Scottish Budget: Use of tax powers can 'ease the path' for Scotland, Fraser of Allander Institute says

Deputy First Minister John Swinney can "ease the path ahead for Scotland" by using devolved tax powers, according to the Fraser of Allander Institute.

Swinney will deliver Scotland's draft Budget on Thursday as he covers for finance secretary Kate Forbes, who remains on maternity leave.

The statement comes amidst continued industrial action over public sector pay and high inflation.

In its pre-Budget report the Institute, based at the University of Strathclyde, says the Scottish Government needs to set out how it will use its "significant" devolved tax powers and whether it will use them to generate more revenue for public services.

High inflation is set to "eat away at living standards over the next two years", it said, and eroded the value of the 2022-23 Budget by around £1bn in real terms.

However, announcements by Chancellor Jeremy Hunt have "more or less" offset the impacts of inflation on Scotland's Budget in 2023-24.

Professor Mairi Spowage, director of the economic research unit, said: "John Swinney is getting set to present his first Budget in seven years and what he has acknowledged is an unprecedentedly tricky time for the Scottish public finances.

"The challenges he has been dealing with for 2022-23 ease a bit for 2023-24; there was some additional money announced at the Autumn Statement which generated around £1bn of consequentials, offsetting the inflationary pressures on the Budget.

"But there is also flexibility that the deputy first minister has for the next financial year that was not available to him for this year – the Scottish Government does have tax powers that could be used, if he wishes, to raise more revenue."

Deputy director Emma Congreve added: "In amongst all the headline-grabbing decisions, it will be important to take a step back to see how this Budget helps Scotland achieve its long-term ambitions.

"We are expecting that the government will set out, clearly and transparently, the choices it has made and what the impact, both good and bad, will be for policy outcomes and the impacts on different groups."

The comments come after Roz Foyer, general secretary of the Scottish Trades Union Congress (STUC), called for politicians to start "stepping up to the plate" to address the cost-of-living crisis. 

The STUC says tax reforms could raise an additional £1.3bn, rising to a potential £2bn.