In its Fiscal Update published today, the Scottish Fiscal Commission shows the Scottish Budget has increased by £3 billion since the Scottish Government presented its Summer Budget Revision to Parliament in May 2020.
The UK Government has responsibility for the UK-wide economic and fiscal response to the current pandemic. In total the UK Government has guaranteed the Scottish Government £6.5 billion of additional funding related to COVID-19. This gives the Scottish Government greater certainty to plan its budget for the remainder of the year, though it still faces other fiscal risks. The Scottish Government will decide how this funding is allocated.
The report assesses the economic outlook for Scotland. Scottish GDP fell sharply earlier in the year because of COVID-19. The economy is now showing some signs of recovery, but the Commission believes that GDP is likely to remain below its pre-COVID-19 level for some time to come, perhaps not recovering fully until 2023. Unemployment will increase and many people’s earnings will be lower.
Dame Susan Rice, Chair of the Scottish Fiscal Commission said:
“The Scottish Government is receiving significant additional funding to help it respond to the pandemic but there are still a number of uncertainties ahead. The winding down of initial COVID-19 policies, the potential for further disruption and the risks associated with additional lockdowns pose challenges for the economy and for both the UK and Scottish Governments.
“Devolved Scottish tax revenues are expected to fall this financial year while social security payments are likely to increase. These changes should be largely offset by adjustments in the block grant, reflecting similar changes to UK tax revenues and benefit spending. The position should be clearer by the time of the Scottish Budget, expected in December.”
The Scottish Fiscal Commission has also published its regular Statement of Data Needs and Forecast Evaluation Report. The Report covers 2019-20, before any significant effects of COVID-19 had arisen. While errors for individual forecasts vary, taken together our overall forecast error was 2 percent.
ENDS
Notes
1. The Commission’s Fiscal Update – September 2020, Forecast Evaluation Report – September 2020 and Statement of Data Needs – 2020 are now published. Background information is also available including spreadsheets with data for all the update’s tables and charts.
2. We would normally evaluate income tax forecast in our annual forecast evaluation report. However, the publication of 2018-19 income tax outturn data has been delayed by HMRC until 23 September. We will publish a supplementary evaluation report covering our 2018-19 income tax forecasts at 9:30 AM on 5 October.
3. On 3 September at 11:00 am we’ll host an online presentation and Q & A session on the Fiscal Update. You can register to join here.
4. The Commission’s next set of forecasts are due to be published alongside the Scottish Budget, expected in December as outlined in the Cabinet Secretary for Finance’s letter to Dame Susan Rice on 25 August.
5. The Scottish Fiscal Commission is the independent fiscal institution for Scotland, established by the Scottish Fiscal Commission (2016) Act. Our statutory duty is to provide the independent and official forecasts of Scottish GDP, devolved tax revenue and devolved social security spending for the Scottish Government to use in its budget and financial planning. The Commission’s forecasts also assist the Parliament’s scrutiny of the Scottish Budget.
6. This update represent the collective view of the Scottish Fiscal Commission, comprising the Commissioners: Professor Francis Breedon, Professor Alasdair Smith, Professor David Ulph, and the Chair, Dame Susan Rice.
Media Enquiries:press@fiscalcommission.scot or phone Caroline on 07547 674277