Chamber and committees

Apologies for the noise; it has nearly finished—it is not my stomach, although I have not had my breakfast.

Mr Davies, I appreciate that you will log off at quarter past 10, so I will start my line of questioning with you before aiming my other questions at the Auditor General.

One of the issues that came up last year—it comes up recurrently—is how complex it is for the Parliament as well as the Government to work out how much the Government can expect to receive from its tax policies versus how much it actually gets when the outturn is delivered. It is also complex to figure out whether those policies are producing, over a period of time, the levels of income that the Government thinks are required for its spending decisions.

So much of that is based on estimates and assumptions that are made by various bodies, including HMRC, the SFC and others. How do we get to a position of relying less on estimates and assumptions and instead get more accurate forecasting so that the Government has a better idea of how much its policies will raise financially?

When we talked about this last year, the convener said that, for every £5 that is raised through additional tax, only £1 finds its way to the Scottish budget. You replied that that was correct. The figures that we have looked at today—£1.7 billion returning £600 million—would suggest that the situation has improved somewhat. For every £5, we are now looking at about £1.80, so it is heading in the right direction. However, are we ever going to get to a stage where, for every £5 raised, £5 is available to spend, or is that an impossible scenario?

As you mentioned earlier, part of that is the Government being open and transparent about those numbers. I will give you some examples. This week, my office has been doing research on comments or statements made by the Government, including the First Minister, cabinet secretaries and other ministers, which found that the higher figure of £1.7 billion is often used by the Government as an example to justify its policy decisions. I am not asking for any comment on the policy decisions, but, when these issues are discussed, it is only ever the higher figure that is mentioned. When they are talking about how much money tax actually produces for the Government to spend, they very rarely use the lower number. Do you think that the Government ought to use both figures, for example, when talking about tax divergence?

Thank you—that is very helpful.

I will briefly revert to a previous line of questioning about identifying the volume of taxpayers in certain tax brackets. We know that, due to Scotland’s population, there is a smaller number of people who pay the top rates of income tax. However, 18 per cent of taxpayers pay more than 65 per cent of all tax, so they are an extremely important group of taxpayers. I find it odd that no one can answer the question of how many taxpayers in Scotland earn more than £100,000, £200,000, £250,000 or £500,000, given how much tax they pay. It is a relatively small group of people—you could probably fit them in this room. How do we get that sort of data? It would only take one or two of them to exit the tax system in Scotland for us to have a problem.

That is very helpful. Thank you. You will be pleased to know that I will leave you in peace now, Mr Davies.

The problem relates to how the public can scrutinise those figures when ministers only ever quote one of the numbers. The example that I have is probably the worst case of it. The First Minister said that

“According to the Scottish Fiscal Commission, the policy choices that we have made will raise up to an additional £1.7 billion in this financial year”,—[Official Report, 22 May 2025; c 20.]

and that that would “help to pay for” a long list of things that he went on to say.

The general public would be listening to that and saying, “'Fine—I may not necessarily agree with tax divergence decisions made by the Government, but it raises £1.7 billion to spend on all these free things that we apparently get.” However, we know that that is not the case. Unless both numbers are quoted by senior members of Government, the public will have no idea how accurate they are or whether they are relevant to the conversation.

My final question is on a comparison with last year and the meeting at which you talked about the issue. We get a feeling that things are improving in some areas—I hope that they are—but if we look at statistics from last year that are relevant to what you have just said, we see that Scottish average earnings last year grew 3.1 per cent less than those in the rest of the UK, and employment rates grew 3.2 per cent less than those in other parts of the UK. That was 12 months ago. Do we have any idea whether we are starting to catch up in those areas?

Included in that would be economic inactivity, which is another key area where there is some divergence, particularly among younger people. There is quite a substantial difference in inactivity levels. Those are the sort of statistics that we would want in order to give us a feel for whether there is improvement—whether the gap is narrowing in any way or getting worse. Both of those areas are relevant and important to us.

I will do so quickly, in the interests of time. Thank you for joining us, Mr Davies. I want to carry on with that theme and ask about a comment that you made to the committee in last year’s evidence session. You said:

“One of our big critiques of Government generally, including HMRC, is the surprisingly low level of investment in evaluation of the impact of different policies.”—[Official Report, Public Audit Committee, 19 February 2025; c 10.]

Is that still the case? Is it still a concern, or have you seen any improvement in the past 12 months in the level of investment that the Government or HMRC has made and in the understanding of how tax-divergent and tax-differential policies in Scotland have an impact on the Scottish budget?

Is that an inherent problem with the contract that HMRC has with Governments? Presumably, HMRC’s job is to collect the money and produce the data. Is it not giving us more data because it has not been asked for more? Should the Governments be asking for more?