Scotland Act 2012 and 2016: annual implementation report 2021

Introduction

1. This is the ninth annual report on the implementation and operation of Part 3 (Financial Provisions) of the Scotland Act 2012 and the fifth report on the implementation of the Scotland Act 2016.

2. It is intended to inform Parliament of the implementation work that has been carried out on fiscal powers in the Scotland Acts 2012 and 2016 as required by section 33 of the Scotland Act 2012 and paragraph 107 of the Fiscal Framework. The UK Government produces a separate report on the implementation work they have carried out.

3. The Scotland Act 2012 was granted Royal Assent in May 2012 and represented the first transfer of fiscal powers from Westminster to the Scottish Parliament following devolution. These included:

• The creation of a new Scottish rate of Income Tax;
• Provisions to introduce a new Scottish tax on land transactions, and to disapply UK Stamp Duty Land Tax in Scotland;
• Provisions to introduce a new Scottish tax on disposals to landfill, and to disapply UK Landfill Tax in Scotland;
• Provision for capital borrowing by Scottish Ministers; and
• The power to create new devolved taxes.

4. The Scotland Act 2016 received Royal Assent in March 2016 and devolved a range of further powers to the Scottish Parliament. These included:

• Further income tax powers including the power to set rates and bands;
• Assignment of Value Added Tax;
• Certain social security benefits;
• Provisions to introduce a new Scottish tax on the carriage of passengers by air from Scottish airports, and to disapply Air Passenger Duty in Scotland;
• Provisions to introduce a new Scottish tax on the commercial exploitation of aggregates, and to disapply the UK Aggregates Levy in Scotland;
• Fines, forfeitures and fixed penalties.

5. This report provides an update on these sections, as well as non-legislative elements in the Fiscal Framework^[1] including:

• Block Grant Adjustments;
• Administration and implementation costs;
• Policy Spillover effects;
• Borrowing; and
• Scotland Reserve.

6. The report provides an update on all legislative, policy and implementation work that has been carried out since the previous report on 22 April 2020^[2] and outlines any forecast administration and implementation costs incurred in 2020-21.

7. Administration costs are the ongoing costs incurred in supporting the delivery of the Scottish Government's responsibilities under the Scotland Acts 2012 and 2016. Implementation costs are one-off costs associated with the initial investment to set up all the necessary systems and other elements required for the delivery of the powers under the Scotland Acts 2012 and 2016, whether through setting up a body or a service, implementing IT systems.

8. The Coronavirus (COVID-19) pandemic has seen significant impacts to work across all areas of government. The Scottish Government has worked with the UK Government and others to transfer additional powers devolved by the 2012 and 2016 Acts in an orderly way to ensure they can be used effectively for the people of Scotland, whilst prioritising its response to COVID-19. This year's report details the implementation work which has been impacted by the pandemic, including the pause of transfer of the remaining social security powers and VAT implementation, as well as the introduction of new benefits and additional support for Scottish citizens such as the extended delivery of Fair Start Scotland employability service.

9. The next report will be published in 2022.