Chamber and committees

We will hear from two sets of witnesses today. The first panel is from the Scottish Fiscal Commission, with whom we will discuss a number of recently published reports, including the commission’s economic and fiscal forecasts. Members have received copies of those reports, along with a private briefing paper from the financial scrutiny unit and the Scottish Parliament information centre.

I welcome from the Scottish Fiscal Commission Dame Susan Rice DBE, chair; Professor Alasdair Smith, commissioner; and John Ireland, chief executive. We will also be joined remotely by Professor Francis Breedon, who is also an SFC commissioner. If members have any questions for Professor Breedon, or if Dame Susan wishes to bring him in at any point, they should make that clear so that our broadcasting operators can activate Professor Breedon’s microphone.

I intend to allow 75 minutes for the session. Before we open up to questions from members, I invite Dame Susan Rice to make a short opening statement.

That will mean that more people become higher-rate taxpayers.

In our second evidence session we will hear from Kate Forbes, the Cabinet Secretary for Finance and the Economy, and Douglas McLaren, deputy director, budget, pay and pensions, in the Scottish Government. I welcome our witnesses to the meeting, not least because the cabinet secretary has come straight from the Local Government, Housing and Planning Committee meeting and has already had an exceptionally busy morning.

Committee members have received a paper providing background information for the evidence session, but before I open the session to questions from members, I invite the cabinet secretary to make a short opening statement.

I agree with your comments. However, the UK and Scotland have the same immigration policies. What can Scotland do to improve its position relative to the rest of the United Kingdom? The block grant adjustment and taxation are obviously major issues in future budgetary considerations.

Absolutely. Daniel Johnson is just warming up for the cabinet secretary—do not worry.

Thank you. SPICe produced an interesting document, which you might have seen mentioned in the press. It says that because of the Scottish Government’s tax policy, some £500 million was raised in taxation, but only £148 million benefited the Scottish budget due to block grant adjustments. We have an explanation from SPICe, but will you talk about that a wee bit?

I thank members of the committee.

I have a couple of questions to wind up with. One relates to capital budget. Raw material prices are growing by between 5 and 15 per cent a year. You said that the agreement with the Greens would not threaten the delivery of Scotland’s capital projects that are already committed to but, clearly, if there is significant pressure on the capital budget because of inflation, that may make it more difficult to deliver some of those projects. What discussions have you had with the UK Government regarding an uplift to the Scottish Government’s capital programme budget?

Politics moves very fast in Scotland, and we now have the co-operation agreement between the Scottish Government and the Green Party, with ministers, including Patrick Harvie, a former member of this committee, being appointed this afternoon. What work has been done on the implications of that for the public finances? For example, the number of affordable houses to be built to 2032 is to increase from 100,000 to 110,000, although that will happen at a time of labour and skills shortages; £500 million is to be invested in a just transition fund for the north-east and Moray; and there is to be a fair fares review to provide a realistic alternative to car use and increase investment in active travel and public transport. Given the likelihood of the funding for those measures impacting on other Scottish Government policies and programmes, can you take me through the process of how the agreement will work as you take the budget forward?

A number of members, myself included, have raised issues with regard to tax and demography. One issue of concern is the need to grow the Scottish economy relative to the UK economy. We have real demographic challenges, and there is also a productivity issue. What steps will be taken on that?

As the Scottish Government recently pointed out, the UK has had the lowest economic growth of any north-west European state over the past 12 years or so since the financial crash, but Scotland does not seem to have done particularly well in comparison, as reflected in the block grant adjustment in some years. What can we do to try to increase productivity so that we can restore and improve the health of, and enhance, the public finances?

This morning, members of the committee received a detailed letter from the Cabinet Secretary for Finance and the Economy. No doubt colleagues will ask questions about that in the second session. She says in that letter:

“there is logic for publishing the MTFS alongside the Scottish Budget and thereby basing it on the updated SFC and OBR forecasts. Publishing it before the OBR October forecasts would mean having to use OBR forecasts from March, the effect of which would be to give a misleading sense of the fiscal outlook.”

Does the commission agree with that statement?