Seòmar agus comataidhean

Good morning, and welcome to the 13th meeting in 2022 of the Finance and Public Administration Committee. The first item on our agenda is an evidence session with the Deputy First Minister on the Scottish Government’s continuous improvement programme. The Deputy First Minister is joined by Scottish Government officials Lesley Fraser, the director general corporate, and Ian Mitchell, the interim director of propriety and ethics. I welcome all the witnesses to the meeting.

I invite the Deputy First Minister to make a short opening statement.

I note that six external investigators and five external decision makers have been recruited to carry out investigations for the updated procedure and that induction sessions have been carried out. How did you come to those figures of six and five, and what criteria were used to decide whom to appoint? Also, what is the nature of the appointments? I realise that they are giving on-going advice, but are they on retainers? Can you be a wee bit more specific about who they are and what they will be doing?

About a decade ago, after the financial crash, the FSB said that, without the small business bonus scheme, around one in six small businesses in Scotland would have gone bust, so the question is really about how effective it is relative to other potential measures.

Thank you very much for that very interesting statement. I believe that a lot of questions will emerge from it.

You mentioned two new principles, the first of which was engagement to promote public understanding. In that respect, you talked about the importance of communicating clearly and engaging the public. What form is that engagement and communication taking?

Prior to the devolution of income tax and in the run-up to 2017, there was a lot of discussion about how Scotland would address tax avoidance differently from the United Kingdom Parliament. How has that evolved over the years? I note that one of the new principles is “to minimise tax avoidance”. What has been the Scottish Government’s method—if you want to put it that way—of minimising tax avoidance, and how does it differ from that of the UK?

My understanding was that the Scottish Government was going to take a principled approach to tax avoidance in contrast to the UK’s position, under which, unless something is specifically addressed in legislation, there is an opportunity for avoidance. In Scotland, these things were not to be set in tablets of stone; the idea was that, if the authorities even perceived that the intention was to avoid tax, they would still be able to collect it. I believe that John Mason was on the committee that deliberated on the matter. Are we not moving forward with that? Was minimising tax avoidance not going to be a significant difference between Scotland and the UK?

I have to say that the choice of taxes does not fulfil Adam Smith’s four criteria of certainty, proportionality to taxpayers’ ability to pay, convenience and efficiency. I think that aspects of the chosen taxes—especially VAT—are extremely contentious when it comes to who gets what and whether Scotland benefits disproportionately from an assignment. However, that is undoubtedly a discussion for another day.

I just want to mention a couple of other wee things before I let others in.

First, on the North Sea, there are a lot of highly paid workers there—71,000 at the last count, I think—who earn more than the Scottish average and pay a lot more in tax than the average person. Is the Scottish Government looking at how the switch to green jobs will impact the tax base in that respect?

I do not want to take up too much of your time, minister, but I just want to ask a second question. Has the Scottish Government looked at the issue of behaviour change? Obviously, if we are short of taxes, Governments will be tempted to put them up. However, if you increase taxes in the short term, you might well dissuade people from investing in or living here and therefore paying their taxes either in the rest of the UK or elsewhere, which means that you effectively lose everything. In that respect, is half a loaf is not better than no bread?

I know that today’s announcement on Cambo, which has been made as a result of rocketing fuel prices and the Russia-Ukraine situation, shows that North Sea oil might have a wee bit more life left in it than we thought, but this is a long-term issue. Behaviour change will always be with us in relation to taxation, so what is the Scottish Government doing about it?

We are talking about the Scottish tax framework, so I just want to see what is Scottish about it. How is it different from the UK framework? It was my understanding that this principled approach was a significant difference, but I would have thought that any legislature anywhere would want to try to make sure that avoidance was minimised when it set a tax. Otherwise, what is the point in setting a tax?

Thanks for that response, but what you have outlined is not really public engagement, is it? It involves stakeholders and people like that. How many will there be at the citizens assembly, for example? A hundred folk?