Bacgkround: What are the indexation options?published at 14:31 Greenwich Mean Time 23 February 2016
There are three main options:
- Indexed deduction - the cut to the Scottish block grant is adjusted by the percentage change in income tax revenues in the rest of the UK
- Per capita indexed deduction - a version of indexed deduction that protects Scotland from the effects of having slower population growth than the rest of the UK
- Levels adjustment - the cut to the Scottish block grant is adjusted by Scotland's population share of any change in cash raised in income tax in the rest of the UK
It is understood the UK government favours a form of levels adjustment, while the Scottish government prefers per capita indexed deduction.
Academics disagree about which model would produce the "fairest" outcome.
Articles by Prof Jim Gallagher, external and Prof Anton Muscatelli, external give a flavour of the debate.