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Chamber and committees

Official Report: search what was said in Parliament

The Official Report is a written record of public meetings of the Parliament and committees.  

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Dates of parliamentary sessions
  1. Session 1: 12 May 1999 to 31 March 2003
  2. Session 2: 7 May 2003 to 2 April 2007
  3. Session 3: 9 May 2007 to 22 March 2011
  4. Session 4: 11 May 2011 to 23 March 2016
  5. Session 5: 12 May 2016 to 5 May 2021
  6. Current session: 12 May 2021 to 21 July 2025
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Displaying 3539 contributions

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Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

[Inaudible.]—on the Scottish budget 2023-24. I warmly welcome to the meeting, in person, Professor Graeme Roy, who is chair of the Scottish Fiscal Commission; Professor Francis Breedon, who is a commissioner on the Scottish Fiscal Commission; and John Ireland, who is the Scottish Fiscal Commission’s chief executive.

Professor Roy, I understand that you wish to make a short opening statement.

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

I am sorry—I try and put the questions to Professor Muscatelli so that he can decide who answers.

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

I think that it is a bit of a stretch to suggest that the Scottish child payment going from £10 in April this year to £25 next year somehow represents a real-terms cut.

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

Yes. I apologise—I should have been clearer about that.

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

That is interesting and is what one would anticipate.

You have said that the underlying structure of the Scottish economy is undergoing profound shifts. You talked about the impact of the pandemic. More people work from home, and some people suffer from prolonged health effects. Have you looked at that? In recent weeks, we have taken evidence from various panels to the effect that, across the UK, around 600,000 people have left the workforce; the corollary is that the number in Scotland is about 60,000. Do you look on that as a long-term consideration or as a one-year or two-year blip, when it comes to your projections of future economic growth and so on?

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

Thank you. I have just one more question before I open things up to colleagues around the table. Last Thursday, you sent me a letter, which said that non-domestic rates will be levied on a revalued roll. You said that

“significant uncertainties remained throughout the forecasting process.”

Obviously, that is of concern to the Scottish Fiscal Commission. Will you expand on that a wee bit, for the record?

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

I will follow up before I let Liz Smith in. I am struck by something that you said, Professor Breedon. You said that you assume that the 1p increase in the top rate will increase taxes by only £3 million rather than £30 million because of behavioural changes, but that if we put the rate up by 2p, that amount would double to £6 million. Surely you get to a point where the effect of behavioural change exceeds the additional income level. If the volatility is such that a 1p increase will take 90 per cent off the revenue, surely 2p in the pound—I am quite astonished at that high level of elasticity—would tip it over the edge and you could end up with negative revenue.

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

Thank you. I have just one final question before I open out the session to colleagues round the table. It is a question about taxation. We see that fiscal drag will increase income taxes quite considerably over the next few years, and you have said that the Scottish Government should continue to consider

“ways that the tax system could be made fairer and better aligned to improving productivity and wellbeing, either through reforms to existing taxes or through the introduction of new taxes”.

By 2027-28, what share of gross domestic product will be taken up by taxes compared with now? Also, you say that the system could be made fairer, but fairer to whom?

We have an anomaly in Scotland whereby people who are earning £45,000 a year, for example, on marginal tax, will pay in the next financial year 42 per cent in income tax and 12 per cent in national insurance, giving a marginal rate of 54 per cent; on the remainder, they will have to pay excise duty, VAT and all the rest of it, depending on their lifestyle. However, for people earning over £50,000, their national insurance level falls to 2 per cent, so their marginal rate is significantly less. How can the tax system be made fairer, given those anomalies?

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

Professor Muscatelli talked about the importance of the public sector reform programme, which your report says “remains key”. You add that

“there has never been a more important time to consider prioritisation in public services and productivity-enhancing reforms in the public sector”.

The Scottish Government resource spending review published in May suggested that the public service reform programme would be undertaken over the remainder of this session of Parliament with additional outcomes to be reported in the 2023-24 Scottish budget, but there is no mention of it in the Scottish budget. Is that an issue of concern to the panel?

Finance and Public Administration Committee

Budget Scrutiny 2023-24

Meeting date: 20 December 2022

Kenneth Gibson

You have also said that the UK Government has announced two new fiscal targets, which

“gives the UK Government more scope to cut capital spending to achieve its deficit rule by treating current and investment spending equally.”

However, you add that that is

“potentially hampering productivity and economic activity in the long run and reducing tax revenues.”

We have seen that there is a £185 million reduction in the Scottish Government’s capital budget for the next financial year. How concerned are you about that?