 Smyth i rwynt ei wneud am y ffordd gwrs mewn i'r Feinnans Coffinus Gwylwgr yn 2015. Mae'r peth ddewid o gymhau pryn PhDol yn gweithio ar gyd o'r amlaes cyffredinol o'r cyd-rwynt o'r ddechrau oedd ymgweithio cyngorau ei wneud â'r argynniadau deiligol a'r cyfrifiadau o'r ffyrdiol yn yr Sgolwll Ffysgol. Mae'n τηempwg ar hyd yn ni oedd o'r nhw'n ddechrau. Fy passa'r peth, oedd dasgwch wedi'r cyffredinol yn ei bod yn teimlo i'w Mary Spowage, head of national accounts, and Simon Fuller, deputy director of the office of the chief economic adviser. Members have received a briefing paper from our witnesses, so they will go straight to questions from the committee. The normal procedure is that I will open with some questions and I will open it to the session to colleagues around the table. First things first, in terms of your written submission, your very first sentence and the very first paragraph says, and I quote, economic statistics are an essential source of information for policy makers and government, parliament and the media, and academics and researchers, and I'm sure that everyone here will agree with that. However, numerous witnesses to this committee in recent weeks and indeed over years have expressed concerns that we do not have enough high quality data, so how would you actually remedy that? Thank you for giving us the opportunity to talk about the economic statistics that we produce. There are challenges in producing comprehensive economic statistics for Scotland. I would say that the national accounts, which is what my area of responsibility covers indicators that describe the Scottish economy, so things like gross domestic product and the flows of goods and services around our economy. Historically, there weren't very many indicators produced about the Scottish economy. There has been, for many years, index of services introduction, but it was only post-evolution that we started to bring that together into a formal GDP measure. Seven years ago now, the Scottish National Accounts project was established to try and fill in some of the gaps in the national accounts data that is available for Scotland. That has come a long way, although there are still areas for further work. We now publish a new bulletin that is trying to bring together all the different data sources to tell us a lot more about the Scottish economy. We have a lot more indicators such as savings ratios, estimates of imports, exports, capital investment in Scotland. We also publish detailed information about specific sectors of the economy, such as manufactured exports and retail sales. Elsewhere in the Scottish Government, there is a lot of information on the labour market that is published, as well as statistics on income and poverty, and on business. In terms of comparing it to other parts of the UK, we are pretty well served in Scotland in terms of economic statistics. However, the aim of the Scottish National Accounts project was to produce a range of indicators so that we would have a full set of national accounts for Scotland. By no means are we there. There are certainly a lot of gaps, but in a lot of cases it is not straight forward to do this for Scotland, so we are not able to collect the financial information that we need from firms because their accounts do not break down their UK operations. It is very difficult for large firms anyway to provide a Scottish figure for their operations, and it is a particular problem for things such as trade, because they do not record that in that way. For example, exports from Scotland to the rest of the UK is particularly challenging to measure, and even more challenging is imports from the rest of the UK to Scotland. We are continually looking to improve the coverage of economic statistics. It is important to stress that we do not do that. We do not set those priorities by ourselves. We have a lot of engagement with external users, so I welcome that engagement to get your thoughts on the things that we should be prioritising. We are quite lucky to have quite an active external user group that is made up of academics and some of the witnesses that you have had to the committee to talk about this. We recently had a meeting where we said that this year we were going to prioritise improving data on imports for Scotland, data on capital investment in Scotland, looking at the linkages between the offshore and onshore economy, and looking at the timeliness of our key outputs to see if we could improve that for users. Those are the things that we are focusing on, but it is a long journey. We will always have the challenges of the data not being as good as it would be for something like the UK, because businesses do not structure their accounts in that way. That is the challenge that we face. Thank you very much for that. There are some areas where there can be improvements. Spice, for example, has said that a number of important pieces of economic data are either incomplete or missing. It did touch on some of those gaps. It talks about how the missing data limits our understanding of how Scotland's economy works. You have obviously touched on the Scottish National Accounts project, but there are other areas that you did not touch on in your responses such as tourism. Spice has said that this is based on a relatively small sample of data from the international passenger survey to estimate tourism expenditure in Scotland and assumptions are made on the value of tourism from the rest of the UK. In areas like that, you must be able to improve the data collection, given the fact that tourism is the biggest employer in the private sector in Scotland. I would like to draw a distinction between estimating the expenditure by tourists in Scotland and estimating the activity of tourism-related industries in Scotland. We have very good information about accommodation and food services industries and other industries that are key for tourism in Scotland. The activities of tourism-related industries in Scotland are well understood. Quite often, we get the question about the tourist industry, but that is not the way it is defined in the national account. There are various industries for which tourism is very important and something like accommodation and food services is obviously one of those, so hotels, restaurants and so on. For example, our business statistics colleagues produce something on key sectors and growth sectors in the Scottish economy, so they try to take tourism-related industries together to produce an estimate for tourism on these sorts of basis. We have a lot of information about the activity of tourism-related industries. The particular indicator that is referred to in the paper by Spice is our estimate of tourist expenditure in Scotland by tourists, which forms part of our exports estimate. We have a very good understanding of the activity in tourism-related industries. It is just the estimate of tourism expenditure, which is only fair quality, because the sample that is used by the Office for National Statistics to estimate that is fairly small. Let us go on to the Government expenditure and revenue in Scotland publication, which comes out to great excitement every March. I am wondering how the accuracy of that can be improved. For example, in areas such as defence, I understand that there is a UK assignation, so, for example, £3 billion is assigned to Scotland and is the amount that is spent in defence in Scotland, but it is more like £2 billion, so that makes it look as if there is a billion pounds more spent here than is the case. Surely there must be ways, given that it is under Scottish Government control, to improve the accuracy of the information that we have in GERS? We get asked this question a lot. The GERS is about showing the expenditure for the benefit of the people of Scotland. After a lot of consultation with users, particularly in the major review of the document in 2007-08, that is the definition that is used to assign spending to Scotland and GERS. Something like defence spending at the UK level, which, in the Treasury's analysis of spending, is classed as non-identifiable, so, basically, it cannot be assigned to any part of the UK. Because a lot of the spending can be overseas and so on, and it is seen for the benefit of the whole of the UK. The GERS approach is to take a population share of that spending, so that is the approach that is used for something like defence spending, as well as it is done for things such as public sector debt interest and so on. The GERS is a combination of a lot of different kind of measures. It is not really a consistent format for our formula used, because you are actually mixing apples and oranges for you know, but, you know, actual economic output and expenditure with, you know, assigned expenditure, if you like. Well, GERS is— Theoretical expenditure even in terms of defence, obviously, you know. Given that, you know, so, activity by the foreign and common wealth office, for example, also is a lot of it can be overseas, and therefore that is seen as the for the benefit of the whole of the UK, sort of, equally, and therefore that is how it is designed in GERS, and defence spending is in that category as well. So, obviously, there are other areas where we take—the approach to taking in GERS is about for the benefit of the people of Scotland. So, for example, some spending on museums, etc., in Scotland can be seen as not just for the benefit of the people in Scotland, but because we get a number of visitors from the rest of the UK, that can be seen for the benefit of the wider UK. So, we adjust the spending similarly. So, it goes kind of both ways, but that is the for principle, which we explain in our publication. But we are always happy to take feedback on whether we could improve our methodology, and it is helpful to get the feedback that you feel that it is an inconsistent approach, because we do try to take that for the benefit of the people in Scotland. Well, I do think that it is, because when GERS comes out, you are arguing about the extent of the Scottish deficit or not thereof, and in actual fact, the deficit is assumed, as opposed to being real, because would any Government spend a money that is allocated effectively to that? To me, it just seems as if it is not substantive in terms of the detail, and I do think that if you are going to have a document on that, it should be more robust in terms of the actual figures that are in it, rather than just extrapolations, which are not real. You are more or less saying that you could argue that, if zero was spent in defence in Scotland and because it gets a benefit arguably from the amount that the UK spends on it, certain aspects of that would be arguable. I would think that whether it is a billion that is actually spent in Scotland or two billion or three billion does not make any odds, because it is seen as a percentage of the UK. Therefore, the expenditure, the GERS expenditure, cannot be seen to be accurate. I know that you are kind of narrowing your eyebrows there to wonder what I am really talking about, but I will try to say as if by your explanation, if one billion is spent in Scotland in defence or two billion or three billion, does this impact on the GERS figures, because it seems to be what is Scotland's share of that? Is that the case or not? In a GERS sense, yes. Fair enough. Let us move on to something else. When further powers are devolved, is it appropriate that economic data such as GERS and GDPs continue to be produced by the Scottish Government? Should that not be produced independently of government by a body such as the ONS, which publishes the current data at UK level? Obviously, statistics such as GERS and our GDP figures are produced by statisticians in the Scottish Government, and they are regularly assessed by the UK statistics authority. GERS, in particular, is assessed fairly regularly, and the most recent assessment was finished in just before a publication in 2014. The assessment from the UK statistics authority is to check that we are producing the documents according to sound methods that we are consulting users on meeting their needs, reliable statistics and that they are managed objectively and impartially in the public interest. The national statistics badge is there to reassure users that they are of a certain quality and that they have been managed impartially and objectively. As such, in the Government, we work under the code of practice for statistics. That is very strict guidelines about how we produce our statistics and how and when we share them with colleagues and ministers. We work under that code of practice at the moment. I will open up the session to colleagues at Round Table. The fiscal fair Scotland and its recent review of GDP suggested that a Scottish consumer price index would be worth collecting in terms of improving the data. How do you feel about that? The fiscal fair Scotland analysis was looking at the overall level of price movements implied by our real-terms GDP growth and our current price, the cash value of GDP. There are differences in how those things move relative to each other for Scotland and the UK, and that is called the implied deflator. What that really is is overall movements in aggregate prices for the Scottish and UK economies. Those are different for our sets of measures, and that is what fiscal fair Scotland was analysing. The very fact that they are different shows that those are capturing the different movements and prices. We build up at a very detailed series level, either using an appropriate volume measure or using the production of electricity in gigawatt hours. Or we use a deflated turnover measure using the most appropriate deflator, which can be a UK deflator, but it is a very detailed series level. When we build that all up for Scotland, the aggregate movement of prices is different for the UK and Scotland because of the different industrial mix. The very fact that those movements are different is captured in the way that we build our statistics. We are following international guidance here, which means that if you do it at a detailed enough series level, UK prices can be appropriate to use for Scotland. Basically, different price movements that are shown by our series are reflective of the different industrial structure. The question is, are those detailed price indices that we are using for each series, the most appropriate one? Case by case, we look for the most appropriate price index to use. For example, a subset of education is things like driving schools. We would never use a UK education deflator to turn that from current to constant prices, because that is completely dominated by English tuition fee prices. That would not be an appropriate one to use. We use a deflator that is more appropriate for the expenditure on personal spending on those sorts of things, such as driving schools. We look for the most appropriate one. Do we have a set of Scottish price indices to choose from? No, we do not, because we do not collect the information that would be required to produce those. That would incur a huge cost to do so. Given that we are doing it at such a detailed over 100 series level, the guidance from Eurostat is around at least 30 or 40 industries, and we are confident that it is capturing correctly the different price movements in the Scottish and UK economies. Thank you for that detailed answer to find what it was going to make. It was about regarding the proposal to sign half of VAT raised in Scotland. It is unclear how that will be calculated. I wonder if you can give us some views of your thinking on that. I would say that it is a challenge, as it can be for a lot of things, to measure this for Scotland. The approach that is taken for JAERS is reasonably broad brush, although it can be seen as fit for purpose for a statistical publication such as JAERS, but when you are talking about it being used to actually assign budgets, it is a completely different matter. At the moment, the VAT estimate is built up of a few different sections, but the majority of it is based on the VAT that is paid by the final consumer, so the VAT people going into shops and buying things, and it uses a measure of household consumption. There is a survey that surveys households in a very detailed manner about the things that they buy, and that is used to estimate the share of VAT that should be assigned to Scotland for the household sector. At the moment, the survey is based on the survey of 500 households a year for Scotland, so that is a very small and statistical survey. The sample has pooled over three years to get more stable results, so there are a number of issues with that. The responsiveness of the survey to change will be reduced. The sampling variability is likely to be quite large, and that obviously is not a desirable thing if this is being used to determine the budget. That is definitely an issue that needs to be looked at. We are starting a programme of work with our colleagues in HMRC to look at improving the measurement of VAT. They are just starting a sort of audit of all the different data sources that can go into measuring this better and doing a better job of measuring it, and whether there needs to be an increase in the sample of that particular survey or whether there are other ways to measure it more precisely. I am tempted to ask further questions on that, but I want to open up the session to colleagues around the table who may do so themselves. The first person to ask questions will be Gavin, to be followed by John. You mentioned in one of your early answers that the initial objective of SNAP was to get a full set of national accounts, and you said that we are not there yet. Obviously, it has evolved slightly since 2008, but in terms of the initial objectives, is there any sense of when we will be there in inverted covers? Depends on what you class as the end of the project. If you are asking the things that we do not have, there are measures in our accounts that are not of the gold standard quality, and things like imports are something like that. However, the beauty of the framework is that it allows you to estimate those things that you do not have primary data for because of the way you balance it all. That is the beauty of the framework and using the supply and demand in the economy to balance everything. However, we do not have sectoral accounts, but that would be a very big development programme to get sectoral accounts for all the different types of corporations in Scotland and the Government sector and the rest of the world. Particularly challenging is the balance of payments with the rest of the world, measuring flows of income in and out of Scotland and transfers in and out of Scotland. We can develop estimates of those things, but they will only ever be modelled estimated because we do not have that data about what is flowing across the border and we do not have the information about what is raised in Scotland. I can give the committee more detail on this and follow-up on all the items that we are missing, I suppose, from the set. If you are asking me if you are halfway there, I would not say that we are. We have not got most of the things that are in a full set of national accounts. Part of that is about data and part of that is about the number of people that we have working on it. Obviously, SNAP was set up in 2008. Since then, you have had the Kalman commission in taxes devolved through that. We are getting the Smith commission in taxes devolved through that. How does SNAP need to evolve and what changes are going to be prioritised to take into account taxes that have been and will be devolved? I think that looking at the estimation of various taxes such as the VAT issue becomes more important if they are likely to be devolved looking at how they have been estimated in the past and whether there needs to be improvements. Obviously, taxes that are being devolved to be collected in Scotland are somewhat easier because there is no estimation needed that it will be raised in Scotland. Therefore, it becomes easier. We need to then look at what we are publishing about those statistics. The way that we are publishing the revenues that are collected in Scotland and are our users getting enough information about what has been collected in the context of all the other taxes that are raised in Scotland, which we are estimating. Perhaps about the way that we publish revenue information and making it more accessible for users. There is a lot of interest in the trade aspect and how much we can improve that. There is also a lot of interest in the links between the onshore and offshore economy. Those are the things that we are prioritising this year, but I do not know if Simon wants to add anything to that. I would like to add a couple of things to that, which is that the Scotland Act and the subsequent Smith commission is very much guided by what we prioritise within our team in terms of what we look at. For example, when we are looking at what taxes can we improve the estimates of what we put a lot of work over the past few years into improving our estimates for air passenger duty, because clearly that is one that is coming to Scotland and is great interested in. Likewise, with the income tax, which is coming in a staged manner via the Scotland Act and the Smith commission, we already have a good estimate of the overall level of income tax in Scotland, so what we have been putting a lot of our resources into understanding the detail behind that. For example, we know that total income tax is £11 billion. What is the distribution of that across the income distribution? How much is paid by basic higher and top-reab tax pairs? All of our focus has been on getting much more data and working with HMRC to improve our wider analytical capacity to inform the broader analysis that is required when the new taxes are devolved. I have a quick question about gyres. It obviously comes out every March and that there are revisions to the previous year's gyres. My feeling on this year's gyres was that the revision has just seemed to be more significant and more marked in previous years. Is that correct? Is there a reason for that in particular or is that something that could carry on going forward? It is correct that the revisions were larger than one would normally expect. The main reason for that is the transition to the European system of accounts 2010. There are a number of changes in treatment. Unfortunately, that impacted the latest year—well, the last published year in particular, quite significantly because there was inclusion of things such as the purchase of the Royal Mail Pension scheme, which was a large one-off only in that year. However, it changed the figures quite a lot in that year. There were a number of different changes, which we sort of detail in a document, but no, I would not expect this level of revision every year. It is only because of a major change to the system of accounts, which obviously we have to incorporate so that our statistics are still comparable with the UK. No, I would not expect that sort of level. So the changes basically feed through in one year and you knew that they should not have an impact on future luncheons. I will add to that. Obviously, there are similar changes occurred at the UK level and across other countries, so revisions in Scotland were not un-comparable. If I am going to just a couple of specific taxes, then you talked a little bit about your modelling for LBTT in the paper that you presented to us. Can you tell us just a little bit more about that model and then are there any changes planned to that model based on the comments of the Fiscal Commission? The model of land and buildings transaction tax is built up from detailed information on virtually every single housing transaction in Scotland over recent years. With LBTT, we are very lucky that we know the detail of transactions on a per-transaction basis. We know selling prices, dates of sale, locations within Scotland and so on. So what the model does is it takes this historic data of levels of transactions, Scotland's distributions of transactions and so on, and then seeks to project that forward based on trends over recent years, how we expect that to evolve in the future. For example, if transaction has just now been well below their long-term average, it may all be reasonable to expect a gradual uptick to return to long-run levels. So we take that information and then what we combine it with is wider intelligence and modelling of what is happening in the Scottish economy. For example, all else being equal, if you expect the Scottish economy to grow strongly over the coming years, based on what our wider economic models would suggest, we would look at the relationship historically between GDP growth in housing transactions and prices, incorporate that into our model, then model how we expect transactions to evolve in the future, how we expect prices as well to evolve in the future and from that we would then derive from the expected bans, the expected rates, what we could expect the aggregate level of tax receipts to be. I would add two points on to that, first, particularly with what you are saying with regard to the Scottish Fiscal Commission. Last year was obviously the first year in which we produced those forecasts and obviously we had a number of discussions with the Fiscal Commission about it, so we had a number of valuable feedback from them. The model that we are using, I mean, essentially it all goes continuous, improving continuous evolution, part of what's incorporated with our changes, but also just because as the economy changes, we need to focus on different parts of the economy, make sure that we're actively picking them up and so on. And so the final point, I would say, just is more just to flag up more than anything else, that of all the taxes, land of buildings transaction tax, SDLT, as it was in the UK before, is one of the more volatile taxes and so it always presents challenges, so it halves in the UK level during recession, but despite that, we have a very detailed model framework and a lot of raw data underpinning it. You're making improvements and obviously it was year one and the idea is to keep improving. I suppose one specific point that the Fiscal Commission made was around behavioural costing and their view was that there was no behavioural costing at all and I think that certainly the cabinet secretary seemed to suggest that that was a true criticism or a true comment. Obviously you've got static costing, which just looks at the numbers alone and then the behavioural costing says, well, what's the likely impact and how likely are those numbers? Are you planning to incorporate some behavioural element into the model for the next set of projections? It's definitely something we're looking at, yes. Again, the behavioural part is in some ways much more challenging, partly because obviously LBTT represented quite significant diversions from the previous system, moving away from a slab tax to much more progressive tax. In some ways, as we go forward with the tax, as we get more data, as we get a much better understanding of how consumers and households have evolved and have responded to those changes, we'll have a much better position to actually incorporate those behavioural changes. Again, it almost takes time to build up this data, to be able to say of sufficient confidence that this is what we can expect behavioural change to be based on past experience. Again, you said in your paper that the GDP figures are your most high profile quarterly output. Does your department make—obviously, you don't publish formal projections, but do you internally have a model where you try to have projections to see if your internal model is anything like what does happen, or do you simply not touch it? There are two points that I would make about that. In the paper that we provided to you, we discussed in a little bit some of the model that we are currently developing. That talked about the fact that we are in the process of developing a macroeconomic forecasting model for Scotland. The model is complete, but we are still in the testing phase, so it can't provide usable outputs as yet. The second point to make is that when looking especially at a quarter head, those types of forecasts, you wouldn't normally use a very big detailed macroeconomic model to do that. What you probably use is a very data-driven model, so you'd say, for example, okay, these are all the data sets that we know for the next quarter already, whether it's from the labour market, from business surveys and so on. In the past, we know that these are broadly correlated with GDP growth in such a way, so we can infer from that what you may expect GDP to go in broad terms. That then helps to inform what we are seeing in terms of the actual statistics and the actual GDP numbers that we have. We very much use the help to guide our process and to support our wider intuition. Finally, if there is work being done on that, it is experimental just now, so you are not in a position to publish, but is the intention of the Scottish Government to publish GDP forecasts? I do not think that I would like to prejudge it at this stage, because that very much depends on the current programme of work and essentially how the model looks like it is performing basically. This is the first time that we have had such a model for Scotland, and so it is impossible to say at this stage quite how it will be able to be used in the future and how usable it will be for that specific purpose. Sure. Okay, no, thank you. Okay, thank you. John, to be followed by Jean. Thanks, convener. A few issues that have been mentioned already, maybe we can look at a little bit more. The comments have been made that we have got a lot less statistics and figures than other countries do or the UK as a whole does, but we do quite well compared to other regions or substates or whatever we want to call them. Are there good examples out there or are others that are doing better of the substates—California, Bavaria, Catalonia—anything like that? Not that I am aware of it. We have done some work on this and it is quite tricky to find areas that are doing supply use tables, for example, which is a framework with which we build on all of our estimates. There are a number of other countries that estimate economic growth and things like that at a lower level. Not that I am aware of, to be honest. Amongst countries, does it vary a lot? Does a big country like the United States have fabulous data and a little one like Luxembourg have much poorer, or does it not work that way? For example, across the EU, all countries have requirements to produce the same sorts of things and give them to Eurostat. Exactly how they do it and how much resource they put into it and what sort of quality they are does vary. Larger countries are likely to have a much bigger all singing and all dancing set of national accounts that are of higher quality. For example, the UK produces what it needs to do for Eurostat, but it also does a lot of other things. For example, it needs to produce its GDP figures within 60 days, but it also produces a figure, which is one of the fastest in the world, 25 days after the end of the quarter. It does not need to do that for Eurostat and most other European countries do not do that, but the UK does, because it is much bigger. The number of people working on national accounts is much smaller. Is accuracy sacrificed because of that speed? The amount of data that they have got in for the quarter is quite limited. The figure is about about 40 per cent of the data that they will eventually use to finalise the estimate. With those economic statistics, with those quarterly ones in particular, you have to balance up the accuracy and the timeliness with each other to decide what level of revision you are prepared to accept because they will be revised going forward. We have done some work with the Irish national accounts people, for example, because I wanted to get a bit of a perspective from a smaller country with a more closer-to-hour size of national accounts units. They have got maybe 40 people compared to our 10, but it is a little bit more comparable. They produce one GDP estimate quarter compared to the UK's three. They produce it 70 days after the end of the quarter because they have negotiated that with Eurostat because that is the best they can do. That is a more realistic place for us to look at aiming for. I am not saying that that is what we will do, but at least it gives us hope that that does not seem quite so impossible. There is a range of experience out there. It is very helpful to talk to other countries in Europe. We have a lot of engagement with the UNS and they are very helpful and they give us a lot of data, because most of our data comes from them that we are using to produce our national accounts. However, it is good to see those other perspectives and the other ways of doing things. Obviously, if you had 40 staff instead of 10, you could do more, but the other side that has been mentioned is that some things are legally required by the state. Who decides that? Is that totally at a reserved matter at the UK level that the UK Government can say what organisations have to break down their figures to, for example, VAT? No, it is all driven by Eurostat, so the EU, basically. All member states in the EU. They need to produce regional accounts, for example, because the EU asks for it, but the regional accounts are modeled estimates of UK figures down to the different areas of the UK. It goes down to quite a detailed level, equivalent to local authority level, but they are very different to the statistics that we produce for Scotland, because we build them from the bottom up. They have a requirement to produce regional information. For example, the information that is used at what is called the NUTS2 level—sub-Scotland—is four areas in Scotland. That is what is used to determine European structural funding, for example. That is how the EU uses that information. Estimates that I have heard from the central statistics office in Ireland, for example, are that 90 per cent of what they do is because they must do it—required to do it by EU law. I have heard estimates from ONS that it is 80 to 90 per cent. The work of these national statistics institutes in the EU is driven by the vast majority of what the EU does not insist that they must do. Obviously, there has been a lot of discussion about company profits and how they get moved around countries. I think that it would be doubtful, even if some of these companies, what their profits are in the UK or their sales or their VAT, let alone within Scotland or whatever, is the European Union instructing them to a company like Diagio that is international? Who is telling them how they have to split up their accounts? It is a wider discussion in the sense that there is a distinction between economic statistics, how those statistics are produced and how they are disseminated and so on, although the issue in terms of tax payments and the tax liability of a company's operations falls is a slightly separate issue. That is normally an issue that would be agreed between finance ministries. It would be agreed perhaps between OECD members about common methodologies, common accounting practices for how profits should be assigned and at the European level as well, but it would not be so much with regard to the statistical collection and data collection that the agreement would take place. It would be very much an accounting and a finance ministry, almost a revenue collection issue rather than a pure statistical issue in the sense of for producing economic statistics. Are you relying on some of those accounting figures for GDP and things? A lot of their statistics are based on the business surveys that are carried out by the ONS. A number of companies will put in these surveys similar information as is in their company accounts. It presents a challenge in things like estimating income flows, for example. If you are going to estimate your gross national income, that becomes very relevant because then you are talking about where incomes flowing after stuff is produced and profits are made, where does that then flow to? That can be more challenging to measure. For example, Ireland has a lot of issues with that. Even though they are a sovereign state, they find that difficult. That is challenging. Some of that will be a legal requirement on companies or other organisations to produce the data, I take it. Is that all reserved to the UK, then, that they could tell companies to produce data if they wanted? Yes. They collect everything under the Stats of Trade Act, so it is a legal obligation for companies to fill in the surveys. In the spice paper, it concerned me a little bit about some of the things that were being told about the imports figures, which you have mentioned already. It seems to be incredibly vague. It talks about various figures and then says that the remaining difference is assumed to be imports, which struck me as pretty vague. Again, at UK or any state level, are they very clear about what their imports are, or are they vague as well? Especially while goods, in particular, are moving across the border, there is very good data on from HMRC. We can exploit some of that data. We do not get access to a lot of the data from HMRC, but there is a lot that we can use in terms of international imports, and that is what we are looking at at the moment, exploiting that data. However, more challenging are imports from the rest of the UK for us, because there is no official border there. Services are more tricky even for countries such as the UK, so they do services such as international trade and services to try to get a sense of services flowing across the border. Obviously, it is less tangible than a good actually leaving or entering the country. Even the UK and other countries are struggling with that, then? Yes, with services, certainly. Obviously, that is the vast majority of the economy, so it is challenging. Also, the definitions of imports and exports in the national accounts have changed since the introduction of the new system of accounts. For goods, there is supposed to be a change in ownership. It is not just about it flowing across the border, and that complicates everything so much more, because it just makes the challenge of measuring those things. That is something that has not really been implemented across Europe yet, because the countries cannot figure out how to do it. That would be a problem if a company, a Volkswagen or something, is just moving stuff between branches? Precisely. If they are sending a car to Scotland to be sprayed and then sent back again or something like that, there is no change in ownership of that. Officially, under the new national accounts, that is not an import than an export. That is just an export of a service to the country, so it complicates everything massively. Another one that seemed a little vague in the spice paper was capital investment, and it says that public sector is pretty reasonable, but private sector is a bit more difficult. There seems to be an assumption that profits basically equals capital investment. That is not our strongest set of data, and there are definitely issues with it. It is one of our priorities for this year to look at it. Capital investment can be very lumpy, and there is no requirement on companies to tell the O&S where it is that they are investing this money in the UK. There has been a lot of pressure from us and from regional accounting people in O&S to try to collect more information for really large bits of capital investment. Where is it? Are you building a building? Where is that building? What is the location of this capital investment? If that is approved, that would improve our estimates by quite a lot. We are also looking at the data that O&S collects from Scottish companies to see whether we can exploit that more than we have been. With that, there are so many things that you can do that you have to prioritise, but capital investment is one of the things that we need to look at this year. We can improve it even with the data that we have, but if more detailed data is collected from companies about the big bits of it—it is the big stuff, if you get that right—you are doing pretty well. We have been having discussions as to whether we can get a share of VAT. Is it just what the customer pays in the shop at the end, or is it also what every factory increases value even though the end sale might be elsewhere, because VAT is based on each step of the process? From your point of view, is it more difficult to get the data from the latter scenario, because it is coming from different places? Is it easier to get the data or statistics for the more simple that is just in the shops and so on? The end consumer, based on consumption, is definitely the simplest way to approach the VAT paid by the household sector. The exempt sector and the Government are obviously simpler, but the exempt sector can be quite challenging to estimate properly, such as financial services and charities, for example. There are a lot of challenges, but we will be working very closely with the HMRC on that. Thanks for watching. That was a bit helpful. Thank you. Mark, you want to do a brief supplementary. A brief supplementary, convener, before every question that I had written down, gets taken away. Just on the capital investment issue, you spoke about the difficulty in determining what is being developed and where. Presumably, obviously, there are ways that that can be collected. For example, local authorities will be issuing building warrants for premises that are being developed. They will also be issuing business rates bills for newly developed properties. Are those areas that you are looking to collect? Obviously, the rateable value will give you some indication as to the value of a development. Is that something that you are looking into in collecting that data? Yes, we are starting out on an audit of all the different data sources that we could use to improve our estimates. We will be looking into that. I gene to be followed by Richard. Over the past couple of years, we have become aware of the lack of information at the Treasury and the HMRC, because they have never really needed to do it, to show the difference—or the figures specifically for Scotland. Do you think that they are working towards that more and more? Is that getting easier, and are you part of that? Since we have been working quite closely across devolved administrations and with the Treasury, with the HMRC and the Cabinet Office in a statistical environment and thinking about the data that may be required as a result of the devolution of further powers to all areas of the UK. The focus is on looking at solutions that can be future proof, so they are not just maybe for one area of the UK. However, if you are looking at improving information, let us think about how it could be used across the UK and thinking about things for the English regions. There was a big discussion that we had about that, and there was a group formed to discuss, based on the current proposals, what might be the work programmes that might need to go ahead. That seems very high up the list in terms of what the Treasury and HMRC and O&S are thinking about in terms of data. Particularly, the O&S seems to prioritising developing statistics for different areas of the country. From my point of view, I would like them to collect lots more data, which gives us more finely grained estimates in terms of activity in Scotland, rather than I am not so focused on publishing statistics, but other users would want them to publish statistics as well. That process has been very positive and it has raised a number of issues, so now we need to see what happens next. Once the further powers are more firm. I mean just going on from that, for example, you talked about the information that is required to go to Europe. Is that something that you would do as an exercise to show where gaps are and things like that? That would probably be the approach to making that return for Scotland independently. That would be the way that I would approach it. I could do that for the committee if that would be helpful. The other thing that I wanted to ask about, it seems that in the Smith commission we have a number of areas of our economy where we are responsible for part. Part income tax, Scottish rate of income tax, say potential to have 50 per cent of our VAT back and all the kind of complications that one imagines at the back of that, as to actually what that really is. In your opinion, would you think that it might be easier? Would we get much greater information even if we were responsible to collect our own VAT? I know that the complication with Europe has to be collected. However, on a regional basis, would it be almost easier to collect, just on VAT alone, to have those figures here and then deliver them to the HMRC, rather than try to do it fairly complicated? There are pros and cons of both approaches. If you go down the approach, which you just outlined, one potential challenge is that in some cases it might be easier to do things to collect the taxes or identify the taxes paid at the UK level. In particular, in this case, given that a lot of the companies will be operating UK-wide, in effect, in other particular cases, for some companies it might be easier to do it on a Scottish sub-sample. To be honest, it is not something that we have thought about personally in any great detail, but I can see pros and cons with both approaches. I do not think that it would be clear-cut in this particular instance, especially given that control of the tax will remain reserved. On the other hand, you said that one of the difficulties that you had in establishing some of the stats about businesses and where their business was done, would that not clarify that much more if there had to be a return for a business that was in Scotland? If they had to do that, yes, it would improve the statistics, but it would have downsides in terms of burden on business having to separate that out and the administration costs of collecting Scotland. From a purely statistical point of view, yes, we would love every business to see all of what they do in Scotland. That would be marvellous, but is that enough benefit enough to justify the cost to business and potential collection costs and things like that? It is a balance. Finally, we talked about the convener mentioning tourism and the importance of that and how that is calculated. I think that I am right in saying that the tourism figures that are calculated to show how many people work in tourism in Scotland go across a whole range of businesses that may all sit in another sector. For example, they have a percentage of retail sector that they take into tourism, but it would be quite important to keep people separate for the purpose of getting a picture across Scotland of what we look like. Tourism is an umbrella. There are a number of different industries, which is why in national accounts terms it is not an industrial classification because it is about the types of goods and services that the industry is providing rather than who is consuming them. The growth sector analysis that my business colleagues produce can then look at all the different sectors of the economy that tend to be dominated by tourist consumers and bring them together to produce estimates, as you described. They are different products for different purposes. During the referendum campaign, there were a number of claims made about the amount of business going north and south of the border, but, in fact, they probably were very vague from everything that you have said, that those stats do not exist. Will that be right? Is that what you mean? One of the issues that Mary mentioned was the difficulty. It is easier to know what our exports are to the rest of Europe or the rest of the world, but crossing the border from Scotland to England is much harder. I am just making a point that there were some facts and figures produced during the referendum campaign, but I wonder how easy that would have been to be exact about, for example, the amount of our market in England. That would be taken as a percentage. In terms of exports, we are in a better position than we are for imports, because we do a survey of businesses called the global connection survey to estimate exports to the rest of the world and all the country destinations, but also to the rest of the UK. That is a key data source for us, because that is the kind of one that we have that shows at least the market for Scottish goods in the rest of the UK. Even though it is not a statutory survey, we do not collect it on the stats of trade activity on S2, we get a good response from businesses on it, which is quite heartening. We also bring in a number of other data sources, whatever we can, to improve the estimates. We are all right for exports, to be honest. We get good data, although we would always want more. It is more important that this is more challenging, so that is why we use the framework of the national accounts to estimate that. Thank you, convener. Anything on to my question, but she was not at import data, because you have talked generally about the importance of having enough data to inform your work. In response to Mr Mason's question on import data, he said that he had a lot of information available from HMRC and import data, but there was also a lot of information that was not available to you. I want to say why is that data not available to you, because it has not been collected by HMRC, where there is a problem accessing that information and why should that be the case, because presumably all levels of government must be of importance placed on ensuring that you have all the data that you need as part of this process. We have had difficulties in the past getting access to some data from HMRC for a number of reasons, and some of them are legislative issues. O&S, for example, gets access to what is called the interest stat and extra stat data, which is the record that businesses have to give about their goods crossing the border between interest stats for in EU and extra stats for outwith EU. That is a key source of information for the UK's balance of payments. We do not currently have access to that information and neither do the other devolved administrations. What is the reason for that, can I ask? I would have to check exactly what they said the last time we were asking about it. Sounds like I might not be a terribly good reason for the response, but I might have to say that the business case to get access to HMRC data has to be very strong. Obviously, the National Statistics Institute needs to give balance of payments data to Eurostat and, therefore, that is a very strong case for getting that information. Given the importance of being placed on developing a fiscal framework for Scotland convener, is that something that we need to return to? It is absolutely essential that the Scottish Government has access to the appropriate level of data. I would absolutely agree. Relevant to this is that there is a data-sharing bill at the UK level, which was started under the last UK Parliament and is still early stages and has not gone through Parliament or anything. The idea of that is to allow HMRC data to be shared with the UNS and other departments. I hope that that would be a route through which more data-sharing could happen. The barrier is that the HMRC feel that they have in sharing data with other UK Government departments would be removed. I think that it is surprising that it requires legislation. Obviously, it is something that we will need to pursue with both the UK Government and this issue. I have one final question, convener, if that is all right. In your submission, you mentioned the development of oil and gas statistics publications. Can you just ask what progress you are making on that? What level of detail do you seem to go into for the publications and what regularity do you think that will be published? We have published—it is not quite a bulletin yet, quarterly, because it is still in early development stages—with information on production and indicative sales revenues for different types of products in the North Sea. It is a quarterly series that shows the production of all of these different products and what sales revenue might be generated. We also produce indicative trade flows, which means that because our principal GDP measures and trade flows are based on onshore Scotland, we can then add in the offshore component, and that is what we do to show overall trade balances. That is the oil and gas statistics publication that we publish quarterly. The plan for that would be to take it to become a more established system publication. It will be quarterly on a full basis from any future. I think that most areas have been covered, and it has been very interesting listening to what you said. It is really just three follow-up questions to what you have said. The first one may have been partly covered by your last answer, but you said new priorities that you listed included capital investment, which you have covered, imports that you have covered and the relationship between the onshore and the offshore economy. I was interested in that last one. It is more than what you said in the last answer that I took. That is an additional piece of work. That would be more looking at our supply use frameworks, all of the different products and industries in the economy and all the links between them, and how those links to the offshore economy would give us a better understanding of the supply chain and what the offshore economy is buying and, therefore, the impacts of changes in the offshore economy on the onshore supply chain. That would be a more detailed piece of work. We will be looking at that in the development of our next set of supply use tables. Our users are quite interested in that in terms of the total contribution of the offshore economy to the onshore economy. The second point—perhaps I am missing something here, but you kept saying that GERS was for the benefit of the people of Scotland, so I could be quite— The expenditure in GERS, yes. It is done on that. It is not what is spent in Scotland, necessarily. It is what is spent for the benefit of the people of Scotland. If there is a UK reserve matter and money is being spent abroad, then, for example, a population share of that may be taken because it is seen as for the benefit of all citizens of the UK. Is that justification for the defence issue? It does not matter what is spent in Scotland, if you are arguing that all UK defence expenditure is for the benefit of— From a public finances point of view, but I would like to clarify for GDP and employment in all that that is about what is produced in Scotland or the employment that is in Scotland. Would that be a break on trying to find out the answer to some of those questions because it would change the rationale for it? In terms of the benefit of the people of Scotland, you could argue that you do not need to find out how much is spent in Scotland. That is a contentious remark, but somebody could argue that. I think that there is probably a distinction between what we are trying to achieve with data. When we are doing the jurors publication for public finances, we are trying to be consistent where possible with wider international standards for doing public finances. It is tricky because those things about where spending is in or for are not in that framework, but we are trying to be as consistent as possible. If you are interested in what defence spending, for example, occurred in Scotland, which in itself is a very interesting question, that would more be a question about the economic impact of the spend. In some ways, that would be a wider economic question and the defence spending that occurs in Scotland. That is something that we would factor into our GDP estimates, for example, because we are doing GDP and we are very much interested in what occurs in Scotland specifically. For the defence part, that would be the defence spending that takes place in Scotland and the wider economic activity that is associated with it. If there is a slight distinction, it depends on what the purpose of the exercise is. That was interesting. The third point is that we are all variants in VAT now because of the Smith proposal. It was alarming what a small sample it was based on, but I wondered based on that 500 household survey—I do not know if that has been around for a year or two or not—what comparisons do you get between Scotland and England in terms of household expenditure and therefore VAT and, secondly, how that has varied over the past few years? The share of the UK VAT has been fairly stable over the past few years. It has not moved that much in terms of the share that has taken of the UK level. I do not have the English figures or the four nations figures in front of me, but I can certainly send that to the committee because, for example, the HMRC will produce those for the four parts of the UK, so I can certainly show the committee some figures on that. Thank you very much. That appears to have exhausted the questions from members of the committee. I have one or two. Myself is to finish off and it is just to follow up to some of the questions that have been asked already with regard to HMRC data. One is that you have direct access to HMRC data in terms of the Scottish rate of income tax, because you talked about some of the sources that are coming through the ONS, why through a third party, why not directly. With regard to income tax, we are still in discussion of HMRC about precisely what data we can get access to. It is not something that I am personally directly involved in, but my understanding is that there are particular restrictions for HMRC's ability to share data on individual taxpayers, as it were. For example, when data is anonymised, it is much easier to share when it has got identifying information such as there are, again, legislative difficulties in being able to share it, not just with ourselves but even with Treasury or anyone else. For example, my understanding is that Treasury would not be able to get access to the raw income tax data collected by HMRC for the same reasons, because it is confidentiality more than anything else. What we are doing just now is that we are discussing with HMRC about how we can get anonymised data and, again, those discussions are on-going just now. Okay, when you get that data, will the Scottish Fiscal Commission have access to it? I would assume so, again. I think that discussions are on-going, so there may will be issues about how the data can be shared more widely. I would not want to prejudge that, but, again, our starting point would be that we give the Scottish Fiscal Commission access to all the data that they need. It would be good to get clarification on that. That is a question for me. I do not want to go back into the jazz thing, although I am solely tempted. I have all these great mandarins in Whitehall who are benefiting Scotland in terms of our jazz figures, etc, with the money that is spent there. I will just ask one other thing, which is, do you have any further points that you want to bring to the tension of committee? No, I do not think so. Okay, thank you very much for answering your questions and thank you very much to colleagues for asking them. I am now going to call a five-minute recess to allow a change of a witness and to allow a natural break for members. Sorry for the slight delay in the previous session overran, such was the interest of the committee in it. So we will now continue to take evidence of Scotland's fiscal framework. I would like to welcome to the meeting our next panel of witnesses who are Alan Birmingham of Sitfer, Charlotte Barber of ICAS and Patrick Stevens of the Chartered Institute of Taxation. Members have received excellent written submissions and so we will move straight to questions from the committee. The way that the committee works is that I will open up with a few introductory and exploratory questions and colleagues will drill down in greater depth into those or perhaps ask completely separate questions as they see fit. So where will we start? Well, let's start at the Institute of Chartered at Council Scotland, and may as well you're in the middle. Don't look so short, you knew you were going to be asked something at some point. As I said earlier, all the submissions are excellent, but I'm going to start with a question with regard to the first question that was actually put to ICAS, but before I ask that question, what I would want to make clear is that if other colleagues among the witnesses wish to then comment, you don't have to, but if you wish to then comment on the particular issue that I'm raising, please let me know that you wish to comment, so I'm not just asking about your own specific papers, I want this to be a wee bit more interactive. In terms of the specific questions, one of the things that ICAS have said is that I quote, Ensuring fairness and effective mechanical measures involve significant analytical and statistical input, fairness may require more detailed calibration of different balancing elements in the Barnett formal adjustments, but the greater the analytical detail and complexity of arithmetical tax and adjustments, the more this is likely to reduce transparency. A balance needs to be found between those conflicting aims, and the $64,000 question is how do we achieve that balance? I'm not sure of the short answer, and one of the reasons we've written this and said as much and not given you an answer is that I don't think there's a clear cut answer. I think one of the difficulties, if you look at VAT in the earlier discussions that you were having with previous witnesses, there's not a full range of evidence, and I completely accept that if one really wants to do something, you can do it, and you could pin points to get Scottish VAT if you put your minds to it, with quite a lot of work for civil servants, or with quite a lot of work on the business community, and that has its intricacies as it is when you look at borders already. So, somehow there's to be a lot of work done if you want to really identify Scottish VAT, and I realise that the exercise and what one wants to get to, but if it's awfully detailed and then you start working that through your known detriment Barnett calculations, you begin to lose sight of where you're going, I think, but I don't know quite where you strike the balance between the two, because if you just took 8 per cent of the economy, it's just a variation on the Barnett formula already, isn't it? Okay, well, Mr Stevens, you were nodding there. I'm just wondering if you have anything you want to add to that at all? The only thing that I was going to say was there are so many calculations that you could do to this and follow logic, because each of them will follow bits of logic that economists, which we are not, will be able to come up with and correctly so, but the bottom line will be that nobody but nobody can get into their minds what has been achieved, I suggest to you. I think that part of it will need to be explaining to people, firstly, how the Barnett formula gets there, as well as the adjustments to it, which are set out in the command paper, but then you've got so many choices as to adjustments. Presumably what we most want to do is to be able to explain to the public why the result that we've got to is fair, which is a rather difficult word. And certainly in conversations that we've had to date when we're looking at adjustments, the starting point has been that not everybody seems to fully understand how Barnett has arrived at in the first place. I won't say that again. Sorry, I won't say that again. I'm sure you can imagine. Mr Behrmingham, do you want to make any comment from the perspective on this? I think that the Smith commission seems to be alluding to a simplified route. By that I mean that there will be an initial adjustment to the block grant representing the tax foregone in the UK or anything like that. And then some form of indexation after that to that amount, which would then be fed into the Barnett formula. So I think there is great difficulty in measuring this area, but if you take that simplistic approach, like with the income tax one that's in the Smith commission saying that it will be indexed by sort of the general growth in taxation or whatever in that respect in the UK, that's a fairly simplistic approach. There's plenty of evidence, I think, from OECD analysis in other countries about how tax-sharing arrangements work. So I think there are opportunities to look at that kind of simplified approach and probably an area for someone like the fiscal commission or the joint next jacker committee to agree with Treasury on how that approach works. Okay, thank you. I'm going to switch between your papers as we go on here. So Mr Stevens, just in terms of your paper, you commented in terms of the no detriment principle there needs to be agreement as to what constitutes no detriment. I'm just wondering what you feel it should constitute no detriment. It seems to me that the first year's adjustment will be relatively straightforward. I'm not suggesting it won't entail lots of work and calculations and such like, but no detriment, it's simply moving lumps of money from one side of the board to another. I'm very sorry if that's simplistic, but it seems to me that it's after that, the years after that, how you should index or adjust or move in accordance with the economies of each piece of land and how those should interact on each other, how that gets you to no detriment is a very difficult thing to say, because whatever happens, just taking Scotland, the change, I'm going to concentrate on tax just because I'm a tax person, so excuse me. The changes in tax take will not simply be as a result of changes of rates and thresholds, it will be as a result of changes in economy, changes in behaviour of people, how you split those out in order to try and keep with the principle of no detriment and everything else that we're talking about, I think will be a challenge and the longer it goes on, the more so. Okay, Mr Beaming, on that issue? Yeah, I suppose I look at no detriment in two areas really, one is if you take the tax side and what gets shared through departmental expenditure limits through the Barnett formula and then secondly the side that is outside of the Barnett calculation, so for example any devolved welfare spending that you have which is AMI or annually managed expenditure and demand led and therefore outside of the Barnett formula, that's going to be a more difficult area to actually index going forward. I agree with my colleague that the initial adjustments will be fine, anything subject to the Barnett formula going forward I think is coming up with an appropriate indexation measure, particularly as that's around tax and things like that, I think there are relatively simplified measures of tax sharing out there that you could avail of and look at. The one on AMI is more difficult, I think that example of say the growth in welfare spend is greater here than it is in the UK, how you therefore index that going forward which is non Barnett formula driven, that becomes more difficult and I suppose the only thing I can say on that would be that you need to look at what are the drivers of that type of spend, you know what drives welfare spend primarily in Scotland and so on and agree that type of measure with treasury is the way forward to index that. Okay Ms Baba, what daycast do you believe constitutes no detriment? I cast hasn't got a view as to exactly what constitutes no detriment, I think I cast has concerns as to how it will eventually be defined because it could be quite high level and just pitch it in year one in broad terms or I've heard quite a few conversations where it's taken a lot further so for instance say in the UK there was a radical change to the personal allowances that would have a knock-on effect into how much Scottish rate of income tax you might be collecting and if that's the case is that no detriment or is the Scottish rate of income tax a partially devolved tax so there's been a kind of joint decision to go there perhaps I don't know whether it would constitute no detriment or not and that's something I think would have to be agreed as part of the overall package. Okay and Ms Bermond did you want to come back on that particular point? Well I think it's important to recognise that you know one area of difficulty with okay no detriment as my understanding means that the overall position in the UK including Scotland will not change just the share between Westminster and Scotland will change. Now if you took that in the context of you're still retaining the Barnett formula for a vast bulk of your spend you know that to me there's a real difficulty there in that the Barnett formula doesn't really work with the devolved powers that you're getting and particularly if you go for further increased devolved powers in the future like say Northern Ireland having corporation tax abilities and things like that and it does seem to be obviously pressure to move that way the Barnett formula becomes less and less relevant really and becomes obsolete in the way it works and in my view you know wouldn't give that kind of accountability that you're looking for in terms of being accountable to the people of Scotland for tax raising and for the resulting spending from those taxes. Okay the Mr Birmingham is sticking to your own paper you've got a section called the practical impact of additional fiscal powers in paragraph 2.3 you say and I quote the majority of Scotland's income will still be in the form of the block grant to the accompanying restrictions and limitations on financial planning and management such as no end of year flexibility and the lack of ability to decide reserves. I mean given the way this is written and the kind of thrust of that do you believe therefore that these kind of restrictions should be loosened somewhat and how should they be loosened? I do believe they should be yes I know you have the ability for essentially what Treasury called a rainy day fund to build up but it's quite small end of year flexibility does lead obviously in its simplest terms to the position where perhaps years and years ago the public sector was always accused of rushing to spend its budget in March and lack of end of year flexibility kind of encourages that regime. If you had more power over reserves and the ability to designate reserves and things like that that would give you the ability to you know encourage longer term planning and that's really the thrust of that comment is that if you're looking you know to develop a fiscal framework that should be aimed at medium to longer term planning and one of those fiscal levers therefore will be the ability to designate your own reserves and hold reserves and therefore plan better for those longer term projects and things like that. Can a scale of reserves would be talking about it perhaps? That's that's I suppose a question I mean if you looked at local government as an example where they do have a fair amount of freedom to hold reserves it's about it is a balance between what is you know essentially making a profit from your council tax and holding the appropriate level of reserves and that in a sense makes the elected representatives in the local authority accountable for that so I think that's one of those prudential type measures that's included in a prudential type regime a framework of what is actually the right level of reserves and what's too much you know I don't have a particular view on that and there isn't much evidence to add a sort of central government level to say what that is. At local government level I know I'm based in Belfast I mean the kind of edict out there is about sort of you know 5% of their kind of ratespace and things like that but there's not a lot of empirical evidence to say that's the appropriate level it's just kind of a guideline really. Okay Ms Barber do you have any comments to me or Mr Steven? Okay that's fine I've got I'll move on then again switching papers to your own the ICAS paper again and you see and I quote you've got a very big section on preventative spend that's a very interesting section I'm sure colleagues will want to drill down into that in some detail but just to open that issue up you see and I quote preventative spending like cattle spending is about investing in the future we believe this provides clear justification for the extension of the Scottish government's revenue borrowing powers to fund preventative spend initiatives within prescribed limits and I'm just wondering what those limits would be. I'm not going to commit myself to any limits one of my colleagues wrote this section and I think when we discussed with your clerk about coming here the my colleague who is involved in this wasn't able to attend today and I we can certainly get you more written evidence if you would like on it or somebody could attend on a different date if you would like I'm a tax person preventative spend it's not my cup of tea. Okay I'm sorry about that I was just going to yeah I'm sorry I was going to do a wee follow-up there and then I wonder if you could maybe give me some information on that if not we could get some follow-up information which is just and you say again in the report the debt financing of charities by government as a potential model for providing working capital to charities for preventative spend initiatives and it was just to ask if you could tell us a wee bit more about that. I'll put that in the follow-up. Okay that's fine okay I'm just wondering then in terms of the I can get back to my report basically in terms of your submission actually Mr Steven I'm just wondering you talk about encompassing tax competition just to go back a wee bit to no detriment I'm just wondering if you how you feel about the issue of tax competition you know as a tax man so to speak do you feel it's a good thing is a bad thing and where would it fit in in terms of these proposals I certainly do not have a view that it is good or bad I do strongly believe that the world is full of tax competition between countries everywhere you look if you've spent your life advising companies that trade across borders tax competition is rife and it has been for a lot of years now and grows all of the time and certainly on the subject that we have today I believe that it is completely inevitable that there will be a growing element of tax competition north and south of the border um even if no one intends it to be even if that is not the driver in any way for any of changes of tax law um as soon as those bits of tax law move out of sync with each other you are just creating tax competition and and uh as soon as a few years ago when the whole of these this sort of question started arising rates of income tax cost rates of incomes everything very very first uh thing was so that's another bit of country tax competition that there is going to be okay thank you for that miss barber your tax expert how do you feel about tax competition I I'm exactly the same as Patrick I don't have views on whether it's good or bad I mean it is and as long as you've got different rates different regimes distinctions there will always be a difference and it's it's part of what people say are attractive about a tax regime aren't they that it's lower or more simple or whatever the case might be uh I think it's quite difficult and you have to pick tax competition out from tax incentives you have to pick it out from tax avoidance because of course if you've competition then one element's going to be avoiding the higher one isn't it that's another side of it they're all tied up together and where they separate themselves from no detriment I'm not sure either okay mr behrman do you have a view on this at all uh only in the context of as you said no detriment uh that kind of tax competition is going to be very difficult to try and assess so I think if treasury uh felt there was some kind of uh detriment for them or adverse impact uh I would see that it's almost impossible to kind of prove that uh you might be able to take a view in terms of companies tax but uh incorporation tax but as an individual uh I would say that's almost impossible to measure really so I think the no detriment issue is going to be the difficulty there with tax competition we've heard a number of examples of say air passenger duty are you going to use it in a tax competitive fashion to make Scottish airports more attractive or will the north of England do it is that no competition or is I mean is it tax competition or is it no detriment and it needs to be evened out okay thank you for that okay I'm going to open up the session to colleagues around the table first person to ask questions will be mark thank you very much convener actually um just on the point around um tax competition um one of the things which we've seen very early on with the devolution of the land and buildings transaction taxes it became not not so much of landfill tax but was the obviously the autumn statement by the chancellor where he made radical changes to stamp duty um and that essentially led to a change being made to the rates that were applied by the Scottish Government now one of the precursors to that was obviously the processes here in Scotland where the Scottish Government consulted early on the rates that they were going to apply whereas the way that the UK budget system works the chancellor can just stand up and say I'm doing this and it happens at midnight do you foresee that as tax devolution becomes more prominent and more prevalent there needs to be a look at how the systems work to ensure that such processes don't you know so you don't have essentially the rug being pulled out from under the feet of a devolved administration in that same way whoever wants to take it first just i'll start just as a point uh to start with that is not what I particularly had in mind as tax competition that that was in a way and please excuse this political competition between two chancellers if you like um what I think of as tax competition is where you are attracting individuals businesses activities to one location or another i'm just that's just sort of a piece of conversation as it were but presumably through the principle still applies in terms of Scottish Government consults on rates whereas at a UK level so there is the rabbit out of the half approach team I was then about to try and answer your your question um which is I I do think it's going to be an interesting journey for each set of lawmakers as to particularly if they do get into the mindset that this is going to be tax competition um because I don't think many people are thinking of it in that way at the moment it's it's just a a a at first it will be more of an unintended consequence um from following policies that people think are right for their part of the UK um but i'm simply saying it will then turn into tax competition because that's life um I will be quite surprised if the UK method of announcing such changes alters hugely mainly because it's not particularly Scotland that they would normally have in mind um that's not who they will be thinking of as who they want to compete with in attracting for example businesses or high income people into rest of the UK and so the fact that Scotland happens to work things through more of a consultation process I don't think will impact them greatly I'll make no comment on the possibility that a Tory Government might not think of Scotland but perhaps Barbara would want to um please I wish to go there I'm merely being flippant Ms Barbara yeah we won't go there I would agree that I think the SDLT move was quite political and I think it probably had a different impact because LBT was coming in as a new tax here so that was the first settling down but I don't think that the Scottish taxes can go radically differently from UK taxes and I'm sure they'll always be a tendency to pull together as there is with the landfill tax just now in terms of process we as tax practitioners we frequently ask for further consultation at the UK level we've never had it on rates and bands and things like that and I don't think we'll ever get it it's a political lever and it's not something that we would actively lobby for or comment on and we didn't comment on LBT rates for instance because again rates are not something that tax practitioners said we work with the legislation as it comes to us and we'll come to you if we think the legislation is difficult to work with we do like the consultative processes here and they've been really helpful so it'll be interesting and I think it sits with you as to whether the processes around your rates will need to differ I mean I've heard plenty of commentary that you don't have an annual finance bill whether we want one as a moot point but maybe the processes will need to change as part of the overall fiscal framework I don't know if Mr Birmingham have anything to add on this particular issue well I'd agree with colleagues that I don't see the process changing per say I do think that you know Northern Ireland say where they have corporation tax legislation again they don't see it as a tax con well I suppose they do in the sense that their main driver for that was competition with the Republic of Ireland on their rate and to attract foreign direct investment I suppose primarily the latter you know that that was the key driver to get foreign direct investment in I think your competition if you took that analogy you know between your closest nearest neighbours therefore you might see some marginal adjustments to tax and slight differences appearing but I agree that I don't see a huge significant material difference coming in the near future so I don't see that you know I think the process here and the process there will will evolve as colleagues have said one of the concerns that has been raised during the examination of the powers that are to come or proposed to come through Smith and the draft clauses is around the very narrow control that the Scottish Government would have over the tax rates for example the suggestion has been made that were a future Scottish Government to take a decision to perhaps reintroduce a 50 pence top rate because they wouldn't have control over all of the areas of taxation individuals could apportion that to for example bonuses or dividends and it would not be touchable by the the Scottish Government under that regime is that something you have a concern with in terms of how how effective future tax powers could be in Scotland? I would suggest it if there's a wild if there's major differentiations it comes back to that tax competition point if there's significant differences tax competition tax planning doing your best not to pay too much whatever it's called people will use what's available I think that's just the nature of people and certainly it can be used in people's favour as well if you look at Isis and savings instance I think the suggestion was that there would be the potential creation of a loophole existing in Scotland I would not perhaps exist in other parts of the UK people could use in order to perhaps lower their tax liability I'm not sure that I would call it a loophole as such it just is what it is and there is the potential for family owned companies directors if they own a company it's a perfectly legitimate business decision as to whether you pay yourself a salary and or dividends and to a certain extent how you you know what proportion you use it will be the case that dividends fall to UK tax salaries will fall to Scottish rate only as a follow-up in the green with with what shall I say it's only going to make any difference to state the obvious if the two sets of rates start to differ by a lot if they do then you will have a number of questions arising and the one that you're talking about I accept that that will raise some interesting questions in the sort of way you're saying I'm agreeing with you okay Mr Barmingham nothing though if it's wired in terms of what the two colleagues have said okay thank you I'll come to you for my Gavin the Trattered Institute of Taxation no sorry ICAS there's an instinct page about VAT which we've discussed quite a bit today already and obviously you point out the options of production based on consumption based although it appears to be moving towards consumption based I think from the last panel that would confirm that I think but but what I was interested in really was your comment about the no detriment and VAT because I hadn't kind of thought of those two as being connected I thought of no detriment in other contexts but you're saying any decision on the calculation of the VAT assignment also needs to be informed how the no detriment principle will be applied so could you kind of open that up a bit and so I can appreciate the significance of that it depends on how you calculate it and then it'll wash through because however your calculations are going to go into your Barnett adjustment aren't they and then flowing through from that you've to unpick the bits as to what relates to economy and what relates to Scottish measures in order to continually to balance your Barnett formula adjustments in future okay I'll have a think about that thank you I mean I take your point about preventative spend at somebody else but but I think if you are writing us to about that I mean I think the main question in my mind when I read that which I found an interesting suggestion and not one which I oppose but I think the problem that we've grappled with in other context is how do you define preventative spending so I imagine that would be one of the objections to it from those who didn't support that so it would be interesting to get your thoughts on that as well and at the end of your paper you seem to be questioning the independence of the fiscal commission while you say its independent is not necessarily obvious if it is a part of the Scottish administration and when one of its proposed functions is to prepare such reports as Scottish ministers may require so do you think its status ought to be changed in that way or I there are two perhaps two points there firstly I think in terms of the wider public I completely accept that the way that the draft legislation is structured at the moment that the Scottish fiscal commission would be independent of the Scottish government but it's quite a kind of technical independence and I'm not sure that if you've got something sitting in the middle of the Scottish administration that to the wider public they see the distinctions within there so and it needs to be seen to be independent I think if independence is what you want okay thank you now one of our other obsessions obviously is the block grant adjustment so if I could ask the other two panel members about that the chartered institute of taxation I put it right this time has interesting comments about that well from from in sections five and six really of the paper now 5.3 talks about index deduction and levels deduction so presumably we're getting index deduction could could you explain what you mean by levels deduction I am now going to duck on this one what we have tried to do in our response to you is to we talked to various of our colleagues and and people in close organisations and have tried to point towards some helpful things to be looked at here however you have now got a tax person and this is deep in the field of economics I will happily write you a note on the subject of course I will but I'm ducking at this moment and does that relate to your comment in 6.3 as well because obviously what we accept we're getting the index method but one concern is obviously that the tax spend areas in Scotland and the rest of the UK might diverge for reasons unrelated to Scotland's policies so would you want to pass on that one as well well I will but just let me come at you for just a couple of sentences if I may it is something that we were touching on earlier in this morning the different elements that go into the change in tax take will be enormously diverse and behavioural change will be one of them just go back to the dividend and and thing that we were talking about earlier but there will be a whole load of behavioural change if rates go a lot different from each other and this is simply suggesting that how exactly you get to these adjustments to the block grant will need to be the subject of lots more negotiation now before you get there okay thank you that's how well yeah yeah that would be good yeah just on the the Barnett formula really I suppose the way I see this moving forward is well the Barnett formula really is the mechanism for adjusting essentially what is called consequentials really so where wishments to spend rises or falls how comparable that is i in terms of that's a devolved function or whatever then whatever percentage is devolved is times by a population based percentage to get you a Barnett consequential so back in the 70s you had a fixed budget and ever since then the Barnett formula has been applied to those consequential adjustments what we seem to be moving to is a situation where in this additional measure now so whatever adjustment comes through the devolved powers that you're going to get in terms of tax foregone or spending that is being transferred and associated savings what treasury would do in their statement of funding policy at budget time and at the autumn statement time would be to list out how that adjustment would work in their statement of funding policy so i assume that there's going to be a little bit of an adjustment to the section that covers Scotland's consequentials saying that the space figure needs to be taken out and then indexed by whatever that index is and then that's the amount of consequential you get now i suppose to me that first of all the thing that shrouds Barnett in mystery is that it's done behind closed doors in treasury and so there's very little input into the issues about what is applied on a devolution basis the classic example being the Olympics where treasury said that benefited the whole of the UK and therefore there was no consequential adjustment for all the increased spending on the Olympics even though you may well have spent some money locally in terms of maybe even supporting teams that were based in Scotland or something like that and that would have come out of your own pocket rather than got any Westminster funding for that so that's an example of how it can kind of work incorrectly or or not in your favour i think there's an issue for the joint Exchequer Committee or perhaps the fiscal commission to be involved with treasury so as you can actually agree in advance of that funding statement being produced exactly what the indexation measures are and what the impact of that will be on the Scottish budget. Yeah i mean i'll tell you a point on that but in your earlier contribution you seem to be implying that the Barnett formula would whether away and i didn't quite follow your logic there because there are these gray areas that i always have been they're not going to change but surely there will still be a notional consequentials and then you would in principle deduct whatever you were supposed to be raising in tax from that so i don't quite see how in principle the Barnett formula would whether away until such times as if they arise when we raise all the all the money that I suppose when I say whether away what the institute's position would be is that it's no longer fit for purpose as we move further down the devolution route particularly and therefore should be withdrawn and replaced with something else that's a bit more needs-based that would be the institute's view on it so withering away is probably the wrong thing to say because obviously there would be something in its place but what we're suggesting is that something would be more needs-based rather than based on a just a consequential adjustment of something that was set up in the 1970s so that's your opinion but it is not it needed whether away as a matter of fact it could still survive but your your own view is it shouldn't sort yeah yeah yeah okay thank you okay thank you a gavened phone by john thank you um first question is just a follow-up on the vat assignment from the from the icast paper the paper talks about um dividing up by place of production or place of consumption and that has been put before this committee before in your view do we have a simple choice between those two options or is there some kind of hybrid option between the two that's possible or is it a simple case you've got to either decide you're going production painful i think both choices have their difficulties i don't vat is what we call an indirect tax it's not directly on the economy in the as endless stages in it doesn't it or if you do it on a consumption basis it's not necessarily being made here so i think it's really difficult i quite see the sense of a hybrid kind of position because it might cut out the worst of both or it might add the worst of both i'm not sure that i completely find vat assignment an easy thing to marry up to the scottish economy okay don't know if others have views i mean is it a simple choice between the two or is is there some other system that we've not thought about yet well if it is i haven't tied that but um i mean on the assumption big assumption that we're all going to remain part of the EU um it seems to me that the whole thing is going towards consumption and is sort of mooring there um and that was the theory that i had always assumed we would get to okay thank you um mr bremmingham you made an interesting comment i mean the block grant adjustment is not an easy subject we've seen that over the last couple of years or particular last couple of months but you suggested it would become even trickier i mean so far we've only looked at block grant adjustment for Dell not for for AME you touched on how you might have to think about it for AME can you just expand on that just a little bit more because i mean we've talked about it a lot for Dell but we've never really discussed how you do a block grant adjustment for AME are there any other factors we should be thinking about that you didn't mention earlier that's the first point is that AME is not driven by the block grant process in the Barnett formula that's purely Dell so what could happen i suppose is the position where you've got to devolve welfare spend and that either accelerates or slows at a different rate to the UK and thinking about the no detriment principle of how you would adjust for that if the overall position is financially going to be the same you know it would allude to the fact that if let's say your welfare spend was increasing at a significantly different rate to the Westminster's you would need the indexation or whatever the process is in place for adjusting the AME spend to reflect that now that's a more difficult measure in my view than just simply saying like on a tax basis you know income tax this is the amount that the UK's foregone and we're going to index it by the general uplift in the tax base in the UK or something like that because that AME spend is can be disproportionate that makes the adjustment more difficult you can't apply a kind of flat index that's why i was suggesting you might need to look at what the drivers of welfare spend are to be able to create an index that that kind of fits that that bill thank you question forever really but i'll like mr bang i'll start with you again because you talked about it in terms of borrowing powers because you all touched on borrowing powers in your papers if you put preventative spend to one side for now because i accept you will get it perhaps some more details on that but in terms of borrowing for other purposes or specifically for capital do you have views on what the regime ought to be should i mean i think you suggested it's it's kind of rainy day money in terms of existing obviously you then think it should be more than that but by how much more do you do you have a view on how much ought to be should there be limits at all or should there be a sort of you know an unlimited opportunity in it and then it you know the markets i guess effectively um regulate you in somebody did you have views on what sort of boring regime we ought to have in place well yeah i think that uh in terms of limits i'll come to that in a minute but yeah uh the smith commission was alluding to the fact that you should have some kind of prudential measures uh of borrowing to support your borrowing powers now treasury have put a kind of ceilings on your borrowing levels of 2.2 billion and things like that in the context i suppose this needs to be seen in the context of your framework supporting a market view if if you ever came to issue bonds or anything like that in the market you would need some kind of credible fiscal framework and regime to support that and that kind of supports your case and and impacts on the interest rates and things like that that you may get uh the prudential regime would suggest that uh what you should be doing is is uh agreeing what's an affordable borrowing limit so in that sense there isn't a dictated limit but you as the elected representatives would agree what an affordable borrowing limit is now affordability is kind of seen in the context of of of how much uh what's the impact of that on the local tax base that you're you're raising so is say 25 percent of the local tax revenues that you're raising being spent on financing borrowing you know is that acceptable uh and you as elected representatives would have to come up with what is the affordable level that we want to put in place and agree and perhaps legislate through uh the annual budget process or something like that that that is the affordable limit we're going to we're going to stick to uh and therefore the market and others can see that that's the that's the kind of uh debt to gdp level or whatever that ratio is that the scotish government reaming for and that's budgetary what they put in place and that that fits in with having a fiscal framework that sort of regime so i think that's the appropriate way to go in that context okay and i wonder if other panelists have views on borrowing the only point that i would make in addition is that on the assumption that the scotish government borrowing was being underwritten by the whole of the uk i suggest there is not quite the same link between levels of borrowing and what the market thinks of it because logically the market would look upon it as simply being part of all uk debt therefore if that is going to be the case it would seem to me that the amounts of borrowing need to be primarily agreed between the two governments if i can put it in that way based on many of the principles that we were talking about there i was just saying the market wouldn't have the same effect um in that case one thing to say is obviously if you are still kind of just ffiscally federal should we call it so under westminster then obviously westminster could have a backstop of imposing a limit on you should you you know kind of really go to town in a way that they fundamentally disagree with what i'm talking about is a fiscal framework that gets you towards a position where it fits in with that kind of fiscal federal approach but also fits in if you ever went to full fiscal authority you know you would have that regime already in place okay that's great thank you thank you for that on the question of analysis and forecasting and things like that um i cast says in paragraph eight um scottish government are developed to deliver the financial analysis necessary to support policy decisions government needs to work out how much tax it will really raise and the sip for one of your four critical questions is what a scottish government must be able to answer what is the fiscal impact of further devolution takes place but i mean if we are subject to making a decision and then as has been pointed out already westminster makes a decision that overrides that and given the difficulties with the block grant adjustment in that we've already taken on landfill tax and we don't know what 11 months ahead what the adjustment will be for that i mean are these just wishful thinking that we cannot possibly do no i i don't believe so i mean the frusta what we're trying to get to as i say is is a fiscal framework that will fully support if you go down the route of further devolution even towards full fiscal autonomy in effect so that's the type of fiscal framework where envisaging should be put in place in terms of some of the things you've talked about measuring the impact of these things that's why i think it's important we've alluded it to it in our submission that scotland reviews its financial management in in the sense that you know like a whole of scotland position having a scottish balance sheet and things like that regularly available for scrutiny to be able to see well if we did take on extra borrowing or if we did that this that and the other that's what the impact of this will be the impact on tax raising the impact on our balance sheet the impact and so on and so forth so bringing in a financial management regime that suits that obviously looking forward it is just about prediction it's a guideline it's not you know an exact science so yes things will impact you but that's why we've also alluded to trying to make an assessment of the risks i think what we're talking about is a medium to longer term financial plan which will also feed into any discussions you do have with treasury so there's an opportunity at preempt where they may come along and do something which has a fundamental adverse impact on what your plan is there's the ability if you know that upfront to be able to say well look you know this is the way our plan works it's based on these assumptions and if you did that you know that would have an impact which would be detrimental so i think it's about you know it's not an exact science but i can't see how the scottish government you know can properly manage some of those powers without having that financial management framework in place that's that's what i would say so we should do all of that and then at the bottom of the page in small letters you know this is all subject to nothing nasty well i think the same principle yeah the same principle applies in west mincer but what i'm saying is if you don't do that uh you you know the impact of treasury doing something else uh you you wouldn't have properly planned for or or worked out what the risk of that is in advance that's what i'm saying so thank you also for saying the fiscal framework should have a legislative basis can you just expand on what you mean by that uh in the same way that uh i talked about treasury statement of funding policy uh that's driven by their legislative basis so sets out that the government must produce a budget for example and it must produce this charter for uh funding statement as well at at order and statement time and at budget time uh and that must set out certain rules what its fiscal mandate is and things like that so if you put that in legislation that makes it a kind of a legal requirement for you to do uh to update that fiscal framework on a regular basis and to actually it's in the legislation it's really the structure that's in the legislation not saying what you've got to balance the budget over six years or no no that will be included in whatever your funding policy statement is in your fiscal mandate uh the legislation's really saying this is the structure of it and this is what you need to publish and produce but and i wasn't clear too if you were thinking that the fiscal commission should be making the forecasts or just reviewing them in 4.7 it talks about they should be checked things should be checked independent reviewed by the Scottish fiscal commission and 5.3 it says commission should provide independent economic and fiscal forecasts uh yeah i mean what we're saying is that i think in the same way the obr produce economic and fiscal forecasts and the government use those uh what we're saying is the government doesn't have to use those uh you know you could go and do something else you're taking that as advice and somebody independent is feeding into you those figures again whatever your output is and whatever your decisions are then there's a role for the fiscal commission to review that and say yes that makes sense or or no we think that those projections are wrong or whatever so what i'm saying is you don't have to take the fiscal commission's forecast as read uh you might well interpret the things differently and come to a different budget decision uh but certainly you've got some input to actually inform that decision making in the first place but but they're at the moment they're not making forecasts are they no no not at the moment no uh but i would suggest that you do need that kind of input so to me that would be a role for the fiscal commission as well i mean i don't know if the other two have any views on that about the fiscal commission and i thought there was a lack of clarity as to whether it was going to be checking forecasting or doing forecasting or maybe something closer to auditing it wasn't crystal clear from the draft legislation as to exactly what the fiscal commission's functions would would be or quite where they would get and the other area where we had some uncertainties when we had looked at it was how much they would be working with say Scottish rate of income tax and if the stats come from hmrc if they come from hmrc uh whether there'd be duplication of work or if there wasn't duplication if there was scope to going in contradictory directions we thought there was perhaps a bit of fine-tuning needed there on the working together areas okay only to add to that the the obr it seems to me does a reasonably good job at the moment i'm not saying whether their forecast is a good or not but they are respected um they are accepted as being about the best estimate of everybody and they are accepted as being largely independent of government i think that's a reasonable place to be and i had assumed that scotland would like in some way an equivalent i mean i just wonder if that's going back to what charlotte barber said earlier that they've got the appearance of being independent whereas in fact hmrc told us that most of their information just comes out of hmrc so they're not really that independent but they do appear to be is that is that the important thing i mean obr does economic forecast with information as it gets from wherever including hmrc um i'm not sure that i think hmrc would argue that they basically do the work and obr just kind of put the icing on but you wouldn't you wouldn't agree with that i i would not accept it's it's it's sufficient icing for me to be impressed by their objectivity just going to say i think the draft legislation around the scottish fiscal commission there's quite a bit where scottish ministers have quite a bit of ability to exercise generally like they have some influence over appointments and that they put them forward the reports need to go to scottish ministers before they come to yourselves some of those areas don't necessarily lead to independence it might not be independence that you want either it might just be that you want them to be impartial scottish is quite small yeah okay right okay mr moment i do think that the obr do take a wider view than just treasury figures you know for example the institute for fiscal studies and things like that feed into the obr so i accept what you're saying in treasury might have that view but i do think they are slightly more independent than you give them credit for okay fair enough um well continue with yourself because we've talked about borrowing earlier on and um we've talked about scottish borrowing scottish government borrowing uh UK government borrowing i just wonder where local government borrowing fits in i know that's kind of sit for area because they've been kind of left out the equation but in one sense if we look at scottish borrowing well we can't totally ignore that local government borrowings in there and they've got more freedom or that looks like they're going to have more freedom than the scottish parliament would have how do you see all that tying together well in a sense they do and i think that's why it's important that as you get these powers and you've got increased freedom of financial responsibility that you do take a view on as i said the whole of scotland position including local government because that's an important point if you move towards a fiscal autonomy position that's the sort of information you'll need to know you cannot just leave local government out and let them to run on and borrow whatever they can and leave you in a position where local tax is going to be completely unmanagable going forward i'm not saying that you need to step in and put some regime in place over local government i think the regime's already there and it works reasonably well but you do need to take account of that particularly if you were like going to a market to issue bonds or anything like that i think it's important you have a position on what the whole of scotland's finances are before you do which parliament should get more involved in what local government borrows not get involved but i think it's part of your financial management overall like an overarching view of of what the total debt of scotland is yes i think you should know that yes okay Mr Stevens in your paper in 3.2 it talks about the Barnett formula and uses the word mechanical which we've looked at before in the committee and i have to say i quite like the word mechanical because it suggests that you've set a system in place and it works its way through but you also talk about we need to be there need to be a review of the formula and that might be on a regular basis and perhaps even an annual basis and i just wonder how that ties in because on the one hand i've got a picture of something that kind of churns along for a few years and on the other hand something that's always reviewed every year for the evidence of doubt we like mechanical as well um it it yeah for a series of reasons um it goes back to something we were talking about a little earlier on this morning of i believe that each year government of whatever variety will ought to account to the people for what the bottom line is of the block grant which takes account of the Barnett formula and the various adjustments that we've been talking about and we were talking about how we needed to simplify you can't go to every theoretical place that you might and that shouldn't just apply to the adjustments but to the formula itself because it's when only when you pull it all together that you can present to the outside world why this is the right net amount of money that should be received therefore you are inevitably going to be re-examining what the Barnett formula says as a starting point because you can't just have a black hole there at the top and then explain in detail adjustments being made because you've still got a fairly black hole at the bottom in that case i think it needs to that the whole calculation needs to be looked at loads of sets of mechanics there to help us towards it but if you just assume that a big chunk of it is always it's going to be all right every year i don't think it gets you to the right answer i just wonder if if you can look at things too often i mean you know like you dig up a plant to see if it's growing kind of thing it's yeah it's it's possible i'm i'm the thing that i'm most trying to say is that i do believe that each year the public needs to be satisfied that a bottom line correct amount of money has been received how you get to be able to do that is probably a matter that the government can best judge because it will need to present it to its population okay and just one final point in 13.1 you talk about scotland having control of 60 of its spending and 40 of its tax revenues i was just wondering if by control now does that include that which we would have the money but we wouldn't have any you know control in that sense i believe that is so and the the implication of what you're saying i think is fair right okay thanks so much thank you jeane thank you thank you convener i just really want to ask one question um the no detriment clause it has i think concentrated the minds of lots of people who've given evidence to us and um shallot barber have made reference to the air passenger duty which others have done to to as to how that would work and i wanted to ask you first of all do you think it's even possible to adhere to such a clause do you think it's there just a kind of temper of what people might think to do or do you think that it's simply political in order to reassure everybody that whatever outcome of this we're all going to be the same and live happily ever after okay let me just start i'm sure my colleagues will have better answers than i um it does seem to so day one or more to the point year one the concept of no detriment i think is is far more easy to get one's mind around if you add in the concept of tax competition that we talked about earlier on which i believe just inevitably will arise it it's it's a phrase that is is meant to be a little bit provocative tax competition and no detriment you could say are mutually exclusive therefore i think you may have a point i would agree with that in its broadest terms clearly if you're part of a wider picture you don't want imbalances between the two but if you take it down to much finer detail much finer analysis like the example we had earlier on of if the personal ounce is significantly increased is that no detriment is it competition is it political i would expect something like that to wash through into no detriment and therefore do you know we are all the same or if the UK government deliberately had a lower top rate of tax therefore persuading a largest number of extremely high income people to move to their jurisdiction um would that be no detriment sorry i'm just trying to give examples there's an element in the no detriment rule by treasury that is probably related to EU rules about not creating within the the UK as a whole particular areas where you know there's unfair competition or something like that so i think that's part of maybe the argument for a no detriment rule so i wouldn't agree that it's just there for you know political purposes i think there is some rationale to that but i think coming up with a simple way of adjustment is really the way forward because there are going to be certain areas where i think it's almost impossible to to measure and judge that because you're assuming as we've said that these adjustments and measures are put in place to achieve something else like stabilising the economy or economic growth rather than to create a position where there's tax competition or something like that so if you stuck with the original driver there are going to be some areas that are very hard to measure and and maybe should be left out of areas of indexation or anything like that and just finally if i may convene it on that basis if you see that as um a basically a good thing would you think that there are examples already where we suffer in scotland where there could be correction for example in delivering renewable energy do you think that the no detriment clause could actually correct a number of of issues like that potentially yeah i mean it's not always going to be a negative thing as i say and using the example of say welfare and disability allowance and things like that you know if there are going to be examples where perhaps that that should impact scotland favourably yes thank you thank you very much okay that appears to have concluded questions from the committee just got one thing out just to seek clarification on it it's from yourself mr bremming and when you talked about the barnet should be replaced by a needs-based formula i'm just wondering if that's the collective view of the chartered institute of public finance and accountancy it is indeed yeah yeah we have put a paper out on that so it is it is the view of the institute yes and what would the impact turn scotland be of that uh yeah it's an interesting question i suppose one if i knew what the needs-based measures would be then i would be able to tell you exactly but as i don't i don't but what i can do is maybe allude to some historical evidence now there would be a suggestion as you probably are aware of if you've looked at this in the past that across the three regions scotland northern island and wells wells would argue that they're underfunded northern island maybe don't have an exact view but there's a view that northern island's overfunded and there would it be a view that scotland perhaps is as well the only evidence i have is there's two old studies by treasury and they are old and out of date so i would certainly caveat that because one goes back to the 70s one goes back to the 90s and i did a piece of work for the department of finance and personnel committee in northern island on their review of the operation of the barnick formula and there was a piece of work by a professory in mclean which looked at some fairly crude measures of need and all three of those studies kind of roughly correlate with each other and actually suggest that northern island is is not too far away from its needs base level scotland is probably slightly overfunded and wells is is definitely underfunded so all i can draw if you were asking me to draw a conclusion from that is that i couldn't tell you what will happen if it moves to a needs base formula because that's something that would need to be agreed there would obviously be a huge transition to that but it would suggest that there would be a more of an adjustment in scotland than perhaps the other two in terms of adverse impact if you took those three studies okay but i thought they'd be a biggest adverse impact on london if it's needs base given the fact that they suck so much money out of the rest of the the UK and have so much money in terms of everything from well the civil service to infrastructure spend but i believe it that is there any further points that witnesses would like to make before we wind up this session okay well that's great well i'd like to thank you very much actually for contributions to that that's very helpful to the committee i'm going to call a recess until noon and to allow a change over witnesses and a natural break for members thank you start at noon and we've gone beyond that so let's fire on fire on okay our final business today is to take evidence in relation to the care of scotland bills financial memorandum from the following scotland officials fee hodgkus linlavery more often and truly mckinney members have received copies of all written evidence received along with a briefing paper so you move straight to questions on the committee and as you know i will start off with some opening questions and the colleagues will explore some of these issues raised in depth so first question i would be as well i'll set out basically policy memorandum just for for the record states that the intentions are that carers should now quote be better supported on a more consistent basis so that they continue to care if they so wish in good health and to have a life alongside caring and that young carers should have a childhood similar to a non-carer peers so questions will be obviously in relation to that context so let's say let's start straight away i mean part two of the financial memorandum contains two estimates for the areas of expenditure that do not appear to be included in calculating the total figures set out these are costs for nhs education scotland scotland social services council for training directly associated with the bill and when it's raising indirectly associated with the bill and costs for the third sector indirectly associated with the bill's implementation so i'm just wondering if you can comment on that yes i can good afternoon convener good afternoon committee the costs for training and development to be taken forward by nhs education for scotland and social services council are included within the financial memorandum with one of the tables near the beginning and so are the costs for the third sector development i think the confusion may have arisen because those costs for next triple s e and the third sector don't carry on to 2020-21 and the costs presented within the paper that you have are the costs from r in 2021 so that's the reason the costs are there one issue which has come up in and i'll just quote the submission from north east of council which is where i my own constituency is in terms of the adult carer support plan according to north east of council while the financial memorandum states demand will peak at 34 per cent and that's made clear in page five the memorandum they say that present 53 per cent of local carers of yellow for any csp in terms of north ayrshire and that this would mean that six full-time equivalent additional staff would have to be required and so they go on to say basically that for also that for children and younger adults the three years in terms of this additional support funding appears too low and once a carer has an expectation that it will receive some of money to purchase support it cannot be time limited and therefore there will be pressures on forthcoming years on carer support within limited budget constraints so all in all what they're seeing quite clearly is that the additional work and associated costs estimated are too low and they've talked about it being unrealistic etc so i wonder if you can comment on that because a number of organisations appear cause like etc appear to have said that now i will say before you answer there is a caveat in that you know whenever a bill comes forward to this committee i can't remember an occasion when people did say that you know that the funding was exactly right and that you know that everything was hunky dory but that not being said there did appear to be substantial concerns about some of these issues i wonder if you can talk me through how you came up with the the figures that you have in terms of the with adult and young carers it would be good certainly if there was a meeting of minds around the around the financial estimates i'm sure the committee would have would have welcomed that but the the financial memorandum is based on the best estimates possible and i think we have to acknowledge nonetheless that there are difficulties in calculating and estimating demand it's it's not an exact science by by any means it is a very grey area and to a great extent the demand will be will depend on carer behaviour and what predicts carer behaviour there will also be issues around around the publication of the bill a local campaigning peer to peer references from carer to carer and so on all of these have a bearing on on demand the bill isn't i mean the Scottish Government wants to be ambitious about the bill certainly but that ambition shouldn't be equated with unrealistic expectations about a demand profile in relation to the figures you've quoted i think you know they they are important and this this is from one council only and but nonetheless it's very important to recognise what the council is saying it certainly come to our attention through submissions in response to the Scottish Government's consultation that another a number of other local authorities take a different view about about the demand profile and and that there'll be a slower build-up in demand than a peak from year one and we wouldn't expect carers to come forward in a large number from from year one of of the bills implementation i think the figures quoted were around the numbers of carers that may be known to that particular council because they are known by association in relation to the the care for person but that doesn't equate to carers therefore wanting an adult carer support plan certainly within the bill there's also duty to offer for councils local authorities to offer a an adult carer support plan as well but we we know from research that not all carers will want what is now called the carers assessment that that some carers a proportion of carers are content and happy with inputting into the community care assessment or the disabled child's assessment of the of the care for person so you know i think for a good number of reasons that that the figures could be quite different from from that stated from from that local authority albeit that what they have said is important in its its own right but we do know that carers decline the offer of a carers assessment as well we very much hope that the carers when they want an adult carer support plan that that they will come forward but we don't quite see it in terms of those figures presented in that way does anybody have anything else to add well i'm always interested in what this particular authority says because it's my own little authority apart from anything else but what they've said is that the the the scotland view is not based on evidence and you talked about realism but causal itself in in you know subsection six of paragraph five and their own submission says that a unit costs for support to carers are also unrealistic in the go on to talk about the fact that in england the government assumes at 967 pounds the average cost per year for carers requiring short breaks respite whereas there's only 300 pounds in terms of this legislation that's quite a significant difference is it not of the unit costs for support as opposed to the unit costs for the adult carers support plan or the young carers statement the Scottish government used the figure of 333 pounds as a unit cost for support it is based on fairly recent publication research from from the carers trust and it also is also a figure which exceeds many of the time to live grants the time to live is one of the programs under the voluntary sector short breaks fund where carers get a grant directly enabled for it for them to purchase what what they so wish including including short breaks and especially short breaks so that's where the 333 pounds comes from the figure quoted of in the English impact assessment of over 900 pounds for for respite yes that's right if we were to include a similar figure in Scotland for respite care it would be over 600 pounds rather than over 900 pounds being the national care contract figure for residential care so that would be the figure but the reason that we haven't included those figures in terms of respite care or replacement care is that the Scottish government with COSLA and others is looking at the issue of waving of charges which I can speak about later and that does have an impact but I'd also like to add that even though the Scottish government hasn't included within the financial memorandum a figure for respite which would have been over 600 pounds in the latter years of the of the demand profile taken on a pro rata basis the resources for Scotland on a pro rata basis are actually more than those for England but I should add there's a caveat about that because the English care act deals with adult carers of adults whereas the carers bill deals with adult carers of adults and adult carers of children and young carers thank you for that now COSLA also say in paragraph nine that all those Scottish government indicated that we prepared to consider any new information which comes to light about cost estimates this willingness did not extend to being prepared to jointly agree revised estimates or to addressing unfunded pressures on councils that result from this new legislation and the national carers organisations in their submission says I quote we believe the government should undertake full scoping on the financial impact of the carers bill in section 1.3 to go back to COSLA they say that they're calling on the Scottish government to tell us to reach joint agreement on the model to be used to estimate cost and demand and again they add COSLA in their conclusion paragraph 12 that many of these concerns are shared by relevant professional associations such as Social Work Scotland and to an extent by third sector colleagues so there really seems to be concerns about some of these financial assessments and just the national carers organisations that I quoted that there's a number of organisations included in that such as Carers Scotland, Coalition of Carers in Scotland, Minority Ethnic Carers, Evolder People's Project Carers Trust Scotland, Scottish Young Carers Services Alliance, Crossroads Carers Scotland and Shared Carers Scotland so there seems to be quite a widespread concern about the about the costings and how they've been arrived at here. It's absolutely correct that COSLA and Social Work Scotland and the national carers organisations have made those statements and I mean in where we're at in a situation of fiscal constraints and really challenging economic climate then it's understandable absolutely understandable that all these organisations would want to have proper costings, fair and proper transparent costings for the legislation because all agree that it's important to support adult carers and young carers as of course does the Scottish Government. Before I pass over to my colleagues I'd like to say that these organisations haven't at the moment provided alternatives to the costing set out in the financial memorandum at least not fully especially around unit costs for the adult carers support plan and young carers statement and also around the demand so across that spectrum there's not an alternative positioning of the financial estimates. The financial estimates in terms of how the Scottish Government arrived at the financial estimates we COSLA on our behalf sent out a survey form to to local authorities and we got 22 returns which is a very healthy level of return we also sent out questionnaires to health boards as well and again we got a healthy level of return and on our behalf the carers trust and coalition carers also surveyed carers centres so there's quite a and I can phrase it this way a bottom-up approach to estimating the figures within the financial memorandum as I've said and as I think it's all these other organisations acknowledge it's very challenging it's not an exact science you know as I've said it depends on carer behaviour but I'm quite you know happy to say to set out how we arrived at the unit costs for the adult carers support plan which COSLA in social work Scotland and some local authorities have commented on I'm also quite happy to talk about the removal of the substantial regular test which has been mentioned as well but there was a transparent process in building up the costings for the financial memorandum based on the information presented to us through the local authority returns and and certainly in terms of the the unit costs for the adult carers support plan then it's the same quite happy to to set that out in detail but perhaps Julie Dudennell to say about the I would just say I would agree with Moira that we recognise the concerns of COSLA and the other local authorities around the accuracy of the estimates and we recognise that those are our best estimates at this point in time but we have given a commitment to take on board any new evidence as it comes to light and we will review that and what we would propose to do similarly to what we did for the bill for health and social integration is to create an expert finance group with representatives from all the key stakeholders including COSLA to review the cost as we move forward towards implementation and take on board any new evidence that they would have but as things stand the estimates are the best position that we have at this point in time. Okay, my beg's the question what is our best estimate but I will leave that just now just one further point before I open up to colleagues around the table in terms of the adult carers support plan that appears to be based on the model of a one-off intervention but an outcome-based support plan is a process rather than a single event so what's your view on that in terms of how that impacts on the financial aspects of this bill? That's a fair point that was presented by the national carers organisations and the national carers organisations do know certainly about how current carers assessments are carried out. Certainly a carers assessment as the adult carers support plan can be a process of building up, building up information, it can be an iterative process, it can be reviewed but equally it can also be quite a low profile if you like form of carers assessment in that it really depends on the situation of the carer and finding out from the carer or the young carer what is the impact that the caring is having on them and what personal outcomes they would like to achieve to go back to the opening statement that you made at the beginning in order to be able to continue caring if that is what carers want to do in good health and to have a life alongside caring and equally for young carers but also to have a childhood so carers assessments can take many forms and we are certainly aware especially where there are complex needs complex issues to explore that a carers assessment adult carers support plan could take longer as the national carers organisations have said but again we know from the returns that we have received and from research that it could be a much shorter process because perhaps the needs are not as demanding. In terms of the unit costs and how the unit costs have been derived it would be quite a difficult exercise quite a challenging exercise and detailed one to try and build up unit costs based on different types of assessment how many days they're carried out and so on. What we do know from the returns is that some assessments are carried out by social workers, some by health professionals, some by social care assistants, some by the voluntary sector and what a point is made in the financial memorandum that what needs to be looked at is the efficiencies around it and the unit costs presented in the financial memorandum set out three costs with 176 being at the top end of that. I would draw attention, I was speaking the other day to colleagues in London around the estimates for their impact assessment on the carers provisions in the CARAT and equally they sought returns from local authorities in England around unit costs. The English unit cost is presented in the financial memorandum as £100. It's now standing at £116 as a median cost and that's based on returns from 120 authorities out of £152 in England which is a 79% return rate which is very good indeed so showing a cost of £116 which should be for different types of assessment, compares very favourably indeed or is much lower than the cost or the higher end cost of £176 set out in the financial memorandum. I think that in looking at the returns from local authorities and the unit costs for the current carers assessment there were only two authorities out of all the returns we received that presented a unit cost of over £300. There were about four or five that presented unit costs of less than £100 and the rest congregated in the middle if you like between £100 up to £250 or so so we derived an estimate of £176 but we do acknowledge that the unit cost will be variable not only depending on the iterative process or whether it's a much simpler process but also on as I've said if it's complex needs more straightforward needs, rurality, travelling time and so on I would also say that there's to add to that that there tends to be some local authorities maybe a few I don't know exactly how many are beginning to look at telephone assessments or assessments online now those would only be valid in certain circumstances and carers do value face-to-face interventions a conversation one local authority calls their carers assessment a conversation another calls it a journey and quite a number call it a carer support plan so that conversation is valued but all I'm saying is that it would be difficult to say look across the piece we've done the best with the information presented and there was a concern that we didn't take account of the figures for over 300 as I've said there was only two at that level but I think we'd be willing to say well despite the fact that the median unit cost in England is 116 pounds that there's merit in considering because of rurality and other issues off a unit cost and maybe going upwards towards the 176 pounds but that would be an issue which would be helpful to explore further in the finance group that Julie has stated would take place. That comprehensive answer I'm going to open out session now to colleagues around the table. The first person to ask questions will be Gavin to be followed by Joan. In one answer to the convener you said that other organisations hadn't provided alternative costings across the piece all of the financial memorandum. Quick question if they did so would that cause you to revisit your figures? Well I think as I said they hadn't provided alternatives across the piece and I think Social Work Scotland and COSLA said that they didn't want to present an alternative at this stage because they felt that that wasn't the right thing to do, the appropriate thing to do because it would present has one set of estimates against another and that's not the way we want to work. We do want to work together on this and indeed we did present our estimates to COSLA in the middle of February and I'm certainly aware that if there's an adjustment for a number of carers coming into the system then that will have an impact on costs if there's a change in the demand situation certainly but given a very uncertain physician around trying to estimate demand then I think that the Scottish Government has certainly done the best it can to do those circumstances. I think for the purposes of the bill we accept the estimate that we have at the moment but as I said as part of this working group as time goes forward and over time as I say if we get more robust estimates or if we can get more submissions from local authorities with sufficient evidence to back that up then we will take that into account and we can look at the position that's presented. You both say that there are a huge number of uncertainties with the demand-driven service and I'm sure that's right. In practice then let's just assume for a second that COSLA turned out to be right and so some of the estimates, the more expensive estimates that some local authorities are coming up with turnout to happen in practice and new estimates do turn out to be under estimates to a significant degree. Let's just assume that that happens. If that happens is there a Scottish Government commitment to underwrite any shortfall or is that just tough luck on local authorities if that happens? I think that we would look at that evidence once the carers bill is implemented. If there is a significant difference between the estimates and the actual cost then we will obviously need to look at that again in light of the overall Scottish Government financial settlement and look at the options that we have available to us at that time alongside other policy and legislative commitments. It's maybe a question more fairly put to ministers who would have to give confirmation on that but I think it's important because if the convener alluded to it there is always a difference between what for example local authorities might say the cost will be and what Scottish Government estimates and the answer will often always be somewhere in between but the important question for me is who bears the risk on those figures being wrong? Is it a local authority or is it the Scottish Government? That's a question that I think I'll put to ministers and you've given an answer on that. I'll go into some of the detail of the memorandum. If you've got the financial memorandum handy, okay. If I look at page 34 on the copy I've got, it's table 3 costs on the NHS. On that table the first cost, the YACS recording is a pretty small one so I'll skip that. Information and advice service abuse to be £2 million a year and it doesn't change but I can understand that. The third one is duty to support carers. It's going to be £3 million per annum in year 1 and that doesn't change at all over the five-year period. Are you confident that there would be no increase in the costs of a duty to support carers six years later? I can explain that. The £2 million for information advice and the £3 million for the duty to support across all the years adds up to the £5 million that's currently available to health boards for carer information strategy funding and that funding has been £5 million per year for the last number of years. Arguably those figures shouldn't be presented in the financial memorandum. Arguably because the vast majority of duties are on local authorities and there are only two duties on health boards. What we've done is because there is so much favourable comment about the impact of a relatively modest sum of £5 million for carer information strategies through health boards and they've built up expertise working with the third sector and local authorities over the number of years but because there is so much very credible information about the impact of that the decision was taken to include that funding in the financial memorandum and to recognise the value of what's been achieved so far. Therefore, the £2 million that you focused on the duty to support, the £3 million that would be added to the funding that has been attributed to local authorities for the duty to support carers as set out in the table on the previous page. If we go back two pages in page 32 of the memorandum, those are support plan costs. If we look at just maybe the top roll, it goes from £17.18 all the way to £22.23. It starts off as a maximum of £1.82 million, increasing year on year to a maximum of £18.86 per year. You're saying that it doesn't increase after that, it's just recurring from 2021-22. Is that right? Is this something that once you reach your maximum of £18.86, it can't increase after that? At the moment, that has been the maximum based on the 34 per cent that we would, the number of carers that would receive an adult care and support plan by that time. We would see that as a maximum and if anything, that number in order to maintain that 34 per cent those numbers could start to decline over the latter years. I think that that's part of what we would want the expert group to look at is the longer term implications of the bill as well and how we would look at that over a longer perhaps five to ten year period. That would be a maximum and could reduce which would free up potential resources to invest in the duty to support carers. Okay. Second question on that area. The causal paper suggests that when this was happening south of the border, they assumed the jump from year one to your maximum would happen over a two-year period and you've assumed it's happening over a five-year period. Are you able to explain why a five-year period is more likely or has anything happened down south that leads you to think that the two-year period was a mistake in the first place? Are you able to expand on that? Yes, I am. Again, I am sure that Scotland and others are right on that. There's a different timeframe in Scotland for the build-up for the adult care support plan compared to the carers assessment in England. The reason is because in England, in proportion to the population, there are more carers assessments carried out than in Scotland, at least according to the estimates that we've managed to build up from the local authority returns that we have received. So, there were 370,000 carers assessments carried out in England in 2013-14, and that figure is from their impact assessment. 10 per cent of that figure would obviously be 37,000 in Scotland, carers assessments carried out, but yet Scotland, according to the estimated figures, does not stand anywhere near 37,000 carers assessments carried out. It is estimated that there are only around 12,000 carers assessments carried out in relation to adult carers across Scotland at the moment. Therefore, in comparison with down south, we are starting from an extremely low base. It's true that carers can be assessed with the person that they care for as well. There are different types of assessments, but based on carers assessments, it's a very low base. Even when we take into account other types of assessment, including assessment with the care for person, it's still a fairly low base. It doubles from 12,000 to 24,000, but it's still a low base. In comparison with England, because it starts from a low base, it means that the profile in our view would have to be over a longer period, and it builds up from the later years. In terms of the unit cost for the assessments, you have taken the average as being £176. In terms of your table, you have put that at the top end. You give a low, medium and high, and you have put that as a high one. You have talked to local authorities and drawn an average. My question is £176. Is that just splitting the average of local authority A and local authority B, for example, or do you look at a number of assessments within each authority and then average it out? I don't know which local authorities are the £260 or £300 ones, but if they are the local authorities with more assessments, if they are the larger local authorities, and the very small local authorities have lower unit costs, then your average might be slightly skewed. Have you taken into account the number of assessments within each local authority, or have you just taken an average for the local authority and divided it that way? For each questionnaire return that we received, the unit cost itself wasn't presented. What was presented was the number of assessments carried out in a year, and then the cost of carrying out those assessments. We calculated the average unit cost for each authority based on that, so we are doing an arithmetic calculation. To that extent it did take account of the numbers of assessments carried out within each local authority area. Your comparison with the English local authorities, where it was £100 to begin with, and you are now saying that it is £116. Are you definitely comparing apples with apples there, or is there something different about those assessments that could make those costs lower? From the information within the impact assessment, we don't have the full information around the English costs, but in speaking to colleagues they did say that, like us, they got returns and they got a unit cost for each local authority area. They said that, same as you, the unit costs in England varied widely from less than £100 to, and they said that, like us, exactly the same as us, there were a few that were over £300. I think that they did some sort of waiting for according to areas, so to that extent it could be different, but that was the basis of theirs. I think that it is instructive to look at the English costs. I think that the number of complex cases will be similar north and south of the border, but there may be issues more around reality and remoteness in Scotland. On page 46 of the financial memo, the unit cost of £333 that you talked about, in one of your earlier answers, you mentioned that the English one was £967, but if you were doing the Scottish one on a like-for-like basis, it would be closer to £600. What is the difference between the £600 figure that you mentioned and the £333 unit cost that you have used in the financial memo? The £333 unit cost is based on Carers Trust research. It has to be said that there is not a huge amount of research in that area, but it is based on direct support to carers. A point was made in one of the responses from one of the national carers organisations that that £333 unit cost does not include short breaks, it includes advocacy, information and advice, emotional support. However, what we have done has cost information and advice separately, so the £333 unit would appear to be reasonable in comparison with time-to-live grants that are given directly to individual carers under the voluntary sector short breaks fund. Those individual grants were varied, as you would expect depending on individual circumstances, but the £333 unit was above a good level of grants that are given under the time-to-live fund. The £333 unit represents direct support to carers. The £600 figure quoted £609 figure is the cost of respite care in a care home per person, so it would be the care for person, an older person in a care home, and the carer getting a short respite as a result of that. I would not include it at the moment because there are challenges around the existing waving of charges regulations, and we want to take stock of that, so there will be a need for further work. However, it is not right to say that the figure down south of £900 is directly comparable here, and the £333 figure could certainly, as an average unit cost, provide a good level of support to carers. At this point, it might be worth—since you referred to this table—to apologise to the Finance Committee for an error in the figures. Social Work Scotland is indeed right, and we value its very careful eye and scrutiny of the figures. The figure in 2020-21 for £330 got it as £24.8. It is indeed £36.288, so we would address that and take that into account. From the earlier part of your answer, you are saying that further work is needed to look at getting rid of charges and so on, but is there any possibility that this £333 unit cost becomes a unit cost of £609? Again, it would be for the group that Julie referred to, to look at this in more detail. We have done the best with what we have got. I have referred to the waving of charges. Would you like me to talk a bit about that and why that has an implication around what we are saying? What I am driving at is that if the £333 unit cost becomes £609, it effectively doubles the cost of the bill, so I am just trying to work out whether there is any risk of that happening and if so, how big a risk it is. As a Finance Committee, I am just trying to establish what the parameters might be. The type of support to carers will vary, of course. The £333 unit, which excludes information and advice, has to be said, so it is a fair amount per carer whose needs are eligible and who are being supported in this way. It could be less than £333, but it could be more. The carers organisations, too, one of their views—I do not want to put words into their mouths, but one of the views of the carers organisations is that we want to see more person-centered type of support, and I refer to that in particular to short breaks, a variety of short breaks, something that is not traditional, or not always, although some traditional forms of respite, if you like, are very relevant indeed, but to try and get in that element of innovation, the type of the holiday break, or even purchasing a greenhouse. That is quoted as providing a break to some people, because it is not seen as traditional respite, but we know from feedback from carers that having this sort of facility, they can do what they want and get time out from caring, that is what they want. It does not have to be that the care for a person is in a care home, but your point is valid. There is such a range of costs, so I do not think that it would be appropriate to say that, in all cases, the unit costs would be £600 over £600. That would not be the case. Again, it is often said that carers do not really want too much. Of course, they want support in the right way, at the right time, which meets their needs and the needs of the person that they are caring for. John Toon, to follow by Malch. I think that we are kind of digging over the same ground a bit, and I think that I will be doing that as well, probably, because it seems to be focused down on some of these issues. I am from Glasgow, so I am looking at Glasgow's submission. I am not quite understanding, because you suggested that, although you had estimated costs from different organisations and you had taken an average, you had not had exactly a specific figure from every local authority. Glasgow specifically says that we estimated that a carer assessment in Glasgow cost around £280, and the FM is working the assumption of £72 to £176. It says that for young carers, we submit an estimated unit cost of £394. Is that something different that they are talking about, or is that like-for-like that we are talking about? How do those figures compare? With regard to adult carers, as we have discussed, the response from Glasgow set out the unit cost of £280. As I said, there were two authorities of the responses that we received in relation to adults where the cost was over £300. Glasgow was one of the 10 authorities that presented costs of between £101 and £299. The cost that was presented by Glasgow was taken into account in working out the figure of £176. As you answered, Mr Brown, that would have pulled the average up a bit. Therefore, Glasgow cannot do the present assessment for £176. Are you saying that they are overdoing it and might be sending two people along when they should only send one too much management cost? I would not say that, because all authorities were given a brief outline of what would be included in a unit cost in terms of staffing and so on. I would not want to comment in that negative way on Glasgow's cost. They were not the highest cost, but because they were presented with such a wide range of unit costs, it is challenging to look at the issues. I think that what I know about Glasgow is that its assessments tend to concentrate on those carers with very intensive caring situations and very difficult situations. They are carried out by the social work department, as far as I am aware, whereas other carers go through a self-assessment process in Glasgow, which is carried out either wholly or partly by the voluntary sector. The cost of that would not be as high. If the voluntary sector picks up, there are cases that should be referred to social work in that way. That is my broad brush understanding of how Glasgow operates, but I certainly would not want to say that they are providing too many social workers or so on. I would say that we know that a lot of the costs are taken up by staffing and that they should look critically at the efficiencies of it. I was just going to add that as part of the further work, it would be helpful to look at the average cost that is submitted by the different authorities and share good practice, where we can see where local authorities are able to drive down those costs. Obviously, we want to do that as efficiently as possible and learn from good practice where we can see that. My perspective is that Glasgow can be top-heavy at times and that it does not use the third sector very well. On the other hand, efficiency makes me think of ATOS. That may be efficient to churn people through and tell them that they are all fit for work, but whether that gives you the best assessment or not, I do not know. I certainly get concerns in that area. The other point, which we have also gone on quite a lot about, is that £333. If I have not understood, we have a young person caring for a parent or an adult or something. The £333 will pay for the young person to go to scout camp or guide camp or something like that for a week. What happens to the older person? There is a wider issue around that regarding who cares for the care for a person when, in this instance, the young carer is away. First of all, I should say that the adult carer support plan will be looking at what the personal outcomes are for—sorry, the young carer statement will be looking at the personal outcomes for the young carer. If it is deemed that the young carer would benefit from the type of scout camp intervention that you speak about, that would happen. It is seen as a bespoke type of support. Providing eligible needs are met has to be said before that process, and that would be funded. On the person that they are caring for, there could be a number of situations there because another family member could stand in or the carer centre, as we understand, happens and works with the local authority to agree an intervention. If you look at the young carers festival that happens every year at East Linton—I do not know if any of you have been, it is great fun—there are 600 young carers there every year. Those 600 young carers are away from their parent that they are caring for or their sibling. In some cases, for the duration of two days, the parent can be without the young carers support that they manage in other ways. As I say, in some cases we know that the carer centre will provide support themselves or will negotiate with the local authority. However, replacement care is an issue in terms of the broad policy. In order to get away from the caring situation or to have a life of their own, in some instances there needs to be replacement care provided, but not in all instances. Is there any financial provision for that replacement care? That comes back to the waving of charges issue that I have alluded to on a few occasions. If you could bear with me just while I outline a bit of the history, because it does lead up to where I am getting to, is that the previous Public Health Minister gave a commitment when the Self-Directed Support Act Bill, as it was, was going through Parliament, and the SDS Bill contains a power to support carers. The minister gave a commitment that if the power is used, the support that the carer receives charges would be waived because carers are providers of services and should not be charged for the services that they provide. The Scottish Government developed regulations and guidance around the waving of charges, and it was stated that, if local authorities use the power through section 3 of the Self-Directed Support Act that is going through the process of looking at the carers' assessments and so on, the charges would be waived. In my scenario, the person who is being cared for goes into the four-seasons care home in Ballaston and the charge is £600. Boopa or Four Seasons are not going to waive that. It would be by the local authority. It could be that the charge that would be waived would be if it is a direct short break like a holiday that that would be waived. By four seasons? By the local authority. But they are not in a local authority home, they are in a private home. Okay, I do not know about that. We have virtually no local authority homes. Yeah, I do not know about that, but if the support was through section 3, what the issue that has arisen with this and the challenge of it is around replacement care for under section 3 of the SDS act, so what COSLA and some local authorities said to us, they said, I am sorry, but it is not possible to say whether replacement care benefits the carer or the cared for person because if it benefits the carer then the charges would be waived. If it benefits the cared for person then normal charging would apply, so charging would be waived in relation to where it supports the carer. Some could say, we understand this issue, it is difficult to judge sometimes, is the replacement care benefiting the carer or the cared for or indeed both the carer and the cared for. In some instances it might be a bit more straightforward if the replacement care is a daycare centre and the cared for person is going there to promote their own independence and to have something good to do within the daycare centre and you can say that supporting the cared for person and therefore normal charging would apply, but it is challenging and difficult to know whether replacement care is for the... I mean, I do take that distinction as to who the replacement care is, but I mean, I think my fundamental point is that somebody is going to engage and have a cost here and it might be if the person stays at home and just gets a few hours extra visits then in Glasgow's case that's going to be a corridor, they're going to be paying somebody to do that, somebody's got to pay that wage, if it's in a proper care home it's going to be the 600 to the private company or whatever it is. I'm still struggling to understand who's paying that bill. Well, if it's within the local authority, it'd be the local authority that waves the charges, we'll come back to you on the question you raised about private care homes, but leading up to the issue and the challenge we've had a number of discussions with COSLA, with a few local authorities, with the national carers organisations, to try and deal with these issues regarding waving of charges and the issues that have arisen, and we're not yet at a position of knowing what we will be doing. Ministers will need to take a final decision around it in order to resolve the impasse, if you like, because not many authorities are using the power to support carers under the SDS act. That might be because of the uncertainty over the charging issue, or it might be because the self-directed support act is relatively new in any event, so there could be a whole host of reasons, but it's certainly an issue that needs to be that we are looking at. I appreciate your answer. I remain convinced that there are costs out there that I'm not seeing in the FFM, thank you. Okay, thank you very much for that, Deputy convener, and next colleague to ask questions, we welcome to be followed by Mark. I was going to ask about something else, but if I can just pick up this issue first. You're going to come back to us on the scenario about £600 in a care home, but are you assuming that there is an issue there and that that would be support for a carer rather than support for a carer for a person? If it's support for a carer for a person, there's no issue, so they'll just have to pay the £600. That is a challenge because some local authorities are saying that they cannot operate the waving of charges regulations because they simply cannot say whether the support is primarily for the carer or for the cared for person. If that's the case, some local authorities are saying that, then there is a challenge for them. You could say that, arguably, if it's directed through the carer's assessment, it's support for the carer, but some local authorities have said that there might be a pressure on practitioners to say that the support is for the cared for person so that they can have charges applied or that there might be pressure from carers to say that it's definitely support for the carer so that they can get that support without paying a charge for it. We understand the complexities and the difficulties around it. We have had a number of meetings with local authorities and national carers organisations to try to see a path forward on that. Because it's unresolved at the moment, the financial memorandum doesn't capture any costs around replacement care. Will there be new regulations connected with the bill or will there just be new regulations to replace the ones from the self-directed support bill? Well, a decision hasn't been made at the moment. COSLA have said that they would like the existing regulations to be changed, but we're not able to do that at the moment because we haven't agreed a way forward. It may be that the existing regulations would stay in place until the bill is commenced and then there would be different regulations depending on the way forward that's agreed, but a decision just hasn't been reached. Currently, local authorities are working with the existing regulations and there is a handful of local authorities that are saying yes. We want to support carers in this way and we will work with the power in the self-directed support. We'll work with the regulations and we'll waive the charge for carers and we'll support carers. Others are saying that it's just too difficult and others are saying that we don't need to use these regulations at all because we're supporting carers via carer centres in our locality and that's working well. It's a very difficult complex. So, do you envisage a supplementary financial memorandum as part of this bill or will it not be resolved within that? Yes, it would need to be resolved. I think that we would envisage a supplementary memorandum to take account of the issues. So, you'll have to resolve it with COSLA within the next few weeks or months? Yes, that's the case. Which, in a way, is connected with the main question that I wanted to ask, because looking at the costings, I mean the overwhelming bulk of the costings arise from the adult carer support plans and even more from the direct support to carers. COSLA, interestingly, they say about this and I'm quoting, but they're basically highlighting the tension as they say it between them and they say, within the context of a finite resource being made available under the carers bill, there is the concern, therefore, that resources that could have been made available for direct support are instead required to be diverted to assessment. That last bit relates to their scepticism about the 34 per cent, I imagine, so that will have to be demand-led. If that proves to be a higher percentage, the local authorities will have to respond. I suppose that this is where I don't know the detail of the bill well enough. Is there, in fact, a lot of flexibility around the support that must be provided? In other words, are there national criteria around that, or are there just local criteria that could vary quite a lot between different local authorities? If they had to spend more on the assessments, could they, within the legislation, take the money from the direct support resources as it were that they'd set aside? We would hope that the sufficient resources are provided for assessment or for the adult care support plan and young care statement, and sufficient for supporting carers themselves that meet the local eligibility criteria that would be determined. The point that COSLA and a few others are making is that they feel that there is a disproportionate emphasis on assessment as opposed to support. There is a scenario on Visish where there is an assessment of consuming resources without any good outcome, if you like. The position has taken that the adult care support plan and the young care statement would be available to all carers, adult carers and young carers. That was very much the way forward. It does not mean to say that resources are being spent in the wrong way. If I can put it that way, there is research evidence and I can refer to the committee to research carried out by Midlothian Council together with local carers organisations that assessment is extremely valuable if it is carried out properly and in the right way and that carers will feel supported through an empathetic and outcome-based assessment in itself. If they have not been listened to, they value the assessment in the first instance and that research points to that. The memorandum sets out the estimates of the finances for the adult care support plan and the young carers statement. The process through the adult care support plan is that there are provisions in the bill that then look at whether the needs of the carer and eligible needs could be met by information and advice services. We know again that carers value information advice or by general services in the community. If their needs cannot be met that way, then it goes on to the duty to support and then look at the kind of bespoke targeted support according to the eligibility criteria. In terms of the 34 per cent of carers having an adult carer support plan that is a steady build-up to reach that figure from quite a low base at the moment. The estimates were made on that. I do not know if you want to comment on the health and social care experience survey and the numbers of carers that are feeling supported at the moment. In general terms, if a financial memorandum is underestimated for some legislation, the money will just have to be found for somewhere. I suppose that the point that I am making more generally is that if the financial memorandum is wrong here, will it in fact just be the carers who suffer because there is so much flexibility around the criteria for support that in fact there would not actually be an implication for public expenditure? It would just mean that they did not get the kind of support that you would like them to have. The financial envelope is important here. The local authorities will draw up their local eligibility criteria, having regard to the amount of resources that they have. That would be incumbent on them to do so, but that sort of normal process, if you like, to take account of the resources that they have, would not be putting carers, if you like, through an adult carer support plan, a young carer's statement, and then to leave them hanging, if you like. There are resources going into information advice, and there are resources for the duty to support, but certainly local authorities would have to take account of the resources that they have available and look at the thresholds for support. I suppose that they could give them crudelyr £100, rather than £300 in terms of the legislation. That would not be breaking the law kind of thing. The local eligibility criteria that has been drawn up has to be drawn up in a transparent way, and they have to be published. It has to involve carers and young carers in drawing it up. It has to be a transparent open process with local democratic accountability, but it would not be breaking the law if that was the case. The section on savings is really interesting, but you have not really factored any of that in. Is that just sort of mood music about potentially there might be savings? There is some research evidence, and I think that it is presented in the policy memorandum, as well, that by supporting carers and especially through early intervention preventative support, there are savings to health and social care, and the policy memorandum quotes three sources of that evidence based on English research. I think that it is acknowledged across the piece that there needs to be more work done in that way, but certainly a lot of the anecdotal information is that carers are supported in the right way, and that will save the care for a person being admitted to hospital or other institutional care, and it will save carer breakdowns. There will be savings, but it is an area that is ripe for further evaluation research. The financial memorandum also refers to potential savings through carers remaining in employment rather than giving up employment, based on research carried out down south and making some broad brush estimates, but the financial memorandum acknowledges that those estimates are a broad brush. You mentioned a couple of times about research, particularly in relation to the issue of respite and short breaks. It strikes me that local authorities ought to maintain a list, if you will, of who the people or organisations that provide respite and short breaks for them are and how much it costs them to provide that. I struggle with the idea that there is not available data out there as to how much it costs for a local authority to provide respite and short breaks. Did you attempt to get that information direct from local authorities rather than relying on the carers trust research that you have mentioned? No, there is no direct answer to that. The £333 covers all different types of support. There is not a duty in the bill around short breaks to provide short breaks. Therefore, I looked at the different types of support in the round, whether local authorities have that information or not. I do not know, but they certainly have information about respite weeks, because the Scottish Government collects from local authorities data on respite weeks every year, and that data is published in the autumn time. There is data about respite weeks. I do not think that it covers the cost of it, but it is certainly worthy of further exploration. I appreciate that there is not a duty in the legislation, but at the same time you would have to factor in an assumption that a number of assessments will identify short breaks or respite as being appropriate support for individuals. While there is not a duty, it is only fair to assume that that is going to arise. Therefore, it would be good to have an idea of what the likely costs of that are going to be and whether the assumptions that are made in the financial memorandum would be sufficient. One of the concerns that is raised by the national carers organisations is that, if the financial memorandums numbers are insufficient, their concern is that what you will see is amendments to local eligibility criteria, which will raise the threshold for receipt of support and will exclude a large number of carers potentially from that support simply because the funding that is available would not be able to provide the support that is required. Is that something that you would recognise as a concern? Yes, I do recognise it as a concern. I think that the carers organisations around shared care Scotland made the point that the resources were heavier in the later years for the duty to support compared to the earlier years. In the earlier years, in particular, there might be an issue around short breaks, not so much in the later years of the financial memorandum. That point is valid, certainly. The finance group that is being set up would look at that. The point that you raised about saying that local authorities would have information about the cost is really valid and something that we would want to look at further. It knows well that there is a concern that the respite weeks have actually gone down between years. There is a concern from the national carers organisations that at least some local authorities are not providing respite weeks in order to meet the inadequate numbers of respite weeks in order to meet needs. It certainly is an issue. There is the voluntary sector short breaks fund. It is a modest sum of £3 million. It is not factored into the financial memorandum, but ministers would want to look positively around the future of the short breaks fund as well. That is another issue. The issue around replacement care that is sitting there at the moment because of the waving of charges issue is relevant, too. Perhaps it is also worth making the point that it is not directly relevant to short breaks but is relevant to the wider picture. The resources that local authorities currently spend directly on supporting carers do not have that figure because we did not get 32 responses to the questionnaire and some of the responses did not set out the figures. For about 12 authorities, more than £5 million is being spent on direct support to carers from local authorities. That will include short breaks. The financial memorandum did not take that off. It did not take it off, so it is there. There is existing funding of local authorities. Arguably, the Scottish Government is being generous in leaving that level of funding. It is also apparent from the questionnaire returns that we asked for the amount of funding that is spent on indirect support to carers, which can include respite for the cared for person, equipment and adaptations and so on. We asked for that figure. From the returns that we got, the figure came to £40 million spent on that type of support. That is only for a certain number of local authorities. We would not want to say that that is all for indirect support to carers, but a proportion of it will be. That is within the system. That carries on. As does the integrated care fund, whose last year of the integrated care fund coincides with the first year of introduction or of commencement, or roughly, as far as we know of commencement of the carers bill. Although there is no ring fancying for the integrated care fund, we know from submissions to the Scottish Government from partnerships that almost all local authorities are saying that we are going to spend resources on carers because we value the support that carers are providing. That is the wider context in terms of the overall resourcing, but the point that you make about short breaks, eligibility and the pressing down is valid, and we would want to consider more widely in that wider context of all the funding. Social Work Scotland has raised a concern around the use of the average, the £176 average, as the top-level number within the financial memorandum. Obviously, if it is the average, it is not the top across Scotland. Can you give an indication as to why you put that as the high level when the deputy convener has highlighted Glasgow City Council? What other local authorities have given figures that are well in excess of £176 per unit cost? Yes, and it was the minority of local authorities that gave a unit cost in excess of £176. The reasons that the unit cost for the carers support plan was set out in that way was to give a flavour to the finance committee that assessments can be carried out in different ways. The lowest one of 72, which was not actually the lowest because we took out of the equation the lowest and the highest because those were at the extremities. To give an indication that assessments can be carried out in different ways—I have mentioned telephone assessment and so on—the £176 was presented as the average across a good number of local authorities, and there are ones at the higher end. I understand social work of Scotland saying that you have not presented those higher ones. That is the case, but there would appear to be good reason for that, especially given what we know about the cost of assessment down south. It is something that would be considered further. One last question. Glasgow City Council, in its submission, raised some concerns around the use of a three-year period as the length of time that people normally would care for. It raised concerns around if you have a child with complex needs, then it is going to be more than three years that an individual is caring for. Where did that three-year figure come from and what was it based on? That relates to the work around £333 that was taken on a three-year episode of caring, if you like, but it is recognised that carers can care for much longer than that. Is that merely a case of something being lost in translation by Glasgow City Council? It does not mean that carers would care for three years, and that is it, although some would, but clearly that is not the case. It is for each £333 unit cost every year. I just want to reflect on what other members have raised around the concerns regarding allocation of costs for replacement care. If a carer is allocated at £333 in terms of support but there is not a replacement care package in place, because of the problems over waiving charges, does that render the duty to support either meaningless or severely impaired in terms of effect? That is why the issue needs to be resolved in time for stage 2, because it is very likely that a stage 2 amendment to the bill would be considered. That is why the waiving of charges is an outstanding issue. To get a sense of the extent and importance of that issue, is not the reality that the cost of replacement care could be the major cost of the bill, the major cost of impact on Government councils? As it stands, it is not in the financial memorandum. You are right. It is not in the financial memorandum for the reasons that I have stated. If you want to put a cost on replacement care, it could be in the region of around about a present cost £30 million across Scotland. Because of the issues, that could support the care for a person, or it could be primarily for the care for a person, and it could be primarily for the carer, or it could be for both the benefit to the carer and the care for a person. Those challenges of categorising replacement care, as I say, are challenges. If you have an estimate of £30 million already, why was that not included in some form in the financial memorandum, as it stands, in even saying that it was dependent on negotiations with COSLA? Because that figure was worked out fairly recently after the financial memorandum was submitted, it is not meaning not to be straightforward about it, but that is the case. Also, because the waving of charges issue is outstanding, it is fair that a further financial memorandum should be presented. However, as I say, it would not be fair to present a figure either. It probably would not be appropriate to present a figure of £30 million if it had been known, because some of that replacement care could certainly be of prime benefit to the care for a person, rather than the carer. I thank you very much to committee members for their questions, and I thank you for the response that we received. However, I think that we will need some clarification for the minister on some of the issues that have been raised here today. I am therefore going to write this afternoon to the minister and seek a response prior to consideration of our own report, which is due to go to the lead committee back on 27 May. I think that there are a lot of questions that colleagues still want to answer, and we might have to, in fact, revisit this at some point in the near future. That being said, I would like to draw this session to a close, and I thank you for your answers today.