Wide-ranging review of Holyrood budget process to consider devolution impact

9 Sep 16

A root-and-branch review of the Scottish Parliament’s budgetary process is to be undertaken in order to reflect Holyrood’s increasing fiscal powers and its changing relationship with Westminster.

A root-and-branch review of the Scottish Parliament’s budgetary process is to be undertaken in order to reflect the Holyrood’s increasing fiscal powers and its changing relationship with Westminster.

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The review, scheduled to report by next summer, will be conducted on a tripartite basis, involving the Scottish Government, the Parliament and a panel of independent experts, among them CIPFA Scotland head Don Peebles, and the auditor general and former CIPFA president, Caroline Gardner.

Others on the panel include former Edinburgh Council chief executive Dame Sue Bruce; Scottish Fiscal Commission chief executive Sean Neill; Revenue Scotland chief executive Elaine Lorimer and several prominent academics.

Charged with making recommendations to ensure effective oversight and scrutiny of Scotland’s fiscal powers, the review will examine a wide range of issues to reflect powers being devolved to Holyrood under the 2012 and 2016 Scotland Acts. These will give the Scottish Government full control of income tax from 2017, as well as devolved revenue from VAT and administration of some benefits.

The review will consider: the forecasting of tax receipts and social security demand; the indexation mechanism; adjustments to the Scottish block grant from Westminster; reconciling fiscal forecasts with outturns; the implications for Scotland of Westminster Autumn Statements; the availability of relevant outturn data; and the revenue effects of behavioural consequences from tax changes.

Cabinet Finance Secretary Derek Mackay welcomed the review: “Scotland’s budget process needs to evolve to take account of the complexities and opportunities associated with the Scottish Parliament’s new powers,” he stated.

“It is important to ensure that we develop a process that balances the time required for proportionate and effective parliamentary scrutiny with the need to ensure that the information being scrutinised is as accurate as possible and based on the most up-to-date forecast information.”

Bruce Crawford, convener of the Scottish Parliament’s finance committee, said that the existing budget process dated back almost 20 years, to a time when Scotland’s public finances were largely determined through a block grant from Westminster and the Barnett Formula.

“With Scotland’s new tax powers, the Scottish Government is about to become responsible for raising much more of what it spends, and will rely on tax forecasting in order to set out its draft budget before Parliament each year,” Crawford said. 

“Understandably, the government will want to rely on the most accurate forecasts of tax revenue possible in order to ensure confidence and credibility in its budget.  Equally, however, the finance committee will want to ensure that any new budget process still includes sufficient time for proper parliamentary scrutiny.”

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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