That block grant provides most of the funds that Holyrood ministers spend, to which revenue is added in Scotland from income tax, business rates and Land and Buildings Transactions Tax.
Changes to it are determined by changes to funding for the big “spending departments” in Whitehall such as health, education, justice and transport.
These gained in funding in Rishi Sunak’s Budget for next year, set out last year, but they do not take account of inflation. So spending departments will have to absorb the extra costs they face in the coming year, notably public sector pay.
And that constraint is passed on through the block grant to Holyrood.
Public sector pay is already rising more slowly than private sector pay, and that is expected to continue. In real terms (after inflation), it is expected to fall significantly, raising the potential for pay disputes between employers and unions.
That is one of the challenges the Scottish government and local authorities will face, unless further funding is released later this year to take account of public sector pay deals.