Chamber and committees

Good morning. I was going to start on some of the issues that Michael Marra has just finished on, so this leads on quite well.

Earlier, you issued a bit of a warning when we were talking about making comparisons of tax policy here with that of other countries. You gave the example of Scandinavian countries, and made the point that a comparison is not easy to make and is not necessarily easy to understand, because it will not compare all aspects of the proposition that is put between Government and citizens, not only around tax but in relation to public services, investment and so on. Is it not reasonable that the same warning should be given in relation to comparisons with the rest of the UK—that there is an increasing gap not only in tax policy but in what people get in return for tax, and we should place less reliance on those comparisons?

Finally, I want to ask about some of the issues about local government that came up. I understand that you say that you do not make forecasts about council tax and you do not take responsibility for issues relating to it, because it is a local tax. However, aspects of the impact on local government finance do not derive from local decisions but from Scottish or UK decisions. In particular, some councils are experiencing significant pressure through homelessness as a result of a combination of changes to asylum policy at UK level and the nature of homelessness legislation that has been passed on a cross-party basis in the Scottish Parliament.

When there are devolved policy choices that have fiscal consequences, the framework says that the fiscal consequences sit with the devolved Government. When there are reserved policy choices, however, there is no mechanism that recognises that those fiscal consequences should sit at the UK level. Is there any effort to create a mechanism that would do something comparable to protect the local services that are under pressure because of UK decisions, in the same way that the fiscal framework says that the Scottish Government should carry the fiscal cost of making devolved policy changes?

In my inbox, I have correspondence from people who are very angry, saying, “I am on a below-average wage and I am paying the higher-rate tax.” These are people who may just have read a Daily Mail headline or a political advert on Facebook. Do we have any understanding of the extent to which people have a broadly accurate understanding, as opposed to a profound misunderstanding?

Both people on below-average income and those on above-average income?

I want to come on to local government. Professor Spowage rightly acknowledged, about 10 minutes ago or a little more, that there is a dispute almost every year between COSLA or local government representatives, who say that the local government settlement is wildly inadequate and extremely unfair, and the Scottish Government, which says that it is bountiful and generous and as fair as it can possibly make it. The truth is usually somewhere in between—but it is not simple: it is a complex relationship to understand. That does not take away from the fact that the long-term direction of travel with local government finances has been really tough. Where will things stand if there are no fundamental changes? There has been an attempt to broaden the range of taxes that are given to local authorities, but that has not been done at a level that would make a profound difference to their financial situation.

There has been a long-running debate about the failure to fundamentally reform council tax. There has been a persistent lack of political consensus on what to do about that, even though everybody understands that the system is broken. If, over the longer term, there was a substantial increase in the block grant that local councils get, that would have to come from national taxation. As David Bell said, if we want to make the tax system more progressive, we need to make changes at the local level rather than make further changes at the national level.

Do you agree that, if none of those things change fundamentally in the relatively near future, councils will be at risk of breaching their statutory responsibilities, never mind all the additional things that people want and need from their council services and from social care?

I want to ask about the gap between what you call the policy-only position with regard to what the Scottish tax policy will generate and the reality. You call it a tax base performance gap. There are probably various reasons why it is happening—such as economic activity, behavioural change, or how both Governments apply policy—but could the Scottish Government implement specific measures to reduce that gap, beyond the aspiration to have a more successful economy, however you define that? Could some mechanistic changes reduce that gap?

Within that, what are the elements that are most amenable to some kind of action to control them?

Does anyone have any further comments?

Is it not fair to say, however, that the Scottish Government, more than anybody else, relies a bit too much on the political rhetoric about the precise proportion of people who pay less tax than they do elsewhere in the UK? That detracts from the fact that, as a result of those changes, people’s kids will not be 50 grand in debt for getting a degree and their community will have fewer children growing up in poverty. Beyond the value that the Government feels is in the political rhetoric of saying that most people pay less tax, does the precise proportion of those people matter in relation to the responsible management of public finances?

11:00

The point that I am trying to make is that, when Scotland moved from the three-band to the five-band tax system—what was implemented was pretty close to ideas that were developed in the 2016 Green manifesto—there was a reasonable case for reassuring people that the tipping point would be roughly in the middle. However, the longer that the system has been in place, the more spurious it has become to try to pin that down to precise figures and to maintain it absolutely at more or less than 50 per cent, because that area in the middle has become increasingly vague.