SCOTLAND would have faced bills of £300 million a year if it had accepted the Treasury’s terms for the Fiscal Framework say economic heavyweight the Institute for Fiscal Studies.
In its analysis of the final agreement between UK and Scottish government on the finances underpinning the Scotland Bill, the think tank says Holyrood got a good deal from the negotiations.
The IFS say the Indexed Per Capita model, how Scotland’s block grant should be adjusted given the taxes raised, and pace of population growth, satisfies the Scottish Government’s interpretation of no detriment, but not the Treasury’s commitment to UK taxpayer fairness.
The report says: “If Scotland’s devolved revenues and welfare spending per person grow at the same rate as those in the rest of the UK, then the Scottish Government’s budget will be exactly the same as if devolution had not happened.”
By 2021-22 around £900 million of additional revenues from the rest of the UK, on top of money raised here, could be redistributed to Scotland.
David Phillips, a senior research economist at the IFS and one of the authors of the report, says: “It was never going to be possible to design a Fiscal Framework that satisfied all the Smith Commission’s principles.”
Deputy First Minister John Swinney said: “This analysis by the IFS demonstrates Scotland’s budget could have been cut by £300 million a year by 2020/21 if the UK Government’s preferred model had been implemented. That is why we ensured that Scotland’s block grant will be adjusted annually, by indexed deduction per capita, to ensure no detriment to Scotland as a result of having new powers.”
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