3. To ask the Scottish Government what its assessment is of the effectiveness of its current income tax policies in stimulating economic growth and job creation. (S6O-02562)

We have the most progressive tax system in the United Kingdom, which raises additional revenue to invest in public services and Scotland’s economy. Since our five-band system was introduced, in 2018, our economy has outperformed that of the UK. Taking into account population growth, gross domestic product per person has grown by 0.2 per cent in Scotland compared with a fall of 0.8 per cent in the UK, while more than 45,000 working-age people moved from the rest of the UK to Scotland in 2021, with a net in-migration of 5,000 people. That is consistent with findings from our policy evaluation of the 2018-19 income tax reforms, which showed no evidence that they were having a negative impact on the economy.

When he appeared in front of the Finance and Public Administration Committee on 19 September, David Bell, professor of economics at the University of Stirling, told my colleague Liz Smith that

“where you have differential tax rates between jurisdictions, you will set up incentives that will cause either capital or labour to move. That move might not be instantaneous, but if two distinct tax systems sit close by each other, incentives are created over time.”—[

Official Report, Finance and Public Administration Committee

, 19 September 2023; c 16.]

Given that, under the Scottish National Party-Green coalition, Scotland is now the highest taxed part of the United Kingdom, how is the Scottish Government monitoring for the long term any movements of that nature?

As I set out in my first answer, there is no evidence of such movement. People move to Scotland and stay in Scotland because of a range of factors, not least the social contract and the various policies and supports that are available here that are not available elsewhere.

In addition, I remind Jamie Halcro Johnston that, based on the Scottish Fiscal Commission’s figures, the Scottish Government calculates that more than 52 per cent of taxpayers in Scotland pay less than they would if they lived elsewhere in the UK.

Those matters will be kept under review. I have set up the expert group on taxation to inform me in relation to current and future tax policy. The Tories cannot get away from the fact that they want tax cuts, but they still come to the chamber to ask for more public expenditure. There is no system in the world that supports that type of economic model.

The Deputy Presiding Officer:

I have received requests from a number of members who wish to ask a supplementary. I intend to accede to each request.

Can the Deputy First Minister quantify the damage that UK Tory tax policies announced in last September’s mini-budget and since have done to Scotland’s economic growth and job creation?

The disastrous mini-budget is indicative of the on-going economic mismanagement of the Tory Government, which has given us the highest inflation in the G7. That is causing real hardship to families in Scotland. The UK’s high inflation is part of the reason that the Office for Budget Responsibility is forecasting the largest fall in living standards on record, with real incomes expected to fall by £1,200 by the end of this year.

Speaking to the Finance and Public Administration Committee last week, Professor David Heald warned:

“We will get into a position whereby national health service consultants ... will start negotiating with their employers for net pay,”—[

Official Report, Finance and Public Administration Committee

, 19 September 2023; c 4.]

and stressed the need to be “very careful”.

When we are in a situation in which we need to attract key talent, such as, in the case of Dundee, breast cancer oncologists, what assessment has the Scottish Government made of the impact of income tax policies on the recruitment challenges in our NHS workforce?

These days, it is hard to work out who is Labour and who are the Tories in this chamber. I will say two things to Michael Marra. First, NHS consultants in Scotland are not on strike, as those down south are. Secondly, junior doctors get paid more here in Scotland than they do down south. When doctors come here to Scotland, they will take into account a range of factors, not least the pay and conditions that they get, as well as all the services that they get and the additional elements of the social contract that I explained earlier. What a strange line of questioning for a Labour member in this chamber.

When John Swinney was the long-standing wise and cautious finance secretary, he knew about the careful balance needed to avoid behavioural change. The finance secretary and Deputy First Minister seems very bullish about the tax rises. I thought that the last set of tax rises was an emergency rise, but now the Government is talking about further rises. Is she sure that she is getting the balance right?

Let me say clearly to Willie Rennie that no decisions have been made about taxation in any form and they will not be until we get into the budget process. I was describing the set of tax decisions that have already been taken, which have led Scotland to be the most progressive part of the United Kingdom, with five tax bands, which take account of what people earn in terms of the tax that they pay.

We will, of course, very carefully consider all the issues that we should do in concluding what is the right balance between tax and the funding of public services, and making sure that we are able to sustain those public services. Although it seems that Labour members come to the chamber wanting us not to make any additional revenues through taxation or anything else, that poses the question of where the money comes from to pay for the public services and the demands that members across—

The Deputy Presiding Officer:

Thank you, cabinet secretary. We will now turn to the next question.

—the chamber make on a regular basis.

From my careful and long-serving perspective, I will ask whether the Deputy First Minister agrees that it is somewhat rich for Jamie Halcro Johnston, as a Scottish Conservative, to come here and complain about differential taxation when his colleagues supported the concept of this Parliament having the powers to vary those taxes and responsibilities in accordance with the needs of people in Scotland. Does she agree that the judgments that individuals will make through the careful behaviour analysis that is undertaken on all those questions will take into account all the benefits of living in Scotland in terms of the availability of public services, lower council tax, access to a range of free services—

The Deputy Presiding Officer:

Thank you, Mr Swinney. We will now turn to the cabinet secretary’s response.

— and the ability to send their children to school?

I agree with every word of that. The important thing is to look at the evidence. As John Swinney absolutely correctly pointed out, the evidence in the round shows that people in Scotland get a range of services that are not available anywhere else in these islands. Actually, those on lower incomes are supported in a way that they are not supported anywhere else in these islands. According to the Scottish Fiscal Commission, 52 per cent of taxpayers in Scotland still pay less than they would elsewhere in these islands.

We have to look at these things in the round and make careful consideration. What we will not do is follow the economic catastrophe and the policies that led to that, which seem to be being articulated and replicated in the chamber. We will certainly not do that, because we know the damage that it does to households and businesses.