Seòmar agus comataidhean

Thank you for that. I appreciate the complexity of the matter and your role in all of this, but it strikes me that the issue must at least be approaching that tipping point where it becomes of interest from a public finance point of view.

Good morning and thank you for attending. I want to ask about a totally different matter that has not yet come up this morning—the B-word, or Brexit. I note your comment in November’s economic and fiscal outlook that

“Brexit has had a significant adverse impact”,

with trade volumes declining. Indeed, they are to fall by 8.3 per cent below the present level by quarter 4 in 2023.

An area that I find very interesting is trade intensity, which you say is

“15 per cent lower ... than if the UK had remained in the EU.”

My understanding is that trade intensity is a measure of a country’s integration with the world economy. Given that we will not be able to replicate what we had with the fairly paltry and thin-gruel deals that have been made thus far, can you say anything about the prospect of trade intensity increasing or, indeed, maintaining the percentage that you set out in your report over the next five years and beyond? It would be useful to hear an answer to that question from whoever is best placed to give us one.

Would you consider taking an explicit look at that? I am thinking, for example, of the proposal to remove the Office of Tax Simplification, despite the fact that, as we know, it is the complexity of tax codes that provides the wriggle room in a variety of areas. We also know from the National Crime Agency and Transparency International—although the latter’s figure is an estimate—that we are talking about a loss to UK GDP of approximately £267 billion each year, and the effects of that will flow through in the availability of public finance for doctors, nurses, teachers and so on.

You do not need to answer this just now, but you might consider looking at that explicitly, because it is a very real issue that could ultimately have quite a significant impact on the sustainability of our public finances. If it is “implicit”, as you have said, it is not overtly understood, and it is overt understanding that will drive action. Any comment on that would be helpful—or you could just tell me that I am wrong.

Yes, and we need to match ambition with financial enablement.

Good morning, minister. Thank you for attending the committee today.

Before I ask my questions, I want to take this up a level. A multitude of figures are being bandied about on exactly how much finance is required to enable the just transition and the changes that we need to make. The figures are quite eye watering, and it is generally agreed that, globally, we are nowhere near that amount.

However, in the Scottish context, the Climate Change Committee report points out that many relevant powers that are related to areas such as funding, finance and product standards are reserved. Therefore, my question to you is this: are you getting the support that you need from the UK Government in supplying that level of funding, or are you having to take that out of the fixed Scottish budget, which obviously has nearside time parameters in terms of planning? How is the funding that you are able to realise being managed and actualised?

In its report, the Climate Change Committee called out risks that are down to UK Government action or inaction around low-carbon heat in existing homes. It made reference to “details of market-based mechanisms”, associated funding and so on.

I want to explore the £500 million just transition fund a wee bit more to get a bit more flavour of how the Government is able to release the funding and protect it, given the constraints and the real-terms cut in its budget. Can you give us a bit more information about that to help us understand some of the challenges related to that fund?

You have given us a lot of flavour. Being given more money is one route, but are you hearing the calls from across the Scottish Parliament for vastly increased borrowing powers for the Scottish Government—such as there would be for any normal Government that might want to undertake ambitious policies—so that we can crowd in private sector funding?

We all agree that no Government will be able to entirely fund what is needed, and that Governments will need to crowd in private sector funding, so are you hearing, in your private discussions, the agreed calls from across the Parliament for extra borrowing powers to do that sort of activity? You might not be able to disclose that.

I am sorry if I sounded as though I was having a pop at you, David; I totally appreciate that your expertise cannot cover everything. Perhaps, though, we can fold the issue into future sessions, because the fact is that, although we are talking about what feel like quite big numbers, they pale into insignificance when we look at the whole gamut. You are correct in what you have said about cuts to HMRC, which suggests that the issue will get only worse, rather than better. Although you are right that this is a global issue, the UK is well up the league table for this; I think that it is the second most corrupt country in this regard after the US, although people might argue about that. That is important, because we tend to look at what we can see rather than guess at what we cannot see, which is growing at a rate of knots.

Going back to the convener’s point about the Office of Tax Simplification, I note the big numbers that have been bandied about—the £6 billion black hole in the finances, the fuel duty escalator and £10 billion per month on debt interest. The National Crime Agency estimates that about £100 billion each year is lost to the UK as a result of money laundering while—although figures vary here—roughly £190 billion is lost every year, because of fraud.

The scale of those figures is staggering. Might the IFS consider looking more actively at that, given that we have almost a shadow economy running? The UK Government appears to have no appetite to tackle it; indeed, it is getting rid of the Office of Tax Simplification, even though it is the complexity in the tax system that provides the wriggle room for those startling losses to UK GDP. I am surprised to hear that neither of you has followed up on the plan to get rid of the Office of Tax Simplification.

Good morning. I absolutely appreciate the complexity and the challenge of what you are trying to do. I am entirely sympathetic in that regard.

One of the two areas that I often major on is the inclusion of women. I recall that, in relation to COP26, the First Minister described the Scottish Government as a “commitment maker”, and that commitment included enabling women and girls to lead a just transition to a green economy. I am fully cognisant of the complexity of this, so I really just ask you for an update on progress in that regard. I note the eminent women that you have on your advisory committee, but an update would be appreciated.