Finance and Constitution Committee calls for evidence on the impact of Brexit on the Scottish Budget

30.06.2017

The Finance and Constitution Committee has issued a call for evidence on the impact of Brexit on the Scottish Budget.

The committee is keen to hear views on how Brexit might impact on the Scottish economy relative to the rest of the UK, and how that could impact upon Scotland’s public finances and the 2018/19 Scottish Budget.

Bruce Crawford, convener of the Scottish Parliament’s Finance and Constitution Committee said:

“Under the new financial powers and fiscal framework arrangement, Scotland’s budget will now be more dependent on the performance of the Scottish economy relative to the rest of the UK. That provides both risks and opportunities for Scotland.

“As we look ahead to the 2018/19 budget, a key question for our committee will be: will Brexit have a different economic impact in Scotland as compared to the rest of the UK?

“We want to hear views on that potential scenario, along with what impact Brexit might have on Scotland’s budget and what measures the Scottish Government should consider accordingly when formulating the budget.”

Background

The closing date for views is 18 August 2017.

The Scottish Government stated in its 2017/18 budget it anticipates the short-term impact of Brexit to be as follows:

  • The depreciation of sterling pushes up inflation, which in turn depresses real wages and, coupled with an increase in economic uncertainty, depresses consumption;
  • Increased economic uncertainty delays or suppresses business investment;
  • Lower economic growth in the rest of the UK, Scotland’s largest trading partner, reduces intra-UK trade;
  • This is partly offset by the depreciation in sterling providing a boost to Scotland’s international exports.

The committee noted in its report on Draft Budget 2017/18 that the Scottish Government is likely to face additional spending pressures from rising inflation arising from Brexit. This is due to both the declining real terms value of budgets and the increased costs of commitments to maintain spending in real terms.

The Finance and Constitution Committee is interested in hearing views on the short-term impact of Brexit on the public finances. In particular:

  • Are there any indications of a differential economic impact in Scotland separately from rUK?
  • What additional spending pressures are there on the public finances as a consequence of Brexit?
  • What should the Scottish Government’s priorities be in formulating Draft Budget 2018-19 in response to the initial economic impact of Brexit?
  • Given that increased inflation is likely to disproportionately impact on the poorest, what measures should the Scottish Government take in its Budget to address this?
  • What issues require to be considered from the loss of EU funding mechanisms arising from Brexit?

 Full details on the call for evidence can be found on the Committee’s webpage: http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/Finance-Constitution-Committee.aspx