Scotland-Specific Economic Shock

A Scotland-specific shock is defined in the Fiscal Framework agreement by two criteria, which are:
·   annual GDP growth in Scotland, on a four quarters on four quarters basis (4Q-on-4Q) is below 1.0 per cent
·   4Q-on-4Q growth in Scotland is 1.0 or more percentage points below the UK

The triggering of a shock increases the limit of resource borrowing from £300 million to £600 million per year, and removes the £250 million drawdown limit from the Scotland Reserve. Once a shock is triggered, the relaxation of the limits applies to the financial year in which the shock is triggered plus the following two financial years. Even if the shock is later revised away, the relaxation of limits will not be revoked.
Our January 2021 forecasts met the conditions for an economic shock to be triggered in 2021-22, allowing the Scottish Government to access the extended powers from 2021-22 to 2023-24. In our August 2021 forecasts the criteria for the shock are no longer met in 2021-22, but as set out in the fiscal framework the extended borrowing powers will still apply.

Find out more in our Analytical Papers series, including our Occasional Papers and Forecast Evaluation Reports.

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Or read our latest Scotland’s Economic and Fiscal Forecasts report.

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