Chamber and committees

Okay. Thank you.

I acknowledge the risk of behaviour change—I am not denying that it is a factor. Our response is to say that, from the information that we have, we have not seen evidence of people relocating for tax purposes. That does not mean to say that there may not be a certain amount of behavioural change in the way that income is accounted for or tax arrangements are made, which are tax planning practices that are quite different from relocating.

We are also quite early in the era of tax divergence between Scotland and the rest of United Kingdom. We do not have many years’ experience of that divergence. We have to be attentive to the detail and open about exploring those questions. In the policy-making space, we have to be conscious of the risks of behavioural change and factor those into our consideration of what tax changes to make—if any.

That adds financial strain to next year.

I do not think that it says that; it simply says that that is the best estimate that we have. A financial memorandum looks at the position many years hence. Operational decisions are taken about the expected expenditure for any particular programme. Those numbers will be constantly reviewed. As I have tried to explain to the committee previously, the Government is concentrating on the preparations in two respects—getting the initial organisational arrangements in place and boosting the salaries of social care workers—which is why we have allocated a substantial amount of money in the budget to enable those to happen.

I think that what you suggest is an option, but I can just imagine the sight of John Swinney turning up at COSLA headquarters to say, “We’re going to do a top-down reform of local government finance departments”—I imagine that Mr Lumsden would be at the front of the queue to support me in all my efforts. It is possible, but I would much rather encourage a process in which local authorities make the necessary changes at their own hands. I do not think that the Government should be making those changes to them.

Let me express my frustration about that point. You alight on a particular problem. I go back to the world that I used to occupy as education secretary, dealing with 32 education authorities and 32 directors of education. Local authorities are of widely varying sizes, so the director of education in the city of Glasgow and the director of education in Clackmannanshire, for example, will be dealing with fundamentally different propositions. To take the Clackmannanshire example, some years ago, Clackmannanshire and Stirling councils did quite a bit of collaboration and got very close to running a joint education service. Nobody lost their identity or their focus on education. However, the councils decided to dismantle those arrangements, which I think is a point of regret.

There is scope for exactly what you suggest. I have encouraged local authorities to work together on the creation of regional improvement collaboratives among groups of local authorities, in which a lot of good work on education goes on. Shared leadership would help with an awful lot of these things as well.

I accept that that is me beginning to get into the territory of specifying what local government should do. I am left with the pretty strong impression and message from local government that that would not be particularly welcome.

It depends on what you mean by “a blueprint”. If that is a list of office buildings to be rationalised, that is unlikely. I do not think that that is how such a programme should be predicated. We should be starting from a perspective of looking at how to reduce costs, improve efficiency and rationalise the estate and should then challenge public bodies to ensure that that happens.

Some of those things will have to happen because of the financial constraints caused by the budget. That will apply right across the public sector. I hope that the Government’s response to the committee’s report, and the detail that we have gone into, gives the committee more clarity about the direction of travel, but it does not give a list of operational changes that will take place. We can report on those as they take their course.

I am very happy to keep the committee informed about developments in that respect, which I think will address some of the issues.

I might best address that question by looking at two different categories of people. The first is people who were economically active and, as a consequence of what happened during the past couple of years, have decided not to continue that economic activity. Covid has been very disruptive to lots of people in lots of ways. We have to find ways of motivating people to continue to make an economic contribution for perhaps longer than they want to. The key to that is entrepreneurship. A lot of those individuals probably have an economic contribution to make through entrepreneurship, and we have to make sure that our entrepreneurship activities reach them and provide them with a way of taking forward their ambitions. That is one grouping.

The other grouping is those who have been economically inactive for a lot longer. I see them as coming under part of the work that we are doing on the tackling child poverty delivery plan.

We have to erode the level of economic inactivity in Scottish society. As I think that I have said to the committee before, in a year, we have seen an improvement of about 1 percentage point in economic inactivity. The committee might say, “Well, that is only 1 per cent”, but it is pretty significant. Economic inactivity levels are about 21 per cent in Scotland, and they can probably only ever come down to about 15 or 16 per cent. Narrowing it by 1 per cent is therefore quite an achievement.

It is necessary to have a relentless focus, in a supportive and holistic way, on those individuals, because none of those cases will be simple. They will all be complex, and people will need complex interventions help them get into economic activity. However, we have to do that. As Liz Smith will know from all her dialogue across the economy, everyone is short of people.

I have made a solemn and absolute commitment to balance this year’s budget and we must accomplish that task.

It is probably best for me to say that the working group has started its activity. It is difficult for me to predict exactly when the group will report. We are anxious to ensure that early progress is made so that we can consider any implications and have wider discussions with stakeholders about those, given that they would be material for local authorities’ decision making on council tax. I would like that process to be concluded as quickly as possible, although it is difficult for me to give that a definitive timescale. However, I recognise the urgency of that work, which is under way.