Scottish Government's Medium Term Financial Strategy: May 2019

Overview

This is the second Medium-Term Financial Strategy published by the Scottish Government. It sets out the key financial challenges and opportunities that lie ahead and provide the context for the upcoming Spending Review and the Scottish Budget later in the year.

The growth forecasts in Chapter 1 demonstrate that the economic backdrop remains uncertain. The global economy is going through a synchronised period of weakness. For Scotland, this is compounded by the continuing uncertainty around the UK’s exit from the EU. The Scottish Government has put in place measures to try to deal with the worst economic and employment impacts. However, no devolved government could fully do so within the existing powers. The chapter sets out the Scottish Government’s approach to achieving inclusive growth, including through the Economic Action Plan and infrastructure investment.

Chapter 2 sets out the funding outlook for the medium term, which continues to be determined by austerity at a UK level. The UK Government’s macroeconomic policy stance since 2010 has been characterised by austerity – prioritising a reduction of Government debt over most other Government priorities. In Scotland, we have protected key services despite austerity causing a real-terms reduction of £2 billion in the block grant (between 2010-11 and 2019-20). 

In Chapter 3 we set out the principles of how the Scottish Government will apply its closely circumscribed fiscal powers on borrowing and the Scotland Reserve in the interest of fiscal sustainability in the medium and long term.

This year, the UK Government has indicated that it plans to publish a three-year Spending Review. As the Budget Process Review Group recognised, the absence of multi-year budgets for devolved public services in recent years has made it more difficult for these services to adopt medium-term priorities and develop plans to address future challenges.

The Scottish Government plans to publish its own Spending Review, following on from the UK Government’s Spending Review. In Chapter 4 we publish the framework for our Spending Review. This sets out the criteria that will govern the assessment of budgets and the process and timetable for the review itself. It does not, however, set out detailed spending plans. 

Chapter 5 concludes by drawing together the different strands of this Strategy.

The Annexes provide detailed information on the economic and financial modelling, as well as key data on the components of the Fiscal Framework.