Finance and Constitution Committee 1 March 2017

Meeting date: Wednesday, March 1, 2017

Official Report 459KB pdf

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Subordinate Legislation

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Scottish Fiscal Commission (Modification of Functions) Regulations 2017 [Draft]

Item 2 is consideration of a Scottish statutory instrument relating to the modifications to the Scottish Fiscal Commission remit. Before we come to the motion seeking our approval, we will hear evidence on the order. We are again joined by the Cabinet Secretary for Finance and the Constitution. He is accompanied by John St Clair, senior principal legal officer in the Scottish Government, and Scottish Government policy adviser David Kerrouchi—have I got that right, David?

Yes.

I welcome our witnesses to the meeting and invite the cabinet secretary to make an opening statement.

I had hoped that my opening statement could also cover the technical aspect of moving the instrument, but I will take guidance from you on that, convener.

The draft Scottish Fiscal Commission (Modification of Functions) Regulations 2017, laid before Parliament on 27 January, expand the functions of the Scottish Fiscal Commission to reflect the powers that have been devolved through the Scotland Act 2016 and the fiscal framework agreement between the Scottish and United Kingdom Governments. In summary, the functions of the commission are expanded by the addition of a function to prepare forecasts of demand-led social security expenditure and the addition of a requirement that the commission prepare Scottish gross domestic product forecasts, which do not cover the value of oil, gas and other hydrocarbons that are produced in the Scottish sector of the UK continental shelf.

The additional functions will take effect when the Scottish Fiscal Commission Act 2016 commences on 1 April. The 2016 act was passed by the Scottish Parliament on 10 March 2016, prior to the Scotland Act 2016 gaining royal assent. It was therefore not possible for the Scottish Parliament to legislate for the devolved social security forecasting during the bill process.

The commission will also produce forecasts for Scottish onshore GDP. That is important because under the fiscal framework agreement the Scottish Parliament has been given additional resource borrowing powers. Those additional powers are in part to assist in the management of any additional risks and volatility associated with the further fiscal devolution in the Scotland Act 2016. The powers come into play if onshore Scottish GDP falls below certain trigger points.

As the committee will be aware, last year, I laid before Parliament the Scottish Fiscal Commission Act 2016 (Commencement and Transitory Provision) Regulations 2016, which, among other things, brought the commission into statutory existence for the purpose of ministers consulting with the commission prior to amending its functions. That is a condition of section 8 of the 2016 act. As such, I wrote to Lady Rice, chair of the commission, on 9 November, and the commission responded positively to our draft amendments.

If members have no questions for the cabinet secretary, we will move to item 3, which is consideration of the motion. I invite the cabinet secretary to move motion S5M-03911.

Motion moved,

That Finance and Constitution Committee recommends that the Scottish Fiscal Commission (Modification of Functions) Regulations 2017 [draft] be approved.—[Derek Mackay]

Motion agreed to.

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Scottish Landfill Tax (Standard Rate and Lower Rate) Order 2017 (SSI 2017/23)

The next item is consideration of a Scottish statutory instrument that seeks to revise the landfill tax rates and bands for 2017-18. Before we consider the motion on the order, we will have an evidence-taking session. We are joined by the same people as previously.

Cabinet secretary, do you wish to make an opening statement?

11:15  

I do, convener. Thank you.

The Scottish Landfill Tax (Standard Rate and Lower Rate) Order 2017 specifies the standard rate and lower rate of the Scottish landfill tax, as I set out in the budget. The proposed rates ensure that the tax increases in line with inflation and matches the planned UK landfill tax rates for 2017-18, as provided for in the Finance Act 2015.

In setting those rates, I am acting to avoid any potential for waste tourism through material differences between the tax rates north and south of the border. In addition, I am providing appropriate financial incentives to support the delivery of our ambitious waste and circular-economy targets, including our zero-waste goal that no more than 5 per cent of total waste should go to landfill by 2025.

The Scottish Government forecasts that it will generate revenue of £149 million from the Scottish landfill tax in 2017-18. The Scottish Fiscal Commission has endorsed that full-year forecast as reasonable.

Cabinet secretary, we are considering the order at the last possible moment. As far as I understand, if the committee were not able to reach a view this morning, it would not be possible to bring a motion to the chamber this week and the order would fail to keep to the 28-day cut-off point. Without getting into the reasons why we are in this position in relation to the order—an instrument to which I detect no objection—will you share your thoughts on how we can avoid such a situation happening again? How can we ensure that, in future, we avoid more delicate and more dangerous last-minute processes than this on the range of tax powers that the Scottish Government now has, some of which are more contentious than landfill tax?

I am happy to give that point further consideration. The rates will be set for the year but the budget review group will help us to navigate our way through some of the process issues. It is not the Government’s intention for you to feel that way about engagement on the matter, because there are some positives in the order. One is how it aligns with our environmental strategy. A further positive is the credit rate for the Scottish landfill communities fund, which is more generous than the UK equivalent.

The point is worthy of further consideration. I am happy to give thought to how we can ensure that timetabling is more meaningful in future. The budget review group will examine all those matters for the total budget process.

If there are no further questions, we move to consideration of the motion on the order.

Motion moved,

That the Finance and Constitution Committee recommends that the Scottish Landfill Tax (Standard Rate and Lower Rate) Order 2017 be approved.—[Derek Mackay]

Motion agreed to.

We will produce a short report on the instruments that we have considered, setting out our decisions.

That is the last item on the agenda. I close the meeting.

Meeting closed at 11:18.