The overall funding outlook

Abstract

The Scottish Government's overall budget depends both on funding from the UK government, which is determined largely via the Barnett formula, and on its own devolved revenues, borrowing and reserves, which are governed by the Fiscal Framework. This chapter of the report looks at the funding outlook in the short term (2022-23 and 2023-24), medium term (2024-25 to 2027-28) and beyond, drawing on Scottish Government and Scottish Fiscal Commission (SFC) figures. Key findings1. The funding available to the Scottish Government in 2023-24 for day-to-day nonbenefits spending is around £1.5 billion higher than forecast in May 2022 at the time of the Resource Spending Review. Of this, just over £0.8 billion reflects higher funding from the UK government via the Barnett formula, and another £0.8 billion reflects a forecast improvement in net revenues from devolved taxes, only a small part of which is due to new tax raising measures. This cash-terms increase is partially, but not fully, offset by higher forecast inflation.2. The Scottish Budget for 2023-24 shows day-to-day non-benefits spending increasing by 1.6% in real terms, on average, compared to what was originally budgeted to be spent this year, which is more generous than the 1% fall expected at the time of the Resource Spending Review. However, these comparisons exclude in-year top-ups to the funding available to the Scottish Government this year, which SFC forecasts suggest amount to around £1.1 billion.