Greater financial clarity for Scotland agreed by Westminster

By Lucy Ashton

The Scottish and UK Governments have reached agreement on the Fiscal Framework, providing greater long-term funding clarity for Scotland and some more flexibility on how the Scottish Government manages the public finances.

After a joint review, the two governments have agreed to permanently adopt the existing Indexed Per Capita (IPC) method used to calculate the funding received from the UK Government.

This enshrines the current way the Fiscal Framework operates, taking into account the devolution of some tax and social security powers and protecting the Scottish Budget from the risk of Scotland’s population growing at a slower rate from the rest of the UK.

In addition, the amount the Scottish Government can borrow to mitigate against errors in forecasting will be increased from £300 million to £600 million, with no limits to the amount that can be drawn from the Scotland Reserve, providing some greater flexibility to handle funding volatility.

Borrowing and reserve limits will grow in line with inflation and will therefore be maintained in real terms.

Deputy First Minister Shona Robison, left, said:  “This is a finely balanced agreement that gives us some extra flexibility to deal with unexpected shocks, against a background of continuing widespread concern about the sustainability of UK public finances and while it is a narrower review than we would have liked, I am grateful to the Chief Secretary to the Treasury for reaching this deal.  

“As I set out in the Medium-Term Financial Strategy, we are committed to tackling poverty, building a fair, green and growing economy, and improving our public services to make them fit for the needs of future generations.

“We still face a profoundly challenging situation and will need to make tough choices in the context of a poorly performing UK economy and the constraints of devolution, to ensure finances remain sustainable.”

Commenting on the new Fiscal Framework agreement Scottish Labour Finance spokesperson Michael Marra, pictured right,  said “Labour is the party of devolution and I welcome this new settlement, which will give the Scottish Parliament more flexibility than ever.

“This puts to bed once and for all the SNP’s false claim that they don’t have any borrowing powers.

“As the devolution settlement continues to evolve, it must be used to meet the needs of the people of Scotland.

“Under the SNP the devolved powers are going unused and devolved finances are being mismanaged – these new powers must be used responsibly to tackle the major challenges Scotland is facing.

“The SNP is out of excuses for failing to deliver for the people of Scotland – they must use the powers and financial flexibility they have to achieve real change.”


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