As well as the draft budget, yesterday also saw a new set of forecasts for the Scottish economy and public finances released by the Scottish Fiscal Commission.

These take account of decisions made by the UK Government at the Autumn Statement, and also new announcements made by the Scottish Government.

There is a lot to digest.

Originally, the Scottish Fiscal Commission (SFC) predicted a return to pre-pandemic GDP levels by the third quarter of 2022.

Now, facing a potentially longrunning economic contraction, Scottish GDP is not expected to rebound to pre-pandemic levels until well into 2025.

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Growth is expected to move more slowly in Scotland than the UK average, as forecasted last month by the Office for Budget Responsibility.

The decline in GDP is due to drops in consumption, trade, and private investment over 2023-24, which makes sense, given the high cost of living, higher interest rates, and ongoing trade difficulties due to Brexit.

There are two key taxes where changes have been made that alter the funding position: income tax and non-domestic rates.

As widely expected, the Scottish Government have decided to freeze the Scottish basic, intermediate and higher rate thresholds in cash terms, and to reduce the threshold at which the top rate of tax becomes payable, from £150,000 to £125,140.

Both these changes are in line with UK Government decisions made at the Autumn Statement.

The government have also announced an increase in Land & Buildings Transaction Tax paid on additional properties from 4% to 6%, which the SFC suggest will raise an extra £34 million in 2023-24.

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These decisions mean that the Scottish Government will raise £15.8 billion in 2023-24 from income tax according to the SFC, bringing total revenue from devolved taxes (including LBTT and Scottish Landfill Tax) to £19.7bn.

The main implication of the reduction in the top rate income tax threshold from £150,000 to £125,140 is the increase in the number of taxpayers paying it - we estimate around 12,000.

The government have also announced 1p increases in both the additional and top rates of tax, to 42p and 47p, respectively.

The tax changes taken together are forecast to raise an additional £129m in 2023-24.

These changes to the upper rates of income tax are particularly important in the context of Scotland's finances.

Since 2016-17, when Scotland's income tax powers were devolved, the higher tax rate threshold in Scotland has increased at a slower pace than the rest of the UK.

This has resulted in a 23 per cent rise in the number of taxpayers paying the higher rate of tax in Scotland, whereas in the rest of the UK, there has been a 10% drop.

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Revaluation of the non-domestic rates tax base means that this is not an ordinary year for them.

The final decision of ministers has been to freeze poundage at a net cost of £308m.

At the Budget last year, we were surprised to see Kate Forbes take an approach to reliefs that was less generous than the UK system.

This year, John Swinney has seemingly taken an even more hardline approach and there are no additional reliefs applied to hospitality and retail, as is the case south of the border.

Despite additional consequentials and further revenues from announced changes to income tax, most spending portfolios are set to see a realterms decrease in budget.

One piece of good news is a commitment to increase devolved benefit rates by 10.1% to keep up with inflation, with some of the additional revenues from changes to income tax rates and thresholds supplementing the Barnett consequential in this area.

This commitment signals an area of future budget pressure for the Scottish Government.

The SFC estimate devolved social security spending will increase from £4.2bn in 2022-23 to £5.2bn in 2023-24 and social security spending will reach £7.3bn in 2027-28.

In 2022-23, the total amount needed to fund social security commitments above and beyond the amount of social security funding in the block grant was £374m; next year, it will be £776m, and in 2027-28 SFC estimates it will reach £1.4bn. These amounts must be funded by the Scottish Government out of revenues beyond the block grant.

The key thing we were all looking out for was the announcement on public sector pay - and we are still looking.

Departing from tradition, the Scottish Government has chosen not to publish formal guidelines for public sector pay in 2023-2024.

John Swinney highlighted the uncertain outlook for inflation and a need to conclude ongoing pay negotiations as reasons for holding back until the New Year.