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Chamber and committees

Official Report: search what was said in Parliament

The Official Report is a written record of public meetings of the Parliament and committees.  

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Dates of parliamentary sessions
  1. Session 1: 12 May 1999 to 31 March 2003
  2. Session 2: 7 May 2003 to 2 April 2007
  3. Session 3: 9 May 2007 to 22 March 2011
  4. Session 4: 11 May 2011 to 23 March 2016
  5. Session 5: 12 May 2016 to 5 May 2021
  6. Current session: 12 May 2021 to 16 August 2025
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Displaying 930 contributions

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Economy and Fair Work Committee

National Strategy for Economic Transformation

Meeting date: 16 March 2022

Kate Forbes

I think that they will. Again, I refer you to the two documents that have been published: the analytics paper, which is quite a weighty document, and the document that sets out the emerging actions, which is an easier read.

There are two issues. One is that we had given a commitment to publish the strategy document as quickly as possible after the election and, obviously, there was some delay because of the emergence of the omicron variant over the winter period.

The other issue is that the agents of delivery are not all within Government. For example, with regard to health, the national health service reports directly to the Government, and all of it, in its entirety, is in the public sector. However, with regard to economic growth, 70 per cent of the agents of delivery are in the private sector. That means that we need businesses, entrepreneurs and academics to be on board with the strategy, and they need to play their part in the delivery and implementation. You will see in the document that, next to each of the actions, we have detailed who we think owns each one, and, in order to deliver an implementation plan, we need to work with them. That is why we believed that it was more important to publish high-level actions and then work with those people on the implementation plan.

Economy and Fair Work Committee

National Strategy for Economic Transformation

Meeting date: 16 March 2022

Kate Forbes

There is a point to be made around businesses working with business. One of the actions to which we have committed is appointing productivity ambassadors. There has been talk in the past about productivity commissioners, but we chose productivity ambassadors, and their job will be to work intensively with key industries to drive productivity improvements.

As part of that, they will work internationally. They will build international networks and work with similar industries in other parts of the world to learn what are the key investments, perhaps in technology or workforce, to improve productivity. They will ensure that there is a particular focus on leadership in those key industries in order to improve productivity.

As you said, there are some industries that are significantly more productive than others by far. However, we must work with them because we cannot be content that they are more productive than other industries; they should be world leading on productivity, because many of them compete on an international stage and not a domestic one. We must also work with other industries—this point is well rehearsed so I will not list them—in which, to bring them higher, there needs to be more investment in reskilling, upskilling, digital, technology and innovation.

Economy and Fair Work Committee

National Strategy for Economic Transformation

Meeting date: 16 March 2022

Kate Forbes

There are two things. First, the access that businesses have to support will change. It will be more streamlined, in that it needs to align with what our strategy says—for example, there will be changes to conditionality and to the things that we focus on. There will inevitably be changes to the support that businesses receive. In relation to that streamlining, as soon as anything is stopped, I guarantee that people, whether it is Colin Smyth or somebody else, will be posing questions to me about why we have stopped certain schemes and initiatives and so on. Inevitably, one of the by-products of streamlining is that you bring everything into one place and by default, things might have to change. If the Parliament believes in change, I hope that members remember that in the future, when considering the schemes that are available. Some of the schemes will have to change or will be no more, because we have adapted our approach.

The second thing is that there is support that is provided by, for example, the enterprise agencies that is not specifically grant support and is not about accessing funding. Again, the enterprise agencies will align all their activity to the actions and objectives that we set out in the strategy. It will be very clear to businesses what the enterprise agencies are doing, what they are seeking to achieve and the opportunities that come from getting on board with that.

Economy and Fair Work Committee

National Strategy for Economic Transformation

Meeting date: 16 March 2022

Kate Forbes

I will take that question in two parts. The second part of the question is about measurement and the first part is about solutions.

I will take this opportunity to say that I am pleased that Ronald MacDonald agrees that we have diagnosed the problem, because that, in itself, is where we should start. It is easy to shy away from diagnosing the problems, which involve long-term structural challenges and some of the short-term post-Covid challenges.

There is a lot that is new in the strategy on solutions. I have already referred to some examples around developing a more robust supply chain—a Scotland-based supply chain—for our renewables. I am sure that you would be one of the first in the Parliament to criticise the Government for not having done enough to develop the supply chain for renewables. The fact that we have set out a comprehensive plan for how we are going to do that and a commitment to do it sounds like it is new, to my mind.

It is unfair to suggest that there are no new solutions. We have started with the data, diagnosed the problem and identified the actions to get where we want to be, bearing in mind the fact that not all the agency lies with Government. A lot of it lies with other institutions and the private sector.

Measurement is vital. If we are not measuring the right things, we will probably not be able to define success. Ultimately, there will be clear metrics for success in the implementation plan.

On what we are measuring, I go back to the analytics paper. I will give the example of entrepreneurship. Scotland is an entrepreneurial country if we define it in terms of entrepreneurial activity such as start-ups—new businesses—but we are not performing as we should on scale-ups. In other words, the success rate for new businesses is not as high as it should be. There is much to celebrate in the way of entrepreneurial activity. If we just stop there, we could say that it has been a success, but there is a problem with business survival rates. We do not perform in the way that Ireland performs, for example.

What we measure is key, and we will set out the measurements. That is unpacked in the analytics paper—particularly the example on entrepreneurship. Gary Gillespie, the chief economist, might want to come in on measurement, because we debated at length what we should measure.

Economy and Fair Work Committee

National Strategy for Economic Transformation

Meeting date: 16 March 2022

Kate Forbes

What do you suggest is missing?

Finance and Public Administration Committee

Budget Scrutiny 2022-23

Meeting date: 1 February 2022

Kate Forbes

We think that it is new money. However, as the committee will know, the key is that every year in either late January or early February we have the supplementary estimates, which is the point at which the UK Government confirms the finalised budget position for this year. The challenge arising from our going earlier on our budget—as we did on 9 December 2021—is that we cannot factor in any late movements. Those late movements usually happen in February. That happened last year, when there were very substantial movements of £1 billion and more in the last few weeks of the financial year.

Right now, the supplementary estimates—the formal point at which our budget is fixed and does not really move any further—are still to happen. However, the impression that we are getting from the UK Government—through informal channels between officials, as well as formal channels, which is me speaking directly to the Chief Secretary to the Treasury—is that there are two new pieces of information.

The first is that, although we have been told multiple times that we would probably need to pay back the £440 million—or some of it—the thinking now is that that is unlikely, because there will be spend by the UK Government that generates sufficient consequentials to cover that £440 million. That obviously gives us a bit more leeway and flexibility this year; otherwise, I would have been thinking about how to be in a position to pay back funding. The second piece of information is that there might be additional funding. As I cannot confirm the quantum of that until the UK Government confirms it to me, I have to try to give the Parliament as much information as possible while stressing that these positions have not yet been finalised by the UK Government. That will happen in a very public fashion when the supplementary estimates are confirmed.

My last little point, which is nevertheless important, is that anyone in my shoes would normally wait until the UK Government had formally announced the position, but I am conscious that local government has decisions to make and that we are going through a budget process. As always with these decisions, there is an element of risk; I am conscious of there being a bit more flexibility and of new information emerging, and ultimately I will have to manage the budget in advance of the formalised position being confirmed.

I hope that that is a fair and comprehensive overview of where we are at, convener.

Finance and Public Administration Committee

Budget Scrutiny 2022-23

Meeting date: 1 February 2022

Kate Forbes

The short answer is no, but that is where we need to get to. As you have outlined, my position has been echoed by my Welsh and Northern Irish counterparts and, indeed, should be echoed by anybody who cares about effective budgeting across financial years. We need to remember that this is only an issue for the devolved Governments because of limits on carry forward in our fiscal framework. In other words, throughout the financial year, we budget to manage the overall funding available for the purposes that we deem necessary with a view to getting into balance by the end of the year, given the severe limits on carry forward.

What I have sought to avoid over the past two years, with great advice from officials, is a position where funding is not being used effectively, simply because it happens to fall on either side of 31 March. As we all know, businesses continue to need support on 31 March and 1 April; vaccines continue to need funding on 31 March and 1 April; and we continue to need to fund public services on 31 March and 1 April. That arbitrary cut-off at the end of the financial year, which we are now used to dealing with, becomes really challenging if in the last few weeks of a financial year we receive additional consequentials that have not been factored in. Basically, our effective budgeting gets undermined because of those consequentials.

Please do not hear me incorrectly: I am not saying that we are not incredibly grateful for additional funding. The problem is the messaging that we get for weeks on end that, first, there is no more money and, secondly, some money will need to be clawed back, which then flips, in a matter of days, to people saying, “There’s going to be more money.” It is a question of effective budgeting.

The position is the same for the Welsh and the Northern Irish—they want to budget effectively and carefully so that there is sufficient funding. There has been no change in the mechanisms. It looks as if, this financial year, we might again have additional money that we did not expect. Nobody is complaining about that; the issue is the management.

I invite the committee to reflect on the most effective means of budgeting across financial years. That goes back to the fiscal framework, the ability to carry forward and the ability to use the reserve. If we can use the reserve, that is great, but if the reserve does not have enough capacity, that creates a problem. The position now is that, if the reserve did not have enough capacity, the UK Government would say that the funding should be paid back. I could not possibly do that, because I know that the funding is needed out there.

Finance and Public Administration Committee

Budget Scrutiny 2022-23

Meeting date: 1 February 2022

Kate Forbes

I will divide that question into two, because the ÂŁ25 billion spend on the supply chain is slightly different from the direct revenue benefit from the option fees, which are about ÂŁ700 million over 10 years.

For next year’s budget, because it was again being produced earlier than normal, and in advance of ScotWind, we identified a prudent estimate of ScotWind fees for next year. As you said, that is included in the £620 million of additional funding for next year’s budget. That funding includes other elements as well, which I can unpack if that is of interest.

That funding is slightly different from the £25 billion figure, which is based on supply chain investment. As you will know, we are intentionally trying to ensure that there is a legacy from ScotWind—which, arguably, is unlike the legacy from other significant industries that have operated in Scotland over the past five decades. That legacy is to build up our supply chain.

Take onshore wind as an example. We know that there has been a lot of scrutiny of the fact that manufacturing is largely done overseas and that we import turbines. We want to do things differently with ScotWind so that we leave a legacy of a Scotland-based supply chain. Therefore, requirements are built into the ScotWind process for winning bids to invest in the supply chain. The commitments to date are about ÂŁ1 billion per gigawatt of energy generated.

That amount will be slightly more uneven—as you can imagine, a significant investment will be made up front in the supply chain to enable the developers to build the required infrastructure. However, the option fees of about £700 million will be a lot more stable over the 10-year period.

Finance and Public Administration Committee

Budget Scrutiny 2022-23

Meeting date: 1 February 2022

Kate Forbes

Others have probably described that better than I could. I remember one business organisation describing the situation at the end of the financial year as being like trying to land a 747 on a postage stamp. We should remember that the Scottish Government cannot overspend its budget, which means that I have to deliver as small an underspend as possible. It would be a remarkable Government that got down to the last penny of spend, not least in a period of emergencies, when urgent responses are required.

That means that, for example, any capital that has been delayed for projects needs to be managed using the carry-forward through the reserve. The same applies to any financial transactions money that has perhaps not been able to be drawn down by businesses or organisations that use it. In essence, we take the risk of managing the budget on behalf of various infrastructure projects in Scotland and so on, so we need to leave some room for the management of capital and financial transactions. Also, with resource, an assumption of some carry-forward is already built into the budget.

You can see how that ÂŁ700 million starts to be eaten away. As we approach the end of the financial year, we need to ensure that there is sufficient capacity in the reserve so that we do not breach it. I think that, when I spoke to the committee previously, I said that there was no forecast underspend on revenue, which was true, but at the time I was trying to factor in potentially having to pay back some of the ÂŁ440 million, with no additional consequentials coming.

Things have changed quite quickly. In the last few weeks of the previous financial year, we had an additional £1 billion from the UK Government, which meant that we exceeded the carry-forward limit—again, that is not a complaint about additional funding; it is purely about effective management of budgets. Last year, we secured an agreement with the UK Government to carry forward some of that outwith the reserve, and I am certainly keen to seek such an approach now.

Ultimately, I hope that we are all agreed that we need to protect our spending power. There is a lot of need out there for additional funding, which I am sure we can all detail, so, no ifs, no buts, we must protect the spending power. If the flaws of the fiscal framework undermine or erode that, the problem is with the fiscal framework and not with budget management.

Finance and Public Administration Committee

Budget Scrutiny 2022-23

Meeting date: 1 February 2022

Kate Forbes

As you said, we have allocated the bulk of the funding—it is largely being paid out to bank accounts or applications for it are open. The feedback that we have had from quite a number of sectors—one of the most obvious is tourism—is that, although the initial funding was useful and it was helpful to have that in business bank accounts to address the immediate challenge, they would very much like us to invest in a programme of economic recovery. The retail sector has also been clear about that, and news reports at the weekend covered that.

We are well advanced in developing such proposals with different sectors, and I hope to confirm what we are doing as quickly as possible. Some sectors would have liked additional funding but, now that most sectors are largely open or trading, even if that is with some restrictions, we should invest in a programme of recovery. As for timescales, I hope to do that as quickly as possible.