Chamber and committees

The floor is yours, Ross.

Liz Smith was cut off in her prime earlier, so I will allow her back in for a question before we move on.

Good morning, and welcome to the first meeting in 2022 of the Finance and Public Administration Committee. I wish everyone a happy new year. We are meeting remotely today.

The single item on our agenda involves taking evidence from two panels of witnesses to inform our consideration of the forthcoming independent report on Scotland’s fiscal framework. Although the terms of reference and authorship of the report have yet to be agreed by the United Kingdom and Scottish Governments, we know that it will focus on block grant adjustments.

First, we will hear from Professor David Bell, David Eiser and David Phillips. David Phillips will join us a little later, at about 10.15 am. Our second panel will focus on arrangements for the Welsh fiscal framework approach to block grant adjustments, and Dr Ed Poole and Guto Ifan from Cardiff University will join us.

I welcome Professor Bell and David Eiser to the meeting. We have about 70 minutes for the discussion. I remind members that broadcasting staff will operate their microphones, so please allow a few moments before speaking to ensure that you will be heard. Members who wish to ask a supplementary question and witnesses who wish to respond should type R in the chat function, and I will bring them in.

I will begin the questioning. What should the independent review cover, and what should be the terms of reference for the independent report? Perhaps Professor Bell can go first.

Are you still alive, Daniel?

David Bell, you and the other two Davids produced a paper in November 2015, in which you said:

“it is impossible to design a block grant adjustment system that satisfies the spirit of the ‘no detriment from the decision to devolve’ principle at the same time as fully achieving the ‘taxpayer fairness’ principle: at least while the Barnett Formula remains in place.”

We have moved on more than six years since that paper was published. What are your thoughts now on trying to develop a fair block grant adjustment system? Has it become easier or more difficult and more complex?

Time is marching on and I have six colleagues who want to ask questions, so I will ask just one more. It is about the issue of transparency that David Bell touched on, so he might want to answer.

The Institute of Chartered Accountants of Scotland highlighted the example of a lack of clarity around the role of block grant adjustments in relation to the land and buildings transaction tax additional dwelling supplement. The institute noted that some had suggested that the tax was introduced in Scotland only because, without the introduction of a similar tax to England’s, the corresponding block grant adjustment would be such that there would be a reduction in the block grant. It commented that that

“demonstrates that either the BGA is wrong in principle or that there is great confusion over it”.

Will you comment on that, Professor Bell?

I thank our three witnesses. I had hoped to ask a question about behavioural responses—I know that that issue is close to David Bell’s heart—but time is sadly against us, as we are well over time already, so I will call a halt to the session.

I hope to see all the witnesses again before too long; I am sure that we have a lot more to discuss on this particular issue. Once again, I thank the three Davids.

Take your time. [Laughter.]

Does David Eiser want to comment on the question that I asked? What should the independent review cover, and what should be the terms of reference for the independent report?

Yes, there is. Before I touch on the block grant, I will follow up what you said. You talked about the adequacy—that was the word that you used—of the fiscal tools. Do we have adequate fiscal tools in terms of borrowing limits, for example? Should the limit be raised? Should it be linked to inflation? Where do the limits need to be increased to give more flexibility for Scotland?