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There is a lot in that question, so I will take each point in turn. The bottom line is that the primary way of increasing public revenue in order to fund our public services is through broadening and increasing the tax base. In order to do that, we need to maximise the number of people in fair, well-paid secure employment. I am sure that the SFC made that point in relation to its updated forecast.

There are primarily two ways of doing that. My primary concern is an economic subsidy over the next 10 years that deals with the structural challenges of productivity and maximising the number of well-paid jobs. In addition, although we are—I hope—heading for significantly lower unemployment than we perhaps feared, a lot of businesses are saying that they are struggling to recruit. Many of them formerly relied on European Union labour. Without the staff, most businesses cannot grow and develop, and individuals are not earning and are therefore not paying income tax.

First, therefore, we need to ensure that our economic strategy for the next 10 years has a laser-like focus on the areas where we want growth and development and economic recovery, and secondly, we need people. First, we need to focus on ensuring that as many people as possible who are already resident in this country have the right skills for those jobs, but we also need to ensure that we have an attractive immigration policy. So many sectors just cannot recruit right now because of their previous reliance on EU labour, which is no longer materialising.

In terms of what I am actually going to do, those are the answers. First, we need a long-term economic strategy that deals with structural issues such as productivity; that is what I intend to do in the economic strategy that is due to be published in the next few months. The second focus is immigration and attracting to this country a workforce that is able to fill roles in order to allow businesses to trade profitably and to enable people to pay income tax.

It is one of my greatest headaches, because last year we were deeply concerned that the UK Government could go right up or down with the funding that we receive. Bear in mind that consequentials emerge only from the money that is actually spent, and not the money that is announced.

Last year provides an important comparison. If the UK Government were to announce X hundred million pounds for the Scottish Government to spend on business, we would immediately be under pressure to spend it, but that amount from the UK Government could then be changed, after we had given the money over to business. Therefore, midway through last year, the UK Government implemented the guarantee, which was just to say that the amount would not be revised downwards. Unfortunately, that guarantee has not been extended to this year. That means that money that is announced could actually be clawed back, and, in the past, it has often been clawed back, as late as February or March in the financial year. Because I have to balance my budget to the penny, by February or March I will already have confirmed that, for example, teachers or businesses will get a certain amount of money. I am then left having to repay some of that money to the UK Government late on in the financial year. Clearly, I do not have the capacity in a fixed budget to suddenly create more headroom, once we have already confirmed that that money is being spent.

That happened the year before Covid. In February 2020, we got confirmation that, despite all the money that had been announced for us during the year, the money that we were going to get was less. That meant that I would have to repay some of that money—and that meant that it was capital—very late in the financial year.

I cannot afford to hold money back—businesses need it and public services need it. Our citizens need that money to be spent in the health service and in remobilising the justice system. Equally, in the back of my mind, I have the fear that money that is announced will be revised down, as has already happened in education; I think it was £25 million pounds that had been previously announced that was clawed back in May.

It is easier to handle that if it happens earlier in the financial year, but if it is in February or March, it is almost impossible. We cannot borrow—we cannot suddenly create additional money to pay it back.

It is a case of reconciling forecasts with outturn. At the beginning of the year, the SFC will forecast what it thinks we will receive in non-domestic rates. We plan what we will spend on public services on the basis of that forecast, but forecasts are just forecasts. The outturn—the amount that we receive in non-domestic rates—could be higher or lower. It is a balancing account, so we need to manage it and ensure that we can meet our commitment to spend £X million on the health service, for example. At the end of the day, it is just a forecast on which we base our budget, not the actual amount of tax take.

Absolutely. Those issues have been raised with the UK Government, and I will continue to raise them. I will also raise them directly with the banks. We have a good and constructive relationship with the banks in Scotland, and I think that they have been quite helpful through this crisis. However, the real test comes now, as people face a wall of liabilities. The question is how banks will help businesses through the next few years when repayment of bounce-back loans, CBILS loans and so on will be required, as it is already being required.

There has been an impact from Covid. We should also recognise the fact that we have maintained 100 per cent rates relief for a full year. We are tracking the situation. One reason why our guarantee to local government is so important is the fluctuations in non-domestic rates. South of the border, there has been a dip in revenue from non-domestic rates, and local government has been exposed to that, whereas there has been a guarantee that local government in Scotland will receive the income that we have confirmed.

They are very helpful figures. For the past year, we have been in discussion with the chief economist about the long-term impacts of Covid. Probably as early as last summer, we were very much looking at a K-shaped recovery. In other words—I think that I spoke to the Finance and Constitution Committee about this—some businesses and sectors were doing comparatively well. New businesses were being created. The tech sector, for example, was obviously booming. However, other sectors were really struggling. That could have led to the SFC’s figures, which suggest that there will be less long-term scarring. Some sectors will probably be dealing with that scarring for longer than others. Although the national picture might be more optimistic, some sectors of our economy will probably need help for longer and will have longer-term scarring than others. There is a different picture when we break it down sectorally.

As you can imagine, I have been all over this—for want of a better phrase—to understand the financial implications and consequences. On housing, which you mentioned, we set out the budget for our original target of 100,000 homes in the capital spending review, and as a result of a number of different discussions—and in light of next week’s programme for government, which is a really important consideration—we will be considering that capital requirement. As for the core financial implications on the resource and capital sides, they will be settled in the budget-setting process. We have come to an agreement, and our responsibility now is to fund that part of the budget.

Secondly, I point out that it is a multiyear co-operation agreement, which leads us into the resource spending review. That review is where we had intended to cost and plan for multiyear commitments, and the co-operation agreement will now be factored into it. I am sure that you are all sighted on this, but, just to give you a little bit of history, we had hoped to carry out our multiyear spending review last autumn. However, we could not proceed with it, because the UK Government’s planned resource spending review did not go ahead last year. We are hoping—certainly the hints have been made and the intentions are there—that the UK Government will do its comprehensive spending review this autumn, and that will allow us to publish our own plans for our intended multiyear spending, which will include the co-operation agreement.

Thank you—that is a very good question. The SFC forecasts are cause for optimism. I do not think that we can downplay the difference between the January forecasts’ really tough outlook for the Scottish economy—which I had to base my budget on and which reflected the huge impact of the pandemic—and where we are now. They are but forecasts, which are based on various variables that the SFC would have gone into, such as vaccinations and lockdowns.

In terms of the fiscal impact, from a financial perspective, one of the biggest challenges right now is the fact that there has not been much additional consequential funding from the UK Government in the past few months. Right now, we are trying to remobilise the health service, the justice system and a host of different public services, as well as dealing with the on-going Covid impact, from a budget that has not been supplemented by additional consequentials from the UK Government in the way that it was last year.

At the moment, the pressures on the Scottish budget are such that we really need the structural support for businesses to be in place—furlough and self-employment income support. If we were to find ourselves going into another lockdown—at the moment, that is not what we are discussing; we are talking about trying to maximise the impact of the baseline measures—we have no certainty that furlough would be in place or that self-employment income support would be in place. I have no certainty that there would be any additional funding in place and I am not sitting on funds right now that I could deploy to support businesses. We would need additional help from the UK Government.

There is a bit of déjà vu here from last October, when furlough was due to come to an end and we repeatedly asked for it to be extended. It was extended at the last minute, but the Scottish Government’s resources are just not sufficient to help businesses to the level at which they need to be supported through furlough and self-employment income support. We would need to ask the UK Government for additional help, because funding would be required on a scale that we cannot provide in light of the need to balance and fix our budget. I cannot borrow for those emergencies that you are talking about.

I will take a short detour, as you talk about block grant adjustments. One of the areas of the fiscal framework that needs to be reviewed concerns income tax and the associated methodology. The SFC has detailed that in its own reports. We are conscious that the methodologies that apply to income tax for our tax base are probably not as helpful as they could be, in that we have a different tax base from the rest of the UK. For example, we need to maximise the number of people who are paying, and broaden the tax base at the upper end because of the way in which tax is calculated. There is currently a question around the methodologies that are applied to the tax base and the way that the block grant adjustment is calculated. However, I shall leave that to one side.

With regard to what else we could do, it is clear that we are more exposed to the impact of what happens with oil and gas. The committee will have seen that in the forecast that the SFC published last week.

When there is a reduction in demand for oil and gas, that has implications for individuals who are working in that area, and therefore we are more exposed to the income tax implications of that. My view is that we need to diversify, and that is why the point of the economic strategy is to focus on the opportunities that there are with alternative emerging technologies, renewables and the just transition. Different countries around the world are grappling to get the competitive advantage that new and emerging technologies offer. I want to ensure that it goes to Scotland—that the supply chains in Scotland are creating new jobs as a result of pioneering research and development. That is one area where I think that we can have a competitive advantage, if we get it right. None of this happens automatically, without us intentionally trying to ensure that we capture the opportunities here in Scotland.

On the capital point, we knowingly published our capital spending review last year before the UK Government published its spending review, which is due in the autumn. It would therefore have been the case anyway that we would have had to look at our capital spending review and our multiyear commitment to infrastructure in light of what the UK Government publishes, and that will still be the case.

Clearly, we have to factor in what capital we receive and what our commitments are, but our commitments still stand. We have not rolled back on our published commitments when it comes to capital investment, but they are subject to what capital is allocated to Scotland as part of the spending review. Do you want to come back on that point?