Chamber and committees

The only number that I am aware of is the one that I spoke about earlier: the 1,200 Covid places. That is the bubble for which we have sustained funding for an additional two years out of Scottish Government resources, because the Covid money that had initially funded those places was stopped by the UK Government. We kept those places going with Scottish Government funding for two years, but we are no longer going to be able to sustain that. Beyond that, no figure has been agreed with the university sector, because discussions are on-going around what the university sector will deliver and they are not yet concluded.

Well, without the bubble of 1,200, it will return to the pre-bubble position.

The position with regard to international students is constrained by the UK Government’s position and the decisions that it has made, which makes it more difficult for international students to come to university in the UK, in particular regarding their ability to bring their families. I think that that is a very short-sighted policy from the UK Government. The universities are pretty clear that it will impact on the numbers of international students who come to the UK, not just to Scotland but elsewhere in these islands. That is unfortunate, and it is not a helpful policy for the university sector as it moves forward.

These decisions are carefully considered. I point out that it is estimated that the new advanced rate will impact only the highest-earning 5 per cent of taxpayers but, nevertheless, the decision was not taken lightly. We have, of course, looked very carefully at the assessment from the Scottish Fiscal Commission on any behavioural change, and that is factored into the net gain or benefit from the tax changes. The SFC estimates that £82 million will be raised from the advanced rate, which is not an insignificant amount. We also have the analysis that is being worked on by HM Revenue and Customs, which will be made publicly available later this year. That builds on the evaluation of the 2018-19 income tax reforms, which found very limited evidence of Scottish taxpayers lowering their declared income, for example, in response to increasing tax rates.

It is important to note that we still see net migration of working-age people from the rest of the UK to Scotland with a net gain that averages about 7,000 people per year. Over time, that adds significantly to Scotland’s workforce and it is important in growing the economy.

However, we should not be complacent about these matters and we keep them very much under review. Taken as a whole, the SFC estimates that the tax changes that we have made over a period of time compared with the rest of the UK are worth about £1.5 billion, which represents a significant contribution to public services.

You started by talking about the marginal rate, and we have to be cognisant of that. The marginal rate for earnings between £100,000 and £125,140 is mainly due to the personal allowance taper rate, which is entirely reserved. The marginal rate for taxpayers in the rest of the UK is also significant.

We are not complacent and we do not take such decisions lightly. However, in the most challenging of budgetary circumstances, if we had not made the decision, even less money would have been available for public services at a time of constraint.

There are not widespread errors. That error has been picked up and we are not aware of any others.

That is not dissimilar to what happened in the previous budget, when pay policy was set out in March last year. There is difficulty in being able to predict the outlook in the light of the forthcoming spring budget, which could make significant changes to our fiscal outlook. It is important to understand what that will look like as part of the issuing of pay metrics. With the level of uncertainty, it would not be right to do so now.

That is why the timeframes are what they are. I accept that, in an ideal world, we would want to align that with the budget, but because of all the difficulties in forecasts, that has proved to be very difficult. We will set out our plans for public sector pay following the spring budget, which will provide an update on the fiscal outlook and, most importantly, on the UK Government’s public spending policy, which could impact on our budgets. Given that pay is such a large part of our budget, as I set out in my letter to you, it is prudent that we do that.

The protocol sets out the information sharing that is expected in the lead up to the budget. We provided the SFC with the latest position on public sector pay costs for 2022-23 and 2023-24, and we commented on the pay award assumptions that are being made for future years. On the specific metrics, we are in an unusual position in which an upcoming spring budget could have a major impact on the available spending, even though our assumptions have been made based on the autumn budget.

I think that it is pretty unusual. There is an unusual set of circumstances, in that the extent of the changes that might be made in the spring budget—given that it is an election year and given some of the noises that are being made in the media about what could happen vis-à-vis income tax changes—could have a profound impact on our budget.

That is not a number with which I am familiar. There is no number, as such, because the Scottish Funding Council is still to have discussions with the university sector about the places that will be available. The point that I am making is that 1,200 is the figure that has been referred to: I am explaining to you why there is a bubble and what its legacy is. The Funding Council is discussing with the universities the number of places, in order to settle on a number that is affordable and sustainable.

First of all, growth is a priority. Earlier, I set out some of the economic indicators in the Scottish economy that show an improving position. The strategic investments that we are making, particularly in net zero and green energy, are the right investments, and we have been encouraged by the investor panel to make them. However, there is no getting away from the fact that, with less money on the resource side and particularly on the capital side, we cannot make the investments that we would want to make. We cannot do that, because there is less money.

We have had to make some very difficult decisions on where we make the investments. For example, we need our enterprise agencies to focus on the key priorities, so there will be things that they are not able to do. Our capital investment is geared to try to use public capital in a strategic way that levers in private sector investment. All those things will be critical to continuing to see the improvements in economic performance that I laid out earlier.

I come back to the point that, with less money, we have had to make difficult decisions, and that has impacted on areas where we would rather not have had to make those decisions. However, there is no escaping the fact that decisions had to be made somewhere in the budget, and those are the decisions and priorities that we have made.