Public services will come under further threat if the Scottish Government does not set out and deliver a clear and costed vision for public service reform, says Scotland’s spendingwatchdog Audit Scotland.
Spending pressures have become more acute in recent years and are forecast to grow. But ministers have continued to rely on short-term decisions to balance the books, rather than making fundamental changes to how services are delivered.
Public service reform is a key component of the Scottish Government’s approach to fiscal sustainability. But there is no evidence of large-scale change on the ground, while the Scottish Government:
has not yet fully established effective governance arrangements for a reform programme
does not know what additional funding is required to support reform
and has not provided enough leadership to help public sector bodies deliver change.
The Scottish Government has not been transparent enough with the Scottish Parliament or the public about the medium-term risks it is facing.
The medium-term financial strategy and financial plans for the NHS and infrastructure investment have all been delayed. The absence of these documents makes scrutiny of the current uncertain financial situation more difficult.
Stephen Boyle, Auditor General for Scotland, said: ““People do not fully understand the medium-term risks public services are facing because of a lack of transparency from the Scottish Government.
“The reality is that we need a fundamental change to how public money is spent to ensure services can meet demand and remain affordable beyond the short-term.
“To turn that into action on the ground, the Scottish Government must set out a clearer vision of what its plans for reform will achieve, including delivery milestones and the likely impact of reform on services and people.”
Budget speculation, the economy returns to growth, the impact of cuts, and the disability employment gap
Three weeks still to go, and speculation about what will be in the Budget on 30th October continues (writes Fraser of Allander Institute’s MAIRI SPOWAGE, SANJAM SURI and EMMA CONGREVE).
Will the Chancellor change her fiscal rules? It looks likely that there will be some movement on this, whether in the definition of debt or something more fundamental, however much that could undermine their commitments in the manifesto.
Will there be increases in Capital Gains Tax? The speculation on this has reached fever pitch, with some stories suggested rates from 33% to 39% are being considered. (Interestingly, when we look at the ready reckoners from the HMRC, changes of this magnitude in some forms of CGT actually may result in less revenue when behavioural effects are taken into account). There certainly seems to be expectations out there in the economy that the rate may change, with lots of signs that disposals have increased hugely in anticipation.
Will there be increases to employer national insurance contributions? There has been much discussion about this, given the commitment of the UK Government not to “raise taxes on working people”, and due to the fact that the PM would not rule this out this week. A 1 percentage point rise in employers NICS would raise almost £9bn according to the ready reckoner (although we think that doesn’t include the additional costs to departments).
We’ll be going into the detail of some of these issues in the run up to the Budget, so there will be plenty for you all to chew over as we wait… and wait… for the Budget.
UK Economy Returns to growth in August
Data released this morning showed that the UK economy posted its first monthly GDP increase since May 2024. ONS reported this morning that monthly real GDP grew 0.2% in August 2024. There were no revisions made to the “no growth” months of June and July. While monthly numbers were in line with consensus forecasts, they show an economy that has slowed down from the beginning of 2024.
The good news is that growth in August came from all key sectors- with services rising by 0.1%, and production and construction rising by 0.5% and 0.4% respectively. Crucially- August was also the first time all three sectors positively contributed to growth since March 2024.
A more granular breakdown of service sector growth indicates that the biggest positive contribution came from the professional, scientific, and technical activities subsector- where monthly change in output was +1.6% from the previous month. Despite overall growth in services sector- seven subsectors saw decline in economic activity- with arts, entertainment, and recreation falling 2.5% over July 2024.
The production sector grew by 0.5% in August after hefty decline of 0.7% in July. Despite a rebound in August, the production output is essentially flat since the end of May 2024. The biggest contributor to production sector came from 1.1% rise in manufacturing activity- driven by transport equipment manufacturing However, mining and quarrying output declined 4.0% over July 2024- continuing their downward trend since end of December 2023.
What is the impact of cuts in spending?
When the Scottish Government presented their Fiscal Statement to parliament in early September, the Cabinet Secretary for Finance said that impact assessments had been done to understand the impact that the announced cuts could have on different groups.
These assessments were not published at the time, but finally were published last week. We welcome the publication of these, and although there are lots of criticisms that could be made of the assessments, it is good to see this transparency. One area of weakness is assuming that if funding was maintained at previous levels, there will be minimal impact, which assumes that previous levels was the correct level… so why was the budget being increased in the first place?
One of the main things to note though is the lack of analysis of cumulative impact on groups. A number of “minimal impacts” could still add up to something significant if they are affecting the same group.
Final report of the parliamentary Inquiry into the disability employment gap published
In 2016, the Scottish Government published A Fairer Scotland for Disabled People, which outlined how the government intended to shape policy – especially labour market policy – for disabled people living in Scotland.
One of the key goals this report outlined was reducing the gap in the employment rate between disabled and non-disabled adults. In 2016, 80.4% of non-disabled working aged adults were employed in Scotland, compared to 42.8% of disabled working aged adults, making for an employment gap of 37.5 percentage points. The government’s goal was to cut this gap in half by 2038.
In 2023, the Economy and Fair Work Committee in Scottish Parliament launched an inquiry into how this policy goal was going. In fact, in 2023, it seemed like it was going quite well.
The gap was down to 30.3 percentage points, which was actually ahead of schedule: if progress were linear, the disability employment gap would drop by about 0.85 percentage points each year, meaning that it would be 31.5 percentage points in 2023.
Two of our economists at the FAI, Allison Catalano and Christy McFadyen, contributed to this inquiry through a fellowship with the Scottish Parliament Information Centre (SPICe). Their work, which we published back in January, found that the majority of the change in disability employment is due to a rise in disability prevalence, rather than any specific policy.
Their report also highlighted some significant data issues: people with different types of disability have vastly different capacities for employment, vastly different support needs within employment, and vastly different rates of employment. Yet, in Scottish data and policymaking, disabled people are often treated as a singular entity, meaning that it is not possible to understand where policy interventions might be most effective.
The final inquiry publication highlights our work and a variety of other issues which will need to be addressed in order to improve work access for disabled people, all of which can be found here. They have produced 44 recommendations to improve employment prospects for disabled people.
Industrial action looming across Scotland paused as members vote
GMB Scotland today suspended looming industrial action in Scotland’s local authorities after receiving a revised pay offer.
The union, one of the biggest in Scotland’s local authorities, paused eight days of strikes in waste and cleansing, due to start on Wednesday, to allow members to vote on the new terms.
GMB Scotland’s local government committee met this morning to discuss the offer from Cosla, representing Scots councils, involving a 3.6% increase for all grades with a rise of £1,292 for the lowest paid, equivalent to 5.6%.
Keir Greenaway, GMB Scotland senior organiser in public services, said: “This offer is a significant improvement on what came before but our members will decide if it is acceptable.
“It is better than that offered to council staff in England and Wales, would mean every worker receives a rise higher than the Retail Price Index and, importantly, is weighted to ensure frontline workers gain most.
“As a gesture of goodwill, we will suspend action until our members can vote on the offer.
“It should never have got to this stage, however, and Scotland’s council leaders have again shown an absolute lack of urgency or sense of realism.
“For months, we have been forced to waste time discussing a series of low-ball offers when it was already clear the Scottish Government needed to be at the table.
“The obvious reluctance of some council leaders to approach ministers has only caused needless uncertainty and threatened disruption.
“That is no way to run a railroad or conduct serious pay negotiations.”
UNITE has also called off imminent strike action and UNISON are expected to announce their position later this afternoon.
Just three days short of its second anniversary, the Covid-19 Public Inquiry published the report from the Module One investigation into the resilience and preparedness of the United Kingdom (writes TUC’s NATHAN OSWIN).
The report highlights the devastating consequences of austerity in the decade that preceded the pandemic and the risk of vulnerability in the UK population.
The Impact of austerity on public services
Inquiry Chair, Baroness Hallett, states plainly that, “In short, the UK entered the pandemic with its public services depleted, health improvement stalled, health inequalities increased, and health among the poorest people in a state of decline.” This blunt assessment underscores the critical condition of the nation’s public services as they faced the unprecedented challenges of the Covid-19 pandemic.
The role of the TUC and evidence from frontline workers
As Core Participants in the Inquiry, the TUC played an integral role in the process, working with our unions to provide the evidence that ten years of under-investment and real terms funding cuts to public service in the run up to the Inquiry left key services struggling to cope.
“Public services, particularly health and social care, were running close to, if not beyond, capacity in normal times” the report states, a statement that doctors, nurses, porters and social care workers have been telling us all.
The Inquiry also heard that “there were severe staff shortages and that a significant amount of the hospital infrastructure was not fit for purpose. England’s social care sector faced similar issues. This combination of factors had a directly negative impact on infection control measures and on the ability of the NHS and the care sector to ‘surge up’ during a pandemic.”
A call to avoid past mistakes
The report is both a damning indictment and a call to never repeat the mistakes of that decade – a desperate reminder of the need to invest in our public services.
And while the report is not naive about the costs needed to make the UK more resilient ahead of the next pandemic – a matter of when not if – it reaches the conclusion that “the massive financial, economic and human cost of the Covid-19 pandemic is proof that, in the area of preparedness and resilience, money spent on systems for our protection will be vastly outweighed by the cost of not doing so”.
Addressing health inequalities
What’s more, the Inquiry is crystal clear as to the price we pay for inequality across our communities. It notes that at the outset of the pandemic, the UK had “substantial systematic health inequalities by socio-economic status, ethnicity, area-level deprivation, region, social excluded minority groups and inclusion health groups”.
And Baroness Hallett’s report correctly states that these inequalities weakened the ability of the UK to cope, stating that “resilience depends on having a resilient population. The existence and persistence of vulnerability in the population is a long-term risk to the UK.’
Recommendations for the future
The recommendations themselves speak of the need to engage with wider society for planning on how we handle a crisis and to take into account the “capacity and capabilities of the UK”.
No one knows the capacity and capabilities of our public services better than the staff that deliver them and the TUC and its affiliated unions stand ready to assist the government in this vital work.
Conclusion: Building a resilient future together
It is by working in partnership – with proper resources going into our public services – that we can truly learn the lessons this report sets out and secure the resilience and preparedness that the UK needs for a future full of challenges.
First Minister John Swinney will welcome new Prime Minister Sir Keir Starmer to Scotland today.
Speaking ahead of the meeting, the First Minister said: “I was really pleased to have the opportunity to speak to the Prime Minister on his first day in office and to congratulate him and wish him, and his family well.
“I look forward to welcoming the Prime Minister to Scotland where I hope to have constructive discussions with him on our shared priorities for the people of Scotland. This includes eradicating child poverty, growing the economy, prioritising net zero, and ensuring effective public services.
“I welcome the Prime Minister’s commitment to forge a positive relationship between our governments and for our part, the Scottish Government is committed to working constructively with the UK Government to build a better Scotland.”
WHATEVER your political allegiances. the relationship between the two governments is crucial to the people of Scotland. I’d like to think it will be more constructive than it has been in the recent past – Ed.
The trade union movement will work with Keir Starmer to deliver change
What an extraordinary moment in British politics (writes TUC General Secretary PAUL NOWAK). Labour back in power with a near-record majority. The Conservatives brutally ejected from office. A dozen cabinet members gone. A red wave in Scotland at the SNP’s expense. But while it’s easy to get carried away by the seismic nature of this election – we cannot afford to be distracted. We have a country to fix.
When I congratulated Keir Starmer this morning my message to him was clear. The trade union movement stands ready to work with the new government to repair and rebuild Britain – and to deliver the change working people desperately need. After 14 years of wretched Tory rule and chaos, I am not blind to the size of the task this incoming government faces.
The Conservatives have left behind a trail of destruction for all to see. Stagnant growth and wages. Rising in-work poverty. Broken public services. The charge sheet goes on and on. But despite all of the damage wrought, I am optimistic. After nearly a decade and a half in opposition, Labour can finally begin transforming the country – an urgent and necessary challenge that must be grasped with both hands. So where should we start?
First and foremost, we need to get our economy growing again. Unions and business have been crying out for years for a proper industrial strategy. The Green Prosperity Plan starts us on the road to economic recovery. And it will be a breath of fresh air to work with ministers who are actually serious about protecting and creating good jobs, and boosting skills and productivity.
But securing growth alone is not enough – we also need better living standards. Labour needs to act urgently to make work pay. We currently have over four million people who are trapped in jobs that offer little or no financial security. This is a national disgrace.
The UK’s long experiment with a low-wage, low-rights economy has been terrible for productivity and workers alike. Labour’s New Deal for Working People – delivered in full – will help end the Tories’ race to the bottom on employment standards.
A race to the bottom that has allowed good employers to be undercut by the bad, and scandals like the illegal sacking of 800 seafarers at P&O Ferries go unpunished. Labour’s plans will be a genuine gamechanger. Employment rights from day one. A ban on zero-hours contracts. An end to fire and rehire. New rights for unions to access the workplace. And the scrapping of anti-union legislation.
These are all part of a comprehensive new package of rights that will be good for workers, good for businesses and good for the UK economy. Inevitably there will be some siren voices in the business community who will seek to delay and water down this legislation. But it is vital Labour stays the course and ignores the doomsayers.
All the tired arguments that have been made against improved rights and protections at work echo those used against the minimum wage – now widely acknowledged to be one of the great policy successes of the last 25 years.
The naysayers were wrong then and they are wrong now. It is also vital that immediate work begins on repairing our crumbling public realm. At the heart of the pressures on our schools, hospitals, prisons and social care system is a huge workforce crisis. Across the NHS and social care alone there are nearly 300,000 staffing vacancies and in education the number of teaching vacancies has more than doubled in the past three years.
With morale at rock bottom – after more than a decade of Tory vandalism and neglect – Labour has the chance to signal a new direction of travel. We’ve already seen really encouraging commitments on scrapping tax breaks for private schools to fund new teachers in the state sector, and on closing non-dom loopholes to help bring down waiting lists. It’s no secret though that I want the party to go further and that we explore all funding options for rebuilding our public services.
The TUC has previously called for a national conversation on taxing wealth and I remain convinced that policies like equalising Capital Gains Tax with the taxes paid on earnings could bring in much-needed revenues. People voted in this election because they wanted real change – and Reform’s populist insurgence is a timely warning of what happens when governments fail to act.
And this question of delivery is the crux of the matter. After 14 years of national decline the country has finally got the Labour government it desperately needs. I know how ambitious Keir Starmer and his team are to improve working people’s lives, and the trade union movement wants to work with them.
Of course there will be moments of tension. That comes with being a critical friend. Our job is to speak up for working people and our members and to make sure their voices are heard at the heart of government – even when the message is difficult.
But the prospect of national renewal is real. Decent jobs, strong public services, a brighter, fairer future for all our children. The work will be hard and it starts today – but together we can realise a better future.
Funding to support the NHS, reduce carbon emissions and help tackle poverty
Almost £50 billion was spent by the Scottish Government last year on public services to help tackle child poverty, reduce carbon emissions, support the NHS and secure pay deals, according to newly published official figures.
The Provisional Outturn, which compares actual spending with the funding commitments set out in the Budget, shows that the Scottish Government spent £49.3 billion in the 2023-24 financial year. There was £292 million remaining – representing 0.6% of the Scottish Government’s total budget – all of which has been carried over through the Scotland Reserve to be directed towards priority areas in 2024-25.
In 2023-24 the Scottish Government:
spent nearly £5.2 billion on social security benefits. This includes £429 million on Scottish Child Payment, alongside funding to introduce Carer Support Payment in pilot areas, ahead of full roll-out in 2024, and to widen eligibility for Best Start Foods
invested more than £19 billion in health and social care, supporting recovery and reform to secure sustainable public services, while delivering a pay uplift for NHS staff
provided nearly £220 million to the Heat in Buildings Programme to help deliver greener and more energy efficient homes
continued providing Just Transition Fund grant funding, including £16.8 million for projects in the North-east and Moray regions, in addition to £3 million to help vulnerable global communities address loss and damage brought on by climate change
invested almost £422 million on bus services and concessionary fares, providing up to 2.3 million people in Scotland with access to free bus travel.
Public Finance Minister Ivan McKee said: “These figures show once again how this government is prudently and competently managing the public finances while delivering funding for the things that matter to people across Scotland, not least the NHS and action to tackle child poverty.
“The Scottish Government has consistently balanced its budgets each and every year. This represented a significant challenge last year, as the continued impact of persistently high inflation, pressure on public sector pay, backlogs as a result of the Covid pandemic and the war in Ukraine combined to place pressure on the public finances.
“We are not allowed to overspend, so must leave ourselves with the headroom to manage any unexpected shocks or issues. The remaining funding has been allocated in full in 2024-25, allowing us to implement measures at the most optimal time rather than being constrained to a single financial year.”
Delivering the building blocks for Scotland’s future?
More than £5 billion is being invested in building a fair, green and growing economy which creates jobs, supports businesses and helps finance Scotland’s public services and the transition to net zero.
Despite one of the most difficult financial climates since devolution, the Scottish Budget 2024-25 maintains its focus on core priorities and drives forward a government-wide approach to economic transformation.
Measures include allocating £67 million to kickstart a five-year commitment to develop Scotland’s offshore wind supply chain and ensure the country reaps the benefits of the global expansion in wind power. This brings total Scottish public sector support for offshore wind to £87 million next year.
The Budget also boosts annual investment in digital connectivity from £93 million to £140 million in 2024-25, delivering critical infrastructure to enable businesses to innovate and grow while connecting more than 114,000 homes and companies in rural areas to gigabit-capable broadband through the R100 programme.
Since entrepreneurship is at the heart of Scotland’s economic strategy, a further £9 million investment in the Techscalers programme will support the country’s best start-ups with world-class mentoring. The Scottish Government is also prioritising the implementation of Ana Stewart and Mark Logan’s Pathways report, focused on helping more women to start and grow businesses.
The Budget also includes:
putting almost £2.5 billion into public transport to provide viable alternatives to car use, and a further £220 million in active travel to promote walking, wheeling and cycling
providing £358 million to continue accelerating energy efficiency upgrades and installation of clean heating systems
increasing the education and skills budget by £128 million
investing £49 million to promote the re-use of resources and reduce consumption, modernise recycling and decarbonise waste disposal as part of Scotland’s transition to a circular economy
Wellbeing Economy Secretary Neil Gray said: “Our focus is on creating new opportunities for a highly productive, competitive economy, providing thousands of new jobs, embedding innovation and boosting skills.
“We are using all the powers we have to support business and to achieve our ambitious net zero targets. Our strategic investment in offshore wind will stimulate and support private investment in the infrastructure and manufacturing facilities critical to the growth of the sector, and we are delivering a real-terms increase in the education budget to help boost skills and increase productivity. As a priority, we will also consult on options for improving the capacity of local authority planning services.
“Scotland’s finances face a worst-case scenario of underinvestment, which means we must make the difficult choices necessary to focus our limited resources on what will deliver most effectively for people and businesses.
“We’ve seen an Autumn Statement that prioritised a tax cut over investing in public services and infrastructure. The Scottish Government cannot follow this, and has not shied away from taking the tough decisions needed to protect and grow this country’s economy.”
COSLA: Council Tax Freeze is NOT Fully Funded
The Scottish Government has delivered a major blow to communities and has put councils at financial risk with a cash cut to Local Government in its draft Budget (published on 19th December) and no provision for inflation or pay increases, COSLA said.
COSLA Leaders described the draft Budget as not only leaving councils at real and significant financial risk for the coming year, but as it stands, it will mean cuts in every community in Scotland and job losses across Scottish Local Government.
Following a full meeting of Council Leaders yesterday (Thursday) COSLA said that whatever way the Government presents the figures, the reality is that once again the people in our communities have been left at the end of the queue.
That is why we are calling for urgent discussions with Scottish government to ensure a meaningful negotiation on the budget takes place before the final budget is presented to Parliament.
Speaking yesterday afternoon, COSLA’s President Councillor Shona Morrison said: “COSLA’s initial analysis, shows a real terms cut to our revenue and capital spending power which will leave Council services at breaking point, with some having to stop altogether.
“The Budget in its current form could result in service cuts, job losses and an inevitable shift to providing statutory services only. This means potentially losing Libraries, leisure centres and all the things that improve our lives.
“COSLA’s initial analysis of the Budget is that the Council Tax freeze is not fully funded. Leaders from across Scotland agreed today that decisions on Council Tax can only be made by each full Council, and it is for each individual Council to determine their own level of Council Tax.
“With any sort of shortfall in core funding, the £144m revenue offered for the freeze is immediately worth less.”
COSLA Vice President Steven Heddle said: “Despite the Verity House Agreement rhetoric about working together on shared priorities it is the same outcome at Budget time for Local Government in reality.
“The Scottish Government is claiming to protect public services, but are not protecting the essential public services provided by councils– Scotland’s councils are key, they deliver your homecare, schools, road maintenance, street lighting, leisure and waste services and have been locked out again.
“We needed increased funding to cope with inflation, but have been given less instead. The cut to Revenue funding we have been given is a devastating blow and the cut to our Capital funding means that we will be unable to meet our targets in terms of a move towards Net Zero and mitigating climate change targets.”
COSLA’s Resources Spokesperson Councillor Katie Hagmann said: “The Scottish Government has disappointingly failed to recognise that investment in Councils is investment in cities, towns and villages across Scotland. As it stands, this is not a good Budget for our communities or the people who deliver our essential front-line services.
“This is a Budget which will mean job losses – real jobs that support families, and deliver vital services that make a positive difference to people’s lives. Sadly, the budget as it stands, leaves nothing for meaningful pay rises in 24/25 so we would call on the Scottish Government to look again, so that our workforce can get the pay rise they deserve next year.”
While all households benefit from public services – some benefit more than others
Research from 2007-08 found that the average cash benefit to households from public services was more than £21,400 per year – but that those on low and modest incomes gain especially.
Spending on public services is particularly valuable for families with children.
We know that women use and depend upon public services more than men. This is because women are more likely to be on low wages, more likely to experience poverty, more likely to have unpaid caring responsibilities for children, elderly, and disabled people, and far more likely to experience domestic abuse and gender-based violence. Services that support families on low incomes including free school meals and childcare are vital to women in Scotland.
In contrast, men disproportionately benefit from tax cuts, such as cuts to national insurance, as they earn more. Across the UK, 26% of men are classed as high earners, but only 18% of women.iii
As well as being more likely to benefit from receiving public services, women are also more likely to work in public services. In Scotland, 40 per cent of female employees are public sector workers compared to only 23 per cent of male employees.
Research from last year found that a 12% increase in public sector pay would reduce Scotland’s earnings gap between men and women by about 2 percentage points.iv
The STUC Women’s Committee is calling for tax raising measures to be put in place to protect our public services. This includes increases in income taxes for high earners, as well as wealth and property taxes.
Lorna Glen, Chair of the STUC Women’s Committee said: “If the Scottish Government are serious about tackling gender inequality, then they need to invest in our public services.
“STUC’s tax report shows that is within the powers of our parliament – through income and property taxes – to raise £1.1 billion from April next year. Coupled with longer-term wealth, property and aviation taxes, the Scottish Government could raise a further £2.6 billion.
“Rather than threatening cuts to public services, these are the measures that we need to see if we are to reduce gender inequality.
“It is women who both power our public services and depend on them.”
DFM calls for Autumn Statement funding to support key missions
The Chancellor’s Autumn Statement must deliver more funding for public services, net zero and cost of living support instead of cutting taxes, Deputy First Minister Shona Robison has urged.
Ahead of the Scottish Budget next month, the Deputy First Minister called for the Chancellor to provide a funding settlement to support the Scottish Government’s key missions of equality, opportunity and community.
Ms Robison, who is also Finance Secretary, is urging the Chancellor to:
increase the Scottish Government’s capital budget in line with inflation to help deliver vital infrastructure
deliver additional funding across the UK to fund public services and fair public sector pay awards
commit to increasing working-age benefits in line with inflation next year
legislate for an essentials guarantee giving basic necessities to those who need them most
prioritise investment in net zero, including funding for offshore wind projects in Scotland
The Deputy First Minister said: “The UK faces a combination of low growth and high interest rates. The Autumn Statement must learn the lessons from last year’s ‘mini budget’ – it must not compound these problems with ill-timed tax breaks which would place even greater pressure on the public finances.
“The Scottish Government is using the levers available to us to support people through this difficult time. However, it is important that the UK Government uses its full range of reserved powers to address these challenges. With many families continuing to struggle with the cost of living, the Chancellor must not use this statement to cut benefits.
“The Autumn Statement provides an important opportunity for the UK Government to support us to deliver the investment and services that Scotland needs, to demonstrate its commitment to net zero, and to help people and businesses with the economic challenges they face.”
Aye, I’m sure Jeremy Hunt will be hanging on to her every word! -Ed.
