This is Aloha United. We stand at Think Tech Hawaii, raising public awareness for Hawaii. Join the conversation here at Think Tech, H.I., and that's our Twitter feed. Once again, we are with Aloha United. We stand and today we are welcoming AccessSurf Hawaii. AccessSurf is a Hawaii nonprofit that provides ocean access to anyone with a disability, and they are celebrating their 10th anniversary here in Hawaii. I'm joined by Kara Short, who is the executive director, and also Rich Julian, the co-founder, and let me get this right, an adaptive athlete. Let's start out with, again, you told me just before the show began that this is your 10th anniversary here in Hawaii. Can you tell us about what AccessSurf is, how it was founded, and what you've been able to accomplish over the last 10 years? Yeah, we started in March 2006 with AccessSurf Hawaii, and we just looked at the community and we noticed that there was no access for people with wheelchairs or disabilities or impairments to get to the beach. Growing up in Hawaii, I was a child surfing here, and then after I got injured, I noticed that there was no access to the beach and no programs to help people with disabilities get back to the water. So we started in March 2006. We founded it and saw a need in the community, and since there we've been just expanding and growing. This was here on Oahu that you started? Yes. Yes, myself and another recreational therapist and a few others from the medical community founded the organization so that it had a therapeutic background, but also filled the need for the people in the community with disabilities to get out there and access the ocean safely. Now here in Hawaii, where there is absolutely no lack of good weather, and the old adage pray for surf, we really don't have to do that here in certain times. What was it, and before your disability and now, what did the water mean to you to be there and be in the waves, whatever shore you enjoyed here? Yes, I grew up surfing canoes and I started surfing there when I was five years old. So I really grew up around the beach community in Waikiki, and at the time I just, it was really special and it was one of the things that I loved. It was what I did as a kid. I got injured when I was 14, so once I got injured I got cut off from that ocean, really. So that was one of the reasons that we needed to start access surf and get back into the water and get others back there too, because as a person living in Hawaii, you're surrounded with all these beautiful islands and all this beautiful water, and it really has its benefits therapeutically as far as getting back in there, and also as far as your self-recovery when you're, you know, after an injury or onset of a disability, it's very therapeutic and you know, you can get back to who you were before the disability. So it has a lot of different benefits other than just accessing the water. It's a spiritual thing as well. Now you had mentioned you had started this with a partner 10 years ago, you've grown, you have other organizations, other groups that have been helping you. What's it like working with all these other folks, convincing them to help you along and the growth in the last 10 years of business partners and volunteers? Carol, what's that like working with our local companies and maybe other nonprofits here? Well, I really feel like everyone is pretty excited about what we're doing, and especially if they've come out to one of our events. That's what I always say. I mean, it's great to hear what we do and see the videos and the photos, but once someone comes to one of our events, they really get it. And why it is so important, like Rich was saying, there's much more to it than just getting in the water. It's really life changing. So I find that locally, we have amazing support and usually, like I said, once someone comes out, they're like, what can we do? What can we do to help? So we often get businesses come out with their staff as volunteers and then, of course, through donations, which keeps us going. Did you have any recent events and anyone else who came out to help you folks? Yeah, actually, we had a big event during Duke's Ocean Fest. We had our International Adaptive Surfing Competition. So this year was quite a big one for us. We had 60 surfers with disabilities from nine nations come and we had several local businesses help us. Hard Rock Cafe, Aroma Cafe as well. And locally, we had a team real estate and Colbert's construction help us with that. When you're out there, when you're out with these folks, just to get back to what you said. And they see, say, one of these groups, when they see the public coming out, when they see volunteers coming out and you are working with the person who's trying to get back in the water. Did that sense of community, what does that do to their families? And from what you've seen, Julian, when you have a community coming together to remind you the water is yours, how does that make them feel? What I really noticed is it's life-changing for the volunteers as much as it is for the participants in a different way. All of us that come together, we built this family and it just spreads through the entire society I've noticed. And I think the biggest thing is it's a way for everyone to be included where there's not this excluded party. If you have a disability, you're included in the day at the beach, the time that everyone likes to spend together. And Julian, do you see that being a water person? Oh yeah, all the time. We see it all the time at AccessSurf. The volunteers that come out there, they're really coming to help and then they go home feeling just so satisfied because it is so rewarding for them to do what it is that they do out there.  So yeah, very rewarding for all of the community as participants and volunteers and business as well. And if I recall correctly, these can be people of any age. Do you see the role that being back, having your freedom in the water, do you see it affecting them the same way if they are younger, older, if they're adjusting or I have a friend who told me a dozen years, he hadn't been in the water and then he met you folks and he's just an incredible athlete today. How do you see that person from different ages going into the water and getting their freedom back? How does that affect them just personally? Yeah, well we always said from Keiki to Kapuna that anybody with disability, any kind of cognitive injuries or any problem you have, we're gonna work it out. We're gonna figure out a way to make it possible for you to get back and enjoy the ocean. So that's always been our goal is to be very inclusive with everybody and everybody can get back to the water even if they've just got a temporary injury. We'll help them out getting out for surfing if they need just a few months' help. So yeah, from all ages, all disabilities, we include everybody and our model of nonprofit has been used over and over again time and time again around the world. So we have other organizations around the world looking at AccessSurf and actually modeling their programs after the way that we care for everybody and treat everybody because it seems to be everybody loves our model. It's very inclusive for anybody that wants to get there. Whatever type of disability, cognitive, whatever it may be. So we have nonprofits in Brazil, in California, South Carolina. We have AccessSurf Okinawa. So it has really had a ripple effect as far as the model of the business. People really like that it's open and inclusive and very open-minded type of nonprofit. And again, it started here in Hawaii and it's wonderful to hear that your practices are very respected, that people want to help in these different areas. But again, you were founded here and you had mentioned to me that there are monthly events. Is that correct? That's correct, yeah. What's happening? Well, we do, we do two monthly events. So generally the first Saturday of the month, we have what we call our day at the beach. And that one is open for anyone with a disability like Rich was saying, whether you're cognitive or physical and your family to come out and enjoy the beach. But then we also do a monthly program specifically for wounded warriors to work with our injured military servicemen and women. And then quarterly, we are now working with smaller events, clinics, we're calling them surf and swim clinics, where we can actually take that concept of getting back into the water but also working with individuals to create more independence and work with their skillset that they might need. It might be maybe they just want to get comfortable putting their face under the water or maybe they're at a level of Rich and they want to improve their skills and techniques to be able to be competitive and that sort of thing. We're also a Paralympic Sports Club as well. So we're working in that vein with swimming and canoe. So who's helping when they go out here? What kind of supporters, staff, people, volunteers? What kind of resources and people are helping give back that freedom? Everybody? Yeah. Yeah, we started initially, you know, just requesting that people with EMT experience, hospital experience and medical surfers, people in the ocean industry. And it's just become so popular with our volunteers. We get people from every walk of life. And that's what's so amazing about it too. And we have in each area that we work with because we have a surfing and a swimming and then we have what we call transfers where we're getting people, you know, from the beach and into the water. So every little area has a key leader. And that leader is specific to that role. Like he was saying, maybe it's somebody with a water safety background or therapeutic background that will oversee the volunteers, but the volunteers quite literally are from throughout the island. You name it. Anybody comes out. And that's what makes it so special. And these are folks who obviously love the water. They love working with it. Sounds like they love working with you. Well, and some people don't even get in the water. That's the other thing that's really important to know. Like as a volunteer, if you are a skilled water person, great, we would love that the more than their volunteers as well. And there's always a place for somebody, whether it's helping serve a hamburger or it's just talking story with people because we'll even have participants come that might not get in the water that day. But they want to be able to come to the beach because this is their one day a month that they might be able to do so. Oh, yeah, it's a while you'll we don't want to just hang out. I find that interesting because sometimes just being around the water being around the sand having you know, being able to feel it with your fingers or your toes. That is a therapeutic feeling to if you just had a long, long day at work. Sometimes I just see people in their sedans, they drive up to the beach, they just stand there and they take that.  Oh, absolutely. Absolutely. Yeah, I'm all I do is think about surfing every day and waiting for days like today to do that. Yeah, it's actually a beautiful day out there today. And as soon as we're Paul, we're surfing. So I mean, yeah, we wait for days like this where the surf is good and the wind is down.  Oh, yes, to give that type of healing to somebody else is a very special thing. You know, so you know, it's it's very rewarding for ourselves. But to hand that off more about that we need to take a really short break to let folks know about the other great shows that we have here at think tech Hawaii. And we'll talk more about the therapeutic waters surf with access to it. Hey, how you doing? Welcome to a Batchie talk. My name is Andrew landing. I'm your co host. And we have a nice program here every Friday at one o'clock think tech studios where we talk about technology and we have a little bit of fun with it. So join us if you can. Thanks. Aloha. You're watching think tech Hawaii, which dreams live on think tech Hawaii. Aloha, I'm Kirsten Baumgart Turner, host of Sustainable Hawaii. Thanks for watching think tech this summer. We have a lot of terrific shows of great importance. And I hope you'll watch my show to every Tuesday at noon, as we address sustainability issues for Hawaii. They're really pertinent as the World Conservation Congress approaches in September, and the World Youth Congress that's focusing on sustainability next year as well. Have a great summer and tune in at noon every Tuesday. Lasties and laddies. This is Angus mctec in think tech Hawaii. And I'm my favorite show. He bought she talked with my good old buddies, good old the tech side and Andrew, the security guy. Please join us every Monday. No, it's Friday, every Friday from 1pm to 1.30pm here on think tech Hawaii. And you can also find us on YouTube. He bought she talked Aloha. Aloha, welcome back. I'm Chris Aguinaldo. And this is Aloha United. We stand we're talking with Access Surf Hawaii. And again, this is Kara short, the executive director and Rich Julian just before the break. I was talking to Rich, who's a co founder here, but they really a healing power of the ways he cannot explain it. If you are able to go out to the waves or the water, no matter where you are, it's 20 minutes away.  This is not hyperbole. We're not exaggerating this because some of the people who have been hurt the most have given service to our country. Those who need help. They can help themselves by going to the ocean. And you had mentioned just before the break that you have, is this a monthly wounded warrior program? Is this a what is this program about? Who is it available to? How long has it been around? Though I believe the wounded warrior program started in 2011. I might be correct. So and it is actually we do it monthly and we do. We rotate locations but it's always at the beach. Sometimes we have an event in Waikiki and sometimes it's at White Plains and it's open to any injured service man or woman. Generally we tend to work with the different bases and their transition units or with the wounded warrior project. We work a lot with them but really it is open to anyone that is injured service man or woman. And what we get, what we hear from the feedback from that is a lot of people that attend that particular day. They suffer from post traumatic stress or traumatic brain injury. We are also some physical injuries but a lot of PTS and traumatic brain injury and that like you were saying that healing power of the ocean is just incredible. What we hear a lot is that it's their minds can be quiet for the first time since their injury or since their trauma and that's just incredible and so that that's why that program is so important and we are excited about and it's grown so much over the last few years. How has it been received from, you said you've got some positive feedback. What do you hear from participants, not only the participants who are trying to help but the folks who are trying to help them. We've talked about how your volunteers are so important. How do they respond to these veterans and service members who are just trying to be, you know, trying to be people who just enjoy the water again, huh? What have you seen there?  So yeah, just seeing them, you know, lifting them up the way that they've carried us is just an honor to have that program there for them monthly. It's a tremendous effect for them. So you have those two events. Earlier you had mentioned the day at the beach where family Ohada, our people can go out there it's their day to enjoy. And quarterly clinics as well, does that change up? Do you have community partners or business partners when your quarter of clinics? What are those focused on? Well, the one is a swim clinic and one is a surf clinic. And so which are that's a little bit alternating in that schedules a little bit fluid at the moment, but we have been able to host several of them. And yeah, we're always looking for someone who does want to partner to help us sponsor that event. Either it be just a straight donation so that we can offer that or maybe perhaps host the lunch for it. We always try to have a lunch for the participants and the volunteers. So there's many ways that people can can work with us. Again, hard rock. They've always been a big support of our events and in particular our swim clinics. Anyone else besides hard rock who's stepped up to the plate? Yeah, actually, we were very excited earlier this year. Surf go Hawaii gave us. We're part of a program that they ran. And I believe they chose 10 nonprofits and we were one of the 10 and they gave a $25,000 donation, which was very life changing for all of us. That really made a very big difference for us. So what people do you have when you say helping us? Who's out there for you day to day as part of your staff or volunteers? That's what's fascinating to me is what's happened over the last 10 years with the growth and what has happened. And we're almost largely volunteer based. I'm the only full time employee and we have two people part time assisting and the rest is a volunteer based and it's unbelievable. We have committees and leadership roles and training and because what happens at the beach? That's just that day. We have all month to prepare for that. Planning, coordinating and doing special events. We also do. We're kind of always doing special events as well. As we mentioned earlier, the event of Duke's Ocean Fest, that was quite undertaking. That was a 10 day event that I think we had something like 60 volunteers to make that happen. And at our day at the beach, for example, we'll have a hundred to 150 volunteers and we need every one of them. It's quite unbelievable. And now, did you anticipate when about 10 years ago Rich that this would be what it is today? When I'm hearing her say all these people come out, you've got corporate volunteerism, you've got people coming in just being part of your regular one. Did you anticipate this happening? You know, it's just very, very humbling and very, um, very awesome to see what's happened over the last 10 years. You know, access service really creating a legacy here. And, you know, we've always looked up to do Conomoku as our leader, ambassador of Aloha. And we've always kind of followed that motto with everything that we do with access serve. So to see access serve provide that kind of opportunity for people like with disabilities around the world, not just in Hawaii, around the world. It's very humbling and we hope to leave a long legacy here and have many different programs and stay around for the next 50 to 100 years. You know, so yeah, it's very humbling and very honored to be a part of it and see what it's become. We have so many different programs now when we started it was just one program. Now we've got a handful of them and more coming. So how do you like it when you see these folks? They may be tentative, but then they get so driven. You yourself, you said you just said, I'd rather be surfing if I could.  How does that feel just as a person and also as a fellow surfer, fellow caner, fellow athlete? Yeah, I mean reconnecting with the ocean and with your community is definitely, you know, a huge important part of getting back to yourself.  This is what I really, this is really what makes me happy in life. So to see that in somebody else's eyes and to see a volunteer give that to somebody else is just truly humbling and you just go home with, you know, just thinking about it the whole time you're driving. And then how about the ones who are really driven? Like you had mentioned to me, is this correct? There's an adaptive surf team? What's up with them? Well, what are they accomplishing? Yeah, so they're breaking down barriers. Yeah, they're traveling. Yeah, what's happening? Yeah, ASP, here we come. What is ASP for our viewers? Well, okay, so we've been partnering with Duke's Ocean Fest for like about the last, I think, almost 10 years now. And they they offered us the opportunity to do an exact adaptive exhibition at Duke's Ocean Fest. And we started with six surfers all with different disabilities, quadriplegic, deafness, paraplegics, amputees. And so we started off with six guys doing an exhibition at Duke's Ocean Fest. And now we've grown over the last 10 years over 60 competitors from all around the world. The rest of the world is really looking at accessor from what they're doing. And they're actually starting to duplicate our competition here around the world. So recently in August with Duke's Ocean Fest, we hosted over 60 athletes.  We had a prone division, a sit upright division, an amputee division, a wounded warrior division. So so to see that program grow and and be as strong as it is today, we're really honored to be partnered with them and doing that can, you know, be their 10 year anniversary. And we do have locally that like we're just saying an adaptive surf team and they train regularly and they compete regularly as well at the local circuit, the Hawaii Surfing Association HOSSA. And then now the ISA, which is the International Surfing Association, which is the world governing body of surfing, they hosted last year their very first adaptive surfing world championships, which was unbelievable. And now this year, well, of course, this year is happening again in December. So we have a team of, I believe seven traveling this year. Oh, San Diego to Los Angeles. Oh, wow. That must be something to be part of, you know, to be a surfer from Hawaii. That's you expect like the world class surfers to be here, but to be part of just a team that has done so much with supportive people that must really, for your athletes on the team, that must make them feel good. How do you feel when you see them achieve this much? Yeah, I mean, some of the Hawaii adaptive adaptive athletes just have so much hard. It's incredible to be standing there on a beach with them and and cheering them on. They bring a lot of the Hawaiian spirit to the mainland and carry the flag.  And it's just amazing. They really want to represent Hawaii well and, you know, just be as competitive as possible and show what the adaptive athletes can do in the water. So and being able to be our own, you know, entity here in Hawaii and be do that is pretty awesome. And again, these are these are just regular folks. It can be any when I when I say that it's just it could be any disability. We're all people. We're just all people. And what you folks are doing is making sure everyone from me to you to you. We have access to a water for families or friends and that your organization is one of those keeping an eye out and making sure that if anybody wants to get into the water, you can. 10 years of that. I know you are very proud of that. What are some room for growth that you see? Either one of you in the next 10 years or so. My mind is bursting with all the things that you can do. Okay, let's hit next year. What's happening next year? Well, actually, I just think that just general growing of the programs that we have. But what we would love to see is more beach access, just permanent access so that anyone can enjoy the ocean at any time. They don't have to attend one of our programs. So that's one thing we'd like to work with the city and county with and they've been very receptive to. We just hoped to move forward with that. But I think that's one of the main goals. But also just if we could increase our amount of programs, it just means there's more accessibility and then people can regain more independence. And we can learn more at your website, which is again, accesssurf.org. Again, I've been talking to Access Surf Hawaii. And I'm with Rich and Kara. And you can tune in next week for another Aloha Unitive We Stand where we're talking to organizations that make a difference here in Hawaii. And you can always join the conversation here at thinktech Hawaii at thinktech.hi on Twitter. Thank you to thank you for sharing about your programs. And thank you for everyone watching Aloha.


Clarice asks a question. She says, Corey, is procrastination a sin? Is procrastination a sin? Well, it's not a sin. What it is is it's a hindrance. However, procrastination can turn to sin. Procrastination, as a matter of fact, let me just type in the word, another word for procrastination. Another word for procrastination would be what? Lazy. So if we just type in lazy, let's put it on the screen. There's a few proverbs that deal with this. Like vinegar to the teeth and smoke to the eyes.   Oh, wow. I sent the wrong person or Proverbs 12 27. A lazy man does not roast his prey, but the precious possessions of a man is diligence. 1519. The way of the lazy is as a hedge of thorns, but the path of the upright is a highway. Laziness can be a problem. You don't get things done or procrastinate. Then that's what it is.  It's, I've diagnosed you with, with a, an acute case of procrastination. Well, just not doing what you should do. Now it, again, it can lead to sin. There are a lot of things, a lot of traits that we have as people that are not preferable, that are not good, but they're not necessarily sin. Everything that's not good is not necessarily a sin. Let me be honest with you.  Of course, use the bad word.  Let me give you an example. Using a public restroom without a barrier, a truck stop without a barrier. That's my point. It's not a sin. Using this, using a public toilet without a barrier. It's not sin. It's not sin.  Amen.


What this election is about is whether we move toward a balanced budget in a way that is fair by cutting corporate welfare, by cutting wasteful and unneeded military spending, by cutting back on the CIA and the other intelligence agencies, by asking the wealthy to start paying their fair share of taxes, or as Gingrich and Army would have it, we balance the budget on the backs of the weakest and most vulnerable people in our society. Working families, the elderly, the children and the poor, the choice is clear.


Special thanks to the second spot for the Guruji. Thank you for voting for our government. Thank you.


I welcome everybody to the fifth meeting of the Public Audit Committee in 2022. The first item on the committee's agenda is for members to agree to take agenda items 3, 4 and 5 in private. Are we all agreed? We are all agreed. The principal reason why we are meeting this morning is to take evidence on the administration of Scottish income tax 2021-22 report that was produced on 12 January this year by the Auditor General, which was in turn a commentary on the report prepared by the National Audit Office. I am very pleased to welcome in person this year our four witnesses, Stephen Boyle, the Auditor General for Scotland, who is accompanied by Mark Taylor, the Audit Director at Audit Scotland. I am also particularly pleased to welcome, I think, for the first time in person before the committee, Gareth Davies, who is the Comptroller and Auditor General at the National Audit Office, and he is joined by Darren Stewart, who is an Audit Director at the NAO. We have a whole series of questions that we would like to put to you, but I want to begin, first of all, by inviting the Auditor General for Scotland to make a short opening statement. Scottish income tax remains a key part of the package of new financial powers implemented as a result of the 2012 and 2016 Scotland Acts. The purpose of today's session is to look at the administration of Scottish income tax. The reports that the committee has before it relate to the 2021-22 year. This was the fifth year in which the full amount of non-savings, non-dividend income tax collected by HMRC is payable to the Scottish Government. It is also the fourth year that HMRC has published Scottish income tax outturns in its accounts. These outturn figures relate to 2020-21 and the difference between actual UK and Scottish tax outturns, and the amounts forecasted at the time is then adjusted through the 23-24 budget. All of that is known as the budget reconciliation process. The reconciliation in the 2021 accounts results in an increase to the 23-24 budget of £50 million. That is noteworthy, convener. It is the first time that there has been a positive budget reconciliation in respect of the Scottish budget. HMRC's annual accounts also include an estimate of Scottish income tax for the 2021-22 year, but this is for reporting purposes and does not affect the Scottish budget. HMRC collects and administers Scottish income tax as part of the UK's overall income tax system. The National Audit Office audits HMRC's accounts, and the Comptroller and Auditor General is responsible for reporting to the Scottish Parliament or HMRC's Administration of Scottish Income Tax. I then report to this committee to provide additional assurance on the NAO's audit work in line with the recommendation from one of your predecessor committees in 2014. I also explain what that means for the Scottish budget. In summary, convener, my report says that I am satisfied with the NAO's audit approach, that it was reasonable and covered the key audit risks. I am also satisfied that the findings and conclusions in the CNAG's report are reasonably based. The CNAG has concluded that the outturn on Scottish income tax was fairly stated. That, therefore, provides the Scottish Parliament with valuable assurance over this aspect of the Scottish budget. As ever, my colleagues and I look forward to answering the committee's questions this morning and I will pause for any further opening statements from the CNAG. Thank you very much indeed. I am going to go straight to Gareth Davis, the Comptroller and Auditor General from the NAO. If you would like to make a short opening statement with Mr Davis, after that we will go straight into questions. Thank you very much and thank you for the invitation to give evidence today. I am delighted to be here in person, as you said. The content of my report, as the Auditor General has explained, follows the requirements set out in legislation, which requires me to report to you on the outturn for 2021 in this case and also HMRC's estimate of revenue for 2021-22. We also look at the rules and procedures in place to administer the system and test through our audit work how those are operating, and then the costs recharged by HMRC to the Scottish Government for this specific work that we also cover. Our report sets out our conclusions in those three areas. As the Auditor General has said, in both the case of the outturn for 2021 and the estimate for 2021-22, I have concluded that both are reasonable. It is worth pointing out that the context for this work and the years that this report covers 2021 being the first full year of the pandemic. We have seen that a small increase in the revenue collected through income tax for that year may be a surprise to everybody looking forward to this at the outset of the pandemic, expecting a significant decline in tax revenues. However, this is a pattern that we have seen across the UK and largely attributable to the various income support schemes that were put in place to make sure that people were still in employment through that very difficult year. You will have noticed that the estimate for 2021-22 shows a sharp increase from the previous year. On the one hand, that reflects the reopening of the economy and the extra activity that everyone was able to see in that year. For this time next year, it provides a very good test of the estimation methodology that is used by HMRC. A significant increase of more than 11 per cent in one year will be very interesting to see how the outturn compares to that when we have this report next time. I look forward to answering the committee's questions on the report. Thank you very much indeed. On the point that you were making there, HMRC estimates that Scottish income tax in 2021-22 will be £13.2 million, which is an increase of about 11.3 per cent on the previous year, which, of course, was a year when the economy was in lockdown. There is also an estimate that the increase in the UK will be 13.2 per cent, which is significantly more. Why is there a expected difference in the UK performance versus the Scottish performance? Steve May wishes to comment on that as well, but I will point to the outturn figure for the previous year. For 2021, as set out in this report, you will see that, in that case too, the Scottish figure slightly lags the UK-wide figure. It is a 1 per cent increase in Scotland and a 2 per cent increase on the previous year for the rest of the UK as a whole. In a way, it is not a surprise to see that pattern replicated in its estimate for the following year, because it is using the same methodology to roll forward. I do not have any more detailed information to elaborate on that, but I do not know, Stephen, whether you have anything to comment on. Briefly, convener, we know that there is real variation and there is increasing divergence. First, the volatility of the factors that are set out in the NEO's report as various parts of the UK recover at different rates from the pandemic, also factoring in other external events. The war in Ukraine is still a residual impact of the UK leading European Union, and then volatility more recently as a result of the cost of living pandemic. I think that the factors that are coupled with elements of early signs of variation from the divergence of Scottish income tax are all factors. Probably, as Gareth says, that it is perhaps going to be the most significant and interesting outturn when we eventually see how reliable those estimates are. A combination of those factors, convener, are the early signs that we are aware of. It probably pushes up to the boundaries of which we are able to give precise detail, and the HMRC itself are the owners of the methodology, and we will be to set that out in more detail, should the committee wish. Mark Taylor wants to come in on this point, too. Thank you, convener. I just really draw the committee's attention to, of course, there are a number of estimates for what the tax position is likely to be in that subsequent year, and the estimates that go into the Scottish budget prepared by the Scottish Fiscal Commission. They will provide a commentary on where their forecasts are at, and they will also provide very helpful and useful commentary on some of the drivers for the differences between the UK and the Scottish position. If it is helpful to the committee, we can perhaps point you in the direction of some of the detail of that. I think that that would be helpful. One of the factors that we considered last year, but has possibly been brought more to the fore in this financial year that we are looking at, is the rate of inflation. Inflation presumably has led to higher-than-previous wage settlements and, therefore, people's incomes rising, and, therefore, presumably, the tax take from income tax going up. Is that a fair assessment of what is going on? I think that it is hard to disagree with that, convener. If you see people's incomes rising faster than would have been anticipated, we are all seeing that through some of the public sector pay conversations that are happening. Rates that would have been assumed are now higher in reality, and that will feed through to eventually the income tax that the HMRC collects. It might be higher in reality. I am not sure that it is higher in real terms, but my point is that, if people's incomes are going up, albeit that they are lagging behind the cost of living and the overall retail and consumer price index, that presumably leads to an expansion of the revenue that is coming in to the HMRC. That will lead to an increase in resources available to the Scottish Government. I will add that this is obviously a UK-wide effect as well, which we are seeing in the rest of our work. One of the big effects of this is to pull people into higher tax brackets more quickly than may have been expected, so that fiscal drag, as it is called, will present a challenge in accuracy of estimation to the HMRC, because it is a faster moving target that it is trying to predict. Will it be able to get as close as it did in 2021 between the estimate and the outturn? It will be very interesting to see. Mark Taylor wants to come in on this. Thank you. Just in your comment about the impact on the Scottish budget, so in overall terms, at UK level, more taxes means increasing budgets. Of course, what matters at Scottish level is the interplay between the Scottish tax and the increase in Scottish taxes per head and the rest of the UK or England and Northern Ireland to be strict and the increase in taxes there, so it is the interplay of those two factors that drives the Scottish budget. If Scottish taxes per head increase at a faster rate than at a UK level, then there will be more budget, but even though they may be increasing but at a slower rate than at a UK level, then that will squeeze the budget. We will come on to discuss that in more detail. You mentioned a couple of times methodology, and that is something that exercises the interest of this committee. Other members of the committee will come in again in more detail in the area, but we are now in a situation in which the Scottish income tax is well established. We have had some concerns that the methodology does not really give us the level of data that we think is necessary to make informed policy decisions. If I can cite one example, in the report you identify some of the methodological flaws, if you like, or recognise areas where there is not the level of data that we might like. For example, if I look at one of the second aspects in the methodology, you say that the methodology combines the calculation of PAYE and self-assessment liabilities for the UK such that the amount of portion to Scotland does not reflect the differing proportions of each type of taxpayer between Scotland and the rest of the UK. Do we know, for example, what the balance is in England, Northern Ireland versus Scotland of those people who are on pay as you were and those people who are on self-assessment? Are there more people on PAYE in Scotland than there are in England and Northern Ireland or vice versa? Mr Stewart. I do not have the data with me on what that proportionate split is, but it is capable of being derived. The way in which HMSE calculates the estimate interrogates and takes extracts from its self-assessment and pays you in systems driven by a Scottish taxpayer indicator. The proportionate split that you are talking about should be capable of being derived, absolutely. That could be built into the data that is available, but currently it is not. Even on some kind of sampling basis, it presumably would be possible to get a gauge on the relative balance between PAYE and self-assessment in both jurisdictions. The other thing that strikes us is that the methodology was something, again, Auditor General Scotland, that you reflected on last year in your report. In paragraph 16 you say that you are noting the NEO's report that the methodology has remained broadly the same since the prior year. We were having conversations with Scottish Government officials as well as HMSE this time last year about the methodology, about the service level agreement, about the quality of data that was being procured, because there is a financial cost to that. If I take Gareth Davies' comment that you made last year, you told us clearly that if you had a more highly specified agreement that got into some of the areas that we have been talking about today, which is about why cannot we get more qualitative data and fewer estimates, it is likely that HMSE would require more cost to be covered, however, on the basis of the agreement that is currently set out, we think that that cost is fairly stated. In other words, we were getting into the terrain of perhaps if the Scottish Government was prepared to pay a little bit more money to HMSE from that, it could get some better quality data. Indeed, Alison Stafford from the Scottish Government, who gave evidence last year, said that the committee's consideration is extremely timely for us to take your observations and comments into account. She talked about that they were looking at data breadth and depth, but nothing appears to have changed. Is that a fair estimate of what is going on here? I do not think that anything has changed fundamentally in the system since last year's report, absolutely. Can I return to your previous question? It might be helpful if you could point out the reference in our report that you were bringing up in relation to the PAWE and self-assessment taxpayers. For the outturn figure for 2021—in other words, the actual figure being reported here—that figure is based on Scotland's PAWE taxpayers and Scotland's self-assessment taxpayers. I just wanted to check the reference that you were quoting to make sure that I was not missing a chance to help the committee. I can look it up in your report, but there were four areas where there was reference made to the methodology that looked at what could be reasonably assessed. The use of sample data introduces sampling uncertainty, so it is based on samples. It is paragraph 1.22 in your report that has those four bullet points in it. The second point is the methodology that comes by the calculation. This is the estimate for 2021-22. The outturn figure, which is the real figure in this report that relates to tax that is actually remitted to Scotland—the outturn figure is always based on the actual taxpayers in Scotland. That 2021 outturn figure that we are reporting on here is not an apportionment between PAWE and self-assessment. It is not based on an aggregate of the UK. It is specifically the Scotland figures. I think that that is a really important point. You can rely on the accuracy of that number as being accurate for Scotland. The paragraph 1.22 is dealing with the estimate for the year. By its definition, of course, the estimate is before people have completed their tax returns, before HMRC knows exactly what is due from each taxpayer. For that estimate, they use the apportion method that we are describing in that paragraph. I hope that that is a helpful distinction between relying on the outturn figure and the estimate is inherently more uncertain. I think that that clarification is helpful. Thank you for that. Obviously, the estimates are in the domain of the decision-making process, and so they are quite important to us. That is why we have taken a view that we think having better data would help to give us a clearer sense of where policy should go and what will have the most impact in raising revenue or redistributing the burden of taxation. Gareth's distinction is very important between the outturn and the estimate. The estimate is used to support policy makers in the Parliament and the Government about spending commitments into the future. Where we get to and draw many of those conclusions is particularly that, as the volatility that you have described, and the increasing divergence between tax rates in Scotland and other parts of the UK, it is our view that it is for the Government in Scotland to be satisfied with the methodology and the associated data that it is receiving to help to inform its budget-setting process. We have broadly reached a point that, with the complexity and the divergence, it is for the Government to reaffirm its satisfaction with the current arrangements to test that the quality of the data is still fit for purpose to support their forecasting requirements. One of the factors that is mentioned in the report is the impact of the Omicron variant of Covid and the war in Ukraine. It suggests that that would have an impact on the taxpayer's ability to meet their tax liabilities. Could you perhaps elaborate on that? There are two points that apply to HMRC's work across the whole of the UK, including Scotland. Those were pandemic impacts, including from the Omicron wave, which we remember was the last very big disruption to life in the UK. The two big factors that have affected HMRC. Firstly, they reduced their compliance activity during the pandemic. HMRC was a department tasked with standing up the big programmes for paying furlough and self-employed income support, so literally thousands of HMRC staff were redeployed onto those tasks. A lot of them came from the compliance teams. The level of compliance work was lower. We have reported on this for the UK as a whole separately. I am very happy to share a copy of that report with the committee if you would find that helpful. Not surprisingly, what we have seen is a reduction in the level of compliance cases from that and a reduced amount of compliance recoveries. In the estimate, Scotland is bearing a share of that reduced compliance recovery. The second one is, for the same sorts of reasons, that tax debt in the UK has gone up sharply. Taxpayers owe more to HMRC because of inability to pay on time. Some of that was caused by HMRC deferring payment dates in the pandemic, but not every taxpayer has been able to catch up their payments to HMRC since the pandemic phases came to an end. There is now a fairly significant challenge for HMRC in collecting outstanding tax due. Again, that has had an impact on the estimate in the way that we set out in the report for next year. There are two important UK-wide factors to be aware of. Thank you. I think that, later on in the morning, we will come on to talk a little bit more about debt collection. I want to now move on to the deputy convener, Sharon Dowie, who has got some questions to put. On administration of the Scottish income tax, HMRC uses the same systems to administer income tax, whether as taxpayers from Scotland or from the rest of the UK. It operates additional rules and procedures for Scotland, such as residency checks and applying tax codes where individuals are identified as Scottish taxpayers. The NEO report also states that, as has been the case in previous years, one of the main admin challenges faced by HMRC is maintaining an accurate and complete record of Scottish taxpayer residency addresses because HMRC relies on taxpayers notifying them of any change of address. What can be done to improve that and would a legal requirement to notify HMRC of address changes assist with the admin challenge in overall compliance? I mean this is obviously one of the key areas of compliance control to make sure that the tax is allocated to the correct country in the system. The more that we see divergence, just intuitively, the greater the pressure on that system of compliance and the more the incentives for people to manipulate address, for example, is one of the ways of avoiding what would otherwise be a higher tax payment. So HMRC is obviously fully aware of that risk and we know that it's a topic that they discuss with the Scottish Government in their regular conversations. I think that in terms of what would represent useful increases in the level of control over those risks, I think that those are really questions for HMRC rather than us, they are the operational experts and they will give you a much more informed answer than we as their auditors can. But as you say, legal requirements to notify HMRC sound plausible, but I think that the experts would need to advise you on whether they would have the desired effect or would they create any kind of perverse effects not intended. The most recent scan of taxpayers' records to identify missing or invalid postcodes which would result in incorrect residency status being applied was in June 2021 and it identified 25,488 missing or invalid postcodes of which 3,031 were updated. Reported postcodes, whether missing or invalid, represent 1 per cent of the 2.5 million total income tax population in 2020-21. A small number of missing taxpayers can potentially equate to a large amount of revenue, especially if the group contains high net worth individuals. Has the NEO received an update from HMRC around the monitoring of the situation and specifically the causes of missing or invalid postcodes? What might the impact be on revenues and what if anything is being done to address it? I take your point first around the causes. This is clearly a key area of focus that we return to every year as part of our work and in reporting to you. Missing and invalid postcodes can arise for things as simple as keying errors in tax returns and things of that nature. The scale of missing and invalid postcodes has fluctuated over time. It is a key feature of the assurance work that HMRC itself does. An important part of that work is interrogating those missing and invalid postcodes to identify where there are residents in those postcodes who are liable to tax. The analysis that they have done often identifies that there are not tax-paying individuals in those households. For various reasons, they could be dormant accounts, they could be economically inactive people and things of that nature. You asked about any follow-up that we have had since that exercise in June. We have not had that. That is something that we will pick up as part of the forthcoming year's work, but it is and remains a key focus of our work. It is really important. Craig Hoy has some questions. Thank you, convener. Good morning, Mr Davies and Mr Boyle. Welcome to see you in the flesh rather than on Zoom. I just want to delve a little deeper on the monitoring and evaluation that you can do around compliance of Scottish income tax payers, which is becoming a live issue given the increasing divergence between the Scottish tax system and the UK tax system. Indeed, it is something that is referred to in a report by the Institute for Fiscal Studies, which is covered in the daily telegraph today. I just want to go back on to the issue that the deputy convener raised in relation to postcodes and where people are resident. Your report says that HMRC has not identified any significant or widespread instance of tax payers changing their address to obtain a tax advantage. However, today's report points to the chief executive of David Alexander, who says that, in Scotland's largest letting agency, he is already seeing signs of high earners leaving. He said that it is a natural situation that people think, actually, why would I reside here when I can move not far and pay substantially less in tax, given that the HMRC says that they are not seeing any significant or widespread instances of that. Can you just elaborate what would be significant or what would be widespread bearing in mind that Scotland has a very small number of upper-rate and high-rate tax payers? I definitely would have to ask HMRC what it meant by those definitions, because they are there terms, and that is not a kind of auditable bit of the process, if you like, that we could help to shed light on, so I am sure that they would be able to help with the detail behind those comments that they have made. What we do know is that they use their database to run the kind of computer checks that they would expect in this situation. Running a report to list out the taxpayers who have changed their postcodes from a Scottish postcode to an English postcode in the last 12 months, that is not a dauntingly enormous list. Of course, there is quite a lot of people on it in any one year. I do not know what the exact number is, but it is a meaningful audit process to then look for any signs of a pattern of behaviour. I would be very surprised if that is not what they are referring to. I suspect that they use those exception reports that they run on a regular basis to assess the volume of transfers across border. Of course, there will be some in the other direction for work reasons and personal reasons and all sorts of others. I am assuming that their comments are based on their analysis of the data, but they would have to give you the detail behind that. The divergence is about 2.1 per cent in relation to the rest of the UK, which is now getting into what I would perceive to be a significant sum. From your perspective, would it be reasonable to expect that those individuals who are faced with a prospect of higher tax, that there is an incentive for them to look at tax, legitimate tax avoidance measures, which, for example, could be converting income to dividends or potentially moving south of the border? That would be a reasonable expectation that each MRC should be aware of. You are voting me to go into policy areas, which I can comment on the audit of the numbers, but those are judgments for elected politicians rather than for auditors. I think that the Auditor General wants to come in on this point, too. Thank you, convener. Mr Hoy, you picked out one of the central themes of our report based on some of the assessment that both the HMRC and the recent commentary from the Scottish Government themselves, the Deputy First Minister's evidence to the Finance and Public Administration Committee, explored some of the emerging risks of change in taxpayer behaviour as a consequence of the divergence in tax regions between Scotland and other parts of the UK. It probably is early days, I think that it is the picture about the HMRC, to say that there is limited evidence, but there is the potential for behavioural change. You mentioned high net worth individuals, right? Looking at the analysis within the NEO's report and some of the comparisons of tax implications on different income tax earning rates, as people earn more than the top rate and particularly go much higher beyond the £150,000 threshold, the differential is less, the most significant impact is on people, what might be called as middle earners, £50,000, I think, is the most significant differential. Where that gets as to from the recommendation and judgment that we make in our report, is for the Scottish Government to take a view on what additional compliance activity it wishes to ask of HMRC. Based on HMRC's position, there is not enough evidence generally to support that there is the sort of behavioural change having an impact. Whether that is a sustainable position, I think that it is something that the Government in Scotland and the HMRC need to keep under close review and discussion. There is a cost benefit to all of us. Additional compliance activity for Scottish income tax purposes will come at a cost and to weigh that up against the benefit that it will produce in terms of further tax take. Is it quite difficult to do that modelling in a predictive sense, or do you only realise that maybe the flight has happened once you look back over the output for a year? I think that maybe, like Gareth has meant, it is difficult for us as auditors to take a position on. I think that it is the specifics of the modelling and the reliance of it as something for HMRC and its advisers to keep under close review. From the Scottish Government's perspective, they will want to be satisfied that the compliance activity that they are asking HMRC is consistent and proportionate for their requirements. Just in terms of your examination, you came forward with various recommendations in your report. Do you think that there should be more third-party data checks and compliance activity undertaken in Scotland? I am sure that Gareth and Darren might want to say a bit more about third-party data checks. I think that looking at the results of the third-party data checks, that is a position that we have reached that there is opportunity for the Government in Scotland to request more third-party and perhaps more frequent third-party data checks to satisfy themselves about the accuracy and the consistency of the tax base in Scotland, which leads to the totality of the outturn and the reliability of the estimates. Colleagues in the annual could probably say a bit more about that. That is absolutely fair. We have made more than once recommendations around the frequency of that third-party data exercise. In the hierarchy of work that HMRC does in the assurance that it provides, third-party independent checks are clearly preferable. When last prompted, HMRC and the Scottish Government settled on a two-year frequency, which they were comfortable with, because they thought that it struck the right balance between timeliness and cost. That is something that we would always recommend that they keep under review. Just going back to a point that was made earlier, where we are attributing HMRC's view that there has not been any instances of significant or widespread manipulation, that is very much referring to manipulation. It is quite important to make the distinction between people who choose to legally move across the border or legally change their tax arrangements versus something that would clearly be of interest to HMRC, where that does strain to manipulation and non-compliance innovation. It is an important distinction to make. People are doing it perfectly legitimately over a number of years. It is not something that HMRC would necessarily be particularly activated about. I think that they should be interested in it. I am not sure that they would have the powers to do anything about it. I guess that it is the distinction that I would make. We have a whole other area that we want to explore around the tax gap and other data issues, so I am going to bring in Colin Beattie at this point. Over a number of years, I have been fairly critical about the quality of the Scottish rate of income tax and all the estimates and so on that are around it. Last year, I drew up a list of 32 areas where there are estimates or, more accurately, perhaps guestimates as to what the figures might be. Looking at this report here, I will do the same—I have not had time yet—but it is quite clear that Scottish figures are inadequate to enable an accurate calculation of the tax. There is also conflation with UK figures at times because Scottish figures are not being available, and yet the mix of taxpayers in Scotland is clearly quite different from the rest of the UK, particularly when you take one of them into account, which is hugely distorting. Are the figures that we have for Scottish tax just fantasy? I will return to my answer to Gavina earlier on. When we are talking about the outturn figures through the system, in this case we are looking at 2021 outturn. They are definitely not fantasy. They are auditable, and our opinion on those is based on the fact that PAYE and self-assessment forms the vast bulk of that amount. 99 per cent of that figure is not an estimate, but 99 per cent of that figure is based on actual tax received. You can be very confident in the accuracy of the outturn figure. That is quite a strong statement for an auditor to make. We do not normally go that far, but in this case there is a strong evidence base behind the outturn. The concerns that you have described apply to the estimate, as we discussed earlier. That estimate is not a figure that affects the amount collected for Scotland and delivered to the Scottish Government, but it is a relevant figure in the planning system in the way that the auditor general explained earlier on. It is important to work on the accuracy of that estimate, but it is not the same as whether you trust the amount of income tax that Scotland is receiving, because that is the outturn. I hope that that is a helpful starting point to that discussion, but you may want to go into specific areas of the estimate in more detail. There are one or two areas that I would like to look at more closely, although I would say again that there are an awful lot of estimates in here that I think must distort the final figure. However, if I look at paragraph 15, on which it states, there are no risks identified in the Scottish SPR, which is specific to Scotland. As HMRC assesses that compliance risk in Scotland is consistent with the rest of the UK, given the different mix of taxpayers and so on across the rest of the UK, is that actually accurate as a statement? It is an accurate statement of the view of HMRC, which is our job here, to give you a clear picture of what their view is. I think that you would have to ask HMRC— As the auditor, though, you would have a view on that. We point out in the same paragraph that, as we look at greater divergence, maybe between the Scottish tax rates and the UK tax rates, that merits a closer look, that risk assessment. It would be surprising if it did not start to feature in a more prominent way in that strategic picture of risk, as it is called, which is why we make the point that we do about, as we have just discussed, returning to the question about, first of all, is the risk sufficiently well understood, given the changing policy picture, and then when the risk is understood, is the level of investment in the controls, the mitigation of those risks, proportionate to the level of risk being run? That is a constantly moving picture, so I do not think that you should ever be satisfied with that. You should continue to probe between the Scottish Government and HMRC whether they have arrived at the right balance in the way that the auditor general was describing earlier on between cost and rigor of control. At the moment, I think that it is an accurate picture of how they are running their system of risk assessment, and we are pointing out that the risks are changing, so that will need to be kept under review. If I carry on down to paragraph 16, where it states that HMRC calculates—this is in connection with the compliance yield of £280 million—HMRC calculates the figures as a proportion of the equivalent UK figure rather than Scotland-specific data to quantify the risks. To me, that does not seem like it could be accurate. They run the same compliance as we point out in the report. The figure of £280 million is essentially the return on the compliance activity, in other words chasing up suspect cases of underpayments and so on. As we say in the report, the process that HMRC uses is the same in Scotland as it is for the rest of the UK, so they do not adjust their compliance approach for Scotland. Therefore, they think that it is a fair estimate to apply the proportion of net losses through the compliance approach and the yield, in this case, from their compliance work on that basis. Again, that is one that we will just need to keep probing on, I think. As the circumstances change and the risks change, that assumption may well become unsafe at some point, but HMRC's assessment is currently that it remains the best way of doing this. Paragraph 17 says that HMRC cannot easily track and monitor compliance activity in Scotland, and that affects its ability to collect performance data about the extent of Scottish non-compliance. Without data, you cannot really project that into the future. Intuitively, without having the ins and outs of all of these systems in great detail, it does seem surprising that it is not possible to isolate Scotland's compliance activity from the UK whole, but the fact is that the HMRC compliance systems are built on a UK-wide basis and were never designed to be applied differently in different parts of the UK. That may become inappropriate at some point, so I think that this is a really important point to stay on as the facts change, as the risks change. It is intuitively surprising that its compliance system is not able to identify the country of the taxpayer. If I move to part 1, part 1.5, it states that the reduction in Scottish income tax downturn arising from these adjustments—this is estimates for tax due and so on—uncollected amounts, tax reliefs. It says that in some areas of the calculation, HMRC does not have data available in sufficient detail to identify income tax liabilities, reliefs or other adjustments relating to individual taxpayers. Again, HMRC uses UK figures to try to work out some sort of calculation on that. However, the pattern of Scottish taxpayers versus the rest of the UK is very different. As far as the information that we have seen here is concerned, how accurate can that be? What kind of distortion is there that comes in there? That figure that you are referring to is the one bit of the out-term that is estimated. As I said, 99 per cent of the out-term is based on actual figures. This is the remaining 1 per cent that is based on estimates. Figure 3 in our report breaks down that £119 million adjustment into the categories of estimates. You have estimated self-assessment liabilities, estimated PAYE liabilities and then a category of estimated further liabilities, things such as tax relief on pension contributions, gift aid and so on. Then there are deductions based on pension contributions. It is possible to break down that estimate into its constituent categories. What we are pointing out is that some of those estimates are estimates of liabilities that have not yet materialised in their final form. For example, self-assessment tax payers who have been very late concluding their tax return. The figure is not known, and so it cannot be accurately entered into the calculation. UK-wide, HMRC knows that there is a level of late filing of tax returns that it can reasonably accurately predict. What it is saying is that it cannot separate that assumption between Scotland and the UK, so that it applies a UK-wide proportion to the figure to derive this Scotland amount. That is the process that it is in at the moment. Should it be able to accurately forecast things like late filing of tax returns and how much tax will arise from those late returns? You can see why that is not straightforward, because it does not have an actual number that it can attribute to Scottish taxpayers in that case. However, the whole system needs to be kept under review. I do not know whether you want to add to that. We have talked about that with the committee before. I agree that there is an area to continue to probe. There is a high-level assurance around the net outturn for those residual areas of estimation and adjustment. I think that the judgment that HMRC and the Scottish Government reach in deciding whether to go further with this is worn around the precision of the outturn figure versus timeliness. In theory, if you tell the example of a self-assessment tax return that could take up to six years to settle, you could wait until the end of that six-year period and have absolute clarity about the amount that is due. However, that would have consequences for budgeting, planning and things of that nature. I think that the judgment that HMRC and the Scottish Government reach is that there is a balance between the timeliness and the precision of producing the outturn. I continue to look at deductions from revenue if I look at 1.15 and 1.16. HMRC has used historical data for the UK as a whole to determine the patterns of uncollected liabilities, and they have apportioned that against Scottish taxpayers, and they have calculated that at £97 million in paragraph 1.16. HMRC is in connection with gift aid and so on, which is not insignificant. They have calculated these deductions by estimating that the Scottish share of tax relief claimed across the UK again using historic data. They have calculated that out to be a deduction of £114.1 on gift aid and £155 million on pension contributions, but it is unclear to me again that the pattern across the UK is not really the same. It becomes one sort of amorphous figure when you put it all together, but when you try to separate it out and then take one part to compare against the other, it cannot be accurate. There must be a margin for error in this. It is absolutely true, like any estimate. One thing that you could be pretty sure of, it will not be absolutely the correct figure by definition almost. All of these questions come down to this balance of cost and timeliness. How important is the accuracy if it means that it is going to be late or expensive to get the figure? That is really what all of these come down to. You might get a bit of extra accuracy, but at what price and with what delay. Clearly, you cannot be a long delay because you need the figure to complete the Scottish Government accounting process. I think that these are completely valid questions about how has that balance been struck in each of those cases? Some of them seem more surprising than others to the layperson. Some of these are hard to understand why there is not Scottish data available straight off the system. In other cases, it is a bit easier to see why it is quite difficult to arrive at that. As systems improve over time, systems are becoming more sophisticated and the ability to interrogate the data is stronger. It is important to keep challenging the Scottish Government in HMRC on why they have not made a different call on some of those estimates. I would expect over time that some of those become quite cheap to produce and should be routinely fed into the calculation rather than estimated, whereas others might continue to be problematic and expensive. I think that this is a live conversation to maintain with the policy makers. If I go through this report and compare what I regard as anomalies with what I took out last year, am I going to see any improvement? At the beginning, I took out 32 cases where parts of the returns and parts of the revenue are estimated and liabilities are estimated, to an extent that, if you take one issue, it is not that big. If you take 32, you are looking at a bigger distortion. I would hope that, over a period of time, that would gradually reduce with experience and with an understanding that there are areas there to be sorted. We have not seen any big changes in the approach in this year that we were reporting for compared to the previous year, as we said earlier on. However, I think that you are right that, over time, we should see a reduction in the length of the list of estimated areas as it becomes more possible to use the system to hone in on the actual figure. Some of those will still need to include an estimate because you are estimating something that has not happened yet. Even in those cases, it should be possible to use Scotland-only data rather than an apportionment of the UK figure. In those two areas, I think that you should expect to see improvements over time as the improvements to the system allow. As the auditor, have you had those conversations with the HMRC and the Scottish Government? We have not had them with the Scottish Government, because our remit does not take us there. However, as the auditor of HMRC, it is the stuff of all our conversations with them. Clearly, we audit them for the accuracy of their accounts and for exercises of the kind that we are discussing today. However, we also carry out value for money audits on HMRC as we do with every other UK Government department. The Public Accounts Committee in Westminster holds hearings based on those reports on a regular basis. We challenge HMRC all the time on whether it could be doing more to ensure that the revenue due is collected, to minimise the compliance losses that we have been discussing, to reduce the tax debt figure that has grown so significantly since the pandemic. All of those areas, and at the heart of all of that, is the system of IT and data collection. One of the biggest IT operations in the country, of course, at HMRC, have hugely sophisticated systems nowadays. A programme to continue to improve those. We are very close to the planned improvements in those systems. We challenge HMRC on a regular basis, as they are auditors, on what they are doing to address the risks that arise using the better data that they have available. Darren, you are their auditor, so do you have anything to add to that? I will return to the point about evidence that suggests that the quality of the estimates and the data is improving over time. It is absolutely valid to continue to reflect on the residual areas of estimation in the outturn. I just want to draw your attention to the overall variance in HMRC's estimate of what the Scottish income tax outturn would be for 2021 and what it actually was. In absolute terms, it was a difference of £87 million, which is clearly in pounds and pens as a significant sum. In percentage terms, the variance is 0.7 per cent, and that is the lowest that it has ever been, certainly in my involvement in that particular piece of work. That has shown some steady improvement over time, so it does give, although the methodology has not changed substantially, the quality of the overall estimate. There is some evidence that that is improving over time, which I think is important to reflect on. Perhaps in relation to the engagement with the Scottish Government on this, the Auditor General Scotland could comment. Ultimately, looking at the reliability of the estimate, it first informs the Government and Scotland of the budget that it proposes for its public spending. As we have seen over a number of years now, that has resulted in fairly large negative budget adjustments and reconciliations once tallied up with the subsequent outturn. We covered in our own report today for the first time that we have a positive budget adjustment of £50 million. What we are not seeing yet is that that is necessarily going to be a reliable indicator of future positive reconciliations, given the volatility that we have covered already. In terms of conversations with the Government, primarily the vehicle for that is our additional assurance report that the committee has today that we set out clearly our view that for the Scottish Government to be satisfied with the robustness of the methodology, the associated compliance activities, the cost-benefit arrangements that we have touched on already this morning in terms of what they are asking of HMRC and that the data is robust to support overall budgeting for the Scottish budget. It is something of a moving feast. As we look at the totality of today's reports, we are seeing more volatility, more divergence and change and therefore a view for the Scottish Government to take as to whether the existing arrangements are sufficient for their purpose. You have probably seen from both the national audit office and ourselves a sense that this increase in complexity and volatility might lead itself to more compliance and more requirements that the Scottish Government should ask of HMRC. I will stop there, because a lot of the questions are there for the HMRC to respond to. I will simply say that there seems to be huge inaccuracies within the calculations for the Scottish rate of income tax, and that a great deal of work needs to be done to get an accurate Scottish figure. Before we leave that theme altogether, the tax gap, which is the difference between the amount of tax that should be paid and what is actually paid, you say in Para 2.3.2 that HMRC does not currently produce a Scotland-specific tax gap figure. You also want to say that HMRC has limited information on total compliance activity undertaken in Scotland. I wonder whether you, both the Auditor General for Scotland as well as the Comptroller and Auditor General from the NEO, have a view on whether that would be useful to have that specific Scottish tax gap data, for example. I will say something about the UK approach to calculating the tax gap. By tax gap, what HMRC means is that if everybody paid the tax that was intended by Governments across the UK, what would be collected? They compare that with what they have collected, and that is the tax gap. It is measured in the tens of billions, typically 30-something billion at the moment each year. That is a measure of the UK-wide tax gap. Clearly, you close that by improving compliance with tax rules, minimising avoidance and so on. The way in which that is calculated is essentially a statistical exercise carried out in the UK. It is quite a controversial methodology and a lot of academic challenge to it every time it is used. Plenty of people with ideas on how it could be improved. That is a very live debate all the time between HMRC and the community of people who are interested in the accuracy of that number. What HMRC's view is that that is a hard-enough challenge coming up with an acceptable figure for the UK. They really struggle to see how they could come up with a Scottish-only version of this statistical estimate because so many of the figures used are UK-wide assumptions. In theory, there is absolutely nothing to stop somebody trying to do that. However, HMRC has said that the cost and effort involved in doing that and the likely methodological challenges that it would face means that it does not think that there is a good case for doing that at the moment. However, it is a discussion between HMRC and the Scottish Government. I have a terrific amount to add to that. I think that Gareth set out the complexity and the reasons why that has not been taken forward. The Scottish Government would have to be clear that the benefits would outweigh the costs in assessing whether that was an exercise that would derive further benefit in establishing a more robust estimate, first of all, for its purposes, and then be satisfied that the extent of tax that is available to Scotland is clearly stated. I am somewhat sitting on the fence on it, convener, and I think that it is one for Government to weigh up the pros and cons if that would support its wider understanding of the methodology and feeding through to its estimate of Scottish tax. It goes back to the earlier conversation that we had about the service level agreement and whether, if there was additional payment made to HMRC, whether that could elicit some of the methodological challenges, that kind of data, it seems to us, would be fundamentally useful data to have. Before I bring Willie Coffey in, there was just one other area that I wanted to raise with you. It has been mentioned in the passing so far, and that is the whole issue of debt collection. I was looking at the public accounts committee and the regular reporting that there is to it from HMRC, NAO of course, and other Government bodies. I am looking at the Government response to last year's 48th report of session 2021-22, which was a reflection on where things have got to there with tax collection. One of the things that is highlighted in the UK Government's response is that it says, in addition, from September 2022, there will be a new contract through which HMRC places debt with private debt collection agencies. That will allow HMRC to increase placements with debt collection agencies by around £1 billion a year without increasing the cost to the Exchequer. I guess my questions are, so are these debt collection agencies doing it for free if there is no cost to the Exchequer or are they taking a percentage of everything that is collected, which I think is normally what happens in these situations? Are they operational in Scotland? Are you aware whether or not the Scottish Government has got a view about the deployment of private debt collection agencies and who principally are they? I do not have those details to hand, but I do not know if you are able to help on any of those points. There are arrangements that we are looking at as part of the current 2022-23 audit round. I could say relatively that they will not be free, but I am not a party to the specifics of the commercial arrangements. Your questions around the distribution of that activity between Scotland and the rest of the UK is probably a question more for HMRC, but something will be interested in as part of our audit. Thank you. Obviously, the committee will consider what its next steps are with that, but I think that there would be interest in understanding whether private debt collection agencies are now being deployed. Auditor General for Scotland. I think that you asked whether the Scottish Government had a view on whether private debt collection agencies were operational in Scotland. I do not think that we know the answer to that, but I think that it is perhaps also worth checking with the Scottish Government whether they are able to have a view on that, given that they might just be a case of a HMRC collecting income tax through its own arrangements across the whole of the UK. It is probably one for the Scottish Government to confirm. It does pose some wider questions and again some policy questions. Willie Coffey has got a number of questions that he wants to put. Thanks very much, convener, and good morning to the panel. I wonder if I could drag you back to the opening remarks on the two big figures that are in the very front pages of the report. Again, please, it is the HMRC's final outturn calculation at £11.9 billion and the estimate being £13.2 billion. That difference is substantial—it is £1.3 billion. My simple question to you on behalf of the man and woman in the street, is that ultimately real money that the Scottish Government will see further along the line or not? Well, if the HMRC's estimation accuracy is maintained at the level of the last couple of years, then yes, it will, because the estimates that we have already discussed have been quite accurate in recent years and increasingly so. The difference between outturn and estimate was only 0.7 per cent in the last year. We think that this is a more challenging test of that estimation accuracy. For the reasons that I said at the start, clearly a big swing of 11.3 per cent in one year is very substantial. There are a lot of moving parts in there, and the risk of the estimate not being as close to the outturn must be higher. However, we do not have any information to point in in either direction. I cannot give you a steer on whether it is optimistic or pessimistic, but we do know that it is a sterner test of the estimation methodology than the previous year. It will be very interesting to see how close— clearly there is a lot riding on this more than just the academic interest of an estimate, but it will be a much better test of the methodology that is used given the scale of the increase in one year. It is a substantial difference. The reason why we have not flagged it up as incredible is that it is not worth believing is because it is a similar picture in the UK as a whole. As we have already pointed out, it is actually an even larger overall increase in the UK as a whole. This represents the shift in economic activity between 2021 and 2022, coming out of the harshest of the lockdowns. Interestingly, in the inflation discussion, it was a post-lockdown but pre-heavy inflation for most of 2021-22. That is why we think that this is going to be quite a hard one to call, because inflation was just starting to take off towards the end of that financial year. It is only in 2022-23 that we have seen the highest levels. Given how fast things were moving at the end of that year, we think that this is a very challenging estimate to get right. It seems as though it could be a potential windfall following down the line. When would we expect to see the real figure emerge? This time next year. Next year's report will include the outturn for 2021-22, and we will be able to compare that with this estimate of 13.3 billion that we are showing in this report. Clearly, HMRC will be getting indications of this much sooner than this time next year, because we have passed the deadline date for self-assessment returns to be submitted to HMRC, which was the end of last month. HMRC, at the moment, is finalising the tax liabilities for all those taxpayers. We will have an emerging indication as we go through this year. In the £50 million figure, the actual positive differential that you mentioned, is that an example of that? That relates to the £95 billion relative to what has been assumed. As we discussed the first time, there has been a positive reconciliation to the Scottish Government, so it is significant in and of itself. If I may, Mr Coffman, I might want to say a bit more about the estimate in a moment, but if you are looking for evidence, it is hard for anyone to be categoric that the estimate that is set out here will be what is received once HMRC collects all the relevant tax. However, in terms of corroborating positions, the Scottish Fiscal Commission's estimate is very close to the estimate that is set out from HMRC. It provides more confidence to the Scottish Government when it is setting its budget that that will not result in hundreds of millions of pounds of reconciliations either way. However, with any estimate, there is always a degree of uncertainty, especially this year, with all the external variables that we have discussed already. To develop that point, Paragraph 23 of the Auditor General's report quotes the most recent figure from the Fiscal Commission. Two things to say about that is that the Fiscal Commission will regularly update its forecasts from the initial one that it prepares that hits the Scottish budget as to how it is playing out in its assessment of that. The other thing to say about that is that its approach is very different to HMRC's. Its approach is founded on the administrative data that it receives on an on-going basis and is much more granular in its overall assessment and is underpinned by its overall modelling. The fact that those two numbers are very close should give you a degree of assurance over it. Whether that continues to be the case going forward is the big question that sits alongside that. The other thing to pull out with your indulgence, convener, is that, of course, the Scottish tax take matters and the UK tax take matters are the interplay between those two. Again, the Scottish Fiscal Commission will look at what the initial assessment of that difference is and what it means for the Scottish budget. That is the place through individual Scottish budgets. However, in the final reconciliation, it will continue to forecast how that is likely to land. We have seen the first positive reconciliation. There is a big negative reconciliation forecast for the subsequent year. After that, you will see a degree of volatility in that. The system is designed that sometimes it will be up and sometimes it will be down because it is based on that interplay of two estimates. From a financial planning perspective, the Scottish Government needs to be very aware of that big negative reconciliation that is forecast for the next budget year, which is 24-25. It is planning for that. It is in the order of £3.25 billion that is currently forecast. Part of the reason for that is that there was discretion with Scottish ministers as a result of the timing difference around a UK budget to take an earlier figure or a later figure, and they took an earlier figure that gave more money up front. However, as the reconciliation plays through, that is likely to add a significant challenge to next year's budget-setting process. I want to turn to ask you a couple of questions about the Scottish S codes and the application of those by employers in Scotland. The numbers appear to be going up. The paper that we have in front of us says that it was about 39,000 or so previously, and it is up to 41,000. Those are employers that do not apply the Scottish S tax code to their employees. I wonder if you have a view about why that has continued to be the case. Is it the same sectors that are perhaps not applying this? Is there any information that you or anyone else could give to the committee to help us to understand what is going on here and what work is going on to try and fix that particular problem? I guess I will start with that. That position has improved over time as employers have become more familiar with how the system works and the requirements of them to apply the S code. That number is still high and needs to be continually borne down on, so I think that is absolutely right. In terms of what HMOC does, my understanding from the work that we have done is that it will target routine offenders. If employers are consistently getting it wrong, they will reach out to them directly and intervene directly. My understanding is that the frequency of that or the instances of that have reduced over time. It also issues things such as employer newsletters, which are called nudge campaigns, which remind employers of their responsibilities in running their payrolls. The overarching thing is that there is a high level of assurance around which tax payers should have the S code applied. Therefore, if employers are not getting it right, when HMOC comes to reconcile its own records to what employers have applied, there is a high level of assurance around the accuracy of that and how that feeds into the Scottish income tax out turn. It would be really unfortunate for the individual employees who have not had the correct code applied, because that could mean that, for a period of time throughout the tax year, they have either been under or overpaying their tax, and that could clearly be a surprise to them and unwelcome one of them. I was going to say to follow-up that the number is actually going up, not down. It was 13,000, it is now 41,000 of those that need to appropriately apply the S codes by employers in Scotland. I just wonder if you are able to dig any deeper about who those groups of people are, as they are the same repeat employers year on year and why that number is not significantly coming down by now. That is something that we look at as part of our order work. I am sorry to go back to your point around that it is increased year on year, but the trend has decreased over a period of time, is what I was pointing to. Is there further information that we could get from ourselves or HMRC about the categories and groups of employees? I think that HMRC could certainly elaborate on what is driving it. I think that we asked it last year, but I do not recall if our response came to that, so we are clearly interested in why and whether employers are habitually not applying the Scottish S code to their employees' tax returns. Is there anything else that you could add on to that, Auditor General? I think that it is primarily one for the national audit office and the HMRC, Mr Coffey. I would be interested in seeing whether HMRC's position has changed. If any further inquiries, I think that the HMRC's position is that the number of employers that routinely use an incorrect tax code is very low, and they are not routinely tracking that information. Perhaps it takes us back into the cost-benefit position as to whether or not their compliance activity and the compliance activity that the Scottish Government asks whether that is an area that they would look for more information. None of that detracts from the overall point that you are making. The reliability and robustness of a Scottish tax base is fundamental to the outturn and reliability of the estimate. As a package of measures for the Scottish Government to take a view on that, are they satisfied about the overall reliability of the estimate that produces the numbers to support the Scottish budget? That is fairly on that point, convener. I would certainly be interested—I am sure that colleagues would be, too—if there were a few employers who had high numbers of employees that were habitually not applying the code. I am sure that that would be of interest to the committee to try and help to resolve that. However, we do not know or see that level of detail, but that is perhaps something that we could follow up on, convener, if we get the opportunity. My last question to you is about the Parliamentarians and the correct application of the S code to them. You will probably recall that, in the early days, 45 of our dearly beloved colleagues in this Parliament were not regarded as Scottish taxpayers. Is that problem completely resolved and solved now for Scottish MSPs in the Scottish Parliament and Scottish MPs that serve at Westminster? Do we know who they all are and who we are applying an S code to them all? You will be unsurprised to hear that, since that happened a number of years ago. What used to be a manual process is now automated and has more scrutiny from both HMRC and we certainly look at it on an annual basis. It is something that we are keenly interested in. Since that time, I have not identified or been made aware of any issues around MSPs coding. I think that any other members of the committee have any final questions if they could indicate. I just wanted to touch on something that Auditor General Scotland in your report, Paragraph 42, which is a section on taxpayer behaviour, in which you say, in my view, the publication of the income tax behavioural analysis and the development of a dataset to track taxpayer responses to income tax changes over time is a positive development. I have not seen anything published yet, but is there an expectation that something will be published later this year? Has the work been commissioned to get that dataset and to have that out in the public domain? A couple of things to touch on, convener. I think that in the preceding paragraphs we referred to the publication of Scottish taxpayer liabilities and behaviour over time that HMRC published in December of 2021. It begins to explore the behavioural change, the incentives that we have covered in part this morning. Some of that will be about addresses that people will use for their tax base, but other parts that we haven't featured so prominently today are the incentives that behavioural change encompasses the extent of ours worked in Scotland relative to other parts of the UK to mitigate tax paid relative to income. The other part talks about HMRC's work with devolved Governments in the UK. Scotland is further ahead than Wales in terms of applying its divergence from the rest of the UK in income tax rates. The HMRC is working with devolved Governments as part of a working group just to establish the reliability of datasets-anticipated-outturn statistics. All of that points to an on-going need. Relief for the Scottish Government as a customer fundamentally in this exercise to satisfy itself that it is getting from HMRC reliable estimates that the outturn is consistent with the methodology and that it can then produce a Scottish budget that will be as close as it possibly can be to what it will ultimately receive in income tax returns. Work is happening, I would say, convener. What we want to see next is that the Government is satisfied that what is produced and more is accumulated this summer is consistent with its expectations in this changing environment. On that note of great clarity, I want to draw this morning's evidence session to a close. I thank our witnesses Darren Stewart, Gareth Davies from the NAO, Stephen Boyle Mark Taylor from Audit Scotland. It has been a very useful session for us. I think that it provides us with a platform upon which we will want to build. Thank you once again and I now move the committee into private session.