 Focs, mae'n gwneud i gael, ei wneud. Fy enw i gael i gael i'r 25th felly i'w gwrth o'r We will hear from two separate sets of witnesses today. First, I would like to welcome to the meeting Ben Thompson and Lucy Hunter Blackburn. Members have received coffees of a briefing note by the budget adviser. Along with written evidence submitted by our witnesses, we will go straight to questions from the committee. Welcome to you both this morning. Ben, you have been to the committee on a number of occasions, so it is good to have you back. I think that you have been here before, have you, Lucy? No, welcome to the finance committee. I will ask you some opening questions and then we will go round the table for colleagues to ask questions. I might ask you to comment on each other's submission, because they are both diametrically opposed, but they are significantly different. We will have a wee look at how you respond to each other, as well as how the committee responds. First of all, Ben, you are talking in your submission, you are suggesting. First of all, I am pleased that you have made concrete suggestions, because many of the people who have given his evidence have shied away from that, so at least you have made suggestions whether the committee agrees with them or whether the Scottish Government ultimately does or not, as we will soon find out. You, Ben, have suggested that a 2 per cent reduction would reduce the tax burden on all Scottish income taxpayers by £660 million, so when I thought of that, I am thinking of how we will have to make the reductions and spend to fund that, but then you go on to suggest that that could be raised, in actual fact that is £660 million, by raising the council tax by an average of 33 per cent, which seems to me a fairly whopping rise. I am just wondering if you can talk us through your thinking on that. On the balance between reducing Scottish rate of income tax by £2 in the pound and, correspondingly, raising council tax by 33 per cent in order to compensate for that, so there is no effect of loss to the Scottish Government in terms of revenue. The thinking behind it is that, first of all, it would be a great disappointment having spent so much of my time over the past six years arguing that different levels of government should have fiscal responsibility if all Scottish Government and the committees and powers within the Parliament did was mirror what happens in the rest of the UK. It seems a immense opportunity to actually do something with the taxes that we have and use them to provide a better tax service. The overall tax service is only raising revenues to create good public services. The suggestion to reduce tax, which I suspect that you have not had many submissions to reduce the rate of tax, is that, first of all, it would give a really good message that you are doing something positively. Secondly, and this may be where Lucy and I disagree a bit, Lucy would see it as a progressive tax. I would say that it would be much more progressive if we were allowed to vary the bans, which will happen potentially later once the effects of the Cowanman commission come in, but at this stage the 10p rate is across all bans, so it is quite an inflexible tax. If you look at it as a percentage of how much tax increases, it will hit the people on lower taxes as a percentage of the total tax that they pay than on higher rates, though higher rates will pay in absolute terms more. That is the first thing. The second thing is that there will be a choice in the next few years for a percentage of people to decide where they want to pay their taxes. I know that the rules are being devised on this, but having a slightly lower tax will encourage people to see being designated as a Scottish resident and decide when they want to pay taxes in Scotland. If the Scottish rate of income tax were to go up if you were proposing a change, it might push some people where they have the choice to decide to pay their tax south of the border rather than north of the border. Lastly, the reason that I am suggesting a reduction is that it sends out a fantastic message that Scotland is open for business and that it is not all about having more and more taxes. As I said in the paper, a 2p reduction is by Treasury figures about £660 million. The Treasury is saying that it is about £330 million per 1p of tax. John Kay, in a presentation a few months ago, was saying that it is about £400 million. You have got your own economists who can do the numbers, but that seems to be about the ballpark figure. The public sector then has to be funded. There are a few things that I think Scotland could do with its taxation system that would actually make a lot more sense to replace the £660 million. The first is council tax. I think that this is where Lucy and I would probably agree is something of a gull. We have had the bans in place since 1991. The bans actually don't make sense. For someone like myself who is in a reasonably expensive property, we are paying the same as a banded person who was on £220,000 in 1991. Properties have changed significantly. It is a fairly regressive tax in that people who have wealth pay as a percentage of their property are a lot less than people who are at the bottom end of the scale who are paying in band A. That is the first thing about council tax that needs to be addressed. The banding is a gull. The second thing is that council tax freeze has distorted things. I know that it is a nice political policy to have the fact that you have frozen a tax, but it is not a tax in a way. It just has to have been funded by the Scottish Government. It has taken away responsibility from local government. I was looking through all the statements of all five parties in the Scottish Parliament. All of them in the last six months have made reference to their commitment towards localism and passing powers down to a local level. This is a fantastic opportunity to actually do that and say that we are reducing the level of tax that Holyrood gets and we are empowering and pushing down more responsibilities for taxes at a local level. The analysis that has been done so far would suggest that the tax freeze alone, if it had been unfrozen since 2008 and allowed to grow with inflation, would be about £570 million. That in itself pretty much offsets it. If you were then also to include the rebanding, then one could see, I think that Rhettis have put forward a proposal that that would do about £750 million of additional revenue. You can actually match the figure of the 2p cut with addressing the council tax. I am not saying that council tax is the only tax that you should potentially look at. I also think that you could look at some taxes that would change real behaviour in Scotland. One that I have suggested before is a tax on sugar. Again, why do we not do things differently? We did things differently when it came to smoking and actually people around the country, the whole of the UK, said well done. Sugar is now a major problem and our NHS is suffering from a huge increase in diabetes. Perhaps looking at treating sugar in the same way that we treat tobacco, if we put the same rate of tax on sugar as we do on tobacco, we would again be raising about £700 million. I am not saying that council tax is the only way to do it. I am really getting to the heart of this, so let us do some creative things with the tax powers that we have rather than just keep the Scottish rate of income tax exactly the same as it is south of the border. Thank you very much for that one point. You did suggest that people who with a lower SRI team might help themselves to organise themselves to pay their income taxes in Scotland, touching on that in your submission. In evidence that we took previously from Professor Belly, he said that at this level it does not make any difference at all. No one is going to decide to change their domicile effectively on the basis of a 2 per cent tax rate or something like that. If it is 10 per cent of a differential, possibly 5 per cent, but with 2 or 3 per cent, there is no real evidence that it makes any difference in terms of deciding where one would reside. I think that there is no real evidence either way round, but I do not think that it is this bit of tax that is going to make the difference. It is the whole attitude towards taxation. What people are looking at is that when all the proposals come in on Calman, that is the point that we may be nervous about what is going to happen to major tax changes. If you are sending the message now that the Scottish Government is going to be different and innovative and actually an exciting place to be, people are going to say that all those tax changes are going to come and I am going to have a choice, and people do have dual residences in south of the border and north of the border, I will organise my affairs if I think that the taxation system in Scotland is going to be worse going forward than it is in England to start having it in England. Once you start residences in a particular place, it is then more difficult to change. I suspect that there will be a number of people who, if you actually said that we are going to lower it, will take a decision, look, if they are going to do that sort of attitude, that will flow through for later tax changes that may happen once we get greater powers after Calman. Lucy, you want to effectively put SRIT at 1.5 per cent in order to effectively release money on spending on services that has been taken out as a result of the council tax freeze that you have said is created because the whole development of the Scottish budget. Is the whole of the Scottish budget not real because the UK Government is cut funding by 10 per cent in real terms, because you have talked about local government funding falling by about 10 per cent in real terms? You are right that the big pressure facing the Scottish budget is what is coming through the Barnett formula, absolutely, but if you look at what is happening with the council tax freeze funding, that is £560 million that we are choosing to spend on the council tax freeze rather than on addressing the pressure that is created on the budget through the Barnett formula. I suppose that is the point that I really want to make, because the council tax freeze costs money. It is a substantial spending commitment on the part of the Scottish Government and it is crept up in time. I do not think that anyone, when it started, would have expected it to reach a point where it was costing something equivalent to the further education college system, and yet now it is. Why I was so pleased that the committee put out this general call for evidence and let everybody, people like myself, put in our views is that it is really not a challenge to say whether we have the council tax freeze but how we fund it and to see the connection. I wanted to invite the committee to see a connection between the new powers available through the Scottish rate and the funding of the council tax freeze. That is really the point that I want to make, but of course you are right, the pressure is on the block our large. That is really why I think it is important that we look again at how we use these powers. Frankly, the reason why I invited you to come along this morning is because you are probably the most interesting of all the submissions that we have received. I think that it is important that we have some kind of an offence to yourself, Ben. It is good to have some kind of challenging pieces of evidence like this. I really enjoyed reading your submission. One of the things that you point out is that you talk about people that hire bans saving more through the council tax freeze, which is absolutely true, obviously, but as a proportion of their income, who saves the most? That is interesting, because you cannot map it back to income, exactly. It is a crude thing. You look at the scale of properties. What we do know is that the very poorest people save nothing in front of the freeze because the council tax reduction scheme means that there is no council tax payable. It is a zero effect. I was trying to see if I could find a simple way of summarising what is happening there, because it is a complex set of data, but we know that one in five households are in the council tax reduction scheme. That is a large number of low-income households. We know that 15 per cent of the potential tax take from the council tax is met through council tax reduction because the Scottish Government took the view that when council tax benefit was abolished, it was going to maintain a low-income safety net. We know for sure that the easiest bit on income is that we know that the very poorest save nothing. The council tax reduction scheme also seems that I know that not everyone gets 100 per cent, but if you look at the sort of saving, it is about £660 per household as an average on some statistics that came out just this week. That suggests that if you are getting a council tax reduction, you are probably getting either 100 per cent or a very high percentage. We know that the very lowest incomes have not really been affected either way. You are right. I am sure that if you could do the numbers, if the data was there and I am not sure that it has been published, as a proportion of income, absolutely, the kind of savings on council tax are probably going to be higher for low earners, people above the council tax reduction, absolutely. My point would be that that is £560 million that we are spending in a way that gives proportionately out-of-income a bit more to the poorest, but it still means that over half of that benefit, over half of that £560 million, is going into higher-band properties, so bandy in above, probably rather more than half. You cannot quite do the sums precisely. It is not really a question about whether the council tax freeze is or is not progressive, although, given the council tax reduction, it is only progressive and limited for a limited group of the population. It is really whether that £560 million could be spent more progressively than on the council tax freeze. I think that if my arguments would be that, if you look at the way that public spending cuts have fallen, it will probably come back to that. There is a better use for that. The £560 million is effectively being paid for disproportionately by people who do not benefit from it in the same way. We will take on board a wee minute about spending progressively, but in terms of the effect on people's income, one of the things Ben put in his submission was that, when you increase taxation, whether it is 2 per cent, 3 per cent, or 1.5 per cent, you are suggesting across the board, the proportion of people's incomes lower-paid people, effectively on the margins, will be the ones that will most adversely impacted. If they are getting a disproportionate saving in terms of council tax freeze, because it is a higher proportion of income, you are suggesting that they would pay a higher proportion of their income because they are paying extra 1.5 per cent. That seems to me the opposite of what you are suggesting in terms of progressive taxation, at least. Even if the spend is more progressive in terms of the income distribution. That is very different with Ben on the progressive argument. It is a really important point, and I am conscious of the committee that I want to take a view on it. Where Ben is looking at when he talks about the impact by income, he is looking at how much your tax goes up. It is absolutely right to say that, under the Scottish rate, as a percentage of your existing tax, the extra penny will be more at lower incomes. What that argument does not pick up is that, at lower incomes, you pay much less of your income as tax full stop. When you run, there is a immensely useful calculator that the committee had put on its site, which is hugely helpful. I am very content to commend whoever's idea that was, because it is really helpful. When you run the figures through, and you can see it in my submission, I put some numbers in, when you look at the tax increase as a proportion of all income, not as a proportion of the tax that you already pay, then the Scottish rate is progressive. It increases the proportion of income that you pay as tax. You put a penny on everyone's income tax above 10,000, roughly. You will pay a larger share of your income as tax because you will pay more of your income as tax generally. It is progressive. The NHS submission made the point that raising the Scottish rate would be a very slight, not huge, but a very slight narrowing of income inequality. That does not make sense unless it fits. Ben, you might want to come back on that. I agree with the analysis that has been done. I think that it would be fair to say that people's wealth is basically made up of both their income and the wealth that is mostly held in property. The two are not necessarily the same. You can have people who have high levels of income, but low levels of property wealth and vice versa. You cannot quite equate the two, which I think is where you are trying to get to, Kenneth. If you look at council tax, those at the bottom of the band are paying approximately 1% of their value of their property each year in rates because of the way that the banding works. Even if you are at the bottom of the higher bands, you are paying about 0.3% of the property. In terms of income tax, we are all happy with that people should pay a higher percentage as you get more income tax, whereas exactly the opposite argument seems to happen at council tax. My point is that, if Scotland really wants to start having some interesting discussions on tax, let us be brave and let us address those things, and let us look at council tax with the gull that it is and say, let us do it properly. Let us use the opportunity that we have now to do something with it. I think that both Lucy and I agree that this is the opportunity. The last thing that I would say on Lucy's submission is that I have made my submission on the basis, which is what the committee asked for, is that if you are having a reduction or an increase in tax, can you just let me know how you are going to match that? I am not making any statements about whether we should overall tax take should be higher or lower, because that is a slightly different argument. I think that Lucy might be making more of an argument for we need more tax revenue anyway to pay for more public sector costs. My arguments are really not looking at that particular question, because I felt that that was not what the committee was asking for this particular meeting. We were looking for people to make all sorts of suggestions, increasing the lowering, maintaining, spending and taxes. Back to yourself, Lucy, in terms of council taxes, in favour of abolishing council tax fees, what impact would that have? Assuming that it is funded by 1.5 per cent increase in tax or whatever, it is required to meet that. Your view is that council tax should just be allowed to rise as necessary, because obviously you will be aware, given your experience of the gearing effect, that 1 per cent rise in spending for a local authority can mean a 5 per cent increase in council tax, because it is 80-20, more than that now, but for argument's sake. Absolutely. In fact, what I was doing with the submission, and that has made my fault for not being clear enough, I am not arguing for the immediate secession of the council tax fees, for exactly the reasons you give. It is too big. You cannot possibly begin to ratchet back from where we are. What I am really arguing for is that we should go on funding the fees, we should put the money on the Scottish rate, that generates the money, so we then have 560 odd more than we now have, which means that we can plug the gap in spending. The council tax fees remains part of that picture in the short term, because it would cause a kind of crisis of legitimacy, I suspect, if you were to try and push up the council tax very quickly and sharply. What I would hope is that the current review of local taxation will come out with something substantial this autumn, to which we can move, but it will take time to move. Local councils and local politicians do not want to suddenly find themselves confronted with issuing a 10 per cent, 20 per cent bill increase. I do not think that most people would find that a comfortable budgeting position. What I am really suggesting here is that you see the Scottish rate as a bridge. We have lost £560 million of revenue, which we would have raised through the council tax. We bring it back in using income tax, which I would agree is fairer than the current council tax. Once you have that space in your budget, you can then begin to transition. Perhaps over time, if you can, you can move more. Ben and I definitely agree that you want to get out of this very acute gearing and push more tax-raising back to the local level. Over time, in fact, in my model, you will bring the Scottish rate back down. A couple of points. First of all, in terms of the additional funding, tax is not going to come from thinning, it is going to come from people's wages. The Scottish retail consortium in there has suggested that with retailing being fairly fragile at the moment, any increase in taxation would impact adversely on the money that people have to spend. Shorts of businesses and that itself would have an adverse impact on the Scottish economy, which are few on that. Are you there of you, both of you? I think that I agree. I do not think that I have the expertise and that sort of macroeconomic side of things. I would absolutely, committee will have a chance and will have its own views on that. I do not bring that part of the debate to the party. I want really here to be the voice of the part of the argument, which says that we have large public spending cuts across the political spectrum. There is concern about the impact of those at local and national levels. That is what I want to bring into this debate, but I would have to say that I do not think that I can bring an evidence-based response to that question. On that particular point, the proposals that I am putting forward does not increase or decrease the overall cake. The public has got to pay for it in the end. The money is coming from the public. It does not make them richer or poorer. It may redistribute it amongst different people. I think that what is important is the messages that you give. The public particularly looks at headline rates. Income tax is one that they always look at. It is incredibly important, and it is about public confidence. You cannot measure public confidence particularly, but if you come out with headline rates such as income tax being reduced, it gives people a real confidence that you are confident about the future going ahead. Even though the tax in the end will be paid by the public because we are raising the same amount of the tax take under my proposals. I have a lot of colleagues who want to come in. I do not want to ask much more because I do not want to give other people a chance. On the potential areas of spending that you have suggested on local services and student grants, you are effectively saying that any increase in taxation is where it should go. One might think that that is because you have a history or a vested interest in that area. You were head of local government finance distribution at the Scottish office and then head of higher education to the Scottish executive. One might suggest that it is because of your background that you have not suggested for example the NHS justice what it happens to be. If you can comment on that. I should say that I did work in the Justice Department in Historic Scotland and they may be rather hacked off that I did not mention them either. I speak more of what I know. I think that what I do think is that, although I grant what I know, I want to put the evidence in front of the committee that if you are on a household income of below 17,000 and you have a student in full-time education, you have lost £900 a year in student grant in the last two years. That is a substantial cut in the household that you can borrow. It is absolutely important to say that students can borrow that, get a fill that gap, but that is just tax that I am going to pay in the future effectively. I want to make the point about grants because I know it, but local government is the one that I would like to press more. It was very interesting that Spice came up with an immensely helpful note yesterday about the council tax and funding of councils. What I picked up from that was that in the last seven years, even though the council tax freeze itself is funded, the actual bit is the right size for the job that it is doing. Spice quite clearly said that. No, sorry, they said that it was overfunded. Well, they said absolutely that it was overfunded over the period. So if you look at 2010-2011, there were years when it was overfunded, absolutely. In the current financial year is a £4 million gap, which is de minimis, I guess I would say. So five, six years are about right for where council tax would have been, as Ben was saying, had we increased it by RPI. At the same time, they identified a £756 million real terms fall in the total grant provided to local government. I think that local government is very much the case. In fact, I spent last night having a bit of catching up on where we are now with what we know about local government budgets. Joseph Rowntree Foundation said two years ago that the reductions of local government grant were £90 a head higher in the most disadvantaged areas than the most advantaged. I spent a bit of time going through Edinburgh's budget documents for the last year, and I won't dwell on them now, but there are endless examples there of where there is salami slicing, I guess, a phrase of services for vulnerable families. That is, I think, in a council that did a very good job, a big public consultation on its budget last year. It is an SNP Labour coalition. It sits outside a lot of the conventional political debate in Scotland. As a parent in Edinburgh, I would say that they did a good job on their budget consultation. I don't get any sense that they took these decisions lightly. I would urge the committee, if I was going to look anywhere across, its local government, because that is where the most vulnerable families and young people and old people are supported most. I think that that is where the cuts probably need to be ameliorated most. The first colleague to ask questions will be Joan, to be followed by Jeane. Thanks, convener. Probably to build on some of the things that have already been raised. Is this a progressive tax, SRIT, or is it a regressive tax? Can we just not answer that yes or no? Is it basically how you look at it? In absolute terms, people who pay more tax will pay an absolute greater amount of tax, but as a percentage of their total amount of tax, people at the lower end will pay a great percentage. The answer is that it is dependent on relative or absolute. Right. Does that make sense? Therefore, it is really not possible for anyone to stand up and say that this is a progressive tax or to say that this is a regressive tax. I would say that it is a much more progressive tax than council tax at the moment, where in council tax terms, those at the bottom are paying a much higher percentage of the wealth of their properties than people at the top end. Right. I must bite one, sorry. It is a progressive tax. The technical definition of a regressive tax, so I was checking this, is a tax that takes a higher proportion of the income at lower incomes of your income, not your tax, but it takes a higher proportion of your income as you earn less. Forgive me if I read this off my submission, but at £15,000, one and a half pence on the street will represent half a percent of your post-tax income. It is paragraph 17 of my submission. At £125,000, the Scottish rate will represent 2.3 percent of your post-tax income, and it rises in a, not linear, but it rises in a straightforward fashion. So, there is absolutely no contest. I am going to have to disagree pretty strongly with Ben here, but I know that he knows I am going to say this, that it is a progressive tax. As I say, the NHS submission very helpfully points out that the raising rate would decrease income inequality. That would be the effect only of a progressive tax, so a progressive tax could not have that effect. They cite evidence, which I confess that I have not read, from I think it is Cumberford, Bell and Eisner at Stirling University, which has done work on this. I have absolute complete confidence in arguing that this is a progressive taxation. The figure that struck me from your paragraph 17 table was that when you compare taxable income 25,000 and 125,000, which is exactly five times, you look at the tax, and it is 2.16 up to 1.875. Someone earning five times the salary is actually paying 8.5 per cent. It is 8.5 times the tax, and that struck me as pretty straightforward. Absolutely. The arithmetic is simple. If you just say 10,000 for simplicity's sake, is what you do not get taxed on. If I have an income of 15,000, I am taxed on only a third of my income. If I have an income of 100,000, I am taxed on 90 per cent, so you are going to get this effect. If I can just give you the numbers back again. If you look at the same numbers on 15,000, your total tax at the moment will be £800 at 15,000. With the increase by 1p, it will go up to 924, which is a £44 increase. That is a 5 per cent increase in your tax on income tax. If you look at 100,000, which is the same thing as the 120, I have not got the 120 figure on me, but 100,000, you would be paying 29,400 of tax, and the additional amount would be 894, so your total tax will have gone up by 3 per cent. That is the difference between the relative and the absolute. If you are basing it on the tax that you are paying, I will take that point. I suppose that, linked to that, somebody made the suggestion that, because this in one sense is a temporary power that we have and that hopefully we are going to get fuller powers over tax when we really can be seriously progressive, as I personally would like to be, then maybe we shouldn't be using it in the meantime. Do you think that that is an argument? I think that you should start as you mean to set on. If you want to set a message that you are going to do really interesting things with taxation, then start when you have the powers. I think that one of the big criticisms of the Scottish Government is that it had 3P raising and lowering power for ages, never got used and the public said, why do you want all these powers if you do not actually use them? We have differences in Scotland and there are problems in our taxation system that Scotland could lead the way and be seen as being innovative, so why don't you grab those? It may not be council tax, so I think that that does need to be changed. We both do, but there are other taxes that you could actually say, let's be innovative and actually do something different. Let's just stick to this tax at the moment. Do you think that we should, the temporary idea of this? I can see why people make that argument. I mean, as a former public servant, you like things tidy. I can see the tidiness of waiting, but it's a question of urgency. I think genuinely it's a question of urgency. I was looking, for example, in Edinburgh in 2015-16, that they've reviewed the family solutions services to save £200,000, which means reducing the service by 10%. I think it's important to be concrete here about what's going on out there. 400 vulnerable families are currently supported by the service. The effect of reviewing that service, according to the report, it will have an impact on the number of families that can be supported with the risk that this could lead to an increase in the number of looked after children, and they will work more with high tariff families to mitigate that effect. If you look, Joseph Rowntree says, you'll find this right across the local government world. It's not that the services are being absolutely killed, but they're being pulled back and targeted. The people who are just on the edge of being vulnerable, actually some of the people we most need to, it would be most sensible to be going to help, are being lost. I think it's an urgency question. I read the political debate about austerity, about public service cuts as an urgent issue. There's a validity in the argument that says, let's wait. If we weren't living in the sort of times we're living in, I would think that that would be a very sensible public administration point. I think that it's complexing for politicians yourselves and those in government to balance is how far do those sort of technical admin arguments outweigh really what's happening and what we can see is going to be happening across budgets very urgently next year. You bring in the kind of political side to this and one of the things I'm thinking of is if we were to raise the tax by say a penny, how do we sell that to the public? Now, I'm not sure that giving more money to local government would be particularly grab them. I'm not sure that—you suggested, is it page 6, paragraph 20, that we could have a kind of bridge to save tax in future. I don't think that's going to grab them either, I'm afraid. But if we said it's for schools, teachers, GPs, would that grab them better, do you think? I think you're more the expert than I am on what works in talking to a wider community. It is really important that SCVO talked about a conversation about tax and I agree with them there, we need to talk about it. One thing I didn't say in the submission but which I'm quite clear about, I can see it would be almost impossible for any single party to put this proposal forward on its own. It's much more easily done if there's a coalition across those parties who are concerned about public spending cuts to put a united front forward. I think there'll always be some legitimate voices and a debate, such as Ben's, saying that there's other ways to think about this. I think that as soon as it gets into the political debate and contest, it becomes harder again, so if you're going to sell this, I suspect it would have to be something which more than one party signed up to. Okay. Mr Thomson, you said that you weren't pushing for an overall increase or decrease in the tax take, I think, but you also said that if we can't— I think that that's what the committee actually asked me to, in their request. They said that if you're reducing the tax, how would you balance it with how would you balance the book? That's the question that I've answered. All right, okay. You did say things like open for business, different, innovative, exciting and boosting confidence, which all seemed linked to reducing income tax. Maybe I misunderstood that. What I was saying is that the message that you give out to people, at the moment, the public probably thinks that the powers that are going to come down will result in higher taxation. I don't know if that's a true statement, but that seems to be the anecdotal evidence of when reading the papers, is that the likelihood is that it's either going to stay the same or taxes are going to go up. I think, actually, this is a huge opportunity to revamp taxes and the powers that come down. The argument is that you change the tax mix to actually make it more sensible throughout the system and also take on board some of the parties' comments, different parties' comments, about how the powers that are coming down to Holyrood should then be passed on down to local government and not necessarily stop at holidays. So it's a message that you're actually changing tax as much as you're just increasing the overall take or decreasing the overall take. I think it's a danger that we get too wide here and I'm keen that we try and keep a focus, but presumably either way it sends a message because if we take a penny off tax, people know that the schools get a bit less money, the hospitals get a bit less money or something. If we put a penny on tax, we get slightly better schools, we get slightly better GPs. So both ways it sends a message, don't they? I totally agree with you. I think that there's an argument to be made for increasing taxes and I think that argument could be made by Lucy to say, look, this is what we could do with increasing taxes. I've actually put an argument, a counter argument to that, to say, wouldn't it be refreshing if the first thing you did with the Scottish income tax rate is to decrease it and use it to do two things. One is to give more empowerment to local government and the second is to sort out some of the other taxes that actually would make a better tax mix. So I think there is a, I would much rather see the tax go up or down than stay the same because I think it sends out a message that this Parliament is actually empowered to do something, but if we're going to do something, I would argue, for a lower taxes. I think that that's actually more interesting and more exciting. I'll take your point and expand it a little bit. The comments have been made somewhere that our taxes here are relatively low by European standards and we could quite safely increase it a bit. Is that your opinion? It depends who you're looking at and I can't remember. Reform Scotland did do the figures on what percentage tax takes across the board and they have changed in the last three years, so I'm not totally up to date, but the UK was pretty much in the middle of European how much tax you raise compared to how much tax, as a percentage of GDP. You can always look at the Scandinavian countries and say that they have a much higher percentage, but that's been falling. Of course, if you look at the Scandinavian countries, you'd have to argue that a lot more of their taxes is done at a much more local level than is done in the UK. Different societies, and this is a huge question, so if you want to be specific, you've now broadened it right out, different societies have a very different attitude to how much tax they take and you can make all sorts of arguments on that. I think what the Scandinavian model, which I think is the one that is significantly higher than the rest of Europe, would demonstrate is that people feel more comfortable about paying greater taxes if they feel there is greater community engagement and those taxes relate more directly to the local spending that they have. I go back to all party statements that that seems to be a trend that all parties actually believe in at the moment because their statements are towards empowering more local government and communities. No, that's fair. Ms Blackburn, do you want to comment on that? But compared to other countries, how do you feel we are? I just know my expertise, I think that you'll find other people. Well, the last area I really wanted to get a question about, which was touched on by the convener, is can we get any kind of grasp on how elastic or how mobile all of this is, that by putting a penny, I think that we got the suggestion before that by putting a penny on or off the rate will not mean a lot of people move around? I mean, if you get any kind of feeling as to what level it would be that people would start moving, or does anybody have this idea? Because we're going to have to make a judgment on this. I mean, the mobility of populations and the sensitivity of individuals to my economic signals is a thing that people do study. I don't know in the tax world what evidence would look like here, interesting, because each society is slightly different. The issues that would allow or constrain mobility vary from country to country. You could look, and I can't give you the evidence, but if the committee was interested here, there would be people who would know, for example, the United States. It's very common in many federal countries for the devolution of income tax to operate at a sub-federal level, so there will be places in the world, but the geography will be different. Somewhere like Germany might have it, I don't know. What I would say from student funding, which is a thing that I know more about, is that mobility is massively complex, and people do study it. If you look across the island of Ireland, there's quite a nice example, because there's different funding regimes. It's cheaper to go south and north or whatever. What you find is that population mobility is driven by all kinds of things that are nothing to do with economic signalling, that it's very easy to pick out that one thing. I'm quite sure that Ben is right that there will be a point at which surely it must matter, more substantially. I think that it's playing always against family ties, where you can get the job that you want, where your kids are, where you want to live quality of life, all sorts of things. I'm sceptical, I have to say, that small tax increases—I think that David Bell clearly has done more on this—but my feeling is a threshold for evidence that you're going to get a big mobility effect by relatively small changes in income tax. I find that hard to see from any evidence. Thank you. Mr Thomson, do you want to comment on that one? I think that Lucy summed it up very well. I think that a very small increase—one percent increase or decrease—is not going to influence people's actual change, but it will send out a message about the intentions of the direction of travel. Like all those things, you can't quite put your finger on it, it's a question of confidence. You reach a tipping point where it suddenly does make a difference and therefore it's accumulation of a lot of things rather than any one particular thing. That confidence, as Ms Blackburn said, will be quality of life, family and what the tax rate is, so there's a whole—even confidence—is made up of a number of factors. Absolutely. Just for clarification, Ben, just before we go on about what questions you were asking, the questions were asked about what should the rate be for SRIT and why. If SRIT should be above 10 per cent, how should the additional funding be allocated? If SRIT should be below 10 per cent, how should the reduction be funded from existing public expenditure? He really had to read him to say that we weren't restricted to a zero-sirm game, whereas he seemed to have been suggesting it. Jeane Freeman, to be followed by Mark. Thank you. A number of my points have been covered and thank you for that. I would quite like to go back to Ben to your argument about the image of Scotland, that you used the phrase, open for business. I kind of take the other argument that, actually, a country that is, for all the other reasons, of welfare and public spending on public services makes it more attractive. Why do you see that as such a key to reducing income tax? I think that the reason for suggesting this is that it sends an interesting message and it's different. I think that the one that John asked is about change. It's important to have change, but I do think that when you mean open for business, I think that business and the general population is fed up about how complicated tax is and the illogicality of a lot of taxes. I do think that they want more engagement at a local level. Combining those things, if you want to be really radical, Jeane, why not say, and I think Kezia may have mentioned this in a Guardian article last month, which is to say that the powers that come down to Scotland, let's see a lot of those powers be passed on to local government. That's a sort of open for business, how you actually empower people right down to a community level, so perhaps being really radical, you should take all 10p and say, why don't we let local government have their own income tax rate and rather than raising 20% through council tax of what they spend, actually being responsible for the majority of what they spend. That's what I mean by being open for business, that actually government starts thinking about, you are a provider of public services, which obviously we all understand need to be funded, but let's do that in a way that actually is simpler and engages us more. I agree with all of that about being creative about how we use tax. However, a Scottish government is going to be fairly limited in this. You mentioned tax on sugar and thinking differently about taxes early on in your opening remarks, but those powers are not with Scotland. Do you think that Scotland should have power over all its taxation? Well, as you know, as I've said on many occasions, I was a huge advocate of Devo Plus, which says that each level of government should be broadly responsible for raising the money that they spend. That is at local government level and at Hollywood level and at Westminster level, because that really makes politicians responsible and accountable if they have to do that. If you look at, I think one mentioned, the United States, the difference in state taxation in terms of how they go about raising their taxes and making sure that it's right for their local communities is huge. Some states have no income tax and raise it all through property taxes and sales taxes, and some have no sales taxes and raise it all through property and income tax. They have a real different attitude, and they embrace the difference. It would be slightly sad if all we did if we got these powers for tax is we would just mirror everything else that happens around the rest of the UK and kept all these tax rates the same. It didn't use an opportunity to make the Scottish taxation system better. The council is suggesting that quite a lot of taxes can be more flexible, so I'm not sure that it would stop us having a sugar tax or radically revising council tax at the same time as balancing that with passing the Scottish rate of income tax down to the more localised taxes. Do you agree that one of the issues that people want to see—we use the word fairer a lot in terms of taxation in Scotland? We'd like to close the gap to see people at the lower end being much better off and taxing people who are high earners a bit more. It seems to me that to reduce income tax by 2 per cent and perhaps using Lucy's table, but to increase council tax by 30 per cent isn't achieving that. As everybody says, taxation gives with one hand and takes away with another. However, the impression that I get is that a lot of people are thinking that we should pay more council tax because they feel that that's directly, rightly or wrongly, of course, related to diminishing public services. My question is that should the basis of any rethinking on taxation be about being fairer? Well, fairness is a very difficult word, and it's used a lot of the moment and said, what do you mean by fair? I would step back and say, as a very start, if Scotland wants to be seen as being progressive, let's have a more transparent, simpler taxation system. I think it was said that in the last 15 years, Tollies has not only doubled, which is the tax guide, but has also seen its font shrink from 12 to 8 so that it can get it all in. It has become very complicated. 85 per cent of taxes are raised through property, income and sales taxes of one sort or another. Why don't we accept that and devise a much simpler taxation system that recognises that and shares that equally, rather than having this very complicated taxation system and welfare system that goes with it, that people struggle with? I mean, I have people saying that I had someone this morning who was struggling because they had to fill in their tax self-assessment form for the first time. It really is quite difficult for people to understand our taxation system. We've just been looking at Reform Scotland at a welfare programme. It is very difficult. Why not start by having a taxation system on fairness that is transparent that people can really understand? Fairness starts by people understanding what is going on and being able to vote on it. I can see the newspaper headline of 2 per cent reduction in income tax and 30 per cent increase in council tax, not being politically acceptable apart from anything else. I agree with you about local tax, but given that these are under review at the moment as well as to how we fund local government, the Scottish rate of income tax possibly in a wider view is going to be something that is looked at. Since the referendum, people are much more in time. We've talked a lot about Scandinavian countries and Scandinavian tax rates versus public services. Would you think—and perhaps Lucy would have an opinion about this, too—that the public mood at the moment is far more accepting of two things. One, that there definitely needs to be an increase in wages, and that's another question, but that, together with an increase in income tax, would actually suit the public mood? The only evidence I've seen on that is an opinion polling, which, if you argue in the case that I'm arguing, is a bit depressing. On the whole, I think that it's a hard sell to the public. At one level, people will embrace and talk about higher public services, but it's all constant battle to persuade people to then do that. I'm probably suggesting—I say this with my former civil service hound—that the political classes in Scotland do something rather brave, which is advice that ministers don't generally welcome. I think that it is a hard sell. I think that it's important to differentiate between, if you like, some of what one sees, whether it's social media or in the press and the arguments put, and actually people out there. I think that if tax was going up, then even by one or two pence, then it would need to be very—if you came back to how do you sell it, how do you persuade people—you mustn't underestimate that it would be a serious job. There would be voices, and there should be advocates out there on your side. There really ought to be—the people who are unhappy with public service cuts ought to be on the side of tax raises. Even still, organisations—you see it in the STUC's submission—find themselves split between their interests as service providers and their interests as representatives of workers. I think that the case is compelling if you're worried about public service cuts, but I don't think that you should underestimate how difficult that job would be. Ben A for Scotland, marked to be followed by Gavin. I wonder in terms of the overall framework. We've strayed through the discussion into other areas of taxation, some of which are not the responsibility of the Scottish Government and are not likely to become the responsibility of the Scottish Government any time soon. Leaving the hypotheticals to one side for a moment, what is the vulnerability of SRIT to policy decisions that are made at Westminster? I'm thinking in particular in terms of issues around the personal allowance, because decisions around the personal allowance would have a direct impact on the amount of money that could be raised as a consequence of changes to SRIT. That's an immensely important question, because you're in an interactive system and one bit of a lever gets pulled here and it affects that. A great deal hangs here on the extent to which there's open and proper discussion. What kind of mechanisms are happening behind the scenes? Obviously, there's an underpinning, if you take Tempe away, how the underpinning financial transfers behind all this. I saw there's a story just this week about gift aid and what might happen with gift aid and so on. Clearly, it's a complex system and you're absolutely right that other bits of it might get changed. I don't know, but the question would be not precisely what would happen in those circumstances, but do we have the mechanisms that ensure a fair adjustment to any underlying financial transfers? That would be the really key thing. The committee will be exploring at some point what the underlying financial transfers are, but it's all doable. A lot then hangs on the rationality of the liaison systems underneath. I was going to say, as I've set out in this committee before, if you're wanting a proposal, I think that, again, matching fiscal powers with spending powers is important. If you're going to give fiscal powers, you should actually give the full fiscal powers, which includes all the banding and the thresholds at the bottom, particularly as we also advocated when I was at Reform Scotland, that welfare should be devolved to the area that the responsibility was for providing the welfare. If you're going to create a holistic welfare system at a particular level for a particular part of government, you need to be able to match what happens with taxation in that area with what happens with welfare. If you're looking at that bottom area around the lowest payers of tax, to be able to take welfare and match it with the personal allowance is an important tool to be able to implement policy decisions about the low paid. Obviously, you've mentioned in terms of the mechanisms, the adjustment mechanisms, that will exist. Obviously, as part of the on-going discussions around the Scotland bill, there's discussion around developing the fiscal framework that will determine allocations and adjustments. That won't be in place at the point at which SRIT is going to be enacted, so those fiscal rules, as such, won't apply in this instance. At the same time, if we take the two possible scenarios that you've highlighted, Ben, your submission, you've spoken about reduction would increase spending, which would result in a boost in income through, for example, increase in VAT. Now, there are proposals on the table in the Scotland bill for assignment of VAT, and there are discussions around how much of that should be assigned, but that won't happen at the point of transfer of this power. At the same time, looking at Lucy's submission, one of the concerns that has been raised previously is if you have control of tax on income, but not tax on dividend, and there is the potential at the higher end for some people to transfer income to dividend income, which would result in a boost to the Treasury rather than a boost to the Scottish Government. So, I guess it's how do you envisage those risks being managed? Obviously, if we don't get the VAT income assigned at the point of SRIT, it's not the Scottish Government who gets the benefit of that increased spending when it initially happens, and then, around the possibility of transfer, should those at the higher end choose to do that in a way to avoid the tax increase that may come? In my submission, Mark, I don't make any allowance for the fact that any impact and what it does will increase the economy and, therefore, you're trying to get a benefit from the economy that will come through. Had I done that, I would agree with your argument that it doesn't really work if you don't have some money back from the improvements in the economy. There you would, of course, through things like business rates and such, like because of the local level, you would get that. As you know, I'm not a particularly great fan of assigned taxes, generally, as they only give you half the benefit. You can't actually use them as fiscal levers. All you can do is get the benefit or the disadvantage on what happens with the economy in the country. I think that you do get—I haven't factored into my submission, which is that you get the benefit or the economics of arising Scotland if that happens. You do a bit through things like business rates, anyway, but I would agree with you that, when we come to the next step, those arguments will become quite prevalent when we look at the Kalman proposals and how they get implemented in the Scotland bill. I think the question of behavioural effects. Obviously, it's an unknown we haven't been here before, and you could get an income to dividend and switch at the top end. That's possible. I think that my observation would be that, as long as it's still in tax, that's still tax will income being taxed somewhere and that spending coming out of the Treasury is what underpins still a great of the welfare system and a great of public spending in Scotland is still underpinned by Treasury, my worry would be more if there was an evident way in which it opened up a way of taking income right out of tax. In that case, as I've net lost to the public purse, I would tend to want to envisage us more in questions of the public purse. The money would be spent. However, in front of the point of view of the Scottish Government, the big issue is how predictable and that's a very fair point. If they put a penny on income tax, how predictable is that going to be? They would need to know from the point that they made that decision that there wasn't, that what the tax threshold say was going to be a good and have the best possible predictions of what the take was going to be and there's quite a lot of variation in what the predictions are on the take. I think that that's been one of the most tough things in all of this. Just one final question, and I suppose that it's probably directly to yourself, Ben, is that you've spoken in your submission about looking at other ways of raising the money that would be lost to the Scottish Government through a reduction. It struck me from listening to it two things. One, I'm intrigued by the scalability of a significant hike in the council tax, but leaving that to one side. The other thing that you've mentioned is a tax on sugar products. I'm just wondering how applicable that would be given that I could buy a box of all brand cereal and the second highest ingredient in that is sugar, but it's not the first thing people would think of when they thought of a sugary product. Secondly, in terms of that, where you think the effect of such a tax would fall, because I suspect that you would find that it would be disproportionately towards those on lower incomes, because those tend to be the areas where we do have problems around uptake of high sugar products. Is it not essentially an indirect tax that is regressive? The analysis that I've seen shows that it's fairly widely now across society that an average adult in Scotland eats between 60 grams and 80 grams of sugar a day. That has got a lot of problems. When you say that it's buried in things like cereals, yes, but if you start putting the tax up, it'll encourage manufacturers to look at other ways of making their products without using so much sugar, because we are getting a huge amount of sugar. Taxes can be used for two things. One is to raise money, but they can also be used to change behaviour, which is what we've seen in taxation on smoking, which is I think cigarette tax is about 77 per cent of the face cost of a packet of cigarettes, same with alcohol. We have to face up to the fact that Scotland does have a significant health issue. Diabetes and illnesses related to obesity are causing the NHS real problems. If we want, it's been said by a number of the parties that we want a healthier society to live in, then we can use some of these taxes to actually change people's behaviour. It would seem an obvious one that sugar tax would be one of those. That sends an interesting message out, and it also then helps to raise some revenues. Like the convener, I, too, like the fact that both of you effectively stuck your necks out and came down with concrete proposals from different sides. Ben, if I ask you first, and you've been very specific, it's a two-pen tax cut, which I personally quite like. What was behind the two-pence? Why was it not one-pence or three-pence, for example? Was there anything specific about two-pence that drew you to it? Not really, to be honest with you. It's more psychological than anything else. One-pence looks a bit un... If you're going to do something, one-pence looks a bit pathetic, really. If you did 100 per cent, people would say, well, you're not being really credible, so it's somewhere between one-pence and two-pence. There's an argument to say, look, just give all of the Scottish rate of income tax down to local government and allow local government to fund itself through the income tax. I thought that this was a sort of somewhere that the public would probably feel is a significant, but it's not outrageous. Okay, no, thank you. I guess a similar question to you, Lucy. You've said one and a half pence tax increase. Why not one-pence or two-pence? Was it purely to fund the council tax issue? Was there something more behind the one and a half pence? I was entirely looking at what I thought the revenue-based loss was since 2008, that sort of 560, and one and a half pence seemed to be across a range of predictions, roughly the amount that you needed to fill that gap. I was absolutely looking at restoring the lost tax income to the Scottish Government since 2008. Okay, thank you. I'm just keen to see your position on the council tax freeze, so you feel that to reverse it in its entirety in one go would be unsustainable, so you're not suggesting that. You're using the extra money that's collected from income tax, I guess, to offset it. What is your view on the council tax freeze as it stands? Should the freeze continue in its current form for now, or are you saying that it should now increase by inflation—I assume that there is any inflation—but it should increase on an annual basis from now on, but you mainstream that 560 and offset it? Are you saying that the freeze should remain in its entirety? Personally, I'm with Ben that the gearing that becomes more and more acute, the longer you freeze the council tax, is a bad thing in terms of that relationship between spending and local choice, so I would be in favour of unfreezing the council tax. I also think that the longer you freeze it, the bigger the task you've got ahead of you in getting local taxation back on some kind of sustainable footing. We're kind of educating a population in not paying tax for local services in a visible way, and that worries me, so I would be inclined to let it go up in the coming year as part of the process of transition. However, I agree that we can't do that in a context in which we elongated the bands at the top, but it's not practical to do that. If you look at property taxes, there are two business rates and council tax that are based on property. If I remember the numbers, council tax was £1.9 billion in Scotland, and business rates were £2 billion, which comes to roughly £4 billion, out of the £56 billion that is raised in taxation in Scotland. That is a very low percentage. We do very low percentage tax on property. If you think of a modern society going forward, a society that is much more global and that can move around, linking taxes to where you have a guardianship of a property or land in Scotland or anywhere in the world makes a lot of sense. I think that our taxation mix is wrong, because as we increasingly go global and people increasingly do things and run their businesses in a global way, the things that remain very localised are where people live and where people have properties. Therefore, 8 per cent of whatever it is raised through property tax is low, and we should start reassessing property tax in the overall mix of taxes. Okay. Just the other final question, because again, most many of mine have been covered. This is once for you, Ben. I mean, while I am personally attracted to the two-pence tax cut, obviously you are offsetting that with an increase to the council tax, and so it does become revenue neutral. In terms of your open for business argument, do you not have some concern that the council tax changes or the council tax offsetting that you are proposing might counteract the open for business argument on income tax? Again, you can see the headlines. People read about a 2 per cent tax cut, and then they read about a 30 per cent tax increase. While the overall money is the same, people will see two versus 30, and potentially, anyway, draw a negative conclusion, particularly given that one is taxed at source and so people sometimes do not notice it as much, whereas the council tax is something that you physically, when I know, it is done by direct debon, but people physically come out of your bank again. Have you given much thought to that? Talking about spin, which is probably more your areas than my own, it would seem to me that another headline could be, isn't it great that the Holyroods, instead of being centralist, is actually doing something about really passing powers from Holyrood on down to local government. The new powers that are coming in are actually passing down to local government, and if it was up to me, I would say, if local government decided not to do it through council tax but wanted to have their own different, whatever it is, bedroom taxes or income taxes, whatever it is, let them start to take some responsibility for fiscal management, rather than taking away the business rate from them, capping their council tax. All of those messages are messages that we do not trust you to run your own fiscal affairs. If you really want a message of, we are empowering local government, then give local government more proper fiscal responsibility, and I think that both Lucy and I are saying, use this opportunity to empower local government. I have statements from all of your parties about how you want to empower local government. This is an opportunity to do it. If that message is the one that is sold with a 30 per cent increase in council tax, and given that you have acknowledged that that actually just balances the budget, then the argument that falls, because nobody is going to see any more money spent on public services without increasing it even more. The argument that I am making is that you are irrespective of, rather than changing the size of the cake in any shape or form, you are actually empowering local government by giving back proper powers to local government. The message that I would take from this is that you are using these tax powers that are coming down, not to form a mini Westminster in Holyrood, but to empower communities and local government to do more. That is a very strong message that people identify with. I do not know if I have not seen your own statements on localism, but I would hope that you are also a supporter of empowering local communities and local government. Government and local communities, if poorer local authorities have a lot less money, then what would happen is that places like Edinburgh would have a much stronger tax base without equalisation than the local authorities around about. North Lanarkshire, Glasgow and huge amounts of money are spent in Glasgow from people in North Lanarkshire, my own area in North Ayrshire. What would happen is that the more prosperous areas would become more prosperous and the poorer areas would simply become poorer because the tax base is clearly weaker. I disagree with that, Kenneth. One of the real responsibilities of central government is to manage that level of wealth redistribution. If you look at us in Europe, people accept that the net is £6 billion and is going to help poorer countries in Europe. In the same way, at a Westminster level, money is being redistributed. One of the jobs of Holyrood is that the money that is raised at Holyrood actually helps to those areas that need economic regeneration or that have suffered a particular... You have just been arguing against that? No, I have not been arguing against that. What I am saying is that one of the responsibilities of central government is an element of wealth redistribution, but it is not to raise all the tax and then pass taxations down. Let me give you an example of why this is a problem. If you took the Barnett formula and you said, okay, each level of government, Scotland would raise its own money and Wales would raise its own money and Ireland would raise its own money and England would raise its own money, you would need approximately £10 billion to rebalance all the books so that they are exactly the same as they were before, raised centrally. Rather than have all the money going into Westminster and then redistributed by the budget formula, you actually have all the individual areas by and large raising their money, but having, if they need, and I think if you look at the Welsh proposals, they are actually quite good on this, is the extra element of redistribution then helps those areas in need of economic redistribution or have deprivation. Lucy is desperate to comment then, Jackie. It is actually to build on Ben's comment. For my sins, the first job that I was given in the Scottish Government in 1995 was working out how to break up the budgets or the government funding that underlie the budgets of the regional councils, so I spent a lot of time taking apart the Strathclyde money, and what becomes very apparent is what Ben describes. It is that there is never going to be an equity of tax base and you look at the tax base of Inverclyde or Weston Bartonshire, it is radically different to that of Edinburgh or East Rennfrewshire, for example. I could not subscribe to a view that was sort of radical, everyone raises their own money, because you would end up with fantastic amounts of inequity. Ben and I converge is that there is a better balance than we could currently achieve, where you would still need a system of quite substantial financial transfer happening. Central Government retains that role, because without that, some communities would just suffer quite disproportionately, but we could achieve that without having such a high degree of government funding. We could give more freedom to local communities to raise money, and I guess it is that balance is where we would agree that balance is not being struck in the right place at the moment. On property taxation, I think that it is massively important that we look more at that. If you look at the work of Thomas Piketty or whatever, he brings out that that kind of property wealth is where global wealth and equity is increasingly concentrating around property, and we need to think about that when we, as using local taxation powers, are one of our strongest levers to do that here. Thank you very much, Jackie, before my Richard. Thank you. I will resist the temptation to go off into property tax. I have to say, I think that Ben, you use the word exciting in taxes in the same sentence at least three times, so I will have to check the definition in my dictionary, but let me put something to you. If you clearly felt constrained by the committee's questioning, if you hadn't felt that constrained, would the proposal on the table be just to reduce taxes by two pence? No. Okay, so you would have made this self-same proposal of increasing council tax. I think that we, and I've said this again to this committee three years ago, is we delude ourselves if we don't think we're in a very difficult position in public finances. In the UK, we have had a deficit of over 100 billion for six or seven years, now since 2007, and we only raise just under 600 billion of taxes in the UK. It is a substantial deficit that we still haven't got to grips with. And in order to tackle that, really tackle that, that is going to be, one can't just tinker with it, one actually has to do a mixture of raising more taxes, we're going to have to do a mixture of looking at how we can be more efficient in the public sector. So there's got to be a balance, and while we're in these difficult times, I don't actually believe that we should be reducing the overall amount of revenue. In fact, we might have to increase it, but so I think that's important. We also need to make public sector more efficient. I think the public still doesn't quite appreciate that we are in, still in, a very high level of deficit that we're running, and therefore we have to use lots of levers to get us back on track. So you wouldn't advocate a tax cut in and of itself. You would recognise that we need at least a cost-neutral budget, because anything else would contribute to that deficit position. So what you're suggesting, forgive me, you said we were responsible for spin, but what you're suggesting looks to me like a bit of smoke and mirrors. Would that be fair? No, because I think it's using it for two things. One is, I really do believe in localism agendas. So I can't stress enough, and I think on this issue, Lucy is the same, is this is a huge opportunity to empower local government, which has been denuded of fiscal powers to buy and large over the more and more, particularly with the cap on council tax and the removal of the business rate from local government. The second thing is the taxation system in this country is both hideously complicated and not fit for purpose in the way that we're getting a more, I hate this word, but I'm going to say it, a more local world, which is to say that people want to see more local responsibility, but at the same time, our business interests and our personal interests and how we operate is done at a much more global level. And the complicated tax system that we have at the moment isn't going to suit the system of how society is going to work in the future. This is an opportunity to start looking at imaginative ideas. And the whole point about having powers at local levels is that we can explore different ways of doing things. Some will be mistakes, but some will actually be some good things. Other people will then pick up on that and start to have a proper debate. I agree with Jeane's point that I'm not sure local government would regard it as empowering to have to start off by making up a gap in revenues, but I absolutely agree with the principal point of pushing more locally. Can I ask you therefore to explain a bit more about your council tax proposal? Is it a 33% rise across all the bands? Are you aiming at the higher bands if you are? That's those over £220,000. I can feel Gavin shivering beside me already. How many are actually in those bands and what proportion would they pay? Actually, I do think it's unfair at the moment. I say this totally against myself. I would end up paying more tax under my proposals. But I think property tax needs to be simplified and made fairer in that the band that was set H band in 1991 doesn't take account of people who sit on really huge properties that should be affording possibly even not paying any income tax at all, who pay very low rates of council tax. I think that's fundamentally unfair and we should have a property tax that is fair across many more bands. Or even if you take away bands, now that you have much better valuation systems, as we start to progress towards a fixed percentage of property value. Let me push you further on this because you haven't answered the question whether it's 33% across the board, whether you would actually move some bands completely out of paying anything and load it onto those above £220,000. Well, I would much rather see, and if you want to push me to be radical, a flat percentage of property value right the way across. Now, at the moment, if you're in band A, you're paying over 1% of your property value. If you're in £100,000 flat in Edinburgh, you're paying over 1% of the property value per year in council tax. If you look at it at a person who's got a million-pound property plus, that's lower than 0.35%. If I'm extending this, you would pay, relatively speaking, three times more at the top end than the bottom end. Now, that is adjusting because you wouldn't be paying three times more absolute because of the way the numbers work, but you would see a much more spread that would shift to people on wealthier homes. Now, the next question will be, there are some people who have very little income who sit on very wealthy homes, so you're going to have to have something of a process of transferring to that because particularly the elderly might be low-income, high property value, but we've got the kilter and the balance wrong, so we've got to find a way of moving from the current system, which I do think is unfair at the moment, to a system that more reflects the underlying property wealth that people have. Which is currently being grappled with by the commission, but there you go. I may have to give evidence there, but I wait to see the commission's evidence when it comes out. Indeed. Lucy, I wonder whether I might ask you just a general question because you acknowledge some sympathy with the Scottish Government's emerging position, which is more nuanced powers come in the next tranche of the Smith commission powers, but you felt austerity was such a pressing issue and it was so in terms of political rhetoric as well. Would you regard it as a completely wasted opportunity if the Scottish Government didn't use their powers now? Yes, I would. I think once you start looking at the real reality of what's being removed out of the public sector and who's affected, I would. Thank you, Richard. I'll be brief, convener. We've covered a lot of ground already, but my first question is for Ben Thompson, because Ben, what you've proposed is a very neat and, in many ways, attractive package in terms of cutting income tax, but then giving far more powers to local authorities and raising their own revenues, and that's obviously something we do all support. Clearly, I presume that that would be a one-off relationship between SRIT and the Government taxation. You've talked about sending out a signal for Scotland by these tax measures. If your first access for the Scottish Government is to cut your rate of income tax by 2%, there is a danger of creating long-term problems in terms of Scottish Government revenues and therefore further pressures down the line in terms of Government spending. How would you foresee that working out in terms of the longer term direction of travel in terms of taxation? I don't quite understand the question now. I think it sends out, I understand the bit, about it sends out a direction of travel. I don't see why it affects the long term, because you balance the... If your first access to cut tax by 2%, that's embedded from the beginning. Everything you raise after that is from a lower base, but indeed a political pressure may well be that we should remain either in a situation of cutting taxes or maintaining a lower tax base, and in the meantime what's happening in terms of council levels out with the control of the Scottish Government as well. The pressure there seems to me quite clearly about reducing the income for Government as a whole across Scotland rather than increasing it or even maintaining it. I see where you're coming from now. I would see the messages that you put out now as being important that you're actually addressing localism, you're actually using taxes to do something different to create a simplicity. Now they're a very limited range of taxes that you've got, a pretty blunt tool. When we get greater taxes that are coming in, and we touched on this, I mean Mark touched on the more taxes that are coming in, I would hope that the more... And I've always argued this, that having a whole toolbox of taxes then enables you really to do some interesting things about how we address both taxation and welfare and create something that's fit for purpose. So when all these bands start coming in, I would fully expect that actually one starts looking at how the bands work, the size of the bands, where the bands start, to actually suit Scotland and to try things out. So actually doing something now, and I think this is the point that Lucy's making, actually sets out that yes, when you get these powers, let's start talking about actually doing things with them that make a difference. And that's the direction of travel, that you're actually going to do something that works and fits for Scotland and tests things out, so that when you get much more powers you'll be able to do that as well. So for me, the fact that we've reduced it by 2P doesn't mean that forever more you're locked into a 2P reduction. It sets out much more a direction of travel, which is when we get these new powers, we can do things with powers that actually make Scotland a really interesting place because we're doing it differently and we're doing it with a thought in mind to achieve things, whether that's to try and address problems with sugar or trying to correct things with local councils or empowering local councils or a whole range of other things that we can use going forward. So that's the message, I think, of the direction of travel that you're actually using the powers rather than you change it by 2P or 1.5P and that sets it forever more as the income tax rate going forward in future. Fair points a bit. So you see a situation where you're using the powers for specific actions but the overall tax takes will be pretty similar in terms of, do you see taxation Scotland for the individual being higher than the rest of the UK in the longer term or is it going to be pretty similar as you're doing it in different ways? I mean that's why I'm trying to capture here. This comes back to sort of Jackie's question in a way, is look, we've got to manage Scotland or you've got to manage Scotland but we as a population have got to try and do things in Scotland as we do in UK, as we do in Europe that is going to create a vibrant economy and actually in the end produces a public sector that is financing itself without a deficit. You cannot run a sizeable deficit of the size that we've got so we've got to address this problem and that means creating a mix of all sorts of different things but unless you can actually be open and start exploring about how we address this we're never going to get anywhere and we need a real change of culture to address the problems that we're in at the moment and for me that real change of culture is getting people to actually do things at a local level to address this to actually get people engaged at a local level and if anything in the last year the level of political activism I believe is because people are actually feeling engaged at a local level let's draw on that to help us solve this problem by giving them more empowerment at a local level. Thank you very much and my final question convener is for Lucy Hunter Blackburn and it was one of the issues of committee has been very interesting and for a long time has issued the idea of preventative spend and it struck me that what you were saying about the current situation we have in terms of local government funding is almost the opposite of that because I think you said that with some of the recommendations that Edinburgh City Councils had to make those are on the edge of being the most vulnerable or losing out on services so in terms of making the argument about why you'd want to increase taxation to invest in those services presumably at this moment in time we're storing up some long-term problems actually will will create some severe pressures on the public purse rather than make government more efficient. I think at that point I'd point to the much greater expertise here that the Joseph Rowntree Foundation have and the report they did in June 2013 and that's the point they made that as budgets tighten and you keep pulling services back and back to the people deemed most vulnerable education welfare officers in Edinburgh we've cut the number in Edinburgh so that the threshold for intervention is no it was 85 percent it's had to fall I don't know but the equalities report I read didn't say what it was going to fall to fewer people will be helped we will catch children who are beginning to fall out of the system less quickly and that sort of model that pattern will be replicated across so absolutely I think there is an argument around prevention about intervention. I mean coming back to Ben's important point on localism do you think there's a situation at the moment where you know some difficult decisions are having to be made at a local level with little flexibility because some of those decisions perhaps aren't being made at a central government level is that perhaps too political a point? No I think it's a not I mean I've worked around local government funding a long time and you know you've become if you work on local government funding for a while you've become a little bit hardened to some of the tales of woe that councils do I'm not completely pollyanna about everything that comes through the press at budget setting time and yet it is really striking you know if you're sort of looking through as I was in preparation for today you know kind of comments so West Dunbartonshire this has been the most difficult budget process in the council's history said the council leader Highland is very huge concern in Highland about 21 million cuts and you go through and you go through and say this is a very high degree of noise in the system about difficulty the tough that Glasgow is making comments but one of the toughest decisions or Edinburgh we've got very tough and it becomes the language of local government spending and in some ways it should be tough you I'm not against putting councils under pressure everybody has their own pet hate bit of council spending that they think should be cut you know we all do it but there's a point at which you have to kind of watch for that prejudice making you deaf to real messages of strain in the system and I I think that's where I feel if I look at the numbers in the messages and more importantly at the actual hard budget choices of a place like Edinburgh that's where I begin to see there's something going on that that requires it is an urgent issue requiring some sort of action okay thank you very much Richard no that's a concluded questions from the committee I just wonder if there's any final brief point you might want to make if it's not of anything that's not been touched upon but only say that I mean if one looks south the border councils have already had to really address a lot of issues that to some extent councils up here have yet to face face in terms of the amount of cuts that have happened and I think that we do need to get a change of culture in getting people engaged because these are problems that we all need to get involved with and share and therefore you know to be able to actually start the empowerment of local government by making them more fiscally responsible this is a real opportunity to do that and we need to do it as I think Lucy was saying urgently now so giving the direction of travel that we really are getting into a local agenda of passing powers down I think this is a huge opportunity and I'd love to see you as politicians challenging the the the decisions that are going to happen over what the the rate is to try and be brave go on be brave and and that's what we want from you so says a man who isn't coming up for election next year Lucy I'm also asking you to be brave because I'm also not coming up for election in a different way I I would I want to I want to emphasise that Ben and I differ on a lot we clearly share a very similar view on the importance of using the powers you've got both symbolically and practically and and the localism agenda and I'm very keen like Ben to encourage you to look at the Scottish rate of income tax alongside council tax as a whole thing but the point I really wanted to finish on was actually about who's round the table and whose voices you're going to hear in this debate because you've heard me today talking about tax increases if you're going to do something as difficult as recommend a tax increase I looked at the the range of people who've replied to your inquiry and of course you're in the hands of who replies you get a lot of tax advisors you get the voices of the wealthy in a debate about tax they tend to pop up more and they're more numerous and they're more present and they pay people a lot of money I did this in my spare time on my sofa I'm an amateur here I really am I have a bit of past professional history but I'm not a tax expert and neither am I an expert in public services and spending anymore but there are people whose voices I really hope you wouldn't recognize you haven't got round your table you haven't got on your list you haven't got the poverty alliance you haven't got Cosler I was surprised to see you haven't got CAB you haven't got Joseph for entry foundation there are plenty of people out there who I think if for what I don't know why they're not at this table now well first of all we have to have you know submissions that are worth actually interrogating people and folk haven't got anything to say there's not much point in us actually asking them I mean all these organisations that have been contacted as a matter of course frankly and we are having a number of panels on this particular issue so we have to interrogate what we have in front of us so I take on what your point is but what you might want to ask somebody's organisations why they haven't made any you know anything submissions I mean we could perhaps have asked them instead of yourself but we wouldn't have gotten such an interesting discussion I think my point convene absolutely you can only do with what you've got I suppose that's I'm just asking you to notice the absence of those voices in your list I'm not not absolutely I think the committee works with what you get completely so and I'm incredibly grateful I'm very grateful to have had the chance to come today but I want just to flag up there are all kinds of voices who who aren't there in your submissions and just please notice that they're not okay well thank you very much for that I would say that just a matter of interest actually met Mr Jonathan Lattock the Premier Minister of Guernsey last night a microstate of 63,000 he was telling me that they have no debt I alone employment of 1.2% flat rate tax of 20% no VAT so of a wee bit of progress to actually go well I'm hoping that you can actually fund that for me no biologs is coming up sadly by the time just shows you okay well thank you very much for your time this morning I really appreciate that we'll have a recess until 11 10 okay folks starting about 15 seconds we're all here okay we'll now continue to evidence on the Scottish rate of income tax from our second panel of witnesses I therefore like to welcome to the meeting Hazel Goff of the Chartered Institute of Taxation Charlotte Barbara Vecass and Gwyneth Schoolfield of Price Waterhouse Coopers members have received copies of all relevance admissions so go straight to questions from the committee and as you probably know some of you have been here before I will start off with the questions and then we will go on to take questions from colleagues now you may have seen some of the last session which last is a good 90 minutes we do have a I can have a bit of tune thrown over tax rates but to notice that basically more or less taking the fifth on in terms of what level of Scottish rate of income tax should be set you know yes indeed indeed I was going to wonder about that I cast have said and I quote as a matter of policy I cast is not coming on the quantum of tax that may be raised by governments the Chartered Institute of Taxation have said we don't generally comment on the setting of rate of taxes so we'll start with Price Waterhouse Cooper because although Price Waterhouse Coopers have actually said you know that along the same lines we don't really want to comment on the taxation you can do a wee bit actually to be honest because what you've said there is the existence of the rate varying power rather than its use has prompted changes but administering a rate that is different to the rate prevailing in the rest of the UK will add complexity and administrative costs therefore clearly indicating that an actual fact going if you do actually support the status quo in terms of taxation that seems to be the kind of message that's coming through here and you've also said that decisions on setting the SRIT should not in a way ignore the potentially ffiscally induced behavioural responses that Scottish indeed RUK taxpayers may have following a change in SRIT so are indeed as Price Waterhouse Coopers basically saying that don't change it. Basically you know it is a complex area awareness across the population is relatively low we engage with a number of employers from a range of industry sectors and the awareness is very low it is a complex area administration and what is required is still not abundantly clear guidance is still not being finalised as to if you like those cases on the borderline for those individuals who are perhaps more mobile they are able to move if the rate fluctuates and that actually drives investment and the economy in Scotland to a certain extent and therefore we're saying be mindful of what you do I guess the changes post smith are coming down relatively quickly and perhaps to embed what is a Scottish taxpayer into the minds of Scottish taxpayers before you change. I'm going to go into those things but I'm more interested in at this point in time and the issues of you know trying to tease out of you so to speak you can I hint nudge nudge wink wink but you don't really want to see a change in the 10p tax rate whether we're more or less right in saying that. I think that you know just keep the status quo would probably be better while you know you're trying to embed a new tax regime into the Scottish. So you're not ruling it out of course but what you're saying is look given the first year here maybe we should you know let's see how things go and then we should be looking to be perhaps a bit more radical one way or the other whether it's raising or lowering taxes in the years ahead would I be more or less right in saying that. I'd say yeah so you know to see how you go in the first year let the thing embed and what you do with future powers post smith will obviously need careful modelling but yeah perhaps do something differently then. Okay the in terms of behavioural responses you've said in terms of your impact on tax revenues section that there may be no significant increase in revenues associated with higher tax due to the belt of income terms in us to relocate within the UK and this follows on from the bit I've already mentioned about behavioural responses. Now we took evidence from Professor Bell some months ago who said that you know if there's a two or three percent difference there's no evidence that there's going to be any behavioural change. You're not going to sell your house then but it moves somewhere south of the border wherever it is on a two or three percent change. Have you got any indication of what kind of change of taxation whether it's lowering tax due for people to come here at you maybe high in us or raising tax that would impact adversely on that? Is it the price was cut with any kind of idea of where that kind of margin might be? We haven't done any specific modelling around that. You know I suspect that you as the Scottish Government will probably be doing some modelling around that for yourselves so no we don't have any evidence around that. What I would say is from the clients we engage with and for the most higher rates additional taxpayers there is you know history tells us that there is a mobility in that section of the tax paying population and therefore it is likely that some of them will move depending on what you do with the rate. Okay first of all a point that we know the Scottish Government clearly but Charlotte in terms of behavioural response I know that you've decided that you don't comment on the rate but in terms of behavioural responses what are I cast as view on behavioural responses viewing and anecdotal evidence even in terms of what confidential would have an impact? Start by saying with no statistical evidence we do get anecdotal evidence probably just the same way as Gwyneth does that some of the more mobile top end who are modelling anecdotal evidence seems to lend itself to the rate going up and if that were the case you do hear stories about houses in Berwick, Northumberland what have you. I have no idea how much strength there is in that or not. What I would say perhaps about behavioural responses is that I think overall my years as a tax practitioner sometimes they are more quicky than you would automatically expect and that can be in either direction. Okay that's fine. Hazel, what's your view on the behavioural responses to all the decreases? I think that the committee should be mindful of the fact that if the status quo is not maintained then the tax pay behaviour does need to be considered. They may accelerate or defer income if they are in a position to do that. They may also base themselves either south or north of the border whichever suits in terms of determining whether or not they are a Scottish taxpayer in the first instance. The people who have the more complex cases where it's not particularly straightforward as to whether or not they are a Scottish taxpayer are likely to be the most mobile within our employment sector. I have no idea what kind of level of threshold it might be, a one or two, three, four or five percent. That's fine. Let's go on to your own submission. In terms of advisers and agents section 5.7 you say in terms of talking about HMRC you talk about a series of campaigns being required and you say that we think HMRC have adopted a sensible approach in terms of the order of campaigns, first of advisers and agents, followed by employers and pension providers and finally taxpayers of the general public. However, in the following paragraph you go on to say that we are concerned that not enough has been done to publicise the SRIT among advisers and agents or to provide them with sufficient information at an early enough stage. Will professional bodies like the CIOT can reach their members, this is only a proportion of advisers and agents. Can you tell us a bit more about your concerns in this and then I will obviously ask the other panelist to come in? In terms of publicity, we are starting from a very low base. We have not undertaken any surveys but based on comments that we have received from the members' awareness is very low in terms of the introduction of the Scottish rate of income tax from next April. Charlotte, you have said that there is very little detailed information for taxpayers about the SRIT. Is that a concern that you have? Again, we are all on anecdotal evidence at the moment and I think that it is quite difficult for HMRC to get the time right. As I said in the submission too soon, it is no use too late and it is no use. It is quite a difficult one to time but lots of our members seem to be getting a bit twitchy that they ought to know about the Scottish rate of income tax and in actual fact I think that once they do know about it there is not so much that needs to be known but the worry is that we have not quite crossed that boundary just yet that it is going to follow PYE procedures in the main or Juniper agents is relatively straightforward through the self-assessment in broad terms and once they know that then I think folk might relax slightly more but SRIT seems to have got completely lost in all the Smith noise. I agree with Charlotte and Hazel. I think that HMRC has taken a very pragmatic approach to agents and advisers engaging in Scotland as well as in the rest of the UK. I think that the awareness is relatively low. It is a low base in Scotland and I would say that it is an even lower base outside of Scotland and there are people who are affected in that area so I think that there is probably something that needs to be done but as Charlotte quite rightly points out it's a timing thing. I think coming back to one of the points that Hazel made around the deferment of income and mobility I think there's still some nuances in the guidance that are still being finalised from HMRC although we understand that that's going to be coming to be published towards the end of this month and I think that will actually the way that that is released will actually help if you like calm people and get them to say that you know probably there isn't a lot for the individuals to do that the majority of people will either be in or out if you like as the way I describe it so I think yeah there is it is a timing thing. Okay thank you now Charlotte in your submission paragraph 18 you add to effective what Gwyneth is saying by saying that there also appears to be a lack of awareness among employers out with Scotland which has obviously just been said but in the previous paragraph you also say that a number of our members in their capacities as agents and as employers have expressed concern about their role in the collection of SRIT and the lack of operational information about SRIT collection so I'm just wondering if you can I think lots of employers and agents to a certain extent too I think there's lots of concerns that generally it tends to be employers that operate PYE and therefore what's their role going to be are they going to have to identify Scottish taxpayers are they going to have to explain what it means are they going to have to do something completely different through PYE and in actual fact when you get there no they're not because HMRC are going to be issuing the S codes and although employers might be encouraged to assist in the process the employer role is actually very informal it's just a kind of stop gap to help out because you tend to go to HR before you phone HMRC so actually employers don't have to do a lot but if they don't know that they're all slightly kind of twitchy for whatever better way to put it and I'd say in the past few weeks even maybe the holidays have finished and everybody's got what's ahead of us there's been a massive increase in interest in Scottish rate of income tax there's been quite a few courses run amongst profession on that recently maybe it's beginning to pick up okay well I mean hazel and you know you said in 5.16 of your submission you said we are disappointed that HMRC and the Scottish Government have jointly agreed it is not necessary to show the SRIT separately on the form p60 and the CIOT called for details with SRIT to be shown on the form p60 is a minimum and also raised the issue of it being on pay slips too so I wonder if you can expand a wee bit on your views on why you feel that way and obviously a lot of other things to comment and then I'll open out the session to colleagues around the table we feel that it's important that taxpayers know how much they are paying in terms of tax and to whom they are paying that tax and many taxpayers the only information that they have will be in the form of the form p60 so if it is not detailed on that form then they will not know how much they are paying under the Scottish rate of income tax okay Gullis um I can see Hazel's point of view that it's click clear that you know it individuals like to know where their taxes going but I also understand because of the if you like the limited time before the introduction of the Scottish rate of income tax perhaps the complexity of breaking it out at this stage given the information that people have was almost a little bit of a complexity too far so I think you know I could understand why we are where we are so what you say is um I mean if there's not going to be any change it's not necessary really for this year anyway but perhaps in future years that's something you would like to see I would say yeah probably that would make sense providing that the the guidance is there as to how it is if you think about it once we get the smith taxes the whole lot will be Scottish so it's academic once you're on to smith and at the moment I do you know it would have been a nice to have but how many people look at their payslips and their p60s realistically and we've certainly attended a number of workshops where just the process mechanics of it I can completely understand how the decisions being reached the other thing that one has to remember is that pa y was never designed to highlight how much tax you're paying yeah so it's so you think it might be a bit of a slight hammer to cracker not really well I just think it's quite difficult to put out some really strong tax messages using pa y because they don't go together okay that's interesting okay I'm going to open out the session to colleagues around table and the first will be the deputy convener john twill by jackie okay I think fairly briefly but um we had a discussion at the previous um I'm not asking you an opinion on rates going up or down but it's more of the kind of technical side of things as to whether it is progressive or regressive to add a penny or take a penny off the 20p because there was the argument was basically that on the one hand somebody who's earning more would pay proportionately more but if you add a penny on a to both 20p and 40p and 45p then as a proportion for the bottom that's 1p on 20 is 5% 1p and 45 is less than that I mean I don't know if you use terms progressive and regressive but can you comment on that argument as to you know who gets hit most or who gets hit less if we added a p on to a penny on who's this to john I'm happy I should have declared by the way I'm a member of eye cast but um yes let's go for charlotte well as a fellow member of eye cast here we go I think that's an interesting discussion there's different ways of cutting that one isn't there and I think some of David Bell's works really interesting because although you know it would depend on whether you're looking at the individual or whether you're looking at everybody wouldn't it because there's David Bell's work suggests that there's down the bottom end of the income distribution you're actually picking up very little income tax so I don't know I think there's different ways of arguing that one to be honest okay well maybe I'm unfair asking that question so I'll let that go I mean the comment was made that actually as compared to other countries we do not actually pay all that much tax here at the moment is that something any of you are able to comment on no what you focus in the submissions john okay and well I'll try again on the on the administration side of it we've also been told that other countries would have a variety of income taxes within them and I understand we understand from previous last panel that in United States for example now I know price waterhouse coupers are all over the world so I'll accept you don't do the payroll all over the world I think Switzerland's another example where there are different rates so I'm just wondering administratively presumably businesses international businesses cope relatively easily with a variety of income tax rates even within a country and probably around countries is the administrative side really such a big problem I think there are challenges internationally with administration I think the United States is an interesting example because I'm presuming you're referring to the state and the federal and the city position I think there are some areas and perhaps when we gave evidence the last time you remember that we alluded to the situation around the New York metropolitan as opposed to the Washington DC one where Washington is driven by residents New York is driven by where you physically work and the complications around that and there have been winners and losers in all of those states around that particular rationale and there have been challenges with that administration it's been embedded for a long time so I think you're right I think complexity shouldn't be underestimated because for those individuals who are mobile or who can work across if you like Scotland and the rest of the UK it can bring challenges as well so there's a lot of legislation behind it in the States there's equally a lot of legislation behind it in Switzerland and elsewhere so do not underestimate that and the other thing I would say is the onus on the administration perhaps is you know is it an employer onus or is it an individual onus and I think that actually drives some of the behaviours as well so in other countries would it be more emphasis on the individual employee filling in a tax return whereas here it's more emphasis on PYE yes in the countries where I'd say it's more complex the the individual has a greater role to play okay that's helpful thank you okay thank you jackie do for by mark we'll hopefully ask you questions you can't answer can I just test because you're outlining quite a cautious position we want certainty of course we all do we want the system to succeed to be easily understood okay I get all of that from your perspective see when we come to a year's time are you not likely to be saying the same thing to us when the pooth smith powers confer more nuance perhaps even more complex system available to us is this just naturally where your default position would be because for employers for taxpayers that certainty that transparency that bedding down in the system is what you would argue anyway I think in a year's time there will be a greater awareness of whom is and who is not a Scottish rate of taxpayer I think there will be an awareness if you like for employers and employees as to how it is administered and and and what it looks like and works with and then post smith you're right there could be a more complex tax rate band and taxing system but you know for me it's all around how you communicate that and take that forward given the starting point you will have with the awareness of who is and who isn't a Scottish rate of taxpayer I would say that I would much support that and I think there's perhaps two points to take out from it one there's the messaging and I'm not sure that it's solely the responsibility of HMRC as to who's a Scottish taxpayer because it ties into accountability doesn't it rather than just operational matters which is where HMRC sits and there's only so much you can do on the operational side but once people know who's a Scottish taxpayer that's fine on the operational side you know what big government IT projects are like and we might always be slightly cautious we are accountants but allowing for that nevertheless you do you know it's a really big undertaking to make payroll to run smoothly and such a lot of money comes out of it and I think you need that to run at least once perhaps without too much jiggling about with it okay I think the arguments you've just made actually apply when we get to the second range of powers that we're going to get and it is that natural kind of I described it as caution but but it's more about making sure systems are right so let me kind of develop a little bit what whittled HMRC are doing so there's a letter to Scottish taxpayers going in December to try and identify that cohort there's been dialogue between HMRC and employers I think you said earlier somebody said guidance wasn't finalised yet has there been any slippage to the timetable is there anything there that HMRC HMRC have been doing or haven't been doing that you would want them to do I think the difficulty for HMRC we had a big meeting with them last week over 100 members turned up and a joint discussion group and it was really helpful and HMRC have done a lot to come and meet the professions and meet employers they're doing a great deal with that I understand from some of the conversations we had that is that there may be restrictions around budget and who's paying for the budget for advertising all of this and you know I don't know if it's coming out of HMRC pocket or whether it's Scottish Government but that maybe needs looked at we were asking them for instance if the broader message about who's a Scottish taxpayer might go out to I know Coronation Street or the Archers or whatever and no because there's no budget for that and I do you know I don't know whether that's necessary but it would definitely help to promote it the way you do on bigger HMRC campaigns so I'm sure we could have a word with River City who are filming their December issues just now but there you go let me push you slightly further on this because in a passage that has been quoted to us HMRC's communication of the operational aspects of SHRECT and its implications for taxpayers will be linked to the Scottish government's communication of decisions on the level of the Scottish rate in the Scottish budget now that level is likely to emerge in February the whole budget process has been delayed as a result of the chancellor's statement in in November but the consequence of that is there is a short period of time for scrutiny but nevertheless we hope to be I think setting those decisions out in in February is that sufficient time in your view given that they are very much hooking what they now do with what the Scottish government announces well from my perspective two points I think February is a bit late given that most of our members seem to be getting a bit twitchy about it now I think in terms of taxpayers more broadly it needs to be starting cranking up ideally because otherwise it's going to come from nowhere in February so so February to me strikes me as a bit late to start putting the main comms out on the other hand I know HMRC have done research into putting the comms out and what's the point in telling somebody about Scottish rate of income tax if you don't know what the rate is so I realize that that one's difficult to manage but they were communicating to you that restrictions in budget will mean that they have curtailed their advertising I wondered on a couple of things first of all following on from from Jackie's points around the publicity around this I mean based on the submissions that you've put in it seems as though there is now a sort of percolation of information to to the professionals but your view would be that there needs to be a wider public awareness of SRIT and I guess my wonder would be what is it you think are the messages the public need to hear because you know the sort of sausage analogy of how much of the process do people really need to know about compared to the end product so what are the messages that you think the public need to hear which obviously would be different to what the you know the sort of tax advisers the professional elements would need to know about the public would need to know what the rate Scottish rate of income tax is they need to know whether they are or not a Scottish taxpayer they also need to know what their responsibilities are so far as being a taxpayer is concerned and they also need to know how it is going to affect them financially. Okay so I mean some of those messages are easier to communicate at an earlier stage and I guess the question around the the sort of the February timescale is really when we'll be consulting on the budget rather than there being the ability to do some publicity around the the mechanics of SRIT that would be more about how much you're going to pay under SRIT and obviously there's a question as well which links into the the convener's earlier question about taxpayer behaviour because the question is you know how early do you pull the rabbit out of the hat in terms of what you're going to be applying the tax rate as because obviously at Westminster you tend to be told at the dispatch box this is the rate and it will apply immediately in many in many instances for some taxes certainly so how early do you think people should be aware of what the tax is going to be and what's the impact that could have on taxpayer behaviour. I think perhaps there's a slightly different conversation because this is new and it's a Scottish rate of income tax it's just what is it and why are we going to have it and even if it's 10p in the pound I do you know well if even more so if it's 10p in the pound why bother it's just the same as what we've had before so so but actually that's not right is it because it's fundamentally different and it gives the Scottish Parliament Government its own money and I think perhaps it's that part of the message that's missing. I agree with me but I think the other point Hazel was making was around how much will people pay was one of the other messages that needs to be put out there and that's about the rate that will be applied and I guess my question was at what point do you feel you know there's a sort of there's a tension there about how early do you communicate the rate that you intend to levy and what impact does that potentially have on taxpayer behaviour for those you know if you were if you were going to take the decision to put up the rate and that could lead to defer all of income and things like that the longer leading period you have from when you announced that rate to when it comes into effect the more time and opportunity there is for individuals to make those behavioural changes in order to perhaps defer income and avoid paying at that rate. I think any change of rate whether it be up or down has a different admin burden attached to it so basically there is something that will need to change in the actual payroll mechanism to actually deal with that rate and generally speaking to make those changes you need probably about three months to kind of make that kind of change to run through a payroll at least three months is the way so if you if you like from it not from a driving behaviours point of view but rather from delivering the payroll you probably need at least that leading time would be what my thoughts would be. From your discussions with AMET, HMRC and stakeholders and clients and so on, other than what you said in your submissions are there any banana skins out there that could affect the smooth operation of the Scottish rate of income tax that you think this committee ought to be aware of now? Is there anything kind of inside you just kind of nervous about anything that you think ought to be put out there on the table now that this committee should be aware of? For all panellists? I think there isn't anything outside of what's in those papers. I think for me the main thing is to raise that awareness of who is a Scottish rate of tax payer and what it actually means not necessarily the rates but get that messaging out earlier it's almost drip feed the information because then people take it on board a bit easier generally speaking so it's be mindful of that so don't be driven by any rate change up or down or staying flat whatever you decide to do make people aware that it is coming because I think that is a big step change that probably would be helpful if it happened. The other kind of possible nervousness I would have in operational terms is that HMRC are going to write to everybody who they think is a Scottish tax payer and that's fine but what happens to all those folk who might be Scottish tax payers who are not written to and do you know do they have a duty to come back to HMRC and say oh you forgot about me I don't know and payroll is not driven at the moment off addresses so there's quite a gap there. There needs to be a sea change in tax payer mentality as to whether they want to tell HMRC that they're Scottish tax payers about telling them when changes of addresses take place and I'm not sure Gwyneth, is there a mechanism in place for that as yet? Not quite is there? It's not clear Charlotte from the discussions I've had that that isn't clear at all that that is there so and that's why you know for me I think it's important to highlight who is a Scottish tax payer and again like you rightly pointed out what if you are a Scottish tax payer or not what your obligations are before you even get to the rate. Okay that's very helpful thank you. The other side is the release as well which we haven't really spoken about for tax payers who are making donations under the gifted scheme and those making pension contributions then the relief is to be given at the Scottish rate of income tax but the systems which are in place at the moment and will be from next April will only give relief at the 20% rate of tax so they will require to be in adjustment to a tax payers liability to give the correct relief overall and we don't know how smoothly that will go. Okay have you raised that with HMRC? Well they've said for the moment what my understanding is that they are looking at updating systems so that they can give the correct relief but it may take two years to do so and they may accelerate that or give further consideration to it if the Scottish rate of income tax diverges significantly from the UK rate. Okay now that's helpful too thank you. There's a couple of our sweep up questions we talked a bit about behavioural response and I think you all indicated that you'd heard you know had anecdotal evidence but no kind of firm evidence. In terms of this committee or in terms of the Scottish Government and the Parliament behavioural response is not something that we've looked at in great detail and it was pointed out by the Scottish Fiscal Commission that it was a weakness in the Scottish Government and that it was just a capacity that we didn't really have at this stage. If you were advising this committee and the Scottish Government and Parliament as a whole what sort of capacity do you think we should have in terms of looking at behavioural responses specifically to income tax? It's quite difficult to judge that one. Isn't it? I think it is very difficult to judge. I think probably depending on where your mind is around the rates I think there's modelling that people far more intelligent than I could probably help you with and I think it needs to be from my point of view it needs to be driven by those facts and figures. Okay if I phrase it another way then from the anecdotal evidence that you have are we talking about a handful of people that might move to Berwick and therefore you probably wouldn't invest a huge amount in building up your capacity or do you think it could be potentially a lot wider than that and therefore it is investing in some capacity to try and make sure you get those sums right? What's your gut feel from the anecdotal stuff you have? Perhaps to take a different analogy my gut feel is that I wouldn't rely on me because I didn't think you would have as much behavioural reaction to the LBTT rates last year. I was quite taken aback at what an impact that had and so I wouldn't like to rely on anything I had to say in behavioural. It is quite strange how people behave in relation to taxes. It's not always predictable. Okay. Charlotte, you talked about people being a bit or starting to get a bit twitchy. Obviously you're involved in some of these stakeholder groups and amazing with HMRC. This guidance that's coming out at the end of this month I mean I don't know whether you've seen the guidance or not but is your view that that might reduce some of the nervousness or do you think something more than clearly they will do more than the guidance but is that going to go some way to reducing it? There's draft guidance out already so anybody who's interested in it has had a look at it and it's there and it's very helpful. It's a really good start and we're fine tuning around the edges. That's grand. I think that the twitchiness is more broadly perhaps amongst those who don't quite have time. You know the people who say that they've got their day jobs to do without rushing about looking at other guidance or draft guidance especially perhaps amongst the small and medium enterprises. Last question. You've been asked about the P60 point already. The argument has been made that some people want to know the information, the counter argument is that because it's only likely to be for a couple of years at some point it becomes redundant when Smith is enacted. Obviously there's some work that would be required but how difficult in technical terms would it have been to include that information in the P60? Is it a case of the amount of effort that actually didn't justify the end or could it actually have been done quite easily? Is there an easy answer to that question? I think that software providers were finding it challenging from a payroll admin perspective so I suspect you thought it was possibly going in the too hard basket is right. As Charlotte White rightly says, in a year or two years time whenever Smith is implemented things will look different again and everything will be coming to the Scottish Government. They will have their own spending power from that so actually it was too hard for the two year period probably yes. Thank you very much for that Gavin. We don't have any full equations for committee, I'm just wondering if witnesses would like to touch on any points that have perhaps not been covered that you feel you want to mention or are you happy to let things lie as they are? Well thank you very much for your time this morning and giving everyone so it's very much appreciated. I'm going to call a two minute recess just to allow for a change over of witnesses. My next item of business is the evidence on the land reform Scotland bills, financial memorandum of the Scottish Government bill team. I therefore like to welcome to the meeting Fiona Taylor, Helen Jones, Douglas McLaren and Fiona Leslie. Members have received copies of a briefing note and all written evidence submitted so we'll go straight to questions from the committee so we're very welcome to you this morning. We'll try not to be too brutal. Okay well first thing I want to touch on is a submission from COSLA and they've said and I quote, A report by Solace has highlighted the potential costs involved in requiring local authorities to register all their land and bills in the next five years. Initial investigation by the improvement services estimates that a total cost to Scottish local government is likely to exceed £150 million and they say that they want to talk about the cost of preparation, including locating the deeds that are accessing, market values and providing plans for each title to be registered. Do you have any comments on that? Obviously the completion of the land register is a separate part of the wider land reform programme that's not immediately relevant to the bill. In terms of any comment on the costs that Solace referred to, our ROS colleagues at register Scotland would be best placed to address that point and we'd certainly be happy to get them to feed into the committee if that would be helpful. I appreciate that because I realise that it wasn't the financial memorandum but clearly it's related to it so therefore it would appreciate it if you did give us some information on it. Instead of what is in the financial memorandum itself, you'll be well aware that there are one or two organisations that have specific concerns and you won't be surprised that I'm going to touch on the submission from the British Association for Shooting and Conservation who say, I hope that we do not feel that the financial memorandum accurately reflects the cost that will be borne by local authorities with respect to billing, collection, enforcement and determination of rates relief and they talk about negative unintended consequences of the non-domestic tax rate for shoots and just to add to that they say, they talk about the statement on page 73 of the financial memorandum being misleading in part 6 where it says and I quote, application of non-domestic rates to shootings and deer forests to remove the exemption for business rates for shootings and deer forests is in order to help fund local services and to place shootings and deer stockings businesses on a level playing field with other rate paying businesses. The latter of that might be true but in terms of funding local services do they not have a point because what they basically want to say is additional receipts from rate pairs will accrue to local authorities and then go to the Scottish consolidated fund, the effect will be a corresponding reduction to general revenue grant blah blah blah. The financial memorandum is not being slightly misleading saying, well this will go to local services implication being that in the area where the shoots are there will be additional funding when in actual fact it will just go to the Scottish consolidated fund for potential redistribution. I'll pass this across to Dougie McClaren to answer. We have read the BASC's points so just in reverse order on the point about where the money goes the rates revenue does accrue to local authorities it's pooled via the Scottish consolidated fund and then effectively returned to local authorities. In terms of following the public pound the rates revenue goes to the local authorities and will be spent by them. The way that the local government finance settlement is agreed with local government is that the two main components of the revenue settlement are rates revenue and general revenue grant, so if one component the rates revenue rises say by x then all else being equal the general revenue grant will what the Scottish government funds falls by x so that allows the government it effectively eases the pressure on the wider Scottish government budget and allows other equivalent funding to be directed not to the general revenue grant but to something else. So it's not directly that same money which because the rates revenue goes to local authority but the effect it has in the Scottish government budget enables us to direct equivalent funding to something else and the First Minister has said the Scottish land fund. Everyone around the committee will be fully aware of that process but it's not really to say about helping funding local services I mean surely it should have been rephrased to make it clear that the implication being that it's going to assist in the areas where the money is being raised, I mean that's clearly the implication surely from the financial memorandum and it's not really the case. I mean you know you could be raising it for example on the island of Arlen where I was shooting the states and the money could be spent in Aberdeen now Edinburgh whatever on something completely different as that other case. I think we've tried to set out factually what happens with the money and the effect it has on the Scottish government budget. I don't think we've tried to say that the the rates revenue itself in terms of following the public pound will go to something like the Scottish land fund but it does have an impact on the wider Scottish government budget because of the local government finance arrangements. Okay, in terms of sticking with this particular issue and the impact on the country's sports tourism, in their submission they again say that recent independent research into Scottish country's sports tourism we've 88 per cent of shooting in stocking providers say that they shoot roughly even or run at a loss. Is there any concern that the removal of this rates relief will have an adverse impact on employment, which is also a concern of the gamekeepers? Perhaps put some of these shoots at our businesses, has there been any work done to see whether or not that will or will not be a case? I certainly listen to all the stakeholder evidence. We absolutely accept that taxes can have impacts and some case adverse impacts on the taxpayers and that can affect their employment decisions. What it is very hard to do is to model the effects of how a change in property tax affects cumulatively employment decisions because obviously that will just be one factor in a businesses decision. It would be difficult enough if we knew accurately the rates liability and because we still have to go through the process where the assessors need to value the tax base, as we've acknowledged, we can't accurately predict that. We can only give a broad estimate at this stage, but even if we were to accurately know the rates revenue, as we do for other sectors that pay not domestic rates, it's very hard to model accurately the effects on employment, such as for rural job losses, because property tax is just one factor in a businesses decision, but we absolutely accept that there are impacts. Negative impacts? In some cases, yes. That's tax, I'm afraid, if you pay out money, of course. Of course, but what would be the positive impacts then? I'm not talking about the Scottish Consolidate Fund, I'm talking about the local communities where that will be implemented. It's a revenue-raising measure, and business rates are obviously a revenue-raising measure. As I said, the money will be used to help fund local services and the indirect benefits that we've said will allow the Government to direct funding elsewhere, such as the Scottish Land Fund. In terms of submission from local authorities Scottish in North Estra Council, which I often quote because they always seem to send a submission in to almost every call for evidence, and I wish more local authorities would do that. The bill will have limited financial consequences for local government, however, in some areas, that is dependent on the definitions applied to key terms in the bill and how those will be implemented. An example of that is in accessing core paths, which places a responsibility in local authorities to make reasonable inquiries into land ownership. Non-ship information is not laid out available, so we're going back to what I was saying initially that I started off with. Inquiries into land ownership can be expensive in the cost implications of the bill, and it should be dependent on what ministers define as reasonable. They talk about savings being dependent on the definitions applied to key terms in the bill. If we look at that, has there really been any kind of analysis of what an impact will be on individual local authorities in terms of that? In terms of the core path aspect specifically, to address that point, I'll pass that across to Helen initially. This bit of the bill is about where there are new core paths. At the moment, Scotland has complete coverage of core path plans, and this is about where a local authority does a review of a core path plan and decides to add in a new core path. That is a situation in which the local authority would be required to serve notification on the owner. What we would expect is that they would make an inquiry through the Register of Scotland in the first instance. If that proved difficult, the bill envisages that they would put a notification or a notice on the land in question. It's really just to make the process a little bit more perhaps fair to the landowners so that they know that a core path is proposed across their land. Under the present procedure, there has been very wide consultation with local access authorities through public events, and other people as local authorities may think fit. We would have hoped that local landowners would have been in some of those people, but now this is just making it a bit more explicit. We don't know the cost because we simply don't know which local authorities will make major revisions to their core path plans in the future. It might only be one or two extra paths. We simply don't know. However, we will be issuing guidance to local authorities. We already have guidance on the part 1 of the Land Reform Scotland Act, and we will update that guidance on the type of inquiries that need to be made. Obviously, you don't know the cost but do you need any kind of ballpark figures? We simply don't know how many authorities and how many paths they want to add. We can't do crystal ball gazing into that, I'm afraid. Surely, if you bring in legislation, it's going to have an impact. Surely, you must have some kind of idea about what kind of impact it's going to have financially on local authorities, especially if local authorities are going to be expected to pay for these out-of-existing budgets, as I imagine there will be. It's interesting that, when you look at the evidence from the local authorities, three have said that, well, there might be a cost but we don't really know how much, and one, Stirling, has said that we can easily subsume this within our existing current service provision. Obviously, our job is to interrogate with people who have concerns. If you look at the submissions from the Scottish Ayrshire Council, they've just put in the word yes to every single question, apart from the last one, which is not anticipated future costs. I feel that I appreciate that there's a balance in terms of the submissions, but, obviously, we have to ask on behalf of those who have particular concerns. South Lanarkshire is another local authority that does have concerns in terms of being asked whether your organisation can meet any financial costs that might be incurred as a result of the bill. They've said that, in the current climate, there is no spare capacity within the budgets of local authorities to meet any additional burdens as a result of new legislation, so surely, if there is going to be additional burdens, it should be funded by the Scottish Government. Let's assume, for example, that South Lanarkshire decided to do a review of their core path plan, and they decided to put in two or three extra paths. I'm making this up, I don't know what the plans really are. If they went to the registers of Scotland, my understanding is that a search is about £20. If they then fail to find the owner, they could then do as the bill suggests and post a notice on the land and do it that way, so it doesn't seem as if the costs would be huge. That's no doubt why some local authorities have said that we know financial implications, but, obviously, there are some who do. Okay, I'll open out the session now to colleagues around the table. Gavin, to be far by Jackie. In terms of the financial memo, you've set out pages 74 to 77. You've basically got all the charts of what the costs are likely to be. Is it possible to get a chart that tells me the total cost of the bill to the Scottish Government, the total cost to local government and the total cost to other organisations? You've set some of them out individually, but I felt that I had to do quite a lot of calculating to try to make sure that I was getting total costs. I don't need it now specifically, but is that something that you either have or can send to the committee? I'd just like to have something in black and white that tells me the total cost of the bill on each of those three. Yeah, certainly in doing this we did follow the pro forma for financial memos and filled it in that way. It will be quite difficult to have the model across the different sectors in some places, because obviously with the ranges that we have and some of the areas within the bill, 10 parts of the bill, there are uncertainties there with some of the costs, but we can certainly attempt to put something together if that would be helpful for the committee's consideration. Just that most financial memos I've dealt with have done what you've done, but then they also gave you the cumulative total and that hasn't happened. I just wonder if that can be done for the sake of completeness. We can certainly look at supplying that for the committee, yes. Thank you. The second question then is one of the aspects in there is the Scottish Land Commission and in terms of sort of concrete costs that you set out, the running costs of that will be £1.321 million a year. I just want to try and establish, should we view all of that as new and additional costs or in policy terms, is that replacing some work that is already done and therefore the net cost is not quite as high as £1.3 million or is that all new work and it's all new money effectively? My understanding is that it is in principle new money, yes, but will be accommodated within existing budgets, yes. I would also emphasise that this is very much illustrative at this point and that we made some assumptions in order to come up with the cost headings to get to the £1.321 million and that we do have in place now a small project team that's starting to look at the critical milestones going forward when decisions will need to be made in terms of public appointments and location set up of office and those sort of things. There may well be some movement between those areas going forward. Sure, no, I understand that and it's a best estimate, but I just wanted to be clear. It's not replacing anything else or it's not carrying out some functions that Government already do and therefore you can see that the net cost is a bit less than that. It's all new functions effectively. It is all new functions, yes. In terms of the community, I'm going to ask you quite a few questions about the valuation role for shootings in deer forests. I just want one comment there that says, you estimated £4 million subject to rates relief or potential rates relief. Is that you just covering all bases or are there firm policy commitments to create rates reliefs in that area? If I think of the main rates reliefs now, it's charities, small business bonus, it wouldn't appear that they wouldn't apply, I don't think. Are there other rates reliefs that you're specifically thinking about or are there new policy options, if you just put that phrase in there to cover yourself effectively? What we're proposing is that the shootings in deer forests would be eligible for the prevailing rates reliefs in the same way as other non-domestic properties. We're not proposing a new rates relief in this area. We're open to suggestions, but so far from our considerations, we're not proposing a new one. We think that quite a few of the smaller-scale shootings on farms, for example, would quite likely get small business bonus rates reliefs. That's why we set it out that way. You think so, but I guess you've not done the work to work out how many. Do you have rough estimates? That is the crux of the question about valuation and being able to predict revenue, because the assessors value the tax base, so that's what this legislation does. It's a valuation provision. In the absence of valuation of the tax base, the best estimate that we can set out is at the macro level of the £2 million 20 years ago projecting that forward. There wasn't much rates relief 20 years ago, so projecting that forward and saying, broadly, total Scottish rates revenue has doubled, hence £4 million, but subject to rates relief is the best that we can do. You've agreed to look at what the total costs would be of the bill across the three categories, Scottish Government, local government, and other organisations, businesses and individuals. That's standard practice for a financial memo. I wonder whether, on that third one, you can provide a bit more information on that, because when I look through the 10 or 12 categories, we've got part 3, £129.80 for disclosure of information for business. Was not clear, is that a one-off, or could businesses potentially have to do that several times over? You've then got engaging communities, prepared guidance, depends on the scale of ownership. Right to buy, there's a whole host of potential costs but no numbers. Dear management measures cannot be quantified, agricultural holdings cannot be quantified. Across most of the boxes, you're basically saying that it can't be quantified. Are you outlining what the costs might involve but with no numbers attached to them? Is there any way of being more specific than that at all? In terms of how we draw up the table across the sectors that you've requested, it's going to look a little bit messy in that respect, because some of the costs are very much upfront costs and some of them are on-going, and initially might be quite high and then drop off. There's no exact science to that in that sense, so there are difficulties in doing that across the board and across the 10 parts of the bill, but we can certainly attempt to do that. I've got a bit of a sense of what the costs are going to be to Scottish Government, a bit of a sense of what the costs are going to be to local government, but when I look at the totality of the boxes for the third option, I'm just with the sense of you're basically saying that it can't be quantified. Sometimes it can't be quantified, but are you sort of saying that it can't be quantified but we're pretty sure that it's a low number or is it just a blanket that can't be quantified? That's where I'm struggling a bit with this bill. As we go through the financial memo in the different parts, we have explained as best we could, and maybe there are parts in which we could be a bit clearer what sectors the costs may impact and when those costs may bite. Maybe that's something would be helpful to clarify within the third category, what sectors specifically we're driving at or would that be helpful to do that? I don't know. What's important to me as a Parliamentarian is that anyone is going to get clobbered by the bill. Sometimes you say that it can't be quantified, but even if we could quantify it, we could say categorically that it's a pretty low number and that it's a minimal impact. I guess that the most important thing to tease out is that are there potential big losers here and if so, who and to what extent? That just doesn't come through in the financial memo. Maybe there aren't any and maybe that's why it doesn't come through, but I would just I guess want some security that that is the case. I don't think that there are any big losers that we've not readily identified in there, so I'm not sure exactly what else we can provide to give that reassurance to the committee. We think that where we have said that things can't really be quantified, that usually the impact will be reasonably minimal, but if there are specific aspects within the financial memo in particular, because obviously there are the 10 parts of the bill, if there are particular areas within the financial memorandum where the committee feels that what we see under that heading is maybe not specific enough in terms of the sector we're identifying or the range that we're giving, then we can certainly try and address that, but we'd have to probably tease that out in a little bit more detail as to the specific parts and what the issues really were, because it's not, as I said before, it's not really an exact science. Okay, well suppose then just to close it off then, what you have said to the committee here is that you have looked at this in depth and in your view as a bill team that there are no big losers, and so there are bits you can't quantify, but in your view, in financial terms, you haven't identified any big losers. Is that a fair summary of your position? That's a fair assessment of our overall position, obviously, where there are potentially bigger losers. We have been a bit more specific in terms of the detail of the impact that we have been able to establish. Sure, okay, thank you. Just before I let Jackie in, standing order 9.32 says that a financial memorandum which shall set out the best estimates of the minister of compliance and other costs to its provisions of the bill would give rise, best estimates of timescales over which such costs would be expected to arise and an indication of the margins of uncertainty in such estimates. Do you actually think that that's been achieved in terms of this bill, this financial memorandum? Sorry, because it seems to be a lot of how long is a piece of string, I'm not really sure in terms of this. I think on the whole we feel, yes, that we have done our very best to try to meet the standing order requirements, so if there are specific aspects of the financial memo that the committee does have concerns about then we'd be very keen to address them. Clearly, with a bill as big and desperate as this one, with 10 quite distinct policy areas within it, there may be some inconsistencies within the financial memo as to how much detail is in there and if there are particular bits that the committee feel that maybe we've not fully addressed the standing order requirement then we'd be only too happy to look at that and address it. It's just potential elephant traps, I think, is a concern that the committee might have. I mean, for example, there weren't 150 million potential costs to Scottish local government in terms of the improvement service estimate in terms of the registration of land buildings set out, which are touched on at the start. I mean, I know you're saying that this financial memorandum is not looking at that directly, but it's part of the same kind of bill. Obviously, those do have concerns, if those things aren't really being included in all aspects of it in terms of the FFM. Just to reiterate to the committee, the completion of the land register is very much a separate freestanding project. It is part of a wider programme and we're very much happy to come back to the committee and address the solace point, but it wouldn't be appropriate to address that point within the financial memo and provide the costs for the completion of the land register, because the financial memorandum is very much about what is contained within the bill and there are no provisions in the bill that directly impact or facilitate in any way the completion of the land register. Okay, we'll cause a little disagree on that, Jackie. Yeah, just to agree with you convener, I think that that information would certainly be helpful. Obviously, there's been clear concern expressed by the Scottish Gamekeepers Association and also by the British Association for Shooting and Conservation. Not normally organisations I have much to deal with, I have to confess, but actually they raise serious points about the robustness of the estimates. Now, I heard your discussion with the convener about what you do in terms of the data you have is 1994. You've just simply rolled it forward, doubled it, based on what's happened elsewhere. The Scottish Government's first estimate, apparently, was £7 million, so I'm curious as to where that came from and what happened when that first estimate was given and now that it's at £4 million, so that's the first question. Second question is, accepting that estimates aren't going to be absolutely accurate, what happens if you've got this badly wrong? Okay, on the first question, as far as I'm aware, we didn't estimate £7 million, I think that that was inferred by some stakeholders due to wider comments about increasing the or the rates revenue enabling funding to be directed to help to increase the Scottish land from £3 million to £10 million. I don't think that we said that that £7 million would come from rates revenues, so I suspect that's where some stakeholders may have inferred the £7 million figure from. Where is it coming from? Because, as I understand it, there was a proposal from ministers to increase the Scottish land from £3 million to £10 million, but ministers had said that the increased rates revenue would help enable that increase from £3 million to £10 million, so I think that some stakeholders may have inferred that £7 million was going to come from the additional rates revenue, which we haven't said, so hopefully that clarifies. Can I just press you again on that? Where is the balance coming from? Well, that's to be part of the budget decision and part of the budget process, to find that from within the Scottish Government's budget, and I would choose to allocate its funds. On your second point, the committee probably knows that my most non-domestic rates legislation is either valuation or rating legislation, so this is valuation legislation that we're proposing in the bill for the assessors to value the tax base and record it in the role. The bill doesn't provide for the rating, it's other existing legislation, I think that section 7 of the 1975 Local Government Scotland Act, and ahead of implementation in 2017-18, ministers will have information from the assessors on the emerging valuations of the shootings and deer forests, and they take that into account when they set the poundage, and they at that stage have options. So your question about what happens if it's wrong, that this bill is only part of the equation, it just values the tax base and gets that recorded in the valuation role. Ministers will, once that has been done or once the draft valuations have started to emerge, have a clearer idea of the tax base, and ministers have an option in terms of setting the poundage. As Mr Brown said, whether a new rates relief scheme, for example, would be appropriate. So there's nothing that you can offer by way of assurance to people now that there is any evidence that you could have brought to bear by what happened in 1994, 20 years ago? The assessors are asked by legislation to go out and do that job, and valuing non-domestic properties can be quite complex, and certainly in other instances it's more complex than shootings and deer forests. For us to try to do a proxy exercise now would be very difficult, because there's probably thousands of possible entries out there. The assessors would have to identify those, decide on the valuation methodology and value them. If anything that we try to do at this stage could compromise the independence of the assessors, but it could also be problematic if we came to a value that was lower than the assessors subsequently formally went on to make, and it could be cited perhaps in appeal hearings. I think that what we've tried to do is give the best estimate. We've cited our evidence sources. If anybody has other proposals, of course, we'll look at them. Some stakeholders have called for better and more robust estimates, but I'm not aware of any actual proposals as to how to do that. Final question, convener. I don't know whether it's appropriate for the witnesses before it's but let me ask anyway. There have been a number of claims made about the loss of jobs. I don't know whether they're real or not. Has an economic impact assessment actually been completed on this? We've published a business and regulatory impact assessment, a Bria, but, as I was saying in remarks earlier to the convener, it's very difficult, even with knowing the revenue from a property tax, to model and analyse the effects that that has on jobs. So, like I say, we accept the point that stakeholders are making and will certainly assess the evidence and we take a judgment as to whether the new or the reintroduce rates liability is sustainable, but clearly, as I said, this bill is only one part of the equation. Ministers will have options that will actually set the tax liability further down the line, including the non-domestic rate order, which goes through Parliament. The final paragraph in the BASC highlights in that respect the recent independent research. Is that something that you've had access to or is that something that they have made public? I'm not sure. It's all about the job losses in shooting the states and the fact that some of them run a loss currently. We certainly read the PASC, the PEC reports and they're very informative and certainly take them to account, but, again, they can only help us so far to understand and judge the effects that a rating liability would have on the sector. No, that's fine. I just wondered if they had been made available and if they were available, if they're in the public domain. I mean, I think that the PASC reports are published. I've certainly seen multi-numerous PASC reports, which I think include that one here. You say that you take these reports into account to what degree? I mean, what has there been any change in terms of the policy following the seat of that? So, how has it been taken into account? Okay, well, in the local government finance unit, I'll work closely with wildlife management colleagues who work closely with the deer management sector, but because, like I say, this is hard to analyse the effects quantitatively, it becomes more of a qualitative assessment and a judgment in dialogue with the industry. But a big important step in being able to understand that call is getting the tax base valued, and that's what this bill does. Now, as things currently stand and all is being equal, other legislation then starts to bite once these things are on the valuation rule come 2017, but, like I say, ministers have options, so there'll be a better appraisal and assessment once the tax base is valued. Okay, that's clear. Thanks very much for that. That appears to have concluded questions from the committee. Are there any further points that the bill team would like to make before we wind up this session? Okay, well, thank you very much for your contributions. Very much appreciated. Thank you. That being the last item on our agenda, I now like to call the committee to close. Thank you very much for your contributions.