You may run into problem with brake caliper clearance with a 16" wheel. Overall diameter could also be an issue.
The genuine 17" spare is already significantly down in diameter from the standard tyres on an xc70. Having said that, the same spare is also used for the xc60 which has even taller standard tyres.
You can get a genuine 17" wheel and tyre from Volvo for just over £50, last time I saw it mentioned on here.
Give FRF a call (not e-mail or forum) with VIN and forum discount code. Check their details and code on the 1st page of their thread in the traders section
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