Financial provisions of Scotland act 2012
The Scotland Act 2012 marked a significant step forward for Scottish devolution.
The Act provided the largest transfer of fiscal power from London since the creation of the United Kingdom, introducing a new Scottish rate of income tax, devolving Stamp Duty Land Tax and Landfill Tax, establishing powers to create new devolved taxes or devolve existing taxes by agreement between the two governments, and creating new borrowing powers for the Scottish Government.
These new financial powers represent a radical, historic and significant change to the financing of public services in Scotland. The Office for Budget Responsibility forecasts that these measures will enable the Scottish Government to fund around a third of the spending it controls; more than double the proportion currently funded through council tax and non-domestic rates.
The Scotland Act 2012 implemented the recommendations of the Commission on Scottish Devolution, delivering substantive reforms to the devolution settlement in Scotland on a range of financial and non-financial matters.
Delivering the Act was a significant achievement; from its introduction in November 2010 through to Royal Assent in May 2012, the legislation was subject to detailed scrutiny in the UK and Scottish Parliaments and received overwhelming support from both. But as we recognised during the passage of the Bill, the legislation is just one part of the process and both governments are now focused on the practical steps required to implement these important changes.
The significant devolution of fiscal powers is set out in Part 3 of the Scotland Act. The implementation of these powers represents a substantial body of work and a timeline that stretches into 2016 and beyond to ensure that the new system operates with stability and predictability for the provision of devolved services in Scotland. In order to ensure that both parliaments are kept informed, we committed during the passage of the Bill to publish an annual report on the implementation of the financial provisions. This is the first annual report and provides an opportunity to reflect on how we have acted to implement these important changes since the Bill received Royal Assent on 1 May 2012.
The work undertaken over the last year illustrates the power of devolution, with two parliaments and two governments working together in the interests of Scotland. The new powers will give the Scottish Parliament greater control over a significant proportion of the Scottish Government Budget and how this money is raised, while transitional arrangements and new borrowing powers for Scottish Ministers ensure that the support and stability of the wider UK economy continues to apply in Scotland. With the implementation of these finance provisions, Scotland will continue to have the best of both worlds.