Source · Select Committees · Scottish Affairs Committee
1st report – The financing of the Scottish Government
Scottish Affairs Committee
HC 456
Published 16 July 2025
Recommendations
9
Acknowledged
Formalising Barnett formula or dedicated dispute process would not improve effectiveness
Recommendation
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 …
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Government Response Summary
The government repeats the committee's conclusion verbatim.
Scotland Office
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Conclusions (3)
10
Conclusion
Acknowledged
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 Summary
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.
13
Conclusion
Acknowledged
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 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.
16
Conclusion
Acknowledged
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 Summary
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 Fiscal Framework review.