The Scottish Government has recently written to the Finance and Public Administration Committee to set out its plan to publish the seventh Medium Term Financial Strategy (MTFS) on 25 June 2025, a four week delay from the expected 29 May publication.
This blog will set out what the MTFS is and how it is expected to support parliamentary scrutiny of the Scottish Budget.
What is the MTFS?
The Budget Process Review Group (BPRG) was established by the (then) Finance and Constitution Committee and the Scottish Government in 2016, to review and suggest improvements to the Scottish Parliament budget process in light of the devolution of further powers under the Scotland Act 2012 and the Scotland Act 2016.
A key recommendation of the BPRG was a move to “year-round” budget scrutiny, underpinned by two key strategic documents published by the Scottish Government to inform Parliament’s pre-budget scrutiny of the Government’s budget. The first of these was the Medium-Term Financial Strategy (MTFS) (to be published annually, normally in May) and the second was the Fiscal Framework Outturn Report (FFOR) to be published annually in September/October.
The BPRG states that the Scottish Government “should work towards the MTFS consisting of the following four elements”:
- forecast revenue and demand-led spending estimates from Scottish Fiscal Commission (SFC) and their effect on Scottish public finances, with SFC forecasts published alongside the MTFS
- broad financial plans for next five years
- clear policies and principles for using, managing and controlling the new financial powers
- scenario plans based on economic forecasts and financial information to assess the potential impact of various scenarios on the budget.
The written agreement between the Finance and Public Administration Committee and the Scottish Government states that the MTFS should normally be published at least four weeks before the summer recess, and following the publication of the UK Spring Statement.
Recent fiscal publications have not met with the intended publication timescales
Of the four MTFS that should have been published so far in Session 6 of the Scottish Parliament, only two have been published in May as intended. The 2021 publication was delayed to December due to the Scottish election which took place on 6 May 2021. In 2022 and 2023 the MTFS was published as expected in May, but the 2024 publication was first delayed due to the change of First Minister, then again due to the UK election. In August 2024 the Cabinet Secretary wrote to the Finance and Public Administration Committee to confirm that the 2024 MTFS would be cancelled, stating that:
“Given the announcement of a UK Government multi-year Spending Review, due to conclude in the Spring, it is my intention not to publish an MTFS alongside the 2025-26 Budget. Publishing an MTFS shortly before the UK Government Spending Review would risk the information provided becoming quickly out of date in the Spring. It is instead my intention to return to the usual schedule for the MTFS and publish a full MTFS in good time ahead of Budget 2026-27”
This means that the most recent MTFS from the Scottish Government is nearly two years old; predating both the current First Minister taking office and the change in UK Government.
Delays to the 2025 publication
Spending decisions by the UK Government have a significant impact on the funding available to the Scottish Government. In January 2025, the UK Chancellor confirmed that the results of the UK Spending Review would be published on 11 June. This Spending Review will set out resource budgets to 2028-29, and capital budgets to 2029-30 for all UK government departments and the devolved administrations.
In the Scottish Government’s response to the Finance and Public Administration’s Budget Scrutiny Report on 13 February 2025, the Cabinet Secretary stated her intention to publish the MTFS at the end of May, noting that:
“Publishing ahead of the UK Spending Review means that the funding outlook in the MTFS will be based on updated OBR forecasts which are due to be published in March 2025 (and SFC forecasts which will be published alongside the MTFS), but it will not include the impacts of the UK Spending Review on our Block Grant position. The multiyear outlook set out in the MTFS will therefore need to reflect the uncertainty generated by the absence of a finalised UK Spending Review.”
Later that month, the Cabinet Secretary wrote again to the Finance and Public Administration Committee confirming that the MTFS and the Fiscal Sustainability Delivery Plan would be published on 29 May.
However, on 6 May the Cabinet Secretary wrote back to the Committee to delay the publications to the week commencing 23 June, citing the uncertainty of the decisions the UK Government would take as part of its Spending Review. In response to this, the Scottish Fiscal Commission has stated that it will still publish its Economic and Fiscal Forecasts as planned on 29 May, followed by a restated forecast when the Scottish Government publish the MTFS in June.
The Finance and Public Administration Committee wrote to the Scottish Government to express its concerns about this delay, noting that Parliament would not have the opportunity to scrutinise the MTFS until September due to the revised publication date falling only two days prior to the start of the summer recess. The Scottish Government responded on 16 May acknowledging that “[the delay] creates difficulties for your proposed scrutiny of the strategy” and setting out their rationale for this delay.
The written agreement between the Finance and Public Administration Committee and the Scottish Government is that the MTFS should be published four weeks before the summer recess, and after the UK Spending Review, so the Scottish Government is right to point out that this was not possible given the timings of the UK Spending Review. However, as the Finance and Public Administration Committee highlights in its correspondence to the Scottish Government, the date of this Spending Review was known earlier this year when the Scottish Government committed to the 29 May publication date.
While the UK Spending Review will have an impact on the Scottish Government assumptions about capital and resource funding projections, not all are agreed that this presents a reason to defer publication of the MTFS. In evidence to the Finance Committee on 29 April, the Auditor General for Scotland noted that:
“There might be fiscal challenges, economic shocks, unanticipated elections or budget challenges—you name it. In my opening remarks, I alluded to the impact that tariffs might cause. However, rather than such events being a reason not to produce a medium-term financial strategy, for me, they reinforce why that is all the more necessary—and not just a financial strategy that involves a broad-brush recognition of scenarios, but one that will be useful in practice.”
What has changed since May 2023?
In August 2023, the Scottish and UK governments agreed to update the fiscal framework. This allows for the Scottish Parliament’s capital borrowing powers to increase; the annual limit was increased from £300 million to £450 million in 2023-24, and now rises in line with inflation, while the statutory limit for total capital borrowing was increased to £3 billion and rises each year in line with inflation. Resource borrowing limits were also increased to a limit of £600 million per year, with an overall limit of £1.75 billion. As with the limits for capital, these increase each year in line with inflation.
The 2023 MTFS highlighted that resource spending, on the projections at that time, would exceed available resources. The estimated gap in 2024-25 was expected to be £1 billion, rising to £1.9 billion by 2027-28. The Scottish Government needs to balance its budget, and so in November 2023 wrote to the Finance and Public Administration Committee setting out £391 million in resource and £289 million in capital savings as part of the Autumn Budget revision to the 2023-24 budget. In September 2024, the Scottish Government wrote to the Committee to outline total savings of £188 million which were required to ensure that the 2024-25 budget remained balanced.
In their Fiscal sustainability and Reform in Scotland report, Audit Scotland stated:
“The Auditor General has previously reported that the Scottish Government needs to change its approach to public spending and public service delivery models to be financially sustainable. The Scottish Government continues to take short-term decisions, reacting to events rather than making fundamental changes to how public money is spent. This approach has so far been effective in balancing the budget, but risks disrupting services at short notice and restricting progress towards better long term outcomes for people. The gap between the Scottish Government’s spending and funding is forecast to continue to grow in coming years”
In October 2024, the Scottish Government held a fiscal sustainability debate, in which the Cabinet Secretary announced her intention to publish a five year fiscal sustainability delivery plan alongside the MTFS in 2025. The Cabinet Secretary stated that:
“That document will set out the Government’s plan to achieve and deliver sustainable public finances within the overall approach that is set out in the medium-term financial strategy.”
What can we expect from the 2025 MTFS?
The 2025 MTFS will be the 7th time this document has been published since the Scottish Parliament and Scottish Government adopted the reformed budget process. In 2022 the Finance and Public Administration Committee wrote to the Cabinet Secretary setting out the conclusions to their review of the MTFS.
“…we cannot help but conclude that the MTFS in its current form does not sufficiently encourage or support meaningful committee scrutiny, in the way originally intended. We further believe that more detailed information is needed to build up an overall picture of Scotland’s medium-term public finances.”
This review recommended that the MTFS should:
- present information consistently from year to year,
- enhance transparency through publishing a more comprehensive set of tables in the annex,
- Include detailed information on spending priorities, future spending trends across portfolios, and cross cutting issues such as climate change,
- Include detailed information on fiscal risks, including setting out how the Scottish Government would mitigate these.
- Factor a single definitive statement of tax and spend policies into the MTFS
Other commentators have suggested that these aims have not been delivered in the subsequent 2022 or 2023 MTFS. Commenting on the 2023 MTFS, SPICe noted that:
“Whilst the MTFS set out revisions to public service reform plans (for example it seems to have dropped the previous plan to reduce the public sector headcount to pre-covid levels) and the extent to which there is a potential “budget gap” between spending available and existing commitments, it did not really set out anything concrete on how the gap might be filled.”
The Finance and Public Administration Committee has recently held an inquiry into the budget process in practice in Scotland. Giving evidence on the MTFS, Professor Mairi Spowage noted that:
“You will see in our response that we do not feel that the medium-term financial strategy has ever delivered what it could have delivered in setting out clearly the challenges that the Government faces. Some editions of the strategy have set out that there is a gap between what the Government wishes to spend money on and the resources that it is likely to have, but the strategy is in no way transparent on how the Government has come up with the figures for what it wishes to spend money on. That means that it is very difficult for anyone to scrutinise the challenges and the different choices that could be made.”
In a written submission to the Committee, Professor David Bell highlighted the lack of read across from the MTFS, to the Programme for Government (PfG) and the National Performance Framework (NPF), noting that:
“The already mentioned SG guide to the Scottish budget explains most of the mechanisms underlying the determination of Scotland’s budget. It also describes other parts of the SG policy framework including the Medium-Term Financial Strategy (MTFS), the Programme for Government and the National Performance Framework. However, it fails to explain how these form a coherent programme that brings together the budget with the fiscal scenarios described in the MTFS, the PfG and the measured outcomes described in the NPF.”
On 20 May, while giving evidence to the Committee, the Cabinet Secretary stated that the Scottish Government also intends to publish a ‘framework’ for the next Scottish spending review alongside the MTFS, which will include setting out the proposed timeline.
It will be interesting to see whether the delayed 2025 MTFS is able to better meet the aims set out by the Budget Process Review Group, and address the criticisms levelled at previous iterations of this key document.
Andrew Feeney-Seale, Senior Researcher, Financial Scrutiny Unit