Chamber and committees

We ask the enterprise agencies to do a lot of different things, which struck me when business leaders whom I spoke to talked about a six-page letter that had gone to one of our enterprise agencies, asking them about the things that the Scottish Government asks them to do. We need to be more focused on and sharper about what the priorities are, particularly in the next year and the immediate future.

To be blunt, the discussions that we are having around health, police and fire services are pretty limited, which you can see if you look at the budget lines for front-line services. That is probably because, in terms of where the money is going, I have focused on and prioritised front-line public services. That has meant really difficult budget decisions elsewhere to make the budget stack up. Is that what I would want to have done in an ideal world? No, but given that money is tight, we have had to prioritise front-line public spending. That has meant that we have had to constrain funding elsewhere, and it means that our enterprise agencies will have to utilise that £307 million in a careful and targeted way to align to the priorities.

There are, in the budget, elements of committed funding for our priorities—for offshore wind, for example—and elements where we have made additional investments. However, it is a tough budget for our enterprise agencies. There is no getting away from that, and we have to be clear about what we are asking them to do with that money.

There is nothing different this year.

On that point, I note that the education secretary will, no doubt, be asked questions in Parliament about the number of teachers—

It was spring of last year when the final agreement with the Scottish Funding Council was reached. There is nothing different at all this year with regard to those discussions with the Scottish Funding Council: it was spring last year and it will be spring this year.

I am happy to schedule that debate, but we need to see the spring budget first. My suggestion is that we consider the matter alongside the medium-term financial strategy, which has that longer-term outlook, but I agree that we need to go beyond that in looking at some of the pressures, such as social security.

I have no issues with scheduling that debate but it needs to be done in a helpful way, which looks beyond the day-to-day debates that we have with one another in the Parliament about spending on this or that area. I would welcome the ability to look beyond some of those day-to-day debates. I am happy to commit to the time for that debate, but let us make sure that we are in full command of all the information that we need and have it in front of us, which will be beyond the spring budget. The offer is to have such a debate around the time of the medium-term financial strategy, if that is helpful.

That is why it is important that we look at the HMRC data. In some ways, we will need to track whether there is behavioural change from year to year. We cannot foresee what effect a tax policy intervention will have in five or 10 years, because the data on behavioural change—if that is what we are talking about—will only emerge as and when it emerges. That is why the HMRC data is important.

There will also be National Records of Scotland data on migration. At the moment, we have positive in-migration of around 7,000 people a year in the working-age population, and we will keep a close eye on whether there is a shift in that. Inevitably, the data is not forward looking because data, by its nature, looks back on what has happened. It is important that we continue to look at the trends. If there is a change in trend that indicates that there is a different direction of travel, we would want to look at that very carefully.

The business community will give its view, as a community. As individuals, I am sure that there are business leaders who believe in progressive taxation—I have no doubt about that, at all. The business community will represent itself in terms of wanting lower taxes for its businesses—I have no doubt about that—and it will make those representations, whether they are about business taxes or VAT.

However, as a Government, we have a judgment to make about how we fund public services. If we reduce taxes for business—or, indeed, income tax—that means that there is less money for public services. That is the balance and those are the decisions that governments have to make, and we have decided to invest in public services through the tax decisions that we have made, whether on income tax or business taxes.

They are users of public services as well, of course, and I think that they recognise the importance of investing in public services.

Yes. I confirmed in a letter to local government a couple of weeks ago that the council tax freeze will be baselined into the settlement.

I go back to the point that, fundamentally, the marginal rate thresholds arise because of the incomplete devolution of tax powers. There are two systems. The powers of the Scottish Parliament and the Scottish Government to vary tax rates have been set for quite some time, but the interaction with the UK Government’s tax position has not been properly resolved. There is a need to do that, but it has to be a two-way street. We are up for having that discussion on how we can take those matters forward, but we have not been able to engage in a way that is helpful or constructive.

You noted the Fraser of Allander Institute’s view on the need for significant increases to the basic and intermediate rates. I do not think that that would be appropriate, given the pressure on household budgets. The solution would be a tax system that is fully devolved to Scotland, so that we can drive out the anomalies that arise.

The marginal rates are a concern and we will continue to pay attention to them. We will look to resolve that issue over the longer term, if we can, but finding the funding to do so and the implications of that in these constrained financial times would be difficult to justify. We recognise that the situation is far from ideal, but resolving it in the short term would not be affordable.