Chamber and committees

Under the current constitutional framework the Scottish Government and Scottish Parliament only have limited control over fiscal policy. The Scottish Parliament is only responsible for around 8 per cent of taxes raised in Scotland when including a geographical share of North Sea revenues. With the new tax powers of the Scotland Act 2012 this figure will only increase to around 16 per cent.

Under the Scotland Act, if revenues in Scotland were to increase by 1 per cent across the four main taxes and spending on key benefit to fall by 1 per cent, only 12 per cent of the total net gain in revenues would be retained by the Scottish Government. More detail is available on pages 6 and 7 of Childcare and Labour Market Participation – Economic Analysis paper.

<>The answer to S4W-20327 refers to a previously answered question S4W-20084 on 20 March 2014, which provided information on how different tax revenue streams could be affected by an increase in female participation rate in Scotland to match Sweden’s. All answers to written parliamentary questions are available on the Parliament’s website, the search facility for which can be found at: http://www.scottish.parliament.uk/parliamentarybusiness/28877.aspx.

As outlined in the answer to question S4W-20501 on 24 April 2014, the £700 million is the estimated increase in revenues that could arise if Scotland matched Swedish female participation rate. All tax rates are held constant.

The Scottish Government estimates that the revenues from the specific taxes identified in the question would increase if Scotland’s female participation rate was to match Sweden’s. The total increase in all revenues would be expected to amount to £700 million in the long-term. Further detail is provided in the Childcare and Labour Market Participation – Economic Analysis paper which can be found at: http://www.scotland.gov.uk/Resource/0044/00441783.pdf.

The information on the component tax revenue streams that contribute to the £700 million is available in the Childcare and Labour Market Participation – Economic Analysis paper published in January 2014.

The Council of Economic Advisers considered the economic and social importance of improving childcare provision in Scotland at their meeting on 30 August 2013. The council’s discussion was informed by a presentation by the late Professor Ailsa McKay on the economic and social importance of access to childcare. The minutes of this discussion are available at:

http://www.scotland.gov.uk/Topics/Economy/Council-Economic-Advisers/Meetings/30-08-2013

The council also received an update on childcare at their meeting on 7 March 2014. Minutes of this meeting will be published online in due course.

The analysis informing the council’s deliberations will be reflected in the Annual Chair’s Report of the Council of Economic Advisers. It is anticipated that the chair’s report will be published in spring 2014.

As outlined in the Childcare and Labour Market Participation – Economic Analysis paper, the increase in the tax revenues by £700 million that could arise from matching Sweden’s female participation rate would be expected to come from a range of different tax revenue streams. Further detail is contained in the paper on pages 4-6.

I refer the member to the answer to question S4W-20502 on 24 April 2014. All answers to written parliamentary questions are available on the Parliament’s website, the search facility for which can be found at:

http://www.scottish.parliament.uk/parliamentarybusiness/28877.aspx

The Scottish Government modelled the impacts of increased female participation using a Computable General Equilibrium model of the Scottish economy. As outlined in the Childcare and Labour Market Participation – Economic Analysis paper, the increase in the tax revenues by £700 million that could arise from matching Sweden’s female participation rate would be expected to come from a range of different tax revenue streams. As highlighted in the paper, as individuals move into employment, or increase the hours they work, they would pay more tax through income tax and national insurance. In addition, as individuals’ incomes increase and their spending rises, receipts from indirect taxes such as VAT, fuel duty and excise duties would also be expected to rise.

The £700 million figure referred to in the question is an output of the Scottish Government’s in-house modelling of the impacts of increased female participation. The Computable General Equilibrium model that was used for this modelling work was developed by the well-respected Fraser of Allander Institute at University of Strathclyde who are among the leading experts in this field of economic modelling.