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We are not proposing a cut, although you could argue that that might end up being the case, depending on whether there is a real-terms increase. The difference between real terms, which accounts for inflation, and flat terms is an important distinction to make. However, there are some flexibilities between resource and capital that we are examining closely. One example is body-worn cameras. There is obviously a capital cost to those but there is also a substantial revenue cost and we are looking to see what we can do to maximise the capital contribution.

It seems to me that, especially after the early part of the previous decade, between 2010 and 2016—I know that that is going back in history somewhat—we regularly had better capital allocations than resource allocations from the UK Government. We also had fairly frequent allocations of financial transactions, which can be applied only in limited ways. However, now, there is a much greater tightening of the grip on capital provision.

I make the point that the indicative capital funding envelope has been maintained from the spending review that was published in February last year. That maintains essential capital funding for the core justice services. That will always be a priority over new initiatives. It includes core services such as estates, technology and fleet. We have also confirmed more than £500 million of capital for our prisons, including the modernisation of the prison estate, which has been on-going for some time.

It is true to say that the spending power of that capital budget has been eroded by inflation and now pays for significantly less as the cost of raw materials increases. However, we remain committed to substantial capital investment in the justice system. We have to keep it under review and how that is done will be part of our discussion and negotiation with the different parts of the portfolio.

We want to see how the existing ones are working first of all. They are absolutely ground breaking—nowhere else has done anything like that—so it is only right that we ensure that they are having the intended effects before we move on to a further roll-out. That roll-out is intended, but it will be based on our experience with the two units that have been up and running.

That will depend on future capital allocations. There are issues with the age of the institution at Greenock, so in the meantime we have carried out works to ensure that it is in a proper habitable condition. The possibility of replacements will depend on future capital allocations, which, as I have said, are currently as constrained as I can ever remember them being.

That relates more to Addiewell prison than to Kilmarnock prison, because the Addiewell contract has an indexation feature. To be perfectly blunt, I would not have signed that contract. In a different context, the local authority in my area, which is small, is now buckling under the pressure of its private finance initiative contracts for schools. As you said, when inflation is at a 41-year high, the impact that that can have is very serious—it is potentially about £4 million per year in this case. We are involved in discussions, but room for manoeuvre is extremely limited.

To go back to my point about schools, my local authority has tried very hard during the past number of years to renegotiate some of those contracts, but that has proven to be extremely difficult. Get-outs from such contracts can be very expensive in their own right.

To be fair to the people who signed the contract, they did it with indexing in mind, and perhaps they would argue that they did not expect to have a long period of low inflation. They managed the process during that time, and they would expect the cost of inflation to be covered in the payments that are made to them, because their overheads will also be rising.

There is limited scope, but the SPS has been looking at it.

My understanding is that the tax liabilities are termed a reserved UK income tax. I am not sure whether that applies personally to the employees. There is no current plan to have employees based in this country; they will be visiting employees. As I understand it, the IIC has no offices in Scotland or the UK.

To check that I have those facts right, I ask my officials whether they want to comment.

First of all, we said that inflation is at 10 per cent and rising. The budget that we have for this year is worth around £1.7 billion less than it was when it was announced in December. At that time, as you know, inflation was around 4 per cent.

Over and above that, the extra budget pressures for the higher-rate pay settlements that reflect that cost inflation are at around £700 million so far, and deals have yet to be done with the Prison Service, teachers and nurses. According to my figures, that has reduced the value of our budget by 2.6 per cent, which goes up to 5.2 or 5.3 per cent, when inflation is taken into account.

Those figures are very real. We cannot strip out from our budget the effects of inflation. I do not know anyone who seriously contests the tightening of the budget. The Welsh Government and UK Government departments have referred to the pressures of inflation. More worryingly, we now seem to be embarking on a further phase of austerity, given the budgets that have been announced. The pressures are very real. The public accounts can be checked; however, those are my budget figures.

That has been established in the First Minister’s responses in the chamber on a number of occasions.

I will not go into the detail of the discussions that I have had with the DFM up to this week and in the period before the budget, but those points are being made.

I very much agree with Pauline McNeill. The way in which Police Scotland dealt with Covid, COP26 and operation unicorn is an extraordinary record of achievement. Not many other police forces could have achieved that. That has registered with other police forces around the world. Policing by consent and the model that we have compared with other models, such as those in some parts of the United States, have registered. There is a lot of interest in how Police Scotland conducted itself during those very pressured times.

Covid is the key example in relation to the point that you have raised, because the police moved into a space that is often to do with health. That the police were seen as the first point of contact is a symbol of the trust that people in Scotland have in the police. I think that you are right. That has meant that they now have an expanded role, which the chief constable has always wanted, in relation to wellbeing and safety for the environment rather than only law enforcement for the population.

Crucially, when there is a health-related issue, we have to get better at the hand-off to health authorities. I mentioned some of the further iterations of reform that might come about in call handling and more liaison between the blue-light services.

You are right that the police have absorbed an additional pressure. I am involved in discussions about how we can better manage that. The classic example involves a person who is in severe mental heath distress. The police will often have to attend. It is fair enough that they attend, but they should ensure that a professional is put in place as quickly as possible rather than a police officer being there for an extended period of time. I concede that that is a challenge that we have to meet, and it features in the discussions within the Cabinet. It will do in the run-up to the budget, as well.

It will be different in different parts of the portfolio. I mentioned in my opening statement some of the digital innovations that we have developed and are looking to expand on. However, we will necessarily have to look to further public sector reform in order to try to fit in with those financial constraints that I have mentioned. I have had discussions with the chief constable of Police Scotland as recently as yesterday, and with other services, and I know that they are actively considering things that may help with public sector reform. Those things would be necessary anyway.

The experience of fire and police in particular is an excellent example of public sector reform. That was a difficult decision to take, around 10 years ago, and there were difficult periods afterwards; I am thinking about the establishment of the joint police and fire boards. In my view, however, having served on a joint police committee in a local authority, the level of scrutiny of the police is now far greater than ever before. Those services have already established substantial public sector reform, but there will be more to come, and they are actively considering that, perhaps in relation to how the three blue-light services can work more closely together, not least given the findings of the Grenfell inquiry. That will be happening.

We have seen that there have been delays on large-scale capital projects right across the UK. Brexit features prominently in the reasons for those. The pressures that it has caused for supply chains and costs are substantial.

Our intention is to complete the project on schedule, but of course that will depend on a number of factors. There have been delays before now. Pauline McNeill has previously asked me questions about delays caused by the change in the prospective site that was to be used and the choice of a new site. We must acknowledge that. As I have said from the start in relation to HMP Highland, we are to some extent at the mercy of external influences such as Brexit, supply chain issues and labour shortages. We are trying our best to withstand those very real pressures and keep to programme, but I cannot deny that they are there.