Revised fiscal framework key to further Scottish devolution

scottish parliament
By Christine Scott, Assistant Director, Charities and Pensions

3 July 2015

The Scottish Parliament Finance Committee has published its report on the future of Scotland's fiscal framework. Christine Scott outlines the recommendations.

Scotland's fiscal framework is fundamental to the devolution of further powers to Scotland, both to how those powers are exercised and to redefining the boundaries of accountability between the Scottish and UK Governments. 

While additional tax powers have been set out in draft legislation currently being debated by the UK Parliament, elements of the fiscal framework including additional borrowing powers are less well progressed.

The Finance Committee's inquiry into Scotland's Fiscal Framework, which covers all aspects of it, has now concluded.

The Committee has stated that it "believes that the manner in which the fiscal framework is agreed will be a significant indicator as to how further devolution is likely to work in practice."

The report includes recommendations primarily directed to the Scottish Government, but with clear messages for the UK Government, too.

ICAS contributed to the inquiry and our views on additional borrowing powers for funding preventative spending initiatives and on the Smith Commission's 'no detriment' principle feature in the inquiry report.

Preventative spending initiatives seek to shift public expenditure away from crisis spending and ICAS believes the ability to borrow to fund the revenue aspects of such initiatives is central to being able to transform public services. 

Therefore, ICAS welcomes the Finance Committee's recommendation that the Scottish Government explores the practicality of additional borrowing powers for preventative spending with the UK Government.

At the heart of the 'no detriment' principle is the notion that the impact of policy decisions taken in one part of the UK do not impact adversely on the funding of public services in other part. 'No detriment' will inevitably involve adjustments to the funding Scotland receives each year from the central UK pot. ICAS caught the general mood of contributors to the inquiry on the implementation of this principle.

The Finance Committee report said: "The issue of adjustments for subsequent years received considerable attention from respondents.  ICAS summarised the general view: Agreeing the appropriate adjustments at the outset will be one task, however the subsequent adjustments for later years are likely to be increasingly difficult to determine."

Implementing 'no detriment' is only one of many challenges in delivering a new fiscal framework for Scotland.  The Finance Committee's inquiry conclusions reflect an ultimate truism that its delivery "…will require cultural change both within the Treasury and at all levels of inter-governmental relations. There needs to be a culture of genuine respect between the various governments within the UK."

Read the Finance Committee report Scotland's Fiscal Framework, published on 29 June 2015, following the completion of its inquiry.

Topics

  • Public sector
  • Tax
  • Charities
  • Political landscape

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