The turmoil engulfing Scotland’s economy will be “prolonged” with fresh cuts to public spending expected after last week’s Brexit vote, finance secretary Derek MacKay today warned MSPs.
The cabinet secretary held talks with Chancellor George Osborne this morning and revealed afterwards that he has scrapped plans for a three-year spending review this year and will instead just publish a one year budget in light of the economic uncertainty.
It follows the UK’s decision to leave the EU in last week’s referendum. Billions of pounds have already been wiped off the stock markets and the pound plummeted against other currencies this week, although it has rallied.
Mr MacKay was appointed as Scotland’s first Finance Secretary by Nicola Sturgeon last month with responsibility for stewardship of Scotland’s public finances as Holyrood takes on sweeping new controls over income tax and welfare.
He warned MSPs that the Brexit vote will have a “profound impact on this country.”
“Clearly there’s a significant impact on the economy right now in terms of economic turbulence,” he told Holyrood’s finance committee.
“That will lead into inevitably public spending decisions and tax decisions.”
“For Scotland specifically, clearly there will be an impact on a range of - if there is to be an exit - on funding streams, on the wider economy and on investment decisions.
“Companies right now will be thinking - and some will potentially put on pause - investment plans so that will have an impact on the wider economy and then in due course, Government’s spending decisions.
“So it’s had quite a serious impact already and I think that will be prolonged.”
The chancellor made it clear during the referendum campaign that spending cuts were likely to follow a Brexit vote and told Mr MacKay during their talks today that Scotland would be hit.
“I did raise the subject and I said `Is it reasonable to assume that there will be a significant shift in the Autumn statement?”
Mr Mackay added.
“He concurred that Yes there would be. It might not be a matter for that Chancellor , but there will be a shift in public finances and tax policies as a consequence of the vote.”