Source · Select Committees · Scottish Affairs Committee
1st report – The financing of the Scottish Government
Scottish Affairs Committee
HC 456
Published 16 July 2025
Conclusions (6)
1
Conclusion
Accepted
We note the Scottish Government’s call for full fiscal autonomy, but do not consider that this currently appears to be a realistic prospect. Fundamental questions remain about how full fiscal autonomy would work in practice, and whether it would be operable within the constraints of the UK’s current devolution settlement. …
Government Response Summary
The government agreed with the committee's conclusion that full fiscal autonomy is not a serious proposition, contrasting it with the financial stability provided by the UK and highlighting a potential £14 billion funding gap for Scotland.
2
Conclusion
Accepted
Whilst the Barnett formula is an imperfect method of calculating Scotland’s funding, we have heard no convincing evidence of a workable alternative. We therefore consider the formula to be fit for purpose and are not convinced there is clear need to reform it significantly. (Conclusion, Paragraph 33)
Government Response Summary
The government accepts the conclusion, citing the significant real-terms settlement for the Scottish Government delivered through the Barnett formula via Phase 2 of the Spending Review, affirming the formula's role in providing financial certainty.
3
Conclusion
Accepted
In particular, we are not convinced there is a need to introduce a needs- based factor into the Barnett formula at this time. Scotland currently may be receiving more than it would if a needs-based factor, like the floors introduced in Northern Ireland and Wales, were to be introduced. However, …
Government Response Summary
The government accepts the conclusion, reiterating the substantial funding increases for the Scottish Government through the existing Barnett formula, which provides financial certainty and stability without the need for a needs-based factor at this time.
4
Conclusion
Accepted
The operation of the Barnett formula is not as transparent as it could or should be. In particular, there is a lack of transparency around how comparability percentages are calculated. Comparability percentages are a fundamental feature of the Barnett formula and the only multiplier which cannot be effectively scrutinised by …
Government Response Summary
The government stated that details on how comparability percentages are calculated, including a programme-by-programme breakdown, are already included in Annex B of the Statement of Funding Policy document published in June 2025.
8
Conclusion
Accepted
HM Treasury, and therefore the UK Government, is the “ultimate arbiter” of the Barnett formula. As the formula is non-statutory, there is no legal recourse for the Scottish Government to challenge the UK Government’s application of it. There is also currently no formal, objective dispute resolution process relating to the …
Government Response Summary
HM Treasury sets out the impact on Scotland of policy changes at fiscal events in the publicly available fiscal event documents.
11
Conclusion
Accepted
The timing of supplementary estimates and UK Government fiscal events can cause clear challenges for the Scottish Government in terms of financial planning, with the Scottish Government’s final funding position not confirmed until close to the end of the financial year. This uncertainty is compounded by in-year changes to UK …
Government Response Summary
The government explained that the Block Grant Transparency is published annually, and the Scottish Government is informed of changes at the earliest possible opportunity, justifying its current practices as appropriate for managing market sensitive information.