Seòmar agus comataidhean

Thank you. We have a few more questions, but we have another panel to hear from, so I will not hold you back. I thank you very much for your evidence this morning. It has been very helpful.

We will take a break for a couple of minutes to allow for a change of witnesses.

We get that answer every year—that there is policy here and delivery there. Surely, the policy is where the delivery is. It seems to me ludicrous, frankly, that every year we get this huge shift. It distorts the budget line. I plead again for the Scottish Government to rethink that; otherwise, we will be asking the same questions ad infinitum. It does not seem sensible to me.

Sorry to cut across you, minister, but if the funding is for delivery in one area, that is really where the policy lies. It is a bit of a mirage to suggest that the budget is ever in health and social care if it is always going to be transferred. The Government’s policy is clearly to transfer the funding every single year to where it is being delivered.

You also said in your submission that you

“welcome the exclusion of islands in Section 5(d). However, Scottish Government regulations on local business taxation have already acknowledged that some rural mainland areas, such as Knoydart, Scoraig, and Cape Wrath, face similar levels of inaccessibility and challenges as island communities.”

Knoydart can be reached only by boat, for example.

There has been a lot of talk in the media about the alleged £1 billion underspend. Do you want to talk us through the Scotland reserve? I understand that £566.7 million has been carried forward. That represents about 79.5 per cent of the cap last year, falling slightly to just under 76 per cent this year.

The Scottish Parliament information centre has provided us with some information on portfolios. Earlier, we talked about how money gets transferred from the same budgets to the same budgets each year. If we compare the position when the Parliament passed the budget with the position now, we see that the finance and local government budget has increased by 9.9 per cent, whereas the education and skills budget has decreased by 8.7 per cent. Other variations are smaller than that—for example, the health budget has increased by 0.1 per cent. The fact that there are such huge variations does not reflect well on the budget process. I have heard what you have said about cross-portfolio working, but surely more must be done to ensure that the budget that is passed by the Parliament is, wherever possible, what is delivered across the financial year.

Indeed. Next year, the transfer is going to be £250 million or £300 million. If that money was in the relevant budget, and only £5 million or £10 million had to be moved one way or the other, that would not be the same as having to move such a large sum.

Discretionary housing payments will always be roughly the same amount—they are usually about £75 million or £80 million. Next year, they might be £85 million. We know that the Government will not spend less than £75 million on DHPs next year, so why not just have that money in the local government portfolio to start off with?

The transfer to education and skills for the training of nursery and midwifery students is £49.3 million. If there was £45 million for that in the education budget, members would have a clearer view of what was happening in that area. If you had to move a few per cent here or there, that would be fair enough.

Including the money in the portfolio in which it is spent would present a much clearer and more accurate picture of the budget, not just to parliamentarians but to the wider public.

I thank the minister for his responses to our questions. We now move to item 2, which involves formal consideration of the motion on the instrument. I invite the minister to move motion S6M-19303.

Motion moved,

That the Finance and Public Administration Committee recommends that the Budget (Scotland) Act 2025 Amendment Regulations 2025 [draft] be approved.—[Ivan McKee]

Motion agreed to.

I looked this up and found an example from 2021, which is not exactly recent, when the average cost of constructing a house in Edinburgh was £126,400 but the average sale price was £375,870. That is more than three times the construction cost. I am well aware that other costs are involved, but those figures show a 197 per cent profit. I do not for a minute accept that that is the real profit, but we are looking at £3,500 out of a price that was £375,000 in Edinburgh four years ago. Developers will pass that on to buyers, and the reality is that no one will put a house up for sale for less than the cost of building it.

You sent a really detailed and excellent 26-page submission full of facts and figures. What impact do you see on the elasticity of demand? Do you think that the levy will reduce demand by 5 or 10 per cent, or will it have no impact? What is your view of the impact on actual demand?

When you say “homes”, you are talking about homes for sale. All the submissions talk about the fact that 44 per cent of housing in Scotland is classed as affordable, compared to 19 per cent in England. Should affordable housing be included if the levy is implemented? That seems to be the implication of what you have said.

Ms Kell, in your submission, you state:

“The exemption of affordable housing, which is more than twice the size of that in England, in terms of its proportion of the market, does not reflect the reality of the make-up of the Scottish market which differs from England. This also ignores that UK Government seeks to substantially grow the tax base in England, through its ambition to deliver 1.5m homes.”

Over five years, that would require 75,000 houses to be built each quarter in England. In fact, however, 43,030 houses were built in quarter 2 last year in England, and the figure has fallen to 36,180 in quarter 1 this year, which is less than half of the target. That is not really much of an example to follow.

Indeed, the people who build those homes will be paying income tax, council tax and all the rest of it. Therefore, if they are not building houses, they will not be paying those taxes, which will also have an impact.

I am really keen to get fired into your submissions and go through them all in great detail. However, because of our time restrictions and the fact that I am dead keen to let my colleagues come in, I shall leave it at that.