Scotland's fiscal outlook: medium-term financial strategy

Glossary

Barnett formula: the formula used by HM Treasury to allocate Block Grant funding to devolved governments in Scotland, Wales and Northern Ireland. The Barnett formula gives these governments a proportion (or consequential) of increased or decreased funding in UK expenditure on devolved policy based on our share of the UK population – currently around 9.52%.

Budget: a document prepared by the government to present its anticipated tax revenues and proposed spending plans for the coming financial year.

Block Grant: the grant received by the Scottish Government from the UK Government, consisting of consequentials calculated by the Barnett formula.

Block Grant Adjustment: deductions or additions to the Scottish Government’s total Block Grant to reflect devolved tax receipts or social security expenditure.

Capital borrowing: funding which the Scottish Government can borrow under the Fiscal Framework Agreement to funding capital expenditure.

Capital funding (or capital expenditure): a form of discretionary cash funding that is tightly constrained in its use. It can only be spent on assets, such as infrastructure and investments, which will create growth.

Consequentials (or Barnett Consequentials): the change to a devolved administration’s assigned budget as a consequence of changes in spending in devolved areas by the UK Government.

Demand-led: expenditure which can be predicted at the beginning of the year but which will ultimately depend on variable factors. For example, the payment of benefits is expected but the total cost is dependent on the number of eligible claimants.

Financial Transactions: a subdivision of capital funding which is allocated by HM Treasury to the Scottish Government. It can only be used for the provision of loans or equity investment outside the public sector boundaries, and they are subject to repayment agreements with HM Treasury.

Fiscal resource or Resource expenditure: cash funding available to the Scottish Government, which represents the SG’s discretionary spending power on day-to-day resources and administration.

Fiscal Framework: the Fiscal Framework Agreement was published alongside the Scotland Act 2016, setting out the funding arrangements, fiscal rules and borrowing powers for the Scottish Government. The agreement was reviewed and updated in 2023.

Funding outlook: the total level of potential funding, based on the forecasts for each element of funding combined.

Gross domestic product: a measure of the size and health of a country’s economy, based on the total value of all goods made and services provided during a specific period of time.

Inflation: a sustained increase in prices of goods and services across the economy.

Nominal terms: value measured in terms of absolute monetary amount, without adjusting for inflation.

Non-Domestic Rates: A tax on non-domestic properties to help pay for local council services such as education, social care and waste management. Often also referred to as business rates.

Net zero: An overall balance between emissions produced and emission taken out of the atmosphere.

Outturn: Official statistics of actual revenues and expenditure, published in regular outturn reports.

Poundage: Non-Domestic Rates are levied on the basis of a national poundage multiplied by the Rateable Value of the property you occupy. If you are the ratepayer for a property with a rateable value in excess of £51,000 then you will be required to pay a supplement on the poundage. The poundage is set annually by the Scottish Government and covers the period 1 April to 31 March.

Rateable value: the notional rental value that a property could be expected to achieve from a tenant on the open market if vacant.

Real terms: value measured by taking account of inflation, to provide an accurate representation of purchasing power.

Reconciliations: Adjustments to address historical budgets’ forecast errors.

Resource borrowing: funding which the Scottish Government can borrow under the Fiscal Framework Agreement to funding resource expenditure.

Scotland Reserve: a method which allows the Scottish Government to reserve funds for future financial years when revenues are higher than forecast. This is separated into resource, capital and financial transactions.

Social Security: a system of benefits and support in Scotland which are provided by the government to people in need.

UK Spending Review: a governmental process carried out by HM Treasury to set departmental budgets for future years.

Volatility: when circumstances are likely to change quickly and in an unpredictable manner. This can mean changes in economic indicators such as gross domestic product, inflation or price variation.