Managing risk and performance in an increasingly devolved Scotland Caroline Gardner Auditor General for Scotland

A brief history of devolution so far… Devolution (Scotland Act 1998), Scottish Parliament established in 1999 New financial powers (Scotland Act 2012) Scottish rate of income tax Devolved taxes (Land & Buildings Transaction Tax and Landfill Tax) Borrowing powers Independence referendum – the Vow – the Smith Commission Further financial devolution (Scotland Act 2016)

Scotland Act 2016 – new financial powers Income tax From April 2017 Estimated revenues of £11.2 billion The power to set income tax rates and bands on earned income and to retain the tax collected from Scottish taxpayers Social security Date TBC Estimated spending of £2.7 billion Responsibility for some social security powers Value Added Tax (VAT) From April 2019 Estimated revenues of £5.4 billion Assigning a share of the VAT collected in Scotland to the Scottish Government's budget Devolved taxes From April 2018 Devolution of two further taxes: Air Passenger Duty (estimated revenues of £309 million) Aggregates Levy (estimated revenues of £54 million) Borrowing and reserve Increased borrowing and reserve powers Revenue (£1.75 billion) and capital investment (£3.0 billion) Scottish Reserve (£700 million)

Taxation as share of devolved expenditure Source: Scottish Parliament Information Centre Financial Scrutiny Unit

Financial devolution: opportunity and risk Opportunities More flexibility on policy choices and associated spending - more closely linked to Scottish priorities Fiscal framework agreed, providing transparent set of fiscal rules Development of wider system for Scottish public finances: longer- term planning, enhanced financial reporting and transparency Risks Fiscal risk – volatility of taxes and spending Greater link between economic performance and public finances Intergovernmental relationships

The role of audit and parliamentary scrutiny Key priorities Overall account of the revenues, expenditure, assets and liabilities of the whole Scottish public sector Greater transparency Stronger parliamentary scrutiny Our reports