Scotland faces fresh austerity drive as more cuts planned

Philip Hammond is expected to announce more funding cuts. Picture: John Devlin/TSPL

The situation is now “worrying and stark” for local services, as Chancellor Philip Hammond prepares to make his Autumn statement this week with a warning that a post-Brexit economic slowdown looks increasingly likely.

The Scottish Government’s finance secretary Derek MacKay has written to Mr Hammond urging him to end austerity and bring forward a number of measures to boost growth.

Mr Hammond said yesterday that the public finances are facing sharp challenges as the impact of Brexit starts to bite.

Chancellor Philip Hammond appeared on the Andrew Marr show yesterday. Picture: Jeff Overs/BBC/PA Wire

Now Scotland’s local council body Cosla has warned that this, and the Scottish Government’s budget next month, will have a “massive bearing on services and jobs.”

Finance spokesman Kevin Keenan said: “It would be a dereliction of my duty as Cosla’s finance spokesperson if I did not make the Chancellor in London and the Cabinet Secretary in Edinburgh fully aware of the consequences of their actions if yet again local government, local services and local jobs bear the brunt of their cuts.”

Councils suffered a £500 million cut in last year’s Scottish Government budget and recent reports by the Fraser of Allander Institute and the IFS have shown financial pressures faced by town halls.

Mr Keenan added: “Local government is at a defining moment and that the communities we represent can take no more pain.

“It is time for an honest debate – there is no more meat on the bone. This time round there are no more soft targets – we would be talking of severe cuts in vital services and job losses in communities and sadly these will impact on the poorest in our society. In addition to this, over the last five years 40,000 jobs have been shed in local government.

“That’s 40,000 people in an economy looking for alternative employment. In areas where local government is the main employer, this is catastrophic and it is those areas that have suffered the most. Communities and the economy are suffering alike.”

“No elected Councillor wants to see this happen, but sadly as more and more of our democratic decisions are taken by national politicians I can only make the appeal on behalf of the people that our message is not only heard by those who control the purse strings but is acted upon.”

The Scottish Local Government Partnership, which includes Glasgow and Aberdeen, also warned of “brutal cuts coming to local authority budgets”.

Finance spokesman Willie Young said: “The areas represented by the SLGP - Aberdeen, Glasgow, Renfrewshire and South Lanarkshire - will be among those worst hit. Our finance chiefs have already said we should brace ourselves for a spending gap of £183 million - that’s around £140 for every man, woman and child in our constituencies.

“What’s worse is if this annual merry-go-round of slash and burn economics continues, we face a £1 billion shortfall by 2020/21.

“So far councils have worked miracles by continuing to provide frontline services but this cannot go on, neither can the First Minister’s attempts to keep blaming the UK Government for these savage reductions.

“The future of local government finances has never looked so bleak.”

It comes at an already bleak time for Scotland’s budget, with real terms cuts every year until at least 2019-20 which ministers admit will hit public services. Since the austerity agenda was embarked upon five years ago Scotland’s budget has been cut by £3.3 billion in real terms, or 10.6 per cent. The IPPR think tank warnedg last week that Brexit could mean a further £1.3 billion of cuts for Scotland.

The Scottish Government is now calling for a package of measures to boost growth the Chancellor in this week’s statement to boost growth. Mr Mackay wants a improved support for the struggling North Sea oil and gas industry, including improved access to decommissioning tax relief, loan guarantees and moves to stimulate. The SNP administration is also calling for a halt to “harmful” welfare cuts – including reversing both the benefits freeze and the reduction of the benefit cap.

“The Chancellor has taken no action to ease the uncertainty felt in the wake of Brexit – it is now more essential than ever that we invest in our economy and stimulate growth,” Mr MacKay said.

“In stark contrast to the silence and inaction of the UK Government we have taken swift action in the wake of Brexit to support the economy by bringing forward an additional £100 million of capital investment. We are working hard to secure Scotland’s continued relationship with Europe and have already set out plans for a £500 million Scottish Growth Scheme to support businesses.”

The Chancellor is reportedly facing a £100 billion black hole in the public finances and warned yesterday he needs “headroom” in the public finances to deal with the economic impact of Brexit with forecasts predicting slower growth.

Many of those forecasts are pointing to a slowing of economic growth next year and a sharp challenge for the public finances.

“There are a range of reasons for that and we’ve got to make sure that what we do is responsible, that everything we do is compatible with building resilience in our economy as we go into a period where there will be some uncertainty around the negotiation over our exit from the EU and focus on making sure that our economy is match-fit for the opportunities and the challenges that will lie ahead.”

Mr Hammond added: “We have to maintain our credibility - we have eye-wateringly large debt, we still have a significant deficit in this country and we have to prepare the economy for the period that lies ahead.

“I want to make sure that the economy is watertight, that we have enough headroom to deal with any unexpected challenges over the next couple of years and most importantly, that we’re ready to seize the opportunities of leaving the European Union.”