Fiscal framework: agreement between the Scottish and UK Governments

The agreement between the Scottish Government and the United Kingdom government on the Scottish Government's fiscal framework.

ANNEX B: Revenue and Expenditure Covered by the Fiscal Framework

115. Following the recommendations of the Smith Commission a number of new tax and spending powers are being devolved to the Scottish Parliament in the current Scotland Bill.

Devolved and Assigned Tax Powers:

  • The Scottish Parliament will be given the power to set rates and bands of non-saving non-dividend income tax.
  • The first 10p in VAT receipts at the standard rate and the first 2.5p in VAT receipts at the reduced rate will be assigned to the Scottish Parliament.
  • Air Passenger Duty and Aggregates Levy are to be fully devolved. Aggregates Levy will be devolved once the European Commission's State Aid investigation is complete.

116. Under the Smith Commission Agreement the Scottish Government will also retain fines, forfeitures and fixed penalties imposed by courts and tribunals in Scotland, as well as sums recovered under Proceeds of Crime.

117. This document also covers fiscal arrangements for the tax powers devolved under the Scotland Act 2012; this covers the Scottish Rate of Income Tax, Stamp Duty Land Tax (now Land and Buildings Transaction Tax) and Landfill Tax (now Scottish Landfill Tax).

Welfare Powers:

118. Powers relating to benefits for carers, disabled people, and those who are ill are being devolved through the Scotland Bill. The Smith Agreement recognises this as referring to the following benefits: Attendance Allowance, Carer's Allowance, Disability Living Allowance, Personal Independence Payment, Industrial Injuries Disablement Allowance, Severe Disablement Allowance, Cold Weather Payment, Funeral Payment, Sure Start Maternity Grant, Winter Fuel Payment and Discretionary Housing Payments. For the purposes of the fiscal framework these benefits are referred to as "devolved welfare".

119. In addition the following powers will be devolved to the Scottish Parliament:

  • Powers to vary housing cost elements of Universal Credit.
  • Administrative powers to change payment arrangements for Universal Credit.
  • Power to top-up reserved benefits.
  • Power to create new benefits in areas other than pensions.

Spending Powers:

The fiscal framework also covers the arrangements for "devolved public services" under the Scotland Act 2016. [5]

120. In addition two key areas being devolved are the Crown Estate and the contracted employment programmes on expiry of the current commercial arrangements. These two areas have more complex funding arrangements and are, therefore, covered separately in the fiscal framework.

Administration and Implementation Cost

121. The fiscal framework also sets out the arrangements for administration and implementation costs.


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