Chamber and committees

I would like to follow up the discussion on the operation of the fiscal framework. The 2019-20 budget contained tax proposals that should have raised an additional £500 million, but, because of the block grant adjustment and the fiscal framework, only £148 million of additional funding came to the Scottish Government. My understanding of that is that we did not do such a good job of growing the number of taxpayers in Scotland or their ability to pay tax—in other words, how much money they were earning. Is that correct? If so, what does that tell us about the policies that are being pursued in Scotland to grow the tax base and earnings? Does it tell us something about the Scottish Government’s ability to use the big fiscal lever that it has, or does it, in fact, show that that lever is not really effective? I am trying to remember what I learned in economics in my first year at university on elasticity of demand and the tax rate. Does it tell us that people switch behaviour when we alter tax rates in Scotland?

I ask David Eiser to respond first, but I am interested in hearing from the other witnesses.

Do Susan and David agree that we need to both prioritise enterprise support and increase its focus? Would you support that proposition?

Please do.

I take your point about the public sector, but a significant number of people—if not most people—who have been on furlough are employed by the private sector. What policy interventions would you like to see? Would they involve skills and retraining or perhaps job guarantee schemes? What interventions would the STUC like to take place to preserve private sector employment?

I wonder whether you can identify any particular consequences. Are there areas of provision that you think are particularly exposed or that have suffered because of the funding shortfall?

Are there any final thoughts before I move on?

My questions follow on from what Gail Macgregor said about the level of funding for local authorities. First, on COSLA’s previous budget submission, you stated that there would be a £500 million shortfall after the budget revisions. Was that the case? If so, I would be interested to know what the consequences were, given what you have said about the difficulties that local authorities face in delivering core, statutory services on the basis of current funding.

Secondly, given that that budget process was undertaken midway through the pandemic and that many of the services that councils provide are fundamental, safety-net services, what is your current assessment of the increase in demand and, therefore, the current shortfall that local government faces?

I am struggling to zero in on what my follow-up question should be, because so many interesting topics have been raised by the panel. That is a good problem to have.

I will start by examining the issues around inequality that were alluded to by the Fraser of Allander Institute in its submission. Unemployment data that was published today shows that unemployment is down but the number of jobs in the economy is still below pre-pandemic levels, which confirms what was going on before.

With furlough coming to an end, we need to be careful not to put ourselves in a position of false security by thinking that the situation with labour shortages means that there are no problems. In fact, we could have both problems: labour shortages and joblessness. Is that a correct assessment of the real risk? If so, how stubborn a problem could that be? Are there sufficient public policy measures in the programme for government—or possibly in the budget to come—to deal with joblessness and labour shortages in the economy?

I will move on, but I am happy for other witnesses to come back on any of those issues.

I alluded to the idea that we should have a laser focus on growing the number of Scottish taxpayers, but it now strikes me that it is critical to grow the amount of income that each Scottish taxpayer has, because that benefits the Scottish exchequer as well as the individuals themselves, and it should ultimately lead to tackling our productivity issues.

Let us return to Ray Perman’s comments about the levels of spending on enterprise support. We are not spending anything like £600 million any more, which we were spending through Scottish Enterprise alone. We are spending about £530 million, so we are now spending less, despite having created the Scottish National Investment Bank. The question is this. We need to be mission led—we need to have that focus. Should that focus be purely on productivity, which will lead to impacts on earnings? If it is not, what should the mission of the Scottish National Investment Bank and other enterprise agencies be? How do we enhance that laser focus?

With regard to the ring-fenced funding that you are receiving, Gail Macgregor highlighted the commitment to 1,140 hours of free childcare, which we all agree with. Can you give us a bit more detail and clarification on that? Are you saying that the funding that you are getting for that is not sufficient now and will likely not be sufficient in years to come? If so, is the implication that local authorities are having to top up the funding to deliver on the 1,140 hours commitment?