Fiscal Framework between Scottish Government and Local Government

Principles

10. The underpinning principles of the Fiscal Framework agreed between the Scottish Government and Local Government are:

The Fiscal Framework should promote stability, certainty, transparency, affordability and sustainability.

a) An effective fiscal framework should provide the foundations of a stable, transparent and certain fiscal relationship.

b) It is accepted that there are circumstances where this might not always be practically possible, for example as a result of the lack of stability and certainty in the funding relationship between the Scottish and UK Governments.

c) Although the Framework will evolve over time, the effective operation of the Framework should not require frequent revisions or negotiations. Periodical review of the Framework as a whole or any specific arrangement, as may be provided for, should be agreed by all relevant parties from the outset.

d) The provisions of the Framework should be transparent and unambiguously clear to all parties to the agreement and other stakeholders.

e) The Fiscal Framework should promote best practice in early engagement to enable mutual consideration of the affordability and sustainability of arrangements between the Scottish Government and Local Government, particularly within the context of new and existing commitments, demands and pressures.

The Fiscal Framework should promote effective use of fiscal flexibilities and levers to address local priorities and improve outcomes.

a) The Fiscal Framework should set out mutual expectations related to the exercising of greater fiscal powers, and the use of new fiscal levers in a local setting. This should include the consideration of how decisions may affect the tax receipts or expenditure of individual councils, Local Government, Scottish Government or UK Government.

b) The Fiscal Framework should set out clear processes for the discussion of the introduction of new fiscal flexibilities for Local Government, ensuring they support the effective overall use of public funds in Scotland.

c) Any proposals to introduce new fiscal flexibilities or levers must consider the impact on Local Government Finance distribution.

d) As far as is reasonably possible, the Fiscal Framework should seek a balance between local flexibilities and administrative and economic efficiency in the context of the tax system as a whole.

e) Where necessary, consideration should be given to a neutral application of fiscal flexibilities across local authorities to ensure certainty for taxpayers, for example utilising whichever forums are available to local authorities.

The Fiscal Framework should enable discussion of fiscal empowerment of Local Government.

a) Both parties agree to establish and maintain a clear route for the exploration of opportunities for further fiscal empowerment that incorporate the right balance of flexibility alongside robust governance and assurance which recognises the role of the Scottish Parliament in scrutinising the use of public money in Scotland.

b) Discussions should include consideration of existing devolved fiscal powers, and those that flow from any future devolution of powers to Scotland.