Finance and Public Administration Committee

Meeting date: Wednesday, December 20, 2023

Official Report 633KB pdf

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Scottish Fiscal Commission

Our second agenda item is to take evidence from the Scottish Fiscal Commission on how it delivers its functions. We are joined by Professor Graeme Roy, chair, and John Ireland, chief executive, both of the Scottish Fiscal Commission. I welcome back Professor Roy, and I know that John Ireland was listening to our earlier session in the background. I invite Professor Roy to make a brief opening statement.

I welcome the opportunity to speak to the committee. It is a privilege to be chair of the Scottish Fiscal Commission. We have a great team of commissioners and staff who are dedicated to public service, as has been demonstrated by their work over the past few weeks under difficult and demanding circumstances.

We aim to be a highly transparent organisation, both in our forecasts, analysis and judgments and in our governance and operations. Our annual business plans set out our operations, our key activities over the previous year and our plans for the year ahead. Our annual accounts show how we are operating within our financial constraints, including operating as a small organisation.

I will highlight a few points. We are looking forward to our statutory review next year, and to beginning work on a future round of recruitment for new commissioners. They will not be appointed until 2025, but we want to start that work as early as possible. That is a large and important piece of work the aim of which is not only to improve diversity within our commissioner team but to develop our skills and experience.

Finally, I thank the committee for its interest in our work. We exist to help Government and Parliament understand the risks and uncertainties in devolved public finances so that the budget can be as transparent and well scrutinised as possible. If the committee feels that there is more that we can do to help with that work we will be more than happy to help.

Thank you for that opening statement, Professor Roy. You and I have spoken privately about the work that you would like to do. I have read your report and cannot see anything on which I would want to criticise you. You have laid out, in detail, the potential principal risks, which do not appear to have arisen. What additional areas would you like to focus on if, for example, the review were to allow for additional resources for staff?

Our most important function is delivering the best possible forecasts for the budget. Protecting and supporting that is crucial. An area of expansion, in which we could add real value, would be to do more work on fiscal sustainability, which will be a crucial issue for Scotland over the long term. Beginning to unpick the big structural questions that will face future Administrations, and not just the current one, is vital. No one else in Scotland is doing that, so we have an important role there.

Another area that I consider to be important and which we touched on in the earlier evidence session is extending our ability to comment on where spending is moving and what might be the medium-term implications of particular choices within spending portfolios. We have started to do more of that work. The more that we can do there, while always protecting our independence and not commenting specifically on policy choices, the more value we can add.

It is not about commenting on policy choices; it is about showing which policy choices are available, and then it is up to politicians to decide whether to take one or other forward—I can see that.

I will open up the session to questions from members.

I will start with a question for Mr Ireland. In the chief executive’s introduction to the commission’s annual report and accounts you say:

“We are continuing to work on the public understanding of fiscal policy in Scotland.”

I wonder whether that is possible. How is it going?

Yes, it is possible. Graeme Roy’s work is particularly important in that respect, so he might want to add to my comments.

It really is part of our job to help the public to understand the policy, but we have to be realistic about that. As you know, the fiscal framework is incredibly complex. However, there are some basic things that we can be clear about. We try to be clear in our reporting, and we try to structure our reports and graphics so that they are accessible to a wide range of people. However, we have to think about where to direct our resources, so we spend a lot of time thinking not so much about how we can communicate with the public en masse, but about how we can communicate with, for example, journalists, who will then do the communication for us.

There are things to be done. We are thinking about engagement in a slightly different way. Graeme Roy might want to add something about that.

13:45  

There were a few things in there. There is a really important piece of work for us to do on communicating more broadly and communicating with the key decision makers who really matter in respect of the big issues that we deal with. If we are talking about fiscal sustainability, we are keen to do much more with the organisations in Scotland that really matter on that, such as the Convention of Scottish Local Authorities, Public Health Scotland and the Scottish Government, to articulate and explain the work that we are doing on that.

The conversation that we had about public sector wages is a really good example of where we can add value by articulating how much of the budget is public sector wages. If choices are made on wages, that will impact not only on employment but on broader areas as well.

There is a lot that we can do with people who are involved in and engaged with that process. We have started to train people, and we will do that over the next year. We explain the budget and the fiscal framework, and our plan is to create a series of bite-sized videos. If people are bored on Christmas day, they can watch a five-minute tutorial on what reconciliations involve.

The more we can do on that and the more we can work with others to get people to understand not so much the detail but why the numbers matter and what they mean for people making decisions, the better.

Thanks. I realise that we are tight for time.

In the past, Dame Susan Rice produced quite a long list of data needs. However, you are now saying that you will publish that only every two years because you seem to have cracked that. Is that right?

We are always in the market for data, and we are always asking for it. There is a point about how regularly we need to keep doing that. That is why we are now doing it every two years.

We have made good strides in Scotland, particularly on data. On the big concerns that we had when I previously spoke about data needs relating to social security, I think that we have a much better relationship with Social Security Scotland in respect of getting the data that we need. We always need more. We will update that. We are also quite happy to raise an issue outside our regular reporting on data needs. If we have concerns or we are not getting the data that we need, we will communicate that through other channels.

My final question is on paragraph 196 of the annual report, which says:

“The Scottish Fiscal Commission is not yet subject to the Public Sector Equality Duty”.

Can you explain why and what is happening there?

That is in relation to reporting on the gender pay gaps explicitly, but we voluntarily report. We have had a negative median pay gap in the past couple of years. That means that, on average in the organisation, women are paid more than men.

But you are going to be subject to the public sector equality duty at some point.

We will be. I think that it depends on employment size, and it sort of squeezes as time goes on. However, we took the decision to voluntarily report on that.

That is great. Thank you.

The report says that you want to make sure that the work is “clear and accessible”. I wonder about its being replicable. In the run-up to the budget, we had a couple of external reports that tried to cost different taxation policies and used markedly different methodologies other than the key methodology, which is yours. To what extent is that a black box that people cannot see into? How much do you engage with external organisations to show your working so that they can plug their numbers into your formula and we can have a more consistent view of some of the issues around behaviour effects?

We are very transparent about our numbers. We are also more than happy to engage with people on that.

Let us take tax as an example. It is interesting that the Government publishes what are essentially ready reckoners that are based on our numbers. Anyone can go into them and say, “What would happen if you put a penny on the top rate of tax?” Broadly speaking, they would come out with our number.

We encourage people to use our numbers, because they are there. If people want more information, we are more than happy to speak to them. You are right that, when people come out with different numbers, it can be confusing. If there is more that we can do to promote the fact that our information is available, that would be great. Our relationship with the Fraser of Allander Institute is a good example of that. It has its models and we have ours, but our officials communicate, so they know why we might use different assumptions. Everything really comes down to the nuts and bolts. Potentially, others may advocate a policy that comes out with different numbers from ours, but hopefully people will use ours.

Would you be proactive in that? I am thinking immediately of two reports—one from the Institute for Public Policy Research and one from the Scottish Trades Union Congress—that have both been produced with what seem to be markedly different methodologies from yours. Would you proactively approach the IPPR and the STUC and say, “You’ve made these assumptions and they’re a key part of the public debate. It’s right that you publish those reports—it’s very useful for all of us—but it would be good if we used a common methodology, or even if you were to display the variance against your methodology and why you’ve made certain assumptions”?

We are more than happy to engage—we engage regularly with organisations such as the IPPR. There is always a balance, particularly in a budget cycle—it is about how much time and so on we have to go out and be proactive. To be fair, the reports that come out with different numbers talk about all the issues around behaviour and the work that we have done and so on. They may then choose to use the static costings or a more generous assessment on the elasticities. Ultimately, that is their judgment. I would not be critical of them for doing that, but there is a broader question about how you communicate all that when you have quite different numbers moving around.

The budget for economic and scientific advice, published yesterday, has almost doubled in two years. Do you get a cut of that?

I will let John Ireland explain. We have our own budget line.

We are not funded as part of the Government’s economic advice budget. Our budget comes from the finance portfolio and is in the budget document. We have an agreement with the Government in our framework document. The amount for the next financial year is in the budget. For the following two years, the cabinet secretary will write to us after the budget bill has passed, giving us an indicative allocation, which, in the past—for all the time that we have been an independent body—has been in line with what we have asked for.

Does that represent an increasing cost for the Scottish Government for that advice? In some respects, this takes us back to our previous conversation about budget scrutiny. I just wonder about your budget and the flex that you need to do your work.

In terms of our budget, the number of people we have working for us has increased over time, as we have done more. For example, with the committee’s support, we asked the Government for more resource to do the fiscal sustainability work. In a sense, our resources have increased in line with the work that we are doing. We are careful about how much money we ask for. At the moment, our resources are sufficient to do what we do.

One of the issues that we have, though, is labour market churn. The people who come and work for us tend to be quite young. They move on and that leaves us with vacancies. Managing vacancies is always an issue for us, but the overall funding that we have from the Government is fair and adequate.

I have a quick suggestion, which is that you repeat the wonderful lunchtime seminar that you did for MSPs and staff about four months ago. All your diagrams were far better than reading through an awful lot of text. It was a fantastic seminar and much appreciated by the staff and the Parliament.

That is very kind of you. Yes, I am more than happy to do that.

It clashed with the Scottish National Party group meeting, which is why a lot of us were not there. However, the early morning, bacon-roll-type seminars are very useful, not only for MSPs but for staff. I am keen that they should continue.

I know that John Mason has to rush to the chamber to be there for 2 o’clock, and of course we cannot meet after 2 o’clock. It is 5 to 2 now, so unless anyone has further questions, I will call the meeting to a halt.

Thank you again for your evidence, Professor Roy and John Ireland. It has been very helpful in our deliberations. I close the meeting and wish everyone a very merry Christmas and a happy and peaceful new year.

Meeting closed at 13:54.