Scotland Act 2016 implementation: tenth annual report

9. Fiscal Framework Implementation

The Fiscal Framework is an agreement made by the Scottish and UK Governments that determines how the Scottish Government is funded, as well as underpinning the powers set out in the Scotland Act 2016. This chapter covers further areas of Fiscal Framework implementation relevant to this report; implementing the changes agreed in the 2023 review of the Fiscal Framework, the upcoming Fiscal Framework Review and the uprating of borrowing and reserve limits.

2025-26 Developments

Implementing changes from the Fiscal Framework Review 2023

97. Following a review of the arrangements in the 2016 Fiscal Framework, the Scottish and UK governments came to an agreement on a revised Fiscal Framework Agreement, which was published on 2 August 2023^[26]. A summary of the changes agreed are in Chapter 9 of the 2024 Scotland Act Implementation report^[27].

98. All the changes to the Fiscal Framework agreed in 2023 have been confirmed and implemented since the review, except for the implementation of VAT Assignment. This was discussed by the Scottish and UK governments at the Joint Exchequer Committee meeting on 17 October 2025^[28], with both parties discussing next steps.

Upcoming Fiscal Framework Review

99. The Fiscal Framework states that reviews should take place on a five yearly basis but not more than once in any UK or Scottish electoral cycle. The Fiscal Framework is due for review in 2028 – although could in principle happen earlier if both sides agree.

100. At a subsequent Joint Exchequer Committee meeting in October 2025, arrangements were discussed for agreeing a scope of the next review of the Fiscal Framework. It was then agreed at the Joint Exchequer Committee meeting in March 2026^[29] that the next review should have a broader scope than the 2023 review, including the flexibilities to manage the risks associated with the devolution of tax and social security powers.

Uprating of borrowing and reserve limits

101. The Scottish Government’s cumulative resource and capital borrowing limits, detailed in chapter 6, are set out in sections 67(2) and 67A(1) of the Scotland Act 1998 (SA 1998)^[30] respectively. As these cumulative limits are uprated annually, an annual Scotland Act Order (SAO) must be laid, which replaces the stated limit in the SA 1998 with an agreed updated figure.

102. The SAO to uprate the 2025-26 cumulative borrowing limits came into force on 24 June 2025^[31]. The updated limits from 2024-25 to 2026-27 are as follows:

Future plans

103. The Scottish and UK governments will continue to work towards agreeing the scope for the next Fiscal Framework Review.

104. Ministerial agreement was reached between the former Cabinet Secretary for Finance and Local Government and the former Chief Secretary to the Treasury on 26 March 2026 to lay a SAO to amend the cumulative limits stated in SA 1998 to reflect the uprated limits for 2026-27.