Scottish Government must take ‘opportunity’ to modernise fiscal framework

13 May 15

CIFPA has today called on the Scottish Government to introduce a modernised fiscal framework that sets out its policy for managing debt and raising taxes.

In a submission to the Scottish Parliament’s finance committee, the institute said the plans for devolution to Holyrood – both through the Scotland Act 2012 and the proposed devolution from the Smith Commission – created an opportunity for fundamental change to how government controls its finances.

Since April, the Scottish Government has levied the first devolved taxes, through a Land and Buildings Transaction Tax and Scottish landfill tax, and has been able to borrow up to £200m in any one year – with a cumulative limit of £500m – to manage fluctuations in revenue. In addition, the Smith Commission, formed after the no vote to independence, has called for income tax and some benefits to be devolved.

Speaking after giving evidence at Holyrood today Don Peebles, the head of CIPFA Scotland, said this rapidly changing political landscape in Scotland provided both the opportunity and the impetus to modernise Scotland’s fiscal framework.

‘If the Scottish Government heeds our advice then any new system will be underpinned by strong prudent principles that would ensure sustainability and affordability backed by a balance sheet that displays the real financial position of the Scottish Government,’ he added.

Scotland’s own fiscal framework should contain four elements, the institute stated. A fiscal policy framework should set out the details for managing debt and raising taxes, and there should be a mandate setting out the targets for the health of the public finances. There should also be a guide to how the framework would operate and rules setting out how independent reviews of the public finances would take place.

In addition, CIPFA also called on the Scottish Government to provide information on Scotland’s overall public finances in the form of a balance sheet for the Scottish public sector.

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