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I will split that into two parts. First, obviously, we are under a statutory obligation to use the SFC forecast for our budget, so we need to do that.

The broader point is about economic data and how it can inform economic policy, by providing more granular data on particular sectors, regional breakdowns and so on. Ideas in that regard have surfaced and been explored during this morning’s meeting. Ultimately, in the context of a resource spending review, we have to make assumptions. In the budget setting process, we have to use what the SFC gives us. We also depend on the decisions that are taken in the UK Parliament.

We could certainly engage in our own independent forecasting, but in essence that would duplicate work that has already taken place. The question is what added value such additional forecasting beyond the numbers that the SFC gives us would bring, and how much additional work would be required to inform policy making decisions.

Have I understood you correctly?

That is an excellent set of questions. I am trying to think of a way that I can answer them concisely in 90 seconds or a couple of minutes.

With regard to behaviour change, there is the principle of efficiency. We do not want tax policy that leads to distortionary effects, because that will ultimately undermine the objective of revenue raising. That is built in as a well-understood principle—it was in the Scottish approach to taxation and it is one of the Adam Smith principles. Indeed, efficiency and being conscious of the impact of behaviour change are part of the six key principles.

The North Sea situation fundamentally comes down to the just transition. The workers involved are highly skilled and, in the transition away from oil and gas, the task that we face is to retain their skill sets and deploy them in the emerging technologies in renewables and the wider green economy. To that end, there is support through the commitment of £500 million of investment to the north-east and through a wide range of other interventions in the employability sphere, such as the national transition training fund.

The task is to grow highly skilled and highly paid jobs in the green economy. That will absorb many of the skilled workers and much of the talent, as opportunities in oil and gas decline with the decline in the resource and the industry in the coming decades. The aim is for the just transition to allow such workers to transition into opportunities in emerging renewables areas, which have the potential to offer highly skilled and highly paid jobs that will compensate for the loss of jobs in the oil and gas industry.

We recognise that there is a process of legislating and a process of implementation, and that going from where we are now to a fully embedded and operational new system would go beyond the lifetime of this session of Parliament. However, the commitment in this session is to do the groundwork at pace to establish the citizens assembly and allow it to be able to report back to Parliament in sufficient time so that Parliament can consider its response.

Our position is that VAT should be devolved. We would like three areas to be devolved. Although our overall constitutional position is clearly understood, in the context of the fiscal framework review and the further devolution that could take place, we would like full devolution over remaining aspects of income tax, national insurance contributions and VAT. As you have rightly said, the latter is now more achievable in a way that it was not when the Smith commission was announced and the Scotland Act 2016 was passed.

The committee has explored that area, as did the predecessor committee in the previous session. We recognise some of the challenges of methodology with VAT assignment. Fundamentally, it is important to remember that VAT assignment is not a power but just an accounting mechanism. There is an opportunity to look at the full devolution of VAT, and we want that to be considered as part of the fiscal framework review.

You are referring to one specific tax—income tax. This is a framework for all tax in Scotland and it looks at the decision-making process that underpins that. Of course, we have set out the fiscal cycle with regard to the decisions that the UK Government takes.

As you pointed out, the framework is a high-level document, and decisions around individual taxes are taken as part of the budget process. The document sets out our high-level approach to tax policy overall and the principles and objectives that inform how we go about taking those particular decisions.

I will give an example that relates to your point about the SFC forecasts. It is important to acknowledge that they are forecasts and that we are coming out of quite a volatile period. We would then want to consider decisions against the relevant principles or objectives. I think that the relevant strategic objective in this respect is that of stable revenues.

How does that align with decision making on income tax? Before we take into account the block grant adjustments, the SFC forecasts that income tax will increase year on year. The challenge, ultimately, as you correctly identify, is the relationship with the rest of the UK and the faster growth in earnings. Ultimately, in our tax policy, we are increasing the revenue that is raised in Scotland year on year. The challenge comes with the operation of the fiscal framework. Again, that should be considered as part of the review.

It is, but, ultimately, those will be a reflection of a judgment and values. It is important to understand the interconnected nature of those aspects. Stable revenues are fundamental to delivering the public services that we require for a wellbeing economy. A wellbeing economy is fundamental to achieving the national outcomes. The national outcomes—the creation of a society that is wealthier, fairer and more prosperous—will be fundamental to creating the conditions to generate sustainable revenues. They are interrelated and should not necessarily be looked at independently. There is a correlation—they are mutually complementary.

There is engagement with stakeholders, but there have also been public consultations. For example, there is a public consultation on the additional dwelling supplement. We are taking a balanced approach through detailed engagement with stakeholders, an opportunity for wider public consultation and discussion and, of course, continuous engagement with Parliament, too.

That principle is still contained in our framework, which is why we have expanded the reference beyond tax avoidance to cover effectiveness. Looking at this in the round, I would say that we want effective tax policy that does what it says on the tin, and reducing and minimising opportunities for avoidance is a key part of that. How we actually go about minimising avoidance needs detailed input from those who administer and deliver the tax on the ground, because their technical expertise is extremely valuable and important. What I have set out with regard to the decision-making matrix and the need to consider delivery and administration from the outset is the sort of practical approach that is contained in the framework, and it will inform how we design effective legislation that, in turn, builds upon the principle of minimising opportunities for avoidance that you have referred to.

Alex, is there anything that you want to add on the consideration that was given to building upon the avoidance principle in developing the framework?

As you would expect, I will preface my remarks by saying that you will understand what the Government’s objective is, constitutionally, and what its views are on where fiscal decisions should be taken. My earlier comments were made specifically in the context of the fiscal framework review. I set out some of the immediate policy challenges that we face that cannot be addressed as a result of our not having control over the three taxes in question. That is why those three taxes are highlighted. As I mentioned, there is also the added complexity of the interaction with the benefits system.

Decisions around the process for devolution of those taxes, the implementation of that and the operation of the devolved system would have to be consistent with the framework. As far as tax authorities are concerned, HMRC operates with the devolved elements of income tax. That works effectively and efficiently, as was recognised through the independent evaluation. There is the role of Revenue Scotland in relation to the two fully devolved taxes, as well as the role of local authorities in relation to the local taxes.

The approach to operation would be underpinned by consideration of what would be consistent with the framework for tax. That is how that decision would have to be taken. We are approaching the fiscal framework with a set of asks. What emerges from that will ultimately determine questions around delivery and operational matters.