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The UK Government would like the idea to be rolled out across the whole of the United Kingdom. It can provide, in essence, a foundation for the approach, through national insurance contribution concessions, but some of detailed and specific provisions that are in the guidance document for England, which I have had a look at, relate to devolved issues, that is, mostly planning and environmental considerations as well as a variety of other questions. The UK Government is engaging us properly on the substance of those considerations.

I rehearsed with Mr Mason some of the issues that I have with investment zones. We have to be careful about the effect of displacement. Does a zone generate new economic activity? Are there alternative ways to support activity? I assure you that we are engaging with the process in a constructive spirit and that the UK Government is engaging constructively with us.

First, I acknowledge Liz Smith’s candid comments. I think that they help the quality of our discussion and reflect the reality of the situation. I also reflect on the exchange that Liz Smith and I had during my closing speech in the programme for government debate on 6 September. One of her colleagues—I will not disclose who the colleague was, to avoid causing any disruption to their prospects in life—told me that it was an example of the more thoughtful contributions that Parliament could do with more of. I am certainly interested in engaging in that type of discussion, because we face difficult challenges and there are no easy answers.

I welcome the timely question that Liz Smith puts to me about economic growth, because it allows me to illustrate the Government’s approach, based on some conversations that I had yesterday at the convention of the Highlands and Islands in Oban, which brings together a variety of public sector leaders from the region. Fundamentally, the Government’s growth agenda is based on the national strategy for economic transformation, from which I would draw out a few key themes. The first is an emphasis on innovation and creativity; the second is an emphasis on the importance of regional economic policy; and the third is a recognition of the importance of activating as many levers in our control as we can in order to support economic activity. Those are three of the big themes from the national strategy that I would draw on.

In one respect, the conversation that I had yesterday with the convention of the Highlands and Islands was enormously encouraging and motivating, because we talked through a more buoyant set of economic opportunities than I have seen in a long time in the area. For example, there are the ScotWind developments, the prospects for technological development around the Beechwood campus in Inverness, some of the related energy activity that is going on in Orkney, Shetland and the Western Isles and a variety of other economic opportunities, including in the tourism sector. There is a huge range of economic opportunities.

However, the challenges that were identified would best be summed up by four factors: availability of the workforce to deliver the opportunities; availability of housing at all levels of the market, not just affordable housing; transport connectivity, including issues about ferry services—those issues were very much to the fore of the discussion—and finally, digital connectivity, where there was a recognition that we are in a much stronger place than before but still have some way to go.

On the one hand, there are some substantial economic opportunities and prospects but, on the other, there are four chunky policy issues, three of which the Scottish Government can help to influence, and one—the availability of people—that is a real shared endeavour and challenge. We have historically low unemployment, although that might not be the case in the period ahead, and we are reducing the level of economic inactivity in Scotland. That is happening slowly, but I expect it to be slow, because trying to reduce economic inactivity invariably takes a lot of focused activity. Fundamentally, however, we are short of people. That is the consequence of the loss of free movement under EU membership.

I am getting a sense that the UK Government is beginning to realise that the loss of migration is a problem—Liz Smith may be party to some of those discussions. I am picking up elements of dialogue within the United Kingdom Government that recognise that the whole of the United Kingdom is getting short of working-age population. I hope that that opens up recognition of some of the steps that we need to take to address that.

I hope that that gives you a flavour of my thinking on those issues.

Yes, there are serious issues about the size of our working population, which is why I thought it absolute madness for us to give up free movement of EU citizens. Even if we had to leave the European Union, why we could not have stayed in the single market is totally beyond me. As an act of absolute self-harm, it is beyond belief.

I have been around here for ages and I remember vividly that, 20 years ago, Jack McConnell’s Administration was obsessed by the danger presented by the decline in the working-age population. I take my hat off to those members—they were totally obsessed by the topic. They did all that work on the fresh talent initiative. Jack McConnell phoned me, as leader of the SNP at the time, to ask if I would support the policy so that he could get good cross-party agreement. There was a lot of rancour between my beloved party and the Labour Party at that time—how things have moved on!—but I gave Jack McConnell unreserved support on that. It was a good idea and it made a bit of headway. Then, in 2002, EU expansion took place, free movement of citizens was enabled and our population started rising.

I think about the community that I represent. My son has just left primary school. A third of his class were the children of EU migrants who came here as young people 20 years ago, started working, met people and made their family life here. They boosted our population, and we did not have to worry about that for 20 years. We need to worry about our population now, and the situation is completely and utterly self-inflicted.

If we could have some thawing of the attitude towards migration, that would be of great benefit. I cannot magic up people out of thin air. Yes, we can work hard to try to activate people who are economically inactive, and I commit to doing that. We are doing good work on that—great pathfinder projects have been undertaken in Dundee and Glasgow to activate economically inactive people—but we are still short of people. That change of attitude would help.

Liz Smith puts it to me that there are forecasts of growth in the United Kingdom. That is not quite what we have got yet. We have got rhetoric about growth; we have not got any forecasts. The forecasts will come from the OBR and we will all have to wait to see what that adds up to.

In the mini-budget statement, the single policy initiative that was about growth was on investment zones—that was it. If the chancellor believes that the OBR will come along and say, “Yeah, yeah—these investment zones are going to be the absolute dynamo and that’s going to deliver 2.5 per cent growth,” my response to that would be, “Good luck with that,” because I do not think that that will be the case. I do not want to foresee OBR forecasts too much, but I suggest that the chancellor will have to come up with an awful lot more growth-related initiatives to substantiate an OBR forecast that would get to 2.5 per cent growth, given what we are experiencing now. Indeed, if the chancellor wants to repair the public finances without making spending cuts, the growth assumption will have to be higher than 2.5 per cent.

Lastly—forgive me for the length of my answer, convener; I am not really helping you with your time management, but there is a lot of really important stuff in here—I unreservedly accept the importance of the Scottish Government having an agenda that is about realising our economic opportunities. I mentioned the discussions that I had yesterday about doing that in one part of the country, in the Highlands and Islands. We must take the steps to enable that to happen.

On the housing question, I accept that we must look at what we can do to help. However, housing developers in the Highlands and Islands tell me that one of the biggest impediments to their building new houses is the availability of people—they just cannot find people.

The Government has taken forward the legislation on the national care service and we are developing those propositions. Obviously, we are having a lot of consultation and dialogue on those points. Today, we have not really got into specific funding decisions about particular areas of policy, so I would not want to give commitments on particular decisions that the Government is making on any aspect of policy, other than to say that we intend to fund what we have committed to doing. However, it all has to be fiscally sustainable and I am wrestling with that challenge in this financial year because we have had a number of significantly increased costs, principally through pay deals and the loss of value through inflation. We have to make sure that all of our current delivery of the budget is fiscally sustainable and that future years are fiscally sustainable as well.

Those will be set out in the financial memorandum that is associated with the bill.

I do not think that I used the word “grown-up” at any stage in my answer to Mr Greer—I possibly argued for a more considered discussion. I am all for that. I do not mean to be disrespectful to anybody, because I am as much a player in that as anybody else, but we probably need to have a more considered debate in Parliament about some of these questions. I give the committee the assurance that I will endeavour to do that through my stewardship of this brief for, I hope, a very short time—if the finance secretary happens to be listening to the session.

I tried to demonstrate that by coming to Parliament with the statement on 7 September. That was not a statement that I was required to make, but I made it because I felt that, in the interests of openness and transparency, I should tell Parliament what I was doing to wrestle with the in-year financial pressures. Normally, that is done in the autumn and spring budget revision process, which does not attract an awful lot of attention, but we are wrestling with some substantial issues.

Therefore, there is a need for us to have an open, considered discussion. I am not persuaded that we need more legislation to do that, because, to go back to what we have talked about, the existing legislative framework on the Scottish Fiscal Commission puts some substantial obligations on Government to adhere to the legislation and for Parliament to be informed by the Fiscal Commission of its conclusions and views. However, I am happy to consider any further relevant points.

The connection to the discussion about the national performance framework is interesting. I accept that it is difficult to look at a pound in the budget and follow its journey into the national performance framework. It is possible to look at the national performance framework periodically and ask, “Do we think that public expenditure and policy decisions are supporting the achievement of this direction of travel and, if not, what do we need to reshape about public expenditure or policy to enable that to be more the case?” However, it is a difficult process to establish a direct connection between public and expenditure outcomes.

A fair conclusion would be to look at decisions on public expenditure and, for example, come to a conclusion on whether the Government is doing enough to support early intervention and preventative measures. If the Government spends all its time running around picking up the pieces of things and not leaping away up stream to avoid problems occurring, that is a pretty big debate for the Parliament to have.

That would probably also lead to changes in how we spend public money. There is not often a queue of people saying, “Please take money away from me because it could be better spent over there.” However, Parliament could always make that decision and agree collectively that we could do with, for example, early intervention. I am a firm believer in early intervention. That is why we invested to expand funded hours of early learning and childcare to 1,140 a year. The Cabinet came to the conclusion that we needed to take a bold decision to alter the life chances of children in our society. The same rationale effected the decision to embark on the Scottish child payment.

Therefore, we took big, bold policy decisions that have financial implications, and we have put them into the budget, in the hope that they help to narrow the attainment gap and erode child poverty. I would argue that there is real benefit in those policy decisions, but they have come at a price in terms of a cost to the budget and, obviously, Parliament is welcome to air some of those questions as we proceed.

I reassure Michelle Thomson that although, today, she is faced by a quartet of men, on any other day, if the director general of the Scottish exchequer or the chief financial officer had been with me, the panel would have looked remarkably different. We have very appropriate levels of gender balance across the Scottish Government, even if we do not have it on the panel today. Indeed, if the Cabinet Secretary for Finance and the Economy was here, it would be very different as well; that is another encouragement for her to come back to her role as quickly as possible.

To be absolutely serious, I unreservedly accept the points that Michelle Thomson made about the importance of assessing the impact of budget measures on women and on other groupings and considerations within our society.

In Scotland, we are very fortunate to have the Scottish Women’s Budget Group, which has been very much involved in the Scottish Government’s financial planning and budget work for many years, and it was actively involved when I was the finance minister. I know that the Government has good dialogue with that group. I will meet with the organisation as part of the dialogue that I will take forward on the budget, and I will listen carefully to the representation that it makes, just as I listen to a range of different organisations.

In the construction of our budget, it is important that we take adequate account of the impact that it may have on different groups in our society, particularly women. If we have to take tough decisions during a financial year, it is probably even more important that we pay particular attention to those issues to avoid getting into a situation where we create a potential negative impact during that process.

I suppose the best way to express it is to say that it will affect the purchasing power of the Scottish budget in the years to come.

If we are undertaking future borrowing—if we are in any way co-investing in a proposition with other interested parties, which the Government does from time to time—that will be a factor that we will need to consider.

If we take, for example, some of the investments that our enterprise agencies or the Scottish National Investment Bank might make, these are invariably co-investment propositions. The ability of other parties to co-invest, which we rely upon so that there is a sharing of risk, might be jeopardised because of those factors. There are a variety of knock-on effects that we may face as a consequence.

Without a doubt, yes. We have to look with care at capital projects. I am looking all the time at what the expectations are on capital projects because of the disruption to supply chains from Covid, exacerbated by the illegal invasion of Ukraine and all the disruption that comes from that, and the impact of energy costs. All of those factors are putting pressure on capital project budgets and we have to be very careful in the management of those sums.

Throughout my involvement in any of these questions, I have always been struck by the importance of investment certainty and attracting commitment to the market. I will take the example of renewable energy. Since 2007, we have given absolutely cast-iron policy certainty on our commitment to renewable energy. The reason why we have such phenomenal progress on getting to a position whereby, in essence, Scotland’s net electricity requirements are generated in their entirety by renewable energy is that we have given that certainty to the marketplace.

Therefore, I accept, fundamentally, the argument that Michelle Thomson puts to me. The Government has given a long-term commitment to the Scottish National Investment Bank. Although, as the committee will understand, I am not at the stage of defining particular budget numbers, the Government is committed to supporting the Scottish National Investment Bank and all of its purposes in the long term.

However, in all honesty, I cannot assure Michelle Thomson that I can insulate Scotland from the damage that has been done by the chancellor’s decisions and the investment uncertainty that has been created, because, fundamentally, the pension funds that she talks about will look at the United Kingdom and the decisions of the United Kingdom Government. I am not surprised that they are all very anxious and nervous about it, because it has been a total fiasco since a week past Friday. I cannot overstate the damage that has been done—on top of an already really volatile situation—by that fiscal recklessness.

I fear—I am really worried—that, in order to go from veering off to that extreme to the other extreme of creating market certainty, the casualty will be public spending, in particular the public spending that vulnerable people in our society depend upon. That is my big fear about where we sit today.