SNP decisions to blame for Scotland Budget 'pressures', say independent experts

Leading economists say much of the financial pressures facing the Scottish Government are down to decisions made in Holyrood, not Westminster.

The Scottish Fiscal Commission (SFC) has published a new report warning the Government is “now facing a challenge in balancing its budget” and will need to make a series of tough choices.

In its report, the commission warns higher than expected public sector pay deals, a council tax freeze and social security reforms are all straining public finances.

First Minister John Swinney, Deputy First Minister Kate Forbes and Finance Secretary Shona Robison. Image: Getty Images. | Getty Images

In a statement accompanying the report’s publication, the SFC said: "While UK government policies contribute to the pressures on the Scottish budget, much of the pressure comes from the Scottish Government’s own decisions."

More than half of the Government’s resource spending is allocated to public sector pay, and the commission warns the public sector pay deals will lead to cuts elsewhere in the public service.

The commission said: “If a budget is set based on pay assumptions which are lower than those that materialise, this creates challenges with in-year management of the budget, requiring the Government to reduce its planned spending on services. The recent emergency spending controls the Scottish Government has put in place for 2024/25 are the result of those challenges.”

This warning comes on the same day as Prime Minister Sir Keir Starmer warning the UK government’s October budget will be “painful”

During a speech in Downing Street’s Rose Garden, Sir Keir said there was no choice but to have those with the broadest shoulders “bearing the heavier burden” after his Government inherited a £22 billion black hole in the public finances.

This warning from the Scottish Fiscal Commission comes after Finance Secretary Shona Robison wrote to all Cabinet secretaries halting all but essential government spending.

Since her letter, there have been numerous government cuts, including to universal winter fuel payments, the return of peak rail fares, cuts for culture and nature restoration funds, and pausing the rollout of free iPads.

Civil servants have also been told to put all options on the table of what to cut from their departments, including universal benefits such as free prescriptions, university tuition, bus travel and school meals.

Professor Graeme Roy, chair of the Scottish Fiscal Commission, said better planning for pay deals was needed to make sure mid-year financial restrictions are avoided.

He said: “The past choices of the Scottish Government narrow its room for manoeuvre now and in the future.

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“Previous pay settlements, the approach to social security payments, and the council tax freeze have all added to the in-year pressures that must be accommodated as it continues to negotiate pay with the public sector unions.

“With pay making up more than half of the Scottish Government’s day-to-day budget, we need more transparency and planning around pay awards at budget time to avoid disruptive spending controls being introduced partway through the year.”

Scottish Labour leader Anas Sarwar told journalists at Holyrood that the Scottish Government was guilty of “deliberate misinformation” for claiming the decision made by his party colleagues in Westminster has forced SNP ministers to make cuts from this year’s budget - accusing Ms Robison and her team of a “blatant lie”.

Scottish Labour leader Anas Sarwar | Jeff J Mitchell/Getty Images.

Labour is drawing a distinction between the £22 billion in-year budget black hole identified by Chancellor Rachel Reeves and the £20 billion figure highlighted by the Institute for Fiscal Studies before the election, saying the latter figure relates to wider pressures on UK Government finances.

The party said that with the exception of the winter fuel allowance, Ms Reeves’ decisions have had “no detrimental impact on the Scottish Government’s budget”.

Mr Sarwar said: “I think people across the country recognise that the Labour Party doesn’t have a magic wand, it can’t fix every problem straight away.

“But it can start the process of changing our country for the better.”

Mr Sarwar added: “The Cabinet ministers know it’s chaos, they privately say it. MSPs know it’s chaos, they privately say it. MPs know it’s chaos.

“They know it’s not working. There’s no plan, no strategy and it’s just trying to live day by day, week by week.”

Amid speculation over limits or cuts being made to free prescriptions or free tuition for Scottish students, Mr Sarwar said those policies would not be touched under a Labour government, insisting he was “not going to re-open those discussions”.

He also claimed a Labour government at Holyrood would alleviate the NHS backlog and fix the “broken” relationship between local and central government.

Pressed over how a Labour government would pay for his vision, Mr Sarwar claimed growing the Scottish economy, despite being partly out of any government’s hands, and reducing waste would mean cuts would not have to be found elsewhere in 2026.

He said: “If we do not increase growth and increase revenues into government, then we are not going to be able to achieve what Scotland can achieve.

“In the longer-term, I would argue we need to reduce the tax burden on Scots as well.”

Responding to the IFS report, Ms Robison said: “I welcome this report, which provides useful independent analysis. As it says, there is significant uncertainty on the level of funding we will receive from the UK government ahead of the UK budget on October 30.

“The First Minister and I have both made clear that, following the UK Chancellor’s July statement, the Scottish Government continues to face the most challenging financial situation since devolution. I will be providing an update to parliament on the urgent action being taken to address these profound financial pressures.”