Chamber and committees

I am sure that a future UK Government could easily reopen those negotiations if it wanted to be more generous to Scotland.

We have covered all the changes that are mentioned in the summary of changes to the fiscal framework, except one. It is a fairly minor one, but it would be remiss of us not to touch on it. What will happen to the coastal communities fund? What will that mean for Scotland? We understand from the agreement that that fund will be absorbed into Barnett, and that there will be no immediate impact on funding. What are the long-term implications?

On that positive note, we will end the session. I thank our witnesses—both of whom will be involved in the next session—very much for their contributions. I will call a wee break until five past 11 so that our new witnesses can be brought in.

As a result, assignment was the only way in which VAT could be considered.

One of the things that you have suggested in your paper is a sales tax rather than VAT. Can you talk to us about that?

We have four political parties represented around this table as well as five experts on this issue. Who thinks that assignment of VAT is a really great idea at this time? [Laughter.] I thought that John Ireland was about to come in there heroically. You should remember that this is like an auction—if anyone twitches, they will be called to speak. David Phillips had his finger on the button of his microphone at one point, but he desisted.

We seem more or less in agreement that this presents considerable difficulties across the board, whether from a forecasting point of view, a practical point of view or an audit perspective. Does anyone see any real benefits to this approach or any way in which we could eventually reach a benefit? Is there any perfect way of getting to that point, or will this always be a bureaucratic and costly distraction that will not add any benefit to Scotland? Does anyone want to contribute for or against that?

But was it not the case that devolution was not considered, because we were part of the European Union then and it was not permitted to devolve such things to sub-state legislatures?

That is right—as long as we do not become a more law-abiding society, of course. Thanks very much.

Mairi, the Deputy First Minister more or less said that the reason why we did not go down the road that we said that we would in November 2021 is that the UK Government said that the model was a kind of take it or leave it. Is that your understanding of the situation? Was the only room for manoeuvre that the Scottish Government had to accept this?

Good morning, and welcome to the 29th meeting in 2023 of the Finance and Public Administration Committee. The first item on our agenda is an evidence session on the Scottish fiscal framework independent report and review. We are joined by David Phillips, who is associate director of the Institute for Fiscal Studies and one of the authors of the independent report, and Professor Mairi Spowage, who is director of the Fraser of Allander Institute. I welcome you both to the meeting.

We have about an hour for this session. Before we move to questions, I will set the scene a wee bit. In November 2021, the then Cabinet Secretary for Finance and the Economy, Kate Forbes MSP, confirmed that the independent report would focus only on block grant adjustments. However, she said that the Chief Secretary to the Treasury had

“agreed this will inform a review that will be wider in scope”

to ensure

“that the current arrangements are thoroughly assessed and options for reform considered, and that input is obtained from a wide range of stakeholders as part of the overall process.”

On 2 August 2023, the Deputy First Minister confirmed:

“I have now reached agreement with the Chief Secretary to the Treasury ... on a package of changes to the Scottish Government’s Fiscal Framework.”

She explained that she had judged it appropriate to concede to a review with a narrower scope than the more fundamental review that was originally envisioned

“in the interest of securing long sought practical borrowing and reserve flexibilities, and to protect those arrangements that we already have in place which work in our favour”.

I wanted to note that in order to set the scene for the questions that will follow.

One of the things that the Deputy First Minister secured is the indexed per capita mechanism for calculating block grant adjustments being adopted permanently. What are the benefits of that to Scotland? Further on in the paper, it says that that will be reviewed every 50 years. Is that what they mean by “permanent”? Do you have another view of what “permanent” might mean in this situation?