Fiscal framework between Scottish Government and local government: progress report December 2023

Principles and Approach

Central to the fiscal framework is the principle of regular and meaningful engagement, and respect for each other’s democratic mandate, in order that we can work together more effectively to improve the lives of people in Scotland.

Further, the Verity House Agreement established a default position from this point forward that there will be no ring-fencing or direction of funding, unless there is a clear joint understanding of and rationale for such arrangements. The Verity House Agreement and the Fiscal Framework should together balance greater flexibility over financial arrangements for local government, with clearer accountability for the delivery of shared priorities.

The Fiscal Framework establishes an agreed foundation for cooperation and coordination on all matters concerning the financial relationship between Local Government and the Scottish Government.

This Fiscal Framework will set out provisions relating to:

• Roles and scope
• Scottish and Local Government Funding
• Local Taxation & Fiscal Flexibilities
• Scrutiny and Accountability
• Governance and Dispute Resolution

The Fiscal Framework will have the status of a ‘Memorandum of Understanding’, it is a statement of political intent and should not be regarded as a binding agreement, and does not create legal obligations. However, the provisions of the European Charter for Local Self-Government are being considered throughout the design and drafting. In accordance with the Charter, this framework is not intended to constrain the independence of Local Government, or the freedoms of either party to operate in areas for which they are responsible, but rather to enhance the work required to deliver our shared priorities and produce better outcomes for communities.

The underpinning principles of this Fiscal Framework as agreed are:

A – The fiscal framework should promote stability, certainty, transparency, affordability and sustainability.

B – The fiscal framework should promote effective use of fiscal flexibilities and levers to address local priorities and improve outcomes

C – The fiscal framework should enable discussion of fiscal empowerment of Local Government.