Scotland-Specific Economic Shock

A Scotland-specific shock is defined in the Fiscal Framework agreement by two criteria, which are:
·   annual Gross Domestic Product (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  drawdown limits 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. The criteria for the shock are no longer met, but as set out in the Fiscal Framework, the extended borrowing powers will still apply.