³ÉÈË¿ìÊÖ

I am aware that every year—concurrent to the budget process for the following year, roughly—we start to get reports of the Government underspend in the current financial year, so I have a question for Audit Scotland on transparency and public understanding. Do we need to have a different kind of discussion, use different language and present things differently when we are talking about underspend?

Two or three years ago, there was a £2 billion headline figure for the underspend, the vast majority of which was just a change in how student loans were accounted for. No cash remained unspent at the end of the year.

If we are talking about public understanding and expectations, we constantly have this issue, every spring, when people think that a big pot of money has not been spent, for no particular reason. However, it is much more complicated than that. Do we need to have a discussion about how we talk about the underspend from each financial year going into the next?

On the point about other options, there is a lot of other money out there. The most obvious example, in my view, would be public sector pension funds, which invest billions of pounds in all sorts of stuff all the time, but very little in public infrastructure such as affordable housing. That is not a criticism—there is no set-up to connect those funds with that area, despite the fact that they have billions of pounds to put in—but it shows that there probably are other options that we could explore to get more money into areas such as affordable housing. Pension funds are just one example.

I go back to David Bell’s point about attracting investment and the cuts to the enterprise agencies, although this question might be too specific. Are the enterprise agencies necessarily the best place for us to put money in order to attract investment? I am thinking of the coverage, over the past couple of days, of the incredible success of our film and TV sector, which, I would argue, is driven largely by the fact that responsibility for state support for that sector has been taken away from the enterprise agencies and given to a bespoke unit in Creative Scotland: the new, or new-ish, Screen Scotland.

Has Scottish Enterprise, in particular—given that Highlands and Islands Enterprise and South of Scotland Enterprise are different, and have a justifiable return—really been able to demonstrate that the spend that we put into it has resulted in increased investment?

David Bell pointed out that spend on Scottish Enterprise has actually gone down at the same time as foreign direct investment in Scotland has gone up.

I would like to go back to the convener’s original line of questioning. Collectively, what we have heard so far this morning are arguments that the budget does not prioritise economic growth enough, it does not prioritise tackling poverty enough and it does not prioritise reaching our net zero targets enough. There is specific criticism of the lack of funding for skills and training, university places, affordable housing, the Scottish child payment, enterprise agencies, the Scottish National Investment Bank and so on. There is also scepticism about tax rises to raise additional revenue.

However, is that not the problem? It is easy to identify what the budget does not do, but there is little in the way of solutions to that. To be fair, Chris Birt identified almost straight away that the money for the council tax freeze could instead have been spent on increasing the Scottish child payment. My criticism of the council tax freeze is on the record, and I would agree with him on that.

However, cumulatively, the Government went into this with a £1.5 billion gap, and what I have not yet heard this morning is a clear identification of where the Government is spending money on the wrong things and what could be reprioritised to fill all the gaps that you have all quite fairly identified. I think that there is a consensus that we should spend more money on all those areas, but the point is that there is not more money. What I have not yet heard this morning is an identification of where that money could come from, especially if it is not going to come from pretty swingeing tax rises.

To make the numbers add up.

I have taken up quite a lot of time, convener. Do I have time for one more question?

Yes.

I would like to stick with the question on behavioural effects, but look at it from a different perspective.

I am struggling somewhat to square the circle with regard to the amount of airtime that we are spending and the amount of political debate that we are having on the risk of negative behavioural effects as a result of income tax changes and the data that we now have from five years of increasingly significant divergence. Despite increasing divergence in our more progressive system, we have seen growth in earnings and thus direct growth in income tax receipts. As Professor Ulph has pointed out, we still have net positive migration into Scotland from the rest of the UK, and we are doing very well in foreign direct investment compared with everywhere other than London, I believe.

Are we, therefore, spending a disproportionate amount of time discussing the potential negative behavioural effects of income tax divergence compared with other factors that affect the budget in a much greater way? As Professor Roy has pointed out, we are talking about relatively small numbers in the grand scheme of a budget of £60 billion or so.

If HMRC is, at some point in the short to medium term, producing more longitudinal data, it might be worth while for the committee to get in touch with it to ask about the timescale for that, because it would inform quite a lot of our work.

Box 4.2 also mentions the extent to which the USA and Switzerland are relied on, because there is such a rich evidence base in both countries. What types of evidence-gathering work or studies that have taken place in other jurisdictions are not taking place—or have not taken place—in Scotland? I am thinking about work that Government could commission or which independent organisations could be encouraged to undertake.

Absolutely. Thanks very much.