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It will probably be at the margins. I think that that would be a fair assessment. The agreement helps, but it will not make a major impact on our ability within the capital picture.

I think that it is fair to say that, for most of the Parliament’s committees, the fiscal framework is probably something that lies in this committee’s territory, because of its complexity. I guess that there will be a high-level understanding that there are some changes that are, in the main, beneficial, but the framework is probably not going to feature as a main line of inquiry for committees that are looking at, for example, capital investment in the prison estate, transport or anything else. I guess that where it matters is around resource borrowing, capital borrowing and the reserve drawdown limits, which, taken together, have some limited impact at the margins, rather than being a game changer for the capital outlook of the Scottish public finances. I suspect that the impact will be at the margins rather than at the centre.

The capital outlook is really challenging—you are right to point to that—for a number of reasons, including, essentially that the capital budget has not been inflation proofed, which impacts our capital availability with an almost 7 per cent reduction over the foreseeable future. That has a huge impact on infrastructure investment. Again, there was no option to use other mechanisms—that was not on the table. It comes back to the limitations of what was on the table and the issue of having a recognition, at least, of the capital budget growth. We felt that the limited gain was important, however, changing the mechanism was not on the table.

That word “balance” is important. There is always a balance of who gets what from a negotiation. What came out of the other end had to satisfy some of our fundamental red lines—of which we had a number—but the UK Government also knew how far it was prepared to go and did not want to be seen to go too far because there are those in the UK Government who perhaps did not like some of the outcomes of the fiscal review itself. Everything is a negotiation, but they had red lines too and they were not going to budge on that one.

Our officials and those from the Treasury would push the boundaries with each other before John Glen and I got in the room, looking at where those boundaries actually were and what was acceptable. We had to reach a balance, or it would not have been agreed. Unfortunately, that meant compromise on our part and capital borrowing was one area where we compromised.

I will bring in Matthew Elsby on that. You have made a really important point, and those issues need to be looked at in the next phase of negotiation.

Earlier on, the point was made that the principles and agreements were established in a very different economic climate. The economic shocks that we have seen since then have exposed some of those issues. In the longer term and in the next phase of negotiation, we need to look at those issues in more detail and expose them to the true light of what we have come to know over the longer period of time rather than what we knew in the earlier years of devolution, which were economically reasonably stable.

That is because of the changes to resource borrowing. We can borrow up to £600 million, some of which can be regarded as baked into the normal fiscal framework.

The latest inward investment figures show that Scotland is second only to London and the south-east in attracting inward investment. That is testament to Scottish Development International and the work that it does in being very effective in bringing inward investment to Scotland, as well as to the skills of the workforce. Investors will look at a whole range of issues in a country. They will look at our strengths, including the key pillars of our economy; the sectors that we are known for; and our universities and the skill sets there. The fact that we, as a country, continue to do well on inward investment gives a perspective. There are always improvements to be made, but the fact that investors make those decisions to come to Scotland tells a very strong story.

I accept that the Scottish Government has made active choices around where to invest in social security spend. A good example is the Scottish child payment. I hope that everyone would agree, particularly when you think of the cost of living crisis that we are going through, that the fact that that has lifted 50,000 children out of poverty in families that would otherwise be struggling even more than they are shows that we made the right investment.

Of course, deciding to invest in social security supports that go beyond the block grant adjustment means that we have to raise that money somehow. The key pillars of spend are social security, the national health service and health more generally—and, of course, local government. All of those have been impacted by inflation and by the need to pay for inflation-busting pay deals. None of that is resented, but it has had an impact on the budget.

A lot of headwinds—not just social security spend—are impacting on the budget, and they are all coming at the same time, putting on pressure beyond that which was budgeted for when the last budget was set. We have tried to manage that in a way that focuses on how we keep people’s heads above water in a cost of living crisis, so we have prioritised spend on things that are absolutely critical. That has meant making difficult decisions elsewhere.

The local government budget rose by 3 per cent in real terms, but it will not feel like that, because inflation was running at 11 per cent at its peak and we did not have an 11 per cent inflation-proofed budget to be able to pass on that funding to local government or health. Although we have tried to protect the health budget in the decisions that we have made, the 11 per cent inflation rate has had an impact on health as well.

There is no getting away from those very difficult challenges. We have tried to make the best choices with the resources that we have available in a very difficult context, and those choices are pretty clear for everyone to see.

Yes, it has lifted 90,000 children out of poverty. I was underselling its impact, convener, so thank you for the correction.

Clearly, there is a lot in that. In the MTFS, we talked about the need to focus on seizing opportunities in areas in which Scotland has a competitive advantage; supporting entrepreneurs, start-ups and scale-ups; and helping businesses to raise productivity. Boosting labour market participation was also discussed, and one of the important things in the programme for government in that area was our enhanced childcare offer.

The university sector has a hugely important role in all of that. We need to listen to that sector—that is the first thing—and make sure that we are maintaining Scotland’s competitive advantage.

You are right: it is a two-way street. Sometimes we have been successful not just in retaining key research and development opportunities and businesses but in attracting some to Scotland. However, that has not always been the case. In such instances, we need to pay attention to what attracted the companies elsewhere and what we can do to try to avoid that happening in the future.

There are huge opportunities for us. For example, we have invested £42 million in our national Techscalar network to support the next generation of Scottish start-ups over five years. CodeBase, which I visited recently, was awarded the contract, and it will act as the service provider for Techscalar. It is very excited about the opportunities for Scotland in that sector.

However, we must not be complacent, and I would not want anybody on the committee to think that we are being complacent in any way, because it is a very competitive world and Scotland needs to compete on the global stage. We need to make sure that, where we deploy public money to lever in private finance, that is done in a strategic way. We cannot pay for everything, and we need to use our public investment wisely in order to lever in private investment to Scotland, particularly in those key sectors.