Hansard

When I agreed to take on the role of convener of the Finance and Constitution Committee—unbelievably, almost five years ago—I could never have imagined how much of a rollercoaster I was letting myself in for. Although the mysteries of the fiscal framework and the impact of Brexit were challenging enough, they have, of course, been overshadowed by the tragic national emergency that we continue to face.

In what is probably my last speech as convener, I pay tribute to my colleagues on the committee throughout session 5, who have largely put political differences to one side in carrying out our essential scrutiny role. We have worked primarily on a consensual basis and always in a constructive and respectful manner. Indeed, we have unanimously agreed all our budget and pre-budget reports during this parliamentary session, which is an achievement for any committee that is dealing with the budget.

I sincerely thank our clerking team, which is led by James Johnston. Its members have supported, advised and—yes—sometimes cautioned me on my approach. They are remarkable, incredibly hard working professionals whom, over the course of the past five years, I have come to greatly admire. [Applause.]

Presiding Officer, it is inevitable that the focus of our report on the budget for 2021-22 has been on the economic and fiscal impact of the pandemic. We recognise that the progress of the vaccination programme provides room for optimism, but the UK and Scottish economic and fiscal outlooks remain highly uncertain. The impact of the UK’s trading relationship with the EU also remains unclear.

Given that continuing uncertainty, and with borrowing costs extraordinarily low, the committee’s view is that economic recovery from the crisis, rather than fiscal consolidation, should be the priority in the next financial year.

The committee notes that there does not yet appear to be evidence of an overall differential impact on the Scottish economy relative to the UK economy from the pandemic or from the future trading relationship with the EU. Given the way that the fiscal framework operates, that means that the Scottish budget is relatively well protected from the continuing UK-wide economic shock. However, the medium-term financial strategy highlights

“a considerable risk that the Scottish Income Tax base might prove less resilient to COVID-19”

and to Brexit,

“simply due to differences in the sectoral composition of the two economies”,

once we begin to emerge from the pandemic. The MTFS also suggests that

“differences are likely to emerge”

when business support measures such as the furlough scheme are withdrawn. The committee has invited the cabinet secretary to explain what actions have been—or can be—taken by the Scottish Government to address that considerable risk.

We have also recommended that our successor committee continue to monitor closely the impact of Scotland’s relative tax performance on the budget as the economy emerges from the pandemic and as Government support is withdrawn.

A key question for the committee was the extent to which the pandemic has had a differential impact on sections of the population and sectors of the economy. Although some sections of the population have been well protected in terms of employment and income, others have suffered economically.

The pandemic has led to more job losses, higher rates of furlough and less ability to work from home among younger, lower-income and less-educated people. The committee therefore recognises that it is highly likely that the crisis has exacerbated existing structural inequalities, with particularly severe consequences for people on low incomes.

It is the committee’s view that a fair economic recovery from Covid will require proactive measures to reduce inequalities in wealth and income, with a need for a particular focus on supporting lower-income, less-educated and younger workers into the labour market. The recovery should also help them to progress up through the labour market while driving up standards of pay and workplace rights.

The committee also suggests that, as we emerge from national lockdown, the Scottish Government should consider targeting business support at protecting the jobs and businesses that are subject to restrictions and to temporarily lower demand. That support should also be targeted at incubating emerging businesses and sectors.

The committee recognises that the fiscal and economic challenges arising from Covid-19 are enormous. However, a crisis can create new thinking. As we begin to shift our focus from crisis management to recovery, it is essential that the differential impact of the pandemic, especially on low-income families, is addressed. That also creates an opportunity to re-examine the persistent structural inequalities in our society. There can be little doubt that such inequalities have been exacerbated by the current crisis.

There should be an examination of how the structure of devolved taxes could be reformed to support a fair and equal economic recovery, and the committee recommends a fundamental consideration of what the Scottish tax system is designed to achieve. In particular, any review should consider the role of tax policy in achieving a just, sustainable and strong economy as we emerge from the grip of Covid. That should include examination of the breadth and nature of the tax base, of the impact of economic growth on the size of the tax base and of the relationship between local, Scottish and UK-wide taxes.

We recommend a national conversation, led jointly by the Government and the Parliament, which should include a wide range of voices from across Scotland. I have every confidence that the Parliament can rise to the enormous challenge it will face in session 6 in addressing the tragic and brutal impact of Covid.

I will finish on a more optimistic note. I have tremendously enjoyed my role as convener, and I wish our successor committee the very best of luck in dealing with the significant challenges that it and the new Parliament will undoubtedly face.