 Welcome to the 22nd meeting in 2023 of the Finance and Public Administration Committee. Before we start, I want to congratulate all members of the committee who contributed to ensuring that we won the Power of Change award last week's Holyrood awards as a committee award, not an individual one for myself as a convener. Thank you to everyone. I double thanks to Michelle, who won the political hero award on Thursday night as well. Thank you very much, folks. I named everyone at the committee to ensure that you are all recognising, including new members such as yourself, Jamie. You also get the nod. Okay, let's go on with the meeting and what we have at hand. The first item on agenda today is an evidence session with the Minister for Community Wealth and Public Finance on the Land and Buildings Transaction Tax Green Freeports Relief Scotland Order 2023 SSI 2023 draft. The minister is joined today by Scottish Government officials Laura Parker, Land and Building Transaction Tax Policy Lead and Laura Duffey, head of Green Freeports Policy and Delivery Unit. I welcome our witnesses and invite them in to make a short opening statement. Thank you, convener. Good morning to the committee and congratulations to the committee on your award and congratulations to Michelle Thomson and her award. Having been in front of this committee several times, I know praise and flattery is not going to get me off the hook. I will go on with the matter at hand. The Land and Buildings Transaction Tax Green Freeports Relief Scotland Order 2023 provides for relief from LBTT in part or in full for qualifying transactions within a designated Green Freeport tax site. Green Freeports are designed to support businesses to create high-quality, well-paid new jobs. The successful bidding consortia are currently developing business cases that will set out plans to establish hubs for trade, investment and innovation, promote regeneration and make a significant contribution to achieving our net zero ambitions. The Scottish and UK Governments have made a commitment to deliver a Green Freeport model that meets the needs of the Scottish economy and offers all the benefits that are available to those situated in freeports in other parts of the UK. LBTT relief is offered on that basis. It is part of a package of incentives for Green Freeports and is designed to be equivalent to the stamp duty land tax relief that is offered to other UK freeports. Ensuring that the overall objective of parity of treatment between freeports and Green Freeports is met. The LBTT relief supports the wider programme by encouraging investment in specific tax sites on land that is under or undeveloped. The legislation enables businesses to start to benefit immediately from relief when the tax sites are designated and the relief will be available for a period of up to five years. I welcome the evidence that has been submitted by a range of organisations in response to the Government's call for evidence and the Scottish Government's own consultation on the draft instrument, and I look forward to members' questions. As you probably know from the official report last week, there was quite a lot of discussion and deliberations regarding all aspects of the Green Freeport proposal. One of the things, of course, is the importance of attracting green jobs into the green ports. However, there was an element of frustration that I felt from our witnesses last week in that there does not appear to be a definition of what a green job actually is. For example, on two occasions, Derek Thomson of Unite the Union said that it does someone on an electric bike making deliveries. Does that person count as a green job? I am just wondering if the Scottish Government has a definition of what a green job is, so that we are not having a discussion by comparing apples and oranges. We do not have a situation where everyone around here has got a different view of what a green job might be. It is a very important point to raise, convener, and I recognise that it is one that various administrations, devolved level, local government level, UK level and international level will be engaging with. In the private sector, various organisations will be assessing their own commitments on sustainability in regard to green jobs and trying to attempt to find a stable definition. Clearly, that is something that has evolved in recent years as tackling the climate emergency has moved to the top of the political agenda domestically and internationally. As you would imagine, there has been an evolution in terms of the development of some of the language that is used. If, for example, I take what the ONS has published in March of this year, a green job is defined as employment and activity that contributes to protecting or restoring the environment, including those that mitigate or adapt to climate change. That definition is sufficiently broad to encompass a range of green jobs, including those related to decarbonisation in net zero. I also understand and that it is anticipated that the ONS will publish estimates of green jobs in the UK in the next few months. There has also been other work done in this particular space. The Green Jobs Fund, which was launched by the Government in 2021, used the definition of jobs and businesses that produce goods or provide services that benefit the environment or conserve natural resources. To add to that, in December 2020, with the climate emergency skills action plans, a definition again, green jobs include those in renewable energy, the circle economy and zero waste, and the nature-based sector with wider green skills, sitting on a spectrum ranging from highly specific requirements in sectors directly supporting the transition to net zero such as energy, transport, construction, agriculture, manufacturing, fruit and more generic requirements across all sectors to thrive in a net zero economy. I recognise that definition is quite brilliant and can be quite all-encompassing. That may prove understandably prompt questions about where there is one draw line, but it speaks to the point that net zero is not something that we do specifically, it is something that runs through all aspects of the economy. Of course, as we move through that, and in the case of green free ports, as OBCs have developed and as we monitor and evaluate the progress that is made with the green free port model, I think that there will be further refinement and greater understanding of what we specifically mean by a green job. However, I hope that, as an opener, that helps to set the scene and develop some of the thinking that has been taking place, both within Scotland but also more widely. I think that that was very helpful, but he did quote three definitions. It would be good if we could boil it down to one specific definition because again it leaves room for ambiguity and I think that that is something that we want to try and reduce as we move forward. One of the issues that came up was the kind of timescale that will be made available for investors. Both the United Union and indeed David Millish of the Scottish Property Federation felt that five years really wasn't enough. I mean, United said it as long as possible, and David Millish said that it can take up to nine years for investments to come through. If we want to ensure that the green ports are impactful from as early as possible and attract as much investment as possible, is the Scottish Government thinking of extending five years? What is the logic behind five years? We don't have any specific plans to extend beyond five years. Part of the logic of five years is having parity with free ports and other parts of the United Kingdom. If Parliament approves the regulations, the permissive environment for our relief to come into effect would take place from 1 October, but the relief could only be specifically claimed following tax site designation, which is a process involving HMRC and HMT. On the question of five years, it is to ensure that there is parity with the offer being made elsewhere in the UK. There is also the element that we would anticipate that there would be early investment. We do recognise that there will be some investment that takes place that enables further investment to take place at a later date within that five-year window. Of course, we will keep the overall five-year period under review should there be any delays or unanticipated problems with regard to the tax site designation, but I would stress that the five-year timeframe is to ensure that there is consistency and parity with the offer that is available with free ports elsewhere in the UK. The Scottish Government specifically talked about free ports and green ports being different, so why is the Scottish Government not trying to give itself a competitive advantage by making it seven or nine years? You have put a number of strictures on green free ports, which one might say makes them less competitive, albeit the fact that towards businesses you might not necessarily want to attract in the first place. However, it seems to me that, if you are looking to have a success for the Scottish green port specifically, why not do something different from what the UK is doing? Are you not being prevented from doing that, or is this a Scottish Government decision? In terms of the approach that we are taking in Scotland, it is recognised and needed in areas of parity, but it is also taken to tailor the model more specifically to the comparative advantage that we have in Scotland, hence a particular focus on zero and decarbonisation. The point about a longer timeframe, for example, for specific relief such as LBTT, I can appreciate the points that are made around having to assemble capital and put together various spins and proposals, but what we also want to do is to incentivise development to be taken place as soon as possible, because there is also a pressing urgency in the activity that we want to see take place within green free ports, particularly given the role that will play in our decarbonisation in net zero agendas. It does bring parity in terms of that offer, but we are wanting to make sure that we are incentivising that investment and development to take place at the earliest possible stage. Of course, we will have a process of monitoring and evaluation that goes on throughout the period of the relief being in place. There will be transparency through the information and data that will be published by Revenue Scotland. There will be ample opportunity to measure the impact that the reliefs are having, both by Government, other stakeholders and Parliament. In terms of pressing urgency, we are talking about—I find the numbers quite fantastic that are being suggested—the 25,000th acromati, 50,000th for relief. If we are thinking about acromati, obviously you will be expecting people to move to those jobs, but what is being done in order to build the schools, the homes that those people actually need, if you are talking about those people in early house infrastructure being upgraded to ensure that that can happen? You have to provide a huge level of support in terms of infrastructure behind a green port just to ensure that the people have somewhere to live and take their kids to school. There are two elements that I would highlight. Within the overall package for each of the green-forged three-forged sites, there is the £25 million of steed capital that will be available, but more crucially, in that point of having a coherent approach and taking into consideration infrastructure, including schooling, local government is a cross-part of that consulting approach and local government in terms of the responsibilities around local development planning are clearly key partners in that aspect. By making sure that we have all the right people at the table and local government with their statutory responsibilities in that regard are at the table, which will help to ensure that there can be a co-ordinated approach to address the particular issues around infrastructure that you highlight. Displacement is a key issue. For example, Cambridge Economics said that of the enterprise zones that were set up in the UK, which lasted from about 1984 to about 2012, 50 per cent of the 126,000 jobs were, more or less, half were effectively displaced from elsewhere. In a Scottish context, between 2012 and 2017, there was an increase in private sector jobs in enterprise zones that were set up here in Scotland of just 16,000, compared to an initial forecast of 54,000, and 34 per cent of those were relocated from elsewhere through displacement. What lessons have been learned by that? The UK actually had seven free ports, I understand, up until about 2012 and the last one Liverpool closed then, so they have not really had a great history of success in terms of doing what it says on the tin. What lessons have been learned? The question of displacement is a key one, and it is an active part of our consideration in terms of engagement with the individual green-free ports sites and the overall process, and I know that it will be a key concern for local government as partners. The risk of displacement is when transferring jobs from one part of the country to another. What we are trying to do here with this particular model is to create new high-quality jobs, jobs that respond very specifically to the assets and strengths of particular areas, and we can recognise that in where there are similarities but also where there are distinct differences between each of the green-free ports sites. What I would want to come back to is the discussion that took place at the committee last week and recognising that the model that is being referred to going back to the 1980s is in many respects from a different era. It is important to learn lessons and to recognise the risks that can take place when you seek to incentivise development in one particular part of the country, but it is also important to recognise that we are in a different era and that some of the particular issues that were pertinent in the 1980s and early 1990s are not so now or to the same degree. Different labour markets also have a different focus in terms of this primacy around tackling the climate emergency decarbonisation, but I would come back to the key point around displacement. Is this about creating new high-quality jobs as opposed to moving jobs from one part of the country to another? Assuming that every single job that is created in the green-free ports is a completely new industry, new manufacturing business, whatever it happens to be, people who are highly skilled in other parts of Scotland and beyond will still want to move there. That will not exist if there are labour shortages and create inflationary pressures in other parts of the economy. There are concrete challenges, but in terms of what we have sought to do with the design of these reliefs, it is about incentivising new developments, so we think about specifically what we are considering and committed to today around LBTT. This is looking at land that is either undeveloped or undeveloped, i.e. land that would perhaps not be seeing any development where it is not for this intervention. It is a reserved area, but on the Employee National Insurance Contributions, this is with regard to new jobs that are created, which helps to mitigate against the risk of jobs being transferred from one part of the country to another. I am ambitious in the sense that, if there is any displacement, it is not from further parts of Scotland but from other parts of the UK and other parts of the world. People coming to work in Scotland are attracting these high-quality jobs and, as Public Finance Minister, high-paid jobs, which can help to generate the revenue to support public services. There is a real opportunity for us in these cutting-edge industries, where we have some comparative advantages and we can be world leaders, to be attracting people outwith Scotland and other parts of the UK and beyond. I certainly hope that that is what happened. Where we have been able to take action around the shaping of the tax policy, for example, on LBTT, it is to incentivise development that would otherwise not take place. Just one last question to me, because there are loads and loads, and I am sure that other people want to come in. The officials behind the UK Government, from the report's perspective, were according to David Melish, who is very impressed by the Scottish Government's prospectus. Unite the union seems frustrated that there does not seem to be much engagement with the trade unions. He said that Edinburgh City Council really went and listened to them and were keen to engage. There was almost an accusation that it was deliberate. I wonder what engagement the Scottish Government is having with trade union partners in relation to those developments. Specifically, as you would appreciate on the point of how individual local authorities choose to engage, it is probably appropriate for me as a minister to comment on that. The decisions are properly for individual local authorities. Certainly, our broader approach is a Government, both on the development of fiscal, economic policy and wider industrial relations, is to have close engagement with our trade union partners. On the actual process of developing the proposal and the engagement that is taking place today, I will perhaps ask Laura Duffy if she can come in and provide some background about the broader engagement that has taken place. When we were initially looking at the proposal, there was engagement with the trade unions, when Mr McKee was the lead minister on that. He met the trade unions and a wide range of stakeholders on a number of occasions to discuss the developing policy. We have, as you have seen within the policy put for your work at the heart of that, as the minister refers, we cannot mandate trade union recognition. However, we have made a strong recommendation for workers' voice within the governance structure of the green free port. As part of the business case process, the two green free ports will be required to set out their strategy for embedding fair work across the green free port areas. That was part of the policy development specific to Scotland that we did for that as a ministerial priority. We will be looking very closely through the business case process at the level of ambition within that part of the OBC around fair work and embedding that. That concludes my questions, at least for now. I will open up the session to colleagues around the table. First, we will be joined by Liz Smith. Thank you very much, convener. Minister, you have used the term underdeveloped a number of times, and that obviously is in the schedule and the policy note and so on. Can you clarify what underdeveloped means? Presumably, if you have a one-story building on a site and you knock it down and put in a five-story building, that is developing it. Is every site underdeveloped? Well, it is underdeveloped and undeveloped. I think that, as well as obviously going to be relation for some sites to go and reach for development potential, we will require other developments to take place around that, not to give too convoluted an answer. This is about helping to allow areas to realise their full economic potential, and the LBTT relief is designed to support these particular developments to take place, as I stated earlier, which would otherwise not take place. Now, as regards to what we would define as underdeveloped, there will, of course, be variations from place to place. That is a place-based approach, so the context of what underdeveloped would mean in a specific instance, in a specific circumstance, would clearly be some latitude within that. I do not know if the law has anything that you want to add more broadly in terms of terminology? Part of the detail and the prospectus set out the criteria for underdeveloped or undeveloped land and part of the process that will run alongside our assessment with the UK Government of the Outlaying Business Cases, Treasury and HMRC will scrutinise and propose tax sites and look at the maps very closely to ensure that they meet that criteria for undeveloped or underdeveloped land. That is part of making sure that we are not trying to attract businesses into areas that are already quite active. Some of the proposed tax sites are basically just a piece of empty brownfield land and the ones that are not will go through similar to the brownfield land pieces, through that very strict scrutiny process run by Treasury before there will be any approval for the tax sites to be switched on. I can understand if it is a piece of brownfield to where something has been demolished and has just been sitting there, which we have certainly got in Glasgow. Is it quite black and white from the Treasury's point of view as to what is undeveloped and underdeveloped? It is set out in the green free ports by the prospectus. I do not have the details to hand, but we can point in the direction of those if that is helpful. In the schedule, it talks about full relief. The paragraph applies to a land transaction if at least 90 per cent of the chargeable consideration for the transaction is attributable to qualifying green free port land. I wonder why 90 per cent, so why not 80 per cent or why not some other figure? The 90 per cent for full relief is intended to capture those scenarios where, in practice, most of the transaction is used for a qualifying purpose. If you have a factory, 95 per cent is used for car takers, quarters, not technically a qualifying use under the legislation. A car taker is quarters, which is technically residential. It captures those scenarios where, in practice, it is fully used for a qualifying purpose. In terms of how to identify the right number to use with consideration to the full range, but for SDLT the range of 10 per cent to 90 per cent is used. For consistency, we also use those figures for LBTT. Also, the idea of partial relief is tied in with the same thinking. Partial relief could mean a variety of levels. Yes, partial relief could be 20 per cent qualified and use 50 per cent qualified and use anything between 10 per cent and 90 per cent. The less than 10 per cent figure allows us to give consideration to the entire substance of the transaction if more than 90 per cent of the land or the building is not being used for a qualifying purpose. That is not really the type of transaction that we would want to seek investment into in terms of the tax sites or provide relief to because it is not really aligned with the wider objectives of the dream-free port programme. As far as the actual cost is concerned, the SFC has said that it is under £5 million, so it is not taking a view because it does not consider that material. However, it is still a chunk of money. Do we have an actual figure as to what this is going to cost? As you correctly identified, the SFC said that it would be below a materiality threshold of £5 million. Given that those things are demand-driven, it can be challenging to necessarily forecast the degree of precision that we would like. However, there would be an expectation that many of the transactions that would take place would be leases rather than convencies. If we look at leases as a total proportion of LBTT revenues, for example 21 to 22, it works out about 3 per cent overall for the whole of Scotland. We are talking about, relatively speaking, small sums of money, but reliefs can be very meaningful and impactful with regard to decisions on whether individual transactions should take place. Of course, there is also the point to bear in mind that these are transactions that we would anticipate would otherwise not be taking place whether or not for the relief being in place. That is what the convener has already been asking about as to whether things might be displaced. If a business goes to one of those sites instead of, say, Glasgow, that would mean less money coming in to the Government. It would be reckoned that the nature of these tax designation sites are very specifically drawn, very clear-defined boundaries. Clearly, overall, between three port sites are chosen for a number of reasons against the criteria, but the place, as well as an important part of that, there will be comparative advantages that these particular parts of Scotland, if these particular sites have. However, what we are seeking to do is to remove barriers to investment that could perhaps not take place elsewhere but could take place there if these barriers were removed. Again, at that point around displacement, it is the case that there is investment potential there that would not necessarily take place where we's relief is not put in place. Are you effectively saying that there is no loss of revenue to the Government? I'm not going to try and outthink the SFC on this and say exactly what I'm trying to say, my point of making is in terms of reducing the evidence available past revenue from leases as a proportion of overall LBTT. The assessment in the May economic and fiscal forecast of the SFC that would evolve below the materiality threshold is that we are talking in the scheme of overall LBTT revenue, never mind a whole devolved and semi-devolved tax revenue, a relatively small amount of money, but that is not to say that that does not translate into a meaningful impact on individual transactions that can influence positively commercial investment decisions. Can I just pursue this point, if I may minister, particularly in line with the job that this committee has to scrutinise, the budget? In your answers there, you gave some idea of what the potential costs might be. If we take that five-year period that we spoke about earlier, has the Government done some arithmetic about the benefits that would accrue, particularly from the creation of new jobs in that five-year period, whereby, hopefully, we would be getting, particularly the high-paid jobs, a greater return on tax revenues from income tax, etc? Have we done any analysis on the benefits and the cost? I don't have a specific set of numbers that I can share with you, but I would anticipate that the successful outcome would, as you highlight, lead to a net gain for the Scottish economy and, indeed, the public finances. The exact timescales on which that will be delivered, of course, are going to be influenced by a number of factors, individual commercial decisions, and the overall macroeconomic environment that we find ourselves within, but the key point would be, and I will come back to that again, that this is about seeking to incentivise investment that would otherwise not take place. Clearly, there would be economic benefit and gain that would come from that, but with regard to specific timescales and seeking to forecast when we would get a return on investment, I am not at a position to give them. Nonetheless, one of the criteria that would be used to judge whether they were successful or not is whether the overall benefit is to the net gain of the Scottish economy over a certain period of time, because that is what is obviously important about it. Of course, and in regard to what has been alluded to by the ambitions around job generation, job creation in both sites, if that is realised in high-quality, high-paying jobs, and I think that it follows from that, that would be a significant return on investment relative to LBTT exemptions, for example. Just related to that, which is a very important point that is made by the Scottish Fiscal Commission, namely our demographic structure that one of the difficulties that we have in the Scottish economy just now is the fact that our demographic structure in terms of the working population size against the total population is a problem for us. Do you believe that the Greenport's initiative can not only help to create new jobs but can actually get some people who have left the labour market to come back in to help some of the issues that we have got in the Scottish budget? I would certainly hope so. I would certainly hope that we would always consider ways in which we can encourage people who are currently inactive that have the potential to re-enter the labour market to do so. I cannot speak to any specific strands of work with regard to targeting those particular groups, but I think that we would all hope that that would be an outcome of that approach and that some of those jobs that are created through these initiatives create opportunities for people to re-enter the labour market and bring their skills to bear on a very exciting set of industries. It is quite an important aspect. The challenges are so huge as set out by the Scottish Fiscal Commission. One of the biggest challenges is to ensure that our labour market is fit for future development. It is not just a case of ensuring that there is new investment to take up new jobs and attracting people into that, but we are going to need the skills and talents of people who have taken themselves out of the workforce and who tend in some cases to be in a particular age group. To look at the two areas that are designated, I would have thought that it might be quite helpful to have a look at some of that, because that is an increasing incentive that might be very valuable to us. On the aspect that you mentioned, skills, in terms of the relevant skills that go with new green jobs and accepting one of the definitions that you put out earlier, as flexible as possible. Do you think that we need to do a lot more to ensure that the skills and training that we provide fit those new green opportunities in a way that can benefit the labour market? As you would expect me to answer, it is clearly a priority for the Government to ensure that our workforce is skilled and is able to take up those new opportunities. I think that there is broad recognition that we have a highly skilled workforce in Scotland. That is reflected across a range of metrics, not least in our consistent success and in attracting foreign direct investment, with regard to specifically how the sphynchon will link up with the green free ports and how the business cases have been taken forward. I do not know for anything that you want to add to that point, Laura. Skills are the key strand of the business cases, so we are looking for the green free ports to tell us how they will address the skills that are needed in the green free ports, and we will be looking very closely at their skills strategies that they will submit as part of that. As for a little detail on that, when they make their application, that is a key part of what that application has to be, is that right? Part of the business case is looking at their skills strategy, so their outline business case will include a skills strategy within that, and we will be scrutinising that very closely to ensure that there is that marry-up between jobs and supply a labour market. Can you give us some detail on what else is in that job application for a... In the outline business case, the outline business case form is published online, and that sets out all the different parts of it. We will be looking at what their plans are for planning, for skills, for fair work, and what their strategy is for investing in the seed capital funding, what their tax site management arrangements will be, what their customs plans are. The business case will come as you would expect in two parts. We will look at the outline business case first, and that is the part that unlocks the tax incentives alongside the tax site designation. Then we will look at the full business case, which is much more fully focused on the detailed financial aspects of it. The broader brush, skills, security, risk, governance, fair work, the heavy lifting on that, if you like, is done in the outline business case, and the full business case builds on the outline business case. The most likely to be successful if you see benefits to the Scottish economy overall in terms of the revenue that they are going to bring in, is that right? There will be most likely to be successful if we have a full and rigorous business case. That will be considered across both Governments. Minister, the rationale that you have outlined this morning is that those companies will be given tax breaks and, in exchange, they will be encouraged to pass on the benefits of that to their workers and to the wider economy. Is that not trickled in economics? The rationale that I have sought to say out is that they are, specifically on LBTT, are sites that would otherwise not be developed, that would remain as they are or underdeveloped. The intention of this incentive, beyond the points that are made with parity with the UK free port model, is to incentivise investment in sites that would otherwise not take place. With a trickle-down approach, that can be regarded to things that would otherwise take place or, through alternative models and alternative vehicles, take place. It is also predicated upon the notion that those on high incomes will spend their monies in ways that are economically social and environmentally impactful rather than hoarding assets offshore. That is about getting investment on the ground, development and land in Scotland that would otherwise not be developed or not be developed to its full potential. You mentioned the traditional issue of a trickle-down economics and the wealth that is generated by them being hoarded offshore. Can any offshore entity benefit from this LBTT break? A company based in an offshore tax haven will be able to benefit from this tax break, won't they? I cannot speak to the commercial decisions or operating arrangements of companies. If companies are operating in a compliant with overall UK tax law, and they are in the position where they are making an investment, they would be treated just as any other company, depending on how it is constituted, would make. Sorry to jump in, minister. This is not about UK tax law, this is about a devolved tax. It is within the power of the Scottish Government to, for example, potentially, if they so wished, exclude any company based and incorporated in a tax haven from benefiting from an LBTT relief, but you have chosen not to in this case. Why is that? With regard to the provisions around avoidance, there are general avoidance provisions. I do not know for Laura that you want to speak to the general avoidance provisions, because I think that it is an important point that the committee will be interested in. The relief in and of itself has its own conditions that any claimant must meet in order to benefit from the relief, and that involves using the land in a qualified way, through development, etc. As part of Revenue Scotland's ongoing compliance activity, it will assess at the point of claim and throughout the three-year control period that any claimant meets the conditions for relief. If there are any artificial arrangements put in place for a company to achieve a tax advantage that they are not otherwise entitled to, at that point, the general anti-avoidance provisions and set out in the RSTPA will be in point. It is an important point about the controlling period. If there is not development taking place within three years, then the relief can be withdrawn. Ultimately, that relief is only going to take place and be utilised if development takes place on the ground. Ultimately, that is about attracting investment into specific sites, and it is seeking to incentivise and unlock development in sites that otherwise would not see development or would not be, as I have said previously, developed to the full potential. The emergency measures that the Scottish Government put in place precluded companies that were based in recognised tax havens, for example the Cayman Islands, benefiting from Scottish Government relief, emergency relief that was provided during the pandemic. The Scottish Government is co-capable of recognising what is not a tax haven and whether a company is based in a tax haven for the purposes of, albeit legally, avoiding tax. The Scottish Government is then allowed, within the devolved settlement, to make policy decisions, for example, to exclude those companies from whether it is public procurement grants or, in this case, tax relief, but has chosen not to do so. I am just asking for a rationale as to why, when the premise of that is about providing those companies with advantages and in exchange, they will pass on those advantages to the wider economy and to their workers. Why companies that have based themselves in offshore tax havens like the Cayman Islands for the purposes of avoiding tax are still allowed to benefit from this further tax break, when they could have been excluded? That is entirely a matter for the Scottish Government. I have spoken previously about one of the key aspects being consistency with the SDLT arrangements elsewhere in the UK, but ultimately the benefit that is going to be conferred is development. I apologise that I am labouring at this point, but it is development that would otherwise have not taken place. It is not as if there is a potentially competitive advantage for one particular model of company or alternative development would have taken place on this side. It is a question of whether development does take place or does development not take place. That is the order of development that does not take place to its potential. That is the rationale underpinning the relief underdeveloped or undeveloped land. There is that aspect of it that is focused on that this relief is only going to be accessible if development takes place. If there is a transaction and is a commitment to development and within three years of development does not take place when the relief has withdrawn, so there has to be development. The second aspect is that broader parity that we have sought with regard to the arrangements elsewhere in the UK. I do not know if there is anything that you want to comment about where we have sought parity with regard to the arrangements for free ports and where we have diverged. In terms of the overall package, we have sought parity across that, as far as we can, within our existing fiscal frameworks. The tax relief package will be aware of reserved and devolved reliefs. From a policy perspective, we have sought to have those reliefs designed to as closely mirror the UK relief as possible in order to make sure that there is a level playing field across the piece. If they start to come out of sync, one or the other becomes disadvantaged. In policy terms, as I alluded to before, in terms of the development of the policy aspect specific to Scotland, the Scottish ministers focused keenly on the fair work aspect, which we wrapped into the high-quality promoting regeneration and high-quality job creation and the introduction of the specific objective around promoting decarbonisation in a just transition to net zero. If the fair work criteria are legally required of companies operating in a free port or, in this case, benefiting from LBTT relief, could a company, for example, pay its workers the minimum wage, not a living wage and refuse to recognise trade unions but still access LBTT relief a tax break? LBTT relief is separate from the other relief, the way in which LBTT is constructed as a tax, which is based on the transaction. I set out the criteria previously with regard to when that could be withdrawn, i.e., development does not take place within the control area. With regard to the broader points around fair work and monitoring, it is clear that there has to be evidence through the outlying business case and into the full business case. Laura, do you want to add anything more to that? The two tax reliefs that we are putting in part of the package are property-based. Applying fair work to those is very difficult. The way in which fair work is built into it is that we scrutinise fair work at bid stage. As I mentioned earlier, we are looking for the green free port strategy for embedding fair work across the green free port area and we will be looking for ambition in that when we come to assess that. The monitoring and evaluation framework that will sit across the whole programme will scrutinise the impact of that as the programme rolls forward into operational phase. We will be looking closely at what the green free ports say they will do and whether they have delivered on that. I understand that, and please correct me if I am wrong, that the fair work criteria are not requirements. They are strongly encouraged and there are guidance. It is clearly what the Scottish Government wants out of that, so I recognise that. However, they are not required and therefore there is not a direct consequence if a company is not meeting fair work criteria as defined in the fair work convention that the Scottish Government has signed up to. Touching the point, are you colliding with the reality of schedule 5 of the Scotland Act and the reservation to over-employment law? We do not have the power to legally require, for example, trade union recognition in these contexts. What we are trying to do is work constructively and in partnership with business, with the other partners involved to promote fair work. Although we do not have the power in this Parliament to legislate in these terms, we have a role in terms of leadership and the convening power of the Scottish Government to seek to encourage businesses to adopt these practices. We have been very clear on what our expectations are throughout this process. I recognise that employment law clearly reserved not devolved. For years we were told that it was not legally possible under schedule 5 of the Scotland Act to require businesses, for example, either bidding for public procurement or receiving business grants from government agencies to pay their workers at least the real living wage. That is now a requirement that the Scottish Government has delivered on. That is a legally binding requirement, so it turns out that we could do that under devolved competencies. Let us put trade union recognition for a moment, because I recognise that that is untested. I would encourage the Government to test it. Clearly, we can require businesses to pay at least the workers' relevant to the work taking place, in this case, within a free port, to pay them at least the real living wage, because we have just done that with procurement and with public grants. Why are we not doing it with the free ports? Procurement is a devolved competency. We have to operate within broader frameworks at the UK and WTO level, but that is distinct from employment law. However, I recognise that we have made significant progress on procurement from over the past 17 years since Mcleilland. We recently published an independent report at the start of the year highlighting the benefits in the journey that we have been on in sustainable procurement. I recognise that there is much more that we can do in that particular space. Indeed, it was an issue that was raised through the recently closed consultation on community wealth building legislation, and the analysis of that will be published later on in the autumn. I just highlight that on topical matter of procurement. Where we can take action, we will. Of course, when we are challenged to go further within these devolved competencies, we will seek to do so. Why have we not here in this case, minister? As far as I understand it, not a lawyer but has tested this particular area through policy a few times. As far as I understand it, the Scottish Government could require to qualify for the benefits it is providing to businesses within the free port areas that those businesses commit to pay at least the real living wage, but it is not doing that. There is a distinction between procurement, grants and then property taxes, and that is the important point. There is a distinction between how they are and how they are administered and what is possible, but there is also the issues that we have sought in terms of that through this programme being developed on these measures for parity with what is available elsewhere in the UK. I certainly, in terms of having responsibility for devolved taxis and indeed for non-domestic rates, am keen to reflect upon how we can use these levers in a way. Working in partnership with trade unions and with businesses to incentivise fair work, but we have to make sure that, considering that, we are not conflating it with distinct areas of policy such as procurement or giving grants. Just finally, minister, is it not the case that this is a UK Government policy that, in terms of fundamental economic principles, the Scottish Government does not really agree with, but the UK Government was going to do it anyway? It is just the case that the Scottish Government is trying to make the best of this situation and it would perhaps be better to be honest and say that this probably would not be happening if the UK Government were not doing it anyway. It is not really what you would like to see. You are just trying to make the best of it. We operate in a UK context and we seek to engage constructively. The three-port model was brought forward by the UK Government, if I recall correctly, following the general election in 2019. What we have sought to do is listen to the voices of business and other partners, including trade unions, and engage constructively in the development of these proposals. We are in a position now where we have managed to come to a joint approach with shared decision making. That reflects the fact that we have sought to engage constructively. I think that if we continue to work in a constructive manner going forward with the UK Government but with the actual green three-port operators, we can seek to harness the opportunity that is there to deliver positive economic outcomes for the green three-port sites in the wider Scottish economy, including strengthening key strategic industries. Thanks, minister. Plenty of other questions, convener, but I think that it is probably time for other members to get a word in. Indeed, it is important to be followed by Michelle. How important is a transparent application and assessment process to the strength of the bids? I think that it is incredibly important. There is a range of material that has already been published on the UK Government website, setting out various aspects of the criteria. I do not know if, Laura, you want to go through some of what has been already made available and what will be further forthcoming. The bidding prospectus was published on 25 March 2022. The assessment process for that was done across Government. A decision note setting out why the decision was made and what the basis behind that was was published shortly after the selected green three-ports were announced. The publications that followed that were the guidance for business case, the business case forums for both outline and full business case, in terms of the content of the bids. We had a number of freedom of information requests, and we have released all of the information that we could within all five bids. I think that, if I recall correctly, the main state of the information that was not released was commercially sensitive information. We have been as transparent as possible with the process. That is very useful detail. It is in stark contrast to the process that was followed for investment zones under the Government, which Neil Gray, in a response to my written question, said that the invitation to host an investment zone was not subject to a bidding or application process. In your words, it was incredibly important to have a proper process. Why was that not followed for investment zones, minister? You have to forgive me, deputy convener. I am here specifically to speak about green three-ports. As not being the lead minister in that area, I do not have the information in front of me, but I am more than happy to ask if there is a response in writing to address any points that you have specifically there that you would further want to articulate during this session. It is when we are investigating the potential benefits and value for money for taxpayers around those approaches, but also our general interest in decision making processes within Government that we have as a committee strikes me that there is a very different approach that has been taken, no real process that was put in place. We had on the day of the announcement of the investment zones, Russell Griggs in the south of Scotland Enterprise wrote to say that he was bitterly disappointed and that he was still awaiting the publication of the selection criteria on that basis. I think that it is a bit confusing for people. I suppose to take it into context if I can. I hear the ministers and any further reflections would be useful, but for Dundee, my home city, we have neither received a green three-port or an investment zone despite being the fourth largest city in the country. We have the most prestigious and high-achieving life sciences institution in the entirety of the UK. We have an outstanding port and we have huge economic need, but there has been no delivery of either of those opportunities. Is there a justification that the Government can give for that? With regard to the decisions that we are taking around investment zones, again, this is something that is a productive engagement between the Scottish Government and the UK Government. In terms of the actual decision-making process and criteria, I do sincerely apologise and seek to provide as much information as possible to the committee, not being the lead minister in that particular area and not being specific to the issue of green three-ports. I am not in a position to respond fully, but I recognise the member's interests as a committee member and as a regional representative, so I am happy to respond in writing. Can you pull it into the generality, if that is possible? Is this not probably an inevitable consequence of doing these things on a specific regional basis rather than a national approach? You are here today to talk about a localised regional approach to economic development, where the Government is making certain decisions about how to lift up certain areas. We are not in a situation in which, essentially, investment zones are just pork. It is just pork barrel politics and decisions taken by the SNP and the Tories to allocate them to areas of political priority. Do those approaches not open up that kind of possibility? It is important to recognise that place-based approaches to economic development are integral to a range of the work that has been taken forward, regional economic partnerships into community wealth building. I would not agree with the characterisation of pork, and I certainly do not think that anyone could suggest that, from an SNP perspective, there was anything politically motivated with regards to the decision in relation to Dundee. I do not think that that is a fair assessment to make. I think that there is a recognition that there are initiatives that have been taken forward by the UK Government. The Scottish Government has sought to work constructively and engage constructively with the UK Government on these matters and with the areas involved. To my mind, and I think that it is a fair point to make, that response to something that is a regular call from parliamentarians of all parties, which is to see greater collaborative working, partnership working. That is ultimately reflected in the fact that we have sought and we have been willing to engage constructively with the UK Government on these particular measures that were originally initiatives, but we have not sought in any way to be obstructive. We have sought to engage and to try to ensure that we can achieve the best outcome for people in Scotland. To be clear, I am in favour of locally based regional economic development, but it has to be transparent and there has to be a criteria that is applied to it. You have two very differing policies in terms of a Government. One that has a criteria that you have set out today, and one that is a complete absence of any criteria or process. I do not want to labour the point any further, convener, but if the minister could set out, and perhaps with his colleagues, some rationale for the distinct approach that has been taken across the two different policies and writing to the committee, I would welcome that. I think that it would be useful so that we can assess the general impact of that. I recognise the challenges that you are operating under the wider environment. Indeed, I will be looking forward to calls for greatly increased further devolution to avoid those sort of challenges happening in the future. However, I want to return to Rossi's comments, which I consider to be very valid. I took from what you were saying that, by use of the term parity and maintaining parity, you are knowingly accepting the considerable potential for tax avoidance that feeds into all of our bottom lines. Am I correct in that assessment? No, we are not. That is why I made reference to the general avoidance principles that Laura touched on with a supplementary commentary in that area. Those are specifically the LBTT, which we are considering in the order for this morning. As I have said, that is seeking to incentivise development that would not have taken place otherwise. Sorry to interrupt, but I absolutely get that comment. You made it clear about what those brownfield sites would not be developed. I absolutely accept that point, but it is difficult to make that point without being aware of the wider environment. I quote again a figure that I dug out a couple of years ago that the estimated loss through money laundering crime to UK GDP is conservatively estimated at £262 billion each and every year. The national crime agency says that it could be £100 billion more. To my mind, we need to be very concerned about this. My question is, what is specific beyond the general principles because they are clearly not working frankly? What specific discussions have you had with the UK Government to establish how they are going to counter tax avoidance, tax evasion and, on top of the very clear warnings from the EU in 2018, which necessitated the EU itself to come out with commentary and take further actions about free ports? What recent discussions have you had with them? I will come in in a moment on some broader points, but in terms of the specific engagement for the UK Government in the design of the prospects and bids and the regards to issues around money laundering and security. We are aware of the reputation of previous free ports and that is not something that we want to see in the green free ports in Scotland. We set out in the bidding prospect quite clearly that the green free ports will be subject to strict conditions. It would be required to adhere to the OECD code of conduct for clean free trade zones and to meet obligations under the UK anti-money laundering regulations. Green free ports will not be a regulation-free area. They will be required to meet the same regulations as other parts of the country. They will not get a free pass to the requirements that are laid upon businesses generally. The customs site operators will have to be authorised by HMRC, and the green free ports will be required to keep a record of all the businesses operating within their tax sites and to share them with law enforcement agencies and make them available. Those agencies will carry out checks on the businesses and their owners before authorising them to operate. All that is pretty standard and all of that in place does not stop the considerable money laundering and fraud that is now quite an epidemic within the UK economy overseen by the UK Government, and I fully accept that most of those are reserved powers. However, the important point was that Ross was making that we have two choices. We could say, yes, that is not very good, or we can start to rattle the cage and use what powers we have, of which absolutely disallow any company and structure that is offshore fundamentally. The other point that I would bring to bear is Scottish limited partnerships. Those are well known for money laundering. They were at the root of the bombing in Beirut. They knew early money was being funneled through nearly brought down the entire Moldovian economy. I mean, they are well known and well understood. Their Scottish limited partnerships affect our global brand name, so can I ask if you have not had discussions with the UK Government, that you have discussions with them and that you return to this committee setting out exactly what assurances you have had and where you dispute with them, because this is our global brand, which is why I care so passionately about it? I will ask that an update is provided to the committee as the OBCs progress in getting three ports come online to try to provide additional confidence about the robust processes that are in place. However, as I know, you will recognise both from your work in this Parliament and also from your work at Westminster that much of what you touch on is acknowledged since it is within the reserve domain. That should not be a barrier to us seeking to do all that we can, but we have to recognise where the limitations lie and seeking to apply, for example, property taxes and transactional taxes in a way in which they are not, perhaps when inherently designed, can lead to unintended consequences and can work against that broader objective of trying to make sure that there is parity with the sites elsewhere in the UK to ensure that we can remain competitive within this process. However, on the specific request of an update, I will ask that that is provided to the committee on the specific points that you have raised and, indeed, Mr Gray has raised in that space. I thank the minister and his colleagues. Just for clarity, I was very pleased to support the winning Crompti Firth bid. A number of the issues that I was looking to raise have already been raised, so I will just cover a couple of things that came up from colleagues. Minister, you talked following the convener's questions about the role of infrastructure in some of the other areas, such as schools, hospitals, housing, that kind of thing. Those will be vital, I think, for accommodating, hopefully, the new people, new jobs within the free port areas, and vital, probably to the success of the free ports, but you suggested that those areas were a responsibility of local government. We know that local government is under severe financial pressures. There are real pressures on services and delivering what they do already. How, as a Government, will you ensure that those services are able to be developed, given their importance to the project as a whole? I made reference to local government in particular their statutory responsibilities over the planning system, and, of course, there are mechanisms through the planning system where development is going to have an impact on infrastructure for contributions to be made, for example, section 75 agreements and other methods. As we start to see the process develop and unfold and we see the additional development that we want to see, broader consideration, of course, when developments are going through the planning process and being approved, consideration will be given to the impact on infrastructure. It will be for local authorities working in partnership to determine what are the appropriate mitigations and adaptations that are required and what additional infrastructure is in place as part of that process. That is all fine when you talk about in partnership with who. Those things, hospitals, schools and houses have to be built. If the money is not to build them, how do they get built? How will we use the Government work with, for example, the Highland Council in the case of Cromity Firth to ensure that those additional, as you hope, needs to be resources are available? Of course, there are a range of values in terms of which resources can be provided that can be, as I say, through the planning system, where there are reasons that are justified on planning matters for resources to be accessed as part of the development taking place. Clearly, public resources are funded through the capital allocations to local government as well. We will, of course, as we always do, continue to dialogue with local government. Something that is more broadly across Scotland has been taken to a new and strengthened level following the Verity House agreement, so having those discussions will continually take place in the first particular areas of pressure that are identified and there needs to be consideration around solutions that go beyond what an individual local authority or group of local authorities was capable of then. We would have those discussions at that particular point, just as local authorities routinely raise a number of areas. We recognise what we are seeking to see here in terms of the creation of jobs, the development of land, which presents a huge opportunity. We also recognise that significant economic development can be attended by a range of challenges, so we will continue to engage—this is not an approach whereby it is on-you-go in people of local government and leave the areas to it. We will continue to engage constructively in any challenges that emerge. We will work to understand that and identify in partnership what the solutions would be. Is there a specific vehicle for doing that going forward? Obviously, some of the resources that we need further down the track are going to need to be delivered through decisions being made now and consultations being made now, whether it is on, as I say, the infrastructure that we have just talked about or whether it is infrastructure such as the A9, which we are now considering behind. Is there a vehicle or a specific group working on that at the moment? More broadly, I would point to our broader programme of infrastructure investment, which has been set out. Of course, the committee will recognise the challenges that our capital budget faces and the challenges in delivering projects due to cost inflation. It is not unique to Scotland that it is impacting across the UK and many other countries. There is that broader framework. Of course, capital spending will be kept under review with regard to timing and phasing with what is feasible within the capital or disposal and the cost of projects, et cetera. That is something that the Parliament is well versed in engaging with specific capital project issues. However, with regard to the particular sites of the Green Free ports, clearly there will be interaction with fees broader projects. The A9 was the example that you cited. However, in terms of the actual specific impacts that could happen locally, I have already touched on that point and will continue to have that dialogue and engagement to understand what any issues are as they emerge. I apologise as well, but I should just note it in terms of each of the two sites that is the seed capital funding that I referred to earlier, which is active online. On a similar point, there are some areas where you have suggested that you are looking for parity largely with the UK scheme, so that Scottish free ports are not at a disadvantage. What is the on-going engagement with the UK Government on the free ports projects in terms of, for example, if there was any need to change the five-year transaction date? How is that on-going engagement happening? It has been touched on at a situation where, subject to the order being passed, we would be in a position where, hopefully, tax site designations would take place between HMT and HMRC in the near future, which would allow the next stage forward. We continue to have active dialogue and engagement and, of course, there is joint decision making between Scottish and UK ministers. Is there anything that you want to add to that, Laura? At official level, we meet the UK Government twice a week. We are delivering this truly in partnership as we come in. We developed the prospectus together jointly. We have developed the process for assessing the business cases together jointly. The green free ports are invited to the UK wide free port SRO forum. Our engagement is very close with the UK Government. If there were a move from either side on a need, for example, to change the situation, that is where it would be brought up and where it would be taken forward. Does that continue in close dialogue and engagement? That will inform many decisions that we are taking and recognise the points that were made earlier around the approach that we are taking at the outset of regard to the parity. Thank you very much. Last year, the convener and, I think, Liz Smith and others have spoken about displacement and some of the impact. Also, the cost involved, for example, the £5 million that advertised costs in terms of land and business transaction tax, but how that might be offset by perhaps increases in income tax take. How detailed will that information be from the income tax side? Will you be able to determine whether there is displacement from local tax figures? How weak will that be an opportunity to be able to see where displacement is happening, the impact of it and how soon will we be able to see that? Specifically, on LBTT, as I made reference to earlier, there will be monitoring, of course, as one would expect by Revenue Scotland in the publication of data. There is also the LBTT revenue that we can accrue following the end of the exemption period. Given that we can see development take place now, which can help to enable and facilitate future development. That is one idea where you could almost say that LBTT can wash its own face in that regard before we consider the broader impact of tax. Through the monitoring engagement that goes on with each of the free ports, it will assist us in identifying the level of job creation, the type of job provocation and the type of economic activity that is taking place. I do not know anything about monitoring the economic impact that you would want to add. We are developing a monitoring and evaluation framework for the programme that will help us to have some clear information. We are working with the Green Free Ports to make sure that they are clear on what the monitoring and evaluation requirements will be so that they are ready to give us information that we are looking for so that we can have a clear picture of the impacts of the programme across the piece. Will that be able to operate on a Scotland-wide model or will it look, for example, displacement from periphery around the free port, 100 miles, 50 miles? We are looking at both aspects of that within the development of the framework. When would you hope that that would be in place? Obviously, it won't be needed for a little bit of time, but when do you expect that to be? The work is under way on the development of the framework. I don't have the planned end date to hand, but it is certainly well underway. Thank you very much, and that has concluded questions from the committee. We now turn to agenda item 2, which involves formal consideration of the motion on the instrument. I invite the minister to speak to and move motion S6M-09584 that the Finance and Public Administration Committee recommends that the land and buildings transaction tax green free ports relief Scotland order 2023, SSI 2023 draft, be approved. Do any members wish to comment? As a setting question to the minister, the economic fundamentals underpinning free ports are those of trickle-down economics, and I don't think that's something that the Scottish Government can subscribe to. There's no evidence base for saying that the wider economic benefits are actually going to be felt as a result of this. The evidence base for free ports across the world shows that the companies who are involved in free ports certainly do benefit, but the wider communities around them don't. I recognise that most of what's involved in setting up these free ports is reserved, but there are levers within the Scottish Government's power that I don't think have been used here, for example, excluding any entity, any company, based in an offshore tax haven from accessing LBTT relief. There's a lot of language here around fair work, and I recognise the Scottish Government's commitment to fair work. In that case, it is just language. There are no binding commitments here to ensure that those companies are adhering to fair work principles. I'm really concerned about the long association that free ports are internationally, but particularly in Europe, in terms of association with crime, particularly money laundering, smuggling and exploitation of workers, the European Commission has highlighted this. The European Parliament called for an end to the free port experiment in Europe as a result of this, and I'm not seeing evidence that there's been sufficient consideration of the impact of that in the UK. As Michelle Thomson said on the impact that that could have on Scotland's international brand, I'm also concerned about the potential for displacement here. We saw the evidence from the UK's last experiment with free ports in the 80s of up to 40 per cent displacement, not new jobs being created. Given the position of the free ports within our economy as a west of Scotland MSP, I'm concerned that the economy in the west of Scotland is already not in the same state as the economy in the east. The depopulation issues that we face are significant. Growth in wages is nothing like what it is in the east coast, and I think that that is only going to exacerbate that. I recognise that the Scottish Government is in a difficult position here. This is a policy being driven by the UK Government, but devolution exists for the purpose of creating divergence where we believe it's necessary. I don't think that the opportunity to do that has been taken here. Tax breaks and deregulation are not the path to prosperity, investments are the path to prosperity, working with rather than against trade unions is the path to prosperity. Greens want to see profits reinvested in local communities, not squirreled away in offshore tax havens. I think that that's going to be the consequence of this, so I'm afraid that I can't support this order. I do have reservations about those green free ports, and I do fear, as has been questioned, that it is displacement rather than new jobs. However, having said that, we are competing with England in some of those matters, so we are in a difficult position about supporting them. Based on my questioning, the amount of money involved is relatively small, so I am happy to support the motion. I have indicated some of my concerns about free ports green or otherwise being used for money laundering and all our nefarious activities. I will support that, but with the provision that I look for strenuous querying of the UK Government over their pretty appalling record for stopping money laundering. However, I recognise that the constraints within which the Scottish Government must operate must operate, which is a function, of course, of devolution. I share some of your own words about the fantastical nature of some of the numbers and the PR claims around some of that. However, my position overall aligns probably with the trade union colleagues whom we saw last week, who are in their view insufficient engagement from the Government, not talking about some of the issues that Ross Greer has raised, but recognising the fact that we are in a competitive regime internationally but across the UK and that our ports have to be competitive if they are going to attract business. I support the SSI at this stage somewhat reluctantly, but I think that the Government could do an awful lot better on exploring the options that are available to them and also dealing with some of the questions that I have raised about transparency and decision making across our economic development prospectus to make sure that we can have confidence in the kind of decisions that they are making. I will make a couple of comments. I was quite keen to have a three-port hunterson in my constituency, so I am certainly going to be supporting the motion. The reason for that primarily is that if we do not get the jobs and investment in Scotland, they will simply move south of the border. My view is that the T-side would be a major threat to jobs. In this part of Scotland, if it was not for the fact that Leith was one of the green ports, I think that engagement is important. We have to take on board what the unions also said was that Edinburgh City Council is not engaging with, and of course that is a labour-led local authority, so I think that other political parties as well as the Scottish Government have to think more about engagement with trade unions and others. However, I will be supporting that for simply pragmatic and economic reasons, which is that the alternative would just be a drain of jobs and money to elsewhere in the UK. Minister, do you want to sum up and then we will go to the question? It is great hope for the committee's question and no further comments. Okay, and I will put the question on the motion, which is that motion S6M-09584 be agreed to. Are we all agreed? No. We are not all agreed. The Leithforby division can have a show of hands for against. The motion is agreed to. I would like to thank the minister and his colleagues for their evidence today. We will publish a short report to the Parliament sitting at our decision on the draft order on due course. I now suspend the meeting briefly to allow for a change of witnesses before we move to the next agenda item. This session continues the evidence taking on reform that we started before the summer. I welcome to the meeting David Moxham, Deputy General Secretary of the Scottish Trade Union Congress, and I should say that David and I once served in Glasgow City Council a quarter of a century ago together. I intend to allow up to an hour for this session. We have your written submission, David, so we will move straight to questions. I should say that, as well as questions on reform, members may also want to take the opportunity to ask Mr Moxham any questions on the STUC's pre-budget 2024-25 submission, which has also been circulated with the papers for this meeting. David Moxham, I will kick his off on the reform agenda. One of the things that the Deputy First Minister has said is that it is for individual public bodies to determine locally the target operating model for their workforces and to ensure workforce plans and projections are affordable in 2023, 2024 and in the medium term. Is this something that the STUC would agree or disagree with? We would generally agree with the contention that public service bodies, particularly ones that have a sound democratic base, such as local authorities, should be the prime leaders and drivers of decisions on service delivery generally and workforce planning too. We would obviously add to that the decent, effective collaboration with trade unions and with the workers more generally is vital for that. Where our difficulty comes is the spending envelopes that are attached to those decisions. If I may digress into a slightly general point, one of the difficulties that we have encountered over the years when considering public service reform is that it tends to raise its head at points where budgets are at their tightest, which in many ways is the least good time to be looking at public service reform. I was involved in the process around the Christie Commission and still attached myself to many of the principles that the Christie Commission established. However, the findings of the Christie Commission dropped in 2011, which was to be followed by three or four years of tight austerity in terms of spending. Our concern is that we seem to be at one of those junctures again, so if you like to return to your point, the answer is yes, but what is the spending envelope and how much freedom to these public bodies have to make genuine decisions about future service delivery? On Christie, one of the issues that the committee has deliberated over in many years has been the preventative spend agenda. In terms of reform of public services, how important do you think that preventative spend is? It is absolutely vital. We have seen some decent examples of it over the last decade and too few in my view, but we would be supportive of some of what you might call the generalised Government fiscal decisions that have sought to improve the conditions for families, particularly the low pay families and those in poverty. It is absolutely vital. I think that there are two points that I would make. The first is lag time. The investments that you make in prevention are rarely seen in service delivery terms for many years. Obviously, that can depend from discipline to discipline, but we sometimes fall into the trap of thinking that A follows B, whereas there is normally a C, a D and an E before you get to the F of some of the advantages that you derive in terms of service delivery and overall health and social outcomes. The second is that sometimes the preventative role within jobs is not paid enough attention to, so I would give the example of a social worker. Is a social worker a preventative job or an end-of-the-road safety job? The answer is both. The more social workers you have and the more investment in social work that you have, the more social workers are able to look at the preventative aspects of their job. Sometimes we tend to be a bit blunt tool by this and say that there are a bunch of preventative jobs and a bunch of acute jobs. In reality, a large number of jobs, particularly in local authorities, exist somewhere in the middle of that spectrum. How difficult is it to disinvest in programmes in the public sector or services that are less effective in order to invest in more effective services at the time of static budgets? I will return to my earlier point with bells on very, very, very difficult. That is partly because it is just a bad planning moment, is it not? You are a departmental head. You have some medium-to-long-term reform objectives, but you also have a budget envelope. Are you going to be progressive, imaginative in your decision-making process? Are your workers who are fearing that they may lose their job or lose their colleague or one of the other many methods that we used over the 2010s to diminish local government and other workforces? Is that the right environment? The answer is no. I have not got all the answers to that problem because we have two or three major challenges in public service delivery that no one can wave a wand about, but it is not the right time to do it if you want to achieve the long-term and sustainable change that we all agree that we need. One of the conclusions that came out of our committee meeting on 23 May in terms of the evidence that it was given was that efficiencies as part of managing budgets are not really part of genuine reform, and I am sure that you would agree with that. What role do you have efficiencies through, for example, the sharing of data and use of artificial intelligence, digital and new technologies? I think that they have a role. I would not claim to be an expert, but if you ask me to talk about one single departmental change involving technology and had it been positive or negative, I would find some difficulty of answering that specifically, but clearly it has a role. There is no area of life in the private public or voluntary sector that is untouched by some of the positive potential within digitalisation and other technological change. However, within public service, I am going to use the horribly sounding Bormoll's cost disease here, which essentially shows that person-based services are generally harder to make more efficient through technology than non-person-based services. That is not something that just affects the public sector, it affects the retail sector. We have seen a whole change in terms of difficulties, and our high street speakers have alternative forms of purchase. We have seen changes within supermarkets themselves in terms of the balance between staff and technology. Even the private sector is trying to come to grips with the fact that it is harder to make the productivity gains through technology in person by services effectively than it is in other areas of the economy. I am going to turn to the issue of paying taxation. What has been said is that 3.5 per cent pay risk suggested in the public sector to pay strategy 23 to 24 is not remotely sustainable. What are the average pay settlements in the public sector now? The graph in detail that we have been providing is from November 2022. Obviously, the way things have been going in recent months is that we are in a very unstable situation and inflation has declined. Where are we in terms of public sector pay at the moment in Scotland? All of our figures would be based on existing or settled pay deals and existing levels of inflation rather than projections of inflation, which I agree seems likely in this uncertain world, to reduce. However, as you will see from my report, the headline is that in almost all areas safe where we have managed to negotiate particularly strong back-ended deal for some low-paid workers, pay continues to fall below inflation. That is really a part of a decade-plus trend. For both public and private sector workers, the public sector has been particularly badly hit. When we say that it is not sustainable, we say that it is not sustainable in terms of service delivery, and it is not sustainable in terms of the budget of many of the key workers that we represent. Frankly, it is not sustainable because they are not having it, and they will take industrial action if they need to, as we have seen. With an aging population and declining workforce that we have in Scotland, the Scottish Fiscal Commission has talked about there being a funding gap, which is likely to remain year-on-year out on uncurrent projections. You have made a suggestion in the paper that was submitted last year that the Scottish Government should look to increase taxation by around £3.3 billion, which is hugely significant in terms of the tax burden that we currently have in Scotland. For example, someone on £43,662 a year would pay 22 per cent income tax and 12 per cent national insurance, and the money that they have left for that would probably go in fuel and excise duty VAT. What would be the impact of raising that sum? I realise that it would not all be done in one go, but what would be the impact of that on behavioural change? There have been concerns expressed by the Scottish Fiscal Commission that if you increase taxation to a certain degree, it results in behavioural change whereby people just do not work as hard or they move somewhere else. I will give you one example. One of the previous Conservative Governments, Chancellor Osborne, limited pension pots to £10 million. The result was a lot of doctors, GPs and consultants who said, you know what? I am going to end up paying more on tax and I am actually going to be gaining, so I am just going to retire early. That was a behavioural change that was detrimental on the UK Government's look to reverse that, so it has reversed that to some degree. What would be the behavioural change? We had last week that there are only 18,000 top rate taxpayers in Scotland, for example. Yes, so there is quite a lot there. I will be very understanding if you or somebody else needs to come back on some of the detail on this. You mentioned a top-line figure of £3.3 billion. That is not what we are proposing. It could be achievable or possible in any one year and it is based upon a view, but with specific examples of how it might be implemented, generally about how we need to shift the tax burden across the UK and the world, frankly, but we are talking about Scotland now, away from unearned asset property-based income, more of it from that and less of it from wages. A significant proportion of that £3.3 billion is based on proposals around wealth taxes and property taxes. If we look at the specific—and we should say that, within those proposals, there are fairly liberal estimates of tax avoidance and tax evasion. Obviously, tax is harder to avoid on fixed assets. It is not impossible. Therefore, it is important in the model to reflect the fact that there would be some overspill in terms of loss of income. Generally speaking, one of the reasons for the shift within our proposals from income to asset over a period of time is to deal with the issue that you raised. In terms of income, we recognise—everyone knows—that there is a laffa curve. The question is how big you think the behavioural change in a laffa curve is. Some people seem to think that we would turn around tomorrow when everybody earning—if you take, for instance, our proposal to increase tax on people earning over £75,000—that everybody would disappear. The truth is that that is not the case. It is partly not the case because the jobs would stay here. There are plenty of people. You do not decide to suddenly start going and practicing law in England if you have been a Scottish lawyer for the last 30 years. You probably do not decide if your child is getting a decent education, a decent health service and a good way of life in Edinburgh just to jump the boarder and pick up somebody and ask to get to play a few hundred more quits. We recognise that there are limitations. We are fast reaching the limitations of how we can use income alone as the basis to get fairer funding for our public services. You will see the balance in our recommendations at the most, with less than £1 billion being able to be raised through income tax measures and a far higher number in the medium to long term—we are probably talking about a three or four year horizon at best—being able to be raised by a more fundamental shift in the way that we tax in Scotland. The issue of behavioural change came up a lot last year in the Scottish Fiscal Commission, and it said that £30 million in raising top-rate payers is 90 per cent to be lost to behavioural change. It said that it was not about moving through Edinburgh to Newcastle, it was about somebody who works five days a week, just saying, I am only going to work four days a week because I just pay too much tax and that impacts on productivity, et cetera, et cetera, so it is about that. I think that what we all want to see is the optimum level of expenditure in our public services. The difficulty is that, given that both the main UK parties have said that they will not have a wealth tax, for example, and they will not increase top-rate tax, it leaves Scotland kind of exposed a wee bit within the United Kingdom in terms of attracting not so much, but keeping retaining people, attracting people who might want to invest or come and live here. I cannot imagine that you are right. Many people want to move—I certainly would not want to, but the tax was moved south of Edinburgh—but I thought it might just think, well, do you know that? I do not know what to actually go there. Do you know if this is a kind of general direction of travel? If one includes council tax, which is significantly lower in Scotland than it is in the UK as a consequence of year-on-year council tax freezes, whatever view one takes on that. You really have to reach to the very, very highest earners to show a massive differential just now between Scotland and the UK. We just have not seen evidence of that migration, and, while undoubtedly it happens at the edges, there are four or five much more significant levers for the Scottish Government and this Parliament to continue to attract investment and to continue to encourage people to live here. That is down to decent services, but it is also down to a skilled and confident workforce that people want to invest in. Whilst I have conceded that there are limits, and there is not that much further that we can go before the relative benefits of raising income taxes are undermined by what we all accept is some form of slippage effect, there is a little bit further that we can go now and we desperately need to do it, but much more fundamental reform that we need in the medium term. I am going to ask the question—make the point now in case no one asks me about it. It is absolutely reprehensible that we are not in 2023—we should have done it 10 years ago—undergoing a council tax reevaluation so that we have a reasonable basis going forward upon which we can begin to make the changes that we need to make sure that property is proportionally taxed and that local wealth taxes are a possibility. On that last point, it is a pragmatic thing, if I am blunt about it. People might not talk about it publicly, but Conservative Labour and SNP Administrations have not done that because of what I think is called loss aversion and the people who are better off because of that will just struggle their shoulders about the people who are actually loss of, will hate you and will not vote for you. It is actually simple as that, to be perfectly honest. I think that people should perhaps be more honest about that. In terms of council tax, there is already strong opposition to the Scottish Government's proposals from within the Parliament and members of the committee have spoken out against that publicly already. The issue about exploring every avenue to increase tax, which is in your document, surely that is a signal that has been sent to people who feel perhaps at a time of 14 interest rate rises in less than two years, inflation is hitting not just the public sector but the private sector, that maybe the time is not right to do that. It is a pretty horrible time to have to do it. No one particularly suggests that at times of relative economic downturn the overall taxation should increase, although obviously it can increase between people's ability to pay. I am not quite sure what alternative it is just now. I mean, you are considering, you will have had evidence which shows not just that particular areas of public service, whether we are talking about NHS waiting lists, whether we are talking about local government service are in crisis. You will also have heard evidence that barely bears repeating that the demography of the balance between the economy and the service that needs to be provided ain't looking good for Scotland. There are some things that it would be nice to see the Scottish Government in power to do about that, which it's not. This is a crisis point. We don't say with any pleasure whatsoever, particularly people on, I guess, what you describe as above-average income but hardly wealthy should be paying more taxes. We have proposed that they should and it's no great fun to go under a teacher's picket line and have to explain to some teachers that the way you want to fund their wage increase is by introducing tax measures which would see many of them lose a significant proportion of that. That's no fun. We are not universally popular with our own movement for coming to those conclusions, but what are the alternatives given the other evidence that we're hearing about local government funding and about the range of other services which are in crisis? I've been spending a lot of time over the last couple of weeks and months supporting firefighters who are completely up in arms about the cuts to services that they were promised incidentally when the single service was introduced wouldn't happen. I have to say to some of those firefighters, some of whom, not all of them, who earn more than £40,000 a year, that some of my proposals will cost them money. It's hard choices. It's difficult times. What else are we going to do? One of the issues, of course, is that the United Kingdom's standard of living is much the same as it was in 2003, and we've been left behind by a lot of other countries. The financial crisis, the austerity pandemic, etc. Is growth economic growth not the answer? What do the STC propose to try and stimulate economic growth so that the cake is bigger and that it will, of course, generate additional tax revenues? The first thing that we'd say is that we don't make such a distinction as some people do between the economic growth and the overall contribution to gross national product that public services provide. They generally do that in the sense that services are provided, services are paid through, albeit by tax income. Taxes are paid on that through people's wages, and that's all part of our economy. There's nothing wrong with growing an economy by growing a public service. Secondly, a lot of those public services are the infrastructure that are required for the private sector and the economy to grow. If you haven't got enough planners, if you haven't got enough people in licensing, if your physical infrastructure isn't operating well, then businesses are going to pay. Of course, we support sustainable economic growth. Again, it's not a straightforward question, but it seems to us that investment in the green economy in areas of new technology but also in improving our infrastructure. We support a national programme of retrofit, which is similar to the one that was embarked upon in the 70s when we converted from onto anoltyd gas, which provided a massive boost for the economy. We can think of public and private ways to increase the economy, but we don't see it as public sector versus private sector when we do that. Just one last question from me, and it's on the issue that I've just touched on, which is about the green economy. What you've said is that a £13 billion green stimulus package could create 150,000 jobs in Scotland and suggest that there's a pressing need for Scottish Government to maximize the impact of its spending priorities. Labour in the UK has said that it can no longer proceed with its £28 billion green prosperity plan because of affordability. How can Scotland, with 8.2 per cent of the UK's population, do something as ambitious as a £13 billion stimulus package? It probably couldn't under existing borrowing and capital spending limits. I think that that was our top level in the middle of the pandemic, two-year. This could really make a revolutionary difference kind of figure, but you can also look within that report and we produced a subsequent one that showed a spectrum of investment decisions all the way from, frankly, where we currently are now in terms of the failure to produce jobs out of the renewable economy through to better outcomes. I'm not going to sit here and say that the finance minister combined £6 million in subsequent years to make that investment. I would just take this opportunity to say that we strongly oppose the change in the UK Government policy when it comes to those levels of investment. We foresee and will continue to agitate for a new UK Government level and a new Government that is prepared to make those investments. A new Government that is prepared to work with the Scottish Parliament and Government up here to say that the proportion of that investment would be best deployed in Scotland, so I'm not going to defend that policy change from the Labour Party. I'm going to open out to colleagues and the first person to ask questions will be a deputy convener, Michael, to be followed by John. Your submission that you've made, David, is very critical, I suppose, of the resource spending review that was previously published by the Government. I wonder whether you could outline why? I guess fundamentally because it identified public spending as a standalone item. I'll give an example. If I'm looking at the revenues that are spent on public services, if I look at the income that is derived from taxation, I also want to look at things like business support, small business bonus scheme. For me, some things were left aside as what we're obviously going to continue to spend £300 million plus on the small business bonus scheme, whereas for us that should have been in the round. We were also critical because its headline figure foresaw now. I know that this has been slightly nuanced since foresaw a cut in the public sector workforce, which we don't support. Given our view that hard decisions need to be made on the resource side, hard decisions need to be made on the relief side as well as the income side, and that particular areas of local government in particular, in our view, have been historically underfunded, we were unlikely to be super positive about it. As we had the permanent secretary in front of us back on 16 May, he told us that it wasn't clear to him what the status of the resource spending review was within Government. The new First Minister at that time had not given him any kind of direction. Do you understand what the current status of the resource spending review is? Not really. We've heard suggestions that some of the elements of that are returning to the very unfortunate quantification of jobs that need to be cut from the public sector has been nuanced, but we're not enormously short. I think that it's reasonable to concede that a change of First Minister and Cabinet would presage some alterations to policy. We've seen that in other areas, arguably in other areas such as the Scottish National Care Service. The last two months have largely been a political quiet period, as it always has. I wouldn't necessarily say that our uncertainty about its exact status is a final and massive criticism. It would be nice, particularly in the next couple of months, particularly running up to the next budget, to have a much clearer idea of what Government intention is. That's a fair point. I suppose that those issues around the civil service, part of the issue that the Permanent Secretary raised with us, are the issues about capacity and the ability to deliver the kind of plans. For instance, within the first two years of a Labour Government that Labour's committed to building up towards £28 billion of investment across the UK in green technology, we have to be in a position as a country to develop those plans as a whole. Do you have concerns about our capacity as a country to meet that aspiration of a new Government to make that investment? It's a really good point. I hope that, slightly digressing into another area, it's okay in terms of illustrating the point. We're obviously fairly keen, as I'm sure our members of the Parliament are aware, on the development of municipal bus models now. If we said yesterday that it would be five or six years, probably before such a thing could be achieved, one of the major issues there would be, do we have the capacity to develop it? We've often found this with other areas, such as procurement reform. The best intention is to use public spending through public bodies to their best effect. We haven't had the capacity within the local bodies for the procurement expertise to begin to build the new model. To return to my original point, that capacity issue within the local authorities, within the civil service, the capability for Government where possible to do it for itself, particularly, and we've been critical of this, where the alternative is to bring in big public sector reform bodies. I won't name any of them, but we know which one we're talking about. There is that issue, and it does return me to this point that if you're going to do public sector reform, you have to get your ducks in a row, and you have to get your capacity strong enough to actually deliver it, and your vision is strong enough before you start making cuts in other areas. Okay, thank you. John, to form my Ross. Thank you very much, convener. Mr Mawksham, you said earlier on that you favored reform being at a more local level, and I would tend to agree with that if I understood you correctly, but it has been suggested to us that sometimes there's a need for a central drive. For example, police and fire would never have reorganised the way they did, for good or bad, if it hadn't been for a central drive. When we're looking at public sector reform, how much do we leave it to the individual organisations and how much should Government or Parliament be driving it? It's quite a general question, and it's difficult not to answer it simply by saying—I mean, the principle of subsidiarity is obviously the founding principle of that, and therefore, from our point of view, the burden of proof, so to speak, for non-local solutions should be on central government. Now, that burden of proof may be provided in given circumstances. I don't think that anybody would be arguing for the further break-up. I certainly don't think so of health boards, for instance. Whilst I wouldn't say that it's problem-free, far from it, I think that most people would accept that national priority is significant, that national outcome is significant, that strategies must be adopted and must be driven by Government. However, my principle would be that it's down to central government to demonstrate why it's not delivered better. On the whole, it has been suggested to us that there are too many public bodies, so several are perhaps overlapping with each other on what they are doing. We have historically been critical of the creation of quangos, NDPBs that do not have the prerequisite levels of accountability and have been in favour wherever possible to maintain democratic delivery and even, in some cases, to strengthen that, where there is local government, local authority councillor representation on NDPBs and other local boards to ensure that that strengthens. It's quite a general question, and I'm sure that both the workforce within some of these NDPBs, not to mention the managers, would have some localised observations on how one might improve that landscape. However, as I say, our general position is as local as possible and as democratic as possible. One of the specific issues that has come up to us as a committee recently has been the number of commissioners in Scotland. There is commissioners for children, for human rights, and there is a proposed one for disabled people, a wide range of them. Do you have any particular view about them? Some people think that they are a bit undemocratic, but they are not answerable to anyone. A slight hesitation, I wasn't particularly expecting to have to consider this. I do think that where government has priorities, and where government has priorities that are new and national and require particular attention, then certainly the creation, whether it be for a finite term or a longer term of people who are specifically tasked with looking at agency delivery in a particular area and bringing that together in forming government policy. There is undoubtedly some value in that. Do I think that everything should have a commission? No. I think that it should be where there is a large consensus amongst the Parliament and amongst the wider population that a particular issue requires a particular focus for a particular period of time. Most of those things should not be forever. I appreciate your comments. We are just looking at it at the moment. I realise that maybe you weren't anticipating it, so that might be a little unfair. On the general point, clearly one of your roles and your colleagues' roles is to defend existing jobs, but if we are looking at reform, I suppose that I would like to see more workers on the front line, if you are sitting behind desks. Are you open to that kind of movement? We are open to it. I often smile. Again, I spent quite a long time in the early 2010s talking about the distinction between front and back office staff, shared services and various other things. We did feel that many of those distinctions were illusory. Obviously, you can look at the payroll function of a public service body and the front line delivery and say, I can see a real clear distinction there. Very often the distinction is far more blurred. The answer to the point is yes, but how and how is that going to be organised? One of the concerns that we have is that some public service reform initiatives have tended to try to chop away particular parts of a function under the illusion that it makes it more efficient, but it actually reduces the KPIs and the main KPIs can shift that job on to somebody else. We have all had it in terms of when we phone up and get the automated or non-alternative service on the phone and the thing that they seem to be best at is telling you that it is somebody else's job. That is normally because they have been told to shift a whole range of inquiries and a whole range of problems into somebody else's lap. That looks very efficient to that small department, but it does not look efficient if you look at the whole of public service delivery. One of my concerns is that we need as many people in public service who are qualified and paid to be problem solvers, which means that we have had an awful lot of chat over the years about following people's delivery journey through service provision from point A to point B and point C and making sure that that public service journey is strong. Sometimes, when you split away the so-called back-offish function from the front-office function, you reduce the number of people within the service who are problem solvers who are able to pick people along a slightly longer part of that journey. That is a very long way of saying yes with a but at the end, John. That is a fair answer, thank you. One of the other things that witnesses have been saying to us and has been mixture has been looking back at Covid and what happened then that that might be a good model for going forward or others have said it might be a bad model for going forward. I think that some of the key themes were decisions were made more quickly on the positive side and some of the bureaucratic systems were kind of chopped a bit, but on the bad side maybe there was less consultation before decisions were made. I just wonder if you have viewed generally during, again it is a wide question, but generally during Covid were there good things that happened that we could take forward? I think that there were some good things that happened which were probably amplifications of things that happened on a day-to-day basis that we do not see and that is the day-to-day engagement with different parts of the public service together to deliver. We have long advocated for what we describe as public service networks, which really looks at how you strengthen the formal but sometimes informal cooperation between different areas of the public service to really optimise local delivery. You use the fact that these people very often attend the same incidents or are part of the same review panel for a social work outcome and you build upon those. By nature of geography, by nature of the need for immediacy, we did see some good examples of people just using some of the informal networks and some of the more formal networks that they had very effectively, very decisively and very dynamically. Would I build out of that a suggestion that we need next consultation? I would probably say no. I think that it is an important blank of Christie that service users continue to be consulted on a high-level basis in terms of the services they deliver. I certainly think that workers need consulted and not just directed, but there were undoubtedly some dynamic examples of people pulling their sleeves up, building on pre-existing relationships and delivering very effectively in communities. A final point out of your own submission, I wanted to ask you about the 3.5 per cent increase that the convener mentioned. You said that if they do not real wages in Scotland, they are likely to fall further behind the UK. Is your suggestion that currently wages across the public sector or elsewhere are behind the UK? We are talking about a fall rather than an absolute level and those figures, as I recall. I will get back to you and correct you if I am wrong on this. We are based on 2022 figures for relative wage growth or relative wage decrease in this case, compared with the nations and regions of the UK. In some sectors, Scottish workers are paid more than the equivalent of the UK. The question is whether we are comparing a fall or whether we are comparing absolute levels. Certainly, the fall more recently has been more acute in Scotland than across the UK. That should not be taken to suggest that we think that the public sector workforce or any other part of the workforce as a whole is paid less in Scotland than across the UK. Dave, on your income tax proposals, am I right in understanding that you are not proposing beyond threshold freezes? You are not proposing any changes to the starter basic and intermediate rates. It would just be your new £40,000 threshold for the new whatever the lower high rate would be called and above, but there is nothing really at those lower thresholds. On a wider point, something that this committee has discussed quite a lot recently is the challenge, as the convener pointed out, with the financial gap that the SFC have identified. Even if we were to make substantial tax changes, substantial tax rises such as the ones that you have proposed or even that my party has proposed, it would be to mitigate to prevent potential cuts rather than to expand public services. Do you have any concerns around public consent for that? Quite consistently in Scotland, polls have shown that people, including those on higher incomes, are willing to pay more tax if it results in better quality services, more services, etc. What we would be doing if we embarked on tax rises within the next few years is simply preventing tax cuts. It is hard for people to identify something that they have not lost as opposed to something that they have gained. How would you manage the public consent around that? I think that it is really hard to manage. I think that the economic conditions that many people find themselves in, frankly, includes a reasonable amount of money, but you still have a budget that is set and things that you do, so you still see yourself losing some things, even if they may be things that are not available to other members of the population. It is an incredibly difficult discussion to have. To refer back to the convener's point about it never being very politically popular to do things around tax, that is absolutely true. Without getting overly heroic about it, I think that it is incumbent upon the parties of the Parliament to have a discussion about tax and services that recognise some of the fundamentals that, in 10 years' time, we will be spending more on the proportion of our income on public services than we do now. It is a fact that nobody in this house would dispute that fact, so can we say it all together? I think that most people think that the council tax is bust and that it is, frankly, ridiculous that we are still basing our system on a 1991 review. Everybody believes that. If there are some things that we can at least say together, then I think that it begins to make that more palatable. It is totally understandable, and I agree with your convener. I would not want to be the one with that particular stick at any given time. What can we do collectively, just to say, where we all genuinely recognise that there is a really significant problem here? Can we at least find some sort of starting point? That means that the conversation that I have to have with my members, that you have to have with your electors is at least based upon the fact that there is a genuine recognition of a shared problem. I absolutely agree with you that there is a need for greater cross-party consensus on some of that, and I am always happy to speak to cross-party colleagues about tax policy, but there is an element of that. There is an understandable public cynicism about politicians. For example, if my party of the SNP is going out with a new real push in public information campaign to sell to people the public services that already exist, people are going to quite understandably say, well, look at waiting times in the NHS, or you are just saying that because you want our votes to the next election. My question back to you as much as I think that we should still do that, my question back to you is what role does the trade union movement have to play in getting the buying of wider society? You have over half a million members, but we have a working age population of what about four million people. What role can the trade union movement play in getting that wider societal buy in here, and not even buy in, but just recognition of what the financial reality is right now? We spend quite a lot of time trying to get ourselves certainly into the media, and we have been quite successful. One of our priority campaigns for this year is basically we want to tax quite a lot of people more, and we have been very public about that. Our members know that, and the general public knows that, and we will continue to make the argument for that, and we will continue to link it, not just to the welfare of the members that we represent, but the pride in the services that they deliver. We will continue to do that. Our priority campaigns are the national care service, which I think that everybody recognises is an organisational but also a funding issue. The first thing that I would say is that we have been right up there. We have not gone to government, as perhaps we have in the past, and other bodies in the past, and said that we need this much extra for public services. It is simply down to you to bear the responsibility for the political debate about how that happens. We have an alternative. It may not be popular. It may not be deliverable in all its aspects. We can take some comfort from the fact that we are not avoiding the most difficult questions in terms of where the money comes from. SDUC deserves commendation for that. Plenty of other organisations, bodies and representative groups come to this committee every single year wanting more, but are unwilling to say where that should come from, or indeed wanting more public spending, but no tax rises or even tax cuts. The final question is just around the public sector estate. The union movement has obviously been a champion of flexible working, remote working, working conditions that suit the needs of workers themselves. Post-pandemic, that genius is not going back into the bottle, and that is particularly true in the public sector. What that resulted in, though, is a number of buildings that are either owned or leased by public sector organisations being largely empty or significantly under occupancy. Does SDUC recognise that that is inefficient and that is not a good use of public money and therefore there needs to be a reform of the public sector estate? Not simply as a cost-saving exercise in the way that there was off the back of 2010 austerity, but in recognition of the fact that we are no longer working in an environment where everybody is in the same office Monday to Friday, 9 to 5? I think it's entirely sensible that, broadly speaking, and there will be examples where I would possibly disagree with myself, broadly speaking, empty buildings, particularly heating empty buildings, is a bad idea. I think what their use becomes is really very much the issue. Certainly if there is more space than we need to house public sector staff, there is also probably more space than we need to fund office workers and people in the private sector, too. Some of this is a general trend. Use is important. I think that some of it, and I have been critical of some of the areas, some of the work that local authorities have done, some of the work that Glasgow's done in terms of looking to begin to reimagine what Glasgow City Centre looks like in terms of its balance between dwelling and commercial. These are things that have to be looked at. These are things that, as I say, we may not agree with every single one of the outcomes, but that's not really the point. The point is that there is going to be significant repurposing going on. That does have an implication for the green economy and what we do in relation to our infrastructure, travel to work times and various other things. We're not going to sit there and say, let Glasgow be full of empty buildings if we can think of a good social purpose for them. It's just important to recognise that the market is probably a challenging one just now for what would have been the old method of simply selling it on to the private sector for more office accommodation. I completely agree with you that if we were to reform council tax, we'd first need to have a revaluation, which is long overdue. Can I just ask a few questions about what your specific proposal would be to replace council tax, which I think you've mentioned in your thing about this proportional property tax. Can you just be very specific about how you think that works? Yes. The first thing to say is that we have quite a range of recommendations in our tax paper. It's definitely more than illustrative, but we're not stating just now that we've come up with a dot and comma system for replacing it. There will be a certain amount of arrogance of that given the failure of everybody to come up with a satisfactory scheme over generations. Largely speaking, it would require a revaluation and then people would pay—I think we'd give illustrative examples of the percentage of that value. That would essentially become their local council tax. If I owned a property value—I wish I did—a value of £0.5 million, if 1 per cent were chosen, it would need to be 0.6 per cent or 0.8 per cent, that would come up with my council tax bill. If it was 1 per cent and my property was valued at £500,000, my council tax bill would be £5,000. If that happened, would you also be in favour of the wealth tax that you suggested in your paper? It would somewhat complicate the wealth tax in the sense that a property is a component part of, obviously, a bigger basket. We wouldn't necessarily suggest that bringing those two things in so that somebody was essentially double taxed on the value of their property would necessarily be the way that we would go. We would still want to avoid double taxation on property. Could I suggest that that would be very important because it would be double taxation and I think that you would be in very considerable danger not only of creating very considerable bills for some people who might not necessarily be, particularly at the top end of the scale, but also administratively. I think that that could be very complex indeed in local authorities, because as I understand it, this Parliament doesn't, as you know, have powers to tax bodies on a non-income basis and we can't have a national wealth tax, but the wealth tax that was suggested in your paper is to be administered locally. Does that not provide quite a complex area in relation to having the... I think it's unlikely that we're going to come up with a tax system that isn't complicated, to be quite honest with you, and doesn't have a whole range of administrative challenges. The current one absolutely does, and there's no property-based scheme, including the one that we currently have that doesn't need a fairly active compensation scheme for the people that you talked about. I think that the issue which you also came to later on in your tax paper is about business tax as well, and I think that the key issue for the Scottish economy just now is to get the right balance between the tax take, the tax revenue, which you suggested various ways to increase, I may disagree with you on some of that, but the behavioural change, and I think that the convener pointed out an example of behavioural change that was really quite significant. It's trying to work out on a projection basis what would happen with various scenarios, and I'm just keen to know what the STEC would pick out as a sort of priority basis for that. A priority basis for... In making recommendations about changing tax, I'm not entirely clear whether you want to change the rates of taxation or whether you want specific structural changes to the overall tax basis. That's a key question, which is what the Scottish Fiscal Commission is asking as well. We want structural changes to the way that tax is levied because we want more of it to be based upon immovable assets than we do on income. I wouldn't go as far as the famous half quote from Peter Mandelson, but one can be more relaxed about people earning high amounts of income if they're at least paying effective tax on their property and their assets. That is a structural change. That's undoubtedly a structural change because it suggests that we do what we can, recognising the limitations of the Parliament, and we'd obviously be advocating that at UK level as well, to change the structural emphasis from income to asset when it comes to taxing people. I come back to the point that I think what we all want for the Scottish economy is a much more sustainable future in terms of the revenue that we bring in in line with what is going to be increased expenditure that's necessary, particularly in things like health and social care and social security. Obviously, that tax revenue is absolutely vital to the future. If we're going to have increased taxation on certain members of the population, plus structural changes, we have to be very clear that what we're suggesting is not going to provide the disincentives of the sort that the convener set out. It's not that people are necessarily going to move elsewhere. It's just that they might think, well, this isn't very good for us. We don't like this extra burden of taxation, so we won't work quite as much, which is a very considerable problem for the economy. From a business angle, people think, do we want a higher tax burden in Scotland? Probably not. Do you accept that that's a view that business and industry hold? We accept it. For instance, the wealth tax proposals within our recommendations do model for some of that to happen. We would argue that the overall benefit, which would be funding not just in public services, but potentially in other investment and other investments available to business and improvements in the workforce for them, would provide a very on-balance and more positive environment for business to operate in. There are plenty of countries with significantly higher taxes, both on individuals and business, that have proved that it really is the high road rather than the low road that matters. Would you accept, in some of those countries, that they have a better quality of the delivery of public services than currently we do in Scotland? Absolutely, and particularly the ones where universalism is more widespread, where people want a social contract where they are quite happy to pay relatively high levels of taxation because the quality and cost of things like childcare are significantly lower. There's a very strong case to be made that that's better for the economy, as well as better. Okay, thank you very much. That appears to have concluded questions from the committee. I've just pointed out that, ironically, the council tax was only meant to be a temporary fix when it actually came in over 30 years ago. I think that one of the difficulties we probably haven't touched on is the fact that if we did have a new system, whatever that system would be, the number of appeals would run into the hundreds of thousands because that's what happened in the council tax scheme, as I remember from my own days in Glasgow City Council. David, do you have any points that you want to make that perhaps we haven't touched on? Simply to emphasise, I'm a member of the Scottish Government's new tax advisory group, so I recognise that I and my organisation will have more than one opportunity to push this forward, but one of the things, and I don't think I'm giving any secrets the way that we discussed that in the first meeting, was there are three different broad areas of taxation and income raising that we can think about. There are things that can be done now that need to be done for the next budget. They are limited, but they are possible. There are additional powers. We've just seen the new fiscal framework come out, which didn't go as far as we would like, but added a bit more. There are new powers, and some of those powers aren't just about fiscal powers. They're about increasing the powers of the Parliament, for instance, over some aspects of migration, which would allow us to build and grow our tax base, but there's some stuff in the middle, which is things that we can do under devolved competencies, but will take a number of years to do, but we need to get started now, and we don't want to be in the situation in five or six years' time of sitting around and saying, we still all agree that the council sex needs to be reformed, or we still all agree that we need to look in more detail at land taxes and find out that we haven't completed the registry, or we haven't started the process of a new revaluation. I'd be really, really urging those things. It's not like the trade union movement to think five years ahead, but normally I would about what's happening tomorrow, but I would encourage this committee and anybody else to really think very clearly about the things that we need to do now, that we can do now. That will put us in a position in four or five years' time to have a greater range of options when it comes to the fiscal challenges that we know we're going to face. Thank you very much for taking the time to speak to the committee today. The evidence guard for this inquiry will help us to inform the committee's pre-budget 24-25 scrutiny, including an evidence session with the Deputy First Minister in early October. That concludes the public part of today's meeting in the next item on our agenda, which will be discussed in private as consideration of our work programme. I'll now move into private session and have a couple of minutes' break in order to allow our witness and official report to leave.