Chamber and committees

We have quite a lot of questions to get through, and I am anxious to press the accelerator a little bit. I invite Willie Coffey to come in.

Sorry—I can look it up in your report. I think that there were four areas in which reference was made to methodology and you looked at what could be reasonably assessed. The report states that

“the use of sample data introduces sampling uncertainty”,

so the figures are based on samples. Paragraph 1.22 in your report has four bullet points. The second point is:

“the methodology combines the calculation of PAYE and Self Assessment liabilities.”

Thank you. Later this morning, we will go on to talking a little more about debt collection. For now, the deputy convener, Sharon Dowey, has some questions.

It goes back to our earlier conversation about the service level agreement and whether, if additional payment was made to HMRC, that could elicit, notwithstanding some of the methodological challenges, the kind of data that, it seems to us, would be fundamentally useful to have.

Before I bring in Willie Coffey, I raise the issue of debt collection, which, so far, has been mentioned only in the passing. Somebody mentioned the regular reporting to the Public Accounts Committee from HMRC, the NAO—of course—and other Government bodies. The UK Government’s response on the 48th report of session 2021-22 was a reflection on where things had got to with tax collection. It highlights:

“In addition, from September 2022, there will be a new contract through which HMRC places debt with private debt collection agencies (DCAs). This will allow HMRC to increase placements with DCAs by around £1 billion a year without increasing the cost to the Exchequer.”

Are those debt collection agencies doing that for free—given that it is said that there is no cost to the exchequer—or are they taking a percentage of everything that is collected, which is normally what happens in such situations? Are those agencies operational in Scotland? Are you aware of whether the Scottish Government has a view about the deployment of private debt collection agencies, and who are they, principally?

I have something to ask before we leave this theme altogether. Paragraph 2.32 of the NAO report says:

“The tax gap is the difference between the amount of tax that should be paid and what is actually paid.”

The report goes on to say that HMRC

“does not currently produce a Scotland-specific tax gap”

and

“has limited information on total compliance activity undertaken in Scotland.”

Do the Auditor General for Scotland and the Comptroller and Auditor General at the NAO have a view on whether it would be useful to have specific Scottish tax gap data?

On that note of great clarity, I will draw this morning’s evidence session to a close. I thank our witnesses. The evidence session has been very useful, and it provides us with a platform on which we will build.

I move the meeting into private session.

Thank you very much. I invite Gareth Davies, the Comptroller and Auditor General from the NAO, to make a short opening statement, after which we will move to questions.

I think that that would be helpful. One of the factors that we considered last year but which has possibly been brought more to the fore in this financial year is the rate of inflation. Inflation has led to higher wage settlements and, therefore, people’s incomes are rising. I presume that that means that the income tax take is going up. Is that a fair assessment of what is going on?

They might be higher in reality, but I am not sure that they are higher in real terms. My point is that people’s incomes going up—albeit that they lag behind the cost of living and the consumer prices index—presumably leads to an expansion of the revenue that comes in to HMRC. In turn, that will lead to an increase in the resources that are available to the Scottish Government.

Yes. We will come to discuss that in more detail.

Gareth Davies, you mentioned methodology a couple of times. Again, that is something that exercises the committee’s interest, and other committee members will have more detailed questions in that area. Scottish income tax is now well established, but we have heard some concerns that the methodology does not give us the level of data that we think is necessary to make informed policy decisions.

I will cite an example. In the report, you identify some of the methodological flaws, if you like, or recognised areas in which there is not the level of data that we might like. The second point about the methodology in your report states that

“The methodology combines the calculation of PAYE and Self Assessment liabilities for the UK such that the amount apportioned to Scotland does not reflect the differing proportions of each type of taxpayer between Scotland and the rest of the UK.”

Do we know, for example, what the balance is, in England and Northern Ireland versus Scotland, between people who are on the pay-as-you-earn system and those who are on the self-assessment system? Are there more people on PAYE in Scotland than there are in England and Northern Ireland, or vice versa?