What is the case for increasing council tax rates in Scotland?

This blog shows that council tax rates are now markedly lower in Scotland than in England and Wales. Increasing council tax in Scotland to match rates in Wales (or England) would raise substantial revenues, but would have adverse distributional implications. The case for more fundamental reform of property taxation is stronger than the case for increasing rates within the existing system.

Differences in income tax policy between Scotland and rUK have been the subject of heated debate. There has been relatively little attention paid to differences in council tax policy in Scotland compared to England and Wales. But in some ways, the differences in council tax policy are more pronounced than they are for income tax.Continue reading

May 22, 2019

Where next on inclusive growth? 6 steps to build upon…

It’s hard to talk about economic policy in Scotland without the phrase ‘inclusive growth’ popping up.

It is, not just at the core of Scottish Government activity, but the central narrative for local authorities, agencies and public bodies across Scotland.

At an event last week, some people asked for our take, so in this slightly longer than usual blog, we set out some thoughts on the inclusive growth agenda, the evidence, and where the debate might go next.

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May 21, 2019

VAT assignment: paused for now, but will it be pulled for good?

The Scottish Government announced last week that the assignment of Scottish VAT revenues to the Scottish budget is likely to be delayed – possibly until after the fiscal framework review in 2022. Giving evidence to the Finance and Constitution Committee last week, Derek MacKay said: ‘I am becoming increasingly minded to postpone VAT assignment until VAT powers can be further discussed at the time of the fiscal framework review’.Continue reading

May 14, 2019

Is the Scottish budget for 2019/20 disadvantaged by UK Government policy decisions on income tax?

Is the Scottish budget for 2019/20 disadvantaged by UK Government policy decisions on income tax? The Scottish Government argues that it is. The government’s case is reasonable – but potentially undermined by its own stated policy commitments.

The Smith Commission identified two ‘no detriment’ principles which it said should apply to Scotland’s new fiscal framework.

The first was that there should be ‘no detriment’ simply as the result of the initial transfer of a particular power.

The second – and the one relevant to this blog – was that neither government should face detriment as a result of a policy decision taken by the other. Specifically, ‘where either government makes a policy decision which effects the revenues or expenditure of the other, the decision-making government should reimburse the other where there is an additional cost, or receive a transfer if there is a saving’.Continue reading

May 13, 2019

Addendum – a quick note about GDP including oil

A few people have got in touch since we published yesterday’s blog to ask why oil and gas isn’t included in the headline real-terms GDP growth series that the Scottish Government publish in their National Accounts, and what the series might look like if it was included. The Scottish Government don’t publish this series, although they do publish it in nominal terms (and is the source of the per capita figure we discussed yesterday).

It is entirely possible to include it and perhaps a fully comprehensive suite of National Accounts might wish to do that. We have a few back-of-the-envelope calculations to look at this, using the published UK series for offshore extraction and weighting that in to the Scottish series.

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May 3, 2019