Chamber and committees

The average household in the lower half of the income distribution will be around £480 better off than it would be under UK tax and social security policies. You have to look at it in the round. It is not just about tax; it is also about social security.

I will come on to that in a second. On the one hand, you are saying that it is important that I prove that a majority of taxpayers will pay less than they would if they lived somewhere else in the rest of the UK. Then you move the debate on and say, “Aha! But it’s not that much less.” The point is that we are not increasing the tax burden on the lower paid; we are reducing it and taking it in hand with social security supports. Those in the lower half of the income distribution in Scotland will be about £480 better off than they would be if they lived anywhere else in the UK. That is significant. It is a deliberate attempt to support those who are on lower incomes.

On your point about the higher thresholds, three quarters of taxpayers are not affected by the freeze to the higher thresholds. We are not freezing them to the same extent, over the same period, as the UK Labour Government. We will review the policy in a shorter period than the UK Government has set out, because it is right to do so.

If we were to shift the higher rate threshold, even to about £44,000, that would cost £125 million. If you are proposing that we should do that, you will have to point out where that money would come from. Earlier, we discussed funding for local government, and you pressed me on whether there is a real-terms increase. If I had to find £125 million to marginally increase the higher rate threshold to £44,000, it would mean that there would be £125 million less for local government or health.

Those are the choices that you have to make when you are in government, in order to reach a fair position. People get a lot from the social contract for the taxes that they pay, and they get far more in terms of social benefits. Those are the policy choices that we have set out. It is for others to set out alternatives, but they also have to say where the money would come from.

We have made an investment in social security in Scotland because we believe that it is the right thing to do. Incidentally, the inflation increases that you referred to were agreed unanimously in Parliament. It might have been before you were elected, Mr Hoy, but every party signed up to those inflation increases in the legislation. In fact, I think they were actually moved by one of your former colleagues. It is not just the SNP Government that has agreed this; it was a unanimous position taken by the Parliament that these benefits should be uprated by inflation. If you are now changing tack and changing your mind, the important thing is that you need to say who should lose out and how the system would change.

By the way, to do that, you would have to consult and do a full assessment, which is also set out in the legislation. The idea that that would be done for 1 April this year to save money for your tax cuts is for the birds, because it would not. It would take at least a year to go through the process of changing benefits and removing them from people, in addition to which you have not specified who the losers would be.

We have made the investment in social security. As you can see from the SFC’s analysis, the proportion of investment that we think we will have to make, according to the medium-term financial strategy, has fallen for a number of reasons, including those relating to the number of adult disability payment claimants. That pressure throughout the spending review period has been reduced for the reasons that have been set out. A report that has just been published by the chief social policy adviser says that the two main contributors to the increase in disability benefits are rising rates of ill health and the UK Government’s raising of the state pension age. I make no apologies for our investment in social security.

What I can tell you is that, when we went through the spending review process, a process was set out that all portfolios and cabinet secretaries had to follow in terms of the value and impact of the spend within their areas. A key set of questions and challenges were followed through for every portfolio, and I engaged directly with each cabinet secretary in challenging them on that. They had to set out on a template the value of the spend within the portfolios. That process was consistent for each area of spend across Government, as you would expect.

We have very much focused on getting two-year pay deals as part of the 9 per cent pay policy, and we have done so successfully. That brings a level of certainty to those who provide public services that there is now a space to talk to the unions and workforces about transformation, rather than just about pay. Buying time for that work to be done is really important, and the two-year pay deals are critical.

As I have said, we will set out what the expectation is for 2027-28, with the recognition that it will be tight to remain within the 9 per cent pay policy.

10:00

Well, then, I am sure that you will be aware of that detail.

I am well aware of the detail, Mr Marra. You do not need to tell me—I am well aware of the detail. It will involve those sources of funding—the Tay cities funding—but that will have to be matched. That is why the Scottish Government is in discussion with the Scottish Funding Council about the first phase move to Gardyne.

10:15

In addition, and separate from that, is the Wellgate infrastructure project, which is far bigger and more expensive. That is where the revenue finance vehicle needs to be established—the timeframe that has been given is by the autumn—to make sure that the work can go ahead with the vehicle to deliver and get the private finance on board. That is more technical, as you will appreciate, because it involves a special purpose vehicle that will have to be established, with all the requirements that will go with that. The first phase of that is under discussion with the Scottish Funding Council. It is well aware of the timeframes around RAAC, and I assure you that it is well aware of the detail.

I was quite struck by the session that you had with the Scottish Fiscal Commission, which laid out in relation to the use of ScotWind funding the severe limitations on us and the lack of levers, which mean that we are not able to smooth out the peaks and troughs of funding. As things stand, we are reliant on the peaks and troughs of the UK spending review; 2027-28 is a trough and it will be challenging. We do not have the levers to smooth that out, other than by being able to deploy ScotWind. Without that, we would be looking at resource reductions to allow us to plan.

On your point about negative reconciliations, yes, we can borrow to cover those, as long as they are within a certain limit. The modifications that were made around the edges of those powers in the previous fiscal framework review are not unwelcome, but it was so limited in nature. Like the other devolved Administrations—the Welsh are saying exactly the same—we need more flexibility and additional levers to be able to borrow to smooth out. We are limited in that at the moment, which is why I have been trying to get the Chief Secretary to the Treasury on to a page where we agree a more ambitious review and work out its terms.

The time is right. After many years of limitations, we now know what the issues are. The time is absolutely right for a more ambitious review.

Social Security Scotland has been doing some analysis on that. Initially, a lot of existing cases were transferred, and we might now be getting into a different phase of ADP applications. Social Security Scotland has been looking at the reasons for the change, and the report by the chief social work adviser that has just been published or is just about to be published attempts to shed some light on that.

Overall, if we compare what was set out in the MTFS with the current predictions for social security spending up until 2029-30, we see that the figures are quite significantly down. One of the reasons for that relates to UK Government changes to benefits and its decision on the two-child cap. The reduction helps with fiscal sustainability, which we discussed earlier. The removal of a few hundred million pounds makes the path a bit easier, which is to be welcomed.

We have debated that issue numerous times. We are clear that our investment in social security is good for our country, for our people and for the economy, because people tend to spend their money locally, as we have talked about previously.

I am just making the point that the position has narrowed compared with what was set out in the MTFS. Some of that narrowing is primarily down to UK Government decisions, but some interesting information on applications is emerging. I am sure that Social Security Scotland will look in some detail at why there has been a fall in the number of successful applications. As I said, I think that the initial cases that were transferred involved very few changes to entitlement, but the new cases that are being dealt with might well be different. I am sure that Social Security Scotland could provide additional information on that.