Source · Select Committees · Scottish Affairs Committee
Recommendation 13
13
Acknowledged
Capped Scotland Reserve limits fiscal flexibility, risking surrender of Scottish Government funds
Conclusion
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 it. 45 The danger of the Scottish Government having to surrender funds, due to a late addition which pushes the Reserve over the limit, whilst hypothetical, remains of concern to us. (Conclusion, Paragraph 99)
Government Response Summary
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.
Government Response
Acknowledged
HM Government
Acknowledged
The Scotland Reserve limit was agreed with the Scottish Government who are responsible for managing annual expenditure within agreed budgets. There are no annual payment or draw down limits on the Scotland Reserve and the limit is uprated annually in line with the latest GDP deflator at the time of the Scottish Government’s draft Budget. We expect the next Fiscal Framework review point to be in 2028. The scope of the next Fiscal Framework review will be determined by the Joint Exchequer Committee (Scotland) at least 3 months before the review is to start. Any future reviews would require mutual agreement between the Scottish and UK Governments. As set out in the 2023 Scottish Fiscal Framework, The Smith Commission recommended that the Fiscal Framework should be reviewed periodically, with subsequent reviews to take place on a 5 yearly basis but not more than once in any UK or Scottish electoral cycle. Following discussion with the Chief Secretary to the Treasury and Cabinet Secretary for Finance and Local Government, HM Treasury and Scottish Government officials have agreed to begin preliminary work on the scope for the next review of the Fiscal Framework in the coming months.