Chamber and committees

I recognise the issue about the marginal rate. It is very difficult to do anything about it in the current climate, given how much it would cost, but I do not dismiss that.

The first thing to say about the tax system is that the more people understand it, the higher the compliance rates. There is some complexity in the system, and people do not always understand how the Scottish tax system is different, or even that we have a Scottish tax system and what that system is. We have been doing work to raise awareness of what the Scottish tax system is and what people’s obligations are, because we want to drive high levels of compliance with that system.

Aligned with that is the issue of stability. We have provided stability on income tax for the remainder of this session of Parliament. That will help people to manage their finances, and it will help businesses to plan and to make investment decisions with confidence, knowing what the future holds. That is why we made that decision.

I should say that, for the first time, the MTFS identifies areas of research interest on tax to support the gathering of evidence and the evaluation of tax policy, because we want to ensure that, whether on enhanced compliance, taxpayer communications or tax legislation, we have the best available evidence for future decisions. As you know, we are considering future reforms in relation to land values, in particular, and we have asked the Scottish Land Commission to look at that. However, those are matters for the future rather than the immediate term.

Earlier, I mentioned that we are looking at how to generate additional tax revenues, partly to ensure that our economy is growing. We have some good indicators on the Scottish economy, even though times are tough. There are UK Government policies, such as the policy on ENICs, that have had a dampening effect on recruitment and the growth of companies. The ENICs increases have definitely had an impact on vacancy rates. As a counter to that, some sectors in Scotland are doing extremely well. We want to make sure that, through NSET, our policies, our support and our agencies are facing in the same direction to help those sectors to continue to grow and to do well. Many of them do very well on the global stage, not just in a UK context.

That was a long-winded answer. We are looking at certainty, compliance and the growth of the economy.

My final point is that one lever that we do not have, which is critical to many of our sectors, is the one that relates to skills and migration. Many sectors tell us all the time that they cannot get the people they need and that it is more difficult for them to recruit from elsewhere. That is a major impediment.

On the positive side, we still have net in-migration to Scotland from the rest of the UK across all tax bands. That is a good thing, but we would like to do more in that space, because there are sectors that want to recruit.

Yes, absolutely. It is one of my busiest times.

I am up for thinking about whether earlier that week could be a compromise. That would give us that first few days back just to finalise things. I am not wedded to its being a Thursday, for sure; I guess that it is about trying to meet in the middle, where we can reach—

That came up in our previous session. A further example is prioritisation within portfolios. For example, in the health portfolio, clear priority has been given to patient-facing front-line health boards that have received, and will continue to receive, a real-terms uplift, whereas non-patient-facing health boards have flat cash and a higher level of efficiency savings. We are saying, “Right folks, patient-facing front-line health boards need to be the priority. Other areas of the national health service will have to do things differently to drive efficiency savings, such as looking at shared services and so on.” Even within portfolios, we are trying to ensure that priority is given to front-line services.

The 20 per cent target for the reduction in corporate staff numbers is sending a clear message that corporate functions in the public sector need to be done differently. Staff numbers need to reduce and services need to use digital innovation and automation in order to release savings for front-line services. That needs to permeate through every part of the public sector and every portfolio interest. That is the principle of what we are working towards.

I recognise the importance of our further education and higher education sectors. The college sector received an increase in teaching funding in the 2025-26 budget—

Work continues on that, convener. There is a slight frustration in that we are in agreement on 95 per cent of the framework and a lot is already being applied in practice. I referred in the meeting four weeks ago to there being early engagement, an open-book approach and so on. Those are all principles of the framework. Most recently, the approach on local government pay was very much in line with the framework, so there is a little bit of frustration about not securing agreement to publish—although those discussions are on-going—because of the issue of rules-based funding.

I have been in discussions with the Convention of Scottish Local Authorities about the limitations of, and difficulties with, rules-based funding. The employer national insurance contributions issue is a very good example. If you stick to rules-based funding, it can be to your disadvantage when something such as an increase in ENIC arises unexpectedly.

We agree on 95 per cent of the framework. I hope that we can reach a position where we can secure full agreement and have a framework for the way that we do business. We can continue to discuss future funding formulas as well, but that should not stop us grasping and securing the progress that has been made, not least on the process around the budget, which I think local government itself has said has been the best for many years. We are still in the process, but I am hoping that we can get through it.

Do you have the numbers, Richard?

I am certainly happy to look at what others have done, whether it be Lithuania or Finland. If you have all the levers—

Or changing the direction of the spend. Let us take employability, for example, which we have talked about quite often. There are some good programmes in employability, but is that area of work as focused as it could be? Is it reaching and supporting those families that we need it to reach and support? Third sector spend has had quite a lot of success in reaching and supporting families. Is that being sustained in areas where there is evidence that it is working? Both are true: we need to interrogate spend to ensure that it is delivering but, where spend is delivering, we need to ensure that it continues and that there is not a disconnect, for example where something that works well ends up not receiving third sector funding.

We rely on the data that is provided, which we can then interrogate, on what is being delivered through third sector grant funding, the outcomes from the employability funding, some of which also goes to the third sector, and the outcomes from the Scottish child payment. There is less clear data in some areas—for example, do we have the data from the huge investment in childcare to show which families are benefiting most from it and which families are not benefiting because it is not flexible enough? Those are the areas that we need to get into. Do the mental health services that we provide reach the folk they need to reach to get people back into work and, importantly, to avoid people falling out of work? I am not sure that we have the data set on that that we want.