Last week, we had the first set of income tax reconciliations for Scotland’s new fiscal framework.
For the coming year, that reconciliation figure will be around £200m.
In the aftermath of the publication of these figures, there were reports that Scotland was also in receipt of a £700m ‘bail-out’ from Westminster.
Today, HMRC published the first ever figures on the scale of ‘income tax reconciliations’ for Scotland.
These ‘reconciliations’ – whilst being a largely dry technical issue – are a key part of Scotland’s new fiscal framework.
These income tax reconciliations are reflections of the fact that Scottish budgets are initially set on the basis of forecasts. Once outturn data is known there is then an adjustment – or reconciliation – according to whether or not these forecasts turned out to be higher or lower than forecast.
Note: before reading this blog you might find it helpful to refresh your understanding of the budget process and the reconciliation issue here.Continue reading
In an article in yesterday’s Commentary, David Eiser and Graeme Roy preview the 2021 review of the Fiscal Framework. This blog provides a quick overview of that article.
The review
In recent years, the Scottish Parliament has been taking on new fiscal responsibilities – with more to follow. In 2021, the process for how these powers are operationalised – the Fiscal Framework – will be reviewed.
But what will the review cover? Will it be a ‘broad review’? Or a more narrowly focussed technical review? Will it open up debates about further devolution? And will politicians – perhaps elsewhere in the UK – seek to open up a debate about devolved funding?
The stakes are likely to be high, not least given Brexit and the prospects for a second independence referendum
It has been widely publicised that the Scottish budget may face income tax ‘reconciliations’ totalling £1bn over the next few years. But what are these reconciliations and why do they come about? Do they tell us anything about Scotland’s economic performance, or do they just reflect forecast error?Continue reading
Last week, the Scottish Government published its 2nd Medium Term Financial Strategy (MTFS).
The purpose of the MTFS, as set out by the Parliament’s Budget Process Review Group, was to ‘provide a means of focussing on the longer term sustainability of Scotland’s public finances’.
This is clearly a positive and the government should be commended for publishing the MTFS.
However, those that had been hoping that this year’s MTFS would build upon last year’s publication and provide a robust overview of the government’s fiscal strategy will be disappointed.
To fair, there are a lot of new helpful elements of information like the policies and principles on borrowing and reserves and the new detail on infrastructure investment funding.
But to be fully effective, whatever administration is in office, future MTFSs will need much more detail on future plans as well as appropriate assessments of risks & opportunities.
