Scotland's Fiscal Outlook: The Scottish Government's Medium-Term Financial Strategy

This is the fifth Medium-Term Financial Strategy (MTFS) published by the Scottish Government and provides the context for the Scottish Budget and the Scottish Parliament. This context will also frame the Resource Spending Review.


This is the fifth edition of the Scottish Government's Medium-Term Financial Strategy. The role of the MTFS is to set out Scotland's fiscal outlook over the next five years, including the risks that may impact on the Scottish Government's fiscal position. It is not intended to set out detailed spending plans or explain how prioritisation decisions will be made to meet policy objectives, in line with the recommendations of the Budget Process Review Group. However, as this edition is being published alongside the Resource Spending Review this MTFS also includes an overview of the Scottish Government's resource spending plans until the end of the parliamentary term. It also includes an update on the Scottish Government's Capital Spending Review, also published alongside this MTFS.

Despite the fourth edition of the MTFS only being published in December 2021, the Scottish Government now faces additional volatility to the spending outlook due to the significant increase in inflation since the December publication. There are also additional risks that the Scottish Government faces in managing the uncertainty and volatility in the Budget arising from the need to respond to emerging needs, emergencies and events that arise in year which were not foreseen such as the rapidly increasing energy prices, the current cost of living crisis and other consequences of the situation in Ukraine. The Scottish Government's financial management needs to be agile to respond to this volatility, using the limited budget management tools available.

The challenges highlighted in this MTFS reinforce the importance of medium-term financial planning, to ensure the long-term sustainability of the public finances, sustainable delivery of the Government's priorities and ultimately progress towards the National Outcomes. The MTFS demonstrates how the Scottish Government continues to proactively utilise the powers that are available across taxation, borrowing and the Reserve to manage fiscal risks over the medium-term. In addition to this, the Resource Spending Review sets out a clear direction on how spending can be used more effectively to support the delivery of Government's core missions.

The Scottish Government welcomes the recommendations on improvements to the MTFS made by the Finance and Public Administration Committee and has considered each of these recommendations in detail. This publication of the MTFS now includes greater detail on the funding assumptions and the risks and uncertainties associated with these. It also sets out greater detail on the risks to both funding and spending, including estimated possible impact, the current levers available to the Scottish Government to manage these risks and the budget management strategy. The Scottish Government will continue to work collaboratively with the Committee and other stakeholders such as the SFC on improvements going forwards.



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