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In the interests of time, this will be my last question. It is for HMRC, which cannot get away lightly from this evidence session.

I turn to page 23 of the Audit General’s report. I was struck by a piece of commentary about migration trends and tax policy, and I wonder whether you could comment on it. Paragraph 80 states:

“HMRC says it cannot draw conclusions about whether migration trends were affected by income tax policy as it does not know what level of migration would have been expected without any divergence in tax policy.”

Surely that is a fundamental flaw in the analysis of tax divergence. How can the Scottish Government make appropriate decisions about tax divergence if it does not know what effect it is having on inward or outward migration?

Thank you very much for that answer.

Exhibit 3 says that the additional tax paid due to tax policy differences came to £3.367 billion. However, you are saying that that is not additional tax paid due to tax differences. Either you are correct or the Auditor General is correct—I am not sure which.

I will interrupt you in the interests of time—it has been a long session already. My questions are about economic performance differentials in Scotland. I am hearing that the economy in London is different from that in Edinburgh. We understand and accept that. We understand that the block grant adjustments alter the amount of money that the Scottish Government gets and that different regions of the UK will have different economic activities. However, I am trying to understand the bigger picture.

Are there issues? Is there, as the Audit Scotland report highlighted, an underwhelming economic performance in Scotland relative to that in the rest of the UK, and does that affect how much money the Scottish Government has to spend? That is the underlying point that I made in the original question. It is not a trick question; I am just using the data that is in front of me.

Let us look at this financial year. The SFC has done some work on the 2025-26 forecast. It estimates that £1.676 billion in additional revenue will be generated through tax divergence in Scotland. That is great and I am sure that the Government will say that it is bringing in extra money. However, the SFC forecasts that it will result in only a net £837 million in cash to the Scottish Government, so that is about half.

Scottish taxpayers are paying more in tax but that is not generating the same amounts of money for the Government to spend on public services as we all want it to do. Is that because of relative economic performance differences between Scotland and the rest of the UK?

Is it not a source of concern to you that 80 per cent of the potential tax take that could be achieved by having a different tax policy in Scotland is being lost to behavioural changes? You mentioned some of them—tax planning and early retirement—

That is good. You mentioned the Fraser of Allander Institute, which does some good independent analysis. I got the impression that the research that you have done on tax divergence seemed to demonstrate that it is having no, or very little, effect on behaviours. Is that the Government’s position?

Good morning. I will start by looking at an area of the report that we have not covered, which is Scotland’s overall economic performance relative to that in the rest of the United Kingdom. For your information, that sits on pages 19 to 23 of the AGS report.

I will start with a question for the Scottish Government. Perhaps you can talk me through exhibit 3, which is the table on page 20. According to the Auditor General, between 2017 and 2023, the cumulative additional tax paid by Scottish taxpayers due to tax policy differences was £3.36 billion. The net increase to the Scottish budget is displayed not far away from that figure, and it is only £629 million. Why is that the case?

What do you mean by “behaviours”? I am just getting my head around that. It is not a trick question, by the way; I am just trying to understand the table.

But we also have high earners, and 0.8 per cent of all Scottish taxpayers pay 18 per cent of all Scottish tax, so we already have a significant, if small, group of people who pay a huge amount of tax. Surely the Government’s ambition should not be to increase that.

What is the Government’s position on the Fraser of Allander Institute’s Scottish business monitor? I presume that you have read that as part of your analysis of tax behaviour. Its last quarterly report, showed that 34 per cent of Scottish businesses reported that tax divergence was having a “fair” or “significant” effect on their business, including on their ability to recruit and retain people, on demands on wage pressures, and on an overall perception of Scotland’s competitiveness and inward investment. The number of businesses that felt that was significantly higher in particular sectors. You talked about the financial sector, but let us look at the construction sector, where nearly one third of businesses said that higher taxes had a significant effect on their ability to recruit and retain people in Scotland.