Scottish Budget shows SNP have lost sense of direction and been reduced to unwise pet political projects

As usual, the Finance Secretary’s speech contained little in the way of an honest discussion of what lies ahead.

First, despite the big boost to the block grant from the UK Budget, the Scottish day-to-day spending (resource) budget position in 2025/26 is not great, rising by only 0.8 per cent in real – after adjusting for inflation – terms.

This has come about largely due to the revising down of expected income tax receipts next year, according to Scottish Fiscal Commission (SFC) analysis and estimates.

Finance Secretary Shona Robison during a visit to Logan Energy Limited in Edinburgh ahead of the publication of the Scottish Budget. Picture: Robert Perry/PA Wire

The situation is exacerbated by the fact the Budget for this year cannot be revised in year, so it remains falsely high, while next year’s Budget takes the full hit.

Furthermore, the overallocation by Treasury this year will be clawed back in 2027/28 – as a reconciliation payment – which means that is looking like another tough year, even if most of this is knocked into the long grass by increasing borrowing to help avoid it.

These calculations can move around as new, updated information becomes available, but it does not bode well.

Second, neither the public sector National Insurance hike compensation, nor the mitigation of the Universal Credit (UC) two-child limit, has been factored into the figures.

This means that money will have to be found from somewhere to fill both the NICs gap and to pay for whatever UC extra payments are agreed upon.

Third, if you exclude rapidly rising Social Security payments, then the real terms change in funding for public services is -0.3 per cent.

If you also adjust for the above inflation hike for the NHS, then the picture for a lot of departments looks even bleaker.

It doesn’t seem so bad across departmental budgets at present because there is still £1.3 billion of Barnett consequentials to be officially allocated in 2024/25.

But in reality, while the outlook for this year is decent – although much of it will go on higher wages – next year it is not, and nor is it likely to be in 2027/28.

Fourth, pay deals are expected to average 3 per cent in each of the next three years, 9 per cent in total, whereas inflation is forecast to be 7 per cent.

That means a real-terms increase in pay for public sector workers of less than 1 per cent a year. If that, optimistic, scenario does not play out, then more emergency, in-year budget adjustments await.

With me so far? I don’t blame you.

Scottish Government budgets are deliberately obtuse and these are certainly not points you would take away from even a very close listening to of the minister’s speech.

Much of any new money for next year will go to the NHS – although even here the budgets for alcohol and drugs policy and for mental health are being cut.

This is necessary due to the long-term mismanagement of health by the Scottish Government.

The mess is becoming akin to that seen with the ferry service, but on a much larger – and Scotland wide – scale.

Both Audit Scotland and the Institute for Fiscal Studies (IFS) have outlined this in the past fortnight. There is no clear strategy or workforce plan and a poor productivity record, all of which has led to the lack of progress in cutting waiting times and a noticeably poorer performance than has been experienced in England.

When you employ proportionally more civil servants than in England and when you pay them better, then you need to get a better result – better outcomes – in the wash up.

If not, you soon get into a difficult financial position. That is where we are.

For Scotland’s higher public spending, it gets deteriorating results in the basics of health and education than in England. Is this the fault of employees or down to poor employer – i.e. the government - management?

On the ‘eradication of child poverty’ – on which no timescale or cost is mentioned – this Budget did next to nothing other than make an unfunded commitment to mitigating for the two-child benefit limit.

The fact they did not tell the SFC of this until after they had done their analysis suggests either pure politicking panic after the Budget looked undercooked or contempt for the role of the Scottish Fiscal Commission.

My money is with the former – although, given the general lack of transparency, the latter can almost be taken as a given.

There is some better news on the capital (investment) budget side, which is expected to rise by 12 per cent next year, although thereafter, according to the SFC, it suffers a slow decline to 2029/30

Few, if any, governments are still in a good place after a decade in power, never mind 17 years. And this administration is no exception.

It has lost any sense of direction or strategy. Now its Budget decisions are reduced to papering over ever widening cracks in public services and unwise pet political projects.

Poor quality government, avoiding hard decisions and a strategic quagmire – lots of strategy, but no clear direction – have led us to the current position.

Whether this is an SNP issue or a parliamentary-wide one remains to be seen.

The suspicion is that devolution badly needs a radical overhaul in order to improve the quality of its performance.

A further poorly thought-out Budget is a just another symptom of a deeper problem.

- John McLaren is a political economist who has worked in the Treasury, the Scottish Office and for a variety of economic think-tanks.