Spring Budget Revision 2024-2025 guidance: finance update for FPAC

B. Scotland Reserve and Funding Position Details

74. Tables 1.7a to 1.7e of the Budget Revision document sets out the Funding Position that supports the revised Scottish Budget. The table below breaks this down by the HM Treasury budget classifications of Fiscal Resource, Capital and Financial Transactions.

75. Annexes A and B detail the funding envelopes for each of the three key budget classifications at the Budget Bill along with the changes allocated within the Spring Budget Revision.

76. The totals reconcile to the breakdown set out above, which in turn reconciles to table 1.7 in the supporting document.

B.1 Fiscal Resource

77. The Fiscal Resource funding position has increased by £1,079.1 million since the Autumn Budget Revision was laid in October 2024. The key changes are outlined in detail below.

78. There have been two UK Government fiscal events since the 2024-25 Autumn Budget Revision, the UK Autumn Budget on 30 October 2024 and the UK Supplementary Estimates. £1,433 million of resource consequentials were confirmed as part of the UK Autumn Budget and these are reflected in full as part of the Spring Budget Revision

79. The UK Government’s 2024-25 Supplementary Estimates process has also now concluded With the vast majority of UK departmental changes actioned in October there is only a modest £10.6 million increase in the resource block grant as part of the Supplementary Estimates. Following discussions with HM Treasury we have included these consequentials in the Spring Budget Revision to ensure our block grant funding was fully up to date.

80. The Spring Budget Revision also reflects the revised block grant adjustments for Social Security and for Taxes and non-tax income following updated forecasts from the OBR at the Autumn Statement. There has been a £137 million increase to the BGA for Social Security with a decrease of £44 million in in the Tax and non-taxes BGA .

81. Committee will remember that at the Autumn Budget Revision a negative adjustment of £146 million was included for the Social Security in respect of the expected decrease in the BGA as a consequence of the decision by the UK Government to reduce eligibility for Winter Fuel Payments. While that figure proved to be an accurate estimate it has been offset by an increase in the BGA for other benefits, most notably in Personal Independence Payment and Disability Living Allowances, with a net reduction of £9 million.

82. The £44 million increase in the Taxes and Non-Tax BGA reflects an increased deduction of £53 million for Land and Buildings Transaction Tax, which is offset by £9 million reduction in the Scottish Landfill Tax BGA. These movements should be considered alongside the revised devolved tax forecasts which increase expected LBTT receipts by £143 million while Scottish Landfill Tax forecasts have dropped by £4 million. The net improvement in the tax position is therefore £94 million.

83. With the 2023-24 Final Outturn process nearing conclusion the resource amounts carried forward within the Scotland Reserve has increased by £103 million.

84. An additional £21 million of funding has been included in respect of the Immigration Health Surcharge following the latest projections provided by the Home Office. This takes total funding from this source to £221 million.

85. £43 million of budget cover transfers have also been included in the budget revision. £35.1 million of this funding was outlined in the UK Autumn Budget with £34.1 million for McCloud remedies and £1 million for City and Growth Deals.

86. The balance of other funding will be formally provided to the Scottish Government as part of the UK Supplementary Estimates with the largest elements being £4.9 million for Ukrainian Thank You payments and £2.9 million for Homes for Ukraine.

87. The improvement in the funding position outlined above have allowed the Scottish Government to remove all ScotWind funding that had been profiled into the 2024-25 financial year. Resource borrowing has also been reduced to nil as part of the budget revision.

B.2 Capital

88. Changes to the capital position since the Autumn Budget Revision have also been reflected in the Spring Budget Revision. These decrease capital funding by £74.6 million.

89. £71.8 million of capital consequentials were confirmed at the UK Autumn Statement. This was reduced by £12.4 million of negative consequentials outlined in the UK Supplementary Estimates, giving a net increase in the block grant of £59.5 million.

90. As noted in the resource section above, the final outturn process is nearing conclusion and the capital Scotland Reserve position has increased by £10.1 million from the position outlined in the provisional outturn.

91. A small number of capital budget cover transfers have also been formalised since the Autumn Budget Revision. These are: i) £2.7 million from Department for Science and Technology for R100 Programme ii) £2.2 million from Department Health and Social Care for Voluntary Scheme for Branded Medicines pricing and access iii) £0.8 million from Department Energy Security and Net Zero to cover half of the total study costs for Petroineos’ Project Willow cross site study iv) £0.1 million from Cabinet Office iro Local Pathfinders to reduce child poverty

92. City Deals funding has been reduced by a net £24.5 million. Following an increase of £19.2 million at the UK Autumn Budget this has been decreased by £43.7 million at the UK Supplementary Estimates following a review of the progress of projects. This will be reprofiled into future years with no loss of funding for the overall City Deal programme.

93. At the 2025-26 Scottish Budget the Cabinet Secretary for Finance and Local Government outlined the intention for capital borrowing to be decreased in 2024-25 to £300 million. Within the Spring Budget Revision there has been a decrease of £125.5 million from £457.5 million to £332 million which reflect the increases in funding elsewhere as well as latest forecasts for spend on capital projects.

94. Final borrowing decisions will be made at the end of the financial year with the expectation that capital borrowing will ultimately be around £300 million.

B.3 Financial Transactions

95. There has been a modest change in the financial transactions budget since the Autumn Budget Revision.

96. There has been a £3.5 million increase in the Scotland Reserve carry forward from 2023-24 while negative financial transaction consequentials totalling £0.4 million were confirmed as part of the 2024-25 Supplementary Estimates process. This amounts to a net improvement in the funding position of £3.2 million.

97. At the beginning of 2024-25 the financial transactions budget was £52.8 million overallocated following the decision to defer negative consequentials confirmed at the 2023-24 UK Supplementary Estimates Following improvement in funding and the recognition of additional FT income across both budget revisions this overallocation has been reduced and currently the financial transaction budget is overallocated by £3.9 million.

98. The expectation is that this will be reduced to nil by the end of the financial year. Given the uncertainty an equivalent amount of capital budget is being held to offset this overallocation.

B.4 Scotland Reserve

99. The current forecast Scotland Reserve as work on the final outturn nears completion is detailed below.

100. In general terms the Scottish Government will always plan to drawdown any Scotland Reserve availability in full each financial year. As set out in the supporting document £350 million is being held as contingency funding for the year end. £60 million is being carried forward for Health and Social Care to support 2025-26 costs and is reflected in the table above.

101. £150 – 200 million is being held as contingency for year-end audit adjustments alongside a balance of funding for any changes in demand led schemes and devolved tax receipts as the financial year concludes. If this funding is not required it will be carried forward in the Scotland Reserve to support 2025-26.

102. Following the conclusion of the Fiscal Framework Review the Scotland Reserve cap will now grow in line with the inflation (as measured by the GDP deflator) from its previous £700 million threshold. The limit for 2024-25 is £712 million. In addition the drawdown limits of £250 million on Resource and £100 million on Capital have ceased to apply.

B.5 ScotWind position