Scotland Acts 2012 and 2016 implementation: annual reports

8. Fiscal Framework Implementation

This chapter covers further areas of Fiscal Framework implementation relevant to this Report: Policy Spillovers.

8.1 Progress on Policy Spillovers

Key Development

The Scottish Government is continuing to pursue a spillover claim in relation to UK Government increases to the income tax Personal Allowance in 2018-19 and 2019-20, as set out in our previous report.

8.1.1 In correspondence from the then Chief Secretary to the Treasury, the UK Government accepted that above-inflation increases to the personal allowance do represent a policy change, in the context of the spillover provisions. The UK Government did not, however, accept that CPI-linked increases to the personal allowance constitute a policy change. The then Cabinet Secretary set out the Scottish Government's position that any increase in the personal allowance causes a spillover due to the differing income distributions of taxpayers in Scotland and the rest of the UK.

8.1.2 The UK Government agreed to consider the analysis presented at the official-level Joint Exchequer Committee, and, subject to agreement on the methodological approach, to estimate the effects of the policy changes for 2019-20 and 2020-21, as the basis for discussions to consider whether any transfer of funding (in either direction) is due for these years.

8.1.3 UK Government officials have since shared analysis with Scottish Government officials and officials will discuss progress and next steps at the next meeting of the official-level Joint Exchequer Committee.

8.2 Behavioural Spillovers

8.2.1 Through correspondence exchanged in February 2020, the Scottish and UK Governments have agreed that an increase in take-up of reserved benefits to which an individual is already entitled is outside the scope of the spillover provisions and the DWP will not seek to raise a spillover claim in this scenario.^[21]

8.2.2 Detailed guidance on the scope and process for behavioural spillovers remains under discussion at the official-level Joint Exchequer Committee.

8.2.3 No behavioural spillovers have been raised to date. In the absence of more detailed guidance, the existing provisions in the Fiscal Framework Agreement will inform consideration of any behavioural spillover raised by either government.