Chamber and committees

Thank you for that helpful opening statement. The committee was taken by surprise by the announcement. I recall what a tortuous process it was to construct the fiscal framework in the 2011 to 2016 session of the Parliament. Had it not been for the First Minister and Deputy First Minister of the day digging in their heels at the last minute, we would have ended up with a framework that would have cost this Parliament several billion pounds over years. A deal was struck. Therefore, we expected the review to be a much more drawn-out process.

You touched on the process. On the delegation of powers over taxation, for example, the UK Government still has control over national insurance, VAT, quite a lot of income tax, corporation tax, fuel duty, savings, dividends and excise duties on cigarettes, tobacco and alcohol. Did the Scottish Government propose any of those for devolution? We will talk about VAT assignment in a minute. How far did the Scottish Government try to push the envelope? I appreciate that you said that you had an opportunity to secure improvements, but it is clearly not a negotiation of equals. Where are you pushing in addition to the areas that you mentioned in your opening statement?

Apologies: I have just had a wee aside with one of the clerks about the letter. I have received the letter, but the clerks have not.

Yes, indeed.

We are in a state of flux, in a way. There has been a settlement that consideration of the fiscal framework will come only once in every five-year term but, as John Mason pointed out, that five-year term could be upon us relatively soon—in a year, or 18 months at the most, I think. That is why I wonder whether the Scottish Government is looking at those issues now, whether it is looking to the next stage of a fiscal framework and whether it is looking at other devolved administrations around the world.

A previous committee that I served on visited the Basque Country. Only about 6.29 per cent of its revenue is handed back to the Spanish Government; all the rest is devolved. Pensions and social security are devolved, and only the monarchy, civil guard and defence are reserved. Everything else is dealt with locally, so there are other models for us to look at.

What modus vivendi do you think we might be able to reach in the future, and are you in contact with political parties that could potentially form a future UK Government?

Thank you. That concludes questions from committee members, other than me: I still have one or two questions, just to wind up. Surprise, surprise.

Given that VAT assignment is, in effect, a dead duck after eight years of deliberations, does the Scottish Government intend to pursue VAT devolution or to look at how we can press for devolution of other taxes. Of course, it takes two to tango and the UK Government might not be keen, but we could, for example, press for devolution of alcohol and tobacco duties, which would generate a disproportionate income, given our overconsumption of both substances. Where would the United Kingdom Internal Market Act 2020 come into play, there? You touched on that in an earlier response. What are your priorities, other than VAT assignment? Do they include national insurance, corporation tax or any of the other taxes that I have mentioned?

The fiscal framework was negotiated in 2016, and the United Kingdom Internal Market Act was imposed in 2020, so will it have an impact in the future if other areas are devolved? We will seek clarity on that.

John Mason talked about a new Government; we need to know whether Sir Ed Davey and his new Administration would be keen to have a better discussion with the Scottish Government.

As well as the institutions that I mentioned, the Chartered Institute of Taxation also participated in the round table. In the briefing before the session, HMRC told us that the volatility in the current financial year is of the order of 9.81 per cent. It would be a real shock; who knows where we could be. That is the highest that it has been in the past 12 years. There is also the bureaucratic cost and the politics of who would gain and who would lose and so on. The committee is clearly of the view that it is simply not worth the candle for all the stress and distress that it would cause. We cannot see any real gain for Scotland—or, indeed, the UK—in it. It would simply be a bit of a nightmare.

I will now open up questioning to colleagues.

The next item is an evidence session with the Deputy First Minister and Cabinet Secretary for Finance on the Scottish fiscal framework independent report and review and VAT assignment in Scotland. Ms Robison is joined by Scottish Government officials: Matthew Elsby, deputy director of fiscal policy and constitution; and Niall Caldwell, corporate treasurer. I welcome all of you to the meeting and invite the cabinet secretary to make a short opening statement.

I am just going to ask a couple more questions and then open it out to colleagues around the table. We have a summary of the changes to the fiscal framework. They are all pretty straightforward and I think that the committee has a good grasp of most of them—no doubt my colleagues will ask for further clarification. However, I am a bit vague about the coastal communities fund. It says in the table of changes that

“A baseline addition was made equal to the UK government spending on CCF in the year immediately prior to devolution.”

The next column says that the CCF is now going to be absorbed into the Barnett formula, with

“no immediate impact on funding.”

The important word there is “immediate”. What will that really mean as we move forward? I ask that as someone who represents a coastal and island constituency.

The indexed per capita methodology was crucial to securing the deal in 2016. Because it came out at the last minute, it is important that it has been consolidated, so I think that that is a significant gain. Inflation linking capital borrowing is also important. When I looked at the projected increase in capital available as a result over the next four years, I was concerned that it seems to be tied to the gross domestic product deflator, which bears no resemblance whatsoever to inflation in the capital sector. So, even if those limits go up by the amounts that are predicted, will it not still mean that there is a real terms reduction in the capital that is available to the Scottish Government?