|The Scotland Reserve is an instrument that allows the Scottish Government to transfer funds between financial years. It replaced the Budget Exchange Mechanism (BEM) within HM Treasury that applies to UK Government departments.|
It is split into three separate accounts or components: resource, capital and financial transactions (FTs). There is an overall limit of £700 million. However, it is not specified how this limit is broken down, so the Scottish Government can manage the weight of each account within the overall limit. Funds cannot generally move between accounts. However, some one-way transfers are allowed: funds from the resource reserve can move to the capital reserve, and funds from the capital reserve can move to the FT reserve.
The Scottish Government can add to the Scotland Reserve each year any underspends or unallocated funding and then support funding in subsequent financial years through drawdowns. Ordinarily, drawdown are limited to £250 million a year for resource and £100 million a year for capital and FTs.