Transparency essential on block grant changes, says Finance Committee

11.10.2013

More clarity and detail is required from both the UK and Scottish Government on the implementation of financial powers within the Scotland Act 2012, according to a report published today by Holyrood’s Finance Committee.

The report calls for greater transparency on a number of issues including the timing and data to be used by the Office of Budget Responsibility (OBR) in forecasting Scottish tax receipts.  The Committee also emphasises that it is essential that the methodology and data used by the OBR and UK Government to adjust the block grant is open to scrutiny.  The reasons for any difference between the forecasts and the actual tax receipts should also be made clear. 

The Committee also welcomed the Scottish Government’s proposal to establish an independent panel or forecasting unit to ensure Scotland’s forecasts are soundly based.  

Finance Committee Convener Kenneth Gibson MSP said:

“We recognise that considerable effort has been put in by both the Scottish and UK Governments in implementing the financial provisions of the Scotland Act 2012.

“However, we believe it is essential that there is effective parliamentary scrutiny of the implementation process and, in particular, the way in which the UK Government will adjust Scotland’s block grant to take account of the new financial powers.

“We will continue to closely monitor the accuracy of the OBR forecasts and will take evidence from the Chair of the OBR on an annual basis.”  
 
“We welcome the commitment of the Scottish Government to consult with the Scottish Parliament on adjustments to the block grant and want to emphasise the need for sufficient time to be made available to allow the Finance Committee to carry out effective scrutiny of the proposals.

“The Scottish Government’s proposal to establish a form of Scottish ‘OBR’ is welcome and we will consider the proposal when we start taking oral evidence in November.” 

The Committee’s other findings included:

• That the Scottish Government provides more detail on the timing and criteria for reviewing the adjustment of the block grant, once agreed with the UK Government, and to confirm the Scottish Parliament will be consulted in carrying out any review.
• That, as it stands, the Scottish Government may have to borrow money as a consequence of OBR forecasting errors rather than as a consequence of poor economic performance. It asks the Scottish Government whether there has been any discussion with the UK Government regarding the terms and conditions of any loan required as a consequence of any forecasting errors.

Background

The Finance Committee has carried out a number of strands of work relating to the implementation of the financial powers within the Act. The Committee has just published its Stage 1 report on Landfill Tax (Scotland) Bill and was lead committee in scrutinising the Land and Buildings Transaction Tax (LBTT) Bill. The Committee also expects to be the lead committee on the Revenue Scotland and Tax powers Bill which is due to be introduced in the Autumn.