³ÉÈË¿ìÊÖ

I do not know whether we have those figures immediately to hand, because I am giving evidence on the future budget, but we can probably write to you.

You make a very good point. As we have just been discussing, forecasts are, by their very nature, uncertain. The SFC—not me—is trying to predict our budget position in three years’ time based on tax and on receipts from the UK Government. Inevitably, I am still to see a forecast that is 100 per cent aligned with outturn—they are forecasts, so they are based on assumptions. Over the past three or four months, we have seen how assumptions can wildly fluctuate. For example, who predicted war in eastern Europe back in December? It is inevitable that forecasts change.

What other Governments around the world can do is accept that those forecasts should be managed, nearly always, through resource borrowing, so that you smooth the trajectory and do not require the NHS or education to give up funding in order to manage forecast error. However, that is what we are expected to do if the forecast error is greater than £300 million. That is where it hits next year and in subsequent years, where you see the impact of the pandemic and of—through no fault of their own—two different forecasters working on different assumptions as well as forecasts that did not come to fruition.

The reconciliation that is required in that year significantly exceeds the borrowing capability to meet it. Therefore, about £500 million has to be found from front-line services. All it would take for the UK Government to deal with that would be for it to adapt the fiscal framework in that one area to ensure that there is £500 million more for front-line services.

The other aspect of that, which goes back to my answer to the convener, is about smoothing the trajectory. You cannot expect the public sector to suddenly, in one year, absorb £500 million, when we are talking about a workforce, and then see that climb again the next year. That is why most Governments borrow for that.

The fiscal framework review is on-going. For me, this is one of the most obvious areas where I would like to see progress. One of the arguments that we have made in the past, for example, was for the ability to use one of the borrowing powers for cash management, which we have not used or needed to use, and redeploy that to manage forecast error. That is one of the biggest areas where I would like to see progress. It would make a big difference for resource borrowing for forecast error to be indexed or even aligned to inflation.

We set out public sector pay policy in advance of every budget. I have been clear in this year’s budget that I cannot inflation-proof public sector pay policy, because of the high level of inflation and the fact that it is due to rise.

I am conscious of the SFC’s forecast on inflation, which it thinks will average 8 per cent across 2022-23 before falling back in line with the Bank of England’s 2 per cent forecast from 2024-25. That is in very stark contrast with the inflation assumptions that the UK Government used to underpin its spending review in October 2021. Therefore, the difficulty for me in answering your question when it comes to the years beyond this year and perhaps next year is that the funding pot that is available to me is based on assumptions that were made last autumn and have been completely overridden by the inflationary outlook that is inherent in the SFC’s forecast.

I am happy to bring in anyone else who wants to come in; I do not know whether your question has been sufficiently answered.

That is the necessity of the art of resource spending review. Again, we cannot afford not to make those reforms. The four pillars of the reform agenda in the resource spending review include procurement. The agenda is to encourage public bodies to look at four areas where we might drive efficiencies. The first is on estates, which you have already touched on. The second is on shared services; the third is on procurement, and the fourth is on brand management.

The RSR does not, in one go, give all the answers as to how we are going to achieve that, but it sets out a plan—over the next few years—for driving that reform. The reason why we need a resource spending review to do that is that it is difficult to drive reform within one year and difficult to do it within annual budgets, so we need to have that longer-term perspective of a three or four-year spending review. The changes that we make in year 1 might be expensive, but we will see the benefits in year 4.

I am actually talking about private investment. At the 26th United Nations climate change conference of the parties—COP26—the Glasgow Financial Alliance for Net Zero told us that there are $130 trillion-worth of assets under management right now that are looking for a home in significant infrastructure projects and other things to help with the transition. I am talking about the substantial sums of private sector funding that are available.

Indeed—the basics of a budget or a resource spending review. I do not know how else to explain the absolute basics of Scottish Government budgets or resource spending reviews: I must balance; I can only spend to the penny what I am forecast to either raise or receive. In a resource spending review or a budget, I cannot have a position whereby I am overspending. That is why querying the Scottish Fiscal Commission’s assumptions is so important. The SFC starts with assumptions, it provides us with forecasts, and I can spend only what it enables me to spend.

No, I do not.

We will update all tax policy in advance of every budget. I will not be drawn today on setting tax plans for subsequent budgets.

Obviously, the SFC has to work on the basis of assumptions. The intention here was certainly not to determine tax policy for future years.

Over the next four years—it is important that it is understood that this is over the longer term and not over a one-year period—we will see a reduction in workforce and in head count to pre-pandemic levels.

There are number of ways to do that, including through effective vacancy and recruitment management or redeploying staff. All that has to be done in collaboration and through discussion with trade unions. That is important. We have a policy of no compulsory redundancies, and we will update public sector pay policy in advance of every budget. The key with a resource spending review is that we are not trying to drive reform over the space of 12 months; we are trying to drive reform over the space of four years, so by 2026-27, we want to the total size of the devolved public sector workforce to be at pre-Covid levels.

In relation to the health workforce, a lot of people already work in care, so we have to take that into account for a national care service, which is an example that I used earlier. It is about effective management across the board, rather than setting arbitrary targets over a very short period of time.

Some of that civil service reduction will be in the health service. I am not disputing the sentiment behind your question, which is that I have said that we need to reset the size of the workforce, we will freeze the pay bill and, ultimately, we want to return to pre-Covid levels. The public sector is large; it is approximately 470,000 people in FTE terms, and we need that to return to pre-pandemic levels. That will need to be managed across the board. That is where my concern is with your arbitrary figures, including the 15,000 in the health service. That is putting arbitrary figures on the other side of that argument.