Fiscal framework outturn report: 2024

1. Introduction

1. This is the seventh Fiscal Framework Outturn Report published by the Scottish Government. It forms part of a revised Budget process, as recommended by the final report of the Budget Process Review Group^[1].

2. In keeping with the recommendations of the Group, it contains the following information:

• Outturn data for Scottish devolved tax revenues and social security benefits expenditure (including comparison of outturn with forecast)
• Calculation of outturn Block Grant Adjustments (BGAs) and comparison with forecast.
• Net effect on Budget (revenue/expenditure minus BGA) for each tax and social security benefit relative to forecast.
• Implications of reconciliations for the subsequent financial year
• Commentary on latest available outturn data for income tax, devolved taxes and social security.
• Payments into the Reserve and withdrawals from the Reserve
• The balance of the Scottish Reserve at the start and end of the previous financial year (with explanations for reasons for withdrawal or source of surplus).
• Borrowing undertaken during the past financial year, and assessment of how far Government remains below its various different borrowing limits.
• Implications of borrowing in terms of estimated profile of future repayments.

Terminology used in this document

3. The Scottish Government must rely on forecasts when setting each Budget, and the UK Government also relies on forecasts when determining BGAs. When information about actual revenues and expenditure becomes available – known as ‘outturn data’ – subsequent Budgets are adjusted to account for the difference between forecast and outturn data. This process is known as a ‘reconciliation’ and can involve additions or reductions to Scotland’s Block Grant.

4. Outturn figures are at times first published on a provisional basis before a final figure is published. Final outturn is then used to calculate final reconciliations, which are applied to Scotland’s block grant. A full explanation of the reconciliation process, BGAs and the calculation of Scotland’s Block Grant can be found in the Technical Note on the Fiscal Framework.^[2]

Outturn data used in this document

5. The forecasts of the BGAs are based on the Office for Budget Responsibility (OBR) forecasts of UK tax revenues and social security benefits expenditure made at the Spring Budget on 06 March 2024. BGAs are based on the forecasts for devolved taxes and social security benefits where the UK Government retains responsibility for them, which is England and Northern Ireland for tax and England and Wales for social security.

6. In previous years the Scottish Fiscal Commission (SFC) have published tax revenue and social security expenditure forecasts alongside the Scottish Government’s Medium-Term Financial Strategy publication (MTFS), which have also been used to inform the Outturn Report. Due to the postponement of the 2024 MTFS, the latest SFC forecasts were published alongside the 2024-25 Scottish Budget on 19 December 2023.

7. This year’s Outturn Report therefore compares tax revenue and social security forecasts for Scotland from December 2023 with BGAs based on forecasts for rUK from March 2024. Therefore, comparisons of the latest available forecasts and BGAs should be interpreted with a degree of caution.

8. Updated forecasts from the SFC will be published alongside the 2025-26 Scottish Budget. The OBR will publish its next set of forecasts alongside the UK Government’s Autumn Budget on 30 October 2024, which will allow for the calculation of updated forecasts of BGAs.

9. As a result of changes to previous publication schedules, some of the outturn data used in this report is provisional. Whether the data is final or is provisional is detailed as follows:

• HMRC 2022-23 outturn data for both Scottish Income Tax revenues and the equivalent revenues for the rest of the UK are considered final.
• The 2023-24 outturn revenue data for Stamp Duty Land Tax (SDLT) and UK Landfill Tax, which feed into the BGA calculations for Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax (SLfT) are considered final.
• The final, audited 2023-24 LBTT and SLfT revenue data will be published as part of Revenue Scotland’s Annual Reports and Accounts towards the end of the calendar year 2024 and the revenue outturn data used within this report is therefore provisional.
• Provisional outturn data is also used for 2023-24 Social Security benefits expenditure and final outturn will be published as part of the Social Security Scotland Annual Report and Accounts, which will be published by November 2024.
• Provisional UK Government Social Security benefits expenditure outturn data has also been used to calculate the BGAs with final outturn being made available when the Local Authority, Parliamentary, and Country and Regional Tables 2023/24 are published later this year.
• Provisional outturn data is used for Fines, Forfeitures and Fixed Penalties revenue outturn for 2023-24. Final outturn will be published as part of the Scottish Government’s Scottish Consolidated Fund Accounts.

Population data used in this document

10. Due to differences in timing of the Census in Scotland compared to the rest of the UK, the population estimates applying to Block Grant Adjustments were not available for both Scotland and the rUK on a consistent basis between Autumn Statement 2022 and July 2024, when the National Records for Scotland (NRS) published its rebased population estimates for mid-2011 to mid-2021. In order to ensure that any relative population growth estimates needed for the BGA calculations were consistent, the Scottish Government and HM Treasury agreed an interim solution to calculate Block Grant Adjustments using population figures based on the Office for National Statistics (ONS) Mid-Year Estimates 2020.

11. As such, Block Grant Adjustments from Autumn Statement 2022 to Spring Budget 2024 were provisional and were to be revised once the Scottish Census 2022 results were available for the NRS to incorporate into their mid-year estimates, allowing a consistent census methodology between NRS estimates for Scotland and ONS estimates for rUK. An additional reconciliation would then be required to account for this final population data. Mid-2020 estimates would continue to be used in this interim period.

12. Following the ONS’ and NRS’ publication of their rebased population estimates, HM Treasury and the Scottish Government have taken account of revisions to Scottish population estimates for the 2022-23 income tax BGAs which will be reconciled to outturn in the 2025-26 Scottish Budget. BGAs from 2023-24 onwards will use the most up to date population estimates. Both governments are working through the funding impact on BGAs that precede the temporary population methodology from Autumn Statement 2022 to Spring Statement 2024.

13. The ONS and NRS’ mid-year estimates for 2023-24 are not yet published, with publication of both expected later this year. This means that while the 2022-23 income tax reconciliation applying to the budget can be considered as final, reconciliations for 2023-24 cannot be finalised until population estimates are published.

Reconciliations set out in this document

14. With consideration to the availability of outturn and population data as established above, the following reconciliations have been calculated and included in this report:

• Final BGA and revenue reconciliations for 2022-23 Scottish Income Tax;
• Provisional BGA reconciliations for 2023-24 LBTT and SLfT, and;
• Provisional BGA reconciliations for 2023-24 Social Security benefits expenditure.

15. Due to the use of provisional data, the overall reconciliation applying to the 2025-26 Scottish Budget cannot be finalised at this point, but will be confirmed in the 2025-26 Scottish Budget document.

Considerations for 2025-26 Scottish Budget

16. The following points are relevant for 2025-26 Budget considerations:

• The total provisional reconciliation required in the 2025-26 Budget will be positive £490.1 million. This figure includes final reconciliations for 2022-23 Income Tax revenue and BGA and provisional reconciliations of the BGAs for 2023-24 LBTT, SLfT and Social Security benefits expenditure.
• This positive reconciliation is largely driven by an Income Tax reconciliation of £448.7 million. The combined reconciliation for LBTT, SLfT and Social Security benefits expenditure is positive £41.4 million.
• The provisional residual balance on the reserve for 2023-24 is £293 million.
• Under current plans, the Scottish Government’s capital debt will be £2.7 billion by the end of 2025-26, 13 per cent below the forecast £3.1 billion limit.

Corrections to outturn

17. Since Autumn Statement 2022, a number of changes to outturn have been identified. SG and HMT will reach a decision on the handling of this outturn and further information will be published in due course. As previous BGAs are a component of new BGA calculations, outturn changes will be reflected in future BGA calculations regardless of the decision on whether a reconciliation will flow from these changes to outturn.