The Scottish Government's Medium Term Financial Strategy

Executive Summary

This is the fourth iteration of the MTFS, this time produced alongside the Scottish Budget, the Resource Spending Review Framework and Public Sector Pay Policy. The 2022 MTFS will revert to its original timetable of a Spring publication and will be published alongside the Resource Spending Review, which will set out our spending plans over the next four years.

The purpose of the MTFS is to examine the medium-term sustainability of Scotland's public finances, with a focus on the management of fiscal risk within existing constitutional and fiscal constraints. It also sets the medium-term context to annual budget decisions and the Resource Spending Review framework by presenting funding and spending scenarios over a five-year period.

Chapter 1 sets out the context for public finance and spending in Scotland by giving an overview of the national and regional economic climate and outlook over the next 5 years, using economic forecasts from the Scottish Fiscal Commission (SFC).

Chapter 2 sets out the forecast funding envelope for resource and capital, drawing on tax forecasts from the SFC and Office for Budget Responsibility (OBR), as well as forecasts of UK Government (UKG) expenditure and resulting consequentials for Scotland. It also sets out the implications of potential scenarios around the central forecast.

Chapter 3 provides a summary of the Resource Spending Review Framework. It also gives an update on the Capital Spending Review and progress against the National Infrastructure Mission, as well as highlighting key drivers of spend.

Chapter 4 discusses how we manage risks within the boundaries of our existing powers, as well as demonstrating the limitations of our current powers ahead of the Fiscal Framework review.^[2]

The conclusion sets out this Government's views on the role of the MTFS and our plans to work with Parliament to review and update the document to ensure it continues to meet the expectations set out by the Budget Process Review Group (BPRG).

Finally, the Annexes provide more detailed technical modelling on tax base distributional risk, as well as key data on the components of the Fiscal Framework.