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I think that Niall Caldwell and Scott Mackay would agree with me that it is always a very busy and intense workload in finance but particularly as we get to this point of the year.

It will always be challenging, just by dint of the fact that we are approaching end of year. We can perhaps remove some of the complexity and what can at times be the capricious nature of the arrangements by having a better process for how the Treasury and the UK Government engage, so as to provide a bit more certainty. We had a Barnett guarantee in a previous year, and that was enormously helpful. That allows us to plan with more certainty and—touching on the points that we have discussed regarding the reserve—increased flexibility. That, in turn, allows us to think about ways to deploy funds more efficiently, rather than having to make what can be an artificial end-of-year deadline to make the budget balance and to ensure that we still have enough headroom in the reserve and that we are not underspending to a degree where we lose the funding. It is an intense process.

As for quantifying the resource and the operational costs within the SG, I do not have the figures to hand. I do not know whether we have those figures available.

It is a fair point, and obviously we will continue to keep the rates under review. However, we are on a journey towards banning biodegradable municipal waste by the end of December 2025, and we will consider the rates in the broader context of our actions to reduce waste and move to a circular economy. For the reasons that I set out in my opening remarks, we are continuing to ensure parity with rates elsewhere in the UK to avoid the risk of waste tourism emerging.

That is a very fair point to make. I do not think that the current set of arrangements is optimal, and we can hopefully remedy that through the fiscal framework review.

Yes. I think that we discussed the matter at the evidence session on the autumn budget revision. That income is collected and administered centrally; although the process involved is analogous to that for the Barnett formula, it is not a Barnett transfer, and it is reflected in budget revisions as a means of allocating it to the budget. I do not know whether Scott Mackay or Niall Caldwell has anything else to add.

You are correct to highlight the issue, convener. We had initial indications of resource supplementaries of £841 million. When the cost of living package was announced—which, if I recall correctly, was on 3 February, the day that the SBR was published—we had been led to believe and expected that to be additional resource on top of what had been previously announced. Subsequently, the resource supplementaries were revised down from £841 million to £827 million, and we also learned that there would be no additional money for the cost of living package. Instead, that money was to come from reductions in the previously announced tranche of money, which itself had been subject to reduction.

You are correct, therefore, to indicate that the money has to be found from the previously announced supplementary estimates, but we have an agreement to carry that money forward into next year’s budget, which means that it will not impact on the reserve.

As you will know, the spring budget revision takes place before the end of the financial year, so there are timing issues, in that, when we prepare the revision, which is normally at the end of January, the end-of-year picture has not fully crystallised. A great deal of uncertainty has been created, but with our monthly internal budget monitoring process and management, I am confident that, through a combination of devolved tax performance and emerging underspends, we will be able to meet the carry-forward requirement as set out in the budget.

In summary, you are correct to identify that the money in question was not new but had been previously announced, and even that quantum was reduced. However, because of better-than-expected devolved tax performance and emerging underspends, we are in a position to meet the carry-forward requirements, and the money that will be allocated for cost of living measures and which will go to local authorities to be administered will be part of next year’s budget. We have been allowed to carry that forward with the reserve.

There are a number of difficulties. There was a view that one of the reserve’s functions was to manage forecast error, but obviously there were borrowing powers to take into account, too. However, we have found that function increasingly difficult to deploy.

I referred earlier to underspends. Capital underspends, in particular, can emerge late in the year and, given that the reserve itself has a total limit of £700 million but an annual drawdown of £100 million in combined capital and financial transactions, there is a risk that, if a late slippage in capital occurs over a number of years, that will start to build up in the reserve. It will then become more challenging to deploy that money in the next financial year, because of the £100 million cap. If there is more capital than FTs in the reserve, the £700 million limit gives less headroom for resource. Beyond that, the reserve itself is not finalised until we reach outturn, and we need to maintain headroom for that.

The limits create a number of challenges. You are limited in the amount of money that you can carry forward, which creates particular problems if you get late allocations and supplementary estimates. It is helpful when the Government allows that money to be carried forward into next year’s budget, but that has been the exception rather than the rule, and we could find ourselves in a situation in which, if we were not able to carry the money forward via the reserve, we would not be allowed to deploy the resource in the most effective way. I am sure that we all want to get the best value for money, and with any supplementaries that come in very late on, we will want the maximum capacity either to deploy them immediately, if that is the best use of the resource, or to carry them forward, as we have done with the £120 million for local government. There is also, as I have said, the broader risk of capital build-up constraining the reserve. Moreover, as you will know, we are talking about a fixed amount that would have been calculated when Scottish Government budgets were, by dint of inflation, lower.

The limits therefore create a number of challenges for end-year management and the most effective deployment of resource and capital. I know that the committee has taken an interest in this area, and it will be an important consideration in the fiscal framework review.

Did you want to add anything, Scott?

Again, ultimately, there is an element of every penny being committed, but as we touched on a few moments ago in relation to affordable housing supply, events such as slippage in capital projects can take place, or, in relation to resource, there can be lower than forecast demand in demand-led programmes of funding. That is what has ultimately allowed us to manage this particular position, which, being at year-end, is challenging.

The situation has been compounded by the overall volatility of the late notifications from the UK Government, the complexity caused by the omicron variant and initial indications of resource funding that did not necessarily materialise or were misleading.

However, we are now in a position where we are confident that, due to those forecast underspends in demand-led areas and the stronger performance of devolved taxation, we will have not only the resource to make sure that we spend within our budget limit but money to deploy in the reserve to carry forward.

I would make three points on that. First, a lot of underspends are going to emerge towards the end of the financial year—that is just the nature of the year end. Secondly, Mr Johnson made reference to there being four weeks until the end of the financial year, but this is not a reflection of the four weeks—the spring budget revision was not published today. It is a very intense period: we are talking about eight weeks—not even a whole quarter. Thirdly, there were significant announcements on demand-led expenditure towards the end of the financial year in response to omicron. All that has created this particular set of circumstances.

As Scott Mackay said, we can see devolved tax forecasts and performance and we can anticipate where that might go but we cannot be certain because of how subsequent months’ performance will outturn, as well as the implications around block grant adjustments. I appreciate that it is a complex matter and perhaps difficult to articulate. I would be happy to reflect on that ahead of next year’s spring budget revision to see whether there is a way in which information can be presented more clearly to assist the committee.

I hope that what Scott Mackay has said and what I have tried to articulate offers members some understanding of how we are in this position, which I appreciate, prima facie, may seem counterintuitive.

This is a really important discussion, and I very much welcome the committee’s interest in this area. Ultimately, the way to remedy the situation is to recognise that the current arrangements that exist are beyond sub-optimal. I do not say that as a partisan or constitutional point. I think that any fair-minded person would recognise that that is the case.

The way to get beyond that and to provide greater transparency is through a revised process. There is an opportunity through the quadrilateral discussions that are taking place among the respective finance secretaries across the UK and through the fiscal framework review, in which I know the committee is taking a keen interest.

I appreciate the question—it is perfectly legitimate. If you are content, I would be happy to write back to you and send a copy to the committee.