David, do you want to come in?

A lot of the money that was underspent on the concessionary fares scheme for young people was switched to bus services in the summer to ensure that they did not fold. That was the case with some local services in my constituency.

I do not think that it helps to have tax havens in the British isles, if we include the Channel Islands and the Isle of Man.

We have talked about the GDP deflator, but what matters to people who put in pay claims is public perception. I would therefore suggest that this is all about headlines, which have a significant impact on the public sector, rather than the GDP deflator. The UK Government might say, “The Treasury costs are blah blah blah, so that is the GDP deflator,” but that is not how the public see it—they just see what is on the news and in the papers.

My understanding is that the figure came from Richard Hughes, the chair of OBR. We will move on.

You talked about growth. I was looking at The Economist’s review of 2023. As you will know, every year The Economist provides a number of forecasts, although they are not the kind of forecasts that we generally discuss—perhaps “predictions” is a better word—for economic growth and so on. It says that the UK will grow at -0.8 per cent next year, with a per capita income of $55,000 at purchasing power parity, whereas the Republic of Ireland will grow at 5.4 per cent, with a purchasing power parity per capita income of $135,000. Why is the UK in such a different position from countries such as Ireland, which is just next door?

That is a good point. I understand that there has been a 600,000 increase in the number of people who are economically inactive relative to the number before the pandemic. I appreciate that that is an issue.

One of the things that has been predicted is a 7 per cent fall in living standards during the next two years. Obviously, the impact of that will vary considerably. Which groups in society do you feel will be most and least impacted?

I have one more question, which is about the block grant adjustment OBR tax forecasts. We have already heard that we do not expect much, if any, growth in the next few years, and we have heard about how living standards are going to fall. The OBR has predicted that Scotland’s income tax take, for example, will grow from just under £14.7 billion to just over £18.1 billion by 2027-28. That is a huge increase of almost £3.4 billion. Do you see that coming through fiscal drag or other measures?

I would have thought that the idea of an office that tries to make tax simpler and more understandable would be a positive thing.

The OBR mentioned unemployment, which we have touched on only peripherally. The OBR expects UK unemployment to rise by between 3.6 and 4.9 per cent by 2024. That will be a significant proportion of the workforce, at in excess of 1.5 million people. What might the regional impacts of that be? How do you anticipate that impacting on Scotland?

Exactly. That is the point that I was trying to make, but you have made it much more articulately than I did.

I thank our witnesses for their excellent contributions and for answering all our questions, and I thank my colleagues round the table for their contributions, too.

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

Paul Johnson, who is the director of the Institute for Fiscal Studies, said:

“what we are really doing is reaping the costs of a long-term failure to grow the economy, the effects of population ageing, and high levels of past borrowing”.

He concluded by saying:

“we are in for a long, hard, unpleasant journey; a journey that has been made more arduous than it might have been by a series of economic own goals”.

What could the UK Government do differently and what should the Scottish Government do differently, in the view of the IFS?

Good morning, and welcome to the 32nd meeting in 2022 of the Finance and Public Administration Committee.

Our first agenda item is an evidence session with the Institute for Fiscal Studies on the United Kingdom autumn budget statement and the wider UK context, with a view to informing our scrutiny of the upcoming Scottish budget 2023-24. We are joined remotely by David Phillips, associate director, and Ben Zaranko, senior research economist, at the Institute for Fiscal Studies. I welcome you both to the meeting.

I move straight to questions. Your submission states that the Office for Budget Responsibility notes that the UK’s economic position with regard to fiscal policy has been beset in the past six months by

“a series of dramatic swings in the direction of fiscal policy with five major fiscal statements delivered by three successive governments”

and that

“the net impact of this series of announcements and reversals has been to add over £40 billion of borrowing by 2027-28”.

What will the impact of that be on not just the UK economy but Scotland’s economy?