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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 4 June 2025
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Displaying 2700 contributions

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Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

That is helpful. I will press you again on the practical impact of the GDP deflator. My understanding is that the Scottish Government uses it to measure factors such as how much it can borrow. However, the illustration that we are always given is inflation in the capital sector—for example, buying materials such as concrete and steel, which have been expensive. Am I right in thinking that the GDP deflator effectively constrains the amount of capital expenditure going forward, or is that a misunderstanding?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

I will move on to another point. I believe that the concept of full expensing of fixed-asset expenditure covers only plant and machinery. How will that approach play out? As I understand it, there will be a short-term hit and then a longer-term advantage. Is that the plan?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

My final question is on the tax burden, which is 4.5 percentage points higher than it was before the pandemic. How does that compare with other countries? Does that have an impact on our economy?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

Okay. I think that I partly understand that. [Laughter.]

The GDP deflator has come up a few times in our committee. I noted that, for 2023, it was forecast to be 5.7 per cent and it is now 6.7 per cent. In practice, where does that impact? Does that make any difference?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

On the question of the tax burden, we now seem to be at 38 per cent, or 37.7 per cent or thereabouts, which our previous witnesses said is nearly 4.5 percentage points higher than it was before the pandemic. However, it is a lot lower than the figure for France, which, it was suggested, was nearly 50 per cent. Should we be worried about that total figure, or is it how it is broken down that matters?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

The UK Government is aiming support at the retail, hospitality and leisure sector through non-domestic rates. Is that because that sector is particularly struggling at the moment?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

Okay; fair enough.

The suggestion is that the UK is more index linked and that other countries have got more fixed rates. They are gaining at the moment but, in the long run, they will have to pay more, we will pay less and it will all even out. Is that a fair assessment?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

On the subject of inflation, we have the GDP deflator. I was somewhat surprised that the OBR said that that was 5.7 per cent in 2022-23 but says that it is now 6.7 per cent. That is a reasonably big difference compared to the past. Is the GDP deflator a vague figure that we are not very clear about at any given point? As I understand it, the UK Government uses that figure a lot. Does that have an impact on spending?

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

I will move on to full expensing. The OBR seems to feel that that will bring a bit of a hit in the short term, in that businesses will not bring forward capital expenditure, but that it will be beneficial in the longer term. I did wonder whether full expensing could encourage companies to make poorer investments because they would get tax benefits. What are your thoughts on that? Earlier, David Phillips said that if a company had been considering investing in buildings, full expensing might push it towards investing in plant and machinery instead.

Finance and Public Administration Committee

Budget Scrutiny 2024-25 (United Kingdom Context)

Meeting date: 12 December 2023

John Mason

On the positive side, if companies have more modern machinery, that should help their productivity. However, is there not also a risk that they might invest for the sake of it, to get their tax bills down, and so make poor investments?