Scottish Budget: Kate Forbes' task 'challenging' despite largest-ever Westminster block grant

Economics experts have warned this week’s Scottish Budget will be “really challenging” despite finance secretary Kate Forbes having been given the largest-ever block grant from Westminster in the history of devolution.

While the lump sum the Scottish Government will receive for 2022/23 is 8 per cent higher in real terms than it was in 2019/20 – before the coronavirus pandemic – the loss of additional cash to deal with Covid-19 means overall resources will be “significantly lower” next year when compared with the current year.

The warning on the “challenging context” surrounding Thursday’s draft Scottish budget came from economics experts at the Fraser of Allander Institute.

Finance secretary Kate Forbes. Picture: PA

David Eiser, an economist at the think-tank, said the block grant from Westminster was “still the key factor determining the overall size of the Scottish Government’s spending envelope”.

He said having a block grant 8 per cent higher than before the pandemic “might well sound generous, but actually I think to deal with the pandemic’s legacy and the pressure on public services it is really not very generous at all”.

While the pandemic resulted in “pretty exceptional” levels of spending, with the Scottish Government allocated £8.6 billion and then £4.9bn in special Covid funding over the past two years, Mr Eiser noted: “That special Covid funding drops out of the equation in 2022/23.

“What we are left with is a block grant that is significantly higher, about 8 per cent higher in real terms than the block grant in 2019/20 before the pandemic, but is nonetheless significantly lower than the total number of resources the Government has had available to it this year.”

Mr Eiser, the author of the institute’s pre-budget report, continued: “Because of that this is a really challenging budget outlook, both in 2022/23 and the subsequent couple of years.

“Even though you can look at this and say this is the highest real-terms block grant since devolution, it’s a really quite challenging context.”

Health spending will absorb more than half of the increase in the Government’s budget over the next three years, the economic think-tank found, with the health budget for 2022/23 likely to top £17bn.

Mr Eiser said promised funding levels may not be enough to meet the recommendations laid on in the Feeley review, which called for the establishment of a national care service.