Scottish Government can borrow more under new deal on devolution finance

It doubles the resource borrowing annual limit to £600 million.

The Scottish Government will be able to borrow more after a new deal was struck with the UK Government on the structure of devolved finances.

The updated fiscal framework doubles the Scottish Government’s resource borrowing annual limit to £600 million, which Deputy First Minister Shona Robison said enables it to mitigate against errors in forecasting.

The deal also removes limits on how much can be withdrawn from the Scotland reserve to spend on future years, with the Treasury claiming the latter change boosts spending through borrowing by £90 million in the next financial year.

The previous framework meant the Scottish Government could borrow £450 million a year within a £3 billion cap, in addition to having a share of UK Government borrowing according to the Barnett formula.

Under the new deal, these amounts will instead rise with inflation, as will the resource borrowing annual limit.

The deal maintains the Barnett formula, which governs how cash is distributed to the devolved regions from the Treasury.

The previous funding arrangements for tax have also not been changed.

Chief Secretary to the Treasury John Glen said: “This is a fair and responsible deal that has been arrived at following a serious and proactive offer from the UK Government.

“We have kept what works and listened to the Scottish Government’s calls for greater certainty and flexibility to deliver for Scotland.

Shona Robison
Shona Robison welcomed the new deal but said the scope is ‘narrower’ than the ideal (Jane Barlow/PA)

“The Scottish Government can now use this for greater investment in public services to help the people of Scotland prosper. These are the clear benefits of a United Kingdom that is stronger as a union.”

Ms Robison, who is also the Scottish Finance Secretary, said: “This is a finely balanced agreement that gives us some extra flexibility to deal with unexpected shocks, against a background of continuing widespread concern about the sustainability of UK public finances, and while it is a narrower review than we would have liked, I am grateful to the Chief Secretary to the Treasury for reaching this deal.

“As I set out in the medium-term financial strategy, we are committed to tackling poverty, building a fair, green and growing economy, and improving our public services to make them fit for the needs of future generations.

“We still face a profoundly challenging situation and will need to make tough choices in the context of a poorly performing UK economy and the constraints of devolution, to ensure finances remain sustainable.”

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