 Fel ydych chi fod yn gwybod a llwyso y 17 ym 2014 o'r Ffynans Cymru? Efallai y gallwch yn fawr i ddim yn bwynt, sydd eich tymp oherwydd mae'n gweithio'r rhan o'r holl. Rwy'n oedd ddim bod wneud symud o phollyd i'r cyffredinol. Annabelle Ewing yn paru'r Ffynans Cymru'r wneud. Dwi'n gweithio Annabelle o'r Ffynans Cymru. A amplified yn eich hwn yw'r firsio y tîm yn teimlo. Rwy'n i'n ffion. First time you have been a substitute, so I invite you to declare any relevant interests that you may have. I would simply point to my entry in the register of interests, and for the sake of completeness, I am a member of the Law Society of Scotland, and I hold a current practicing certificate. Thank you very much for that. We move on to agenda item 1, which is a decision on taking business in private. Maen nhw rydyn ni'n meddwl i ddaf i ddatganiadol o'r mwy o wорod cyffaint mwy i drio graf o blodau. Rydyn ni'n meddwl i ddominion o'r mwy o blaen adigwmeddau. Felly, mae gennym i ddyn nhw Rhym Gwlaffynau Ffionwedd y Pwge ni'n meddwl i ddod of inclusion Scotland? Members have received copies of written submissions from both witnesses, so we will go straight to questions from the committee. We are fairly pressed for time this morning, and I would ask that each member restricts his or her questions to no more than 10 minutes. I will set the example at the beginning. I will make it quite strict on this because the session finishes it. We have to finish this at 10.45, because John Dickey is going to another committee this morning immediately IeudeUsent Gwaith Siarad Scotland wiil do hefyd am y gwaith ei leziad. The 2010 child poverty act, which, as I understand it, was intended to eradicate child poverty, and you used that word, eradicate by 2020. First of all, I'm right in thinking that eradicate means still 10 per cent of children who are going to be left in poverty, but more substantially is this achievable. It is still to reduce child poverty to 10 per cent of children living in relative low income by 2020, so that's the headline target. There are other targets to be met as part of the act as well relating to a combination of relative low income and material deprivation relating to persistent poverty and relating to absolute low income, but you're right about that headline target to reduce to 10 per cent of children. Is that possible? It should be possible. We have unusually high levels of poverty here in Scotland and across the UK. Other countries have levels of child poverty that we would count as eradication, so, for example, Norway and Denmark have come close to, if not below, 10 per cent of children living in poverty, so it should be possible. The other key thing to say is that real progress was made towards meeting those targets since the initial commitment to eradicate child poverty was made at UK level back in 1997. Real progress was made. In Scotland alone, 160,000 children lifted out of poverty up until 2011-12, a 44 per cent reduction in child poverty, although it has to be said that, even if those gains, those that progress had been consistently followed up, it would have actually been in 2017 before child poverty was eradicated, but clearly progress was in the right direction and policy worked. Investment in child benefit, tax credits at UK level, introduction of national minimum wage, support to parents to move into work, introduction of improved childcare, support both at UK and Scotland level all worked to reduce levels of child poverty and, perhaps more importantly, worked to improve measurable child wellbeing. Scotland in the UK's position on child poverty and on child wellbeing improved relative to other countries in quite an unprecedented way, but, of course, we now know that the direction of travel looking ahead is far worse. The reality is that the current approach that is being taken at UK level to tax and benefit policy is likely to see up to 100,000 children pushed into poverty, so an additional 100,000 children living in poverty by 2020 rather than the reduction in child poverty that would be needed in order to meet those 2020 targets. The challenge, I suppose, for government at UK and at Scotland level, but at UK level, given the big tax and benefit leavers that lie there and given that it is those leavers and the policies around tax and benefits that lie behind that huge increase in child poverty that is forecast and that is not forecast by us, that is forecast by the Institute of Fiscal Studies that have modelled the impact of tax and benefit policy on levels of child poverty in Scotland and across the UK. On the position that is just inevitable that by 2020, whether Scotland is running the show or UK is running the show, we are just not going to meet this target because there is just not enough money to fix it? We need a fundamental change of approach. Wherever powers end up lying post 2014, we need to see a significant shift in the way that we use our tax and benefit policy, so that is about investing again in child benefit and tax credits and the financial support that families need and ensuring that those resources are put in place. I think that it is very difficult now across the board to realise that it would be very difficult given where we are now and how few years there are to 2020 to bring about that sea change. We could certainly change the direction of travel very markedly. If we could just do one thing, what would be top of your list to do? One single, it is always a hard one. Again, this is more directed at UK level, currently where powers lie at UK level, is that we need to reinstate that link between operating of benefits and tax credits and inflation. That link has been broken, which means that those families both in and out of work who rely on tax credits and benefits for substantial part of their income are seeing their incomes fall further and further behind relative to the actual cost of inflation and earnings, as earnings start to increase again, hopefully. Mr Scott, I know that you are in a slightly different area. I have a specific question for you as well, but if you want to comment on anything that has been said so far, please feel comfortable. Families with disabled children are even more likely to be living in poverty than those of the general population. On top of that, the UK Government and the Scottish Government are committed to implementing the UN Convention on the Rights of Disabled People, which states that disabled people need an adequate income to live on to be able to participate fully in society. Exactly the same situation is arising where more disabled people are expected to be living in poverty over the next four or five years, because of the range of benefit cuts where over half the cuts are going to fall on disabled people and their families. It is exactly the same scenario even for adult disabled people who are being faced. The direction that they travel at the moment is going to put more element into poverty. That could be reversed both at a UK and at a Scottish level, with a different approach to how tax is collected and how you view benefits bending. Instead of seeing benefits bending, as we say, as a safety net, I think that it should be seen much, much more as something to support people who participate in society. If you view it that way, you make savings in other areas and you increase revenue. It is like the Scottish Government's childcare strategy. If you get more women into work, you bring back in the additional revenue that pays for that. If you get more disabled people participating in society, you reduce health and care costs and you increase revenue as they participate in the workplace, rather than as at a moment where more than half of disabled people working age do not work. Is there a timing issue there? You said just now that we need to view benefits differently. That is just our attitude, and you use the word investment. We should treat it as investment in the paper, which is fair enough. You also said that such investment would cost money in the short term, but would lead to savings in the longer term. Do you have any suggestions on how we find that money for the short term? The HMRC, down south, has found £28 billion more in the last year through chasing tax avoidance and tax evasion. That shows what can be done if you apply yourself to the problem of increasing your revenue sources so that you can make that investment in your people to get them out of poverty. By a whole range of means—it is always difficult when you put it in the spot—to say that there is one way of doing it, because I do not think that there is one way of doing it. You have to have a range of measures to assist people out of poverty, but one of them is to view them as citizens who you want to participate in society. Once you begin doing that, people get jobs not because they go to the job centre. The vast majority of people who go into work get jobs because they word of mouth. If they do not participate in society and do not meet other people in employment, they do not hear that word of mouth. The first thing is to get them out and get them active. In various activities, volunteering has been one of the prime ways of moving from a situation where you are doing nothing to one where you are participating, you are meeting people in employment and you begin to hear of those opportunities. I am just on the issue of whether we have the resources to invest in the social security and the financial support that families need. Of my paper, I pointed to the UK Treasury's own analysis of the cumulative impact of budgets since 2011. It demonstrates that the combined effect of tax and benefit policy has been to increase the incomes of most of those in the top half of the population, the wealthiest half of the population, and to reduce the incomes of most of those in the bottom half of the population. Clearly, there have been resources there in the approach to public finances that have allowed us to increase the incomes of those in the wealthiest half of the population, but continue to cut the incomes of those in the bottom half. It is those cuts that lie behind the forecast increases of child poverty, so there are political choices rather than inevitable consequences of needing to cut the deficit or approach to balancing the public finances. I said that I was going to be disciplined, so I have used up my 10 minutes. John Dickie has already referred to the IFS forecast of an increase of 100,000 more children in Scotland living poverty as a result of UK Government tax and benefits policy, but I want to tie that to something else in your paper, John, because you refer to analysis for CPAC suggesting the cost of child poverty in Scotland alone amounts around £3.5 billion. Presumably, with this upward trend in more children coming into poverty, this figure could grow, but I wonder if you could quantify that a little, what you mean by this figure, what you mean by these costs? I mean, what was done, this is work that has been done by Donald Hirsh at Loughborough University at UK level commissioned by JRF, so it looks at what are the additional costs that child poverty generates, the levels of child poverty that we have generates on the public purse, looking first at the additional cost of services, and what they did was look at costs of services, social services, health, housing, education, what are the additional costs that incur, and they looked at areas of where there were high levels of child poverty, and what the additional costs there are and quantified that. So it is the additional cost in terms of service provision, basically picking up the pieces of child poverty, picking up the pieces trying to fix the damage that growing up in poverty costs in terms of children's health, their wellbeing, their education, but to also look at what is the lost income in terms of tax receipts that are the consequence of the reduced chances of likely diverning less as an adult if you have grown up in poverty, and also the increased spending on benefits that are the consequence of being more likely to rely on benefits. So combining those costs, costs of services and lost income, we come to that cost. It is interesting that the academics behind the work describe it as a cautious estimate of what the costs are, and of course these are the quantifiable financial costs, not taking into account the personal costs, the actual costs to children's experiences and family's experiences that come about as growing up in poverty. Where do you refer to lost income, lost income for the state through taxation? Yes, so this is my other way. The flip side of that of course is that it's a lost opportunity for the people themselves because they're not in employment and the rest of it, so as a result of these current policies being pursued by the UK that's going to be even more the case for more people in Scottish society presumably. Yes, absolutely, and then the figure for across the UK was in 2013 the estimated cost of child poverty £29 billion, looking at the increased levels of child poverty forecast by the IFS and taking those into account, then the figure for 2020 would be £35 billion a year, the costs of picking up the pieces of child poverty. That was done at UK level. In terms of the Scotland figure, that was broken down looking at levels of child poverty in local authority areas across the UK. I'm pulling those together for Scotland to come up with that figure. I should actually have a figure for what the estimated cost for 2020 would be if we see the forecast increases. Both your papers are quite critical of the UK Government's handling of tax collection. You're both critical of the amount that's lost to avoidance, fraud and late payment. I suppose that the question is there for both of you. As you know what lessons Scotland can draw from this, particularly if we're in the post-2014 context where we have more substantial taxation powers. One thing is to invest more in tax collection. There are, I think, 400 officers in HMRC who are charged with pursuing tax evasion and avoidance. There are 4,000 officers in DWP who are dedicated to finding fraud in the system, and the fraud in the system in the DWP is minute compared to tax avoidance. We're talking about maybe £1.5 billion a year, as compared to estimates anywhere up to £80 billion a year, lost in tax avoidance and tax evasion. The investment in catching those who are avoiding and evading paying tax is just not the same as the investment that we put into chasing people on low incomes on benefits. The key thing is that whichever level tax powers lie is important that people have confidence that people are making the contributions that they're meant to be making and that those who have the wealth and the resources that could be making a contribution and are needed, so desperately needed, to invest in the infrastructure that we know is required for a society free of child poverty in terms of our particular focus. It's absolutely vital that people have that confidence when we have robust systems in place to ensure that that tax is collected and that people see it as a positive thing to be contributing to the resources to your society that are needed to maintain a level of society that doesn't have the levels of poverty and inequality that we have at the moment. Bill refers to investing in collection which is obviously a very important point, but it's also about the culture of the tax collection agency and the government behind it. We know that the Scottish Government has already put in place revenue Scotland and it's got the general anti-avoidance rule for the very limited tax powers that are coming our way under the Scotland Act 2012, but this idea of a general anti-avoidance rule that doesn't have lots of rules which create loopholes and rest of it is something that you would welcome and think should be applied on a wider basis? I just look at the amount of investment and adverts on the television, radio, on the street and billboards etc in the newspapers about benefit fraud. Benefit fraud shouldn't happen. Nobody is saying that it should happen, but there are millions and millions of pounds invested in telling the public that if you think that your neighbour is doing that, tell us about it and we will chase him. I don't see that level of investment in saying why aren't people paying their fair contribution, only what they are expected to pay. At the end of the month, when my wages are taxed, all tax national insurance goes straight to the exchequer and yet there are people who can avoid paying their fair share through going to a tax lawyer or a tax account. I just think that they should be paying their fair share because the casualties are the children who grow up in poverty, whose life chances are absolutely blighted and whose life expectancy is shortened by 20 years. That's the consequence. I think that people should be woken up to that. Tax avoidance and tax evasions are not victimless crimes. They do have an impact on other people living in society. I have about two minutes left from here, so I'll ask another question. I thought that you raised an interesting issue in your paper, Bill, about the access to work issue. You said that, essentially, Scotland was underrepresented in terms of the numbers of disabled people who should have benefited by that programme. You said that there should have been about 3,450 people through the programme, but there was nearly 1,000 less. Can you just talk us through that? That isn't an issue that I was particularly aware of. Essentially, your access to work is supposed to be there to help people entering employment and maintaining employment who are disabled persons. It's there from the DWP. There's so much spent throughout the UK. The highest level of spend is in London and the South East and the lowest level is in Scotland. I don't understand why that should be the case because we have more disabled people per head of population than most other areas of the UK, so you would expect that it would be higher spend here rather than lower per head of population, but it's the other way around. I can't genuinely explain that. Again, it may be down to attitudes to officials or particular rules and procedures in place that are being interpreted differently in one region to another, but, certainly, if you look at spend per head of population, it's much higher in London and the South East than it is in Scotland. That has a consequence, because it goes on later to say that research has done estimates that for every pound spent on access to work, the Treasury gets back £1.48 in revenue. That is an investment that we know absolutely results in higher tax and national insurance returns. For every pound that you put in, you get £1.48 back, and you can ask any investment analyst to tell you that that's a very, very good rate of return, and yet we're not spending it. When Liz Sace did the review of employee services and recommended that employee factories should be closed, it was on the understanding and on the consequent recommendation that the money that was saved by closing the employee plants should be reinvested in access to work. There has been a slight improvement in the amount of money going into access to work, but there is nothing like the savings that the UK Government has made through closing its employee factories. If that investment was made, there would be far more disabled people who could get into work and maintain their employment than there are currently. The single greatest cause of disabling in over 50s are strokes. It can be quite difficult to return to work afterwards, because you may need adjustments both for speech and as a consequence, paralysis may not be as accessible a workplace as it was before for you. That could be overcome by access to work investment, and we could return people to useful work and get revenue returns, and we're not doing it. I think that we need to do more to support people both to maintain their employment and to get into work. As I said, there is a tiny proportion—0.4 per cent—of Scottish working-age disabled people who get access to work support. Increase that to 3 or 4 per cent, and the revenue returns will pay for itself, more than pay for itself. Michael McMahon has got some. Can I just start by trying to get a baseline in terms of what we discussed here when it comes to talking about poverty levels? I was reading an article recently where there was a warming given that when you're comparing country A to country B, you have to be mindful that country B may not count poverty in the way that country A does. Is that something that you're aware of? Is there a baseline by which we can make accurate comparisons between the level of poverty from one country to another? The internationally accepted comparison is using those numbers of people living in households below 60 per cent of median income before housing costs. We prefer the after housing cost measure because that gives you a better picture of what families are left with once housing costs have been paid, which doesn't quite often reflect the actual standard of living that they're enjoying. Across Europe and internationally, the 60 per cent median income before housing costs has been accepted as a useful tool for measuring progress and levels of poverty across Europe. When I make those comparisons between Scotland, the UK and other European countries, that is based on robust comparable measures. That's helpful to know because I was concerned when I read that article that might not actually be getting a fair reflection. The other thing that you've also got to be reminded is the tax levels and the tax systems in those countries and comparing them. In your paper, John, you mentioned in paragraph 2.7 the potential for using existing devolved tax in order to address some of the problems that we know are already here in Scotland. There are two examples that you cite. One is Professor Bell's analysis of the impact of the council tax freeze and also the variable rate that we currently have is never being used. Are you advocating as organisations would you advocate more progressive taxation in order to address the problems that you face day in and day out from your client groups? Absolutely. I think that there has been—we would like to see more discussion, more debate, more analysis of what the impact—and I'm not claiming that we've not done this work and I think that it has to be thought through and done pretty thoroughly to actually look at what would be the implications of different approaches to local taxation to using the limited powers to have to vary income tax in Scotland, but what would be the implications of those both in terms of tackling inequality but also in terms of generating the level of resources needed to provide the kind of infrastructure. I think that there's a consensus that we know is needed in terms of early years, in terms of childcare provision and in terms of the services that families and others at risk of poverty face, so absolutely more progressive approaches thinking through those are examples. We've not sort of said this is the policy to advocate, but I think that there should be more discussion about the role that tax policy, even within the current powers and devolved powers, could play in both generating income and making an impact on household incomes here in Scotland. When we talk about very often the kind of budget and the Scottish budget analysis, most of the focus is on spending and spending decisions, and I suppose it's just to draw attention to the fact that there's actually, even within the existing powers, potential for more discussion about what's the actual role for changing the way in which we collect and generate resources in a way that might be more progressive and also generate the resources that are needed to protect families from poverty in Scotland. We haven't consulted on use of the extra three pence, up to three pence, on basic rate. We have consulted on the council tax in the past and basically our membership want to see the council tax either reformed or got rid of for a more progressive form of local taxation. I don't think that anybody can maintain that you can keep the council tax freeze in place indefinitely. It's not sustainable, but on the other hand, I have to look down south and, according to figures, council tax is now the single greatest cause of debt advice needs in CABs in England and Wales. That reflects 600,000 people, presumably, being taken to the balas for council tax arrears in England and Wales, and that's not happening in Scotland. At present, the council tax freeze does seem to be benefiting low-income families in Scotland, and its removal would increase work disincentives, and you'd also have to find that, if you're going to increase that, it's going to hit those low incomes hardest because of the ratchet effect where the wealthiest members only ever pay three times more. If you are going to get rid of the freeze, you need to look at local taxation much more in the round about how we can find a more progressive form of local taxation, which is also democratic, in that people support when they go to the ballot box and elect local councils. If you do start making it relevant to local people about things like that, maybe more of them will turn out and vote. Yes, so essentially, I think the message I'm getting from both of you, you would quite like to see political parties putting forward at least the suggestion that we should have an open and honest debate about how much we should tax and what services we should spend money on and where our priorities should lie. Absolutely, that needs to be a part of it. In one of the ways that we can help with that type of thing, there's a suggestion from your paper, Bill 4.6, Inclusion Scotland believes that a future Scotland should establish an independent review of the funding of social care to ensure that it's both equitable and in line with wider health and government aims. We could do that just now, but who would do it? I would imagine that it should involve service users as well as the usual great and the good. I think that it has to involve service users because the amount of income that's being generated by social care charging is a very small percentage of the amount that's spent on social care. It's only about 3 per cent or so, I think, even at present, even with the rises. A lot of that money is lost through the administration of the charging system. Estimates as high as 3 up to 4 pence and every 10 pence collected is lost in the administration costs, the assessment people, and you could make savings. Some authorities have moved to get rid of social care charging like Fife and without any huge impact on the amount of social care that they provide. I think that, again, it's something that we should be looking at, but disabled people have to be in there, I think, and involved because they are at the sharp end. Although it doesn't generate a lot of money, for those who are affected by those charges, it can be literally 70 to 90 per cent of disposable income that's spent on charges, and it leaves them on income support rates, even when they're in employment in some areas. Again, what incentive is there to go into work if you know that it's simply going to be whacked back from you in attacks, in all but name, on the support that you need to lead your daily life to get up, to dress, to eat, et cetera? That's what people are being charged for. We don't charge people who need those services because they're ill for a short period in hospital, it's outside. I can't see why we're charging them to live in the community. I'm wondering about what your priorities would be for childcare. I think that for a long time people have said that childcare could contribute to anti-poverty measures, although we know in your comments that in-work poverty would be useful as well, because clearly that's a big issue even for people who move into work, but I'm wondering in terms of childcare, a lot of discussion about that, obviously, currently. What would, from an anti-poverty point of view, what would be your priorities in terms of measures for childcare that could be taken out initially, but you can also obviously look to the future as well in other possible scenarios? The important thing is, I think, continuing down the road of expanding access to universal early-years provision, which was the childcare from an anti-poverty perspective, is important for two key reasons. One, in terms of ensuring that all our children get access to the range of experiences and informal early-years education that benefit, and they've been shown to have a benefit later on in life, so it's about ensuring that all children have access to that. It's also about ensuring that parents are able to take up returns to the labour market, extend their hours in their labour market in work and increase their earnings in the workplace, and obviously that making an immediate impact in terms of family incomes and an ability to protect your children from poverty. That's why childcare is so important for those two reasons. It's important to maintain that focus on quality and the quality of childcare, the quality of early-years provision, as well as on the quantity of it and the number of hours that are available. It's also about giving parents choice so that parents on the lowest incomes have the same kind of choices as those on the highest in terms of how to make the best balance between what they feel is in the best interest of their children in terms of childcare being there for their children themselves and also being able to take up employment opportunities. That choice and flexibility is an important priority, so we need to keep a focus on that. Flexibility is too often, at the moment, childcare availability in the provision of early years, which forms part of the childcare provision that parents rely on. It's set within certain hours and structures that don't reflect the reality of working patterns and working hours, so making sure that, as we expand access to free early years, it's done in a way that's flexible and enables parents to make it take advantage of that in terms of potentially increasing hours in work. I agree with all of that, obviously, but parents of disabled children face additional challenges and they need to be absolutely sure that the childcare that's provided will actually meet their children's needs. That's something that we have to look at as well within that overall increase in universal provision. As far as we can, including disabled children, so that they can play alongside and learn alongside their non-disabled peers, because it's not putting them apart as far as we can, it's bringing them in. If they can get that socialisation right and be seen as just another child, then one of the barriers that's there in society when we separate people off and put them into special provision is that they're seen as different and they see themselves as different. A lot of the opportunities that we give to non-disabled children are denied to disabled children. I think that it's something that we really need to think about. It may increase slightly across the universal provision, but the benefits again in the long term could be quite profound both in children's development and later what their opportunities are and how they take up those opportunities in life. Thanks for that. I suppose there have been some of those developments in terms of nursery education and UK-level childcare tax credits, but I just wondered, I suppose a lot of the focus on early years is from a child development point of view, which is very important, but I just thought if we were looking at it exclusively from an anti-poverty measure, what would be your priority, your one priority in terms of a policy on childcare that would actually boost it as an anti-poverty measure? I mean, would it be the affordability of it? Would it be extended hours or what would be your priority? I wouldn't want to lose sight of that kind of quality side of it and the experience that it gives children, because that has an additional benefit for children in low-income families and children growing up in poverty in terms of long term solutions to long term routes out of poverty for children. In terms of affordability is a key issue. I mean, too often it is still unaffordable and too often not available and this was going back to the flexibility not available at the times and in the places that people need to take advantage of the employment opportunities that are available. That has been work done in the past, you know, local authorities and other partners trying to find ways of providing childcare provision that is flexible and the reality is that that ends up, you know, there's costs attached to that and that takes us back too. We need to be able to generate the resource and prioritise the resources that allow parents who would otherwise be living in poverty and would otherwise be struggling to maximise their incomes in work, so that is about flexibility and ensuring that and also identifying, overcoming some of the other barriers, so transport barriers that mean that parents, particularly in rural areas, can't access the childcare provision that maybe is there and that's certainly been an issue that's come up quite regularly for those families and particularly lone parents in rural areas where there's a transport barrier, there's a geographical barrier to accessing, so flexibility, affordability, ensuring that those on the lowest incomes are able to access the childcare that is available. It's just one further point on that. I mean, the prevalence and the increase in prevalence of zero-hours contracts makes it much more difficult to predict when the childcare will be needed and that in turn increases the costs of providing the childcare because if you don't know when it's going to be needed, you have to provide it all the time and you could be providing childcare when there's no children there that need it and not have it, you know, in another area, not having it when it is needed, so you know that again there's something that we have to address in wider societal developments that are zero-hours contracts and whether that is the way forward, whether, you know, what cost does that impose on society over and above the costs that it imposes on the workers? I agree with that entirely, which I suppose leads on to the question of the quality of work. I mean, both from a child point of view, there's been emphasis obviously on parents having opportunities to move into work and Bill, obviously, you said that half of disabled people of working age don't work and obviously you're implying there that there's that many that we'd actually want to work if they could, so I suppose there's two questions there. One is, you know, what can we do about the in-work poverty and that's a whole big issue for both of you, I'm sure, but also I suppose in terms of inclusion Scotland, I suppose how a lot of the rhetoric obviously around welfare reform is that people can work and don't and obviously you're actually saying that's not the case at all, there's meant many more people want to work and can't work, so I suppose just a general comment on work in general with reference to disabled people, but also just this whole issue about zero-hours contracts in work poverty and what your priorities would be for action on those fronts? I mean, a lot more disabled people want to work than are currently in work. I think currently it's 44 per cent of Scottish disabled people are in employment and most of the best estimates suggest that somewhere between 70 and 80 per cent of disabled people working age would actually like to be in work. There are a number of disabled people who do not feel that they could work even if there were opportunities to do so and they tend to be people with the most profound level of impairment, et cetera, and it would be wrong to try and dragoon them into work when they face multiple impairments, et cetera, but there are a lot more people who could work and work is therapeutic. It reduces social isolation and that's as big a killer as cancer and heart disease, so again you reduce healthcare costs by getting disabled people into work. I don't think that there's anybody in the disabled people's movement who's ever put the argument that we want to see less disabled people in work. What we object to is really an assessment regime that doesn't take the specific needs of the individual into account and address those needs and trying to help them find work. If the system was geared to doing that, more disabled people would take up the opportunities. Some of them need to be given the self-confidence to do so because they've never worked for maybe 10, 20, 30 years, but they often want to work part-time rather than full-time to see if they can cope with it because they may have impairments or they get fatigued or they cope less well later in the day than they did earlier in the day. If those things could be taken into account and people are provided with support through schemes like access to work to get into work, as I said earlier, you begin to generate revenue that pay for the extra support that you're providing and in that way you get healthier disabled people, more of them in work, generating revenue, etc. It's a very virtuous cycle and we need to begin to think that way. Rather than punishing people for not making a move into work, we need to begin to support them to make that move and I don't think that's happening at present. The First Question is one that Mr Hepburn touched on regarding access to work. I agree with you that finding out the answer to that question is quite important. What work have you done on it so far? Are those new figures that you've not had a chance to investigate, or have you tried every avenue and you feel your bang in your head against the wall and that just isn't an FOI? We've asked the DWP for explanations but they're not the sort of responses you get through an FOI. We keep tabs on it. We check regularly whether there have been increases or not. There are quarterly figures released. I think that those figures are perhaps from about six months ago, but I doubt if they've changed markedly in that time. We have asked—again, we've made approaches through MPs at Westminster to try and find out why there's a disparity. There is no official explanation as to why that disparity exists. I don't think that it's because the DWP discriminates against Scots. I don't think that it's anything like that. I'm an ex-civil servant myself and I used to work in a department employment way back in the 1980s. I do know that sometimes in interpreting rules and regulations, Scottish civil servants were sometimes more determined to do so. I worked in unemployment benefit and we had higher rates of penalising people for not actively seeking work than other areas of the UK. It may be something like that. It may be something to do with the culture rather than that the rules are different here to elsewhere. However, there is a significant difference. I think that it would be worth pursuing. It's not huge amounts of money. We're talking about £130 million, £140 million a year in total across the UK. However, it makes a significant difference to disabled people's lives if we can get that support. Obviously, if there are less who are receiving it, that could potentially impact on their ability to maintain employment. A less rigorous regime might result in a few more disabled people getting into work and staying in work. There's no official explanation, but in terms of the stakeholders and service users that you speak to, other than the sort of different interpretation by civil servants, is there anything that you genuinely scratch into? It's very difficult for us because we're a Scottish only organisation, so it's difficult for us to compare and contrast with other areas of the UK. Talking to service users, they do fear that the rules are being interpreted very vigorously in Scotland as to whether you're entitled to support and then what support you're entitled to. I have to give credit where credit is due. The DWP introduced a range of things that you are not going to get support with, including George's software, which basically reads on-screen information and renders it into a voice so that a blind or personally visual impairment can read emails and have them read to them. They stopped supplying special chairs for people with back problems and things like that. They've relaxed that, and that's changed again this year, so we expect to see a rise, hopefully, over the course of this year in the amount of support that's being provided. Although those were low-expendent items—about £800 for George's, I think—again, for a blind person or somebody whose vision is deteriorating rapidly, they're absolutely essential in the modern-day work-office environment to be able to maintain your job. I think that we'll hopefully see a rise in the amount that's being spent on access to work, including in Scotland, but I still think that disparity is probably going to be that. Okay, I'm grateful, thank you. Next issue, Mr Dickey, in your first answer, you said—I think that I've written it down—you're looking for a significant shift in the tax and benefit system. You gave some examples of changes that you wanted to see in the benefit system. If we focus on those shifts in the tax system that you'd like to see—I'm interested in answers from both of you—you have both touched on council tax, I think, either a change or, I think, Mr Scott's abolition of it, and you've also touched about investing more in tax collection. Other than those two, in terms of significant shift in the tax system, are there other proposals that your organisations are pushing for? A greater balance, if it's accepted that the priority needed to be at UK-level deficit reduction balance in the public finances, then a decision was made that that should come through 80 per cent spending cuts and 20 per cent tax increases. That's a political decision. The consequences of that are that those who are more reliant on spending and on social security, which has seen one of the biggest hits in terms of cuts to public spending, bear the brunt of that policy. They are the ones that have seen their incomes reduced the most as a result. The most thing is looking at this is integrated rather than just looking at tax and benefit. We have to look across the board how does the tax and benefit system work together to ensure that resources and income wealth are distributed in such a way that ensures that those who are on the lowest incomes are protected. I suppose that looking at how, across the life courses, there's not just going to be redistribution from them from the richer to the poorer or the less well-off, but looking at the system and the way of collecting resources at that point and paying in at that point when we're able to, when we're working, we're contributing, and then drawing out at those points where we're looking after children when we're affected by all health or disability or old age. Looking at the system more as an integrated package and the overall role that tax and benefits plays in reducing and protecting families from poverty, I suppose would be the key thing we would look at and getting a better balance of when, in the overall approach to the public finances, there's a better balance between thinking about tax cuts as opposed to spending cuts or tax increases as opposed to... Just on the specific point of the 80-20 split, so 80 per cent on public spending reduction in 20 per cent tax, does your organisation have an official view on how that split... I mean, if you were controlling the purse strings as it were, do you have a formal view on a percentage or are you just saying it shouldn't be 80-20? That should be a far fairer, far more even split so we haven't gone beyond what we've done to identify what that should be. Part of that should be thinking through what are the consequences, what are the implications. I suppose it's trying to apply a child poverty, a poverty-proofing lens to those big public finance decisions that are made about approach to tax and benefits generally and that, at the top of that, should be what are the implications of that for all levels of poverty in our society and our particular focus on children, so what's the impact in relation to child poverty and that would drive you in terms of what's the best balance to get. Okay, thank you. Last, last issue. Just very quickly, Mr Scott's paper, you talked about a couple of changes to the tax system. One is VAT and one is taxing on benefits, obviously they're in your written paper, is it possible just to say them here so they're on the official record? Yeah, yeah. At present, jobseekers allowance, carers allowance and employment support allowance, which is one of the main benefits paid to disabled people, are all taxable income in the course of the year. The amount that you actually get paid is minimal, but it does reduce any tax rebate that you may be due if you've lost your job. I just think that it's pretty parsimonious in the Government to whack that back off the people who have either become ill or unemployed and particularly towards carers as well who are saving the Government billions providing unpaid care. The VAT one, I think again, is a really, it's a poor example of how things are thought through. A disabled person spends money to adjust their own house to their living needs, reducing their social care costs as a consequence. For example, by themselves paying for a stair lift or to install a wet room in their house so that they don't need help with bathing, gets charged VAT on that work and we just think that it's unfair because the needs of that person are in their daily life rather than improving the house for investment purposes. I'm sure that you could expand on that more, but if you don't mind, I'll leave it at that. Thanks, Gavin. Our next questions are from Jeane Urquhart. I wanted to ask, when these topics of tax and spending and both papers really, I think, give a very clear view of how you see the lie of the land just now and I'm happy to accept that the horrendous position that we find ourselves in. I wanted to ask you so, on a different subject about maybe the third sector and what I choose to call the fourth sector, which is when people do things for themselves. My own experience in this job is much more in rural areas where I see incredibly good strong groups of people actually just taking things into their own hands often and doing really well in quite small communities. I don't have the same experience in large areas, although I do know from hearing evidence at other committees too that that's the case. Could you say how you see the best way forward for us to really make the investment at a local level where we can inspire people to, because I think they do it so well? I mean, if given half the chance to how we should, we can best make these investments or even if you think that it's worthy of note and that when communities actually are kind of liberated to make a change themselves and they get it then they actually are almost more efficient and better at doing it. Whether it's the job centre, I think just as an example, Bill, you mentioned that most jobs come by word of mouth. People hear about a job and they go for it or somebody recommends somebody that they know or a neighbour or a friend or whatever to get the job and the job centre often is the place where actually people don't go because it's not making it work for them. I tend to agree with you, but I won't come as a surprise to John. I worked in anti-poverty initiatives for a long time and I do believe that people living in poverty often have the solutions at hand, but they don't have the resources to actually make it work. I do think that more power needs to be passed down to local communities to deal with these things themselves. I think that that would be a good use of public funds to invest in those communities to allow them to generate the sort of life chances that would really make a difference. I do think that that's the case. That's one of the reasons that disabled people in particular are in favour of independent living. It's often misunderstood as living on your own. It doesn't mean that or it means living a full life with the necessary support that a disabled person might need. If we could achieve that and reduce social isolation, because people can be even more isolated in a city than they are in a rural community, where, as you say, everybody tends to know one another and look after one another, whereas you can live next door to your neighbours and maybe never see them because they go out to work in the morning and come home in the evening and there's no contact. However, if you begin to generate something at a community level where people do look in the right way into each other's lives and begin to help each other, I think that it's got benefits all around. People feel good when they do good for other people and it makes them feel better about their own lives as well as helping the other people. Invest in local communities, definitely. Would you see that being extended to things like childcare, if we were making the investment in training and so on for people, but they decide, they make the decision about the hours, for example, that childcare is available? How else will we ever get it right for folk if they don't actually have that control? I agree. I think that there are examples already of where community based, local people have come together, formed childcare provision, nurseries, creches and developed it and that's become integrated into the wider childcare picture in their local area. Other examples, advice and information provision, which emerges within local communities and you have community based advice and information services, peer-to-peer employability support that people, picking up on both what you and Bill said, very often the most effective way of engaging with people and supporting them is when people from their own communities, people of the same experiences I've had of unemployment have been cut out of the labour market and when they're supported by somebody else who's had that experience themselves to make moves back into work, that can be most effective. I suppose it's about trying to identify what are the big structural barriers that prevent people from doing more of that. I think that I recently did some work with the Poverty Truth Commission in Glasgow in speaking to some of the people there, women who are involved in a local community group. I can't remember exactly what it was to do with it, but it started off as volunteer work, developing skills, and they had an idea of turning this into a local business. She was unable to continue with that because she was pulled back into a work programme or an official employment programme that meant that she didn't have the time to be investing in something that seemed to be working, which was just beginning to flour and beginning to flourish. Having more within our mainstream employment and benefit services recognises some of the really valuable voluntary work that could emerge and develop into potential small businesses and enterprises at local level, so removing some of those barriers that prevent that happening more needs to be at the heart of this. The other thing is that it's very hard for individuals and communities to come under increasing pressure and the loss of income. Families are facing a real crisis where they're just struggling to get by day-to-day, to pay for food for the week ahead, to pay their energy bills, to pay their bills. It makes it much harder to have the time, the energy and the personal capacity of resources to invest in the local solutions that you're describing. We need to remove barriers, and we also need to ensure that at a national structural level that individuals and communities have the basic resources that they need to allow them to, on top of that, develop and flourish and develop their own solutions to the situations in terms of long-term tackling poverty in that area. OK. Thanks, Jeane. That's great. And final set of questions from Annabelle Ewing. Thank you, good morning, gentlemen. Going back to the paper from CPAC looking at paragraph 1.2.3, where it's stated, referring to the Institute for Fiscal Studies, and it now forecasts that this is a result of current UK Government tax and benefits policy. There will be massive rises in poverty in the coming years. In Scotland alone up to 100,000 more children will be pushed into poverty by 2020. In terms of our discussion already this morning, what seems clear is that when we look at that stark statement, behind that lies a whole tale of lost opportunity, loss of lifetime chances, loss of potential. Can I ask if there's been any thought in how that can be measured? Yes, I mean that. I referred earlier on that as well as measuring the improved incomes and the improved reductions in child poverty, there was also analysis that looked at improvements in child wellbeing and the overall impact of that. We saw the UK's relative position in terms of UNICEF, child wellbeing index, and the wellbeing of children across the UK and Scotland across the world significantly improved as the incomes of our lost income families improved. Clearly, the reverse of that is now unfortunately unlikely, as more and more families are pushed back into poverty and more and more children grow up in families with inadequate incomes. The reverse is likely to be the case. We know the damage that poverty does to children in terms of health, their ability to get the most out of the school day, in terms of lost opportunities outwith school and formal opportunities, holidays, visits to museums, visits to friends and families, the things that give you all the kind of experience that helps to develop your overall education more generally as well as at school. All of those are damaged when families don't have adequate incomes, so I don't think that there's any question that we're likely to see a negative impact on children's health and children's education on their overall wellbeing as more of them are pushed back into poverty. In terms specifically of disabled children, because there's additional issues there, I mean we know that health of anyone is affected by their feelings of wellbeing and self-esteem. How they view themselves and how the rest of society views them impacts not just on their mental health, whether they get depressed or not, it actually impacts on their physical health and you'll see a much higher prevalence of heart disease and cancer and an inability to recover from those when they occur. That is to do with how the body is affected by how we feel about ourselves, so we know that children living in poverty suffer from low self-esteem. This is one of the things that's misunderstood about relative poverty as compared to absolute poverty. We look at the situation today and people in my parents' generation will say, but things aren't as bad as they were in the 1930s. In absolute terms they're right, absolute poverty was greater then, but the problem with the relative poverty is that it has a much more insidious effect on children and their life, later life expectancy. It affects their self-esteem for the rest of their lives and therefore reduces their life expectancy. Because they are more likely to be unhealthy, they're less likely to achieve at school, they're less likely to achieve at school, they're less likely to get the qualifications that they need to enter higher education, they're less likely to get a job because one of the requirements of a modern society is those pieces of paper, the qualifications. At every stage of the life journey, children, but particularly disabled children, who already start with a deficit model within our societies, are already seen as different from other to other children. They've already got issues with their self-esteem because of the discrimination that exists in our society. That impacts on them to an even greater extent. One of the strangest things is that children from disabled children at age 16 have the same life expectations in terms of what they're looking for from their lives as other children, but by age 25 they think that nothing will change their life and nothing will change it for the better. That lossy hope that we impose on disabled children after the leave school is a huge, huge factor and so few of them have been in employment and so few of them are thriving within modern society. It's a pretty bleak picture. That's a reality in terms of current tax and benefit policy and the impact on child poverty, but it's also important that we don't get too—there are things that we can be doing. One of the key things that we're doing at CPEG is trying to collect evidence from the range of case work support and from the advisers that we support and work with across Scotland about how our changes in the benefit system and the welfare system are impacting on families in a bit more detail and then trying to—what are the lessons there for the way that local services and Scotland-devolved national services here in Scotland are delivered that can help to take account of the reality that families—I lost thinking of families—do just have less resources, have less money and will have less money in the years ahead if current policy continues. There are things that can be done in terms of social care, thinking about the charging around social care during the school day, how do we remove some of the charges for school materials, school trips, school activities, school meals. There's a whole lot of costs there that are an additional burden on families that we can look at trying to remove, how we look at some of those transport costs that families face that can potentially be identified and addressed within existing powers here in Scotland. It's a bleak picture, but it shouldn't be one that leads us to all this. There's nothing that we can do. There are things that we can and must do within existing powers wherever powers lie after this year in order to address the consequences and support families and ensure that we're not reinforcing problems created by the reality of the lower incomes that are going to be faced with going ahead. I'd agree very much with John. Having painted a very bleak picture, we also know that interventions can change people's view of themselves and boost their self-esteem. That can again have lifetime long consequences in terms of going on to achieve things in their lives, which they believed maybe five or ten years before they could never do. You can boost people's self-confidence if you make the right interventions. We shouldn't be writing off those children, we should just be saying, this will happen unless we do something, but we know what we need to do. I mean, going back to earlier discussions, I think it was John who said that obviously the big tax and benefit leavers do lie currently at the UK Government level. Obviously, within that, one can try to do the best one can, but if you don't control the policy leavers, the fundamental policy leavers, would you not accept then that that acts as a constraint on what you can do? If you don't control the fundamentals, as somebody else does, you don't have the same ability to tackle the underlying problems. Clearly, depending on where powers lie, different levels of government have different powers that they can use to tackle those. I mean, our job is, you know, wherever powers lie, to be making the case for a different approach to tax and benefit policy, to labour market policy, but also to education, to health, to housing, to ensure that we're doing everything at every possible level to maximise the incomes of our lowest poorest families, to maximise the opportunities children in Scotland have. I suppose that's our approach. Different challenges arise depending on where those powers end up lying. Presumably, though, it would at least be possible for an independent Scotland with those powers to change what appears to be, to have a certain inevitability in terms of outcome, in terms of the IFS forecast, at least for 2020. There seems to be a certain inevitability about the loss of lifetime chances, which for me is an unacceptable cost. Presumably, therefore, at least an independent Scotland would have the opportunity with the powers, the key fundamental leavers, to do something different. I mean, I think that there's no question of the reference, the debate about the future of Scotland and where powers end up lying for us creates an opportunity to be generating the public support, identifying what the issues are, generating the public support, increasing the political will so that wherever those powers end up lying after 2014, they would be used in a way that would be more in line with the principles and the approach that we've hopefully outlined in our paper in terms of the approach that should be taken towards the public finances. That's the opportunity to end up to the people to decide where those powers lie. I suppose, for us, the key issue is how, then, are those powers used, and wherever they end up there'll be a challenge for us in terms of ensuring that there is that public support, that there is that political will to ensure that we generate the resources, that we gather the resources from what is a wealthy country, will be a wealthy country, whichever way things go, how do we ensure that those resources are used and our tax system ensures that we gather those resources and our social security and our spending policies are used in such a way as that we spend those resources to ensure that all our children have a decent start in life and don't have to suffer the consequences of the levels of poverty that they have up until now? We have no position on independence as an organisation. I very much echo what John said. Wherever the power lies, we have to be making the arguments that need to be used differently. Whether it's an independent Scotland with full fiscal powers, whether it's a deval max, we increase powers to the Scottish Parliament. If those powers that are increased happen to include some of the fiscal powers that we're talking about, then, yes, we would be arguing that they should be used in that way. If it's the state school, we will have to continue to argue with Westminster that a different approach needs to be made. We haven't got a tax and benefit system that works in concert with one another to maximise incomes for those that are least well off, because redistribution can happen through both methods, not just one. We've given a few examples of tax hits on low-income people. One of the ones that has actually been a recent tax change for small businesses, where the first £2,000 of national insurance for employers are not having to pay it, but disabled people who employ personal assistants are not included in that tax change. Disabled people already have higher living costs. We know that, and we're saying to them, but part of the monies that you get, we're expecting you to pay employers' national insurance contributions for your employees, even though other small businesses are exempt. I can't understand the reasoning for that, because that is to only allow a disabled person to just do what everybody else does when they get up in the morning. I'm afraid that we have fully used up our time, and I thank my colleagues for being disciplined. I thank the two witnesses, Mr Dickie and Mr Scott, very much for your answers. I think that some of those issues we could have probably gone on longer, but there we go. I thank everybody and we shall start again at 10.55 to allow a break and a change of witnesses. Welcome back to Susan Rice and Campbell Leith. Our next item of business is to take evidence from two of the Scottish Government's nominees for appointment to the Scottish Fiscal Commission. We will hear from the third nominee at next week's meeting. Members have received copies of CVs and completed questionnaires from the nominees from whom we will hear today, so we welcome to the meeting Lady Susan Rice and Professor Campbell Leith. I would like to invite both our candidates to make an opening statement. I don't know if you have decided amongst yourselves who is going first. Thank you. We hadn't. Good morning and thank you very much for inviting both of us to this session to consider our nomination to the new Scottish Fiscal Commission, in my case, as potentially the chair. I'm aware that for some months now the Finance Committee has taken testimony from a wide range of people in order to develop its own view about the creation of a fiscal commission, which I understand you support as do others in Holyrood. Over a number of days, rather than a number of months, I've read through much of the testimony you collected from your witnesses, and I have no doubt that if I read it a second time I'd gain even more knowledge from it. You've certainly been thorough by reaching in that activity, and some of that testimony I think has also begun to help me form my own thinking, so it's been useful in that regard. I noticed in particular a couple of words which were used with probably greater frequency than any others right across those different sessions. The words were independence with a lower case I and transparency, and I'd like to say something about each of those in general, in relation to myself, and then add two words to that mix. To be genuinely effective, I believe the Fiscal Commission needs to be trusted for the work it does, the way it does it, and for its overarching commitment to the public good, but trust isn't something that individuals bring to the table themselves. Trust is something that has to be earned, it has to be bestowed by others. I believe that a fiscal commission whose members are in fact and perceived, both in fact and perceived to be independent of political, personal and professional agendas, and whose work is done as transparently as possible will go a long way to winning public trust, so I was glad to see those two words mentioned so frequently. In relation to myself, I can confirm that I have no conflicts that should interfere with the perception or the fact of my own independence. Regarding transparency, over the years I've come to value greatly doing things that way. There's huge value of a wider audience understanding what you're doing as you do it, and of being clear enough yourself that you can explain your activities to a wide audience. I would perhaps add two words to independence and transparency in their challenge and competence. Challenge because I've learned over a long career that the best ideas, the best plans are made even better when others who represent diverse perspectives challenge those ideas in their formative stages and right through their development, of course doing so constructively. Particularly in my board director roles, I'm expected to provide challenge at all levels and of all parties within the relevant organisation. And competence, perhaps that's a given, but it never should be, even with all the best ways of working, including transparency and challenge and independence, the output will not be sufficient if those who are producing it lack a high level of competence, but I'm sure you have that in mind. I'm honoured to have had my name put forward as a potential chair of the new Scottish Fiscal Commission. I have quite a lot of experience in helping create new entities, and I thoroughly enjoy that. This is a very important step for Scotland, one not to be taken lightly. It will require undoubtedly hard work, focus, widespread engagement with a range of stakeholders and perhaps a bit of wisdom. I would bring to bear knowledge of the business and financial climate, a personal style of constant learning and asking questions, the rigor of my early scientific training. Also extensive experience as a board director, chairmanship of a range of bodies and a fierce desire to try to make a success of anything I'm involved with. Finally, I was brought up to embrace a public service motive and have done so in many ways over many years. If my appointment is approved, I would look forward to working hard to create something brand new for this country and genuinely important in seeing that it operates to the highest standards. It would be a great privilege to do that. First, I fully agree with everything Lady Rice has said. I would like to make briefly three points. As an academic whose work has been mainly focused on looking at optimal policy design, macro policy design and the design of institutions to support that optimal policy, it really is an honour to be asked to be involved in setting up a fiscal commission for Scotland and seeing those ideas actually implemented. The second thing is that I was struck when reading the documentation associated with the decision to create the fiscal commission and in the discussions we had when I previously gave evidence to the committee, the degree of consensus that has been built around the creation of the fiscal commission for Scotland and also the key properties that it must have. Like Lady Rice, I saw the words non-partisan, independence, transparency coming up time and time again in the documentation supporting the creation of the fiscal commission. The way that the commission is being created reflects that with fixed-term appointments and so on reflects the need to achieve those goals. However, in order to have it fully realised, it has to be embodied within the people serving on the commission itself. As potentially a member of the commission, I recognise very deeply how important it is that the commission has those elements. It is independent, it is transparent. My actions and where I serve in the commission would be to fully support that. The final point that I want to make is that, in terms of the operation of the fiscal commission, the practical logistics of it, this is something that really needs to be discussed amongst the fiscal commission itself once appointed, they need to meet and have dialogue with all the relevant bodies. However, one thing I thought it might be important to note is that while we would hope that the fiscal commission helps to improve the forecasting of the Scottish Government forecasters, forecasting is still an inherently difficult process. Forecasts will still be wrong no matter how good the fiscal commission is. A large part of the scrutiny that the fiscal commission has to offer is not just of the headline number that is produced, but it is the whole process of forecasting, the whole method of forecasting. It is not just in the heat of the moment round about the draft budget publication that the fiscal commission may do its work. It may have spread that work throughout the year, scrutinising the modelling that is being done, how that can be improved and engage with the Scottish Government forecasters on a more continuous basis. I will ask a couple of questions and then colleagues can come in with questions as well. You have both touched on independence and your right in saying that that has been very much to the four of the committee's thinking as we have looked at this whole subject. Is the key to independence having the system correct and the right checks and balances? Or is it just down to the individuals that the individuals have the right attitude who are on the fiscal commission? I will go first again if that is okay. Campbell and I have just met, so we need to work out how to work together. I think that it is both. In fact, if you ask is the key, I think that there are two keys. I think that the nature of the appointments process, and I am very much welcomed the notion that our names would be recommended to this committee, and if you thought we were suitable, you would recommend us to the wider Parliament. I think that is very important. That creates a degree of responsibility and keeps us mindful whatever pressures might come along day by day that we have that greater responsibility. I think that is really important, but at the end of the day it is also how we ourselves conduct ourselves, and I think that it has to do with our past conduct, as well as our future conduct. We need to be seen as being independent in what we do, and also in positions where there is no potential gain from, you know, I am not trying to build my CV. Unfortunately, I think you have seen it. It is dreadfully long, and so I would not see that I was gaining something personally. This for me would be purely a matter of public service of wanting to engage in something that is hugely important and at a very exciting time, so I think that that is what helps the independence. Essentially, I agree. We discuss the various formal mechanisms that can facilitate independence, but they do not ensure independence. Independence comes from the behaviour of the members of the commission. I have worked in this area for a long time, and the commission only has a value if it is independent. I want the commission to succeed. I buy into the notion of independence wholeheartedly for the commission, and I would work to ensure that that was maintained. We spent a bit of time discussing, as the commission answered primarily to the Parliament or to the Government or to both. Do you see any tensions in there between your relationship with the Government and your relationship with the Parliament? Not necessarily and intrinsically, if we all operate properly. You could create a scenario possibly where there might be. At the end of the day, I welcome the idea that we are answerable to the Parliament. It is a public form of responsiveness. That is what really matters here. We would obviously have dealings with the civil servants who work on economic modelling for the Government and with the Government itself. By creating this route to the Parliament, I think that that gives us the means to stay above Anjou influence or the influence that one would not want. My understanding is that the Government is very keen for that to happen as well. It wants the body to be seen as independent. If challenges arose, we deal with them. That happens in life all the time. It happens in my business life all the time, in which case you address them. However, I think that the ultimate route back to Parliament is the one that takes primacy in all of this. You do not have to comment as well. There are examples of both in fiscal councils throughout the world. It is not obvious that one dominates the other. It is how we behave that ultimately matters. One of the things that struck me, Mr Rice, was when you talked about being able to explain the commission. Is that to the Parliament and the Government or to the wider public? Does the wider public need to know about this commission or just needs to know that it exists or do you think that the wider public is going to be really getting to know the organisation very well? I suspect the broadest definition of the wider public will not get to know the organisation very well, but I think there will be people and members in the wider public who might be interested. I think any business that goes before Parliament is potentially of interest to others that go beyond those who are elected to Holyrood. When I talk about explaining something, what I mean is that in an area which can be highly technical, the ability to put into fairly plain language to express and communicate what you're doing or what the decisions are or why in a way that people like me can understand, if you see what I mean, that ordinary people can understand. I think that's really important because I think that speaks to your own grasp of what it is you're doing. People who can only explain technical things in highly technical terms don't always actually understand it. That's why I mentioned that. I think there will be interest more broadly because things are new here. The new taxes that are being devolved in the Scotland 2012 act to start in the next year, that's new. There may be people who want to see what does this really mean? How is this working? I hope that they would be reassured by the existence of the Scottish Fiscal Commission. For full-scale fiscal councils acting in independent countries, part of the objective of the fiscal council is to add credibility to the policy-making process. You would want people making big economic decisions out there in a wider economy to understand what the fiscal council is doing, what credibility it's lending and what credibility it's not lending. You would hope that its work does get out there. At the moment, for the Fiscal Commission for Scotland, its remit is rather more limited, so that wider credibility issue affecting wider-scale economic decision-making is maybe not so important to this point. That's great. Thank you very much. The next questions are going to come from Markham Chisholm. You referred Professor Leith to a kind of narrower remit than perhaps exists in some other countries and also perhaps narrower than some of the people who gave us evidence were suggesting, for example, Jeremy Pete and David Bell. I wondered whether, in fact, that is a disappointment to you. I noticed that your work was right, optimal policy design, so I kind of just wondered whether you're going to be slightly frustrated, both of you, in fact, by the narrower remit or do you think that there is scope for more to be done in terms of analysis beyond your sort of fairly narrow remit, as it were? For me, at the moment, what the Fiscal Commission is doing, given the current state of devolved powers, is opening up elements of the forecasting process within the Scottish Government to scrutiny and transparency. It's changing the culture that's producing those forecasts in a sense, so that's where its value lies at the moment. For me, a critical change in how the Fiscal Commission would have to operate would be should the Scottish Government have significant debt issuance powers and then it becomes more like the full-scale fiscal commissions or fiscal councils that we see throughout the world. It's once, if and when, that power is granted that the Fiscal Commission has to transform itself and really move up a gear and do something quite different. Do you want to comment on that? We can keep the mutton Jeff thing going here. I think I commented in my response to your questions that I think it's quite right for this to start off in this small and contained way. The reason I say that is that, as I mentioned before, in my professional life helped to create lots of new entities, organisations, committees, boards, whatever it is. The thing to make that work successfully is to get started. I think you get started if you have a defined remit, you know what you're doing, it's not too big, we're not trying to do everything all at once. Let's get this up, let's get it running, which I think is your guidance by doing it this year. Then, as times and matters change, the remit may grow and we'll be in a much better position to expand or reshape or change if that's needed. That's interesting. I take it that you're boasting that it could evolve, given further fiscal responsibilities for Scotland, either under devolution or independence. The issue of independence with a small eye has already been touched on by the convener. I wonder if you foresee any potential areas of difficulties in your dealings with the Government and Revenue Scotland, and how do you feel the memorandum of understanding should prepare for any conflicts between the three bodies? I have not really had personal dealings with Revenue Scotland, so it's very hard for me to... Obviously, I would develop that relationship, but if I took on this role, I think the memorandum of understanding is really important, and I think a full and frank discussion around a table with the members of the Commission and those with whom we'd be dealing would be the start point to talk about where potential issues, strains, conflicts might come up to help each other understand fully what the remit, what the boundaries are, what the expectations are, and I think the memorandum of understanding is a very early step in the creation of the Fiscal Commission. I suspect that the draft that is agreed initially might not be the final draft, and I think these things evolve over time as well. You have to work, you have to rub elbows together in a sense, because sometimes you don't anticipate points of tension, and if those develop, you need a good personal relationship in order to address them and deal with them. Professor Leith, you point out that it might be desirable to avoid the commission's work being concentrated in a very short period prior to each forecast round. I think that I'm quoting you here. This would then spread the scrutiny work throughout the year and enable the Fiscal Commission to undertake some limited longer-term research work. I suppose that my question really is to do with do you have the capacity to carry out this approach? Do you seek to engage a wider range of people in your work, or do you feel that working on an on-going basis, as you suggest, would be quite manageable for you, given your other responsibilities? Given that the remit of the Fiscal Commission is quite tightly defined at the moment, it really depends once we get into the nitty gritty as to how the Scottish Government is actually producing those forecasts. Once we get access to the models, the modelling work that underpins it all, once we see that, individual elements of that may become apparent that certain elements of that modelling work are more material than others in inducing sensitivity in the forecasts, assumptions and so on. Those might be areas where you want to undertake some limited research work to see whether that part of the forecasting process can be made more robust or generally in our scrutiny work. Those are the underlying assumptions about the projections of house prices, underpinning some of those tax revenue forecasts, so you may want to do some research work looking at the literature on forecasting house prices and how that compares with the Scottish Government's approach. Given the research budget and the time constraints that we all face, it is necessarily going to be quite limited our ability to do that. To the extent that it is possible, I think that that would be a useful way to just have an on-going relationship with the forecasters. The next person to ask questions is Jeane Irkart. Thank you. Lady Rice in answer to question 3, you are answering on the operation of the SFC and you say that it will require a lot of data, a lot of information, it will need the expertise to analyse the economic models, it will need information on wider economic factors, it will likely need to identify a small cohort of skilled individuals and so on. When we took evidence earlier last week or the week before, Jeremy Pete was concerned about the small budget that has been made available and I wonder if that is an issue here. Just given the kind of support that this group, three people can do so much but the backup clearly is going to be really important. Do you think that the budget is sufficient? In a way, it is hard to give an absolute yes or no answer to that. There are two ways to respond to some of these questions. One would be fiscal commission as one conceives it to develop into what it might be and the other is where we start off. I think the proposed £20,000 budget is where we begin and the remit, as Campbell has stated, is quite restricted in the very first few months. When I say that we would need all of this other, I perhaps should have used the word, we will likely, I don't know what we need until we get going to be very honest, but the anticipation was we would need to turn to some experts or some expertise to support the work that three of us alone probably could not satisfactorily achieve. I think £20,000 is something to get started with. I come from a background where every penny counts and so I'm not one to spend much. Having a public sector experience through my association with the Bank of England, I'm very conscious of value for money. I think that the pennies would be spent wisely if one needed more for some reason we'd have to speak up and over time, as it developed, we might well need more. The fact that the commission is planned to be hosted at the University of Glasgow has indicated that it will support the commission's work, may help that £20,000 to go a bit further than it would if you were just commissioning research from outside organisations. I think that you mentioned as you came in that you've just met. I was just going to ask you if you clearly know of each other's work. Professor Leith, you've contributed and written extensively. Lady Rice knows of what you've written, and if you will provide a challenge to each other, or are you similar thinking along similar lines economically? The simple answer is I've known Professor Leith a bit by reputation. I am not an economist in my own right and I don't follow economic papers. To some extent, I do actually, as they've related to my role with the Bank of England where I need to be very focused on economic matters and hear lots of reports and read lots of information. Some of that may be from yourself, but I might not have registered that I was reading your work, so I can't say that we share a perspective or not, to be very honest. But you asked the important question, which is one of a challenge or a group thing to use a bit of today's jargon. Challenge, and I mentioned that in my opening comments, is absolutely essential. That is what this is about because you come out to a better place when you can challenge each other. I don't know if we share economic views, but because I'm not an academic, an academic economist, I won't necessarily look at the world in the same way. I think that's perhaps an advantage that what I bring to the table is pretty deep knowledge of the business environment and the consumer world and the financial climate. I have no difficulty, in fact, this has almost become a trademark of my style of asking what I call the daft lassie, as opposed to daft laddie questions. I think that brings out a lot of good information. I would also say that challenge isn't necessarily finger-pointing aggression at all. Challenge is actual challenge, is exploring, is say, help me understand it in this context and that, and I think you've come out to a better place. So I have no problem with the concept of challenge, whether or not I agree with you and I don't know yet. I'm a kind of quantitative macroeconomist, but with no strong ideological bias the way some economists sometimes have. Really, I want to get my hands in the model and the data and see how that's working, and that's the contribution I think I would make. Thank you very much. Jamie Hepburn is next. Thank you, convener, for just a couple of questions. I was struck by the fact that you've said a couple of times now that you're driven by a public service ethos. I think you said that you were brought up with this and you're driven to serve on this commission by that sense of public service and it's also reflected in your written paper in terms of some of the other positions you've taken up. Can you just talk a little bit more about that, why this idea of public service ethos is important to you? I literally was brought up with that notion. Obviously, I was brought up in a country other than this, which you'll either know or you can tell from my accent, but it was a country America made up of at least in the last century and continues in some ways a huge immigrant populations. My grandparents were immigrants to America. I was brought up with the notion that life has not treated you dismally, that if things have gone reasonably well, you have an obligation to give back somehow, to find a way to give back. That's just a mantra that I was raised with. I had relatives who did various things of that sort. We don't do what we do in isolation or for ourselves. We obviously have lots of communities or circles around us. Sometimes it's family and those close to us, sometimes literally our physical community, but we are part of a bigger society. There's something about justice and fairness that's just part of my psyche. I was brought up with that and it feels very natural to want to do something of this sort. I am just completing seven years as a director of the Bank of England, which is quite a notable institution, hugely demanding amount of workload, fascinating, a great privilege to have done that, and certainly public service in every sense of the word. For me, the timing of this actually works very well, because I would be keen to continue to feel that I was giving something, especially here in Scotland, which is my home. What you want to bring to the table in terms of this role is what drives you to take up this challenge. It's one thing. I mentioned creating new things. I'm excited by the detail of actually making this work and putting it together and testing myself and learning, because it's all about learning. It will be especially for myself. All of those things are the things that interest me, so there are a lot of reasons for doing it. I think it's important, and I've said and used the word important several times. This is an important undertaking. I believe it's the right one and it's a good one, and I'd like to help with others, because you don't do something yourself. Make it happen. Professor Leith, in your paper that you made an interesting point, and I recall you making similar point previously to this, you made a point in your discipline in academia generally that the integrity of what you say in your paper, the integrity of research maintained by the peer review process and also by ensuring that other researchers have access to sufficient information to enable them to replicate the findings of published studies, and you say that you believe that ffongless approaches as far as is practically possible in relation to the work of the commission is a good thing, so suppose that we get the question, who are the peers of the fiscal commission? I want to review our work. I guess our commentaries will be published, will be scrutinised by anyone who chooses to scrutinise it. It may also not be a bad idea to have periodic reviews by other fiscal commissions, other academics, other non-academics who look at the quality of the commentary that's being offered by the fiscal commission. That seems a reasonable thing to do. As your general point, you should be transparent that the information is there for your peers, whether they exist or not, to be able to access that information, if they're interested in doing it, they can. Yes, the kind of gold standard is that you should be able to, when academics do research, it used to be the case that you would publish the paper and then it would be a really hard slog to try and replicate what was done in that paper. These days, with electronic resources available, you'd put all the computer code, all the data up there and someone could just take it off the shelf and see where the results were coming from and change things and do robustness checks. The more you do that, the more you ensure that the original research is of high standard and no corners were cut. Thank you. Thanks, Jimmy. Gavin Brown is next. Lady Rice just wanted to touch on question five of the questionnaires. Do you hold any other roles that might give rise to or be perceived as being a potential conflict of interest? My question is this. You sit on the Council of Economic Advisers at the moment and, looking at their remit, they've got three key themes on which to advise the Government, one of which is economic levers. You've got an advisory role on economic levers. On the Scottish Fiscal Commission, there would obviously be a challenge function again on the application of those economic levers. How do you avoid the perception of a conflict of interest between those two very different roles? I've given a good deal of thought to that. If I felt that there was a conflict of interest that developed, I would simply deal with it. I think that the role of chairing the Fiscal Commission is the role that would again take primacy in this instance. I would see how that goes. I mean, would I add to the discussions that the Council of Economic Advisers again draws on my business knowledge, my knowledge of our markets here in Scotland and that kind of thing. We don't develop policy in those discussions in any specific way, but if there was a conflict, it would have to be addressed, pure and simple. I'm not sure what else to say. I just, I mean, your intention as it stands is to remain on the Council of Economic Advisers. Your intention is to do both roles? My intention right now is to do both roles unless there is an issue. Quite honestly, the fact that I'm sitting here, or that I knew I would be sitting here, is only a matter of a couple of weeks or days old, so I haven't actually thought through or I've spoken to anyone with regard to the Council of Economic Advisers, but if that was a problem, if it was genuinely a problem, we would deal with it. They have methods also of dealing with matters, if you forgive me just for a little bit of story. When I was invited to join it in 2011 with my role at the Bank of England, I had to get permission from the Governor for any external appointment that I take, so I had my discussions at the Bank of England. What came of that was that they encouraged me, because they would have had similar questions, to do this with the proviso, that if any matters came up which related to monetary policy, even though I don't sit on the monetary policy committee but I'm responsible for its proper running, if any of those matters came up that I would be excused, and that was put in writing to the Council of Economic Advisers. They accepted that as a proviso and they have used a subcommittee system to ensure that, in those instances, I didn't have to be part of it. There are ways to address potential conflicts, but if there really are conflicts, I really have to think this through properly, so it's a good question to have raised, then I would address it. I'm sorry, I was thinking I was getting in a bit too early. No, Michael, you were in the next, Michael. That was my mistake, sorry. Thank you very much, convener. Lady Rice, in relation to question three, talking about how do you think the Scottish Fiscal Commission should operate in reaching its position, part of your answer you say, this does not mean that all the judgments of the Scottish Fiscal Commission or any other body in retrospect turn out to have been the right ones, but it does mean that there must be no imputation or conflict of carelessness in making these determinations. In a previous answer, you said that it would be helpful in some instances to consult with the OBR. If we had a pound for every time the OBR had been criticised in this Parliament, we'd probably covered the cost of running the Scottish Fiscal Commission. So, do you hold the OBR in high regard? I don't hold them in regard one way or the other. The mention of the OBR, I believe, was in the context of getting into the detail of setting up the Scottish Fiscal Commission, and you've already done this, but I would want us to do it, is to look around at other fiscal commissions that exist and just find out a little more about problems they've had, any issues, particularly those that have been set up in the last few years that we could learn from. So, the relationship to the OBR that I referred to was that kind of gathering some more knowledge on top of what one could get from the testimony that your committee has published. My point here, and it's very similar to one that Professor Leith just made, which is that forecasting is forecasting, and there's no guarantee that there is no such thing as a right number out there. You do your best to understand the circumstances, to come up with something that seems reasonable, and we would be asked to comment on the reasonableness of the forecasts of the Scottish Government, and that is the best we can do, and that's really what I was trying to say here, is that our goal would be to do this as well as we could, but to point out that nobody, no institution, no person, ever gets it all right all the time. But that was not in relationship to the OBR, how it's structured or anything. It wasn't in relation to the OBR, I was just connecting the fact that you wanted to indicate that you felt they were an organisation you wanted to consult with, and yet, in this Parliament, they are heavily criticised because their forecasts are considered to be less than valuable, and I think Professor Leith would be interested to know whether you have any take on the value or the standard of the work of the OBR. Let me make one more comment and then turn over to you. This is not a judgment about the quality of the work of the OBR, but if a body is judged to have done very well, one can learn from them, but if it's judged to have done less well, one can learn equally and sometimes more. What you're saying, I understand, I was perhaps less aware of it, I am very much aware of it now, about the discussions that you've had in the Parliament here, but that would absolutely not diminish my instinct to have some conversations with them, just because I think one learns from that. When an institution like the Bank of England does forecasting, it recognises the uncertainty, so it produces what they call fan charts, and very quickly, these fan charts get very wide, indicating that what can happen to that forecast is anywhere between a very high number and a very low number, so it's inherently difficult to forecast. The OBR doesn't do this formal confidence interval, doesn't do this formal fan charts analysis, they do a more sensitivity analysis of their forecasts, which are kind of, if this scenario changed to being like this scenario, our central estimate would be this, but there's still huge uncertainty implicit in all these forecasts, so they're bound to get it wrong, that's the nature of forecasting. Would you believe that the Scottish Fiscal Commission would be doing forecasting more like the Bank of England or the OBR? I don't think we're forecasting ourselves, as I understand it, in direct response to the question, we would be making some judgments about those who are preparing the forecasts, and we would be challenging. I would hope that we would think a little bit about scenarios, I think that's a useful way to understand the efficacy of a particular determination, but I don't think we would be doing forecasts ourselves. My own instinct, but I'm not the economist amongst the three candidates you're talking to, is, I like the fan charts, they really do explain what the potential universe is, and I think they're more helpful to people. I often say, and it's actually my husband's phrase, that numbers are one interpretation of reality, but there are other realities out there, and people can get very hooked on the number being the right answer, and I think what I'm trying to say, and I think what you're trying to say is there are often a number of different answers. Thanks very much, sir. Thank you. I thank you. As a substitute on the committee this morning, I felt it only polite to wait for my colleagues to have their say, given their much more detailed involvement in the background to the Scottish British School Commission, but just really picking up on something that was raised already in a question directed to Lady Rice, I note from her response to question one that a number of public bodies that Lady Rice has been involved in sitting on dealing with policy matters are listed, and that the point is made that these were bodies that reported, if you like, to different administrations of different political hues, and in terms of very extensive CV that Lady Rice has provided to the committee. I wonder if it would not perhaps be a reasonable view of this CV to take the view that clearly there has been established, I would argue, a long and robust track record of independence from the political process in terms of Lady Rice's involvement, and I just wonder if Lady Rice would wish to add anything to that point. Thank you for saying that, because really my point here was to say that I do the things I do that I'm asked to do, which are in my extra time, if you will, because I'm interested in them and interested in the issues and interested in the impact on society and so forth, and not interested, and I would not do something as a favour to an individual ever, and not interested because someone of a particular party came and approached me. I don't approach the world that way, so I would say very much, yes, these are things that have interested me and I've had good relationships, I think, with each of the administrations since Hillary began. Thanks, Annabelle. Just a couple final things, I think, from myself. Professor Leith, you mentioned the answer to the previous question, you talked about the commentaries being published, and there's this point that you also made the point when I asked question 3. In my view, the Scottish Government forecasters should develop their modelling techniques and present the fiscal commission with both their provisional forecast and as much detail of the underlying process, so presumably there's going to be a provisional forecast, some response or commentary from the commission, then a more solid final forecast, and then further commentary from the commission. I mean, I don't know how much you've thought this through, but I mean, how much of that would you hope or expect to be published, all of it, or would only some of it be published, do you think? I would need to discuss this with all relevant parties. I think that the focus of the remit is on the forecast that's produced for the draft budget, so the final forecast that's produced there is the thing that the formal commentary has to be attached to. However, in the answer to other questions, I thought it would be a good role for the commission to have to have an on-going look at the process, the modelling work that's being done within the Scottish Government to produce this forecast, and that will inform the detail of the commentary that's provided with the specific numbers that are attached to the forecast. I don't think that there's any need for continuous-time commentaries going on throughout the year, but the commentary that's attached to the forecast at the time of the draft budget will include analysis that comes from this on-going scrutiny of the whole forecasting process, not just the forecast itself. That's the way I would suggest doing it, but again, it's merely a suggestion open to discussion. Do you want to comment? No, I mean, I think that's a reasonable way forward, but we three, if it is us three, would have that discussion and with others and actually take other suggestions as well and give it some thought. What we want to be, I think, is useful at the end of the day. What we would absolutely have to have is a comment in a written form when the budget is submitted, the draft budget is submitted in the autumn, which gives our best judgment on the reasonableness of the assumptions around the new taxes, so that would be an absolute given. Anything else that we would discuss? I think that this is quite a reasonable starting point. I've obviously heard from two of you today, and there's a third candidate that we're going to be meeting next week. If I understand it correctly, we're talking about two economists and one banker and businesswoman, if that's how you describe yourself. Is that a good mix, leaving aside the individuals, but do you think, as a mix for the commission, is that a good mix? The forecasting process is, in essence, a macro-modelling process, and that's where I have experienced. Lady Rice has a broader experience, which can then ask the right questions, facilitate the communication of the commission's work more generally. Professor Hughes-Hallert is more involved in practical policy analysis, so that's a slightly different bent to the more techie approach that my research is involved in, so it seems a reasonable mix, as far as I can see. I think that as well. You have two economists who do quite different things in terms of their economic disciplines. I think that both of those are really important, so it's good to have that balance. I would simply draw on all of my experience, and I think that it would come to bear, because I don't think that you want a purely, forgive me, academic exercise, you want something that relates back to society at large, to the public that you all represent. We seem to have gone through all the questions that the committee had. I don't know if either of you have any final comment or statement that you want to make? The questions were good questions, and I look forward to hearing the outcome of your deliberations. If I can thank you both very much for taking part. I think that it's maybe been a new experience for yourselves, and I think that it's been a new experience for the committee as well, so hopefully that's been okay. As I explained at the start of this item, the committee will hear from the third nominee at its meeting next week, after which we will consider whether or not to recommend approval to the Parliament and agree a short committee report. At the start of the meeting, the committee agreed to take the next two items in private, and I therefore now close the public part of the meeting.