Transcript of Module 2A Public Hearing on 30 January 2024

(10.00 am)

Lady Hallett: Good morning.

Mr Dawson: Good morning, my Lady. The first witness today is Ms Kate Forbes MSP.

1. Ms Kate Forbes

MS KATE FORBES (sworn).

Questions From Lead Counsel to the Inquiry for Module 2A

Mr Dawson: You are Kate Forbes?

Ms Kate Forbes: I am.

Lead 2A: You have helpfully provided a witness statement to the Inquiry which is under reference INQ000273982, dated 16 November 2023. Is that your statement?

Ms Kate Forbes: That is my statement.

Lead 2A: Have you signed the statement?

Ms Kate Forbes: I believe I have signed the statement.

Lead 2A: And do the contents of this statement remain true and accurate as at today’s date?

Ms Kate Forbes: They do.

Lead 2A: You were appointed Cabinet Secretary for Finance on 17 February 2020; is that correct?

Ms Kate Forbes: That is correct.

Lead 2A: Until taking the role as Cabinet Secretary, you were minister for public finance and digital economy. In that role you had responsibility for fully devolved taxes; is that correct?

Ms Kate Forbes: That’s correct.

Lead 2A: You served in the role as Cabinet Secretary until May 2021 when the role was expanded to take into account additional responsibility for economy, the role became Cabinet Secretary for Finance and Economy; is that correct?

Ms Kate Forbes: That’s correct.

Lead 2A: As at May 2021 clearly the economy was in turmoil, Scotland was emerging from its second lockdown, there were – significant business support had required to be provided. Is that a fair summary?

Ms Kate Forbes: Yes, that would be –

Lead 2A: Thank you.

Ms Kate Forbes: – a fair summary.

Lead 2A: Can you describe how – if and how your role changed when you took on the responsibility for the economy portfolio after May 2021?

Ms Kate Forbes: Yes. Up until that point I had primarily been, obviously, responsible for funding the pandemic, but I had taken on quite considerable responsibility for direct business support. So although that would have previously been under the economy portfolio in a sense it continued when I became economy secretary too.

The thing that changed was probably my direct engagement with business, so I increased my direct engagement with business and with trade unions, and also took on more responsibility for the guidance that was being given to businesses and places of work in terms o how to keep the guidance and the rules around the Covid pandemic.

Lead 2A: Thank you.

You explain in your statement that you remained in the role of Cabinet Secretary for Finance and the Economy for the remainder of the pandemic, indeed you remained in the role until 28 March 2023; is that correct?

Ms Kate Forbes: That is correct.

Lead 2A: Thank you.

Your appointment to the Cabinet Secretary position followed on from the sudden resignation of your predecessor, which took place on the day of the Scottish budget, 6 February 2020. Is that correct?

Ms Kate Forbes: That’s correct.

Lead 2A: Due to that unforeseen situation, you stepped in to deliver the Scottish budget that day?

Ms Kate Forbes: Correct.

Lead 2A: You presumably had had some role in contributing to the preparation of the budget when you were minister for public finance and digital economy; is that correct?

Ms Kate Forbes: I would say very little in terms of contributing to the budget.

Lead 2A: As at – we’ve heard from other evidence that as at that date, 6 February 2020, there was some emerging evidence available to the Scottish Government through various sources, in particular from a consultant epidemiologist called Professor Woolhouse, about the basic threat of the virus and what it might mean for Scotland.

When you stepped into that role, were you aware of that information, either broadly or the specifics?

Ms Kate Forbes: Not that I recall being aware of, no, beyond what might have been just generally discussed in the public domain.

Lead 2A: Was any provision made in the budget delivered on 6 February 2020 for the emerging threat?

Ms Kate Forbes: Not that I recall.

Lead 2A: So insofar as that information was available, it hadn’t penetrated yet the financial side of the operation?

Ms Kate Forbes: I don’t remember anything in the budget that I presented, which I’d only had sight of for a few hours at that point. I don’t recall any reference. There may have been some passing reference as the budget developed over the subsequent month –

Lead 2A: Yes.

Ms Kate Forbes: – but not in that initial statement.

Lead 2A: We’ll get on to that important period in a moment.

Before doing so I’d just like to ask you some questions about messaging and indeed the retention of WhatsApp messages.

You have provided some WhatsApp messages that you retained to the Inquiry; is that correct?

Ms Kate Forbes: That’s correct.

Lead 2A: And these are WhatsApp messages which fell within the ambit of our request for messages relating to decision-making about the pandemic?

Ms Kate Forbes: That’s correct.

Lead 2A: You’ve provided, as I understand it, some exchanges with Professor Leitch, from whom we’ve heard, limited exchanges with the former First Minister, Ms Sturgeon, exchanges with Ms Freeman, from whom we heard yesterday, and with officials such as Alyson Stafford, who was the director general within the Scottish Exchequer. Is that a broad summary, I think, of what you’ve provided?

Ms Kate Forbes: Yeah, I think there’s maybe a few more, but –

Lead 2A: Yes –

Ms Kate Forbes: – that’s generally –

Lead 2A: Thank you.

Your position, as I understand it, is that you did not delete any of your WhatsApp messages; is that right?

Ms Kate Forbes: I did not delete any of the WhatsApp messages with Cabinet secretaries, with special advisers, and with private office until January 2022, after all of the major Covid decisions were taken, which was the point at which a member of my private office, I think you have the reference – the relevant message, which – the message deletion policy was given to me, and that was a point at which – the first point at which I knew there was any policy governing messages.

Lead 2A: But given that you were able to provide messages to us subsequently, those messages must still have existed in some form?

Ms Kate Forbes: Yes, that’s right, they – I did not retrospectively delete anything.

Lead 2A: Yes. So you started deleting the messages that were sent after January 2022 but you didn’t delete any of them that you held that had been sent before that period?

Ms Kate Forbes: Precisely, yeah.

Lead 2A: Obviously that coincides roughly with the period in which we’re interested, which goes up to April 2022, so the ones that you’ve provided are all from before January 2022?

Ms Kate Forbes: Yes. And I should say that that – I only shared that in the spirit of being completely open, but I should also state that that only applied to that particular individual in private office, and not generally to the rest of government.

Lead 2A: I understand.

So do I take it from what you’ve said that you became aware of a policy in around January 2022 which required the deletion of messages?

Ms Kate Forbes: The – in January 2022 a junior member of my private office stated that it was now required government policy for messages with private office to be deleted, going forward, to which I acquiesced because I believed it was an instruction. And that only applied to that particular member, a junior member of private office, and I don’t recall it applying to anybody else in and around the Cabinet or government.

Lead 2A: So as far as you’re concerned, therefore, with regard to the messages we were more interested in, which is ones you were sharing with senior officials or with other Cabinet secretaries or other ministers, your position has been that your understanding is that there has been no policy either mandating or suggesting the deletion of those messages at all up till today?

Ms Kate Forbes: Correct.

Lead 2A: I’d like to understand a little bit more about precisely the role that you were playing during the pandemic. Your helpful statement sets this out to some extent, but I wanted to try to summarise, if possible, the various different aspects of the role, and it may of course be, as we’ve highlighted already, that the role changed to an extent when your title changed after the May 2021 election, but just to be clear as to exactly what it was you were responsible for, I’d like to go through various bits.

My understanding primarily is that you were responsible for allocating funding for aspects of the pandemic response or, indeed, with regard to effects of countermeasures taken to combat it. Is that broadly correct?

Ms Kate Forbes: That’s correct.

Lead 2A: So, for example, you would have been the person responsible if one wanted to get funding for testing and tracing mechanisms, for example?

Ms Kate Forbes: To an extent. The NHS or the health portfolio is approximately just under 50% of the overall budget, and so the financing of health response was largely taken by the Health Secretary. So I would have engagement with the Health Secretary at the time in terms of the overall quantum of funding that he or she determined that they might need for the various responses, and then it was their responsibility to determine from within that quantum whether it should be spent on, for example, Test & Protect, vaccinations and so on.

Lead 2A: So what I’m trying to get at is that during the course of the pandemic there would be things that couldn’t have been anticipated that there would be funding required for; is that right?

Ms Kate Forbes: That’s true.

Lead 2A: And I gave an example of increased testing capacity; that wouldn’t have been required before the Covid virus was known?

Ms Kate Forbes: That’s right, yeah.

Lead 2A: So what you’re telling me is that there was a system whereby the Health Secretary, be that Ms Freeman or later on Mr Yousaf, they would come up with a sort of list in their own minds of all of the things that they needed funding for which were additional to the budget they already had, and they would come to you with a figure, and you – what – your job would be to work out whether that overall figure was one that you could cope with in the general budgeting of the Scottish Government?

Ms Kate Forbes: I think that’s a fair characterisation.

Lead 2A: Thank you.

So the list of things that they might have, and of course this would extend across all of government to focus on some of the things, that would have included the additional funding that might be required for testing or tracing mechanisms that weren’t required before the pandemic?

Ms Kate Forbes: Indeed.

Lead 2A: It might also include things like the requirement for extra money to provide sanitation, infection control in hospitals or schools or care homes?

Ms Kate Forbes: Yes, it –

Lead 2A: Which, again, wouldn’t have been necessary, necessarily, in advance of the pandemic but became necessary as time went on?

Ms Kate Forbes: That’s correct.

Lead 2A: Thank you.

We’ve heard a lot, I’m sure we’ll hear more today, about the four harms framework, and this is no doubt a structure which you are familiar with; yes?

Ms Kate Forbes: Yes, yes.

Lead 2A: It was introduced, we understand, in April of 2020, and one of the four harms, the fourth harm, was the economic harm which was being caused either by the virus or by the countermeasures taken to combat it; is that broadly correct?

Ms Kate Forbes: That’s correct.

Lead 2A: We know that there was a four harms group set up that provided advice and analysis to government decision-making about the four harms; is that right?

Ms Kate Forbes: That’s correct.

Lead 2A: And that started to meet and provide that function formally in October of 2020?

Ms Kate Forbes: Correct.

Lead 2A: I’d be interested to know the extent to which your role involved an element of analysis and assessment in particular in relation to the fourth harm, which seems to sit most neatly with your portfolio.

Ms Kate Forbes: Yes, so from just before the announcement of lockdown, the Economy Sub-Cabinet Group was established, and that was chaired by my colleague Fiona Hyslop, who was the Economy Secretary, but I had a role in meeting weekly with the First Minister as well as with the Chief Economist to discuss the impact to the economy and also to look at what recovery might look like, and that obviously shaped our discussions around how the funding should be spent in order to try to mitigate the harms that workers and businesses were experiencing.

Lead 2A: Because these two aspects that we’ve discussed so far are interconnected, aren’t they? If you have a certain amount of money you want to spend it in the right place to deal with fighting the virus but you also want to have some consideration of whether it’s being spent in the right place to minimise overall or – either short, medium or long-term economic harm?

Ms Kate Forbes: Absolutely.

Lead 2A: And you would have been involved, along with your colleague Ms Hyslop, in providing analysis, assessment, input into the overall government strategy as to where the funding would be best placed with a view to putting it in the right place for fighting the virus but also giving some consideration to the fourth harm?

Ms Kate Forbes: Absolutely.

Lead 2A: Thank you.

In your role, I understand it that you were responsible – we’ll get on to issues about the Treasury and contact with the UK Government in a moment, but I understand that in your role you were responsible for allocating funding to support businesses in order to try to minimise the effect on the economy in the short and medium and long term; is that correct?

Ms Kate Forbes: That’s right.

Lead 2A: Because, again, if one looks at the amount of money that’s available in order to try to work out where that money needs to be directed from the overall budget, one requires to think, well, where would it be best spent in order to try to deal with what needs to be dealt with today but also deal with the longer-term economic harm, harm 4, that was part of the strategy?

Ms Kate Forbes: Yes.

Lead 2A: Is that broadly right?

Ms Kate Forbes: That is broadly right.

Lead 2A: And that role involved, I think you said, possibly in your particular case, more, after May 2021, contact with stakeholder businesses and organisations representing business or workers in order to try to understand and inform your analysis of the best place to spend the budget that was available so as to achieve those aims?

Ms Kate Forbes: Yes.

Lead 2A: Thank you.

I’ve mentioned already that Her Majesty’s Treasury is a reserved matter; is that right?

Ms Kate Forbes: That’s right.

Lead 2A: And what that means – again, I’ll try and analyse this complicated subject in a moment as well, but it meant, in effect, that you also were involved in discussions with ministers and other representatives from Her Majesty’s Treasury about how Scotland was to access funding from the UK Government in order to comprise the budget that you were then handing out to the various directorates and ministers –

Ms Kate Forbes: Yes.

Lead 2A: – is that right?

In performing this role, these various roles I should say, you had available to you a team of people, including – you’ve mentioned an advisory group, but also civil servants within, presumably, a number of different directorates who were able to provide you with data, information, analysis, in order to inform your input into discussions about how best decisions should be made about using money. Is that correct?

Ms Kate Forbes: Yes, my primary source of advice was the director-general of the Exchequer and the Exchequer team.

Lead 2A: Okay, and as we’ve heard broadly already there’s a system in the Scottish Government of directorates-general, and under those sit a number of different directorates, it’s been described as a system of “directorate families” by a previous witness, and you had a directorate-general that would presumably be most closely associated with your particular role?

Ms Kate Forbes: Ab – yes, yeah.

Lead 2A: Thank you.

I understand that as Cabinet Secretary you attended, on occasion, the SGoRR meetings that we’ve also heard of?

Ms Kate Forbes: Yes, I did.

Lead 2A: And you also attended meetings of another body called either gold or gold command?

Ms Kate Forbes: Yes, perhaps later on in the pandemic.

Lead 2A: Yes, I wanted to ask you some questions, we’ll get on to that in a second.

In your statement you say on page 29 at paragraph 76, if we could have that up, please, just in connection with the role of these bodies and the Cabinet:

“At times, waiting for the weekly meeting of Cabinet or waiting for an extraordinary meeting of Cabinet was deemed to be too slow for a decision to be made. Furthermore, sometimes Cabinet would discuss all the factors related to a decision and agree that the final decision would rest with the First Minister. This wasn’t an uncommon way of working during the pandemic.”

I’d just like to explore a little bit more precisely what that means.

Is it not the case that in order that decisions should be made within Cabinet, Cabinet could have been convened at relatively short notice?

Ms Kate Forbes: Yes, and it frequently was, particularly where the – for example, the evidence was still emerging or there was new information that hadn’t been considered at a previous meeting of Cabinet. There was quite a number of extraordinary meetings of Cabinet.

Lead 2A: Right. What do you mean when you say that “all of the factors related to a decision would be discussed in Cabinet”?

Ms Kate Forbes: Well, I think whenever there was a decision to be made, for example, introducing new non-pharmaceutical interventions or discussing a circuit-breaker or lockdown, Cabinet would meet and I would of course contribute some of the points around the finance, the Health Secretary would contribute in terms of the health factor, we would discuss that, there would be a very frank conversation, but you will often see in Cabinet papers that there was an agreement that Cabinet would delegate to the First Minister –

Lead 2A: That is right.

Ms Kate Forbes: – for final agreement or final sign-off. Or where there was a very tight decision being made, for example whether a particular local authority area should go into level 3 or stay in level 2, often those decisions would be delegated to the First Minister.

Lead 2A: That’s what you mean by there being all the factors related to a – there’s a discussion that takes place in Cabinet about those factors, there is then a delegation, the decision is then made elsewhere, is that broadly the process that you say was not an uncommon way of working during the pandemic?

Ms Kate Forbes: Roughly. I think that the bulk of the decision would always be made by Cabinet, but when there were fine points that Cabinet hadn’t come to an agreement on, that final decision would rest with the First Minister.

Lead 2A: This is really what we’re interested in, because we’ve seen a number of expressions like this which don’t define with any degree of precision what you mean by “the bulk of the decision”. There may well – it may well be, for example, this is a hypothetical example, that if the position were that the Cabinet were to agree that “We should do something about this virus”, and then everything from that point on was left to the First Minister or a close group of advisers, then that might accurately be characterised as Cabinet not really having made any part of the decision at all and all of the operative parts of the decision had been made outwith Cabinet. In that hypothetical situation do you agree with the proposition that that’s what that would be?

Ms Kate Forbes: I wouldn’t agree that that would be a fair characterisation of how things operated.

Lead 2A: Indeed.

Ms Kate Forbes: I would suggest that Cabinet had a key role in terms of making the decisions. The example that I gave earlier is probably a good example of the nature of a decision, where Cabinet might have agreed, for example, that some local authorities should move up or down a level, but that there was a few local authorities where it was very, very tight and finely balanced. That’s an example where it would be delegated to the First Minister.

Lead 2A: Neither the SGoRR nor the gold group meetings are minuted; is that correct?

Ms Kate Forbes: Well, that surprises me, and this would be the first of me hearing it.

Lead 2A: Right. The reason that we think that that’s the case is we’ve obviously asked the Scottish Government for all of its papers concerning these matters, and although we have, for example, Cabinet minutes, of course, we don’t have minuted records of either of those groups. So therefore it becomes difficult to understand what precisely the ultimate decision-making process is when there is no record of how those decisions were ultimately taken.

Ms Kate Forbes: And I can understand that frustration.

Lead 2A: Do you think those meetings should be minuted in future, for what it’s worth?

Ms Kate Forbes: I think that every meeting of that nature in the Scottish Government should be minuted and, as I say, I’m surprised to hear that they weren’t.

Lead 2A: So your expectation, after having participated in some of them, was that they would be minuted in the same way as Cabinet is minuted?

Ms Kate Forbes: My expectation would be as you’ve described. I also recall sort of summary emails being sent out afterwards in terms of the main issues that were discussed. And perhaps if I could also just say, as a Cabinet Secretary, these summaries and minutes and so on were extremely important in terms of retrospectively considering how a decision had been arrived at.

Lead 2A: Yes, because it’s important, isn’t it, in particular in a continuing threat like a pandemic, that there is the material available in, one would imagine, formal minutes, to be able to assess whether the way we went about it last month or six months ago was right so that, as the threat continued, there could be an internal assessment of “Well, how do we do it the next time”?

Ms Kate Forbes: Absolutely, corporate memory was critical, so I was Cabinet Secretary for the two and a half years but of course officials would come and go, teams would sometimes change, and if individual officials couldn’t recall how things had been approached the last time the decision was made, then it would be much more challenging to make the decision again.

Lead 2A: Thank you.

As far as the gold or – gold or gold command it seems to be called, again we don’t have minutes of those meetings although we see them referred to in various places. There are, for example, Cabinet meetings saying “Well, there was a meeting of gold that discussed this”, and so you can pick up information.

You have provided us helpfully with a list of the gold meetings you attended with the material that you’ve provided. From that we can see that you attended gold on 11 occasions. These meetings were in mid-2021 and in late 2021 and early 2022. You did not attend any gold meetings in 2020, is that correct?

Ms Kate Forbes: Well, this list is drawn directly from the diary, so I don’t recall attending gold, I don’t recall even being aware that it existed until later on in the pandemic.

Lead 2A: Again, this has been the effort of looking through the material that we do have because we don’t have minutes, but we’ve certainly ascertained that there were at least six such meetings in the period between September 2020 and January 2021, that there may be more, but we’re trying to piece together what all of these actually were.

You didn’t input into the discussions at those meetings then because you didn’t attend them; is that correct?

Ms Kate Forbes: If I wasn’t there, I won’t have inputted, no.

Lead 2A: Okay.

Over that period, at least, the meetings from September 2020 to January 2021, again, as I often try to do, to put it into the context of where we were in the pandemic, that was a period which started with the First Minister announcing on 7 September that there needed to be a slowing down of the easing of lockdown because there had started to be an increase in cases. It was subsequently shown that that was connected largely with foreign travel. And then as the year went on, with cases going up and up, Scotland started to feel the effects of the Alpha variant, which then led into the second lockdown.

Over that period, we’ve seen evidence that there were a number of discussions about a number of potential things that might be done, advice tendered then ultimately withdrawn about a circuit-breaker, the way in which local restrictions might be used.

These are all matters that would have significant economic impacts on Scotland, isn’t that right?

Ms Kate Forbes: Correct.

Lead 2A: All matters in which one would imagine, given our discussion about the roles you played, input from you would have been significant and the absence of input might have had significant consequences?

Ms Kate Forbes: Well, I assume that that might lead from the fact that there wasn’t a finance minister present. What I can’t answer for is whether or not Ms Hyslop, the Economy Secretary, was present at those meetings.

Lead 2A: Thank you.

There were issues – we’ll come back to this general topic, but there were issues around that time in particular connected to whether the furlough scheme would continue to be available if Scotland decided to have any further lockdown or significant restrictions. Do you remember that period?

Ms Kate Forbes: Very much.

Lead 2A: We’ll look back on that. It seems in paperwork that we’ve seen to be represented that the impression that the Scottish Government had that if it were to impose another lockdown, circuit-breaker, firebreak lockdown or whatever, that there would be an impediment to that course of action because furlough funding would not necessarily be available from the UK Government.

We’ll get on to the details of that in due course, but that was a very important matter in which you had had involvement, as I understand it?

Ms Kate Forbes: That’s correct.

Lead 2A: And it appears from the paperwork it was central in the decision-making about whether to have a lockdown or not at all?

Ms Kate Forbes: Correct, in terms of the subsequent lockdown. I’m assuming we’re talking about late 2020 here?

Lead 2A: That’s right, yes, the period I’ve tried to define as best I can for you.

Ms Kate Forbes: Yeah.

Lead 2A: But over that whole period there were discussions about what should be done in light of rising cases. It culminated in the second lockdown but there were significant funding aspects to the decision-making over that period; yes?

Ms Kate Forbes: Yes, there were.

Lead 2A: And indeed, of course, to look at the slightly different aspect from your perspective, a further lockdown would – it would have been predictable that a further lockdown would have economic consequences for the country, fourth harm type harms?

Ms Kate Forbes: Very much so.

Lead 2A: Yes.

Could I ask you some questions, please, about generally the way in which public services in Scotland are funded?

Ms Kate Forbes: Yes.

Lead 2A: I’m going to try, as I did before, to take you through some general propositions to see if our understanding, our current understanding about it is correct. I’m sure if we entered into a discussion about it we’d be here for many hours, but hopefully this is roughly correct.

As I understand it the Scottish Government receives a fixed budget which means that it cannot overspend that budget, and it requires to spend only what it is allocated for a particular year?

Ms Kate Forbes: That’s correct, it has to be a fixed budget.

Lead 2A: Yes, and that budget, which I understand is called a block grant, comes from Her Majesty’s Treasury part of the UK Government?

Ms Kate Forbes: Correct.

Lead 2A: So every year there is an allocation of a certain amount of money for Scotland, and your role, part of your role, would have been to have that amount of money in normal times, if you like, and allocate that the way that the Scottish Government wished to, amongst its various different commitments?

Ms Kate Forbes: Primarily through the budget.

Lead 2A: Yes. And the Scottish Government then, with this general sum of money, has the ability to decide what it wants to use the money for?

Ms Kate Forbes: Correct.

Lead 2A: And, for example, as I think you’ve said already, health, the health budget often in Scotland is seen as requiring a higher percentage spend than is spent per capita, if you like, in other parts of the United Kingdom?

Ms Kate Forbes: Correct.

Lead 2A: And what that means is if – if Scotland, the Scottish Government, is choosing to spend more on health, what that means is one has to try to find money in another place where less is spent in order to balance the books at the end of the day?

Ms Kate Forbes: Correct. It’s sort of like a fixed pie and you can only cut from within that pie.

Lead 2A: Yes. And that was very much your function, to try to work out the way in which the pie would be cut up?

Ms Kate Forbes: Yes. Of course the complication in Covid was that additional funding was often announced unexpectedly, very rarely was it announced expectedly, and so we were repeating the budget process numerous times.

Lead 2A: Yes, because in normal times, as I’ve said, there is this one block grant that comes from the United Kingdom Government, and it is then allocated in accordance with the priorities of the Scottish Government; is that right, broadly?

Ms Kate Forbes: Correct.

Lead 2A: But in times of emergency, where additional funding is required to deal with things that couldn’t have been anticipated as being part of the normal budgetary processes, there requires to be further funding made available from the UK Treasury to Scotland to fund those additional requirements?

Ms Kate Forbes: Indeed.

Lead 2A: Is it the case that where these – if I call those emergency funding grants – if those emergency funding grants were made available, was it within the gift of the Scottish Government to decide what they would be used for?

Ms Kate Forbes: Yes.

Lead 2A: It is also the case, is it not, that it – because of the devolution settlement, the United Kingdom Government has the ability to spend directly in Scotland?

Ms Kate Forbes: Yes.

Lead 2A: And so what that means is that that’s – if the United Kingdom Government has a certain amount of money that it wants to spend on an initiative, it can do so, and it doesn’t form part of that budgetary process with the Scottish Government that I’ve just tried to explain?

Ms Kate Forbes: Indeed.

Lead 2A: An example of that to which we’ll also return is the Eat Out to Help Out scheme.

Ms Kate Forbes: Exactly.

Lead 2A: That, as we’ve heard from a political expert who gave evidence from the University of Stirling, Professor Cairney, was an example of a direct UK Government spend in Scotland?

Ms Kate Forbes: Yes.

Lead 2A: We’ll return to the details of that in a moment but that’s very helpful.

Does the Scottish Government have powers to borrow money?

Ms Kate Forbes: Very limited, and not resource borrowing, which is obviously what largely funded the response to the Covid pandemic. So we have some limited capital borrowing, which was not overly useful in a pandemic, and we can borrow for reasons that weren’t useful in a pandemic. So, for example, for cash management, which was never an issue.

Lead 2A: But the UK Government can borrow money?

Ms Kate Forbes: They can.

Lead 2A: And in Covid the UK Government was able to borrow money to fund the emergency elements of the Covid response that were necessary?

Ms Kate Forbes: That’s right.

Lead 2A: But in order for the Scottish Government to get part of that, it had to rely on the arrangements the UK Government had for borrowing money?

Ms Kate Forbes: Yes, so Barnett formula was the only mechanism by which money was provided to the Scottish Government during the pandemic.

Lead 2A: You’re jumping a line –

Ms Kate Forbes: Sorry.

Lead 2A: You’re ahead of me, but thank you.

It is, as I understand it, also the case that Scotland has limited – the Scottish Government has limited tax-raising powers?

Ms Kate Forbes: Correct.

Lead 2A: To what extent were those tax-raising powers effective or really relevant to the pandemic response in Scotland?

Ms Kate Forbes: I would say they were almost irrelevant during the pandemic.

Lead 2A: Can you explain broadly, if you can, why that is.

Ms Kate Forbes: Well, largely because income tax is only reconciled about 18 months after the year has passed, so we are budgeted for the – we budget for the period of the pandemic on the basis of forecasts of what we think we might get. So of course we were monitoring those forecasts in real times but it doesn’t have a bearing on the actual substantive funding you have in front of you. And then non-domestic rates was the other big tax, but of course there were record levels of non-domestic rates relief in place to support businesses.

Lead 2A: So the issue with the Scottish Government’s tax-raising powers in these areas, including income tax, was if money was needed it was needed there and then –

Ms Kate Forbes: Precisely.

Lead 2A: – and these changes would have taken too long to filter through; is that broadly correct?

Ms Kate Forbes: Precisely.

Lead 2A: So if it were to be suggested in any other evidence that Scotland’s tax-raising powers were a way in which it could have itself funded the response, I assume you would disagree with that proposition?

Ms Kate Forbes: I would disagree.

Lead 2A: With for the reasons you’ve said?

Ms Kate Forbes: Yes.

Lead 2A: Funding from the UK Government is allocated to the Scottish Government by way of the Barnett formula that you’ve mentioned?

Ms Kate Forbes: That’s correct.

Lead 2A: Again, as I tried with Professor Cairney, can we try not to get into the controversy surrounding that, as I know there are many, but effectively my understanding is that this is a means by which the percentage of what is spent in the UK Government, in England effectively, is allocated to Scotland. So you work out how much is spent overall in England and a certain Barnett percentage is applied to that and that’s what results in Scotland’s block grant; is that correct?

Ms Kate Forbes: That’s correct.

Lead 2A: And is it – is it the case that where one is dealing with a block grant, which deals with all of Scotland’s public spending, as we’ve discussed, that there may be swings and roundabouts and balances that can be incorporated in? So if, for example, you get a certain amount of money every year, you have to balance the books at the end of the year; yes?

Ms Kate Forbes: Yes.

Lead 2A: But you can do that by choosing “I’ll spend more in area A but I’ll spend less in area Z”, and that’s a way of balancing the books?

Ms Kate Forbes: Yes, it’s the only way, really, of balancing the books.

Lead 2A: Yes. But to what extent is it by operation of law or convention automatic that the Barnett formula should be applied to grants of emergency funding, such as the ones that were made available by the UK Government during the pandemic?

Ms Kate Forbes: Well, it was the only mechanism that was considered, I think, by the UK Government for allocating funding to Scotland. As you may come on to later, there was extensive discussion between myself and Treasury about looking at alternative means of allocating funding to Scotland. But there was no effort, I would suggest, in order to develop those alternatives, despite representations from the Welsh, Northern Irish and myself.

Lead 2A: I’ll go to a passage about this in your statement in a moment, but do I understand it correctly that broadly the position is whereas the Barnett formula – and there are people who don’t like that, but it might in some eyes be deemed to be appropriate for a block grant, for the reasons we’ve discussed, it logically really doesn’t necessarily apply to more specific funding because one might be able to demonstrate in that specific area that the need in one constituent part of United Kingdom is different from the English need upon which the amount is calculated?

Ms Kate Forbes: Absolutely. And if I could add, our primary concern was less to do with the quantum and more to do with the timing of when the Barnett allocation would be triggered, because it’s only triggered when there is spending on England-only areas. So where there might be funding that was triggered at a particular point, that may have been several weeks later or several weeks earlier than we might have needed to access it. So my primary concern with Barnett formula was around the timing and how we might access that funding. We did have discussions, for example, with the Treasury as to how, therefore, we could continue to use Barnett but resolve the timing issue by, for example, drawing down some funding which would then be netted off future Barnett allocations. But that didn’t progress.

Lead 2A: Right. Professor Cairney provided us with a very helpful analysis of a number of these issues in his expert report. He mentioned something called a Barnett guarantee. Could you explain what the concept was and whether that was something you favoured and ultimately whether that ever happened?

Ms Kate Forbes: The Barnett guarantee was enormously helpful, and it was agreed in the summer of 2020. I should say that when the Scottish Government is allocated funding, it’s only actually at the end of the year that we know precisely how much funding we will be given, because we don’t get a share of what’s announced, we get a share of what’s actually spent. And like every government, you only know what you actually spend at the end of the year. So there means that there can be negative consequentials. So if, for example, the UK Government is looking for savings in a particular area, then they’re going to spend less, and there was a risk that we would have to give back money.

So for that first part of the pandemic we weren’t just in receipt of funding, but we were also being told that we might have to give back. The guarantee said: You won’t have to give back to the UK Government, so when we make an announcement, we can promise you that that’s what you will receive and so you can budget with a lot more certainty.

Which was transformational in that first year.

Lead 2A: When did that element of the arrangement kick in?

Ms Kate Forbes: It kicked in from the summer, I think it was July 2020.

Lead 2A: Right. But there are, I think, still other concerns that you had – would have about the way in which the Barnett formula’s applied. Am I right?

Ms Kate Forbes: Well, it continued to be the case that the UK Government would understandably inform us that there would be no additional funding, and we would budget on that basis, and then a few weeks later, or indeed, in some cases, a few days later, there would be an announcement of additional funding. And it would have aided planning considerably if we had known the full extent of the funding that we had available to access.

That wasn’t a question of personalities, I had very constructive relationships, but it was a question of the systems, where the systems were just not set up to give us the budget guarantee that we needed.

Lead 2A: In his report, Professor Cairney in his analysis, his detailed analysis, suggests that the use of the Barnett formula – he describes it as a political solution rather than a coherent financial solution. Is that a proposition with which you would agree?

Ms Kate Forbes: I don’t necessarily follow the sort of political point, but I would say that it wasn’t a sufficiently flexible system for an emergency.

Lead 2A: It may be slightly elusive as to precisely what he means by that, but what I take him to mean by that is that, in the circumstances of the pandemic, because people were used to using the Barnett formula as part of a mechanism for providing funding but also to give a percentage that you could apply, it was an easy ready reckoner to use rather than trying to develop on the hoof, if you like, a more sophisticated system that would have targeted funding to the right places.

Do you think that that’s fair? Was what your experience of the use of the Barnett formula?

Ms Kate Forbes: Yes, I think from the very – yes, by and large, but I think from the very beginning my Welsh and Northern Irish counterparts and I all agreed that it couldn’t bear the weight of an emergency, and we suggested a number of flexibilities that could be adapted and adopted in and around Barnett, so that Barnett remained the basis on which funding was provided but there were flexibilities around it. And it remains an element of disappointment that only the guarantee was implemented of those various flexibilities that we had suggested.

Lead 2A: Yes, this is what I was trying to get at when I asked you were there other dissatisfactions with the Barnett arrangement applied in an emergency situation.

What – we’re obviously very interested in this Inquiry in trying to think about how things would work better if another pandemic were to come along, and in order to assist with that I was keen to understand more – put the guarantee to one side, we’ve dealt with that, but what these other flexibilities were that you think would have been useful to incorporate within the system which, as I understand it, you say were never implemented?

Ms Kate Forbes: Yeah. So the flexibilities that we proposed were all solutions, but perhaps it would be more useful to the Inquiry if I outline just the problems, because there may be better solutions to them.

But the first one was around managing a budget between years. So at the moment the Scottish Government has to have a fixed budget, it cannot overspend on that budget, and we can’t carry forward very much budget into the next year. So we can only draw down about £250 million in a new year. Remember, that’s in the context of a £55 billion budget.

On 15 February 2021, the UK Government announced an additional £1.1 billion of Barnett, which obviously was hugely welcome, but that is six weeks away from the end of the financial year, and we can’t carry money forward. So that was an example of a flexibility that we asked for: can we carry forward funding across years? Because otherwise you’re in the situation of having to figure out how to spend that money before the end of the financial year when it might better be spent in April.

That was the first one. The second one –

Lead 2A: Just on that –

Ms Kate Forbes: Yeah.

Lead 2A: – are you saying then that you weren’t able to carry forward that allocation of funding to be used after April 2020?

Ms Kate Forbes: So we could in March, it was finally granted to us to be able to carry forward that £1.1 billion as a one-off. But I think the principle still stands that if the government can manage funding across years, that would strike me as an eminently sensible adaptation to Barnett which doesn’t compromise the core principles of Barnett.

Lead 2A: Okay.

Ms Kate Forbes: And the second big one was this point around being able to spend money when it was required rather than when the UK Government announced it. So I recall, for example, in December 2021, you will remember that the Omicron variant was posing real concerns, and I had engaged extensively with the chief secretary to the Treasury to look to see if any additional funding might be granted, and was told that there wouldn’t be any funding granted, so we had to make decisions on that basis.

And then I think it was in – on 14 December, about £220 million was – we were told that £220 million was coming. Five days later it was doubled to £440 million. So rather than waiting for the UK Government to allocate funding, it would have been far easier for us to just say: look, we will spend this funding as it is required and the UK Government would have said “That’s okay, we understand that, you can pay that off over a longer period of time”.

Lead 2A: I see. If we could just look – you have mentioned the Omicron period, which is one that we’ve looked at with other witnesses and I was wanting to ask you some questions about that, we’ll return to the general discussion in a moment. But just to understand your evidence there, the difficulty you had with the UK Government, as I understand it, was there was a suggestion you would get £220 million, no doubt that was welcome, but that doubled, and it would have been good to have known that you were going to get double the amount, to assist with planning earlier than that; is that right?

Ms Kate Forbes: That’s right. And the initial 220 was itself, I think, a couple of days after the Cabinet discussion where we agreed that action needed to be taken.

I see.

Could I look, please, at INQ000334573, at page 9.

(Pause)

Ms Kate Forbes: It will just come up in a second.

This is some WhatsApp exchanges that you had with Alyson Stafford.

Ms Kate Forbes: That’s correct.

Lead 2A: Who was she?

Ms Kate Forbes: She was the director-general of the Exchequer.

Lead 2A: Thank you. And these – the messages I’m interested in, this is the period that you’re talking about, I think, when the Omicron variant was starting to – around about this time I think had just become the dominant variant in Scotland and the cases were rocketing.

Ms Kate Forbes: Yes.

Lead 2A: Is that roughly right?

There are some messages from the 14th that you exchange there that refer to what we’ve just been looking at. You message Ms Stafford saying:

“Hi Alyson, a very awkward discussion at cabinet where mr Yousaf said that health had identified a further £100 [million] for business support – which was news to me and obviously news to the FM who wasn’t best pleased. Somewhat embarrassing…can you try and get to the root of what Mr Yousaf was offering and perhaps use it as a lever [I think it’s meant to say] to get £100 [million] off health.”

To which Ms Stafford replies:

“Of course…. news to us all!!!!”

You say:

“He’s done it before…but this time he did it in front of the FM so I think we should ensure we get £100m this time.”

Then you further say:

“Anyway, I’ve never seen the FM this angry in all my cabinets…for good reason.”

Is this around the period that we were discussing? There are some previous exchanges, and indeed minutes – we’ve looked at an exchange with the current First Minister between himself and Professor Leitch around this time where they are talking about the need to get more funding and do more to try to deal with this emerging threat, there are various references to this difficult Cabinet meeting, and is the position that you’re seeking to get funding from the UK Government at this stage, there is reference to you trying to source money but having trouble with it, but that the current First Minister found £100 million in his health budget that you weren’t aware existed?

Ms Kate Forbes: Well, I think if I could just make one point of context here, furlough didn’t apply, furlough didn’t exist, so we had – I had been tasked with trying to source funding in any part of government, in any portfolio, over the previous week or so, maybe two weeks, to identify funding that could be used for business support. We had identified between £86 million and £100 million, but we considered that that would largely just about cover the self-isolation support grant and anything of the remainder would cover business, but we didn’t think there would be much left from that.

So I had gone to that Cabinet, as I recall, making the point that we had very limited funding available. I think that, if I remember correctly, I had cover to perhaps provide about £100 million perhaps at risk, at risk meaning it wasn’t guaranteed that we would have that £100 million sourced from the UK Government or otherwise, but the emergency nature of this meant that I put up £100 million, and then in that particular Cabinet meeting, the current First Minister, former Health Secretary, was trying to be helpful in saying that perhaps Health could look at providing £100 million, knowing that this would have a significant positive impact on the pandemic, and therefore on the health portfolio more generally.

It was often the case that surprises were never welcome at Cabinet, and so what I’m alluding to there in terms of the embarrassment and so on was the fact that it had been a comment that hadn’t been drafted in the papers, that it had perhaps come from left field.

Lead 2A: I see. So just to be clear, the £100 million that was identified for business support, you’ve explained why that was necessary, but was he saying that he had access to that £100 million, which is why you say “We can use this as a level to get £100 million off health”?

Ms Kate Forbes: Well, health, in my view, was – you know, they were always in need of additional funding, as you would understand, for this full scale of the response, and so when I had gone to all the portfolios asking if there was anything that they could free up, I had got a blank response from every part of the government –

Lead 2A: Yes.

Ms Kate Forbes: – because they were extremely stretched. And so my understanding was, from that exchange, that Mr Yousaf had offered £100 million from Health. I don’t know if it goes into it in that exchange, I don’t think it does, but in perhaps the papers you will then see a very rapid working with Health finance to identify where they might find that £100 million.

Lead 2A: But his position, to everyone’s surprise, it appears, at the Cabinet meeting, or the meeting, was that he had, contrary to what your impression was, about whether there was anything left in the back of the cupboard, that he did, in fact, have £100 million that he could make available for this purpose, and the irritation was based on the fact that this had not been made clear beforehand?

Ms Kate Forbes: I think that would be a fair characterisation, although I would say that the intention, I think, was to be helpful and not in any way to undermine the process.

Lead 2A: I see.

Just as we’re on this period and as you’ve mentioned it, I’d like to ask you some more questions in due course about furlough and how all that worked, but at this stage it appears to be the case that, as I think you said, there was no furlough available for dealing with a third wave of Covid; is that correct?

Ms Kate Forbes: That’s correct.

Lead 2A: It had been the case, by this point, December 2021, that Scotland had had record cases, really from the summer onwards, which had initially been caused by the Delta wave, which had caused, really, Scotland’s cases, as we’ve seen some statistical evidence, to go higher than anywhere else in the UK, it had led to issues around hospitals having to cancel non-emergency surgery, the military being called in to assist with the running of hospitals.

What – was it – over this period, were there discussions about the need to have further considerable social distancing or even lockdowns?

Ms Kate Forbes: Yes, I remember that autumn as a period of constant engagement with business organisations, and obviously there was the introduction of various changes in terms of NPIs, social distancing, and so on. So, yes, I think that over the course of the autumn things had been tightening up.

Lead 2A: Yes. We’ve already been through with Mr Yousaf, again helpfully illustrated through his WhatsApp exchanges with Professor Leitch, which were frequent, a growing concern on their part, from the Health perspective, about whether we were really doing enough to deal with this emerging threat, these record cases, this effect on the NHS. We looked in particular at discussions around the possibility of cancelling the EURO fan zone in the summer of 2021, there was also the COP26 in November, there are discussions around that.

So, in light of that, there were concerns expressed by them as to whether these additional measures could or should be imposed. Ultimately, the fan zone was allowed to go ahead. There was a rise in cases. As far as you’re concerned, were you having discussions at this stage with the UK Government about the possibility that Scotland may need to go further, have a lockdown even, and that therefore funding which would be associated with a lockdown, including for things like furlough, might need to be made available again?

Ms Kate Forbes: Yes, I think I made at least one, if not a number of public requests for furlough to be extended or at least reintroduced in that period.

But secondly, you will see from any table of the consequential funding that was being allocated over that period that the quantum decreases, in other words there was less being spent on business support in England, and therefore generating less funding, so there was less funding available to in any way mitigate losses that were being experienced by businesses over that period. And so that meant that in the discussion about what Scotland should do with the rising numbers, we were also balancing these other challenges.

Lead 2A: Right.

Could I go again to INQ000334572, this time at page 10. This again is an exchange between yourself and Ms Stafford from 18 December, so a few days later. It will come up in a moment.

(Pause)

Lead 2A: I’m looking at the one starting at 9.54.53 on the 18th. This looks like it is Ms Stafford forwarding on something from Sue Gray. Does that look right?

Ms Kate Forbes: I – oh, yes – sorry, yes, I see it now.

Lead 2A: You see it?

Ms Kate Forbes: Yes, I do.

Lead 2A: Who was Sue Gray?

Ms Kate Forbes: Sue Gray would have been, at that point – I don’t actually recall her specific title at that point, but she obviously was a point of contact in terms of devolved funding.

Lead 2A: I see. And it looks like Ms Stafford is forwarding something on to you from Sue Gray which says:

“HMT to engage DAs before COBR. COBR expected to be Sunday. Jackie’s aware too. Jackie checking in with Ben at HMT at 11.30 this morning to see how things have progressed post FM/PM Friday call.

Then Ms Stafford says:

“Last night, HMT were saying we’d hear at the beginning of the week and it would be only a modest adjustment to what was committed last week.

Then she says:

“The only other point I’d add is that seeking funding for targeted initiatives is likely to be better received by HMT….

“There’s no appetite for, in fact quite an allergic reaction to furlough.”

So does this indicate that Ms Stafford is reporting to you efforts that she’s making at an official civil servant level to try to explore the possibility of furlough funding being made available from the UK Government at this crucial time in Scotland?

Ms Kate Forbes: That’s right –

Lead 2A: And what she got was “quite an allergic reaction to furlough”?

Ms Kate Forbes: Yes, I think there was an intense effort over these days between officials and ministers to engage with the UK Government, and – she obviously characterises the response to requesting reintroduction of furlough.

I was also requesting additional funding for us to be able to not necessarily set up something which was akin to furlough but which would provide sufficient funding to businesses in order to keep their staff employed over that period.

Lead 2A: I see. And there’s a suggestion that more targeted initiatives would be likely to be received, so it’s not a closed door on the possibility of more funding, but furlough was off the table?

Ms Kate Forbes: That’s right.

Lead 2A: Okay.

Of course at this stage the Scottish Government had become, one would imagine, quite experienced at dealing with the threat of the pandemic, there having been two waves before, and indeed one would imagine quite experienced at dealing with anyone they required to deal with in the Treasury in order to try to anticipate the requirements from a financial point of view.

It I think would be fair to say that one must have learned or should have learned from the previous waves that the waves would often come quickly, they would often need urgent action, financial or otherwise, and so good preparation was absolutely mandatory; is that correct?

Ms Kate Forbes: Absolutely.

Lead 2A: Given the fact that although it is fair to say my understanding is that this is when Scotland started to feel the full force of Omicron for the first time, given that Scotland had been in the grip of Delta for some months before this, to what extent had efforts along these lines been made in those previous several months to try to anticipate the need for furlough that might arise as a result of Delta, never mind Omicron?

Ms Kate Forbes: There had been extensive engagement over that autumn period in terms of requesting what I would call the tools to be able to respond, and my tool was primarily funding that could help mitigate the losses experienced by households as well as businesses. So there certainly was extensive engagement. I imagine that this point would have been raised in every conversation I had with the chief secretary to the Treasury and was frequently raised between officials as well.

Lead 2A: Was it the case, generally speaking, that the reaction that you got was along these lines in that period too, because of course Scotland had higher cases in Delta, and therefore one might imagine, logically, that you would have experienced the same problems, because English funding was being made available presumably in accordance with spending priorities for the English situation, as you explained, but to what extent was there any progress in trying to persuade Her Majesty’s Treasury that Scotland was in a different position and therefore needed to be treated differently?

Ms Kate Forbes: Well, we had sought to persuade the UK Government, probably over the entirety of the pandemic, that funding should be aligned with when it was needed in Scotland rather than when it was needed in England.

But perhaps if I could make one point, which is that I often thought that the engagement with the chief secretary to the Treasury and with his officials that were tasked with devolved finance were always good. I would suggest that one major learning is that they were not always – the devolved finance officials were very seldom sighted on what the UK Government might be about to do financially more generally. So they would give us their best evidence, they would seek to be helpful, and they would speak honestly and truthfully when they said no further funding would be provided. And when it was provided 24 hours later, it was largely because they didn’t know rather than because they were in any way being deceptive.

Lead 2A: Right, I see. When you were speaking there, it sounded as if it was slightly reminiscent of some of the other evidence we’ve heard from people in the Scottish Government about information not being shared or not being shared till the last minute, but as I understand your evidence what you’re saying is that happened as a matter of fact but you accept from a financial perspective that that was reasonable in the circumstances; is that correct?

Ms Kate Forbes: It was a breakdown between – amongst officials within Treasury rather than a breakdown between Treasury officials and the Scottish Government, is what I’m trying to say.

Lead 2A: Thank you.

Lady Hallett: (inaudible) shared by the UK Government with its own officials?

Ms Kate Forbes: Precisely.

Mr Dawson: When you were, at a ministerial level, dealing with the UK Government, you were dealing with the chief secretary to the Treasury, was that Mr Barclay for large periods?

Ms Kate Forbes: It was Mr Barclay and then Mr Clarke.

Lead 2A: Right. You were not dealing with the Chancellor?

Ms Kate Forbes: Not directly, no.

Lead 2A: Right. Is that the normal line of communication or …

Ms Kate Forbes: Well, in terms of, I would sometimes be in wider meetings with the Chancellor, but in terms of my face-to-face engagement, discussion and so on, it would always be with the chief secretary to the Treasury, although that didn’t stop me from seeking meetings with the Chancellor or writing directly to the Chancellor.

Lead 2A: Can I take you chronologically right back to the beginning. I’m sorry to jump around, but the opportunity to look at Omicron came up from your evidence.

Right back at the beginning, you had obviously, as we’ve explained, somewhat been thrust into the role that you held for the rest of the pandemic, and as I’ve said already there was, there is evidence available to the Inquiry of increasing concern amongst medical specialists about the position. We have heard evidence, or we’ve seen evidence from an individual who was a civil servant within the health directorate, Mr Grieve, who suggested – whose entries in his notebook suggest that over the period of February there was generally a lethargy, and in fact a relative lethargy when compared with the UK Government, with whom he was having frequent contact, about the way in which the Scottish Government operation was warming up to the threat.

I’d be interested to know from your perspective, in what, for you, was a new role, within the directorates which you were involved in, whether that was a general impression that you would share. Obviously against the background of emerging information, but some of which we’ve looked at and would suggest emerging information which was a basis for considerable alarm.

Ms Kate Forbes: The challenges posed – so I was appointed 17 February and, as you can imagine, being thrust into a job like that and having to complete a budget meant that my primary focus was getting the budget through Parliament. The budget was then nailed down, I believe, on 6 March, and within probably a couple of days the UK Government announced the first tranche of funding for Covid. So from an Exchequer perspective, in a sense we never stopped being in that budget period, and almost immediately we went straight into budgeting for a pandemic.

So from an Exchequer perspective we basically respond to the policy priorities of other parts of the government, and I think it would be fair to say that over the period of February, in hindsight, there should have been a lot more discussion about how to budget for the pandemic, and it was indeed in response to the funding that was made available on 11 March that we really got into that territory.

So I do think that that is a learning and a lesson that we should have, in that first budget, be considering a lot more around how we might have to budget in response to the pandemic.

Lead 2A: We’ve discussed with other witnesses in their specific portfolios, in particular with Ms Freeman, connected to health and other medical and scientific advisers, whether appropriate steps were being taken over that period to try to put in place the kinds of structures that experts were suggesting would be necessary to deal with the threat based on past pandemics and the information that was available. These included things like putting in place, first of all, testing but subsequently tracing facilities, the ramping up of the acquisition of PPE for hospitals, but more widely for the care sector and the like.

One might deduce from the evidence that we’ve heard that in that regard there was a degree of lethargy. Was that lethargy connected to an extent with lack of funding? And to what extent for these unusual events over that period could additional funding have been sought, looked for in a cupboard in another department, so as to be able to try to move more quickly as, on one view, the evidence might suggest should have happened?

Ms Kate Forbes: I’m not sure that I would agree with that, for the reason that when it came to, for example, procuring PPE and ventilators, I would suggest that the Scottish Government kicked into gear very rapidly, and kicked into gear several months before we had actually acquired any funding for the PPE and so on. So in that regard, I think it was an example where understanding the immediate need for PPE – it was my colleague Ivan McKee that immediately looked for Scottish supply chains, worked with business to start manufacturing PPE, and it was only really until the April or the May that we received Barnett consequentials to cover the PPE.

Lead 2A: You say that, but of course the Scottish health directorate will have had available to it a budget which it was entitled to spend any way it wanted?

Ms Kate Forbes: That’s right, yes.

Lead 2A: And it could, I think, in accordance with the procedures that we’ve looked at from a later period, have said “There’s a big problem, we absolutely need to get access, can you try to find some money, please” – to you – “within other budgets, because this needs to take absolute priority”; that could have happened?

Ms Kate Forbes: To an extent, and I think we – we did that. My point being that if you are funding something, then it means an equal and opposite reduction of funding in another area, and within the health portfolio in particular there was nowhere that could justify an equal and opposite reduction in funding. And so, much of this was done at risk, by which I mean they went ahead to procure the PPE before there was agreement with the UK Government around the Barnett consequentials. At risk, I held the corporate risk. And therefore they had, as it were, agreement to go ahead and procure it, even though the funding wasn’t lined up, reflecting the emergency and the urgent nature of the issue.

Lead 2A: So if they required to commit to spending beyond budget, they needed to get your agreement to that? Was that –

Ms Kate Forbes: Yes, they did. Well, it had to held as a corporate pressure.

Lead 2A: Yes, of course.

So I’d just like to explore the concept which one sees in many places that you can’t go ahead with doing things because you don’t have funding for that specific thing. I think we’ve discussed that isn’t quite the way the system works. You can choose to prioritise something, you can choose to try to get guarantees from you about the need for testing, the need for testing systems, genomic sequencing, for PPE. You don’t have to wait until the UK Government gives you the money for that specific thing, because once funding has been allocated or allocated to a department, they can choose to prioritise that any way they want?

Ms Kate Forbes: To an extent. The difference with the pandemic was a question of risk. That may work in normal times, where the risk that you’re holding is in the tens of millions of pounds. The risk we were holding in the pandemic started running to the billions of pounds. So that’s why I use the PPE example, that at the point where it was estimated that they had spent £160 million on PPE, and that may indeed rise to £200 million, that’s when I started engaging extremely intensively with the UK Government, because the UK Government had agreed to supply the PPE and therefore there would be no Barnett consequentials, because that’s UK-wide funding, but I made that point that we had procured our own PPE in order to be prepared and therefore we needed a Barnett share.

So I think the distinction I would make is on risk. You can take some risk but when it starts to mount up and you have a fixed budget to deliver, that becomes more of a concern.

Lead 2A: Were you required or asked to provide further funding to improve testing over this period?

Ms Kate Forbes: That was – that would have been held within the – I don’t recall any specific requests to me in terms of a corporate pressure, so that would have been managed within –

Lead 2A: The existing budget.

Ms Kate Forbes: – the Health budget.

Lead 2A: But a request, in the same way as I understand a request was made, effectively, for additional funding by way of your corporate guarantee, additional funding could have been asked for in the testing sphere?

Ms Kate Forbes: I –

Lead 2A: It could have been?

Ms Kate Forbes: I don’t recall any specific asks for testing. I do recall the health portfolio constantly asking for additional funding more generally.

Lead 2A: Okay.

There are various references that we’ve looked at in early documents, Cabinet minutes and the like – there are occasional references in these amongst the various health information to thought, in a broad sense, starting to turn to what the potential financial implications of whatever it was that was coming would be.

It is our general impression of these, without going to the specific mentions, that there seemed to be little consideration of the likely overall economic impact at that stage, and also that, insofar as any initial attempt at modelling that might be concerned, it seemed to be based on a number of things which, on one view, might be deemed to be broadly analogous but not directly analogous, including the fallout of the 2008 banking crisis, severe weather events, and the like.

In – I think you may have said something about this earlier, but in those early stages was modelling of the likely financial impact done to any extent? Recognising, of course, that this is a situation of urgency.

Ms Kate Forbes: Yes, but I don’t think it captured the full extent of the pandemic that unfolded. So, for example, I recall after – on one occasion, the health budget considering that it might need sort of an additional £800 million or so, and we ended up spending over £5 billion on health.

The general modelling of the impact on the economy I think was pretty consistent with what actually unfolded. So from memory I think Gary Gillespie suggested that about 900,000 jobs would be affected, there would be sort of a 25% or so impact on the economy. But that modelling was probably in late March. So prior to late March I think you’re right in saying that the economic modelling did not capture the full extent of a two and a half year impact on the economy.

Lead 2A: There’s mention in Cabinet minutes and indeed other documentation of the impending likelihood that the virus would affect what are usually broadly referred to as “vulnerable people” the most, and certainly we’ve seen very early indications in the medical information being provided to government that that was part of the unfolding picture really from January onwards.

To what extent are you aware of whether any assessment was done in the period up to March of the likely financial requirements which would flow from the fact that vulnerable people, particularly in Scotland, with its elderly population and considerable health inequalities, would be hit the hardest, and as regards the possibility that they would require significant financial assistance to survive?

Ms Kate Forbes: I don’t recall any specific modelling, but I know that it was well understood that vulnerable people would be particularly hit by the pandemic, and it’s part of the reason why I think one of our first major financial announcements was about £350 million to go towards, for example, food for those that were shielding and support for charities that were working in communities to help with social isolation and so on. So it was certainly uppermost in my mind that sufficient budget had to be made available for, as it were, social support for those alongside the business support.

Lead 2A: You mentioned charities there. We have been given a number of statements by charitable organisations in Scotland and, without wishing to summarise them all too broadly, I think it fair to say that the tenor of what they say is actually relatively complimentary about the provision of funding, although there were certain delays in certain cases.

Was it the view of the Scottish Government at that stage that the charitable organisations could be given relatively small amounts of money to deal with the all the difficulties that various vulnerable groups would experience, because systems did not exist for the government to assist those people themselves?

Ms Kate Forbes: I think that’s fair. And it also meant that it was a very devolved approach. So I could speak to, for example, the charities that operated in my own rural patch that were best placed to respond, and we – I think the first announcement was about £20 million for the third sector in that first tranche of funding.

Mr Dawson: Thank you.

If that’s a convenient moment, my Lady.

Lady Hallett: Certainly. I will return at 11.30.

(11.16 am)

(A short break)

(11.30 am)

Lady Hallett: Mr Dawson.

Mr Dawson: Thank you, my Lady.

Ms Forbes, we had reached, before the break, some discussions about some of the early period, the developing understanding of what the wider financial impacts might be but also the immediate spending priorities.

If I could take you, please, to INQ000214556.

This is – again, we call them minutes, the government seems to call them conclusions, of a Cabinet meeting from 7 April. Could we go – you were in attendance. Could we go to page 6, please.

There is a section here entitled “The Scottish Budget and COVID-19”. It says at paragraph 24:

“In relation to the item in paper SC(20)43 concerning the impact of the COVID-19 pandemic on the Scottish Budget, Ms Forbes noted that the projected net shortfall in the 2020-21 Resource Departmental Expenditure Limit (DEL) budget of £1.6 billion was the highest ever recorded by the Scottish Government at the opening of a financial year, and represented an increase of some £900 million beyond what had been expected when the Budget Bill was approved by the Parliament.

“25. On the basis of discussions with [Her Majesty’s] Treasury to date, it was not expected that there would be any further significant consequentials beyond those included in arriving at that position. In addition, any cost estimates were – due to the nature of the outbreak – highly susceptible to change.

“26. Further reprioritisation and savings options would be essential in order to move towards delivering a balanced budget. To this end, a series of targeted interventions were to be launched at portfolio level to identify further options, the outcome of which were to be included in a paper for consideration by Cabinet later in April.”

I was just keen to try to understand a little bit more, there is a lot of complexity around what’s happening at this time obviously, about where we were financially. Obviously you mention the budget being the highest ever recorded by the Scottish Government and some funding having been made available, what was the position at this time as regards where we were in budget terms, what had been made available, what was the projected deficit, obviously subject to the fact that things were obviously about to be quite turbulent?

Ms Kate Forbes: Yeah. I think a number of points. One is that we had understood that, as it were, the full quantum of Covid consequentials had been granted and therefore the only option to fund any additional Covid costs would have to come from within our own budget, which we did. And I should stress that that came almost entirely from non-Covid areas, so work that had been planned had to be re-prioritised.

It was a really phenomenally challenging time, because it was quite clear that the cost to respond to the pandemic, particularly in Health, were continuing to grow, and there was no access to emergency funding at that point.

Now, I should say that when we look back retrospectively, it seems remarkable because we know over the course of the pandemic over £14 billion in consequentials were received, but at this point I think it would have been in the region of about over £3 billion, and so that’s why we were – we were considering where we might find additional funding from within our own portfolios.

Lead 2A: So you had received that consequential, but for the forthcoming year your understanding was that that was all of them extra money you were going to get, so therefore because there was a shortfall in your projections you would have to find that money from elsewhere?

Ms Kate Forbes: That would be correct. And also if I could also mention, I said earlier, the risk of negative consequentials. So if the UK Government was itself looking for savings, bearing in mind we only receive what’s actually spent, if they had found savings and we understood that the UK Government was doing that, then the risk wasn’t just that there would be no additional money but that we might be in a position where there was negative consequentials.

Lead 2A: That’s at this point, but that –

Ms Kate Forbes: That’s at this point.

Lead 2A: – was subsequently resolved by the guarantee point discussed earlier –

Ms Kate Forbes: Indeed, in the summer.

Lead 2A: In the summer.

Just to understand, the concept of finding money from elsewhere always seems like a difficult one, but presumably were you at this stage able to predict to any extent, because of the fact that in the pandemic there would be certain things that couldn’t be done because of lockdown, capital projects and things, presumably it is – it was possible to find funding in the budget more easily than would normally be the case; is that correct?

Ms Kate Forbes: Well, it was a lot easier to find capital, but of course it’s not capital you need in an emergency like this, you need resource. And so, yes, major infrastructure projects could be parked, but it didn’t actually relieve the pressure. There were areas – so, for example, the expansion of early learning in childcare would be an example which was deprioritised and it freed up funding that could be reinvested and it was resource, which is what we needed.

Lead 2A: The reason I was interested in that particular area really relates to our discussion earlier about the fourth harm, because obviously – the particular example you gave is a good one, but the need to deprioritise things like that will have negative consequences further down the line. So if the government, as you say, was planning investment in early learning for children, that then didn’t happen, which presumably will have exacerbated the difficulties of those children not being able to access that learning, such that whatever should have been there for them wouldn’t be there at the end; is that right?

Ms Kate Forbes: Well, I think in this case it was postponed by a year, if I recall, which actually made sense, because it probably couldn’t have been rolled out anyway in light of the fact that children were not attending school. It may also be helpful to state that about half the Scottish Government’s budget is pay bill, so it’s people.

In light of what the whole government was trying to do in terms of keeping people in work, quite clearly that funding was guaranteed, and we didn’t look to make savings in that respect, which then meant the rest of the budget was under considerable strain.

Lead 2A: I see.

I think in your statement you mention, paragraph 25, pages 9 to 10, that – this is INQ000273982. Thank you very much. From the words “we often”, I think it might be over the page. Yes.

You say there:

“… we often provided funding to mitigate the impact of NPIs rather than avoid the harms of NPIs. For example, if we had invested in better technology upfront for Test and Protect or in Education so that children’s education wasn’t disrupted, the harms might have been less pronounced.”

I’m trying to put this in the context of that period, where you had a lot of difficulty in working out where the money was going to come from. There seems to be a recognition there that there are certain areas where you think greater investment could and should have been made. (a) is that correct, are there other areas that fall into these categories? And (b) why was investment not made in those, given that it would be almost inevitable, wouldn’t it, that, for example, children who are at home, not having learning, perhaps digitally excluded, would suffer significantly?

Ms Kate Forbes: So I think this is one of my primary lessons, I think. That, going back, the response to the initial lockdown was very much to do what we could in order to prevent the spread of the virus. It wasn’t to invest in brand new systems. So I think that principle applies very much to business support as well, that actually if we had invested in systems at the outset that would have lasted the two and a half years, I do believe that some of the other harms would have been lessened.

I mention education. Of course I’m not the Education Secretary, but some local authorities provided digital devices, some didn’t, which meant it was a patchwork. Now, a year later the Scottish Government committed to providing everybody with a digital device, but in the weeks prior to lockdown, assuming that lockdown would be short, it wasn’t considered to be a priority to build brand new systems which, inevitably in the public sector, as you will know, can take quite a long time, and also be very expensive, and we needed to get the money out to relieve the harms, if that makes sense.

Lead 2A: Yes. Indeed.

You mentioned in the statement also the possibility of better technology upfront for Test & Protect. Professor Mark Woolhouse gave evidence to the effect that it was thought that even in, by autumn 2020, the Scottish Government was only finding half of the cases because of deficiencies in the system of testing and tracing. Again, is it the case that better investment in that regard would have helped with the mitigation of what became known as harm 1, but also, as a result, the mitigation of other harms as well?

Ms Kate Forbes: I think it’s a principle that I would apply to everything from Test & Protect to education, that if in the first weeks of the pandemic we had invested in the infrastructure, then we might have – and expected the length of the pandemic, then I think we would have lessened harms. I suppose my point would be that in those first few weeks I don’t think, as Finance Secretary, I would have been permitted to do that by anybody, because immediately cash had to get to businesses, cash had to get to those charities, cash had to get to the PPE. And so we weren’t sitting with considerable sums of money and the time and capacity to build systems.

Lead 2A: You mention there something about the expected length of the pandemic. What was the expected length of the pandemic around the April period that we were discussing?

Ms Kate Forbes: Well, I think by April we were looking at starting to emerge from the first lockdown, and there was a lot of hope. And I think at the time our eyes were firmly set on getting to the summer and emerging from lockdown. You will recall the various documents that were published in terms of a framework for decision-making and the route map out of lockdown.

I do recall comments being made about a second wave, though, so I think that the risk of a second wave was very much on the periphery of our discussions, it wasn’t that it didn’t exist. But at that point it was trying to emerge from the first lockdown.

Lead 2A: Because one might reasonably argue that in the torrid period of February/March a lot of this was new, systems had to be created, there was a lot of pressure, uncertainty, planning for second wave or other subsequent lockdowns or restrictions, that did in fact happen, it might be slightly more difficult to defend those in circumstances where they were more predictable and not quite so torrid. Do you think that would be a fair point?

Ms Kate Forbes: And I think we start to see some of those systems emerge over that summer. So as we came out of lockdown, that first lockdown, over the summer months, I recall, for example, discussions about what systems would be best for providing business support going forward, and so we adopted a new model, which was the levels, where you got a different amount depending on what level you were in when the levels emerged.

But I do think it’s fair that in that summer we could have done even more in terms of building structures and systems. It did feel to an extent like we never actually emerged fully from that lockdown, because Aberdeen then was placed in restrictions, Glasgow, and so on. So I guess the perception was that we didn’t actually ever get to a point of reprieve, the pressures continued.

Lead 2A: Over the summer, of course, it appeared that – from documents we’ve seen that the priority was trying to eliminate the virus within the Scottish Government; is that fair?

Ms Kate Forbes: I think in terms of the objectives of the Cabinet, that may have been a priority. I suppose from my perspective, not being in and around the health elements, my priority continued to be just ensuring that there was sufficient funding for whatever our response was, and clearly other areas went into lockdown and we needed to continue to fund it.

Lead 2A: Because one of the phenomena that comes through in the evidence we’ve seen from disabled groups, other vulnerable people, ethnic minorities, children, women, elderly people, is that they saw no tangible improvement in the support that was provided for them throughout the two years plus of the entire pandemic. And, as I say, whereas one might, and I think they might, be relatively sympathetic to the torrid times of February and March, the tenor of their evidence is that they are far from sympathetic about what the Scottish Government did for them in the later part of the pandemic, from summer 2020 onwards.

Is it your position that the Scottish Government ought to have done more in recognition, and in the knowledge of what happened in the early part of the first wave, to protect the most vulnerable and indeed invest sums of money to ensure that that happened?

Ms Kate Forbes: Yes. And can I use the opportunity to express my immense sorrow at the devastation that was wreaked amongst so many families but also the personal cost and loss for those that had to shield, those that had to isolate, and particularly those that were separated from family over that period. And I do agree – I recall, for example, some additional investment in, for example, care homes to assist them with digital resources to connect with families, but that seems small in comparison with the billions of pounds that were being spent, for example, on financial support for businesses and so on.

Lead 2A: If groups like that or members of Scottish society more widely wanted to know what it was that the Scottish Government had spent its money on, the additional money that we’re talking about, the budgeted money as it changed and more money came through, it would be important, would it not, that the Scottish people would be able to access the information about what it had been spent on?

Ms Kate Forbes: Yes.

Lead 2A: In his, again, helpful analysis of matters, Professor Cairney drew our attention to an Audit Scotland report which identified a range of unresolved concerns about Covid-19 governance effectively to do with the ability of that body to access what the money had actually been spent on. No doubt complex. But was that, or is that, as far as you’re concerned, an issue which remains unresolved, justifying to people who will have had promises made to them that investment would be made in their sector, to help their children or their family or their disabled relative or whatever, their relative in a care home, that they are now not able to access information which tells them whether that money was actually spent in the way that they expected?

Ms Kate Forbes: Well, it’s obviously a very complex picture, but I agree with the principle that it is absolutely imperative that everybody in Scotland can understand where the funding was spent.

There was a number of initiatives that we took to try to make that clearer, so for example where we normally had two budget revisions we increased it to three. But one of the challenges in making it crystal clear is the way in which the funding was both informally and formally being dealt with. So often at the point that an announcement was made, it may have already been the case that we had informally allocated that funding on the basis of Treasury conversations, and it was also the case that, when we moved into the guarantee period, announcements were made which created a basic expectation, which was then spent. So I think the challenge with the complex picture, and obviously Audit Scotland has considered this in great deal, is that it was – there was a lot of moving pieces and every time we took a snapshot it was out of date probably within a matter of hours, if not days.

So during the pandemic, it was extremely complicated to try to pinpoint precisely what was happening.

Lead 2A: Those might well be reasons why if commitments were made, changing circumstances meant that those couldn’t always be fulfilled, because other things came along or what you expected to get from the UK Government wasn’t quite what you ended up getting, but it’s not quite the same question as being able to work out in the end whether or not monies were spent as they had been committed. It is important that people are able to understand that information, is it not?

Ms Kate Forbes: Absolutely.

Lead 2A: In particular because a number of representative organisations, some of the charitable organisations referred to earlier, spent a considerable amount of time and effort trying to lobby government to make sure that funding would be available, presenting arguments as convincingly as they could as to why that money was required, obtaining what they considered to be guarantees that it would be spent to meet the needs which they had identified and argued for, and they find themselves in a position of not being able to know whether that ever happened, and also in a position where, because of the considerable harms experienced within their particular constituency, they have a lingering suspicion that money was not spent as it was promised.

Ms Kate Forbes: I’m very sorry to hear how much efforts those groups have gone to to try to get answers to their questions, and I – I don’t think there’s any way but to say that it should be clear where promises were made how the funding was spent.

There are a number of documents that are published in terms of, for example, the Scottish Government accounts which will obviously go through in detail what money was spent and where, but if there are specific areas, then I don’t disagree with the premise of your question that that is probably a lesson that should be learned in terms of the clarity of public accounting and public budgeting in terms of linking funding.

I can obviously say with complete commitment that every single penny of Covid consequentials was spent on tackling Covid. And I can also say that there was – even with £14 billion, it could not in any way compensate for losses that have been experienced by any part of society.

Lead 2A: Thank you.

In your evidence broadly I think you’ve mentioned this already, I understand that, perhaps unlike some of your ministerial colleagues, you I think enjoyed a generally quite positive relationship with the UK Government ministers with whom you interacted; would that be fair?

Ms Kate Forbes: Well, I had a priority to keep it constructive because my end goal was ensuring that there was adequate funding, so …

Lead 2A: Yes, yes, I’m just trying to understand, would that be a fair reflection of your position –

Ms Kate Forbes: I think it would be fair, I think it would be fair that it was constructive.

Lead 2A: Yes. I would like to ask you some questions about the furlough scheme, which we’ve touched on already in connection to the Omicron wave and the apparent non-availability of furlough funding.

This was a considerable issue around the period we looked at earlier, around September, October and into the end of the year, when, as we understand it from previous evidence given to the Inquiry in Module 2, advice was tendered by SAGE, the advisory body, that there should be a firebreak or circuit-breaker lockdown to try to deal with the rise in cases at that time.

As we know, Scotland was also experiencing a rise in cases which, as I said earlier, led to the First Minister announcing on 7 September that there would require to be a slowdown of the easing of lockdown, and subsequently we know cases started to rise further.

Over this period we understand that it was the Scottish Government’s position that it had concerns about whether, if it required to impose a further lockdown, which was advised at one stage by the Chief Medical Officer and other medical advisers, that that would be difficult in the absence of any guarantees about funding. And on 1 November a public statement was made by the First Minister related to this issue which, as I understand it, was responded to the very same day by the Prime Minister, giving commitments that any devolved nation lockdown would be – would attract furlough funding.

Because this is an area in which you had significant engagement, I was interested to explore your perspective on it. Was it before 1 November – if my narrative is broadly in accordance with your recollection, was it before 1 November the Scottish Government’s position that it legitimately did not understand whether furlough funding would be available if a lockdown was necessary in Scotland?

Ms Kate Forbes: I would push that further and make the point that we believed it would not be available.

Lead 2A: What was the basis for that understanding?

Ms Kate Forbes: The Chancellor had announced, if I recall correctly, on 25 September that the furlough scheme was due to come to an end on 31 October, to be replaced by the Job Support Scheme, and over that month of October we intensely lobbied the chief secretary to the Treasury to ask that furlough be extended, and if it couldn’t be extended for the whole of the UK, it would be extended for those devolved governments that needed it.

Our concern was that it severely constrained the period within which we might be able to introduce some form of lockdown, because in the previous lockdown furlough had been absolutely critical. So we, in that October – and by that point also furlough had been reduced, so employers were being expected to compensate for more of the replacement of furlough. So in that October break, we obviously announced some financial support, and also part of that was very much tailored to try to compensate for the top-up on furlough that had been removed.

But in those engagements, I think if I recall correctly in one meeting the Welsh Finance Secretary actually saying that they would fund a replacement for furlough themselves. The difficulty for all of us is that none of us could control the administration of furlough, because it was HMRC, and that was reserved.

Lead 2A: So just to be clear, over that period of October at least, you were lobbying the UK Government for commitments in this regard, but you – not only did not get a commitment you got a positive no, if you like?

Ms Kate Forbes: Yes, there was no inch given that I can recall, there was no hint that it would be extended, there was no suggestion. And indeed where we had suggested alternatives, for example, doing a top-up ourselves but needing help with the administration, even that was not supported.

Lead 2A: So you made suggestions that you would fund it yourself as long as they helped with the administration?

Ms Kate Forbes: Well, we were open to all alternatives. I think the example I gave was actually from the Welsh Finance Secretary rather than from me, because we were quite constrained financially at that point.

Lead 2A: It seemed to us to be slightly politically odd, in the circumstances where the UK Government in terms of the 2020 Act had accorded in the schedules to that Act significant powers to the Scottish Government to impose social distancing restrictions and up to and including a lockdown, and that, as you say, by that stage there appeared to be an acceptance, if I understand your evidence correctly, that furlough was an essential part of a lockdown, that politically it would really be possible for the UK Government in those circumstances not to fund it, in particular in circumstances where at some future time England might have to have a lockdown and it be funded.

Would you agree with that assessment and was that the Scottish Government’s position at the time?

Ms Kate Forbes: Yes, and it did seem strange, because we were making the arguments throughout that period of the need for financial or economic support to match the health response, and so it seemed somewhat remarkable that our prophetic comments actually resulted in our fears happening where furlough was only extended on the eve of an announcement of lockdown in England.

Lead 2A: Had discussions taken place about the possible requirement for furlough, the UK Government’s position in that regard, before October?

Ms Kate Forbes: It had taken place over the – our conversations about furlough probably took place right throughout the summer, I would suggest, because we had been told that it would come to an end at some point, and –

Lead 2A: What I mean, to be clear, is discussions about the possibility of the need for a further furlough scheme in connection with further lockdowns rather than the one that was still in Scotland, certainly going on in the summer of 2020?

Ms Kate Forbes: Yes. Largely because we had seen the need for localised lockdown in Aberdeen and in Glasgow. So my memory of the summer is that we never actually came out of some form of lockdown because of those localised outbreaks, and so it felt like the proof of the need was there.

Lead 2A: You mentioned that the – the Welsh situation, which certainly seemed to us to be relevant, that Wales of course had a firebreak lockdown for 17 days starting on 23 October, and we have some information in a statement from Mark Drakeford, First Minister of Wales, where he said that he wrote to the Chancellor of the Exchequer to seek an extension of the job support scheme for the firebreak lockdown proposed in Wales, and claims that the Chancellor refused. He says that the firebreak lockdown came into effect on 23 October without the financial support of the UK Government and he states that the Chancellor of the Exchequer refused to fund the consequences of a public health decision taken in Wales. And he described that decision as one of the most misguided decisions of the whole pandemic, saying that the Treasury was acting as a Treasury for England not a Treasury for the UK.

Now, you’ve already mentioned the Welsh position. Would you say, although Scotland didn’t have a lockdown at that time so it didn’t suffer that particular consequence, was that – does that indicate the same sense of frustration in this regard that the Scottish Government had around this issue at that time?

Ms Kate Forbes: I would say so, yes.

Lead 2A: Was it a matter, and we’ve heard evidence that this happened on over occasions, on which the devolved administrations rather stood together and the UK Government took a position that they couldn’t quite fathom?

Ms Kate Forbes: Very much so.

Lead 2A: Thank you.

You do say in your statement at paragraph – page 19, paragraph 46, you say:

“Ultimately, I don’t believe that a lack of clarity or standardised mechanisms had a material impact on decisions about managing the health harms of the pandemic, but it added risk to the decision-making process and may have affected other harms like economic harms.”

Is that you in this regard, as we understand it, bringing together the fact that although this was a problem, and you’ve explained why it was a problem, ultimately it didn’t affect decisions about restrictions or lockdowns, as it appears to have done in Wales, because Scotland wouldn’t otherwise have done anything any differently as regards to the restrictions, based on the medical advice it had at the time?

Ms Kate Forbes: I think by and large, yes, that is the case. So in terms of the examples, that circuit-breaker, we – it was still introduced despite the fact that I think only £27 million were sourced to fund business support. Compare that with the £2.2 billion at the beginning of the first lockdown.

So that measure was still introduced. It did mean, however – I mean, there was no way during the Covid lockdowns we could in any way compensate for loss of trade for business, but we could try to mitigate the harms. So I do think that the decisions were still made. And I think, if I could add, the First Minister was ultimately I think absolutely focused on the health impacts and reducing the impact of the Covid health harms, and I think was often braver in doing what needed to be done irrespective of some of the other challenging situations facing businesses.

Lead 2A: Just to be clear, you mentioned a circuit-breaker there. Scotland didn’t have a circuit-breaker at this time.

Ms Kate Forbes: This was at the October, I’m talking about the October.

Lead 2A: But we didn’t have a circuit-breaker at that time.

Ms Kate Forbes: We – well, in terms of the measures that were taken over the October holidays, is what I’m referencing.

Lead 2A: Yes.

Ms Kate Forbes: The restrictions that were introduced –

Lead 2A: Yes –

Ms Kate Forbes: – sorry –

Lead 2A: – there were, of course, restrictions –

Ms Kate Forbes: Yes, the restrictions that were introduced, apologies.

Lead 2A: But to be clear, your position is that ultimately, although these added risk, you say, and one can understand why that’s the case, they didn’t ultimately affect the decision that the Scottish Government considered was the best decision to take in the interests of harm 1, minimising the effects of the virus –

Ms Kate Forbes: Not in a material way, no.

Lead 2A: Right, thank you.

You mentioned there the determination of the First Minister to combat harm 1 and to have her own strategies around that, and we’ve heard a lot about that in the evidence we’ve already had. Do you think that, in particular given the fact that the Treasury is a reserved matter, Scotland adopted a policy of “Fight the virus now, worry about the financial consequences later”?

Ms Kate Forbes: Well, they certainly took an approach of “Fight the virus now”, but I can assure you I did a lot of worrying about the finances throughout the pandemic.

Lead 2A: I’m sure you did, but as regards – you mentioned earlier that it was the First Minister who was the one who was driving the strategy, and I’m asking you whether that strategy, which ultimately became Scotland’s restrictions strategy, which of course differed from other nations in the United Kingdom, whether that strategy – it obviously prioritised harm 1, but whether it did that unreasonably to the detriment of other harms, including economic harms?

Ms Kate Forbes: I think that with every new introduction of an NPI, there was no harm-free option ever before us. And I saw my job as trying to ensure there was sufficient funding for whatever decision was deemed to be the best for the health reasons. So, in that sense, I do think that harm 1 was prioritised over everything else. But the justification for me was that the only way to ultimately resolve harms 2, 3 and 4 was to manage the Covid impact. So in prioritising harm 1, and trying to ensure we dealt with harm 1, we could hope to emerge from whatever NPI it was, whether it was lockdown or otherwise, and then start the road to recovery for all the other harms.

Lead 2A: There might be something of a logical issue with that, in the sense that what you’re suggesting is that the premise was as long as you deal with harm 1 everything else will take care of itself, but what is required, is it not, in terms of the four harms strategy, if nothing else, is a balancing of whether what is done for harm 1 is proportionate to what happens to harms 2 to 4?

Ms Kate Forbes: Yeah.

Lead 2A: Are you suggesting that the prioritisation, certainly in 2020, which is the period we have been looking at, of harm 1 was done at the decision-making stage without adequate consideration of the other harms?

Ms Kate Forbes: No, I think there was a lot of consideration, but – you know, there was – it was never the case that – let’s take harm 4, it was never the case that the economy could recover or be free of harm for as long as Covid existed. So any financial support that we could identify would never compensate for loss. It could only mitigate the harm.

Lead 2A: Yes.

Ms Kate Forbes: And what businesses wanted was ultimately to be able to trade completely freely, but it wasn’t within anybody’s gift to enable that for as long as Covid existed, because even when we came out of lockdown, there were other NPIs in terms of distancing that had an impact on them.

And that’s – my logic here is that – and, you know, I faced off to businesses, I met businesses probably on a daily basis, particularly when I became Economy Secretary, so I heard their stories of anguish, the harm – harm 4 is often characterised as business and the economy, it was people, it was workers, it was their mental health, and the pressure on an employer to give their workers reassurance.

So throughout the two and a half years, whether we were in lockdown or out of lockdown, there was an economic harm, and the only way to ultimately resolve that was to deal with the Covid health harm.

Lead 2A: What some might suggest is that that is a process whereby, although of course information was being gathered about the various harms and was on the table, the ultimate decision-making only focused on harm 1 and that ultimately what that meant was that the decision-making was not balanced or proportionate.

The owners of those businesses with whom you were meeting, many, many small businesses closed in the pandemic. The owners of those businesses might well suggest that a greater degree of priority should have been given in the weighing of the balance of allowing their business to open up to some extent, keeping some social distancing in place to manage harm 1, but that that would have been a more equitable balance.

Is your position that harm 1 was always prioritised on the assumption that the other harms would take care of themselves thereafter?

Ms Kate Forbes: Certainly not that they would “take care of themselves”, but I think where this became really concentrated was in, for example, the route map out of lockdown, and many businesses would have wanted to re-open earlier than they were able to. I think also going forward – in the first lockdown there was widespread acceptance of the need to lock down, and going forward, having suffered catastrophic losses in the first lockdown, businesses just did not have the resilience. And so I think that – I certainly believe I tried to weigh up all of the harms, but there was no harm-free option ever on the table, and so it was trying to figure out how to lessen the harm rather than to eradicate it completely.

Lead 2A: That might have been the process going on in your head, but you weren’t present at any of the gold meetings that took place in 2020, were you?

Ms Kate Forbes: I wasn’t.

Lead 2A: Okay.

So I just have a couple of areas that I’d like to try and cover with you, if I can.

Lady Hallett: Before you do, Mr Dawson.

Given your seniority in the Scottish Government, why weren’t you at the command meetings in 2020?

Ms Kate Forbes: I don’t recall – well, I wasn’t obviously invited.

Lady Hallett: Well, you obviously don’t know because you didn’t make the decision, but do you have any idea?

Ms Kate Forbes: I don’t. I wasn’t invited. I’m not even sure I was aware that they existed, because I remember, when I was invited to my first one, not really knowing what it was until somebody explained it.

Lady Hallett: You would have expected to be invited, wouldn’t you?

Ms Kate Forbes: Well, I would have expected to be invited to any meeting where there were significant financial implications.

Lady Hallett: Sorry, Mr Dawson.

Mr Dawson: Thank you.

A couple of areas. The first one I was going to try to cover with you was Eat Out to Help Out. We mentioned this earlier. This was a – as I understand it, an example that I cited earlier of a direct UK Government spend in Scotland. Is that right?

Ms Kate Forbes: Yes.

Lead 2A: And in your statement you say at paragraph 77 on page 29 that:

“We recognised the significant economic opportunity of the scheme but reservations were expressed about how it might encourage the spread of Covid-19. It was introduced on a UK-wide basis, without any decision-making or funding implications for the Scottish Government.”

So what that means is you didn’t need to find money in the budget for it, the budget came directly from the UK Government, but to what extent were you aware before it was introduced, I think on 3 August, that this was something the UK Government was going to do?

Ms Kate Forbes: I had no knowledge.

Lead 2A: As far as you understand it, is that the position across the Scottish Government.

Ms Kate Forbes: It’s certainly the position of anybody I’ve ever spoken to about it.

Lead 2A: Is it correct to say, given your expression there about reservations to do with the possibility it may encourage the spread of Covid-19, that this was not consistent with the Scottish Government’s then policy, strategy if you like, to seek to ease the lockdown slowly in order to try to suppress the virus?

Ms Kate Forbes: Well, that – that would – the reservations that I was conscious of was that it was likely to result in more people meeting together and therefore the virus spreading.

I should also say, though, that recalling all the meetings I had had with those businesses who had suffered catastrophic losses and the anguish they faced in some cases meant that it was largely popular amongst the stakeholders that – the business stakeholders that I was engaging with.

Lead 2A: That’s why you say that you recognised the significant economic opportunity from that perspective; is that right?

Ms Kate Forbes: Yes.

Lead 2A: The last thing I’d like to cover with you quickly, another area that we’ve covered, and you’ve explained that your role in this somewhat evolved before and after the election, it’s engagement with stakeholder bodies.

What was the policy as regards you or other ministers in your department engaging throughout the pandemic with business or representatives of business in order to get as full a picture as possible about the impacts on them?

Ms Kate Forbes: I would characterise it as extensive and constant.

So prior to the – my new role in May 2021, I still engaged. I would suggest that officials were engaging with the main business organisations on a daily basis. We would often seek their input to business support, for example. There was at least twice-weekly engagement between me and those business organisations, when I became Economy Secretary, to discuss what they were experiencing and why the Scottish Government was adopting certain policies.

Lead 2A: And before that I think you said that that was part of your role although not as prominent a part of your role; is that right?

Ms Kate Forbes: Yeah. Yeah.

Lead 2A: And before that, and perhaps after that, other ministers would have been doing something similar?

Ms Kate Forbes: Yes, I would have assumed so.

Lead 2A: Yes. And we’ve heard some evidence in the sessions that we’ve had from a representative of the STUC who told the Inquiry that they felt that there was a degree of consultation, as you’ve mentioned, but when they were consulted they felt as if the decision had already been made. Do you recognise those concerns and do you have any explanation as to why they exist?

Ms Kate Forbes: Yeah, I think that tension existed with nearly all of the stakeholder engagement work we did, including with the STUC. Largely because – each representative organisation obviously had concerns, they had desires for change, and we would then take that back to Cabinet, or we would have come from Cabinet, where those were also being balanced with other considerations across the four harms. So I would say that we tried to feed in all of those concerns and issues, but for every individual that said one thing there was another individual that would say the opposite, and in Cabinet we were trying to balance all of that. I think we tried to get the balance right, but it often left stakeholders disappointed that their particular issue hadn’t been delivered in full as they envisaged.

Lead 2A: You obviously can’t please all of the people all of the time, Ms Forbes, but is it perhaps the case that the STUC’s concern was based on the fact that no doubt they were lobbying on behalf of workers across Scotland, their various – parts of their organisation, that what they felt was that the decision had already been made because the decision was always to prioritise harm 1 and never deal with the concerns that the workers they represented were raising with them?

Ms Kate Forbes: I wouldn’t agree with that latter part in terms of never prioritising workers, because I think that throughout the pandemic we did seek to prioritise workers and workers’ rights.

What I would say in terms of balancing those harms, I would say that towards the middle of the pandemic there was an active shift – I certainly tried to deliver – which was to discuss a decision with a stakeholder group before it was made. There were always some elements of risk in terms of confidentiality, announcing decisions before you announce it to Parliament, but to try to bring issues to those stakeholder groups before it was made rather than after. And I think there was a bit of a mix throughout the pandemic of the point at which we engaged stakeholders.

Lead 2A: When did that shift occur? I mean, in the middle, might be about the time of the election, something like that?

Ms Kate Forbes: No, it would have been after the election, I would say. I remember trying to implement that shift in summer 2021. I was newly in post, Cabinet Secretary for the economy, and thinking: wait, can we build more of a trust here? And say, “Look, these are the problems that we’re trying to resolve, what do you think?” And then taking that into Cabinet.

Lead 2A: Do you think it would be fair to say that that – although that was obviously a personal initiative on your part, that would be part of a wider government initiative at that stage to try to turn the attentions more on the other harms and away from managing the virus itself, to achieve a better balance?

Ms Kate Forbes: Yeah, I think harm 1 obviously continued to be prioritised but I do think that there was more interest in proportionality, although that had probably started to shift in the previous October, I would suggest.

Mr Dawson: Thank you.

Those are my questions, my Lady. I don’t understand there are any CP questions.

Lady Hallett: I don’t think so. Thank you very much indeed. Thank you, Ms Forbes, I’m deeply grateful for your help.

The Witness: Thank you.

Lady Hallett: Thank you very much.

(The witness withdrew)

Mr Dawson: The next witness, my Lady, is the

Right Honourable John Swinney MSP.