Select Committee · Scottish Affairs Committee

The financing of the Scottish Government

Status: Closed Opened: 21 Nov 2024 Closed: 20 Oct 2025 7 recommendations 12 conclusions 1 report

This inquiry is examining the framework for fiscal devolution in Scotland. The Committee is evaluating the effectiveness of the Barnett formula and the fiscal framework in calculating the amount of money available for providing devolved services in Scotland. As part of this, the Committee is examining the interaction between UK Government fiscal events and in-year …

Reports

1 report

Title	HC No.	Published	Items	Response
1st report – The financing of the Scottish Government	HC 456	16 Jul 2025	19	Responded

Recommendations & Conclusions

4 items

9 Recommendation 1st report – The financing of the Scott… Acknowledged

Formalising Barnett formula or dedicated dispute process would not improve effectiveness

We are not convinced that putting the Barnett formula on a statutory footing, or otherwise formalising it, would significantly improve its effectiveness. The use of the Barnett formula is already a well-established practice, not unlike other features of the UK’s uncodified constitution. Although new routes to legal challenge may be …

Government response. The government repeats the committee's conclusion verbatim.

Scotland Office

10 Conclusion 1st report – The financing of the Scott… Acknowledged

Significant Block Grant changes necessitate urgent Scottish Government spending plan adjustments

The Committee notes that the Block Grant is the single largest source of Scottish Government funding, and that tight rules on borrowing and fiscal reserves mean that significant changes to the block grant will almost always require significant, urgent changes to the Scottish Government’s spending plans. (Conclusion, Paragraph 80)

Government response. The government provided an update on the Scottish Government's block grant, stating it has received the largest real terms settlement since devolution and additional funding, contrasting this with the Scottish Government's stance on the Barnett Formula.

Scotland Office

13 Conclusion 1st report – The financing of the Scott… Acknowledged

Capped Scotland Reserve limits fiscal flexibility, risking surrender of Scottish Government funds

Given the challenges the Scottish Government faces, we recognise its need for fiscal flexibility. The Scotland Reserve is a key tool that enables the Scottish Government to carry funds from one year to another, and there seems little benefit in capping the amount of money that can be stored in …

Government response. The government explained the Scotland Reserve limit was mutually agreed and is uprated annually, with consideration of any changes deferred to the next Fiscal Framework review expected in 2028.

Scotland Office

16 Conclusion 1st report – The financing of the Scott… Acknowledged

Limited Scottish Government borrowing powers constrain ability to manage fiscal shocks

At present, the Scottish Government’s limited borrowing powers constrain its ability to manage fiscal shocks, as it is only able to borrow for resource purposes to cover forecast errors. Capital borrowing limits are currently linked to and grow in line with inflation, which may not necessarily be the highest metric …

Government response. The government acknowledges the conclusion by explaining that borrowing powers and limits were jointly agreed in the 2023 Fiscal Framework and are uprated annually by the GDP deflator to maintain real value, committing to consider these arrangements at the next …

Scotland Office

Oral evidence sessions

1 session

Date	Witnesses
29 Jan 2025	Claire Murdoch · NHS England, David Phillips · Institute for Fiscal Studies, Dr João Sousa · Fraser of Allander Institute	View ↗

Correspondence

2 letters

Date	Direction	Title
5 Feb 2025	—	Correspondence from David Phillips, Associate Director, Institute for Fiscal St…
22 Jan 2025	—	Correspondence from Shona Robison MSP, Scottish Government, regarding the fina…