The UK Government has pledged to continue supplementing the Scottish Government’s tax revenues, which amounted to £1.4 billion last year, as a result of the strength and scale of the UK. This commitment, along with an increase in borrowing powers and support through the Barnett formula, aims to foster a better future for Scotland and drive economic growth.
Chief Secretary to the Treasury, John Glen, lauds the agreement as a fair and responsible deal that aligns with the Prime Minister’s economic priorities. On 2 August, the UK and Scottish Governments reached an agreement on an updated Fiscal Framework.
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Under the new framework, Holyrood’s capital borrowing powers will rise in line with inflation, enabling the Scottish Government to make further investments in schools, hospitals, roads, and other vital infrastructure, which will create better-paid jobs and opportunities in Scotland.
The agreement also preserves the Barnett formula, which provides the Scottish Government with over £8 billion in additional funding annually compared to the levels of UK Government spending per person in other parts of the UK. Additionally, funding arrangements related to court revenues and the Crown Estate have been updated.
John Glen, Chief Secretary to the Treasury, stated, “This fair and responsible deal was reached following a serious and proactive offer from the UK Government. We have retained effective measures and responded to the Scottish Government’s calls for greater certainty and flexibility in delivering for Scotland.
The Scottish Government can now utilize this to make greater investments in public services, enabling the people of Scotland to prosper. These are the evident benefits of a stronger United Kingdom.”
The generous funding arrangements for tax will continue, allowing the Scottish Government to retain all devolved Scottish taxes and receive an additional contribution from the rest of the UK.
Previously, under the Fiscal Framework, the Scottish Government could borrow £450 million annually within a £3 billion cap, in addition to a share of UK Government borrowing based on the Barnett formula. Going forward, these amounts will increase in line with inflation, supporting additional investments across Scotland and laying the groundwork for economic growth.
In response to the Scottish Government’s calls for greater certainty and flexibility in managing their budget, the UK Government has agreed to permanently double the resource borrowing annual limit from £300 million to £600 million.
Moreover, limits on withdrawals from the Scotland Reserve for future spending will be removed. This will result in a borrowing boost of £90 million in 2024/25, with all future limits increasing in line with inflation.
Scottish Secretary, Alister Jack, remarked, “The renewed Fiscal Framework exemplifies what can be achieved through collaborative efforts to deliver economic opportunities, demonstrating why we are stronger and more prosperous as one United Kingdom.
This deal, worth billions of pounds to Scotland in the coming years, builds upon our work to support economic growth, provide more high-skilled jobs, and create investment and future prospects for local communities, including the establishment of Investment Zones and Freeports in Scotland.
The UK Government recognizes that high prices remain a significant concern for families. That is why we are committed to halving inflation, reducing debt, and fostering economic growth.
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In addition to the targeted cost of living support, we are directly investing over £2.4 billion in hundreds of projects across Scotland as part of our efforts to level up the country.”
As both governments continue to collaborate in addressing challenges such as the cost of living, the updated Fiscal Framework equips the Scottish Government with the necessary tools for growth while safeguarding broader public finances.
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