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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 5 May 2021
  6. Current session: 12 May 2021 to 8 June 2025
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Displaying 3368 contributions

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Finance and Public Administration Committee

Scottish Fiscal Framework: Independent Report and Review

Meeting date: 21 November 2023

Kenneth Gibson

The next item is an evidence session with the Deputy First Minister and Cabinet Secretary for Finance on the Scottish fiscal framework independent report and review and VAT assignment in Scotland. Ms Robison is joined by Scottish Government officials: Matthew Elsby, deputy director of fiscal policy and constitution; and Niall Caldwell, corporate treasurer. I welcome all of you to the meeting and invite the cabinet secretary to make a short opening statement.

Finance and Public Administration Committee

Scottish Fiscal Framework: Independent Report and Review

Meeting date: 21 November 2023

Kenneth Gibson

I am just going to ask a couple more questions and then open it out to colleagues around the table. We have a summary of the changes to the fiscal framework. They are all pretty straightforward and I think that the committee has a good grasp of most of them—no doubt my colleagues will ask for further clarification. However, I am a bit vague about the coastal communities fund. It says in the table of changes that

“A baseline addition was made equal to the UK government spending on CCF in the year immediately prior to devolution.”

The next column says that the CCF is now going to be absorbed into the Barnett formula, with

“no immediate impact on funding.”

The important word there is “immediate”. What will that really mean as we move forward? I ask that as someone who represents a coastal and island constituency.

Finance and Public Administration Committee

Scottish Fiscal Framework: Independent Report and Review

Meeting date: 21 November 2023

Kenneth Gibson

The indexed per capita methodology was crucial to securing the deal in 2016. Because it came out at the last minute, it is important that it has been consolidated, so I think that that is a significant gain. Inflation linking capital borrowing is also important. When I looked at the projected increase in capital available as a result over the next four years, I was concerned that it seems to be tied to the gross domestic product deflator, which bears no resemblance whatsoever to inflation in the capital sector. So, even if those limits go up by the amounts that are predicted, will it not still mean that there is a real terms reduction in the capital that is available to the Scottish Government?

Finance and Public Administration Committee

Scottish Fiscal Framework: Independent Report and Review

Meeting date: 14 November 2023

Kenneth Gibson

David, you said in the independent report that

“relevant data used to forecast the BGAs and to determine tax and welfare receipts should also be reviewed to ensure it is sufficiently robust and comprehensive for those purposes.”

You make a number of other recommendations, one of which is about

“whether the OBR and SFC forecasts could be better tied to minimise this risk.”

Finance and Public Administration Committee

Scottish Fiscal Framework: Independent Report and Review

Meeting date: 14 November 2023

Kenneth Gibson

What are the financial parameters that we are talking about?

Finance and Public Administration Committee

Scottish Fiscal Framework: Value Added Tax Assignment

Meeting date: 14 November 2023

Kenneth Gibson

There is also the issue of cross-border purchases and so on, but there are sales taxes in the United States and Europe. They are quite common around the world, aren’t they?

Finance and Public Administration Committee

Scottish Fiscal Framework: Value Added Tax Assignment

Meeting date: 14 November 2023

Kenneth Gibson

The finance committee from 2011 to 2016, of which I was convener, looked at the matter briefly and we took the view that there was not enough on it. The Scottish Fiscal Commission was in an embryonic stage; we were not at the stage that we are at now; and it was hoped that, in future years, we would be able to look at the issue in greater depth. I should say that our predecessor committee in the last session of Parliament was very sceptical about this as a practical way forward.

However, it remains part of the Smith commission’s work. I take the view that the Smith commission is not necessarily set in tablets of stone. It happened some years ago now; I think that we have to evolve beyond it in some areas, and this might be one of those area where we have to say that this approach will not be a runner in the foreseeable future. Scottish Government officials are looking at the matter, yet, given that we can see no practical or pragmatic way forward, one has to wonder whether that is a good use of public resources.

Finance and Public Administration Committee

Scottish Fiscal Framework: Value Added Tax Assignment

Meeting date: 14 November 2023

Kenneth Gibson

Before I get trampled by people wanting to come in, because no one has so far, I will add to what you have been saying there. HMRC did a presentation this morning and it said that the changes between each publication in the past year were, indeed, the highest that they had been in the last decade at 9.81 per cent. Mark Taylor, you said:

“The implementation of VAT assignment would further increase the uncertainty, volatility and complexity of the Scottish Budget.”

Finance and Public Administration Committee

Scottish Fiscal Framework: Value Added Tax Assignment

Meeting date: 14 November 2023

Kenneth Gibson

I will bring in one of my colleagues in a minute but there are a couple of others who want to speak so I will bring them in first. First of all, David Phillips, to add a wee bit more to the mix here, you said that

“VAT has properties that make it a relatively poor candidate for devolution”,

although we are talking about assignment at the moment. Then you go on to say:

“The administrative difficulties of devolving VAT to Scotland should not be overstated”.

Finance and Public Administration Committee

Scottish Fiscal Framework: Value Added Tax Assignment

Meeting date: 14 November 2023

Kenneth Gibson

Is the issue for you that it would perhaps skew economic activity as well? For example, if food is VAT zero rated and in other areas of the economy VAT is 20 per cent, that would perhaps skew Government policy and decision making, if it were devolved, into areas where it was likely to have a VAT return.