Official Report 795KB pdf
The next item on the agenda is our annual evidence session with representatives from the Scottish Fiscal Commission on how it fulfils its functions. For this item, we are joined by a much pared down group from the Scottish Fiscal Commission: Professor Graeme Roy, the chair; and John Ireland, the chief executive. As in the previous session, we move straight to questions.
In your report that was published last March, you recommended
“that the Scottish Government publish the costs of each policy and programme supported in the Climate Change Plan and Scottish National Adaptation Plan”
and that
“spend on mitigation and adaptation be identifiable in budget documentation and outturn so that spending plans can be linked to delivered spending.”
In the months since then, what progress has been made?
Recently, Graeme Roy wrote to the Net Zero, Energy and Transport Committee in response to a conversation that we have been having with that committee about the characteristics of a good climate change plan. The work that we have done since we published the report is to have those conversations about what a good climate change plan looks like. We have set out some thinking on the information that should appear in the plan about the mitigation policies, their impact on emissions and how their costs should be split between the public and private sectors. We think that that information should be available, and our views are contained in Graeme’s letter to the Net Zero, Energy and Transport Committee.
The other thing that we have been thinking about is updating the work that we did last spring. The Climate Change Committee has published a new UK carbon budget; it will soon give advice to the Scottish Government on a Scottish climate budget. Our intention is to do some work over the summer to update the analytical work that we did last spring and to give the Net Zero, Energy and Transport Committee a revised set of estimates in the light of the new climate budget for the UK as a whole.
The OECD’s 2025 report on the Scottish Fiscal Commission was very positive, as you know from when we discussed it. You will have seen the Official Report of the committee’s deliberations from two weeks ago.
The OECD said:
“the SFC will need to broaden and deepen its spending analysis beyond social security. This will enable the SFC to undertake robust independent analysis of spending pressures across the budget and highlight in politically neutral terms some of the different ways in which they might be alleviated.”
I know that you welcome that. What would be the resource implications of it?
Do you mean the resource implications of that work for the Scottish Fiscal Commission?
Indeed.
As you know, each year we put in a bid to the Government for multiyear funding. Last year, in preparation for the financial year that starts today, we make a multiyear ask, which the Government has given us in full. We are expecting confirmation from it very shortly of our plans for the next two years.
For that ask, we planned on the basis of setting up a new team in the commission to do that work. We reallocated resources internally from other areas in order to half fund that work, and we asked the Government for a bit of additional money to fund a new senior analyst post to head up that team. I cannot remember the exact increase, but the resource implications are relatively modest because we made some efficiency savings as well as asking the Government for additional money.
I noticed that 80 to 81 per cent of your budget goes on staff and that you have underspent that by about 5 per cent in the past couple of years. If you were to do this additional work, would there need to be a significant expansion in the SFC’s budget, or are you reasonably confident that it can be delivered with the budget as it is?
I am reasonably confident that it can be done within the amount that we asked the Government for and that it gave us. There is some additional resource there.
You are right that we have underspent our budget in the past few years. In part, that comes from the asymmetric nature of the constraints on us: it is not good to underspend but it is very bad to overspend. Because of that asymmetry, and particularly given our role as the fiscal watchdog, we do not want to break the first rule of budgeting, which is not to overspend.
We are conscious that we are underspending, and we are trying to do things to improve on that basis.
I do think that you should put the heating on in winter. Working with candles is not as effective as working with electricity. [Laughter.]
I am pleased to say that a new electric boiler is about to be commissioned, so it will be more warm next winter.
We are now deliberately overbudgeting by a small—and, I hope, prudent—amount at the beginning of the financial year. So, we are running our staffing budget slightly hotter than we have done in previous years. One of our managerial problems is that, although we have 28 staff, it is hard to predict when people will leave. They can leave with a month’s notice and it takes us about six months to recruit new people. For our latest addition to the team, we started the recruitment process back in December—there are long lead-in times to recruit and very short lead-in times when we lose people. That makes it difficult to manage the staffing budget.
I am worried that the recruitment of Ross Burnside, with his outrageous financial demands, might tip you into deficit, so I hope that you will be reining him in early doors on that.
One document that you published was your corporate plan for 2022 to 2025. In that plan, there are four strategic objectives—I have them written here in front of me. Could you talk about them for a minute or two?
I did not print out the corporate plan, I am afraid. [Laughter.] I thank Graeme Roy for passing a copy to me.
You are correct. Let me just find the strategic objectives. The first is about providing forecasts of the economy, tax and social security. In a sense, that is about the delivery of our core statutory remit. We are very clear that those forecasts need to be independent of the Scottish and UK Governments. They need to be as robust as possible. The analytical quality needs to be good.
We are also aware of other aspects of the Government’s budget. This morning, we have talked a lot about funding. That strategic objective was written a while back. In our next corporate plan, we intend to add more about analysing the funding and spending of the Government.
We also have a statutory duty, for each budget and each MTFS, to assess the reasonableness of the Government’s borrowing requirement. Over the years, as you will remember, we have taken an increasingly broad view of that duty, which allows us to talk about the funding, the spending plans in total, the balance of those and any risks around that.
The third strategic objective is about the long-term sustainability of the Scottish budget. That is the objective through which we did the work on the 50-year projections that we published two years ago. We will publish our next set next Tuesday. That objective also allows us to do the work on climate change that we have talked about this morning. Our report next Tuesday will have a focus on health spending as well.
The final objective deals with our internal organisation and the fact that we need to be effective. We certainly need to be efficient in how we spend our money. The core of what we do is the people that we employ, as well as our commissioners—making sure that the team is of good quality, is skilled and has the right skills and knowledge.
Those are the strategic objectives and what they are intended to achieve.
You touched briefly on risks. You have identified five potential areas of risk. When it comes to corporate systems, the annual report explains:
“This risk rose to and remained high amber for the second half of the year”.
What is happening?
That risk is about the transformation. Last week, the permanent secretary spoke to you about the introduction of Oracle, a new system that covers both finance and human resources. That new system has very long-term benefits, but its introduction has been a lot of work, certainly for the Government but also for us, because we had to deal with new systems as we had churn in our corporate team, so there was a staffing issue about recruiting the right people at the right time, from a position of not being clear about what the Oracle system would deliver.
Those corporate risks are about the ability to pay our bills, monitor our finances and do our human resources work, given that we rely on the Government because the service is shared and the Government has been going through issues in its investment in its new Oracle cloud system.
When it comes to independent financial institutions, the Scottish Fiscal Commission is considered to be one of the most independent not just in Europe but globally. The OECD said that there is a perception that there could be a potential threat to the SFC’s independence: with
“the possibility of a changed political landscape ... tensions could emerge.”
In evidence, the OECD explained that, potentially,
“a separate budget line in the budget for those institutions would mean that it would become increasingly transparent when changes were made.”—[Official Report, Finance and Public Administration Committee, 18 March 2025; c 55.]
It also talked about multiyear funding, which you are keen on. Will you talk about those issues?
11:15
I will go first, and perhaps John Ireland can talk about some of the specifics.
Ultimately, we are here to support the Parliament with the budget scrutiny and to support all parliamentarians and the Government through the budget process. On that basis, we are always subject to potential risk and change, and future Parliaments might decide to do different things.
The most important thing for us is to do our job as independently and effectively as possible, so we have the trust of parliamentarians. Ultimately, that is our best defence. They are our best stakeholders and the biggest supporters of the work that we do. That is the bit that is really important in managing that risk.
There is also a flipside of that risk, which is that the Parliament has to be happy with us, because if we were not performing effectively and were not doing our job, we should not just be able to continue on without that scrutiny and challenge. It works both ways.
John Ireland might want to say a bit more about the budget point. It was interesting that the OECD talked about having a separate budget line and potentially more multiyear asks. As chair, I can certainly say that we have a good relationship with the Government—John Ireland might speak a bit more about the day to day. The Government understands the value of what we do, so I do not sense any pressure on us about budgets. When we have conversations about additional asks, they are supported, but we are also mindful of the broader public finance landscape. As John Ireland said, when we have made an ask, we have made some efficiency savings in other areas to free up resource.
There is a risk around potential budgets, and, if you compare that with others that have their budgets ring fenced, there is additional certainty. It does not feel as though something is playing out as a day-to-day risk for us, because any of the conversations that we have had with the Government have mitigated that.
It might be worth saying a little bit more. At the moment, we have a separate budget line in the budget document, so how much we are being funded by for the next financial year is clear.
There is, however, room to be a little bit clearer about the following two years. At the moment, the process is that we make a multiyear ask of the Government and, when the budget bill has passed, the cabinet secretary writes to us to say that the Parliament has confirmed our budget for the next financial year and the two following financial years, and it includes indicative budget lines. That process usually takes place around about now. We have not quite received the letter this time, but I am told that it is in the post—sort of, metaphorically.
We could have a little bit more clarity on that. It might also be useful to go through that process slightly earlier, so that it does not happen simultaneously with the budget. Perhaps we can put in our multiyear ask so that the Government can tell us the result before we start the budget forecast. That could be helpful.
It could also be helpful to firm up a little bit what an indicative funding line is. As well as telling us what those lines are earlier, the Government needs to be clear that it is some sort of baseline that it intends to stick to unless there are business case reasons for changing it—if we take on more work, for example. We just need a little bit more clarity on what indicative funding would look like, and we also need to accelerate the process of the multiyear ask, so that it is concluded before the budget forecast starts.
Another potential risk is deterioration in relationships with partner organisations. The annual report says that the risk
“first decreased but then rose to and remained amber for the last quarter, reflecting a very challenging Budget process and changes in our Scottish Government liaison team.”
That was not the budget that has just gone through the Parliament. That was the previous—
Yes, indeed, because it is a 2023-24 report. I appreciate that.
Mr Yousaf was First Minister. If you remember, the difficulty of that budget process was with the income tax decisions and the discussions that the Cabinet was having about them. The risk register reflected that. At the same time, there was a transition when our old liaison team within the Government was being redeployed and we were being moved to a different directorate.
I am pleased to say that that move has worked out well. The new liaison team is really good. It is located at exactly the right place in the Scottish exchequer. They are the people who are actually doing the budget work and the MTFS work, so that new liaison team is really good—[Interruption.]
In our previous evidence session, we touched on the issue of communications and how difficult it is to get things out to a wider audience. Last week, I spoke about fiscal literacy among MSPs. We have constituency work, which, certainly for me, is about 70 to 80 per cent of my weekly workload. We then have our parliamentary duties on top of that. If people are not necessarily focused on finance, they might not have a deep grasp of the fiscal framework, frankly. Do you believe that you have a role to play there? When members are elected to the Parliament next year, I do not know how many of them will be new MSPs, but it could be 30 or 40 per cent of them or more. The SFC could perhaps play a role in the training—for want of a better word—of new members on fiscal issues.
I very much hope so. A large part of what we have been doing involves investing in resources that will let us do that. John Mason mentioned the videos that we have made. They are on the stocks now, and people can use those.
We have done some training with Parliament staff and officials on the budget process, in which we have walked people through it. We very much hope that we will be able to play a role in helping new MSPs to get up to speed with the budget process and the key elements of it.
We have been and are always open to having conversations with any member of the Parliament about the budget process. I confess that I have a folder containing the guide to the fiscal framework. Before we start the budget process, I read it once again, because, even for those of us who work on it all the time, remembering everything and all the numbers is really complex. We would be more than happy to speak to people and walk them through some of the key elements. We would be happy to be on hand to support MSPs both in the initial period and through the next parliamentary session.
I have spoken at a few SPICe briefing sessions, and I will be doing another one this month. They are usually held at about half past 8 in the morning, and the difficulty is that they are held on the same days as committees. Some people who want to come along will email me saying, “I really wanted to come along, but we’ve got our committee.” They might not be able to come if they are preparing for a committee meeting. Is there any possibility, looking to the future, of having those at lunchtime, after the committee meetings have ended but before we have the afternoon plenaries? That could perhaps be a way of increasing participation.
Definitely. We are entirely in the hands of the people who think about how that would work best—parliamentary staff and MSPs. We are more than happy to do that.
One of our core objectives involves our engagement strategy. We proactively go out and speak to MSPs and their staff informally or at events. We are more than happy to do that.
Good morning, and thanks for joining us. I will follow on from the convener’s commentary about the challenge of building and sustaining MSPs’ knowledge of—and the critical importance of understanding—where money is coming from, where it is going and the wriggle room therein.
Given your slight underspend on staff costs, have you ever thought about consulting with a public affairs company? I appreciate that, as a public body, you probably do not want to be in the business of paying a very expensive company on an on-going basis, but it might be possible to get one to set up an initial strategy that you could then run with. I appreciate the complex challenge of messaging.
When I joined, I started to set out an internal communications strategy within the commission. I have touched on this before, but there is a role that we can play, given our resources, and there is a role where we can contribute as part of a wider team.
To explain that a bit more, where we can add value is in helping people who really need to know the intricacies of the fiscal framework in detail; that is, people such as yourselves, as MSPs, and broader stakeholders. We have prioritised a lot of our effort and engagement work on that. Alongside that, we have increasingly been doing work in relation to almost a second tier of stakeholders that we need to speak to, made up of key leaders in public bodies and key strategic leaders in Government or related sectors, such as business leaders, university principals and chief executives of local authorities. In relation to them, it is less about the specifics of the fiscal framework and more about what is happening in demographics or overall trends in spending. Those have been revealing and interesting conversations. That is also an area of priority.
The third area is about thinking about the public affairs strategy and how we engage with the broader public. We can do some of it, but we can do it only within our resource and as part of a much bigger effort to talk about budget issues. We spend quite a bit of time explaining what we are doing to people such as Douglas Fraser at the BBC and Peter MacMahon, when he was at ITV Border, who can help to get the really big messages out into the public domain. However—this comes back to the question about the Netherlands—even if we put a lot of resource and effort into that, we need a strong media and a strong level of engagement with these sorts of things in order for that to be picked up. We can do lots of press releases, but, unless they get picked up, we could be expending a lot of effort for not that much output.
I think that we all agree about that concern. I was thinking about the creative and adaptive ideas that a public affairs company might be able to come up with, which we, collectively, have not thought of yet. If it were me, I would think that it might be worth having a chat with them. They will try to sell you chapter and verse, which you will obviously resist, but you might get some hot tips in the meantime.
That is exactly right. If you know anyone who can give us a good discount, let us know. [Laughter.]
Okay.
I will quickly pick up on your climate change report. I know that we have already covered that a wee bit, but you may recall that I was impressed by that targeted focus on a specific policy area. Do you intend to refresh that report? I know that we have talked about other policy areas as well, but what is your intention with that work?
John, do you want to explain a bit about what we are doing on climate?
As I said earlier, the Climate Change Committee has now produced the next carbon budget for the UK and it is about to advise the Scottish Government on a climate budget and targets. On the back of that work, our plan is to update our report over the summer, and we hope to have it updated before the Parliament comes back in September. Given the rumours about when the climate change plan might be published, that timing is probably helpful.
That is helpful.
The main gist of what I want to ask, which will probably not come as a surprise to you, is about your annual report on diversity and inclusion. I do not want to sound a little rude but, to be honest, it read to me as saying that you were definitely going to do something at some point but that that point is undetermined in terms of specific dates or saying that you are going to take action X by this date. It would be useful if you could walk me through your plans.
I appreciate that there are constraints; I appreciate the environment and economics and so on. However, let us start from board level and take it down. My particular concern is about giving representation to 51 per cent of the population, whose voices we simply do not hear.
I will pick up on the commissioners, and then perhaps John Ireland can explain a bit more about that within the team.
Michelle Thomson is entirely right. We do not meet any of the targets around what we should do. It was one of the first things that I wrote to John about when I joined, because we appointed myself as chair, renewed two commissioners and appointed a new commissioner all at the same time, meaning that, when I became chair, I inherited four men working as commissioners.
Michelle Thomson is right that there are a couple of things in that. One point is that it reflects a large part of the economics profession, which is not great at all and which gets swept up into that. However, a lot of progress is being made in economics, which is helpful, and which we will be able to tap into.
11:30I have talked to John about the timing of the next steps and how we can start to address the issue. The nature of the commissioners is that we are all appointed for fixed terms, so—and this brings me back to your question about the next time that action will be taken—we cannot really do anything until we recruit the next batch. That means that what we do over the next few months will be really important both for the organisation and for recruiting the two new commissioners. We have an opportunity to address the balance within the commissioners, too.
I can explain a bit more about our intentions in that respect and what we are trying to do, but, on your question about timescales, we were constrained by the nature of the appointments that were made when I joined. We now have two new appointments to make and we are moving into the timescale for taking action.
I would like to hear a wee bit more about that, but I suppose that I would have liked to have seen a much clearer recognition of that in the annual report itself, with at least something more about the specific actions that you might take. It read to me as though you were just saying, “Yeah, this is a problem and we’re definitely going to do something at some point.”
My understanding is that you can look to widen things out beyond economics, and that will clearly have a benefit with regard to cognitive diversity, which is the other side issue of having all men in these positions. Can you give us a bit more of a flavour of what you are thinking? Having cognitive diversity on boards or via your commissioners will be a good thing anyway, regardless.
Perhaps I can make a couple of points on that.
In each governance board meeting, we have an agenda item on diversity in which we discuss such issues and what our next steps will be. That also takes us into the next stage, which is recruitment, and there are a couple of things that we can say about that process. First, a challenge is that, historically, the commissioners have had not only a governance role but a technical expertise role. If you want economics to be represented, I point out that at Glasgow university, where I am, there is, I think, one female professor in the entire economics department. It is an issue right across the economics profession, and a lot of work is going into it. That is not to say that we cannot target or explore things; indeed, it is our intention not to use a consultant to recruit, because we think that we can do a lot more targeted work ourselves by going out and speaking to key people and so on.
The second point is about the nature of the role and the time required to carry it out. The time needed from the commissioners makes it relatively difficult for us to get a pool to attract from. It is more work than a simple half a day a month-type governance role, but it is not a full-time role either, which makes things slightly challenging.
My third point comes back to what you said about the skill set. Before I joined the commission, the approach to recruitment was to get an economist—in fact, an academic economist. That was what people had decided that the commission needed. Looking back, I can see that that probably made sense up to a point, because of the focus on economic and tax forecasts, but what we do now—and what we spend most effort on—does not actually involve economics and does not require an economics academic. That is still a core element, and we still need some of that expertise, but, with the expansion of our work, we need people who understand social security, public spending, demographics, climate change, statistics and the public sector. The commission’s remit has grown a lot, even in the past three years that I have been part of it, although it was changing before that. Therefore, the type of candidate that we are looking for will have a broader skill set.
One of our actions is to be very clear about that. Indeed—and this brings me back to your point about diversity and ways of thinking—I hope that the requirement for different ways of thinking and a different skill set from what we have had in the past will, in turn, open up a much bigger pool of people. Clearly, we will then follow all the various processes, and we will see the best candidates coming through, but that should, I hope, be a way of expanding the range of applicants for these roles.
I have one last wee question on a different area before I hand back to the convener.
I know that it is always hard to get a picture of risk assessment with annual reports, because they represent a fixed point in time, but I did not really get a sense of the dynamic flow of the probability of a risk occurring and I found it hard to grasp. I do not know whether you have thought about how you would represent that. I appreciate that what is in the report is fixed, but there is nothing on the probability of such an occurrence.
John may want to explain a bit about the risk process and how we manage risks.
At the core of the process are our quarterly discussions at the governance board and the audit and risk committee. For those, we prepare a set of very full risk cards, so what you see in the annual report is only the highlight. The document that I have here takes a more dynamic approach—it talks about what the situation was at the previous meeting of the audit and risk committee; our assessment now, and how and why that has changed; and what we are doing in addition to mitigate that. That represents the formal process that we go through, so that the members of the audit and risk committee, including our two external members, are aware of the evolution of risks and how they change over time, and what we are doing about that.
As a senior management team, we also have regular risk discussions to support that process. In addition, we work very much in a risk-based way, so we are always looking for things that can go wrong. We have talked quite a lot about the forecasting process, which is quite a good example of that. We have a concentrated 10-week period in which a lot of things can go wrong, including things such as people being off sick or being on paternity leave. As those things evolve, we talk through them daily or weekly; so, again, the process is very dynamic.
We involve the commissioners in that work as well. If something looks particularly difficult in producing the forecast, we will talk to the commissioners about that, and we will also be adjusting our plans. We work in a very dynamic way to take account of risk.
There is also the very formal quarterly process, which is documented, and which we talk through with the governance board and the audit and risk committee.
That is very helpful. Thank you. It would be helpful to include in your report a sentence that sets out the fact that you have static representation but a very dynamic process. You have basically answered my question regarding what I wanted to hear.
My questions follow on from some of the things that Michelle Thomson asked about. There are between three and five commissioners, and you say that the scope is widening. Is between three and five the right number, or should we be looking at that?
There are four of us, and I think that that is a good number. Obviously, the chair has wider responsibilities, but having three other commissioners who have—one would hope—quite a diverse skill set and a different set of views on things means that there is quite a nice conversation. On a practical point, it helps with drafting and looking at work—when we have the numbers and we are working quickly, it helps with the context.
It also builds in a bit of resilience. For example, if we had only three commissioners and we were to lose one, we would be down to two. We could still function, but there would be a lot of pressure. With any more commissioners, conversely, we would potentially run the risk of having too many people commenting on the work. I think the optimal number is four commissioners, but we could live with three.
I noticed that all the commissioners—barring yourself, I think—are on the audit committee, which strikes me as a little bit unusual.
In large part, that is the nature of our being a small organisation. We have only four commissioners and 20 to 25 members of staff, so that is the nature of where we are. However, I think that the governance works well. I attend the audit and risk committee as an observer, as it is useful to hear what goes on, but it is chaired by another commissioner, who very much drives the agenda and then reports to the Government—
There are outside members on that committee, too.
Yes, there are outside members, who add a lot to it.
I think that underspends are a good thing and that that money does not need to be spent—although Michelle Thomson obviously thinks that it does. We would do a lot better if more sectors of Government underspent.
Box 2 on page 21 of the OECD report looks at how, in comparison to other countries, the SFC is operating in quite a “high-stakes forecasting environment”. That is the OECD’s choice of wording. All of us together—we, you, and the Government—have less room for manoeuvre than we would in other countries. I was interested to read that the average deficit in OECD countries is 1.4 per cent of gross domestic product, yet we are allowed a deficit of only 0.6 per cent of GDP. I think the OECD’s point is that there is a reputational risk for the SFC because you will get part of the blame if something goes horribly wrong. Is that a problem?
It is a risk. There is a challenge in that the nature of the framework means that any large measurement error in our forecasts or in the OBR forecast can lead to quite a significant reconciliation, which could lead to budgets being amended on the back of that. That is the nature of the process. It is what we signed up to and it is the framework that we have committed to, so it is a large part of what we have to deal with.
We try to make the best possible forecasts, but we are also clear about where we see potential risks and variations coming down the line. For example, we have repeatedly highlighted the fact that our forecast for earnings has been slightly more optimistic than that of the OBR and that, if the two align, there is a risk to the net tax position in the future. We have also highlighted the risks regarding some of our judgments on social security, because we have not yet had data. We are making what we think is our best assessment about trends, but we do not yet know what the take-up or outflows will be, which creates a risk.
I agree that the nature of the framework means that it is more constrained, which means that the risks are higher and that we have to get even better at communicating and talking about the trade-offs and the need for a plan to manage those risks.
That is something that we have to live with.
I already spoke about how we compare with other IFIs, if that is the right term. We have accepted that one in the Netherlands is not a good comparison, because it has more resources and the media takes a more in-depth interest in it. Do you compare yourselves to international organisations and do you do that at a national level or at what we might call a sub-state-level? Can you learn lessons from any of those groups?
We are part of a couple of networks. The OECD has its own network of fiscal institutions and we are part of that and attend meetings as and when they take place. Unfortunately, this year’s meeting is in Santiago and we did not think—even with the underspend—that we could justify a trip to South America. In principle, we engage a lot and the OECD shares lots of helpful resources and information.
We have close and effective links with the OBR, which is our closest partner because it operates in a similar framework. There is a lot of engagement and knowledge sharing and a lot of learning about what other people have been working on.
We are relatively unique in being part of a larger fiscal framework. A lot of the other independent fiscal institutions are at the state level, with the one for the Netherlands covering the Netherlands as a whole. We have the slight issue of being what the fiscal language would call a sub-central tier, which makes us quite unique.
Are you saying that the German Länder or American states would not have that?
The Canadian provinces have some, and there are some in Switzerland, but that is because of the federal governance systems that operate there and it is not the standard way of doing things.
So, it is relatively unusual from that point of view.
Yes.
We are also unusual in that we produce our own forecasts, rather than commenting on other people’s forecasts. The OBR is in a similar position, although it asks His Majesty’s Revenue and Customs and the Department of Work and Pensions to do the analytical work. We are unique in that we produce our own forecasts in house.
11:45
I seem to remember that that was discussed at great length many years ago.
Indeed.
Your annual report indicates that you do not yet have a legal responsibility under the public sector equality duty. Perhaps I should know this, but could you remind us whether that will become a legal responsibility?
I cannot remember exactly when that will happen, but we comply with it voluntarily. There is a duty to produce data on the gender pay gap and things of that nature.
I was struck by the phrase
“The Scottish Fiscal Commission is not yet subject to the Public Sector Equality Duty”.
If I have heard an explanation as to why that is, I have forgotten it, and I would be interested to know more. It would be great if you could come back to the committee at some point with information on when it will become a legal responsibility.
Recruiting staff has been marked as one of your risks. Is it a difficulty? I see that you are changing from a 37-hour to a 35-hour working week. I would have thought that that would be more attractive when you are recruiting staff, but it might not be.
I can give a high-level explanation. It comes back to our reputation. If we are an effective organisation with a strong reputation, that will make the SFC an attractive place for people to work. We engage quite a lot with the various economics, statistics and research departments across the country, and we attend careers fairs to talk about and promote the work that we do. We hope that those things help us to become an attractive environment.
As we are a relatively small organisation, if we lose a key member of our team during a difficult moment in the year, recruiting quickly is more challenging than it might be for other organisations. We do not have large numbers of people whom we can just plug into the organisation. That is a potential risk. John Ireland can explain a bit more about it more generally.
We work very hard on our recruitment. One thing that is really important is ensuring that people who do not already work in the civil service can apply with ease and that we address any perceived difficulty with the process. We have spent a lot of time trying to make our recruitment process more straightforward, as well as explaining it and hosting webinars when we advertise posts, which has helped.
Graeme Roy is right that our reputation also helps. We had more than 200 applications for our last analytical vacancy—that was just one vacancy. We are attractive as an employer. We are part of the Scottish Government’s bargaining block, which means that our terms and conditions are tied to the Scottish Government and that people who work for us can apply for internal Scottish Government jobs, which is very attractive. Similarly, people who work for the Government can apply for our jobs, which are not always advertised externally. A young person who comes to work with us straight after university can work for a couple of years and then move into a Government economist or statistician role, which offers them a really good career path. I think that people appreciate that.
We have already talked about your interaction with MSPs and their understanding of the fiscal framework and so on. I know that, as well as working with us, you have worked with the Social Justice and Social Security Committee, and I think that you have worked with the Health, Social Care and Sport Committee, because you are doing a report for it. Have other committees shown any interest in engaging with you?
We have given evidence at the Net Zero, Energy and Transport Committee and the Economy and Fair Work Committee. Typically, those are the committees that invite us to speak. To be fair, that is a result of our contributions to broader committee discussions and scrutiny of policies such as net zero rather than those committees explicitly thinking about how the fiscal framework or the budget would relate to the economy or aspects of it.
Paragraph 1.2 of the OECD report is titled “The SFC has strengthened relationships with key stakeholders”, and you mentioned some of those stakeholders. Why do you think that your relationships have improved? Is it because your personal contacts are very strong, or is it because you have a greater understanding of those stakeholders and more data on what they are doing?
There are a couple of things to say. One is that we have made a concerted effort, as part of our communication strategy, to speak to the key stakeholders. We have identified the stakeholders that we think should be thinking about and be aware of the issues. A lot of the time, if we are publishing a report that we think is relevant, we will get in touch with and write to stakeholders. For example, when we publish our health report next week, we will not just write to the committee; we will get in touch with NHS boards, Public Health Scotland and so on. We will then offer to speak with them. Also, when they have events on, we will volunteer to come along for those.
That goes back to the point about skills and commissioners. That was not really part of the job profile of commissioners, but it is something that we are putting into the job description for the next round of commissioners. We want them to be people who can go out and talk about our work across a wider group.
I have a follow-up question on diversity and inclusion based on the table that is part of paragraph 85 of the “Annual Report and Accounts for the year ended 31 March 2024”. On those who apply for roles in the organisation, it has numbers for the categories of male, female and those who prefer not to say, but you have not provided information on the numbers who were successful at interview or who agreed to start broken down by gender. The notation says that that is
“suppressed due to the small numbers involved.”
You can say that a total of five people were successful at interview. What is the threshold that prevents you from telling us what the gender make-up is of that number?
I think that it is about one or two. With those numbers, it becomes very clear that, were we to say that the next person whom we are appointing is of a particular gender, that is disclosive information. It is a standard statistical practice that we follow.
Okay. The table mentions protective characteristics or something. It just seemed a bit odd that you could identify that five people were appointed but you could not break that down.
The threshold is lower than five, obviously.
Fine.
On the broader role and remit of the organisation, the OECD points to there potentially being an issue in relation to your independence and funding. Can anything be done that could give you greater clarity that this Government or a future one might not use funding as a means by which to somehow neuter your activities?
I will let John Ireland come in on some of the specifics. That goes back to the point about the bid for multiyear funding. I am quite relaxed about us not having written into tablets of stone guaranteed funding that no one should ever touch, because we have to be accountable for what we do. Our being visible and, I hope, constructive means that it would be very difficult for a future Government to cut our funding in a targeted way if it did not like what we were doing, because that would then be exceptionally visible to the committee and to parliamentarians more broadly.
The funding is published on a separate line, which feels right to me. We have a very good relationship with this committee. I would have no hesitation in writing to the committee to say that the Government was cutting our budget, to set out that we would have to scale back our operations and to ask for support. That is an effective way of doing things. It gives us a guarantee that we know that that support and engagement would be there.
There is a challenge in funding being fixed. As John Ireland said, in recent years we have been asking for more. The Government has been asking us to do more on fiscal sustainability and has been open to us doing more on spending and so on. Therefore, the bid goes up.
As John said, there might be an opportunity for the Government to say what our funding is for the next year and what our indicative funding is, but that would almost be like a baseline or a floor and it might ask us to do more in the future. That might be one area in which you could strengthen it.
On staffing numbers, if I am reading the figures correctly, you have about 20 staff.
The current staffing level is 28.
I think that the OBR has about 52 staff. You identified the issue in relation to the way in which the OBR operates in forecasting for the Treasury and undertaking other modelling, and you identified that the situation with the fiscal framework is more complex. Is it just a given that, because we do not have the economy of scale in Scotland, the SFC appears disproportionately large compared with, for example, the OBR?
The reason for the disparity is that the OBR gets the DWP and HMRC to produce its tax and social security forecasts, whereas we do those in house. If you count up the number of people in HMRC and the DWP who work on the OBR’s forecasts—I cannot remember whether that has been done recently, but it was certainly done about five years ago, when the OBR was reviewed—you find that our staffing is not disproportionate.
I got that impression.
In all Governments, including in the UK, I assume that there is merit in having a look at whether the structures are fit for purpose and as efficient and effective as possible. You came into being formally in 2016, which was a time when, politically, there was a sense of what I would call Scottish exceptionalism—other people might come to a different conclusion on that. Given the interdependence of and interconnectivity between the Scottish and the UK public finances, and given that the bodies that we have in the UK are not asymmetrical—that came up when we were in Belfast recently—is there merit in looking again at whether the structure that we have is the most effective and efficient one? Is there a case, for example, for considering somehow making the SFC part of the OBR, as its Scottish division? Would that not also perhaps have the merit of making you slightly more distant from the Scottish Government, which would address any underlying concerns about your independence from Government?
I am entirely relaxed about future structures, what we look like and what a future Scottish Fiscal Commission would do. The most important thing for me is whether the commission does its job effectively and whether it does its scrutiny and challenge work independently of Government. I would say quite strongly that, under the current framework of the commission and in our current performance, we do that. We have that independence, impartiality and element of trust. That part of it has worked over the first nine years, or whatever it is, of the organisation being formally in place. We would not want to lose that. It is up to others to decide how it evolves and what it looks like.
There are advantages from being close to the OBR when it comes to the information and so on that it has. We already get a lot of that anyway. We have a really good and effective working relationship.
Yes, I know that there is a memorandum of understanding. Is there any duplication that you could identify on which the MOU could go further or could be looked at again, perhaps to make things better for your workload and that of the OBR?
We have an effective working relationship. The point that I was going to make—I will let John Ireland come in on this—is that there is an advantage in having something separate in Scotland. I agree that there is a debate to be had about people’s views on the specifics and size of that. The advantage of having a distinct organisation in Scotland is that our budget process is so distinct from how it works in the rest of the UK, whether in Wales, Northern Ireland or the UK Parliament, that it would be a tough ask for the OBR to pivot very quickly to do the specific Scottish bit.
In addition, by having an institution in Scotland, there is accountability, because, ultimately, we are accountable to the Parliament. There is a question about who the OBR would be accountable to in the Scottish context, whereas you can call us to account.
There are merits in having a look at this, but, for me, it is about protecting the independence and impartiality of the organisation. Perhaps John would like to add something about relationships with the OBR.
We try to work as closely with the OBR as we can. There are areas on which we have more expertise than it does about things that it forecasts. For example, it has responsibility for forecasting certain lines of Government expenditure in Scotland, and we help a lot in that space because we do the social security forecast; it is obviously an OBR forecast, but we help a substantive amount. Similarly, it has responsibility for producing a forecast at a UK level for some devolved taxes, and we help with the Scottish component. Again, it is an OBR forecast, but we try to help to make those things as efficient as possible. There is a lot of stuff that goes on underneath, which is helpful and improves efficiency as well.
To go back to what Graeme Roy was talking about, I think that one of the really good things about our act—the Scottish Fiscal Commission Act 2016—is the requirement for a formal independent evaluation every five years. We have just gone through the second one. That is a really good place to talk about these issues and to ensure that we are performing as required, as well as to ensure that other organisational forms are considered.
12:00
The OECD report said that the SFC is as independent as the OBR, if not more so. If the Scottish Government tried to cut your funding, I think that you would find that the coverage that you got in the Scottish media would be a lot higher than it probably is at present, so I do not think that there is any likelihood of that happening.
That concludes our questions. Are there any final points that you want to raise on any issues that you feel that we should have touched on but have not?
I do not think so. The only thing to flag is that our next fiscal sustainability report will be out on Tuesday. We look forward to speaking about that and then, in May, about the medium-term financial strategy. There is quite a lot on, and I hope that we might pick up some of this stuff again when we talk about those things.
I thank you all for your contributions this morning, which have been very helpful.
12:00 Meeting continued in private until 12:25.