Pre-budget scrutiny 2021-22

PDF Published: Monday 07 Dec 2020 (FCC/S5/20/13)

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Overview
Report

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Overview
Report
- Introduction
- The Scale of the Economic Impact of COVID-19 and the UK Government’s Fiscal Response
  - Economic Outlook
  - Fiscal Outlook
- Impact of Covid-19 on the Scottish Budget
- Budget 2020-21 In-Year Revisions
  - Budget Revisions
  - Unallocated Consequentials
  - Redeployment
- Transparency and Scrutiny
- Operation of the Fiscal Framework During a Crisis
  - Differential Impact
  - Forecast Error
- Additional Fiscal Flexibilities
  - Capital to Resource Switches
  - Resource Borrowing and Reserve Powers
- Fiscal Flexibilities and Powers for Local Authorities
  - Business Rates Relief
  - Loss of Income
  - Additional Fiscal Flexibilities
  - Local Government Reserves
- A Human Rights Approach to Taxation
- Scottish Income Tax 2018/19 – Reconciliation Process
  - Income Tax Policy
  - Earnings Growth
- Conclusion
- Introduction
- The Scale of the Economic Impact of COVID-19 and the UK Government’s Fiscal Response
- Impact of Covid-19 on the Scottish Budget
- Budget 2020-21 In-Year Revisions
- Transparency and Scrutiny
- Operation of the Fiscal Framework During a Crisis
- Additional Fiscal Flexibilities
- Fiscal Flexibilities and Powers for Local Authorities
- A Human Rights Approach to Taxation
- Scottish Income Tax 2018/19 – Reconciliation Process
- Conclusion
Sources

Chart 1 shows the increasing costs of the coronavirus policy response from the Chancellor's announcement on 11 March 2020 with figures until 25 November based on forecast estimates from the OBR.

Image: Chart 1: The evolving cost of the coronavirus policy response in 2020-21 …

Table 1 shows UK GDP growth by percentage change in GDP and GDP per capita for each year from 2019 to 2025 with a figures of -11.3% and -11.8% respectively for 2020, rising to 6.6% and 6.2% respectively for 2022 before falling to 1.8% and 1.5% respectively in 2025.

Image: Table 1: UK GDP Growth …

Table 2 shows the Scottish Budget for the 3 years 2019/20, 2020/21 and 2021/22 breaking down into Resource and Capital DEL and Covid19 Cpital and Resource DEL.

Image: Table 2: The Scottish Budget …

Figure 1 describes what influences the size of the Scottish Budget. Rest of the UK tax policy, growth in Rest of the UK taxes and OBR forecasts influences the block grant adjustment while Scottish tax policy, growth in Scottish taxes and Scottish Fiscal Commission forecasts influence the Tax revenues from each devolved tax.

Image: Figure 1 …

Figure 2 shows a breakdown of the £8.2 billion additional funding from Barnett consequentials with £3.6 billion allocated at the Summer budget revision, £2.4 billion allocated at the Autumn budget revision and £2.2 billion allocation yet to be confirmed

Image: Figure 2: HM Treasury Funding Guarantee for 2020-21 …

Chart 2 shows the range of areas with planned spending with the largest two being £972 million for non-domestic rates relief and £1,202 million for business support grants.

Image: Chart 2: Summer Budget Revision Allocations …

Chart 3 shows how individual Scottish Government portfolio budgets have increased since February 2020 with the total increase of £5.2 billion. Health and Sport has received the largest amount followed by Communities and Local Government receiving the second largest amount, each increasing by over £2 billion.

Image: Chart 3: Impact of Budget Revisions on Individual Portfolios …

Figure 3 shows the changes in Gross Domestic product bi monthly from April 2019 to August 2020 for Scotland compared to the UK.

Image: Figure 3: Gross Domestic Product (GDP) …

Figure 4 shows the purchasing managers index by month from January 2020 to October 2020 for Scotland compared to the UK.

Image: Figure 4: Purchasing Managers Index …

Figure 5 shows employees in the payroll bimonthly from April 2019 to August 2020 in Scotland compared to the UK.

Image: Figure 5: Employees on Payroll …

Figure 6 shows the employment rate on a bimonthly basis from April 2019 until August 2020 in Scotland compared with England.

Image: Figure 6: Employment rate …

Figure 7 shows the number of employees on furlough at any time and at the end of August in Scotland compared with England and Northern Ireland.

Image: Figure 7: Employees on furlough …

Figure 8 shows the aggregate pay bill on a bimonthly basis from April 2019 until August 2020 for Scotland compared with the UK.

Image: Figure 8: Aggregate pay bill …

Figure 9 shows residential property transactions by month from April 2019 to September 2020 in Scotland compared with the rest of the UK.

Image: Figure 9: Residential property transactions …

Figure 10 is described in the report text.

Image: Figure 10: Income Tax Reconciliation 2018-19 …

Table 3 shows the NSND Income tax revenues and block grant adjustment for the years 2017-18 and 2018-19 and is described in the report text.

Image: Table 3: Outturn Scottish Income Tax revenues and Block Grant Adjustments …

Chart 4 shows that Scottish income tax receipts grew by more (at 5.9%) than the UK (at 4.4%) in 2018-19.

Image: Chart 4: Relative Income Tax Growth …

Table 4 is described in the report text.

Image: Table 4: Growth rates of economic determinants between 2016-17 and 2018-19 …

OBR. (2020, November). Economic and Fiscal Outlook November 2020. Retrieved from http://cdn.obr.uk/CCS1020397650-001_OBR-November2020-EFO-v2-Web-accessible.pdf

Scottish Parliament. (2020, October 7). Finance and Constitution Committee Official Report. Retrieved from http://parliament.scot/parliamentarybusiness/report.aspx?r=12884&mode=pdf

Audit Scotland. (, August 2020). Covid-19: Implications for public spending in Scotland. Retrieved from https://www.audit-scotland.gov.uk/uploads/docs/report/2020/briefing_200820_covid.pdf

Fraser of Allander Institute. (2020, November 24). The evolution of the Scottish Budget 2020/21 – and a look forward to the Spending Review. Retrieved from https://fraserofallander.org/scottish-economy/fiscal-policy-tax/the-evolution-of-the-scottish-budget-2020-21-and-a-look-forward-to-the-spending-review/

Audit Scotland. (2020, August). Covid-19: Implications for Public Finances in Scotland. Retrieved from https://www.audit-scotland.gov.uk/uploads/docs/report/2020/briefing_200820_covid.pdf

SPICe. (2020, November 12). COVID-19 Barnett consequentials guarantee up again: more certainty, less clarity. Retrieved from https://spice-spotlight.scot/2020/11/12/covid-19-barnett-consequentials-guarantee-up-again-more-certainty-less-clarity/

Scottish Parliament. (2020, November 18). Finance and Constitution Committee Official Report. Retrieved from http://www.parliament.scot/parliamentarybusiness/report.aspx?r=12950&mode=pdf

Audit Scotland. (2020, August). Covid-19: Implications for Public Spending in Scotland. Retrieved from https://www.audit-scotland.gov.uk/uploads/docs/report/2020/briefing_200820_covid.pdf

See for example. (n.d.) Retrieved from https://www.energyvoice.com/oilandgas/north-sea/251447/north-sea-job-cuts-rise-to-7500-oguk/

No title (n.d.) Retrieved from https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/publicsectorpersonnel

Scottish Parliament. (2020, October 28). Finance and Constitution Committee Official Report. Retrieved from https://www.parliament.scot/parliamentarybusiness/report.aspx?r=12907&mode=pdf

Scottish Parliament. (2020, June 12). Finance and Constitution Committee Official Report. Retrieved from https://www.parliament.scot/parliamentarybusiness/report.aspx?r=12695&mode=pdf

No title (n.d.) Retrieved from https://www.parliament.scot/S5_Finance/General%20Documents/2020.07.14_Letter_to_Finance_Committee.pdf

No title (n.d.) Retrieved from https://www.parliament.scot/S5_Finance/General%20Documents/CST_to_SPFCC_-_Sep_2020.pdf

No title (n.d.) Retrieved from https://www.parliament.scot/S5_Finance/General%20Documents/Report(2).pdf

Letter to the UK Government on Review of the Fiscal Framework. (2020, October 28). Retrieved from https://www.parliament.scot/S5_Finance/General%20Documents/Report(2).pdf [accessed 30 November 2020]

Scottish Parliament. (2020, November 4). Finance and Constitution Committee Official Report. Retrieved from http://www.parliament.scot/parliamentarybusiness/report.aspx?r=12923&mode=pdf

The Guardian. (2020, November 1). No title Retrieved from https://www.theguardian.com/world/2020/nov/01/not-fair-welsh-and-scottish-leaders-hit-out-at-furlough-extension-for-england-covid-lockdown.

No title (n.d.) Retrieved from https://www.fiscalcommission.scot/forecast/non-domestic-rates-supplementary-costings/

No title (n.d.) Retrieved from https://www.parliament.scot/S5_Finance/Inquiries/COSLA.pdf

No title (n.d.) Retrieved from http://www.parliament.scot/parliamentarybusiness/report.aspx?r=12923&mode=pdf

No title (n.d.) Retrieved from https://www.gov.uk/guidance/local-government-income-compensation-scheme-for-lost-sales-fees-and-charges

No title (n.d.) Retrieved from https://www.parliament.scot/S5_Local_Gov/COVID-19_-_finanical_flexibilities_Cabinet_Secretary_for_Finance_to_COSLA_-_081020.pdf

No title (n.d.) Retrieved from https://www.parliament.scot/S5_European/Inquiries/12_Scottish_Human_Rights_Commission.pdf

No title (n.d.) Retrieved from http://www.parliament.scot/parliamentarybusiness/report.aspx?r=12950&mode=pdf

No title (n.d.) Retrieved from http://www.parliament.scot/parliamentarybusiness/report.aspx?r=12907&mode=pdf

No title (n.d.) Retrieved from https://www.fiscalcommission.scot/wp-content/uploads/2020/10/Forecast-Evaluation-Report-September-2020-Income-Tax.pdf

No title (n.d.) Retrieved from https://www.parliament.scot/S5_Finance/General%20Documents/20201007_Advisor_briefing_SFC_Forecast_Eval_Part_2.pdf