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I am sorry—I appreciate that, but is the issue not that the impact is built into the bands themselves? Now that we have had a year of this, have you been able to assess what the impact has been?

Paragraph 67 of your report says:

“We estimate that the behavioural response reduces overall yield of the policy by £10 million in 2025-26, with this behavioural response reaching £31 million by 2029-30.”

How much are the two higher rates—the additional advanced rate and the top rate—perceived on paper to contribute to income, and how much do you believe is being lost to behavioural change as a result?

Okay. I have a couple of questions, the first of which is about LBTT. You expect significant growth in LBTT, from £911 million to £1,019 million. One aspect of that is the additional dwelling supplement, the rate of which will increase from 6 to 8 per cent, and the revenue from which is expected to grow by £32 million in the next financial year. Do you envisage any behavioural change as a result of that increase? There have certainly been some rumblings about that over the past few days.

My other question is about the labour market. On page 78, you say that you expect earnings growth in Scotland to continue to grow faster than that in the rest of the UK, and that unemployment will be lower than that in the rest of the UK, although there will be some loosening of the labour market. We discussed with the Institute for Fiscal Studies the issue that more than a quarter of people in the UK who are of working age are economically inactive, and the fact that the difference between Scotland and England in that regard is about 1 per cent. We touched on the fact that our four-year degrees might have something to do with that. I know that you, Professor Roy, have said previously that our approach takes a year out of the working life of a substantial number of the population. I am wondering what effect that has.

Also, how does Scotland’s expenditure on social security impact on the number of people who are economically inactive, if at all?

That is why I was looking at the overall net position. A significant fiscal stimulus is important, but I am not seeing any great increases in economic growth over the four years. In fact, the Office for Budget Responsibility seems to think that, although there will be a boost initially, it will, in effect, tail off over the next three to four years. Is that your assessment?

What impact do you think the increase in social security spend is having on the economy and productivity?

I now open up the session to colleagues around the table.

When we were taking evidence on the ABR, the Government told us that it did not really know where it was going, which can perhaps explain why it has not provided all the information that we would require on those portfolio spends.

Over the years, the committee has expressed concern about the fact that we get the exact same transfers from one portfolio to another occurring every year. The committee has been concerned, first, that the Government does not put the amounts into the portfolio line where they will ultimately go to be spent, and, secondly, that that distorts the pictures that we have here. In your report, for example, we have figure 2, but figure 3 is particularly illuminating if it really shows what the Government’s direction is. For example, I note that, in that table, most budgets are growing by between minus 9 per cent and plus 8 per cent compared with 2022-23, with the one notable exception being social protection, which is growing by 36 per cent. How fiscally sustainable is that, given the current economic situation in Scotland?

The third sector and organisations including universities have said that the increase will cost about £210 million and are pressing the Scottish Government to fund that, although, of course, it is a Westminster decision.

The private sector does not seem to be being talked about too much, but we have heard that there could be an impact of up to £1.5 billion on that sector. Given that the OBR has said that 75 per cent of the cost of the NICs increase will fall on workers and 25 per cent on business investment, will that impact on your projections for Scottish economic growth, productivity and income tax revenues?

Good morning, and welcome to the 35th meeting in 2024 of the Finance and Public Administration Committee. The first item on our agenda is an evidence session with the Scottish Fiscal Commission to discuss the 2025-26 Scottish budget and its December 2024 economic and fiscal forecasts, which were both published on 4 December. From the Scottish Fiscal Commission, we are joined by Professor Graeme Roy, the chair; Professor David Ulph, a commissioner; John Ireland, the chief executive; and Claire Murdoch, the head of fiscal sustainability and public funding. I welcome you all to the meeting and invite Professor Roy to make a brief opening statement.