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Fiscal framework outturn report: 2020

The Fiscal Framework Outturn Report 2020 publishes outturn and reconciliation information for Scottish Income Tax, Scottish Landfill Tax, Land and Buildings Transaction Tax and devolved Social Security benefits, as well as updates on borrowing and the Scotland Reserve.

Fiscal framework outturn report: 2020
4. Fully Devolved Taxes

4. Fully Devolved Taxes

4.1 This section focuses on the operation of the fully devolved taxes (LBTT and SLfT). It sets out forecasts, outturn and reconciliations for 2019-20, along with the potential reconciliations required for the 2020-21 Budget. This report uses provisional 2019-20 outturn revenue and BGA data for the fully devolved taxes. The final revenue data will be published as part of Revenue Scotland’s Annual Report and Accounts later in the year. HMRC outturn data which is used to calculate the final BGAs will also be available in due course.

4.2 Revenue Scotland manages and collects LBTT and SLfT, and these revenue streams feed in to the Scottish Budget as they are collected. This means reconciliations for revenue are not necessary. The Scottish Government manages any variance between forecast and actual revenues as part of its in-year budget management process. 

4.3 The BGAs for these taxes are reconciled in two stages. The first stage is an in-year reconciliation, which normally takes place within the same financial year, on the basis of updated OBR forecasts for the UK Autumn Budget. Outturn data becomes available in the autumn following the end of each financial year. Using these outturn figures, a final reconciliation is applied to the Block Grant in the financial year two years after the original BGA was applied.

4.4 Due to the late UK Budget, the in-year reconciliations for LBTT and SLfT in 2019-20 were made to the 2020-21 Scottish Block Grant based on the Scottish Budget BGAs. A final reconciliation will then be applied to the 2021-22 Scottish Budget on the basis of final outturn figures.

LBTT

4.5 Table 5 shows the provisional net effect on budget for LBTT for 2019-20, and compares outturn to forecasts.

Table 5: 2019-20 LBTT Provisional Outturn Compared with Forecasts (£ million)
Revenues BGA Net effect on Budget
Forecast as of Budget Act 2019 642.9 -566.5 +76.4
Provisional Outturn 597.8 -533.0 +64.8
Provisional Outturn against forecast -45.1 +33.6 -11.6

4.6 A provisional negative BGA reconciliation of £5.8 million will be applied in 2021-22, as shown in table 6. £39.4 million was added in the in-year reconciliation but the outturn in table 5 shows that the ultimate reconciliation amounts to £33.6 million, leaving a final reconciliation of £5.8 million.

Table 6: LBTT 2019-20 Provisional BGA Reconciliation (£ million)
Forecast BGA - UK Autumn Budget 2018 -566.5  
Forecast BGA - Scottish Budget 2020 -527.1  
In-year reconciliation applied to 2020-21 Block Grant*   +39.4
Provisional Outturn BGA -533.0
Provisional Reconciliation applied to 2021-22 Block Grant   -5.8

* 2019-20 in-year reconciliation delayed to impact 2020-21 due to late UK Budget.

4.7 Table 7 compares the forecasts used to set the 2020-21 Budget with the latest forecasts of revenue and BGA for 2020-21 LBTT. As noted in the introduction, COVID-19 has meant that there have been no updated SFC forecasts of revenues since the Scottish Budget in February 2020. There has therefore been no change in the forecast of revenues.

4.8 Similarly, there have been no updated OBR forecasts since the UK Budget in March 2020. However, as noted in paragraph 1.5, the Scottish Budget used provisional BGAs as it took place in February, before the UK Budget in March. The change in the forecasts for the BGA, the net effect on the Budget, and the forecasts reconciliation therefore reflect the difference between the provisional BGA used in the Budget, and the forecast of the BGA provided at the UK Budget in March 2020. The actual in-year reconciliation will be based on updated BGAs forecasts provided for the next Scottish Budget.

Table 7: Forecast Comparison of 2020-21 LBTT (£ million)
Revenues BGA Net effect on Budget
Forecast as of Budget Act 2020 641.5 -556.5 +84.9
Latest Forecast 641.5* -583.9 +57.6
Change N/A -27.3 -27.3

* SFC forecasts would normally have been updated at the MTFS in Spring however its publication was delayed due to the impact of COVID.

SLfT

4.9 Table 8 shows the provisional net effect on budget for SLfT for 2019-20, and compares outturn to forecasts.

Table 8: 2019-20 SLfT Provisional Outturn Compared with Forecasts
(£ million)
Revenues BGA Net effect on Budget
Forecast as of Budget Act 2019 103.7 -91.1 +12.6
Provisional Outturn 119.2 -98.8 +20.4
Provisional Outturn against forecast +15.5 -7.7 +7.8

4.10 A provisional negative BGA reconciliation of £2.1 million will be applied in 2021-22, as shown in table 9. £5.5 million was subtracted in the in-year reconciliation but the outturn in table 8 shows that the ultimate reconciliation amounts to £7.7 million, leaving a final reconciliation of £2.1 million.

Table 9: SLfT 2019-20 Provisional BGA Reconciliation (£ million)
Forecast BGA - UK Autumn Budget 2018 -91.1  
Forecast BGA – Scottish  Budget 2020 -96.6  
In-year reconciliation applied to 2020-21 Block Grant*   -5.5
Provisional Outturn BGA -98.8
Provisional Reconciliation applied to 2021-22 Block Grant -2.1

* 2019-20 in-year reconciliation delayed to impact 2020-21 due to late UK Budget.

4.11 Table 10 compares the forecasts used to set the 2020-21 Budget with the latest forecasts of revenue and BGA for 2020-21 SLfT. As noted in paragraphs 4.7 and 4.8, there has been no updated revenue forecasts and the difference between the two BGA figures reflects the difference between the provisional BGA on which the Scottish Budget was based in February, and the updated BGA position at the UK Budget in March. The actual in-year reconciliation will be based on updated BGAs forecasts provided for the next Scottish Budget.

Table 10: Forecast Comparison of 2020-21 SLfT (£ million)
Revenues BGA Net effect on Budget
Forecast as of Budget Act 2020 115.9 -87.3 +28.5
Latest Forecast 115.9* -95.6 +20.2
Change  N/A   -8.3    -8.3

* SFC forecasts would normally have been updated at the MTFS in Spring however its publication was delayed due to the impact of COVID.


Contact

Email: martin.hay@gov.scot