Scottish Government underspent annual budget by half a billion pounds

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The Scottish Government underspent its budget by almost half a billion pounds in 2017/18, Finance Secretary Derek Mackay told Holyrood today.

The Finance Secretary said the £453 million underspend was a product of prudent budgeting but his opponents accused him of “gross financial mismanagement” and hoarding cash when councils faced cuts.

First Minister Nicola Sturgeon during First Minister's Questions at the Scottish Parliament. Picture: Jane Barlow/PA Wire

First Minister Nicola Sturgeon during First Minister's Questions at the Scottish Parliament. Picture: Jane Barlow/PA Wire

Mr Mackay said the government had spent £30.9 billion out of a budget of £31.4 billion for the most recent financial year.

The leftover funds

Of the £453 million unspent cash, £66 million is to be added to Scotland’s reserves in case of future budget “volatility”.

Mr Mackay also said there were already plans to carry forward £235 million to 2018/19, emphasising that none would be returned to the Treasury.

A further £100 million will go towards Scotland’s new social security agency and comes from UK Government cash given to the Scottish Government for that purpose one year earlier than expected.

Another £50 million was the result of higher than forecast tax receipts from the Scottish Government’s new Stamp Duty replacement – the Land and Buildings Transactions Tax (LBTT) and Scottish Landfill Tax.

The underspend was more than twice the £191 million recorded in the previous 2016/17 financial year. The most recent underspend also exceeded the £392 million recorded in 2015/16 and the £200 million of 2014/15.

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“Piling up” cash

Mr Mackay was accused of “piling up” a slush fund to “bribe” Green support to get his budget through parliament. But he defended himself by saying that the £66 million destined for Scotland’s reserves amounted to just 0.2 per cent of the overall budget.

Labour’s James Kelly called on Mr Mackay to apologise for failing to spend the cash.

“Labour will always fight to protect Scotland’s vital public services but SNP Finance Secretary Derek Mackay underspent almost half a billion pounds whilst cutting council budgets by £1.5 billion,” Mr Kelly said.

“Money is piling up in his slush fund for his annual bribe to win Green votes to get his budgets passed. This is simply a gross mismanagement of Scottish finances by a Finance Secretary that is clearly out of his depth.

“Throughout his tenure as Finance Secretary Mr Mackay his tinkered on tax instead of ensuring the richest pay their fair share to fund our schools, hospitals and other vital public services.”

Mr Kelly added: “Derek Mackay must apologise to communities across Scotland that have been damaged by his reckless actions. Scottish Labour will always put our public services first and will use the powers of the Parliament to end austerity.”

Future shortfalls

Scottish Conservative shadow finance secretary Murdo Fraser claimed the Finance Secretary was having to set money aside to pay for future shortfalls in the tax take.

Mr Fraser said: “Derek Mackay might like to fool us all into thinking this £453 million underspend figure is an insignificant sum.

“But it’s worth noting that it’s higher than what the SNP’s independence blueprint said it would cost to create a separate state. The finance secretary is having to put money aside to meet a projected shortfall in tax revenues due to Scottish economic underperformance.

“If the SNP could grow the Scottish economy at least at the same rate as the rest of the UK, there would be hundreds of millions more to spend on public services and reduce the tax burden on hardworking people and businesses.”

New forecasts published by the Scottish Fiscal Commission last month anticipated Scotland’s overall revenue from devolved taxation will be just over £1.7 billion lower for 2018/19 to 2022/23 than was forecast in February.

But Mr Mackay said income from devolved taxes had increased for the second year running.

The total provisional income from Land & Buildings Transactions Tax and Scottish Landfill Tax is £706 million, £50 million above initial budget forecasts and an increase of £73 million, or 12 per cent, from 2016-2017.

Mr Mackay told MSPs: “After taking into account the social security funding, the planned carry forward for the 2018/19 budget, surplus tax receipts and fees for guarantees, there is then a remaining underspend of £66 million not yet committed to expenditure.

“This modest sum represents just 0.2 per cent of the overall fiscal budget and will also be carried through the Scotland reserve, and will be available to support management of future budget volatility - a key feature of the new world we live in.”

He added: “The 2017/18 provisional outturn results show that once again this government has prudently and competently managed Scotland’s finances.

“The prudent management of our 2017 budget and the new financial powers has been delivered against the backdrop of uncertainty around the UK’s exit from the EU, and the UK Government’s continued austerity measures.”