Scotland budget: Cost-of-living crisis lays bare 'fiscal constraints of devolution,' says John Swinney

The cost-of-living crisis has laid bare the "fiscal constraints of devolution", John Swinney has said, as he prepares to set out the Scottish Budget.

The Deputy First Minister insisted the Scottish Government "will use its limited powers to the maximum extent that is responsible". He pledged to take steps to address inequality and eradicate child poverty, as well as ensuring public services remain sustainable.

It came as he was urged to prioritise targeted help for those in need and end the "scandal of low pay" in the public sector. Business leaders also called for a package of support for smaller firms, whose reserves are now "long exhausted".

The draft Budget will be published this afternoon against a backdrop of high inflation and economic turmoil. Mr Swinney, who is the acting finance secretary while Kate Forbes is on maternity leave, has warned of "difficult decisions".

Deputy First Minister John Swinney. Picture: Jeff J Mitchell/Getty Images

In previous years, the Budget has been the subject of intense negotiations between parties to secure the required votes to pass. However, with the co-operation agreement between the SNP and the Scottish Greens, it can now be passed without opposition party support.

Speaking ahead of publication, Mr Swinney said: “Our Budget goals are mutually beneficial and represent a distinctive approach to the economic challenges we face.

"The Scottish Budget will take further steps to address inequality and eradicate child poverty. It will encourage a just transition to net zero, creating wealth and opportunity across the country. And it will be the catalyst for reforms necessary to ensure our first-class public services remain sustainable in the face of the challenges to come.

“I would like to go even further, but the cost-of-living crisis has also laid bare the fiscal constraints of devolution, as we cannot borrow to support day to day expenditure when times are hard to assist us through these difficult days. It is clear that businesses and households are paying a steep price for the economic mismanagement of the UK Government.

“The cost-of-living crisis requires decisive action. In setting this Budget, the Scottish Government will use its limited powers to the maximum extent that is responsible, to meet the challenges faced by the people of Scotland.”

The Scottish Conservatives said the Government should fully pass on the £1.2 billion of consequentials from recent UK Government spending decisions and redeploy the £20 million previously earmarked for an independence referendum next year.

Labour insisted local authorities and public bodies must be provided with adequate funding to offer fair pay deals to workers. The party also repeated its calls for the SNP to prioritise support for those most in need, with a freeze on water charges, help for home owners facing repossession, cancellation of school meal debt and measures to tackle the cost of commuting.

Andrew McRae, Scotland policy chair at the Federation of Small Businesses, said this would be "one of the most important Scottish Budgets for small businesses".

He said: “With margins wafer-thin, if in existence at all, and reserves long-exhausted, small businesses need some financial breathing space. That’s why we need to freeze the business rates multiplier, continue the Small Business Bonus Scheme and deliver targeted support for smaller firms in sectors hit hardest by sky-high energy prices and the ending of the temporary Covid rates relief schemes."