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Finance and Public Administration Committee

Block Grant Adjustments

Letter from Cabinet Secretary for Finance and the Economy to the Convener of 9 November 2021

Dear Kenneth

The Office for Budget Responsibility (OBR) published updated UK Government tax revenue and social security expenditure forecasts on October 27. These forecasts inform the Block Grant Adjustments (BGAs) for the Scottish Budget 2022-23. Table A in the annexe to this letter sets out the BGAs for Income Tax, Land and Buildings Transaction Tax (LBTT), Scottish Landfill Tax (SLfT), and the devolved Social Security benefits.

These BGAs only provide half of the story as the full impact on Scotland’s Budget will not be known until the SFC publish their forecasts in December.

As the 2021-22 BGAs for the Fully Devolved Taxes and Social Security benefits have been updated to reflect the latest forecasts of corresponding tax receipts and social security expenditure in the rest of the UK, we have calculated the in-year reconciliations required to the 2021-22 Scottish Budget, as outlined at Table B in the annexe.  A negative reconciliation of £96 million will be deducted from the 2021-22 Block Grant. As noted above, this only provides one side of the calculation, and SFC forecasts alongside the 2022-23 Scottish Budget will allow a rounded picture of the net position.

The final reconciliation applying to the 2022-23 Scottish Budget relating to previous years’ outturn will be finalised once final outturn data is published by HMRC, for tax, and DWP, for social security expenditure, in November and I will update the Committee when the data is available.

I hope you have found this update helpful, and my officials would be happy to provide any further information on the BGAs to Committee Members, as required.

Yours sincerely
Kate Forbes

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Annexe A

Block Grant Adjustments and In-Year Reconciliations