The Scottish Fiscal Commission today published an evaluation of its recent forecasts, together with two new papers on forecasting Scotland's VAT assignment and on the data it requires to carry out its work.
The evaluation report showed the Commission's 2017-18 economic forecast was affected by the Scottish Government's data revisions published last month. While this re-profiling of Scotland's Gross Domestic Product (GDP) now shows stronger growth in 2017-18 than previously reported, average growth since 2010-11 has fallen slightly. The Commission's view is that these revisions provide no evidence to suggest that it would change its analysis of the underlying subdued trends in the economy.
The Commission's report also includes an analysis of Scotland's finalised 2016-17 income tax outturn data published by HMRC over the summer. This was the first ever official release of data on Scottish non-savings, non-dividend income tax receipts. It showed that receipts were £550 million lower in 2016-17 than the Commission had previously estimated. We believe that this reduction is primarily driven by the number of additional and higher rate income taxpayers being lower than other data sources suggested. HMRC's new data will become the baseline for the Commission's future forecasts.
Commission chair Dame Susan Rice said:
"While the revised estimates of GDP indicate a growth rate above the Commission's most recent forecast, we believe the outlook for the economy remains largely unchanged, with trend growth in Scotland remaining subdued.
"Data revisions are a natural part of measuring the economy and producing forecasts. They help us to build a more accurate picture of whatâ€™s happening in the economy and we look forward to reflecting this new information in our models as we prepare our forecast to inform the Scottish Budget for 2019-20."
The Commission has also published a paper on how it proposes to forecast around £5 billion of VAT revenue which is expected to be assigned to Scotland from 2019-20, and impact the Scottish Government's budget from 2020-21.
The Commission works with a large number of Scottish and UK data providers to create its forecasts. The third paper published today sets out the improvements in data that the Commission feels would help it produce better forecasts.
Note to Editors:
- The Commission's Forecast Evaluation Report 2017-18 is now published on its website.
- The Commission's Value Added Tax (VAT) Approach to Forecasting September 2018 and Statement of Data Needs September 2018 are also available.
- The Commission has published two economic and fiscal forecasts (in December 2017 and May 2018) since it became Scotland's official, independent forecaster in April last year. The Commission's forecasting process is explained in a short video on its website
- Dame Susan Rice is chair of the Scottish Fiscal Commission; she and Professor Alasdair Smith are Commissioners.