Seòmar agus comataidhean

Your predecessor committee was very helpful in this regard. Its report on the fiscal framework was supported by all parties. The report identified some benefits of the fiscal framework, particularly during a period of volatility, but it also identified some of its shortcomings. We are due to work with the UK Government to commission an independent report on the fiscal framework. I am keen that that report captures all the points that the previous committee and independent stakeholders such as the Fraser of Allander Institute highlighted.

The previous committee’s report demonstrates that the arbitrary caps on borrowing for the forecast error and on spending are not keeping pace with inflation, with the size of the budget or with the potential size of the forecast error. The report also suggests that we have limited ability to carry forward and manage the budget across years. Thirdly, there are challenges to managing levels of volatility and risk and we should consider some additional levers to help the Scottish Government manage that. It is a very technical area and I would be grateful if the committee continued considering what it believes should be done with the fiscal framework. The review or the report should not be so narrow that we are not cognisant of what the pandemic has taught us about the operation of Scottish Government finances.

I think that that is a fair point. Although interventions around young people are important, we face real challenges in relation to people who face redundancy or have been made redundant because their industries are changing. That is where the national transition training fund comes in; it seeks to provide funding to particular sectors to help their people transition.

For example, I take you back to the tourism recovery plan. Bear in mind that that was the response to recommendations that were established by the tourism recovery task force, which was composed predominantly of industry leaders. They asked specifically for help for reskilling and retraining. An element of the national transition training fund has therefore gone specifically to help the tourism and hospitality industries reskill and upskill their staff. Obviously, they are facing labour market shortages, so it is really important that the right skills are there.

When it comes to people who are moving between sectors—upskilling not within their sector but between sectors—we also have support in place. Perhaps we need to review that support and make sure that it is fit for purpose, as we progress through the pandemic, to help take people from where they are now to where they want to be. The most obvious example of that would be providing support for people in the oil and gas sector, who have, unfortunately, faced redundancy, not because of decisions made by Governments in this country, but through the global reduction in the demand for oil and gas. That support needs to be made available within and across industries.

I will make a final point before I stop. Through partnership action for continuing employment—PACE—which is the wraparound support for employees who face redundancy, we have specific and targeted training available to help. However, it is a huge challenge to equip people with the skills that they need to transition to a new job or a different job in their industry.

We currently believe that the application of block-grant adjustments in relation to the revenues of £4 million per annum under the Proceeds of Crime Act 2002 breaches the Smith commission’s no-detriment principle. That is because we believe that that funding should come to the Scottish Government.

I have written to the Chief Secretary to the Treasury to try to progress resolution of that issue, and we have agreed that it should be resolved as part of the fiscal framework review. It is still an outstanding issue.

Obviously, this is a highly technical area. Claire McManus might be able to supply some information that I have missed out.

The UK Government has announced what money it thinks will be generated and therefore what will come in consequentials, but I encourage the committee to scrutinise what is finally announced, to ensure that the £1 billion—if it is £1 billion—is additional and not netted off elsewhere. That remains my concern, and we will not know the answer to that until 27 October.

It has been well documented that the national insurance increase will have an impact on private and public sector employers, as any increase in taxation will have. There is no doubt of that. Our job is to ensure that the money is used wisely and carefully.

Convener, I promised to provide an update on the small business bonus scheme, in response to Ross Greer’s question. Dougie McLaren says that he is happy to answer the question now, to save writing a letter. That is entirely at your discretion.

That is a good question. We have commissioned the Fraser of Allander Institute to review the effectiveness of the small business bonus scheme, in particular. That work is on-going. The institute is reviewing how effective the scheme is in meeting its policy objective of helping small businesses. The scheme has a huge role to play, especially in local economies and on our high streets. That is the primary review that is on-going.

However, we are regularly asked for additional reliefs. We now have reliefs in place for hydro power, new buildings and recently occupied buildings, all of which will have to be reviewed according to their terms. The business growth accelerator, which incentivises new builds, and the fresh start scheme, which incentivises tenants to occupy previously unoccupied buildings, need to be reviewed on their own merits. At every budget period, we consider again whether either those reliefs are the best use of our limited funds, or there is another way to meet the policy aims—which, I think, we all agree on—through other use of the funding. Such regular reviewing is important.

That is a good question. I might have to write to you on that. It was originally due a number of months ago, but was delayed because of Covid. We wanted to ensure that the reviewers got access to small businesses and had comprehensive data. If my officials do not know whether we have confirmed an updated timetable, I will get back to you in writing about the latest deadline.

Your question highlights the point that some things can be actioned in budgets from year to year; you asked about council tax. A fuller conversation about the right mix of powers and flexibilities is—I think, rightly—for the fiscal framework discussions, in collaboration with the Convention of Scottish Local Authorities. The discussions have, largely because of Covid, perhaps not moved at the speed at which I think either party would have liked them to move. I am committed to getting them back on track.

Our position on council tax, specifically, will be set out in the upcoming budget. I assure you that that budget will be set only after extensive consultation with COSLA’s finance spokesperson, Gail Macgregor.

That is an important context-setting question because, as I said the last time I appeared before the committee, next year’s budget feels like one of the most challenging in devolution. I think that every finance secretary has said that since the beginning of devolution, but next year’s budget is particularly challenging for three reasons.

First, the costs of mitigating Covid continue, as do the associated volatility and uncertainty. Therefore, we need to manage those when it comes to self-isolation payments or the national health service. Secondly, we are trying to remobilise all our public services. Remobilising the health service, social care and the justice system requires financial support, as does economic recovery.

Over and above that, the final challenge is the funding settlement that we are receiving. Although they were significantly less, there were still Covid consequentials this year. I think it highly unlikely that we will see such additional funding from the United Kingdom Government to deal with the additional pressures next year. Indeed, the UK Government is already pulling back significantly, with the removal of the £20-a-week uplift to universal credit and the end of the furlough scheme.

All in all, the cost and the need will continue but the funding that is available to us will significantly decrease.

You asked what the Scottish Government’s priorities are. Our priorities are set out in the programme for government. They are simply to continue to support families in need who are dealing with the consequences of Covid and some of the inequalities that it has exacerbated, to remobilise our public services and to drive economic recovery. Those are our three main priorities.

You talked about the Scottish child payment. The First Minister said in the programme for government that we would double the payment to £20 as soon as possible. We will outline plans in the budget for how we will do that.

No. As a Highlander who knows the importance of such roads and who has driven up and down the A9 far too often to count, I think that it is really important that we continue to invest in Highland, northern and north-east communities.

I hope to be able to build a constructive relationship with the new Chief Secretary to the Treasury. I had a good first conversation with him just over a week ago. I am due to see him on 14 October for a quadrilateral meeting about the spending review and I may be able to answer the question better after that meeting. I am happy to provide the committee with an outline of that meeting and an update about how it goes.