This was an intriguing UK Spending Review which sets up future challenges for both the UK and Scottish governments.
For the UK government, questions remain about what the final solution to the tax credits issue will be. The Spending Review simply delayed this until the Universal Credit system is introduced.
On social care and policing, the funding problem has been partly shunted over to local government and police commissioners and their ability and willingness to raise more money via council tax rises. Is this equally viable in all areas and if so for how long?
In terms of the Scottish Government, challenges have been laid down by the UK government in terms of how council tax and business rates are to be set in the future. To what degree will the Scottish Government follow the UK’s lead?
In relation to the NHS, the big increases in funding for the English NHS emphasise that we are in the midst of a crucial period for this politically high-profile service.
Post-devolution, successive Scottish governments have effectively left decisions over the funding of the NHS in Scotland to the Westminster Parliament, by simply applying the equivalent, population-related changes in English funding to Scotland.
This abrogation of responsibility in such a key area has always been odd but may now prove untenable in a world where the English NHS model is also being driven by substantial efficiency savings and by the move to a seven-day working week. What is planned in Scotland and what will it cost?
This uncertainty is compounded by the new position over the funding of social care in England, now dependent, in part, on councils’ ability to raise council tax. One thing we should not do is imagine that this spending review is the end of the story. The Office for Budget Responsibility has the UK economy growing at a remarkably stable rate of just below 2.5 per cent, while at the same time interest rates and inflation rates return from historically low levels back to “normal”.
Such a scenario is very unlikely to happen in practice. More likely is a worse outlook, with lingering economic problems reigniting, or a better outlook, whereby the UK regains some of its lost output from recent years. Either way, the actual out-turn will probably mean revisions to future spending levels. So treat this as rough sketch, not as the final picture.
And for those who look to fiscal autonomy for Scotland as a way out of our misery, the disappearance of oil revenues, from almost £11 billion four years ago to just £130 million now, highlights why this is not a realistic alternative for the foreseeable future.
• John McLaren is Honorary Professor (Adam Smith Business School) at the University of Glasgow