Even before any Brexit effect is taken into account, the Scottish Government’s budget is likely to be subject to much greater volatility, as a result of the Smith Commission changes and the Fiscal Framework says Holyrood’s new Finance Committee convener, Michael Russell MSP - and he is also concerned that Brexit has the potential to make that situation even more difficult to predict and manage.
Having previously been a largely fixed budget determined by Westminster the budget is now partly dependent on the level of devolved tax receipts which will be influenced by the relative performance of the Scottish economy.
Mr Russell said a step change is therefore needed in the budget scrutiny process if Parliament is to have proper over-sight of the Government’s spending plans and new tax raising powers.
To that end, the Committee Convener has announced the Parliament will lead a ‘tri-partite review’ of Holyrood’s Budget process, involving the Finance Committee, the Scottish Government and external financial experts.
Over summer, Parliament officials have been tasked with bringing forward proposals for a fundamental review of the budget process, that will ensure Parliament and its Finance Committee have access to adequate and timely information on tax forecasting and other key economic data.
More immediately, the committee has today issued calls for evidence to support what will be its first two parliamentary inquiries this session:
- A review of the first year of the Land and Building Transaction Tax (LBTT), and
- A Scottish approach to taxation - an examination of the principles which should underpin a Scottish taxation system.
Mr Russell said:
“One of the main consequences of the new powers is that the Scottish Government’s budget is now potentially subject to much greater uncertainty and volatility than previously when the Block Grant was relatively fixed.
“For the first time under devolution, there will be heavy reliance on tax forecasting in the budget process. These forecasts are due to be prepared by the independent Scottish Fiscal Commission which will have a critical role in supporting the committee’s budget scrutiny.
“It is also essential that the Parliament ensures there is now a balance between effective scrutiny of the new tax powers and the government’s spending decisions. The budget process was designed when the parliament had relatively few tax powers and the Committee is therefore in agreement that there needs to be a Parliament-led review.
“I want to emphasise that the budget process is a parliamentary process in which this committee fulfils a fundamental role. The nature of the budget process relates back to the founding principles underpinning the establishment of this Parliament.
“As a consequence, I consider it to be vital that the Parliament leads a tri-partite review, involving this committee, the Scottish Government and outside external experts. I have instructed our clerks to set that process in train over the summer with a view to considering options at our committee planning session in August.”
Updates on the review will provided post-summer recess.
Information on the two calls for evidence can be found here: