Official Report: Minutes of Evidence

The Chairperson (Dr Aiken): Are you happy that we call you Dame Susan, or does Susan work?

Dame Susan Rice (Scottish Fiscal Commission): Sorry, I lost your voice briefly. Are you asking me to say a few words at the beginning?

The Chairperson (Dr Aiken): Yes, please.

Dame Susan Rice: Thank you very much indeed. Good afternoon. Thank you all for inviting the Scottish Fiscal Commission to give some evidence today. I am joined by two of my colleagues: John Ireland, who is chief executive of the commission; and Claire Murdoch, who has a very senior role in the commission. Claire has worked for the commission for five years now, and, like me, was involved in our transition from a non-statutory body to our current statutory status. Amongst the three of us, we have a lot of history as well as the current. We are more than happy to answer any questions that you have about our experiences of setting up and working as an independent fiscal institution or fiscal council in Scotland, but I thought that it would be useful if I first drew out a few points around our origins, our key working relationships and our independence.

The Scottish Fiscal Commission was formed in 2014, when new tax powers were first devolved to the Scottish Government. Back then, we comprised three commissioners — two colleagues and myself as chair — all part-time, unpaid and with no support at all, a bit like the three musketeers. We were responsible for judging whether the Scottish Government's forecasts of receipts from the then newly developed taxes were reasonable. That was our parameter: reasonableness. It was a job of scrutiny.

In April 2017, a year after the Scottish Government had agreed their new fiscal framework and the Scotland Act 2016 had been passed, the remit and responsibilities of our commission changed profoundly. We became Scotland's official fiscal and economic forecaster, an independent statutory body, responsible for producing the central forecasts ourselves, rather than simply vetting the Government's forecasts. Our work now is to forecast the Scottish economy, devolved tax revenues and the newly expanded suite of devolved social security payments. In addition, we have to assess the reasonableness of the Scottish Government's borrowing plans. To do that, we now take a broader look at the Scottish Government's funding and how that changes over the course of a year. We have also expanded. We are now four commissioners, still part-time, but we are paid to some extent and are supported by 22 brilliant staff. I am afraid we do not have any pigeons on our payroll, however,

so

today. We took a look back; that was funny.

We took an early decision that the forecasts would be produced in-house by our own analysts — there was a reason for that — and that the models would be owned and maintained within the commission. We share copies of our models with the Scottish Government's analysts so that they can provide advice to Ministers on the same basis as we prepare our forecasts. However, ultimately, as commissioners, we four are personally responsible for the forecasts. We sign off the forecast judgements. We are in the room when the Government challenge us on the forecast. We sign the forecast document. That contrasts, for instance, with the approach taken by our colleagues in London at the Office for Budget Responsibility (OBR), who commission their fiscal forecasts from relevant UK Departments. Scotland is one of a very few subnational countries in the world with an independent fiscal forecaster, so we are conscious of others looking in at us and, especially, of how our role dovetails with the OBR's in London.

The OBR plays a comprehensive, UK-wide role that includes a broader remit on expenditure than ours, as well as on issues such as fiscal sustainability, where the UK Government's borrowing powers are obviously much wider than those of the Scottish Government. The OBR takes a top-down view of the UK and its regions. Our commission draws on new data sources in order to take a bottom-up view of Scotland. Although we work closely with the OBR, we are firmly independent of it, as we are of the Scottish and UK Governments. We can reach different conclusions and judgements to the OBR in producing our Scottish forecasts.

I turn finally to independence — not Scottish independence, but with a lower case "i". I must emphasise that. We are not looking at political independence, because that is a matter on which the commission must be and is strictly impartial. I refer to the independence of the work of the Scottish Fiscal Commission as an organisation and the actual outputs we publish. A key objective of the commission has been to establish its independence from government and ensure that it is seen as credible. We have always acted independently, but perception also matters greatly. When our mission was first mooted and I was asked to become chair in 2014, I was helpfully steered towards the Organisation for Economic Co-operation and Development's (OECD) 22 principles for independent fiscal institutions. The principles have remained on my desk ever since — actually in the desk drawer but very close at hand. Independence is key to the commission's operation, efficacy and credibility. The 22 principles define and guide an institution such as ours to demonstrate and exemplify its independence.

Back in 2019, after two years of operation as a statutory body, we were pleased to receive an endorsement of our independence. In its peer review of the commission, the OECD credited us with having quickly developed a reputation for delivering independent and credible forecasts, reflecting, in part, the quality of our modelling, which had been subjected to their technical assessment. It also credits us with having enriched the fiscal debate in Scotland.

The OECD principles also informed our founding legislation, which includes several guarantors of independence. Those include clear rules on the appointment of commissioners and on Parliament's involvement; a right of access to information that may be held by the Scottish Government and its agencies that we may require to produce our reports; and the power to produce reports on the resources that are available to the Scottish Government whenever we want to produce them. The legislation has served us well in establishing an effective fiscal council, and we were encouraged that the OECD reviewers agreed, saying that it could act as a model for others wishing to establish fiscal councils.

I could say a lot more about the experience of the last seven years, but I will leave it there. My colleagues and I are happy to answer any questions.

The Chairperson (Dr Aiken): Thank you very much, and thank you for your written briefing as well. I have a couple of questions.

First, when you talked about modelling, you said that you all agreed to use a similar modelling process. How difficult was it to get Departments to buy into that? Of course, in Northern Ireland we have a five-party coalition, and there would not necessarily be that full political buy-in from some Departments. How easy was it for you to achieve agreement between everybody to work on the same modelling?

Dame Susan Rice: Let me be clear that my answer responds to the question that you have asked. In the commission, we have created our own models to use for all the payments and benefits and the economic and fiscal forecasting. Those are our models. We share the basis for those models, and we put a huge amount of information about them on our website. I talked about independence but not about transparency. We are also very transparent. We share the models, which develop and change over time, with the analysts within government so that they know the basis on which we are looking. Along the way, they often use their own models to do a lot of the work as they consider policy options and as different parties consider policy options. One of the important points in our legislation is that we do not do costings or look at the potential policies of all the parties. We only become involved when an official policy is presented to Parliament. That may be part of the answer.

How did we get all the parties to agree? Way back when, our sense was that there was a concurrence in the Scottish Parliament that, after it had done a lot of the research that you are doing, looking around at other examples, all the parties were behind our coming into being. Over time, we developed a way of working, and we talked to them and worked with them. We have not had party-particular challenges that have been sustained over that period.

The Chairperson (Dr Aiken): My next question is about one of the biggest problems that we anticipate. As a Committee, we have great difficulty getting evidence, data and reports on time. How easy have you found getting information out of government so that you can do the business of monitoring and oversight? I really like the way you talk about transparency. In Northern Ireland, we probably see just the very top level of the Budgets, and particularly the outcomes. We never get to see the detail behind that. What degree of — I hate using the word, and I apologise for it — granularity are you getting on the economic and budgetary detail coming from government?

Dame Susan Rice: I will say very little and turn to my colleagues. This evolves over time. That is one important point. Over time, we learn what we need. We work closely with colleagues in the Scottish Government. From the very start, we developed a protocol for working with them. We have a protocol with individual agencies or teams and with some of the UK agencies. Some have been easy to put together, and others have been more challenging. They take time, and they take relationship-building, but we seem to get there.

You have been involved in a lot of those protocols, Claire. Do you want to say something?

Ms Claire Murdoch (Scottish Fiscal Commission): In working with the Scottish Government to get the data that we have, because we have a key role at fiscal events — when the Budget happens, we are producing the forecasts, and we have to assess the Government's borrowing plans — we have a timetable with the Government that is agreed by both parties. There is a process in there that sets out when we will request information and when we will get it. We put that in place, and we have in the legislation a statutory right of access, although we have not had to test that so far because we have received what we needed.

Your question about the level of granularity that we get is an interesting one. The focus of our work is generally on producing the tax and social security forecasts, but, over the past five years, we have developed our work, looking at the whole Scottish Budget. Some of the challenges that you alluded to have been challenges in Scotland to do with the level of transparency around the Budget. Because we are playing a role here, we are now starting to ask the questions and getting more information. We are putting it out there. In part of our report, we have developed what we call a "fiscal overview chapter" where we look at the Budget as a whole. Over the past year, we have developed fiscal updates where we are looking at the Scottish Budget and how it is changing.

We have been able to get the information that we need to do our job. Our job has evolved, and what the Parliament has asked us for has evolved. What you would potentially get out of a fiscal council depends on what you ask it to do and whether you gave it the right of access to that information. If you want it to be able to look at more granular information and publish it, you need to put it in the legislation or make it clear that that is the role of the fiscal council.

The Chairperson (Dr Aiken): Claire and Susan, you have probably already answered the final question that I am going to ask before I hand over to the rest of the Committee. How important is it to be on a statutory basis and have legislation that is supportive of you?

Dame Susan Rice: Very. The legislation has to be really thoughtful. It is not good enough just to be there by way of statute. What our role is and is not is clearly defined, because that stops us being pulled into political debates that we should not be pulled into if we want to remain independent. The wording and the concepts behind the statute are really important. John and Claire, I believe that you will agree with that notion.

Mr John Ireland (Scottish Fiscal Commission): Yes. I will perhaps add one thing that is sort of relevant to the first question as well. Claire mentioned one important part of the legislation, which is the statutory right of access to information. Another part that is really important is the statutory requirement on the Government to use our forecasts in setting the Budget. The fact that they have to use our forecasts gives us a lot of weight, and it means that they have a vested interest in understanding our models, because part of the forecast is the effect of any policy measures and any variations in taxation or in social security payments. Their Ministers will have to use our estimates of those costs, so they have an incentive to use our models so that they can advise Ministers on our likely estimates. That part of the legislation is also tremendously important. It is really what gives us bite, I think, on the process.

The Chairperson (Dr Aiken): Apologies: I am not familiar with the enabling legislation that set up your council. You say that there is a statutory requirement to use your forecasts: was that in from the beginning?

Mr Ireland: Yes, it has been in the legislation from the beginning. It appeared in the legislation late in the legislative process, at stage 3 of the passage of the Bill, as part of the negotiations between the Scottish Government and the Treasury on the fiscal framework.

The Chairperson (Dr Aiken): Thanks very much indeed.

Mr O'Toole: Thanks, all, very much for coming and giving us evidence. It is really critical, and your experience is really useful to us. On the point that you were just talking about, the Fiscal Commission was established in June 2014 — I was working in the Treasury at the time, so I remember it — but you were not established in legislation until the Scottish Fiscal Commission Act 2016. Is that right? There was about a two-year interregnum where you did not have a statutory footing?

Dame Susan Rice: It was in April 2017, so it was closer to three years. The legislation passed in 2016.

Mr O'Toole: It did not come into force until 2017?

Dame Susan Rice: Yes.

Mr O'Toole: What differences did you observe once the legislation had passed and you were on a statutory footing? Did it just give you a greater sense of confidence, or did it change the way in which devolved Departments interacted with you?

Dame Susan Rice: Being on a statutory footing made us begin to think about what the requirements under that statute would be. To begin with, there were three devolved taxes, and our job was to make a pronouncement about the reasonableness of the Scottish Government's forecasts for those taxes. It was a relatively simple remit by comparison with what we do now. The statute that came into effect in April 2017 added a good bit to the remit. It was not only about being on a statutory basis but about what the statute required us to do. That led us to understand that we needed to appoint staff. We needed to have a team of highly qualified technical analysts and experts to create the models. It led to a lot of steps.

Claire, you are nodding. You were there at that transition and very much part of the negotiations on it.

Ms Murdoch: I was part of the team that supported Susan in the non-statutory role. At that point, we were scrutinising the Scottish Government's forecasts. We got full support from the Scottish Government. They were transparent about things that we asked for. We did not have any difficulties. It is difficult to say whether that was because we were about to become a statutory body, but support from the Government was there. You can operate as a non-statutory body, provided that the Government support that. The reason for being on a statutory footing is, effectively, to force that Government and any future Governments to continue to make sure that the commission has a role or can act independently.

Mr O'Toole: It is interesting that you do both a full economic forecast and a fiscal forecast. Why is it better to do an economic forecast than just a fiscal forecast? What is the advantage of that?

Dame Susan Rice: I will give you my answer, and then I will turn to John to will give you a better answer. Until our inception and the time that we got going on this, for the most part there had only been two-year economic forecasts in Scotland. We were required to do a five-year forecast, and we were filling a gap that needed to be filled. That was of benefit to the Government and to the Parliament. In addition, we have responsibility for part of income tax — non-savings, non-dividend income tax — paid by Scottish designated taxpayers. That forecast depends on some elements of our economic forecast, so it just made sense to fulfil that remit. It was also very helpful that we were doing the economic forecast.

Mr Ireland: I will add one more thing. It is a feature of the fiscal framework that, in the event of a Scotland-specific economic shock — in other words, the Scottish economy performing less well than the UK as a whole — there are additional borrowing powers that the Scottish Government can access. The test for that is partly done on data, but it is also done on our forward-looking forecasts. If you have a glance at our latest forecast reports, you will see that that shock was triggered for the first time in January. We use the economic forecasts in forecasting income tax and other tax receipts. It is part of the fiscal framework for the Scottish-specific economic shock and, as Susan said, we got a lot of coverage of our work on the basis of our forecasts initially. That helped us to raise our profile as an institution.

Mr O'Toole: Is it fair to say that the Scottish Fiscal Commission has a relatively maximalist approach or remit under the framework to do the Scottish equivalent of the OBR's economic and fiscal outlook (EFO), a full economic and fiscal forecast, as opposed to a relatively narrow judgement on spending plans?

Mr Ireland: It is a little bit more limited than the OBR because we do not produce, for example, forecasts of government expenditure in aggregate. We only produce social security payment forecasts, devolved taxes forecasts, income tax forecasts and full economic forecasts. Our remit is narrower than the OBR's.

Mr O'Toole: OK. I want to go back to the economic forecast point, and then, if I may, Chair, one final one after this — actually, two final ones. I will be quick. When it comes to the economic forecasting point, has there been any reaction from the economic policymaking firmament in Scotland? For example, do they welcome the fact that there is now an official independent economic forecaster enshrined in legislation? This is not to in any way demean or undermine the work of academics, banks or whoever, but has the fact that an officially mandated, independent economic forecast exists been welcomed?

Mr Ireland: You can see the welcome for that in our news coverage. If you do a simple look back at where the coverage comes from, you see that our economic forecasts get quoted an awful lot. You can see it in the real preference of people. If they want to find an economic forecast for Scotland, they tend to go to us, because we produce those forecasts on a five-year basis, which is a longer term than most other people in Scotland provide forecasts for. We do ours on a pretty regular basis as well.

Mr O'Toole: Do you do forecast evaluations?

Dame Susan Rice: Yes.

Mr Ireland: Yes. We all simultaneously say yes.

Mr O'Toole: My next question is an obvious one: how well do you do? [Laughter.]

The Chairperson (Dr Aiken): Spoken as an ex-Treasury official.

Mr O'Toole: Obviously 2020 was a difficult year, but how have you broadly done from your perspective?

Dame Susan Rice: I will let my colleagues give you the detail, but I just want to say one thing. In talking to a lot of our key stakeholders, who are very interested in our work but do not necessarily have a strict economics background, it took quite a while for them to understand that "forecast error" is a technical term in economic forecasting, and it does not mean that we did not add two plus two correctly. I will just share that with you, and you can share it among your parliamentary colleagues.

With our forecast evaluations, we go through painstakingly all the differences and all the reasons. We discuss those at Committee in Parliament, and we are challenged about them. We then use those differences to refine and improve the forecasts in the future. We have not yet evaluated the most recent forecasts, because they are quite recent and we need a few months to do that. Probably in early autumn, we will have something back on the more recent forecasts. For a more granular answer to that, I will pass over to John or Claire.

Mr Ireland: I will say a little bit to begin with, and Claire can pick up on it as well. It is quite a difficult question to answer, because we have not been doing forecasts for that long, so we have a relatively small number of forecasts under our belt. We have also had a fair number of data problems as well. Also, we are forecasting some very new stuff; Claire can perhaps add something on social security payments there. It is fair to say that, when things settled down, we were roughly within the same sorts of limits as the OBR forecasts. There have been particular issues around income tax, because we were forecasting for a while without having proper out-turn data on Scotland, so we were making an estimate of the out-turns from an imperfect survey. HMRC did not produce any out-turn data for a year or so, and that caused more difficulties. In broad terms, we are getting towards OBR tolerance. Perhaps Claire should add a little bit there on social security.

Mr O'Toole: This is my final question; I will keep it limited. You are the obvious example for us of a subnational fiscal institution in the UK, so we are obviously going to look to you. Has the Department of Finance here asked for your input in developing its plans for our independent fiscal institutions?

If it has not asked you, what are the top tips that you would give it? What is absolutely essential for a subnational independent fiscal institution to be successful in the context of a devolved UK?

Dame Susan Rice: I had a conversation with someone from the Civil Service in Northern Ireland who has been involved in pulling this together, so

Claire, I do not know whether you were contacted as well. The answer is yes; they have done. Do you both want to go with your one or two tips? I know what mine are. Claire, what would your couple of tips be?

Ms Murdoch: Be clear about what you want the organisation to do in the legislation. I would also make sure that the organisation has the power to comment on any fiscal matter. That is one of the things that has given us the most scope to expand our work into areas that we, the Finance Committee and the Scottish Parliament have subsequently thought are important for us to look at. That is my top tip.

Mr Ireland: Claire has said everything that I would say.

Dame Susan Rice: I agree with that. Above all, as you shape your legislation, you should think very carefully about the unintended consequences of any statements in that legislation in relation

The Chairperson (Dr Aiken): Susan, we need to hear this. You just froze out there.

Dame Susan Rice: Uh-oh. I will give you an example: funding. Fiscal councils elsewhere in the world have had their funding played with because they had annual funding promises. It is very hard for assemblies and parliaments to give multi-year funding promises, but we found a way to get at least a three-year look ahead for our funding needs. That gives us more freedom to speak up now; we know that we will not be put out of business tomorrow because the budget will not be taken away. You can enshrine such things in legislation so that it is smoother when you get going.

Mr Allister: Thanks for your evidence. It is pretty clear that the catalyst for the appointment of the Scottish commission was the transfer of tax-raising powers to Edinburgh. Does it therefore follow that, without at least significant tax-raising powers, there is a limited, if any, role for a fiscal commission?

Dame Susan Rice: It can be what you make of it. The OECD has a network of fiscal councils and commissions around the world. One gets to observe and know them and interact with them over time. So many of them are different. There was no model like ours when we were formed. That is true of others as well. If you value an independent, dispassionate, evidence-based view of any aspect of your Budget-setting process, there is a place and a role for a fiscal council.

Mr Allister: But is the key component or work of a fiscal council/commission not to assess how the taxes raised are being efficiently, or otherwise, spent? If you are not raising taxes, how do you do that?

Ms Murdoch: I will add a little bit about our work. The primary role that we are playing is looking at tax and social security forecasting, but we have also been expanding our work on public funding. One of the challenges that we had here, when we first started producing our forecast, was that people said, "OK, that's great, but what does it mean for the whole Scottish Budget? How does it fit in?". Part of our role here has been trying to explain how the Scottish Government are funded, what is coming from the UK, what is variable, and how much certainty the Scottish Government can have about that funding. That has played into our commentary on the Scottish Government's choices in terms of how they use reserves and what they do about borrowing. That is not about us saying that the Scottish Government should do this or that; it is about adding transparency to the decisions that the Government make and being clear about what is happening so that parliamentarians such as you can challenge the Government on those questions.

Mr Allister: Do you distinguish between a fiscal council and a fiscal commission? We have been given both, neither of them yet on a statutory basis, and yet we have no tax-raising powers. Do you make a distinction between the two?

Ms Murdoch: Internationally, "council" is the more common word for an independent fiscal institution. Internationally, we would be known as a "fiscal council". It is just that the name of our organisation is the Scottish Fiscal Commission. The fiscal commission that you have in Northern Ireland is similar to what we had in Scotland, in the Smith commission, which played quite a different role. We are not playing the fiscal commission role in Northern Ireland. It is rather the fiscal council role, albeit with a different remit.

Dame Susan Rice: One is forming, and the other is then carrying out.

Mr Allister: Yes. Analysing the tax take is more academic than real, here. However, I understand from reading some of your material that you have had difficulties in coming to a view on the VAT take in Scotland. Can you say a word to us about that?

Mr Ireland: Perhaps I can answer that. There is no data on how much VAT is collected in Scotland, so in order for receipts from tax to be part of the Scottish Government's Budget, there had to be some sort of assignment model, which HMRC built. In a sense, it then became a political issue between the Scottish Government and the Treasury, about whether they would actually assign the revenue from that model to the Scottish Budget. It was decided not to do that until the fiscal framework review.

The difficulty was, basically, that it is a tax which was assigned without any data, or any hope of getting real data, so it would have to be model-driven.

Mr Allister: Is that just at an impasse now?

Mr Ireland: That is a question for both the Treasury and the Scottish Government to decide.

Mr Allister: Yes. Scotland was also given social security powers, but, of course, with that, came the cost to Scotland of administering social security. Is that not correct?

Dame Susan Rice: Yes.

Mr Allister: Whereas, in Northern Ireland, we do not have social security powers, but it also means that we do not have to pick up any of what must be the very substantial administrative costs. Is that correct?

Dame Susan Rice: Yes.

Mr Allister: So can you give us an indication of the administrative costs of social security in Scotland?

Dame Susan Rice: Herein lies one of those constraints around our remit. It is very important, as I said before, that these are clear. We do not, for instance, forecast how much Social Security Scotland, the new agency

that kind of thing. That is not the job. The job is to help the Parliament understand, through forecasting, the likely cost of the individual benefits that are devolved. So it is not the cost of social security as a whole, it is of the actual benefits in relation to the recipients.

Mr Allister: However, in Scotland, you have to bear the administration costs of social security. Can you identify what they are?

Ms Murdoch: That is a question for the Scottish Government. We only look, as Susan said, at the benefit payments, whereas the Scottish Government manages their administration costs themselves, effectively because those are not so demand-led, in comparison to the payments that go out the door. There was some provision in the fiscal framework for the Scottish Government to receive some money from Treasury, although I suspect it does not cover the full amount.

I am afraid that the Scottish Government would need to tell you the cost of administering their system. It is not a question that we can answer.

Mr Allister: What does the Scottish Fiscal Commission or council cost?

Dame Susan Rice: John, you are the budget holder, I cannot [Inaudible.]

Mr Ireland: I do not have the exact figure to hand, but it is just a little bit short of £2 million a year.

Mr Allister: Thank you.

Mr Ireland: I can certainly send the Clerk the exact figure, if that would be helpful.

Mr Wells: You can always rely on clever Jim to ask some really tough questions, and those certainly were tough. I do not think that my questions will be anything like that.

You are bound to be asked the question about the economic impact of Scotland becoming independent. I noticed that you got your retaliation in quickly and said that you take no position whatsoever, pro- or anti-independence. Your staff must have been asked to do projections on the likely impact of any decision on the Scottish Budget. Is that taboo as far as your staff and your remit are concerned?

Dame Susan Rice: That is a complicated area. As I said, our remit is to do policy costings on policies that are going through Parliament

of costings and speculative

But we have been discussing, as and when conversations may develop

where we might have a role. We are looking at that space, but, up till now, that is not within what we have been told that we can do.

Mr Wells: If it is not even possible to identify the VAT that would be apportioned to the Scottish Budget, are there not severe limitations placed on you about projecting the overall impact of an independent Scotland?

Dame Susan Rice: Right now, we are not forecasting the overall economic impact of an independent Scotland. Elements may develop over time in relation to that, which may be brought forward as potential policy, and we may need to think about them.

One of the things that we try to do is to enrich the debate to the extent that we can on important matters. There may be areas that we would explore, but our remit is not for everything in Scotland. It is, maybe, important to say that. For instance, we do not have anything to do with the cost of the NHS in Scotland; that is completely separate from our remit. We are not looking at absolutely everything all the time, but, increasingly, as Claire said, we are looking overall at what goes into the Scottish Budget, and how that plays out over a year and what changes happen are very important, as was shown during the past year with all the extra COVID-related funding.

Mr Wells: Here, health service funding makes up 51% of the entire block grant. I am sure that it must also be, by far, the largest element of expenditure in Scotland. Of course, health is devolved in Scotland. How on earth can any of your projections be viable or valid if you are not allowed to take into account the biggest single expenditure line in the entire Budget?

Dame Susan Rice: Maybe I am not explaining it properly. We forecast in, if you will, certain buckets of taxes, benefits and so forth. We do not forecast the overall piece. That is not within what we do. We are constrained by the legislation that put us into statute and that tells us what we can do. That is the power that will lie in your hands as you put your body together and give it some powers.

John, you could, maybe, explain it better than I can.

Mr Ireland: Perhaps I will take it from a slightly different perspective. When the Scottish Government set a Budget or, perhaps, when they think about their medium-term financial strategy, as they did in January, they think about the next five years under the current constitutional settlement. They will think about the likely size of the block grant and use OBR forecasts to help them do that. We provide them with income tax and other tax forecasts and social security payment forecasts. As the Scottish Budget has to balance, all the arithmetic works out very straightforwardly. We come in at the very end and look at the implied borrowing or the extent to which they can move small amounts of money between fiscal years and borrow small amounts. We judge the reasonableness of that.

In a sense, you have to think about how the Budget works under the current constitutional arrangements and our place in that. Thinking about independence and its impact on the health budget does not impact on how the Budget is currently set.

Mr Wells: If we were to set up a similar body, health spend would have to be the centre and core of it, because it is such a major part of what we do. Finally, if, as a result of your work, you were convinced that the Minister of Finance in Scotland was doing something reckless or completely out of any sensible understanding of budgetary control, what can you do?

Dame Susan Rice: When our reports are near publication and at any other time, we can be called to give evidence to parliamentary Committees such as the Finance and Constitution Committee, the Social Security Committee and, occasionally, we have spoken to the Economic, Energy and Fair Work Committee as well. In a sense, parliamentarians own that space and know what is going on and are informed. They can speak to us, and we dispassionately use evidence to share the information that we can. Our job is not to judge the performance of a given Minister or Department; we do not operate in that space. However, literally everything we do is public and on record.

Mr Wells: For instance, I will take an arbitrary example; if there was a renewable heating scheme in Scotland that was, clearly, rapidly running out of control and was going to build up a £600 million debit — this is all mythical, of course — that would have to be borne by the Scottish taxpayer. Are you saying that all you can do is give evidence to the Economy Committee? You have no power to intervene; you can just give evidence to the appropriate Committee at Holyrood.

Dame Susan Rice: We would not intervene as the policy was being developed to say, "We do not think that is a good idea. Do it this way". Let me backtrack for a moment; John said something a minute ago that was very important. By law, the Scottish Government have to have a balanced Budget, and therefore that is a constraint on it. The Government have some borrowing powers, and we need to comment on those powers. There are routes to make comments about something that might topple the castle, as it were, if it was extreme. There are ways to do that. Claire or John?

Ms Murdoch: The main role that a fiscal council can play is to be a voice if there are risks to the budget. We have not highlighted any risks in the way that you have mentioned. However, there are certain aspects to the fiscal framework that will have fiscal consequences for the Scottish Government, and we have highlighted those. When we do a press release at Budget time, we can get news coverage. A fiscal council is a fiscal watchdog. It is the bark of the fiscal watchdog that can play quite an important role in signalling any issues. After that, it is up to the public, the media and parliamentarians to make the Government change policy. The fiscal council is there to raise awareness of those issues rather than to dictate what happens.

Mr Catney: I just have a few points. Susan, earlier you mentioned that you have rules for the appointment of commissioners. How do the rules work to ensure independence? The follow-on question is on the governance benefits a fiscal council might have for the Executive and Northern Ireland. Additionally, the legislation that established the Scottish Fiscal Commission ensures that it fulfils its functions. What do you think Northern Ireland should copy from the Scottish Fiscal Commission legislation, bearing in mind that the thread running through my question is: how can ordinary Assembly Members have a say and control who is appointed?

Dame Susan Rice: I have the — what is the word? I do not know — badge of being the first individual under the Scottish Parliament whose appointment was made through a Minister by a public appointments commission, and then, my appointment and that of my two initial fellow commissioners and everyone since was made by the Scottish Parliament.

From the very start, and I have to say that it was right from the very beginning, even before we went on statute, there were times when I would tell people that, "We answer to the Parliament of Scotland", because it had to approve our appointments. It debated. It is very odd to be personally debated by parliamentarians. However, that was done. A new commissioner has to have a hearing, if you will, in front of the Finance Committee, and they will be asked questions about their background and whatever questions the individuals want to ask them. Then, in addition, the Parliament approves the appointments. Therefore, the appointments are recommended through the ministerial route and are, ultimately, approved by Parliament. That gives you a lot of say on that.

Of course, there are restraints. We would not have people who are sitting in government coming to do this job. There are various obvious restraints. That rule of the Scottish Parliament's approving our appointments and taking that process seriously through interview and debate on the Chamber Floor is the way in which it has taken hold of that. Does that answer your question?

Mr Catney: I could not hear some of it very well, simply because of the sound, but I understand what you are saying. I think that I get what you were saying there. Which legislation on the establishment of the Scottish Fiscal Commission is most important in ensuring that you can fulfil your functions? Which is the most important and should be copied for a fiscal council for Northern Ireland? Which of those rules and benefits that were set out from the start should we copy, bearing in mind what I have said; that, as an ordinary Member, I feel that I would have no part to play in that and would not be able to check it? I do not know what it is like in Scotland, but, here, it is difficult to get documents when we try to get into the meat of something. You have already stated how you put it out at the start and the powers that you have to fulfil your functions. How can we police that? Can it be policed by ordinary Assembly Members, not necessarily just by the Executive? That is what I am trying to get at.

Dame Susan Rice: perhaps, Claire could respond. You are asking an important question; absolutely. The idea is that the commissioners, who, as I said in my opening comments, are, ultimately, responsible for the forecasts that are published — we have personal responsibility for those forecasts —

, and we report to the Parliament. Therefore, we are held personally accountable by the Parliament. That accountability is carried out through evidence sessions at the various Committees. If we are asked, we go. It is not as though we can say that we do not feel like it. Absolutely; the Parliament is the body to whom we owe our allegiance and, in that sense, it is really the people of Scotland. That is what helps us to keep independence. John or Claire, that is one element that you might come at slightly differently.

Ms Murdoch: With regard to legislation, there are things that help a fiscal council to play an important role. One part of our legislation is that we are a key part of the Budget process, because our forecasts have to be used. There may be other ways to do that that would be more appropriate in Northern Ireland, but, because the Government are required to use our forecasts, we are required to be part of the Budget process, which means that we must have the information in order for the Budget process to take place. That gives us more power, influence or opportunity to ask for it.

Another one is the statutory right of access to information, which is incredibly important, and a fiscal council absolutely should have that. That is a key OECD principle. Another one is giving the fiscal council the power to comment on anything. You need to be clear in the legislation what its role is and also give it scope to comment on other things. Another one is that we are also required to publish all our reports, and that includes our forecast accuracy reports, our main forecasts and any other papers, and we are required to lay them in Parliament, so Parliament absolutely gets access to everything that we publish. Those are the key things from our legislation.

Susan set out our appointments process. In some other countries, some members of fiscal councils are directly appointed by Parliament and some are directly appointed by the Executive. There are different ways internationally and different models for how you appoint council members that may be more appropriate in the Northern Irish context. John, do you want to add anything?

Mr Ireland: I would add something that is not part of the statute but is part of the operation of the Scottish Parliament. When we go to give evidence to the Finance Committee, I do not think that any of us looks forward to it. The quality of the questions is pretty high, and there have certainly been times when I felt very uncomfortable. It is also down to how the Assembly and the members of the Finance Committee interrogate a fiscal council. If you make its life uncomfortable by asking tough questions, that is a really important part of the process.

The Chairperson (Dr Aiken): OK. Thanks very much indeed for that. Maolíosa.

Mr McHugh: I think that my question has been answered. Hello, can you hear me, Chair?

The Chairperson (Dr Aiken): Yes, we can, Maolíosa. Can you hear us?

Mr McHugh: Yes, I can. I intended to ask which aspect of the legislation to establish the fiscal council you regard as vital in the case of Northern Ireland.

The Chairperson (Dr Aiken): Thanks very much, Maolíosa.

Before you go, Susan, thank you very much indeed for your evidence. I have three short questions. I will not prolong them, because you can tell by the questions that are being asked of you that you have done a lot of really good work that we need to mirror.

The first question is this: how important is it for the likes of OECD to check your homework, for want of better terminology? We have an issue in Northern Ireland with public-sector reform. OECD made a recommendation for that but has not been invited back to check the progress. First of all, how important is that external validation?

Secondly, I looked at your data set. One of our Departments in Northern Ireland has a great deal of difficulty getting information out of HMRC, but it seems, from your data tables, that a lot of your issues with HMRC have been resolved, with the exception of the VAT issue. All the other things seem to have been resolved and are not highlighted as particular issues. Can you give a short answer on that?

The final one is this: what extra capacity could you have to shadow a nascent Northern Ireland fiscal council and to provide that support once whatever we set up here gets up and running and manages to deliver?

Dame Susan Rice: Those are three good questions, and I will give very quick answers. I think — we all share this view — that it is important for any body, especially a body so closely aligned to the public interest, to be vetted. Built into our legislation — it horrified me in the beginning — was that we would have an external peer review after two years of operating under statute. I thought, "Oh my goodness, we are barely up and running". I thought that it was terrific that that happened after two years, because it was early enough. We could see the comments and what had been recommended, and we could shift and adjust if we wanted to. These reviews can be done in various ways, but our experience and, increasingly, the experience of many fiscal councils is that the OECD has a reputation, an expertise, the people resources and the intellectual resources to carry out these reviews. It is not that we have to have OECD do it, but, in our judgement — we looked further afield — we felt that it was the best body to do that review for us. It brings along peers from other councils, so that is very helpful in vetting what we do and also making suggestions. It is a good learning time for everybody, so review is really important.

That is number one. Number two has gone right out of my head. What was the second question?

The Chairperson (Dr Aiken): The second question was about HMRC. One of our Departments has complained about not getting data from HMRC, but, when I look at your data in the tables, I see that you seem to have managed to do that quite effectively.

Dame Susan Rice: We have been in operation for seven years now. We have worked with the UK agencies that have to provide us with data for several years. Sometimes, it is hard for them to do that, because they are now doing a different run of data and may be looking at things differently. They may be working to a timetable that is different from that of a subnational fiscal council or institution. They need to adapt, and we need to work with them. That is about building relationships, explaining what you need and when you need it, and understanding the challenges that they face. It is also about being pretty open. I was public about one agency — not HMRC — at our Finance Committee when we really had difficulties with getting data. That is just about working through the issues. It does not happen automatically; you have to work at it. I suggest that the sensible way to work at it is to say, "Here is what we need. What can you do? Where is the gap, and how can we bridge that gap?". That is what I would do. Was there anything else on that?

The Chairperson (Dr Aiken): The final question was this: could you shadow our organisation? Do you have the capacity to do that?

The Chairperson (Dr Aiken): Sorry, I did not pick that up, Susan.

Dame Susan Rice: Can you hear me? I am just turning to John, as the chief executive, to see whether he has a view on that.

Mr Ireland: We are in a position to be helpful and friendly. We are not resourced to formally shadow people, but we have received a lot of help in the past from bodies such as the OBR, and we see it as part of our function to repay that debt. We have some capacity, but not enough to do anything formal.

The Chairperson (Dr Aiken): Thank you very much, Susan, John and Claire. Would you be happy to continue a dialogue with us as this journey develops? I am looking around the Committee, and I think that we would be very interested to keep on communicating. There are lots of ideas that we will need to continue to explore as we, hopefully, bring this to fruition.

Dame Susan Rice: I know that I speak for my colleagues when I say that the answer is that we will absolutely do that. It is in your interests and all our interests that you get set up in the best way possible. We are very happy to continue an engagement.

The Chairperson (Dr Aiken): Thank you very much. I apologise for the poor communications. Be safe. Thank you everybody.