'Increasingly challenging': Scotland facing Budget cut after Barnett consequentials drop

Managing Scotland’s finances is becoming “increasingly challenging” due to last minute changes to Barnett consequentials, the finance minister has said.

It comes as the Cabinet secretary confirmed to Holyrood’s finance committee the final Scottish Budget for 2021/22 would be £38m lower than expected.

This is due to the finalised settlement from Westminster being lower than the provisional figures provided to the Scottish Government by the Treasury.

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Further complicating matters is the £290m from the UK Government to tackle the cost-of-living crisis, which the finance secretary said was not “additional” funding for the Scottish Government.

Economy Secretary Kate Forbes, speaking at the Scottish Parliament in HolyroodEconomy Secretary Kate Forbes, speaking at the Scottish Parliament in Holyrood
Economy Secretary Kate Forbes, speaking at the Scottish Parliament in Holyrood

In a letter, Kate Forbes said: “The financial management of the Scottish Budget in the latter months of the financial year has become increasingly challenging.

"I have therefore written, along with my colleagues in Northern Ireland and Wales, to the Chief Secretary to the Treasury to request that any funding confirmed in supplementary estimates can be managed across financial years, and I await his response.”

Supplementary estimates confirm the additional Barnett consequentials available to the Scottish Government’s Budget for the year following announcements of funding by Westminster.

In a letter to the Scottish Parliament’s finance committee, the finance minister said the Scottish Government had expected £852m of consequentials.

This would include £984m of resource funding, inclusive of £143m extra for Test and Trace, offset by a reduction of £123m in capital funding.

This was also alongside a further drop of £9m within financial transactions – a type of funding allocated to the Scottish Government for loans or equity investments in the private sector and ultimately must be repaid to the Treasury.

However, after the supplementary process was finished, these earlier estimates indicated the Scottish Budget faced an unexpected hole of £38m.

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This was due to a £17m drop in the overall available resource budget and a £21m further reduction in financial transactions funding compared to what the Scottish Government had been previously told to expect.

In total, the Scottish Government will now receive £814m, rather than the expected £852m.

In addition, the £290m for cost of living will be carried forward for use in 2022/23, with the UK Government stating this was included in the £814m from supplementary estimates, further reducing the 2021/22 settlement.

A Scottish Government spokesperson said: “The Spring Budget Revision was finalised on the basis of estimated UK Government funding allocations and was provided before the UK Government set out funding relating to rising energy costs.

"The UK Government has confirmed that this funding was offset by reductions relating to their estimated spend elsewhere, with no increase to the prior funding estimate provided to the Scottish Government.”

A Treasury spokesperson said: “The economic strength of the UK has allowed us to deliver financial support for millions of people.

“This has included an additional £15.7 billion of Barnett funding for the Scottish Government in the past two years and they are also receiving around £41bn each year for the next three years, the biggest annual funding settlement since devolution.

“At the Scottish Government’s request we shared estimates of funding throughout the year, always being clear that final figures would only be confirmed through the supplementary estimates process.

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"This confirmed additional funding on top of the extra £440m announced in December."

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