Another step is taken towards a new discount rate-setting process in Scotland

22 January 2019 has been set for completion of Stage 2 of the three stage legislative process for the Scottish Discount Rate and PPO Bill.

Stage 2 will be completed at committee level, with the Economy Energy and Fair Work Committee having power to amend the Bill, subject to possible further amendment by the Scottish Parliament in Chamber at Stage 3 Debate.

Though legislatively behind England and Wales on this, it is worth noting that the Scottish Bill provides for a shorter maximum rate review period of 90 days. This 90 day period will not necessarily run from the date of Royal Assent but, rather, from “the appointed day” to be set by Ministerial regulations. The Scottish period is shorter given the more prescriptive and formulaic methodology north of the border compared to the more discretionary and consultative approach in England and Wales.

With no date yet set for the completion of Stage 3 and given the uncertainty of the period between Royal Assent and the appointed day, it remains premature to commit with any meaningful accuracy on when the first Scottish review under the new methodology will be complete. It is, though, possible that that might be broadly contemporaneous with the equivalent date in England and Wales. Of perhaps greater importance than the question of timing is the potential for significant disparity in discount rates north and south of the border. That arises principally from the more cautious approach in Scotland. The main differences arise from the make-up of the notional portfolio and from the further adjustment to guard against under-compensation.

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Authored by partner, Iain Buchanan

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