How and why has the Scottish Government’s funding changed in recent years?

This report from UK think tank the Institute for Fiscal Studies looks at real-terms funding for the Scottish Government.

Real-terms funding for the Scottish Government’s day-to-day (or resource) spending in 2021-22 is still set to be 2% lower per person than in 2010-11, after excluding temporary COVID-19 related funding, and adjusting for new responsibilities. However, this fall is smaller than the fall seen in England over the same period. That’s because of slower population growth and a flaw in the Barnett formula until 2015-16 that meant Scotland escaped most of its share of cuts to local government funding. The Scottish Government now has over £1.30 per person to spend on public services for every £1 of comparable spending per person in England. Almost all of this gap – 28.9p out of the overall 30.6p – is explained by relatively high levels of funding from the UK government via the Barnett formula. Net revenues from the Scottish Government’s devolved taxes, on the other hand, make only a marginal contribution. This is partly because the Scottish government’s tax reforms have been modest. It is also because Scotland’s underlying income tax base has performed relatively poorly compared to the rest of the UK since the devolution of income tax powers, reflecting slightly weaker economic growth. This has offset almost three-quarters of the revenues raised by the income tax reforms. So, while the Scottish Government’s income tax reforms are estimated to raise around £456 million, the latest forecasts suggest it will receive just £117 million more in funding this year as a result of the devolution of income tax. Had income tax not been raised revenues would have fallen relative to a world without devolution. These are among the findings of the first Scottish Election Briefing Note by IFS researchers, funded by the Scottish Policy Foundation as part of its programme of work to inform public debate in the run up to the Scottish parliamentary elections.

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