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Will Brexit delay the draft Scottish Budget?

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The Budget process in Scotland is hostage to the UK Budget in that it cannot be finalised until the UK Budget has been released. The UK Treasury operates within various confidentiality restrictions and purdah and as such, the Scottish government may not know whether, or to what extent, the UK Budget will be relevant in Scotland (e.g. personal allowances for income tax), or if measures might indirectly affect the Scottish public purse via the Barnett formula and associated block grant adjustments.

Scottish draft Budget 2018

Amongst other measures, it is crucial that the Scottish government makes provision for Scottish Income Tax rates and bands by way of a ‘Scottish rate resolution’ and that this is voted in before the start of the new tax year in accordance with the provisions of s 80C of the Scotland Act 1998 (as amended by the Scotland Act 2016). The Scottish Parliament standing orders require this motion for the rate resolution to be moved before the commencement of stage 3 proceedings of the associated Budget Bill. So, enough time needs to be allocated to draft all the Scottish Budget proposals and factor in time for the Scottish Parliament to vote in the measures. Voting is a three-stage process, so cannot be done overnight.

The Scottish government therefore remains poised and committed to deliver its draft Scottish Budget within three weeks of the date of the UK Budget.

UK Budget 2018

In his letter to Nicky Morgan, chairman of the Treasury Select Committee, Robert Chote of the Office of Budget Responsibility (OBR) explained that the OBR would wish to include the conclusions reached in the Brexit agreement in its Economic and Fiscal Outlook (EFO) forecast for 2018, but that a ten-week period is normally allowed between the OBR being given notice of the date for the Budget and its production of the EFO.

Nonetheless, assuming the final exit agreement is not published until the conclusion of the European Council meeting on 18-19 October, Robert Chote stated that he still thinks it will be possible to produce an EFO including Brexit measures by the first week in December, if cross-department resources could be pooled to assist the process. Robert Chote was keen to emphasise that he could not predict how detailed the forecasts pertaining to Brexit would be, and that the methodologies would be provisional in this regard.

Implications for Scottish Budget

An early December UK Budget could mean a January 2019 draft Scottish Budget, due to the Christmas recess. Derek Mackay and the tax directorate at the Scottish government will have their work cut out for them. This is far from an ideal situation for everyone. Hopefully once Brexit is out of the way, the UK and Scottish governments can pave the way together for a more stable Budget timetable.

One thing ICAS is certain of in relation to devolved taxes and revenue raising in Scotland is that there needs to be strong relations between the Scottish government and HM Treasury to make the budget process as smooth as possible for both governments.

The Scottish government has created a new ministerial position and appointed a dedicated minister for public finance and digital economy in June 2018, Kate Forbes MSP, as part of its cabinet re-shuffle. Our tax director Charlotte Barbour met Kate on 10 July together with LSS and CIOT representatives, when the need for close liaison was discussed.

Issue: 1410
Categories: In brief