Is the Scottish budget for 2019/20 disadvantaged by UK Government policy decisions on income tax?
Is the Scottish budget for 2019/20 disadvantaged by UK Government policy decisions on income tax? The Scottish Government argues that it is. The government’s case is reasonable – but potentially undermined by its own stated policy commitments.
The Smith Commission identified two ‘no detriment’ principles which it said should apply to Scotland’s new fiscal framework.
The first was that there should be ‘no detriment’ simply as the result of the initial transfer of a particular power.
The second – and the one relevant to this blog – was that neither government should face detriment as a result of a policy decision taken by the other. Specifically, ‘where either government makes a policy decision which effects the revenues or expenditure of the other, the decision-making government should reimburse the other where there is an additional cost, or receive a transfer if there is a saving’.
The Fiscal Framework subsequently agreed that where a policy decision has a direct and mechanical effect on the revenues or spending of the other government they will be ‘accounted for’ (i.e. compensated in some way).
Budget detriment in 2019/20
The Scottish Government has recently raised the issue of a potential policy spillover with the UK Government. The spillover arises from the increase to the Personal Allowance (PA).
The PA – set by the UK Government and applicable across the UK – was increased from £11,850 in 2018/19 to £12,500 in 2019/20. This is substantially larger…