Fiscal framework outturn report: 2019

The second Fiscal Framework Outturn Report forms part of a revised budget process – as recommended by the final report of the Budget Process Review Group - and follows on from May’s publication of Scotland’s Fiscal Outlook: The Scottish Government’s Five Year Financial Strategy.


4. Fully Devolved Taxes

4.1 This section focuses on the operation of the fully devolved taxes (LBTT and SLfT). It sets out forecasts, outturn and reconciliations for 2018-19, along with the potential reconciliations required for the 2019-20 Budget. This report uses provisional 2018-19 outturn revenue data for the fully devolved taxes. The final revenue data will be published as part of Revenue Scotland's Annual Accounts in October 2019.

4.2 Revenue Scotland manages and collects LBTT and SLfT and these revenue streams feed in to the Scottish Budget as they are collected. This means reconciliations for revenue are not necessary. The Scottish Government manages any variance between forecast and actual revenues as part of its in-year budget management process.

4.3 The BGAs for these taxes are reconciled in two stages. The first stage is an in-year reconciliation which takes place within the same financial year, on the basis of updated OBR forecasts for the UK Autumn Budget. Outturn data becomes available in the autumn following the end of each financial year. Using these outturn figures, a final reconciliation is applied to the Block Grant in the financial year two years after the original BGA was applied.

4.4 Thus, for LBTT and SLfT in 2018-19, an in-year reconciliation was made in 2018-19 following the 2018 UK Autumn Budget. A final reconciliation will be applied to the 2020-21 Scottish Budget on the basis of outturn figures which became available in autumn 2019.

LBTT

4.5 Table 5 shows the net effect on budget for LBTT for 2018-19, and compares outturn to forecasts.

Table 5: 2018-19 LBTT Outturn Compared with Forecasts (£ Million)

Revenues BGA Net effect on Budget
Forecast as of Budget Act 2018 588 600 -12
Outturn 557 549 +7
Outturn against forecast -32 -51 +19

4.6 A negative BGA reconciliation of £3 million will be applied in 2020-21, as shown in table 6. £54 million was added in the in-year reconciliation but the outturn in table 5 shows that the ultimate reconciliation only amounts to £51 million, leaving a final reconciliation of £3 million.

Table 6: LBTT 2018-19 BGA Reconciliation (£ Million)

Forecast BGA - UK Autumn Budget 2017 600  
Forecast BGA - UK Autumn Budget 2018 546  
In-year reconciliation applied to 2018-19 Block Grant   +54
Outturn BGA 549  
Final Reconciliation applied to 2020-21 Block Grant   -3

4.7 Table 7 compares the forecasts used to set the 2019-20 Budget with the latest forecasts of revenue and BGA for 2019-20 LBTT. The difference between the two BGA figures gives some indication of the scale of the in-year BGA reconciliation that will be applied, though the actual reconciliation will be based on a more up-to-date forecast prepared at the UK Autumn Budget.

Table 7: Forecast Comparison Of 2019-20 LBTT (£ Million)

Revenues BGA Net effect on Budget
Forecast as of Budget Act 2019 643 567 +76
Latest Forecast as of MTFS 2019 616 535 +81
Change -27 -32 +5

SLfT

4.8 Table 8 shows the net effect on budget for SLfT for 2018-19, and compares outturn to forecasts.

Table 8: 2018-19 SLfT Outturn Compared with Forecasts (£ Million)

  Revenues BGA Net effect on Budget
Forecast as of Budget Act 2018 106 94 +12
Outturn 143 105 +37
Outturn against forecast +36 +11 +25

4.9 A negative reconciliation requirement of £2 million will be applied to the 2020-21 Budget. A breakdown of the reconciliation process at different stages is given in table 9. £9 million was taken off the Scottish budget as the in-year reconciliation with a further negative reconciliation of £2 million to be applied to the 2020-21 Budget.

Table 9: SLFT 2018-19 BGA Reconciliation (£ Million)

Forecast BGA - UK Autumn Budget 2017 94  
Forecast BGA - UK Autumn Budget 2018 104  
In-year reconciliation applied to 2018-19 Block Grant   -9
Outturn BGA 105  
Final Reconciliation applied to 2020-21 Block Grant   -2

Figures may not sum due to rounding.

4.10 Table 10 compares forecasts of the net effect on Budget for SLfT in 2019-20. Forecasts of BGAs will be updated at the 2019 UK Autumn Budget, when the in-year BGA reconciliation will take place. As with the LBTT 2019-20 forecast (table 7) these figures are indicative only, because the in-year BGA reconciliation will be based on a subsequent forecast which is not yet available.

Table 10: Forecast Comparison Of 2019-20 SIFT (£ Million)

Revenues BGA Net effect on Budget
Forecast as of Budget Act 2019 104 91 +13
Latest Forecast as of MTFS 2019 109 92 +17
Change +6 +1 +5

Figures may not sum due to rounding.

Contact

Email: claire.mcmanus@gov.scot

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