Information

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.

This document is part of a collection


Annex C - Fiscal Framework data

This Annex sets out the implications of the Fiscal Framework for the Scottish Budget. The Fiscal Framework Technical Note sets out more detail on how the Fiscal Framework operates including the evolution of the fiscal powers of the Scottish Parliament, the timelines for reconciliations and how they affect the Scottish Budget, the limits of the borrowing powers and Scotland Reserve, and the Fiscal Framework Review. [53]

At the time of the Scottish Budget on 28 January 2021, a UK Budget had not been published, but was instead scheduled for 3 March 2021. The block grant adjustments (BGAs) that inform the Scottish Budget would ordinarily be provided alongside the UK Budget.

The Fiscal Framework sets outs that, where the Scottish Budget takes place before the UK Budget, the Scottish Budget will be based on provisional BGAs.[54] The provisional BGAs for the 2021-22 Scottish Budget (together with forecast BGAs for other years) are informed by OBR forecasts published alongside the UK Government’s Spending Review on 25 November 2020.

The Framework also sets out that, where the UK Budget takes place less than three months before the start of the financial year, provisional BGAs will be applied to the Scottish Block Grant for that year. However, the UK and Scottish Governments have agreed that the Scottish Government can choose to use the BGAs provided alongside the UK Budget if it prefers to do so.

Reconciliations relating to 2021-22 will take place in the normal way against the set of BGAs which are ultimately used to determine the Scottish Budget for 2021-22.

Tax

Table C1 shows the latest forecasts for tax revenues from the SFC and BGA estimates from the OBR forecasts published alongside UK Government’s Spending Review in November 2020.

Table C1: Forecasts Of Tax Revenues And Block Grant Adjustments
£ million 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
Income Tax2 Revenue 11,838 11,850 12,263 12,907 13,481 14,080 14,718
BGA1 -11,582 -11,677 -11,788 -12,294 -12,840 -13,475 -14,105
Difference +257 +173 +475 +613 +641 +605 +613
LBTT2 Revenue 597 517 586 629 664 701 740
BGA1 -533 -391 -515 -544 -601 -666 -723
Difference +64 +126 +71 +85 +63 +35 +17
SLfT2 Revenue 119 95 88 86 72 74 61
BGA1 -99 -87 -95 -91 -79 -74 -80
Difference +20 +8 -7 -5 -7 0 -19
Total Revenue 12,555 12,462 12,937 13,623 14,217 14,855 15,519
BGA1 -12,213 -12,154 -12,398 -12,930 -13,520 -14,215 -14,908
Difference +341 +307 +539 +693 +697 +640 +611

Note 1: The BGAs shown are calculated using the Indexed Per Capita (IPC) indexation method. This method in practice determines the BGAs applied to the budget.
Note 2: The 2018-19 Income Tax, LBTT and SLfT and 2019-20 LBTT and SLfT revenue and BGA are outturn figures.
Figures may not sum due to rounding.

The forecasts of tax revenues and BGAs for 2021-22 will inform the Scottish Budget. Updated BGA forecasts will be provided alongside the UK Budget on 3 March and the Scottish Government can choose to use these BGAs rather than the provisional BGAs from the Spending Review in November 2020 should it wish to do so.

Forecasts of future years provide an indication of the level of revenues that the SFC anticipates, but these figures will not be used to set future budgets, which will draw upon updated SFC forecasts.

Social Security

Table C2 shows the SFC’s latest expenditure forecasts for social security benefits and the BGA estimates from the OBR forecasts published alongside UK Government’s Spending Review in November 2020.

Table C2: Forecasts Of Social Security Expenditure And Block Grant Adjustments (£ Million) 4
2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
Attendance Allowance Expenditure N/A -534 -550 -568 -583 -599 -618
BGA1 N/A 531 546 564 586 608 638
Difference N/A -3 -3 -4 +3 +9 +19
Personal Independence Payment Expenditure N/A -1,574 -1,669 -1,807 -1,916 -2,008 -2,105
BGA1 N/A 1,555 1,682 1,856 2,009 2,158 2,309
Difference N/A -19 +12 +49 +93 +150 +204
Disability Living Allowance Expenditure N/A -717 -696 -696 -692 -682 -673
BGA1 N/A 719 685 665 642 610 557
Difference N/A +2 -11 -31 -50 -72 -116
Carer’s Allowance 2, 3 Expenditure -279 -299 -306 -322 -342 -359 -376
BGA1 283 289 309 333 355 379 404
Difference +4 -9 +3 +11 +13 +20 +28
Industrial Injuries Disablement Scheme Expenditure N/A -82 -80 -79 -78 -77 -76
BGA1 N/A 84 81 79 77 76 74
Difference N/A +1 +1 0 0 -1 -2
Severe Disablement Allowance Expenditure N/A -8 -7 -6 -5 -5 -4
BGA1 N/A 8 7 7 7 6 6
Difference N/A 0 +1 +1 +1 +1 +2
Total Social Security Expenditure -279 -3,214 -3,308 -3,477 -3,617 -3,730 -3,853
BGA1 283 3,185 3,310 3,503 3,676 3,837 3,988
Difference +4 -29 +1 +26 +59 +107 +135

Note 1: The BGAs shown are calculated using the Indexed Per Capita (IPC) indexation method. This method in practice determines the BGAs applied to the budget.
Note 2: The 2018-19 and 2019-20 Carer’s Allowance expenditure and BGA are outturn figures.
Note 3: Carer’s Allowance Expenditure Forecast does not include Carer’s Allowance Supplement expenditure.
Note 4: There are minor differences in the methodology used to calculate the SFC’s spending forecasts and the BGA forecasts, which are based on expenditure outturn and OBR’s November 2020 forecasts, so comparisons should be interpreted with caution. Figures may not sum due to rounding.

Benefits Yet to Commence

Executive competence for the remaining benefits devolved under the Scotland Act 2016 (Cold Weather Payments and Winter Fuel Allowance) has yet to be transferred to the Scottish Government. Where relevant, BGAs will be agreed.

Reconciliations and implications for the Scottish Budget

The forecasts for Scottish tax revenues and social security expenditure, and the corresponding BGAs, are based on the latest available information at the time of the Budget. Once outturn data are available, reconciliations are made to the Scottish Budget to ensure that the funding available ultimately corresponds to actual revenues and the BGAs based on the outturn data.

Reconciliations are made for both the revenues and the BGA for income tax. For Fully Devolved Taxes (LBTT and Scottish Landfill Tax), Social Security, and Non-Tax Revenues (Fines, Forfeitures and Fixed Penalties - FFFP), reconciliations are only made to the BGA element of funding.

In relation to income tax, a reconciliation for both revenues and the BGA for the 2018-19 financial year will be applied to the 2021-22 Scottish Budget. Updated forecasts for the other past years - 2019-20 and 2020-21 – do not have any immediate impact on the Scottish Budget. Under the Fiscal Framework, a single reconciliation takes place three financial years after each financial year and the updated forecasts in the interim have no direct impact.

In relation to LBTT and Scottish Landfill Tax, Carer’s Allowance[55] and FFFP, reconciliations for the BGAs for 2019-20 financial year will be applied to the 2021-22 Scottish Budget.

The Fully Devolved Taxes and Social Security BGAs are also subject to an additional in-year reconciliation which takes place within each financial year, based on the latest OBR forecasts. There is no in-year reconciliation for FFFP.

Income Tax

For Scottish income tax, outturn data is normally available around 16 months after the end of the financial year. Given this long lag of availability of outturn data, Income Tax revenue and BGAs are fixed for three years from the time the Budget is set. A single reconciliation is then applied to the Budget three financial years after the Budget is set, e.g the reconciliation for 2017-18 Income Tax was applied to the 2020-21 budget. Outturn data for Income Tax 2018-19 was delayed due to the impact of COVID-19 and was published in September 2020.

Table C3 shows the confirmed 2018-19 Income Tax reconciliation applying to the 2021-22 Budget.

Table C3: Confirmed Income Tax Reconciliation Applying To 2021-22 Budget (£ Million)
2018-19 Income Tax Revenues BGA Net Position
Forecast as of Budget 2018-19 12,177 -11,749 +428
Outturn 11,556 -11,437 +119
Outturn against forecast -621 +312* -309

* The BGA has been revised downward – this has a positive effect on net revenues.
Figures may not sum due to rounding.

The potential scale of the reconciliations applying to the 2022-23 and 2023-24 Budgets are shown in tables C4 and C5 using the latest forecasts.

Table C4: Forecast Income Tax Reconciliation Applying To 2022-23 Budget (£ Million)
2019-20 Income Tax Revenues BGA Net Position Forecast Reconciliation
Forecast as of Budget 2019-20 11,684 -11,501 +182
Latest forecast 11,838 -11,582 +257 +74
Change +155 -80

Figures may not sum due to rounding.

Table C5: Forecast Income Tax Reconciliation Applying To 2023-24 Budget (£ Million)
2020-21 Income Tax Revenues BGA Net Position Forecast Reconciliation
Forecast as of Budget 2020-21 12,365 -12,319 +46
Latest forecast 11,850 -11,677 +173 +127
Change -516 +643

Figures may not sum due to rounding.

Based on the latest forecasts, the reconciliation to the Scottish Budget 2022-23 for 2019-20 Income Tax is expected to be +£74m. An even larger positive reconciliation of +£127 million is expected to apply to the Scottish Budget 2023-24 to account for 2020-21 income tax.

However, these forecasts are not certain and the final position will not be known for sure until outturn receipts are available for 2019-20 in summer 2021, and for 2020-21 in summer 2022.

Fully Devolved Taxes

Revenue Scotland manages and collects LBTT and SLfT and these revenue streams feed in to the Scottish Budget as they are collected. There is no reconciliation required for these revenues; the Scottish Government manages any variance between what was forecast and actual revenues as part of its in-year budget management process. The latest 2020-21 revenue forecasts for LBTT and SLfT and the previous revenue forecasts are shown in Table C6.

Table C6: 2020-21 Revenue Forecast (£ Million)
LBTT SFC Revenue Forecast – Budget 2020-21 641
SFC Revenue Forecast – Budget 2021-22 517
Change -125
SLfT SFC Revenue Forecast – Budget 2020-21 116
SFC Revenue Forecast – Budget 2021-22 95
Change -21

Figures may not sum due to rounding.

The BGAs for these taxes are reconciled in two stages. An in-year reconciliation is made within the same financial year. This is usually on the basis of OBR forecasts produced alongside the UK Autumn Budget. This year, in the absence of the UK Autumn Budget, the OBR forecasts were instead published alongside the UK Spending Review in November 2020. On the basis of the provisional BGAs calculated alongside the UK Spending Review in November 2020, the in-year reconciliations for 2020-21 LBTT and SLfT are shown in table C7.

Table C7: 2020-21 In-Year BGA Reconciliations (£ Million)
LBTT Forecast BGA – Scottish Budget February 2020 -557
Forecast BGAUK Spending Review November 2020 -391
In-year reconciliation to 2020-21 Budget +166
SLfT Forecast BGA – Scottish Budget February 2020 -87
Forecast BGAUK Spending Review November 2020 -87
In-year reconciliation to 2020-21 Budget 0

Figures may not sum due to rounding.

The net effect on the Scottish Budget 2020-21 of the latest fully devolved revenue forecasts, as set out in table C6, when compared to the in-year BGA reconciliations, as set out in table C7 is +£21m, (comprising +£41m for LBTT and -£20m for SLfT).

Outturn data becomes available in the autumn following the end of each financial year. Using these outturn figures, a final reconciliation is applied to the Block Grant in the financial year two years after the Budget was set. Table C8 shows the final reconciliations for 2019-20 LBTT and SLfT BGAs applying to the 2021-22 Scottish Budget.

Table C8: 2019-20 Final BGA Reconciliation (£ Million)
LBTT Forecast BGA – Scottish Budget February 20201 -527
Outturn -533
Reconciliation to 2021-22 Budget2 -6
SLfT Forecast BGA – Scottish Budget February 20201 -97
Outturn -99
Reconciliation to 2021-22 Budget2 -2

Note 1: As a UK Budget had not been published at the time of the Scottish Budget in February, provisional BGAs were used to inform the Scottish Budget as directed under the Fiscal Framework. Updated BGAs were produced at the UK Budget in March. However, the provisional BGAs were used to inform the Scottish Budget.
Note 2: The final BGA reconciliation effectively calculates the difference between the in-year forecast of the BGA (used to calculate the in-year reconciliation) and the outturn data.
Figures may not sum due to rounding.

Table C9 table shows the confirmed net effect on the budget for 2019-20 LBTT & SLfT and compares outturn to forecasts.

Table C9: 2019-20 Outturn Compared With Forecasts (£ Million)
Revenues BGA Net Position
LBTT Forecast as of Budget 2019-20 643 -567 +76
Outturn 597 -533 +64
Outturn against forecast -46 +34 -12
SLfT Forecast as of Budget 2019-20 104 -91 +13
Outturn 119 -99 +20
Outturn against forecast +15 -8 +8

Figures may not sum due to rounding.

Social Security

The latest 2020-21 expenditure forecasts for Social Security and the previous expenditure forecasts are shown in Table C10.

Table C10: 2020-21 Expenditure Forecast (£ Million)
Attendance Allowance SFC Expenditure Forecast – Budget 2020-21 -532
SFC Expenditure Forecast – Budget 2021-22 -534
Change -2
Personal Independence Payment SFC Expenditure Forecast – Budget 2020-21 -1583
SFC Expenditure Forecast – Budget 2021-22 -1574
Change +9
Disability Living Allowance SFC Expenditure Forecast – Budget 2020-21 -718
SFC Expenditure Forecast – Budget 2021-22 -717
Change +1
Carer’s Allowance SFC Expenditure Forecast – Budget 2020-21 -292
SFC Expenditure Forecast – Budget 2021-22 -299
Change -7
Industrial Injuries Disablement Scheme SFC Expenditure Forecast – Budget 2020-21 -80
SFC Expenditure Forecast – Budget 2021-22 -82
Change -2
Severe Disablement Allowance SFC Expenditure Forecast – Budget 2020-21 -7
SFC Expenditure Forecast – Budget 2021-22 -8
Change 0
Total Social Security SFC Expenditure Forecast – Budget 2020-21 -3213
SFC Expenditure Forecast – Budget 2021-22 -3214
Change -1

Note: Figures may not sum due to rounding.

As with the fully devolved taxes, the BGAs for benefits are reconciled in two stages. An in-year reconciliation is made within the same financial year. This is usually on the basis of OBR forecasts produced alongside the UK Autumn Budget. This year, in the absence of the UK Autumn Budget, the OBR forecasts were instead published alongside the UK Spending Review in November 2020. On the basis of the provisional BGAs calculated alongside the UK Spending Review in November 2020, the in-year reconciliations to the 2020-21 Social Security BGAs are shown in Table C11.

Table C11: 2020-21 In-Year BGA Reconciliation (£ Million)
Attendance Allowance Forecast BGA – Scottish Budget February 2020 +535
Forecast BGAUK Spending Review November 2020 +531
In-year reconciliation to 2020-21 Budget -5
Personal Independence Payment Forecast BGA – Scottish Budget February 2020 +1601
Forecast BGAUK Spending Review November 2020 +1555
In-year reconciliation to 2020-21 Budget -46
Disability Living Allowance Forecast BGA – Scottish Budget February 2020 +669
Forecast BGAUK Spending Review November 2020 +719
In-year reconciliation to 2020-21 Budget +50
Carer’s Allowance Forecast BGA – Scottish Budget February 2020 +303
Forecast BGAUK Spending Review November 2020 +289
In-year reconciliation to 2020-21 Budget -14
Industrial Injuries Disablement Scheme Forecast BGA – Scottish Budget February 2020 +85
Forecast BGAUK Spending Review November 2020 +84
In-year reconciliation to 2020-21 Budget -1
Severe Disablement Allowance Forecast BGA – Scottish Budget February 2020 +9
Forecast BGAUK Spending Review November 2020 +8
In-year reconciliation to 2020-21 Budget -1
Total Social Security Forecast BGA – Scottish Budget February 2020 +3203
Forecast BGAUK Spending Review November 2020 +3185
In-year reconciliation to 2020-21 Budget -17

Figures may not sum due to rounding.

The net effect on the Scottish Budget 2020-21 of the latest devolved social security expenditure forecasts, as set out in table C10, when compared to the in-year BGA reconciliations, as set out in table C11 is -£18m.

Outturn data becomes available in the autumn following the end of each financial year. Using these outturn figures, a final reconciliation is applied to the Block Grant in the financial year two years after the Budget was set. Table C12 shows the reconciliation for the 2019-20 Carer’s Allowance BGA applying to the 2021-22 Scottish Budget, which is the only devolved social security benefit in operation in 2019-20 that required a BGA.

Table C12: Carer’s Allowance 2019-20 Final Bga Reconciliation (£ Million)
Forecast BGA - Scottish Budget February 20201 +286
Outturn +283
Reconciliation to 2021-22 Budget2 -3

Note 1: As a UK Budget had not been published at the time of the Scottish Budget in February, provisional Block Grant Adjustments (BGAs) were used to inform the Scottish Budget as directed under the Fiscal Framework. Updated BGAs were produced at the UK Budget in March. However, the provisional BGAs were used to inform the Scottish Budget.
Note 2: The final BGA reconciliation effectively calculates the difference between the in-year forecast of the BGA (used to calculate the in-year reconciliation) and the outturn data.
Figures may not sum due to rounding.

Table C13 shows the confirmed net effect on the budget for 2019-20 Carer’s Allowance and compares outturn to forecasts.

Table C13: 2019-20 Outturn Compared With Forecasts (£ Million) 1
Revenues BGA Net Position
Carer’s Allowance Forecast as of Budget 2019-20 -283 290 +6
Outturn -279 283 +4
Outturn against forecast +4 -7 -3

Note 1: There are minor differences in the methodology used to calculate the expenditure outturn and the BGA outturn, so comparisons should be interpreted with caution.
Figures may not sum due to rounding.

Non-Tax revenue

Fines, Forfeitures and Fixed Penalties

Revenue from Fines, Forfeitures and Fixed Penalties (FFFP) is paid into the Scottish Consolidated Fund after being collected by the Scottish Courts and Tribunals Service. No reconciliation takes place for revenue, as the Scottish Government deals with any variation between forecast and receipts through in-year budget management. The SFC does not provide revenue forecasts for FFFP and instead the Scottish Government calculates its own estimates.

The latest Scottish Government 2020-21 revenue forecast for FFFP and the previous revenue forecasts are shown in Table C14.

Table C14: 2020-21 Revenue Forecast (£ Million)
FFFP SG Revenue Forecast – Budget 2020-21 25
SG Revenue Forecast – Budget 2021-22 13
Change -12

Note: Figures may not sum due to rounding.

Unlike the devolved taxes, there is only one round of reconciliation for the BGA. Outturn data are normally available three months after the end of the financial year, and the reconciliation is applied to the Block Grant for the financial year thereafter (i.e. two years after the Budget was set).

Table C15 shows the final reconciliation for the 2019-20 FFFP BGA applying to the 2021-22 Scottish Budget.

Table C15: 2019-20 Final BGA Reconciliation (£ Million)
FFFP Forecast BGA – Budget 2019-20 -27
Outturn -25
Reconciliation to 2021-22 Budget +2

Note: Figures may not sum due to rounding.

Table C16 shows the confirmed net effect on the budget for 2019-20 FFFP and compares outturn to forecasts.

Table C16: 2019-20 Outturn Compared With Forecasts (£ Million)
Revenues BGA Net Position
FFFP Forecast as of Budget 2019-20 25 -27 -2
Outturn 27 -25 +2
Outturn against forecast +2 +2 +4

Note: Figures may not sum due to rounding.

Proceeds of Crime

Revenue seized under the Proceeds of Crime Act 2002 is also subject to a BGA. The basis on which this is carried out is currently the subject of dispute between the Scottish and UK Governments and the BGA remains at -£4m while the dispute remains unresolved.[56] The Scottish Government will seek to address this issue as part of the review of the Fiscal Framework.

No reconciliation takes place while the BGA remains the subject of dispute between the Scottish and UK Governments.

Table C17 shows the confirmed net effect on the budget for 2019-20 PoC and compares outturn to forecasts.

Table C17: 2019-20 Outturn Compared With Forecasts (£ Million)
Revenues BGA Net Position
PoC Forecast as of Budget 2019-20 5 -4 +1
Outturn 4 -4 0
Outturn against forecast -1 0 -1

Note: Figures may not sum due to rounding.

Reconciliations applying to 2021-22 Budget

Table C18 sets out the reconciliations which will be applied to the 2021-22 Budget.

Table C18: Reconciliations Applying To 2021-22 Budget (£ Million)
Income Tax 2018-19 -309
Of Which:
Final Revenue Reconciliation
-621
Final BGA Reconciliation +312
LBTT 2019-20 Final BGA Reconciliation -6
SLfT 2019-20 Final BGA Reconciliation -2
FFFP 2019-20 Final BGA Reconciliation +2
PoC 2019-20 Final BGA Reconciliation 0
Carer’s Allowance 2019-20 Final BGA Reconciliation -3
Total Reconciliation Requirement -319

Note: Figures May Not Sum Due To Rounding.

Sources of Data

To view the various sources of data for Tax and Social Security that have been used to compile this Annex C, please see the data annex at Fiscal Framework: factsheet - gov.scot (www.gov.scot). Please note that data for Fines, Forfeitures and Fixed Penalties (FFFP) and Proceeds of Crime (POC) are as detailed in Table C19.

Table C19: FFFP and POC Data Sources
Data Source
FFFP Revenue Outturn and Forecasts Scottish Government unpublished data
FFFP Budget 2019-20 Budget BGA UK Autumn Budget 2018
FFFP Outturn BGA HMCTS Trust Statement 2019-20
POC Revenue Outturn and Forecasts Scottish Government unpublished data
POC 2019-20 Budget BGA UK Autumn Budget 2018
POC Outturn BGA N/A

Capital Borrowing

The 2020-21 Scottish Budget announced plans to borrow the annual maximum of £450 million capital reflecting the climate emergency, however at time of publication no drawdowns have occurred.

The UK spending review of 2020 outlined a significant reduction to the medium-term Capital and Financial Transactions budgets, therefore in order to retain sufficient borrowing headroom to mitigate this in future years 2020-21 borrowing is likely to be less than previously advertised.

Final decisions for 2020-21 borrowing are yet to be finalised, however, £300m is used as an indicative figure in Table C20 as the current medium-term central scenario.

The 2021-22 Scottish Budget confirms the intention to borrow £450 million and this is assumed to be over a period of 25 years. Final decisions on all future borrowing will be taken over the course of the applicable financial years.

Chapter 5 sets out the Scottish Government’s policy of borrowing between £250 million and £450 million over the remaining period of the National Infrastructure Mission, but this is not included in table C20 at this stage.

On the basis of existing and planned borrowing included in the table, the Scottish Government will have accumulated £2.22 billion in capital debt by the end of 2021-22, 74% of its overall limit. However as repayments of principle increase over time this ensures sufficient borrowing headroom will be available to support the National Infrastructure Mission in subsequent financial years.

Table C20: Capital Borrowing And Repayment Schedule
£ million 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
Debt Stock at the start of the Year 1,036 1,258 1,617 1,844 2,212 2,113 2,004
Debt Stock as a percentage of Debt Cap 35% 42% 54% 61% 74% 70% 67%
Borrowing 250 405 300 450 - - -
Repayment on 2015-16 borrowing Capital 9.4 9.4 9.4 9.4 9.4 9.4 9.4
Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Repayment on 2016-17 borrowing Capital 11.1 11.1 11.1 11.1 11.1 11.1 11.1
Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Repayment on 2017-18 borrowing Capital 7.1 14.3 14.6 14.9 15.2 15.5 15.8
Interest 7.7 8.3 8.1 7.8 7.5 7.2 6.9
Repayment on 2018-19 borrowing Capital 11.9 24.1 24.3 24.5 24.8 25.0
Interest 2.1 2.2 2.0 1.7 1.5 1.3
Repayment on 2019-20 borrowing Capital 3.8 7.7 7.7 7.8 7.8
Interest 0.0 1.1 1.1 1.1 1.1 1.0
Repayment on 2020-21 borrowing Capital 5.5 11.2 11.2 11.3
Interest 0.0 1.7 1.8 1.8 1.7
Repayment on 2021-22 borrowing Capital 10.0 20.1 20.4
Interest 4.8 5.3 5.1
Repayment on 2022-23 borrowing Capital
Interest
Total Repayments of Principal 28 47 63 73 89 100 101
Debt Stock at the end of the Year 1,258 1,617 1,844 2,212 2,113 2,004 1,893
Debt Stock as a percentage of Debt Cap 42% 54% 61% 74% 70% 67% 63%
Repayment period for borrowing (years) 10 20/
25/
25
25* 20* 0 0 0
Interest rate 0.97 0.60/ 0.56/
0.76
0.63* 1.22* 0 0 0
Is interest rate fixed or variable? Fixed Fixed Fixed Fixed

*Figures related to 2020-21 and 2021-22 borrowing are indicative at this stage.

Resource Borrowing

As set out in Chapter 5, the Scottish Government will make full use of resource borrowing in 2021-22. The table below shows the full budget impact of borrowing and reconciliations over the period.

Table C21: Medium-Term Impact Of Reconciliations And Resource Borrowing (£ Million)
2020-21 2021-22 2022-23 2023-24 2024-25
Known and Forecast Reconciliations - 207 -319 74 127 -
Planned Resource Borrowing 207 319 - - -
Projected Resource Cost of Resource Borrowing - -21 -75 -106 -106
Net Impact - -21 -1 21 -106
YOY Net Impact -21 20 21 -127

The incremental impact of resource borrowing, the costs of resource borrowing and known and forecast Income Tax reconciliations is as follows:

  • The projected resource cost of borrowing line comprises repayments of both principal and interest, both of which impact the resource budget.
  • All drawdowns are based on NLF annuity structure loans, this is the only source of resource borrowing available to the Scottish Government under the Fiscal Framework.
  • These loans are priced at 11 basis points above the equivalent UK par Gilt yield. Assumptions in Table C21 use the implied forward rates as of 15/01/21 plus a premium of 50 basis points.
  • NLF annuity loans have principal deferred in the first (semi-annual repayment) period.
  • A five-year tenor is assumed in all cases (the maximum allowable under the Fiscal Framework).

As stated in 5.1.2 The Scottish Government will assess all planned Resource Borrowing decisions to smoothen the funding trajectory over five years. The graphs below demonstrate what this trajectory would look like under three scenarios:

  • Borrowing the full allowance – as per table above
  • Borrowing half the available allowance
  • Borrowing nothing

In the case of ‘no borrowing’ the swings in the funding position are most pronounced for both budgets. The graphs below show the impact in the original and future budget years, taking into consideration actual or expected borrowing for reconciliations in each of the years as well as repayment of borrowing and interest in subsequent fiscal years.

Chart C1: Incremental Effect Of Different Borrowing Strategies On The Scottish Budget At 2021-22 Scottish Budget

Note: Positive values connote reconciliation requirements and repayments which reduce the budget.

Chart C2: Incremental Effect Of Different Borrowing Strategies On The Scottish Budget At 2020-21 Scottish Budget

These projections are subject to considerable volatility and have moved significantly in the course of one year. However, in each circumstance, planning to borrow in full against known and forecast adverse reconciliations reduces volatility over the medium term.

Scotland Reserve

Table C22 shows the 2020-21 Reserve position following the 2021-22 Autumn Budget Revision and 2019-20 Final Outturn.

Table C22: 2020-21 Scotland Reserve Forecast At 31 December 2020
£ million
2019-20 Opening Balance (605.0)
2019-20 Movements 172.4
In-year Reserve Drawdown 428.8
Forecast Underspends (256.4)
2019-20 Closing Balance (432.6)
2020-21 Expenditure Commitments 222.6
Scottish Budget Commitments 168.0
Effects of Budget Revisions 54.6
2020-21 Forecast Residual Balance (210.0)
Of Which
Resource (68.9)
Capital (141.1)

2020-21 drawdowns from the reserve have increased by £54.6 million to date. £24.6m was drawn down (£17.6m Resource and £7m capital) in the Summer Budget Revision in order to balance the funding position while an additional £30m of capital was drawn down in the Autumn Budget Revision as an interim measure. It is highly likely that this additional Capital drawdown will be reversed through the 2020-21 Spring Budget Revision which should support drawdown assumptions in the 2021-22 Scottish Budget.

The Scotland Reserve (by nature) is a constantly moving position. Annual drawdowns are not finalised until the end of a financial year, equally additions to the reserve from any underspends or excess devolved tax receipts are not finalised until the final outturn is complete some six months after the end of the financial year.

Table C22 reflects the confirmed 2019-20 position following the 2019-20 final outturn process and interim 2020-21 drawdown plans. However anticipated underspends from 2020-21 which would result in additions to the reserve are not reflected here.

Contact

Email: Gabrielle.Cahen@gov.scot

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