Holyrood to raise scrutiny of budget process in wake of new powers

An expert-led group is to carry out a fundamental review of Holyrood’s budget process to take account of Scotland’s new fiscal powers.

The tripartite group, comprising eight public finance experts and academics together with four senior officials from each of the Scottish Government and Scottish Parliament, will examine what changes are required to the Scottish Parliament’s budget process to ensure there is proper oversight and scrutiny of the new tax and spending powers that Holyrood will acquire by 2018.

Tasked with reporting to the Finance Committee and ministers before the 2017 summer recess, the group will consider the new complexities of the Parliament’s powers including the potential impact of:

• forecasting of tax receipts and demand-led social security spending;
• the operation of the indexation mechanism;
• the calculation of the adjustments to the block grant;
• the reconciliation between tax receipt forecasts and outturn figures;
• the UK Government’s Autumn Statement;
• the availability of relevant outturn data; and
• associated revenue effects of tax change behaviours.

Its terms of reference are: “To carry out a fundamental review of the Scottish Parliament’s budget process following the devolution of further powers in the Scotland Act 2012 and Scotland Act 2016. To bring forward proposals for a revised budget process which are consistent as far as possible with the principles of the Financial Issues Advisory Group for consideration by the Finance Committee and the Cabinet Secretary for Finance and the Constitution.“

After assessing the impact of the new powers on the effectiveness of the present process, the group will devise a revised budget process which addresses the increased level of responsibility, provide opportunities for the Parliament to comment on expenditure priorities and influence the preparation of budgets, and allow the public the opportunity to put their views to subject committees, as well as individual MSPs at an early stage in the process.

There is also to be sufficient time for full parliamentary debate, including a meaningful role for subject committees and the Finance Committee, and the right of amendment.

Expert members are Caroline Gardner, Auditor General for Scotland; Don Peebles, Head of CIPFA Scotland; Sean Neill, chief executive, Scottish Fiscal Commission; Professor James Mitchell, Director of Academy of Government, University of Edinburgh; Dame Sue Bruce, non-executive director; Dr Angela O’Hagan, Glasgow Caledonian and Gender Budgeting expert; Elaine Lorimer, chief executive of Revenue Scotland; and Professor Mike Danson, Heriot-Watt University.

Finance Committee convener Bruce Crawford MSP commented: “Holyrood’s budget process was designed nearly 20 years ago, at a time when the Scottish Government’s budget was largely determined by Westminster through the Barnett formula.

“With Scotland’s new tax powers, the Scottish Government is about to become responsible for raising much more of what it spends, and will rely on tax forecasting in order to set out its draft budget before Parliament each year.

“Understandably the Government will want to rely on the most accurate forecasts of tax revenue possible in order to ensure confidence and credibility in its budget. Equally, however, the Finance Committee will want to ensure that any new budget process still includes sufficient time for proper parliamentary scrutiny."

Cabinet Secretary for Finance and the Constitution, Derek Mackay added: “Scotland’s budget process needs to evolve to take account of the complexities and opportunities associated with the Scottish Parliament’s new powers. It is important to ensure that we develop a process that balances the time required for proportionate and effective parliamentary scrutiny with the need to ensure that the information being scrutinised is as accurate as possible and based on the most up-to-date forecast information.”