Budget 2021/22: Supporting the COVID-19 Recovery - Analysis of Consultation Responses

The ‘Budget 2021-22: Supporting the COVID-19 Recovery – Scotland’s taxes and Fiscal Framework’ consultation, sought views on the role of our devolved taxes and the Fiscal Framework in the COVID-19 economic recovery and to inform decisions taken at the Scottish Budget 2021-22.

1. Executive Summary

The Scottish Government’s 2020-21 Programme for Government[1] included a commitment to consult on our approach to tax policy in advance of Budget 2021-22, building on our strong track record of taking an open and consultative approach to tax policy.

On 3 September 2020, the Scottish Government launched ‘Budget 2021-22: Supporting the COVID-19 Recovery – Scotland’s taxes and Fiscal Framework’[2], a consultation that sought views on the role of our devolved taxes and the Fiscal Framework in the COVID-19 economic recovery, to inform decisions taken at the Scottish Budget 2021-22 and beyond.

The consultation closed on 8 October 2020 and received 64 responses. Of those, 36 were from individuals and 28 were from organisations. A list of respondents and a link to their responses is available in Annex A. We would like to express our sincere thanks to those that submitted a response to the consultation.

The responses to the consultation have informed policy development in relation to the Scottish Budget 2021-22, and continue to inform our longer term thinking.

Summary of responses

The consultation asked six questions, which can be broadly separated into two categories:

  • Tax policy priorities in relation to the COVID-19 recovery, the Scottish Budget 2021-22 and beyond.
  • The fiscal challenges highlighted by COVID-19, the Scottish Government’s fiscal powers and the scope to change them.

There was broad recognition that COVID-19 has had a disproportionate impact on specific sectors of the economy and certain households, and although a diverse range of viewpoints were expressed on the use of tax powers, there was a notable theme on the need for tax policy to deliver certainty and stability, as well as support for targeted measures to protect and stimulate the economy. In addition, views were expressed that the impact of COVID-19 has reinforced the need for more progressive tax policies.

There was a mix of responses on how the Scottish Government should use its local and devolved tax powers, and commentary on the need to further develop the Scottish Government’s approach to tax policy making and the interactions between the Scottish and UK tax systems.

Some respondents supported the further devolution of tax powers to the Scottish Parliament to facilitate the economic recovery from COVID-19. Responses in that respect focused on business taxes, VAT, National Insurance and wealth taxes (e.g. Capital Gains Tax, Inheritance Tax). Among those respondents who raised concerns over further powers, partial devolution was cited as a source of additional complexity in the tax system. The interaction between National Insurance and Income Tax was a commonly cited example, with some respondents calling for the full set of policy levers to be devolved in future.

The consultation also sought views on new taxes that respondents would like to see implemented by the Scottish Government, and received responses covering a range of topics (e.g. wealth taxation, land ownership, transport and environmental issues).

With respect to the Scottish Government’s devolved powers under the Fiscal Framework[3], consultation respondents noted a range of fiscal challenges faced as a result of COVID-19. There was strong support from respondents that increased borrowing limits are needed to allow the Scottish Government to support the economy in response to the COVID-19 pandemic. Some respondents supported greater fiscal autonomy on a more permanent basis, and some suggested more permanent changes to the Fiscal Framework that should be considered, while others noted that current arrangements were adequate.

On the fiscal rules the Scottish Government should follow, the key theme was that there should be clear rules and rationale for borrowing.

Next steps

We aim to develop a clear engagement cycle which underpins the Scottish approach to taxation and the Fiscal Framework. Working with stakeholders is at the heart of that approach, with a commitment to openness and collaboration aimed at ensuring tax policy is understood and informed by a diverse range of views and perspectives. We will aim to create engagement platforms that allow a wide range of ideas to emerge, including opportunities such as this consultation exercise, and deliver a transparent and outward-focused tax policy making process.

Fiscal Framework Review

The Fiscal Framework is due to be reviewed after the Scottish Parliament elections in 2021, and it will be informed by an independent report that will be completed before the end of 2021.

In the Scottish Government’s view, the COVID-19 crisis has further highlighted the need for the review of the Fiscal Framework to have a wide scope. It should not only consider the case for revisions to the existing framework, such as increasing borrowing and reserve flexibility, but also to fundamentally examine whether the Scottish Parliament’s current powers are sufficient to manage the risks we face within our devolved responsibilities, and to support economic recovery in a post-COVID-19 world.


Email: covidrecoveryconsultation@gov.scot

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