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

This is the third Medium Term Financial Strategy (MTFS) published by the Scottish Government. The MTFS provides the context for the Scottish Budget and the next Scottish Parliament. This context will frame the incoming Government’s strategic approach to fiscal policy.

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Foreword by the Cabinet Secretary for Finance

In the midst of this global pandemic and economic crisis, the outlook for the economies and public finances of countries and Governments around the world has been upended. We all face the same intractable challenge: to balance the competing demands of increased public spending, reduced tax income and the pressing need to support citizens and businesses. The challenges we faced pre-pandemic are also still with us: the need to tackle climate change, the desire to invest in our public services and the efforts to build a wellbeing economy.

While we share this challenge with our friends and neighbours, Scotland does not have access to the same tools and flexibilities that would help us to minimise the impact of the crisis and spread the cost of the response.

Even before this crisis occurred, I had been clear that the current Fiscal Framework did not allow me adequately to manage the levels of fiscal risk in our Budget process. In the current context, these levels of risk and volatility have only been compounded. They illustrate, more than any of us could have predicted, the need for different parts of the UK to have access to fiscal levers in order to respond adequately to the needs of their local populations.

Despite the challenges brought by 2020, compounded by the implications of EU Exit, I believe in the people of Scotland’s tenacity, commitment and ability to build a better society. I am certain that, together, we can meet these challenges. Now more than ever, we will need to be creative and enterprising, to lay out a vision of how we can emerge from this global crisis to rebuild, to innovate and to prosper. This crisis has shown us that we are resilient, united in our purpose and in our values.

I have made no secret of my belief that only in an independent Scotland can we truly and fully fulfil this ambition. Although it is not a focus of this document, only independence would give us the full fiscal levers we require in order to set a different trajectory to that of the UK Government. Nonetheless, this document sets out how we will respond as a Government within our limited powers. It also outlines the further flexibilities and levers required in order to manage the risks and volatility with which the Scottish budget will need to contend in coming years.

By publishing this year’s Medium-Term Financial Strategy (MTFS) alongside the Budget, I want to provide a clear direction at a time of significant uncertainty and set some context around the difficult decisions that need to be made as part of this Budget. After the Holyrood election, it will be for the incoming Government to work with the next Parliament to agree how best the MTFS can continue to support budget scrutiny, accountability and transparency, by setting out the evolving context for annual budgets.

The First Minister, by being open about the challenges brought by the Covid-19 pandemic, has set a clear tone for a maturing relationship between Scotland’s government and its people. This document is an important part of our efforts to build on this commitment to fiscal transparency and parliamentary accountability.

Kate Forbes MSP, Cabinet Secretary for Finance



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