For 2020-21, we anticipate utilising £168 million in total from the Scotland reserve, which comprises £30 million of resource, £5 million of capital and £32 million of financial transactions from the existing reserve balance; and £101 million of resource underspend from 2019-20. That total compares with the £143 million originally stated in the “Scottish Budget: 2020-21” document, with the change due to an additional £25 million resource underspend this year, following updated forecasts. Therefore, there is no change to the forecast balance at the end of 2020-21.
“we should add to the reserve in order to increase the Government’s ability to manage the inherent volatility under the fiscal framework.”—[
Official Report, Finance and Constitution Committee
, 4 March 2020; c 15.]
Given that the Scottish Government faces a black hole of over £500 million in next year’s budget, how does she intend to build up the Scotland reserve further?
As the member will know, every financial year since 2017-18, the resource, capital and financial transactions underspends have been deposited in the reserve and it is quite right that we build up the reserve. However, the fact of the matter is that the fiscal framework is insufficient to allow the Scottish Government to manage the volatility and the uncertainty that is inherent in our financial position in terms of meeting some of the forecast error challenges that, it is worth remembering, are about Westminster clawing back resource because of forecast error.
After the delay to this year’s United Kingdom budget, it is clear that more flexibility is needed in setting Scotland’s budget. Can the cabinet secretary please advise the chamber what engagement the Scottish Government has had with the UK Government regarding increasing the limits on borrowing and Scotland’s reserve powers, given the likely post-Brexit economic turbulence that we will face in coming years?
The member is quite right to highlight that. We have been seeking immediate changes to our borrowing and reserve limits, given the volatility inherent in the fiscal framework. My predecessor wrote to the Chief Secretary to the Treasury in September 2019 requesting an increase to those limits, but we have yet to receive a formal response to that request. However, we continue to discuss the matter at ministerial level and, as recently as last week, I raised the matter in an introductory call with the Chief Secretary to the Treasury and I will follow that up in our bilateral meeting.