Chamber and committees

At a time of static budgets, how difficult is it to disinvest in programmes or services in the public sector that are less effective, in order to invest in more effective services?

Scotland has an ageing population and declining workforce and the Scottish Fiscal Commission has said, based on current projections, that the funding gap is likely to remain for years. In a paper submitted last year, you suggested that the Scottish Government should look to increase tax revenues by around £3.3 billion, which is hugely significant if we think of Scotland’s current tax burden. For example, someone earning £43,662 a year would pay 42 per cent income tax and 12 per cent national insurance and a lot of the money that they have left would probably go on fuel duty, excise duty, value-added tax and so on.

What would be the impact of raising that sum? I realise that it would not all be done in one go, but what would be the impact on behavioural change? The Scottish Fiscal Commission has expressed concern that increasing taxation to a certain degree results in behavioural change whereby people do not work as hard or move somewhere else.

I will give you an example. Under a previous Conservative Government, Chancellor Osborne limited pension pots to £1 million. As a result, a lot of doctors, including general practitioners and consultants, realised that they would end up paying more in tax than they would gain, so they decided that they would retire early. That was a detrimental behavioural change, and the UK Government is now looking to reverse that policy—and has reversed it, to a degree.

What would be the behavioural change in this case? Last week, we heard that there are only 18,000 top-rate taxpayers in Scotland.

There is indeed, so I will give you plenty of time to answer.

To be blunt, that is a pragmatic thing. People might not talk about it publicly, but Conservative, Labour and Scottish National Party Administrations have not done a revaluation because of loss aversion. The people who are better off because of revaluation will shrug their shoulders, but the people who are worse off will hate you and not vote for you—it is as simple as that, to be perfectly honest. Perhaps people should be more honest about that. There is strong opposition in the Parliament to the Scottish Government’s council tax proposals, and committee members have already spoken out against them.

Your submission talks about

“Exploring every avenue to increase tax”.

Surely that sends a signal to people who feel that, with 14 interest rate rises in less than two years and with inflation hitting not just the public sector but the private sector, maybe the time is not right to do that.

There will be a division.

For

Gibson, Kenneth (Cunninghame North) (SNP)
Halcro Johnston, Jamie (Highlands and Islands) (Con)
Marra, Michael (North East Scotland) (Lab)
Mason, John (Glasgow Shettleston) (SNP)
Smith, Liz (Mid Scotland and Fife) (Con)
Thomson, Michelle (Falkirk East) (SNP)

Against

Greer, Ross (West Scotland) (Green)

The next item on our agenda is to take evidence in relation to the committee’s inquiry into the Scottish Government’s public service reform programme. This session continues the evidence taking that we started before the summer. I welcome David Moxham, deputy general secretary of the Scottish Trades Union Congress. David and I served on Glasgow City Council together a quarter of a century ago.

I intend to allow up to an hour for the session. We have your written submission, David, so we move straight to questions. As well as questions on reform, members may take the opportunity to ask Mr Moxham any questions on the STUC’s pre-budget 2024-25 submission, which has also been circulated with the meeting papers.

I will kick us off on the reform agenda. The Deputy First Minister has said:

“it is for individual public bodies to determine locally the target operating model for their workforces and to ensure workforce plans and projections are affordable in 2023-24 and in the medium term”.

Does the STUC agree or disagree with that?

You touched on Christie. One of the issues that the committee has deliberated over many years has been the preventative spend agenda. How important is preventative spend in relation to reform of public services?

Thank you very much for taking the time to speak to the committee. The evidence that has been gathered from this inquiry, including an evidence session with the Deputy First Minister in early October, will help us to inform the committee’s pre-budget 2024-25 scrutiny.

That concludes the public part of today’s meeting. The next item on our agenda is consideration of our work programme in private.

Displacement is a key issue. For example, Cambridge Econometrics said that, of the enterprise zones that were set up in the UK, which lasted from about 1984 to about 2012, 50 per cent of the 126,000 jobs were, in effect, displaced from elsewhere. In a Scottish context, between 2012 and 2017, there was a net increase in private sector jobs in the enterprise zones that were set up in Scotland of just 16,000, compared to an initial forecast of 54,000, and 34 per cent of those were relocated from elsewhere through displacement.

What lessons are being learned from that? I understand that the UK had seven freeports, up until about 2012, when the last one, Liverpool, closed. Therefore, they have not had a great history of success in doing what it says on the tin.

I turn to issues of pay and taxation. It has been said that the 3.5 per cent pay rise suggested in the public sector pay strategy for 2023-24 is not remotely sustainable. What are the average pay settlements in the public sector now? The details that we have been provided with come from November 2022, but the way that things have been going in recent months puts us in a very unstable situation. Inflation has declined, but where are we with public sector pay in Scotland?