Data delays ‘could hamper’ assignation of VAT revenues to Scotland

5 Sep 19

The assignation of almost £6bn in VAT revenues to the Scottish Government could be undermined by the “disappointing” failure of HMRC to produce timely data, Scotland’s official forecaster has warned.

Plans to assign a share of VAT, the next major step towards fiscal devolution, were put on hold earlier this year after it emerged that officials in London and Edinburgh had failed to produce a reliable model under which the assignation could take place. 

At the time, HMRC delayed publication of VAT estimates for 2017 until August, saying it required time for further quality assurance of the VAT assignation model.

However, when pressed for the estimates last month by the Scottish Fiscal Commission – which relies on data from Scottish and UK bodies for its economic and fiscal forecasts - HMRC said that work was still underway, with officials continuing to work through “quality assurance issues” with underlying data sources. 

The commission, which last September called for timely publication of VAT data to coordinate with the timing of Scottish fiscal events, expressed frustration over the delay in its annual statement of data needs.

“It is disappointing that a year on the publication of VAT assignment data is still irregular and uncertain,” it said.

“If VAT assignment implementation does go ahead for 2020-21, we think…Scottish and UK budget forecasts must be based on consistent estimates of the latest available VAT assignment estimates.”

This would be “challenging” if publication of 2017 VAT assignment estimates were delayed until later in the autumn, it said. 

“We also feel that the latest data are important for transparency and for there to be an informed public debate about VAT assignment,” the commission said, adding that a decision on whether to implement VAT assignation should be made this month, in time for the next Scottish budget.

The body also said a statutory right of access to data held by UK government bodies, in particular HMRC on income tax and the Department for Work and Pensions on social security, would “greatly support” its work. 

Currently, it only has a statutory right to information from Scottish bodies, with access to UK data reliant on the provisions of the fiscal framework between the Scottish and UK governments.

Commission chair Dame Susan Rice said that forecasts of taxes and benefits devolved to Scotland had a real impact on the Scottish budget, and these had become more accurate as improved data sources became available.

“More accurate forecasts reduce uncertainty in the budget and help the Scottish Government to plan its finances,” she said.

“Because having good data is so vital to producing good forecasts, the Scottish Fiscal Commission works closely with every organisation that prepares Scottish economic, tax and benefit statistics.”

HMRC has been approached for comment.

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