Seòmar agus comataidhean

You are being diplomatic in the responses that you are giving. It seems to me—correct me if I am wrong—that you were presented with a take-it-or-leave-it situation with little wriggle room. As my mother would say, half a loaf is better than no bread. Was that the kind of approach with which you were presented?

That is great. My last question is about VAT. As you will be aware, last week we took evidence on VAT assignment; we had a round-table discussion with a number of organisations, including the Scottish Fiscal Commission and Audit Scotland. We had planned a 75-minute session but we took only 50 minutes because it became very clear that no one thinks that VAT assignment is in any way a good idea. I might not be speaking for everyone, although I am pretty sure that I am, but we felt that it was added to the Smith commission so that it could appear that the commission was going to move towards 50 per cent of taxation being devolved at some point and it was thrown in as part of that mix.

However, when we looked at the intricacies of assignation and the nightmare that it would be—HM Revenue and Customs, for example, briefed us on volatility, as did many others—it appeared to us, the Fraser of Allander Institute and the SFC that it was not in Scotland’s interests to secure the assignment of VAT. The volatility would be huge and we could see zero benefits, because we would not have control over the policy or the VAT levels at all. Of course, it was also a way of getting around the fact that, when we were in the European Union, we could not devolve VAT to sub-state legislatures.

Will the Scottish Government abandon the policy of assigning VAT or will it consider whether VAT can potentially be devolved in future? What is the Scottish Government’s position on that? It seems to us that Scottish Government officials have done a lot of work on that over many years. I feel for the people who have been doing that work, but it is a dead end as far as we can see. That is the unanimous view of the committee and, indeed, of the people who participated in last week’s round table.

We have spoken about prudential borrowing over the years. It is available to local authorities, and it has always seemed bizarre to me, as well as many others, that local authorities appear to have more flexibility with borrowing than the Parliament does.

Thank you for that helpful opening statement. The committee was taken by surprise by the announcement. I recall what a tortuous process it was to construct the fiscal framework in the 2011 to 2016 session of the Parliament. Had it not been for the First Minister and Deputy First Minister of the day digging in their heels at the last minute, we would have ended up with a framework that would have cost this Parliament several billion pounds over years. A deal was struck. Therefore, we expected the review to be a much more drawn-out process.

You touched on the process. On the delegation of powers over taxation, for example, the UK Government still has control over national insurance, VAT, quite a lot of income tax, corporation tax, fuel duty, savings, dividends and excise duties on cigarettes, tobacco and alcohol. Did the Scottish Government propose any of those for devolution? We will talk about VAT assignment in a minute. How far did the Scottish Government try to push the envelope? I appreciate that you said that you had an opportunity to secure improvements, but it is clearly not a negotiation of equals. Where are you pushing in addition to the areas that you mentioned in your opening statement?

Apologies: I have just had a wee aside with one of the clerks about the letter. I have received the letter, but the clerks have not.

Yes, indeed.

We are in a state of flux, in a way. There has been a settlement that consideration of the fiscal framework will come only once in every five-year term but, as John Mason pointed out, that five-year term could be upon us relatively soon—in a year, or 18 months at the most, I think. That is why I wonder whether the Scottish Government is looking at those issues now, whether it is looking to the next stage of a fiscal framework and whether it is looking at other devolved administrations around the world.

A previous committee that I served on visited the Basque Country. Only about 6.29 per cent of its revenue is handed back to the Spanish Government; all the rest is devolved. Pensions and social security are devolved, and only the monarchy, civil guard and defence are reserved. Everything else is dealt with locally, so there are other models for us to look at.

What modus vivendi do you think we might be able to reach in the future, and are you in contact with political parties that could potentially form a future UK Government?

Thank you. That concludes questions from committee members, other than me: I still have one or two questions, just to wind up. Surprise, surprise.

Given that VAT assignment is, in effect, a dead duck after eight years of deliberations, does the Scottish Government intend to pursue VAT devolution or to look at how we can press for devolution of other taxes. Of course, it takes two to tango and the UK Government might not be keen, but we could, for example, press for devolution of alcohol and tobacco duties, which would generate a disproportionate income, given our overconsumption of both substances. Where would the United Kingdom Internal Market Act 2020 come into play, there? You touched on that in an earlier response. What are your priorities, other than VAT assignment? Do they include national insurance, corporation tax or any of the other taxes that I have mentioned?

The fiscal framework was negotiated in 2016, and the United Kingdom Internal Market Act was imposed in 2020, so will it have an impact in the future if other areas are devolved? We will seek clarity on that.

John Mason talked about a new Government; we need to know whether Sir Ed Davey and his new Administration would be keen to have a better discussion with the Scottish Government.

As well as the institutions that I mentioned, the Chartered Institute of Taxation also participated in the round table. In the briefing before the session, HMRC told us that the volatility in the current financial year is of the order of 9.81 per cent. It would be a real shock; who knows where we could be. That is the highest that it has been in the past 12 years. There is also the bureaucratic cost and the politics of who would gain and who would lose and so on. The committee is clearly of the view that it is simply not worth the candle for all the stress and distress that it would cause. We cannot see any real gain for Scotland—or, indeed, the UK—in it. It would simply be a bit of a nightmare.

I will now open up questioning to colleagues.