Scottish Budget

Holyrood facing half a billion pound Budget hit

John Ireland Scottish Fiscal Commission

John Ireland: ‘it’s about being aware’ (pic: Terry Murden)

Scottish ministers are facing a half billion pound black hole in the budget because of discrepancies in forecasting tax receipts.

About £555million is due to come out of the Holyrood budget in 2021/22 – more than the government’s reserves and borrowing can cover.

Independent forecasting group, the Scottish Fiscal Commission, has warned that ministers “need to start thinking” about how they will plug the gap.

Commission chief executive John Ireland told a media briefing: “It’s too early to do a lot of planning, but they need to have it in mind.

“It’s being aware that you have this half-a-billion-pound hit on the budget in a couple of years’ time.”

The Scottish Government is forecast to have £100m in reserve next year and can only borrow up to £300m annually to make up any shortfall.

In a paper following this week’s Scottish Budget, the SFC warned: “It would seem that the Government is not building up its reserves to deal with the large income tax reconciliations expected to reduce the budget in 2020-21 and 2022-2023.”

It expects the government to provide an update in May. “The Scottish government should consider how best to prepare for future reconciliations,” said the Commission.

Dame Susan Rice, chairman, said: “This coming year is when the country will feel the full impact of the fiscal framework.”

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