Spending Round 2019: what does it mean for the Scottish budget?

As had been widely expected, UK Chancellor Sajid Javid used today’s Spending Round to announce significant increases in UK Government resource spending – to fund day-to-day public services – in 2020/21.

The announcements amount to an additional £12bn of resource spending next year relative to the plans that his predecessor Phillip Hammond had already pencilled in. This including a substantial uplift to schools spending (£2.6bn), extra resources for social care (£1bn), and for the police (£750m).

Of course these figures relate to spending in England. But the increases in spending in England will generate an uplift to the Scottish block grant, via the Barnett Formula.Continue reading

September 4, 2019

Spending Review 2019: how might it affect the Scottish Budget?

Wednesday’s Spending Review will influence the size of the Scottish budget in 2020/21. But it is just one piece of the jigsaw – with the other pieces not becoming available until later in the year.

In normal times, the publication of a UK Government Spending Review would be a major moment in the political and public finance annual calendar. This week’s Spending Review however will be overshadowed by the ongoing mess that is the UK’s withdrawal from the EU.

But the Spending Review is important, and it will set out departmental spending limits for 2020/21 in key areas of the NHS, education, defence and other public services. However, the government’s previous aspirations to deliver a multi-year spending review have been jettisoned given ongoing uncertainty over Brexit.

The Spending Review will of course also have important implications for next year’s Scottish budget which Derek Mackay will present to parliament later on this autumn – most likely in December. The setting of departmental spending limits for UK departments will determine the size of the Scottish block grant.Continue reading

September 3, 2019

Today’s Income Tax Reconciliations from HMRC: confirmed £200m shortfall in funding to hit next year

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

July 18, 2019

The Fiscal Framework: 2021 Review

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

Continue reading

June 27, 2019