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In his statement to parliament last week, Finance Secretary Derek Mackay insisted the UK government could allocate more money to Scotland while still meeting its fiscal targets.

The minister argues that that "austerity is a choice" and Chancellor Philip Hammond has "fiscal headroom" to do otherwise.

Pointing to Scottish government modelling, Mr Mackay suggested the chancellor could still meet his structural deficit and debt reduction and provide £5bn extra to Scotland.

Look back on the statement here.

SNP MSP Emma Harper kicks off with productivity, asking what interventions could be taken to boost it.

Finance Secretary Derek Mackay accepts productivity has been a challenge, but says investment in skills, innovation and enterprise will help to improve this.

A range of economic interventions will both boost growth and productivity, Mr Mackay suggests.

Shifts in the working age population are probably having an impact, he adds, which is why immigration is factor though he highlights it is outwith the Scottish government's control.

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The medium term financial strategy (MTFS) was first proposed by the Budget Process Review Group.

It forms part of the new budget process endorsed by MSPs on Tuesday 8 May.

The MTFS is designed to improve parliamentary scrutiny of Scottish government budgets by providing information on the sustainability of devolved public finances.

The Budget Process Review Group recommends that the MTFS:

• use revenue and expenditure forecasts to measure the effect on public finances
• set out broad finance plans over the next five years
• outline policies and principles for the use, management and control of financial powers
• undertake scenario planning based on economic forecasts

Here's the full Budget Process Review Group report., external

Image source, Scottish government

The committee will now consider the Scottish government's medium-term financial strategy, external with:

• Finance Secretary Derek Mackay
• John Nicholson, deputy director for dinancial scrutiny and outcomes with the Scottish government
• Aidan Grisewood, deputy director – fiscal responsibility division
• Simon Fuller, deputy director – economic analysis

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Professor Alasdair Smith says the housing market is volatile, making LBTT difficult to forecast.

The SFC commissioner explains new information does shift the forecast, but one year of information does not have a big impact on the long run forecast.

The housing market model is self contained, without a big feed in from the rest of the economy.

SNP MSP Emma Harper says she is interested in landfill tax, which the SFC report says will be the only tax not to increase.

Scottish Fiscal Commission chair Dame Susan Rice responds: "We believe it will continue to reduce."

Convener Bruce Crawford wraps up the session with the quip: "I don't envy your job."

SNP MSP Ash Denham pivots to migration projections.

Mr Wilson says the SFC uses ONS and National Records of Scotland forecasts.

Population is very important in terms of economic forecasts and different levels of in-migration has caused differences between Scotland and England, he explains.

Given the Brexit vote and expectation of a tighter immigration regime, the assumption is EU in-migration and out-migration will be half, the commissioner states.

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Committee convener Bruce Crawford asks about Brexit and Bank of England governor Mark Carney's statement that the Brexit vote has left households £900 worse off.

Has this been built into the forecast, Mr Crawford asks.

Scottish Fiscal Commission chair Dame Susan Rice says in the economic forecast Brexit is looked at as a background factor, but there is a lot of uncertainty.

This leads to less confidence in business investment, she explains.

Brexit is there as a background factor creating a "drag on future investment", says Dame Susan.

Prof Smith confirms the next December forecast will include a much fuller analysis of the impact of Brexit.

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Labour MSP Neil Bibby asks if there has been a relative reduction in living standards.

Dame Susan Rice agrees you can draw the conclusion from the lack of growth in real wages, however the plus side is there are jobs out there as employment is growing.

SNP MSP Ivan McKee queries how the SFC deals with variability.

Commission David Wilson replies: "We're all learning as part of this process."

The uncertainty in modelling around income tax is set out in the MTFS, he highlights.

The Scottish government has estimated the next spending power could be between -£400m or +£1.4bn from the SFC's central estimate.

There is a significant range of potential income, Mr Wilson adds.

Digital innovation, productivity boosts and other positive elements are taking place in the economy but these are being hidden by the overhang of the 2008 financial crash, Commissioner David Wilson explains.

Green MSP Patrick Harvie asks about the distribution of incomes and the impact on income inequality.

Mr Wilson says the SFC has no plan to publish this in forecasts at the moment, thought it does have to be considered as part of a material part of the forecast.

He suggests further work could be done if the committee wished.

In March, we reported that Chancellor Philip Hammond had unveiled upgraded projections for growth and predicted falling inflation and borrowing in his Spring Statement.

He claimed the UK economy had reached a turning point and there was "light at the end of the tunnel".

He ruled out an immediate end to austerity but hinted at possible spending rises in the future.

Labour accused him of "astounding complacency" in the face of the worst ever public sector funding crisis.

Read more.

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Professor Alasdair Smith from the Scottish Fiscal Commission says the strongest statistic to focus on is the pattern of real wages which are lower now than they were in 2009.

This is a virtually unprecedented economic picture, he explains.

Tory MSP Adam Tomkins asks if he facts have changed, or if the SFC have changed their mind about the existing facts or if this this additional work.

Dame Susan says: "We've had a few more data points, not a lot."

This is part judgement made at a particular point of time, she says.

Dame Susan adds that since the last SFC forceast we've had the OBR forecast in the middle of March.

Labour MSP James Kelly notes four sources are used to calculate wage data and he asks about changes to these.

Mr Ireland says the four sources are of data which are collected in different ways and all have different strengths and weaknesses.

Mr Kelly presses about what new data has become available over the last four months.

While there has been some new data, the principle change was a result of more analysis of existing data, the chief exec explains.

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Tory MSP Murdo Fraser asks what has brought about this "radical change".

Scottish Fiscal Commission chair Dame Susan Rice explains further analysis of more information has taken place.

Mr Fraser points out that this revision downwards combined with revision of the OBR in this financial year leaves "Scotland facing a black hole of £390m".

Dame Susan says this is in the nature of forecasting.

David Wilson points out the last OBR forecast amended their income tax forecast by 2%, more than the SFC revision.

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The SFC does not foresee, external GDP growth reaching 1% in the period running up to 2023, lagging behind Office for Budget Responsibility forecasts for the UK as a whole.

The commission also said real wages were lower today than they were a decade ago, and that the outlook was weaker than expected, with no real-terms growth until 2020.

This has an impact on the predicted tax take over the coming years, which has also been cut back.

The forecast income tax take for 2018-19 has been revised downward by £209m as a result of weaker than expected wage growth.

Convener Bruce Crawford asks about the change to the forecast and the data used.

SFC chief executive John Ireland explains that there is little data on wages in Scotland so a variety of different sources are used instead.

Productivity and labour market slack drives wages according to economic theory, so the SFC has done some work around this which has allowed us the reconsider its forecasts, Mr Ireland states.

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Committee convener Bruce Crawford says the income tax forecast is £209m lower than it was in December and he asks what has changed.

Dame Susan Rice explains the December report focused on productivity, but since then a lot of analysis has been done on wage growth.

When there are lower earnings less tax is paid, she says.

Professor Alasdair Smith says wage growth has been low since 2008.