GovWire

Under the fiscal framework agreed between the UK and Scottish governments in 2016, the Scottish Governments funding is initially based on forecasts of Income Tax and updated once actual Income Tax revenues are available.

In short, actual Income Tax data for 2021-22 replaces forecasts of Scottish Income Tax (made by the Scottish Fiscal Commission) and forecasts of the associated block grant adjustment (based on forecasts of UK Government Income Tax made by the Office for Budget Responsibility).

This reconciliation process for 2021-22 can now be undertaken as HMRC have published 2021-22 Income Tax outturn data today:

• Scottish Income Tax is higher than forecast at the time of the 2021-22 Scottish Budget so this will increase Scottish Government self-funding by 1,461 million in 2024-25
• The associated block grant adjustment is also higher than forecast at the time of the 2020-21 Scottish Budget (driven by higher than forecast Income Tax revenue for the rest of the UK) so this will reduce Scottish Governments block grant funding by 1,851m in 2024-25
• The net effect is a 390 million reduction in the Scottish Governments overall funding for 2024-25.