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What developments do you envisage from that in terms of enhanced public engagement?

We continue our evidence taking on the Scottish budget 2023-24. I welcome to the meeting John Swinney, the Deputy First Minister and Cabinet Secretary for Covid Recovery. He is joined by the Scottish Government officials Alison Cumming, director of budget and public spending; Gary Gillespie, chief economist; and Andrew Scott, director of tax and revenues.

We have around 90 minutes for this session. Before I open the discussion, I wish Mr Swinney and his colleagues a happy new year, and I invite him to make an opening statement.

Colleagues might want to examine the net impact of that, but I will focus on what that tax will be used for. There are Barnett consequentials for health. In addition to those, how much additional resource is going into the national health service, for example?

Through fiscal drag, raising taxes impacts adversely on living standards, and it is anticipated that living standards across the UK will fall by 7.1 per cent over the next two years.

On St Andrew’s day, I was privileged to attend the official opening of the £88 million medicines manufacturing innovation centre in Inchinnan, which is a world-leading facility that has in part been made possible through Scottish Government investment. Given such examples, is it not time to focus more of the Scottish Government’s limited financial resources on boosting tech scalers—I know that there is an element of that in the budget, which I asked about after your budget statement, as you know—start-ups, research and development, innovation, skills and infrastructure in order to create high-value jobs, drive up private sector confidence in investment, attract people of working age—not just retirees—from across the UK and beyond to Scotland, and deliver the tax revenue that is needed to pay for the public services that we require?

On sustainability, in evidence to the committee, Professor Ruane said:

“It is about optimising the use of digital technologies to be efficient in the delivery of public services”.—[Official Report, Finance and Public Administration Committee, 20 December 2022; c 4.]

However, there is a concern that details of public sector reforms, which were expected along with the budget, will now be set out in due course. When is that likely to be?

I appreciate that.

I take on board what you are saying, but at the time of the resource spending review last May, we were advised that a package of reforms would be presented with the budget, and that has not happened. Now, it is being presented as a kind of on-going situation—almost a mañana approach. That is how it seems. The committee would prefer that, when we are told that something will happen in eight months’ time, it actually happens in eight months. If that is not possible—I realise that there has been huge turmoil in the past year—we should be told that you have not been able to present the package of reforms by the time of the budget but that you will do that in March, May or whenever. It seems that we are now being presented with almost a rolling reform thing, which it is difficult to get a grip of. It is hard for us to grasp it fully and to scrutinise and analyse it.

Okay. In evidence to the committee, Dr Brewer of the Resolution Foundation said that UK Government cuts of £185 million to Scotland’s capital allocation were not “a sensible action”. He added:

“We are pointing the finger of blame principally at the UK Government”.—[Official Report, Finance and Public Administration Committee, 20 December 2022; c 6.]

He had said previously that the decision not to enhance capital funding, given the high levels of inflation,

“will lead to a steep decline in the purchasing power of Scottish Government investments ... this may hamper the Scottish Government’s ability to meet its net zero targets and damage the economic recovery”.

To what extent is that the case? How is the Scottish Government trying to mitigate the damage?

Obviously, if there are significant increases, the money would, understandably, have to be found from elsewhere.

Colleagues will be glad to know that I have only a couple of questions more, and then I will open out the session. I am not going to ask all the juicy questions, but I want to ask about one important issue that has gone back and forth.

In evidence to the committee, Professor Roy of the Scottish Fiscal Commission said, in talking about higher rate and additional taxes:

“the Government has to be careful when it thinks about how much additional revenue might come in, just because of people’s potential behavioural responses.”

He added that, although on paper the extra penny on the additional rate would bring in a further £30 million of taxation,

“that is without behavioural change”,

and he went on to say:

“When you add in the behavioural change, we think that the totality of that is only £3 million.”—[Official Report, Finance and Public Administration Committee, 20 December 2022; c 30, 38.]

Other organisations and groups might have different views on that, but that is what the Scottish Fiscal Commission is basically saying.

Is it worth the bother of adding an extra penny on tax if 90 per cent will be lost to behavioural change? How concerned are you that the level of behavioural change restricts your room to manoeuvre and that, if tax went up further, you might end up with a negative tax-raising situation?

While I am on taxation, I will ask more about that. Is the Scottish Government worried about an increase in people incorporating to avoid paying taxes? Is it worried about the image that is presented to other parts of the UK—wrongly, in my view—that Scotland is a high-tax country?

There is, of course, an argument for additional taxation that is being made by some people. The difficulty is that that does not seem to take behavioural change into account at all. People seem to think that, if tax is increased by X amount, the revenue to the Scottish Government will indeed be X although , in fact, that is not the case.