Chamber and committees

That is the number of individuals; it does not necessarily equate to higher tax intake in numerical terms. You could be losing people and have more people coming in, but they are paying less tax than the people that you are losing. What does that analysis look like?

My other question is about commercial assets, so I will stop there for now and ask about that later.

You think that it is appropriate and impartial. That is your view?

Yes, but those trade-offs are often quite substantial and will come at the expense of the delivery of other worthy public services. For example, capital investments have been frozen, and there have been shifts from the rural affairs, transport and housing budgets to other portfolios where we simply cannot say no to a funding increase. Benefits have to be paid, but we can pause progress on a road project or a hospital renewal. I appreciate that those decisions are made by ministers, but what advice is given to them by the civil service on which portfolios have to be cut to fund increased expenditure in other portfolios?

Okay—I have quite a lot of ground to cover, so I will move on.

Permanent secretary, we hear frequently from ministers, in a comment or a statement—it is a matter of record in the Official Report—that the Scottish Government needs more borrowing powers. My understanding is that the Scottish Government already has a significant amount of borrowing power. Its outstanding borrowing balance is to the tune of £1.7 billion for capital borrowing and £0.5 billion for resource borrowing, which means that over £2 billion is already on the books. Of course, that amount attracts quite a large amount of interest. I understand that there has already been over £320 million of interest on those two figures combined. In the year 2023-24, borrowing repayments of £217 million were made, which is up from £160 million in the year before.

I am trying to understand where we are at with borrowing, because those sound like pretty hefty figures. Are the levels of borrowing in Scotland sustainable? Are we borrowing enough to fund capital projects, or are we borrowing too much?

I will try to squeeze it all into one. I pre-empt it by saying that, if you do not have the responses to my question, you are welcome to write to me or the committee with the statistics that I am looking for.

First, how many people in the Scottish Government work for the constitutional futures division, and what is the annual cost of that department within the civil service?

Secondly, can you confirm today that all members of staff working within the Scottish Government pay income tax in Scotland? If the answer is that some do not, how many of them are there, and into which pay bands do they fall?

Understood. Thank you.

Good morning, permanent secretary and witnesses.

To start, I would like to look at the macroeconomic state of affairs that is reflected by the consolidated accounts. The consolidated accounts give us a better understanding of the state of the Scottish Government’s finances and its three main sources of income. Obviously, the block grant is outside the Scottish Government’s control, but the other two sources—that is, borrowing and devolved taxation—are within the control of ministers.

Will you give an overview of whether you are content that the decisions being made in the two areas that are under the Scottish Government’s control are being taken in such a way as to maximise the potential income that is available to ministers and therefore translates into their budget spending decisions?

Thank you for that comprehensive answer. There is quite a lot in there, so I will pick out some of the areas that you have just mentioned.

You talked a little bit about spending decisions as a result of further devolution. This committee, other parliamentary committees and Audit Scotland have noted that, with that further devolution, those decisions have a further financial cost to the Government. As we have seen in the analysis of budgets, they are also often made at the expense of other portfolios. For example, the social security spend is rapidly increasing to the point at which it might reach par with the health and social care budget, which is a new phenomenon. However, it is entirely unclear whether the variance in devolved taxation levels in Scotland compared with other parts of the UK is adequately funding the spending policy decisions that ministers are making. Are we therefore looking down the barrel of the supposed black hole that people talk about where spending decisions are uncontrollable and unfundable? Where does the money come from if not from the block grant? Does it come from higher borrowing or higher taxation?

I guess that we are looking for some comfort that those decisions are being looked at in the round.

What I cannot get my head around is that there is still headroom, which means that ministers have had—and still have—the ability to borrow more if they wish to. In the financial year 2023-24, for example, the Scottish Government borrowed £300 million to support capital projects, which was less than the £450 million that was initially outlined in the budget, so there was significant underborrowing, so to speak. At the same time, there was a mid-year review into capital investment that led to a number of projects not proceeding.

The public will look at that and say, “You have had headroom to borrow cash, yet at the same time there is a freeze on capital investment in much-needed projects—for example, in the national health service or in other infrastructure projects”. The public will not understand why such projects are not going ahead when, at the same time, ministers are not borrowing the cash that is available to them. How do you marry those two things together?