Revisions to the Scottish income tax forecasts: what has driven them, and do they matter?

In its latest forecasts, published last week, the SFC revised down its forecast for Scottish income tax revenues by £209m compared to its previous forecast in December.

In questioning the SFC on Wednesday this week, MSPs on the Finance and Constitution Committee seemed unanimously incredulous about this. That a forecast could be revised, in a relatively short period of time, by what is (in political terms) a significant sum, seemed difficult to fathom – particularly when the broader forecasts of economic output and employment had remained unchanged.

So why was the forecast revised down by £209m? Is the justification for the revisions reasonable? How significant are the revisions? And to what extent are we likely to see revisions of similar scale at future budget events?Continue reading

June 7, 2018

Construction and the Scottish economy: might the Scottish economy be stronger than it seems?

At the end of the month, we will get new data on Scottish GDP. Recent statistics have been disappointing with the economy growing by just 0.8% in 2017.

One of the main drivers of the weak performance in 2017 was the sharp fall in construction output.

Digging into the data reveals that this is because infrastructure spending in Scotland fell by around 25% between 2015 and 2017. In this blog, we discuss the possible reasons behind this and the impact on Scotland’s headline growth estimates.Continue reading

Optimism returning to the North Sea

The price of a barrel of oil has been rising steadily in recent months.

Whilst prices have slipped back a little – in the light of OPEC’s apparent plan to relax their recent self-imposed constraints on supply – oil prices continue to hover close to their highest level in three years.

The recent increase has helped to provide a boost for contractors and operators in the North Sea.

You may have missed it over the last few days following the publication of a couple of other economic reports, but late last month we published the latest set of results in our joint survey with Aberdeen and Grampian Chamber of Commerce – sponsored by KPMG – which showed further signs of returning optimism in the sector.

In this blog, we discuss some of the key results and their potential implications for the wider Scottish economy and the growth outlook for 2018.Continue reading

June 6, 2018

Implications of today’s forecast revisions for the 2018/19 budget

The Scottish Budget 2018/19, introduced in draft form in December last year and finalised in February, was informed by revenue forecasts made by the Scottish Fiscal Commission. Three of these revenue forecasts were particularly relevant: those for Scottish income tax; Land and Buildings Transactions Tax (LBTT); and Scottish Landfill Tax.

Forecasts are inevitably subject to change as new information comes to light. There was always a likelihood therefore that the Scottish Government might end up having somewhat more, or somewhat less, resources available to it in 2018/19 than it thought when the budget was set.

Today the SFC has published updated forecasts for the 2018/19 financial year and beyond. How do these change the outlook for the Scottish Government’s resource budget in 2018/19?Continue reading

May 31, 2018

The economic impact of changes in alcohol consumption in the UK

2018 is set to be a significant year for the UK alcohol industry as, after a prolonged legal battle, the Scottish Government has imposed a minimum unit price for alcohol of 50p per unit. Beyond Scotland, the policy has sparked debate on UK-wide policy with calls to develop a new UK alcohol strategy focused on reducing harmful consumption.

The purpose of this blog is to summarise the results from a recent research project on the potential macroeconomic impact of changes in UK alcohol consumption. Previous studies have tended to focus on the impact of a reduction in consumption on alcohol in isolation. However, it is likely that a shift in tastes away from alcohol – either through policy or change in consumption patterns – would result in an increase in spending on other goods and services. The full report presents a wide range of the modelled scenarios to look at this ‘net’ effect. Here we summarise just a few of them.

Continue reading