The UK government has proposed a devolved funding model for Scotland which ‘essentially extends the Barnett formula so that it applies to devolved taxes as well as devolved spending’. This would involve deducting tax consequentials when there are changes in comparable UK government tax, in the same way that, under current arrangements, Barnett consequentials are added to the block grant when there are changes in comparable UK government spending.
Scotland currently generates less than a population share of income tax. The proposal therefore provides for the tax comparability element in the funding formula to use an 89% share of devolved income tax for Scotland.
The proposal would also update Scotland’s population share over time. A fast-growing Scottish population would receive more tax revenue, but need to provide public services to more people, while slow population growth would mean less tax revenue, but provision of public services to fewer people. The Scottish government would therefore retain all devolved Scottish taxes and a share of the growth in corresponding taxes in the rest of the UK.
This proposal was set out in a letter from the chief secretary to the Treasury (see www.bit.ly/1Qhnjfi) containing the government’s interim response to the Scottish Affairs Committee report on the Scottish fiscal framework, published on 11 February. See www.bit.ly/1Vl1Czz.
Scottish deputy first minister John Swinney is to have further talks this week with the Chief Secretary to discuss the Scottish government’s revised offer. ‘No-one should be in any doubt that there remain very significant issues that are yet to be resolved’ Mr Swinney said. ‘Our proposal is with the Treasury and I hope and believe we can now agree this issue, and the remaining outstanding issues, this week.’
The UK government has proposed a devolved funding model for Scotland which ‘essentially extends the Barnett formula so that it applies to devolved taxes as well as devolved spending’. This would involve deducting tax consequentials when there are changes in comparable UK government tax, in the same way that, under current arrangements, Barnett consequentials are added to the block grant when there are changes in comparable UK government spending.
Scotland currently generates less than a population share of income tax. The proposal therefore provides for the tax comparability element in the funding formula to use an 89% share of devolved income tax for Scotland.
The proposal would also update Scotland’s population share over time. A fast-growing Scottish population would receive more tax revenue, but need to provide public services to more people, while slow population growth would mean less tax revenue, but provision of public services to fewer people. The Scottish government would therefore retain all devolved Scottish taxes and a share of the growth in corresponding taxes in the rest of the UK.
This proposal was set out in a letter from the chief secretary to the Treasury (see www.bit.ly/1Qhnjfi) containing the government’s interim response to the Scottish Affairs Committee report on the Scottish fiscal framework, published on 11 February. See www.bit.ly/1Vl1Czz.
Scottish deputy first minister John Swinney is to have further talks this week with the Chief Secretary to discuss the Scottish government’s revised offer. ‘No-one should be in any doubt that there remain very significant issues that are yet to be resolved’ Mr Swinney said. ‘Our proposal is with the Treasury and I hope and believe we can now agree this issue, and the remaining outstanding issues, this week.’
