Scottish Government faces cuts of £3 billion

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SCOTLAND faces a huge cut in its finances over the next four years as a result of the £38 billion of projected savings announced by the Chancellor in the Budget.

• Picture: TSPL

In an interview with The Scotsman, Alistair Darling confirmed his plans would have significant consequences for the Scottish Government's spending plans. The exact figure is still to be calculated, but experts last night estimated the Scottish budget of 35bn would face a 3bn real-terms cut by 2013-14.

Mr Darling said the governments both north and south of the Border had "got difficult decisions to make".

Speaking in the Treasury, he said: "It is going to be tough. We have already said that the halving of the debt is non-negotiable, so we can't get out of that."

In his Budget on Wednesday, Mr Darling announced a series of cuts and efficiencies adding up to 38bn.

Details of 11bn of efficiency savings were unveiled, although these were ridiculed as they did not involve cutting any jobs. Mr Darling said the savings could instead be achieved by measures such as turning off lights and reducing staff absence through sickness.

He also announced 5bn of unspecified cuts and said a further 18bn would come from the spending review to be carried out before the autumn. Some 4bn would be saved by freezing wages and pensions for senior civil servants.

There had been doubts over whether the savings would affect Scotland via the Barnett formula, the mechanism that decides the spread of spending around the UK.

But Mr Darling confirmed for the first time that Scotland would be directly affected. He said: "That question can only be answered when we decide what the spending review will be and we break it down between departments … as you know, some of it is Barnett-able and some of it is not.

"But, as a general proposition, if there is tighter spending overall, then that feeds through. But you couldn't at the moment derive a numerical number for that."

Leading Scottish economist John McLaren said the Budget appeared to have confirmed his calculations that the Scottish block grant of 35bn was facing a 3bn real terms cut by 2013-14.

In a stark illustration of how deep the cuts could be, financial think tank the Institute for Fiscal Studies yesterday said Whitehall spending on defence, transport, housing and universities could be slashed by up to a quarter following the election.

That is due to the UK government's pledge to protect front-line spending on schools and health for two years – along with the overseas aid budget – meaning the axe would fall disproportionately on other departments.

If the Scottish Government was also to protect health and education spending, other departments could suffer large cuts.

Mr Darling said: "Obviously, something like Ministry of Defence spending is largely not Barnett-able, although Scotland gets a lot of that. But, for example, the result of whatever the education budget will be, then Scotland will get the consequentials of that. We have said we will protect the NHS budget, and obviously they will get the consequences of that. Obviously, I cannot guarantee that Alex Salmond will spend that money on health, he might choose to spend it on something else."

However, Mr Darling pointed out that extra spending funded by the bank bonus tax meant Scotland would get an additional 82 million this year.

And he offered hope of new jobs for Scotland through the relocation of staff from Whitehall. "I hope some of the jobs will come to Scotland," he said. "It will depend on the various departments.

"The Ministry of Defence is certainly one department where we want to do a lot of decentralising and there is no need for it all to be in central London."

Finance secretary John Swinney yesterday urged the Chancellor to set out details of future UK spending so he could plan ahead.

He also said the Scottish Government would soon put forward proposals on how it would spend its 76m of additional money.