Meeting of the Parliament 10 March 2016
Amendment 29 seeks to give the Fiscal Commission responsibility for, first, scrutinising the Government’s performance against fiscal rules and, secondly, considering the sustainability of our public finances. In lodging the amendment, I have reflected on the cabinet secretary’s comments at stage 2 and the original intentions of the Finance Committee, both in its report on fiscal institutions and in its stage 1 report on the bill.
Across the world, fiscal institutions have a role in looking at fiscal rules and the future sustainability of public finances, so that role is nothing new. In the 17 Organisation of Economic Co-operation and Development countries that have been researched on the issue, 15 have institutions that have a responsibility for looking at the long-term sustainability of public finances and 11 have institutions that have a role in monitoring compliance with fiscal rules: Austria, Belgium, Denmark, Finland, Portugal, Sweden and the United Kingdom, to name but a few. It is normal for fiscal institutions to do those things.
Mr Swinney asked at stage 1, and has asked since, what the fiscal rules are. I would expect him, as finance secretary, to know that, but I will help him. There are the fiscal rules that are set out in the Public Finance and Accountability (Scotland) Act 2000. There are also the fiscal rules in relation to capital borrowing, revenue borrowing and the budget exchange mechanism, all three of which will change when the new Scotland Bill is enacted. There is also the fiscal rule that is set by the Scottish Government itself: the 5 per cent revenue-financed projects cap. In addition, there are the rules that are set out in the fiscal framework agreement, including on the Scotland reserve. We should be interested in making sure that those are scrutinised and reported on to Parliament.
I turn to the sustainability of public finances. When we consider the International Monetary Fund fiscal council data set, we can see that the second most important function of the emerging new generation of fiscal councils is to judge the long-term sustainability of public finances. I do not see why we should not want that to be done. The majority of expert witnesses to the committee agreed that it was important to look at both the fiscal rules and the long-term sustainability of public finances.
The Scottish Fiscal Commission said in a letter to the committee that it
“believes it should have responsibility for assessing the Scottish Government’s forecast on the sustainability of Scotland’s public finances, such as adherence to fiscal rules ... and it would welcome the Bill being amended now to anticipate this additional responsibility”.
Indeed, Professor Andrew Hughes Hallett, a member of the Scottish Fiscal Commission, said in evidence to the Finance Committee that the bill should be amended to make explicit that the commission has a role in assessing fiscal sustainability.
Professor Campbell Leith, another member of the commission—we should remember that the members of the commission are appointed by the cabinet secretary himself—said:
“One of the main objectives of creating a fiscal commission is to ensure fiscal sustainability.”—[Official Report, Finance Committee, 25 November 2015; c 47.]
The committee convener, Kenny Gibson, in reflecting the committee’s unanimous view on the role of the commission, said:
“We believe it should assess the Scottish Government’s adherence to its fiscal rules and assess the long-term sustainability of the public finances. This will further strengthen the independent scrutiny role of the Commission and reflects the view of many witnesses who have appeared before the Committee.”
Those are not my words; they are Kenny Gibson’s words. The IMF, the OECD, SFC members, the Finance Committee and numerous expert witnesses say that it is a good thing, so I hope that the cabinet secretary is listening and will indeed support my amendment 29.
I move amendment 29.