Seòmar agus comataidhean

I request that members reflect on whether they have any audit or governance roles with external organisations and maybe use the opportunity to declare those now.

Thank you very much for those answers, which provide us with a good overview of the challenges and changes that Covid has brought.

I started with the macro, but I hope that you will forgive me for diving straight into the micro. In looking at your accounts for this year, I see a number of variances that I might expect, such as a decrease in expenditure on stationery and an increase in information technology spend, but two line items jump out at me, the first of which is a 44 per cent increase in rent and rates. I would like an explanation of that, because it is quite a large increase not only in percentage terms, but in actual terms, especially at a time when people were using buildings less. I am keen to understand why that occurred.

Likewise, expenditure on staff recruitment was up by 44 per cent. That might not be a significant amount in actual terms, but I would be concerned if that indicated underlying staff churn. I would be interested in an explanation of why staff recruitment costs increased so significantly in the year.

The fundamental point is that we want productivity to go up so that people are paid more and they pay more tax. That is the fundamental of what we are discussing, in broad terms.

I agree that we need to get into the detail of the fiscal framework, but I do not think we have time for that this morning. However, there is clear agreement that we need to increase income tax on a per capita basis. Fundamentally, that would tell us that people in Scotland are earning more money, which is a good thing. Indeed, you summed it up earlier as more people participating in the economy and earning more money, underpinned by productivity.

In relation to some of the things that the convener was raising, my concern is that that sounds a lot like economic growth. I am very clear that economic growth is a good thing, especially when it is underpinned by growth in productivity, because it means that people are better off and are leading better lives. However, certain people who are about to join your Government think that economic growth is a bad thing. What is the Scottish Government’s view on economic growth?

Thank you—I almost completely agree with everything that you have just set out. We need growth because, ultimately, that should lead to greater fairness and prosperity for people. My only concern is that you and I might agree more than you agree with some of your new ministers. However, I will leave that there.

I have a final point. Earlier this morning, we were discussing the Scottish Fiscal Commission’s forecast. On one hand, the forecast is very encouraging, because it looks like we will return to pre-Covid levels by quarter 2 of 2022, which is a good deal earlier than we expected. However, our discussion with the commission’s representatives raised a number of risks. Indeed, one of the things that they said was that the forecast assumes that the current relative absence of restrictions is maintained. Given the events of recent weeks, we are all concerned about the levels of infections. Understandably, there has been talk of circuit breakers and the possibility, at the very least, of restrictions being reimposed. Within the Scottish Government, what work is being done to look at the impact of those measures and how they would impact on spending in the current year? Can you outline the fiscal consequences of a circuit breaker or any other interventions that might be required if the situation does not improve?

Following on from some of the topics that have already been touched on, I have a question that is by and large about some of the short-term elements that we been discussing and some of the longer-term ones that you have just touched on with Liz Smith.

In the shorter term, your forecast has us returning to pre-Covid levels in quarter 2. Given what you have just set out, how safe is that forecast? Furlough is coming to an end and we can see from what has been happening over recent months the phenomenon of unexpected savers who are spending money on things that they would not otherwise have bought. I saw a report yesterday showing that used car prices are up by 15 per cent and you just highlighted spending on home improvements. It strikes me that those spending patterns cannot be sustained into the medium or long term. If that is true, is it safe to straight-line our economic performance from quarter 2 of this year? That is what your forecast appears to do, on the basis of your report. Should we not at least have a sense, if not an expectation, that there is a risk of more of an oscillation in our recovery or that there may be some head winds resulting from some of those effects?

I will ask a final question about the longer-term impact. I accept that it is difficult to predict right now what the long-term structural changes in the economy will be, but I agree that there will be some. Are some of those, even if we are not able to safely predict them, a good bet? It is very likely that there will be structural changes in relation to the consumer-facing economy, especially retail, and I declare an interest as a former retailer. Those patterns of spending have permanently changed—I do not think that anybody in the retail industry thinks otherwise.

To what degree are you starting to consider or identify those changes so that you can embed them in your forecasting as soon as possible and anticipate them? Some of those changes are very likely. Likewise, in relation to changing patterns of work, having a screen and being able to work over Zoom is all well and good if your work involves things for which that is suitable, but if you are a retail worker or a delivery driver, it is somewhat more difficult to do those things by Zoom. Not only sectorally but in terms of types of employment, the recovery might well look very different depending on where you are and what industry you work in. Are you starting to identify that and embed it in your forecasting?

Exactly so.

To take the next step, I absolutely understand those points, but the key conclusion that is drawn in the paper is that growth has been slower in Scotland than in the rest of the UK. Do you share that conclusion? Do you have insight into that?

Following on from the convener’s remarks at the beginning of the meeting, we can agree that we both have excellent diction and enunciation.

I want to follow up on some points that have already been raised. I am clear that you have read the SPICe report and the Fraser of Allander Institute piece looking at the outturn reports and comparing them with the tax plans. In the 2019-20 budget, the Scottish Government expected its tax plans to raise an additional £500 million, but, based on the outturn, they have raised only £148 million. I understand what you were hinting at with regard to the block grant mechanism. However, it is clear from both of those bodies that what that difference fundamentally tells us is that income tax per capita has not grown as much in Scotland as it has in the rest of the UK.

First, do you agree with that assessment? More importantly, and given what you were just saying about the need to expand the income tax base and to make sure that people are earning more within that, what does that say about the policies that you have been pursuing? What policies will you pursue to ensure that people are earning more so that they pay more tax, which we can all agree would be a good thing?