Spending Review: As a financial black hole looms, the Scottish Government faces tough choices

These are challenging times, finance secretary Kate Forbes warned at the weekend, with "difficult decisions" ahead.

With Scotland potentially facing a funding gap of £3.5 billion by 2026/27 – the equivalent of around £640 per person – you can say that again.

The Scottish Government will publish its resource spending review today, setting out its broad spending plans for the next four years.

Finance Secretary Kate Forbes

This could involve communicating some “very tough decisions”, according to the Institute for Fiscal Studies (IFS).

The institute said ministers must choose between axing certain areas of spending, hiking taxes or hoping for extra cash or borrowing powers from the UK Government.

How have we found ourselves in this sticky situation? The IFS highlights a number of causes.

Pricey policy commitments, such as those relating to devolved social security powers, have played a part, as have income tax revenue shortfalls.

Elsewhere, public services are struggling to recover from the pandemic and inflation is sky-high.

That figure of £3.5bn, which comes from the Scottish Government’s own analysis, predates the recent rise in inflation.

And because Scottish ministers have very limited borrowing powers, they are constrained in how they can deal with financial deficits.

Which brings us back to axing, taxing and hoping, as the IFS snappily put it.

The first two, of course, are politically problematic. Which services do you cut back?

Justice is seen as one area where the axe could fall, but Scotland’s courts are already grappling with Covid-related backlogs.

Income tax powers could be used to close some of the gap.

Ms Forbes could also opt to simply kick the can down the road. This is what some opposition figures expect.

But going down this route – and hoping the UK Government increases funding – isn’t much use, given the size of that black hole.

The finance secretary was clear over the weekend that “while the spending review is not a budget, it will include difficult decisions”.

This seemed like an acknowledgement that, as the IFS noted, tough choices on tax and spending will eventually have to be faced.

In other words, you can only kick that can so far before it hits a multi-billion pound wall – and we are already under its shadow.