Chamber and committees

To follow up that point, I challenge what was said about businesses having figured out how to operate through Covid. The businesses that I speak to have managed to get through Covid but, although they are trading, their trade is significantly down from where it would have been. For a lot of consumer-facing businesses, 60 to 80 per cent is not unusual and it is not sustainable for them. Furthermore, most of those businesses have got to that point by accumulating significant sums of debt, whether that is through Government schemes, deferred payment of rent to landlords or other arrangements. It has even been reported that small business owners have cashed in their pensions. I am told that a lot. It strikes me that those businesses are operating under a very different set of circumstances from those that existed pre-Covid, and that, too, must imply a degree of fiscal headwind when you start looking at those figures, or certainly the overall economic performance of the country.

No.

Following on from the convener’s remarks at the beginning of the meeting, we can agree that we both have excellent diction and enunciation.

I want to follow up on some points that have already been raised. I am clear that you have read the SPICe report and the Fraser of Allander Institute piece looking at the outturn reports and comparing them with the tax plans. In the 2019-20 budget, the Scottish Government expected its tax plans to raise an additional £500 million, but, based on the outturn, they have raised only £148 million. I understand what you were hinting at with regard to the block grant mechanism. However, it is clear from both of those bodies that what that difference fundamentally tells us is that income tax per capita has not grown as much in Scotland as it has in the rest of the UK.

First, do you agree with that assessment? More importantly, and given what you were just saying about the need to expand the income tax base and to make sure that people are earning more within that, what does that say about the policies that you have been pursuing? What policies will you pursue to ensure that people are earning more so that they pay more tax, which we can all agree would be a good thing?

I want to return to the block grant, income tax revenues and the SPICe paper that the convener mentioned. I recognise what was said about not wanting to get into the hypotheticals of previous regimes. However, as I understand it, the paper sets out that the current fiscal framework relies on income tax growth, which seems to point to the fundamental issue that income tax receipts per capita in Scotland have grown more slowly than those in the rest of the UK. Is that conclusion supported by the data that you have? If so, what are the reasons behind that?

I ask those questions because we are all mindful that the fiscal framework is being renegotiated. Understanding the fundamentals of how the framework works and what we benefit from—as I understand it, income tax growth is critical in the current regime—is clearly important as the framework is renegotiated. Will you elaborate on the insight that you have on the growth of income tax receipts per capita in Scotland compared with that in the rest of the UK?

The fundamental point is that we want productivity to go up so that people are paid more and they pay more tax. That is the fundamental of what we are discussing, in broad terms.

Exactly so.

I agree that we need to get into the detail of the fiscal framework, but I do not think we have time for that this morning. However, there is clear agreement that we need to increase income tax on a per capita basis. Fundamentally, that would tell us that people in Scotland are earning more money, which is a good thing. Indeed, you summed it up earlier as more people participating in the economy and earning more money, underpinned by productivity.

In relation to some of the things that the convener was raising, my concern is that that sounds a lot like economic growth. I am very clear that economic growth is a good thing, especially when it is underpinned by growth in productivity, because it means that people are better off and are leading better lives. However, certain people who are about to join your Government think that economic growth is a bad thing. What is the Scottish Government’s view on economic growth?

Thank you—I almost completely agree with everything that you have just set out. We need growth because, ultimately, that should lead to greater fairness and prosperity for people. My only concern is that you and I might agree more than you agree with some of your new ministers. However, I will leave that there.

I have a final point. Earlier this morning, we were discussing the Scottish Fiscal Commission’s forecast. On one hand, the forecast is very encouraging, because it looks like we will return to pre-Covid levels by quarter 2 of 2022, which is a good deal earlier than we expected. However, our discussion with the commission’s representatives raised a number of risks. Indeed, one of the things that they said was that the forecast assumes that the current relative absence of restrictions is maintained. Given the events of recent weeks, we are all concerned about the levels of infections. Understandably, there has been talk of circuit breakers and the possibility, at the very least, of restrictions being reimposed. Within the Scottish Government, what work is being done to look at the impact of those measures and how they would impact on spending in the current year? Can you outline the fiscal consequences of a circuit breaker or any other interventions that might be required if the situation does not improve?

To take the next step, I absolutely understand those points, but the key conclusion that is drawn in the paper is that growth has been slower in Scotland than in the rest of the UK. Do you share that conclusion? Do you have insight into that?

Following on from some of the topics that have already been touched on, I have a question that is by and large about some of the short-term elements that we been discussing and some of the longer-term ones that you have just touched on with Liz Smith.

In the shorter term, your forecast has us returning to pre-Covid levels in quarter 2. Given what you have just set out, how safe is that forecast? Furlough is coming to an end and we can see from what has been happening over recent months the phenomenon of unexpected savers who are spending money on things that they would not otherwise have bought. I saw a report yesterday showing that used car prices are up by 15 per cent and you just highlighted spending on home improvements. It strikes me that those spending patterns cannot be sustained into the medium or long term. If that is true, is it safe to straight-line our economic performance from quarter 2 of this year? That is what your forecast appears to do, on the basis of your report. Should we not at least have a sense, if not an expectation, that there is a risk of more of an oscillation in our recovery or that there may be some head winds resulting from some of those effects?