A ‘Scotland-specific shock’ was forecast back in January triggering additional budget flexibilities for the Scottish Government over the next few years. This article considers whether the shock still holds up in light of the new OBR forecasts for the UK economy.
This was a budget of two parts – more spending in the short term to support mitigate the impacts of covid restrictions, and future fiscal tightening to address concerns about fiscal sustainability. But what were the implications for Scotland?
The latest GDP data for Scotland shows that the Scottish economy continued to contract into December with a decline of 0.3%. The Scottish economy remains 7.2% below pre-pandemic levels; this compares to 6.3% in the UK economy.
As the national lockdown remains across Scotland and the UK, and we approach the one-year anniversary of the first COVID-19 case in Scotland, the story amongst the sectors of the economy continues to emerge.
The Scottish Fiscal Commission’s forecasts accompanying the Scottish Budget last week triggered the conditions for a ‘Scotland specific economic shock’. As a result, additional budgetary flexibilities for the Scottish Government are unlocked.
Scotland, like the rest of the UK, remains under a national lockdown with over half of Scottish businesses with furloughed staff and a rise in businesses expecting to make staff redundant in the coming weeks.
In our last update back in November, the number of businesses trading and the outlook for business activity remained fairly stable. However, with restrictions tightening over the Christmas period, many businesses finished off 2020 with more uncertainty than hoped.
The West Midlands labour market has been sharply affected at the beginning of the pandemic, but its sectoral mix has allowed GDP to start recovering faster compared to rUK once the lockdown was eased. Trade in goods declined significantly in West Midlands due to its reliance on the manufacturing industry. Furthermore, a higher concentration of jobs in low-skilled occupations means that only a small share of employees in West Midlands can work from home.
The ONS recently published new data for Scotland on tax paid as a percentage of income by household income quantile. Unsurprisingly, some taxes are progressive (high income households pay a larger percentage of income in tax than lower income households) and others are regressive. But is the overall burden progressive or regressive?
How should a wealth tax be designed? What and who should be taxed in principle, and would this be feasible in practice? And, given the interest in devolving greater revenue responsibility to the Scottish Parliament, would a wealth tax be suitable for devolution? This article considers some of these questions.
