Scotland Act 2012 financial provisions implementation: fifth annual report

Chapter 7 - Scottish Fiscal Commission

Scotland Act 2012

80. The Scottish Fiscal Commission was established on a non-statutory basis in 2014 to provide assurance over the reasonableness of the Scottish Government's forecasts of revenue from the devolved taxes and of the economic determinants underpinning the Scottish Government's forecasts of revenues from non-domestic rates.

81. Over the course of 2016-17, the Commission has continued its scrutiny of the devolved tax forecasts and NDR assumptions by means of a series of challenge meetings with the Scottish Government analysts who prepared them. The Commission published its third report on the Scottish Government's forecasts of revenue from income tax, LBTT and SLfT for the 2017-18 Draft Budget, as well as the forecasts of the economic determinants of Non-Domestic Rates, on 15 December 2016.

82. The Scottish Fiscal Commission Act 2016 established, from 1 April 2017, a robust and fully independent Commission on a statutory basis, with direct accountability to the Scottish Parliament. The initial statutory remit of the Commission was proportionate to the fiscal powers devolved to the Scottish Parliament at the time of the Bill process.

Scotland Act 2016

83. Following the agreement reached with the UK Government on the Scottish Government's new fiscal framework, and passage of the Scotland Act 2016, the Scottish Government launched a consultation ^[20] on designating additional functions to the Commission on the 27 October 2016.

84. The Scottish Fiscal Commission (Modification of Functions) Regulations 2017 were subsequently laid on the 27 January and passed by the Scottish Parliament on 8 March 2017. From 1 April, the Commission will be responsible for preparation of tax revenue forecasts including, for the first time, the preparation of forecasts for Air Departure Tax revenues as well as the existing devolved taxes. The Commission will also produce Scottish onshore GDP forecasts, income tax attributable to a Scottish rate resolution, non-domestic rates and demand-led devolved social security forecasts, as well as assessing the reasonableness of Scottish Ministers' borrowing projections.

85. In addition to the modification of the Commission's functions, amendments were also made to the Scotland Act 1998 by way of the Scottish Fiscal Commission Act 2016 (Consequential Provisions and Modifications) Order 2017. This instrument constituted the Commission as a non-Ministerial department within the Scottish Administration and included further provisions to secure its independence. The Order was passed by the UK Parliament on 21 February 2017.

Membership and appointments

86. To ensure that the Commission is appropriately resourced to discharge its expanded remit, Scottish Ministers have determined that the statutory Commission should have a maximum of four members. Lady Rice, appointed as Chair of the non-statutory Commission on 24 June 2014, will continue in the role with a further two members, David Wilson and Professor Alastair Smith, identified and recruited through a public appointment round.

87. The Scottish Fiscal Commission Act 2016 provides that appointments to the statutory Commission should be made by Scottish Ministers, regulated by the Commissioner for Ethical Standards in Public Life in Scotland, and subject to the approval of the Scottish Parliament. The appointments of David Wilson and Professor Smith were the first statutory Ministerial appointments to undergo this double scrutiny process and were approved by the Scottish Parliament on 21 February 2017.