Fiscal framework outturn report: 2024

9. Borrowing

Capital Borrowing

77. Table 17 shows the Scottish Government’s capital borrowing plans.

Note 1: The 2023 Fiscal Framework Agreement states that from 2023-24 onwards, the statutory limit on borrowing for capital expenditure will be increased to and maintained at £3bn in 2023-24 prices. The annual limit on the amount of borrowing for capital expenditure will also be increased. From 2023-24 onwards, it will now be maintained at £450m a year in 2023-24 prices. Both limits will be uprated annually. These changes may impact on borrowing decisions, with decisions on borrowing to be set out at the next fiscal event.

Note 2: Projected Borrowing based on existing Scottish Government Capital Borrowing Policy using interest rates as at 23/09/2024.

Figures may not sum due to rounding.

78. In 2023-24 the Scottish Government drew down £300 million of Capital Borrowing from the National Loans Fund at a ten year tenor with an interest rate of 3.95%.

79. The Scottish Government published a memorandum^[10] on Capital Borrowing and Bonds alongside the 2024-25 Scottish Budget. Through this the intention was set to borrow the maximum facility (£458 million) in 2024-25 and £250 million per annum in subsequent years. Borrowing at this level is fiscally sustainable even under the previous fiscal framework limits.

80. Following the Fiscal Framework review the annual and cumulative limits will grow in real terms. Further revisions to the Capital Borrowing policy will be set out at subsequent Scottish Budgets and medium term financial strategy publications.

81. In its report, “Scotland’s Economic and Fiscal Forecasts”, published on 19 December 2023, the Scottish Fiscal Commission judged the Government’s projections of capital borrowing as reasonable.^[11]

Resource Borrowing

82. Table 18 shows the Scottish Government’s resource borrowing plans.

83. The Scottish Government must balance its Budget each year, and has specific and limited powers in relation to resource borrowing. The overall limits on resource borrowing were £1.75 billion cumulatively and the total annual limit was £600 million. Within these limits the facility to borrow was further restricted to £300 million per annum for forecast error which could only be used for in-year cash management or in cases of forecast error. These limits were adjusted as part of the Fiscal Framework review, which concluded in August 2023. Further details on the circumstances in which the Scottish Government can invoke its resource borrowing powers are set out in the Fiscal Framework Technical Note.^[12]

84. In 2023-24 the Scottish Government borrowed £104 million in respect of final reconciliations and in-year forecast error on taxes and welfare expenditure. This was drawn down from the National Loans fund at a rate of 4.23% over a five year tenor.

85. A negative £338.0 million reconciliation was applied to the Scottish Budget 2024-25 relating to 2021-22 Scottish Income Tax, 2022-23 fully devolved taxes, FFFP and social security. The Scottish Government provided indicative plans to use its resource borrowing powers in 2024-25 to borrow £338 million to fully offset the impact of the negative reconciliations embedded within this net figure, however all resource borrowing decisions will be finalised at the end of the financial year based on the overall financial position.

86. The Scottish Budget: 2024 to 2025 sets out the Scottish Government’s plans for resource borrowing and other sources of discretionary funding available.^[13]

87. The outstanding debt from resource borrowing was £476 million at the end of 2023-24, £1.27 billion below the cumulative Resource Borrowing limit of £1.75 billion.