Finance and Public Administration Committee

Meeting date: Tuesday, September 12, 2023

Official Report 683KB pdf

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Public Service Reform Programme

The next item on our agenda is to take evidence in relation to the committee’s inquiry into the Scottish Government’s public service reform programme. This session continues the evidence taking that we started before the summer. I welcome David Moxham, deputy general secretary of the Scottish Trades Union Congress. David and I served on Glasgow City Council together a quarter of a century ago.

I intend to allow up to an hour for the session. We have your written submission, David, so we move straight to questions. As well as questions on reform, members may take the opportunity to ask Mr Moxham any questions on the STUC’s pre-budget 2024-25 submission, which has also been circulated with the meeting papers.

I will kick us off on the reform agenda. The Deputy First Minister has said:

“it is for individual public bodies to determine locally the target operating model for their workforces and to ensure workforce plans and projections are affordable in 2023-24 and in the medium term”.

Does the STUC agree or disagree with that?

We generally agree with the contention that public service bodies—particularly those that have a sound democratic basis, such as local authorities—should be the prime leaders and drivers of decisions on service delivery generally and workforce planning, too. Obviously, we would add that decent and effective collaboration with trade unions and workers more generally is vital for that. Our difficulty is in relation to the spending envelopes that are attached to those decisions.

To digress into a slightly more general point, one of the difficulties that we have encountered over the years when considering public service reform is that it tends to raise its head at points where budgets are at their tightest, which, in many ways, is the least good time to look at public service reform. I was involved in the process around the Christie commission, and I still attach myself to many of the principles that the Christie commission established. However, the findings of the Christie commission dropped in 2011, and three or four years of tight austerity in terms of spending followed. Our concern is that we seem to be at one of those junctures again.

To return to your point, convener, the answer is yes—but what is the spending envelope and how much freedom do those public bodies have to make genuine decisions about future service delivery?

You touched on Christie. One of the issues that the committee has deliberated over many years has been the preventative spend agenda. How important is preventative spend in relation to reform of public services?

It is absolutely vital. Over the past decade, we have seen some decent examples of it although, in my view, there have been too few. We are supportive of some of the generalised Government fiscal decisions that have sought to improve the conditions of families, particularly low-paid families and those in poverty.

I will make two points, the first of which is about lag time. The effects of the investments that Government makes in prevention are rarely seen in service delivery terms for many years. Obviously, that can differ from discipline to discipline, but we sometimes fall into the trap of thinking that B follows A, whereas there is normally a B, a C, a D and an E before we get to the F of some of the advantages that we derive in relation to service delivery and overall health and social outcomes.

The second point is that, sometimes, the preventative role in jobs is not paid enough attention to. For example, is the role of a social worker a preventative job or an end-of-the-road safety job? The answer is both, and the more social workers and investment in social work that we have, the more that social workers are able to look at the preventative aspects of their job. Sometimes, we tend to take a bit of a blunt tool approach and say that there is a bunch of preventative jobs and a bunch of acute jobs. In reality, a large number of jobs, particularly in local authorities, exist somewhere in the middle of that spectrum.

At a time of static budgets, how difficult is it to disinvest in programmes or services in the public sector that are less effective, in order to invest in more effective services?

I will return to my earlier point with bells on—it is very, very difficult. That is partly because it is a bad planning moment. A departmental head has some medium to long-term reform objectives, but they also have a budget envelope. Are they going to be progressive and imaginative in their decision-making process? Their workers fear that they might lose their jobs or their colleagues, including through one of the many methods that were used over the 2010s to diminish local government and other workforces. Is that the right environment? The answer is no. I do not have all the answers to that problem. We have two or three major challenges in public service delivery that no one can wave a wand over, but it is not the right time to do that if you want to achieve the long-term and sustainable change that we all agree that we need.

11:00  

One of the conclusions that came from the committee’s meeting on 23 May was that efficiencies made as part of managing budgets are not a genuine reform. I am sure that you would agree with that. What role do efficiencies such as sharing data or making use of artificial intelligence and digital technologies play?

They have a role. I would not claim to be an expert. If you were to ask me to talk about a particular departmental change involving technology and to say whether that was positive or negative, I would find it difficult to give a specific answer, but technology clearly has a role. There is no area of private, public or voluntary sector life that is untouched by some of the positive potential of digitalisation and other technological change.

Public service suffers from the horrible-sounding Baumol’s cost disease. It is generally harder to make person-based services more efficient through technology than it is to do that for non-person-based services. That does not affect just the public sector; it affects the retail sector. We have seen difficulties for the high street because of alternative forms of purchase, and supermarkets have seen a change in the balance between staff and technology. Even the private sector is trying to get to grips with the fact that it is harder to make effective productivity gains through technology in person-based services than in other areas of the economy.

I turn to issues of pay and taxation. It has been said that the 3.5 per cent pay rise suggested in the public sector pay strategy for 2023-24 is not remotely sustainable. What are the average pay settlements in the public sector now? The details that we have been provided with come from November 2022, but the way that things have been going in recent months puts us in a very unstable situation. Inflation has declined, but where are we with public sector pay in Scotland?

All our figures are based on existing or settled pay deals and on existing, rather than projected, levels of inflation, which I agree seems likely, in this uncertain world, to reduce.

You will see from my report that the headline is that, in almost all areas except those where we have managed to negotiate particularly strong back-end deals for some lower-paid workers, pay rises continue to be below the rate of inflation. That is part of a decade-long trend for both public and private sector workers, but the public sector has been particularly badly hit. When we say that that is not sustainable, we mean that it is not sustainable for service delivery or for the budgets of many of the key workers that we represent. Frankly, it is not sustainable because they are not going to put up with it and will take industrial action if they have to, as we have seen.

Scotland has an ageing population and declining workforce and the Scottish Fiscal Commission has said, based on current projections, that the funding gap is likely to remain for years. In a paper submitted last year, you suggested that the Scottish Government should look to increase tax revenues by around £3.3 billion, which is hugely significant if we think of Scotland’s current tax burden. For example, someone earning £43,662 a year would pay 42 per cent income tax and 12 per cent national insurance and a lot of the money that they have left would probably go on fuel duty, excise duty, value-added tax and so on.

What would be the impact of raising that sum? I realise that it would not all be done in one go, but what would be the impact on behavioural change? The Scottish Fiscal Commission has expressed concern that increasing taxation to a certain degree results in behavioural change whereby people do not work as hard or move somewhere else.

I will give you an example. Under a previous Conservative Government, Chancellor Osborne limited pension pots to £1 million. As a result, a lot of doctors, including general practitioners and consultants, realised that they would end up paying more in tax than they would gain, so they decided that they would retire early. That was a detrimental behavioural change, and the UK Government is now looking to reverse that policy—and has reversed it, to a degree.

What would be the behavioural change in this case? Last week, we heard that there are only 18,000 top-rate taxpayers in Scotland.

There is quite a lot in there.

There is indeed, so I will give you plenty of time to answer.

I will be very understanding if you or another member needs to come back on some of the detail.

You mentioned a top-line figure of £3.3 billion, but we are not proposing that that could be achievable or possible in any one year.

I appreciate that.

That is based on a view, and there are some specific examples of how the policy might be implemented. There is a general question of how we need to shift the tax burden—across the UK and across the world, although we are talking about Scotland here—with more from unearned asset or property-based income and less from wages. A significant proportion of the £3.3 billion is based on proposals around wealth taxes and property taxes.

The proposals involve fairly liberal estimates of tax avoidance and tax evasion. Tax is harder to avoid on fixed assets, although it is not impossible to do that. It is therefore important, within the modelling, to reflect the fact that there will be some overspill in loss of income. Generally speaking, however, one reason for our proposed shift from income to assets over time is to deal with the issue that you have raised.

On income, everyone knows about the Laffer curve, but the question is how big we think the behavioural change is according to the Laffer curve. Some people seem to think that we could turn things around tomorrow, and that, taking our proposal to increase tax on people earning more than £75,000, for instance, everybody would disappear. The truth is that that is not the case, and that is partly because the jobs would stay here. Someone does not suddenly decide to start practising law in England if they have been a Scottish lawyer for the past 30 years. Someone whose child has a decent education and health service and a good way of life in Edinburgh will probably not jump the border just because they are asked to pay a few hundred quid more.

We recognise, however, that there are limitations, and we are fast reaching the limits of how we can use income alone as a basis to get fairer funding for our public services. You will see that the balance in our recommendations shows that less than £1 billion can be raised through income tax measures, with a far higher number being raised in the medium to long term—we are probably talking about a three or four-year horizon at best—through a more fundamental shift in how we tax in Scotland.

Behavioural change came up a lot last year. The Scottish Fiscal Commission said that, of the £30 million raised from top-rate payers, 90 per cent would be lost to behavioural change. The commission said that it was not about folk movin fae Edinburgh to Newcastle, for instance; it was about somebody who had been working five days a week saying that they will now work only four days a week, because they pay too much tax. That impacts on productivity and so on.

We all want there to be the optimum level of expenditure in our public services. The difficulty with the fact that both the main UK parties have said that they will not have a wealth tax and will not increase top-rate tax is that it leaves Scotland a wee bit exposed, within the United Kingdom, not so much for retaining people but for attracting people who might want to invest here or come and live here.

I imagine that you are right that not many people want to move—I certainly wouldnae want to move south of the border, whatever the tax rate was—but other folk might think, “Do you know what? I don’t know if I want to go there,” because of the direction of travel.

Council tax in Scotland is significantly lower than council tax in the rest of the UK as a consequence of year-on-year council tax freezes—whatever view one takes on that. If we include that, we have to reach the very highest earners to show a massive differential between Scotland and the UK. We have not seen evidence of such migration. It undoubtedly happens at the edges, but the Scottish Government and this Parliament have four or five much more significant levers to use to continue to attract investment and encourage people to live here. That is down to having decent services and a skilled and competent workforce that people want to invest in.

I concede that there are limits and that we cannot go much further before the relative benefits of raising income taxes are undermined by what we all accept is some form of slippage effect, but we can go a bit further now and we desperately need to do so. In the medium term, we need much more fundamental reform. In case no one asks me about this, I make the point that it is absolutely reprehensible that, in 2023, we are not undergoing a council tax revaluation—we should have done it 10 years ago—so that we have a reasonable basis on which we can begin to make the changes that we need to ensure that property is proportionally taxed and that local wealth taxes are a possibility.

To be blunt, that is a pragmatic thing. People might not talk about it publicly, but Conservative, Labour and Scottish National Party Administrations have not done a revaluation because of loss aversion. The people who are better off because of revaluation will shrug their shoulders, but the people who are worse off will hate you and not vote for you—it is as simple as that, to be perfectly honest. Perhaps people should be more honest about that. There is strong opposition in the Parliament to the Scottish Government’s council tax proposals, and committee members have already spoken out against them.

Your submission talks about

“Exploring every avenue to increase tax”.

Surely that sends a signal to people who feel that, with 14 interest rate rises in less than two years and with inflation hitting not just the public sector but the private sector, maybe the time is not right to do that.

It is a pretty horrible time to have to raise tax. No one particularly suggests that, at times of relative economic downturn, overall taxation should increase, although it can increase according to people’s ability to pay.

I am not sure what our alternative is. Members will have heard evidence that particular areas of public service, such as national health service waiting lists or local government services, are in crisis. You will also have heard evidence—it barely bears repeating—that, because of demography, the balance between the economy and the services that need to be provided ain’t looking good for Scotland. It would be nice for the Scottish Government to be empowered to do some things about that, which it is not.

This is a crisis point. We say with no pleasure whatsoever—particularly to people who have an above-average income but who are hardly wealthy—that people should pay more taxes, but we have proposed that they should. It is not great fun to go on to a picket line and explain to teachers that we want to fund their wage increase by introducing tax measures under which many of them would lose a significant proportion of that increase. We are not universally popular in our movement for coming to those conclusions but, given the other evidence that we are hearing about local government funding and the range of services that are in crisis, what are the alternatives?

Over the past couple of weeks and months, I have been spending a lot of time supporting firefighters who are completely up in arms about the cuts to services—which, incidentally, they were promised would not happen when the single service was introduced. I have to say to some of those firefighters, some—not all—of whom earn more than £40,000 a year, that some of my proposals would cost them money. It is about hard choices. We are in difficult times. What else are we going to do?

11:15  

One of the issues is that the United Kingdom’s standard of living is much the same as it was in 2003. We have been left behind by a lot of other countries. We have obviously had a financial crisis, with austerity, the pandemic and so on. Is economic growth not the answer? What does the STUC propose to stimulate economic growth so that the cake is bigger, which will of course generate additional tax revenues?

The first thing that we would say is that we do not, as some people do, make a distinction between economic growth and the overall contribution to gross national product that public services provide. They do that generally, in the sense that services are provided, albeit that they are paid for through tax income in the form of taxes paid through people’s wages. That is all part of our economy. There is nothing wrong with growing the economy by growing public services.

An awful lot of those public services are the infrastructure that is required for the private sector in the economy to grow. If you do not have enough planners or people in licensing, or if your physical infrastructure is not operating well, businesses will pay.

We of course support sustainable economic growth. Again, it is not a straightforward question, but it seems to us that it is about investment in the green economy—in areas of new technology but also in improving our infrastructure. We support a national programme of retrofitting similar to the one that was embarked upon in the 1970s when we converted on to North Sea gas, which provided a massive boost for the economy. We can think of public and private ways to increase the economy; we do not see doing so as public versus private sector.

I have one last question on the issue of the green economy, which you just touched on.

You said that a £13 billion green stimulus package could create 150,000 jobs in Scotland and suggested that there is a pressing need for the Scottish Government to maximise the impact of its spending priorities. Labour in the UK has said that it can no longer proceed with its £28 billion green prosperity plan because of affordability. How can Scotland, with 8.2 per cent of the UK’s population, afford to do something as ambitious as a £13 billion stimulus package?

It probably could not, under existing borrowing and capital spending limits. That was our top-level, in the middle of the pandemic, two-year, this could really make a revolutionary difference kind of figure. You can also see from that report that we produced a subsequent figure that showed the spectrum of investment decisions, all the way from where we currently are—which is, frankly, failure to produce jobs out of the renewable economy—through to better outcomes. I am not going to sit here and say that the finance minister can find £6 million in subsequent years to make that investment.

I take the opportunity to say that we strongly oppose the change in Labour Party policy—we hope that it will be UK Government policy—when it comes to those levels of investment. We foresee, and will continue to agitate for, a new Government at a UK level that is prepared to make those investments and to work with the Scottish Parliament and Government up here to discuss how the proportion of that investment would best be deployed in Scotland. I am not going to defend that policy change from the Labour Party.

I will open it out to colleagues. The first person to ask questions will be our deputy convener, Michael Marra.

Could you outline why the STUC’s submission is critical of the resource spending review that was previously published by the Government?

Fundamentally, because it identified public spending as a standalone item. For example, if I look at the revenue that is spent on public services and the income that is derived from taxation, I also want to look at things such as business support and the small business bonus scheme. I think that some things were left aside. The Government’s approach was: “Well, we are obviously going to continue to spend £300 million plus on the small business bonus scheme.” However, for us, that should have been reviewed in the round. We were also critical because the headline figure foresaw a cut in the public sector workforce, which we do not support. I know that that position has been slightly nuanced since then. Given our view that hard decisions need to be made about resource, relief and income, and that some areas of government—local government in particular—have, in our view, been historically underfunded, we were unlikely to be super positive about it.

The permanent secretary gave evidence to the committee on 16 May. He told us that it was not clear to him what the status of the resource spending review was within Government. At that time, the new First Minister had not given him any kind of direction. Do you understand what the current status of the resource spending review is?

Not really. We have heard suggestions that some elements of it, including the unfortunate quantification of the number of jobs that needed to be cut from the public sector, have been nuanced. However, we are not enormously sure. I think that it is reasonable to concede that a change of First Minister and Cabinet would presage some alterations to policy. Arguably, we have seen that in other areas, such as the Scottish national care service. The past two months have, as always, been a politically quiet period. I would not necessarily say that our uncertainty about the status of the resource spending review is a final and massive criticism of it. However, in the next couple of months and running up to the next budget, it would be nice to have a much clearer idea of what the Government’s intention is.

That is a fair point. The permanent secretary raised the issue of capacity and the ability of the civil service to be able to deliver plans. For instance, within the first two years of a Labour government, Labour is committed to building towards £28 billion of investments in green technology across the UK. We have to be in a position as a country to develop those plans. Do you have concerns about our capacity as a country to meet the aspiration of a new government to make those investments?

That is a good point. I hope that it is okay for me to digress into another area so that I can illustrate the point. As I am sure that members of the Parliament are aware, we are keen on the development of municipal bus models. If we said yes to that today, it would probably be five or six years before such a thing could be achieved. One of the major issues with that would be whether we had the capacity to develop it. We have often found that with other areas, such as procurement reform. There have been the best intentions to use public spending through public bodies to its best effect, but we have not had the capacity within local bodies or the procurement expertise to begin to build the new model.

I will return to my original point about the capacity issue within local authorities and the civil service, and the capability of the Government to do it for itself, where possible. We have been critical of that where the alternative is to bring in big public sector reform bodies. I will not name any of them, but I think that we know which ones we are talking about. That returns me to the point that, if you are going to do public sector reform, you have to get your ducks in a row and get your capacity and vision strong enough to be able to deliver it before you start making cuts in other areas.

Mr Moxham, you said earlier on that you favour reform being at a more local level. If I understood you correctly, I tend to agree with that. However, it has been suggested to us that there is sometimes a need for a central drive. For example, the police and fire services would never have reorganised in the way that they did—for good or bad—if it had not been for a central drive. How much should we leave public sector reform to the individual organisations, and how much should Government or the Parliament drive it?

That is quite a general question, and it is difficult not to answer it simply by saying that the principle of subsidiarity is, obviously, the founding principle of that, so, from our point of view, the burden of proof, so to speak, for non-local solutions should be on central Government. That burden of proof may be provided in given circumstances. I do not think that anybody would argue for the further break-up of health boards, for instance. Although this is not problem free—far from it—I think that most people would accept that significant national priorities and outcomes and significant strategies must be adopted and driven by Government. However, my principle would be that it is down to central Government to demonstrate why something would not be delivered better locally.

It has been suggested to us that there are too many public bodies. Perhaps several overlap with each other in what they do.

Historically, we have been critical—most people remember this—of the creation of quangos and non-departmental public bodies that do not have the prerequisite levels of accountability, and we have been in favour, wherever possible, of maintaining democratic delivery and even of strengthening that in some cases where there is local government or local authority councillor representation on NDPBs and other local boards.

The question is quite a general one, and I am sure that the workforce in some of the NDPBs, not to mention the managers, would have localised observations on how one might improve the landscape. As I have said, our general position is that things should be as local and democratic as possible.

I largely agree with that.

A specific issue that has come up to the committee recently has been the number of commissioners in Scotland. There is a commissioner for children and a commissioner for human rights, and a commissioner for disabled people is proposed. There is a wide range of commissioners. Do you have a particular view on them? Some people think that they are a bit undemocratic and are not answerable to anyone.

Again, I am slightly hesitant to answer that. I was not particularly expecting to have to consider that issue.

I think that, where Government has priorities that are new and national and require particular attention, there is undoubtedly some value in the creation of posts for people who are specifically tasked with looking at agency delivery in a particular area—whether for a finite term or a longer term—bringing things together, and informing Government policy. I do not think that everything should have a commission. There should be a large consensus in the Parliament and among the wider population that a particular issue requires a particular focus for a particular period of time. Most of those things should not be for ever.

I appreciate your comments. That is something that we are currently looking at. I realise that you did not anticipate the question, so asking it was maybe a little unfair.

It is clear that one of the roles that you and your colleagues have is to defend existing jobs. However, in looking at reform, I suppose that I would like to see more workers on the front line and fewer sitting behind desks. Are you open to that kind of movement?

11:30  

We are open to it. I often smile because I spent a long time in the early 2010s talking about the distinction between front and back-office staff, shared services and so on, and we felt that many of those distinctions were illusory. You can look at the payroll function of a public service body and the front-line delivery and say that you can see a clear distinction, but often the distinction is far more blurred.

The answer to your question is, yes, but how—and how will that be organised? One of our concerns is that some public service reform initiatives tend to chop away parts of a function under the illusion that that makes the service more efficient, but it actually reduces the key performance indicators and the main KPI becomes whether you can you shift that job on to somebody else. We have all experienced getting an automated service on the phone when the thing that they seem to be best at is telling you that it is somebody else’s job. That is normally because they have been told to shift a whole range of inquiries and problems into somebody else’s lap. That looks very efficient to that small department but it does not look efficient if you look at the whole of public service delivery.

One of my concerns is that we need as many people as possible in public service who are qualified and paid to be problem solvers. We have heard an awful lot of chat over the years about following people’s journey through service provision, from point A to point B and point C, and ensuring that that public service journey is strong. Sometimes, when you split the so-called back-office function from the front-office function, you reduce the number of people in the service who are problem solvers and able to take people along a slightly longer part of that journey. That is a very long way of saying, yes, but with a but at the end.

That is a fair answer. Thank you. The committee has received a mixture of responses. One of the things that witnesses have done is looked back at the Covid pandemic and said that what happened then might be a good model for going forward. Others have said that that might be a bad model. Some of the key themes were that, on the positive side, decisions were made more quickly and some of the bureaucratic systems were chopped a bit but that, on the bad side, there was less consultation before decisions were made. Again, it is a wide question, but generally, did good things happen that we could take forward?

Some good things happened, which were probably amplifications of things that already happened daily but which we do not see—the day-to-day engagement with different parts of the public service in order to deliver. We have long advocated for what we describe as public service networks, which look at how you strengthen the formal but sometimes informal co-operation between different areas of the public service to optimise local delivery. You use the fact that people often attend the same incidents or are part of the same review panel for social work outcomes and you build upon that. By the nature of geography and the need for immediacy, we saw some good examples of people using some of the informal and more formal networks effectively, decisively and dynamically.

Would I build out of that a suggestion that we need less consultation? I would probably say no. It is an important plank of the Christie reforms that service users continue to be consulted on a high-level basis about the services that are delivered. Workers need to be consulted and not just directed, but there are undoubtedly some dynamic examples of people rolling up their sleeves, building on existing relationships and delivering very effectively in communities.

Thanks. That is helpful. I have a final question about point 5 in your submission. You refer to the 3.5 per cent pay increase that the convener mentioned and say that, if the Scottish Government does not reconsider that figure,

“real wages in Scotland are likely to fall further behind the UK.”

Is it your suggestion that, in Scotland, wages across the public sector or elsewhere are behind those in the UK?

We are talking about a fall, rather than an absolute level. As I recall—and I will get back to you with a correction if I am wrong—the figures were based on 2022 figures for relative wage growth and relative wage decreases and were compared across the nations and regions of the UK.

In some sectors, Scottish workers are paid more than their equivalents in other parts of the UK.

The question is whether we are comparing a fall or comparing absolute levels. The recent fall has been more acute in Scotland than across the UK, which should not be taken as a suggestion that we think that the public sector workforce, or any part of the workforce as a whole, is paid less in Scotland than across the UK.

That is helpful; thank you.

First, I would like some clarification. Regarding your income tax proposals, am I right in understanding that, beyond threshold freezes, you are not proposing any changes to the starter, basic and intermediate rates, and that you are only proposing the new £40,000 threshold for whatever the new higher rate would be called, without any change to the lower thresholds?

That is correct.

Thank you. Something that the committee has discussed quite a lot recently is the challenge that the convener pointed out, which is the financial gap that the SFC has identified. Even if we were to have substantial tax rises, such as those that you, and even my party, have proposed, that would mitigate or prevent potential cuts in public services, rather than expanding those services.

Do you have any concerns about public consent for that? Polls have consistently shown that people in Scotland, including those who are on higher incomes, are willing to pay more tax if that results in better, or more, services. If we embarked on tax rises in the next few years, we would simply be preventing cuts and it is hard for people to identify something that they have not lost, as opposed to something that they have gained. How would you manage public consent around that?

That is really hard to manage. Many people find themselves in difficult economic conditions. You can earn a reasonable amount of money but still have a set budget and things to do and still see yourself losing some things, even if those are things that are not available to other members of the population. It is an incredibly difficult discussion to have.

The convener made a point about it never being politically popular to do things with tax, which is absolutely true. Without being overly heroic about it, I think it is incumbent upon the parties in the Parliament to have a discussion about tax and services that recognises some of the fundamentals. It is a fundamental that, in 10 years’ time, we will be spending a higher proportion of our income on public services than we do now. That is a fact that no one here would dispute, so we should all say it together. I think that most people think that the council tax system is bust and that it is frankly ridiculous that we are still basing our system on a 1991 review: everyone believes that.

If we can say at least some things together, we could begin to make tax rises more palatable. I agree with the convener. I would not want to be the one holding that particular stick at any point, so we should act collectively to say that we all genuinely recognise that there is a really significant problem and that we need to find some sort of starting point. That means that the conversation that I have to have with my members and that you have to have with your electors would at least be based upon the genuine recognition of a shared problem.

I absolutely agree that there is a need for greater cross-party consensus on that and I am always happy to speak to cross-party colleagues about tax policy.

However, there is an understandable public cynicism about politicians. If my party, or the Scottish National Party, made a real push with an information campaign to sell people the public services that already exist, people would understandably point to NHS waiting times or say that we are just saying that because we want their votes at the next election. Much as I think that we should still do that, my question for you is about the role of the trade union movement in getting a buy in from wider society.

The STUC has more than 500,000 members, but we have a working-age population of about 4 million. What role can the trade union movement play in getting wider societal buy-in, or not even buy-in but just recognition of the financial reality right now?

We spend a lot of time trying to get ourselves into the media and we have been quite successful at that. One of our priority campaigns for this year is that we want to tax quite a lot of people more. We have been very public about that; our members know that and the general public know that. We will continue to make the argument for that and we will continue to link it to not only the welfare of the members that we represent, but the pride in the services that they deliver.

Our other priority campaign is the national care service, which—I think everybody recognises—presents an organisational issue and a funding issue.

We have been right up there on those issues. We have not gone to Government and other bodies—as, perhaps, we have done in the past—and said that we need a certain amount extra for public services, or that it is simply down to them to bear the responsibility for the political debate about how that happens. We have offered an alternative; it might not be popular and all aspects might not be deliverable, but we can take some comfort from the fact that we are not avoiding the difficult questions about where the money comes from.

The STUC deserves commendation for that. Other organisations, bodies and representative groups come to the committee every single year wanting more money, but they are unwilling to say where it should come from or, indeed, they say that they want more public spending but they do not want tax rises—some even want tax cuts.

My final question is about the public sector estate. The union movement has been a champion of flexible working, remote working and working conditions that suit the needs of workers. Post-pandemic, that genie is not going back into the bottle, and that is true in the public sector in particular. However, that has resulted in a number of buildings that are either owned or leased by public sector organisations being largely empty or certainly significantly underoccupied. Does the STUC recognise that that is inefficient and not a good use of public money, and that therefore there needs to be reform in the public sector estate?

That should be done not simply as a cost-saving exercise, in the way that it was off the back of 2010 austerity, but in recognition of the fact that we no longer work in an environment where everybody is in the same office from Monday to Friday, nine to five.

That is entirely sensible. There will be examples where I would possibly disagree with myself about that, but broadly speaking, empty buildings are a bad idea—particularly heating them. What their use becomes is the issue. If there is more space than we need to house public sector staff, there is also probably more space than we need for office workers and people who are in the private sector, because working from home is a general trend, so future use is important.

I have been critical of some of the work that local authorities have done. Glasgow City Council has done some work as it looks to begin to reimagine what Glasgow city centre will look like in terms of its balance between dwellings and commercial properties. That is the kind of thing that has to be looked at. We might not agree with every single one of the outcomes, but that is not really the point; the point is that significant repurposing will be going on, and that has implications for the green economy and what we do in relation to infrastructure, travel to work time and various other things.

We are not going to sit here and say that we should let Glasgow be full of empty buildings if we can think of a good social purpose for them, but it is important to recognise that the market is challenging just now for the old method of simply selling the buildings on to the private sector for more office accommodation.

I completely agree with you that any reform of council tax would first require a revaluation, which is long overdue.

I want to ask a few questions about your specific proposal for replacing council tax—what you call a “Proportional Property Tax”. Can you be very specific about how that would work?

11:45  

Yes. The first thing to say is that we have quite a range of recommendations in our tax paper; however, although it is definitely more than illustrative, we are not stating just now that we have come up with an every-dot-and-comma system for replacing council tax. There would be a certain arrogance in that, given the fact that everybody has failed to come up with a satisfactory scheme for generations.

Obviously, it would require revaluation, and we give illustrative examples of the percentage of that value that would essentially become the overall council tax. Let us say that I owned—and I wish that I did—a property valued at half a million pounds. If, say, 1 per cent were chosen as the figure—although it need not be; the figure could be 0.6 or 0.8 per cent—that would be what would come up in my council tax bill. If the figure were 1 per cent and my property were to be valued at £500,000, my council tax bill would be £5,000 a year.

If that happened, would you also be in favour of the wealth tax that you have suggested in your paper?

It would somewhat complicate the wealth tax, in that a property is a component part of a bigger basket. We would therefore not necessarily suggest bringing the two things in, as it would mean somebody being essentially double taxed on the value of their property. We would want to avoid the double taxation of property.

That is very important. It would be double taxation, and you would be in very considerable danger of not only creating very considerable bills for some people who might not actually be at the top end of the scale but making things very complex administratively. As you know, the Parliament does not have the power to tax bodies on a non-income basis—that is, we cannot have a national wealth tax—but I think that the wealth tax that you have suggested in your paper is to be administered locally.

That is correct.

Would that not make things more complex, too?

To be quite honest, I think it unlikely that we will come up with a tax system that is not complicated and that does not have a whole range of administrative challenges. The current system absolutely does, and there is no property-based scheme, including the one that we currently have, that does not need a fairly active compensation scheme for the people whom you are talking about.

The other issue, which you come to later in your tax paper, is business tax. The key issue for the Scottish economy just now is getting the right balance between the tax take or revenue, which you have suggested can be increased in various ways—I might disagree with you on some of that—and behavioural change, a really quite significant example of which the convener has pointed out. It is all about trying to project what would happen in various scenarios and I am keen to know what the STUC would pick out as a priority basis in that respect.

Do you mean a priority basis for a behavioural tax?

I am just not entirely clear whether, by making recommendations on changes to tax, you want to change taxation rates or you want specific structural changes to the overall tax basis. That is a key question, and a question that the Scottish Fiscal Commission is asking, too.

We want structural changes to the way in which tax is levied, because we want more of it to be based on immovable assets instead of income. I would not go as far as that famous half-quote from Peter Mandelson, but I think that one can be more relaxed about people earning high amounts of income if they are at least paying effective tax on their property and assets. That is undoubtedly a structural change, because it suggests that we do what we can—recognising the limitations on this Parliament; obviously, we would be advocating this at UK level, too—to change the structural emphasis from income to asset when we tax people.

I come back to the point that we want a much more sustainable future for the Scottish economy in terms of the revenue that we bring in, in line with necessary increased expenditure, particularly on things such as health and social care and social security. Obviously, that tax revenue is absolutely vital to the future. If we are going to have increased taxation on certain members of the population, as well as structural changes, we have to be clear that what we are suggesting will not provide the disincentives of the sort that the convener set out. It is not necessarily that people are going to move elsewhere, but that they might think, “Well, this isn’t very good for us—we don’t like this extra burden of taxation, so we won’t work quite as much,” which would be a considerable problem for the economy. Also, from a business angle, people think, “Do we want a higher tax burden in Scotland? Probably not.” Do you accept that that is a view that, certainly, business and industry hold?

We accept that and, for instance, the wealth tax proposals in our recommendations model for some of that to happen. However, we argue that the overall benefit—which would be funding not just for public services but, potentially, for other investments that are available to business, as well as improvements in their workforce—would provide, on balance, a more positive environment for business to operate in. There are plenty of countries with significantly higher taxes, both on individuals and on business, which have proved that, when it comes to investment opportunities, it really is the high road rather than the low road that matters.

Do you accept that some of those countries have a better quality of public service delivery than we currently do in Scotland?

Absolutely—and particularly the countries where universalism is more widespread and there is a social contract through which people are happy to pay relatively high levels of taxation, because the quality of services is higher and the cost of things such as childcare is significantly lower. There is a very strong case to be made that that is better for the economy as well as better for the people.

Thank you.

That appears to have concluded the questions from the committee, but I will just point out that, ironically, the council tax was meant to be a temporary fix when it came in more than 30 years ago. One of the difficulties that we have not touched on is that, if we did have a new system, whatever that system would be, the number of appeals would run into the hundreds of thousands, because that is what happened when the council tax came in, as I remember from my days on Glasgow City Council.

David, do you want to make any points that we have not touched on?

I will simply emphasise one issue. I am a member of the Scottish Government’s new tax advisory group, so I recognise that my organisation and I will have more than one opportunity to push the issue forward. I do not think that I am giving any secrets away when I say that, in the first meeting of that group, one of the things that we discussed was that there are three broad areas of taxation and income raising that we can think about. There are things that can be done now, which need to be done for the next budget. They are limited, but they are possible. There are additional powers—the new fiscal framework has just come out and, although it did not go as far as we would have liked, it added a bit more—and some of those new powers are not just fiscal, but about increasing the powers of the Parliament over, for instance, some aspects of migration, which would allow us to build and grow our tax base.

In the middle, there are things that we can do under devolved competencies that would take a number of years to do, so we need to get started now. In five or six years’ time, we do not want to be sitting around and saying that we still all agree that the council tax needs to be reformed, or that we still all agree that we need to look in more detail at land taxes, and find out that we have not completed the registry or we have not started the process of a new revaluation. I really urge the addressing of those things. It is not like the trade union movement to think five years ahead—we are usually worried about what is happening tomorrow—but I encourage this committee and anybody else to think really clearly about the things that we can do now, which, in four or five years’ time, will give us a greater range of options when it comes to the fiscal challenges that we know that we will face.

Thank you very much for taking the time to speak to the committee. The evidence that has been gathered from this inquiry, including an evidence session with the Deputy First Minister in early October, will help us to inform the committee’s pre-budget 2024-25 scrutiny.

That concludes the public part of today’s meeting. The next item on our agenda is consideration of our work programme in private.

11:55 Meeting continued in private until 12:07.