Chamber and committees

I have two more questions before I open up the discussion to other members. One is on capital. You touched on the full expensing policy. That will be a £3 billion tax cut, but corporation tax is going from 19 to 25 per cent, which is an £18 billion tax hit. What impact, if any, has that corporation tax rise had on investment? What is your view of the impact of flat cash for capital investment in relation to UK infrastructure and growth?

Overseas students still put billions into the economy, even if they do not work. What is the contribution to the UK economy of the overseas student population? There are thousands and thousands here in Edinburgh, and in Glasgow, Manchester, London and elsewhere. What is their net contribution to the economy?

I was not really planning to go down that road. I was just curious about the overall contribution of overseas students.

The OBR has commented that there is

“little sign in the UK of significant new investment in low-carbon energy and heating technologies in response to the rise in gas prices.”

Why is that?

Does that mean that Britain’s international competitiveness in this sector is falling back?

Public debt is a major issue now facing the UK economy, and you have highlighted the fact that it has more than trebled from below 30 per cent of GDP at the start of this century to almost 100 per cent of GDP. The Institute for Fiscal Studies director, Paul Johnson, has said that

“early action to tackle these risks and vulnerabilities can help to contain their fiscal consequences”

and that

“delay or inaction is likely to see debt continuing to rise toward unsustainable levels in the decades to come”.

What is the level of debt in the UK? How many billions of pounds a year are we now paying to service our debt? What will the impact be on the forecast for the UK’s long-term sustainability?

Inflation is persistently higher than you predicted even in March of this year. You spoke about debt interest of more than £100 billion. I think that the last figure I saw was £116 billion or £118 billion. Is that about right at this point?

I have two more questions for you before I let colleagues in. One is on the fact that public sector capital spending has been frozen in cash terms. What is that likely to mean for infrastructure and economic growth?

You talked about where you predicted the economy would be and the economy having been stronger than you thought. However, the 3 per cent difference seems quite big. It was thought that the economy would be 1 per cent below pre-pandemic levels, but it was actually 2 per cent higher. Why was there such a significant difference from what you anticipated in the forecast?

Interestingly, the UK population has been growing very consistently over the past three years by about a third of 1 per cent a year. When it looks at growth for the UK economy, does the OBR also look separately at per capita income growth, or does it simply look at the economy globally? You are talking about 1.6 per cent growth in the UK economy but, if you take population into account, it is probably about 1.2 or 1.3 per cent. Do you look at that?

Good morning, and welcome to the 33rd meeting in 2023 of the Finance and Public Administration Committee. We have apologies from Jamie Halcro Johnston, who is unwell, and from Ross Greer, who will be late. Michael Marra joins us remotely.

The first item on our agenda is an evidence session with the Office for Budget Responsibility on the United Kingdom autumn budget statement and the wider UK context, with a view to informing our scrutiny of the upcoming 2024-25 Scottish budget. I welcome to the meeting our witnesses from the Office for Budget Responsibility: Richard Hughes is chair of the budget responsibility committee; Tom Josephs is a member of the budget responsibility committee; and Professor David Miles, who joins us remotely, is a member of the budget responsibility committee. I understand that questions should be put to Richard Hughes and that he will bring in Professor Miles if he needs to do so.

We will move directly to questions from me; I will then bring in other members of the committee.

It appears that, in September, the Chancellor of the Exchequer was in—let us say—deep trouble with the fiscal situation, but by November, he had some significant wriggle room, thanks to OBR predictions of higher inflation and fiscal drag. I understand that that amounts to around £14 billion since March alone. Can you talk us through how the OBR forecasts have changed over the months since March?