Scottish Budget: 2024 to 2025

The Scottish Budget sets out the Scottish Government’s proposed spending and tax plans for 2024 to 2025, as presented to the Scottish Parliament.

Annex B - Scottish Government Fiscal Control Framework

(1) Introduction

The Scottish Government is required to set a balanced budget each year. This must also remain within the key control totals as set out below:

Table B.01 – Scottish Government Total Funding
Scottish Government Discretionary Fiscal Budget 2022-23 £m 2023-24 £m 2024-25 £m
Fiscal Resource 39,188 41,944 44,527
Non Domestic Rates 2,766 3,047 3,068
Capital 5,824 5,940 6,017
Financial Transactions 527 424 176
Total Discretionary Fiscal Budget 48,305 51,354 53,788
Effect of IFRS16 on Discretionary Resource Funding (203) (200) (203)
Effect of IFRS16 on Discretionary Capital Funding 861 441 233
Discretionary Funding Revised for IFRS16 48,963 51,595 53,817
Scottish Government Discretionary Fiscal Budget 2022-23 £m 2023-24 £m 2024-25 £m
Non-Cash Resource Budget 1,103 1,015 1,322
UK Funded Annually Managed Expenditure (UKAME) 6,934 7,444 4,329
Effect of IFRS16 on Non-Cash Resource Budget 209 228 231
Effect of IFRS16 on AME budget 16 10 8
Total non-discretionary Budget 8,262 8,697 5,890
Total Scottish Budget 57,225 60,292 59,708

The prior year comparators throughout this document reflect the position as set out in the Scottish Budget as approved by Parliament for that year but adjusted to reflect the impact of baseline transfers between portfolios and the impact of the public sector adoption of International Financial Reporting Standard 16, which changes the budgeting and accounting treatment of leases. The funding position shown is consistent with the original draft Budget allocation for a given year. The Budget position changes throughout the year and subsequent budget revisions are available from the Scottish Government website.

Some figures may not sum due to rounding (all Scottish Budget figures are rounded at Level 4. Level 4 tables are published alongside the Scottish Budget document on the Scottish Government website).

This presentation draws a distinction between the discretionary budget, where the Scottish Government may deploy cash funding according to its own priorities within devolved competence, and the non-discretionary budget which can only be used for specific defined purposes with no scope to fire into discretionary budget lines.

The discretionary fiscal budget comprises four sub-categories of spending subject to their own control limits. These sub-limits are imposed by HM Treasury as part of UK fiscal rules. These limits apply to:

Fiscal resource budgets – the largest element of government expenditure comprises expenditure on the day-to-day costs of delivering public services, used for example to pay public sector staff wages and purchase goods and services. Full analysis of the fiscal resource funding envelope is detailed in table B.02 below.

Capital budgets are used mainly to support the delivery of public infrastructure in Scotland. This is split between fiscal capital and a separate control for budgets that can only be used to support loan or equity investment in bodies outside the public sector – labelled as Financial Transactions. It is not possible within HM Treasury fiscal rules to use capital budgets to fund additional day-to-day expenditure; they must be used to support long-term investment. Full analysis of the capital and Financial Transactions funding envelope is detailed in tables B.03 and B.04 below.

Non-Domestic Rates (NDR) – are fully devolved and outside scope of the block grant and Fiscal Framework arrangements controlled by HM Treasury. These are forecast by the Scottish Fiscal Commission (SFC) based on Scottish Government policies and collected by local authorities. The total distributable amount used in Scottish Budgets reflects the forecasts by the SFC taking into account outturn and other adjustments managed through the NDR pool. The arrangements for operation of the Non-Domestic Rates, and the management of the NDR pool in Scotland are available on the Scottish Government website.

To note, NDR is disclosed as AME within the Local Government portfolio allocation.

The non-discretionary budget reflects the items where use of funding is restricted and/or has no impact on cash deployment and has two subcategories.

The non-cash resource limit – largely for depreciation of assets. It is not possible to use the notional non-cash budgets to support any fiscal spending.

UK Funded AME – A small number of programmes that, whilst they fall within the devolved responsibilities of the Scottish Government, continue to be funded annually by the UK Government on the basis of demand (shown here as UK-funded Annually Managed Expenditure or UK-funded AME). These budgets are ring-fenced for specific purposes – principally NHS and teachers’ pension payments and Student Loans. HM Treasury fiscal rules prohibit the use of funding provided for these areas to support other expenditure. However, this is not the case for all demand-led programmes notably Social Security expenditure in Scotland, which is managed within the Fiscal Resource Departmental Expenditure Limit (DEL) rather than AME. This means that any demand risk in Social Security Expenditure has to be managed alongside demand risk with other portfolio expenditure. This is different from the rest of the UK.

The Scottish Government operates within the requirements of the Fiscal Framework, agreed as part of the further devolution of fiscal powers contained in Scotland Act 2016 and subsequently revised in August 2023.

(2) Fiscal Resource Funding Envelope

A full breakdown of the fiscal resource envelope by source of funding is detailed below.

Table B.02 Fiscal Resource Funding
Fiscal Resource Funding 2022-23 £m 2023-24 £m 2024-25 £m
Core Block Grant from UK Government 34,322 36,023 36,960
Ring-fenced Funding 704 715 715
Total UK Settlement (A) 35,026 36,737 37,674
Social Security Block Grant Adjustment (B) 3,587 4,360 5,191
Block Grant Adjustment for Taxes and Non-Tax Income (14,639) (16,131) (18,066)
Scottish Income Tax 13,671 15,810 18,844
Land and Buildings Transaction Tax 749 773 730
Scottish Landfill Tax 101 79 58
Non-Tax Income 25 25 25
Net Budget Adjustment for Taxes and Non-Tax Income (C) (94) 557 1,592
Reconciliations (15) 46 (338)
Resource Borrowing 15 41 338
Resource Borrowing Costs (76) (120) (124)
Capital Borrowing Costs (92) (112) (141)
Crown Estate Revenues 40 310 200
Scotland Reserve 120
Migrant Surcharge 92 120 200
KLTR 5 5 5
Other 180 18
Spillover 400
Resource to Capital Switch (89)
Other Income and Funding Adjustments (D) 669 289 69
Total Scottish Government Fiscal Resource Funding (A+B+C+D) 39,188 41,944 44,527
Non Domestic Rates – Distributable Amount 2,766 3,047 3,068
Total Scottish and Local Government Fiscal Resource Funding 41,954 44,991 47,594
IFRS 16 Adjustment to Budget Aggregate (203) (200) (203)
IFRS 16 Adjusted Fiscal Resource Funding 41,751 44,791 47,391

Some figures may not sum due to rounding

Scottish Government budgets are determined through the combination of block grant funding from HM Treasury and some ring-fenced funds as explained below. The block grant is adjusted to reflect the transfer of social security powers, devolution of taxes and other income devolved to Scotland (through the Scotland Act 2012 and Scotland Act 2016), plus any planned use of available devolved borrowing powers and Non-Domestic Rates Income. Specifically:

Total UK Settlement (A) – This contains the core block grant settlement as outlined in the UK Autumn Budget. Ring-fenced funding here relates to the replacement EU funding for Agriculture and Fisheries.

Changes in the Scottish Government’s block grant continue to be determined via the operation of the Barnett formula. Under the Barnett formula, the Scottish Government’s block grant in any given financial year is equal to the block grant baseline plus a population share of changes in UK Government spending on areas that are devolved to the Scottish Parliament. Detail of how the Barnett formula works is set out in the UK Government’s Statement of Funding Policy[2].

Social Security Block Grant Adjustment (B) – The block grant is adjusted upwards to reflect the devolution of social security powers and this figure is calculated by HM Treasury with reference to forecasts prepared by the Office for Budget Responsibility.

Net Budget adjustment for Taxes and Non Tax Income (C) – The total funding available to the Scottish Government is also dependent on decisions Scottish Ministers take on tax policy. Variation of Scottish tax policy relative to that of the UK will adjust the level of tax income received by the Scottish Government and the overall level of funding available to support spending plans. For the purpose of this budget, these relativities are drawn between existing UK tax policy and the devolved tax policy proposals advanced by the Scottish Government. No assumptions are made about possible future changes to UK tax policy.

Other Income and Funding Adjustments (D) – A number of other adjustments are made to fiscal resource funding: these are detailed below. These form part of the overall fiscal envelope.

Reconciliations – This comprises positive and negative outturn movements versus previous forecasts on income tax (net of BGAs) along with final outturn reconciliations in respect of Social Security and fully devolved taxes. Block Grant Adjustments (BGAs) and these reconciliations are part of the Fiscal Framework agreement between the Scottish Government and HM Treasury.

Resource Borrowing – The Scottish Government can use resource borrowing to offset any negative reconciliations arising from forecast errors, within the overall annual and cumulative resource borrowing limits as defined in the Fiscal Framework agreement. In 2024-25 this power is being deployed to offset the adverse BGA reconciliations in relation to devolved taxes and benefit expenditure and included within the net reconciliation total above.

Borrowing Costs – All costs of capital and resource borrowing (including repayments of principal and interest) are deducted directly from fiscal resource funding.

Crown Estate Revenues – In 2022-23 the Crown Estate Scotland concluded the first round of offshore wind leasing which has generated in excess of £756 million of income. The amounts detailed for 2023-24 is as previously profiled. The amount profiled for 2024-25 has been reduced from the £350 million set out in the 2023 Medium Term Financial Strategy to £200 million. This reflects ongoing risks around managing the 2023-24 budget position and the possibility that additional funding will be required to balance the position. Active management of the 2023-24 position will continue, with final decisions on the amount of Crown Estate revenues to be drawn down taken towards the end of the 2023-24 financial year. The Crown Estate has also announced successful bidders on the INTOG (Innovation and Targeted Oil & Gas) leasing round (designed to enable offshore wind energy to directly supply offshore oil and gas platforms). Successful applicants have now accepted initial exclusivity agreements that enable them to progress through the application process.

Scotland Reserve – The Scotland Reserve allows the Scottish Government limited ability to manage spending across financial years. The Fiscal Framework sets out the limits of the Scotland Reserve – for 2023-24 up to £700 million in aggregate may be deposited in the Reserve. Maximum drawdown in any one year from the Reserve is £250 million of resource budget and £100 million of capital budget (including Financial Transactions). The Fiscal Framework renegotiation increased the aggregate limit in real terms from 2024-25 and waives the drawdown limits.

Migrant Surcharge – This is income derived from charges on migrants for using NHS Services and is collected by the UK Department for the Home Office and redistributed to devolved governments on a Barnett formula basis. Despite the Barnett formula applying, this is not a Barnett Consequential included within the block grant as it has no relationship to UK departmental spending. Amounts are allocated to Scottish Government’s settlements incrementally. The uplift in forecast for 2024-25 is driven by an anticipated UK policy change (announced on 13 July 2023) on the level of charges applied.

King’s Lord Treasurer Remembrancer (KLTR formerly Queen’s QLTR) – This is the Crown’s representative in Scotland who deals with ownerless property. In the Scotland Act 1998, the Crown’s property rights in ownerless goods and the revenues raised from them were transferred to Scottish Ministers and the revenues paid into the Scottish Consolidated Fund.

Other – The £18 million for 2024-25 other fiscal resource relates to an anticipated correction to the block grant for an error in the Home Office comparability factor applied at the last UK Spending Review (+£21 million), offset by an adjustment to the Block Grant baseline for the devolution of Crown Estates to Scotland (-£3 million, agreed as part of the Fiscal Framework renegotiation). In 2022-23 the amount was related to expected, but unconfirmed, Barnett consequentials, which were subsequently received in full.

Spillover – As part of the 2022-23 Scottish Budget £620 million ‘other income’ assumption, £400 million was assumed to be forthcoming through the conclusion of a previous dispute on the application of increases to the personal allowance on adjustments to the Scottish Block Grant, dating back to 2017-18. An agreement was reached in 2022-23 reflecting all prior year adjustments up to and including financial year 2021-22 resulting in a transfer of £375 million in 2022-23. No adjustment is made or required for 2023-24 onwards.

Resource to Capital Switch – Recognising the pressure on infrastructure investment as a result of the persistent UK government squeeze on capital funding, £89 million of resource funding is being transferred to support the capital position.

Non-Domestic Rates Income – This is determined by policies set by the Scottish Government. In 2024-25, £3,069 million will form part of the settlement to Local Government in Scotland. The detailed polices for 2024-25 are set out in Chapter 2.

Public Sector Adoption of International Financial Reporting Standard 16 (IFRS 16) – The public sector adoption of IFRS 16 changes the budgeting and accounting treatment for leases. This is a technical change, with budgets now adjusted to align with the requirement to capitalise the value of leased assets. 2024-25 is the final year of a three-year transition period with budgets for 2024-25 and prior year comparators are adjusted to reflect the necessary changes. These changes provide additional capital and non-cash budget cover to be applied for existing and new assets acquired under lease arrangements, to allow for their reclassification and subsequent depreciation. The changes to the resource budget position adjust for the elements of the rental costs that are now capitalised and therefore no longer score as resource. Non-discretionary ring-fenced budget cover is being provided by HM Treasury to support this change in treatment and the Scottish Government’s net discretionary funding is not impacted by these changes.

(3) Capital and Financial Transactions Funding Envelope

Table B.03 Capital Funding Envelope
Capital Funding 2022-23 £m 2023-24 £m 2024-25 £m
Core Block Grant from UK Government 4,469 4,757 4,701
Ring-fenced Funding 643 632 670
Borrowing (per Capital Borrowing Policy) 450 450 458
Scotland Reserve 118
Fossil Fuel Levy 44
City Deals 100 100 100
Resource to Capital Switch 89
Total Capital Funding 5,824 5,940 6,017
IFRS 16 Adjustment to Budget Aggregate 861 441 233
IFRS 16 Adjusted Capital Funding 6,685 6,380 6,250
Table B.04 Financial Transactions Funding Envelope
Financial Transactions Funding (£m) 2022-23 £m 2023-24 £m 2024-25 £m
Core Block Grant from UK Government 466 186 176
Scotland Reserve 61 50
Corrections to historic settlement to be reflected 188
Total Financial Transactions Funding 527 424 176

Core Block Grant Settlement from UK Government – As with fiscal resource these amounts are as per the recent UK Autumn Statement on 22 November 2023 and determined using the Barnett formula.

Ring-fenced Funding – This funding relates to the separate and specific agreement to transfer capital funding to support Network Rail outside the usual Barnett arrangements.

Capital Borrowing – Up to 2023-24 the Scottish Government could borrow up to £450 million per annum for capital borrowing, subject to a cumulative limit of £3 billion. From 2024-25, following the Fiscal Framework renegotiation, these limits will grow in line with inflation. The Scottish Government’s policy on capital borrowing seeks to utilise borrowing capacity in a fiscally sustainable manner within these limits. An additional memorandum is published alongside this Budget document that provides more detail on the approach to capital borrowing and the approach to a potential future bond issuance, subject to due diligence.

Scotland Reserve – As detailed above the Scottish Government has ability to carry forward some funds or net underspends via the Scotland Reserve. No assumption is made for carry forward in the 2024-25 Budget.

Fossil Fuel Levy – The Fossil Fuel Levy was used to compensate power companies for the higher costs involved in meeting the terms of contracts to purchase renewable electricity, awarded to certain projects during the 1990s under a former renewables support mechanism. The funding shown for 2022-23 represents a final transfer to the Scottish Government following the winding up of the scheme. No such funding is available from 2023-24 onwards.

City Deals Funding – City deals are jointly funded through agreement with the UK Government. UK Government contributions to these agreements are not yet included in the block grant figures. The £100 million anticipated here is consistent with the profile of UK Government contributions to these agreements.

Corrections to historic FT settlement – The methodology underpinning the Barnett calculation (and subsequent repayment requirements) of Financial Transactions was amended as part of the 2020 UK Spending Review. This drew a distinction between FTs to be allocated on a gross basis and those allocated on a net basis (where repayments can be retained for redeployment). The change revealed some previous miscalculation of the Scottish Government FT settlement since 2015. In aggregate the total change amounted to around £400 million. £188 million reflects an adjustment to the FT settlement agreed with HMT for 2023-24. The balancing amount remains subject to discussion.

Financial Transactions – a separate control for capital budgets that can only be used to support loan or equity investment in bodies outside the public sector – labelled as Financial Transactions.

(4) Specific Funding Issues for 2024-25 and beyond

Whilst Barnett funding from the UK Government has increased in real terms in 2024-25 on the basis of the standard GDP deflator calculation, this does not compensate the Scottish Budget for increases in prices over 2023-24 and 2024-25 combined. As the table below demonstrates, the funding received for 2024-25 is lower in real terms than in 2022-23.

Table B.05 Real Terms change in Core Block Grant from the UK Government
Block Grant Funding (2023-24 prices) 2022-23 £m 2023-24 £m 2024-25 £m
Fiscal Resource Budget 37,162 36,737 37,052
Capital Budget 4,742 4,757 4,623
Financial Transactions Budget 494 186 173
Total 42,398 41,680 41,848
Real Terms Change against prior year (1.7%) 0.4%
Cumulative Real Terms changes since 2022-23 (1.7%) (1.3%)
Table B.06 Real Terms change in Discretionary Funding
Total Discretionary Funding (2023-24 prices) 2022-23 £m 2023-24 £m 2024-25 £m
Fiscal Resource Budget 44,514 44,991 46,808
Capital Budget 6,179 5,940 5,918
Financial Transactions Budget 559 424 173
Total 51,252 51,354 52,899
Real Terms Change against prior year 0.2% 3.0%
Cumulative Real Terms changes since 2022-23 0.2% 3.2%
GDP Deflators for 2023–24 prices 0.943 1.000 1.061
GDP Deflators for 2022–23 prices 1.000 1.061

Looking at discretionary funding (incorporating the effect of Scottish Government policies on tax and borrowing) shows that these policies have mitigated these inflationary effects. The 2023-24 discretionary budget is shows a small increase in real terms against the opening budget position for 2022-23, whilst for 2024-25 Scottish Government funding in total has increased by 3.4% after factoring in devolved funding policies.


[2] Statement of Funding Policy 2021 (

[3] Local government: Non-domestic rates (business rates) – (



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