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I am not precluding issues or saying what the citizens assembly may or may not choose to deliberate on. As I said, you can look at the exact wording in the framework for tax on the programme of work that we are undertaking. It is incumbent on me to ensure that the remit of the citizens assembly reflects the shared policy commitment that was agreed with the Scottish Green Party, and it will.

May I ask you to clarify that? The big focus here is income tax revenues, and in that context what the SFC and the block grant adjustment say is what we must operate with. We can come up with a separate set of forecasts, using a different model and methodology, but that is an academic point; we have to work with what the SFC gives us. I am keen to get a sense of what additional forecasting the committee is asking the Government to explore.

Okay. Let me break it down.

On the broader issue of productivity, we have just published a national strategy for economic transformation, which sets out a range of measures and has productivity and skills at its heart. We recognise the issues with growing the working-age population, but we have to operate within the constraints of the Scotland Act 1998. As a result, we have no control over the levers of migration, which is a huge issue that has been compounded by Brexit—

That is too far down the road. Obviously, the important thing with national insurance contributions is the interaction with the benefit system, which has to be borne in mind. A significant majority of social security is still reserved and controlled at Westminster. The framework provides the means of considering and scrutinising any proposals for new taxes to be devolved and how they should be implemented and delivered.

A practical piece of work that could be done immediately and achieved relatively quickly were national insurance contributions to be devolved would be to address the marginal rate—the gap between the Scottish higher rate and the UK upper earnings limit. The fundamental consideration of the role of the tax and how it interacts with income tax more broadly would be a complex matter, but the methodology that is outlined in the framework would provide a way to consider any changes and to scrutinise and test proposals.

Again, we are open to proposals. I think that the mechanism to which you refer is in section 80B of the Scotland Act 1998, but that is not without its significant challenges—a proposal would require the agreement of the UK Parliament and would have to be run through a set of tests. It could be quite a challenging process. As an example, we have made some basic requests of the UK Government in respect of the aforementioned national insurance marginal rate and around VAT and refurbishing properties. We have not been able to make progress on those simple areas, which does not bode well for dialogue on the potential devolution of new national taxes. Of course, we keep those matters under review, and the framework sets out a process for how such issues can be considered.

Alex Doig might want to add something on the process for devolution of new national taxes via section 80B.

The question is fair but, to be up front, I am not in a position to give a concrete timescale. This is a commitment and a key priority, and I am working to take it forward.

To answer the question directly, I do not want to pre-empt the outcome of the citizens assembly. If we think about the wording—

The citizens assembly will look not just at council tax but at resourcing of local government and council tax. A process will lead up to that, which will include engagement with COSLA. I cannot pre-empt what the citizens assembly will ultimately decide through its deliberations.

What comes out of the citizens assembly will have to be considered against the framework that we are discussing, and a key part will be on delivery and administration. There is a range of possibilities and I do not want to start indulging in speculation. I am sure that members can imagine a range from relatively minor changes to significant and fundamental reform. On that spectrum, some elements could be addressed fairly straightforwardly and others could require primary legislation. There is a broad array of possible outcomes, which is why it is difficult to say at this stage how quickly anything could be implemented.

I take the point that you are making. On the specific issue of non-domestic rates, we had the Barclay review only a few years ago, and that has still to be fully implemented in terms of the revaluation.

You might have noted the Fraser of Allander Institute’s report on the small business bonus scheme. One of the key issues that emerged from that was the lack of data, which we are reflecting on carefully, and we will establish a short-life working group to consider it in more detail. If we want to get to a position where we can consider further reform of non-domestic rates, the starting point is to ensure that we have the data to inform that policy conversation. We are reflecting carefully on the Fraser of Allander Institute’s report, and are particularly focusing on the need for more data.

I think that we would recognise that there is not always a correlation between a property’s rateable value and the performance of the business that uses it. A way to help to address that will be to ensure that we have in place robust procedures and mechanisms for gathering data.

Addressing the lack of data, which the Fraser of Allander Institute report identified, will be a prerequisite for further consideration of policy reform.

Thank you and good morning. I begin by extending my thanks to the committee for inviting me to give evidence on Scotland’s first framework for tax. I understand that the committee is keen to learn more about the framework’s purpose and content, which I am very happy to discuss.

The framework builds on the Scottish approach to taxation, which was the subject of an inquiry by the Finance and Constitution Committee in the previous parliamentary session. It seeks to capture the key components of good tax policy making and to reflect the principles and processes that underpin our approach to tax, as well as our programme of work. In short, it is about our identity in relation to tax policy, what we are trying to do and why we are trying to do it.

As the committee will be aware, the Scottish approach to taxation is based on Adam Smith’s well-recognised four principles for a good tax system—proportionality, certainty, convenience and efficiency. We have added two further principles to demonstrate our commitment to engaging and collaborating with stakeholders on tax policy and to underline our firm approach to tackling tax avoidance activity.

Those principles remain a core part of the framework, although we have strengthened the final principle to capture what is described as “effective” tax policy making. That includes a firm approach to tax avoidance—our resolve on that remains the same—but it recognises the importance of effective policy design and delivery as the first step in reducing the scope for avoidance practices.

In developing the framework, we wanted to build on those principles by setting out, as clearly and accessibly as possible, a fuller explanation of how we make tax policy in Scotland and how we sequence it around the Scottish budget process. In doing so, we expect to realise a number of benefits.

First, the framework will demonstrate our commitment to openness and transparency, which are key ingredients of any good tax system. Secondly, it will lay the foundation for a process of continuous improvement using feedback from stakeholders and policy evaluation to ensure best practice in how we design and deliver tax policy. Thirdly, it will support our efforts to align the tax policy cycle, as far as possible, with the Scottish budget and United Kingdom fiscal events, which are of critical importance to the development of devolved and local tax policy. Fourthly, it will enable us to be up front about our priorities and programme of work for this session of Parliament. Events and circumstances can change rapidly, and that can change the context within which we take tax policy decisions. Covid-19 is a profound example of that. However, it is important that we set out our intentions for taxpayers and businesses, particularly in times of volatility, and that is what we have done. Finally, it will demonstrate our desire for a more open, mature and informed debate about tax policy in Scotland, which is something that I know that the committee is committed to.

The framework is intended for a range of audiences. Our ambition was to make it as accessible and as easy to understand as possible. It is written concisely; jargon is minimised or explained, which is not an easy task in this area; and it sets out the extent of our powers and how the revenue that we raise contributes to the Scottish budget.

Communicating clearly on tax and engaging the public on tax policy is a priority for the Scottish Government. However, improving public understanding of tax cannot be achieved by Government alone and I am keen to work with the committee and all other interested stakeholders on initiatives that can help achieve that.

In that spirit, I take the opportunity to thank all those who contributed to the framework’s production. We sought engagement with a wide range of stakeholders including tax professionals, business representatives, third sector organisations and the general public, and we also carried out a two-month consultation process last September and October. The incredibly valuable and constructive feedback that we received made a positive contribution to the framework’s final version, which was published on 16 December last year and was warmly welcomed by stakeholders. I genuinely believe that we have a product that has been co-produced, and I am extremely grateful to all those who contributed for their expertise and advice.

I will end by looking to the future. As I hope will be clear, the framework acts as a foundation for tax policy in Scotland. Aspects such as the programme of work chapter will need to be refreshed to reflect changes to our work, and we plan to revise that chapter around the mid-point of this parliamentary session. Our intention is for the framework as a whole to stand the test of time and, indeed, to be built on further, acknowledging that one document can never be a silver bullet for every issue or challenge that we face.

The framework demonstrates our commitment to good guardianship of our devolved and local tax powers, including a sustained commitment to continuous improvement. Indeed, that is why, for example, we have published an evaluation of the changes made to income tax in 2018-19 alongside the framework. It is also why we will work with the Parliament on reconvening the devolved taxes legislation working group, which will allow for more detailed consideration of how we can improve the way in which we consult and make legislation on devolved taxes.

As I said at the outset, the framework provides a foundation for the design and delivery of tax policy in Scotland, with policies that support the recovery, national outcomes and our pursuit of a fairer, greener and more prosperous Scotland for everyone, and I look forward to discussing it with the committee.

With regard to how we use our tax powers, the framework sets out a range of principles that are applicable to the question that you have asked. Perhaps I can pick out just one or two in that respect.

The fact is that we have to look at policies in the round. I have referred to the decision-making matrix, which involves looking not just at how we adhere to the principles and the objectives in the framework but more broadly at how our taxes interact with other taxes—devolved, local and UK taxes—and with the broader policy landscape in which we operate, including social security. That broader approach is built into our consideration of tax policy development, decision making and implementation.

Clearly, this has to be looked at on a case-by-case basis. You have referred to forecast expenditure on social security. Of course, decisions on allocation of funding are taken as part of the budget process, and I am conscious that we are moving into the territory of spend.

As for what we are doing around tax, all of this ultimately comes back to how we use the tax system to maximise return of revenues. We have just, for example, talked about wanting to minimise avoidance. Of course, certainty is a key principle, and we seek to provide that, because it very much benefits business. One of the major business taxes is non-domestic rates, and our commitments on poundage, on retaining the small business bonus scheme for the length of the Parliament, on the business growth accelerator and on fresh start relief give long-term assurance to users of the tax system of consistency in the policy landscape. That is an example of where the principle of certainty, when applied to our implementation of tax policy in Scotland, can help achieve the aim of sustainable revenues.

Clearly, the question is much broader than that, because ultimately tax is about the collection of revenues. With revenue generation, though, we begin to get into broader economic considerations.