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Thank you for giving such a clear illustration. I think that you are making the point that nobody would choose to start from where we are, as it is an inefficient way to manage the finances.

That leads me on to another issue that I found interesting when I read the spending review document. We are talking about people’s understanding of what is actually going on. I was attracted by the economies of scale that you are looking at getting through, for example, shared services, which to me is an absolutely obvious example of where we could derive value. You mentioned other areas to look at, such as grant management, procurement and the 129 or so public bodies.

That brings me to the point about the public’s understanding. I appreciate that it will be useful to have a conversation with councils about whether we might be able to do this, but I foresee difficulties in that people will not necessarily want a shared service, because they will see that as a loss of control. I agree with your approach of having a conversation, but what further challenges do you foresee? In principle, the approach is useful and good but, given the discussion that we have just had, I foresee that it will immediately throw up comments such as, “Oh, you want to get rid of this?”, even though we are all aware of the huge fiscal constraints.

Do you have any more thoughts on how you will approach that and the timescales involved? My experience is that, even if you get agreement, it always takes longer than you think, it is always more expensive than you think, and the return on investment is never quite what you think, either.

I was going to raise similar questions and ask how confident you are—accepting what Professor Breedon said about everyone else making the same prediction—that inflation will peak at 8.7 per cent in the last quarter of this year. When you read more detail about some of the uncertainties that you point out on the supply side—which we have much less understanding about—realistically, how confident are you? We know that the prediction will probably be wrong, which I fully accept because all these things can be wrong, and Andrew Bailey recently conceded that the fiscal levers that he has to exert control over CPI inflation are fairly limited. It is always uncertain, but how uncertain is it? If I asked you to place a wager of, say, £500 of your own money, how much of that money would you risk? Perhaps that is a better way of putting it.

It is there. Okay.

Good morning. I am sure that, for people who are watching the committee—I always say that, and everyone laughs and says, “No one ever watches this committee”—the discussion about whether or not there is a black hole is an important, pivotal point, because it is actually predicated on debt. You make the important point that whether or not there is a black hole comes down to actuals, not forecasts. Perhaps the media have tended to use that in a very florid way.

Dr Verne Atrill discovered that

“there is a precise point, a mathematical singularity, which we can measure as the Ratio of GDP/Total Debt, at which an economy stops expanding and begins to contract instead.”

On that point, I simply note that the UK Government is hugely in debt.

That leads me to the fiscal framework, and I want to get some reflections from you. We know that any Government, including the UK Government, will have frequent errors across a wide range of forecasts. The UK Government—unlike the Scottish Government—does not suffer any penalty as such for the forecast that, for example, it will have to repay £817 million in 2024-25. Of course, the UK Government does not then have to repay that in a single year’s cycle; it can repay it over several years and—to go back to my earlier point—it can borrow.

I, too, applaud the fact that the resource spending review has been done; it is a worthwhile exercise. However, it really brings into sharp focus the issues with the fiscal framework, utterly and fundamentally, with regard to what you are being expected to do within limitations that other normal Governments would not have. Therefore, perhaps the discussion is really about that. I would like some further reflections from you on that issue before I move on.

Okay. I will collect £500 from all four of you at the end of the session.

I am not clear about how and where you baked the impact of Brexit into all your forecasts. I assume that you have reflected all the way through your forecasts the hangover from the pandemic and the supply issues that we have talked about, which have reverberated around the world, but I was slightly surprised that there was no mention of Brexit in your report, given that we now know that the impacts are only starting to be felt. I appreciate that it is complex to pin Brexit on one thing, because it is a very fragmented picture, but I was surprised that there was no mention of it. How and where have you baked it into all the numbers?

Is that similar to what you have done with the pandemic? Have you taken the same approach?

Do you want to add anything, Andrea?

Good morning, Deputy First Minister. As you will be well aware, the Community Empowerment (Scotland) Act 2015 states that public sector bodies, including local authorities, are required to “have regard to” the act in carrying out their functions. We are also aware that that does not apply to city region deals and the new replacement for EU funds.

When the Secretary of State for Levelling Up, Housing and Communities and Minister for Intergovernmental Relations gave evidence to the committee, he agreed that policy differences could occur but said that, ideally, those would be resolved through

“regular dialogue and honesty on our part about where we might diverge.”—[Official Report, Finance and Public Administration Committee, 24 February 2022; c 11.]

In other words, he conceded that there could be divergence.

Given that the Scottish Government remains accountable for the national outcomes, could the 2015 act be reviewed to ensure that all spend—even spend that goes through public bodies or local authorities—must be aligned with the national outcomes?

I do not want to take up everyone’s time—it is a highly complex area to consider—but you furnish a good example of the difference that is made by preventative spend having a longer sight of funding to lock that in, given that we have a five-year review point. That is an important point.

Every strategy will have two sides, a push and a pull, and what you outlined reflects both sides of that—how you incentivise and measure whether your stakeholder partners are actually producing instead of just encouraging them, although I am not saying that you would not also encourage them.

On another area that follows on from what John Mason was saying, I very much enjoyed reading your comprehensive submission, and I was pleased to note that you made reference to some of the factors that influence productivity. That is something that I have talked about often. Macroeconomics, for example, is absolutely fundamental, as are exports and research and development. I was reminded of the example of EMEC—the European Marine Energy Centre—in the Orkney islands, which has lost its funding now even though it is an excellent example of a project to do with another area. I am pointing that out to encourage you to continue to do that in the future, because it is my perception, having come to Parliament, that there is not necessarily the same understanding across the board of the factors that influence productivity. I am simply commenting that I was really pleased to see that.

My next wee point is that I wonder where your thinking is on competence versus excellence. You will be aware of the Cumberford-Little report, which came out a couple of years ago. I did not hear all that much about it after it was launched but, in fairness, that was in the middle of the pandemic. That report is clear about the need for a move from mere competence to excellence, with excellence being a differentiator that will drive us forward. I want to get a steer on where your thinking is around that theme and how that will feed into your strategy.