Explainers

Scotland-Specific Economic Shock

Following the 2023 fiscal framework review agreement, the concept of Scotland-specific economic shock has been made redundant.

Previously, it was a scenario defined by two criteria:
·   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 increased the limit of resource borrowing from £300 million to £600 million per year, and removed the drawdown limits from the Scotland Reserve. Once a shock was triggered, the relaxation of the limits applied to the financial year in which the shock was triggered plus the following two.
 
However, the extended flexibilities of the Scotland-specific economic shock have since 2023 become the standard in ordinary circumstances.