Letter from Cabinet Secretary for Finance and the Economy to the Convener of 30 August 2021
Dear Kenneth,
I am looking forward to my evidence session with the Committee tomorrow, ahead of which I wished to offer some initial thoughts on the process and timetable related to the Scottish Budget.
I greatly valued the dialogue and joint working that I had on these matters with the Finance and Constitution Committee in the last session. The circumstances relating to EU Exit, Covid-19 and delayed UK Budgets bearing on our 2020-21 and 2021-22 budget processes were indeed exceptional, and together we worked flexibly to enable informed proposals and space for scrutiny.
However we do not yet know the full context for the 2022-23 budget process, and may again need to plan for uncertainty. We do not have confirmed timings for UK fiscal events: the UK Government has indicated that work supporting a multi-year spending review is on-going and set to conclude in the autumn; and there is no date yet for the UK Budget, which has for the last two years been delayed from the autumn until March. That said, the Chancellor has publicly asked the Office for Budget Responsibility to produce forecasts on 27 October, and he may soon confirm whether that will also be the date for the next UK fiscal event.
I am mindful both of the parameters in our Written Agreement and of our collective experiences around the delay of the last two Scottish Budgets arising from the respective circumstances. Indeed I appreciate the difficulties caused to Parliament and others by the uncertainty and the truncated time for scrutiny. And, while it has been far from ideal to have had to budget with only provisional Block Grant Adjustments and without the tax policies and updated consequential funding associated with a UK Budget, I am prepared for the scenario that the Scottish Budget will again precede the UK Budget.
With that in mind, I would be amenable to reverting toward the timetable envisaged in the Written Agreement, and publishing Scottish Budget 2022-23 during this calendar year. I
would be happy to expand and explore that with the Committee tomorrow, should it so wish.
Related to this is my thinking on the delayed Medium Term Financial Strategy, the context for which is the prevailing timetable for forecasts: namely the Scottish Fiscal Commission forecasts last week, the OBR forecasts due on 27 October and then the subsequent SFC forecasts around the Scottish Budget. There is logic for publishing the MTFS alongside the Scottish Budget and thereby basing it on the updated SFC and OBR forecasts. Publishing it before the OBR October forecasts would mean having to use OBR forecasts from March, the effect of which would be to give a misleading sense of the fiscal outlook. However publishing the MTFS after the OBR forecasts but before the Scottish Budget could do likewise, due to having to use the SFC forecasts from August rather than those used for the Scottish Budget, with the added complication that there would be two different set of forecasts for the fiscal outlook published in close proximity in an MTFS and a Budget. I understand that the Committee might be concerned about time to scrutinise the MTFS alongside a Budget, but on the other hand I would be concerned about the value and clarity around an MTFS based
on forecasts which would shortly become out of date. I would, of course, intend for the 2022 MTFS to return to its normal May slot.
Turning to the Fiscal Framework Outturn Report (FFOR), I understand that the Committee is keen for this to be published in advance of its final meeting before October recess. The
Committee will appreciate that there is an inherent tension between meeting the recommendation of the Budget Process Review Group that the Report is published in September, and the recommendation that it draws on audited data (which are not all available in September). Having considered the late availability of audited outturn data, and that last year’s difference between provisional and final outturn data was negligible, I am proposing that we publish the FFOR 2021 on 1 October. This would miss the recommended September publication window by a day but this is unavoidable due to the fact that outturn data for Fines are not available until late September. I hope that this seems suitable to the Committee.
This is, of course, my initial perspective, and I appreciate the Committee will be concerned with the sequencing and timing of the respective elements of its scrutiny. I would be happy to discuss any or all of this with the Committee tomorrow.
I would also take the opportunity in this letter to advise you that tomorrow the Minister for Public Finance, Planning and Community Wealth will host an inaugural tax event to discuss tax policy-making in Scotland, alongside the launch of our consultation, ‘Tax Policy and the Budget’, which will run for two months and close on 26 October. This year’s consultation seeks views from the public and stakeholders on their priorities for devolved and local tax policy over the course of this Parliamentary session and in advance of Scottish Budget 2022-23.
It also launches Scotland’s first Framework for Tax in draft, on which we are seeking feedback in the spirit of genuine co-production. The Framework enhances our Scottish Approach to Taxation, setting out our overarching approach to tax policy and providing a foundation for demonstrating our commitment to open government, transparency and engagement, and reinforces our responsible approach to fiscal policy in the management of our devolved and local tax powers. I look forward to engaging with the Committee and wider Parliament in the coming months to discuss this work in more detail.
In the context of the Framework, I would also welcome the Committee’s support in reconvening the Devolved Taxes Legislative Working Group as early as possible, in order to build on the Group’s interim report published last year and help ensure that we have a robust legislative framework in place for tax.
I trust this letter is helpful in advance of our meeting tomorrow.
Your sincerely
KATE FORBES