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I go back to David Bell’s point about attracting investment and the cuts to the enterprise agencies, although this question might be too specific. Are the enterprise agencies necessarily the best place for us to put money in order to attract investment? I am thinking of the coverage, over the past couple of days, of the incredible success of our film and TV sector, which, I would argue, is driven largely by the fact that responsibility for state support for that sector has been taken away from the enterprise agencies and given to a bespoke unit in Creative Scotland: the new, or new-ish, Screen Scotland.

Has Scottish Enterprise, in particular—given that Highlands and Islands Enterprise and South of Scotland Enterprise are different, and have a justifiable return—really been able to demonstrate that the spend that we put into it has resulted in increased investment?

David Bell pointed out that spend on Scottish Enterprise has actually gone down at the same time as foreign direct investment in Scotland has gone up.

I am jumping around somewhat, but I want to go back to Chris Birt’s earlier points about capital funding for affordable housing and his highlighting of the roads budget as an area that could be reprioritised. If you listen to my Conservative colleagues, apparently my party has already done that, because the roads budget has gone down significantly. In fact, it is up this year, but that is due to the exception of an amount of money for the A9. I am not enthusiastic about that, but it is a small amount and it is mostly for safety-critical infrastructure.

Does that, though, not raise a wider point with regard to affordable housing? Nobody would defend the budget going down by £196 million or thereabouts as a good outcome of the process. However, affordable housing is an area of capital spend where other policy levers are available. For example, there has been an emergency rent freeze and cap; there are eviction protections; there are permanent rent controls coming in; and there is regulation of short-term lets—which should, it is hoped, free up more housing—and the doubling of council tax on holiday homes.

In other areas of capital spend, however, there is no legislative policy alternative to reach the same eventual outcomes. As David Bell pointed out, net zero targets cannot really be achieved in any way other than hitting capital spend. As much as the decision on affordable housing is unpleasant, therefore, and nobody is saying that it is a good outcome, there are, in the limited context of devolution, other levers that the Government can pull, and other options to meet our ambitions for housing, excluding capital spend. Is that correct?

That goes back to the point that João Sousa made about affordable housing. If we had made decisions in every portfolio area purely on the basis of what would generate the best long-term return in that area, we would almost certainly have ended up with a budget that did not add up. Ultimately, the budget had to add up one way or another.

That was a very pertinent point. The challenge, perhaps, is that, although it is well within the Parliament’s power to legislate for targets, we are limited in the range of powers that we have to reach them. You are right, though, that we have not fully utilised those things.

I just want to touch on a couple of specifics and, first of all, go back to the discussion that we had early on about income tax changes and the splitting of the higher rate. My first question is for David Bell. Is it not somewhat strange to have a higher rate that applies between £45,000 and £125,000? Is that not a massive range to be taxing at the same rate? I acknowledge that the withdrawal of the personal allowance from £100,000 obviously has an effect, but even in European terms, is it not somewhat unusual to have such a big range covered by one rate?

I have sat in on some public sector pay negotiations and union reps quite reasonably say, “Well, hold on, the newspapers this morning say that you have £2 billion, but you will not give us £200 million to settle this,” but, actually, there is not £2 billion.

I am aware that every year—concurrent to the budget process for the following year, roughly—we start to get reports of the Government underspend in the current financial year, so I have a question for Audit Scotland on transparency and public understanding. Do we need to have a different kind of discussion, use different language and present things differently when we are talking about underspend?

Two or three years ago, there was a £2 billion headline figure for the underspend, the vast majority of which was just a change in how student loans were accounted for. No cash remained unspent at the end of the year.

If we are talking about public understanding and expectations, we constantly have this issue, every spring, when people think that a big pot of money has not been spent, for no particular reason. However, it is much more complicated than that. Do we need to have a discussion about how we talk about the underspend from each financial year going into the next?

Absolutely. Thanks very much.

That draws us into the debate about the fiscal framework and whether relative tax growth is the best measurement from Scotland’s perspective. We have discussed that before, and I am sure that we will continue to discuss it for some time to come.

Box 4.2 of your report has an interesting reference to the behavioural effects and how you estimate, measure and mitigate them. It also references the HMRC report from 2021 on the behavioural effects of tax changes in Scotland. I remember that report, but I cannot remember why HMRC produced it. Does it do so on a cyclical basis? Should we expect another one, or was it a one-off?

If HMRC is, at some point in the short to medium term, producing more longitudinal data, it might be worth while for the committee to get in touch with it to ask about the timescale for that, because it would inform quite a lot of our work.

Box 4.2 also mentions the extent to which the USA and Switzerland are relied on, because there is such a rich evidence base in both countries. What types of evidence-gathering work or studies that have taken place in other jurisdictions are not taking place—or have not taken place—in Scotland? I am thinking about work that Government could commission or which independent organisations could be encouraged to undertake.

I would like to stick with the question on behavioural effects, but look at it from a different perspective.

I am struggling somewhat to square the circle with regard to the amount of airtime that we are spending and the amount of political debate that we are having on the risk of negative behavioural effects as a result of income tax changes and the data that we now have from five years of increasingly significant divergence. Despite increasing divergence in our more progressive system, we have seen growth in earnings and thus direct growth in income tax receipts. As Professor Ulph has pointed out, we still have net positive migration into Scotland from the rest of the UK, and we are doing very well in foreign direct investment compared with everywhere other than London, I believe.

Are we, therefore, spending a disproportionate amount of time discussing the potential negative behavioural effects of income tax divergence compared with other factors that affect the budget in a much greater way? As Professor Roy has pointed out, we are talking about relatively small numbers in the grand scheme of a budget of £60 billion or so.