 Mae geni. Felly, wrth fawr, Fynghor, yn gweithio eich gweithwyr cwm weeklyt, a ddraeth theychwch gyntaf hynny, ond ydych chi'n dweud yn gyhoedd, mae'n ddweud i gyflymu cymdeithasol, a'u gweithio eich cyfnod o'r cyfrannu. Mae hi sefydl iawn i amdodd o'r rhagleniau arbodd o'r Tavish ScotMSP. Fe fi'n eu cysylltiad i'n dweud i gyllid i ddim yn cael ei amddangos, No other apologies have been received at this time at this stage. Agenda item 1 is seeking agreement with members that agenda items 6 and 7 be taken in private. Are we agreed? Thank you very much. That takes us to agenda item 2, subordinate legislation. In particular, the Scotland Act 1998, which modifies the schedules 4 and 5 and transfers the functions to the Scottish ministers, etc. Order 2015. We have witnesses here this morning. I welcome you, Cabinet Secretary and Deputy First Minister, John Swinney, Stephen Saddler, team leader from the elections and constitution division, and Neil Mojee, if I've got that right. Policy advisers are on elections and constitution division also in the Scottish Government. Deputy First Minister, thank you in particular for being able to come to this particular meeting at such extremely short notice that was given to you. We're very grateful that you were able to attend in the circumstances. I suspect you'll wish to make an opening statement. I welcome the committee's invitation to attend today and to present the draft order. We're considering the Scotland Act 1998 modification of schedules 4 and 5 and transfer of functions to the Scottish ministers, etc. Order 2015 that will transfer competence to the Scottish Parliament to extend the franchise to 16 and 17-year-olds in Scottish Parliament and local government elections. The terms of the order the committee is considering this morning have been agreed by the Scottish and United Kingdom Governments to give effect to the recommendation at paragraph 25 of the report of the Smith Commission that called on the UK Parliament to, and I quote, devolve the relevant powers in sufficient time to allow the Scottish Parliament to extend the franchise to 16 and 17-year-olds for the 2016 Scottish parliamentary elections. The powers to be devolved through the section 30 order, subject to agreement in this Parliament and at Westminster, are narrowly focused on enfranchising 16 and 17-year-olds. Full powers over Scottish Parliament and local government elections will follow later through the proposed Scotland Bill. The Scottish Government is satisfied that the order in front of the committee will enable the Scottish Government to bring forward legislation to lower the voting age for future elections to the Scottish Parliament and local government elections in Scotland. The order also transfers the power to legislate to make provision about registration in order to give effect to any reduction in the minimum voting age. That will allow us to build on one of the key democratic triumphs of the referendum campaign. As I indicated in the chamber on Tuesday, those of us who witnessed the engagement and enthusiasm of young people in exercising their democratic rights saw the value and the impact of that participation on the process. Since the referendum, I have been delighted to see that there is now unanimous support across the Parliament for lowering the voting age to 16, and I hope that support will be demonstrated by agreement to the section 30 order in time for it to be considered by the Privy Council on 19 March. At the start of this week, the House of Lords Select Committee and the Constitution published a report on the order prompted by your question convener on the report on Tuesday. The Parliament was given the opportunity to make its views known on the points raised by the Lords Committee. The views expressed on Tuesday were clear and unambiguous, the decision on whether and if so how to lower the voting ages one for the Scottish Parliament to take. Subject to parliamentary approval of the order, the Scottish Government will bring forward legislation shortly, setting out detailed proposals to achieve the same. The parliamentary stages of the legislation will provide the usual opportunity for Parliament to consider the details to seek public views and to debate our proposals. I look forward to discussing those issues with the committee this month. Thank you, Deputy First Minister. This is now the chance for the committee to ask any questions, make any comments and, of course, at this stage, it is free for the Deputy First Minister to always involve officials if they wish to be so. Does anyone have any points or any questions that they would like to make? Rob, you have an apparent lack of clarity in article 5 with regard to the extent of the functions to be exercisable by the Scottish ministers concurrently with the Secretary of State. Do you have any views on that, Deputy First Minister? The issues in section 5, and I have seen the report of the what used to be the subordinate legislation committee one day, I will remember what it was called. The powers under section 5 are trying to deal with what is certainly not an issue from our perspective, but an understanding that has to be put into the order that there will be certain powers around registration that will continue to be exercised by the United Kingdom Government ministers, particularly in relation to individual electoral registration. Section 5 recognises that how we act on this question has to be compatible with what steps have been taken by UK ministers with which we have no issue, and we quite understand why that is a requirement. It is essentially focused on the activities that will be taken forward, principally around individual electoral registration and the digital implications of all of that. The House of Lords Select Committee on the Constitution also published its report on this, and it suggested that, although initially it highlighted its concerns that the extension of the franchise for Scotland goes beyond the Smith commission recommendations, as it also highlighted that there has not been a wide consultation in this aspect regarding the order. Do you have any concerns about that? I do not have concerns about that. I think that the point on translating the Smith commission recommendations into practice—if I go back to the point that the Smith commission settled on was devolving the relevant powers in sufficient time to allow the Scottish Parliament to extend the franchise to 16 and 17-year-olds for the 2016 Scottish parliamentary elections—is very clearly reflected in what the order has taken forward. The additional element is around the devolution of responsibility around local authority elections, which the Smith commission provides for in other respects, in its wider responsibilities, where full powers over the Scottish Parliament and local authority elections will follow in due course. I think that the only point that the House of Lords Committee makes of any substance here is the issue of consultation. Of course, that issue will be remedied by the legislation that we take forward. It is not as if this is the last word on the matter—there is a bill that has to come through the Scottish Parliament. It will have to go through the usual channels of analysis and scrutiny that any bill in this Parliament has to go through, and that will open up the opportunity for a whole range of stakeholders to make the contribution. The key point here is that there is a practical democratic point at the heart of all of this. It is clear that the intention of this Parliament is to ensure that 16 and 17-year-olds can participate in the elections for which we have responsibility. We have formed that. We have legislated for that on previous occasions. We have legislated for it on the independence referendum. We have legislated for it on the pilot exercises on local authority and on health board elections. I am very happy with the point that we have reached with the UK Government that we are able to take forward that in a practical form to reflect the democratic intentions of this Parliament. Thank you very much, cabinet secretary. The purpose and intent are clear, and as you say are broadly supported. One of the points that was made by the Constitution Committee of the Lords was to draw or to highlight what it regarded as a difference between provision and the draft clauses for future amendment of the franchise and provision within the order. Is that something that you recognise, and if so, what would your comments be? Those issues again will be covered by the bill process that the Scottish Parliament will go through. The point that I thought that the Lords Committee missed completely was the fact that there was to be a process of legislation undertaken by the Scottish Parliament that would explore all of those questions with the usual rigor that is taken forward. I think that that would be my answer to the point that Mr MacDonald raises. I think that all of those issues are properly captured by the bill process that we will undertake. Would it be fair to deduce that the clearly constructive engagement that you have had with the UK Government on this means that the bill, when it is finally coming forward, will reflect the intention behind the draft clauses that the UK Government has published? Certainly. The focus of the draft clauses is to extend the franchise to 16-17-year-olds in the Scottish Parliamentary and Local Authority elections. That will be the purpose of the legislation that the Scottish Government brings forward. Thank you. One of the concerns that was quite apparent in the House of Lords report was about data protection issues for young people, protection of vulnerable people. We extensively covered that in the referendum bill committee because there were great concerns by all the members of that that we would protect people. I wondered about your view as to whether the extensive work that we did in that committee was taken into account by the House of Lords. Have you and your team had any concerns at all about how that was dealt with through the referendum process? The example of how that issue was first highlighted by stakeholders was then exhaustively considered by the committee in the Scottish Parliament, which influenced the legislation that the Government brought forward in connection with the legislation. I certainly have not had any representations of concern about the way in which that issue was handled in the independence referendum. The issues are very important. It is vital that those issues about data protection and privacy, about the protection of vulnerable individuals, are all absolutely comprehensively taken forward by Parliament. The fact that we do not have any concerns expressed to me as part of the aftermath of the referendum is a tribute to the strength of the scrutiny that was undertaken by committees in advance of the referendum. There will clearly be lessons to be learnt from that process. There will be strong foundations upon which our position should be based in taking forward that legislation. We should not just take the view that, because we have it right in the run-up to the referendum, we will automatically get it right in the run-up to the Scottish parliamentary elections, so we should test those issues with just as much rigor. I would encourage the committee to do so to make sure that we absolutely—because the Government's interests will be the same as Parliament's interests—to make sure that there is no breach of privacy, that the interests of vulnerable individuals are properly taken into account, and that will be reflected in how the Government interacts with the committee on that question. I certainly would invite the committee to be very clear on its challenge to the Government on how we take forward that legislation. Perhaps next time that you are down there, you can invite the House of Lords to have a look as well? Certainly. I think that there was one of my observations about the House of Lords report. I did not feel the concerns or the issues that were being raised about the process that had taken place or anything that was relevant from that really took into account what had been a very robust process that was undertaken by the committees of this Parliament and by the Scottish Government. I would like to ask one particular question, because, if incredibly, the House of Lords was not to pass the order today because the order is going in front of them today, what do you think the impact would be on the ability of 16 and 17-year-olds to be able to achieve the vote and get the legislation through in time? If the order is not passed today, I am not sufficiently familiar with the timetabling and circumstances of the interaction between the House of Lords decision and the privy council, but if the order is not passed satisfactorily and it does not reach the privy council on 19 March, there will be no section 30 order before the United Kingdom election. In that context, the ability of the Scottish Parliament to have adequate time to legislate where a section 30 order to be passed at a later stage or if we were to rest on the Scotland bill taking its course, then I cannot see how it would be practically possible for 16 and 17-year-olds to exercise the vote in the 2016 election. The crucial date is can the privy council meeting on 19 March be reached that is fundamental to enabling the Scottish Parliament to then be able to commence its legislative process? The privy council, I understand, meets on 19 March, so timescales are very tight. We will have to, as a Parliament, consider the order next week in order to meet that deadline for the privy council, so I think that that makes it pretty clear about this sort of… My view is that if this order is not approved by the privy council on 19 March, then I cannot see how 16 and 17-year-olds will be able to vote in the Scottish Parliament elections in 2016 because the order will not have been approved, so we then can start our legislative process here. If we were to wait till after the UK election, if we waited for another section 30 order, that would take time. I think that our window to successfully legislate and then undertake the process of registration would be severely curtailed. I think that it would be utterly impractical, and if we waited for a bill, it is completely impractical. Is there any other questions? If there are no other questions, I thank you, Deputy First Minister, for that particular part of it, in the name of the committee's delegated powers and law reform committee, which the clerk had to give me a note about because I can never remember either. We will now move on to agenda item 3. At this stage, I will ask the Deputy First Minister to move the motion that the Devolution Further Powers Committee recommend that the Scotland-Scotland Act 1998 modificational schedules 4 and 5, transfer of functions to Scottish ministers, order etc, be approved. I ask the members if they agree the motion. For the purpose of the record, can we record that the motion was agreed unanimously? I thank you, Deputy First Minister, for his attendance this morning. We will now go into private for a few moments to allow the witnesses to change over. Thank you very much. We recommend item 4 on the agenda today, evidence from three experts on borrowing powers. Our experts today are Professor David Bell, Professor of Economics at University of Stirling, Don Peebles, the head of SIPFA in Scotland, and Philip Milburn, the investment manager Cames Capital and Investment Association. To try to get through this in a structured way, and we are timing this for about half past 10, we should look at this in three ways. The principles that will underprint the framework to enable borrowing by a sub-national government in the specific challenges around that, further powers and revenue borrowing and capital borrowing and what the mix is and what the right appropriate mix would be, and the overall fiscal framework and the institutional bits that will underpin it all. If we try to concentrate in these three areas, I think that we can probably get through what we need to be able to do. I will just ask my colleagues gentlemen to ask you questions as we go along. They may ask you of an individual, but on most occasion it will probably be to everyone on the panel. I am very grateful for you coming along today to give us evidence in helping us to come to our conclusions. I will begin with a general question. The UK command paper containing the draft clauses are relatively silent on borrowing powers to devolve, instead indicating that that is a matter for agreement between the UK and Scottish Governments. Do you consider that legislation should be required in this order to devolve powers in this area? In any case, what principles or structures should underpin the devolution of borrowing powers? To all three of you, please. I do not mind who kicks off. Introduction to the Prudential Code in the local authorities is probably a useful comparator. If we go back to 2000 and 2003 legislation, there was a requirement for a change to primary legislation to enable the significant change that was at that time for the introduction of a more flexible framework. Our expectation was that there would be some indicator and indication that there would almost certainly be some forward notification of change. You are right to observe that the clauses are silent on borrowing powers. I was one of the points that we made in our written submission that, for as much as we are here to talk about borrowing powers and there has been much discussion on borrowing powers since the publication of the Smith commission, there has been nothing firm and fast that would indicate that there is a certainty that enhanced borrowing powers will be introduced. I see no borrowing powers in the command paper, that there are no clauses that would indicate anything that would even determine that there is a forward requirement for enhanced borrowing powers in any way. That said, our expectation about change to primary legislation, if that is going to come at a further point, then what is that going to look like is probably what we are going to go on to debate. The change in primary legislation for local authorities all those years ago was to remove it from a largely prescriptive framework where local authorities were, in fact, advised how much they could borrow for capital expenditure to a framework that was significantly more flexible allowing individual local authorities to determine themselves what was affordable and what was sustainable. That has been the general debate so far, the expectation that that kind of framework would be overlaid over Scotland, but we are silent on fact so far and we are certainly silent on clause. The useful comparison is with local authorities where, and this is my evidence, the committee's primary legislation change was needed. There is quite a bit of discussion of the prudential code in the draft paper. Of course, there are the borrowing powers that are coming to Scotland in relation to the Scotland Act 2012. I guess that there is a real question when we may come back to that about whether they will be sufficient given the enhanced tax powers, and I suspect that they would not be for a variety of reasons. In one sense, it might be a little bit different from the local authority issue, although, in that Scotland, it is relatively large compared with the average local authority in England. There is not necessarily a worry to the same extent that borrowing at a local authority level would overall threaten the UK's fiscal position. Probably Scotland is still relatively small and that would not be the case. Local authority borrowing at the moment is around £83 billion in that set against overall central government borrowing of £1.2 trillion. It is relatively small beer at the moment. It is important to think about the capital borrowing on the one hand and the resource borrowing on the other. However, it seems to me that where we are is that the draft paper has some discussion, but there is nowhere near enough for us to be going on and saying that this is how it is going to be. There is a lot up for debate, it seems to me. There is a lot of work still to be done before we come up with a set of figures that could be agreed on. One of the issues I think probably will be around bailout. I mentioned that in my paper and I argue that difficulties between central and subnational governments are relatively common. I guess what the Treasury will try to be doing will be to avoid difficulties in which it might appear that the UK Government would bail out the Scottish Government if it got into difficulty. If the markets believe that that is the case, Scotland would be able to borrow at a slightly lower rate if there is a belief that there is a backstop there eventually. Whether that needs primary legislation or not, I do not think that I am qualified to say it, but I think that there will be a lot of debate around that issue. A very small amount to add. Thank you for your time this morning. I completely agree with Professor David that my role is to say what the markets would want. The markets will always want as much certainty as possible. The stronger the framework, the stronger the legislation, the more markets will understand, the more markets will therefore charge less of a risk premium. The stronger the legislation is what the markets generically would look for. That is probably a good place to start anyway in terms of the institutional framework. I will begin a discussion with that. If anybody wants to come in, please show me that you want to. It would be good to hear from you and what advice you can give us that would enable us to advise the Treasury or any incoming UK Government what that institutional framework might look like and how it would operate, because that will be the thing that is really going to underpin whether or not we get the credit ratings from woody's and standard and poor's that we require and that the level we require. If you have any advice on that, I think that probably now is the time to let us know. It might be a big question, I know of it. Just one issue. I suppose that there is an institutional argument about should there be some third party that is holding the ring around this particular question, so it is not all driven from the Treasury. The issue will probably arise in relation to Wales, it may well also arise in relation to Northern Ireland and, for all we know, given yesterday's developments in relation to some of the larger local authorities in England, with Manchester getting control over NHS spending. It seems to me that the whole framework is moving around at the moment, and nobody is really quite sure where it will settle. There is a reasonable question to ask as to whether there should be some kind of external body that is looking at borrowing that has the confidence of the markets. That can exert some kind of certainty that Philip was talking about. Unfortunately, my answer probably raises more questions than answers, and I apologise for that in advance, but his typical financial practitioner there. There are quite a few questions that would need answering. One of the most important ones is, what will service the debt? Will it be the Scottish tax revenue or the Scottish tax revenue plus the remaining transfers from Westminster? Obviously, there is still going to be a mix because of who collects. First of all, what services the debt? The assumption is generally that it will be all of the tax-raising power. There is a next question of, where will the interest payments rank? Normally, interest payments rank about equivalent to all other spending, but if you take, for example, the Californian example, admittedly, California was in a fiscal mess. This is why it was set up like this. The interest payments are senior to many things such as teachers' wages, pensions, etc., which is politically close to unpalatable in most countries nowadays, but, again, it is the certainty. All the markets want to do is, if they lend money, have that interest paid and get their money back. There are institutional questions around that. The other thing that I thought was quite interesting is, and Don referred to this, that there is not a lot of explicit language in the command paper, but nearly all the numbers that we have seen are absolute numbers of potential debt raised, be it at the £2.2 or £5 billion that Don has modelled in his entries. I think that an ad valorum limit, so a per cent of GDP or something like that, would, sorry, it is a dreffel English, but future proof the system more so that you do not have to go back and renegotiate any legislation every five, 10, 15 years and get into the same problems the US does with its debt ceiling or anything like that. An ad valorum limit, I always think, would be preferable to an absolute limit. That is very helpful to you, Don. It is worth putting all of this into context. We will reflect headlong into detail on that, and that is maybe what we would actually love to do. David was right to draw attention to the staggering size of the outstanding debt of £1.3 trillion, which is for the UK. We started off speaking about local authorities. £15 billion is the outstanding level of debt, but around about £12 billion of the £15 billion is local authority debt in Scotland, so I think that it is important to keep that sense of scale around that. It is also important to remember that, although there is risk with debt and borrowing, borrowing is not a bad thing. It can be something that is quite significant and important for Governments to take forward and implement policies in a short to medium-term basis, albeit that there is a long-term consequence associated with that. In managing that risk, it is right that there is some formal framework that is going to be a combination of primary legislation, regulation and professional practice, which we can see in other parts of the public sector. In operating that, the point of all of that is to enable Governments, whether local or national, to degenerate the money that is necessary to implement the policies. Importantly, equally, is that borrowing in itself will not give anybody any more money, not one penny more money. All we are actually doing is rescheduling tax receipts, so it is a timing issue, in which case the key concern is one of intergenerational considerations, to the extent to which one generation is benefiting, but further generations may have to actually put the bill for that. Maintain that in context. David, do you want to say something else on that? Well, if I can quickly just say a couple of things. One reason why the Treasury is clearly very interested in this issue is that my understanding is that for international agreements around debt, it is all of the public sector debt that matters as far as the UK is concerned. It is not just central Government debt, it is all other Government debt that includes local Government debt and would include Scottish debt. The Maastricht agreement, for example, is one where limit a set of 60 per cent of GDP is public sector debt. That would include the kind of debt that we are talking about now. Philip's point about the pecking order of interest charges is pretty important. We are already spending, I think, close to a billion out of del on PFI repayments. We have an interesting situation where around £2.6 billion of welfare spending might come to Scotland. You could make a case for some of that going into del, but even welfare spending is coming up against the possibility of where it lies in the pecking order if there is an issue around interest charges and if interest charges have to be the first commitment that is met. There really is a need for some work done on the interaction between the different parts of the Scottish budget, because the introduction of welfare payments changes the landscape quite massively. How Scotland deals with that is extremely important. Five people want to make supplementaries here, so I will try and rattle through this if we can. A small point that was mentioned there, and I want to go back over it just so that I understand it. Philip Mulburn made the suggestion that Scottish borrowing should have to be serviced exclusively from Scottish tax revenue rather than global income, including block grant. The general view is that a strict rule that we ought to apply? Sorry, I have maybe misrepresented there. The markets would need clarity whether it is serviced by pure Scottish taxes, which the mix is changing, or the taxes, including the money that is raised in Scotland goes to Westminster and comes back again. My assumption, and I think that this is a reasonably safe assumption, is that the debt will be raised on the whole rather than on a split part of it, because by definition the larger pool of tax-raising powers you have claim over, the less risk it is. It is almost a definitional aspect of how independent you want this debt to seem. Provided, and this is close to David's point about, will it be fully consolidated into the UK? If the answer is probably yes, then you might as well go for a cheaper debt that is reliant on the whole tax base. If it is going to be non-consolidated or potentially non-consolidated, then you go for the Scottish tax only. My personal opinion, legally given what I do for a living, I am not allowed to give investment advice, my personal opinion is go cheap. I am not in private, so I would do that. However, you do not see the size of Scottish tax revenue limiting the ability of Scotland to use its borrowing powers, other than in the most practical sense we can only afford. Income tax is going to generate about £11 billion a year, the whole of income tax, and you have half of VAT, another £5 billion or so. We are talking about the Scotland Act giving us £2.2 billion potentially to spend on infrastructure, while the servicing costs on that go nowhere near the kind of revenue that you are raising from income tax in Scotland and VAT together. I do not think that in the first instance it would be much finished. You might be right, the key word there is affordability in effect. The likelihood is that there will be an expectation that there will be a consideration of risk across all the basket of taxes, but the consideration for policy implementation would be what is affordable and is sustainable over generations. It is just some clarification back to the start of the discussion that I am looking for. It was quite clear from the Smith report about borrowing powers and looking for a prudential borrowing regime. There was a lot of discussion around that on the commission about how it was felt that that would be a sensible way forward. I recognise that local authorities had more power in terms of borrowing than the Scottish Parliament Government currently had. When I am looking at Don Sipfa's paper in the Executive Summary 1.2, it is talking about a potential omission from the Enduring Settlement document in terms of what was in the Smith report. When we look at the Enduring Settlement document, the draft clause is under the section of borrowing for capital spending. The first clause recognises what the Smith commission agreement requested, but then it goes on to say that the 2012 act already provides the Scottish Parliament with specific powers as set out above. I find that quite confusing because it is quite clear to me that we do not have a prudential borrowing regime. That was what was requested. Then we have draft clauses that say that we already have that power. Can I have views on that? That is exactly right. It relates back to what I said in my own comments. The recommendation from the Smith commission was for the introduction of a prudential framework. The expectation was that that would have translated through to the clauses. It is not there. Despite that, there is still in the command paper discussion as if there is going to be a prudential framework. However, the trigger point that we think is primary legislation or the proposal for primary legislation is not there. At the moment, we can talk about prudential framework. We do not have one. We do not have the basis to enable one to be introduced. The statutory borrowing power that Scotland has at the moment is the £2.2 billion that is capped. It is worth comparing that to the experience of local authorities a number of years ago, where there was a cap that was prescribed by central government. That was removed in the introduction of a more flexible framework that enabled public bodies' local authorities to have regard to affordability, sustainability and prudence, but to borrow at a level that was more akin to local need rather than to central prescription. You can see how that similarity was expected to be overlaid here. Again, I would reiterate for as much as we are talking about borrowing powers. We do not have the infrastructure then set out to enable us to have a meaningful discussion about borrowing powers. There is no proposal for borrowing powers at the moment. We are therefore no further forward than we were. Thoroughly, we would still have to adhere to the £2.2 billion plus in the extra 10 per cent. There is an interesting reference in the command paper that talks about the prudential framework. It says that it was not aimed at increasing the amount of capital expenditure, which is an interesting indication. That may well be the case, but it was aimed at introducing flexibility into that flexibility that, as a country, Scotland would be looking for. So we would be able to administer, rather than have powers to change? Yes, it is restricted, as it stands to the £2.2 billion. Thank you. Really, along the same lines, to understand better the experience of the prudential framework as its work. Clearly, it is a code in which that would require local authorities to have regard, which cannot have a weaker meaning in Scotland's practice than it does in England, as I understand it. Partly to understand how far that has been successful in delivering what was intended. For Philip Milburn, he used the phrase that the market will look for the strongest possible legislation, the strongest possible framework, from a market perspective. The difference between the borrowing provision in the 2012 act and the prudential framework is that significant or not from a market perspective. I have two supplementaries on related aspects. I can talk about the practical operation. There was a fairly seamless move from those of us who are familiar with local authority to call the section 94 regime into the prudential code. The practical operation of it moved from how the Government centrally would specify to each individual local authority how much they would be allowed to borrow, which in effect was prescribed a level for capital expenditure, which was a proxy for borrowing, and local authorities would borrow up to and including that level. On 1 April 2004, that changed with introduction of the prudential framework. From that central prescription, we went to this local flexibility. That local flexibility was placed firmly on the shoulders of not only the chief financial officers, but the local politicians themselves. Rather than being told specifically what they could afford to spend on capital, the responsibility was theirs, which had regard to their strategic planning and their local needs. It was seen as a framework that was not only more flexible but more in keeping with a more strategic approach to how local services should be delivered. The control mechanism was twofold. The regulations underlined the primary legislation, and the professional practice, which was the prudential code itself, was a prescribed code for the professionals within local authorities. It required the chief financial officer to report regularly to elected members and place responsibility for the first time on elected members to be aware of, have regard to and approve the capital plans going forward, which, as I said, was something more akin to central prescription. On 11 years since the introduction, I am not aware of any approval or qualification to the financial accounts of local authorities. I know that Audit Scotland is in the process of finalising a report, and there will probably be a report coming out next year and next month about the borrowing and treasure management in local authorities. My sense is from the information that I am aware of. I am not in Scotland, but throughout the UK, where the potential code is in operation, it has been successful and it has operated as expected. It has allowed local flexibility and freedom to be utilised fully by local authorities. Without oversimplifying, would it be fair to describe the 2012 act provision as parallel to the section 94 provision? Correct. That is a fair comparison. That may be true. They are not all borrowing at AAA, so they are borrowing a little bit more expensively in central government. It is not AAA any more, but it is nearly AAA. I did just specifically want Philip's view as to whether there was a difference from a market perspective between a prudential borrowing regime and one that is capped and directed from the centre. It would be nuanced enough that it would be considered, but it would be way down the list of priorities. I imagine that most people would gloss over that compared to other issues. I am going back to the current theme that I have raised at previous committees when we have been dealing with each of the issues that commit us with and the difficult issues. Are we at the step where what we need to have is those understandings, taking into account the UK influence and the European influence? Before we get to any of the other issues about the level of borrowing, we need the framework in place. If we get the framework in place that deals with risk, link to the level of borrowing and security of the markets and the financial institutions in that framework in place, then there is the potential to agree on that principle within that framework, then the issues of a level of borrowing and how we service that net, how we issue bonds and, for goodness sake, all of that. Is it chicken and egg here? Do we need to settle those issues? Although you have expressed little interest in the institutional frameworks in your paper, Professor Bell, is that not the key to that, the foundation to that and everything else flows if we get some of those things right? The simple argument is that, if that framework is not in place, the markets will take it out on you. If there is uncertainty associated with how, for example, things such as the block grant adjustment are going to work, which is hugely important for Scotland, how the welfare monies are going to be transferred, whether there is going to be any short-run adjustments to grants for political reasons that may be going on in Northern Ireland at the moment. Until the market sees a clear framework, it seems to me that everyone will be paying a little bit more for the debt than they need. I think that you have to go beyond the prudential regime here, because we are now talking about the macroeconomics of Scotland and the UK as a whole, because borrowing positions taken by local authorities do not matter hugely, but the position of the country as a whole matters for borrowing purposes for all kinds of things. We are in this austerity regime, largely because our borrowing got out of control towards the end of the last decade. It is worth bearing in mind that the national borrowing limit stands at £2.2 billion, whereas for local government at the moment, the outstanding debt is £15 billion in effect, so local authority can actually come to the conclusion of considerable greater powers even now than the national government. It is worth reitering, and I cannot agree more with Duncan MacNeill's point, that we need, in our view, the framework that we have to know what it is that we are speaking about. Otherwise, I think that we are then reverted to type the three of us. We start talking about the concerns, the issues, the risks and the problems associated with it. We have to come back to why that is a good thing. The point of the borrowing powers is to enable US politicians to have the full suite of fiscal available powers that they need to deliver positive policies to benefit the people of Scotland. That is what it is about. It is not a technical issue in effect. It should not be a technical issue. We can handle that. However, you have to have the tools to enable you to do your job and to make your decisions. I think that Duncan MacNeill has got to the heart of the matter here. My assumption is that the framework will be put in place at some stage if there is the political desire and will to do so. It is maybe a bit of a bold assumption, but the question is, once that framework is put in place, does it want to be used? There is not much point putting in place if you do not want to use it. What cost in terms of the interest cost and the intergenerational cost that Don was talking about earlier? I mentioned the European agreements that were involved in and the UK relationship that needs to exist to either secure some of that money or whatever. Is there an issue in terms of the whole of Scotland's debt that we need to have some discussion with local authority and that the central government is not going to be using up all that bother and, as a consequence, there is less borrowing for local authorities? My understanding of the way that the debate has gone is that the powers that have been discussed or the flexibilities that have been discussed, the intention is to enhance, rather than limit, or to penalise any existing powers. I would not anticipate that. I think that Professor Bell says that we can go double that cap if we get the frameworks right, so that the cap is hand-described but is low. That needs to grow. If you were thinking about Scotland's debt, what proportion of the PFI debt should be brought on to the balance sheet? That has been a very contentious issue for the UK as a whole over the years. There is about a billion going out each year just to service that debt. There is a good argument for having a total view about the indebtedness of all the public bodies in Scotland. If something goes wrong, who will bear the cost of that? Suppose that one of our local authorities failed to abide by the prudential regime and got into trouble, who would bear the cost of that? Would it be the Scottish Government? One might expect that that would be the case, but who knows? At least I do not know what the answer to that question is. I think that to assume that things will always work out is quite a strong assumption over time. Mr Stewart, let's finish this bit off, because there is something that is not barking here. That is the limit that we are going to have or not. The Scotland Acts talks about £2 billion. The previous committee on that came to a conclusion that it should be £5 billion, if I am correct. Do the three of you support the idea that it should be closer to £5 billion in that respect? Why should that be? I would like to get some of that on the record, so that we can come back to be aware of that. If there is a continuation of the capital grant element as part of the spending review, we will allocate DEL for the next two years, three years ahead. It is normally a resource component and a capital component. You can transfer from resource into capital, but you cannot transfer in the opposite direction. The borrowing power seems to be conditional on how much money you are getting from that source through the block grant. Arguably, too little has been spent on infrastructure in recent years. There is a multiplier argument that money spent on infrastructure has a more long-run beneficial effect on growth. Unfortunately, I do not think that I can give you an answer about how much, until I knew how much capital is coming through DEL. I also mentioned the question about intergenerational burden. We have to be very confident that we are in a position to make decisions that our grandchildren are going to say that that was the right decision to make. We have got ourselves in this much debt, but we have assets, such as the fourth road bridge or whatever, that offset those assets and are the things that the last generation did for us. I think that the answer, in effect, is what we as politicians want to do. What are your priorities? How do you want to deliver it? If it is an investment in infrastructure, that might necessitate an increase from somewhere around £2.2 to a figure closer than £5 billion, but it will ultimately be about what is affordable and sustainable. To talk about fixed numbers, I think that they would just take us into the realm of almost a credit card limit, whereas what we are actually looking at is a system whereby there is flexibility for the Scottish Government to enable it to take decisions depending on economic circumstances, depending on what policies it wants to implement. As I said, what it has to hand is a suite of fiscal tools to enable it to take all the necessary decisions in effect. I know that it is maybe unsatisfactory and that I am not giving you a specific figure, but I think that it is a flexibility that we are actually looking at. Whether it is £2.2 billion or whether it is £5 billion or greater is irrelevant compared to what it is that you will want to do on a national basis. Just to add to that, and I alluded to this earlier talking about Advilorum, I would try to avoid a hard limit, be it £2.2 billion or £5 billion, and I would veer toward some form of percentage of Scottish GDP. Obviously, that is what we need negotiating, but so that it can either put in place a counter-cyclical measure, and if you assume that there is a downturn in recession GDP shrinks by 2% to 3%, then that starts to be a sensible sort of area. The second question is exactly what Don said, the serviceability of that extra debt or the service cost of it and what effect that has on the future years after that as well, but I would always try to look at a percentage to make sure that this could last for the next 10, 20, 30 years, assuming the Scottish economy, as everyone does, which should grow nicely over that period. That seems to be a progressive and sensible way to go about it, but of course Treasury might not see it that way because they want to put limits on it and that is what they want to do with the discussion about it with Stuart. The question that I was going to ask is partly been answered now after the last couple of minutes, but there is another element to it though. The word certainty and also the other word of uncertainty, as we mentioned this morning. In terms of the £2.2 billion limit, it could be argued that that provides an element of certainty in terms of what the A Government could do, whereas, if Mr Milborne suggested in terms of the percentage of GDP, if he had that and there was an economic downturn at some point in the future, that could then be argued that that provides an element of uncertainty in terms of what borrowing could actually happen for a Government. Is that that? No, I completely agree. You were right. The absolute cap of say £2.2 billion provides certainty. Please do not take this as flippant in any way whatsoever, but £2.2 billion is such a small amount of money in the international market sense that it would also be implicitly assumed that if the Scottish Government did get into borrowing difficulties, that it would be so small that there would be some form of bailout from the rest of the UK Government. That would be implicit, not explicit, assumed by the markets. Another element to that as well is that economies are cyclical. In a hypothetical situation, if the £2.2 billion limit was there over the course of the last seven years and at some point in the future, if the £2.2 billion was there, then the Government would have had that element of certainty and flexibility to then invest. However, if it did have the percentage of GDP figure and the economy went down, that could be argued that it should decrease the Government's opportunity to stimulate the economy, particularly if it was going to be an infrastructure investment. Do you mind if I go first on that one? This is not any comment on the Scottish Government whatsoever. Governments around the world often talk about balanced budgets and have their debt-to-GDP and fiscal deficit ratios, such as the Maastricht 3 per cent fiscal deficit, 6 per cent debt-to-GDP. What Governments around the world always forget to do is pay back the debt in the good times. They find themselves banging up against the limits exactly at the time when they should be spending. The limit would almost be there to exactly what you want to spend when you can't, but the idea should hopefully be some form of prudence that you do pay it back in the good times. That's the hardest bit. It's good fun spending money and building infrastructure. It's a popular thing to do. Paying it back is the hard bit. I would argue that the GDP limits are sensible, provided that there is some form of framework or agreement to make sure that budgets are balanced through the cycle, so that you have the flex to use that firepower in the downturn. You might want to not have it as a share of current GDP, but a cyclically adjusted GDP, so that you can take the cyclical effects out of it. Of course, that opens up a whole bunch of arguments that were played through in the last decade as to exactly what the cyclically adjusted level of GDP was. That's certainly an issue. One thing that we've glossed over in the last few minutes is the issue of the borrowing powers under the Scotland Act 2012. The 2.2 is for infrastructure. It's not mentioned that it's for combating the effects of recession. There is a provision for resource spending, which is really about where you get it wrong as far as the forecasts of your tax revenues are concerned. In my paper, what I tried to do was to say, what would be the worst-case scenario for getting it wrong? That would create an immediate problem, as it did in the UK in 2009-10, when income tax revenues went way below what had been forecast for them. You've got a piggy bank to deal with that issue, as well as the longer-term capital infrastructure issue. The way that the enduring settlement document goes, it tries to make that distinction fairly clear. I think that Lewis has a short supplementary. Just very quickly to pick up on David Bell's earlier point about what would happen if a local authority borrowed responsibly, and the assumption is made that the UK Government would bail it out. Is the implication of that comment that there needs to be some statutory backup to that, and do you think that the same would apply in relation to UK Governments bailing out a Scottish Government that's got it financially wrong and found itself in that condition? One view that you could take is that, as long as the Scottish Government borys much as it likes, it is absolutely clear that the UK Government will not bail it out if it gets into difficulties. Countries find that incredibly difficult to do. To stick with a no bail-out clause, we've seen that play this week with Greece. They thought there was a no bail-out clause. The Germans were very strong on the issue, but, ultimately, another compromise has been found. It is an extraordinarily difficult thing to do. That's presumably because, as long as Scotland is part of the UK, part of the UK public sector borrowing profile, then it's in the UK's interest always to bail out. There's this too big to fail argument, and whether Scotland is too big or not, doesn't matter. It's not in the UK's interest for Scotland to get into fiscal difficulties. That's absolutely clear. That might affect the market thinking about debt. Just to pick up on the point that has been made about local authorities and the possibilities that could transpire, under the 2003 legislation, there is a reserve power for the Scottish Government, which means that it can actually revert to central control. It might be that the primary legislation that comes along might have some sort of protective clause like that. Mark, I was going to come to you, but just to keep political balance, I'm going to go to Alison Johnston first and I'll come back to you. I think that I'd probably just like to pick up on Lewis MacDonald's question there. You suggested in your paper that bail-outs are actually more likely, where the central and sub-national Governments perhaps share the same political persuasion. Is there international evidence that backs that up? I'm happy to share the paper that I was drawing that evidence from. There seems to be no regularity around the kind of fiscal arrangements that exist between national Governments and sub-national Governments. The researchers who looked into this didn't find that it was a particular form of federal system that resulted in the need for bail-outs. That doesn't seem to be it, but they did find that it was more common that where the sub-national Government and the central Government shared the same political allegiance, bail-out was more likely. It wasn't actually the too big to fail argument, it was, are you in the same party argument. Obviously, bail-outs do occur in cases in which they don't share the same political. They do. I was quite surprised at the countries that I listed. I think that it was Sweden, Germany and Australia were three of those, and you would assume that those are countries that are fiscally responsible. I would appreciate seeing that paper, certainly. I'd like to go back to Linda Fabiani's line of questioning. It's just about the lack of a clause, if you like. Professor Bell, you state that borrowing powers are an essential part of any fiscal framework, but Don Peebles suggests that the draft clauses don't provide for an extension to the existing powers. Are you surprised? Do you think that that has just been an oversight? Is it a surprising oversight? The assumption of making is that it's either an omission or it's a key consideration by the draft person of the command paper that they're looking for some other form of arrangement. They do talk the language of a prudential framework in there, and you could be forgiven for thinking that a prudential framework of some form, when the hands of borrowing powers has come along, but there is no substance, there is nothing that would point us in that direction. In the absence of anything else, I am assuming omission at this stage. Do you think it's unclear as to the intention? I'm unclear. I thought that the Smith commission was clear. I thought that the command paper picked that up, but there isn't the obvious corollary in the command paper, which I thought would have been given the direction of everything else that would be a clear clause saying what would actually happen. I agree with Don, but I wonder if it was just a victim of the hurried nature of the drafting, that agreement couldn't be reached in the time available. Do you review Mr Milburn? I will stick with the experts if that's okay. Thank you, convener. Alison Johnstone's questioning leads nicely on. Obviously, at the moment, there is a capital grant provided to the Scottish Government. I think that the expectation that there would be additional borrowing powers as a supplement to that. However, there has been some suggestion that it may be a replacement, which obviously would provide for restricted flexibility in terms of capital investment. What would be your understanding of where that is likely to go in terms of the capital grant that currently is provided to the Scottish Government? I think that the wording of the enduring settlement document wasn't entirely clear on that point. That is what has happened to local authorities, as Don has been explaining. I guess that the big question would be what happens to the block grant if there is a decision about a change in the status of the del capital element of that block grant. Does the block grant stay the same and will Scotland get to decide on the allocation? That allocation is always set up in the spending review. The allocation between resource and capital is set up in the spending review by the Treasury. Each department gets a resource allocation and a capital allocation, and it cannot reduce the capital allocation. It is another bit of uncertainty, I am afraid, but we are not absolutely clear about whether Scotland might go just towards a prudential regime approach, but we are not absolutely clear what that might mean in relation to the size of the del grant. To take away the £2.3 billion or so would be pretty drastic. For example, it might be in your consideration that that £2.3 billion would become part of a lump sum resource allocation and it would then be open to a future Scottish Government to make an allocation from resource to capital. It can obviously make resource to capital allocations at present, but there is a capital del identified. Are you suggesting that that identification may go and it would be for the Government to decide its own capital allocation from within our resource budget, or are you suggesting something different? That is a possible outcome, and I am just speculating around that. In a world if we are depending on what happens in relation to the political outcomes in May and the spending review outcomes following that, it might be that further cuts are being made and the Treasury decides to allow departments themselves to determine del and resource limits, but that is just speculation on that part. I would be grateful for perhaps Mr Peebles and Mr Milburn's input on this. It does concern me that there appears to be a lack of clarity in respect of this. Obviously, in terms of future planning and, obviously, from this committee's perspective, in terms of determining whether what is going to come to Scotland is, first of all, matching up to what was agreed in the Smith commission, but also in terms of its appropriateness for use, do you agree that there needs to be some further clarity around what happens to the capital grant allocation as it currently stands? Against the background of the whole consideration of borrowing and capital expenditure, there has to be clarity. I think that we have to be clear as to why we would actually want that in effect. Again, I come back to the point that is a positive thing, and we do not want the necessary to get caught up in the technicalities of the HM Treasury-led terminology. Like we can do that, we are actually looking for the fiscal tools to enable you to deliver effective government in effect. What that might mean is that, depending on the state of the economy, depending on what the policies of the day are, it may well be that in certain years you borrow more than you would previously, or it may well be that there is a shift from one resource to the other. That is the kind of freedom that you are actually looking for, but it is going to be wholly dependent on what, as politicians, you decide that you want to do, rather than what another department decides that you should be doing. I come back to the point on the comparison with the 694 and the Prudential Framework Arrangement in Local Authorities. That was the whole point that has shifted central prescription with clarity from government to the local arrangement in Scottish local authority. I would see a similarity that that could undertake the same from central government to the Scottish government. Again, I reiterate that it is part of the big unknown at the moment, for a couple of years' time, is the size of the block grant. Obviously, a lot of the taxing ability is already known. The big unknown is then what the compensatory decrease in the block grant is. That is the bit that obviously needs—forgive the terminology but—nailing down first before you then even know if you need to borrow or want to borrow. However, I completely echo the comments from earlier that, once you have your steady state, how much you have, roughly each year, to spend, having that flex around it is a necessary power in order to be able to have local tools, local Scottish-level tools, in order to do counter-cyclical or infrastructure-type investment. My personal view is that, as well as the on-going, how much you have to spend year on year having that capital extra power in order to be able to do big projects, implement big projects, if one so desires, is a necessary tool to have that more flexibility that is desired. The concern would be if it were to go the other way from what Professor Bell has suggested might happen, is that if that £2.3 billion were to be removed and essentially had to be replaced through borrowing, it means that you are borrowing £2.3 billion just to stand still before you can then exercise further borrowing power. It is actually worse than that in that you are borrowing to stand still and then the interest on that will start to compound. It is even that bad. I have got a couple of quick supplementaries in this area and I want to just get into a couple of their areas before we get to the end of the session. I think that Linda had a supplementary and I think that Alec is right. My supplementary might be a very confusing one. It was just when Mark was talking there that something struck me about, if you only have the admin power and not further fiscal power and you are relying on flexibility within that admin power, how does that then affect things such as the treasury rules on end-year flexibilities that were changed a few years ago, clawback? Would you have to set up particular types of borrowing that was purely drawdown? Would that be taken into account in those annual calculations that are carried on? David Mick was talking about the changes to end-year flexibility in these papers. Those changes took place because the Scottish Government managed to successfully argue that Scotland was actually building up a considerable underspend on its Dell budget and that there was a clear case that that should be spent and it was in subsequent years. That is part of seeking clarity around all of that. As I point out in the paper, you have on one hand forecast errors around the taxes that you may generate. If we make the kind of errors that were made in 2009 and commit to spending on that basis, then there is an immediate need to borrow on that for that reason. On the other hand, I do not think that people have noted that in terms of the current debate. You have also got spending risk in that you may not spend in a year what the plans say you are going to spend. You have the forecast error or the forecast risk, you have the spending risk and you need a short-term facility to deal with that. The assumption would be that you would have to be determined by the framework that we are all talking about, but it does not exist. We are not really sure what it really means, but you would think that that would have to be dealt with with errors of that kind of a short-term nature that would have to be dealt with in two or three years, whereas borrowing for capital reasons would be longer-term borrowing, which might go to the market. All that I am doing is adding to the uncertainty, and I am sorry about that, but I think that it reveals further the need for a clear framework that we have all been talking about, that all of those issues together can be discussed. I suspect that it has to be done at the UK level, because it is not only Scotland that is in this game. It may well be Wales if they get the income tax power and Northern Ireland if they get the corporation tax power. I think that that is a very important factor. Is the clawback at the end of the year for the underspend in any future regime prudent to not have that clawback as such because you want to be able to hang on to that money for future years so that one could almost target to have an underspend each year? Solving an underspend is much easier than solving an overspend. The reason why we are using terms such as end-year flexibility and clawback is because Scotland does not have the power to hold reserves as such. It is part of the HMT overall look on an annual basis rather than a long-term basis. One of the recommendations that we have made to the Smith commission is that, again, part of that significant fiscal suite would be the power to hold reserves. It is a reference to reserves, a short or small reserve in the command paper, but not the full power that we would be looking for, or we think that it is necessary. I think that we have got into the area that I was going to go in. It is great fun to have capital borrow and powers because you can spend money on stuff and put it on tech. Good housekeeping requires that we address the revenue issue. As you mentioned, there is no power to hold a reserve. What proportion of Scotland's borrowing powers is going to have to be held in reserve in order to ensure that we can overcome any tax volatility year on year? You are right to refer to volatility because the income base increases by way of power. Volatility will be more of a consideration. That will have to be factored into any calculations of affordability and long-term sustainability. The Government will consider the extent to which all the revenue resources have to be utilised in a single year or the extent to which looking ahead to what it thinks may happen economically in the future. It has to set some of those revenue resources aside to build up a reserve such that it can draw down from that reserve in the future. There is no statutory requirement nor is there any specific guided requirement about percentage of reserves that should be held. That is down to local determination and consideration of what the economic circumstances and known information is at the time. Would it be fair to say that the risk of tax volatility is relatively low in the proposals compared to what it might have been, for example if oil and gas revenue had been devolved? The volatility would have been so big that the borrow and powers required to cover that year on year would have been disproportionately virtually unachievable. I have got no evidence to give on that specific question, I am afraid. On pure economics, no political point at all, yes, is the answer. Of course, if oil and oil revenues had been devolved, it would have been out of volatility. Good volatility in the up years and bad volatility in the down years, but yes. The rough numbers—I do not have them in front of me, sorry—under what has been devolved under the command paper, the tax take will become more geared to economic growth, just Scottish economic growth than it was before. It will go up from the high single-digit pence in the pound to mid-teens pence in the pound for every extra 1 per cent that Scotland grows and how much extra Scotland has spending power because of Scottish growth rather than UK growth. If oil was included, that would have added enormous volatility. I tried in my paper to work out a kind of worst-case scenario for income tax volatility, and that is based on the error that was made in the budget forecast, I think, for £8.9 or £9.10, and what actually happened in terms of income tax revenue. If you translated that across to the Scottish income tax take, if Scotland gets all of the income tax take, that would be costing in the high £400 million, that kind of area. I suppose that probably was the worst post-war shock to income tax revenues that has been experienced. Alex, you are okay? I guess that somebody has said about making sure that you do the investment at the right place in the good years. If we manage things properly, I can manage things properly, then that starts to manage out the volatility issue if you have sufficient reserves in the system to be able to deal with that through the good years. The good question that I wanted to ask Philip in particular was, in your paper, you suggested two different ways of treating the expenditure in Scotland in terms of balance sheet issues. One is a balance sheet for Scotland approach. To Dawn, I apologise, it is not Philip. The other one is the whole of Scotland accounts. I could see you starting to wonder if I said that in my paper, but it was Dawn. You suggested these two different approaches. What do you think the best approach would be? I think that the two things that we focused on—we have come back to accountability, that is what we are actually interested in, because if we think about the extent to which there are going to be new powers, there are going to be different things going forward, both on expenditure and on income, does that mean that the old form of accountability would be appropriate? In some cases it might be, but if we think about the proposal as a country, we do not necessarily report as a country. We do on statistics, but we actually do not on audit accounts. We heavily favour a balance sheet for Scotland, which would form part of the whole of Scotland accounts, so that we can assess the performance of the country overall, the public services of the country overall, something that we are not able to do at the moment unless we aggregate the audited financial statements of the nearly 200 public bodies that are actually there, so we favour a whole of Scotland accounts. Can I ask you a question specifically about—I think that I have got you right this time that I am asking you this question? Obviously, as Scotland begins to get these powers, the knowledge and interest in the markets will begin to emerge. I am not sure, from where I sit certainly and I do not have enough information, to know that the markets are beginning to be informed about what Scotland is going to get. Is there a job for the Scottish and UK Governments to begin to warm up the markets so when we do enter into this situation, we are able to be entering in a much easier and smoother process? Excuse me, I lose my voice there in shock. The short answer is yes of keeping in touch with the markets. Again, to emphasise the amount of debt that has potentially been able to raise is—if it is just £2.2 billion—is very small internationally compared to, say, the £1.3 trillion of UK debt out there. Again, it is that the market loves certainty. The more information you give the market, the better and staying in constant contact. In terms of the nuances of if this all goes ahead and the Scottish issuing entity then wants to issue debt, I think that the necessary steps there might be better for another occasion once all the other bits of the framework are in place, but a simplified version is get together a presentation pack, trot round Edinburgh, London and a few other centres and show people the finances, the balance sheet that Don has been talking about, just give people information that they can judge. The strength of the institutions, the strength of the legal system—all of these Scotland will score very well on, by the way. The strength of the fiscal position, none of it is particularly Scotland-specific, it is just another country or, in this case, a subnational issuing entity that will want to issue debt to the markets. The more information, the better, but a lot of what we are talking about is arguing about an odd half per cent of cost on the debt here or there, not on the difference between 2 per cent and 10 per cent, but we might be arguing between 10-year debt. This is an estimate and nothing more at the moment. We are arguing the difference between 2.5 per cent and 3 per cent interest cost in terms of what the private market with information will do. I add some support to what Don has just said about getting accounts for the whole of the public sector in Scotland. There are accounts for the UK's whole, called the whole of government accounts. One of the things that that does is to take into account pension liabilities, both in the state pension and public sector pensions—actually, I am not absolutely sure that the state pension is in there—but if you are going to take a view about what is affordable going forward, those accounts can sometimes prove quite salutary in terms of commitments that are forthcoming that people have not quite figured out as yet. Thank you very much. It has been a very helpful session this morning. Certainly, I think that a number of you have said that all you have done has raised more questions and more concerns, but that is still important. I am sorry, Stuart. I am not going to come to an end of this particular part of the discussion, but I would like to say to some whole work if that is okay, because if you have time—I realise that I am borrowing a bit here to use that terminology—we had a discussion at the beginning and it has been touched on all the way through about the institutional framework and what that looks like in budgetary terms and regulatory perspectives, what the new regime would be, who borrows, who regulates, who scrutinises, how the market is reassured. If you have some time, gentlemen, it would be useful for us to hear a bit more from you in written form about any advice that you could give us in that way, that would be helpful to us. It would also be helpful in a later date to the finance committee, and they may be asking you the same thing, so forgive me if they are. Thank you very much for coming along to give us evidence at this time. That is the end of the evidence session. We are now about to go into private, and I thank the panellists for their attendance. The next meeting of the committee will be on Thursday 5 March, when the committee will take evidence from a range of experts regarding the draft clauses on the Crown Estate. I close this and we are now moving to private.