Scottish budget: 'Scotland-specific shock' hits economy

The economic impact of the coronavirus lockdown means that a "Scotland-specific economic shock" has been formally reached for the first time, with growth set to nosedive.

The condition applies when annual GDP growth in Scotland, on a four-quarters-on-four-quarters basis, is forecast to be below 1 per cent and is 1 per cent or more below the UK.

This is set out in the fiscal framework that governs devolved public finances.

It means finance secretary Kate Forbes is allowed to borrow hundreds of millions from emergency reserves to weather the impact of the pandemic.

Finance secretary Kate Forbes delivers her budget at the Scottish Parliament in Edinburgh. Picture: Robert Perry/POOL/AFP via Getty Images

"The UK Government has confirmed these flexibilities are available to me and I will use them to support our recovery," Ms Forbes said.

The Scottish Government now plans to borrow £319 million in 2021/22 to help deal with the impact of the pandemic.

The resource borrowing limit increases from £300m to £600m for the next three years, under the terms of the Scotland-specific economic shock.

In addition, limits on taking cash from the Scotland Reserve are removed for the same period.

Even if future forecasts or outturn data no longer trigger a shock in 2021/22, the relaxation of limits will not be revoked.

The figures, which show Scotland lagging behind the rest of the UK, are based on estimates from each country's fiscal watchdogs.

Ms Forbes said they did not reflect a significant difference in "underlying economic performance", but were instead down to the more up-to-date figures from Scotland's Fiscal Commission, which has taken into the account the latest lockdown and forecast contraction of 5.2 per cent.

The Office for Budget Responsibility (OBR) figures don’t include the latest lockdown in UK-wide estimates.

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