 Welcome to the 25th meeting of the 2018 financial constitution committees, to remind all members of who is going to switch through to our mobile phones or at least to live into a mode that will not interfere with proceedings. Before I begin the normal part of business this morning, I thank Christine O'Neill, who has been our constitutional agencies adviser for the past two years. The committee members will agree that her hard work clear and detailed advice was greatly supported and enhanced the committee's work. I would also like to take the opportunity to welcome Professor Tom Mullin. There is our new constitutional issues adviser. I look forward to him attending committees in the future. The first item on our agenda today is to decide whether to take items 4 and 6 in private. Are members agreed? Members agreed. The next item on the agenda has to take evidence from the Scottish Government's foning算 Cyfliw vivos, neu ddatblyguds eu honamingol, addedillaween exempl heads by Dr David Alff yn Professor Francis Beatton ac mae ystafell unfemi ag wedi gwneud yn cynlogod dyma bodies i ddwy talki ddeStudio Cyfliw mamlu cyflwywn risenred eraill. Fe wnaeth mwyn holl oedd i dda cameraeth y cys الم m nooitos oherwydd hyn am d 완전 yn teidiaeth a restaurant ei eistedd i chi i dŵr ac rydw Nonell Fyster Inswr? Rydw i fy rydynod i chi i gweithio gyda pa Eli D backward hyn bydd ex-profizieduc would Professor of Economics at the University of St Andrews, most of my research throughout my life has been on issues relating to public policy, including understanding the effects of taxes and benefits on individual behaviour. In fact, the first piece of research that I published when I was a lecturer at Stirling University was to look at the effects of income tax on individual labour supply. I also have direct experience of forecasting tax revenues because I was chief economist and director of analysis at initially Indian revenue and then HMRC between 2001 and 2006. As such, I was personally accountable for the forecast of all tax revenues and for the production of the figures for national income. Some of the things that came across to me from holding that post was, first of all, I saw the pressures that arose on tax forecasts when they were done for the Chancellor through HM Treasury. I must admit that that made me a fan of independent tax forecasting bodies like OBR and the physical commission. I have also overseen a major review of the way in which we forecast corporation tax revenue at Indian revenue. Initially, that was done from a very microeconomics-based and then scaled up. We switched from that to a more macro-based way of forecasting and that turned out to be a more successful way of forecasting with much lower errors on it. I also oversaw some changes in the way that we forecast income tax revenues through taking more account of income distribution questions. I have a number of areas of experience of giving independent advice to various bodies. I am a member of the NHS pay review body. I have been a member for three years and my appointment has been renewed for another three years. I also sit on the competition appeals tribunal. I have been a member of that since last year. Professor of Economics and Finance at Queen Mary University London. My background is, certainly in the early part of my career, very much involved in macroeconomic forecasting. I started off in the London Business School in the macro forecasting group and then moved to the Bank of England, where I headed up the group of coordinated forecasts that were done there. In terms of academic research, I am largely in finance but also in macroeconomic policy issues. I have worked particularly on things like quantitative easing recently. In terms of policy background, things are highlighted with a key one. I undertake a role similar but different to this one for the states of Jersey. I am on the fiscal policy panel for Jersey. I also have, like David, an experience of policy reviews. I have been in the policy review of local government finance, one on the foreign exchange reserve management for the Treasury and also a work for the Central Bank of Iceland on their exchange rate policy, as well as for the Norwegian Ministry of Finance on the allocation of their sovereign wealth fund. A note from both your respective CVs and some of the material that you have presented in your opening statements is that you have had experience in the fields of forecasting, finance and economics. I wonder if you can tell the committee any specific experience that you have had in respect of production or analysis of forecasting relating to the Scottish economy or finances or, indeed, such other work that you have undertaken in that regard that might be helpful in contributing to the Scottish scene. For a while, I was an adviser to the committee of the Scottish Parliament that was taking the Scotland bill through the Scottish Parliament. As part of the work of doing that, we both scrutinised evidence given by various experts on the potential impact of the devolved taxes to Scotland as well as well as working with SPICE to produce our own forecasts of tax revenues in Scotland. I have some experience through that. I have no experience in Scotland, so my experience is broad in the UK as a whole but also to do with the work. I guess that the key experience, similar, as I said before, is working. It's interesting as well. Is there other comparators that you can draw that would help us? He is an interesting experience in the sense that they are very devolved. They are in their own world. As David was saying, the role of the independent commission is very clear. There is less of a political, more of a technical deficit in terms of trying to improve forecasting techniques. That is one of the roles that I do there. I would like to carry on to work with a team on some of the more technical issues of forecasting to make sure that things are done as efficiently and in the most up-to-date way as possible. That is an area for my jazz experience that I would like to bring to Scotland. One of the issues that the committee has looked at in recent weeks has been the divergence in forecasts between the OBR and the Scottish Fiscal Commission. That has quite serious implications in terms of the fiscal framework. If there is a divergence, it leads to a gap that needs to be reconciled against out-term figures when it appears. Is there more that could be done to align the forecast between the OBR and the Fiscal Commission, given that both organisations are starting with the same raw data but seem to be arriving at different conclusions that are presenting some challenges? I wonder whether that is an issue that either of you have any thoughts on. It depends a little bit on how the tax forecasts are actually done. If you are just trying to produce a forecast that is a number, that is a point forecast, then there is always the problem that you can never forecast with absolute precision. That was the problem that we faced when I was at HMRC. You can forecast within ranges of accuracy. It is possible that, even with the same underlying approaches, you can come up with two numbers, which are different, but if they lie in the same range, in some sense they are equivalent. Without knowing in more detail precisely how OBR does its forecast, because I have not been part of OBR to see how they do that, it would be hard to see exactly. The devil is in the detail with this stuff. Maybe there are some things that they do in the way that they forecast, which is a difference in the methodology that is being used with the Scottish Fiscal Commission. Even if you start from the same data, if you use that data in slightly different ways, you can come up with different numbers, but I agree with your general point that it is really difficult to manage a situation where you have two numbers coming up from apparently authoritative bodies. It is a really difficult message to manage. To add to that, in some sense it is difficult, because one of the things that I would feel is important is that the commission feels that it is completely independent from the OBR and therefore should be using its own skill and judgment and techniques. Clearly, as David said, the ideal is that if the commission does something that is better or different, there is discussion internally with the OBR and an agreement about how to proceed. I think that there should be a presumption that both parties should not be forced to come together too early in the process. I think that it should be ideally brought together before it finishes, but there should be a degree of independent thought going on in the process, early on at least in the process. As the Scottish budget has evolved and we have picked up more tax-raising powers, because of the lag in delay in publication of out-turn data, the role of the Fiscal Commission is crucial in providing forecasts that lay the basis of some of the budget, which is ultimately agreed. The accuracy of those forecasts is important not only for the Government, but also if they change over time they can become politically challenged. From that point of view, it is welcome that in your CV and statements you have given an explanation of forecasting experience just to drill down on that a bit. One of the areas that is very important in accurate forecasting is reliable data sources, good data collection and feeding that into an appropriate financial model. Can you give a bit more explanation of your experience in managing those scenarios? In terms of managing some of the issues around data, when I first joined in on revenue, I assumed that I would be walking into an organisation with a vast amount of terribly accurate up-to-date data from all the taxpayer returns. For some areas, that is true. For some areas where it is computerised, there is some pretty accurate information there, but there are some other areas of information where we needed to drill down into some of the data. We had to go down into the basement of Somerset House, get our stacks of paper records and transcribe those into our data sets before we could do the analysis. Having good systems for collecting data is really important. Even then things can go wrong. I had experience where we had to pool the national income statistics for the UK for a period of six months because we found that the systems were not properly capturing data where people had multiple partnerships. It would capture the first page of the partnerships, but it would skip all the other partnerships. The level of national income did not show up at all, but because MPs were very interested in what was happening in their constituency, once we drilled down to the constituency level and asked questions about it, what was happening to the high net worth individuals in this constituency, we saw huge changes in one year to the next. That is what alerted us to the fact that the system was going wrong. We had to stop the whole system of producing national income forecasts until we rectified the problem with the computer system and then go back and reproduce national income forecasts. Those are tricky problems. Even with the most sophisticated machinery around, you can find the data sometimes that gets lost in the computer programmes. It has been more in the actual building of forecasting models and how those are done. I started in the era of large-scale conmetric models, so 500 plus equation models are less popular now. That is something that is interesting to look at, what techniques have improved and what things we can carry on pushing forward. With the availability, unfortunately, data is no longer kept in cupboards any more. There is much more accessible information and large-scale estimation techniques that can go down to individual levels. Those are techniques that are going to come to the fore in the next few years. We can forecast from individuals, which we would not have been able to do that before. I am interested in just a wee quick question. When we talk about the budget or Scotland's finances or the revenue or whatever, we often hear, prior to any explanation, it is complicated. Part of the job description essential skills and desirable skills and experience, it talks about communicating, influencing complex information in an accessible language. How do you propose to do that? What would make it easier for non-financial people to understand Scotland's budget? Part of the question is deciding what the most important pieces of information are that you need to convey to people. Often, when you are doing some of those forecasting tasks, you have in the back of your mind masses and masses of detail, but a lot of that may not be centrally relevant to the main message that you want to convey to others. I think that the first important thing is to decide what that key message is and then work out what is the best way of getting that particular message across to somebody. If it helps, I can give you one example of where I did that in the revenue, not particularly in a forecasting context, but there was a proposal coming up for the way in which we treated people's offshore bank accounts. There was a proposal to send out a letter to taxpayers saying, if you come forward and confess you have these accounts, then instead of paying the usual penalty of 100%, we will lower the penalty to zero if you confess. When I first saw that information, I went straight up to the person who was in charge of me and said, this isn't going to work, because think about what you think the probability detection would have to be to make it worthwhile confessing and giving up 100% penalty. You would have to think that you had a more than 50% chance of being caught. At that point, the average probability of being caught by the end-in-revenue was 5%. I convinced the head of an-in-review that this was not going to work, just by a very simple arithmetic example. We changed the whole way we did it and because of the way we changed it, we brought in billions of tax revenue. It was just a question of deciding what was the message you had to get across with a simple example and trying to persuade somebody about your case. One of the important things when delivering complex messages is that you have to make it relevant to the person you're talking to. I think that people have a very high capacity for taking in something quite complicated if they think it's important to them personally. Where people switch off quite often is where they think that the person speaking is explaining something that they don't really need to understand or that they don't find personally useful. I think that there's a lot of making sure that the messages are as relevant to the person as possible. The other thing that I find works a lot is putting everything in context. An international context often helps a lot when explaining things. If you can say your bottom of the list or your top of the list, those things get people interested about the topic. I think that putting things in some sort of context helps. That's very generally, but that's the techniques that I generally use. Patrick Stewart Good morning. It's a question principally for Professor Breeden relevant to your experience in the fiscal policy panel in Jersey. If I'm understanding it right, it has a slightly different remit than the Scottish Fiscal Commission in that it actually advises on tax and spending policy. Whereas the Fiscal Commission does work that informs those policy decisions but doesn't directly comment on matters of policy, is that accurate? I mean, I think clearly still down to the states, the Parliament makes the decisions, but I think we have a broader advisory role, so I don't think we don't actually set the policy, but we will give advice on areas which probably in this context the commissioners wouldn't give advice on, which includes policy. In particular, it involves the use, so Jersey is in the happy position of having a very large fiscal reserve, so we have a big role in when that reserve is added to taking away, so that's something that is specific to Jersey. Okay, and given that, obviously, in the context and the history of Jersey, tax avoidance is such a major and controversial issue, I'm wondering how the panel or you engage with questions of tax ethics and what you think the relevance of that experience, how that can be brought to bear in relation to the Scottish Fiscal Commission. In the Jersey case, we don't have any remit over those issues at all, so our focus is very much on sustainability, so we're interested in a tax policy that is overall, there are elements of individual tax policies we wouldn't get involved in. In terms of the financial system in Jersey, I know of it, but we don't have any remit to advise on that. I don't think it's up to the political decision of the states in terms of how they run that. I don't think it would be appropriate for us to make comments on that. Thank you very much, convener. We've heard at the committee in recent times that often the estimates for things like VAT that will be assigned and attributed to Scotland are going to be done via surveys. I think I've concerned some members about the accuracy of that. Any ideas on how we can improve the accuracy of data that we deal with to try to get closer to exact pictures for things like that, things like VAT or even Scottish income tax pairs and so on? It seems to be pretty inaccurate. Is there a fair message that we've heard to date? At the UK level, our forecast of VAT were probably the most accurate forecasts. Back in the sea, there is a problem with how you assign some of those revenues to Scotland. Most of the stuff on forecast of VAT comes from consumer expenditure surveys. They are inevitably based on surveys because it's very hard to get some direct measures of consumer spending. Obviously, you get it through the shops, but if you want to know how much people in Scotland are spending on this, it's very hard to get that other than through a survey. Over time, we might find ways of trying to improve the accuracy of that once we have a better understanding of the patterns that we are able to find ways in which we can identify more accurately spending that is genuinely attributable to people in Scotland. Inevitably at the moment, we are going to be reduced to using surveys. Good surveys can be quite accurate as well. As an economist, I was initially quite sceptical of surveys, but I became more of a fan as I saw the use of them. The surveys are all in the construction. It is amazing the power of statistics that a survey for small number of people can be informative as long as a survey is carefully constructed. As I said before, there is increasing ability to do something cleverer and fancier than that in the future. One of the things that we want to look at is what opportunities there are to use new data sources and new approaches to all those problems. I'm afraid that day one for me, so I can't say much more than those ideas. I can't give any specifics of the stage. I don't have any other member indicating I wish to ask any other questions. I thank both of our professors for joining us today. The committee will now consider nominations later in a meeting in private, and then we'll publish a report setting out our recommendations to Parliament. I thank both of our professors for their attendance before the committee this morning, and I will briefly suspend the meeting to allow a changeover of witnesses. Colleagues, our next piece of business is to take evidence from Itramar Sea as part of our pre-budget scrutiny. We're joined for this item by Jim Hara, who's the director general of the customer strategy and tax design, and Jackie McGeachan, who's the deputy director of income tax policy. I welcome both of our witnesses to the meeting this morning. Members have received copies of Itramar Sea's annual report, but before we go to questions from the committee, Jim or Jackie, do you want to make an opening statement? I'll make a few short points. First of all, to confirm to the committee that HMLC has provided the annual report on Scottish income tax to the Scottish Government, has set out in our service level agreement, and this has also been provided to the committee, along with the relevant extract from the department's accounts on Scottish income tax. I also want to draw the committee's attention to the successful delivery of the changes to Scottish income tax for 1918-19 that were announced in last year's budget. We work closely with the Scottish Government at every stage of implementing those powers, including incorporating the 1918-19 changes, and we look forward to delivering on the budget announcement that we expect later this year. Finally, I just like to apologise, convener, that a letter from me to you in the summer went astray somehow. I don't know why, but you should now have a copy of it, so apologies for that. I'm not asking any more about that. I think that James Kelly would like to begin some of the questions as well. Thank you, convener, and good morning to you. I want to focus on the issue of the income tax outturn for 2016-17. Clearly, in terms of your report, that was £550 million less than previous estimates, and part of the reason that was attributed to that was the movement in additional. Higher rate tax pairs, so that the initial estimates were based on the survey of personal income, and the movement from that resulted in 5,000 less additional rate pairs and 43,000 less higher rate pairs, which contributed to the reduction in the outturn from estimate of £550 million. Initially, I'm interested just in an explanation of the methodology around the survey of personal income and how that drove the number of tax pairs and how you arrived at the actual outturn figures in the report that you produced. The survey of personal incomes is conducted on a sample of tax pairs, where we gather the data from tax returns on their incomes. The most recent one was for 2015-16, which was what the 16-17 forecast was based on. There are some issues with doing that. First of all, the fact that projecting data from a previous year, making assumptions about wage growth and population changes, builds in uncertainty into the forecast. Additionally, the survey, although it is regarded as representative at the UK level, is less accurate at a sub-UK level when you try to break it down by country or by region. We are working with ONS and the Scottish Fiscal Commission and Scottish Government about what improvements can be made to that. That would be a key reason why, as the Scottish Fiscal Commission says, the SPI overestimated the number of higher rate and additional rate Scottish tax pairs, which was a significant factor in the inaccuracy in the forecast. In addition, for the 15-16 SPI, we did not have the identification of Scottish tax pairs, so we had to try to identify them from that survey just based on postcode information. When we produce the 16-17 SPI, we will be able to do that based on the actual identifier of Scottish tax pairs, so that we will make it more accurate than the previous one for forecasting purposes. Turning to the out-turn, that is based on the actual information from PEGWERN and self-assessment returns for people who are identified on our database as Scottish tax pairs. Therefore, it is a much more accurate out-turn and based on much more up-to-date data. It has been audited by the National Audit Office as part of the audit of our accounts in our trust statement. A couple of long points from that. If we then take 16-17 as a baseline position, because that is the first year that we have captured all the Scottish tax pairs, how confident are you in the figures that you have captured that that is an accurate baseline? Yes, we are confident that that is an accurate out-turn and, as I said, it has been audited independently. It is based on much more up-to-date information. There is a table in our accounts that shows some further adjustments that we have had to make for events that had not yet happened at the point when that out-turn got locked down. For example, there will be some people who pay late and we have had to look at historical data for payment rates in order to adjust that for non-payment by late payers, for example, but those are really quite marginal adjustments. That is an accurate out-turn and has been independently verified. What is the size of the Scottish sample for SPI and what role does that play in moving forward for future forecasts? I do not have the information for the size of the Scottish input to the SPI. It is an O&S-owned piece of statistics, but I can certainly get you that information. Your service-level agreement with the Scottish Government requires HMRC to provide the Scottish Government with sufficient, relevant, timely information and data for rates setting and forecasting for the Scottish income tax. There are issues about that Scottish data in relation to the UK data. In section 2 of your annual report, although the SPI is considered to be representative of the UK taxpayer population, it is less reliable at sub-UK level. That gives me some concerns, as you might imagine, given that our process is very much based on forecasting. Given the significance of income tax forecasting to the size of the Scottish budget, is it reasonable that the data that you are providing to support the process, which your own report describes, is less reliable than the sub-UK level? We are all under a slight misapprehension that the data being looked at for the Scottish circumstances and the UK circumstances were the same, but it is obviously not the same. It is the same information base, but it is not the same level of data. It is exactly the same data set, and the Scottish Government and the Scottish Fiscal Commission get what is materially identical data to what the OBR get for the UK from that set. You are right that when you drill down into the SPI to look at Scotland only, it is less reliable than it is if you look at a whole UK picture. That is the data that we had from the 15-16 survey. We are looking with the Scottish Fiscal Commission and the Scottish Government and the Office for National Statistics for what improvements could be made, but the key thing is to get that more up-to-date data and to have data that is based on actual Scottish taxpayer identification are two key steps. Given that there is potential significance for any forecast error for the Scottish budget, how pressing is the work that is going on for the Scottish Fiscal Commission to have increased access to the data on Scottish income tax at the same level as it is available at the UK? For example, why have the SAFE only got access to the public user's tape data for the survey of personal incomes? In terms of access to data, the Scottish Fiscal Commission has got exactly the same access to Scotland-level data as the OBR has to UK data, so there is no question of reduced access. The only slight exception to that is at the very top of the income ranges. We have had to do a bit more aggregation at Scotland to avoid identifying individuals, but that is sort of immaterial in terms of the level of data access. It is actually the quality of the underlying data in the survey that is the issue rather than a restriction of access. Can you tell us a bit more about what is going on to improve the quality of the data that is available so that we can understand it a bit more clearly? The statisticians are working with the Scottish Fiscal Commission and the Scottish Government on how the base of the survey could be improved, both to provide more data that gives a more accurate picture for Scotland but also to give it more timeously. We have, this year, pulled forward the timing of when we produced that data in accordance with our agreement with the Scottish Fiscal Commission to support them, and we will be looking to do that again next year. I would reiterate the point that the sample size is very important. I am sure that I read somewhere that it might be as low as 2 per cent. If it is quite a low sample size and you are extrapolating from that, it obviously adds to the potential risk of error. You have the baseline figure now in terms of the actual outturn figures, and you have the SPI survey that is on-going. How do those two interact to update your forecasts? I am not a statistician, but I know that even what sounds like relatively small sample sizes can give very accurate levels of data compared with the full population. Obviously, the larger the sample size, the smaller the error rate. However, sometimes, as you increase the sample size, that can be a very marginal difference. However, I think that that is something that the statisticians in HMRC, ONS and the Scottish Fiscal Commission are looking at. Your second point was how does it interact? You have the survey data going forward and you have the baseline numbers on the outturn report for 16, 17 and the actual number of taxpayers. How does that work going forward to update forecasts? The outturn is based on the full set of just over £2.5 million taxpayers, so it is not survey-based at all. What that outturn tells you is that, A, it was significantly lower than the forecast for 16, 17 but now having a baseline year, if you compare that with the forecast for 17, 18 for example, that assumes a level of growth in Scottish income tax receipts, which, whilst possible, is not likely. Therefore, I would expect those who issue forecasts, which is the Scottish Fiscal Commission and OBR, to take that into account in the next forecasting round. There were some other issues with that year, which I think affected forecasting. The devolved powers relate to non-savings and non-dividend income, as well as having to estimate the balance between Scottish and non-Scollish taxpayers. You also have to estimate the balance between savings and dividend income and non-savings and dividend income. That was a particular challenge in 16, 17, because the UK Parliament introduced changes to the taxation of dividends around that time, which had a behavioural effect on people who control their own companies in terms of the timing of their dividends. One of the lessons that I suspect is that, when we analyse the outturn for 16, 17, you will find that the proportion of the total UK income tax receipts that came from dividend income was different from the assumption in the forecast. That will wash itself through in further years. I am sorry to label this point, but, as you said, on the outturn data, you have got 2.5 million taxpayers now that you have identified and you have got this on-going survey, which is a sample going forward. How is that then used, for example, to update the 17, 18 forecast? How is the survey data used to interact with the 2.5 million-based data set that you have to update your forecasts? HONC does not issue the forecasts. That is OBR and Scottish Fiscal Commission. What we do is provide them with the data that we have. When they made their forecasts last round, they did not have the 16, 17 outturn data. Next round, they have that plus some further data around economic determinants, which may well change their forecasts, but it is for them to produce the forecasts with the data that we have available. I think that one of those has got direct supplementary to that. Thanks, James. Yes, thank you. Good morning, Mr Hara. I just wanted clarity around the issue of the number of Scottish taxpayers in table 2 on section 2 of your annual report. You have the figure for all Scottish taxpayers 2.528 million. Does that include everyone who has an S code, or is that only people actually paying tax? In other words, I am trying to capture people who are earning but below the personal allowance level. No, those are only people who are paying tax. There is a larger number of people who would potentially be Scottish taxpayers if they had savings non-dividend income within the taxable range. Do we have a figure for that larger number? I am afraid that James would let you have that figure. That would be helpful, thank you. Willie, am I right that you had a question in this area as well? Many thanks. I wonder if I could refer you to table 1 in your report that shows the outturn figures. I am interested in the breakdown between the Scottish figure and the rest of the UK figure. If you look at the self-assessed tally total layer at 79.76 for the RUK and 4.36 for Scotland, that represents about 5.4 per cent of the share for Scotland. It seems a wee bit in the low side to me. If you look at the next line, the PAYE columns, the Scottish share of that RUK is about 9 per cent. I wonder if there is a wee bit of a narrative behind that and why the Scottish share of that. Those are actual figures, remember. Those are not forecasts. Why would the Scottish share be so low in my view compared to what perhaps the population share might be, which would be around 9 per cent? That will be because of differences in the profile of the Scottish and the rest of the UK tax payers in terms of their sources and levels of income. Who is in self-assessment is not a legislative test that puts you into self-assessment. You are in self-assessment if HMRC feels that that is necessary in order to administer your tax affairs. It will be down to the profile of tax payers in Scotland compared with tax payers in the rest of the UK, how many of them are in self-assessment. That balance will be different, partly because of the profiles of employment versus self-employment and other income, but also income levels. That is one of the determinants about whether we feel that we need to put someone in self-assessment. In your footnote below the table, it also says that the first line includes an element of PAYE, so that first line figure may in fact be even smaller if that were not. For example, I am an employee of HMRC, but I am also in self-assessment. When I complete my self-assessment return, I put my employment income on to my return. In this table, that would have come out in the SA figure rather than in the Peugeot round figure. The Peugeot round figure is really for people who are only in Peugeot round and do not have to complete a self-assessment return, but if you do have to complete a self-assessment return, then your employment income and the tax on it is reflected in the SA line. You are happy that it is completely accurate, because it seems such a quite a discrepancy between the two. If you like it, we can go and get you some proper analysis of what we think. I have described what I believe the reasons for that are. We will see if we can get some analysis to back up what I have told you. Those are two ways of administering tax, as opposed to two different sets of tax liabilities. As you have mentioned, people who are in Peugeot are also in self-assessment, so they are in a different line. We can try to get you some more analysis that explains that. Alex, do you think that you are interested in the consolidation issue? It is still on the theme of the reconciliation and the three-year time lag and the issues with it. I wonder what your views are in terms of having an interim or what can be done to have some sort of interim reconciliation. I see in your report that you mentioned that there is intention for HMRC to publish real-time figures that would obviously improve that ability. That is my first question, but the second bit is around. It talks about this data. Is this just PAYE data, rather than self-assessment data? In which case, would that be more accurate for Scotland, because we have a higher percentage of PAYE taxpayers? Lastly, for the self-assessment bit, is there any possibility of publishing that? I appreciate that the profile of that payment during the year will vary, which is maybe why it is not done. You mentioned that you look at the historical data for payment rates around what is paid late to give you a profile. Is there a possibility of that being improved on so that you can have interim data around self-assessment? A couple of years ago, we introduced a new IT system for Peugeotern and method of collecting payroll data, called real-time information. For Peugeotern, we now have in-year data, which we gathered from employers that we did not previously have. That is supplied by employers every time they run their payrolls. It is generally monthly, but it can be more frequently than that. We have shared that data with the Scottish Fiscal Commission and the Scottish Government to support the in-year forecasting. There are a couple of issues with that. First of all, it does not include self-employed income, which is about 16-17 per cent of the income that you are interested in. Within our Peugeotern codes, we do sometimes adjust for things that are not relevant to the Scottish income tax. For example, if someone has savings income, we may adjust their Peugeotern code to collect that. The amount of tax that is being deducted as you go along through Peugeotern is not always precisely the same as what the eventual Scottish income tax will be. I said a couple, but a third one is that that is based on the S code each month. However, the test for being a Scottish taxpayer is not a monthly test, it is an annual test, so it is possible that we would deduct tax from someone on the basis that they are a Scottish taxpayer in April, May and June, then they would move south of the border and, for that tax year, they would turn out not to be a Scottish taxpayer and, therefore, those first three months of collection would come out in the out-turn or vice versa. Those are issues with the quality of the data that the Scottish Commission and Scottish Government need to take account of, but, nevertheless, we think that it will give a very useful source of data for in-year forecasting. As far as the self-employed are concerned, we do not have any in-year data. They give us their income data on their self-assessment return by 31 January after the end of the tax year, so there is quite a lag in collecting that. Potentially in the future, we will get more in-year data from the self-employed, so we have a new policy that we are rolling out making tax digital for businesses, which involves receiving quarterly updates of data from the self-employed. That launches next April for VAT, but there is already a pilot out there that enables people to do that for income tax purposes as well. In the future, it may well be that we will get in-year data on the self-employed, but currently we do not have any. To summarise that, you can get 80 per cent accuracy in real-time. The real-time information data that we give based on pay-as-you-round will cover about 83 to 84 per cent of the total income that is within the Scottish income tax, but subject to those issues with the data that I mentioned. I think that you were interested in this area as well, am I right? Yes, I think that it's largely covered, but if your permission can be reached a very brief supplementary to some of the points that Mr Kelly was raising. With reference to the provisional estimate of revenue for 2017-18, £11.9 billion, if I'm correct, how provisional is that estimate? That, I think, was the OBR forecast in March. Our own forecast that goes into our trust statement uses a little bit more up-to-date data, because it was done slightly later in the year, but not materially different. However, as I said, now that we have got the out-turn data for 2016-17, which was not available when that forecast was made, you can see that that forecast assumes a level of growth. In Scottish income tax between 2016-17 and 2017-18, which, although not impossible, is unlikely, so I would expect that in the next round forecast that might come down. Thank you for that clarification. Am I right that you had some issues on data as well, correct? I will play about identifying all the Scottish taxpayers. Are you confident that all the Scottish rate taxpayers have been fully captured and that the 2016-17 out-turn data is accurate and that it is a current reflection on reality? You spoke about people who might spend the first three months north of the border and then move south, and that would add additional complexity in it all. I think that we are confident that 98 to 99 per cent we have captured Scottish taxpayers and our data. There is no definitive list of Scottish taxpayers. Obviously, that population moves around a little bit. People come in and out for various reasons, but each year we carry out a big data matching exercise to identify and improve our data on Scottish taxpayers. It starts from a data clash between all of our UK records against third-party data to corroborate the details of tax of individuals. We started with about 47 million records matched by name, national insurance number and so on. In that group, only around 5,000 were identified as having a third-party Scottish address with our records, a UK address, and then around 4,000 had a third-party UK address and our records, a Scottish address. It was a pretty good matching record and we wrote to all of those where there was some doubt over which address was correct. We had quite a good return in response to those letters. More than a third of people responded, which is a high rate for something that they don't really feel they need to do. In most cases, they confirmed that the HMRC address was correct, or they told us what the correct address was and we updated our records. Then we looked at the unmatched records and the Scottish unmatched records, something like 1.1 million. We took out duplicates, we took out those who had moved abroad, and then we took out some who were temporary reference numbers, for example. If someone takes on a new employee and they don't have all the information about them, a temporary reference number might be allocated in the tax system and it's not accurate as to where the person is living. We took out the records of those where there was no tax activity in the past five years. We whittled down that population. After removing all of those groups, we got to about 490,000. We needed to do more work to corroborate. We looked at where their employer was and did they have a Scottish employer with their pay-as-you-one records with a Scottish employer, and about 280,000 had a Scottish employer, leaving 208,000 uncorroborated. Within that number, some of those individuals will be in Scotland, they will be in SA, but we haven't been able to check the address yet, or they will be employed by an employer who is based across the UK. A large employer with employees across the whole of the UK, we wouldn't be able to see from the pay-as-you-one record that the employer was Scottish. Essentially, we get down to something over 96 per cent firm corroboration plus an assumption that, within the remaining small number, some of those will also be Scottish, so 98 to 99 per cent. We repeat that exercise every year. The other part of this is very important—we will touch on it later—is the communication around asking people to tell us if they do move. Most people do without any prompting, but we just keep reinforcing that message that they need to tell us if they have moved address. It's a long process, sorry for all the detail, but we do a lot of work to check the addresses. The detail helps, actually. That works going on, because there were some questions raised at the beginning of the process. I guess that that leads into your area. I was going to ask about some of the compliance issues and your addresses in your annual report on potential behaviour changes around tax changes that are made. You talk about potential cross-border migration, which, in light of the level of tax changes, is unlikely, but what might be more likely is that people have high net worth individuals shifting income towards dividend payments. Is that something that you are giving a close eye on and how you are monitoring that aspect? Clearly, where there is a differential in tax rates that creates incentives, the risk that people will change their behaviour in response to those incentives depends on the scale of the differential, on the scale of effort involved in changing their behaviour and on what the compliance rules around that are. As you heard from a previous witness and what the chances are of being caught if you break the rules. If you assume that Scottish income tax is higher than the UK, which is the case for higher earners, the incentives are that you disguise your identity as a Scottish taxpayer and you pretend not to be a Scottish taxpayer. Jackie's described the work that we do to validate that, or that you avoid or evade the tax on your income by either under declaring it or, as you say, changing its nature from non-savings non-dividend. When it comes to incorporation and changing your income into dividends, some people have got the scope to do that and there are limited rules that prevent you from doing it. In the case of people whose working relationship is employment, there are quite strong rules that prevent them from shifting that employment income into incorporation and dividend income. For people who are self-employed, there are no rules to stop them incorporating their business and then drawing out income by way of dividend. Tax-motivated incorporation is an issue in the whole of the UK tax system as well as in the Scottish tax system because, even in the rest of the UK, the differential between corporate tax rates and income tax rates is there and creates an incentive. On the other hand, the dividend taxation changes that I mentioned earlier that came in a couple of years ago reduce the incentive to incorporate to some extent because it has increased the level of taxation on dividend income. It is a behavioural response that is entirely possible. I think that the Scottish Fiscal Commission has made an estimate of what impact that will have on Scottish income tax receipts but, for self-employed people, there are no rules to stop you incorporating. You will be monitoring on an on-going basis, I assume, whether there is a trend in that direction. You will be able to identify that, will you? We, as a sort of administrative and compliance organisation, in relation to the self-employed, do not have a direct interest in it because it is not non-compliant behaviour. It is something that they are quite at liberty to do. However, clearly policy makers and forecasters have an interest in it and therefore we do supply data that enables them to assess that. A couple of years ago, the OBR did quite a bit of work on the level of tax-motivated incorporation across the UK and its impact on receipts. In the last forecast, the Scottish Fiscal Commission made its own estimate of the impact on Scottish income tax receipts, which is between £5 million and £30 million a year. You will collect the data but ultimately it will be the Fiscal Commission who will express a view on that. Yes, and policy makers who keep an eye on it as well. The dividend taxation changes that came in a couple of years ago were in part a recognition of the fact that, as corporation tax rates come down, the incentive to incorporate grows and that counteracted that to some extent. That is very useful because, if there are some suggestions, there might be a reduction in the corporation tax as part of making assumptions based on what I see in the media. The chancellor may reduce the corporation tax in his budget and that would potentially have a significant impact or some impact on the amount of income tax that is then paid in Scotland, which supports the public services in Scotland. How soon can you pick up from your information about what impact that is having? You might expect that we would be concerned if the amount of income tax taken in Scotland was reduced as a result of a lever for legitimate reasons being used at another place. First of all, the UK Government has set out its road map for corporation tax rates over the next couple of years, going down to 17 per cent. That has already been factored into the forecasts. You are right that it is within its power to change that road map and then you would have to revise the forecasts accordingly. However, at the moment, the forecasts already have baked into them an assumption about where corporate tax rates are going based on the road map that the British Government has announced. If a new corporate tax rate was announced, the economists will forecast what the behavioural effect of that will be. The Scottish Fiscal Commission and the OBR will turn that into their forecast of the impact of tax motivated incorporations. Over time, you would then have to track whether the behaviour matched the forecast and it would take some time for that to come through. People would not go out the next day after an announcement and set up their company. It will probably be the next time they see their accountant. The accountant will say, have you thought about it? It happens over a period of time. It is something that we can track in terms of the growth of company registrations and the growth of the corporate tax base, but it takes time to monitor it. You must have some historical data on that, in terms of the shift that there has been from paying income tax to corporation tax. At this stage, that will be across the UK. The OBR published a comprehensive report on that in 2016, which I will happily send a copy to the committee. I guess the question for me is, would the Scottish Fiscal Commission be able to get a data set for Scotland that would tell me what was happening in Scotland specifically that it would be accurate enough for them to make forecasts as well? I know that the Scottish Fiscal Commission has made a forecast. I need to check what data we can provide as opposed to what assumptions it will have to make and then test later on. It would be useful to know that. Angela, I think that you had issues on transparency. Thank you, convener. Given that anything to do with the fiscal framework is somewhat complex and we would like more people to engage with it and understand it, I have a few quick questions about transparency. There have been instances in the past where fairly fundamental information has been buried away in technical annexes and then the more fulsome information has come out in dribs and drabs. I suppose that the instance that I am referring to is the 1617 global figure, the 10.7 billion figure for the Scottish receipts that was buried away in an annex and then Mr Harrah wrote to committee and supplied further information. I am interested in looking ahead. Will you first publish the 2017-18 non-saving, non-dividend Scottish Income Tax outturn figures? How will you do that in a publicly accessible manner? Will you discuss with stakeholders whether that is the committee, the Scottish Fiscal Commission and the Scottish Government about the timing of that information, how it is best put in context and the method by which it is communicated? We have a commitment under our service level agreement with the Scottish Government to produce the annual report. I am quite happy to discuss with people the format of that and how it is made more accessible to people. The purpose of that report was to make sure that the extracts that are in their voluminous set of HMRC accounts and trust statements are taken out and can be made more accessible, but I am quite happy to look at what more work can be done on that. In terms of timing, that is part of our overall accounts and trust statement, which gets published around June time each year, which is as quickly as we can possibly make it after the 31st March end of the financial year. We have pulled that forward in recent years and we continue to try and do it as soon as we can, but given the scale of what we have to produce, there is limited scope to bring it in much earlier than it currently is. However, this year, as well as the figure for the Scottish income tax, there was also an interest in the figure for the rest of the UK, which we did not produce at the same time. We actually produced that a few weeks later, and certainly for next year we will be able to produce that at the same time, so there will be a comprehensive set. We are also working with the Scottish Fiscal Commission on what further official statistics we can publish around that time on the Scottish income tax. For example, the RTI data that I mentioned earlier that we provide monthly to the Scottish Government and the Scottish Fiscal Commission, I know that there has been a fiscal framework recommendation that that would be published every month and that would be our intention. We are just working through some of those data issues that I described that are not relevant to Scottish income tax but make that data less than perfect to make sure that, when we publish it monthly, we are able to describe that in an effective way. I thank our witnesses for their contribution this morning. It was very useful information that you have provided to Jim and Jackie. I am very grateful to you. I now suspend this meeting to allow a changeover of witnesses. Our next piece of business is to continue our pre-budget scrutiny by taking evidence from the Cabinet Secretary for Finance, Economy and Fair Work. The Cabinet Secretary is accompanied today by the Scottish Government officials, Edin Grieswood, who is the Deputy Director of Tax, Daniel Hines, who is the Deputy Director of Fiscal Sustainability. I welcome our witnesses to the meeting. Members have received copies of the Scottish Government's fiscal out-turn report, which will help inform today's evidence session and deliberations. Before we go to questions from the committee, can I ask the Cabinet Secretary if he wants to make an opening statement? Just to say that, following from the budget process review group, the report was requested. We have tried to make it as comprehensive as possible, but as another first arriving from the new arrangements, we are very happy to take further suggestions to see how we can progress this report in any other workings and understanding of the out-turn. I welcome the publication of the report engagement in it, as it covers issues around reconciliation and the issues in relation to the fiscal framework and transfer of powers, recognising that we took evidence from the chief secretary to the Treasury last week. I met her just the day before her evidence session as well. I am happy to take any questions on the report. Can the cabinet secretary explain what effect the lower than forecast income tax revenues for 2016 will have on the Scottish budget for 2016, 17 and 1718? That was essentially the issue about the earlier estimates that were survey based on income tax. As we move closer to out-turn, we have more exact numbers coming from HMRC and then what the SFC uses. In short, there is no impact on the Scottish budget as a consequence of that particular issue. That said, in understanding the absolute detail of the composition of the Scottish tax base, all decision makers have to be mindful of what that composition of the tax base looks like going forward in policy, but there is no impact on the budget coming from that particular statistical issue to be clear. Given that there are implications in terms of the lower numbers of additional rate and higher tax payers that were estimated going forward, what impact will that have on your policy? Of course, the numbers that we can draw down from Treasury, the numbers that we understand will raise in tax from any tax policy changes. We make cognisant of all the complexities of the fiscal framework, but fundamentally we have a clearer understanding of how many additional rate and higher rate tax payers that we have. That will inform decisions going forward. Decisions are not just what the Government takes, but all parties in Parliament would take and how they arrive at any budget position or policy that they have on tax rates emerge going forward. Because that was the baselining issue, it has no budget impact, but in policy terms going forward you would certainly want to be mindful of that. From the 2018-19 budget that was agreed to by Parliament in February, when the Fiscal Commission later in the year looked at the income tax position, they downgraded the income tax forecast by £208 million. In addition to that, as you have noted, and we have heard earlier from HMRC, there are 5,000 less additional tax payers and 43,000 less higher tax payers. If the income tax forecast in the current budget has been downgraded and stands to reason that there are less income tax payers, that will mean public spending cuts, does it not? I think that we have to our budget. I am trying to be really clear and helpful with the committee. There are separate issues here and we are taking different points of time and different bits of the process. The early baselining issue was the issue that you asked me about, convener, which has no budgetary impact because we reconcile the numbers and we arrive at a main baseline issue to which the UK Government and the Scottish Government work. maen nhw sut mae'n cymhiyntiau, hwnna'n i gynnyddio phobl i dyn nhw'n ei ffordd oherwydd mae'n rчив iddyn nhw. Fy hoffi'r ddiwodd mwyllfa a'iHoldnego? Llei wnaeth voi o'r wych ar gyfer' hwnnw ddiwodd i dyn nhw? Fy hoffi'r dyn nhw, mae'r dyn nhw yn rhaid i fod i ddath o gynhyrch, mae'r dyn nhw'n rhaid i fod o hwnnw dyn nhw o'r ffordd. Ond ychydig yn dda i gael i fynd i lle i'r ddiddor. Rhywbeth yn chi, fel ddigonion, yn ffordd ar gyfer y ffordd. Rhywbeth yn gwneud i ffiscol sy'n gyfrif clwr yn y llwybr, a diwrnoddol i ddau'r byw, ac yn ei wneud i studiaeth erdraeth oeddenedig a phrysgrionol. Focu'r ffordd y ffordd ar gyfer y ffordd yn yr Eistedd yn gwyfodol, ond bach yn hyn oedd ffordd yn ei dweud y ffordd. Rhywbeth yn grwp y ffordd yn gyf aiming i'r bach, ac mae'n rhes gymaint, SFC forecast is also subject to change. For example, the GDP stats are different to what the fiscal commission had estimated in our favour, in Scotland's favour. What that will mean taking an isolation already, the forecast that they have around what might be raised around income tax, just taking the GDP element in isolation will enhance the position as reported by the fiscal commission, so I respect it. It's complex and it's dynamic, but when we get to the budget, the Scottish budget will have the numbers from OBR and will have the latest forecast from the SFC, and it will be informed by more up-to-date data. I think that all of that is helpful. Again, back to your original point, convener, we now know that we have fewer additional rate and higher rate taxpayers than we thought in earlier years. That has all been addressed in the base-lining issue, but policy makers should think about that in determining their propositions going forward into future years. That's about as clear as I can be on that matter. If you have less taxpayers going forward and less revenue coming through, particularly at these higher rates, then, when you cite your budget for 1920, you're going to have less in that tax envelope, and that's going to feed through to cut some public services? No, convener. That's the policy outcome. If you maintain your tax at the level that it's at currently, I'm trying to be as helpful as possible, but if we understand the fullest possible workings of the fiscal framework, the block grant adjustment and all the elements that go along with it, it isn't actually as simple as that. What we do is relative to what the UK Government's doing in their tax policy. I'm trying to describe where we are in the composition of the tax base. If I had adopted, for talking sake, convener, to help Mr Kelly, the proposition that was put to me by the Labour Party at last year's budget, yes, I would have been more heavily reliant upon additional rate and higher rate taxpayers, so, yes, the composition of the tax base is really important in arriving at the tax decisions that you take, but it's driven by the Scottish Fiscal Commission, of course, forecast on understanding of our policy. I understand the point. If we have fewer taxpayers in a particular category of marginal rate attacks, that has implications for the outcome, but the historic issues have been redressed because it was about the base lining to which we were all working. Of course, the starting position of the Scottish budget is the block grant. All the other adjustments then come after that. I hope that that is more helpful. Final question, convener. What is your view then? What is going to be an approach to tax going forward? Bear in mind these challenges, someone who has outlined your view on tax policy. Are you minded to keep it at the same level? Are you looking at any changes? I know that this is pre-budget scrutiny, but that is somewhat bold, convener, to ask me what my tax plans are in advance of the chancellor outlining his tax plans. It's a very fair question and it's a nice attempt for me to reveal the tax position going forward. That really would be bringing pre-budget scrutiny to a whole new level, convener. I think that the committee is very well cited on the process that I have to undertake. The position of the UK budget is a huge fiscal event that impacts on the block grant, the block grant adjustment, as understood by the OBR SFC forecast. I will work my way through all that before I present to Parliament what our tax plans are. Again for the record, cabinet secretary, the baseline is now being established. We just confirmed that it is from here on that the relative rates of growth rates from the baseline will be the important issue, not the information that has already gone past. That's what actually matters. That's the divergence that's the issue, yes, not the starting baseline point. Adam. Thank you for those answers, cabinet secretary, which I think were very clear. I want to move on to the issue of borrowing, which is dealt with in chapter 5 of your report, and I hope that your answers will be just as clear here as they were earlier this morning. You say in your report that in total the Scottish Government—I'm talking about capital borrowing in particular, cabinet secretary—in total the Scottish Government will have accumulated £1.459 million of capital debt by the end of 2018-19, which you say is, and I quote, well within your overall £3 billion limit. That's true. It's also true, as you report later on in the chapter that the Scottish Fiscal Commission has judged these levels of borrowing as being compliant within the term set out in the fiscal framework and also as reasonable, but isn't it also the case, cabinet secretary, that if you continue with that level of capital borrowing for the next few years—and you haven't said, of course, whether you propose to do that or not—if you continue to draw down your maximum annual allocation each year and continue to borrow on the basis of relatively long terms, such as 25 years, you will likely run up against your borrowing limit by 2022? That analysis is correct. Is that what the Scottish Government proposes to do? That is not my proposition. Would the cabinet secretary not say any more about what his proposition is likely to be? I know that Mr Tom can ask for clear and concise answers, so that was clear and concise. I can now go into greater detail. I think that proposition, if I do draw down at that level, is right. Of course, we hit the cap. I was able to outline some of that in the medium-term financial strategy. I haven't set out the longer-term capital plans in the programme for government announced by the First Minister. It was an indication that we want a national infrastructure mission. I think that we all support in this committee the investment in the infrastructure that we'll invest in today, help support our economy and prepare us for the future as well. I think that the Parliament as well as the Government will have choices to make about how we invest in our infrastructure and how we fund that as well. It can be a mix of investment in our infrastructure that can achieve our infrastructure needs as a country. Of course, we use our capital borrowing powers as well as our resource borrowing powers, but our capital borrowing powers in relation to that question responsibly. If the Chancellor—I am not much clearer on this—if there is a comprehensive spending review in spring next year, that might give us the ability to set out further multi-year budgets in terms of capital. The resource budget has, of course, been one year, so it has capital, but I think that it would be helpful for everyone if we were able to set out multi-year capital budgets. I think that I will be able to give more detail, hopefully, at the Scottish budget and beyond, but some of that is contingent upon a multi-year settlement from the UK Government to understand what capital that we have. However, we will want to use the capital borrowing powers wisely in a way that gives stability and stimulates the economy, but there can be a mix. To invest in capital—to invest in infrastructure rather—it doesn't necessarily just have to be that capital borrowing powers that are used. There are other levers that can be used. I thank the cabinet secretary for that answer. The cabinet secretary is clearly right that some significant choices confront both you as a Government and us as a Parliament. You have indicated that you do not want to run up against that £3 billion cap by 2022, which indicates that, in future years, your priorities with regard to capital borrowing are going to be different from the priorities that they have been in the past two or three years where we are on that trajectory at the moment. I am not asking you to give details as to what it is that you are going to be proposing in the budget, but can you enlighten us a bit about the structure and nature of your thinking about the kinds of factors that you will take into account when deciding when and how to change course from the current trajectory? I will not describe it as changing course as such, because I was clear in the medium-term financial strategy for a further period of what borrowing powers should be used. I am genuinely reflecting on the point that we all want to continue with the infrastructure investment. There are huge capital demands, huge call on resources, but there is a mix of levers that can be used to fund infrastructure investment. In this pre-budget scrutiny, I am being clear with you, we have used the borrowing powers as outlined to stimulate support of our economy. I hope to set out longer-term plans on capital. I have done it on some substantial commitments, save for early years to local government on a childcare commitment or on housing investment, resource planning assumptions or in digital. There is a £600 commitment on digital, but how that is funded is absolutely something to be transparent about and returned to Parliament over the course of the budget. However, what I have been clear on is that we want to use the borrowing powers responsibly. Of course, we return to the review of the fiscal framework and engagement with the UK Government on what our arrangements are, what our limits are, what our borrowing powers are and every other part of the fiscal framework is part of that review, leading to 2021. However, I am trying to reassure Mr Tomkins that I am looking at the range of levers that can be used to invest in infrastructure but to use our borrowing powers responsibly. That is helpful to a degree. In order for the Parliament to engage in effective pre-budget scrutiny, I think that it would be helpful if we could get a little bit below the top line. We know that there are a range of levers. We know that there are a range of financial devices. We know that capital borrowing is not the only tool that you have in your toolbox, but you have not been any more specific today with respect than you were last time that we talked about this a few weeks ago in terms of how you propose to use that different range of levers that you have available to you. In order for us to be able to do our job effectively in terms of pre-budget scrutiny, I think that it would be useful if not this year than in future years for us to get a bit below that top line. However, there is one outstanding top line question. Do you anticipate that, when it comes to the fiscal framework review, you will be asking the UK Government to raise that cap above £3 billion? It is a premature question, but I would always as a Scottish finance secretary, as any finance secretary, would want as much flexibility as possible. There are prudent limits that we have imposed in terms of resource spending as part of our budget, the 5 per cent self-imposed rule. We will always act prudently, but the borrowing limits for the Scottish Government are set in that agreement. It is a premature question to say what I will be asking from the UK Government in those discussions. Incidentally, I would want to revert to the committee first to get the committee's view on how we should engage with the UK Government in that review, and I am sure that you would want to be part of that engagement process as we review the fiscal framework and the written agreement. I am a Scottish nationalist, I want Scottish independence, I want as much normality as any other country in the world in terms of the borrowing arrangements that we can deploy. However, what I have at the moment is an agreement with the UK Government, and, of course, we will return to that at some point in time. I understand Mr Tomkins' desire for more detail around the capital budget going forward. I understand that, but for me to present that, the budget is the most appropriate time to do that bit, when that is the point that I outline my plans therein. However, I was able to cover some of the parameters in which we are working in the medium-term financial strategy. In this paper, in terms of the borrowing pages that Mr Tomkins referred to, I outlined some more of the detail beneath the headline commitment. I know that Mr Tomkins wants more on what the future looks like, but I can really only return to that comprehensively at the next big fiscal event. The major shift since the last time I was before committee was the national infrastructure mission, in which we outlined that commitment to leave in more finance to take our infrastructure investment to internationally competitive levels. That would require a range of financial tools to be able to deliver that, and, of course, that has to be transparent. Emma, I think that we have probably got to the area of your question a bit sooner, and I expect you to rather than come back to it later on and come back to the subject. Do you want to ask your question now? Sure. Thank you, convener. Good morning, cabinet secretary. Adam Tomkins has just talked about repayment of borrowing and resource repayment. Capital borrowing is over 10 years repayment, and repayment of resources is 3 to 5 years. I am interested in whether it is reasonable that we should be required to balance the budget annually despite the increasing dependence on tax revenue forecasts to determine an annual spending limit. Would it not make more sense, because the way that the budget spending repayments is over 3 to 5 years or 10 years, would it not make more sense to have the same flexibility as other Governments to balance the books over a longer period of time so that maybe the introduction of statutory fiscal rules could be applied? I suppose that partly touches on the point that I was just making, convener, to be fair, that, as a devolved administration, we are working within the framework. Yes, the arrangements we have signed up to, but sometimes it does feel as if we are working in a somewhat constrained fashion. Some fiscal rules we have imposed on ourselves to show good governance and that fiscal restraint, the 5 per cent rule around resource spending on capital, for examples, and we are well within our borrowing limits. We are showing a prudent approach, but independent Governments around the world can enhance their borrowing and should do it in a prudent and ffiscally responsible way. The UK Government right now has a degree of fiscal headroom. It is up to the UK Government how it chooses to use that. We have made points about how it should use that to turn the tap on in terms of spending and that would help to stimulate the economy, support of public services and, of course, devolved administrations would be part of that as well. Yes, I would appreciate more flexibility, but that said, I am working within the arrangements that we have agreed and I am trying to get on with. I was trying to follow a particular route earlier, but it is inevitably going into a slightly different route than I expected. I am trying to get the flow going then. Tom, Patrick, because I think that it is all playing into the same area now. Thank you, convener. It is a supplementary to Emma's question. In its regards to flexibility, the fiscal framework was a product of the pre-Brexit era and, as things stand at the moment, it seems as if we are heading towards a hard Brexit, which Sir Anton Muscatelli described as representing the most unhinged example of national self-sabotage in living memory. Do you believe that there is enough flexibility within the fiscal framework to contend with those particular shocks and damaging effects that a hard Brexit could have in Scotland, given that, for example, for Zavallander, it is estimated that between 13,000 and 80,000 job losses, and in the case of a no-deal Brexit, the Government of the Bank of England is estimated that house prices could fall by up to a third? Convener, that is an excellent question. I do not think the fiscal framework. I do not think that the agreement envisaged those circumstances, and therefore I do not think that there is enough flexibility to deal with such a shock. That said, the shock could be to the whole of the UK. It might have a disproportionate impact on Scotland. We have seen some of the evidence around that, whether it is working-age population, impact on GDP or a whole host of other matters. As it stands right now, the GDP statistics were outperforming the rest of the United Kingdom, contrary to what the Fiscal Commission forecast that I just gently throw in there. Some material consideration. The issue for us is how we could respond to those challenging economic circumstances. It is true to say that Brexit was a bit of a Tory gamble, then a guzzle. Now it is an act of economic self-harm. We need to see where the negotiations get. I will not focus on Brexit today, other than to say that the parameters of flexibility that we have are somewhat constrained and limited in those circumstances. I hope that we can continue to grow our economy and enjoy success, but it is somewhat challenged by the threat of Brexit right now. I am working within that agreement, but if you look at some of the parameters that constrain us, for example, on what was budget exchange, the Scotland reserve, how much I can draw down, even if we have it in the reserve and constrained, as what can be drawn down, even if we have it in our resource. I think that that is a challenge. Those are matters that we will return to as part of the review that we have agreed to, but, yes, it is a very challenging environment at the moment, with the threat of Brexit looming large over us. Patrick, I hope that we have not got too much into the territory that you wanted to cover. No, it is fine. Thank you, convener. Good morning. The review of the framework that you have touched on briefly in discussion with Adam Tomkins, but I am interested in talking about how that review should take place and what the early thinking is on the nature of it, the way that it should be conducted. As things stand, and the current plan is supposed to take place towards the end of this parliamentary term, I would like to suggest that it might be difficult to get any consensus if that is happening in the months immediately prior to an election. Some earlier upfront engagement on the broad approach to it might be useful that the chief secretary of the Treasury did not seem very interested in getting into that discussion last week. I am wondering whether the Scottish Government is yet giving any consideration to how it should happen. Obviously, I would hope that we would all agree that it should not take the form of the UK Government reviewing and then imposing its solution, but it will not be simply a matter of the Scottish Government saying what it thinks should happen. How do we get an open, collaborative, participative process that does not repeat the break-neck behind closed doors process of the Smith commission? I appreciate the question, convener, and the way in which it has been raised. I want it to be a collaborative process coming from the Scottish Parliament, as well as the Scottish Government. Of course, that review is some time away, and the pressing issue on me is delivering budgets year to year and the circumstances therein. However, it is fair to say that I think that the agreement and other members who are present were in the room will know that we have to have an independent review that informs the dialogue and decisions by the Government. The Joint Exchequer Committee between the Chief Secretary of Treasury and myself has not touched upon the review yet, but in the meeting I had with the chief secretary to the Treasury, I think that I underlined the point that because of some of the circumstances that we have touched upon, the volatility, the economic challenges that the UK faces, and some of the specific issues that we have in Scotland, the chief secretary continues to be mindful to be flexible on matters when we can show evidence that there may need to be a change of approach. The chief secretary was open to that. What I am indicating is that, short of the review, we can still have a consensual basis on which we can address issues. The chief secretary said to me that she was certainly open to that, but the overall fundamental review was my understanding that it was to be one full Parliament's worth of implementation and then delivered the review, because of substantial issues at stake here, including the model that is used to indexation, for example, or the limits or the other arrangements around our powers. It is something that we will all have to give time to reflect on, and I want to do it in a collaborative way. I am open to further discussion with the committee on that regard. I make the suggestion that there ought to be some good agreement between the two Governments, and hopefully with the input of the Parliament by this time next year, not about the whole detail, but about how that is going to be taken forward and what kind of timescale there will be for public involvement, for transparency around it, for open participation and for other stakeholders to comment. If we get into 2020, if we go past 2019 and into 2020, the atmosphere will inevitably become pre-election, perhaps a little bit more battle lines being drawn and less space for any kind of discussion about this. I appreciate that point, Cymru. I will certainly take that up. I think that analysis of the politics and the heightened political sensitivities is fair. I am not sure that will be top of the treasuries list of things to do at that point in time, so I am happy to post-Brexit negotiations, pre-Scots Parliament elections, to make sure that we have the space, the time and the opportunity to do that right and in a transparent fashion. Angela Constance, that plays into the area that you were interested in as well. I wanted to discuss with the Cabinet Secretary about relationships and working together. The Cabinet Secretary is perhaps aware of the Public Administration, Constitutional Affairs Committee at Westminster that produced a report in July. That concluded that, 20 years after devolution, Whitehall still has not really got with the devolution programme, and that is evidence in their structures and, crucially, that they are cultures of working. They also concluded that the lack of appreciation and understanding about devolution did not just go against the principles of devolution, but was also contrary to good governance across the UK. Last week, we heard from the chief secretary who, in fairness, described some of the structures in which, in particular, HMRC worked with the Scottish Government, and she talked about some of the other mechanisms. She was obviously positive about relationships and the existing structures to assist with communication. I wonder what your perspective was on the existing arrangements. Can we, Ms Constance, ask a good question? It depends on the minister and on the civil servant—maybe that is true of every Government—but in relation to the matters that I deal with, there has to be the structures in place of the Joint Exchequer Committee, the Finance Minister and the Quadraterals. We might disagree over policy, but when it comes to the fundamental workings, we try to get on with what is agreed, because it is important that people have confidence in the competence of tax collection and the devolution of powers, be it financial arrangements or anything else. As Angela Constance is well aware, sometimes some of the detail can be very difficult, whether it is in social security, transfer or other powers, sometimes to get everything that the Scottish Government requires. There is a sense that sometimes the UK Government does not get devolution, but there are education processes within the civil service to try to make people aware of devolution and those issues. In relation to those workings, I have vehicles to raise ministerial issues and officials have working arrangements as well. I was watching your evidence earlier on, convener, and probing HMRC, for example, in the release of data that, say, the Scottish Fiscal Commission requires. Although the Scottish Fiscal Commission is independent of Government, we want to support them in getting from HMRC and others the data that they need, so we apply pressure when required and where we can. We are trying to get as much competent understanding of devolution as possible so that we can get on with what is agreed. The politics can be radically different, but sometimes the understanding and nature of devolution does depend on the minister and the civil servants involved, if you want me to be totally frank. However, a greater appreciation of devolution would be helpful. I have clearly expressed to the UK Government what helps us and what does not help us in terms of the budget cycle, for example, because it is totally and materially important to the decisions that we take. I do not know if that is of some assistance. Just if I could follow up very quickly, convener, in fairness, I would be interested to know what specifically you would wish Whitehall and your experience to do differently, but also what we or what you in the Scottish Government could do differently as well, bearing in mind that it takes to its angle. To be as concise as possible that devolved administrations have that mutual respect that is treated as another Government within the United Kingdom rather than as another department or sub-department of Whitehall, that is how the Scottish Parliament, the Scottish Government should be perceived as a nation, as an equal within the arrangements of the United Kingdom and therefore be given our place in that regard, rather than sometimes it does fuel as if all the devolved administrations would share that view. I am very close to the finance ministers. Sometimes a department of Whitehall or a sub-department of Whitehall that has to be managed. No, we were meant to be partners within those arrangements if you want to be as concise as possible. How would I like to be treated as equals to the arrangements of the United Kingdom? Which Government do different? If we had independence, we would be certainly seen as an equal to the UK Government. The short of that is to try and progress the commitments that we have in terms of the ministerial arrangements that we have and then the UK Government's understanding of what we are doing in Scotland. We all understand that, for us to get on with the transfer of powers, we need the operational arrangements to work clearly, whether that is around providing data, whether that is around providing access to the necessary officials or allowing us to get on with resolving some of the outstanding issues would make us be able to maximise what we have agreed around devolution. As you say, the place that I would raise any dispute would be through, as finance minister anyway, the finance minister's quadlateral or the Joint Exchequer Committee, or directly with the chief set of treasurer, chancellor or other ministers, as I have done. So I would raise any concerns directly with them. The other ministerial arrangements have not worked particularly well to go wider than just my own brief. The Joint Ministerial Council around Brexit negotiations, the Scottish Government most definitely has not felt well involved in that regard, but when it comes to finance, I try and get on with it. I can just press you a bit more, cabinet secretary, because you actually did not answer the question. What would you do differently? In terms of how the Scottish Government, how you operate to improve relationships, that was all about what others can do. I do not think that the Scottish Government can improve on what we do in terms of the— No, convener, in all seriousness, I do not have any complaints from the UK Government other than they disagree with our constitutional position. I am not aware in terms of what I could do differently or what is recommended I do differently with the UK Government to try and progress matters that we have before us. I can tell you what I think the UK Government should do differently as to the question if the committee has suggestions as to what I should do differently to engage with the UK Government. I am interested. One element of change that I do not know if the chief secretary highlighted in her evidence session though is in recognition that some of the Joint Ministerial Council arrangements, or the Joint Ministerial Committee arrangements, have not worked as well. They know the displeasure of the devolved administrations in that regard, is that we are looking at a new forum for the finance ministers. That is the finance minister's quadrilateral at the moment. Of course, the Northern Ireland Executive is not operational right now, but that aside, we are looking at the meeting of finance ministers to be part of the existing ministerial arrangements. Again, convener, you are asking me to say what I could do differently, and you are asking why I do not answer that question. You need to tell me what you think I should do differently. I will send you a list. Are we getting to some specifics now? I think that Willie and Neil were interested in the APD and VAT issues. Thanks, convener. Cabinet Secretary, could you clear up this issue about the air departure tax? It was raised last week by the committee. I think that it was Neil that raised it. Liz Truss said that there was no approach that she was aware of by the Scottish Government to the UK on the matter of air departure tax and how it affects the Highlands and Islands exemption. You have written to this committee just yesterday. Could you just clear up for the committee exactly what the position is? The position, convener, is exactly as I have repeatedly reported to this committee. Fortunately, I have written communication to prove it. I will give it. I know that some committee members accuse me of misleading Parliament, and I think that it is unfortunate that the reality is that I have been totally accurate on this and other members will have to reflect on what they have said. I can give you, in terms of the question, have I ever approached the UK Government around the need for notification of European union? I have correspondence that I can share with the committee, but I have a letter here from Mell Stride MP who, at the time, was the Exchequer Secretary to the Treasury, I think, or the Financial Secretary to the Treasury. The reason is that UK ministers have changed portfolio in this a few times, so maybe the Chief Secretary to the Treasury didn't know because so many other ministers have been dealing with it. In a letter to me on 19 July 2007, I will read it out because it is pertinent to the question, in our conversation, you expressed your wish to notify the European Commission formally for a Highlands and Islands exemption for your new ADT. I want to reiterate the serious concern that I expressed in our call about this approach. I am afraid that I have a series of letters, convener, where, as I have described to the committee, I highlighted the issue of concern. We wanted a resolution from the UK Government, and I have a list of correspondence that backs up what I have informed the committee. The UK Government, to give a whole answer, said its reservations about notification for the reasons that we understand. We didn't think that it was compliant with EU rules, and therefore they didn't want to proceed with notification. The committee then wrote to me and said that, if the Scottish Government takes on the liability, bearing in mind that that is historic non-compliance, it might approach Europe. Convener, would you seriously expect me to sign up to take on the historic liability for potential non-compliance of an EU commission matter? Of course, you wouldn't. What we focused on then was what a resolution can we get to the air departure tax issue, and, as I say, I have a correspondence trail that backs that up. I am trying to be fair to the chief secretary to the Treasury. The financial secretary to the Treasury has dealt with this issue, the exchequer secretary to the Treasury has dealt with this issue, the economic secretary to the Treasury has dealt with this issue, and I have consistently dealt with this issue. If the committee wishes to see further correspondence, so be it, but I have been totally accurate to this Parliament. Is it the UK that haven't made an approach to the European Commission about this? To be fair, only the UK can, because the UK is a member state. The Scottish Government can't seek notification, only the UK Government could do that in any event. I approached the UK Government to say here is a way forward, they said they were reluctant to do that. Understanding the impact ultimately that this might mean for the airlines in Scotland, let's say they had to pay back any support. It would just have a horrendous impact on the highlands and islands, therefore we together in partnership tried to work on other ways to resolve this issue, and I've put forward other suggestions such as using the rates and bans, for example. We have continued to work on the issue, but it's just true that I can prove it. It's just not true to say that I didn't approach the UK Government around notification. They have written back to me in those terms, convener. Is there other APD issues before we get to VAT, Neil? In your letter to the committee yesterday, I would like to put on record the suggestion that there has been no engagement with the UK Government on the issue of notification is simply untrue. There is, of course, an important distinction between the Scottish Government engaging with the UK Government on ADT and the Scottish Government making a formal request that the UK Government notify the European Commission. You've just mentioned that you wrote to the financial secretary to the Treasury. Can I formally request that you do provide the committee with that letter and any other relevant letters and emails that you've sent? Okay. Thank you for that. You've also said that the Scottish Government doesn't want to take on the liability of the risk of the UK Government notifying the EU Commission, and you said that the UK Government made an assessment of that. What assessment is the Scottish Government made of the chances of the European Commission approving an exemption for violence and violence? First of all, again, there's an issue about legal advice here, but it's in the public interest and I think now probably a number of people are quite aware. Our assessment is that it may well not be compliant. Therefore, you're asking for notification for something that you think might well not be compliant, so that's our assessment. Okay. Is either a case to be made or not to be made, and you seem to be saying that it may not be compliant? Is that your assessment? That's my assessment. Okay. As I said before— Incidentally, I think that it's UK Government's assessment too, which is why they haven't notified. Yeah. Well, as I said before, there's a distinction between engaging and formally requesting, and I don't think that distinction has been— Well, let me be clear, I formally requested in a letter and they responded to me in writing. You have been happy to give the impression that you want to find a solution as soon as possible, but you're not necessarily supporting the actions to find that solution as soon as possible, because, as Patrick Harvie said last week, it would make your budget process harder. Last week, the Treasury said that they were working with the Scottish Government in developing options for devolving APD and delivering an exemption for the Highlands and Islands passengers. Can you tell us what alternatives to notify in the EU commission you are working on? How serious are you about those alternatives, and when is air departure tax likely to be devolved? Convener, on 17 July 2017, I wrote to Mel Stride who was then financial secretary to the Treasury. I said, as you know, under APD there is an exemption for all passengers flying from the Highlands and Islands airports, however, as we discussed, and careful and detailed consideration of legal advice has been clear for some time that an exemption needs to be notified and approved by the European Commission under state rules before it can be implemented for ADT. Again, just further written evidence to the point that have I raised it with the UK Government. It was clear on that. It was then the letter that I referred to that replied to my point, my subsequent conversation. On the other matters, I would just be wondering if Neil Bibby maybe wants to reflect on the information that he has put in the public domain that is inaccurate, but in terms of my attempts to resolve that issue, we have been working very hard on that. The current arrangements for air passenger duty, of course, are being delivered by the UK Government. If they want to reduce the rates, they can do so now. To rehearse that issue again, convener, we cannot implement laws in Scotland that are contrary to EU law. We do not know how the world changes post Brexit, but as it stands right now, we cannot continue the Highlands and Islands exemption like for like. Now, it is an aspiration to do that, because to impose the tax for the first time on the Highlands and Islands, we will have, I think, the terminology used by High All as catastrophic impact on the Highlands and Islands. That is why this issue is so important to have resolved. As far as I know, none of that was raised through the course of the Smith negotiations, the fiscal agreement. That was all new to us at the point of trying to implement the tax in Scotland, the air departure tax. Generally, with the UK Government on identification of an issue around state aid notification, we have genuinely tried to find a way through that. However, it is the UK Government's member state that has to pursue notification. It is short of that issue being resolved. There has been no other suggestion from the UK Government that works that would be compliant. One suggestion that I made to the UK Government, which would substantially resolve the issue, would be for them to allow us to use the powers under the rates and bans, particularly for short-haul flights. However, that would require a zero rating for all of Scotland, and that comes at our cost. However, that would breach the no detriment principle within the Smith agreement, so we are at an impasse with the UK Government. Pass that, what have we tried to do about it? I have set up a Highlands and Islands working group so that all interests can come together to see whether there are any other ways forward in that regard, recognising that there seems—I thought there was a consensus to try and address a Highlands and Islands exemption issue so that there is a like-for-like exemption going forward. I am happy to share the membership of that working group with the committee if that is helpful, is going through to try and exhaust the issue to see if there is any other way forward to try and address that issue so that we can in a satisfactory manner take on the devolution of the tax. I was asked for the detail, and I have tried to provide that. We are working very hard to try and resolve that issue, but I am not going to sacrifice the Highlands and Islands of Scotland by imposing the tax upon them when we are generally trying to work on a solution to that issue. I have inherited a problem from the UK Government, and I do think that there is some responsibility on the UK Government to find a solution here. I know that you were in the last discussion, so I will let you in here very quickly. You were also asked when is it later that they would have evolved? Well, I cannot answer that, because the solution has not been found yet. Willie, do you have some stuff on VAT as well? Yes, thank you, Bruce. I was hoping to ask a question about VAT. Cabinet Secretary, last week Liz Truss said that it was a good time to be talking about the fiscal framework and asked if it was a good time to talk about the possible future assignment of VAT to Scotland. As you said, we have a lot on our plate at the moment, and let's exist in power's bed in, which is fair enough. Post-Brexit, the reason that we couldn't assign VAT as understand was that the European Union wouldn't allow different rates within member states, so post-Brexit, there's no real reason as to why VAT couldn't be fully assigned to Scotland. So, convener, to be clear, it's a good point that all that's been assigned is the assignation of VATs that we're saving up power around rate setting. I think that the power would be more useful, but that's not in the agreement, it was the assignation. The issue around assignation—again, of course, Mr Coffey makes a fair point, the world has changed, Brexit circumstances mean the constraints upon us, upon the UK, on varying rates, so we'll be assuming that there's an arrangement more flexible. However, the assignment issue that we're facing is around the methodology that's published and how we think we arrive at the number. I know that the committee has considered before some concern around essentially estimate-to-estimate. On VAT, we never get an out-turn figure on, like income tax or other devolved taxes, because its estimate-to-estimate is quite challenging and could be quite volatile. I do continue to have concerns about that. We are still trying to stay true to the agreement. I have raised that with the chief secretary to the treasury around my concerns on the volatility. Maybe there will be an opportunity to revisit the issue. We'll publish the methodology shortly, but there are still outstanding concerns about the fact that it's estimate-based. I think that I saw the chief secretary to the treasury and evidence to the committee to rule out any other administrative alternative. We want to make sure that the estimates are absolutely robust. I would say to the committee that even though there's a transitional arrangement, I think that one year's data is probably insufficient, especially when that year will be subject to Brexit turbulence as well. I think that we possibly have to look at a longer time frame to understand the impact of what's happening in relation to Brexit, the economy, VAT receipts and so on. I think that we have to take the time to get that one right, convener. I have flagged that up to the chief secretary. I want to ask a question about LBTT, but I wonder if I can just ask a follow-up question on the APD issue that we've just touched on. You said, cabinet secretary, quite fairly that the issue hang on whether there should be a notification to the European Commission of the High Lease Isles exemption. Treasury had said that it would do that, but only if the Scottish Government took full liability for all the risks, both historical and future, associated with that. That wasn't acceptable to the Scottish Government. If the Treasury were to say that they would agree a referral, but only if you accepted responsibility for future risks, would that be acceptable? First of all, we're running close to the clock on Brexit anyway, so we ask a notification from an organisation that apparently we're leaving. I think that the chief secretary, when she came last week, said that she expected that any future arrangement with the EU would include an element of us adhering to state aid rules. The track depends on what state aid rules are. Of course, all this is subject to negotiations, so in fairness, I'm been asked a hypothetical situation without knowing any of the legal parameters, so it would be ill-judged to me to try and set it on. I'm generally trying to be as helpful as possible. If there were future liability issues, the problem we would still have, if the legal advice that were not compliant cannot be passed in the Scottish Parliament. I would still do not pass school. The law officers would not allow it. That hypothetical situation doesn't even get past the consideration of the law officers. Something would have to be compliant for us to be able to take it forward in a legislative fashion in the Scottish Parliament. What you've said is that this whole question of who has the risk therefore is irrelevant. Even if the Treasury did underwrite the entire risk, if the law officers tell you that there's a compliance issue, you couldn't proceed. If something was illegal, yes. If the risk therefore is irrelevant. We are in the bounds of total speculation of a hypothetical situation, but if there was some way around it that addresses the legal compliance, the fiscal problems, the historic legacy and any risk of going forward, would I like the power? If we can resolve all of that, it makes it more attractive than where it is right now. Hopefully, the Highlands and Islands Working Group will come up with a more practical solution than the one that's been presented to me by Mr Fraser. Okay, thank you. That wasn't the question that I was going to ask, but I'm relieved. I was going to ask you about LBTT. There was an announcement on Saturday from the Prime Minister that the UK Government is publishing a consultation on changes to SDLT, looking at introducing a surcharge on SDLT for non-UK resident purchasers of property, and suggesting that this will be between 1 and 3 per cent of the surcharge. Now, I appreciate that this is only a consultation, and it's very early stage, and I don't expect you to reveal at this stage what might be in your budget. But if the UK Government proceeds down this route, is it something that you think Scotland should follow suit on? I genuinely can't answer that question without seeing the detail, but I will advise the committee that I've asked the information from the UK Government to see how they think it would work. Of course, I would look at the contents of the consultation. Of course, understanding the nature of the fiscal framework and the relationship we have, if they do something on LBTT and we don't match it, then there's a financial outcome to that. Of course, I have to look very closely at what they're proposing. Once I have the detail, I'll certainly look at it, and as soon as I saw the announcement, I had no earlier awareness that the announcement was coming, so I'll certainly react to it when I have all the information before me. Tom, I realised that there were potentially questions in the earlier session that you gave in the supplementary. Was there any remaining things that you wanted to ask? It was just very briefly. Cabinet Secretary, you spoke earlier how the Scottish Government supports the work of the Independent Scottish Fiscal Commission, for example, when pressing the UK government, or pressing HMRC, rather, to provide sufficient data if that is required. Are you satisfied at the level of data and robustness of the data that is provided by HMRC? Is there sufficient data on, for example, non-devolved taxis such as income tax from dividends, which can act as an indirect indicator of behavioural change, such as people shifting their income from income tax to dividends? There are many elements to that question. Fundamentally, I ask officials, are we assured that the SFC has the data that they need? They have been clear on some of the data requirements that they require. We are working through that, and we are trying to support them to get what they need from HMRC. I was watching the evidence from HMRC earlier as well, and, of course, they described a level of accuracy on income tax to about 98 to 9 per cent. We have a service-level agreement with them, and they described comprehensively how they identify Scottish rate tax payers. Beyond the compliance issues that Mr Fraser raised into the wider issue about, do some people then go for incorporation, to pay incorporation tax rather than income tax, rather than saving non-dividend income, we will have to watch that closely to see what the behavioural effects are. That said, the Scottish Fiscal Commission makes an analysis of what the tax behaviours are and quantifies them. It will have to look very closely at all the relevant data to make sure that they feel that they are robust in the assessments that they are giving us. It is notwithstanding everything that you heard earlier, the income tax figures that we have taken into account and the behavioural impacts of our policy as well. Concludes questions from the members. I thank the cabinet secretary and she is officials for the reverence. At the start of the meeting we agreed to take the next items in private and now suspend this meeting to allow the witnesses to leave. Thank you, cabinet secretary.