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I completely agree with Mr Stewart, in as much as he says that things cannot remain the same. Things around us are changing and we need to react to those changes and ensure that our cultural organisations and our cultural funding organisations are best placed to deal with those changing circumstances.

I am sure that Mr Stewart would not want to create the impression that changes are not taking place in cultural organisations or their funding. We have discussed multi-annual funding this morning, which is a demand from the sector, is supported by the Scottish Government and is being introduced by Creative Scotland. That will lead to a set of wider questions about how bodies that are not part of the multi-annual funding system can have the stability that they want.

What I am trying to say is that change is the only constant in all this and we have to find the best way through that. I am gently trying to make the point that, given the anxiety that exists out there, it is really important that, where there is certainty of funding and finance is assured, we do everything that we can to help people to understand that that is the case.

I have provided evidence to the committee this morning about particular funding challenges with major events. We have been able to secure progress on that issue, but we will have to return to it and find the right funding mechanism across Government for it. Scotland has an excellent reputation in that regard. Mr Stewart was right to talk about Scotland being world leading, and one area in which we are world leading is major events, as we saw with the cycling world championships. We have other events coming up, including major footballing events, so we must ensure that the funding mechanism across Government is in place.

Creative Scotland is assured of its funding situation through the use of reserves, and the regularly funded organisations are being informed that they will get the support that they expected to get. There is no detriment there.

On wider non-contracted spend, we are now in the significantly better place of being able to provide the stability that Mr Stewart has quite rightly underlined as being so important to the sector.

I absolutely acknowledge that that is where the concern lies. For those who are watching our proceedings who are hearing all this terminology around culture funding, the importance of multiyear funding is something that we all understand. It is a new approach that I think has cross-party support as the best approach for cultural organisations, and there is a wish to roll that out more widely to the third sector. It is a way of helping organisations to not have to apply every single year for funding and, instead, when a strong case is made for financial support, an organisation would receive it for, in this case, three years. That will be to the benefit of cultural organisations.

As Mr Ruskell has indicated, that is a change from the current situation, and there is an expectation that many of our leading cultural organisations will be in receipt of multiyear funding. However, some organisations are concerned that they will not receive that, and Creative Scotland has been working hard to ensure that those organisations are still financially supported. That is the requirement for the use of Creative Scotland’s reserves.

That is just the background to Mr Ruskell’s point—

I have given assurance—

The key word, which I have mentioned a number of times, is reserves. Not just in the culture sector but right across Government, there are parts of the public sector that are in a position to hold reserves, which are there for times of duress. If reserves will make a material difference to the extreme situation that we are in, frankly, they should be used, and that is exactly what is happening. It is really important to land the point, which I have made a number of times, that zero cuts are being passed on to regularly funded organisations in the culture sector, because reserves that are being used now will be replenished in Creative Scotland’s budget next year. I have also explained the rationale as to why there is a difference between the start of this year and the end of this year, given the massive additional and unforeseen pressures that have been brought to bear on public finances in Scotland.

To answer Mr Bibby’s question, the key point in all this is reserves. Creative Scotland has reserves—the Scottish Government has provided funding to it, and it has been able to build up those reserves. Given that, and my explanation about the three areas of particular pressure on the portfolio budget, if those reserves were not going to be used, that amount of money would then have counted against all of the remaining uncontracted spend in the culture budget. You can take it from me that if people’s concerns about Creative Scotland’s budgetary situation, even with the use of reserves, are significant, that approach would have caused concern in the culture sector of considerably higher order.

We have managed to get ourselves into a situation where the Scottish Government is recognising that when there are major events and the potential for additional associated costs, those should be borne across Government. That is a really good result for culture. With regard to Creative Scotland’s situation, without detriment to or impact on regularly funded organisations—they have reserves, and that position will be maintained next year—we have the best potential outcome, given the three challenges, that we could have. I am pleased that we have managed to get there.

The short answer to Mr Bibby’s question is that reserves are the difference. They are there for difficult circumstances, and those are what we find ourselves in financially at present.

It is, yes.

Thanks very much, convener, and good morning, colleagues. Thanks for the invitation to contribute to the committee’s discussion as part of its 2024-25 pre-budget scrutiny and for the opportunity to make some opening comments.

I am a passionate supporter of the culture sector and the fundamental role that creativity and self-expression can play in everyone’s lives. Along with the economic value of cultural exports for Scotland, the sector is crucial for our international connections, ambitions and reputation. However, we all recognise the challenges that the sector has experienced through the pandemic and the cost of living crisis. Its international engagement has been directly impacted by Brexit, which has led to financial fragility in parts of the sector. Support for cultural organisations has therefore never been more critical.

I appreciate that the sector is very concerned about what the future holds in respect of Scottish Government funding and support. The responses that I have seen to the committee’s call for views on culture budgets make sombre and extremely stark reading. I recognise the strength of feeling that has been expressed by the culture sector this week about the funding for Creative Scotland. I will address that shortly.

I reassure members that I understand and appreciate the difficult situation that the sector faces. I have been discussing with my Cabinet colleagues the important role that culture can play across the piece, and I have been pushing for the best possible settlement for the sector for next year. However, none of us is under any illusions about the challenges that are faced with our public finances. To illustrate that, I note that, in the 2023-24 pay round, an estimated additional £785 million will be spent on pay compared with our original central pay assumptions. That includes the agreed pay deals for teachers, national health service agenda for change staff, doctors, junior doctors, dentists and those in the fire service, plus the proposed offers for non-teaching local government staff and the police and the Scottish Government’s two-year offer. The figure also includes pay assumptions on the deals for further education and the judiciary.

To enable enhanced pay deals, we have had to make difficult decisions in reprioritising existing allocations. However, as all committees know, there is no unallocated pot of money from which to fund higher pay deals or extra support for those in need. If the pay bill grows faster than our overall funding, it squeezes our wider capacity to maintain services. Every additional percentage point on a pay deal and every pound that we spend on measures to help with rising costs must be funded by reductions elsewhere in our budgets.

Last year, we prioritised funding for enhanced public sector pay deals to support those who need help most, and we spent over £900 million more than was originally budgeted. However, I recognise that the culture sector needs stability and the opportunity for longer-term planning and development. We are committed to developing a fair funding approach for the wider third sector, of which cultural organisations are a key contributor.

I have had to make very tough choices to balance my budget this year in the light of all those challenges, and it is with regret that I note that that includes not being able to top up Creative Scotland’s lottery funding shortfall for this year. I know that the sector is frustrated by that, but it is worth highlighting that the Scottish Government has topped up lottery funding for five years, which is two years more than was originally agreed. That has meant providing an extra £33 million over the five years to Creative Scotland.

I discussed the issue with Creative Scotland’s board last week, and I was grateful that the board agreed to use its accumulated funding reserves to avoid passing any impacts of the decision to its regularly funded organisations. I have assured the board that the funding will be provided next year, subject to the normal parliamentary processes, and I have discussed that with the Deputy First Minister.

We have an obligation to balance the Scottish Government budget each year and to prioritise funding in order to deliver the best value for every taxpayer in Scotland. Given the rising costs and pressures on budgets across Government—which are made more challenging as a result of United Kingdom inflation—we continue to work with partners to ensure that all public investment is used to deliver the maximum benefit for communities and organisations across Scotland.

This year, funding from the Scottish Government and partners across the country helped to deliver the 2023 UCI cycling world championships. The event promoted the health and wellbeing benefits of cycling and drove wider economic and social benefits across Scotland. However, due to increases in costs, including through inflation, the total funding that was provided by the Scottish Government and partners to support the delivery of the championships is still being finalised. Final costs will be confirmed in due course, but they are of the order of £8 million. Prior to the completion of the event, Scottish Government funding was delivered through our major events budget. However, following the event’s conclusion, any additional funding that might be required will be managed centrally by the Scottish Government.

The 2023-24 programme for government commits us to producing a plan to deliver improvements, including greater clarity and consistency in existing arrangements and a recognition of the third sector’s strategic role in enabling the transformation and delivery of person-centred services to the people of Scotland. We will continue to build the case for multiyear funding, and we will explore the extent to which that can be secured in unpredictable economic circumstances.

Culture can also play a valuable preventative role in health settings. Evidence has shown that participation in cultural events and activities can promote lifelong health and wellbeing, reduce social isolation, increase resilience and confidence, and give individuals an increased sense of purpose and of belonging to their communities. As was announced in the programme for government, we will publish a refreshed culture strategy action plan later this year. The culture strategy will set out a vision that recognises the value of culture and its power to inspire, enrich and transform our lives and communities. Our action plan will set out the actions that we will take in response to the challenges that are brought about by the changed landscape.

That commitment reaffirms my aim of placing culture as a central consideration across all policy areas and making it clear how it can deliver on a range of priority outcomes, such as improving health and wellbeing, supporting a thriving economy, raising educational attainment, tackling inequality and realising a greener future. It is more important than ever to work together to explore ideas such as sharing back-office functions, maximising income through philanthropy and—this is perhaps more important—enabling organisations to become more sustainable. In a time of limited resource, collaboration rather than competition will be of significant benefit to the wider sector.

I have two things to say about that; the first is a wider cultural but also linguistic point. I am well aware of the fragile nature of Gaelic-speaking Scotland, Gaelic-speaking communities and the importance of one’s community being reflected in one’s language, whether that is in terms of television, radio or the wider arts. We have support that helps provide television and radio in the Gaelic language and has an impact on different communities—there are the BBC studios in Inverness, Stornoway and elsewhere.

Secondly, I draw people’s attention to other organisations that are really important in that respect. We should also acknowledge that some of that is difficult to capture in metrics, although it should not necessarily be so. Last night, I was at an event to celebrate two years of success for the Culture Collective, which is supported through Creative Scotland, which is funded through the Scottish Government. I do not know whether you have ever taken evidence from it, but it provides hugely important funding for freelance creatives to practise their art in communities across Scotland. When one walked into the reception last night at the Scottish Storytelling Centre, there was a map of Scotland with a little dot showing where each of those people was from, and they were from right across Scotland. There was testimonial evidence of what they have been able to do and the impact that they have been able to have. We have already talked a little about health and wellbeing and other things that are really important for better governance and living in a better society.

To my mind, what those people do is critical, not only in enabling their arts to be practised in their communities, but to our mission of making the interventions that we want to make. There was one person who said that he was the only person he knew who worked in culture in the community that he lived in. That reflects the fact that, in some parts of the country, some people find themselves in that less-than-optimal situation. The good news is that we now have two years of experience of funding people so that they can operate as creative freelancers across Scotland. A lot of good stuff is happening, and more can be done. That gives me an opportunity to congratulate the Culture Collective on the wonderful work that it has done.

There is much around the challenge of depopulation that we need to think about. We must ensure that our cultural institutions throughout Scotland continue to be supported, and if there are ways in which we should be doing more of that, particularly within our different linguistic communities, I am keen to support that.

Mr Ruskell mentions a number of key facts, one of which is the size of the portfolio’s budget relative to that for the rest of Government. Another is the fact that there are certain responsibilities within the portfolio that have wider Government benefit. He is right to say that the responsibility for major events is one of those; responsibility for the census is another. Although the census falls every 10 years, there is a significant risk of financial displacement within a small portfolio if one has such a major responsibility without necessarily having specific funding. In the past, interventions have been made to provide specific support for the likes of the census.

What the Scottish Government is doing is a really good example of its recognising the cross-Government benefits that major events can bring. There will be wider discussions about how that should be approached in future. One of the side-effects of Scotland becoming as successful as it has been in recent years with major events is that we need to think about how we do all of that. I do not think that anyone wants there to be a displacement effect within the wider portfolio, which includes, as well as culture, external affairs. To go back to Mr Cameron’s point, the culture portfolio includes our ability to project, among other things, our cultural offering to the rest of the world, so it is really important that we maintain all those different areas of the portfolio’s work so that we can do what we are trying to do to promote Scotland domestically and internationally.

No doubt, there will be conversations about how we make sure that we have a cross-Government approach to major events, but there is an acknowledgement that one of the benefits of major events working hand in hand with the culture directorate in the Scottish Government is that a lot of people in the civil service who work in culture are extremely talented in the organisation of events, whether those are cultural events or wider events that are hosted in Scotland.

There are reasons why major events work closely together with culture. The question is whether the funding model is fit for the place that we now find ourselves in, having had that good experience of major events. Since the Commonwealth games in 2014, we have seen really large, world-class events and we have the aspiration to do more. Therefore, we must make sure that we have the right mechanisms—funding is a part of that—to be able to do that.

Those are, frankly, unnecessarily pointed questions from Mr Bibby. He has been here since the beginning of the session, so he heard me draw attention to not only the inflation rate but—this is mission critical in the context of having a serious approach to funding culture—the appreciation of the additional pressure on the Scottish budget due to pay settlements worth an additional £785 million. That significant amount of money brings additional pressure to bear on the Scottish Government budget.

In reference to Kate Forbes’s question, it is the additionality of the costs of the likes of pay claims—I am not talking about inflation, which means that you can buy less—that squeezes the Government’s budget and that has the impact of displacing our ability to do everything that we would want to do. That is a really very basic public administration and finance point.

Unless somebody wants to be serious about explaining how one deals with that pressure by finding money from elsewhere, one must broach the pressures that one is having to face and deal with them. It seems to me to be eminently sensible that if one has the ability to use reserves such that one does not actually cut—that is, end—funding for organisations, that is the best course of action. If Mr Bibby would prefer to cut culture budget lines in areas where there are no reserves, he has to explain how to do that. I have not heard that from anybody thus far.

We find ourselves in circumstances that, again, any fair-minded person would acknowledge are significant and extreme. Given those pressures, where there are reserves that can deal with a situation in extremis and can then be recompensed to ensure that on-going financial and planning purposes are fulfilled, it seems that that is the prudent, sensible and sustainable decision, which we are making. If not, one is talking about ending financial support for cultural organisations, which I am not prepared to do.

There is a lot in that. The first thing is to acknowledge the scale of the hugely significant economic benefit of the culture sector. We must do all that we can to ensure that that success continues, which is about Government providing the funding that it is able to. However, it is also about creating the circumstances in which the culture sector can thrive and be sustainable on its own terms. We must ensure that there are parallel funding streams.

One of the areas that I am most optimistic about, because of its new significance to the wider economy, is the screen sector. Film festivals have been successful since their inception: we know that the Edinburgh international film festival goes back to the late 1940s. What is new is that we have moved beyond having a comparatively small-scale screen sector making occasional films, along with work at the BBC, STV and, increasingly, Channel 4 and others, to having a burgeoning wider screen sector.

We have gone from not having a single large-scale studio, despite appeals for famous Scottish actors to open them in the 1980s and 1990s, to us now having studios across the country, with more to come. As has been borne out by Screen Scotland’s report, we have got to a situation in which the value of screen—this figure is from memory, but I think that it is right—is nearly £650 million GVA, with a trajectory for it to be worth more than £1 billion by 2030. That has a massive positive impact on our economy, and we want to do everything that we can to support that. We want to make sure that that brings benefit everywhere in Scotland, and we need to embrace the opportunity that it will give for a new generation of people to find employment in those sectors.

Previously, in those sectors, we exported our talent and did not have the financial benefit of it being here. We need to acknowledge the value of—and do everything that we can to support—the established and successful parts of the cultural economy and the newer bits of the wider sector. That is a really good example of where, compared to the level of value, the intervention through Scottish Government funding—via Screen Scotland, with the likes of its production growth fund—is minuscule in comparison with the wider value that is accrued to the Scottish economy.

The challenge is to make sure that we provide funds in a way that helps sustainability, growth and new starts and, at the same time, is what is required for more established events, including festivals, at a time of change. That is exactly the kind of thing that I am interested in discussing with colleagues in the festivals sector, to make sure that things are as successful as they can be.