Fiscal Framework Review: Independent Report

Footnotes

1. See The Smith Commission has reported - What's next?

2. See: Scottish Fiscal Commission - Explainers - Social Security.

3. £20 million was deducted from the initial adjustment for Stamp Duty Land Tax, because analysis suggested property transactions had been brought forward to avoid plans for higher taxes.

4. Cold Weather Payments were the exception to this, where the average spending between 2008-09 and the year immediately prior to devolution was used, so as to not be unduly influenced by the volatility of spending on this payment (which is determined by the weather).

5. It is also worth noting that because the CM method and Barnett formula do not update the previous year's 'baseline' funding for changes in relative population size, funding in any given year (T) is a function not just of how Scotland's population has changed between that period and the initial point of devolution (T₀), but the precise path of how population evolved during that period. For example, funding would be higher if more of any relative population decline occurred in later years as opposed to earlier years. In contrast, because the IPC method fully updates the BGAs for differential population growth, it is not path dependent in this year. All that would matter at time T is the relative population change between T₀ and T, not its path in the years in between. In this sense the size of the BGA under the IPC method may be seen as less arbitrary than under the CM method and Barnett formula. This issue is discussed further in Section 3.3 and Appendix C.

6. In the case of spending on reserved social security benefits, Scotland's share would be derived explicitly depending on the number of eligible claimants in Scotland – depending on the particular benefit in question, Scotland's share may be somewhat higher or lower than its population share. In the case of non-identifiable expenditure such as spending on foreign affairs or debt interest, Scottish taxpayers are assumed to implicitly benefit from a population share of the 'benefits' of such spending.

7. Source: Stat Xplore, Department for Work and Pensions

8. This is analogous to the 'Barnett squeeze', whereby population-based increments to Scotland's funding under the Barnett formula mean that total funding would converge to Scotland's population-share of funding for England, if population growth was equal in both countries. Note that if population growth differs between the two nations, the 'Barnett squeeze' and similar 'BGA squeeze' would lead to funding and the BGAs to converge to a level that is higher or lower than Scotland's population share. For example, if Scotland's population is growing less quickly than rUK's, while each additional increment to the BGA would take account of the fact that Scotland's population share is falling, the existing BGA is not updated to account for this. This means that the BGA converges to a point where it is equal to more than Scotland's share of rUK revenues, penalising Scotland. (On the other hand, on the spending side, by not updating existing funding levels to account for Scotland's falling population share, funding under the Barnett formula converges to a level where the Scottish Government receives a higher-than-population share of funding, benefiting Scotland).

9. Paragraph 33 of the Scottish Government's evidence submission.

10. Paragraph 34 of the Scottish Government's evidence submission.

11. See the letter from the Chief Secretary of the Treasury to the Chair of the Scottish Affairs Committee, CST_response_SAC.pdf (publishing.service.gov.uk).

12. The exception of is Landfill Tax, where Scotland raises slightly more per capita than in rUK.