DEREK Mackay has hit out at a UK Treasury Minister over a “ridiculously false” claim on the Scottish Budget.
Tory MP Liz Truss said she had provided “additional cash” for the Scottish Government after a shortfall in income tax revenues.
Writing in the Scottish Daily Mail, Truss said: “Our mutually agreed fiscal framework is designed to benefit the Scottish Government if growth in Scotland is faster than the rest of the UK.
“Thankfully, it also cushions the blow when growth is down in Scotland. So I have confirmed that the Treasury will give £737 million additional cash through the block grant to the Scottish Government.”
The Scottish Government faces a £204m Budget shortfall, with income tax receipts falling £941m short of the 2017-18 period.
However, the £737m being provided by the UK Government reflects the amount it should not have taken off the block grant to Scotland when the Budget was set out, rather than being “confirmation” of additional money, and so the error will be corrected in the 2021-21 Budget.
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The Scottish Budget is based on forecasts, and so when the outturn figures were available, the block grant adjustment (BGA) was recalculated to £737m lower than had been predicted.
The BGA compensates the UK Government for money it would have received from tax revenues that are now devolved.
Hitting back on Twitter, Mackay said: “This is a wilful misrepresentation of the truth. The UK income tax take for 2017-18 is lower than expected which means that Treasury deducted £737m more from our block grant in 2017-18 than they should have. The UK is simply correcting this forecasting mistake.
“I wonder why the UK Tory Treasury Minister would be choosing now as her timing to make such a ridiculously false case against Scotland.
“And how absurd from a Tory government paralysed by their own divisions with no economic credibility, who in an act of social and economic vandalism are about to take the UK & Scotland into a painful recession wilfully and knowingly.
“Meanwhile in Scotland we are outperforming rUK on low unemployment, export growth, productivity improvement and other economic indicators. All at risk from a Tory Brexit!"
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He continued: “With full economic powers I’m sure we could do so much more in Scotland. An alternative to the failed austerity, London-centric and inequality compounding Tory economic model – and that’s before your Brexit car crash!
“Scotland is building a more progressive income tax system, based on principles that protects the economy, raises revenue for public services and protects the lower paid. 55% of taxpayers pay less in Scotland than they would if they lived south of the Border.
“In contrast to a principles-based tax approach, the Tory party has clearly gone off the deep end with their two leadership candidates leaning to the extremes.”
Fact Check: Liz Truss’s claims just don’t add up
TREASURY Minister Liz Truss said the UK Treasury is “cushioning the blow” of lower than expected income tax receipts in Scotland.
Truss said the fiscal framework “cushions the blow when growth is down in Scotland. So I have confirmed that the Treasury will give £737 million additional cash through the block grant to the Scottish Government.”
Should Scotland be singing the praises of Westminster for this generous act, then?
The UK provides a block grant to Scotland via the Barnett Formula, but with some of Scotland’s budget funded by tax revenues that are now devolved, an adjustment is made to compensate the UK Government for money it would have received. This is called the block grant adjustment (BGA).
Scotland’s budget is based on forecasts. So, the forecast income tax revenue in the Holyrood 2017-18 budget was £11,857m. The corresponding block grant adjustment (BGA) was forecast at £11,750m.
But income tax receipts in Scotland and the BGA were lower than expected. Revenues in Scotland were actually £941m below predictions and the BGA was recalculated at £11,013m. That’s £737m lower than was forecast.
In other words, the UK Government took £737m off the Scottish block grant when the budget was set that, in fact, it shouldn’t have. Truss has not “confirmed” additional cash – this is just how this framework works.
The Scottish Government will have to find the cash to cover a £204m Budget shortfall, but this is not a UK Government bail-out.
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