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Do you mean in terms of last week?

This afternoon, the First Minister will set out, alongside the omicron figures and the next steps, what more we might be able to do for business. Most of that is informed by a figure of approximately £175 million that came from the UK Government on Sunday night. That is the £220 million, less the £45 million that was already factored in. That will be factored in this afternoon.

Any other funding that we make available right now is made available at some degree of risk, because it will need to be managed over the next three or four months. It is quite late in the financial year. At this point in the financial year, most of the funding is either contractually or legally already agreed. For example, it is for salaries, local government or legal commitments to do with transport, and it is very difficult to free up. Anywhere that we have discretion, it is about phasing it rather than either stopping something or delivering underspend. It is quite unlikely that there will be any underspends at this late point in the financial year.

That £20 million is part of the £500 million for the just transition fund, obviously. You will appreciate that quite a number of local partners want to have a say on how it is spent—my inbox certainly shows that. We have said that we are willing to engage with them on the specifics of how it should be spent, although, of course, it will be spent on helping with the transition.

Last year, in an agreement with the Liberal Democrats for £15 million of additional funding, we engaged particularly with Opportunity North East on how to allocate that money and I would want to engage similarly on how to deploy the transition funding. We have put the money in the budget and we are now engaging intensively to figure out the best way of deploying it.

It will be as soon as possible. The money needs to be spent in the next financial year, and we are now three months away from the end of this financial year, so the plans have to be determined fairly soon to enable the money to start being spent early in the next financial year.

If you are asking about the UK Government’s perspective, I can say that what the UK Government would normally do is make announcements and then confirm the final allocation in January or February. What it has done is confirm the final allocations in December rather than January or February.

There is a fundamental difference between cash flow and budgeting. Once we know that the budget is coming, it is our responsibility to manage cash flow. The funding does not necessarily come into our bank account; it has to be drawn down. That will happen before the end of the financial year, probably in January or February. However, now that we know that that budget is definitive, we can decide how it will be spent as part of our overall budget. However, the key thing is that we already thought that it was coming, so we had already budgeted for it in our overall budget plans.

The pilot projects will require to be funded and will therefore have a financial impact. We had previously set out in our manifesto an overall quantum of about £10 million over the course of the parliamentary session for the pilots, and with regard to taking forward the process this year and working with public bodies, I think that everything will depend on the nature of the pilot. Obviously public bodies vary in size and in the average wage that they pay, so we will need to work with them to understand the financial implications. However, we are committed to taking forward trials this year.

Earnings growth in Scotland increased every year between tax devolution and the pandemic. I do not have it to hand, but the analysis that we have been able to share as part of previous budgets shows that earnings growth and, in some cases, it shows tax take growing at a faster rate.

I point to three things. You will say that I am describing the problem, but we cannot find solutions unless we do that. The first is the way in which certain sectors have been hit by Covid. The second is the way in which higher earners in particular have been affected by the downturn in oil and gas. The third relates to what you called participation and economic activity, which is a legacy issue. How do we solve all that? Here are three answers.

First, we bring people closer to the labour market. We need to get them into work in the first place. I point to initiatives such as the no one left behind strategy that try to do that. They are relatively recent initiatives that specifically target the problems that we are talking about, not initiatives that have been running for many years and that have failed to deliver.

Secondly, from an economic perspective, we invest in high-growth sectors. Where are our high-growth sectors? What sectors will create the high wages or, at least, ensure that everybody is paid the real living wage and above? They are particularly in the green economy, but they are also in technology and life sciences—the areas where we have strengths.

The third answer is to make sure that we do the analysis on a regional basis. There are clearly areas in Scotland where wage growth is higher and there are more higher-rate taxpayers than there are elsewhere. The convener is regularly at pains to tell me about the need to invest in the west of Scotland; we must ensure that areas such as the one that he represents are not left behind and that we do not focus on creating jobs only in places such as Edinburgh and Aberdeen.

Those are three examples. They are works in progress, and we have not nailed them yet, but we all have an interest in ensuring that they work.

It is for forecasters to determine these things as per their methodology. I would not want to get into the territory of criticising any forecaster’s methodology, given that forecasters are independent of Government. I recently met the OBR and I have spoken to the SFC about the need to align their methodologies as much as possible, as that will make things easier for us. After all, if one forecaster bases its forecast on a far more optimistic scenario than the other, that creates a real challenge for us with regard to block grant adjustments and the overall funding that is available to us.

There are difficulties in that respect. This year, we tried to align the timing as far as possible to ensure that the methodologies, too, were aligned. Indeed, that is why we went so quickly after the UK Government’s budget.

I am happy to bring in officials to respond, but I should point out that no methodology is completely risk free and that there are challenges and opportunities with all the models.

On balance, our sense right now is that we are being penalised by the growing gap between the richest and the poorest in the UK, which informs the fiscal framework methodology that is applied to tax. Indeed, prior to the pandemic, we were seeing growth in earnings, but there were still challenges with the overall funding that was made available to us. It is therefore overly simplistic to say that, because earnings have not been growing, there is a disproportionate impact on our block grant. There was earnings growth in Scotland, yet there were still challenges with the block grant.

I might be putting her on the spot unfairly, but I wonder whether Lucy O’Carroll has anything to add.

There are several questions in there. I will take them in turn. The first is on the undistributed sums that you reference. They are considered by the settlement and distribution group, whose next meeting is on 18 January, I believe. It will decide how the undistributed sums will be distributed.

On the overall settlement, I know that there have been conflicting views. I say again that I am not here to deny that there are challenging decisions in the budget, which I had to make. There are challenging decisions in it. In the local government budget, there is a distinction to be made between the core budget and the overall settlement. We have protected the core budget in cash terms and there has been real-terms growth to the overall settlement.

The wider settlement is not just about Scottish Government priorities; by and large, they are shared priorities. Most local authorities will tell you, for example, that there are acute challenges in social care on both recruitment and the funding position. That is why the additional £200 million to support investment in health and social care that has come as part of the overall consequentials is so important.

Your last question is a very pertinent one. It is ultimately about methodology. I will repeat what I have said in previous years, which is that I am completely open to considering any changes to the funding methodology. The committee will appreciate that that needs to come from the Convention of Scottish Local Authorities, as much as from me, and that agreement is needed within COSLA about reviewing that methodology. I think that we should review it, but I cannot do that without a request from COSLA to do so.