Despite increases in funding for Scotland from the UK Government’s October Budget, Scottish Government Finance Minister Shona Robison has little room for manoeuvre when she presents her Budget for 2025-26 next week (write FRASER OF ALLANDER INSTITUTE’S Joao Sousa and Mairi Spowage).
This is the headline message of the Scotland’s Budget Report 2024, published yesterday by the Fraser of Allander Institute at the University of Strathclyde.
Significant Barnett Formula consequentials have been generated by UK Chancellor Rachel Reeves announcements last month – £1.5bn in 2024-25 (of which £1.4bn is resource) and £3.4billion in 2025-26 (of which £2.8bn is resource).
However, the Scottish Government has said the funding provided in the 2024-25 year is already largely committed. If this is the case, the uplift for 2025-26 is under more pressure than it would appear. On the resource side, this would mean an uplift of £1.4 bn in 2024-25 being followed by an uplift of £1.4bn in 2025-26.
Public Sector Pay makes up over half of the Scottish Government’s resource budget, and therefore the decisions made on pay will have significant bearing on the overall budget position. Wage bills recur every year, thus current and future 2024-25 pay decisions will have a big impact on the overall budgetary decisions.
The fact that public sector workers are, on average, paid more in Scotland, will mean that the challenges are even more acute, given the country’s much larger public sector. The decisions on this, and on areas like social security, have put additional pressure on the Scottish Government’s budget.
Dr João Sousa, Deputy Director of the Institute, said: “As part of our report today, we have published where we think the Scottish Government are in terms of their funding position for 2024-25.
“Figuring out the funding position for 2025-26 has been much more challenging. The lack of a Medium Term Financial Strategy this year has made calculating this near impossible, but we have set out the various pressures that the budget is likely to be under.
“Health Spending, all other pay, social security and grants to local government make up £7 in every £8 the Scottish Government spends. This seriously limits their room for manoeuvre in changing the overall shape of the Budget.”
The report includes significant analysis of how Scotland spends its money to understand more about the discretionary power the Government has to prioritise its budgetary decisions.
Also included is analysis of the impact of employer National Insurance Contribution rises on the Scottish Government’s Budget, and analysis of the cost to the Scottish Government of replicating the 40% retail, hospitality and leisure relief (RHL) announced by Rachel Reeves in Scotland.
Our analysis also that although spending on reducing child poverty – stated by successive Scottish First Ministers as one of the main, if not their utmost priority – has grown significantly since 2018-19, it would not be fair to say that it has become a large part of the Scottish Budget.
It remains under 3% of all discretionary resource funding, and capital spending on child poverty reduction through the provision of affordable housing and urban regeneration has actually fallen by 13% in real terms since 2019-20.
In the Budget, the Chancellor announced that Retail, Hospitality and Leisure (RHL) businesses would receive 40% rates relief in England next year, following a 75% relief in the current year (write Fraser of Allander Institute’s MAIRI SPOWAGE and JOAO SOUSA).
RHL businesses in Scotland have had no such relief since 2021-22, which (as you can imagine) has led to many businesses saying they are at a disadvantage to their counterparts South of the Border. Given this extension in relief in England, businesses in the RHL sector are likely to be calling on the Scottish Government to follow suit.
Such a decision by the Chancellor does generate Barnett consequentials for the Scottish Government, because the UK Government compensated English councils for the lost revenue. Business rates are devolved to all three devolved nations, and there is no obligation for any of the devolved governments to replicate measures in their jurisdiction.
Last year, we looked at the 75% relief announcement in England and tried to estimate how much it would cost to replicate. This analysis concluded that it was likely to cost considerably more in Scotland to replicate the relief than was provided through Barnett, because:
The business rates system is just differently structured in Scotland; but mainly;
RHL businesses make up a larger share of the property tax base in Scotland.
What about the 40% relief?
As we did last year, we have looked at the data available on the tax base for business rates to try to estimate how much it might cost to replicate the 40% relief in Scotland.
We must emphasise that this is not completely straightforward from the publicly available data. Whilst the Valuation Roll (which lists all properties and their rateable value) is a public document, the extent to which different properties attract reliefs is not on this database, so we have to make some assumptions about the extent to which properties may already be receiving reliefs. Obviously, for example, if a property is already receiving 100% relief (e.g. through the Small Business Bonus Scheme), then they cannot receive any more relief from the 40% measure, even if they are in RHL.
This is important because 100% relief for property is actually quite common: 48% of properties receive this.
Chart 1: Proportion of properties that receive 100% relief, selected property classes
Source: Scottish Government
The second challenge is that there is a cap on the amount of relief that an individual company can receive, which limits the amount of relief paid, but requires a property-by-property analysis (and some assumptions about multi-property companies) to understand the impact this has on the overall cost.
All of these assumptions mean our analysis will not be as accurate as a proper costing by the Scottish Fiscal Commission if the Scottish Government were to introduce this measure (given the additional data they have access to): and our attempt to account for multi-property enterprises is likely to be imperfect which might mean we are underestimating the impact of the cap (so slightly overestimating the cost of a new relief).
Having said all that (sorry for all the caveats), our analysis suggests that it will cost roughly £220m to replicate this relief in Scotland, compared to the £147m that was generated by the decision in England through Barnett.
[For those who are interested, you will note that this is not a linear reduction on our estimate for the 75% relief. This is because of the cap for each company again: companies are more likely to hit the cap with a higher level of relief so it is not as simple as it appears, unfortunately!]
Look out for more analysis
We will be producing Scotland’s Budget Report 2024 on 29 November, which will set the context for the Scottish Budget on 4 December. In the run-up, we will continue to publish blogs with new analysis to add to the discussion!
Budget speculation, the economy returns to growth, the impact of cuts, and the disability employment gap
Three weeks still to go, and speculation about what will be in the Budget on 30th October continues (writes Fraser of Allander Institute’s MAIRI SPOWAGE, SANJAM SURI and EMMA CONGREVE).
Will the Chancellor change her fiscal rules? It looks likely that there will be some movement on this, whether in the definition of debt or something more fundamental, however much that could undermine their commitments in the manifesto.
Will there be increases in Capital Gains Tax? The speculation on this has reached fever pitch, with some stories suggested rates from 33% to 39% are being considered. (Interestingly, when we look at the ready reckoners from the HMRC, changes of this magnitude in some forms of CGT actually may result in less revenue when behavioural effects are taken into account). There certainly seems to be expectations out there in the economy that the rate may change, with lots of signs that disposals have increased hugely in anticipation.
Will there be increases to employer national insurance contributions? There has been much discussion about this, given the commitment of the UK Government not to “raise taxes on working people”, and due to the fact that the PM would not rule this out this week. A 1 percentage point rise in employers NICS would raise almost £9bn according to the ready reckoner (although we think that doesn’t include the additional costs to departments).
We’ll be going into the detail of some of these issues in the run up to the Budget, so there will be plenty for you all to chew over as we wait… and wait… for the Budget.
UK Economy Returns to growth in August
Data released this morning showed that the UK economy posted its first monthly GDP increase since May 2024. ONS reported this morning that monthly real GDP grew 0.2% in August 2024. There were no revisions made to the “no growth” months of June and July. While monthly numbers were in line with consensus forecasts, they show an economy that has slowed down from the beginning of 2024.
The good news is that growth in August came from all key sectors- with services rising by 0.1%, and production and construction rising by 0.5% and 0.4% respectively. Crucially- August was also the first time all three sectors positively contributed to growth since March 2024.
A more granular breakdown of service sector growth indicates that the biggest positive contribution came from the professional, scientific, and technical activities subsector- where monthly change in output was +1.6% from the previous month. Despite overall growth in services sector- seven subsectors saw decline in economic activity- with arts, entertainment, and recreation falling 2.5% over July 2024.
The production sector grew by 0.5% in August after hefty decline of 0.7% in July. Despite a rebound in August, the production output is essentially flat since the end of May 2024. The biggest contributor to production sector came from 1.1% rise in manufacturing activity- driven by transport equipment manufacturing However, mining and quarrying output declined 4.0% over July 2024- continuing their downward trend since end of December 2023.
What is the impact of cuts in spending?
When the Scottish Government presented their Fiscal Statement to parliament in early September, the Cabinet Secretary for Finance said that impact assessments had been done to understand the impact that the announced cuts could have on different groups.
These assessments were not published at the time, but finally were published last week. We welcome the publication of these, and although there are lots of criticisms that could be made of the assessments, it is good to see this transparency. One area of weakness is assuming that if funding was maintained at previous levels, there will be minimal impact, which assumes that previous levels was the correct level… so why was the budget being increased in the first place?
One of the main things to note though is the lack of analysis of cumulative impact on groups. A number of “minimal impacts” could still add up to something significant if they are affecting the same group.
Final report of the parliamentary Inquiry into the disability employment gap published
In 2016, the Scottish Government published A Fairer Scotland for Disabled People, which outlined how the government intended to shape policy – especially labour market policy – for disabled people living in Scotland.
One of the key goals this report outlined was reducing the gap in the employment rate between disabled and non-disabled adults. In 2016, 80.4% of non-disabled working aged adults were employed in Scotland, compared to 42.8% of disabled working aged adults, making for an employment gap of 37.5 percentage points. The government’s goal was to cut this gap in half by 2038.
In 2023, the Economy and Fair Work Committee in Scottish Parliament launched an inquiry into how this policy goal was going. In fact, in 2023, it seemed like it was going quite well.
The gap was down to 30.3 percentage points, which was actually ahead of schedule: if progress were linear, the disability employment gap would drop by about 0.85 percentage points each year, meaning that it would be 31.5 percentage points in 2023.
Two of our economists at the FAI, Allison Catalano and Christy McFadyen, contributed to this inquiry through a fellowship with the Scottish Parliament Information Centre (SPICe). Their work, which we published back in January, found that the majority of the change in disability employment is due to a rise in disability prevalence, rather than any specific policy.
Their report also highlighted some significant data issues: people with different types of disability have vastly different capacities for employment, vastly different support needs within employment, and vastly different rates of employment. Yet, in Scottish data and policymaking, disabled people are often treated as a singular entity, meaning that it is not possible to understand where policy interventions might be most effective.
The final inquiry publication highlights our work and a variety of other issues which will need to be addressed in order to improve work access for disabled people, all of which can be found here. They have produced 44 recommendations to improve employment prospects for disabled people.
It ain’t pretty. But there’s also politics at play.
Rachel Reeves gave a statement to the House of Commons on what the government calls the “spending inheritance” (writes Fraser of Allander Institute’s JOAO SOUSA).
It’s important to make clear what this is and isn’t about. If you hear people saying that this is all to do with fiscal rules, that’s incorrect. We have highlighted many problems with them, but this statement is all to do with this year’s public finances, meaning 2024-25 – all the fiscal rules will apply to 2029-30, although there will be some knock-on effects into future years from these decisions.
Ultimately, this is only a partial fiscal statement – setting the scene for the Budget, the date of which has been announced for 30 October. It is a welcome return to normality in that there will be more than 10 weeks for the OBR to prepare its forecast.
The spending pressures and the ‘black hole’ – how does the Treasury calculate it?
Rachel Reeves said in her statement that pressures on public spending exceeded allocated funding by £35 billion. Some of this is additional spending from accepting the recommended pay awards from the Pay Review Boards in England, which are higher than the previous government had budgeted for.
Others come from areas like accommodation for asylum claimants, which the previous government had just assumed would come from the Home Office’s spending limit. Given that the Home Office’s total allocation is £21 billion, you can see why accommodating a pressure worth nearly a third the size of its envelope was not credible.
The Treasury had set aside £9 billion in reserve – a usual management practice for unforeseen circumstances during the course of the year, and which allows the government to plan in some budget cover for unspecified departments. This reduces spending pressures to £26 billion.
The Treasury also assumes that some of these pressures will either not materialise (they are pressures after all, not crystallised spending yet) or that some will be “managed away” – usually by playing hardball and forcing departments to find savings somewhere else.
Ever wondered why the Home Office keeps putting fees for anything to do with visas and passports? The Treasury allows them to deduct it against their budget (fees are classified in Estimates as “negative spending”, for the fiscal aficionados) and it’s the quid pro quo of accepting responsibility for the financial risk for spending pressures.
There are a few rounds of this over the course of the year, and by the time of Supplementary Estimates – usually mid-February – the Treasury and other departments essentially have a stare-down contest, which tends to end up with both sides conceding somewhat, and so the Treasury assumes something about its ability to do that – what is called ‘fallaway’ in the document. This amounts to £7.1 billion, and bring estimated pressures down to £19 billion.
The Treasury then adds back £2.9 billion to get to what they call “total pressures”, because this is how much the OBR assumes that the UK Government will underspend its limits by. Essentially, the OBR assumed actual spending would be £2.9 billion lower than the limits; given that pressures on the Treasury side are relative to the limits, this amount needs added to get to the total pressures compared with the OBR forecast.
This ‘Treasury maths’ is all fine – but what does this mean in practice?
This statement only looked at the spending side of the ledger, comparing what had been budgeted for with what the most recent view of spending plans is. It’s actually quite consistent with the latest data from the ONS as well, which when compared with the OBR’s forecast and extrapolated for the rest of the year, would suggest that consumption spending (mostly comprising of departmental spending) is running around £20 billion higher than expected in March.
Faced with this, the Chancellor has several options: she can let borrowing increase – which would happen automatically if she accommodated pressures; she can reallocate spending from other areas to combat pressures; she could raise taxes; or a combination of the three.
The immediate signal appears to be that the Chancellor is not prepared to just borrow the additional £22 billion. She has committed to £5.5 billion in savings this year: £1.4 billion coming from means-testing winter fuel payments to pensioners, with most of the rest coming from as-yet not fully specified ‘efficiencies’: out of the £3.2 billion pencilled in, just £0.9 billion are itemised.
This is a legitimate criticism of the plans – these savings are hard to deliver and can’t just be magicked into existence. Although the same (or even more) could be said about the fantasy £20 billion in productivity improvements that Jeremy Hunt claimed he had delivered in his response.
But this still leaves around £16 billion to cover. Rachel Reeves left the door open to some tax rises – she said she would not increase any of the headline rates of income tax, National Insurance contributions, VAT or corporation tax, but that still leaves room for base-broadening reforms and increases in other taxes.
We’ll have to wait until the Autumn to see how much of this additional £16 billion will be covered by tax rises, and to what extent the Chancellor will accommodate some additional borrowing. A combination of the two seems likely.
Did Jeremy Hunt or the Treasury hide this?
The more politically heated debate was the extent to which there was some sort of hiding of the ugly truth of what spending pressures looked like in March, at the time which the OBR included the Treasury’s plans in the forecasts for the public finances.
Richard Hughes, Chair of the OBR, wrote a letter to the Treasury Committee announcing a review of the “adequacy of the information and the assurances provided to the OBR by the Treasury regarding departmental spending.”
This is a pretty strongly worded letter, and in my view – as someone who was included in the scrutiny of these spending plans – reflects long-standing frustrations of OBR officials and commissioners about their inability to fully assess the credibility of spending plans.
The Chancellor announced she would be updating the Charter for Budget Responsibility to include the sharing information on ‘immediate spending pressures’ with the OBR. This sounds like a good idea, right? So good that in fact it already is in place, and is provided in legislation by compelling the Government to make available to the OBR essentially any information that is relevant for the preparation of the forecasts.
And the Treasury does share this, in my experience – although with some prompting required at times. Ultimately, the biggest issue here is more political and less tractable than the Chancellor let on, and reflects what former commissioner Andy King wrote earlier in the year.
The OBR is really in a bit of a bind, having to reflect spending policy which is set at a very aggregate level and which it cannot opt out of including in the forecasts. If it did, it would be the nuclear option – it would cause a breakdown in the institutional framework between it and the Treasury.
This is quite a difficult institutional arrangement, and there’s probably no single solution that would solve that. But I do think that a bigger focus on economic categories such as pay, procurement and other elements – much like Andy King’s suggestion – would be helpful in increasing scrutiny and understanding of the underpinnings of the forecast.
I would go further in suggesting doing this for the largest departments as well as the overall central government sector – which would allow further scrutiny in terms of understanding what’s being planned for different areas in the face of an ageing population.
This is an area where the Treasury’s lack of interest and buy-in into providing always struck me as odd and self-defeating. Of course it might unearth some difficult trade-offs, but it is also what a responsible workforce planning authority should be doing anyway. And in any case, to govern is to choose – and all of us members of the public would benefit from having access to better information on this.
That alone would be enough to make it worthwhile keeping the pressure on the Treasury to agree to provide this.
Brace yourselves: a spending review is coming
The Chancellor also provided some much needed clarity in terms of the spending review timetable. We now know that what is essentially an interim 1-year review will be concluded alongside the Budget on 30 October, where 2025-26 budgets will be set.
The spring of 2025 will see a welcome return to multi-year budgeting, with a full spending review covering at least three of the five forecast years. There will also be a requirement for a spending review every two calendar years, bringing a much-needed default assumption about the frequency of these exercises. They had become progressively ad hoc, and it will be up to the Government to show it does indeed comply with its own set of timetables.
Implications for the Scottish Government
A few things stand out in terms of what this means for the Scottish Government. In terms of timings, we now know when the UK Budget will be and that it will come alongside a block grant settlement for 2025-26, a pre-condition for the Scottish Budget.
This means we are likely to see the Cabinet Secretary for Finance appearing in the Debating Chamber to deliver the Budget Statement in late November or early December – hopefully avoiding the difficulties the Finance Committee had in scrutinising the Budget last year due to proximity to recess.
In the case of most of the measures announced, the direct impact on the Scottish Budget might be relatively limited, though we’ll have to wait until 30 October to be sure. A non-negligible proportion of the accommodated pressures will come from reductions in other spending areas – most of those reallocations would not change budget totals, although composition matters for Barnett consequentials.
If there is increased borrowing to allow for some of this additional spending, then there might be some added funding for Scotland.
But where there is an immediate prospect of a decision for the Scottish Government to make is on winter fuel payments (or pension age winter heating payments, as they are now known in Scotland). This is now a devolved benefit, and the Scottish Government gets an additional block of funding on the basis of equivalent in England and Wales, worth around £180 million.
With eligibility being restricted, the transfer from Westminster will be reduced, and it will therefore be for the Scottish Government to decide whether it follows the UK Government in changing eligibility or whether it wants to maintain universality and therefore needs to find additional funds for it.
On 19 March of this year, the Shadow Chancellor Rachel Reeves delivered the 36th Mais Lecture at Bayes Business School in London (writes Fraser of Allander Institute’s João Sousa).
This was an opportunity for Labour to set out their stall on economic policy, and Rachel Reeves used it as a chance to outline her proposed fiscal rules.
In doing so, she said: “[O]ur fiscal rules differ from the government’s. Their borrowing rule, which targets the overall deficit rather than the current deficit, creates a clear incentive to cut investment that will have long-run benefits for short-term gains.
“I reject that approach, and that is why our borrowing rule targets day-to-day spending. We will prioritise investment within a framework that would get debt falling as a share of GDP over the medium term.”
The borrowing rule currently in place that Rachel Reeves refers to is the supplementary target, which is defined in the Charter for Budget Responsibility, and which says that public sector net borrowing (PSNB) must be below 3% of GDP in the final year of the forecast period that the OBR projects. This is five years into the future, and so the current end is 2028-29 – but whenever the next forecast is, it will roll over to 2029-30.
Labour’s proposal means that will no longer use this rule and will instead make sure that it keeps the current budget in surplus in 2029-30, while maintaining the fiscal mandate – the rule that debt should be falling as a share of GDP in the final year of the forecast. This seems like it would be a clear dividing line in terms of macroeconomic policy.
The current forecasts for net borrowing and the current budget
The current budget deficit is simply defined as net borrowing excluding net investment. So in a formal sense, Rachel Reeves is right – her proposed rule does not formally limit investment. Though neither does the current one: it is perfectly possible for the government to meet the 3% borrowing rule with more or less investment.
Net borrowing is forecast by the OBR to be below 3% in every year of the forecast, and falling in every year. By 2028-29 – the year in which the rule was assessed in March – net borrowing was forecast to be 1.2%, and a full £43 billion lower than it would have had to be for the 3% threshold to be breached.
Chart 1: PSNB forecast and comparison with the borrowing rule
Source: OBR, FAI analysis
This ‘headroom’ appears very large in recent memory, and larger than the headroom any Chancellor left themselves since George Osborne in the 2014 Autumn Statement, and if that were the only constraint, it would mean there was significant room to increase spending borrowing without breaching that rule.
This ‘headroom’ against the 3% borrowing rule is also substantially larger than the one against Rachel Reeves’ favoured rule. But note that the current budget is already forecast to be in surplus by 2028-29 to the tune of £14 billion. This means that the current Government’s plans already meet Rachel Reeves’ rule, and this is likely to remain the case whatever happens. It’s not a particularly demanding rule to meet, mind: the UK ran a current budget surplus in 2018-19 and very small deficits in many other years of the 21st century.
Chart 2: Current budget deficit and comparison with the Labour-proposed current budget rule
Source: OBR, FAI analysis
In fact, on their own, meeting the two is pretty manageable. If these were the only rules, the Government could borrow an additional £30 billion a year for capital spending and still meet both rules – with a historically low cushion, but not dissimilar to Jeremy Hunt’s in the last few events.
The difficulty is in getting debt falling
The reason why the Government is constrained much more than it would appear in the first place is that debt is barely on a falling path in the final year of the forecast. The underlying debt stock only has to rise by just under £9 billion for it to no longer fall – which is a minuscule difference, and also a historically very low level of cushion against economic shocks and forecast uncertainty.
As the chart below illustrates, it’s the debt rule rule that bites in any of the scenarios with additional capital investment – and therefore that is the real constraint on how much additional investment comes from this rule, not the current 3% rule or a hypothetical current budget rule. Changing from the borrowing rule to the ‘borrow-to-invest’ rule does nothing to change the fiscal space available to the Government so long as it remains committed to getting debt on a falling path by the end of the forecast.
Chart 3: Headroom against current and proposed fiscal rules in the OBR’s central forecast and for different scenarios of additional capital spending
Source: OBR, FAI analysis
Of course, it wouldn’t be the first time we saw a government play about with the timing and profile of capital spending to ensure that it increases earlier in the forecast, making it easier for indicators to be hit at the end. And it’s certainly something that we will be keeping an eye out for – not least because that’s the sort of tricks that seem to work in the short run, but actually are incredibly detrimental to the stability that Rachel Reeves claims she wants to instil.
Reading between the lines – could Labour be trying to wrest some fiscal room for manoeuvre?
It’s worth circling back to Rachel Reeves’ statement about the fiscal rules, both in what it says and what it doesn’t say.
It’s obvious what the current budget rule will be, which is for it to be in surplus. It’s less immediately clear that the debt metric used will be PSND ex BoE – the current metric chosen by Jeremy Hunt.
The choice of PSND ex BoE – or ‘underlying’ debt, as it’s often called by the Treasury – means that it creates an artificial barrier within the public sector in the National Accounts. For a large part of the 2010s, during expansions in quantitative easing, this benefitted the Treasury – it was much easier to get ‘underlying’ debt down by excluding the effects of the Bank’s policy.
Chart 4: PSND and PSND ex BoE as a share of GDP
Source: ONS
But that is no longer the case. With higher interest rate losses accumulating with quantitative tightening and the Treasury indemnifying the Bank for those losses through capital transfers, ‘underlying’ debt is now rising much faster than PSND.
PSND looks through these artificial intra-public sector boundaries, ignoring whether the Bank or the Treasury holds these liabilities – both are ultimately arms of the government, and therefore what matters is whether they reside in the public or private sector.
The situation regarding headroom against getting PSND falling as a share of GDP in the final year of the forecast is much healthier. As the chart below shows, an additional £20 billion in capital spending per year would see the PSND/GDP being met with roughly the same headroom that the ‘underlying’ debt rule is met currently.
Chart 5: Headroom against current/proposed fiscal rules and PSND falling in the OBR’s central forecast and for different scenarios of additional capital spending
Source: OBR, FAI analysis
Was Rachel Reeves leaving herself some room for this by not mentioned underlying debt anywhere in the Mais Lecture?
Yes, it’s a slightly different metric, but one that arguably is a better indicator of the state of the public finances – and a Chancellor would have no better time to institute this than at the start of a new Parliament with a change in the political weather.
Whether it’s developing skills and training to enter the workforce, investing in buildings and equipment, or providing services to fill gaps left by the public sector, the voluntary sector plays a significant part in the UK economy. However, measurement of its economic contribution is inherently complex, meaning the role it plays is often undervalued (write CIARA CRUMMEY and MAIRI SPOWAGE of FRASER of ALLANDER INSTITUTE).
There are several difficulties in measuring this economic contribution compared to methods used for the private sector. One reason for this is a lack of an adequate, recognised definition across the sector, which leads to wide variation in valuations.
Core National Accounts can be used to estimate the voluntary sector, through the Non-Profit Institutions Serving Households (NPISH) sector. However, the UK voluntary sector is much larger than the organisations that are included within NPISH, given the specific definition of this sector. Voluntary organisations are spread across sectors and industries in the National Accounts, so the use of NPISH results in significant undervaluation of the sector’s economic contribution.
It will answer questions surrounding NPISH and the National Accounts and improve measurement of the sector within the UK National Accounts framework. This project builds on previous FAI research on Scottish charities and links to other ESCoE work on National Accounts and beyond GDP.
Why does this matter?
The inability to measure the voluntary sector’s contribution to the UK economy limits its comparison to the non-voluntary sector, meaning that it may be undervalued or overlooked. Accurate measurement would allow for better recognition of the sector’s economic contribution.
This could encourage further volunteering and involvement and investment in the sector, along with better use and allocation of resources. Unleashing the potential of the voluntary sector by measuring it more accurately could also allow its inclusion in economic growth strategies to improve both regional and national economic performance.
What are the possible solutions?
Significant research has been conducted into how the voluntary sector can be measured more accurately, and what data is required to do so. Various methods have been identified to produce a variety of estimates of the size and contributions of the sector. These methods have used different definitions of the sector.
Extensive research has been conducted into the use of satellite accounts, as an extension to National Accounts, to measure both the size and impact of the voluntary sector.
National Accounts provide a single overview of all economic activity in a country through collating and presenting the output, expenditure, and income activities of a country’s economic actors; satellite accounts provide a framework that is linked to the National Accounts but allows for a more detailed focus on a certain field or aspect of the economy.
Stakeholders have highlighted that the existence of a satellite account is as important as what it includes to provide validity for the sector. They recommend that an initial satellite account should start with the simplest definitions and be improved with further additions over time. It should take a modular approach, allowing for different definitions of the sector, and should allow for comparisons with other sectors in the economy.
In 2023, Pro Bono Economics conducted an in-depth feasibility study into satellite accounts and developed a preliminary framework for its creation.
Their recommended short-term approach uses the legal status on the Inter-Departmental Business Register (IDBR) and organisation type in the Labour Force Survey (LFS) to identify organisations that are not included in NPISH but are considered to be within civil society. They suggest a modular approach where data can be broken down and compared by Standard Industrial Classification (SIC) codes.
They also propose an ‘intermediate approach’ to capture organisations within civil society that have been missed. They provide details on how to identify these organisations, where to access relevant data and how to select what data to include. However, they acknowledge that this ‘intermediate’ approach is still limited in measuring all aspects of the sector and highlight the need for further research on volunteering, social enterprises and growth measurements.
Whatever form a satellite account takes in the UK, it is clear from previous research that one of the biggest challenges is the delineation of the sector. Given the different views of stakeholders, it is likely that a ‘menu’ of definitions is likely to be required to ensure this product has greatest utility for users.
What issues remain?
Despite these significant recent advances, issues still remain in measuring the voluntary sector and capturing its economic contributions.
The first issue is the lack of a clear, adequate definition that is recognised and adopted across the sector. Until this is agreed, measurement methodologies and estimates will continue to differ.
NPISH in the National Accounts is also an inadequate measure of the voluntary sector. NPISH is defined as economic units that supply services on a non-commercial basis. To be considered, NPISH institutions must: provide goods and services either for free or below market prices; mainly derive their income from grants and donations; and not be controlled by the government. Therefore, NPISH does not capture all voluntary sector organisations.
As a result, using the value of the NPISH sector significantly underestimates the economic contribution of the voluntary sector. Additionally, the methodology used by the Office for National Statistics (ONS) to create these estimates in unclear and not publicly documented, so it cannot be critiqued or replicated in devolved countries’ national accounts.
Finally, while the Pro Bono Economics report has made great advances in the technicalities of constructing a satellite account, several questions still remain to ensure the entire sector is accurately measured.
This includes a need for further understanding on how the IDBR legal status flag is constructed and how to capture other organisations not included on the IDBR (including many small organisations).
Additional considerations include how to capture informal volunteering, data collection on sources of funding for organisations, how to identify social enterprises and how to prevent double counting across multiple data records.
A new research project
Our project aims to answer some of these questions surrounding NPISH and the National Accounts. It will focus on three elements:
Documenting ONS methodology for calculating NPISH
Interviewing data providers and users
Investigating recommendations for data on the voluntary sector used in National Accounts
1. Documenting ONS methodology for calculating NPISH
Through this project we will formally document the full methodology used to create the NPISH statistics in the National Accounts. NPISH includes charities, higher education and further education, political parties, and trade unions, and we will highlight what data is used for each of these elements.
In particular, we will focus on documenting the data process for charities, at both the National Council for Voluntary Organisations (NCVO) level (who provide charity data to the ONS), and how the ONS then use this data. NCVO provide ONS with data for charities in England and Wales, collected from the Charity Commission register.
These charities undergo a ‘market test’, where charities that ‘fail’ the market test (if 50% or more of income comes from donations and legacies) remain in NPISH, and the rest are captured in the industrial market sectors of the National Accounts.
We will document and review these processes and outline recommendations for improvements on how to make NPISH more representative of charities outwith England and Wales and allow for replication in both regional and devolved National Accounts.
2. Interviewing data providers and users
We plan to interview key practitioners in the sector about their understanding of the role of data in the development of national accounts. These will include national infrastructure organisations involved in producing the data for the accounts, organisations that might use the accounts for their work understanding and campaigning about the sector, and government officials. We will identify what role they think National Accounts plays in their work and how they think it shapes understanding of the voluntary sector within society.
3. Investigating recommendations for data on the voluntary sector used in National Accounts
Following on from our interviews with providers, we will recommend improvements and investments in the data infrastructure for the voluntary sector, ensuring regulators, voluntary sector representative organisations, and statistical producers are focussed on supporting the production of appropriate and accurate statistics about the sector. We will investigate the IDBR flag recommendation underpinning the PBE recommendations for a satellite account. A better understanding of this flag will identify if it would be possible to use this flag to describe voluntary organisations across the National Accounts, including those currently considered outside the NPISH sector.
We will also analyse the data collected for charities in Scotland and Northern Ireland to identify how this can be included in UK NPISH calculations in addition to NCVO data. Finally, we will examine the sectors charities self-report into, and design a mapping methodology between different industry classification codes This will ensure greater consistency in the classifications used across charity registers.
As part of this final research stage, this ESCoE research project will support an economic student summer placement through the Economics Futures programme, hosted at the Fraser of Allander Institute.
This placement will focus on highlighting the differences in charity registers held across the UK. We will then use the data held in the charity registers in Scotland and Northern Ireland as a proxy to estimate the number of charities that are under the minimum registration requirements in England and Wales, so are not captured in their register. This same methodology will be applied to identify charities missing from UK business register data, to inform recommendations on expanding the data used for measuring the charities in NPISH.
Overall, this research will provide a review of the current National Accounts practise. Our recommendations have the potential to improve the National Accounts construction methodology and allow for more accurate measurement of NPISH in both UK, regional and devolved country’s National Accounts.
This will complement the building of a civil society satellite account, if the underpinning National Accounts are fundamentally more robust.
The First Minister has set out his ambitions for Scotland’s economy during a speech in Glasgow.
Speaking at the Barclays Campus in Glasgow’s financial district on Friday, First Minister John Swinney outlined his government’s approach to economic policy making.
Mr Swinney said poor decision-making at UK level, typified by Brexit and immigration policy, means the Scottish Government must work even harder with its limited powers to help businesses and workers thrive.
The First Minister stated his determination to bring hope and optimism and said he will “go all out” to encourage economic investment.
John Swinney said policy making will be governed by:
Moderate left of centre, progressive values
A partnership approach with unions and business
A focus on actions
Problem solving based on evidence
The First Minister will highlight significant announcements in Scotland’s renewable energy sector this week and actions the Scottish Government is taking to boost high growth businesses.
The First Minister said: “My goal is to help people live happier and healthier lives with higher living standards and to help businesses boost profitability.
“The evidence shows that independent countries that are comparable to Scotland are wealthier and fairer than the UK.
“Scotland has the talents and resources to match that performance with independence but in the here and now and in the face of Brexit we must work even harder to help Scotland’s economy with the powers we have.
“I will go all out to encourage investment in Scotland and I will ensure people know my government is a firmly pro-business administration.
“A partnership with trade unions and business will be at the core of my approach and through that approach and given our resources, not least incredible renewable energy, we should look to the future with hope and optimism.”
ANALYSIS: FRASER of ALLANDER INSTITUTE
New FM – new approach on the economy?
Today, the new First Minister John Swinney set out his broad economic aspirations for Scotland (write MAIRI SPOWAGE and EMMA CONGREVE).
In a speech at the impressive Barclays Glasgow Campus (which he said embodied the ambition he wished to have for the economy), he set out the vision he had for Scotland to have a strong, successful, innovative and dynamic economy.
For people who were after specific policy actions, the speech was light on detail, but it was not perhaps fair to expect the FM to outline these sorts of specifics in a speech like this.
The FM also had a difficult line to tread, given (as he himself pointed out) that he has been a Minister in government for 16 of the last 17 years and wanted to talk about successes in a record he is “immensely proud of”. At the same time, he needed to recognise that there were failings in the previous administration that had led to him being in office as First Minister.
Economic Growth is front and centre
The First Minister had said as he took office that eradicating child poverty was his key policy objective. This morning he was keen to set out that there is no conflict between eradicating child poverty and boosting economic growth – rather, they go hand in hand. He set out that boosting the economy will create opportunities for people and raise living standards and that reducing poverty raises spending power and boosts productivity. This is to a large degree true, but there will at times be trade-offs that will require one to be prioritised over the other.
Given the key stakeholders from businesses and business organisations in the room for his speech today, he was very keen to set out that his government was going to work collaboratively with businesses and other organisations to design and implement policies to strengthen the economy. Even more broadly, the FM said that he wished to bring more consensus building back into Scottish politics to try to achieve outcomes – to “build up, not tear down” as he put it.
There was a clear “Scotland is open for business” from the FM today. Supporting more investment in Scotland (particularly related to the Energy Transition and Housing) is clearly a priority for this new administration. This featured heavily in this speech and has been supported by some of the policy announcements made earlier this week.
We will do, rather than write strategy documents
A widely welcomed aspect of the speech is likely to be the FM’s acknowledgment that his government could probably do with carrying out “more concrete actions and fewer strategy documents”.
We have been on record a number of times as saying that the Scottish Government produces too many and too weighty strategy documents. So this is a crowd pleaser to a room of people who are likely to want to see action rather than just warm words and have seen endless strategies come and go.
However, it is important to remember what the problem sometimes was with these documents. Sometimes, in the case of recent economic strategy documents, the problem is that they aren’t really strategies – if they set out high-level principles that no one can disagree with, but don’t provide a meaningful framework for prioritisation and dealing with trade-offs, then they aren’t particularly useful.
In other cases, even where strategies are set, they can often gather dust on a shelf rather than meaningfully drive activity in government.
All of this from the FM is likely to be broadly welcomed – it’s an easy sell to say there will be less bureaucracy. But let’s not forget that we still need a clear economic strategy from the FM and the DFM – and that a strategy is not a strategy unless it rules some things out and recognises trade-offs and carries through into day-to-day activity. This clarity and policy stability is what is likely to be required to inspire the confidence in investors that this new administration would like to see.
Looking forward, not back
Many of the questions from journalists in the room today were designed to get the FM’s views on what went wrong with economic policy under the previous leadership, In addition, he was asked what his government was likely to do on policies like rent controls, short term lets legislation, and tax increases (specifically income tax) that have been put in place at the past budgets. Essentially, people were keen to hear what, in these specific areas, might change under a John Swinney government.
The FM said clearly that he was “looking forward, not back” in response to the question about what went wrong under Humza Yousaf.
With regards to specific policies where regulation was impacting businesses, he said his Cabinet colleagues were looking at lots of areas of policy and that more details on specific policies would be following in the weeks and months to come.
On tax, he was more forthcoming – acknowledging that the higher tax rates on above-median earners in Scotland are an important component of raising revenue in straitened fiscal times, but also saying that “we can’t keep raising taxes”. It will be interesting to see how this approach to tax is reflected in the Government’s Draft Tax Strategy, which is due alongside the Medium Term Financial Strategy (date currently tbc). That is if these two documents survive the cull of strategies …
Evidence-based approaches
The FM today said a number of times that the government he leads will be more practical and will be driven by the evidence of “what works”. We are very supportive of this, of course, and hope it signals a shift of more meaningful appraisal and assessment of policy options within the Scottish Government, with the associated investment in evaluation.
In doing this, unintended consequences, whether economic or otherwise, are more likely to be identified and can be proactively mitigated, and/or it can allow the government to change course at an earlier stage.
In addition, progress and continuous improvement can only happen in a culture of meaningful evaluation and being prepared to learn from what worked and what didn’t work.
For example, how well has the policy on rent freezes and caps worked to date? It would initially appear from rental costs that it has had the opposite effect on rents than the government presumably desired, and it would also appear to have had an impact on investor confidence in the sector. Given the FM’s focus on housing in his speech today, and his commitment to be evidence-based, it will be interesting to see how this policy area progresses.
Is this a meaningful shift in approach?
With his speech today, that is certainly what the FM is trying to convey. He was saying many of the right things to hearten those who want to see the government focus on economic growth.
However, the proof will be in the policy action that is actually taken. So, let’s wait for these details in the weeks to come.
On Thursday, the Scottish Government announced the 2030 climate change target is “out of reach”. So, what went wrong (writes Fraser of Allander Institute’s JAMES ALLAN)?
In 2022, we undertook research commissioned by ClimateXChange for the Joint Budget Review between the Scottish Government and Scottish Parliament on matters related to climate change.
Our remit focused on how budgetary and policy decisions are made rather than individual policies themselves. This required us to piece together through many interviews how civil servants were developing policy in practice, how decisions were being made and challenged internally and what information was flowing to Ministers and Parliament.
The culmination was a number of recommendations, one of which was for a “Net Zero Assessment” of policies as they are being developed. The basic principle is simple – if your policy is likely to have significant positive or negative impacts on greenhouse gas emissions, you need to roughly estimate the emissions that policy is likely to create. In most cases, this isn’t hugely difficult and some parts of government were already applying fairly rigorous assessments. But for many areas, these were patchily applied at best or seemingly sidestepped at worst.
In the areas where civil servants seemed less likely to routinely produce emissions estimates, it became apparent that these were often not being asked for by those approving projects. Approval without challenge beyond the financial cost led into a cultural view that some processes were optional.
It was encouraging to see that the climate change action policy package announced alongside the 2030 target statement reinforced earlier commitments to introduce a Net Zero Assessment.
Dropping targets can be disappointing but the Scottish Government now has the opportunity to take stock and refocus efforts where immediate progress is critical. Setting targets is not enough to meet them. Nor is it enough to have genuine ambition to reduce emissions – which we regularly encountered in our interviews. Both of these cannot create change that outweighs a system of processes and practice that gravitate towards the status quo.
But this also means that it is not simply enough to add a process like a Net Zero Assessment and assume that policymaking in practice will suddenly start following expected processes. A Net Zero Assessment must be sufficiently embedded within practices so that incentives and norms within Government act as a support rather than a counterweight. This isn’t easy – governments are having to grapple with this challenge globally.
But first and foremost, this means ensuring that a challenge function is in place and that challenge function has sufficient clout. The results of net zero assessments must be asked for, they must have taken place early enough in a project before too much momentum has built up, and there must be a degree of centralisation in this challenge function so that lagging policy areas are identified and supported.
This is the “how” of policy, rather than the “what” of policy. Is it the only step the Scottish Government will need to take to hit 2045 targets?
No – not by a long shot. Many difficult decisions lie ahead. But you cannot make and deliver on effective decisions without good evidence and robust processes. Significant and immediate focus now on the “how” of policy must be seen as a non-negotiable requirement if the Government wishes to make substantial further progress on its 2045 climate targets.
The introduction of a Net Zero Assessment will be a big step forward for the Scottish Government and will demonstrate global leadership on climate change processes. But don’t forget that the challenge function is just as important as the process itself.
I want to end this article with the concluding remarks from our report to the Joint Budget Review, which refers to the methodology within a Net Zero Assessment as an “individual level carbon assessment”.
These parting comments seem as relevant now as they were when published in December 2022:
‘A key emissions reduction target looms in 2030. While eight years away, many of the decisions the Government makes today are deciding its level of emissions in 2030. Missing this target substantially raises the risk of missing Scotland’s 2045 net zero target and results in challenging economic headwinds in the 2030s.
‘Our recommendations therefore cannot be left for years down the road, when the outcome of Scotland’s progress, determined by decisions taken now, becomes inevitable.
‘It is critical that the Scottish Government creates an environment of continuous improvement in policymaking processes. This environment can develop the processes that will ultimately help deliver the required outcomes in the short, medium and long-term.
‘Therefore, we conclude this report with a clear message that the mistakes of the past cannot be repeated.
‘In 2008, a project to explore a methodology for a high-level carbon assessment was undertaken. This resulted in the Carbon Assessment published annually alongside the Scottish Government’s Draft Budget.
‘It was widely recognised at the time that this was a limited tool, and that the critical next step in achieving carbon reductions was the development of individual-level carbon assessments, running in a parallel project.
‘It appears, from what we have seen, that this project was never taken forward. Fourteen years have now passed. This work cannot wait any longer to be seriously implemented.
‘Some of these recommendations will be challenging to implement – Government-wide change is never simple. But nor are these recommendations untested on an international stage.
‘The Scottish Government will need ambition, it will need the courage to embrace change, and it will need to treat a declared global climate emergency as just that – an emergency.‘
We are less than a week away from the Budget – a special day for the House of Commons, and one of incredible significance for the UK as a whole (writes Fraser of Allander Institute’s João Sousa).
In a speech expected to last around 60 minutes, the Chancellor of the Exchequer, Jeremy Hunt, will lay out plans for taxation and spending over the coming years, introduce some immediate tax measures and provide an update on the economic and fiscal forecasts he received from the Office for Budget Responsibility (OBR).
But what we can do is demystify it and provide some historical context. So join us on this tour through the weird history of how it has come to be the way it is.
A statement to the House of Commons – but it wasn’t always like that
The Budget Statement – or historically called the Financial Statement – was originally made to the Committee of Ways and Means, a committee similar to the Committee of the Whole House (which still exists) concerned with financial matters, and in which all members could sit. This is why the Budget was originally chaired by the Chairman of Ways and Means, one of the most senior Deputy Speakers, rather than the Speaker of the House.
In 1967, the Committee of Ways and Means was abolished as part of a series of reforms to modernise the operation of the House under the Commons’ Leadership of Richard Crossman. Unfortunately, the modernisation didn’t extend to the existing the inherently sexist name of Chairman of Ways and Means – Dame Eleanor Laing (the current post holder) continues to be referred to as Chairman in official proceedings. Maybe it’s time we finally ditched it.
The Chairman of Ways and Means continues to chair the Budget debate to this day, which can look odd to the casual observer. The reply is also not by the corresponding shadow cabinet member, as one would expect, but by the Leader of the Opposition – a custom dating back to the 1938 Budget, which seems to have arisen from the fact that the Ministers of the Crown Act 1937 defined the role and duties of the Leader of the Opposition, as well as granting them a cabinet minister-equivalent salary.
The development of specific roles in the shadow cabinet happened significantly later (during the 1950s with the advent of television), by which point the convention had already been established.
The Budget has become more powerful and concentrated over time
The Committee on Ways and Means formally allowed for any member to raise proposals for taxation and spending, which would not be the case in a sitting of the House – during which the Government has control of the agenda, or “business” in the jargon.
In practice, however, this almost never happened. As party discipline grew over time and stronger governments backed by a Commons majority became the norm, the Government’s majority served to eliminate that possibility.
When the Committee was abolished in 1967, all responsibilities for fiscal policy decisions were transferred wholesale to the Chancellor of the Exchequer – but in practice that had already happened.
The Budget is now a three-part statement: it encompasses economic forecasts, taxation proposals and spending plans. It wasn’t always like that. The financial statement itself was originally concerned principally with tax powers.
Spending plans were a consideration of course, as they determined the balance that the Chancellor wanted to strike, but they were (and still are formally) voted separately as part of the Estimates process.
It was only in 1993 that Ken Clarke formally merged the presentation of plans for tax and spend as part of the move to an Autumn Budget – although really the Government had been using the Budget for many decades to pre-announce and revise spending plans when presenting the Budget.
Economic forecasting has contributed to fiscal events being more frequent – which is not necessarily great
What about economic forecasts? They are a more recent addition to the Government’s business, certainly in the level of detail that they exist today, and are to some extent a by-product of the need to more accurately forecast the public finances of a more complex economy.
But it was the 1970s inflationary shocks that really caused economic forecasting to become front and centre of the Chancellor’s statements to the Commons. It was also felt that an annual update was too infrequent given the rapidly evolving situation, and therefore that it would be appropriate for the Treasury to publish forecasts twice a year from a macroeconomic model that it was to build in order to project economic conditions.
Many of the provisions contained in Schedule 5 of the Industry Act 1975 would strike a current observer as peculiar or even downright ridiculous – for example, the need to require explicitly that “[t]he model shall be maintained on a computer” – but the twice yearly publication specified in that has subsequently been enshrined into the Budget Responsibility and National Audit Act 2011, which governs the operations of the OBR and its relationship with the Treasury.
For many years, the Budget was by far and away the largest fiscal event of the year, and for all intents and purposes, the only one worthy of that name. The Autumn/Summer/Spring Statement (timings have fluctuated over the years) was merely a statement of updated economic and fiscal forecasts – the only recent example of which was Philip Hammond’s 2019 Spring Statement, which did not even have a command paper alongside it.
The bloat in the “secondary” fiscal event started in 1998, with the introduction of the Pre-Budget Report. It was billed as setting out “the direction of Government policy and further measures that are under consideration in the run up to the 1999 Budget”, but it became another decision-making point in its own right. This approach has continued ever since, even if the name has changed, save for that singular 2019 Spring Statement.
This development evolved as a series of historical accidents – the need for more frequent forecasts, and an attempt to lay out the direction of travel for government policy – but has been seized by successive Chancellors as an opportunity to “make the weather” and generate headlines. But many experts – and we agree with them – would argue that having than one budget-like event a year is not a great thing, encouraging tinkering and zig-zagging policy rather than the stability that is often needed.
It is often argued as a reason for having more of these events that economic conditions can and do require at times rapid response – take the Covid-19 pandemic for example. That was such a rapidly evolving situation that it necessitated what the OBR called “twelve ‘mini-Budgets’ through the course of the year” during 2020-21. But emergency situations have always called for emergency statements to the House – something that already happened before the requirement for multiple events a year (take 1961 or 1966, for example). It’s the insistence on having them when it isn’t required that creates unwelcome uncertain.
Why do we even need a Budget every year?
In its current state, the operation of the UK’s public finances requires a number of resolutions to be passed in each financial year. The main reason is to allow the collection of income tax, which is brought into place by statutory instrument each year and must be renewed.
The Finance Bill also generally takes forward changes announced at the Budget, but that can take a while to pass through Parliament. In the meantime, the Government can collect taxes at newly announced rates by using the Provisional Collection of Taxes Act 1968.
This is why you’ll hear the Deputy Speaker mention this rather obscure act of parliament and the Budget resolutions just before calling the Chancellor to make their statement.
Could we have a Budget less than once a year? It would be possible, though some changes would have to be made. In practical terms, however, a year is quite a natural length for planning and monitoring expenditure and tax receipts – and there is often enough movement in the economy for it to be worthwhile and convenient to make decisions at such an interval.
How does the forecasting process work, and when are decisions made?
As per the Memorandum of Understanding between the OBR, Treasury and other government departments, the Chancellor has to give the OBR 10 weeks’ notice to produce a forecast in normal circumstances. The letter of the requirement was fulfilled in this case – though arguably not the spirit, as notice was given on 27 December. So the effective notice period was more like 8 and half to 9 weeks.
In a welcome move, the OBR has in recent times published the timetable for the forecast process. This has increased transparency, though it still requires some interpretation. The forecast timetable can broadly be divided into two periods: pre- and post-measures.
Pre-measures rounds (in this case, 1 and 2) refer to the incorporation of underlying data, both economic and administrative. For example, the OBR will have taken on new GDP figures and inflation data, as well as tax receipts and spending figures from government departments.
The last pre-measures round closed on 14 February, and so market determinants – including, importantly, interest rates and market expectations about the Bank of England’s behaviour in the coming months – will have been closed around a week before (6 or 7 February). They are now fixed and will not have been updated since then, despite the fact that there will have inevitably been movements.
This is a normal process in the OBR’s forecast, for two reasons. One is that the fiscal forecast needs to be conducted by departments and scrutinised by the OBR, and that takes around a week in early rounds.
But there is also a significant amount of time for the Chancellor to make decisions about policy measures on a stable base. Jeremy Hunt has been keen to extend the length of the decision-making period, and that has meant the OBR is now closing the forecast period about a week earlier.
Rounds 3 and 4 will have given the Chancellor the opportunity to notify the OBR of all major policy measures. These rounds allow the OBR to model any large impacts of major policies on the economy (also known as indirect or second-round effects). This forecast is then returned to the Treasury. Round 4 was returned on Wednesday (28th February), and all major decisions have now been taken.
This means any supposed agonisingby Jeremy Hunt over whether to abolish ‘non-dom’ tax status in the coming days is purely pitch-rolling: a PR exercise to guide people through a supposed decision-making process that in fact has already happened.
All major decisions (i.e. over £1bn) are now closed. The final scorecard will be delivered to the OBR on Friday, 1 March. All numbers will then be closed for good, subject to any errors being found, and the OBR will spend the weekend writing their Economic and Fiscal Outlook. Likewise, the Treasury will be writing the speech for the Chancellor and the Red Book that comes out on Wednesday.
Of course, this won’t avoid many news articles over the weekend about the Chancellor still having to make tough decisions, and poring over the numbers to make it all add up. But if you’re reading this, you’ll know how to spot when a reporter is being fed lines directly from 11 Downing Street.
Speaking of which, what exactly is the scorecard?
Much like pitch-rolling, the scorecard is a term borrowed from cricket and in the Treasury’s parlance, it refers to the detailed list of measures taken by the Chancellor since the last fiscal event. It is essentially a very large spreadsheet, with often hundreds of rows detailed the movement in each tax and spending stream from each measure. It was originally called the tally, and it has been present in one form or another in every Budget document going back to the 1870s.
The table does quite resemble a cricket scorecard, and the metaphor has stuck. But it also resembles many other large tables, so why cricket?
It’s probably not unrelated to it being historically a past-time of the upper classes and very popular with Parliamentarians, reflecting the make-up and cultural references of those historically in the Treasury and Parliament.
There are a few different versions of the scorecard – table 4.1 in the Red Book is the one that Westminster insiders are most familiar with already, which is also called the ‘presentational’ scorecard. This is the ‘themed’-version, and measures are quite often grouped together. For most people, that is already more than enough.
But for the purists, the OBR publishes supplementary table 3.11, which is a version of the ‘analytical’ scorecard – which just means it has all the detail on revenue and spending stream.
The OBR’s version is also much more transparent, including a section labelled ‘non-scorecard’ measures – meaning decisions that the Government has taken and probably should have included in their presentation, but has decided not to. This used to be a large number, but has been heavily cut back – in large part because the OBR started publishing it.
Look out for more analysis from Fraser of Allander next week
The research project examined fresh-thinking and technology adoption across Scotland’s housing, health and social care sectors with the aim of better understanding the potential for innovation clusters, the role of public investment and capacity for innovation in the key sectors.
Despite the research reenforcing sector-wide challenges, Edinburgh-based Blackwood and its bespoke tech solutions were included as a case study of what is possible within tech-enabled care, despite the challenges faced by the sector.
Simon Fitzpatrick, Chief Executive at Blackwood said: “We are constantly striving to find new ways to improve the lives of the people we support. Receiving recognition and awareness for it always motivates us to keep pushing boundaries and leading the way.
“The research study by the Fraser of Allander Institute is an extremely valuable piece of work for the sector that we’re thrilled to be positively featured in. It’s very rewarding to be recognised.”
One tech solution mentioned in the report is Blackwood’s CleverCogs technology, a specially designed tablet-based system, which has delivered measurable improvements in quality of life and efficiencies in service delivery, despite major budgetary constraints.
Many Blackwood properties feature its CleverCogs technology which is personalised and links users to care and health services, home automation, local information, entertainment and video access to family and friends. The CleverCogs digital system lets users customise it to suit their life.
Emma Congreve, Deputy Director at the University of Strathclyde’s Fraser of Allander Institute said: “We were asked by the Scottish Government to analyse the current social care innovation landscape and the potential for further development of tech solutions for those who draw on care.
“Blackwood homes provided an example of an organisation that has been able to take forward significant technological innovations. As our report stated, based on our research with others in the sector, this was an exception rather than the rule.”
The report, which was released late last year, also noted Blackwood’s strategy of close collaboration with residents and technology partners to develop solutions tailored to their needs – noting the crucial role of innovation-focused leadership in driving progress and cultural change.
Blackwood is now renowned as Scotland’s most tech-focused housing specialist, deploying cutting-edge technology to help its customers to live independently. With 600 staff across Scotland, the charity’s headquarters are in Edinburgh.
Simon added: “Making change is a team effort of course, so it’s fantastic to see our co-design approaches with customers and partners held up as an example model.
“The report does an excellent job of highlighting the hurdles the housing and care sector is having to jump in Scotland at the moment and it can be difficult to continue to innovate new forms of tech-enabled care while combatting challenges like funding or labour shortages.
“Despite that, it only gives us more fuel to continue that fresh thinking to allow people to live as independently as possible.
“Our customers are at the heart of everything we do and we owe it to them to explore every opportunity that technology offers to enhance the quality of their lives. It’s rewarding that Blackwood is setting the standard in that.”
As Scotland’s most tech-focused housing provider, its Blackwood House design guide – developed in partnership with architects Lewis and Hickey – is the gold standard for accessible housing.
Over the next five years Blackwood aims to build 400 such homes, that can adapt to tenants’ future needs. Each can be adapted to include a host of benefits such as lift access, remotely controlled automated functions, and digital care and housing systems.
The housing specialist puts customers at the heart of everything it does, and their satisfaction is critical to Blackwood’s success. As a modern, supportive employer it also provides individuals with pathways towards achieving long and rewarding careers in roles that make a positive difference.
