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
Category: Scottish Budget
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.
Today the Scottish Fiscal Commission (SFCs) released their latest set of economic and fiscal forecasts.
You can read the full document here.
In this blog we give a quick tour of the latest forecasts and some of the additional insights.
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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. On balance, the case for more fundamental reform of property taxation would appear much 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
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