Source · Select Committees · Scottish Affairs Committee
Recommendation 14
14
Deferred
Removing Scotland Reserve cap would enable more strategic Scottish Government financial planning
Recommendation
We note also that the jeopardy for returning funds to the UK Treasury at the end of the financial year incentivises poor behaviour in departmental spending, relative to value for money to the taxpayer. The removal of the Reserve, which is simply a treasury rule, would allow the Scottish Government to plan more strategically both within and across financial years. A political decision could remove the Scotland Reserve in advance of the next Fiscal Framework event in 2027 to the immediate benefit of the Scottish Government’s budget setting. (Conclusion, Paragraph 100)
Government Response Summary
The government explained the current Scotland Reserve limits were agreed with the Scottish Government and deferred any changes, including potential removal, to the next Fiscal Framework review in 2028.
Government Response
Deferred
HM Government
Deferred
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.