eb ddegwnaeth am oedden nhw'r carrach. Fy iddo fi, a gweld i ddweud â'r 30 ydw y ddechrau a 14 yddyr y Ffynans Cymru ym Ffinoch ac rwyf btwch hwn ein golygu ddiwedd y ddau, maen nhw'r properau o ddigwyd, ond maen nhw'n fawr. Fy rwy'n gweithio wel πrwy sydd oeddaeth ar y cyfynghyrch allaniedd gyda am y byd i teimlo ei fod yn cysylltiadau. Fy rwy'n gweithiau, ysgolwch i ddegwneidiaeth, lŷd iawn i ddegwnaeth ac efallai Members have indicated their agreement. Agenda item two, our next item of business this morning, is to take evidence on further fiscal devolution from Peter Kelly of the Poverty Alliance and David Moxham of the Scottish Trade Union Congress. Unfortunately Mr Moxham has not yet appeared given any indication of where he might be, so we will go straight to Peter. Thank you for arriving,ternight, but what we will do is asking some questions to your I will open out the session to colleagues around the table. I thought that it was an excellent submission that you put forward on the Poverty Alliance, since quite a lot of interesting points. Obviously, I will be asking you some questions directly on that. You have said quite clearly that, as far as the Poverty Alliance is concerned, what you are looking for in your submission is powers for a purpose. What you have looked at is whether powers will help to address poverty and inequality, and that should be the primary purpose of any powers that are devolved. You talked about the need to work towards a fundamental transformation of the Scottish economy and society. Let us look at some of the powers that we have talked about on being that react would have to be real and effective. One of the first things that I picked up was that you talked about powers of oil and gas to remain at UK level, but Scotland should receive a fair share of revenues raised. How would you define a fair share? I think that we had, as Pity Dave is not here, because we did follow the STUC line on this on other taxes. The taxes that we were not talking about being devolved to Scotland, which was obviously income tax primarily, should receive a share of that. I think that we had said 50 per cent of VAT or an apportionment of VAT. We had not done a calculation to say what would be fair, but it should be in line with the revenues raised in Scotland through taxes-link VAT. It should be dispersed back to Scotland. Do you think that, however, that assignment allows Scotland any kind of control over policy direction, for example? Is that something that you would like to see in terms of discussions between the Scottish Government and the UK Government? That is one of the weaknesses. I think that one of the things that we stated in our paper and that we have tried to reflect whether we are talking about more powers over social security and welfare or more powers over taxation is that we need to reflect the outcome of the referendum. The outcome of the referendum suggests that there needs to be a sharing of powers between Scotland and the rest of the UK. In terms of taxation powers, we do not have the power to vary VAT. We would not have had that power anyway, as far as I understand, given EU rules around VAT. It does not allow us the full control to vary the amount that is raised. In terms of the full economic impact of tax-raising powers, it is limited. Obviously, welfare is a key issue for you in paragraph 5.2. It is essential that any powers over welfare must come with necessary financial controls and policy-making powers to allow for effective delivery. Do you feel that what has been agreed at Smith allows for that? If we look at income tax, we were calling for the bans to be devolved and the rates have been delivered. That is a good thing. I think that the key flaw in what has been recommended by Smith so far is the power around allowances. That seems to me a fundamental flaw in what has been recommended so far. The power particularly to vary the starting rate, the allowances at the bottom, is fundamental for tackling poverty. There are mixed views on the impact of increasing the allowances at the bottom. The starting rate is in terms of tackling poverty by lifting people out of tax altogether. You are essentially giving a tax cut, obviously, to everyone paying above the allowance. There are debates to be had about that, but I think that by not giving that full control over income tax in that way, we are somewhat limited again over what we can do with income tax. In terms of other powers around taxation and whether they can help us more effectively to address poverty, we were pleased that the corporation tax was not devolved. We had not called for that, so we are pleased that that did not happen. In terms of the welfare powers that have been devolved, it is a bit of a mixed bag. There are some powers around largely health and disability benefits that have been devolved. They can be used. Any new powers around welfare are useful, but I think that there is not a coherence. One of the things that we talked about in the paper and certainly a lot of our members and many people in civil society talked about was the need for a coherence in the powers that are devolved. I am not sure that I see necessarily the logic in terms of the welfare powers that are being proposed to be devolved to Scotland. I am not sure that I see the logic there. I am not sure that I see that they are being devolved on the basis of giving us the ability or the capacity to more effectively address poverty. Thank you for that. In terms of paragraph 5.3, you said that benefit rates should be set at a level where no one is left in poverty and all have sufficient income to lead a dignified life. Further on, in paragraph 5.6, you mentioned the powers to create new benefits. You talked about loan-payment grants, health and pregnancy grants and child trust funds. The issue is that Smith allows enough resources to be raised in Scotland to pay for these additional benefits and to create the level of equality that he would look for. I will make an obvious statement here. It is quite complicated with the powers that are potentially being devolved. The Barnett formula will remain, but it will obviously need to be adjusted. We have new borrow and powers, but they will need to be negotiated with the UK Treasury. That potentially allows some flexibility. We have new powers to create additional benefits, but they would need to be paid for. Whether the fiscal powers are there to allow us to pay for new benefits, if we so choose to do that, or whether the powers around new taxes will be sufficiently flexible to allow us to raise in a way that we can spend more on those programmes that we think will help to target social injustice, it is not quite clear yet at the moment. Over the piece, we are not convinced by at least some of the powers, particularly around income tax at the moment, that they will provide as sufficient flexibility to get to the heart of tackling poverty in Scotland. Thank you very much for that. Your view is a step in the right direction. I think that we are trying to be as positive about this as possible. There are things that we think should also have been devolved and have not been so. Mino and wage, for instance, would be one that would be quite important in terms of how we address labour market inequality that has not been devolved. A step in the right direction is probably where we would put ourselves. I mean, going on to employment and equality, you said that 91.5 per cent of people believe that Scotland should have the power to set and enforce the minimum wage in terms of, in this figure, some of the response to your own survey. How do you feel then about the fact that the minimum wage is not being devolved? I think that it is a missed opportunity. Again, we are talking about coherence. There are things around the work programme. For example, the work programme is being devolved. It seems to have been devolved in more or less a useful way. There is a lot of the answer that we seem to have. I think that there is still a lot to be worked out. Obviously, you know this. This is the recommendations from Smith where we get to with some of those recommendations remains to be seen. We have control over parts of the employability system in Scotland, so the work programme being a big part of that. We will have control over that. We will not have control over Jobcentre Plus. We will not have control over sanctions, for example. The minimum wage should be seen as part of that attempt not only to address exploitation in the labour market and pay inequality, but also as a way of encouraging people back into the labour market. That was one of the arguments that was used when the minimum wage was first introduced. I think that there was a good case for devolving the setting of the national minimum wage to make it coherent with other parts of policy in Scotland. However, we did not get some of those other parts around sanctions and Jobcentre Plus, the machinery architecture for helping people back into the labour market. I would see the minimum wage as part of that, so it would have been useful to have that. I am going to open up the session in a couple of minutes to colleagues. Do you feel, therefore, given that you are happy with some of the measures of Smith but you have some frustrations that others have not been delivered? Are you the view that this is effectively the settled will for a lot of a better phrase, or do you feel that there is still an opportunity to campaign for additional powers financial and otherwise to come to Scotland at the poverty lines that we would like to see delivered here? I think that, certainly, in terms of the submission that we put to Smith, we have not seen all those things devolved to Scotland. For us, as a network, as an organisation, we would want to try and retain both a focus on looking for opportunities to devolve new powers, as we have done in the past. When, for example, the power over the social fund came to Scotland, we campaigned around that to be delivered in Scotland in a particular format. Going into the future, we would certainly look at other opportunities to devolve further powers to Scotland in line with the recommendations that we were making in the paper. In the Smith commission, there are proposals in there that talk about future negotiations between the Scottish Government and the UK Government. For example, they talk about co-location of some services within Jobcentre Plus and better coordination around the delivery of Jobcentre Plus. I am far from clear what that means in practice, but what that does set to me is that there is an opportunity to work some of those things out in the future. One of the things that maybe has not been picked up so much about the Smith commission is about the inter-governmental relationship that does not seem strong at all at the moment. There are things that need to be some greater element of co-decision making. Jobcentre Plus would be one of those that is highlighted in the Smith commission report. Whether it is who has settled well, I am not sure, but I can only speak for the poverty lines. We would certainly want to campaign around those issues that we think still need further investigation. The powers that are coming to Scotland will campaign around those to make sure that they work best to enable us to tackle poverty. We will thank you for that. Just before opening up the session to colleagues, I will let the committee know that Dave Moxham will not be coming this morning. He apparently had the committee meeting in his diary as taking place tomorrow, and he apologises to the committee for that. You are on your own for the rest of the session, Peter. The first colleague to ask questions will be a deputy convener to be followed by Mark. Clearly, we were given a copy of your report to the Smith commission, which is quite wide-ranging and goes beyond probably just what this committee looks at. In some of your general comments, you make some interesting observations. You talk about it in 2.6. This means a different approach to economic development, which suggests that it is all kind of culture change. Is that separate from the actual rules, the powers that we might get, or is that something that needs to be changed separately, or is that linked to the powers that we might get? That is a really good question. I think that they are linked. I think that with more powers, there is more potential to do things differently. As I have already said, there are certain constraints on some of the powers that are being devolved at the moment. However, I think that there is a question about the extent to which powers allow for that cultural change to take place, for a different kind of set of priorities to take place. Again, maybe not focusing so much on the issue of fiscal powers, but on welfare. The fact that we have the work programme and that it would appear full control over the work programme allows us to set that programme up in a different way. It allows us to set that it is going to operate, that it has rules around conditionality that are inherent in the work programme, to operate in a slightly different way. However, the fact that we do not have Jobcentre Plus, we do not have universal credit, we do not have control over sanctions and conditionality in the main will militate against perhaps having real full control over the work programme and really developing it in a different way, if we so choose. However, the question about economic development is about setting different kinds of priorities, so raising revenues through taxation but having different kinds of priorities about how we spend it, how we think about particularly local economic development. Some of those things that we recommend that we ought to focus on, if Dave was here, I am sure that we would talk about the foundational economy and talk about those things that matter to people in their communities and that are quite important for economic stimulus rather than constantly focus on economic growth. We are maybe starting to see some development, some moves not away from that but some interesting new thoughts around how we grow our economy in a way that does not entail rising poverty or rising inequality. We need to think about how we use the new powers in a different way rather than just simply varying tax rates to stimulate economic growth. That is why we are concerned about co-operation tax and how that would be used just to stimulate economic growth. Is that enough? We would say no. If you take the work programme, the way that we did the work programme could be done differently and the way that people are treated or whatever it be, that is where we could make a change of emphasis. That would then become a problem if we had one ethos in the work programme and a different ethos in Jobcentre Plus. That seems to me—we were talking about not only the work programme but also Jobcentre Plus. There are other reasons why Jobcentre Plus would have been useful to bring to Scotland. We have extensive employability programmes delivered by local authorities and others that sometimes come into conflict with the way that Jobcentre Plus support is delivered through Jobcentre Plus to people going back into the labour market. It would have been better to have some greater level of coherence between the work programme, Jobcentre Plus and those other various employability programmes delivered by others. If we move on to section on taxation powers and talk about various taxes, income tax is one that you have mentioned. You have particularly mentioned that you felt that it would be useful to have had control over the actual allowance. Would that really make a big difference? Is the big thing not that we can decide if it is 10p, 15p, 20p or all of these things? That is important. There is potential for the allowance to be raised by the UK Government and that would surely have an impact on the rates that we would want to set in Scotland. That is something that we would not have control over. Again, for coherence and for making for income tax work fully, we would have argued for full control and for control over the allowances as well. Do you think that there is an issue with the timing of when that would work in practice? If the Scottish Parliament set the rates in October and then the allowances were set in March, would you foresee a problem in that? That could be. That is not an issue that I have considered. Again, that is maybe about the way that the two Governments work together in setting those policies. Obviously, there is a whole process that we go through in Scotland in terms of the budget that we maybe need to look at in terms of the setting of the UK budget. How do you see national insurance tying in with income tax? We have had people here—basically, we have had both views here—some people saying that national insurance is effectively the same as income tax and other people saying that it is very closely linked to welfare and pensions and all those things. We should keep the two separately. Do you have a view on that area? I think that we would have been in favour of national insurance being devolved to Scotland as well. We would say that, again, for coherence, it would be useful to have national insurance. If we retain pensions at the UK level, perhaps there is good reason for national insurance to be retained at the UK level. Again, it seems that this is a major form of taxation in terms of allowing the Scottish Government more control over fiscal policy, more control over economic growth, then national insurance and the ability to vary national insurance would have been an important power to allow us to do that. Under income tax, income tax can be a tool for redistribution of wealth and so on. Is that what you mean, or do you mean that it is redistribution of income? That will then take me into inheritance tax as to where that fits in, because I think that you do also say that that could be used to redistribute wealth. It is about redistribution of income, that is correct. You do also support inheritance tax. Presumably, if we are going to deal with poverty, it is not just about redistributing income. We have to get some of the wealth from the wealthy into the hands of the poor. Is there any other way of doing that, apart from inheritance tax? I guess that the most effective way of raising incomes for most people is to get them into quality work, not low-paid work. We would argue that that is the most effective route over the long term. Taxation over wealth is a major way of holding on to wealth, passing on inherited wealth. That would be an area that we need to consider. I know that that is something that will be done in the future. Again, we have had arguments on both sides at this committee. Some people say that inheritance tax is quite linked to land, so it is not movable. Therefore, it would be a good one to have control over. On the other hand, some people's wealth is in shares, and that can move around very easily. It is not a good one. Where do you think on that balance? We were in favour of inheritance tax being devolved. I do not think that we saw a great concern about avoidance. I am not sure whether that is what you are looking at. In that respect, having control over inheritance tax would have been useful again in setting a different approach to taxation and trying to do things differently in Scotland. You mentioned the issue of coherence. Last Thursday, at the devolution for the powers committee, we had a panel of academics who said that the proposals as they stand are incoherent and unsustainable. Is that a view that you would share? I think that I have already said that identifying the logic for some of the particular powers we have struggled to identify that. You mentioned in your evidence the participatory process of the referendum and your concern that the way in which the Smith commission timetable and process have been carried out has lost almost all of that participatory element. Do you see a risk that the wider public who became exceptionally engaged during the referendum campaign, including in particular those in some of our most deprived communities, will be disengaged as a result of what is seen by them as a closed doors political carve-up rather than a properly participatory process? I think that that is an issue that ourselves and others like SCVO, the STUC, the electoral reform society have all raised about the process of the Smith commission. There is just simply no way that in terms of the period that we had, the period that the Smith commission had to produce its report that it could do anything really approaching a kind of participatory approach that many of us were calling for. I think that it is down to the political parties, to the Scottish, the UK Government and also civil society organisations to try to find ways to ensure that the participatory elements remain. However, I think that there is a danger in the post referendum period that people see as a closed process and one that they have very little opportunity to influence. I do not know if you have had a chance to look at the STUC submission and I realise that Dave is not here to answer the questions on it, so I am not going to question you on the STUC submission, but in their submission they make reference to a citizen-led process, citizen juries. Do you believe that there is a role for that in terms of perhaps improving some of the proposals that are there? Would you view what the Smith commission has come up with as being perhaps more of a floor than a ceiling, and would that be the spirit that you would want to see being taken forward? Again, I think that in the opening questions that I had said, settled will is probably a phrase that is thrown about too much, but I think that there are still opportunities for those of us who are campaigners, who want to see more powers, who have set out their position to argue for more. I think that many of us were also concerned that it was the usual suspects, if you like, of organisations such as the Poverty Alliance and the STUC and others. That is where the desire for those genuinely participatory elements to emerge came from, so we supported that call that came from the STUC and electoral reform and others for that kind of participatory process, allowing for citizens juries and so on. The time is moving on, and those calls that I do not think are being delivered, and we are now in the next stage of the Smith process, if you like to call it that, the devolution of more powers. Those opportunities for that engagement are not being developed, as far as I am aware anyway, as far as I can see. Turning to some of the detail around how things might pan out, one of the issues that has been raised and was raised at the committee last week was about the potential for essentially gaming in the process, and that was raised by Professor David Heald last week at the Regulation of Further Powers Committee. The process around land-building's transaction tax gives us an indication of where that might happen, where the Scottish Government consults early on proposed bans and the proposed system. The chancellor stands up in his budget speech and announces that he is making changes at midnight that evening, which is seen by some as an attempt to circumvent some of the decisions that the Scottish Government have consulted on. Also, the fact that the negotiation around what happens to the block grant for devolved taxes has still not been resolved. Do you foresee difficulties ahead for the Scottish Government in administering some of the new powers that come if there is not some correction to the way that that process operates? That goes back to the question that I raised earlier about the intergovernmental relationship. That may well never be easy, but it becomes all the more important when we have enhanced powers, particularly fiscal powers. It does then require clearer communications, clearer processes for negotiation and agreement than necessarily takes place at the moment or up until now. To try and get round that possibility of gaming, to try and get round that possibility, where decisions that are arrived at by the Scottish Government could potentially be undermined by the UK Government, we would want to see the two Governments working in concert. That would be our favoured position. We want to see if the Scottish Government has taken actions to address poverty and inequality, whether that is using new powers to create new benefits, whether it is doing things like abolishing the bedroom tax. We would not want to see policy or activity at the UK level undermining those efforts. That will be difficult to achieve, but the basis of that is clearer and better intergovernmental relationships. I mean, that kind of goes back to the coherence point, but would you see a concern in one of the points that has been raised? Yes, the Scottish Government has the ability to create new benefits, has the ability to top up benefits, but the tax base from which it can draw more income, the variability is limited and that essentially income tax is really the only significant lever that you have available, and there are only so many different ways that you can go at the same well. Do you have a concern then that one of the consequences could be that, while you have the powers to do those things, you do not have the financial base to be able to do them or to be able to do them in a meaningful way? I think that that was always a concern, and that was a concern that came through from many civil society organisations that, if new powers around welfare and benefits in particular were to be given to Scotland, we had to have the wherewithal to do something with those benefits creatively. Whether that is increasing those benefits, delivering them in a different way or creating new benefits, we needed to have the tax-raising powers needed to do that and to borrow on powers as well in difficult times. Given what I have already said about the proposals that are in Smith around income tax, we perhaps do not have all the powers around raising the money to deliver some of those benefits. Therefore, if we have the power to create new benefits, it is not clear to me yet how we would pay for some of those. The convener of the devolution committee received a note from the Parliament's information centre, which suggested that, if the Scottish Government were to top up a reserved benefit in the future, that that could have a knock-on effect on the claimant's universal credit. Paragraph 55 of the Smith commission appears to suggest that that is something that should not happen, but do you foresee that being a potential issue? Is it something that you think needs to be absolutely bottomed out before powers are transferred? That would be my reading exactly. The Smith commission says quite clearly that that shouldn't happen. As far as I understand it at the moment, that could happen in terms of the current set-up of our welfare system or benefit system. That is something that really needs to be addressed and set out very clearly what the impact of any additional new benefits or top-ups to existing benefits would be on claimant's other benefit income. The next question will be given to be followed by Malcolm. Last week, we had a pretty interesting session with tax experts who looked at the powers that were going to be developed, primarily the financial powers. I think that they outlined some of the challenges that we might face or the difficulties of implementation. There were one or two issues in relation to that, and there was a stamp duty issue that I think had been not picked up by anyone up until then. In terms of the powers that are being devolved—start with the welfare powers—are there any difficult decisions that we are going to have to make? Are there any challenges for implementation that you are able to highlight to the committee just now so that us as a committee and anyone who is reading our report can think about those things as soon as possible? I think that we need to think about the delivery mechanism for any new benefits. At the moment, we have where new powers have come. I will go back to the Scottish Welfare Fund. Where new powers have come, we have used local authorities as the delivery mechanism. That seems to be working at the moment for the Scottish Welfare Fund. With the range of benefits that are being devolved to Scotland, we need to think about how they will be delivered. That is undoubtedly a challenge. We do not have a separate Scottish social security system, so we need to think about the delivery of those benefits. That would be an initial challenge. You have highlighted a good issue. Do you have any initial views or does your organisation have initial views on how they should be delivered, or are you more highlighting the issue? We have not got there yet, to be honest. We have not taken a position. It is not work that has been done trying to think whether any of our members have raised any issues with us around delivery. I cannot think that they have. They have raised that question about whether local authorities would be able to deliver those responsibilities. I have not had a clear answer on that, but there was certainly equivocation about it. The initial question is to the work programme. Are there things that we really need to think about now in relation to that, to make sure that we get the implementation correct? The criticisms of the work programme that was made at the time of its development, one of the rationales behind the work programme was that the voluntary sector would be able to deliver much of the work programme. The reality has been quite different. Across the UK, with third sector providers being squeezed out or giving very small parts of the work programme, we would need to think about how the prime contractors were brought into that, particularly the third sector, which has a great deal of expertise in delivering back-to-work programmes. We also need to think about the role of the public sector in delivering aspects of the work programme. At the moment, the work programme is not really delivering, so we need to look quite fundamentally at it. The rates of success are improving very slowly, but there is still no better than the work programme's predecessors, and we need to have much more ambition for the successor to the work programme that comes to Scotland. We need to think quite fundamentally about how the programme is constructed, who delivers it and how it is delivered. I know that the Smith commission has obviously reported now, but in your paper you talked about alcohol, tobacco, fuel and gaming duties being assigned in a similar way to VAT. The argument behind the VAT position was that, while you would not control the rate, if you managed to grow the economy more, then more VAT would be collected. What was the rationale behind your stance on alcohol and tobacco? If that were to be devolved or at least assigned, the public policy would be attempting to reduce alcohol and tobacco consumption and so on. There is not the same opportunity to grow the revenues that were, so I just want to know what was the rationale behind that policy. I suppose that it was more in terms of fairness. It was not so much about using those powers to grow the economy in the same way that you might try to use other taxation powers, but it was more in terms of fairness that this is money that is raised in Scotland, and therefore should be assigned back to Scotland. The next member is Markins, who is followed by Gene. Can you tell us how many member organisations you have and what range of members you have? We have around 200 members. Around a third of those members are individual members. Many of those are people with direct experience of poverty who have been through work with the poverty alliance. The other two thirds are made up of a range of voluntary community organisations. Some statutory bodies are also members and associate membership. Most of the main anti-poverty organisations in Scotland are members of the alliance. What would be your top priorities in extending the provisions of Smith? I think that you mentioned the minimum wage, but it would be interesting if we would take tax and welfare separately. What would be your top two priorities in further tax devolution? I think that we would need to look at what we do as an organisation for the future. I think that there is something around making sure that the taxation powers that we have, that are eventually devolved, are delivered in such a way and are used by the Scottish Government in such a way that they can be used to help address poverty, to help fund the fight against poverty. In terms of future priorities, looking at potential further devolution, we would probably have to go back to that question of allowances and see whether that might be over a longer term, to look at whether how that works in practice once new taxes are devolved, to look at whether there might be a strong argument once we see what happens in practice for the devolution of allowances. That would be around taxation. Why don't we just stick with taxation for a moment? In a way, that's more important to you than additional taxes such as inheritance tax or whatever other taxes that you would like to get devolved? I think that that would be fairly central to what we would be calling for. Obviously, we need to go back to our members again and start to have a discussion about post-Smith. We had as much discussion as was possible before the Smith commission to try to get feedback on the paper that we produced and try to get people to feed into us, their views. In terms of the specifics around taxation, I think that there are opportunities there for us with new powers to have more of a discussion about what we do with taxation in Scotland, with the new powers that will come, than we had in the past. Obviously, the tax varying powers that we had were very limited. I think that we, in common with many other people, didn't campaign around that. However, there is more scope for us to think about how we use the new taxation powers that will come to Scotland and, at the same time, to be thinking given that all the things that we are lobbying for have not been delivered, what kind of emphasis can we put on further devolution? It will be a question of what our members think are priorities. On previous experience, I would imagine that they would want us to focus on the powers that we have and to make sure that they are used to best effect. It seems that your tax proposals in general are not too dissimilar from what the STUC is proposing, but they also feel that we would be right for about two thirds of the money that we spend to be raised by our taxes. Do you have a view on that, or is that not really a matter of priority for you? It's not something that we've had a view on up until now, no? Perhaps moving on to welfare, perhaps you're a bit more divergent from the STUC on that. What would be your kind of top priority for additional welfare powers beyond what's been proposed? We need to look again at how the new powers play out. The main things that we were talking about were the devolution of powers around working-age benefits. We still need to look at how those powers are delivered at the UK level. Up until now, we have campaigned and lobbied around the delivery of welfare in Scotland but in the UK context. Our lobbying has been focused on Westminster in that way. I guess that, in some ways, it will remain as such. We'll be wanting to see in line with our partners in the Scottish campaign on welfare reform. We want to see adequate benefits. We want to see delivery that supports people back into work. We want to see a system that treats people with dignity. On the whole, the main parts of welfare, universal credit, will be the main part of that now and in the future. We want to see those principles applied to the delivery of universal credit. While we might argue for those powers to be devolved to Scotland, we will take those arguments to whether control lies at the moment. I am giving you my campaign strategy rather than what our priorities are. We will have to argue with Westminster as universal credit is retained in Westminster. It is the main benefit. It is one where, potentially, there are significant problems. As I have said already, the conditionality regime remains at UK level. We will argue that Jobcentre Plus should be devolved. Prior to the referendum, that was a position that I think was starting to develop. It had not been articulated very clearly by many organisations, but it was a position that was starting to be discussed more often about the devolution of Jobcentre Plus. I think that that would still make sense. The devolution of the work programme makes it more logical. As I said earlier about employability programmes, it is important that they are coherent. On the basis of subsidiarity, which we mentioned in the paper, it makes more sense for those services to be delivered in Scotland and to be controlled in Scotland to make it coherent with the employability programmes that we already have here. Do you see any risks in terms of the devolution of welfare that you are suggesting? I mean, presumably, for example, if you have a big rise in unemployment and so on, how would that be catered for in the kind of devolved settlement? If we were to have those kind of powers devolved, then we would need additional powers, fiscal powers, to be devolved also. We have borrowing powers devolved to some extent. The way that we should have addressed rising unemployment in the UK over the past few years was that we do not believe that we should have been cutting benefits and cutting services. The division between cuts and borrowing should have been different, I think. Many people would agree with that. If unemployment was to increase and if we had control over some of those welfare benefits that we talked about, then we would need to look at a different way of supporting the increase in expenditure on those benefits if unemployment went up. However, we do not have those powers over welfare, so it is not really a question that we need to address at the moment, I do not think. Thank you for your submission. It is very interesting. Do you think that the attempt by the miscommission is, in a sense, too broad that there is a little bit of leeway in a number of areas, rather than any dramatic change of real devolved powers to the Scottish Government, that would mean that, in one area, there could be a significant difference that the general public in Scotland would be aware of it? To add just to be clear, are you suggesting that the recommendations from Smith are too broad, perhaps too thin, not having sufficient impact on any of the areas? Is that getting that right? Yes, you are. Just to clarify what I am trying to get at, there are a lot of similarities, in some ways, between some of the wish list, if you like, of the STUC paper and your own welfare, income and work programmes. The response to all of that in the Smith commission seems to be so far but not far enough, almost in every area. Would you agree with that? I think that that would be a correct assessment. I think that if we accept that other areas where we might have not seen any devolved power but gone as far as the requests were in other areas, that would have made a more dramatic difference. In other words, if we had devolved the entire work programme, employment, minimum wage and so on, at the expense of perhaps not doing so much on welfare, could that have made a greater difference to the overall picture? Had we focused our attention on particular aspects of whether taxation policy or welfare policy, we might have seen more. That was more or less what we were suggesting in our paper. We would use that phrase about devolving all the welfare powers that were best delivered in Scotland. That was a fairly open phrase, I think, and deliberately so, that should allow you to devolve particular packages if it wasn't all of welfare that we talked about, about working-age-related benefits. Many people talked about working-age-related benefits. What we have seen is enough to call it a package but sets of benefits around disability. There is an example where we will see a difference and I think that people will feel the difference. Of course, the thing is that we get these powers, we need to decide whether we are going to do something different with them. That is the important thing. If we are just administering them in the same way, people will feel no difference to the way that they have been administered from the UK Government. Around the disability benefits, there are risks. There are potential issues that we face in the period up to devolution. We are seeing already cuts in some of those benefits. When those benefits eventually come to Scotland, they will have been cut. They will be worth less than they are at the moment. That immediately presents a challenge for the Scottish Government post 2016 that might wish to do something different with those benefits. I am sure that many people in disability organisations will be saying that they need to be restored to current or even previous levels. I think that the question of whether the population would, in general, have felt things to be done differently, felt a difference with a different focus to the powers that have devolved in. With the ones that are devolved, we will potentially see a big difference depending on the decisions that we make once those powers come. You also mentioned in your paper the possibility of a percentage of other taxes of that and duties. Given that we do not understand the Barnett formula, I wonder whether that is going to make any difference whatsoever. Would we not need to know with real clarity how the Barnett formula is arrived at? For example, if we see that the economy improves and there is a high income, that would surely have to show somewhere in order for us to be convinced that Scotland was better off. Currently, we could arguably, and a number of economists are raising real concerns that Scotland could end up worse off so that we might alter income tax and improve the economy. We might do better with a work programme, but all of it would be for nothing if we do not understand how the calculation of the Barnett formula shows that improvement in the Scottish economy. I think that one of the proposals in the Smith commission and one of the discussions has been about the reworking of the Barnett formula. That needs to be done, and that seems to me to be part of the discussion about what happens now after Smith. I am not sure about the context in which we could lose out through the assignation of those taxes to Scotland. I am not sure of that scenario. I just do not know enough. I think that that was really all that I wanted to ask you. A lot of the evidence that we heard in the run-up to the referendum and also post referendum in anticipation of the Smith commission's outcome, we took a lot of evidence from experts, academics and others. It was a point made by quite a number of them that there seemed to be an assumption that, by getting powers automatically, things would therefore be better. A lot of organisations and their analysis and their anticipation of the changes that could come failed to mention the risks involved in some of the decisions that would have to be faced. I have to commend you that you have not fallen into that trap. You have not said quite clearly that the devolution of further powers to Scotland must take into account the need to reflect the desire to share responsibilities, risks and powers with the rest of the UK. Those risks relate to the economy. The more powers we get in terms of economic levers, the greater the risks in terms of what the Scottish economy can allow the Scottish Government to do to create greater levels of benefit, a stronger organised welfare system, the types of programmes that will create the dignity that you would hope for. Is there a danger that we do not take account of those risks when we make this analysis? I think that one of the fundamental points that we were trying to get across in our paper, which I think that you touched on at the start of your question, was that it is not simply just about more powers, it is about what we do with those powers and it is about using those powers in different ways to tackle poverty. There are risks in any change in the balance of responsibilities between the UK Government and the Scottish Government and the other devolved administrations. There are risks that, on the policy level, the decisions that are made from our point of view and from the party's point of view do not help to address poverty. Those risks remain at the current or previous division of powers. Is the question about that, by devolving those powers to Scotland, the risk increases of economic failure? The reality is that it is two sides of the same coin. Unfortunately, some people only see one side of the coin and only talk about the devolution of powers being a benefit, an improvement and enhancement, but unless you take into account the risks on the other side of the coin, then it is not a fair analysis. That is true. That is what we tried to get across in our paper and we tried to say that, as has already been highlighted, the devolution of further powers to Scotland needs to take into account what the Scottish people said in September. Certainly, a lot of the discussion up until September and after that has been about the desire for more powers. I think that we need to recognise that in the context of sharing those powers and sharing those risks. What we have tried to suggest in the paper that we put to the Smith commission, we argued for a set of powers that took into consideration that question of retaining certain powers at the UK level, the things that are best done at that level. What we tried to emphasise was what are the things that would work best in Scotland that would help us to deliver on what we think are the aspirations of most Scottish people and that is to address poverty and inequality. In your paper, you also recognised that there had been some progress for a period of time towards the reduction of poverty. We know that there was a catastrophic economic change that took place in 2008-2009, which, obviously, must have made a huge contribution to halting that progress. However, in 2013, the Joseph Rowntree Foundation carried out a report in which they looked at existing powers that were held by the Scottish Government and were fairly critical of the failure of the Scottish Government to do more with the powers that it had at that time, to continue to address the issues of poverty. Is there not a concern that, if we do not focus on what we do with the powers, it becomes a continuation of a constitutional discussion rather than a discussion about what we want to do with the powers and are we best using the powers that we have? I think that we are in the middle of a constitutional discussion and we need to look again at the powers that are best delivered in Scotland that make sense to be delivered in Scotland in the overall constitutional settlement of a division of powers between the UK and the Scottish Government. For those of us in civil society, we will always be concerned about what happens to those powers and how they are used. I keep going back to the Scottish welfare fund because I think that it is important that the approach that we ended up with in Scotland, because we had that power and because it was devolved to Scotland, allowed us to do something different. It reflected the desire of many in civil society to have a consistent approach across Scotland and to deliver emergency support to people who needed it. We have seen a different approach take place in England and Wales and one that I would argue is far less effective. No one was arguing for the social fund to be devolved to Scotland simply because we said that it should be devolved to Scotland. If a power comes to Scotland, those of us in civil society want to do our best to make sure that it delivers most for people who are living on low incomes. It is not simply about a constitutional question, it is about what we do with those powers once we arrive at them. That concludes the question. Is there any further point that you want to make before we wind up this session? Thank you very much for shouldering the burden today. Your response is very much appreciated by the committee. What I had intended to do at the end of this session, which we thought would last some 90 minutes, if we had both witnesses, was to have a short break and then go on to our next session. However, it looks like that will not happen for another 20 minutes or so. I am just wondering if colleagues would be happy to take item 4 at this point in private session and then we will have a break until our next panel. We will go into private session just now. I will leave out a minute for Peter in the official report to leave. We will go to item 4, which is in relation to our approach to post-legislative scrutiny of financial memorandum. I am going to reconvene today's business. Our next item is to take evidence on the devolved tax implementation from Eleanor Emerson, head of Revenue Scotland at the Scottish Government, John King, director of registration, registers of Scotland and John Kenny, head of national operations Scottish environment protection agency. Of course, all the witnesses were here some three weeks ago and it is no secret that we are here because of the issues that were raised. In the preparations for the implementation of the Scotland Act 2012 Auditor General report. Without further ado, I might as well go straight into that and, of course, you obviously know the drill. I will ask a question and it is up to you who wants to answer the specific question. First, I will go straight to the summary of the report. Eleanor Emerson and Paragraph 1 key messages that should be familiar says, and I quote, Delays have reduced the time available to develop the IT system and appoint staff. As a result, there is increased risk that the IT system may not be fully operational by 1 April 2015 and the Revenue Scotland may not have the expertise to manage the devolved taxes effectively from 1 April. It is just to have your initial comments on that paragraph please. Good morning, convener. I am happy to do that. We are confident, as I made clear in my evidence to the committee on 26 November, that we are on track. We did work through the material in the report with the Auditor General, so we agree the fact in the report, but obviously the conclusions drawn from those facts are the Auditor General's own, not ours. The Auditor General notes increases in risk. We would recognise that we are managing those risks. Managing programmes and managing projects is not simply about writing down plans and then doing them. It is about staying on top of any problems that arise, actively managing risk, watching your critical path in the terminology and making sure that you are ready to deliver. We are confident that, on the areas that the Auditor General has highlighted, that we are managing any risks and that we are still on track to deliver. All colleagues around the table have a copy of the official report from the committee three weeks ago, so some might be asking questions directly from that. Sticking to the Auditor General's report, he has made some recommendations, and the second one is to clarify what progress needs to be made to ensure that IT systems to collect the devolved taxes will be placed by 1 April to inform its decision on whether to implement its contingency plans. Paragraph 2780 specifically highlights that there is a risk that the IT system for collecting the devolved taxes will not be fully implemented by 1 April again. It talks about the timescale for implementing the new system being very tight and there is a risk that it will not be in place at the time. From the evidence that the committee gave to the committee before, my understanding was that the system was effectively going to be completed by the end of January and two months for testing. Is that still the current timescale, and do you believe that that is a realistic timescale to eliminate glitches, as you said in your previous evidence? Absolutely. The system is doing internal testing at the moment. We will move to external user testing with people who will eventually be users of the system in January. My description of the period in February and March, in a very lay language referred to as snagging, is a standstill period in a restricted testing environment where a range of eventual users of the system have a fully tested version of the system. I am even told that I am allowed to use the word play to make sure that everyone is confident that it is absolutely fine, but we will be testing internally and externally in January every reason to suppose that we are on track to deliver for 1 April. I am pleased to hear that now. In part of 20, the auditor general highlights her view. She says that there is a clear understanding of Revenue Scotland, ROS and SIPA about their respective roles and responsibility, but that has only recently been established. I wonder if you can talk us through that a wee bit. I think that this is a point that has been of interest to the committee in the past. This is a deliberate approach that we have taken from the very beginning that registers of Scotland and Revenue Scotland and SIPA have worked together to develop the plans for collecting the taxes. That is all of the elements, so we have worked together on how the processes should work, how we will do compliance, how we will manage communications with taxpayers and so on. That has led us, as we have got close to the end and we understand what those processes look like and we know what all the details of the communication plans and so on are. That allows us then to decide which of the bodies is going to do which element of work. What we did not do was sit down at the beginning and say, right, well why don't you do compliance and we'll do something else and then go away and work on those things? I think that that would have led to something that was not optimal from a taxpayer's point of view. We have been working on all of this, trying to look at it from how it would work, from a taxpayer's point of view, so that the taxes are as easy as possible to pay, as hard as possible to avoid. We have allocated roles and responsibilities near the end of the process once we were confident that we knew how we wanted all of that to work. John or John wishes to add anything? Yes, but it is a very positive collaborative work in relationship. We have gone with the best person to do the best job, and that has evolved. We have, certainly, clarity over what role we have to undertake from 1 April. In our report, the Auditor General highlights a number of concerns regarding staffing. We obviously touched on that when you were here three weeks ago. She talks about, in paragraph 16, a court delays in recruiting to the tax administration programme division, and that there was no clear resourcing plan setting out the number of positions and grades of staff. She talks about, in paragraph 26, the risk remains that Revenue Scotland will not fill all of the operational posts in line with its revised plans. From my personal perspective, paragraph 41 is a issue that should concern me. In our report, the Auditor General said that in that, I quote, the Scottish Government's current assessment is that while it currently has enough skilled people in place to fulfil its responsibilities, it is dependent on a single member of staff and, consequently, there is a need to consider resilience as April 2016 approaches. That is obviously with regard to SRIT, but is it the case that you are dependent for this whole structure on one individual? Can you talk us through some of those issues in relation to staffing? Certainly. You are quite right that the paragraph 41 references to the Scottish Rate of Income Tax, which is not a Revenue Scotland or Rosalyn Seeper point, but we can say something about it if it is helpful. There are two elements to the staffing of Revenue Scotland. There is what we call the programme team, which has been working on all the setup of all the elements, the processes, the IT, the technical guidance, the communications, and then what we are now developing is the operational team, who are the people who are going to actually run all of this live. The delays that the Auditor General highlights and the point about the resourcing plan at paragraph 16 relate to the programme team in the setup. On that, the Auditor General argues that we should have had more staff earlier in the setup. I think that that would have been helpful with hindsight, but I do not accept that it was required to use her language in the headline. If we had had more people in sooner, very slightly sooner, perhaps a couple of months sooner, I think that that would have made things go more smoothly, but it would not, I think, have materially changed the position that we are in today. On the operational staffing, obviously, the position has moved on very significantly since the Auditor General's staff were doing the work on that in October. The First Minister, in fact, updated Parliament on that in her statement last week, but I can give you even more up-to-date figures, as of yesterday, of the 40 operational staff. We have 21 now recruited. We have eight, which are going through the process of recruitment, so three have interviews scheduled and five of them are at slightly earlier stage than that. That will leave us 11 that we will advertise as planned in January. We do not need absolutely all those 40 people in place to go live on 1 April, but we are very confident that we will have all the staff that we need for 1 April, and we were aiming to have all 40. To cut a long story short, your view is that things will happen as planned on 1 April, and there are no glitches in terms of collection of these devolved taxes. That is certainly what we are planning to achieve. We have explained all that to the committee, but we can look at individual elements of that today. On the Scottish rate of income tax point, that is really for colleagues, but I recognise the reference. I think that it is a little misleading. There is one member of staff who is concentrating very significantly on working with HMRC on the Scottish rate of income tax, but he has an entire finance team around him with lots of other expertise and colleagues to draw on, and others, including myself, until more recently, are involved. I think that while there is technically one person leading, there are a lot of people with expertise to bring to that. I will get one further question before I open the session out to colleagues around the table. That is in terms of the recommendations and page 18 of the general report. It talks about what revenue Scotland should do, and it says in the third bullet point, finalise its contingency plans and ensure the points at which contingencies would be activated allow sufficient time for effective tax collection from 1 April 2015. Has that been done? Yes. We have done more work on our contingency plan, and we know that we could invoke it around the end of February, if we needed to, and be ready for 1 April. Thank you very much for that. I will open out the session, and Gavin will be first to be followed by Malcolm. I want to focus mainly on IT, but just looking at staffing first, just taking your answer there about what has happened. The First Minister said on Thursday of last week that 16 offers accepted, five offers made, five are going through the normal recruitment process, and we are going to advertise 14 posts in January. Six days later, 21 are in place, eight have got offers, and 11 are being advertised in January. Have we appointed people before we have advertised posts, or can you explain the discrepancy? Surely. The 21 relate to the First Minister, 16 and 5. The eight are three. I said that the three of them have interviews scheduled, and five more are at a slightly earlier stage in the recruitment process. All that has happened is that we have moved a little faster on advertising some of the jobs. The First Minister was highlighting 14 that were still to be advertised, and I am saying that we are down to 11 because three more have gone into the advert system. We have done that slightly earlier than was on the plan. We had 14 planned to be advertised in January, and we have gone ahead with three of them. We basically advertised additional posts after Thursday, and we have got interviews lined up. I want to focus mainly on the IT. I refer you to page 15 of the Audit Scotland report, paragraph 32. I suppose that this was a paragraph that really jumped out on me. Due to the tight timescales, Revenue Scotland is prioritising the development of the part of the IT system that it will use to process tax returns. This is an expert, though. The public-facing part of the system through which people will submit their tax returns online will be developed after this, which might be after April 2015. Can you explain that? That is not the position now. We did do the system development in the order that the Auditor General has highlighted. We did build what we call the back-end of the system first, the bit that does the management of tax cases and all the calculations. That has to be connected up to a public-facing portal, I believe, of the terminology. We will do that part in January as part of the user testing that I was referring to in January. The Auditor General staff were noting the order in which we were doing things, and we are saying that something might happen after April. I am saying that it is happening in January now. If we take the two separately, you have the part that is processing the tax returns. To use your language, what you describe as back-end or front-end is that back-end. Where are we with the back-end system? I have seen a demo, as I have some others. We have internal colleagues in Revenue Scotland doing testing on that back-end, as they have been for some time. We are iterating the testing, as you do. In January, the public-facing bit will move to user testing involving external users. We will have people who will be end-users of the system, solicitors or people from solicitors' offices, and help us with the system testing. Is the system complete or close to complete, and you are now simply testing it? I would never describe anything as complete until all the testing is complete, because that would not be proper. However, the main development work is done, and that is why we are in a position to be doing testing. Therefore, that is why I can give you some confidence that we will deliver for April. On the back-end, because previously you said that there will be a first version of the back-end that is tested internally, and then there is a full version that will come out. Is this just version 1 that is being tested at the moment, or is this what you might have described previously as a full version? The language full version is that we have been iterating the development. We have had a version of the system, we have done tests, there have been things spotted, there have been comments made, those have gone back to the developer, the developer then addresses those points, gives us another release of the system, we do it all again. We get a release, we do testing, we get one more release. It is more iterative than that. Does that help? It helps, but there are not formal releases. Previously, you talked about how many formal releases have there been then. We had what we called our readiness release at the end of November, so that is our formal release. The iterations have been going on. There will be, to be honest, I have probably ought to go away and check the details of the plans before I put any wording around releases in the new year, but we will have external users testing the system in January and we would aim to have certainly a release at the end of January. Forgive me for dwelling on that. In terms of the back-end system, you had an initial release. Has there been a second formal release of the back-end system yet? The reason I am hesitating is just language. I want to get to the bottom of it, so I would rather you hesitated than tell me the wrong thing, but I am keen to explore what the fact is. The fact is that we had the release that we were expecting at the end of November, that we have the testing going on in an iterative way on that, that we will have the further testing that we anticipate in January and we have the release that we will anticipate in the new year. Well, that is the plan that we have to have another release in the new year, but I understand that each time that we iterate, one could describe that as another release of the system. I understand that. The next release is planned in the new year, just for accuracy. Is that early January, end of January? What do you have a timescale for that? If we are talking about formal points, the next really formal point will be at the end of January, after we have done the testing involving external users. As I currently understand it, if I have any of that wrong, I will write and make sure that I correct it for you. Moving on to the front-end of the system, the one that the users will interact with, obviously when this report was written, the Auditor General's opinion, was that this could be after April 2015 for the front-end, but if you like, to be formally working. What is the current prediction from Revenue Scotland for that to be in place and working? We expect to have that in January. There actually isn't a lot, if you talk about front-end, there isn't a lot to that. What we do is develop an online form, which is what staff of Revenue Scotland could say, but is also the same online form that an external user will see when we put that live externally. The online portal element of it is about putting the back-end system into a position for external users to see. It is not as if it is a massive, additional system in its own right. We also have a case management system for Revenue Scotland staff to be sure that they are managing every stage of the tax collection process. Are there any bits of the IT system then that if the Auditor General or anyone else were to audit it today, are there any bits of the IT system at all where they might highlight a risk or say that there is a chance that it will not be ready for April? If anyone were to come in and look at an IT system and say that there is absolutely no risk before that system is fully tested and put live, that would be, shall we say, unusual. I think that there is no unusual level of risk here. We are completely on top of development, we are managing the risks and we are doing the internal testing. We have confidence that the external testing will work and that we will be ready to go. I take your point about the word no risk, of course. Nothing in life is risk free. If anyone is looking at it now and they look to all aspects of the IT system, are there any part of it that an objective person would say that there is a reasonable risk or there is a strong possibility that this element is not ready by 1 April? I do not believe so. Okay. Referring back to the report again, page 15, paragraph 35, in recognition of the reducing time available between now and the first of April to establish the required IT systems, the IT implementation group is developing contingency plans. My understanding from the evidence session last time was that we were doing the contingency plans just because we were super cautious, we were taking any kind of belt braces and a piece of string approach, but the audit Scotland report reads differently. That suggests that the reason for those plans being developed at this stage is in response to the reducing time available. Is audit Scotland's interpretation of that correct or would you disagree with that? We would have done the contingency planning anyway. We have to because, as we have just discussed, until an IT system is fully tested and live, there is always some level of risk that there might be a problem. There is no red flag that has gone up that has led us to think that we suddenly have to do contingency planning. It was part of what we were always going to do. They say specifically that it is in recognition of the reducing time available. You would disagree with that conclusion. It is not my perception of the situation. I think that we would have been doing the contingency planning anyway. Last time you were here, you talked about there being contingency developed and that we would make a decision on this in December. So we are now in December. When will you take a decision? We need to implement our contingency plan or we do not need to go near the contingency plan. We have refined our contingency plan considerably. On our first pass, we looked at a plan that might have a 12-week lead time, which would have meant that, by the end of December, we would have had to make a decision if we needed to go into contingency. We have done a lot of work on it. We now have a version of a plan that we could implement really around the end of February with about four-week lead time or so. Therefore, we are not in a position to need to make that decision today. You talked about AMBERs last time when there were a few AMBERs. You also said in the last evidence session that you were currently doing an assessment what is currently AMBER for this project. I am not allowed to talk about it publicly. So last time I talked to you about the aggregate reporting and I think I said there were about two dozen indicators. I went away and counted them and I should correct myself. There were three dozen indicators and some of them were AMBER. Underneath all of that, there are individual, what we call products. They are individual things that we need to put in place. They might be a piece of guidance. They might be design of a process. They might be about staffing. They might be whatever they are. When we did the assessment that you are referring to, there were 568 of those, of which 27 were at AMBER. We had a programme board yesterday. We are now 17 of them are at AMBER, but that changes week to week. This is the point that managing projects is not about having no risk. It is about managing risk and managing delivery. Every week, we reassess where we are on the delivery of all those individual elements. If we need to take action to bring something back on track, we do. Anything that the committee should know about that is not on track or where there is a potential risk of things not happening. There is nothing that the committee should know about that I am not, we are not managing. Gavin has covered that very exhaustively. I was going to go slightly into the past, but just before doing that, can I just ask you one question about section 32, which Gavin asked you about in detail? He has already quoted the sentence, the public facing part of the system through which people will submit their tax terms online will be developed after this, which may be after April 2015. You said at the beginning that you checked it for accuracy, so would you have challenged that at the time that that was raised with you? Would you not have said that this will definitely be tested in January, or how did that arise, that comment about April? It is the language of May. At the time that the Auditor General staff were doing the work on all of this, they were looking at plans and they obviously took the view that they thought that there was some possibility that we would not deliver on plan and that it would happen. We can challenge factual things in the Audit Scotland report, but we cannot really change the Auditor General's assessment of the position. Was it in your plan at that stage that all of this should be done in January? I will go back into the past, which seems to be the source of some of the concerns. I am sticking with IT, first of all. On page 13 of the report, there is more than one reference to slippage, I suppose, of one sentence in 30 as revenue Scotland aimed to identify a supplier for the IST system by April 2014, but that took four months longer than planned. Then there is reference to advertising atender in mid June. Did some of the advertising and the decision about what kind of IT system and how to commission it, did that slip in the way that she is suggesting? If it did, why did it slip? It is helpful to look at Exhibit 3 on page 14 of the report. There was a period between January and April when we were working with the Scottish Government's internal IT team. We were strongly attracted to the idea of doing the IT development in-house for a variety of reasons, including value for money. We were working with the Scottish Government IT team so that they fully understood the system requirements that we had developed. We could assess whether they had the capability to develop the system. We came to the conclusion at the end of April that that was not the best option, it was not, in fact, the lowest-risk option. We then moved thereafter to go from the very end of April when that decision was taken. We were out to tender within six weeks, so we were out in the middle of June. We had the contract awarded by the middle of August. We went out through a Scottish Government's existing framework contract, and we have a supplier who has already done work for the Scottish Government. I do not think that Audit Scotland would challenge the decision to use the external supplier, but we did spend a period of time between January and April, which I think is the four months that the Auditor General is referring to, looking at an in-house option. Moving on to the staffing side of things, again, you have indicated where we are now, but, again, just going back into the past, on page 12, there are various references, again, to slippage, basically, confirmed job descriptions and grades by the beginning of October, originally August, and confirmed job descriptions and grades by mid-October, originally September. So, was there slippage in terms of decisions about staff and the advertising for staff, and if there was, why did that arise? I do not think that there was slippage in terms of decision taking. Within a programme that there are rapidly changing environments, so plans are not something that you make and then never revisit. During this period, we were thinking through our plans for staffing, so at a very early stage, I am going back well over a year, I think, I thought that we might have all the operational staff in for the end of October when we looked at that. It does not make sense to have all those people in, what am I going to do with them, so we had moved to a different phasing and then we moved again. There is not a problem on the operational staffing. We are on track to have the staff that we need for the first of April, so the fact that the plan has evolved is simply the natural thing that happens within a project. Is there any relationship between staff that you have admitted that you would rather have had more programme team staff earlier? Is there any relationship between your shortage of staff there and some of the slippage in terms of the operational decision making? No, we have had the full, we have had a well staffed programme team for quite a lot of months now. All the people relevant were imposed at the point that we were doing that, so I do not think that having had more programme staff in sooner might have helped us to evolve our plans a little sooner and that would have been useful, but it would not have meant that we would wind up with more operational staff in post sooner. You are saying that you do not really need contingency around that because you are going to have the staff, but would there be any possibility if you were short of operational staff for some of the programme people to stay longer or are they doing completely different things and not really able to—not interchangeable, as it were? A number of the programme staff are not interchangeable, but some would be. I think that the important point is that I mentioned that we will have 11 staff left to recruit in the new year and those are staff with—we have prioritised filling the posts like the solicitor, some tax specialists, accountants, so that we are coming to do the last tranche of staff, there are more of what I might call generic skills. Therefore, if we were really struggling, I can look around the whole of the Scottish Administration for staff. In terms of those 11 in January, why would you wait to January rather than advertise for them in November or something? People have to sift, people have to interview, we have to have something for them to do when they come in. It is simply about what work will they be doing, who is actually undertaking the recruitment and re-stagger the recruitment so that you are not trying to do all the interviews in the same week or something like that. I am sorry, I was just talking to Clavs. You can interview someone in November. They do not have to start until January or February. I do not understand why you would leave it late, because I thought that those positions of expertise would be fairly few and far on the ground. There are not a lot of people who can fulfil those tasks, and surely they might be doing other work and may not be available if you are leaving it to last minute. I do not understand why you might not want someone to start until relatively late in the process, but why would you not interview to ensure that those people are actually available when you require them? We have interviewed for the posts that we thought would be the hardest to fill, so we have moved ahead and recruited people with tax expertise. As I mentioned, you may have heard the solicitor accountant, a statistician to help with the performance monitoring, so we have pressed ahead. We did it on a risk basis, so we went ahead earliest with the staff that we thought might be the most challenging ones to secure, and then the rest of the team came in behind. I do not need absolutely all of the 40 to be in post for the 1st of April, so we are aiming to bring them in in time for the 1st of April, but if some of those posts were not filled, it would not prevent us from going live. I think that most of the ground has been covered. I certainly remember when I was on the Audit Committee at local authority level being told to understand the difference between risk and likelihood, and I think that that has come through in terms of the responses that have come forward. Just in terms of the staffing issue, I was not on the committee previously, but I note looking back at the previous evidence sessions with yourselves that you stated in October that all key appointments would be in post by February 2015. Is that now confirmed that that will be the case? Yes, I think that the key appointments are now actually in place. That was really the only question that I had left, because it is pretty much everything else that is being covered by other committee members. Thank you. It is not like you, Mark. It is going to lie down after the committee. Thank you, convener. We have covered quite a lot of the ground. The question has been touched on especially around paragraph 23, page 12, and the headline of that is the risk that Revenue Scotland will not fill of its operational posts. I think that Malcolm Chisholm referred to the slippage under those two bullet points, or apparent slippage. Can I just ask you to expand on what you have already said? You said that the plans were kind of kept evolving. In one sense, would you say that the original plan and the dates of recruiting were actually too early and you made a better decision? Is that what you are saying? We made the decision that we think makes the best sense in light of the business, so we hope that we have made the best decisions now. I think that the key thing for the committee is that we have 21 people identified, we have eight more well in hand, we have only 11 still to fill. One can go backwards and forwards over plans, but the important thing is that we are going to have all the people in place. Is there a sense that the Audit Scotland would say that you could have recruited people earlier, but if you had recruited people earlier and gone over your budget, you would then have criticised you for recruiting people too early? There is always that judgment to be made, and the same is true on the point about programme staff. If I had brought in more programme staff earlier, I would indeed have spent more money. We are always juggling the value for money and making sure that we are going to deliver. We think that we have a plan here that works and that is value for money. The word risk has floated around quite a lot. You have already said that you used one phrase, no unusual level of risk. Audit Scotland throws the word risk around quite loosely, it seems to me. We have talked already about greens and amber and reds, which are fairly broad spectrums. When you are looking at your risks, I do not know if you have a risk register or whatever you have, but do you narrow it down beyond that? You could have a 95 per cent risk that something is going to happen, or you could have a 5 per cent risk that something is going to happen. Do you look at it that way? We look at, in the standard methodology, impact and likelihood for risk. What would the impact of this be if this risk were to materialise and how likely is it to happen? I am afraid that we do not measure them in percentages, but in the usual way, we have high-medium-low categories and a five-point scale of risk. Do we know what Audit Scotland means when they use risk? Do they analyse it, or do they just use the risk, meaning that it could be 1 per cent, it could be 99 per cent, it could be anything? You would have to ask the Auditor General how they evaluate risk. There is not a quantification of risk that I can see in the report. I talk about higher or lower, but I am not aware of a scale. In 26, however, the risk remains that Revenue Scotland will not fill all of the operational posts in line with its revised plans. There is a risk that all the shops will be closed next week and I will not get my Christmas shopping done, but presumably that is quite a small risk. On that particular one, you would accept that there is a risk, but what is the risk, or even what was the risk, that Revenue Scotland will not fill all of these operational posts? Could you put any kind of figure on it? I can tell you now that it is significantly lower than it would have been at the time that Audit Scotland. We are looking at this because we are two months further on, and we have filled a lot of those posts. I do not think that I could put a figure on it for you. I do not see it as a high risk now at all. If I said that it was a 10 per cent risk and that it is now a 5 per cent risk, would you be arguing with that? I would not be arguing that it is a much lower risk now than it was, and I do not think that it was a high risk at the time. Mark Ruskell is now desperate to come in. It is just because we have gone back on to the issue of risk. As I understand it, there are two types of risk or two analyses of risk. One is the risk that something will not happen, so the likelihood, and the other is the risk to the organisation if something happens. That is the two ways that you distinguish, so there is the risk that it will not happen. There is also the risk to the organisation if it does not happen. Do you make those distinctions in terms of your reds, ambers and greens? Obviously, the two are not the same thing. We look at, for any particular element of risk, both the impact and the likelihood. Reds, ambers and greens are effectively a product of those two things. We are in danger of going a long way into project and programme management methodology here, but you have a one-to-five score for likelihood, you have a one-to-five score for impact, best assessment, and recognise that these change frequently. We would be reviewing things regularly, weekly, monthly, and you look at that. A risk that was a very low likelihood but a very high impact might still appear to have a score on your risk register because you recognise that you do not think that it is going to happen, but you know that you need to be careful about it because if it were to happen it would have a very high impact. Obviously, we do not have the order general here, but reading the report, sometimes it is not always clear whether the risk that is being used is the one that refers to likelihood or to impact or a combination of the two. I think that you can assume that what the auditor general is looking at here is risks that would have a high impact. If we did not have enough operational staff for the first of April or if our IT were not ready and we did not have a good contingency plan, those would be very high impact. They would have a very big impact on being able to collect the devolved taxes. However, we do not see those as high likelihood and we are managing them to manage down the likelihood. That is the way that you go about all of this. It is good to know that politicians on local authority audit committees and politicians around this table understand the difference between a risk and a likelihood. Do you think that the auditor general would understand the difference between a risk and a likelihood? Impact and likelihood are both elements of risk. I am sure that the auditor general understands that, but we have to speak to her. It is good to know that we are not debating the report where the person who compelled it would not actually know what they were talking about. The auditor general in her report says that we have been preparing for this for two years, but it does not look as though it is ready. That is the summary from my reading of it. Do you think that they would have said that if they did not believe that that was the case? No, of course I do not. I am sure that the auditor general has presented a report that is her assessment of the facts that have been laid in front of her. When they say that there are not enough staff being put in place early enough, you consider that to be an accurate assessment of the situation from their perspective. They have looked at the staff that we had at each stage and they are saying that, in their judgment, that was not enough. I am saying that it would have been better if I had had my time over again that we would have put more programme staff in place earlier, but I do not accept that they were required and I do not accept that that would have made a material difference to where we are right now. Was it entirely your decision that staff were not in place at the time that this study was undertaken? The plans for recruitment were my decision. There were some delays in the programme staff recruitment that were not my decision. They were to do with whether we could get people with the right expertise at the time. I am sure that you have a degree of autonomy to make those types of decisions, but were the Government ministers responsible for your office aware of that, did they sanction it, did they approve of your decision not to get the staff in at the time that the auditor general thought was to me? I have not discussed staff recruitment with ministers at any point. I am clear on ministers' expectations. It is my job to make sure that I do all the things staff, the team manage the plans, make it all work. That is my responsibility, not ministers' responsibility. No minister spoke to you about the preparedness of your department to do that? We have certainly provided reports to the committee, we provide updates to ministers about our progress, but I have never had a conversation with a minister about my detailed staffing plans or how many staff I was recruiting at different stages. When you said to the committee in November when you were here, there has been a lot of progress and there is nothing, sorry, but there is nothing negative that I need to report. That seems strange. The Audit Commission must have known, you must have known of the report at that time and you knew that the criticisms existed. Did you just ignore the criticism when you said that to us? Well, there are two things. I said that in response to a question, I think it was from Gavin Brown, about what had happened since the written report that I provided to the committee in the middle of October. I provided you with a written update and the question was, so here we were at the end of November, had anything happened in the interim that I needed to report? I said that there has been a lot of progress, but there is nothing negative that I need to report. I was aware that Audit Scotland was going to report. I obviously could not discuss that with you because that report was not in the public domain. I was aware that the Auditor General would be criticising some things that had happened at a much earlier stage in the programme, that she would have issues about risk. I stand by what I said to the committee, we are on track to deliver, we are managing the risks. I do not see it, I do not see a problem. You are taking to task the point that made that only one member of staff was responsible for this. I understand your explanation for that. You said that other staff were available and were part of the team, but what else were they doing then if they were not directly hands-on as the other individual member of staff was? Were they deployed to other responsibilities at that time? None of that relates to any of the Revenue Scotland teams. The single member of staff point at paragraph 41 is about the Scottish rate of income tax. The member of staff referred to is a member of staff in one of the Scottish Government finance policy teams. He has around him a range of other colleagues in Scottish Government finance who do all the different things that you would expect, including finance policy payments, professional accountants, all the people that you might expect. They all have other jobs, but he has expertise that he can draw on. What else would they have been doing other than their jobs then? They would not have been doing anything other than their job. Part of what the Scottish Government finance team is doing at the moment, collectively, is working with HMRC on the Scottish rate of income tax. He explained that a decision to bring people in earlier would have increased the cost of the staffing, but the overall costs have already gone up £2 million than expected. He said that he wanted to manage the project very tightly and ensure that it delivered what it needs to deliver and stays within budget. It already had not stayed within budget. How much more would it have gone up and how much more will it go up above budget? We have gone up by £1.7 million. How much would it have gone up if I brought more staff in earlier would depend on which staff and when. I have no expectation that it will go up further from here. That is now a full programme team. As reported to the committee previously, we are now seeing that I have scheduled the set-up team to continue to be in place for a number of months into 2015-16. I have given you my full estimate of what I think this is now going to cost and set up an operation. I do not have any expectation of that £1.7 million increasing. You have told us that you have a contingency plan. Had it been necessary to put it in place just now, it could have been more likely that if there is going to be a contingency, it may not be required until February, even if it is required at all. What is the contingency? What is the plan? When the IT system goes live, we will still be offering solicitors a paper of tax return, that we would prefer them to use the online system, but we have heard from the Law Society, from solicitors representatives, that not all solicitors are ready or willing to use an online system. We took our policy decision that we would provide them with a paper form and build a system. Our aim is that the system will be so attractive that eventually we will be able to move everyone online. However, the contingency plan is that we would use the paper form for all the tax returns. If absolutely required, we would use a paper form for all the tax returns for a short period from 1 April until the IT was finalised. Will it only be if all returns are done by paper that that contingency will have been put in place? We have to do certain things behind the scenes in order to make sure that we are ready to process that volume of paper returns if that were to be the case. We would make an active decision to invoke the contingency plan if we needed to do it. If people wanted to do it by paper, what was your expectation of the level of return that would have been done by paper, regardless of whether there was a contingency in place or not? It would be helpful if I bring in my colleague John King from Rose at this point, because Rose has experience of working with solicitors with online and paper registration. The planning assumption was that 90 per cent of returns would be submitted online. The evidence for that is based on the percentage of returns that are currently submitted to HMRC through their e-filing system. It is also based on some very recent experience from ROS. A week pass on Monday, we launched some new IT systems, four in total, to support the new land registration act, which the Parliament passed in 2012. A couple of those systems are voluntary electronic systems, and we have seen a dramatic increase in solicitors uptake of those systems, which we think bodes well for the 90 per cent assumption for LBTT that returns were submitted online. The expectation is that 90 per cent of solicitors would have wanted to return online, so if 80 per cent do it or 70 per cent do it, does that mean that the system has not been ready? No, the IT system will be there or it won't. I mean, if we have an IT system there and only 85 per cent of people choose to use it, then only 85 per cent of them have chosen to use it, that's simply their choice, and then we will work with them to encourage them to use the IT system. It's always been in the communications plan that, between January and March, a considerable degree of focus is on explaining to solicitors what's involved in the new land and buildings transaction tax and the mechanics of that, how they actually submit a return and encouraging them to move to or stay with an electronic version of submission. I know that colleagues in Revenue Scotland have various roadshows planned with the solicitor community, particularly to convey messages like that. I mean, a very short question that you have answered very comprehensively. I guess that it's just about related to the budget and the overspend. Was there any connection between the kind of, for want of a better word, slippage of employment from your original plan linked to trying to save some money? Or, I mean, I perhaps haven't looked carefully enough, but, in other words, is the difference in the budget or the estimated budget and the reality, the fact that it is a bit greater, is it related in any way to any of the criticisms of the Auditor General's report? So, no, we haven't deliberately delayed staff recruitment in order to try to save money. We've been very focused on what we need in the way of staffing in order to successfully deliver. Had we allowed budget to dominate delivery, we wouldn't be overspending by wealth at all. But, in fact, we're completely focused on making sure that everything's in place for April. I think that there may have been an element of your question that I haven't answered there. I guess it's just where the increase in the budget is that wasn't anticipated. It's all staff and it's all programme set-up staff. So, the Auditor General, well, I mean the Auditor General. So, we brought in additional staff to make sure that we are managing the programme on the project tightly, managing the IT project tightly, we have in place people to do all the work that needs to be done in order to deliver for the 1st of April. So, when I say that we're managing risk, we have brought additional staff in to make sure that we are on top of all of that. Were you surprised by the Auditor General's report or do you think that it was, she was, there were areas that she was right to highlight? It wasn't a surprise to me by the time it was published because I had spent quite a lot of time with her staff discussing findings and evidence and all of that. I have to say that I don't share the perception but that I have a perspective sitting within the programme and she has a different perspective. Thank you. Okay, thank you for that. That has concluded the questions from the colleagues around the table. I'll just get one further final question and it's regarding paragraph 60, where there's a recommendation that the Revenue Scotland needs to consider how to report on its performance, collect and devolved taxes and it notes that you're in the process of developing a performance reporting framework. I'm just wondering if you can give us a wee bit of information on how that is going forward? We have a statistician who's doing a lot of work on that at the moment, internal reports and what we might report externally. One of the things that she has done is go through the various discussions that have been with committees and other questions that have been asked publicly. She's trying to make sure that we map out a framework that is going to address the sorts of questions that we anticipate, that what it's Scotland and the Parliament and the public will be interested in. However, I really would be interested in taking the committee's view on that before we put a final framework in place. We would like to share something with you at some point and test with you whether the performance reporting framework that we imagine having will meet your needs. That's very helpful and Jim's has been written that down. Thank you for that. Just to say if any of our three witnesses have got any points that they wish to make to the committee at this point before we wind up. Okay, well thank you very much for your evidence today. Thank you to committee members for their questions today and indeed all year. I'd like to wish all committee members and indeed all the staff a great Christmas and a happy new year.