Chamber and committees

We will continue to discuss with business the best way to shape the funding that is available in order to have the outcomes that we want.

For example, we are talking to the hospitality sector at the moment about whether the current regime that is focused on turnover is fair to the hospitality sector compared to retail. We are not absolutely wedded to doing things the way that they have always been done. We are all cognisant of the current climate in which businesses are trying to recover from Covid and of the headwinds that are impacting on small businesses in particular, but it is not a bad challenge to say that the small business sector might have ideas.

We are talking to business and engaging with it on what the future looks like. It is a good time to have those discussions and to frame the issue in a way that shows that it is not about taking something away but about what investments could work better. I will continue to have those discussions through the budget process and into manifesto territory.

We can come back to you on that.

I will come back to you on that. I feel that discussions with the UK Government are in a better place now.

I guess that that is just drawing the distinction between saying that we would like to have VAT along with all the other revenue-raising powers, but that it cannot be through a system of assigned revenues. It is a matter of distinguishing between the principle and what was being suggested in relation to assigned revenues, because that is where the risk is. If the UK Government was to turn around tomorrow and say that it will give us responsibility over VAT full stop, that would be a very different matter.

That is why we took action in June to set out where we would close the gap. Clearly, there are some moving parts around the spending review. For example, on social security spend, the updated forecasts in the autumn will show the movement in the block grant because of the U-turn on welfare policy, which will probably adjust the projection by about £440 million by 2029-30.

There are other unknowns—for example, if there is an announcement on the two-child cap; we have factored in about £150 million to start with, but that grows as the projection goes towards 2029-30. At the moment, there are some unknowns that will impact on that gap, in addition to the steps that we have already set out. We will make sure that the committee is updated as we get confirmation of those forecasts.

Let me deal with the £36 million. That relates to the total sum of historic devolved debts that were either transferred to the Scottish Government under devolution or accrued under the lifetime of the agency agreement, when the DWP was still administering. That is historic debt, not somehow something that was created—

We will not let it go. Social Security Scotland will continue to take a zero tolerance approach to fraud. Any decision to write off any debts will be made only on an exceptional basis and after a full assessment has been taken.

I can take you through a lot of the detail of what Social Security Scotland is doing. It is using intelligence gathering and working with partners to identify and respond to fraud quickly and effectively, and suspected fraud is actively being referred to the Crown Office and Procurator Fiscal Service—a number of cases are already with the Crown Office, and it is ensuring that it is recovering overpayments. It has recovered a significant amount of money in the past two years. Although more needs to be done, I would not want anybody to have anything other than the impression that Social Security Scotland takes a zero tolerance approach to overpayment or fraud.

That does not mean that it is correct.

Look—I say again that, in setting pay policy, we draw on the range of judgments that are in front of us at the time. The policy was based on inflation forecasts over the three-year period and on a desire for long-term certainty on public sector workers’ pay. That is why we tied in the fact that anything that went beyond 3 per cent for year 1 would have to be a multiyear deal. We had to buy some peace in the industrial landscape through multiyear deals, and we have been quite successful.

The cost of industrial action cannot be overestimated. Imagine how many appointments would be cancelled in the NHS if there was widespread industrial action—that would well outstrip the value of the pay deals.

Another thing to bear in mind is that it is difficult to walk away from the verdicts that have been given by UK public sector pay bodies, which we do not control. The UK Government set a policy of a 2.8 per cent pay increase, but pay review bodies’ verdicts went way beyond that. They took into account a more up-to-date inflation figure, because they had it to hand. To be fair to the UK Government, it was left in the same position as we are in. What is the point of having an independent pay review body if you ignore its findings? The UK Government did not ignore the findings, and it would have been difficult for us to ignore them.

Through having mainly two-year deals, we can now focus all the effort on reform, efficiency and doing things differently, rather than on the annual round of pay negotiations. That has a big value, and it is what my colleagues and I are focused on. We have been pragmatic. We have tried to land somewhere reasonable that gives some certainty, buys us some peace and gets us moving into reform territory.