level in the medium-term financial strategy, but it is done at a lower level of planning. A better conversation can be had across Scottish society about what those decisions are going to have to be made. One of the areas that has been commented on since the budget was announced is the cuts to housing programmes. Fraser Allander has highlighted that in his work. We are looking at affordable housing supply programme, cut by more than 30 per cent in real terms. That is on top of a greater than 10 per cent cut last year. Housing support and homelessness budget is down by 5 per cent. Local government capital budget is down by more than 20 per cent. As time and cities are declaring a housing emergency, on the broader impact on that, will the doctors say that a few could pick up on that in the first instance? It is really hard to square how the cuts to the housing building budget and affordable housing supply budget are how they join with the fact that the Scottish Government does have a stated priority of increasing housing supply. I know that there are other types of housing supply. Government does not have to be involved in everything, but a lot of the housing supply that is needed is at the lower or more affordable end of the spectrum. That will have a bigger effect in terms of allowing affordability to perpetuate through the system. It is difficult to square that. I know that the convener has mentioned that there are choices to be made and there are difficult decisions to be made, but this is a lot—30 per cent in real terms. I think that the total cut is about 40 per cent in two years. That is a lot. I would make a couple of points. One is that I wonder if we are looking at solutions as far as affordable housing is concerned. I completely agree that this is a massive cut in the budget. Recently, I was listening to a podcast about how productivity in the construction industry has been stagnant for decades. One of the solutions that the Irish Government could be wrong has gone for is insisting that affordable housing is not now all modular, so that, effectively, the housing is built in factories rather than on-site. That is one thing. Another thing is that I work with a group, Northwest 2045, which is looking at the west and north coasts of Sutherland. We always spend our time talking about housing, and the lack of affordable housing in rural areas is contributing significantly to depopulation pressures in those areas. The three missions that the convener was highlighting are community and public services. Staining public services, particularly in rural areas, requires affordable housing. There is no doubt about that. Opportunity is meant to be about fairness, about green transition. We have already heard about fuel efficiency, energy efficiency in housing, and about growth in the economy, and about the equality mission around poverty. Does those cuts comprehensively fail all three of those missions? Do they not? They do not do a lot for them. Chris Burr? The convener was right to push me on the pressure that was on the capital budget, but I described it as baffling, I think. Housing is a foundation for all of our lives, and I am going to give it a flowery on this. Having somewhere safe, warm, connected, we all need that. It is that hierarchy of needs. It is right up the top. This Scottish Government has a pretty good record on housing, much better than Government's elsewhere in the UK, and that is to their credit. One of the big reactions to the previous downturn in 2010 was, well, let's focus capital funding and we will focus on things like building houses. That was a good decision, and that has meant that poverty rates across the UK have diverged a bit, and Scotland tends to have lower poverty than England and Wales, and Northern Ireland is slightly different. Housing is not—other than the module—but you cannot build houses overnight. They need to be planned, they need to be in the right places. How you do it in rural areas is different in urban areas. When we pull back that funding, we reduce predictability, we reduce the sector's ability to draw in private funding, and we are already seeing an enormous slowdown in completions and of starts and approvals for affordable housing. That sends the wrong message to investors, as well. Fundamentally, housing is a protection from poverty in a cost sense. If your rents and your mortgages are not too high, you have more income to go about. The Scottish Government is investing £450 million in the Scottish child payment, but if your rents are going up, you are going to prioritise keeping a roof over your head, and that means that the family is short for other things. It has the opportunity or the potential to contribute to all those aims that the Scottish Government has rightly prioritised, and that is why I think that this cut is so difficult to defend. It feels very short-term what you are describing as previous long-term decisions about poverty and the health of the country. Much in the budget that it feels to me is about dealing with immediate threats rather than thinking about the long term. You are not in that, Professor Bell. Do you feel that that is your perception? I think that, from the autumn statement on the one hand and the Scottish budget on the other, those have not been fiscal events for future generations. From either Government? No. I was just going to say that the council budget is short for relative to plans that has led to the need to prioritisation that happened. I agree that the autumn statement was not brilliant for future generations. There are a lot of things that happen in terms of plans in departmental expenditure limits, which includes the allocation for Scotland. Those are very constrained and have been penciled in to meet the fiscal targets that the chancellor has set himself. However, the Scottish Government was already not on track to fulfil all its capital plans in the medium-term financial strategy. There was already a half a billion pound gap there, so it does not all come just from the autumn statement. I would not necessarily say that it was entirely short term. What I think is happening is that the Scottish Government has to balance its budget. It gets scrambled towards the end of the year. The autumn statement was very late, but we did it. The Scottish budget was on Christmas Day, or whatever it was. Everything had to be squeezed in at the last minute. The cabinet secretary had to argue to balance off the budget. I do not think for a second that anybody in the Scottish Government will take any pleasure from this cut to the housing budget at all. What has not happened is that we are doing a project just now with cash, looking at the Ford of Housing supply programme. How do we get the most return for that investment in terms of poverty reduction? Those are the kinds of questions that have to make. If the Scottish Government were saying, look, the broader conditions in the housing sector are such that, in this financial year, our investment could be less and we could focus that investment on rural affordability issues. However, that is not what we are hearing. It just feels like we have got to squeeze under a budget line. Chris, can I ask you on the parental employability support fund? That is something that Joseph Renty Foundation has been very keen on in the past. The Social Security Secretary said that I am afraid that the fund has just run its course as a concept. Do you have reflections on that? I think that this is a bit of my worry about the best upright futures, which is the tackle child poverty reduction plan. There was a lot in that, rightly, on the focus on how you support more parents into work. One of the solutions around that was that parental employability support fund. That was focused initially on upfront childcare costs. The UK Government made a welcome decision to allow more people to get upfront childcare costs through the universal credit system, but that money, essentially because it was not spent, was reprioritised for something else, for the fuel and security fund, which has now been cut. That is my worry. It is not that there are not things in it that protect people from poverty, which the Scottish Government has already committed to and announced, things such as the child payment. It is that the things that push us towards the child poverty reduction target like that fund are gone now. That is not what the cabinet secretary said, but she said that it has run its course as a concept, like it is a failed concept. It was not a choice. She has told the Social Justice and Social Security Committee that on 14 September. Is that your view that, as a concept, it failed? In the way that it is designed, from my understanding, they spoke to the UK Government who said that they would treat that as income so that they cannot provide a funding in particular way, but could they have spent that money in other ways that would have supported more parents getting to work? Yes, of course. Yesterday, the First Minister made a speech about the economy and creating different choices that he would want to make. He said in that speech that, if he could marshal £2 billion of capital annually, £20 billion over 10 years, he could deliver growth levels at the level of China in the 1990s. Professor Bell, do you think that that is realistic? It would be good to be able to be spending significant amounts of capital. Of course, when China developed one issue, it had unlimited labour resource at very low cost. That situation is not replicated here. It had a very supportive infrastructure, huge investment around the country, which is directed rather than developed through a market system. I think that the situations are very different. My comparator would not be China if I was thinking about what Scotland could potentially do. I think that timescales tend to be very difficult to pin down and often much longer than people expect them to be. We have highlighted the cut to capital spending in the budget of £484 million. That would be four times that, but could we realistically say that if we were to produce four times the level of, or put that money back three times more on top of it, we could produce growth rates that were double-digit growth rates in Scotland? Is that realistic? If that is possible, I think that that might be what the committee would want to be getting into recommending. Could we find that money and get 10% growth in Scotland? Not in the 1990s, but we grew in double-digit rates. That is what the comparison is, and it is what would be required to raise the level of income in this country to the levels that the First Minister is suggesting. I will say that Scotland is already a high income country. Therefore, a lot of catch-up growth that emerging economies have in the short run or over even very long periods of time. We have already had that many years ago over bigger periods of time. If we compare growth historically, we have already had a lot of it. It would be nice to grow at 2.5% rather than 1.4%. That would be a great outcome. That would be transformative to grow at 2.5% every year. Any thoughts on that, Chris? We need more capital investment, and the UK has structurally under-invested in stuff for years. How do we go about that? I will leave that to the learned economists. Scotland does have lower investment as a share of GDP than the UK average. Scotland could benefit from having more investment and might have some catch-up in that regard in terms of GDP if that were the case, but we are not talking about double-digit catch-up. Let's see what you have spent it on. Thank you. I concentrate on economic inactivity, which, as you rightly said this morning, not only affects economic growth but it affects wellbeing as well. I firmly believe that what we have to do in Scotland is to improve or address that situation so that economic inactivity is reduced. Could I ask each of you what you feel about many of the comments within the business and industry sectors following the budget that the budget hasn't done enough to address the concerns about inactivity but also to try to stimulate growth in the areas where there would be the higher-paid jobs? Can I ask for your reflections on that? One of the things that I think is a bit concerning about the budget is the effect on colleges. If people have, for whatever reason, become inactive, what we are not good at is retraining them to rejoin the labour market. Colleges can play a hugely positive role in that respect. The educational aspect and the health aspect are inactivity down to reasons of poor health. Understanding the processes involved there seems to me to be important. I have already referenced the mental health set of issues. Unfortunately, my fallback position on looking at the stats on the labour force survey has been a bit… Its reputation has been tarnished in the last little while so it is not really clear what the extent of inactivity, especially among older people, was thought to be almost an epidemic post-pandemic. We are not entirely sure about that at the moment, but clearly the business sector is observing. Just on that point, Professor Bill, it is a very interesting point about whether we have sufficiently accurate data about the reasons why people are inactive. Do you think that there is a gap in the data? What do we have to do to try it? If we do not have the right data, it is obviously very difficult to address the policy concern. The labour force survey traditionally asked people to give them a list of reasons why they did not want to engage with the labour market. It is not so much that those reasons do not cover the options, although mental health used to be a very small segment and now it is a very large segment. Maybe you need to fine-tune in that area a bit more. The main problem has been that the sample size of the labour force survey has halved over the years. There is a question about how representative it is and how you have to weight it. What has happened is that administrative data on HMRC, for example, seems to be telling a different story from what the labour force survey is saying. I think that OINS will address that in the year with possibly a revised version of it. However, for all of those things, if you want to take effective policy action, you have to base that effect of action on accurate data. On the point about the delivery force survey, we have no sub-UK data that is being published at the moment from the OINS. That is because the survey has got such a low response rate as a whole that they cannot really rely on it for UK-wide numbers, let alone sub-UK results. We do not really know the level of inactivity in Scotland. We barely even know it at a UK level. We are expecting the OINS to provide data based on what is called the transformed labour force survey from, I think, March onwards, but the extent to which that is compared, so they were doing testing of that alongside the existing labour force survey, but the fact that the existing one is not really fit for purpose means that we do not really know how comparable the estimates of the new survey will be to the old one. I had it put to me by a Finnish colleague yesterday that we should stop basing our data on regular surveys but rather have a register as they do in Scandinavia, all the Scandinavian countries have registers. Effectively, we do have a register through what is called the Community Health Index, your NHS number. If you added a little bit more data to that, you would have a much more up-to-date and regular picture. Just for clarity, Professor Will, do you think that the OINS is doing something about this issue? It is quite serious if we do not have the right information to please pose. In terms of making Scotland a more attractive place in which to live, to work and to invest, what policies within the budget area that is available to Scotland do you think the priority should be put? Professor Will, you were very clear in your article, I think that it was in the 20th of December immediately after the budget and also this morning that you do not think that the budget has prioritised growth enough. What policies would you like to see? We have all alluded to the difficulties but the capital budget has to be a starting point for that. I have to say that the relevance of skills. We have talked about the Scottish National Investment Bank, so we have to have a facilitating environment for business investment. Otherwise, you do not grow incomes, you cannot pay for social security, and the consequences in the long run are difficult. Just to slight the reverse back-and-rear issue around economic inactivity. Obviously, if people are going to invest here, they want access to a healthy labour market. At the moment, we are making it awfully difficult for people who are in this situation. We have fairly miserly social security support, as David has alluded to, mental health support, which we hear all the time as part of a structural issue for why people are in poverty and it is often locked out of the labour market. It just is not there, NHS waiting times contributes to that too. Part of that is also on employers. Employers in a tight labour market need to be able to show more flexibility, particularly for disabled people and particularly for parents. That is not a simple issue. There is a Government fixed to this. It is not just on business as well. I think that to see more of that partnership and to work around people to help them into work and having that ease of access to the labour market for people coming into it is a benefit to both sides of the coin. Do you think that there is sufficient understanding about the skills issue that the employers know enough about where the problems are with the skills agenda? Do you think that knowledge is good within business? I think that those words are difficult to say, so excuse me if I trip over them. We often put a lot of focus on employability in terms of putting the focus on the individual rather than employer ability. I think that we probably need a bit of both, so employers being able to understand more about what are the practical barriers that people face into getting work or into getting the skills that you talk about. Employers knowing more about that, individuals knowing more about the access services that are available in their areas and those services being responsive to both individual and business needs. The Scottish Government is cutting the budget for employability by the £30 million in the cash terms, but do you think that that employability budget has to be separated out a little bit about awareness for employers and for employees? I think that some of the best employability services at the moment in Scotland are provided by the third sector. The reason why is that they understand the people that they are supporting and that they understand the communities that they serve and the businesses that are part of that community. At the moment, employability funding is hard to know what the Scottish Government is spending on employability, to be honest, but it could really do with somebody taking a deep breath of pausing and focusing on that sort of level of support rather than what we have just now, but, as a concern, I would go along with that around the third sector contribution to that. Of course, the third sector is less apparent in the rural areas, especially in the remote rural areas, for understandable reasons. I keep alluding back to Sutherland. I keep hearing housing, but I then hear childcare as the next issue. Childcare is a thing that employers need to engage with as well. Dr Suza, you mentioned earlier, and other panellists have mentioned, about the importance of the college sector. Can I just ask about the cut to the Scottish funding council and the ramifications that that might have? Both the college sector and the university sector are absolutely critical to developing Scotland to the economic growth apart from anything else, but to making the best use of the assets that we have. How critical do you think that funding cut is? The first time I saw this was with a letter to yourselves about the 23-24 cut and subsequent cut in future years. I think that it transpired by looking again at the level 4 tables. I am surprised that that is a decision that has been taken given the fact that skills are such an important thing. They can have really long-term ramifications. They are investing in human capital, essentially, even if they go out of the resource budget in most cases. That means that if we are training fewer people in areas that we might want to focus on, and David in particular mentioned the retraining element, which is key for industries that might no longer be viable in the long term and for whose employees it will be required that they train on to doing something else. That also staves off, in some sense, the threat of inactivity from people who have been employed for a long time and have built up capital in a particular industry. That is a concern in my opinion. I would like to go back to the convener's original line of question. Quite what we have heard so far this morning is arguments that the budget does not prioritise economic growth enough, it does not prioritise tackling poverty enough, it does not prioritise tackling reaching our net zero targets enough, specific criticism of the lack of funding for skills and training, university places affordable housing, the Scottish Shell payment enterprise agencies, the national investment bank, etc., etc., etc., and scepticism about tax rises to raise additional revenue. Is not that the problem? It is really easy to identify what this budget does not do, but there is little in the way of solutions to that. Chris, if you are identified almost straight away that the money for the council tax freeze could instead have been spent on increase in the Scottish Shell payment, absolutely my criticism of the council tax freeze is on the record, I agree with you on that. Cumulatively, the Government went into this with a £1.5 billion gap. What I have not heard yet this morning is a clear identification of where the Government is spending money on the wrong things. What could be reprioritised to fill all the gaps that you have all quite fairly identified? Those are all areas that I think there would be a consensus that we should spend more money on, but there is no more money, is the point. What I have not yet heard this morning is the identification of where that money could come from, especially if it is not going to come from pretty swinging tax rises. I guess that my argument would be that those decisions are political decisions, but they should be made in an informed way. Circumstances have not been ideal given the timetable of everything this autumn. Nevertheless, the medium-term financial strategy pointed out that there was an issue. Essentially, rather than making the decisions in what appeared to be the last minute, things might have been taken forward in a more considered way. I agree that there is not enough money here. There was no way of inventing additional money, but my point is that we have to be in a situation where there are considered plans in place to deal with situations where there is sudden shock. Reconciliations could cost us £1 billion easily. It seems to me that we all say long-term, but a more considered view, so that we know that if something really bad happens in terms of the overall budget, people have an understanding of how decisions are going to be made. My point in highlighting a lot of the areas has not been to say that we should not do that. That is not my place here to say that, and it is not the issue's place. It is to highlight the things that are left unsaid by the budget statement that I think you, as a committee, should consider and query with the Cabinet Secretary for Finance. For example, is this the priority? How do you square this with your priorities? There are arguments for doing a lot of the things that were done. We have all kind of criticised council tax in particular, but for all the other things there are arguments for it. It is the trade-off that is implied by it that I think is really important to highlight here. The other thing I should say is that the medium-term financial strategy was back in May. We all knew and we all know that a projected shortfall cannot happen, and therefore we know roughly, in the absence of anything else, how much almost the axis is going to fall out, and then it is a question of distributing where that goes. There are six months in between events. Even if the autumn segment is close to it, the medium-term financial strategy was not. The final choices that were made in the budget were the only possible choices. As David said, there are political decisions within it, within the couple of weeks that we have had to have a look at it. We have not had the time to study it in detail, but I think that your point is quite fundamental. It comes back to something that Michael asked earlier. The Parliament has set targets for having very low poverty in Scotland, for having much lower carbon emissions. Quite rightly, it is an ambition that is shared by all the politicians here. However, we need to do more to get there, and we cannot sit here and go, well, we have spent all the money, we are stuck, because we are not stuck, but we have to do things and we are going to have to change things. As I said, around the housing supply programme, maybe there are ways in which we have to change how we target that funding to impact and cause an impact on poverty. Council tax is a very obvious one. We have talked about council tax reform for years, and everybody has dodged it, let's stop dodging it. We have greatly expanded the availability of childcare. Good, that is needed. However, if we are going to keep going, we probably need to have a debate about how we are going to pay for that. It doesn't necessarily need to be taxed, are there contribution systems, saving social care, mental health support is fundamental. Those are all things that you would all nod and agree at, but we are not having the debate about how we as a society say that this is what we expect from our Government and our public sector, and this is how we are going to collectively contribute towards it, because if we accept today that we are stuck, then those ambitions that this Parliament has won't be achieved. That is a really pertinent point. There is perhaps a challenge there as well within the Parliament's power to legislate for targets. The challenge that we have is that the range of powers that we have to reach those targets is a limited range, so you are right, Chris, that we have not fully utilised those. Just touch on a couple of specifics and go back to the discussion early on around the income tax changes and splitting the higher rate. David, if I could ask you first, was it not somewhat strange or at the moment, is it not somewhat strange to have a higher rate with such a massive range between £45,000 and £125,000 to be taxing at the same rate between those? It's a massive range to be doing that, all acknowledging that from 100 onwards when they withdraw the personal allowance obviously has an effect, but was that even in European terms it's somewhat unusual to have such a big rate for one rate? I think you're probably right. Because I referred to them on my paper, I was looking at the OECD schedules in other countries. I think that Belgium is really ramping up every 10,000, something like that. I think that that is what you mean. My quick scan of the OECD's income tax schedules suggests that, in general, the gaps aren't as big as £45,000 to £125,000 or whatever. It is also the case that, although that may be an issue with the UK income tax system, there is also the massive issue around the way that it interacts with national insurance, plus the removal of the personal allowance, which I think was done by the Labour Government, is an issue because it creates, all of a sudden, a stratospheric marginal rate which no other country copies. There is a case for reviewing income tax and national insurance together that is complicated by the fact that, in Wales and Scotland, income tax is a devolved or the bans. The bans and rates are devolved and the systems are different as between Scotland and Wales. It is a bit of a mess, the whole thing. We actually did some work on this prior to the budget, trying to look particularly at the distortion around the £43,000 to £50,000 income tax marginal rates, which interact, as you said, with the national insurance because people pay the higher rate of national insurance rather than the 2 per cent. I prefer to focus on that one, because that one is easier for the Scottish Government and the Scottish Parliament to do something about. I know that it raises a lot of money. I think we estimated it raises about £600 million a year, not raising the threshold. What we looked at is, could you do something to raise, to bring in the same amount of revenue roughly, but remove that king in the system? That would increase the progressivity in the system, because that would mean that employees at £45,000 would pay lower rates than people earning £55,000, which surely is what a progressive system should do. Jumping around somewhat, Chris, to the points that you made earlier on, particularly around capital affordable housing, you highlighted the roads budget as an area that could be reprioritised. For us and to my Conservative colleagues, my party has already done that and the roads budget has gone down significantly.  It is mostly for safety critical infrastructure. Is there not a wider point with the affordable housing? Nobody would defend that as a good outcome. That is £196 million or whatever it is there about. That is not a good outcome of the process, but affordable housing is an area of capital spend where there are other policy levers available. There has been an emergency rent freezing cap, there are eviction protections, permanent rent controls coming in, there is regulation of short-term lets, which should hopefully free up more housing, doubling a council tax on holiday homes, whereas there are other areas of capital spend where there is no legislative or policy alternative to reach those same eventual outcomes. English David pointed out that a lot of net zero spend in particular cannot be done any other way than through hitting capital spend. As much as the affordable housing decision is a really unpleasant one, nobody says that it is going to be a good outcome. There are other levers that the Government can pull within the limited context of devolution. There are other options to hit our ambitions for housing, excluding capital spend. Is that not correct? I live just off the A9, so I will stop my comments on roads. Obviously, the capital investment in housing is not the only thing that we choose. Although I would say that the homelessness support budget does not seem to have gone down a bit as well, but the fundamental issues that are within our housing system at the moment—why do we need rent caps, why do we need rent controls, et cetera—are because of a lack of supply. We need more affordable housing. We will stop if we can find different ways of doing that. Grant, but we do not have those yet. I think that there probably are. Sorry, I will bring in a second. There is a lot of other money out there. The most obvious example to me is that public sector pension funds invest billions and billions of pounds into all sorts of stuff all the time. Are public sector pension funds invested very little into public infrastructure like affordable housing? That is not a criticism of them. There is no setup to connect them with that, despite the fact that they have billions of pounds to put in. There probably are other options that we can explore to get more money into areas such as pension funds. That is just one example. I was just going to say that there can be, especially in terms of supply constraints in terms of housing, a benefit to just—there is always some leakage in incentivising measures to release supply, whereas it can, on the other hand, be more direct to just intervene and create that. There is a decision to be made and an assessment to be made, I think, from the Government side as to whether which of them is preferable in what level of leakage there is in terms of that. The other thing is I think what would be helpful would be to have a more spelled out direction, which I think what doesn't feel like there was a lot in this budget in particular with the housing supply is that there is no joined up thinking of like what are we doing overall to these areas. It just feels like this was cut because something had to be, that can be paused because you are just bringing new things on mind. It just doesn't necessarily feel like the best way of making those decisions. I have taken up quite a lot of time for one more question. I will go back to the point that you made, David, on attracting investment in the cuts to the enterprise agencies. That might be too specific a question, but are the enterprise agencies necessarily the best place for us to put money to attract investment? I think that the coverage over the past couple of days of the incredible success of our film and TV sector, which I would argue is largely driven by the fact that the responsibility for state support for that has been taken away from the enterprise agencies and given to a bespoke unit within Crate Scotland, the new-ish Screen Scotland, particularly Scottish Enterprise. High and so there are different and do have a justifiable return. Has Scottish Enterprise been able to really demonstrate that the spend that we have put into it has resulted in increased investment? You have pointed out that spend on Scottish Enterprise has actually gone down at the same time as foreign direct investment in Scotland has gone up. That is a very reasonable question that seems to me. I haven't looked at the data recently. There was a time when Scottish Enterprise or its predecessor was doing very well in attracting what were effectively the companies that formed Silicon Glen. The nature of the world has changed a lot since then. We are effectively a service economy and we are not a manufacturing economy. Therefore, a lot of the areas where we want to attract do not necessarily lead to huge requirements for concrete and buildings in general. I am open to the idea that industry-specific areas may or may not do better. Something like Visit Scotland is an important potential agent for supporting what is a key industry for Scotland going forward. I do not think that the enterprise agencies are unaware of all of this. I think that the question that you have raised is a very fair one, but I do not think that the cuts were demonstrably there on the basis of an assessment that they were doing badly. That goes back to the point that was made about the affordable housing. If we had made decisions in every portfolio area purely on the basis of what is going to generate the best long-term return in that area, we would have almost certainly ended up with a budget that did not add up. Ultimately, the budget had to add up one way or another. I was going to speak about economic growth, but I think that we have covered that fairly well today. On the point that Ross was doing and others have raised, I think that you have raised some of yourselves, do you get an understanding of what the budget is trying to achieve from the Scottish Government? Do you think that the Scottish Government has explained its direction, its ambitions and where it has cut some of the inconsistencies particularly around woodland grants? Why is it a priority one year but not a priority this year? Do you think that there is enough of an explanation from the Scottish Government on why some of those decisions have been made? It was budget, necessarily, made in haste, as it often is. We have had a lot of discussions about short-termism, and a lot of that has to do with the budget process. I have been and discussed the budget process for decades now, and it still seems to be a very compressed affair. I think back to things like the national strategy for economic transformation. How does this budget link up to that? It is not very clear to me how it does. That is the sort of growth prerogative, but of course there is a set of other issues. There is the social justice area and so on, but I do not see a narrative that says how that has all been added into the budgetary process and a clear narrative come out of it. Chris But? I just heard that from something that George has said. The housing thing is a good example. I am never going to sit here and tell you that cutting the housing capital budget was a good thing, but if the Scottish Government would say that we are under an incredible pressure this year so that we have reduced capital funding for housing forward, even with an ambition and later again millier planning to discuss it. If it was because this year we are going to do bang bang bang to meet those longer term outcomes and our aim is to, on the social justice fund, plan to spend £3.6 billion in this Parliament, is that gone? It looks that way, but we are not having that discussion. I understand that that would be an awkward political discussion, but it would be much harder for me to sit here and say that this looks like a big problem. If we were discussing whether the Scottish Government has reduced this budget and we are going to target on those things, that would be a more productive discussion. That is the case in the areas that there are cuts, as well as the areas that there have been increases in investment. For example, the Scottish Government is better at saying that this is what we want to do. We are putting money into this than we are justifying what cuts are made. Perhaps that is fair, but I have not thought about it in great detail, to be honest. I do think that there is something about being intentional and saying that we are going to spend this money—for example, the mental health support stuff. If we said that we do not have the money to spend lots of money on mental health support and on employability support, but we hear all the time from people about the mental health struggles that they face, we are going to prioritise investment in that and distance it. Those are the choices that they have to make. I do not feel like we get that balance between yes, we are going to positively do this and for that reason we are not doing that. If you look at a budget document, it is necessarily something that has loads of different measures, and it is then that everyone tries to—the Government weaves a narrative together to explain why they have done what they have done. Those decisions are also made based on the priorities there. Essentially, I think that there is a point of—it is easier to just highlight the things that are priorities. I understand why that would be the case, but then, as Chris said, that is why we come here to this panel and highlight all the things that were left unspoken from the budget. One of the things that I think makes something stronger rather than weaker is acknowledging those trade-offs and bringing things together in a coherent way that means that you can understand how the decisions have been made and how things that might be across different portfolios come together to form one direction of travel in a particular area. Different portfolios can have responsibility for things that can cross them. Employability might be in work and fair work and wellbeing economy, whereas mental health is on health, but they can be related and how those interact is important to understand when you are making decisions about which one to prioritise. I am a Highlands Alliance MSP. I represent a huge part of rural Scotland. We have talked about housing within rural areas. We have talked about the importance of delivering health services and how it is more expensive—local public services, transport, et cetera. We have talked about council services in Orkney and the fact that my council tax bill is going to be going up. I was just wondering if you could give me your thought on the impact on rural Scotland, whether there are any particular comments or concerns that you have given the difficulty sometimes in delivering those services? We know that some of the geographical challenges just mean that things are harder to deliver consistently across councils. I am concerned about the blanket approach to the council tax compensation. I think that that could have some unintended consequences across councils. I think that there are then some of the issues about some of the opportunities from things like—I talked about woodland grants and things like that—a lot of the projects that rely on Scotland's geography are less front of mind necessarily when they are being decided, but they cannot have important consequences for net zero targets and things like that. That is something that will be important to think about in terms of the priority of the growing in greener economy that we talked about. I want to declare an interest. I am a member of the Aberfelda Development Trust that we look at affordable housing in our area. However, I think that housing is absolutely key, because it glues everything together. Of course, there is affordability of that in the seasonal element of work and how that interacts with people's rents, but also how businesses are able to flourish to be able to have employees of working age living in those areas, too. Welcomely, the affordability of housing supply programme did have an element that is focused on rural homes. Any contraction of that is a concern. We know that we have too many people living in our island communities, particularly Skye and Orkney, and others who are living in substandard accommodation. However, there is also such a shortage of accommodation that people who want to live and work in those areas cannot live and work in that area. Is that an important issue? I am from the Highlands as well. I pointed out in my paper that the rural affairs land reform and islands resource budget fell by about 13 per cent. Issues such as depopulation, which relates back to housing, child care and so on, and fuel poverty are all big issues. One thing that has not been mentioned so far is agriculture and support for agriculture, which has fallen quite considerably in real terms, which is tough for crofters who are receiving a higher proportion of their income from the state than arable farmers. The budget poses a particular challenge, particularly in areas such as the highlands, which do not get the benefit of additional funding, such as the islands do. I would have to declare an interest as a partner in a farming business if I mentioned that, but I think that it is absolutely fine. Thank you very much. Thank you very much, Jamie. I would like to thank our witnesses today. We have over one hour time, quite considerably. That is because of the interesting questions that were asked, and the very interesting responses that we received. I want to thank our witnesses. I normally would ask if you had any final points, but we do not have time for that at the moment. Just to thank you, and we will take a break until 11.35, when we will have the next panel. Okay, then, folks. For the second part of the revenue session of the Scottish budget, 24.25, I would like you to welcome to the meeting Richard Robinson, Senior Manager, Performance Audit and Best Value, Audit Scotland, Dr Jenny Peachy, Senior Policy Advocate, Carnegie UK, Shona Struthers, Chief Executive Officer, Colleges Scotland, Stacey Dingwall, Head of Policy and External Affairs Scotland, Federation of Small Businesses, Martin Booth, Executive Director of Finance at Glasgow City Council, Keir Greenaway, Senior Organiser for Public Services, GMB Scotland, Francesca Osowska, Chief Executive of Nature Scotland and Kirsten Hogg, Head of Policy and Research, Scottish Council of Voluntary Organisations. It's not a question that I'm just asking you all the questions. I'm only going to ask one question to start off with, and that's going to be to Stacey, first of all, and then people can come in with any comments they want to make to the comments that perhaps Stacey has made, or if they want to take the discussion in a different direction. We're not going to go through this in some kind of stultified theme approach. It'll just be for people to come in when they wish to, on the issues that they so wish, and if we get stuck, I'll just drag somebody in to keep things moving. When people want to speak, just let me know with a nod or whatever our clerks to know signalling. Let's fire away. The first one is something that we're not really touched on in the first panel session. What the Deputy First Minister told the chamber was at a quote, prioritising health spending is meant that the Government is less able to support the business sector. I'm just wondering, Stacey, what your view on that is from the view of the Federation small businesses? Thank you, convener. I think the previous panel talked a lot about making choices, and I would say that when we heard that during the budget statement, I think our reaction was that those choices maybe aren't as binary. No, just because you do this doesn't mean that you can't do both of those. It's about we make choices. I think that we talked a lot about we choose to do things. I'm not saying that those are bad decisions, but we choose to keep offering non-means-tested benefits, like three prescriptions to everyone in Scotland, but we also want to do other things. I think that the previous panel touched on that, is that if we do want to do this new thing, does that mean that we can still keep doing what we have been doing? We all have to make choices at that in our daily budget. If I want to do this, that means that I'll have to stop doing that. I think that our reaction was that it's not as binary as that. For instance, one of our big asks was around passing on that 75 per cent rates relief to retail hospitality and leisure that the UK Government have extended to March 2025. We know in Scotland that it's been since July 2022, I believe, since any relief was available to those businesses. I know that it was calculated about £230 million, I think, the Barnett consequentials. I know that Fraser of Allander, looking at the valuation roll for this year, have calculated that it would actually cost the Scottish Government about £360 million to replicate that in Scotland. I think that's because, obviously, you can't really compare the different rates relief systems. They're not comparable. There are different complexities. However, we look at the Welsh Government, which has chosen to pass on 40 per cent relief to those businesses in Wales to March 2025, so our push was really for, because the systems are different, because we know that the small business bonus scheme offers a lot of benefits, particularly to our members. It was looking at, if we're not able to pass on the 75 per cent relief, because those businesses already get other reliefs, for example, SBES, was there something around the 40 per cent relief that maybe the Scottish Government could have replicated as it did in Wales? I suppose that the issue for the Scottish Government is where would they have found the proportion at £360 million from, because they already have £685 million in non-domestic relief, and, indeed, with someone who represents Ireland, they actually increased relief to all businesses with rates such as £110,000. They'll now get 100 per cent relief. John Swinney, do you want to come in? Yes, when I was at that point strangely enough, I met the hospitality sector yesterday. Some of the hospitality sector are very profitable and don't need support, and some are struggling and do need support. Given that you were arguing that, say, for prescriptions that should be targeted, do you not think that any support for business needs to be targeted at those that need it? Yes, absolutely. I know that it's a big ask for the hospitality sector now to look at introducing a specific rate for hospitality businesses. All hospitality businesses? I would say that that has to be targeted. I think that you are correct. I'm part of the work of the new deal for business group looking at reform of rates. We've not had time to specifically get into detail as much as that, but I would expect that as something that we would look at as the work of that group continues. On that point, the 75-year relief is for retail as well. We've all probably seen more noticeable as our high streets, more and more businesses, business spaces becoming available. I was speaking to some local business people about the increases in their rents, which have gone up from 12,000 to 18,000 on a new lease. What are your concerns for our high streets? It's a big issue for all the MSPs here. The businesses in Scotland statistics released just before Christmas showed that we lost 3,500 retail hospitality and accommodation businesses and over 20,000 businesses overall, mainly in those 0 to 49, the smallest of businesses. Just over 20,000 businesses were what we lost in the first year of the pandemic and we lost that again last year. If we can't offer support, it looks like that's going to continue, unfortunately. The economy committee that I was on did an inquiry into town centres, and I think that I was on as well. I came up with some suggestions. I think that there's probably a repeated process in committees of this Parliament looking at high streets and our town centres and how we can make them sustainable. If we don't get it right, we don't get tax level right, support level right and some of the wider issues around access to town centres, both within this budget and others. Do you have a future? I mean, you look at some of our biggest high streets in our Salkie Hall Street—I'm from Glasgow. We look at the difference in Salkie Hall Street in the last 15 years. If we don't have that investment, then I just don't see how we improve it, unfortunately. It's a different tack, but I would just want to bring it back to the Government's ambitions of opportunity, community and equality. The college sector has seen an equivalent of 5 per cent cut in its budget. It's a sector that's suffered cuts for the last decade, but it's a sector that delivers on all of those things. It gives opportunity to people. It gives them hope. It gives them skills. It gives them work. It supports the economy to do that, and it supports communities. All that fabric where colleges support communities and support the people in it, if you keep cutting and cutting the way that the cuts have been done by the budgets, is death by 1,000 cuts. It's not a strategy. It's almost like the budgets being, if everyone just gets a little bit of a cut, it'll add up. That's not a strategy. If you really do want to deliver on equality, opportunity and community, you need to invest, and the college sector has shown that the investment—the Fraser of Alun, the recent report in November—is a great return on investment. We need to grow the economy and give people hope and give our businesses purpose. Your paper says that we're repurposing existing resources. Can you tell us what that means? Does that mean that we cut the universities and especially cut the richer universities? I'm not advocating that at all. The university sector has also seen a cut as a sector. What I'm proposing is that we've got £3.2 billion in a skills system, and I think the minister will be speaking tomorrow on the Wither's report. There's been the Hayward review. There's been purpose and principles. There's been a lot of work around the whole skills system. It's about making sure that any duplication is taken out. It's about targeting it. It's making sure that the investment that the government has already made in colleges, which is significant and substantial, get the best return on that. Invest in them properly. This 5% cut that's happened is that you're going to close campuses, you're going to have less students go to college, you're going to have less curriculum. It's just lots and lots of tiny cuts. It's not a strategy. So it's repurposed the skills money that you have. We're not asking to take from others for the benefit of us. We're just saying invest properly and you'll get a better return. I suppose one of the things that I'm very thoughtful about and the thing that seems to be coming out and came out in the earlier session was this discussion about what should go from one budget line to another budget line. There's clearly no easy answer with this. I suppose I was thinking about the starting point and an outcomes focus, really, I suppose. It was really encouraging to see the outcomes in the budget, but were they bolted on or were they built in from the outset? I suppose where I'm coming from with that is New Zealand and their Living Standards framework. There is the Living Standards Survey. It helps officials to identify where the well-being priority outcomes for the people of New Zealand and then departments bid to the well-being fund to address those issues and those departments that work cross-departmentally and those bids that seek to deliver on a range of outcomes are given priority in the budget. I suppose what made me think about that was that colleges do an awful lot of things beyond what the stereotype might be. It's a way of, I suppose, construction slightly differently, I suppose. I suppose the question we had was would it be interesting or helpful to explore with a more longer term view, obviously, not with just this year's. Is there a way to think about, is this outcome really the starting point for thinking about what to spend and how to spend and how people can come together to deliver on those set outcomes, as it were, rather than starting with the priorities and saying, oh, then this leads to this outcome and it's that outcome? Because then it's also easy, perhaps, to measure and monitor progress and see whether there's success in delivering those outcomes and, again, also able to see where the priority outcomes are. Are they being given more budget or is that being protected in any way? I realise that it sounds a little abstract and a bit whistled back almost, but it's related to me to some of the things that I was hearing sort of in the previous session and from colleagues. Hold on a second list because Michael is wanting to come in here. I suppose it's on this point that they reflect a little bit on that previous session. We have long-term targets in Scotland, whether those be around reducing child poverty, whether those be around climate change and our targets in those areas, but it feels to me that the budget is much more short-term than actually looking at those long-term targets set out by the Government, the priorities that they have, about how they get there. I think that there is that point that I think is much commented on in this implementation gap. It's interesting that colleagues comment and views around that between the rhetoric and the political language and whether they're seeing those priorities reflected in what's coming forward. That's exactly the same question, so it's fine. Oh, the same question, right? Okay. Just on that issue, I think of the difference between the rhetoric and the reality. For us, the problem is that the budget makes it almost impossible to tell the difference between the rhetoric and the reality because there's a real lack of transparency around the third sector, the voluntary sector. We hear an enormous amount of rhetoric, including this morning, actually about the importance of the sector around mental health, employability, prevention, all the things that we've discussed is super important this morning. Within the budget process, there is one line called third sector, which relates to a little bit of infrastructure. No other way for us to tell how much money comes out of Scottish Government into the sector. There is no overall figure. The Scottish Government doesn't collect it. It's not a box on a spreadsheet in a way that it feels to me really simple that it probably should. We have no way to really say whether or not the rhetoric around the importance of the sector is brought through in terms of the budget, in terms of that transparency. What we can say is that nothing has been done to help the sector through the budget. We only made one ask for money. It wasn't very much. It was the Barnett consequentials of £100 million that came from Westminster around support for energy. The response was basically, to my mind, that it was never considered. There is none of the narrative about how decisions are made. The answer was just no. That's a really difficult position to sit in. The other thing that I think is really important when we're talking about the way that budgets are constructed is around the length of time that we're looking at in our horizons here. The thing that we asked for that doesn't cost any money is to look at multi-year funding for voluntary organisations to give us that sustainability, that understanding that we'll still be here in a year, to not be putting staff at risk of redundancy. The First Minister stood up in November in front of 600 people from the sector and said that we would see it, and then the budget came in December and things had changed. I think that's really a significant miss. I know it's been punted into the long grass in the next event, whatever that is, that we'll be able to talk about out there.  I think that's a really significant issue. If we want to be looking at preventative services in particular, if we want to be looking at the voluntary sector's role in public services altogether, then we really have to get those things back on the table. I absolutely agree with Kirsten about the comment about lack of transparency. It's not just the third and voluntary sector that's across the entire settlement. We put figures out based on where we were at this time last year rather than where we were at the end of the year, so there's a distortion in the figures. The headline is that local governments get 5 per cent more in real terms. That's not an accurate comparison, and what it does is it leads people to believe that you've got money that you don't have, so those decisions become much more difficult. I come back to the comment about focusing on outcomes. One of our biggest individual spend lines in local government is teachers' pay, and we're constrained by the teacher numbers. That's an input. It's not an output, it's not an outcome, it's an input. So attainment is improving. A lot of our indicators are really positive, but we're being constrained with how we deliver services by a constraint that is putting a massive amount of pressure on every other budget line. Multiyear funding would be fantastic, but I would be wary of multiyear funding when that's not coming through the entire system. If you don't know what's coming from Westminster, for example, you will be naturally prudent in your assumptions, so you might end up with a worse settlement than having to make worse decisions because you're trying to predict forward, but it's ridiculous that Governments and local authorities are budgeting on a one-year basis. It is a nonsense, but the whole system has to move that. Moving a bit of the system creates potentially a bigger problem. What we really need is an honest conversation about how we deliver public services in Scotland and what's affordable, because we continually increase what we deliver, but we don't fund it and we don't fund it going forward to 1140 hours. I don't think that anyone would disagree that 1140 hours was a good policy, but actually the funding for 1140 hours hasn't changed since it was first introduced, but the cost of delivering it has gone up quite significantly. Inflation over the past few years has been, you know, I'm old enough to remember inflation at that level, but most people aren't. That pressure on the system has just been thrown over the wall and it's leading to cut sales where, so we need to have an honest conversation about what we can afford to deliver. Francesca, to a fall by Jenny. Thanks very much. I just wanted to return to the theme of rhetoric and reality. I think the previous session and we're already hearing in this session has highlighted the really difficult issue around choices in the budget, and there was a question, I can't remember. I think it was yourself or us that asked in the previous panel session, okay, we've heard all the issues, what would you change and what would you prioritise and I'm not sure I can answer that fully, but what I do see in this budget in terms of rhetoric and reality is a shift to recognising the long-term challenges around climate change. We've had reference already to those statutory targets on climate change. There will be statutory targets in relation to nature degradation linked to climate change in the future, and I have seen that shift in this budget towards those areas. From that perspective, I think there is some follow-up in terms of reality in relation to the rhetoric. There is still quite a lot of uncertainties in terms of the budget. We have headline figures, we have headline figures for the environment and forestry area, I have headline figures for my budget, but some of the wider implications, and I think it was yourself, Jamie, who referenced the reduction in other portfolio budgets, which will have an impact. Some of that is still to be worked through. From my perspective, while that shift to tackling those very long-term systemic issues around climate change, nature degradation and how they impact on communities' equality and opportunity is welcome, we've still got quite a long way to go to understanding the full implications across the budget as a whole. The Implementation Gap and the Martiny raised the point about funding public services. I suppose that we are thoughtful about how there is broad consensus that the current model for financing public services is unsustainable and that something needs to be done and that something would be to invest upstream in prevention, as we have heard. I found it interesting that in the health foundation's report last year, no one left behind, they reflected on how there are many reasons for implementation gap, but one of the things is not the lack of managerial understanding but lack of political consensus. I suppose that it struck me that the real strength of an excitement about a committee like this is to build that cross-party and broad kind of consensus and support for this because it is not just about alleviating pressure on public services because we need to alleviate pressure but you're alleviating them because people's lives are better, they're living healthier lives, they're able to fulfil their potential and therefore not putting pressure on public services if that makes sense. I actually think that there is consensus on the need for prevention. The difficulty is what do you actually reduce expenditure on now in order to put money into prevention? That's when you struggle to actually get people volunteering to say, well, do you know what we should do? Maybe a segment of our budget shouldn't be spent this year so we can invest it for the future. That's always been the difficulty. We've been debating this since at least 2011. Michelle, do you have a follow-up comment about how we provide best value and Martin started it off? I'm sure that Richard has a view on the cost of central government and that increase of £30 million where we saw other budgets cut. Obviously, you've drawn our attention again to the report about the need for workforce planning and so on, so I'd appreciate your thoughts. Were you surprised by that increase and what are your reflections on that within the budget and the light of the report that you produced at the back end of last year? Just before you come in, I've been threatening to bring her down, because one interesting point that was in his submission was that, since the Scottish Parliament was established, the number of people working in public sectors has grown from 150,000 full-time employees to 245,000, so there's been a huge increase in paydeals. A grade between 22, 23 and 23, 24 were £1.7 billion more than initially planned, so Howard has talked about the need for significant form of the public sector, including the workforce, to protect services in the long term and goes on to state that public services in their current shape are not affordable, so that's an umbrella area, so we can go, but if you want to respond to Michelle Howard and then we'll see you go from there, sorry, Rick, what did I call you, Howard? I don't know, Richard. I've been calling Michelle Gillian for the last two years inexplicably, I just do these things, I don't, I do apologize for it. Okay, Richard. There's a few things to unpack there, I think, one, just on the workforce numbers, so what we're saying is that we would have expected the workforce numbers to increase since the start of the Scottish Parliament and they have. What it does though is bring an additional challenge in terms of the financing of that given some of the recent pressures in particular, particularly around increases in wages, costs of living, all those types of things, so what we really look into sort of promote is the need for reform, because what we're saying, what we find within many of our reports is that what we're not necessarily, when we go and report on a variety of sectors, they tell us that there are capacity concerns and they tell us that there's issues in how that affects how they can deliver services, so a reduction in numbers on its own and the cost that make, reduction in costs that make them with that wouldn't be sufficient to address it. So one of the things that we're really looking to do, and it probably goes to another point which is about, which I may come back to just about that medium and long term lens, is to encourage and ask the Scottish Government to work with the public sector bodies across the piece to say, well all the bodies are different, to what extent are you reliant on workforce costs and a workforce, what is the extent of reform, what would that look like, what would it mean for services and that doesn't necessarily have to mean a reduction in quality of services, we give examples of using digitisation for example to to improve an online experience which might reduce the number of workforce input required. So I think within all these conversations is about how can we see and monitor the pace of reform and I think that probably goes back to some of the points that are being made around it only being one year we don't have multi-year budgets. So while the ambitions of the Scottish Government often have a long term lens around the environment, around poverty, it's difficult to even map out in approximate terms what that might mean in terms of settlements for the various portfolios and how they work together over time. So the end set was raised I think and an example of that, how's that going to impact on the economy in the matter when you're coming in for budgets, health, we know that the SFC have done some work on long term demographic changes and some fairly scary results in what that means for costs of managing health, it would be useful to see some of that and have that factored through also into areas such as workforce and capital was another thing that was mentioned. Interestingly, digital is an area where there has been a significant increase in the budget going forward. John to follow by Shona? Yes, we're also following up on the multi-year thing. I wanted to follow up what Martin and Kirsten had said about the multi-year funding. I just wonder if we're looking for slightly different things between local authorities and SFC voluntary organisations because presumably for Glasgow or something I mean 5% up or 5% down would make a big difference if you knew that was coming down the route. I mean to know that you had 50% as you say wouldn't be very helpful presumably whereas I mean we've raised this before with SCVO that you know even if you knew you were getting 50% or 75% of what you'd had the previous year would make a big difference because you wouldn't have to make people redundant. Organisations at least would know they would have something so are we talking about two slightly different things here? I do know who I am. I understand from the voluntary organisation and you get to December and you have to start giving redundancy notices because you've only got funding up until March and finding out in February is far too late but actually if you get multi-year funding where you think you're only going to get 50% then you're actually making those people redundant and then the funding comes through eventually so part of it is if you've got bad settlement or even worse settlements might be more accurate because it's based on a projection without having the full detail you start planning to make bad decisions or difficult decisions, negative decisions and actually that creates a massive amount of anxiety for staff, for service recipients, for our communities so it's that you know you actually create more stress talking about making a cut almost as much as you do about making the cut so it's you know and this is a very much probably a personal view that actually having certainty over a budget is I think more important than having that longer term view although as I said it's ridiculous that we're planning you know we're setting a budget in February to start in March. Yeah and we've got another budget coming in March as well actually a UK budget so we don't know how that'll impact it. Shona, to be full. Can Kirsten come back on? Oh sorry Kirsten I didn't realise you were going to come back. No just to say that I think the slight difference is that for a voluntary organisation that might be an existential issue as to whether or not your whole organisation exists so it might not only be about putting some staff on a redundancy notice, we are now at the point where the closure of services might also mean the closure of an organisation and so I think that the certainty that we're looking for is not just around individual projects but that now in some cases translates to the whole organisation and once the organisation is gone it's gone and it can't be readily replaced within that community to provide the support and the connections that are already there and that it has so I think I think it's two sides of the same coin in terms of looking for that certainty but the potential impacts for voluntary organisations can be much greater. I think it also probably speaks to the different funding situations that we find ourselves in that I find it almost impossible to imagine a time where the amount that's agreed then would go up at the end of that period. I think that would be a lovely situation to be in but I'd much rather plan for a cut and have that certainty and have that stability because it's just not the funding environment that we exist in. The other thing just very quickly about delayed decisions is that I think that the lateness of this budget process means that almost certainly organisations which receive their funding from Scottish Government and also from local authorities are going to be facing those late decisions yet again this year. The Deputy First Minister has, I understand from the Christmas press, said that voluntary organisations who are Scottish Government funded will know that by March and it would be really good if the committee could help us to keep an eye on that because little things like that that don't cost any money, those little process issues can make all the difference to voluntary organisations. When I was first elected in 1999 I was in social justice committee and we did inquiry into long-term funding for the third sector, so that's more than 20 years ago and we say it came to much the same conclusions as you've came to just now, more than 20 years ago and it's still an issue that's hanging over. Is Shona to be followed by Keir? Yeah, a couple of points. I would say that the college sector also suffers from short-termism because we don't have budgets that allow us to plan and in fact Audit Scotland have addressed that in some reports about if we had the ability to plan, I think you'd make a lot better decisions. So there's 24 colleges in Scotland, 11,000 staff, that uncertainty that you talked about is massive and you're trying to run organisations, you're trying to encourage people to come to college and get an education and it's very difficult when you just don't know if you've got enough money to run that course or you know, we go out in January and start to recruit, we've just had a 5% cut. So that wasn't the point I was going to make but I would absolutely agree having the ability to plan longer term just means that you run your businesses a lot better, whatever your business is. I wanted to raise the point about the budget. I said we've got a 5% cut but actually I'm not 100% sure what our budget is right now. We think it's that level, there's ambiguity about exactly the amount of money that the colleges have got to run for next year because some of the money comes from different budget lines not just within the portfolio but even still that's a level of uncertainty. College boards are actually, colleges are actually charities so all of our board members are charitable trustees so they sit there as independent volunteers on college boards making decisions and actually they don't know how much resource they're making decisions with and then if you add to that complexity cash flow there's a recent report out from the funding council last week that has highlighted because of the cuts that are coming to tertiary sector both colleges and universities but particularly colleges their cash flow situation is dire. We have some colleges who could well run out of cash this academic year and that's unprecedented. So I suppose what I'm asking for I like the idea of someone saying have an honest conversation because I think that is missing. I think we should have an honest conversation. If there is limited resources then let's be honest about what we can deliver rather than just do this lots of cuts all over the place because actually it's really really inefficient and you won't deliver on priorities because it's just it's like taking the head of everything rather than actually being specific and say what your priorities are and the college sector are absolutely up for thriving growing helping individuals get out of poverty give them skills support our businesses a lot Scotland is full of small businesses skilled workforces come from college students they are the college you know they are the people that will help your businesses run and if you've got if you've got economy running with profitable businesses everyone benefits you have your money for your public sector I mean the cut isn't the same across the board though because some areas have it's quite significant cuts but other areas like police fire and NHS have actually increased you know I know there's priorities it's different prioritisations care to be followed by Michael I just wanted to raise the point about reform of the public sector I think when we talk about reform of the public sector the conversation can be quite lazy and the public sector has not stood still over the last 10 years it has been constantly changing and changing on a shoestring so I mean for us to talk about reform like the public sector has not moved I think is it's just really lazy I think the problems the public sector has around funding is that they're making constant changes trying to deliver services on a shoestring and at the moment they've got the spectative redundancy privatisation and bankruptcy hanging over them while they're trying to make those changes. Challenges in finding an strategic approach around public sector reform so you're right here I think it is clear that it's happening everywhere every organisation is having to react rather than having a strategic approach so I just wondered so we've had the permanent secretary and he said he didn't understand what the wasn't aware what the current government's approach to this was there are status of the resource spending review and that's been dropped it seems to be back on the table. Do people have clarity all that Scotland may particular Martin about where that kind of approach is headed given what you've heard from the Deputy First Minister? Well I think that the in terms of what was written to the committee in response to your pre-projectary scrutiny you give some further information about the stages I think one of the things where it's that strategic approach isn't it and it's right reform happens but is how do you capture that and quantify it financially but also spread it out over time because some of these reforms may take some time and require some investments so we talked about digital there so I think what we'd like to see is is good to see this list we will be inquiring about the detail in the progress of that reform. One of the things I think we've said is about the urgency of it so the extent to which we can we can see what the pace of it is but also a little bit about what exactly we can see in terms of savings or cost simulation to it because reform isn't always free it's not as I think he was alluding to there it can cost money to make reform so how can we see that in the budget in terms of through digital and then what type of financial return are we going to get for it or indeed improvement of services. I counted it in 95 at the time of the local government reform there and I remember how expensive that actually was at the time. Stacey? I just wanted to pick up on Shona's point there about that pipeline between colleges and small businesses in terms of employees. We're actually hearing from our members really low levels of engagement particularly with the apprenticeship system just I think primarily at the moment because of the cost of doing business so that might be businesses who want to recruit but they just can't afford to. There's a lot of barriers that we hear from our members in terms of the smallest businesses in the apprenticeship you know the cost of taking that on the space and time that is needed to support an apprentice and then kind of you get to the apprentice when you get to the end of the apprenticeship it's often more attractive for the apprentice to then leave and go to a larger company who is able to offer progression higher wages in that small business so we are certainly I think when we surveyed our members at this time last year it was about 80% or more had hadn't engaged with the apprenticeship system in Scotland unfortunately.  Okay Martin Kear and then Francesca. To follow on the apprenticeship point so in local government generally recruitment is incredibly difficult whether that's social care staff or whether that's professional staff it is really really challenging. We can't compete with the private sector for professional staff and actually our solution has been so last year in Glasgow we took on 10 trainee accountants a mixture of apprentices and graduates and this year we're taking on another four now that's because we had vacancies for qualified staff and we couldn't get them so we took on additional apprentices so and apprentices and graduates are fantastic but again keeping them once they qualify is really really challenging and again it's that have we got the structure right in the public services the amount of time that we spend dealing with the bureaucracy around whether that's the relationship with Scottish government and doing returns audit has definitely become more challenging over the last few years and we've moved away from Audit Scotland so I'm not having a go at Audit Scotland but the amount of resources we have to put into support and audit really because of things that have happened elsewhere where auditors are becoming incredibly risk averse and want to increase their sample size but we don't have the resources to do that and it's a real real challenge as we go forward. Kear to be followed by Francesca. I just wanted to raise a point around the equality priority in the budget I think from a local government perspective we are looking at equal pay issues across the public sector and I mean with a five judgment recently that many councils are looking at it might not be able to tell you a bit about the cost of equal pay but I think one of the problems we've got is that councils are in fear of taking on and finding resolutions towards equal pay and taking on the challenge of equal pay because they don't have the finances and the support to be able to resolve that so I think that's something that we definitely need to consider it. Okay thanks Francesca to be followed by Custer. Yeah I wanted to come back to the points raised about public service reform because as we've been talking and again in the previous session the conclusion is that we don't have sufficient resource at the moment to deliver all the services that the public sector is delivering and that the public currently expects and there are a number of ways that you can address that but one has to be through changing the shape of the public sector and through a reform process. Now I completely agree with Kear in relation to his points about the ongoing change that we've had throughout th