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You will be aware that the committee is looking at public sector review, spending and so on, in the light of rolling back from the resource spending review. I note your three key missions, part of which will involve looking at public bodies and public sector reform. To what extent are you open to thinking ambitiously about that?

Part of my private worry is that agencies may look simply at efficiencies—although I suspect that a lot of them have been doing that for years, due to public sector constraints. We had an interesting comment that perhaps the bolder and more ambitious projects would need to be mandated by the Government. My simple question is, are you going to be able to have a level of ambition in what you look at? I appreciate that such projects have a cost in themselves and are very complex and time consuming. I do not negate that. I want to get a sense of whether it is about more than efficiencies.

Good morning, cabinet secretary. Thank you for joining us. One of the things that the committee discussed with the Scottish Fiscal Commission at last week’s meeting was the 14 per cent cut in capital expenditure from 2023-24 to 2028-29. I asked the SFC for clarification on the possible implications of that in relation to limiting our ability to invest. Traditionally, economists say that you should invest when your economy is not doing so well. The clear point that emerged was that capital expenditure has a direct impact on productivity. We know that there is a massive issue with productivity in the UK and, because of those limitations, there is an issue with productivity in Scotland. Have you been able to model that diminution of productivity? It does not seem to be understood that lower productivity leads to a lower tax take and that a lower tax take leads to less money being available to spend for public services. I do not know whether, behind the scenes, you or some of your officials are able to model that, because a 14 per cent cut in real terms will have a direct flow-through to the tax take available to spend on vital public services.

Thanks for that clarification. Given the autonomy of all the different boards, the Centre for Sustainable Delivery was designed to stop NHS boards working as autonomous units. Is it your experience that it does that?

Yes.

I went through your submission and I note that you mention deficit reduction, efficiency in delivery and distributed working. I have asked you about staff—you corrected me to say that the issue is banding—and about the number of territorial boards and the Centre for Sustainable Delivery. At the start of this inquiry, Police Scotland commented that it would not have been created had that not been mandated. Are they the sorts of things that you would expect to see mandated by central Government? Is your primary focus therefore on the areas that you have set out both in your evidence today and in your submission?

Good morning. What has been said leads on quite neatly to my questions on capital expenditure. We know that block grant funding from the UK Government is the largest component of the Scottish Government’s capital funding. The commission’s projections suggest that that funding will, in nominal terms, be cut by 14 per cent between 2023-24 and 2028-29. How will that cut affect the productive capacity of the Scottish economy?

Good. Thank you.

Okay, thank you.

I have a last wee question just to finish off. It strikes me that, because of the limitations instilled by a fixed budget, the narrative is continually about revenue spend, for very good reason—of course that needs to be scrutinised and monitored—without there necessarily being the same kind of awareness in the body politic of the implications of capital expenditure in investment terms. Is that something that, as economists, you see happening almost as an inevitable consequence? I can see that you are nodding.

I will explore that a bit more. Could you all, as top-notch economists, say how productive capacity can be affected by low levels of capital expenditure? For example, you have talked about AI, research and development, productivity, economic growth and sustainable wellbeing or otherwise. It would be useful to get that on the record.