Fiscal Framework between Scottish Government and Local Government

Introduction

1. The Verity House Agreement, signed on 30 June 2023 as part of the New Deal with Local Government, committed to “a robust Fiscal Framework which will include meaningful early budget engagement, the Local Government Settlement will be simplified and consolidated, clear routes to explore local revenue raising and sources of funding will be established, and wherever possible multi-year certainty will be provided to support strategic planning and investment.”

2. The Verity House Agreement, sets out Scottish and Local Government’s clear starting point and public commitment to the principle of regular and meaningful engagement, and respect for each other’s democratic mandate, in order that we can work together more effectively to improve the lives of people in Scotland.

3. Further, the Verity House Agreement commits to regularly reviewing powers and funding for Local Government to ensure they are aligned with the effective delivery of outcomes. It established a default position that there will be no ring-fencing or direction of funding, unless there is a clear joint understanding of, and rationale for, such arrangements.

4. The Verity House Agreement and the Fiscal Framework aims to balance greater flexibility over financial arrangements for Local Government, with clearer accountability for the delivery of shared priorities.

5. The Fiscal Framework establishes an agreed foundation for cooperation and coordination on all matters concerning the financial relationship between Local Government and the Scottish Government.

6. This Fiscal Framework sets out provisions relating to:

• Principles
• Roles and scope
• Engagement
• Local Taxation and Fiscal Flexibilities
• Multi-year Allocations
• Forward Work Plan

7. The Fiscal Framework has the status of a ‘Memorandum of Understanding’. As with the Verity House Agreement, it is an agreed statement of political intent. The Framework is not intended to constrain the independence of Local Government, nor the freedoms of either party to operate in areas for which they are responsible, but rather to enhance the work required to deliver our shared priorities and produce better outcomes for communities.

8. Whilst the Verity House Agreement committed to concluding a Fiscal Framework between the Scottish Government and Local Government, both parties agree that the Framework should be viewed as an evolving document that will develop over time to ensure both parties continue to benefit from its core principles and objectives. COSLA and Scottish Government will together monitor the effectiveness of the Fiscal Framework periodically.

9. The 2025-26 Scottish Budget setting process highlighted the benefits of a Fiscal Framework. This was reflected in the engagement and greater transparency between Local and Scottish Government at both a political and official level during the 2025-26 Scottish Budget setting process and the plans for further strategic engagement during 2025-26. This has been acknowledged to have delivered an improvement on previous years. Importantly, this engagement enabled a greater degree of transparency than in previous years and ensured there was agreement about the levels of funding in the statement. Investing in maintaining a strong partnership approach through best practice in engagement will remain a critical component of the Fiscal Framework.