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From 1.30pm MSPs will debate whether to keep the European flag flying at the parliament during the Brexit transition period, despite the proposal having been rejected by the SPCB.

The Scottish government motion points out the UK will still be in the Council of Europe post-Brexit and "directs" the parliamentary authorities to keep flying the European flag.

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After health and local government questions, Nicola Sturgeon will lead a debate titled 'Scotland's future'. She is calling for the Scottish Parliament to be given the powers to legislate for indyref2.

The vote on this and the flags will be at 5pm.

Labour MSP David Stewart will lead the member's debate on palliative care at home.

Ms Spowage says one of the consequences of fiscal devolution is taking on more risk and the question is whether there are levers to manage that risk.

Labour MSP Alex Rowley cites "tens of thousands" of job losses in local government and what the economic knock on affect of this is.

The FAI deputy director replies between 2016/17 to 19/20 resource spending increased by £1bn in real terms, with the majority going to the health budget and social security.

Spending on non-health and non-social security has fallen, with local government and higher and further education hit the worst, she adds.

The evidence session draws to a close.

Tory MSP Alexander Burnett moves on to local government funding, citing a nearly 8% reduction in funding since 2013.

Ms Spowage says the FAI has done no economic analysis of long term affects of cutting funding local government.

The FAI deputy director explains that transport link modelling is difficult to do and not for her think tank.

Labour MSP Neil Bibby wonders if there has been any evaluation of the impact of city deals on local economies.

Mairi Spowage says there has not been specific analysis, but it would be interesting to look into this and whether any impact has been displaced to other parts of Scotland.

Mr Bibby asks about capital spend on infrastructure projects.

The projects have a long lead in time and may take a while to come through in figures, Ms Spowage says.

Asked whether spend could be more effective, she replies is depends on what the aim is.

Of course using local supply chains will have an bigger impact on local economies, which is one of the bigger issues for how such capital investment impacts the Scottish economy she explains.

Mr Harvie wonders if the approach New Zealand is taking is worth exploring.

Last year First Minister Nicola Sturgeon joined with other leaders to promote a "wellbeing" agenda.

Iceland's prime minister, Katrin Jakobsdottir, and the prime minister of New Zealand, Jacinda Ardern, joined Ms Sturgeon in calling for new social indicators to be considered beside traditional GDP data.

Ms Spowage says it is important to be able to measure specifics or else we cannot hold people to account.

Difficult decisions would have to be made in order to focus on things like preventative spend and to reduce poverty, and what we measure to demonstrate this, she adds.

New Zealand set their budget in the context of a budget surplus, she highlights.

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Scottish Green Party co-leader Patrick Harvie pivots to what the Scottish government is trying to achieve with its budget, citing the FAI report which looked at its "wellbeing economic approach".

He says there is no definition of "sustainable economic growth" and "wellbeing" may suffer from the same thing.

It's certainly true that governments should be about improving society's wellbeing, replies Ms Spowage.

The FAI deputy director agrees it is true that the words used around "sustainable economic growth, focusing on inclusive growth and now the wellbeing economy are hard to pin down in terms of what they mean for policy making and budgetary decisions".

That is unless there are more specific outcomes about what they actually mean for society and what interventions the government can actually prioritise to achieve those, she elucidates.

"Otherwise it can just look like window dressing, or moving the deckchairs around in order to present the budgets in different ways."

I do agree that unless there is more definition of what is meant by prioritising wellbeing or a wellbeing economy, and linking that to specific action and budgets it is difficult to see it as being anything other than a bit of a PR exercise she adds.

Ms Spowage says there are plans to frame the budget in those terms however, which will be interesting to see.

Tory MSP Murdo Fraser points out that while the UK and Scottish unemployment rate are broadly similar, the Scottish employment rate is 2% below the UK average.

He wonders if the Scottish employment rate rose to meet the UK average, would this impact the budget.

The FAI deputy director says in principle higher employment would lead to higher tax tax, though it depends on the income distribution of the employees.

Ms Spowage says based on the SFC forecasts on social security it does look like the BGA (block grant adjustment) will be more or less the same as expenditure in 2020/21.

She points out there was no figures for income tax previously, which led to overestimates of the tax base in Scotland. However, we are not in that situation with social security she says.

We know how many people receive these payments with certainty, she adds.

Ms Spowage says the uncertainty lies with policy changes in the future which affect forecasting, for example campaigns to increase the uptake of payments.

Ms Spowage says if the block grant adjustments are locked in based on the announcements made in September it is possible to plan for the next couple of years.

But the FAI deputy director says any extra spending announcements made by the chancellor in March could impact the block grant adjustment significantly.

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UK government plans for a March budget are "disrespectful to devolution" and could have "profound consequences" for Scotland, Derek Mackay has warned.

Chancellor Sajid Javid has announced he will set out his tax and spending plans on 11 March.

Scottish ministers wanted to see these plans before drawing up their own.

Mr Mackay, the Scottish finance secretary, said the move was "really disrespectful" to Holyrood.

Read more.

SNP MSP Angela Constance asks about the cumulative risks about the Scottish budget taking place before the UK budget.

Ms Spowage replies it is quite difficult to look at the overall risk, adding the risk seems low to moderate for each of them.

The risk of the block grant being reduced is low, she points out.

However she adds: "Yes, it does create additional uncertainty."

This is due to the lack of a forecast from the OBR for a year so it makes it uncertain where they are going, Ms Spowage says.

The FAI deputy director adds the think tank does not think the risks are as high as some but she reiterates it is suboptimal.

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The Autumn Statement is the second of the two big economic statements made by the UK government every year - the first being the Budget which happens in the Spring.

Traditionally, the Autumn Statement has outlined economic projections and broad departmental spending allocations, while the Budget largely dealt with taxation plans.

In recent years that distinction has become blurred and some taxation plans are now also announced in the Autumn Statement, but we don't learn fine details, such as duties on alcoholic drinks or cigarettes.

Mr Tomkins reiterates that within the fiscal framework the UK budget was originally scheduled for March, after the Scottish budget.

Ms Spowage points out it was generally welcome when the UK budget was moved to Autumn to give more time.

She says it would be a bit of a step backward to go back to the March situation with the timing of the UK budget.

"It would sort of cause tension between the two governments," she adds.

Mr Tomkins suggests the fiscal framework was designed to deal with the Scottish budget coming before UK budgets because the latter was published in March in the past.

Ms Spowage says this is true - but the block grant adjustment would have been set in the Autumn Statement from the UK government.

On the block grant, it seems likely that there is limited risks to the Scottish budget she explains.

But there is a risk in relation to the lack of OBR forecasts (of which there have been none since March 2019), as small changes to assumptions of wage growth could lead to large change in cash terms for the block grant adjustment.

There is a political policy risk because an announcement by the UK government could make Scottish government decisions look "unviable" by comparison, she warns.

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MSPs on the finance committee are discussing the next Scottish budget.

Finance Secretary Derek Mackay will set out his tax and spending plans on Thursday 6 February - a month ahead of the UK budget.

The Fraser of Allander Institute has been critical of the UK government's handling of the situation.

In a blog post, external, it warned the Scottish government faced the "risk that subsequent policy changes by the UK government make Scottish policy choices look unsustainable or unviable".

Ms Spowage says there are many movable parts that make things uncertain this year and we will know more next week with the fiscal forecast from the Scottish Fiscal Commission.

The Fraser of Allander Institute deputy director says in 2021, Scotland will be exposed to new risks when the devolved social security powers are transferred to the parliament, a risk similar to the transfer of income tax powers.

We have the complexity of the Scottish budget taking place before the UK budget this year which is "suboptimal", she adds.

She explains the Fraser of Allander Institute has done a lot of thinking about the risks around this sequencing.

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The Scottish government is to announce its draft budget plans on 6 February.

Finance Secretary Derek Mackay will set out his tax and spending proposals a month ahead of the UK budget, which will not be published until 11 March.

Mr Mackay said it would have been "impossible" to wait for the UK budget as usual while councils and public services need clarity about funding.

A spokesman for the Treasury said it would work with Scottish ministers to provide the fiscal information needed.

Read more.

Mairi Spowage says much of the analysis the FAI published in November remains the case, given the outcome of the recent general election.

She says the FAI estimates the resource block grant to Scotland will grow by 2.1% in 2020/21 and probably a similar amount the year after.

This is fairly healthy in the context of recent years, she explains.

But she adds there is some uncertainty to these figures as they are based on September announcements rather than the UK budget - which will not take place until March.

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Deputy convener Adam Tomkins welcomes Mairi Spowage from the Fraser of Allander Institute, external to the session.