Hansard

I intend to maintain the resources within Government to ensure that we can satisfy ourselves that we have a forecast from the Fiscal Commission that we believe to be credible and deliverable to underpin the Scottish budget.

The timing of commencement of forecasting responsibilities is still to be discussed and agreed with the Fiscal Commission. I want us to be in a position whereby the commission can exercise its full forecasting responsibilities as early as possible, but it is important to allow the commission time to put robust resourcing and operational arrangements in place, so that the Government and Parliament can be assured of the integrity of the forecasts that underpin the Scottish budget. I have every confidence that the chair and members of the commission will do just that as they oversee the transition to a statutory body, but I put on record the need to agree the transition arrangements with the commission to ensure that we have robust forecasts to underpin the Scottish budget.

The Parliament currently has competence to legislate for a fiscal commission with functions that relate to the tax and borrowing powers that were devolved by the Scotland Act 1998 and the Scotland Act 2012. Once the current Scotland Bill has been enacted, we will be able to move quickly to expand the functions of the commission in accordance with the fiscal framework agreement. We plan to use the regulation-making powers in the bill to require the commission to also produce forecasts of devolved demand-led social security expenditure and Scottish gross domestic product, and the existing function in relation to income tax will be modified to reflect the wider powers that are due for devolution in 2017.

The Government has lodged amendments that not only deliver the changes to statutory functions necessary to fulfil my obligations under the fiscal framework agreement but build in additional safeguards that strengthen the scrutiny and accountability arrangements underpinning a forecast preparation model. I have already referred to the requirement on the commission to publish details of its forecasting methodology, as the Scottish Government has done for the past two years. In addition, the commission will be required to prepare a report evaluating the accuracy of its previous forecasts to provide transparency on the past precision and accuracy of its technical analysis.

The commission will also be subject to an external review of its performance two years after the commencement of its statutory functions. That recognises the strong public interest in ensuring that the forecasting arrangements that underpin the Scottish budget and our new fiscal framework are operating effectively and are supported by robust institutional and governance arrangements. All of the reviews and reports must be laid before Parliament to provide additional tools by which Parliament can hold the commission to account.

I also want to ensure that we retain a form of the challenge function that is currently carried out by the non-statutory commission and which I believe has greatly enhanced the Government’s forecasting abilities. I envisage that, in future, forecasts will be prepared by a professional group of staff appointed by the commission and that those forecasts will in turn be scrutinised by the commission members. I have shared that view with members of the commission, who will determine how forecasts will be produced and what quality assurance processes are required to vouchsafe the integrity of the forecasts.

At its introduction, the bill delivered a Scottish Fiscal Commission that was structurally, operationally and visibly independent of Government. Independence has been a key feature of our proposals for the commission, with Audit Scotland commenting that the consultation paper that we published almost a year ago on 26 March 2015

“rightly identifies the independence and impartiality of the Commission as being of paramount importance and sets out proposals to achieve this.”

The bill expressly provides that in performing its functions the commission will not be subject to direction or control by any member of the Scottish Government, thus guaranteeing its operational independence. Moreover, the amendment that I lodged at stage 2 requiring the commission and the Government to agree and publish a protocol delivers greater transparency on the interaction between the commission and Scottish ministers. The commission will retain the flexibility to determine its own work programme within the scope of devolved fiscal powers, and that will enhance its operational independence.

The commission will rightly be directly accountable to Parliament for the discharge of its functions, and Parliament will play a key role in approving the appointment of commission members. In light of issues raised by the Finance Committee in its stage 1 report, I lodged amendments at stage 2 that allow members of the commission to be appointed to serve a second consecutive term of office and which specify that an appointment term will be a maximum of five years.

Everybody across the chamber should welcome the creation of the Scottish Fiscal Commission, because it demonstrates how seriously we are committed to establishing robust forecasting arrangements to support the operation of new tax and borrowing powers. The continuation of the Scottish Fiscal Commission but as a statutory body is another important milestone in the journey to enhance Scotland’s fiscal powers. The commission already plays a key role in supporting the exercise of the tax powers devolved under the Scotland acts of 1998 and 2012 and the bill provides for an institutional and operational framework that enhances that role, protects the commission's independence and creates a solid basis for the commission to expand its functions over time in line with the fiscal powers of this Parliament.

I move,

That the Parliament agrees that the Scottish Fiscal Commission Bill be passed.