Implementation of the Scotland Act 2016: second report

Chapter 6 - Scottish Fiscal Commission

Scotland Act 2012

91. The Scottish Fiscal Commission was established on a non-statutory basis in 2014 to assess the reasonableness of the Scottish Government's forecasts of revenue from the devolved taxes and of the economic determinants underpinning the Scottish Government's forecasts of revenues from non-domestic rates.

92. The Scottish Fiscal Commission Act 2016 established, from 1 April 2017, a fully independent Commission on a statutory basis, with direct accountability to the Scottish Parliament.

Scotland Act 2016

93. Following the Fiscal Framework agreement and passage of the Scotland Act 2016, the Commission's functions were expanded from 1 April 2017. The Commission prepares forecasts of devolved tax revenues, Scottish onshore GDP, income tax attributable to a Scottish rate resolution, non-domestic rates income and devolved social security. The Commission also assesses the reasonableness of Scottish Ministers' borrowing projections.

94. The Commission's first independent forecasts ^[15] were published in December 2017 to accompany the publication of the Scottish Draft Budget. Updated income tax forecasts were published in February 2018 to reflect policy changes announced in January 2018.

95. The Commission and the Scottish Government agreed a protocol in March 2017 which set out their working relationship and timings of the interactions between the Commission and the Government. Amendments to this were mutually agreed by the Commission and the Government in consultation with the Scottish Parliament during the course of the year to reflect that additional forecasts would be required during the passage of the Budget Bill.

Function Changes

96. The Scottish Parliament and the Scottish Government jointly formed a Budget Process Review Group which reported in June 2017. The Commission's Chief Executive was a member of the Group. The Group recommended that the Scottish Government prepare a Medium Term Financial Strategy which should be supported by forecasts from the Scottish Fiscal Commission. The Commission's functions will be amended to reflect this new process. Regulations will be laid in the Scottish Parliament in Spring 2018 to make this change. The regulations will also be used to confer the responsibility on the Commission to prepare forecasts of assigned VAT receipts.

Membership and Appointments

97. The Scottish Fiscal Commission currently comprises three Commissioners. Commissioners have executive responsibility for core functions, including the judgments reached in its forecasts, and abide by a Code of Conduct. The Commissioners are also responsible for the corporate governance of the Commission through a Governance Board. The Board is collectively responsible for the leadership and direction of the Commission and for ensuring it achieves the strategic objectives set out in the Corporate Plan.

98. Dame Susan Rice was reappointed as Chair of the Commission in February 2018 and her appointment will run until June 2022. An appointments process commenced in February 2018 for a fourth Commissioner. It is intended that this appointment will commence in Summer 2018.

99. The Scottish Fiscal Commission Act 2016 provides that appointments to the statutory Commission should be made by Scottish Ministers, regulated by the Commissioner for Ethical Standards in Public Life in Scotland, and subject to the approval of the Scottish Parliament. The appointment of all Commissioners is subject to that double scrutiny.