In the Fiscal Framework the UK and Scottish Governments agreed that over the period to 2021 to 2022 the BGAs for each tax will be indexed using two different indices: the Comparable Model (CM) and the Indexed Per Capita (IPC) model.
The results from both indices will be published, but in practice the BGAs will be indexed using the IPC model. Under IPC, the Scottish block grant will reduce in line with the growth in equivalent tax revenue per head in the rest of the UK.
This means that if devolved Scottish tax revenues per head grow at the same rate as in the rest of the UK, the Scottish budget will be no better or worse off than before devolution. This is because the amount being taken out through the block grant adjustment is the same as the amount coming in through devolved revenues.
If per capita receipts grow faster in Scotland than the rest of the UK, then the Scottish budget is better off relative to pre-devolution and vice versa. This could reflect differences in economic performance in Scotland and the rest of the UK, as well as different choices about the future path of tax policy in Scotland.
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