Scottish spending review: Public services braced for 'brutal' cuts as Kate Forbes publishes spending priorities

Public services in Scotland are braced for “brutal” cuts after ministers unveiled spending plans that will slash more than £1 billion from key areas including councils and the police.

SNP Finance Secretary Kate Forbes said the public sector will need to “re-shape and re-focus” in the coming years.

But police representatives warned officer numbers will “inevitably plummet”, and branded it a good day for criminals.

Disposable household incomes in Scotland are forecast to see their biggest fall since records began.

Finance Secretary Kate Forbes. Picture: Robert Perry/pool/AFP via Getty Images

The Scottish Government previously projected a growing gap between its funding and spending of around £3.5 billion by 2026/27, with critics accusing it of “mismanagement”.

It has now published its resource spending review, which sets out its broad spending plans for the next four years.

Ms Forbes pointed to factors including the pandemic, the war in Ukraine, an “unprecedented” cost-of-living crisis and inflation hitting a 40-year high, with Brexit exacerbating issues.

She insisted the Scottish Government is doing “all it can” in response.

Health spending is due to rise from £17.1 billion to £19 billion by 2025/26, while funding for social security benefits will jump from £3.9 billion to £6.4 billion, a real terms increase of 48 per cent.

However, spending elsewhere will stagnate.

David Phillips, associate director of the Institute for Fiscal Studies, said: “On the plans set out today, the axe is set to fall on a wide range of public service areas.”

He said budgets for local government, the police, prisons, justice, universities and rural affairs are set to fall by around 8 per cent in real terms over the next four years, equivalent to a real terms cut of £1.1 billion.

Enterprise, tourism and trade promotion will see a 16 per cent reduction in real terms.

The Fraser of Allander Institute, attached to the University of Strathclyde, said the funding outlook was “extremely tight”.

It said the spending review implied councils would see a real terms cut of 7 per cent between 2022/23 and 2026/27.

Calum Steele, general secretary of the Scottish Police Federation, said the plans were “absolutely brutal for police and wider justice funding”.

He said: “Flat cash for police, prisons, legal aid, the judiciary, and courts and tribunals. Police numbers will now inevitably plummet.

"A bad day for the public, a good one for criminals.”

Elsewhere, ministers announced their intention to reduce the size of the public sector to “broadly” pre-pandemic levels while selling off buildings.

Public sector staffing has grown to more than 440,000 in the last two years, rising from around 410,000 in 2016/17.

The Scottish Government proposes to cut the workforce using “effective vacancy and recruitment management”.

The spending review notes there are 129 public bodies in Scotland, adding: “We expect all public bodies to demonstrate that they remain fit for purpose against the present and future needs of Scotland’s people, places and communities.”

The independent Scottish Fiscal Commission (SFC), the Scottish Government’s official forecaster, said rising inflation and higher taxes are set to “reduce real household disposable income by 2.9 per cent in 2022/23, the biggest fall since Scottish records began”.

Ms Forbes said: "We are of course still recovering from the Coronavirus pandemic. There is still acute pressure on the NHS, on business and the wider economy.

"The illegal Russian invasion of Ukraine is a humanitarian crisis, which is affecting the global economy. Rising energy prices and constrained supply chains have affected countries worldwide. While inflation is also impacting other countries, it is not impacting them equally.

"The UK currently has the highest inflation of any G7 country– almost twice the rate of France. Brexit has made this problem worse, with increases in food prices, hitting the poorest hardest.

"We are experiencing an unprecedented cost of living crisis. Inflation is at a 40-year high of 9 per cent with households facing considerable hardship.”

She said the spending review is not a Budget and does not outline tax decisions.

Ms Forbes said: “However, it is essential to share high-level financial parameters with public bodies, local government and the third sector, so we can plan ahead together.”

She called the public spending framework “ambitious but realistic”, adding: “It does not ignore the realities of our financial position, but neither does it roll back on our ambitions for change."

Dame Susan Rice, chair of the SFC, said: “The difficulties the Scottish Government faces in managing its budget are illustrated by the 8 per cent fall in funding available by 2025/26 for areas other than health and social security after adjusting for inflation.

"Scotland continues to be affected by challenging economic circumstances and uncertainty.

"Rising inflation means earnings aren’t keeping pace with the cost of living. We expect inflation pressures to last into the middle of next year, with a return to positive real earnings growth in 2023/24.”

The SFC said social security will make up a growing proportion of Scottish Government funding, rising from 10 per cent this year to 14 per cent in 2026/27.

Its analysis said this would put pressure on other areas of Government spending, particularly in the early years of the five-year period.

The UK and Scottish Governments have taken different approaches to welfare spending, including the introduction of new Scottish payments.

By 2026, the Scottish Government is expected to spend more than £1.3 billion above what it receives from the UK Government on social security.

Scottish GDP growth is expected to slow to 1.1 per cent in 2023/24, down a single percentage point from the current year.

However, the SFC said Scotland was not forecast to enter a recession.

Scottish Conservative finance spokeswoman Liz Smith said: “If ever proof was needed of the SNP’s mismanagement of the Scottish economy, it can be seen in the glaring £3.5 billion black hole in our public finances.

“The world economy is facing extraordinary pressures, but the financial shortfall that has been forecast comes despite the SNP receiving record funding from Westminster, this year.

“The gaping hole between projected public spending and tax revenues in the next few years is the product of staggering incompetence from an SNP Government that has no idea how to manage public finances – the ferries fiasco being just one example.

“With hard-pressed families here in Scotland struggling to make ends meet, the SNP must urgently get on top of our economic decline.

“They must commit to bringing Scottish income tax levels back on a par with the UK, so that Scotland is no longer the highest taxed part of the country.

"They must address the ever-growing skills gap that is stifling our productivity.

"And they must take an economically devastating independence referendum off the table, to finally prioritise Scotland’s economic growth.”

Labour MSP Daniel Johnson said: “Fifteen years of failed SNP economic policy have got us to this point, and this dire update promises more of the same.

“Scots have been paying the price the SNP’s warped priorities and disastrous incompetence for years, and now things are set to get even worse.

“Scotland deserves better than managed decline from this tired government– we need real ambition to get our economy back on track.”