SNP MSP John Mason says he is very disappointed that the Scottish Fiscal Commission will now carry out forecasts.

Mr Mason asks if the SFC will need more money.

Mr Swinney says: "Yes".

He says he had warned Lady Rice, the chair of the SFC, that the change could be a possibility. 

Mr Swinney says the Scottish block grant already carries population risk as the Barnett formula is a product of population.

Barnett fundamentally is a population based formula, he says.

Image source, PA

On the issue of no detriment, the finance secretary says the Smith Commission stated that that the Scottish block grant would be calculated by Barnett.

He says the original UK government proposal on the table would have seen a reduction of £7bn over a 10 year period, but the Barnett formula has been secured.

The Barnett formula is a system of grants which dictates the level of public spending in Scotland, Wales and Northern Ireland.

Under it, extra funding - or cuts - from Westminster are allocated according to the population size of each nation and which powers are devolved to them.

When the UK government increases or decreases funding for departments such as health and education in England, the Barnett formula is used to decide how much devolved governments will receive.

The formula is named after its inventor, the former Labour Chief Secretary to the Treasury Joel Barnett, who devised it in the late 1970s.

Why is it controversial?

The main reason the formula has come under criticism is that public spending per head is considerably different in different parts of the UK. It has typically been 20% higher in Scotland than in England, for example.

That's left some countries feeling short changed.

Politicians in Wales - where overall GDP remains lower than any other part of the UK - have said the country misses out to the tune of £300m a year.

Some argue a needs-based system - which would take into account factors such as the age of the population and levels of poverty - would be a fairer formula.

Independent MSP Jean Urquhart says there has been a mystery around the Barnett formula.

Mr Swinney says the calculations applied in the Barnett formula are pretty open, they are driven by the Statement of Funding Policy.

This means a change in, say health funding in England, there must be a comparitive alteration in Scotland, driven by population share he explains.

The deputy first minister says the OBR will publish a set of numbers looking at the change in policy decisions by the UK government.

Ms Baillie asks what the consequences would be of no agreement after the transitional period.

She says she is worried the no detriment position will not continue.

Mr Swinney says: "That scenario could not happen as nothing could be imposed apon us."

Scottish Labour MSP Jackie Baillie welcomes the move to allow the Scottish Fiscal Commission to carry out independent forecasting.

Mr Swinney says the forecasts will be on GDP and revenues.

Brian Taylor
BBC Scotland Political Editor

And so a deal has been done on the fiscal framework which accompanies planned new tax powers for Holyrood.

At the outset of the day, John Swinney, the finance secretary, had looked and sounded rather gloomy - he would probably say realistic - about the prospects of an agreement.

But, after a day of detailed negotiation behind the scenes, agreement was reached. And Nicola Sturgeon permitted herself a smile as she said that the agreement would not cut a penny from Scotland's budget.

Image source, Getty Images

Both sides had an incentive to reach agreement.

The Scottish government, because it might have been hard to explain why they were seemingly rejecting a plan for new Holyrood tax powers.

The UK government, because they favour a narrative which says that Scotland is gaining more responsibility for tax - and, hence, it is implied, reducing any requirement for support from London. An implication naturally rejected by Scottish ministers.

The deputy first minister says the impact of the deal on the money is per capita index deduction which delivers the no detriment principle.

Mr Swinney says it is an "inelegant route to get to per capita index deduction".

Mr Swinney says, following the deal, he can now recommend the Scotland Bill for legislative consent subject to committee scrutiny.

The deputy first minister says he will make himself available to come before the Devolution Committee or Finance Committee at any time, to address the time constraints for sctuiny.

The Scottish Fiscal Commission , externalwas established in June 2014 to provide independent scrutiny of Scottish Government forecasts of receipts and economic determinants from taxes devolved to Scotland.

At present there are two devolved taxes in Scotland, Scottish Landfill Tax and Land and Buildings Transaction Tax. 

The Commission also scrutinises the Scottish Government’s assumptions about the economic determinants that drive income from Non-Domestic Rates. 

Following the deal it will now carry out economic forecasts. 

Mr Brown says he is pleased to hear the Scottish Fiscal Commission will now carry out forecasts and asks about the amendments to the Scottish Fiscal Commission Bill, external that will allow this to happen.

The finance secretary says he is not at all keen to restructure the SFC but it will carry out forecasts now. 

Scottish Conservative MSP Gavin Brown asks about capital borrowing and when the changes take effect.

Mr Swinney says they cannot take affect until, at the very least, until the Scotland Act has Royal Assent, which will be the 1st of April at the earliest.

Mr Swinney says the DWP estimate for welfare set up was £350m and the government has secured more than half of that capital cost.

Image source, Getty Images

He concedes that the Smith Commission had recommended Westminster only pay share of that cost and £200m has been secured.

The finance secretary says Scotland will have responsibility for the employability programmes but not the funding streams envisaged by the Smith Commission. 

Image source, Getty Images

Mr Gibson raises concerns about the devolution of employment and welfare programmes.

The finance secretary says no detriment refers to the block grant.

He says the UK government extended its employability contracts delaying its devolution.

Finance Committee convener Kenneth Gibson says the committee is delighted an agreement has been reached.

Mr Gibson asks about any other compromises, beyond the Scottish Fiscal Commission forecasts.

Mr Swinney says on borrowing he had argued for a higher limit.

He compromised on the total debt limit he would like to have seen and on the annual constraints on capital borrowing.

This is a reasonable package to recommend to parliament, he says. 

The deputy first minister says the deal ensures there can be no detriment to Scotland in the future.

Mr Swinney says he has agreed the Scottish Fiscal Commission will carry out the forecasts for GDP and tax revenues.

He says the Barnett formula has been protected. 

F is for framework. Fiscal framework. But what is it and why does it matter so much?

Image source, shironosav

The Smith commission included an important principle - that there should be "no detriment" to either side.

In other words, neither the Scottish nor UK government should be worse off financially as a result of the devolution of extra powers.

There are two parts to this. "No detriment" as a result of the decision to devolve a power and "no detriment" for either government as a knock on effect of the policy decisions made by the other.

The finance secretary says he refused to compromise on the principle of no detriment.

Mr Swinney says: "The fiscal framework is as important if not more so than the Scotland Bill itself."

He says there is on the table an agreement in principle that the government thinks the parliament can recommend.