Chamber and committees

Good afternoon. John Mason’s last question was one that I was going to ask. Part of our responsibility here is making sure that we are guarding against groupthink. You mentioned the importance of the SFC being independent. That sometimes requires being pretty robust with the Government. You can take it either way when considering appointing someone who has extensive experience from within Government—you might consider that there is a danger of groupthink if you appoint them, or you might consider that they know where all the bodies are buried and they have all those years of experiencing frustration inside the system. If we assume that it is the latter, do you have any examples of processes that the Government undertakes, particularly in relation to the budget and its fiscal forecasting, about which, after leaving Government, you thought, “My God, why did we do it that way?”, or of processes that you are now excited to have the opportunity to put pressure on the Government to take a different approach on?

I am good, convener. My questions were about the Office of Tax Simplification and the principles of simple systems, which have been well covered.

I will ask Dave Moxham a question but then try to open it up to everybody else.

The STUC has consistently come up with proposals to raise revenue, which is helpful. Very often in pre-budget scrutiny everybody comes to make a pitch for why there needs to be more spending in their area, so it is helpful to hear those suggestions. However, I am interested in whether you believe that the fiscal gap that we have can be addressed entirely through the revenue-raising options that you have set out in your papers recently, bearing in mind that a lot of the more substantive reforms that you are talking about would take three, four or five years to implement—council tax re-evaluation would probably take a minimum of three years, and some of the suggestions would require new primary legislation.

If you do not think that it could all be done through additional revenue raising, are there any particularly obvious areas of savings? It feels like your paper hinted at that in some areas, but it would be useful to draw that out.

To broaden out the question to everybody else, it would be helpful to hear whether you have even just one example of an area in which the Government could make obvious savings on its current spend, such as areas of low-value spend that could be redeployed elsewhere at a reduced cost.

On the MTFS, as an example, you were talking about laying out options. By that do you mean that the Government should set out clearly what its intentions are or that it should provide scenario planning, setting out the options that would be available over the long term to close the fiscal gap, either through spending cuts or tax rises?

There is merit to both approaches. It would be valuable for the Parliament and for the public to know what the current Government’s intentions are, but, particularly in terms of the public economic literacy point that the convener mentioned, it is also important to understand what levers are available to Government, regardless of which lever any Government at any given time pulls on.

I appreciate that, given the point that we are at in the parliamentary timetable. However, the Government needs to be brave enough to accept that the only way that council tax reform will move forward is through a majority, not unanimity. I do not see the prospect for unanimity, and the Government needs to recognise that there is a potential majority for some reform—revaluation at the very minimum—but only if the Government forms part of that majority. There are other MSPs who would support that, and my group is certainly willing to play a part in that majority, but it will not be unanimous.

There are levers that are entirely within devolved competencies. Most obviously, the council tax is the most immediate form of wealth taxation. The single largest form of wealth in Scotland—although it is not the majority of wealth—is residential property wealth. In my view, the failure to reform council tax is the single biggest failure of the devolution era. Taking on board what you said about the other pieces of work that are under way, for example, on land taxation, I am looking to get a sense of whether the Scottish Government has a plan to reduce wealth inequality. Is it looking at all the levers that are available to it and at which could be used to reduce wealth inequality in a way that is good for public finances and good for the economy at large by redistributing more of the money to those who will go out and use it?

With respect, cabinet secretary, I totally accept that premise—I agree with you on the importance of small businesses. My point is that the Government commissioned an independent review that clearly concluded that, if we want to spend £0.25 billion supporting small businesses and the Scottish economy, the small business bonus scheme is not the way to do that. The review was quite unequivocal. It found no evidence of positive economic outcomes, and the scheme has not changed since then. For an unrelated reason, it was tapered somewhat, as a result of which the number of businesses that access it has gone down slightly.

The Government commissioned an independent review, as it should have done, but it did not change anything on the basis of that review, so I am struggling to see a Government that is determined to follow the evidence and get best value for public money. I am not challenging the premise that £0.25 billion should be spent on supporting small businesses, but do you not accept that there is a better way to do it and that the Government needs to take a more robust approach? The Government went through the first half of the process, which was to commission an independent review, but it did not go through the second half of it, which was to change the scheme to make it more effective.

Good afternoon, cabinet secretary. You said—either in your opening remarks or in one of your initial answers to the convener—that the Government’s goal is for every pound to be invested in the most productive way, but I struggle to accept that in the light of the examples that I have raised with you previously, the most obvious of which is the small business bonus scheme. The premise of that scheme is that it is appropriate to spend in the region of £0.25 billion giving support to small businesses in the form of tax relief. Three years ago, the Government commissioned an independent review of that scheme, and the Fraser of Allander Institute could find no evidence that it had had positive economic outcomes. Is that £0.25 billion being spent in the most productive way?

That reminds me of John Mason’s line of questioning about whether to take money out of hospitals to put it into areas such as housing. We know that that would create long-term health benefits, but no one wants to defund hospitals at the moment.

To pick up on some of what Craig Hoy said about the impact of UK Government decisions, I am interested in looking not at the spending side but at the tax side. In the past couple of weeks, the Treasury has continually briefed that it is looking at what could be really significant changes in England’s tax system, particularly in relation to stamp duty and council tax. One option that has been mooted is to replace both of those taxes with a new, combined tax. Any change on that scale would have a significant impact on Scotland, so I am interested in whether the fiscal framework, as it currently stands, could cope with significant tax reform that affects England and the rest of the UK but does not affect Scotland. Would any change on that scale immediately necessitate reopening and reforming the framework itself?

There is no neat distinction between that and preventative spend, which is often the most impactful thing.