1st report – The financing of the Scottish Government
Select Committee
Scottish Affairs Committee
HC 456
16 July 2025
Government response
3rd Special Report – The Financing of the Scottish Government: Government response · published 17 Oct 2025
Recommendations & Conclusions
4 results
9
Recommendation
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 …
Read more
Government Response Summary
The government repeats the committee's conclusion verbatim.
Scotland Office
View Details
10
Conclusion
Acknowledged
Significant Block Grant changes necessitate urgent Scottish Government spending plan adjustments
Conclusion
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 …
Read more
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.
Scotland Office
View Details
13
Conclusion
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 …
Read more
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.
Scotland Office
View Details
16
Conclusion
Acknowledged
Limited Scottish Government borrowing powers constrain ability to manage fiscal shocks
Conclusion
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 …
Read more
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.
Scotland Office
View Details