Impact of SG tax changes on household incomes

The Scottish Government says that income tax policy changes since 2016/17 have been ‘highly redistributive’ and have ‘protected low income earners’. But how much of this affect can be attributed to the Scottish Government’s rates and band changes, and how much to the UK Government’s Personal Allowance changes? And how does the story about the distributional impact of recent policy decisions change if we incorporate other taxes (council tax) or social security spending?Continue reading

March 2, 2020

Analysis of Jackson Carlaw’s income tax proposals

Earlier this week, Scottish Conservatives leadership candidate Jackson Carlaw committed to close the income tax gap between Scotland and rUK for those earning between £27,000 and £45,000.

The majority of individuals with income in this range (those with incomes less than £43,430) currently face annual income tax liabilities of up to £150 higher than equivalent counterparts in rUK. But this difference increases rapidly beyond £43,430, reaching £500 at incomes of £45,000 (Chart 1).Continue reading

January 17, 2020

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