Hansard

Having served as a member of both the Devolution (Further Powers) Committee and the Finance Committee, I cannot help but feel that a gaping hole is about to open in my life as the Scotland Bill and the fiscal framework discussions no longer play such a prominent role.

I pay tribute to Bruce Crawford for his convenership. One of the features of a Thursday morning committee is that the timescale can need to be truncated, which can affect the ability to take evidence. That requires the convener to run a tight ship, and I think that most people accept that Mr Crawford ran a very tight ship while being cognisant of the fact that he wanted to ensure that all members of the committee had an opportunity to have input to the evidence-taking sessions. He is to be congratulated whole-heartedly on his efforts in that regard.

I also thank the clerking team, which put in a phenomenal amount of work to ensure that the committee was kept well briefed and well informed—and fed and watered, which was always welcome.

In today’s debate, we have heard a number of thoughtful speeches. I refer in particular to the final speeches in this Parliament from Annabel Goldie, Alex Salmond and Duncan McNeil. I was interested when Duncan McNeil analogised the Scottish Parliament’s transition to that of somebody attaining the various stages of life. He said that there was a threat to leave but that now, as a 17-year-old, we have decided to stay and are instead going to earn more of our keep. I merely point out that I finally left home at the age of 24, so I am very much looking forward to how the next seven years of the Parliament’s journey will develop. [Laughter.]

Having served on both the Devolution (Further Powers) Committee and the Finance Committee, I think that it would be remiss of me not to say a little about both the fiscal framework and some of the financial elements.

It was clear very early on that there was a disagreement—I think that that his how we should term it—about what no detriment constituted in relation to how the fiscal framework was to operate. It is a testament to the negotiating skills of the Deputy First Minister that he was able to arrive at a position where the Treasury agreed with the definition that the Scottish Government applied, although a slightly more tortuous route may have been taken to get to the methodology, because the Treasury seemed unwilling to sign up to what the Scottish Government had initially put on the table.

When it comes to how things will operate in future, there are a number of areas that this Parliament will have to pay close attention to and scrutinise closely. The first is tax avoidance and tax evasion, because the collection of income tax and of the Scottish income tax will remain the preserve of HM Revenue and Customs. Although the Scottish Government, in establishing Revenue Scotland for the collection of land and buildings transaction act and landfill tax, has created in that legislation what is widely regarded as a strong anti-avoidance mechanism, we are aware that there is still a great deal of tax that goes unpaid at UK level. There will therefore be a need to scrutinise the measures that HMRC is taking for the collection of Scottish income tax, because they will have a material impact on the funds that are available to this Parliament for future use.

The second area relates to some of the limitations that exist. I am not seeking to play down the role that the Parliament will have in terms of setting tax rates and bands in future, but we should remember that there are elements of income tax that will still not be the preserve of this Parliament. One is the personal allowance and another is savings and dividend income. Should individuals be in a position to transfer income from their regular income into dividend income, that money would not be readily available to the Parliament and it would flow instead to the Treasury through dividend. If that proves over time to be material, consideration needs to be given to how we can address that.

My final point is that, with those powers coming, and with the experience that we have had of how land and buildings transaction tax has operated since it was established, with the forestalling at the initial stage, the Parliament needs to consider our budget-setting processes in future. We will now be in a position in which, as part of the budget process, we could be announcing changes to tax rates or tax bands. That could trigger behavioural change among those who would be paying. The further out that any change is signposted, the more likely it becomes that behavioural change will take effect, and that could have an impact both in the financial year of the announcement and in the financial year in which the changes are to take effect.

We need to look carefully at how budgets are constructed in this Parliament and how they are consulted upon, and we need to review some of our old thinking, which was fine when we were responsible only for dealing with a block grant and we did not have to worry about the potential behavioural changes that might come. In future years, if we expect a finance secretary to stand up and announce potential tax rates some six months in advance, we must bear in mind the behavioural effects that that could give rise to. We must consider what to do about that and how to set budgets in future.