Good morning and welcome to what is, as you will know, the first evidence session of this Scottish Affairs Committee. We are looking forward to what you have to say. We have some questions that we would like to ask and we will ask them in an order we have agreed beforehand. We are conscious that time is very tight but we will try to get through as much as we can this morning. We are interested in a range of issues across the Department and, Baroness Smith, we are particularly interested in the work that you will be doing, so thank you for being able to come along today. It is very helpful. We have heard that it is the intention of the Scotland Office to reset the UK Government’s relationship with the Scottish Government. Secretary of State, how would your approach differ from that of your predecessor, for example?

Good morning and congratulations on your chairmanship of this Committee. It is very much welcomed. Congratulations, also, to everyone on the Committee. I know that elections, on the Labour side anyway, were very hard fought. It is nice that you have the Committee up and running and it is a great delight to be here in my first evidence session as the Secretary of State. You can also see behind me here the wonderful team that we have assembled in the Scotland Office. Starting to reset the relationship is the key thing that has happened since the General Election. The First Minister and the Prime Minister met within the first 48 hours of the Government being formed. There was a long discussion at Bute House about common issues and common goals. The key message that came from that meeting was that both the First Minister and the Prime Minister were clear that resetting the relationship was the way forward for both Governments to deliver on their common agendas and their own agendas in government. That resetting has been clear. The Prime Minister has been clear with the Secretaries of State and Ministers. The First Minister has been clear with Cabinet Secretaries and Scottish Government Ministers. Everyone has been working very closely together on their common agendas. Of course, you cannot syringe the politics out of the relationship and we would not expect that. If I were to put that forward as a proposition, you would not believe me anyway. However, the working relationship is close. I can give you an example. I have already met with the Deputy First Minister five times. I have met with the First Minister on four separate occasions, including at events that we have held jointly. I have a tremendous relationship with other Cabinet Secretaries. We have been working very closely with Gillian Martin, the Cabinet Secretary for Net Zero and Energy on common issues around GB Energy and Grangemouth, for example. The resetting of the relationship is very clear. It is working very well, and it is not just at political and government level. The message has filtered down through civil society, business and third sector organisations that we are very keen to work together and that will only benefit the people of Scotland.

Could you describe what you think the relationship would look like were it to be successfully reset? What does a successful reset look like?

Success is about delivery. I can give you an example. Our GB Energy mission, which is one of the key missions of the Labour Government in getting to clean power by 2030, can only be achieved through both Governments working together. Of course, devolved and reserved issues are involved, whether, say, in consenting or planning. Energy is reserved and devolved in certain aspects and, therefore, resetting the relationship means that we have to work together to deliver common aims. There are already some great examples of where the relationship has worked. We worked together to bring the Commonwealth Games back to Glasgow in 2026. That was a joint endeavour of both Governments. In the first weekend of taking office, we worked very closely together to jointly fund Project Willow, which is about the future of the Grangemouth site. That was a very important project to get up and running and fund jointly. Success is about delivery. Resetting our relationship is about both delivering for the people of Scotland and making sure that people can see both Governments working together. I am very conscious, Chair, of all the polling that has been done, both publicly and otherwise, before the election and over the last few years, that shows that the people of Scotland want both Governments, regardless of colour, to work together. That is what we are determined to do.

Good morning to you all and congratulations, Baroness Smith, on your new and well-deserved role. Secretary of State, on the resetting of relationships—and notwithstanding the comments you have made that are accurate in terms of the numbers of meetings and so on—do you think that giving the Scottish Government 19 minutes’ notice of the plan to reduce funding for the winter fuel allowance reflected a genuine resetting of relations?

If you would not mind my saying so, our relationship with the First Minister, the Deputy First Minister and indeed the Scottish Government are probably slightly better than your own at this point in time. We have worked very closely together. In the way in which the fiscal statements work, there is a lot of market-sensitive information in there and the Scottish Government—and indeed Shona Robison, as the Cabinet Secretary for Finance—were given all the information that was in the Budget at the time it could be given. It was given at about the same time as it was given to the wider Cabinet. Yes, these things are quite difficult. I would hope that the Scottish Government might reciprocate and give us some information about the Scottish Budget, which is happening in the early part of December, so that we can see what we can also do to work together on those things. We have tried to ensure that enough and as much information as possible could be given in a timely manner. Of course, everything is market sensitive so the Budget is not delivered until the Chancellor gets to her feet. Trying to ensure that enough information that is not market sensitive goes out from those fiscal statements is incredibly difficult. Market-sensitive information ending up in the public domain could be detrimental to the country. We gave out all the information that we could give at the time that we could give it. I was also in those meetings. No discourtesy was intended. We will continue to work on how we can improve processes through the Scottish Fiscal Commission. The Chief Secretary to the Treasury has committed to improving those processes where we can.

I accept what you say about that but surely you would recognise that, where a benefit is under the devolved control of the Scottish Government, 90 minutes’ notice of the withdrawal of the funding does not represent a respect agenda. Surely, if the Government mean to try to reset relations, some sort of adjustment is needed to recognise that the Scottish Parliament does have responsibilities and needs to exercise them. However, of course, many of the financial levers rest with the Government in London. Do you think the processes can and should be better in future and will you be able to stop decisions of that kind impacting Scotland’s Parliament?

Devolution works best when both Governments work together. That is quite clear. However, market-sensitive information has to be given at the time it has to be given. For the Budget, for example, the Chief Secretary and I met with Shona Robison via Zoom. We went through the entire Budget with her about two hours, maybe even a bit longer than that, before it was given. That would have been much earlier than many people would have seen the Budget. We had a long and productive discussion and she welcomed that. Of course, we will try to improve these processes. The Chief Secretary to the Treasury wants to improve processes where they can be improved but the nature of a Budget is that there will be market-sensitive information in there that can only be given at the time that the Budget is sealed down and can be given.

The Scottish Parliament can put together rules and regulations for what it wants to do. Individual parties can also do that. I would find double-jobbing incredibly difficult. There is not enough time in the day to do one job, let alone two, particularly if we want to represent our constituents properly. I would have thought that we would want to ensure that double-jobbing does not happen. It has happened in the past, of course, but everyone sitting around this table will know how difficult it is to be a constituency MP, let alone have other responsibilities as well. So, yes, I would have thought that the Scottish Parliament may want to look at that. I know that the UK Parliament is looking at it. It is a Labour party policy. It was in our manifesto.

May I pass your question to Baroness Smith, our fantastic new Advocate General for Scotland? She is steeped in Sewel.

Thank you for inviting me to give evidence this morning. I welcome the opportunity to introduce myself to the Committee. I hope that in due course I will also get a chance to introduce my role. As I make my way through Westminster, I am discovering that not everyone is completely across the role of Advocate General for Scotland, which seems to be quite unique and quirky, so I would welcome an opportunity this morning to set it out. It provides some context for Sewel so perhaps we will get into that a little bit more later on. The first part of the answer to your question is that the Government are committed to the Sewel Convention. It is a manifesto commitment to strengthen it. Work on that is already under way and is quite well advanced. We are drafting a memorandum of understanding, which we ought to be in a position to present to the Scottish Government very soon. It is a principles document, as you might expect. It is seeking to entrench a lot of what already goes on in practice. I can see that there is a lot that already works very well. A lot of it is also under the radar. At official level, there is incredibly good co-operation and negotiation. Numerous pieces of legislation have to butt up against the Sewel Convention and a lot of the under-the-radar stuff works very well. That has been my main takeaway since I have been in the role and that is very heartening. The lawyers and the officials who are quietly working away are the unsung heroes. From my perspective, anyway, I want to build on that foundation and have it reflected in the memorandum of understanding so it is recognised. To a large extent, what strengthening Sewel means is consolidating what is already going on very well. That is certainly where I am coming from. There are obviously some political elements to it, which are not part of my role, but that is where I am on it.

There are two parts to that. I will let Ian step in if he wants to. The Scotland Office has a role that no doubt Ian is better placed to set out than I am. The role of my office is a bit more technical and probably follows on from that. We work with the Bill Ministers and the Bill Departments creating the Westminster legislation, right from the policy end of it, through to the legislation, to ensure that there is a proper understanding of the legal aspects that affect Scotland. The policy aspects are more in Ian’s domain than in mine.

There are two parts to this. The first part is the technical, legal side, the way the Sewel Convention operates in terms of the legislation, legislative consent motions, and so on. Then there is the political side and of course that butts up against the other side. I suppose this goes back to the answer to the Committee’s first question. If we are working properly together as Governments, it makes the Sewel Convention almost redundant. It should be something that comes in as a last resort, not up front. Legislative consent motions should be relatively straightforward if the work is done and the relationship is working before Sewel has to kick in. I will give you some examples of where it is working very well. The Scottish Government have asked the UK Government to legislate in devolved areas in pieces of legislation that are going through here but would ordinarily have been reserved. The Renters (Reform) Bill is one of them. The Rail Reform Bill is another. The Tobacco and Vapes Bill will be back in the House again shortly. There are already areas where we have been working together where the Sewel Convention has not been required because the Scottish Government have said that we are doing a piece of legislation that they agree with and could we please just extend the scope of it to Scotland. I would hope that the relationship would continue to work on that basis. There is a technical way, which the Advocate General looks after and which is a very important constitutional way of looking after the Sewel Convention. There is also the politics of it, which can be dealt with by working more closely together.

If I may come in, Chair. In thinking about the relationship between the Governments, we can think about the reset as a process but also as an attitude and a habit of mind. The sincerity of the reset will be tested by its depth and duration but to give some sort of indication of how committed we are to it; good legislation will be a product not just of collaboration and conversation between the two Governments but between Scottish stakeholders more widely. That is why between us the Secretary of State and I have had 108 different stakeholder meetings in the first three months in office. When we are talking and thinking about the reset, we can of course think about the technical elements of the Sewel Convention but I do urge the Committee, in your deliberations going forward, to think about how we are engaging the Scottish taxpayer and the Scottish public more widely. That is something that we have been very committed to doing in thinking about the reset as being not just between the two Governments but with Scotland writ large.

We once agreed that the United Kingdom Internal Market Act undermines the principle of consent. Does that agreement still exist?

The United Kingdom Internal Market Act is also being reviewed. There is a commitment in the Act for it to be looked at next year. In the meantime, we are looking at the way it operates. The First Minister was very clear that the principle of the Internal Market Act is there. That it is quite clear what it is supposed to be but that the operation of it has not been entirely clear. A set of proposals will be coming out shortly showing how the processes work and can be looked at. There is a commitment to consult and to look at how the Act is operating in 2025. We are committed to seeing that through.

To the Secretary of State a question about the Council of Nations and Regions. How will the Council of Nations and Regions fit into the existing system of intergovernmental systems?

The intergovernmental relations infrastructure is indeed complex but it has been built up over a number of years to deal with various issues, to ensure that people know what is happening and that common interests and goals can be looked at across the infrastructure of both Governments. The Council of Nations and Regions was a commitment by the Prime Minister in our manifesto to bring together the mayoralties of the regions of England with the First Ministers of Scotland, Wales and Northern Ireland. We had our first meeting of the Council of Nations and Regions in Scotland, in Queen Elizabeth House in Edinburgh, last month. It was a hugely successful opportunity for people to get around a table and talk about what was most relevant to them. The theme of the first Council of Nations and Regions meeting was investment. The International Investment Summit meeting that week set the scene for the nations and regions to play a key role in economic growth across the country, driving inward investment, ensuring that we get growth in all four corners of the country and showing that growth is a responsibility of every level of government as well as the UK Government driving the national mission. The Council of Nations and Regions represents the Prime Minister’s commitment to ensuring that the nations and regions have a seat round the table, have influence round the table, can have common goals and discussions and come to common conclusions. The first meeting worked very well. I look forward to the next meeting in April.

Can I ask you again, Secretary of State, why Scottish council leaders were not invited to the first Council of the Nations and Regions meeting in Edinburgh? Will that continue to be the case moving forward?

The manifesto commitment was very clear. It was for the nations and regions and the mayoralties of England. MHCLG has put out an offer to regions or areas of England that do not have a mayoral structure to set up a structure so they could be involved in the Council of Nations and Regions. It was set up for the First Minister to be involved, to have direct access and direct discussions with the Prime Minister on a committee-type basis. There are structures in place for the Convention of Scottish Local Authorities and individual local authorities to come together through the growth deals and regional growth partnerships. There is a host of intergovernmental relations bodies that Scottish local government could be in. I would hope that the First Minister, as the representative of the Scottish Parliament and the Scottish Government on that body, would seek the views of COSLA and other local authorities and take their views to the Council of Nations and Regions as their representative as well as their figurehead.

Can I add to that, Chair? The Secretary of State and I have had two meetings with the COSLA presidency and I had another one on Budget Day. I think COSLA knows it has an open door to the Scotland Office and we would be delighted to continue dialogue with it. It may not be through that structure but I think COSLA knows it has an open door.

My final question is for the Secretary of State. The Prime Minister announced a new role of Envoy for the Nations and Regions last month. Why is this position necessary? The role is now vacant. Are there plans to fill it?

There are no plans to fill it, no.

Okay. Thank you.

We are going to move on to a couple of questions for the Advocate General.

Good morning, Baroness Smith, and my congratulations to you on your appointment. In your earlier evidence this morning, you indicated that you would welcome the opportunity to set out your role. Can I ask you to do that now? May I begin with perhaps the obvious opening question: what are your priorities as Advocate General for Scotland?

If you will forgive me, I might just set out the role first—is that okay?—because I am not convinced that every citizen in the country knows what it is. Maybe this Committee does and of course I know that the Chair has long experience in many matters that will have touched on the Advocate General. If I may just set it out, I think that would be of assistance. I am, of course, a Government Minister but I am also a Law Officer of the Crown and one of the UK’s three law officers alongside the Attorney General and the Solicitor General for England. What it means to be the Advocate General is to be the principal legal adviser on Scots law and the Scottish devolution settlement. Structurally, it is important to understand that I am not part of the Attorney’s office. I am not his deputy. Equally, I am not part of the Scotland Office either. I sit alone in a rather quirky Government Department. It means that I am separate from all Government Departments, which of course is important because I am required to advise them. I am the Minister responsible for the Office of the Advocate General. The vast majority of my staff provide litigation services to represent the UK Government in the Scottish Courts and, indeed, the Supreme Court. This is primarily the Home Office, the Department for Work and Pensions and HMRC. Another big function is to provide advice to UK Government Departments. As we were discussing earlier, that is right from the policy formation stage to try to ensure that Scotland’s interests are properly taken account of in the formation of policy, so that we do not end up in a situation where a policy is coming to the legislative end and Scotland has not been properly thought about. My team engages with Government Departments on that basis but then, of course, when it comes to the legislative part of it, continues to engage to ensure that Scotland’s interests and Scottish law are properly accounted for and do not become a bolt-on to legislation, because it is obvious what problems that can bring about. I have separate responsibilities as a law officer and as one of the three UK law officers. I sit, for example, on the Parliamentary Business and Legislative Committee, which assesses the readiness of legislation to be presented to Parliament. My role there is as a law officer and I have the same position as the Attorney General, for example, in terms of asking questions, scrutinising and, indeed, not giving consent to a piece of legislation. That is whether or not it is an issue related to Scotland or, indeed, whether it even relates to Scotland at all. In those functions, I am primarily concerned with respecting, protecting and upholding the rule of law, which is something that I share with the Attorney General, and has not been respected as well as it ought to have been in recent years and we are keen to press yet another reset button in respect of that. That is about a whole host of rather technical things around delegated powers that I will not get into just now, but they are actually very important so quite a lot of my time is spent on that. I have statutory functions in respect of the Devolution Settlement and am required to keep an eye on the legislative competence, of course of both Parliaments. There is one thing I did want to mention as well. I am sure the Committee will be aware that there is a longstanding convention that the existence and content of law officers’ advice is generally not disclosed outwith Government. I am delighted to appear again before this Committee should you invite me, but I should just make it clear that any advice that I have given to ministerial colleagues may limit my contribution, so it is just to lay down that marker. You asked me what my priorities are, so I am going to get to that. I think there are really three priorities. The first I have already mentioned, which is upholding the rule of law, and that is in a general sense in terms of good legislation going through Parliament, but it is also more particularly about protecting Scotland’s interests and I do feel that my role on the Parliamentary Business and Legislation Committee is quite a powerful one. It is not a particularly big Committee. Ministers require to come to that Committee and present their Bill, and it allows me the opportunity to discuss whether or not the devolution analysis has been adequate, what more needs to be done and, indeed, allows me the opportunity to speak directly to the Minister. What I am saying at literally every Committee meeting is that the devolved nations need to be taken account of early on in policy information and in the legislative process. So, I am beating a drum, and I am doing it on a regular basis. While there is very good engagement at an official level, as I have mentioned, I do think it is important to raise it up to that ministerial as well and that is something that I have the opportunity to do. I am also keen to contribute to the reset of the relationships between the Governments and I think, again, if we legislate well together and our officials can work well together, that will assist. I suppose, as a subpoint of that, my third mission is to have a good relationship with the law officers in Scotland and, indeed, anyone else based in Scotland. The Advocate General has traditionally spent a lot of time of London, and I plan to spend less time in London. I have based myself out of Queen Elizabeth House in Edinburgh. That is a deliberate choice. That reflects my own view that if you are representing the needs of the people of Scotland, you should be rooted in Scotland and connected to people in Scotland. That includes the law officers of Scotland. My first external engagement was to meet the Lord Advocate. That is not an accident. That was a deliberate demonstration that is part of the reset of the relationships. I met with her and the Solicitor General and had an excellent meeting at which she made it clear to me that she was looking forward to working together differently than she had had the opportunity to work with law officers before, and I welcome that very much. Sorry, that was a very long answer.

Thank you Advocate General for that very full answer. In that answer, you have explained very clearly in my mind how your office sits alone and separately, but I was very interested to hear your second and third priorities in relation to resetting relationships and your good relationships with the Scottish law officers. Following on from that, how do the UK and Scottish law officers work together and have you done anything to change this working relationship in any way since entering office?

I hope I signalled at the start that I intend it to be different and I said that clearly at that meeting and, as I say, a certain view was reflected back to me. I probably want to pick up on what Kirsty McNeill was saying, which is it is ultimately about actions, not words, I think. I have a role to play in ensuring that once things come to my Department to implement—so I am not obviously involved in the politics of it—what I have learned, as I said earlier, is that actually there is an awful lot that can be resolved by lawyers and officials working together quietly to find the way through what is an initially a disagreement about, for example, where competence lies, and finding a route through. I think there have been over 200 pieces of legislation where legislative consent motions have been granted and very few where they have not been, so that is actually a really good news story, in any event, and what I have tried to do is to signal that that is absolutely the direction of travel that I think my Department should be taking and that is the role that we can play.

Good morning, Advocate General, and I would like to offer my congratulations on your appointment. Picking up on the reset theme that you have just discussed as a priority, we have seen increasing recourse to the courts in recent years to solve intergovernmental disputes. What do you think that says about the recent state of intergovernmental relationships?

I am grateful for that question because it allows me to set out a bit of clarity about some of the courts’ actions. I regret to say, I do not really agree with the premise of the question. I do not think the courts have been used to resolve disputes between Governments. If I might just set it out a little bit, I think it would be assistance for this Committee to understand it. Some of the higher profile cases have been individuals bringing cases against the Government. The Committee will be familiar with the Miller case, the Cherry case, and Wightman. That is not a Government on Government dispute, and it is not the court adjudicating between Governments in an adversarial way. References to the Supreme Court from the Scotland Act are equally not Government on Government disputes that the courts are adjudicating between. They are a mechanism within the Scotland Act that allows Governments to refer a question for clarification to the Supreme Court. In my view, doing so, whether it comes from the Scottish Government or from the UK Government, it is an entirely appropriate use of a mechanism that was legislated for in the Scotland Act. I think it is wrong to view that as one Government against another. Each Government comes to the adjudicator, presents their argument and the mechanism allows the court to provide clarity. So I think it is unhelpful to characterise it as disputes between Governments and, indeed, the court stepping in to adjudicate on them. Now, of course, individuals can bring any litigation that they want. However, my own view is that actually there has been relatively little. We have had 25 years of the devolution settlement, and I actually think that the small number of cases—relatively speaking—speaks to a very robust piece of legislation working very well. If we look at it from the other point of view, let’s imagine there had not been any cases, no individuals taking cases, or no references to the Supreme Court, one might imagine that that was just really rather odd, considering the seismic nature of the changes that devolution brought about. I think it is the system working well, is the short answer.

Thank you very much for that and I do appreciate the distinction that you have drawn between individuals bringing forward cases and also the point you make about it being a legitimate mechanism that is there to be used, effectively. However, in 2023, the then Scotland Secretary used section 35 of the Scotland Act to block Scotland’s Gender Recognition Reform Scotland Bill, a very high profile case. Can I ask you what your assessment is of the previous Government’s use of section 35 in this case.

For my part, I am a lawyer and law officer, so it is there in the Act to be used if one wishes to do so. It is probably a slightly more political question so, with the content of the Chair, I might ask Ian to do that one. I think I am straying outwith my brief.

Essentially, we cross between the politics and the legal here in terms of section 35. Just to emphasise what Baroness Smith has said, the very fact that section 35 had never been used before in the 25 years of devolution actually shows the strength of the Scotland Act in terms of its operation. What section 35 was doing was asking the courts to determine whether or not it was lawful to use section 35 of the Scotland Act in order to determine whether or not a question of cross-border issues arose. Of course, the Supreme Court did respond with saying it was lawful to use it. That shows, from a legal perspective, that the system works. There will be arguments about the policies and the politics of that, but the actual legal mechanisms in terms of that dispute resolution operate correctly. Was it the right thing to do in terms of the previous Government using it? I have said, clearly, we will not lift the section 35 order that was put in place on that basis and it is probably a question for the previous Government in terms of whether or not they should have used it. It is a political question for them, not a legal question for us.

I think you might have answered my next question already. Will the Government’s approach to section 35 differ from the previous Government’s?

The primary role of the Scotland Office is to uphold the constitutional settlement, and the constitutional settlement contains section 35, as it contains all the other sections that are in the Act, is a relatively obvious thing to say. However, I suppose the direct answer to that question is that Minister McNeill and I are in the Scotland Office and want to look to the future, not the past. All the answers we have given already to resetting the relationship, to the priorities that we have in the Scotland Office is all about making sure we can deliver the UK Government’s manifesto, our promises and our missions. That means that we have to work very closely together with the Scottish Government. They are of the same view. The use of section 35 is at the end of a process. I would hope that the answers that you have heard from the Advocate General, from Minister McNeill and myself so far in this Committee would assure you that we would do everything in our power to ensure that nothing got to that stage. That means that we need Cabinet Secretaries and Secretaries of State working very closely together, across all Departments, on issues of common interest. Of course, there will be differences, which is the way that asymmetric devolution works. We have to work through those carefully and we have to ensure we are doing the right thing by the Scottish people.

First of all, I would like to thank you all for coming and congratulate Baroness Smith, but also to say that it has been really heartening to hear of the approach of working together and building on what is already working. I would just like to ask how the Secretary of State thinks the Department will achieve its long-term priorities and how these differ from those of your predecessor.

Congratulations to you on your election back in July. We have four key priorities. We have reshaped the Department and Director Laurence Rockey may wish to add something to this, but we have four main priorities. The first one being economic growth, which is the national mission of course of the UK Labour Government as well. However, I think the UK Labour Government’s mission of growth is shared with the Scottish Government as well. In fact, it is shared with many other Governments across the world and that is to ensure that we can develop that growth in all four corners of the UK, but also in all regions of Scotland as well. It is really important for that to be the case. The second one is in green energy. Our mission for clean power by 2030 is a key one. Scotland will play a critical role in the delivery of that. That means jobs. It means lower bills. It means making sure that we can have that transition away from fossil fuels, and that is a key priority of the Scotland Office. We will provide and do provide and want to provide that window to Whitehall for the industry, but also for the issues that are coming in, whether that be related to DEFRA or DESNZ in this particular case. We have already shown that we can pull people together and use that convening power to drive some of this forward. GB Energy, of course, will be headquartered in Aberdeen South in terms of the constituency it will be in, and that has been capitalised in the Budget with ₤125 million to get it up and running and set up and, of course, the overall capitalisation is in the billions, ₤7.3 billion. That is a key priority of the Scotland Office. The third key priority is Brand Scotland. We have spent the last 25 years selling Scotland to Scots. It is now time we sold Scotland to the world. We have some tremendous door openers in terms of our soft power, but we also have some tremendous opportunities in terms of our goods and services. Wherever you go in the world—you will know this—and you say you are from Scotland that in itself is a great door opener. We should be exploiting that, working with our colleagues in DBT and the FCDO to ensure our international networks are selling Scotland, but we have ₤750,000 allocated to us in the Budget to drive Brand Scotland forward as the Scotland Office and that is a huge step forward and we are very much looking forward to doing that. We are in south-east Asia next week, in Malaysia and Singapore, and we were in Norway looking at common interests of energy and defence just two weeks ago, so that Brand Scotland thing is very much a priority. The fourth one is a key priority that Minister McNeill and I share passionately, which is the anti-poverty priority, which feeds into the other three priorities of the Scotland Office, as well. We are reshaping the whole of the Department. The whole of Government are behind these priorities. We will be working hand in glove with other Government Departments. We had the Delivering for Scotland board yesterday where all Government Departments come together and see what their contribution can be to delivery for Scotland on those four priorities. It was a very constructive meeting, and we look forward to achieving many of the goals that we have as a Department.

Thanks for that. What are the main levers that the Scotland Office has to deliver that?

The key things are that the Prime Minister has been pretty clear that Scotland will be at the heart of this new UK Labour Government. We want to achieve the UK national missions that were set out in our manifesto, but also those have to be achieved across the whole of the country. Growth has to be in all four corners of the country. It cannot just be concentrated in the south-east where we have had a problem before. The Prime Minister has been very clear. It is very easy to create growth in the south-east. What is more difficult is creating growth in all our communities right across the country. In order to do that, we all have to work together. The Scotland Office has a very strong convening power bringing people together and the Delivering for Scotland board yesterday is a key component of that, but also being industry’s, society’s, institutions’ and Government’s window to Whitehall so we can provide that ability. We are a very nimble Department, so we can be talking to people. We have great relationships across Whitehall. That has been seen already in industry in terms of our green agenda. There is a real drive to ensure that this is cross-Government at Whitehall but also cross-society in terms of Scotland, and the 108 meetings that we have already held with stakeholders, which Minister McNeill pointed out earlier, is a key driver of that.

In some ways you have started to answer my final question, but in your first statement as Secretary of State, you said that you would ensure that the Scotland Office has a strong voice for Scotland within the UK Government. I think you have already started to outline that, but how will you achieve that, and do you feel that you have already started to achieve that?

I can give you some practical examples. We have already managed to get both the Scottish and UK Governments to jointly fund Project Willow, which is about the future of the Grangemouth site. We worked with the Scottish Government and our colleagues in Treasury and MHCLG to get the Falkirk and Grangemouth growth deal over the line before the Budget. We have a very strong voice within the Budget, the largest single settlement of the Scottish Government in the history of devolution: ₤1.5 billion this year and ₤3.4 billion next year. That has been a very, very strong case we put to the Treasury. We did get our ₤150,000 for Brand Scotland, so we have been very influential across putting the case, but I think the key thing here is delivery. It is all easy to talk about the things that we do, the Commonwealth Games being another example of working very closely with FCDO and DCMS, with the Scottish Government of course. There are real life examples of the impact of the stuff that the Scotland Office does that is felt in Scottish society. For example, a new deal for working people has a disproportionate benefit to Scots, because more Scots are on zero hours contracts. We have already achieved so much in the last four or five months, but with our priorities and the direction of travel the Scotland Office has so much more to achieve.

Secretary of State, I have been trying for a long time to come to see you, but your assistant says you are not available for several months and I am thrilled to have you here. As you will know, my issue is community benefits from renewable energy. Scotland—when the wind blows—will be producing by 2030, 10 times the amount of energy it requires. We have the highest level of fuel poverty in rural Scotland. We have an elderly population. We have significant depopulation. We pay far more for energy prices than the rest of the UK and GB Energy—despite many people trying—would make no mention of community benefit or community ownership of renewables in it, and a lot of us are very concerned that this bonanza of renewables will pass rural Scotland by without any significant benefits. Could you give some reassurance to the Committee that this is a priority for the Scotland Office?

Thank you for the question. Just for the record, Chair, we have met twice previously. It is the third meeting that we have struggled to get back into the diary. This is a key part of what GB Energy has to achieve because the way to unlock the future of energy in the Scottish context is to unlock that community benefit and what that means. For the record, as well, the reason that GB Energy does not contain the provisions around community energy and those kinds of community ownership things is because the Bill is to be straight forward in terms of what it is trying to deliver. There are other bits that will come later, including the Secretary of State’s strategy that fits into section 5 of the Great Britain Energy Bill. That will contain all of the issues that you are raising, and I think the Energy Minister, Michael Shanks, has made that commitment, both publicly in the House and indeed directly. That community energy is there because a lot of our communities in rural Scotland have the natural resources. They will be asked to take the infrastructure in the national interest and, therefore, they need that community benefit. We see it working in other places. I was in Shetland at the Viking Wind Farm to see what has been done there. Torcuil Crichton, the Member for the Western Isles has tried to do exactly the same on the Western Isles in terms of the contribution that they will make to the national interest in terms of meeting our mission of clean power by 2030, so it is very much at the top of the agenda. We will be working very closely with DESNZ, the Secretary of State and the Minister. Michael Shanks as a Scottish Labour MP, of course, was a very deliberate appointment to ensure that a Scottish Minister was in charge of our energy because of the contribution Scotland will make. It is very much alive and active, both industry and Government discussion, and if we can crack the community benefit issue it will unlock a lot of the benefits that both rural communities will get from hosting the energy infrastructure, but also the benefits the country will get from having that clean power target by 2030.

I was just about to say that we actually do intend to ask a number of questions about GB Energy in the course of today’s discussion. So, I maybe would not pre-empt that too much just now. Perhaps just come to that when it is natural to do so if that is okay. Stephen, you wanted in on this area?

Yes. The Secretary of State, if I was listening correctly, said it is fourth in his personal mission along with the Minister in relation to reducing poverty. I think all of us can agree with that. His Government colleague revealed last night that an additional 100,000 people across the UK will be put into poverty as a result of the UK Government’s decision to withhold winter fuel payments for pensioners across the UK. How many of those pensioners will be put into poverty in Scotland?

I think I am familiar with the report that the DWP produced yesterday. Was that the—

It is a letter that the Secretary of State produced, yes.

For the benefit of the Committee, the analysis that DWP has done did not include the triple lock. It did not include the Household Support Fund and did not include the massive increase of uptake of pension credit. So I would challenge the figures on that in terms of the overall analysis because one of the key things that this Government have done is protect the triple lock. That was worth ₤900 this April. I think it will be worth ₤473 next April. That is a long-term commitment from this Government to ensure we can maintain the triple lock which is another ₤1,700 across the end of the Parliament. Looking at these figures in isolation I do not think is helpful, but I think the published £100,000 that you talk about is not including those three big elements of support for not just our poorest pensioners, but all pensioners.

With all due respect, Secretary of State, I am referring to your own Government colleague’s letter. The question was quite simple: if there are 100,000 pensioners in the UK who are going to be getting pushed into poverty, how many of those are in Scotland? I assume, as the Secretary of State for Scotland, you have asked your colleagues.

The reason that I do not have a figure to give you on that basis is because the 100,000 does not include the other stuff that the Government are doing. I would not like fear-mongering that people are being pushed into poverty without having the actual figures. If it does not include the triple lock, which is worth that ₤900 April past and ₤473 next April, it does not include the Household Support Fund and it does not include the massive uptake in pension credit, I would be dubious about coming up with figures that do not include the full picture of the funding that we are giving to support pensioners.

You are making reference to the state pension triple lock, which does increase, but for the first 75% of pensioners who sit on the old form of the state pension rather than the new state pension that is not the figure that they were to receive, so I think you should probably be a little bit more transparent in relation to the differential there. However, I would—

If I can respond to that.

With all due respect, Secretary of State, it is me asking the questions. With regards to the winter fuel payment, can you confirm that you will now go and ask his colleagues in Government how many people in Scotland are going to be pushed into poverty as a result of the decisions of your Government?

Obviously, the decision to means test the winter fuel payment in Scotland was made by your Government as well in terms of the Scottish Government’s position. On that basis, I think that if we are going to look at figures and analyse figures properly, particularly in terms of the baseline for poverty or other socioeconomic figures in this country, we need to do it with the whole picture so that we do not end up legislating or putting in public policy that means we are dealing with the wrong issues. In my view, that baseline figure is incorrect because it does not take into account—

With your colleague in Government—

—some of the major public policy issues that this Government have already put in place, the triple lock, the Household Support Fund and the massive increases in pension credit. If you don’t include those figures, you end up in a situation where you are dealing with a baseline that is incorrect and, therefore, could end up putting policy in place that deals with the wrong thing. If I can just reflect on the fact that the Child Poverty Taskforce has been set up by the Secretaries of State for Education and for Work and Pensions. The key thing for that taskforce is to start with a proper baseline of what poverty is and how you deal with that particular poverty from the endemic problems that we have in this country that increase poverty. If we do it on the wrong baseline, you end up with the wrong answers. Therefore, I am loth to comment on a piece of documentation that I think is incorrect.

You think your own colleague’s work is incorrect?

The number they have come up with is probably accurate, but it does not include all the factors. A number that you come up with depends on the question you ask, and the question that has been asked has been analysed on the basis that it does not include the major impact on pensioners’ income which is the triple lock, the Household Support Fund and the indeed the massive—

Which you have been disingenuous about.

Mr Flynn.

Tens of thousands of pensioners have got themselves onto pension credit because of the massive increase in the advertising and the efforts that have been done by DWP. That is not included in those figures as an example, so I am loth to comment on public policy on the basis of a figure that I deem to be not showing an accurate picture of the whole platform and the whole matrix of the public policies that are in place for pensioners.

Thank you, Secretary of State. Can I just remind members they need to speak through the Chair and will wait for my permission to ask the question before they do so in future. Thank you. We are now going to move on to another question because we are running out of time.

I have just one question. Why was it important for GB Energy to be headquartered in Scotland? On the back of that, it has been reported that the GB Energy Chair, Juergen Maier, will be based in Manchester and not in GB Energy’s Aberdeen headquarters. What message does that send about Scotland’s role in delivering net zero?

I think GB Energy is one of the best policies in our manifesto. It was really important for the legislation to be one of the first pieces of legislation into Parliament. Hopefully, it will be one of the first pieces of legislation out. I am disappointed that the Member who will actually host GB Energy did not back it and did not vote for it in the House, but the ₤125 million that was put forward in the Budget to get GB Energy up and running is a commitment from the Government to do this as quickly as possible. The ambitions to get clean power by 2030 are tough. The NESO report says we can get there, but there are a number of hurdles that have to be swept away, and we are determined to do that. The two other things to be clear about is that, ultimately, it is great that GB Energy is headquartered in Scotland. It is great that it is headquartered in Aberdeen. That sends a very strong signal of Scotland’s importance to delivering our manifesto commitments in the green energy mission. The two things that fall from that is, it is what GB Energy does, essentially, rather than what it is and what it is going to deliver. That is very important. The second thing is all organisations have a board of directors. They have CEOs. They are all based in Aberdeen. The chairs of many companies are not necessarily in the place where the companies are headquartered—it is a non-executive role—but the key thing for the Chair’s role is he has already been around about the industry, talking to people, engaging stakeholders. That is incredibly important because he is incredibly well respected across the whole of industry. They very much welcome the discussions that they have had with him already and they will continue. Wherever you go in the world—as I said, the Scotland Office went to Norway two weeks ago. We had a round table with energy companies there. Norway is looking to Scotland, particularly on offshore floating wind because we are the world leaders in this. This is a world race, and we don’t just want to be part of that race. We want to win it. We have all the attributes to win it, and GB Energy is the catalyst for us to be able to do that.

I am very pleased to be here from the official side. Obviously, GB Energy is moving forward apace but the wider movement of civil servants from London, as part of the Places for Growth Programme to be based around the UK, including Scotland, means that we have now over 100 DESNZ civil servants in Queen Elizabeth House in Edinburgh. The importance of having civil servants based in the communities for which they are making policy is important, and DESNZ are doing excellent work in that regard in Edinburgh, which is positive from my point of view.

Thank you for that additional information; that is helpful and good to know. How many people we are expecting to be getting jobs through GB Energy in Aberdeen, Edinburgh and Glasgow, and what do we expect they will be employed to do?

Ultimately, the size of GB Energy as an organisation is very much comparable with other bodies, probably 200 to 300. I would hope they will be headquartered in Aberdeen but of course they will have to be based across the country. We have heard from Mr MacDonald, who represents some of the most rural communities in Scotland, that they have to be on the ground delivering. It will be investing in, generating, owning, being the catalyst for energy generation across the whole of the United Kingdom. The key element and principle is that delivering clean power by 2030 and getting to our net zero ambitions will be tough. We know it will be tough, but the biggest thing that this Government have done is send out the message to the industry and to the world that, not only is the UK open for business but we are determined to deliver this. We will have a stable economic environment but also a stable policy environment in terms of energy. That has sent a very strong signal. Those routes to market are actually the biggest thing that the Government can do and GB Energy is our legislative commitment to doing that; not only in practical terms delivering it, but sending out that very strong signal that this Government are determined to get there. It takes away and draws a line under the previous Government, who were essentially all over the place on both energy policy and that economic platform and, therefore, delivering anything would have been much more difficult.

The Cabinet Secretary for Energy, Gillian Martin, and Minister Shanks have worked very closely together. The Secretary of State, Ed Miliband, has also been working very closely with the Scottish Government. One of the five missions of the UK Labour Government is to deliver that clean power by 2030, but all of that working together is to look at how you deliver that. There has got to be very close working on consenting, planning and all the devolved areas that are required. It is actually a common Scottish Government agenda as well. If you look at some of the issues, which I am sure have been brought to you as a constituency Member, from inception to spades in the ground can be decades; 14 years I think on average. We have to deliver four times as much energy infrastructure in the next five years than we have delivered in the last 30. That will require both Governments to work together. The engagement has been very strong. I am incredibly disappointed that the Great British Energy Bill was not supported by representatives of the Scottish Government when it went through the House because I think this is a key opportunity, not just for lower bills, not just for energy security, not just for climate change requirements but also for the jobs of the future. This should be a national mission that we all get behind to deliver.

There are active discussions. Maybe Laurence at an official level could tell us what the format of those perhaps are, but the key thing here is that these are joint priorities. The Scottish Government also have very ambitious climate change targets, obviously they have been diluted somewhat. We have to deliver this. This is about transition. It is about lowering people’s bills, which is a huge issue across the country in terms of cost of living. If you look at what has been happening in the energy markets across Europe with Ukraine and Russia, it is about energy security. It is about meeting our climate change commitments, but the key thing for communities all across Scotland, it is about those jobs and careers of the future and that transition away from an ageing basin in the North Sea. That is a key thing this Government have to deliver. We cannot have a situation that we have had in previous deindustrialisation where communities have been left behind, and GB Energy’s goals to deliver that have to be done in conjunction with the Scottish Government.

From my perspective, the legislation and the setting up of GB Energy as an organisation is running at pace but obviously fits in a wider system and framework of the Government’s net zero mission, which is obviously very aligned with the Scottish Government. The collaboration you are seeing is real and extremely dynamic. The current consultation for consenting—planning is a devolved issue, but the legislation required to make it easier is actually UK-wide legislation—is a good example and that consultation is currently live. From a ministerial and official level, both in IGR structures in due course but also informally, you are seeing excellent collaboration on the net zero space where the two Governments broadly share very similar objectives. So, very positive from my point of view but it is only a few months since the election, GB Energy still has a lot of work to do to go from post-election to implementation.

Secretary of State, we will now move onto the question of Grangemouth. The UK Government have said it will leave no stone unturned in seeking a future for Grangemouth, but you have also acknowledged that not all workers’ jobs can be guaranteed, and I do appreciate it is a private endeavour. Can you tell me how many Grangemouth workers you still expect to be employed at this time next year?

It is a great question, and it has been the No. 1 issue that has been on our to do list since within hours of taking office in terms of the issues at Grangemouth. I think it is important at the start to separate the two issues out. There is the Grangemouth Refinery and there is the Grangemouth site. In answering your question about the site, it is difficult to know what we will do with those 400 workers at the refinery, which obviously Petroineos has announced will close in Q2 next year. What the Government have put in place is three things: there is a short-term strategy, a medium-term strategy and a longer term strategy. The short-term strategy is to protect and do everything we possibly can to support the workers who will be losing their jobs at the refinery on the basis of that closure. That whole support is being put in place in conjunction again with the Scottish Government to ensure that they have the support that they require for retraining and reskilling, other jobs that may be on the site, and so on. They are a hugely skilled workforce and something we should be making sure we try and protect as much as we can. The medium term is the Falkirk Grangemouth Growth Deal that was signed by the Deputy First Minister and I last Thursday. The wonderful Rosebank Distillery in the Falkirk constituency—an advert for them, go and see it if you can, it is fantastic, they do good tours—and that £100 million was originally an £80 million Falkirk Grangemouth Growth Deal; £40 million from the Scottish Government and the UK Government, increased by £10 million each to deal with some of the issues in terms of the skills that will be required at a future Grangemouth site. The longer term project, Willow, is an investment from the UK and Scottish Governments to see what we should be doing with the much wider Grangemouth site as we move forward towards our decarbonised future. Project Willow should report in the early part of next year. The Secretary of State at DESNZ has given a commitment that the National Wealth Fund will look at some of the proposals in there to try to see if that can help the site transform. It is well documented, the kind of things that may be in that project when they report, but we look forward to getting it. So there is that short term, medium and long term. It is worth saying that the Grangemouth site has a bright future. Of course the refinery is devastating; it is something that we did not want to happen but has happened. I wish we had had more time in Government to maybe try and do something about that, but the horse had bolted by the time that we took office. We have put in place those short-term, medium-term and longer term proposals that I think give the area in Grangemouth a much brighter future.

Thank you, Secretary of State, for making that important distinction between the refinery and the site; I think that is critical. I am aware of the skills and support package that has been developed, and that will help map current skills and qualifications to the future skills needed for local clean energy goals. With that in mind—and I do not want to pre-empt Project Willow, and I would not put you in that position of asking you that question—can I ask where you anticipate or expect workers will find the highly skilled, high-quality jobs that they currently have?

The oil and gas industry is an ageing industry. We know that it will continue to decline and has been for some years now. It is important to say that oil and gas will be with us for decades to come, and we do require that world-class workforce to be able to ensure that we can have that active base in the North Sea, but also the attached issues to it including St Fergus and Grangemouth as being the centrepiece of that industrial heritage and industrial future in the Falkirk area. It is important for that to be stated but we do have to have that transition in jobs. The GB Energy part of that is key. This has got to be jobs-driven policy. I do not want to pre-empt Project Willow either, but it does not take much to work out that has to be about what happens in the future. Sustainable aviation fuels have been spoken about a lot, clean chemicals. There is obviously the Acorn Project, which feeds through the infrastructure at Grangemouth. There is a whole host of things that Project Willow will be examining at the moment in terms of its practicality to deliver, but it is important for the Government to set out clearly that we see that bright future for Grangemouth, and we want to do everything we possibly can to ensure that it has that bright future. That is what Project Willow is designed to achieve, and I hope that both Governments being fully behind Project Willow means that we can send out the signal to both fledgling technologies, like sustainable aviation fuels, and the markets that Scotland can play a key part in the Grangemouth site of delivering that greener future.

You have partially answered my final question. As you know, the UK Government have been accused of having no plan for the Grangemouth closure. As the UK moves towards net zero, can you tell me what steps you are taking to ensure that workers across Scotland’s oil and gas sector are not placed in a similar position to those in Grangemouth?

We inherited an industrial crisis at the election as well—right across Scotland—as well as an economic and public finances crisis. That industrial crisis has touched on pretty much everyone’s constituencies, whether it be in oil and gas, Grangemouth, Mitsubishi Electric, Alexander Dennis buses, Harland & Wolff. The list has been unfortunately long, and the Government have been fully committed to working through each of those to try to see what support we can give. The key thing here, though, is to make that transition not just about words but about actions. GB Energy is part of that. I do not think anybody could deny the Government’s commitment to making sure that we can get that legislation in place and GB Energy up and running as quickly as possible and capitalised properly as well. We have to ensure that we have that transition, we have to ensure that we say to the workforce who are the world’s best in terms of the work they do in oil and gas, that there are the jobs of the future that they can transition across to. It is incumbent on us to ensure we can generate those jobs and keep them here, manufacturing stuff here and making sure that we have as much on the ground in terms of that industrial base as possible, because we need to prove to them that there are the jobs of the future, but we also need to provide those jobs. It is incumbent on us with a declining basin that we do so, and we want to keep those world class skills here in the UK and Scotland.

These questions are on Brand Scotland and selling Brand Scotland to the world. In terms of the Budget that has been announced, Scotland Office received £750,000 to establish Brand Scotland. In regards to its activities, what are they and will that be set out in the strategy?

The Brand Scotland strategy is being worked on at the moment. It will have three major strands to it. It will be about the trade mission that we committed to in the election campaign, so making sure that we are actually going out there, working in conjunction with our DBT colleagues, our FCDO colleagues, and the Scottish Government to sell Scotland abroad. It will be about inward investment as well, making sure that the world knows that Scotland is a great, investable place, whether it be in shipbuilding, energy, some of the wonderful stuff that we produce, our financial services, our wider professional services industry, our cultural services and our cultural offering as well. It will also be about trying to assist and work in partnership with other organisations that can help businesses export, whether they have not exported before or whether they are fledgling exporters, or whether they want to grow exporting, finding and partnering up with those networks as well. We have the most wonderful opportunity with our ambassadorial mission network across the world to utilise them to ensure that Scotland is a key part of what they are doing as well. That means working in conjunction with other Departments to get more bang for our buck. I am excited about the Brand Scotland thing. It is a real opportunity for us. Ultimately, when you distil it all down, it is about jobs. It is about growth, and it is about making sure communities in Scotland benefit from it.

HMRC’s recent figures valued Scotland’s exports at £31.9 billion this year, so is the £750,000 commensurate with the existing and potential value of our Scottish exports? On the back of that as well—you have probably answered this but to be clear—the Delivering For Scotland board, you said earlier that you have had a recent meeting with them so will that be continuing?

Yes, and actually the Delivering for Scotland board I suspect—and I am not quite sure I have told Laurence this yet—we may have put specific boards now on our key four priorities of the Scotland Office, one of them of course being Brand Scotland, which may or may not be the next one that we do in terms of getting all Government Departments thinking about how they deliver some of this. In the past—and it is not necessarily a criticism, it has probably happened subconsciously—something comes up internationally about Scotland and it gets put in a sort of Scotland box and “somebody else will do that”, but I think it is about cross-government, ensuring that every Government Department is helping us. The £750,000, yes, is the money we got out of the Treasury but actually it is worth much more than that. If you compare that, as you have done, to the £31.9 billion of exports, what we want to be doing with that £750,000 is working with other Government Departments, levering in more money, making sure Scotland is open for business, bringing in inward investment, and helping people to export even more. We want that £31.9 billion to grow because growing that means jobs; jobs in your constituency and mine.

Absolutely. Thanks very much, Secretary of State.

I would like to move the subject to how Scotland is funded by the UK Government. The Scottish Government are well within their limit for resource borrowing but remain close to their cap on investment. Are borrowing limits for resource set high enough, or too high?

Let me reflect on the Budget we have just had. When the Chancellor got to her feet on 30 October, to the time she sat down, Scotland was better off to the tune of £4.9 billion. That is the largest single settlement in devolution’s history. I think we should celebrate that. It shows a direction of travel from this UK Labour Government that we want to invest in our public services, we want that money spent on the frontline. We want to invest in growth and our priorities, and we want it invested in the people of Scotland. That £4.9 billion is a considerable amount of money and a considerable commitment and delivered not without pain because of the other issues that have had to happen in the Budget in order to stabilise the economy, fill the £22 billion black hole, and provide that investment to get our public services off their knees. That is a huge commitment. I would hope that money is now spent on the frontline. I hope it is now spent sensibly, and I hope it is spent to ensure that we can improve our public services and deliver the growth that Scotland requires for those jobs of the future. That is my overall aim. In terms of other issues around the fiscal framework and the caps and resource borrowing requirements, and so on, there is now an awful lot of money in the pot to be spent and we need to ensure all of us collectively spend that for the benefit of the people of Scotland.

The Scottish Government’s budget will obviously come after the UK Labour Government and, as the Secretary of State has mentioned, the UK Labour Government have pledged record historic levels of funding for Scotland with a £5 million boost to the block grant. In my opinion the UK Government have changed the financial weather. Therefore, do you agree with me that hopefully this will prompt a change of direction by the Scottish Government and that a different path is possible? Do you hope that the funding will be used to tackle NHS waiting lists? One in six Scots are on NHS waiting lists. Do you hope that a different path is possible for the performance of our education system and the number of homes built across Scotland with this record funding?

The beauty of devolution is it is up to the Scottish Government to spend the money in the ways in which they wish to spend it. We do have some commitments of course—education being one—and there will be some money going in directly from the VAT on private school fees and will be spent on education. There has been some discussions already and some commitments made. I do reflect on the Institute for Fiscal Studies’ report that said that most of the financial problems that the Scottish Government currently have are as a result of the decisions that they have made. That leads to the answer to your question that we hope that the decisions that are made at the Scottish Government level in terms of their budget reflect the challenges that you have set out in your question that are currently both in our public services and our economy. Those challenges need to be met head on because we cannot afford for this massive opportunity, in terms of that funding, to be wasted.

One other point about the drawdown limit on the Scotland reserve. They have been removed, but there is still a cap of £700 million. Do you think this goes far enough to provide sufficient flexibility to protect Scotland from future economic volatility?

I would not want to open up a discussion about the fiscal framework in this Committee. It may be a very long inquiry that you may want to start yourself because it is hugely complex, but there was a fiscal framework review before the election that I think doubled the allocation that was allowed for resource borrowing, at the request of the Scottish Government. Of course, there has to be balancing mechanisms in place in terms of the way the Scottish budget operates, but a lot of these issues that come up in terms of borrowing and the fiscal framework are much diluted if the block grant and the £47.7 billion—which was massively increased at the Budget—is in place. That is now the baseline budget of course. It is now in place for the future, and we have the second phase of the Spending Review which will conclude in April. These kinds of issues are much more pronounced when there is less money around, and the Budget has delivered that £4.9 billion, which is a huge increase in the Scottish Government’s budget. Therefore, I would think that some of these fiscal framework issues that have been around for a long time will become less of an issue.

Secretary of State, the hospitality and retail sectors are massive in the more remote parts of Scotland, particularly all the way up the West Coast and North Coast 500, and so on. Tourism is the biggest sector in the Highlands. On the face of it, it would seem to be quite strong. The reality is that the school rolls have fallen, Gairloch School has more than halved, and that is the same all the way down the West Coast. We are seeing a massive movement of people towards the cities and a depopulation. The hospitality industry—and to disclose myself, I am in the hospitality industry in a way in Fort William—is completely on its knees. For example, we have not had the 75% break on business rates for hospitality and retail in Scotland, and so for a business that I am very involved in that is costing us £40,000, which would not cost us that money in England. Your National Insurance increase in the Budget is an 8.7% increase. Hospitality employs young people, so very often it is their first job, they come straight out of school, and so the businesses I am involved in are having a 12.7% increase when you take into account the increases of pay, for the younger people in particular. My question to you is: I do not know if you guys consider what is happening in the Scottish Parliament when increases like this go through, but increasing the payroll cost by 12.7%, which is five times inflation, is absolutely catastrophic and I can tell you it is bringing the tourism industry in the West Coast absolutely down on its knees. Was that considered before that increase went through?

Before you continue, I am glad you made your declaration of interest at the beginning, Angus. I am not sure it was obvious as perhaps you intended it to be so I will draw attention to it for you.

Thank you.

It is a multifaceted question and there are lots of answers to it but let me go to pay first of all. It was the largest increase in the National Living Wage, but the right thing to do because we have a situation in this country whereby 70% of people who have a connection with the welfare system are in work. One or both of the households with children are in work. Therefore, we have a problem with pay in this country and making sure people are paid properly and decently for a good day’s work is actually where we should be as a Government, and I am very proud of the fact that we will get there. That disproportionately affects Scots and Scottish workers because a larger majority were on lower pay and, indeed, zero hours contracts, and so on, so there is that side of it. The second thing is in terms of employers’ National Insurance contributions. Look, somebody had to pay for the Budget and all these decisions were difficult. The criticisms of the Budget from various quarters are that everyone wants the benefits of the Budget, as we have been talking about, but nobody wants the pain. Every Budget has to do some difficult things, stabilising the economy, filling a £22 billion black hole. When the Chancellor got to her feet she started on minus £22 billion so had to fill that and then resolve everything else. Therefore, I think the Budget that she delivered in the Scottish context was transformational in that sense, setting aside the previous question in terms of how that money is now spent. The issues around rural hospitality are ones that are key. We meet with the hospitality organisations all the time, and that is again multifaceted. It is about housing, access to public services and depopulation. We have to resolve some of those big issues in terms of how we do that, but if I reflect on your first question, there are great opportunities. When we visited Shetland we got off the plane and we went all the way up to the Spaceport on the island of Unst. The opportunities are there for all to see. For rural communities those opportunities in energy, in the future technologies around space—which are prevalent to rural industries—are exciting. We can only capture, develop and maximise those opportunities if we get the infrastructure right. All of that needs to feed into that, whether it be the school rolls, the depopulation, or the difficulties with the hospitality industry. One more small reflection, Chair, if I may. The Budget did permanently put in place a 40% reduction in rates in England and Wales for hospitality businesses. That is not reflected in Scotland and there has been a significant amount of pressure on the hospitality industry, who feel they have been disadvantaged. I hope that the Scottish Government reflect on that disadvantage but they—as I have said already—are completely responsible for spending their own money. That is the way devolution works, and they are right to do so.

I hugely hope that the Scottish Government do listen to that on business rates relief because it is incredibly important. In your first statement in July you spoke about three things: driving economic growth, creating jobs and reducing poverty. I am afraid that on the West Coast of Scotland, particularly, this Budget will result in a lot less jobs and will drive people out of the area. Things like that National Insurance increase are devastating. I am afraid you did hear it from me first, but it is painful.

As I have already said, there is pain in the Budget. We understand that, but we had to make lots of tough decisions in order to try to set the economy in the direction of travel that will benefit your constituents in the rural areas in the short, medium and longer term. I do not want to—

An increase in Corporation Tax would have done the job and hit the profits of profitable companies. This hits charities. It hits small businesses and it has clobbered everybody with—

We had a manifesto commitment not to increase Corporation Tax above the 25% that it is currently at, to give that economic stability for businesses right across the country. That is the right thing to do because, with all due respect, we have been in power since July, the last 14 years will be difficult to turn around. We need time to do that but there will be some tough decisions. We have a lot of mess to clear up in fixing those foundations of the economy. I hope the Budget is the direction of travel the Government want to go in, and everyone has had to put a little bit into the pot in order for us to be able to deliver that. I hope that the economic future is much brighter for the country, which will benefit all the businesses in your constituency.

On this subject of the Budget, I think everybody in the room would welcome the substantial uplift there has been in the Budget for Scotland. However, I was greatly troubled to hear the First Minister make a statement to say that a lot of the money had already been spent. Can I ask if he made you aware beforehand that instead of investing this money in public services—investment that is badly needed—he would plug the gap in the Scottish Government’s finances, the black hole that the Scottish Government have had for so many years?

I would refer Committee members to the Institute for Fiscal Studies report that says that the Scottish Government’s budget problems are as the result of the decisions that they have made, in large part. Those are political decisions that are made. They have every right to make them. They have the mandate from the electorate to make them, but what is clear is that the way in which that gap has been filled in terms of £500 million of cuts, and indeed using the capital money from the Scotland licences, £500 million, which is supposed to be about investing in the future, to plug revenue gaps is not sustainable. I am sure the chickens are now coming home to roost because you cannot continue to use one-off funding to plug revenue gaps, because that ultimately ends up with an empty cupboard at the end of the period at which the money runs out. We need that money invested into the Budget. We had a discussion about where the money has come from. If people have other ideas about where the money should be coming from, I am very happy to hear them, but everybody wants the benefits of this Budget, and nobody wants to pay for it. Unless we fix the foundations of the economy then I would expect to be appearing in front of this Committee in future months and years having to explain the decisions of the Government in terms of why the economy has not been stabilised and why it is affecting all of our constituents.

Secretary of State, prior to the election it was reported that you wanted to turn the Scotland Office into a proper spending Department with financial clout. You said that over £150 million will be given directly to your office to dole out north of the border. I appreciate that those were not your words, but you did of course share those newspaper stories on your own social media account. When do you expect that £150 million to be doled out from the Scotland Office?

The £150 million is not my figure but we have three things already. First, the £750,000 for Brand Scotland, essentially effectively turns us into a de facto spending Department because we have to spend that money on the Brand Scotland issues. There was £1.4 billion in the Budget for the regional growth in Scotland, projects across Scotland in everyone’s constituency. I think there might be £100 million or so in the Aberdeen area for your own constituencies as well, and those local growth projects are key to that. The second stage of the spending review, which happens in April, is where we are taking the discussions forward about the next three years. We have started that process, and we will continue that process. It is a very exciting time for the Scotland Office for a whole host of reasons that we are delivering for Scotland.

Thank you very much, Secretary of State. We have come to the end of our formal questions. I have one final question to ask but it is more of a request than a question. The previous Committee had conducted two inquiries that were cut short because of the general election being called ahead of when most people expected it. Those were on Scottish Space, which you referred to yourself, and also the science sector. The Committee wrote to the Scotland Office. It would be lovely to have a response to those two letters at some point so that we can finish off the work of the last Committee.

I am very happy to respond to those. May I ask for the current Committee to refresh that letter and send it back to us, if that is possible, on the basis that the current Government do not have access to the previous Government’s issues. I am very happy to respond. On space, I spoke at the Space Expo in Glasgow back in October, and obviously visited the Spaceport in Unst. The space sector is hugely important to us in the Scotland Office, and we want to nurture and develop that. It is a great opportunity for Scotland, so I am very happy to respond to those.

Thank you very much. We will ensure you get copies of those letters. On behalf of the Committee, I thank all of our panel today. Baroness Smith, it was very interesting to hear your explanation, and it was very helpful to have you here to answer questions. We hope we will see you again in the near future. Obviously, Secretary of State, Ms McNeill, we look forward to having regular dialogue with you over the piece and we will no doubt feed back to you about the inquiries that we will undertake. Thank you very much, Mr Rockey, for additions that were very helpful to have too. Thank you all very much.