Writing in the Scottish Daily Mail, Treasury Minister Liz Truss said the UK Treasury is “cushioning the blow” of lower than expected income tax receipts in Scotland.
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.”
Should Scotland be singing the praises of Westminster for this generous act, then?
Not quite.
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).
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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's claim that she has "confirmed the treasury will give £737m additional cash through the block grant" is nonsense. She hasn't confirmed this and it's not additional cash – it's just how this framework works.
The Scottish Government will have to find the cash to cover a £204m Budget shortfall, but this is far from the UK Government bailing Scotland out of a £1 billion black hole.
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