Fiscal framework outturn report: 2018

6 Conclusion

6.1 In summary, the following points are relevant for budget considerations:

• It is estimated that a downward reconciliation of £2 million will be made to the 2019-20 Budget in relation to the fully devolved taxes.
• Only a baseline value has been established for income tax and the 2020-21 Budget will be the first Scottish Budget in which an income tax reconciliation will have to be made, relating to income tax for 2017-18.
• The potential scale of the reconciliation required in the 2020-21 Budget is uncertain, but is indicated in the latest forecasts. Since the 2017-18 Budget, the forecast updates have shown a deterioration in the net budget position, which - if proved correct in the outturn - would lead to a reconciliation requirement in 2020-21 of -£267 million. This forecast is based on an estimated baseline, and subject to forecast error. The SFC’s Forecast Evaluation Report highlights that an under-estimate of 2017-18 GDP growth had – considered in isolation – taken £188 million off its income tax forecast for 2017-18, which would reduce the estimated reconciliation requirement from -£267 million to ‑£79 million. The forecasts that will be available at the time of the Budget will provide a more up-to-date estimate of the reconciliation that is to be expected.
• The residual balance of the Scotland Reserve is £192 million, on the basis of planned drawdowns outlined at provisional outturn 2018.
• The Scottish Government has accumulated £1,459 million of capital debt, well within its overall £3 billion limit. This means that the Scottish Government could make full use of the £450 million annual drawdown limit in 2019-20 should it decide to do so. No resource borrowing has been undertaken.

6.2 Comparing the outturn to the position that was forecast at the 2017-18 Scottish Budget (including the latest estimate for income tax) one can see that revenue and BGAs have moved in the same direction (both increased or both decreased) for each tax.

6.3 In line with the recommendations of the Budget Process Review Group, the next Fiscal Framework Outturn Report will be published in September 2019.

6.4 If you have comments on this document, we would be delighted to receive them. Please contact Finance.Co-ordination@gov.scot.