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Official Report: search what was said in Parliament

The Official Report is a written record of public meetings of the Parliament and committees.  

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Dates of parliamentary sessions
  1. Session 1: 12 May 1999 to 31 March 2003
  2. Session 2: 7 May 2003 to 2 April 2007
  3. Session 3: 9 May 2007 to 22 March 2011
  4. Session 4: 11 May 2011 to 23 March 2016
  5. Session 5: 12 May 2016 to 4 May 2021
  6. Current session: 13 May 2021 to 10 November 2025
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Displaying 3846 contributions

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Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

I will stick with tax for a minute. One of the issues that is being talked about is the coherence of the tax strategy. In relation to the UK tax system, IFS director Paul Johnson said:

“if this government really wants to focus on growth, then part of the plan needs to be a much more coherent tax strategy than we saw”

in the 2024 budget. Will you explain what the IFS believes that “more coherent ... strategy” should be and how we in Scotland can build on that, bearing in mind that a lot of our tax strategies depend on what happens UK wide?

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

I will open up the session now, and the first colleague to ask questions will be Liz Smith.

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

You mentioned incorporation. The Office for Budget Responsibility has said that, across the UK, the measure is likely to encourage about 17,000 incorporations, costing about £0.7 billion in revenue. Have you seen higher rates of incorporation in Scotland, in relative terms, as a result of recent tax changes in the rest of the UK? Alternatively, is there no real difference, or do you not have the data to assess that yet?

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

No—it is the cash headroom, which is £9.9 billion.

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

Thank you for that. In your document, you say:

“as with funding in 2024-25, part of the increase in resource funding ... reflects extra SCAPE costs rather than an increase in spending power.”

You have talked about the fact that the budget is increasing fairly modestly in real terms. However, that also means that the Scottish Government has to be very careful about how it spends its money. You have talked about behavioural response in relation to income tax, and mentioned tax revenues in that regard, too. You highlight that the SFC found that

“such responses will offset half of revenues from the Scottish 45% rate and 85% from Scotland’s top rate of tax”

and that there is a need to better evaluate the impact of that. The document goes on to talk about

“the complexity introduced by having 19%, 20% and 21%”

and suggests that that

“is particularly unwarranted”.

Where do you think the Scottish Government is in terms of the issues of taxation and behavioural responses at this time? The document goes on to say that the Scottish Government should be

“open to reversing course if new evidence again suggests bigger-than-expected behavioural impacts”

and that

“a strategy should always be open to revision, not set in stone”.

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

It is 0.3 per cent of our expenditure targets, so it is about £10 billion.

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

We have gone well over our time and I know that our witnesses and members have other meetings to go to, so I bring the session to an end. I thank everyone for their contributions.

The Scottish budget be published tomorrow, 4 December. The committee will take evidence on the Scottish Government’s tax and spending plans at future meetings in December and January and all members have been given details of the budget timeline.

As that was the only item on our agenda, I close the meeting.

Meeting closed at 11:34.  

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

My colleagues will explore that in more detail. I have a couple more questions to ask. The OBR has suggested that the Chancellor of the Exchequer’s headroom is only 0.3 per cent over the forecast period, which it thinks is extremely tight. How does the IFS feel about that?

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

Yes—the OBR suggests that there is a 54 per cent chance of meeting the target, which is more or less the 50:50 that you suggested.

The last question from me is about a quote from your Scottish analysis. You say:

“an increase in forecast whole-economy inflation since the Budget (from 1.7% to 2.4%) means that capital funding this year is little changed in real terms compared with what was expected at the time of the Scottish Budget—in stark contrast to the situation for resource funding.”

What does that mean with regard not just to capital projects going forward, but to the likely impact on productivity?

Finance and Public Administration Committee

Budget Scrutiny 2025-26 (United Kingdom Context)

Meeting date: 3 December 2024

Kenneth Gibson

Paul Johnson, in his assessment of the UK budget, said:

“the most striking aspect of the spending decisions is how incredibly front loaded the additional spending is”.

You have touched on that to some extent. He also said that

“it would be odd to increase spending rapidly only to start cutting back again in subsequent years”

and that

“when it comes to settling with departments for the period after 2025-26 keeping within that 1.3% envelope will be extremely challenging”.

He described that as a big gamble. However, how much of a gamble is it? Is there any way that you can assess how likely it is that the Government will be able to reach its goals? Saying that it is a big gamble does not really quantify it to any degree. Can you help us with that?