Health budget raided to fund pay deals as John Swinney sets out £1.2bn in cuts

Cuts to frontline services in Scotland to help pay for inflation-busting pay deals have been labelled “downright dangerous” following a raid of the health budget as part of £1.2 billion in spending cuts.

The health budget cuts, worth £400 million, come ahead of an extremely challenging winter for the NHS, which continues to strain under the pressure of the pandemic, faces threats of widespread strike action among health service workers, and posts record poor performance in accident and emergency departments.

Setting out the outcome of the long-awaited emergency budget review, John Swinney announced a further £615m cuts in addition to the £560m outlined in September. The review of the in-year budget was due within two weeks of the ‘mini-budget’ in Westminster, which ultimately cost Liz Truss her job as Prime Minister, but was twice delayed until Wednesday. The statement from the finance secretary, who is standing in for Kate Forbes while she is on maternity leave, means £1.2bn has been cut from the Scottish budget in two months.

The deputy first minister blamed the “severe financial mismanagement” by the UK Government for the cuts, saying “calamity is giving way to austerity” ahead of the UK Government’s Autumn statement on November 17. He also pointed to “extraordinary pressures from inflation" which he said had forced the Government’s hand.

Mr Swinney told MSPs: “I must balance the books, but I am committed to doing so in a way that prioritises funding to help families, to back business, to provide fair pay awards and to protect the delivery of public services. They are not decisions we would wish to make, but in the absence of additional funding from the UK Government, they are decisions we are compelled to make. They ensure a path to a balanced budget, whilst also prioritising fair public sector pay offers and recognising that this is critical to the delivery of key public services.”

The deputy first minister also confirmed more cuts for the in-year budget might need to be found should the UK Government’s Autumn Statement lead to a reduction in the Scottish Government’s block grant funding due to spending cuts at a Westminster level. A late-year budget process called the supplementary estimates could also result in further costs or additional funding for the Scottish Exchequer.

The £400m reprioritised from the health budget includes £116m in cuts to Covid-19 spending on vaccination, Test and Protect, and PPE, as well as £70m from social care and the development of the heavily criticised National Care Service plans. A further £65m has been raided from primary care services, including delays to community optometry and audiology services, with an additional £63m cut from the Scottish Trauma Network and improvement programmes.

Scottish Labour health spokesperson, Jackie Baillie labelled the cuts “downright dangerous” for a health service “on the brink of catastrophe”. She said: “There is a deadly winter crisis looming and raiding the budgets of essential frontline services will cost lives. The SNP claim that this is ‘reprioritising’ budgets to pay NHS staff, but pay is recurring year after year, so these are clearly cuts. NHS staff and patients cannot be forced to pay the price for SNP and Tory economic vandalism. The SNP must rethink these reckless plans.”

Deputy First Minister John Swinney delivers a budget statement to the Scottish Parliament at Holyrood, Edinburgh

The Scottish Liberal Democrats also highlighted the £38m cut to mental health services, with party leader Alex Cole-Hamilton labelling that decision as “manifestly wrong”. Mr Swinney said resources within mental health would now not increase as “fast as we had planned”, but would still rise.

Liz Smith, the finance spokesperson for the Scottish Conservatives, attempted to deflect blame away from the UK Government. She called on the Scottish Government to support “the priorities of Scottish households rather than our own pet projects”. The MSP also called on the Government to drop plans for a National Care Service due to the financial implications and to turn to the constitution budget for further savings.

She said: “The current difficult circumstances do not absolve the deputy first minister or his colleagues of responsibility for the position Scotland finds itself in after 15 years of their government.

“These savage spending cuts to frontline NHS services from the SNP will only put more patients’ lives on the line. Our health service is already on its knees and patients and heroic staff are facing the prospect of a truly catastrophic winter.”

Other areas hit by spending cuts includes £30m of capital spending on further education construction projects, £10m relating to the roll-out of digital devices in school, and £16m around the R100 superfast broadband scheme. A total of £28.5m has been cut from support for active travel projects and the Future Transport Fund, with just over £7m cut from road projects.

However, the savings will also fund the doubling of the value of the December Scottish Child Payment bridging payment to £260m, increase funding to councils for additional discretionary housing payment support, and provide a £1.4m Island Cost Crisis Emergency Fund to support those on islands facing even more significant cost-of-living challenges.

The full Scottish budget, which will set out the fiscal scenario for next year, will be laid out on December 15, including any planned tax rises. Mr Swinney gave an inkling of the scale of the challenge, stating reserves earmarked for next year’s budget had yet to be found in this year’s budget. This suggests the finalised budget will be well below the already difficult forecasts from May’s Resource Spending Review, which set out real terms cuts to the majority of portfolios including local government and justice. Such a situation could see even deeper cuts announced alongside tax rises for Scots just prior to Christmas.

Mairi Spowage, director of the Fraser of Allander Institute, said the inflexibility of the budget for the Scottish Government meant a “strong case” could be made for enhancing fiscal powers. She said: “The lack of any real ability on the part of the Scottish Government to be able to flex its budget within year in response to unanticipated shocks remains a real limitation of the existing fiscal settlement. As we noted in a report last year, joint with the IFS [Institute for Fiscal Studies] and the University of Stirling, a strong case can be made for enhancing the Scottish Government’s ability to borrow and/or draw down resources from its reserve.

"Such fiscal flexibilities would provide the Scottish Government additional policy levers to deal with such unprecedented circumstances.”

Philip Whyte, director of the Institute for Public Policy Research Scotland, said the actions of the UK Government “cannot absolve the Scottish Government of all responsibility” despite powers resting in Downing Street. He said: “While this process has to an extent exposed the limitations of the current devolution settlement, we cannot allow for that to become an annual excuse for in-year cuts.

"Tackling child poverty, strong public services, a better and more inclusive economy, and a sustainable future remain the priorities of the people of Scotland – they must be delivered. Long term, the Scottish Government must think bigger – looking at income tax, local and wealth taxes and a replacement to the regressive council tax – and use its existing powers in a more progressive way to secure sustainable revenue to fund Scotland’s collective priorities."

The Scottish Government’s own expert panel, brought together to advise on the emergency budget review, also called on the Government to prioritise growth and productivity. In a paper, they said it was “imperative for the Scottish Government to make fiscal choices which improve business investment and innovation” at the budget.

Want to hear more from The Scotsman's politics team? Check out the latest episode of our political podcast, The Steamie.

It's available wherever you get your podcasts, including Apple Podcasts and Spotify.