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I am not sure that taking everything on the basis of what the country can afford, in its bluntest sense, is the best starting point. The starting point needs to be what priority is being given in a difficult financial environment. I can say that social care is a key priority. You made the point about unlocking some of our systems: you could not find a better example of where that needs to happen than the money that is tied up in health. People are in hospital when they do not need to be there, are going into hospital when they do not need to go or sometimes end up in long-term care when they could have remained at home for longer.

It is also important that we do not lose housing to second homes and short-term lets. That is one of the issues that came up at the travelling Cabinet. People are concerned about the loss of homes for local people.

On the block grant, you will excuse me if my time and focus are more tied up with the immediate term. Next year, we will be wrestling with a real-terms decrease in the block grant. The forecast beyond that is that we will begin to see a bit of improvement by 2027-28, but, in capital, we will see a real-terms reduction right the way through to 2027-28. I need to focus on the here and now of what that looks like in terms of the extremely difficult and challenging decisions that we have to make.

We have just had a travelling Cabinet—it was the first one since the pandemic—over in Argyll and Bute, where we met a lot of local organisations and businesses. There is no doubt that there are challenges around infrastructure investment, digital connectivity, housing and jobs, and in making sure that the west and rural Scotland get a fair crack of the whip in migration and people coming. How do you attract people to live and work in areas that would otherwise suffer depopulation?

Some really good things are happening. I visited an affordable housing project in Dunbeg, where 300 affordable homes have been built for the local population. That will enable people to remain living in the area in homes that they can afford. The people to whom I spoke were previously in the private rented sector, paying costs that they struggled to afford. That makes a huge difference, because they are able to remain working in the local area. Those homes are energy efficient, so they are also able to afford their fuel bills, which is important. We need to see more of that.

We have put money aside for the key worker housing scheme through the affordable housing supply programme, in which we work with local businesses. Perhaps they are trying to recruit labour, whether they are a fish farm or in the hospitality sector, and are finding it difficult, partly because of the housing situation. How can we work with local businesses to look for available land and joint solutions, to make sure that we do not lose people from rural communities and that we get people to live and work there as well? There is not one solution; all those things will be important in addressing that very live and important issue.

Yes, but it would have covered the vast bulk of it. It will not surprise you to hear that we asked for more borrowing capacity. However, it was a negotiation, so there had to be compromise. It is really important that we will be able to cover whatever negative tax reconciliation there will be. We asked for a longer repayment term and, again, we had to give ground, because we did not win that particular argument, but we won the argument on the use of the index per capita methodology. That is quite important for our budget, given the issue of population.

There are areas that we still need to work on, such as VAT assignment. We agreed that those areas would take longer to work through because of the potential unintended consequences of having responsibility but no levers. That was a worry for us.

Traditional capital is obviously cheaper than borrowing or other options. However, when it comes to either being able to do projects or not, the questions are different, so we need to take them in the round. Some of the considerations will include the nature of the project, how long it will take to deliver and how complex it is. All those things need to be assessed against where they leave us with the revision to the capital spending review that we will bring forward as part of the budget process. However, we will lay out why we have come to some of those decisions. Alison, I can see that you want to come in.

Thanks very much, convener. I will be brief.

Thank you for the invitation to join the committee today. I welcome the opportunity to discuss the preparations for the 2024-25 budget. I am aware of the committee’s long-standing interest in transparency, and I recognise the importance of my appearance here to engage with the committee in advance of the budget.

With the 2024-25 budget, the Scottish Government will look to deliver the vision that has been set out by the First Minister in the policy prospectus and the programme for government. We will be clear. We will be anti-poverty and pro-fair and green growth, and focused on delivering high-quality public services.

We also need to recognise the challenges that Scotland’s public finances face, including the economic shocks that we have faced over the past three years: sustained high inflation, the war in Ukraine, the fallout from the United Kingdom’s mini-budget last year, Brexit and the on-going impact of the Covid pandemic. The budget will be a budget of difficult decisions. In making those decisions, we will be required to address the scale of the challenges that our public finances face.

I met the Chief Secretary to the Treasury at the finance interministerial standing committee on 20 September. We had a frank conversation in which we discussed the current economic and fiscal context alongside the Welsh minister for finance and officials from the Northern Ireland Executive. It was made clear to the chief secretary that the UK Government needs to provide sufficient support to the devolved Governments to ensure that we can adequately manage the pressures arising from those challenges.

I can confirm that the Government intends to publish the draft budget on 19 December. I would like to reiterate the reasons behind that decision.

We are restricted in our planning for the budget by the timings of the UK Government’s autumn statement and the accompanying Office for Budget Responsibility forecasts. The agreement between the Scottish Government and Parliament to deliver a budget within three weeks of a UK Government fiscal event was made at a time when fewer policy and tax options were available to the Government. The forecasting produced by the Scottish Fiscal Commission is therefore now significantly more complex, as are the associated decisions to be made by ministers. Adhering to the three-week timeline is therefore no longer practically possible, unfortunately. However, I am keen to deliver a December budget. Our proposed date of 19 December ensures that we will lose only one sitting day of Parliament. I hope that the committee will agree that that is a reasonable compromise that will provide sufficient time for the scrutiny and passage of the budget bill once Parliament returns from recess.

I look forward to answering members’ questions. I am happy to confirm that I will make myself available to the committee throughout the budget bill process.

Let me end on a point of consensus: yes. The points that you make are legitimate. Doing it is sometimes a little more complex. Think of some of the reforms that we took forward—I am sure that there will be debate around these matters—such as the formation of Police Scotland, which has been a success with regard to the more effective use of resources and the solving of serious crime, although I accept that it has not been without its challenges. It was difficult and took a long time. It is only after a time that you begin to see some of the benefits roll out from a painful process.

I am up for structural public service reform, but, sometimes, when you get into the weeds of the changes that need to be made, opposition begins to grow. You have people asking, “What about this?” and people with vested interests saying, “This will be to the detriment of A, B and C.” You have my absolute assurance that I am keen to push to the maximum the opportunities for public sector reform, and that includes how organisations deliver their services, how they work together, the landscape and how we get that to make more sense, not in a detrimental way but in a way that is more effective. On that point, you will not get any pushback from me. My only point is that making it happen is sometimes more complex.

We hope to complete it as soon as possible. I can come back to the committee with firmer timeframes, but we want to conclude it as quickly as we can.

To be clear, in his letter to the NZET Committee, Neil Gray stated that officials were preparing to undertake due diligence, drawing upon the value-for-money assessment that was completed earlier this year, and to provide that committee and the Public Audit Committee with further information on that when the assessment was complete.

We have made our expectations clear to Ferguson’s, and I have been pretty clear with the committee about what those expectations are. Those two committees in particular will get that updated information, which I hope they will find helpful.

The shorter-term figures from NRS, which are important, show that we are still seeing net in-migration to Scotland from the rest of the UK, but you are absolutely right that—