Seòmar agus comataidhean

Good morning, and welcome to the 32nd meeting in 2022 of the Finance and Public Administration Committee.

Our first agenda item is an evidence session with the Institute for Fiscal Studies on the United Kingdom autumn budget statement and the wider UK context, with a view to informing our scrutiny of the upcoming Scottish budget 2023-24. We are joined remotely by David Phillips, associate director, and Ben Zaranko, senior research economist, at the Institute for Fiscal Studies. I welcome you both to the meeting.

I move straight to questions. Your submission states that the Office for Budget Responsibility notes that the UK’s economic position with regard to fiscal policy has been beset in the past six months by

“a series of dramatic swings in the direction of fiscal policy with five major fiscal statements delivered by three successive governments”

and that

“the net impact of this series of announcements and reversals has been to add over £40 billion of borrowing by 2027-28”.

What will the impact of that be on not just the UK economy but Scotland’s economy?

The prediction is that there will be a 1 per cent increase in real incomes by 2027-28. How can you possibly predict that level of growth at this point, given all the potential shocks that we might see? If someone had predicted that five years ago, everyone would have been astonished; five years ago, everyone expected that a five-year prediction would be much more positive. How big a pinch of salt do we need to take with the forecasts?

Of course, the Scottish Government does not have the same levers, which is why I asked what specifically the Scottish Government could do.

Perhaps David Phillips could say what the Scottish Government could do, given the situation that we are in.

Abolishing the transmission charges imposed on Scotland by the previous Labour Government would also help.

One of the interesting things about the autumn statement was that the UK Government decided to close the Office of Tax Simplification. What was the reason for that decision, and what will the impact be? It is not being reversed by the new Chancellor of the Exchequer.

Earlier, you talked about the changing footprint of public services relative to the pre-pandemic position. What impact do you think that that will have on the Scottish budget?

I ask that, because I read at the weekend that, although the number of passengers on buses is still below the pre-pandemic level, it is approaching 90 per cent of what it was before; however, rail passenger numbers are barely at 50 per cent of the level that they were at before the pandemic. I believe that the Scottish Government spends just over £1.5 billion subsiding the railways in Scotland. Therefore, one would anticipate either a significant increase in public support for the railways or, indeed, a reduction in services, which will have knock-on effects, including on reliability, because of strikes, staff shortages or whatever, and on the drive to get people to switch from cars to public transport. What effect is the impact of the pandemic likely to have on public transport in the Scottish budget?

My point is that it is not very helpful for the Treasury to set a GDP deflator that clearly does not take realistic pay demands into account.

On education and skills, there is a £40 million reduction in what the document calls “Education Capital Projects”. Which projects will be impacted by that?

The figure for roads and taxis capital projects is £7.2 million. I cannot believe for a second that there is no demand for that money. I could tell you about a project in my constituency that has been delayed for two years because of governance procedures. After two years, I am still trying to find out what they are from Transport Scotland, which has been taking the fifth on it. I cannot understand why there would be a lack of demand of £7.2 million for roads and taxis capital projects.

Liz Smith has a supplementary.