Fiscal framework outturn report: 2019
The second Fiscal Framework Outturn Report forms part of a revised budget process – as recommended by the final report of the Budget Process Review Group - and follows on from May’s publication of Scotland’s Fiscal Outlook: The Scottish Government’s Five Year Financial Strategy.
3. Income Tax
3.1 For Scottish income tax, outturn data is available around 16 months after the end of the financial year, and a single reconciliation is applied to the Budget three years after that financial year.
3.2 Outturn data for income tax for 2017-18 was published by HMRC on 18 July 2019 and the reconciliation will be applied to the 2020-21 Budget. This data, together with the net effect on the Budget, is shown in table 2.
Table 2: Income Tax Budget Position For 2017-18 Compared with Forecasts (£ Million)
|Revenues||BGA||Net effect on Budget|
|Forecast as of Budget Act 2017||11,857||11,750||107|
|Outturn against forecast||-941||-737||-204|
3.3 This translates into a £204 million negative reconciliation requirement that will be applied to the 2020-21 Budget (see section 8 for a full breakdown of reconciliations for 2020-21). This is the first time a reconciliation for income tax will be applied.
3.4 The following chart demonstrates how the forecasts for both revenue and BGAs for income tax in 2017-18 have changed over time, at successive fiscal events in Scotland and the rest of the UK.
Changes In The Forecasts Of Income Tax Revenue and BGA for 2017-18
2017-18 income tax was forecast to have a positive net effect on Scotland's finances as of the 2017-18 Budget, with revenues exceeding the BGA by £107m. However, the net impact was ultimately negative, with outturn revenue £97m below BGA. This translates into a £204 million negative reconciliation requirement that will be applied to the 2020-21 Budget.
The forecasts of income tax revenue and BGA used in the 2017-18 Scottish Budget were drawn up using an estimate of the 2016-17 baseline, which underpinned the whole series of revenue and BGAs. When outturn figures for 2016-17 became available, this baseline was revised downwards by just over £800m. The sizeable baseline revision, coupled with forecast error, meant that the outturn BGA was £737m below and outturn revenue was £941m below the forecasts that were used to set the 2017-18 Budget.
3.5 The outturn data for income tax for 2018-19 will be available in summer 2020, with a reconciliation to outturn being applied to the 2021-22 Budget. Table 3 shows the latest forecast of the size of the potential reconciliation.
Table 3: Forecast Income Tax Reconciliation To 2021-22 Budget (£ Million)
|2018-19 Income Tax||Revenues||BGA||Net Effect On Budget||Forecast Reconciliation|
|Forecast as of Budget 2018-19||12,177||11,749||+428|
3.6 Outturn data for 2019-20 will be available in summer 2021, with reconciliation to the 2022-23 Budget. Table 4 shows the latest forecasts of the reconciliation requirement.
Table 4: Forecast Income Tax Reconciliation To 2022-23 Budget (£ Million)
|2019-20 Income Tax||Revenues||BGA||Net effect on Budget||Forecast Reconciliation|
|Forecast as of Budget 2019-20||11,684||11,501||+182|
3.7 Income tax outturn data is available online at https://www.gov.uk/government/statistics/scottish-income-tax-outturn-statistics
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