Chamber and committees

Good morning. I am aware of time, so I have just a couple of questions. First, with regard to the status of phase 1 projects, I am aware that two are at amber—destination net zero and the Scottish tourism observatory. Before I go on to another question, I want to get a sense of the current status and rationale and any further thoughts about those projects. That question goes to whoever is the most appropriate person to answer.

Finally, do you want to put anything else on the record in relation to your comment about there being no easy investment solutions? A lot of what we have seen has been exacerbated by the pandemic and, if you like, the flow of funds.

Do you have anything to add, Vicki? I know that Rob Dickson and I were focusing on capex and the inability to carry that forward, although I also know that you can carry forward revenue. Is there anything more that you want to say about investment before we move on? I am aware that time is of the essence.

Stephen and Leon, in no particular order, could you answer the same question?

Is it not the case that, given the high proportion of women in tourism and hospitality already, you are already well versed in some of the flexible working practices that have now been introduced in other sectors? After all, women often have to juggle multiple elements in their lives. Would that be true?

Thank you. Rob mentioned something about capital expenditure, which is the other area that I wanted to ask about. A comment in the minutes of STERG’s most recent meeting notes that the investment models have been challenging. You commented on the financial accountability rules and the fact that the Scottish Government cannot offer any flexibility. Is my understanding correct—that that is simply to do with the fact that the Scottish Government, according to the fiscal framework rules by which it is bound, cannot carry forward? In effect, by law, it is not in a position to offer flexibility. If that is correct, are you any further forward with that blocker around structuring investment models? That might follow on from what Rob Dickson was saying about capex.

Yes. What you have described is careful management of the limitations on that money, which, after all, cannot be carried forward. I would think that if you were running a business, as I have done, and were unable to carry forward any money—particularly capex, with all the implications that that would have—you would have to do a lot of work just to manage that kind of limitation. That is what I am trying to explore. Is that the case? Have you just got used to the fact that you will have to manage things around that limitation and will expend effort and incur expenditure in doing so?

Thank you for that, Marc, but before we move on, do you have hard data on women-led businesses, and do you routinely disaggregate that data in any surveys? I am heartened by the warm fuzzy feeling that I am getting from you, but data is everything.

It certainly does. Does Vicki Miller have anything to add to that?

I will keep up the debate’s brisk pace. Given the multiple shocks to the economy from Brexit, the pandemic, spiralling energy costs and the impending rise in national insurance rates that the UK Government is to impose, I welcome the fact that the cabinet secretary has not added another shock to our system. By only increasing the starter and basic rate bands by inflation, she has produced proposals that bring a degree of welcome stability.

A significant and constant challenge is the instability of forecasts. Since the Scottish Fiscal Commission’s previous forecasts in August 2021, its forecasts for income tax revenues in 2022-23 have changed by £400 million. That forecasts can change so significantly in the short run should make us wary of laying too much store by longer-term forecasts.

I have in the past pointed out that forecasting, including from the Office for Budget Responsibility and the UK Treasury, is far from an exact science, and in turbulent times when behaviours at the level of both individuals and businesses can change quickly, forecasting models can often be subject to considerable error. My main message is therefore that we must be particularly vigilant on actual outcomes, rather than investing too much faith in forecasts.

One of the weaknesses that we face, however, is that too much of the tax base overall is not under the control of the Scottish Government. As Paul Johnson of the Institute for Fiscal Studies put it in The Times on 20 December this past year,

“We know from the experience of Scotland and Wales that income tax can be at least partially devolved, as can stamp duty on property transactions. There is no reason in principle why a slew of other taxes shouldn’t eventually be devolved to all three nations.”

Indeed, as chair of the Independent Fiscal Commission for Northern Ireland, he has argued for the devolution of corporation tax, for which I know that some members have argued too.

At a time of public health challenges, we too should reflect on Paul Johnson’s independent view of another area of tax. He argues that

“the devolved governments have responsibility for public health but cannot alter duties on alcohol. That’s one reason Scotland was forced down the route of a minimum unit price for alcohol, increasing the profits of those selling alcohol rather than increasing tax revenues.”

In the here and now, the cabinet secretary does not have the type of flexibility that would allow her to use a wide range of tax powers. Given the constraints and challenges of our times, I fully support the Scottish Government’s proposals on tax as strongly as I disagree with the UK Government’s national insurance hike.