Scottish v. UK growth forecasts: how big a difference is there, and does it matter?

David Eiser, Fraser of Allander Institute

The Scottish Fiscal Commission’s forecasts for economic growth in Scotland over the next five years, published in December, raised some eyebrows. Growth in GDP per capita will average just half a percent a year over the period to 2022 according to the forecasts. This is about half the average growth rate seen during the noughties. It is also slower than the 0.7% average growth rate that the OBR is forecasting for the UK.

The latest GDP statistics for Scotland, published last week, included a downward revision to recent rates of GDP per capita growth. Prior to the revision, recent growth of Scottish GDP per capita had already been looking weak, with growth of just over half a percent between Q1 2015 and Q2 2017. But following the data revision this positioned has worsened, with GDP per capita actually shrinking fractionally over that same period, according to the revised figures. In contrast, UK GDP per capita grew 2.7% over the same period, opening up a marked gap in relative performance (see Chart).

Scottish UK GDP per cap with forecast

Continue reading “Scottish v. UK growth forecasts: how big a difference is there, and does it matter?”

The Scottish Fiscal Commission’s Forecasts: An unprecedented weak outlook?

For many, the big story of the Budget won’t be the tax and spending announcements of the Scottish Government but the forecasts for the Scottish economy published today by the Scottish Fiscal Commission (SFC).

Recall that the SFC was established to provide independent forecasts of the Scottish economy following the passing of the Smith Commission powers. These are the official forecasts upon which the Scottish budget is based.

Their assessment of the outlook for the Scottish economy – if it turns out to be accurate – suggests a period of exceptionally weak growth for the next 5 years. Growth is projected to be below 1% each year to 2020/21 and only just above 1% by 2022/23.

Such trends in Scottish economic growth have not been witnessed in 60 years.

Like the outlook of the OBR for the UK as a whole, the SFC forecast that real household disposable income in Scotland will not see any growth before 2020-21. Continue reading “The Scottish Fiscal Commission’s Forecasts: An unprecedented weak outlook?”

Will increasing income tax rates harm Scottish economic growth?

It seems a near certainty that the Scottish Government will seek to increase income tax revenues in tomorrow’s budget – through a combination of changes to rates and thresholds. If this happens, it will kick-off a hotly contested debate about the impact on the Scottish economy.

The Scottish Chambers of Commerce have got their response in early, arguing that “at a time of sluggish growth and faltering business investment, a competitive Scotland cannot afford to be associated with higher taxes than elsewhere in the UK”. The Federation of Small Businesses has also warned about the impact of tax increases on the economy. Continue reading “Will increasing income tax rates harm Scottish economic growth?”