Letter from Cabinet Secretary for Finance and the Economy to the Convener of 13 September 2021
Dear Kenneth
Thank you for your letter dated 7 September and for the Committee’s consideration of the Government’s proposals for the 2022-23 Scottish Budget. I appreciate the Committee’s support for the Government’s preference to return to the previously agreed budget timetable envisaged in the Written Agreement.
The Committee will be aware of the announcements by the UK Government on 7 September to complete a multi-year spending review (2022-23 to 2024-25) and autumn budget on 27 October 2021. The Scottish Government has been pressing the UK Government for confirmation of its plans for some time and while it is helpful to now have certainty of the detail, it is extremely disappointing that there was no advance discussion with the devolved administrations given the impact on our budget processes. We also received no advanced warning, outside the media speculation, of the very significant new proposal to introduce a new Health and Social care levy, through an increase to national insurance contributions in the first year. The Scottish Government is working with HM Treasury to understand what this will mean for future Scottish Budgets. The initial information that has been shared is based on financial estimates, which will not be confirmed until the spending review is published.
These plans create a complicated financial environment with the need for the Scottish Government to analyse and interpret the UK’s conclusions of its three-year spending review alongside an autumn budget in November, while concurrently developing the 2022-23 Scottish Budget and the 2021 Medium Term Financial Strategy (MTFS).
Furthermore, the UK Government has committed to publishing the findings of its ‘Fundamental Review of Business Rates’ in the autumn and we anticipate that this will be published alongside the budget. Whilst Non-Domestic Rates are wholly devolved, given the fundamental similarities between the two systems, we would wish to fully consider the system design and revenue implications of the review before finalising the Scottish Government Non-Domestic Rates policy position.
I fully support the Parliament’s objective to deliver effective and meaningful scrutiny of the Scottish Budget and propose to the Committee that the Scottish Budget be introduced on 16 December. In my view this supports the needs of the Parliament while balancing the asks on the Scottish Government as we continue Scotland’s recovery from the pandemic and navigate the UK Government’s financial plans.
I appreciate the Committee’s support of the Scottish Government’s intentions this year to publish the 2021 MTFS alongside the 2022-23 Scottish Budget and welcome the Committee’s work-planning approach to accommodate this. The multi-year financial forecast approach of the MTFS will provide a helpful context for the Committee for the new Budget due to the joint focus of both publications on the winter SFC forecasts. I stand ready to work with the Committee to support its consideration of the MTFS and 2022-23 Scottish Budget.
On the Scottish Government’s resource spending review plans, as the Committee is aware, early work has commenced on this and we are planning to publish, for public consultation, a framework for the resource spending review in December alongside the 2022-23 Scottish Budget and MTFS. Any spending review undertaken by the Scottish Government will be informed by the conclusions of the UK Government’s spending review in the autumn and I welcome the opportunity to engage fully with Parliament on this.
I would like to conclude by thanking the Committee for its support of the Government’s plans to publish the Fiscal Framework Outturn Report on 1 October this year and for its interest in the Government’s Draft Framework for Tax published on 31 August. The Committee’s views on these are warmly welcomed and I look forward to further engagement and discussion.
I have copied this letter for information to the Scottish Fiscal Commission.
Yours sincerely
KATE FORBES