Chamber and committees

Thank you for that. I think that we all realise how incredibly complex that is. It is a tribute to you that you are able to produce forecasts as accurately as you do, given those issues.

As inflation goes up, even with increased pay rises, we could end up with significant fiscal drag, which is concerning many people. In figure 4 of your report, you talk about the implied income tax net position. What do you believe the impact of fiscal drag will be on disposable income?

Why is your £591 million figure different from the Scottish Government’s £400 million figure?

If an employer such as the Convention of Scottish Local Authorities were to say to unions that local authorities were happy to provide workers with a 2.4 per cent pay rise—I do not think that it is even offering that—because that equated to the GDP deflator, then straightaway there would be difficult discussions. Is the GDP deflator still an appropriate measure to use for forecasts?

Thanks—I appreciate that. We have many more questions that we could ask, but time is against us and, as Ross Greer has pointed out, the cabinet secretary is waiting to come in. We have another evidence session to begin.

I will wind up the session by formally thanking Dame Susan Rice for all her phenomenal work over the years and her leadership, wisdom and insight, which have proved invaluable to the committee. Like John Mason, I was here at the very birth of the SFC, and it is great to see how it has developed and flourished over the years. I am sure that it will continue to do so.

I will see you tomorrow, Dame Susan, at the Scottish Parliament information centre briefing, which starts at 8 am—with bacon rolls, just for those who are not already sold on the idea of attending. The committee will take a break until 11.25.

Thank you very much for that opening statement.

It is significant that you have very little room to manoeuvre. I think that the committee appreciates that fact, but we will ask questions about the Scottish Government’s choices and the reasons for making them.

First, some outside organisations have expressed an element of frustration about the detail that has been provided. I know that you will want to make it clear up front that this is not a budget but a resource spending review. However, the concern is that we have received only level 1 and level 2 funding figures, and organisations are obviously wondering where they fit into some of the decision making that is taking place.

Thank you.

I asked that very question of the Scottish Fiscal Commission representatives—not today but the last time they were here. Their view was that that would have no impact on spending in fact. However, I would say that the child poverty budget line, as distinct from social security assistance, is projected to increase from £34 million to £97 million, so that is a significant increase, but it is only a fraction of the £2.4 billion increase in social security spend.

Yes, I can see him champing at the bit.

Absolutely. I fully appreciate that. In your report, you talk about how you expect inflation to get back to around 2 per cent. Once oil prices have jumped, and if they do not increase any more, the following year there will be zero inflation in oil prices—there is a platforming effect. I understand that you expect long-running inflation to go back to normal, rather than behave as it did in the 1979-82 phase, when inflation was at 27 to 30 per cent for two or three years.

Let me go back to taxation. In your report, you said:

“From 2024-25 the UK Government intends to reduce the basic rate of income tax to 19 per cent. The income tax BGA will reduce accordingly, thus supporting net Scottish income tax funding.”

The committee has quite a good understanding of that point, but it would be helpful if the commission were to expand on it, for the benefit of the Official Report.

That is a question that we will probably want to put to the cabinet secretary—although I expect that, prior to the budget deliberations, she will want to plead the fifth amendment in that respect.

I have one more question before my colleagues come in. On page 18 of “Scotland’s Fiscal Outlook: The Scottish Government’s Medium-Term Financial Strategy”, it says:

“The assumption of future Barnett consequentials beyond the core Block Grant is based on analysis of historic data.”

The strategy suggests £250 million in assumed future consequentials next year and £400 million after that.

In paragraph 32 of your report summary, you talk about consequentials of £250 million, rising to £591 million in 2026-27. That is £191 million more than the figure in the MTFS. Can you talk about that? Will you also say how the Scottish Government fared in terms of its assumption about the £620 million, which the committee deliberated over considerably, and whether—or how much of—that came forward?