Chamber and committees

You mentioned that capital funding will fall by 5 per cent in real terms between 2025-26 and 2030-31. What measure are you using to calculate that? Are you using the normal GDP deflator or, for example, the Building Cost Information Service figures, which say that there will be a 15 per cent rise in construction inflation over the next five years?

Sorry to come in, but it sometimes works the other way as well. I remember that, after the 2008 financial crash, one of the housing associations was building houses, and the tender came in 16 per cent below what it thought it would be because there was such a shortage of projects happening at the time and companies just wanted to stay in business. Companies were effectively building things without making any profit, just to keep themselves rolling forward.

10:00

It seems to me that, if you were able to measure inflation differently, you would be able to see whether the Government has clout. I am labouring the point a wee bit, but—

Thank you for that. I will let committee colleagues come in now.

We are well over time, so Michael Marra’s supplementary will have to be extremely brief.

For our next evidence-taking session on the Scottish budget 2026-27, I welcome to the meeting Professor Mairi Spowage, professor of practice and director, Fraser of Allander Institute, University of Strathclyde; Professor David Heald, emeritus professor, Adam Smith business school, University of Glasgow; and Professor David Bell, professor of economics, University of Stirling. Good morning to you all, and apologies for keeping you waiting—the previous session overran. I also thank you for your helpful written submissions.

We will move straight to questions, the first of which will be to Professor Heald, although the other witnesses can respond, too. Professor Heald, you say in your submission:

“The Westminster Parliament does not take ex-ante scrutiny of public expenditure seriously, unlike the devolved legislatures. The disruption caused to the budgetary procedures of the devolved legislatures clearly does not rank highly in the timing decisions of UK Governments.”

Can you expand on what the actual impact of that is?

You go on to say:

“The limited attention … to the detailed choices in the Scottish Budget 2026-27 is motivated by the urgency of securing Parliamentary approval in order to limit disruption to public service delivery.”

Would I be right in saying that what you are saying there is that, because the UK budget comes so late, the Scottish budget process has to be truncated and the priority is really just to get a budget through?

One of the things that Labour did way back when—in 1997—was to stick with Conservative budgetary decisions for two years, which, whether or not you agreed with those decisions, actually allowed for some stability. Are you suggesting that, if this budget goes through, a new Government should stick to those decisions, at least in the first year, and then it can perhaps develop its own proposals?

One of the difficulties for this committee is that, in 27 years of devolution, we have never had a Chancellor of the Exchequer give evidence to this committee or any of its predecessors, despite numerous invitations. It has also been extremely difficult—we have certainly not managed it in this term—to get a Chief Secretary to the Treasury in front of the committee, although we have done so in previous terms with previous Governments. It is a real difficulty that we cannot talk to them directly, despite the fact that the UK Government provides through the block grant somewhere in the region of 60 per cent of our overall expenditure in this Parliament.

In relation to your Ruud Gullit anecdote, I remember that, in the 1980s, John DeLorean famously asked the UK Government for a billion to support his factory in Northern Ireland. He meant $1 billion, but the UK Government gave him £1 billion, so he was well chuffed.

As we know, Governments of all colours—Conservative Governments, Labour Governments and Scottish National Party Governments—have implemented fiscal drag. The reality is that all Governments try to raise as much money as possible while causing the least political damage to themselves.

I will ask this question to Professor Heald, but I will ask the other witnesses a similar question. You have been very concerned about the UK tax system, because it is not progressive in the sense that it does not look like a straight line—the line goes up and down like the skyline in New York. If you became Scotland’s president for life in a devolved context, how would you make the current system more progressive, taking into account that Scotland would not be an independent country and would have to work with the UK system?

Clearly, it would not be perfect, but how could we do that while gathering much the same amount of revenue? Where would the splits be? You spoke about 21 per cent and 42 per cent. How would you do that? It might take five years, but how would it be done?

11:45

What would you do?