Chamber and committees

I sometimes think that we look too much at what is happening in the UK and that we should look further beyond our borders, where there might be many more ideas for us to look at.

That brings us to the end of our time. I thank our guests, David Eiser and Graeme Roy, for again providing thought-provoking and helpful evidence for our scrutiny.

We will allow our witnesses to leave and then I will take a couple of minutes to update members of the committee on a couple of important matters.

Indeed.

The decline in the number of younger people in the labour force has come up quite a lot. We discussed it to some extent in our private session before the meeting. What is the reason for that decline? Is it that more young people are in higher education? Is it our lower birth rates, or the fact that there are fewer young migrants in the population? Why is the situation here so different from that in the rest of the UK?

I have to say that it is all a bit vague. I think that colleagues will want to explore the issue in some depth, because there are no numbers against the £620 million to explain how it comes together.

With regard to your forecasting, how has your thinking evolved since August? Why have there been changes in your judgment over that period? One of the main surprises that came out of the budget was the £190 million reduction in the net tax position, relative to your previous forecast. Will you talk us through how you arrived at that?

If we take the nadir of business rates to 2027, the growth will be 69 per cent. That is why I did not take the nadir: it was from 2022-23 to 2026-27. I discounted what was an unusual year, but there is still a 25 per cent growth in rates, which is quite a lot for the business community to cough up. That is why I was wondering about your view on where that money will come from. Is that increase being driven by inflation? It is at twice the level of growth. Why are you predicting an increase from £2.8 billion to £3.5 billion over that four-year period? It seems quite a big increase in a relatively short period.

David Eiser, I do not think that you want to make any opening remarks, but you can if you so wish.

One of the issues that we have with this budget is the plethora of different figures. For example, the Scottish Government is saying one thing about figures and the Scottish Fiscal Commission is saying something slightly different. Of course, the UK Government is probably saying something different again, depending on whether Covid figures are included.

Where do you and the Fraser of Allander Institute stand on the figures that we are dealing with? On page 2 of the budget document, which you have seen, the Scottish Government says:

“In practical terms, between 2021-22 and 2022-23, resource funding is 7.1% less in real terms.”

The key words are “In practical terms”. It goes on to say:

“The equivalent reduction for Scotland’s capital budget grant funding is a 9.7% real terms cut between 2021-22 and 2022-23.”

From the figures that others have presented, the second figure appears to be less controversial. Where do you feel that we are on those figures? Obviously, when we scrutinise the budget, we have to look at the figures and see where we are and what room for manoeuvre the Scottish Government has.

Is it not the case that the capital budget is declining quite significantly—by about 9.7 per cent in real terms—in the next financial year?

Is one productivity issue not that much of the Scottish budget is demand led? Given our ageing population, we need more care workers and more people in the national health service, and it is harder to increase productivity in those areas. Much of that work is highly people focused and labour intensive. We cannot just decide to reduce the number of people who are seen by a certain doctor, nurse or carer in a shift. It is much more difficult than increasing productivity through technological change in manufacturing, for instance.

Good morning and welcome to the 14th meeting in 2021 of the Finance and Public Administration Committee. Today, with the Scottish Parliamentary Corporate Body’s agreement, we are meeting in hybrid format due to the timing and nature of our budget scrutiny. Additional mitigations are in place, with fewer people attending the meeting.

The only item on our agenda today is evidence from two panels of witnesses as part of our scrutiny of the Scottish budget for 2022-23. First, we will hear from the Scottish Fiscal Commission, and we will then hear from David Eiser from the Fraser of Allander Institute and Professor Graeme Roy from the University of Glasgow.

Our first panel is from the Scottish Fiscal Commission. We are joined remotely by Dame Susan Rice, chair; John Ireland, chief executive; and Professor Alasdair Smith and Professor Francis Breedon, who are commissioners. We have up to 90 minutes for this discussion. I remind members that our broadcasting team will operate their microphones.

I would now like to hear an opening statement from Dame Susan Rice.

I thank the Scottish Fiscal Commission for its evidence and for producing such an excellent and detailed report.

That concludes this section of our evidence taking. We will reassemble at 11.37.