Shirley Mcintosh

Written by: Shirley McIntosh

Shirley McIntosh

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Scottish Government to set out draft Budget plan before the UK Budget

Finance Secretary Derek Mackay announced on 13 January that the Scottish Government will set out its draft Budget plans on 6 February, more than a month ahead of the UK Budget. 

This is going to be a difficult Budget to call. We will be coming out of Europe, we have a UK Government with a clear majority and many people will be expecting a Westminster Budget that reflects their vote of confidence in Boris Johnson’s leadership. 

Normally the Scottish Budget would be delivered several weeks after the UK Budget, but with the latter’s delay until 11 March, there is insufficient time before the start of the new tax year on 6 April for the minority Scottish Government to prepare and deliver their Budget, never mind getting it approved by the Holyrood Parliament.

Bringing the Budget forward raises two significant issues for the Scottish Government.

The Scottish Government is partly funded by the UK government block grant, and partly through raising revenue from devolved taxes and borrowing, as set out in the Scotland Act 2016. The size of the block grant Scotland receives is determined by the Barnett Formula, and is directly proportionate to Westminster spending. 

However, this poses the first issue. If Scotland doesn’t know what Westminster spending will be, it doesn’t know what the block grant will be, and in turn the funds then available to the Scotland government. The Treasury has said it will work with Scottish ministers to provide the information it needs but with a month until the Westminster Budget, there would still be the possibility of changes.

The other significant issue is tax. There is already divergence between income tax rates in Scotland and those in the rest of the UK. The general election campaign suggested that there could be some major tax changes in this Budget and the Scottish government therefore needs to assess the effect of those and the potential for further divergence when reviewing the use of its own tax-raising powers.

A lot will depend on the conversations that take place between Holyrood and Westminster between now and 6 February.

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