UK Government confirms increase to Scottish Government borrowing

Scotland Act Order approval will increases borrowing resource to fund vital public services including schools, hospitals and key infrastructure to boost growth

More money to fund vital public services will be at the disposal of the Scottish Government after a motion passed in the House of Commons yesterday that will see their borrowing powers increased in line with inflation.

Scotland Office Minister John Lamont secured the approval of a Scotland Act Order that increases the Scottish Government’s resource borrowing limit from £1.75 billion to £1.78 billion and the capital borrowing limit from £3 billion to £3.05 billion in 2024-25, enabling them to invest further in schools, hospitals, roads and other key infrastructure that will help to grow the economy and create better paid jobs and opportunity in Scotland.  

The move upholds the UK Government’s commitment to the new Fiscal Framework agreed in August 2023 between the UK and Scottish governments which included annual uprating and gives the Scottish Government certainty over borrowing limits for the 2024/25 financial year.

UK Government Minister for Scotland John Lamont said: “We have listened to calls from the Scottish Government for greater certainty and flexibility to help them manage their budget. This is a great example of devolution in action and how we can deliver for people of Scotland when our two governments work together.

“The wider Fiscal Framework deal – worth billions of pounds to Scotland over the coming years – builds upon work to support economic growth and provide more high-skill jobs, investment and future opportunities for local people, such as through Investment Zones and Freeports in Scotland. 

“The UK Government has made great strides in growing the economy and by halving inflation sooner than forecast. With our direct investment in Scotland now standing at more than £3billion, we are creating opportunities right across the UK.”

In addition to the changes made to the cumulative borrowing limits through today’s Order, the Fiscal Framework agreement also saw the permanent doubling of the resource borrowing annual limit from £300 million to £600 million.

Limits on how much can be withdrawn from the Scotland Reserve to spend in future years was also removed. This boosts spending through borrowing by £90 million in 2024/25. All future limits will increase in line with inflation. 

The new arrangements compare with the previous Fiscal Framework, where the Scottish Government’s capital borrowing limit was £450 million per year within a £3 billion cap, as well as receiving a Barnett-based share of UK Government borrowing. Going forward these amounts now rise with inflation instead, which supports additional investment across Scotland and lays the foundations for economic growth. 

The funding arrangements for tax continue, with the Scottish Government continuing to keep every penny of devolved Scottish taxes while also receiving an additional contribution from the rest of the UK.

Background:

• Scotland act orders in the UK Parliament fully support devolution by facilitating amendments to be made to UK legislation affecting Scotland, to enable Scottish legislation to have full effect, or additional powers to be transferred to Scottish Government ministers.
• On average, seven Scotland Act Orders are made each year and more than 250 have been passed since the start of devolution.
• The target date for the order to come into force is 17 June 2024, subject to the date of signing.