Scotland's Fiscal Outlook: The Scottish Government's Medium-Term Financial Strategy

Executive summary

This is the fifth edition of the Medium-Term Financial Strategy (MTFS) and has been published alongside the Resource Spending Review (RSR) and Capital Spending Review (CSR). It sets out the medium-term economic and fiscal outlook and provides the context for the Scottish Government's spending decisions.

Chapter 1 - Scotland's Economic Outlook

This chapter provides an update on the latest state of the Scottish economy; a summary of the latest economic forecasts from the Scottish Fiscal Commission (SFC) and Office for Budget Responsibility (OBR), and what these imply for the Scottish Budget; how the Scottish Government is acting to promote economic recovery from the COVID-19 pandemic; supporting households and businesses following the UK's exit from the EU and during the cost of living crisis; all whilst continuing progress towards the delivery of the Scottish Government's priorities and the National Outcomes.

Chapter 2 - Scotland's Fiscal Outlook

This chapter sets out the Scottish Government's expectations for its funding position over the next five years. It includes the assumptions that underpin the Scottish Government's central funding scenario, supporting spending plans for 2023-24 to 2026-27 as published in the accompanying RSR. It also includes the assumptions that support the funding envelope for capital, with the update to the CSR also published alongside this MTFS.

Chapter 3 overview - Scotland's Spending Outlook

The purpose of this chapter is to provide an update on the overall spending outlook and its component parts, including:

• The Resource Spending Outlook;
• The Capital Spending Outlook; and,
• Key drivers of spend such as pay and demand-led social security

Chapter 4 overview - Managing Fiscal Risks

Building on the analysis about both funding and spending, this chapter analyses the different sources of fiscal risk that need to be managed as well as the available fiscal tools to manage those risks.

Conclusion

The conclusion reiterates the importance of the MTFS, RSR and CSR for robust medium-term financial planning to ensure long term sustainability of public finances. It also highlights the progress we have made in implementing the recommendations from the Finance and Public Administration Committee to further improve the MTFS and our intention to continue to collaborate with the Committee and other stakeholders such as the SFC on improvements going forwards.

Annexes

The annexes provide technical analysis on regional and sectoral trends across the Scottish and rest of the UK (rUK) Income Tax bases (Annex A) as well as key data on the components of the Fiscal Framework (Annex B).