The Scottish Government's Medium Term Financial Strategy

This is the fourth Medium Term Financial Strategy (MTFS) published by the Scottish Government. The MTFS provides the context for the Scottish Budget and the Scottish Parliament.


1 Budget Process Review Group (2017), Final Report – June 2017

2 To learn more about the Fiscal Framework and how it operates, please consult Scottish Government (2021), Fiscal Framework factsheet – November 2021

3 OECD (2021), OECD Economic Outlook – December 2021

4 Scottish Government (2021), GDP Monthly Estimate – September 2021

5 The figures in this chapter are the latest available as of 24th November, which was the cut-off point for new data releases.

6 Scottish Government (2021), COVID-19 Recovery Strategy - October 2021

7 Advisory Group on Economy Recovery (2020), Towards a Robust, Resilient, Wellbeing Economy for Scotland - June 2020

8 Scottish Government (2021), Infrastructure Investment Plan 2021-22 to 2025-26 – February 2021

9 Scottish Fiscal Commission (2021), Forecast Evaluation Report – July 2021

10 Pension schemes for the civil service and the judiciary are reserved schemes. While employer pension contributions are paid to these schemes in respect of Scottish devolved public sector employees/appointees, scheme cash flow is managed by the Cabinet Office and the Ministry of Justice, respectively, with shortfalls topped up by UK Government-funded AME. The Scottish Local Government Pension Scheme is a funded scheme, managed locally, with some non-local authority public bodies as participating employers. Member and employer contributions are invested; resulting returns on investment are added to fund assets used to pay pensions.

11 Scottish Government (2021), Medium-Term Financial Strategy - January 2021

12 See paragraphs 78-82 of the Scotland Act 2012 and 2016: annual implementation report 2021

13 Scottish Parliament Finance and Constitution and Social Security Committees and Scottish Government (2020), The scope and terms of reference for the independent report

and review of the Fiscal Framework – October 2020

14 Scottish Government (2021), Scotland's Fiscal Outlook: The Scottish Government's Medium-Term Financial Strategy – January 2021

15 Due to the devolution of NSND Income Tax to Wales in 2019-20 the Block Grant Adjustment will be indexed on the performance of NSND Income Tax in the rUK excluding Wales.

16 This is an extension of the analysis in the Scottish Income Tax Outturn Statistics using data from the Real Time Information (RTI) and Self-Assessment system. The published outturn statistics are available here. This analysis, and the results, may therefore be different from the Survey of Personal Incomes (SPI) which is based on a representative sample of Scottish taxpayer records.

17 Please note, a direct comparison between the 2018-19 distributional analysis published in Annex B of the January 2021 MTFS and the 2019-20 distributional analysis published here cannot be made as the 2018-19 figures define the rUK as including Wales, whereas the 2019-20 figures published here define the rUK as excluding Wales.

18 It is worth noting that, as per Figure A.2, we would not expect tax base distributions to be as normally distributed as these and would tend to have longer right hand tails, although this does not take away from the validity of the results.

19 The choice to simulate a tax base distribution centred around £30,000 is relatively arbitrary, although the latest Annual Survey of Hours and Earnings data for 2021 found that the average annual gross pay for all employee jobs in Scotland was just under £30,000 whilst in the UK it was just under £31,500.

20 The choice of a 2% growth rate is relatively arbitrary, although using the ONS RTI earnings data, annual growth in average pay for PAYE employees in Scotland has averaged around 2.4% since July 2014.

21 Scottish Government (2021), Fiscal framework: factsheet - November 2021

22 HM Revenue and Customs (2021), HMRC annual report and accounts: 2020 to 2021 – November 2021

23 See the Fiscal Framework outturn report 2019 for further background.

24 Further information can be found at the Cashback for Communities website



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