Chamber and committees

I was, in fact, about to start with the last point that you raised, which was about transfers. Has the Scottish Government explained to you why it has transferred £786 million but not £606 million? It seems to me that you either put everything into the autumn budget revisions or you do not. We have a mixed picture, which makes it very difficult to make comparisons. No doubt, we will put the question to the Cabinet Secretary for Finance and Local Government, but has it been explained to you how this rather odd position has transpired?

Before you say more on that, I note that paragraph 5.7 of the report states that there has been a decrease in the authorisation rate for new applicants, from over 50 per cent in 2023 to below 35 per cent in July 2025, whereas in England and Wales it is 45 per cent. It therefore looks as though fewer people are getting those payments, yet the numbers are still going up quite significantly.

That seems almost anomalous. One would expect the Scottish figure to be lower than the English figure, given that the authorisation rate is lower, so I am wondering how all of that transpires. We are talking about a potential difference of 35,000 people—that is, if the rate of increase were the same as in England, there would be 35,000 fewer people on that benefit.

09:45

You are still predicting a 55 per cent increase in the amount of benefit money that will be spent on ADP over the next five years—rising to some £5,308 million by 2030. Are people really getting that payment more? Will there be so many more people with disabilities in the next five years, even with an ageing population? It is surely not ageing that rapidly—we are not all disintegrating quite that quickly, are we?

Okay. Thank you. In your opening statement, you talked about the £1.5 billion savings that were identified and about the fact that the majority would be achieved in the health and social care portfolio. In your forecasts, you go through some of the predicted annual savings, and you go on to say:

“The recent Audit Scotland Report on the NHS noted that progress has been made … in 2024-25 … However, just two territorial boards and three national boards achieved the 3 per cent recurring savings target.”

With regard to your forecasting, how confident are you that those targets will, indeed, be met?

Thank you for that. One issue that many colleagues will, no doubt, want to touch on is pay policy, which you talked about in your introductory comments. In paragraph 50 of your report, you state:

“The Scottish Government has set the Spending Review allocations based on the existing three-year public sector pay policy.”

You go on to say that

“there would need to be an average pay award of 1.1 per cent in 2027-28”

to complete that. There is no apparent change in the Government’s approach to that, even though it is clear that an average pay award of 1.1 per cent will not be deliverable. I do not think that anybody believes that it will be. You also said that,

“For the majority of NHS workers it would require a pay award of 0.78 per cent”,

and we all know that that is not going to happen.

How does that work with your forecast? You state:

“For the purposes of our economy and tax forecasts, we assume pay awards in 2027-28 equal inflation”.

So, you are basically saying, “We know that the Government is not going to meet that, so our forecasts are just going to be what we believe the rate of inflation will be.”

Okay. I will jump back to income tax—I like to jump about, to keep you on your toes and all that kind of stuff, but I know that you know all of this inside out.

On page 98, you discuss the freeze in the higher rate threshold in 2027-28 and 2028-29, and you talk about behavioural change. The effect is £10 million in 2027-28 and rises to £20 million, £21 million and £22 million in the following years. You then compare that to the static forecast. Last year, I understood that the behavioural change effect for the tax would mean that—correct me if I am wrong—about 83 per cent of the tax would be lost, compared to the forecast. Is the behavioural change in this year’s document on top of that? Are you looking at cumulative behavioural change or only at the fact that the threshold has been frozen? I am not seeing the big picture of the impact on the tax overall. Alternatively, are you saying that you have already baked that in and that these figures are just about the impact of the decisions in the draft budget that was published last week?

If you were to do that, that would give an overall view. For example, we could see that a tax was meant to raise £100 million but raises only £10 million, £20 million or whatever. If we look only at the changes, we could end up in a situation where the cumulative behavioural changes are more than the tax is intended to raise. We would not necessarily get a clear picture.

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.