The Scottish Parliament’s Finance and Constitution Committee conducts its pre-budget 21-22 scrutiny
By Charlotte Barbour, Director of Taxation
6 November 2020
ICAS has submitted written evidence to the Scottish Parliament’s Finance and Constitution Committee. Charlotte Barbour notes that we were also pleased to be asked to give oral evidence, alongside the CIOT on 4 November.
In 2018, the Parliament agreed a new process for budget scrutiny based on the recommendations of the Budget Process Review Group. The budget process should have the following four core objectives:
- to have a greater influence on the formulation of the budget
- to improve transparency and raise public understanding and awareness of the budget
- to respond effectively to new fiscal and wider policy challenges; and
- to lead to better outputs and outcomes as measured against benchmarks and stated objectives.
ICAS evidence
In our evidence, we noted that the Budget will need to manage the tensions arising from a desire to spend, but with less revenue with which to do so. And where any burdens fall (say, less spending and/or any tax increases) needs to be agreed and supported by the citizens of Scotland. It will also be set against the UK backdrop.
Revenues for the Scottish Budget come predominantly from the block grant, taxation and the impact of block grant adjustments. The fiscal framework is due for re-negotiation in 2021. The negotiations may, or may not, be brought forward but the Scottish Budget constraints are not unique; in broad terms they also apply to the rest of the UK. What is unique is the number of moving components that make up the Scottish Budget and the need to manage these in the round. They are not easy to understand making accountability and public understanding more challenging.
The written evidence states that a policy of openness and transparency “is critical in building trust in government, meeting stewardship duties and demonstrating accountability for decisions.”
COVID-19 has dealt a blow to many sectors of Scotland’s economy. An equilibrium will be needed between:
- any “kneejerk” reaction to raise taxes to fund the extra borrowing arising from Covid-19,
- raising taxes to fund the inflationary element of existing public services, and
- the need to keep the tax burden manageable over 2021/22 to support the economy in order to get people back into employment and through Brexit.
Taxation needs to both collect funds and support the economy or, at the very least, not create economic disincentives or distort behaviour.
An opportunity to learn and collaborate
The unique and often unforeseen challenges created by the coronavirus pandemic have led to closer and stronger collaboration with the professional bodies and the accountancy profession. We hope this will continue as the focus shifts to rebuilding the economy because we believe it has been beneficial.
Process around taxation
In response to the Finance and Constitution Committee question regarding direct changes to the budget process, ICAS has noted that the pandemic has not created a need for new tax policy and legislative processes in Scotland – this need already existed. And it would be disappointing if the Covid-19 crisis delayed work in progressing new tax processes; an interim report on the devolved legislative process was issued in February 2020.
ICAS has also called for the Scottish Parliament to institute a Tax Committee to aid with scrutiny of tax policy.