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Chamber and committees

Finance and Public Administration Committee


Scottish Fiscal Framework: Independent Report and Review

The Scottish Fiscal Framework will be subject to an independent report followed by a joint review by the Scottish Government and UK Government. Preparations for the independent report are underway and the review is expected to begin in early 2022.

The Committee is therefore undertaking work to understand how the framework has operated to date. This work will help inform the Committee’s scrutiny of the independent report and the review that will follow.

About the Fiscal Framework

The UK Government and the Scottish Government agreed a Fiscal Framework in 2016 (pdf). That framework sets out the funding arrangements that help determine the size of the Scottish Budget each year.

The fiscal framework includes

  • how the Scottish Block Grant will be adjusted to take account of the Scottish Parliament’s tax and welfare powers
  • how forecasts of the funding raised from the new taxes and welfare spending will be provided and by whom
  • rules around revenue borrowing powers and a reserve fund to manage funding from year to year
  • rules around capital borrowing powers
  • how policies made by either government but which directly ‘spill over’ and impact the other government’s finances will be managed
  • administrative procedures such as how operational costs are paid for, how disputes between both governments will be managed and how the framework will be reviewed in future.

Scrutiny of Block Grant Adjustments

Both governments agreed the independent report should examine Block Grant Adjustments. These are adjustments to the Scottish Budget to reflect the devolution of tax and social security.

The Committee will therefore focus on this part of the Fiscal Framework first.

About Block Grant Adjustments

The Scottish Block Grant is funding for the Scottish Budget. It is calculated based upon UK Government funding. That funding is then adjusted by the UK Government to reflect that some taxes are now the responsibility of the Scottish Government.

It is also adjusted because the Scottish Government has responsibility for certain welfare payments.

In both cases these are called Block Grant Adjustments.

The independent report

The work on the independent report on Block Grant Adjustments will include the following:

  • the accuracy of the first (baseline) adjustment made to the Scottish Block Grant as each of the new powers became operational
  • the indexation method used to adjust the Block Grant in the following years.

Correspondence

Letter from the Convener to the Chief Secretary to the Treasury of 7 October 2021

Letter from the Convener to the Cabinet Secretary for Finance and the Economy of 7 October 2021

Letter from the Cabinet Secretary for Finance and the Economy to the Convener of 2 November 2021

Letter from the Chief Secretary to the Treasury to the Convener of 2 November 2021

Letter from the Cabinet Secretary for Finance and the Economy to the Convener of 21 December 2021

Letter from the Cabinet Secretary for Finance and the Economy to the Convener of 8 March 2022

Letter from the Cabinet Secretary for Finance and the Economy to the Convener of 27 June 2022


Briefing Paper from the Scottish Government

The Scottish Government provided the following briefing paper on block grant adjustments:

Briefing Paper from the Scottish Government on Block Grant Adjustments (171KB pdf, posted 13 December 2021)

Note: We aim to make all of the information we publish fully accessible. However, when documents are provided by external organisations this is not always possible. If you need the document provided in an alternative format please contact the Clerk to the Committee. Further information is available on our accessibility statement.


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