Explainers

Machinery of Government transfers and BCTs

Much of the funding the Scottish Government receives from the UK Government is either its Block Grant or its devolved tax revenues.

However, sometimes decisions from a UK Government minister have spending implications for the Scottish Budget. For example, creating a welcoming programme for Ukrainian refugees was a UK Government decision, because immigration is a reserved area, but it created devolved spending pressures for the Scottish Government in schools and hospitals for those who relocated to Scotland. Or sometimes a UK Government department keeps an income which is to support spending in devolved areas, such as the Migrant Surcharge, which the Home Office collects from those applying for visas to fund their healthcare costs.

In those cases, the relevant UK Government department, in both examples the Home Office, cedes part of its budget to the Scottish Government. These are known as Budget Cover Transfers (BCTs).

A Machinery of Government (MoG) transfer is a special kind of BCT. It happens when a UK Government department creates a new programme that is deemed to be devolved. When that is the case, there is a one-off BCT from the relevant department to the Scottish Government. From then on it is included in the Block Grant and, if spending plans for that new programme change, the Block Grant is updated using the Barnett formula as usual. Both BCTs and MoGs are implemented as part of the Supply Estimates process. Sometimes the Scottish Government includes assumed funding from these in the Budget, especially when they are recurrent, like the Migrant Surcharge. If Supply Estimates confirm numbers that are different, the Scottish Government will amend funding levels at its Budget Revisions.