Outturn Scottish income tax revenues 2016/17

Buried away in a technical annex to its 2017/18 Annual Accounts, HMRC last week published Non-Savings, Non-Dividend (NSND) income tax outturn data for Scotland in 2016/17.

This is the first published outturn data for Scottish NSND income tax since the Scotland Act 2016 transferred responsibility for setting the rates and bands of NSND income tax to the Scottish Parliament. It is also the first outturn data published on the basis of HMRC’s Scottish taxpayer codes.

So what does the data say?

HMRC estimates Scottish NSND outturn revenues at £10.7bn in 2016/17.

How does this compare to the latest forecasts? Continue reading

July 17, 2018

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

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

Should the Scottish Government borrow to fund higher levels of capital investment?

David Eiser, FAI

The Scottish Government’s capital borrowing powers

Under its fiscal framework, the Scottish Government can borrow up to £450 million annually to fund capital investment, as long as it remains within a total borrowing envelope of £3bn.

The catch with borrowing of course is that you have to pay back what you have borrowed, with interest. If it chose to use its borrowing powers, the government would be able to borrow via the UK Government through the National Loans Fund (NLF). (It could also borrow by issuing its own bonds, but it is unlikely to face lower interest rates through this channel than through the NLF).

At the moment, the government could borrow for a 25-year period at an interest rate of about 1.9%. On a £450m loan, this would imply total repayments of around £570m, or around £23m per annum. Alternatively, it could borrow for a 10-year term at an interest rate of around 1.5%. Total repayments would be lower (£490m) but the annual repayment would be higher, at around £49m.Continue reading

May 18, 2018