public spending – The NEN – North Edinburgh News

Tax Justice: A Matter of Life and Death

CATASTROPHIC: Tax justice or austerity-induced declines in life expectancy?

Tax Justice Scotland is seeking to promote a better conversation on tax policy. As such, the views expressed in this blog are those of the author and do not necessarily reflect the views of Tax Justice Scotland and its diverse supporters.

UK-wide austerity has caused average life expectancy to stagnate since 2012, and to decrease in the most disadvantaged areas (write GERRY McCARTNEY and DAVID WALSH) . With more UK-wide public spending cuts looming, the Scottish Government should use fairer taxation to combat the impacts of austerity – and avoid additional cuts.

Austerity Kills

Since 2010, a range of austerity measures have been implemented across the UK. Although most areas of public spending have suffered to some degree, the largest cuts have been directed at social security and local government, with brief interruptions in this broad approach only seen during the pandemic.

Our analyses show that the effects of austerity policies have been catastrophic.

Life expectancy, which had on average increased uninterrupted across the UK since 1945 suddenly stopped improving after 2012. Even worse, for people living in the 20-30% most disadvantaged areas, life expectancy started to decline.

Let that sink in: despite medical advances, people in our least well-off households have seen their lives get shorter.

‘Healthy life expectancy’ is also in decline, meaning that people are living for a shorter time in good health. The evidence that these dreadful health and life expectancy trends are due to austerity is now overwhelming, as summarised in our book Social Murder: austerity and life expectancy in the UK.

Austerity continuing under Keir Starmer’s Labour

Make no mistake: austerity is not going away.

The UK Labour Government’s self-imposed ‘fiscal rules’, which limit public spending, are triggering a new round of spending reviews across departments, with cuts again on the cards. Ahead of the Chancellor’s Spring Statement on 26 March, we’re now seeing reports of looming cuts to social security, with those on benefits further stigmatised.

Elsewhere, local government spending has been squeezed in real-terms per person by 18% in England (2010 to 2023/24), and 7% in Scotland (2009/10 to 2022/23). We have also just seen the international aid budget slashed to fund defence spending.

These cuts are a choice: after all, there is no shortage of fair tax options to raise more resources at UK level. Tax Justice UK and the Patriotic Millionaires suggest over £60 billion more could be raised per year through tax reforms and the closure of tax loopholes.

What can be done in Scotland?

In the absence of tax justice at UK level, the Scottish Government isn’t powerless.

It’s true that the devolution settlement dictates that it has to run a balanced budget, with the bulk of its revenues coming from the block grant, and a smaller proportion from devolved taxes.

This has meant that as budgets were squeezed in real-terms between 2010 and 2019 the Scottish Government has either had to pass on those cuts to Scottish public services, or raise taxes to protect budgets. Subsequent increases to deal with the pandemic have been eroded away .

Positively, the Scottish Government has chosen to raise some additional tax revenues; for example, the relatively small, but progressive adjustments in the Income Tax bands and rates. However, the scale of these changes has been wholly insufficient to compensate for the cuts in the block grant up to 2020.

Implementing a more comprehensive tax justice programme in Scotland is therefore the obvious option to protect the health of the Scottish population from further austerity.

Many tax options are available

Generating more revenue from Income Tax by increasing taxes for people on higher incomes would be a fair first step, particularly given that it is likely that most Scottish high earners work in the public sector and therefore cannot move that income elsewhere (the postholder could leave, but the job – and the tax paid on the income from it – would remain in Scotland).

But taxing earned income from employment isn’t the only way to raise more revenues to combat austerity; we must find ways to better tax wealth too.

Changes to how property wealth is taxed are long-overdue. Right now, the Council Tax is patently unfair because it taxes poorer households more than richer households as a percentage of their income and property value.

The Scottish Government has powers to make it fairer, or to replace it entirely, something that has been (unimplemented) SNP policy for many years. While the Cabinet Secretary for Finance says she’s “seeking a consensus on a local taxation system that is fairer, financially sustainable and fits a modern Scotland”, we’ve heard similar promises too many times to count.

Wealth takes many forms – including ownership of land, shares and savings, as well as pensions, and other assets. Devolved powers to better tax all of these forms of wealth are limited, but options like a land tax, perhaps administered locally, could be considered. Doing so would not only raise more revenues to fund services but also combat the damaging impact of wealth inequality on the economy.

Wealth inequality fuels other inequalities, like those related to gender and ethnicity. But most importantly, a growing wealth gap between those who have wealth and those who don’t – locks some of us into a life of precarity and poverty, and others into one of privilege and opportunity.

This not only concentrates advantage, opportunity and power in fewer hands, but also limits social mobility for the majority, undermines the social contract, and can ultimately threaten social cohesion and democratic politics.

With a recent report for the STUC indicating that a combination of tax justice reforms in Scotland could raise an additional £3.7bn per year, we must see faster progress.

Reject austerity and deliver tax justice

So, in the absence of action at UK level, if the Scottish Government really wants to protect the health of the Scottish population, fighting back against austerity will be necessary. The only real option in the current context is to increase taxes in a fair way so that the rich pay more.

Tax justice for Scotland, and the rest of the UK, really is a matter of life and death.

This blog was written by Gerry McCartney, Professor of Wellbeing Economy, University of Glasgow and David Walsh, Senior Lecturer in Health Inequalities, University of Glasgow.

David and Gerry’s book, Social Murder: austerity and life expectancy in the UK, is available now from https://policy.bristoluniversitypress.co.uk/social-murder

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Fraser of Allander: Scotland’s Budget

Budget Deals, Budget Revisions, and Budget Pressures

There was a lot of focus this week on the Budget deal struck by the Scottish Government, which will allow the Budget to be supported by the Scottish Green Party and the Scottish Liberal Democrats (write Fraser of Allander Institute’s MAIRI SPOWAGE and SANJAM SURI).

In early January, Anas Sarwar announced that Scottish Labour would abstain on the Budget as the Scottish Government were likely to secure support from the budget from one or other of these parties. Of course, this meant that the Scottish Government did not need to secure support from other parties to ensure that the budget would pass.

However, no doubt John Swinney will be pleased that he can demonstrate working across the chamber, and particularly constitutional boundaries, to come to a deal.

On the face of it, the price paid for the support of these parties seems pretty cheap (in the scheme of the SG Budget!), totalling £16.7m.

With the Scottish Liberal Democrats (TOTAL £7.7m):

Increase Drugs and Neonatal Service Investment. +£2.5m
Strengthen support for Hospices. Increase the funding from £4m to £5m. +£1m
Invest in targeted support for the College sector. +£3.5m in creating an Offshore Wind Skills Programme and College Care Skill Programme.
Support the continuation of Corseford College. + 0.7m
Offer flexibility to Orkney Island Council in terms of capital and resource funding.

With the Scottish Greens (~£9m):

Establish a £2 bus fare cap pilot in a regional transport partnership area. +£3m in 25-26 (£10m in total)
Increase Nature Restoration funding. increase from £23 million to £26 million. +£3m
Extend free school meal eligibility in S1-S3 in 8 local authority areas – covering pupils in an urban, rural, semi-urban and island authorities in receipt of Scottish Child Payment. +£3m (although it looks like most costs will fall in 2026/27, so not sure about the exact cost in 2025-26)

The Scottish Government say that this will be funded by another draw down from the Scotwind fund (more on Scotwind below) of £3 million to support the capital spending on nature restoration, and the remaining amendments are funded through debt servicing costs which they expect will be lower than they expected at the Draft Budget in early December.

The Spring Budget Revision changes the picture for 2024-25 considerably

Getting less coverage this week is the Spring Budget Revision, which was laid before parliament on Thursday. This is a pretty technical document, with the “supporting notes” document running to 146 pages. This is for the current year, and now reflects the additional Barnett consequentials which were announced through the UK Budget for 2024-25

[By way of background, these revisions happen twice a year, once in the Autumn and once in the Spring, to update the parliament to changes in the funding positions for the current fiscal year. The Budget bill will normally be passed by late February. The ABR comes in roughly Oct/Nov, then the Spring one in Jan/Feb]

The Government did not include any of these announcements in the baseline comparisons for the Budget in December. When asked about the uplifts for 2024-25 in the wake of the UK Budget, they said that the £1.4bn extra in resource funding for 2024-25 was “in line with internal planning assumptions”. This was in the context of the clear budgetary pressures earlier in the financial year, which lead to the emergency budget announcements in September 2024.

The Scottish Fiscal Commission were not please with this, saying “This is a material limitation to information available to the Scottish Parliament for its scrutiny of the Budget and in the spending analysis we can do.”

The SBR published yesterday shows how this money has been allocated in the current year.

The highlights for us are:

The £338m resource borrowing that had been planned to cover for a forecast error reconciliation will not be necessary (so they had planned that borrowing into the 2024-25 budget due to this negative reconciliation from previous years, and now do not need to use it because of the funding received)
That the planned £424m drawdown for the Scotwind licencing fund will all now be returned (they had already announced that they would reduce this drawdown by £300m at the Budget but now they are returning all of it because of the funding received)
That £103m more than planned will be put into the Scotland reserve.

Two things are demonstrated by where the money has gone – first, that it does not seem credible that it was in line with “internal planning assumptions”, in the context of emergency budget measures prior to the UK Budget followed by cancelling of already planned borrowing. Second, it would have helped scrutiny for the 2025-26 Budget if this had been included in the baseline presented at the Scottish Budget, given the SFC role in assessing borrowing and use of the reserve and the role of the Finance and Public Administration Committee.

The restoration of the Scotwind fund is welcome – let’s hope now it will be exclusively committed to capital/infrastructure spending to support the energy transition. It would be good if this could be formally done so the money cannot be used in this way in the future.

Employer NICs likely to cause more budget pressures

We’ve covered the impacts that the employer NICS rises could cause to public services in Scotland.

As a reminder, the Chancellor increased both the rate of employer NICS (from 13.8% to 15%) and lowered the threshold at which employers have to start paying NICS (from £9,100 to £5,000). At the time of the Budget, the Treasury said that public sector employers will be compensated – but no amounts were confirmed, which caused the Scottish Government to (quite rightly) raise concerns about the uncertainty that this would cause.

We’ve heard from the Scottish Government that the expected impact is expected to
range anywhere between £550m (for public sector workers), and £750m (including indirect employees such as childcare, higher education, social care). We estimated around £500 for the direct public sector. The rumoured amount on the table from the Treasury is £280-300m. Our blog explains the reasons behind these different amounts.

[But, in short, the difference between the SG and the Treasury is what “compensating” the public sector means – the actual cost, or the actual cost if the size and pay bill of the public sector in Scotland was proportionately the same as the UK.]

Whatever the final amount, it is unlikely the whole cost to the public sector will be covered. We said at the time of the Budget that the Scottish Government hadn’t budgeted for this likely shortfall.

Kate Forbes said this week that the public sector in Scotland will have to “absorb” the shortfall- which basically means that the public sector would have to find savings or efficiencies elsewhere to absorb the budgetary impacts of higher NICS.

The confirmation of the compensation will not come until the Supplementary Estimates are published (which might be as late as the end of February). This means that bodies like councils, who are currently trying to set their budgets, will likely have to plan on the basis of absorbing maybe 40-70% of this additional cost until they get confirmation.

Given the scale of financial challenges councils face, this may well impact on the proposed council tax changes they have to consider.

Spending watchdog disclaims UK Government’s accounts for the first time

The disclaimed audit opinion from the Comptroller and Auditor General (C&AG), Gareth Davies, on the Whole of Government Accounts (WGA) 2022-23 is the first ever.
The cause is the severe backlogs in English local authority audits, with the consequence that there is inadequate assurance over material amounts throughout the WGA.
The WGA is a vital tool in the management and scrutiny of public spending, as it brings together all public sector assets and liabilities. It is essential that the steps being taken by Government to restore timely and robust local authority audited accounts are effective.
The PAC Chair’s statement can be found here PAC Chair’s statement – WGA.pdf. The link to the WGA 22/23 can be found in the notes to editors.

Backlogs in firms’ audits of England’s 426 local authorities have led to the National Audit Office (NAO) disclaiming the 2022-23 WGA for the first time.

As well as local authority accounts, the WGA combines the accounts of over 10,000 public bodies, such as central government departments, devolved administrations, the NHS, academy schools and public corporations.

Within his audit report, the NAO’s head, Gareth Davies, said he had been “unable to obtain sufficient, appropriate evidence upon which to form an opinion”.

Just over 10% (43) of England’s 426 local authorities submitted reliable data to the WGA.

Of the near 90% of local authorities that failed to submit reliable data, 46% (196) submitted information that hasn’t been audited, and 44% (187) did not submit any data at all.

The Government is taking steps to address the backlog in audited accounts for English local authorities, including the use of fixed dates by which each year’s audits must be completed.

This process is unlikely to allow the disclaimer on WGA to be removed for 2023-24, but it does offer a medium-term solution to the problem.

The WGA is a vital tool in the management and scrutiny of public spending, as it brings together all public sector assets, liabilities, income and expenditure. This means that long-term costs to the public purse such as clinical negligence and nuclear decommissioning are visible to policy makers and Parliamentarians.

Gareth Davies, head of the NAO said: “It is clearly not acceptable that delays in audited accounts for English local authorities have made it impossible for me to provide assurance on the Whole of Government Accounts for 2022-23.

“It is essential that the steps being taken by Government to restore timely and robust local authority audited accounts are effective”.

The disclaiming of the WGA is in relation to local authority audit omissions and unaudited returns. The impact of this impact is so large and pervasive that the Comptroller and Auditor General is unable to give any opinion on the WGA at all. The C&AG continues to provide assurance over all central government departments via their statutory departmental accounts on an annual basis, and the disclaimer of the WGA does not impact upon the opinions he gives on those accounts.
The 22/23 accounts can be found here: WGA_2022-23_final_accounts.pdf
Page 279 includes the audit certificate from the Comptroller and Auditor General.

Transparency needed on spending risks and plans for public services

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 spending watchdog 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.”

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Starmer: Fixing the Foundations? Or AUSTERITY 2 – the sequel?

Prime Minister Keir Starmer delivered a speech in the Downing Street garden today on fixing the foundations of our country

When I stood on the steps of Downing Street – just over there – two months ago. I promised this government would serve people like you.

Apprentices. Teachers. Nurses. Small business owners. Firefighters. Those serving our community and our country every day.

I promised that we would get a grip on the problems we face. And that we would be judged by our actions, not by our words.

I said before the election – and I say it again really clearly today: Growth.

And, frankly, by that I do mean wealth creation…

[Please note political content redacted here.]

is the number one priority of this government.

That’s why, in our first few weeks, we set up the National Wealth Fund –

because we want every person and every community to benefit.

It’s why we’ve unlocked planning decisions –

Because we are going to build 1.5 million new homes.

It’s why we’ve set up Great British Energy –

To create good jobs and cut people’s bills.

And it’s why we ended the national strikes that have crippled our country for years.

Because I defy anyone to tell me that you can grow the economy…

when people can’t get to work – because the transport system is broken.

Or can’t return to work – because they’re stuck on an NHS waiting list.

[Please note political content redacted here.]

And these are just the first steps towards the change that people voted for.

The change I’m determined to deliver.

But before the election I also gave a warning.

I said change would not happen overnight.

When there is deep rot in the heart of a structure, you can’t just cover it up.

You can’t tinker with it or rely on quick fixes.

You have to overhaul the entire thing.

Tackle it at root.

Even if it’s harder work and takes more time.

Because otherwise what happens?

The rot returns.

In all the same places.

And it spreads.

Worse than before.

You know that – I know that.

That’s why this project has always been about fixing the foundations of this country.

But I have to be honest with you. Things are worse than we ever imagined.

In the first few weeks, we discovered a £22 billion black hole in the public finances.

And before anyone says ‘oh this is just performative’.

Or ‘playing politics’.

Let’s remember.

The OBR did not know about this.

They didn’t know.

They wrote a letter saying they didn’t know.

[Please note political content redacted here.]

Even just last Wednesday, we found out that

[Please note political content redacted here.]

We borrowed almost £5 billion more than the OBR expected in the last three months alone.

That’s not performative – that’s fact.

But as well as the things we’ve discovered, we’ve also seen shocking scenes across the nation.

A mindless minority of thugs – who thought they could get away with causing chaos.

Smashing up communities and terrifying minorities.

Vandalising and destroying people’s property.

Even trying to set fire to a building – with human beings inside it.

And as if that wasn’t despicable enough.

People displaying swastika tattoos.

Shouting racist slurs on our streets.

Nazi salutes at the cenotaph –

The cenotaph – the very place we honour those who gave their lives for this country.

Desecrating their memory….

Under the pretence – and it is a pretence – of ‘legitimate protest’.

Now they’re learning that crime has consequences.

That I won’t tolerate a break down in law and order under any circumstances.

And I will not listen to those who exploit grieving families, and disrespect local communities.

But these riots didn’t happen in a vacuum. They exposed the state of our country. Revealed a deeply unhealthy society. The cracks in our foundation laid bare –

Weakened by a decade of division and decline.

Infected by a spiral of populism…

Which fed off cycles of failures

[Please note political content redacted here.]

Stuck in the rut of the politics of performance.

And I saw the beginning of that downward spiral firsthand.

Back in 2011.

When riots ripped through London and across the country.

I was then Director of Public Prosecutions.

And when I think back to that time.

I see just how far we have fallen.

Because responding to those riots was hard – of course it was.

But dealing with the riots this summer was much harder.

In 2011, I didn’t doubt the courts could do what they needed to do.

This time – to be honest with you – I genuinely didn’t know.

Let me tell you this. Every day of that disorder – literally every day – we had to check the precise number of prison places we had and where those places were.

To make sure we could arrest, charge and prosecute people quickly.

Not having enough prison places is about as fundamental a failure as you can get.

And those people throwing rocks, torching cars, making threats.

They didn’t just know the system was broken.

They were betting on it.

Gaming it.

They thought – ‘ah, they’ll never arrest me.

And if they do, I won’t be prosecuted.

And if I am, I won’t get much of a sentence.’

They saw the cracks in our society after 14 years of populism and failure – and they exploited them.

That’s what we have inherited.

Not just an economic black hole.

A societal black hole.

And that’s we have to take action and do things differently.

And part of that is being honest with people – about the choices we face. And How tough this will be. And frankly – things will get worse before they get better.

I didn’t want to release prisoners early.

I was Chief Prosecutor for five years.

It goes against the grain of everything I’ve ever done.

But to be blunt – if we hadn’t taken that difficult decision immediately.

We wouldn’t have been able to respond to the riots as we did.

And if we don’t take tough action across the board. We won’t be able to fix the foundations of the country as we need.

I didn’t want to means test the Winter Fuel Payment. But it was a choice we had to make.

A choice to protect the most vulnerable pensioners. while doing what is necessary to repair the public finances.

Because pensioners also rely on a functioning NHS.

Good public transport.

Strong national infrastructure.

They want their children to be able to buy homes.

They want their grandchildren to get a good education.

So we have made that difficult decision –

To mend the public finances.

So everyone benefits in the long term –

Including pensioners.

Now that is a difficult trade off.

And there will be more to come.

I won’t shy away from making unpopular decisions now…

If it’s the right thing for the country in the long term.

That’s what a government of service means.

This shouldn’t be a country where people fear walking down their street.

Their TVs showing cars and buildings being set on fire.

This shouldn’t be a country where the Prime Minister can’t guarantee prison places.

This shouldn’t be a country where people are paying thousands more on their mortgage.

Or waiting months for hospital appointments they desperately need.

Where our waters are filled with sewage.

Where parents worry that their kids won’t get the opportunities they did.

Where nothing seems to work anymore.

So, when I talk about the inheritance the last government left us…

The £22 billion black hole in our finances…

This isn’t about a line on a graph.

That’s about people’s lives.

Your lives.

[Please note political content redacted here.]

This government won’t always be perfect, but I promise you this:

You will be at the heart of it…

In the forefront of our minds…

At the centre of everything we do.

That’s why I wanted to invite you here today.

To show that decent, hard-working people who make up the backbone of this country belong here.

This government is for you.

A garden and a building that were once used for lockdown parties…

Remember the pictures just over there? With the wine and the food.

Well this garden…

And this building…

are now back in your service.

[Please note political content redacted here.]

Those things happened precisely because the government itself lost its focus.

on the hopes and ambitions of working people.

During those recent riots, I made huge asks…

of the police and of the criminal justice system –

People already stretched to the limit.

They knew I was making big asks of them.

And I’m not going to apologise for it.

But let me tell you this – they delivered.

They deserve our gratitude.

And that’s why I went to Southport…

To Lambeth…

To Belfast…

To thank them personally. To shake the hands of the first responders who rose up to the ask I made of them.

They deserve a government that trusts them.

Supports them.

And works with them.

That is the sort of government we will be.

One that works with people, not does things to them.

One that believes in hard graft, not gimmicks.

Honest about the challenges we face…

And working tirelessly to fix them.

That is how we will always work.

Now, next week, parliament returns. The business of politics will resume. But it won’t be business as usual.

Because we can’t go on like this anymore. Things will have to be done differently.

We will do the hard work to root out 14 years of rot. Reverse a decade of decline. And fix the foundations.

Between now and Christmas, we will carry on as we have started. Action not words.

We will introduce legislation and take decisions to protect taxpayers’ money.

To take on the blockers by accelerating planning. to build homes and boost growth.

We’ll move forward this autumn with harnessing the full potential of AI for growth and the public good.

We’ll bring rail service into public ownership, putting passengers first.

The biggest levelling up of workers’ rights in a generation to give people security, dignity and respect at work.

And Great British Energy will be owned by the taxpayer, making money for the taxpayer. Producing clean energy and creating good jobs.

That is our focus for the rest of the year.

But I will be honest with you. There’s a budget coming in October. and it’s going to be painful.

We have no other choice given the situation that we’re in. So those with the broadest shoulders should bear the heavier burden. And that’s why we’re cracking down on non-doms.

Those who made the mess should have to do their bit to clean it up. That’s why we’re strengthening the powers of the water regulator and backing tough fines on water companies that have let sewage flood our rivers, lakes and seas.

But just as when I responded to the riots – I’ll have to turn to the country and make big asks of you as well.

To accept short term pain for long term good.

The difficult trade-off for the genuine solution.

And I know that after all that you’ve been through – that is a really big ask and really difficult to hear.

That is not the position we should be in. It’s not the position I want to be in. But we have to end the politics of the easy answer that solves nothing.

But I also know that we can get through this together.

Because the riots didn’t just betray the sickness. They also revealed the cure.

Found not in the cynical conflict of populism. But in the coming together of a country.

The people who got together the morning after. All around the country. With their brooms, their shovels, their trowels. And cleared up their community.

They reminded us who we really are.

I felt real pride in those people who cleaned up the streets.

Rebuilt the walls. Repaired the damage.

And I couldn’t help thinking about the obvious parallels.

Because imagine the pride we will feel as a nation.

When, after the hard work of clearing up the mess is done.

We have a country that we have built together.

Built to last.

That belongs to every single one of us.

And all of us have a stake in it.

Our hard work rewarded – a dozen times over.

Because we’ll have an economy that works for everyone.

An NHS not just back on its feet, but fit for the future.

Streets that everyone feels safe in.

No longer dependent on foreign dictators…because we’re producing our own clean energy right here.

And giving every child – wherever they come from. Whatever their background.The chance – to go as far as their talent will take them.

I won’t lose sight of that prize. I won’t lose sight of what we were elected to do.

And most importantly – I won’t lose sight of the people that we were elected to do it for.

You.

This is our country. Let’s fix it – together.

GERS stats ‘show higher public spending for Scotland as part of UK’

The annual Government Expenditure and Revenue report underlines the collective economic strength of the UK, says Scotland Office Minister Kirsty McNeill

The collective economic strength of the UK means higher spending on public services in Scotland, according to new figures released today [14 August].

The Scottish Government’s Government Expenditure and Revenue (GERS) figures show that people in Scotland benefit from £2,417 more per head of additional spending compared to the UK average, as a result of the redistribution of wealth throughout the UK.

In 2023-24, £88.5 billion in tax receipts was raised in Scotland through devolved and reserved taxation, with £111 billion in public spending for Scotland. That works out to 8.1 per cent of UK revenue and 9.1 per cent of spending.

The figures also reveal that the ‘notional deficit’ in Scotland grew to around £22 billion, or 10.4 per cent of GDP, more than double the UK deficit of 4.5 per cent of GDP.

The UK Government is committed to retaining the Barnett Formula and funding arrangements agreed with the Scottish Government in the Fiscal Framework, which enables this higher spending for Scotland, and working in partnership with the Scottish Government to drive economic growth in Scotland.

UK Government Minister for Scotland Kirsty McNeill said: “These figures underline the collective economic strength of the United Kingdom.

“By pooling and sharing resources across the UK, Scots benefit by £2,417 more per head in public spending than the UK average. That means more money for schools and hospitals, if the Scottish Parliament chooses to invest in those areas.

“Ensuring economic stability and then delivering economic growth are two of the driving missions of the UK Government. We have reset relationships with partners across the UK, and want to work closely with the Scottish Government to produce better results for people in Scotland.”

The Scottish Conservatives added: “Today’s GERS figures underline the huge benefits Scotland gains from being part of the United Kingdom.

“Every single person is almost £2,400 better off because of higher spending on Scotland’s public services.”

Better Together? The GERS figures can be found here.

NHS building plans for Scotland delayed: Briggs speaks out

Plans to reveal which new hospitals, surgeries and treatment centres will be built in Scotland have been delayed.

In a letter to Holyrood’s finance committee, Cabinet secretary for Finance and Local Government Shona Robison explained: ‘To provide as much certainty as possible to parliament and wider stakeholders of our capital investment plans, I must wait until I have confirmed capital allocations from the new UK government”.

That confirmation is not expected until late Autumn – and, given the new Labour government’s warnings about a £20 bn. ‘black hole in the UK’s finances, it’s not expected to be good news.

Lothian Conservative MSP, Miles Briggs said: “This further delay to finding out if SNP Ministers will reinstate the funding for a new Princess Alexandra Eye Pavilion is extremely disappointing.

“We urgently need a new eye hospital to improve the delivery of ophthalmology across the South East of Scotland.

“The decision by SNP Ministers not to reverse funding for a new hospital has been a disastrous decision and will ultimately lead to additional costs for the delivery of a new hospital.

“I will continue to lead calls for the funding for a new eye hospital. What we desperately need is to see some leadership from SNP Ministers.”

Protecting Scotland’s Libraries: A plea to prioritise community wellbeing

An Open Letter from Pamela Tulloch, chief executive officer of the Scottish Library and Information Council (SLIC)

It’s no secret that Scotland’s libraries, along with the rest of our world-class culture sector, are currently embroiled in a perfect storm: budget pressures, reduced income generation, and rising costs have created a potent force for our services to contend with.

That’s why we’ve written to councillors across the City of Edinburgh, ahead of final decisions being taken on 2024/25 public spending, to not only remind them of the vast benefits a thriving public library service can provide, but to highlight those who stand to lose the most if our services are cut even further – communities across Edinburgh.

The Scottish Library and Information Council (SLIC) is the advocacy body for Scotland’s network of over 500 public libraries – celebrating the creativity, commitment, and value that libraries offer the communities they serve. A lifeline of support for so many.

Our latest research, Scotland’s Public Library Survey, helps to demonstrate the immense value, trust, and appreciation that people across Edinburgh place in their library service. With over 93 per cent of respondents agreeing that using the library improves their quality of life, the pivotal role they play is clear.

This is best evidenced by:

Closing the attainment gap by supporting children’s development, education and improving literacy through adulthood;
Combatting social isolation and helping those struggling with mental health;
Bridging the digital divide through free e-learning opportunities;
Connecting rural and remote communities through mobile library provision; and
Providing free IT equipment, employability sessions and activities to alleviate the impact of the ongoing cost-of-living crisis.

This is supported by the poignant feedback shared by library users across Edinburgh. When asked about the positive impact library use had had on their life, one local commented:

“The library is a busy meeting place for groups, acting as a hub for all sorts of activities, including groups of parents and children who meet here to play. Staff at the library are very helpful in recommending books that suit my tastes.

“The library is a very social place with a lovely atmosphere and is welcoming place to go. It always cheers me up.”

This sentiment is common and is underpinned by a strong economic case: for every £1 invested into our libraries, there’s a return on investment of £6.95 for the local economy.

And it is to the credit of our public libraries that this is the case, despite budgets having been hollowed out over the past 14 years which has resulted in reduced opening hours and staffing levels.

Indeed, Scotland’s libraries remained the most frequently visited cultural places in 2022, and also enjoy the highest customer satisfaction rate of any local authority cultural service, at 89 per cent.

Now is the time for the City of Edinburgh Council’s elected members to give libraries the financial backing that they need – that they deserve – to continue delivering the public services which have become vital to communities across the country.

This is more than a bid for culture funding – it’s a plea to prioritise community wellbeing. We hope that all elected members will consider both the financial and social cost of not maintaining these essential services and use the upcoming budget period to protect the services that matter most to their constituents by ensuring continued investment in our libraries.

Pamela Tulloch,

Chief executive officer of the Scottish Library and Information Council (SLIC)

Deal struck on a renewed Fiscal Framework for Scottish Government

UK Government will continue to top-up the Scottish Government’s tax revenues, worth £1.4 billion last year, as a benefit of strength and scale of the UK.
Boost to borrowing powers and backing of Barnett formula will build a better future for Scotland and help to grow the economy.
Chief Secretary to the Treasury John Glen hails a fair and responsible deal in line with the Prime Minister’s economic priorities.

The UK and Scottish Governments have today reached an agreement on an updated Fiscal Framework.

Holyrood’s capital borrowing powers will rise in line with inflation, enabling the Scottish Government to invest further in schools, hospitals, roads and other key infrastructure that will help to create better paid jobs and opportunity in Scotland.

The new deal maintains the Barnett formula, through which the Scottish Government receives over £8 billion more funding each year than if it received the levels of UK Government spending per person elsewhere in the UK. It also updates funding arrangements in relation to court revenues and the Crown Estate.

Chief Secretary to the Treasury, John Glen, said: “This is a fair and responsible deal that has been arrived at following a serious and proactive offer from the UK Government.

“We have kept what works and listened to the Scottish Government’s calls for greater certainty and flexibility to deliver for Scotland.

“The Scottish Government can now use this for greater investment in public services to help the people of Scotland prosper. These are the clear benefits of a United Kingdom that is stronger as a union.”

The funding arrangements for tax will be continued, with the Scottish Government continuing to keep every penny of devolved Scottish taxes while also receiving an additional contribution from the rest of the UK.

Under the previous Fiscal Framework, the Scottish Government could borrow £450 million per year within a £3 billion cap, as well as receiving a Barnett-based share of UK Government borrowing. Going forward these amounts will instead rise in line with inflation, which supports additional investment across Scotland and lays the foundations for economic growth.

The UK Government has listened to calls from the Scottish Government for greater certainty and flexibility to help them manage their Budget and agreed a permanent doubling of the resource borrowing annual limit from £300 million to £600 million.

Limits on how much can be withdrawn from the Scotland Reserve to spend in future years will also be removed. This will boost spending through borrowing by £90 million in 2024/25. All future limits will increase in line with inflation.

Scottish Secretary Alister Jack said:  “The renewed Fiscal Framework shows what can be achieved when there is a collaborative focus on delivering economic opportunity and why we are stronger and more prosperous as one United Kingdom.  

“The deal – worth billions of pounds to Scotland over the coming years – builds upon work to support economic growth and provide more high skill jobs, investment and future opportunities for local people, such as the establishment of Investment Zones and Freeports in Scotland.

“The UK Government knows that high prices are still a huge worry for families. That’s why we’re sticking to our plan to halve inflation, reduce debt and grow the economy.  As well as providing targeted cost of living support, we are directly investing more than £2.4 billion in hundreds of projects across Scotland as we help level up the country.”  

As both governments continue to work together to tackle challenges like the cost of living, an updated Fiscal Framework equips the Scottish Government with the instruments for growth while protecting the wider public finances.

Scotland’s Deputy First Minister Shona Robison said: “This is a finely balanced agreement that gives us some extra flexibility to deal with unexpected shocks, against a background of continuing widespread concern about the sustainability of UK public finances and while it is a narrower review than we would have liked, I am grateful to the Chief Secretary to the Treasury for reaching this deal.

“As I set out in the Medium-Term Financial Strategy, we are committed to tackling poverty, building a fair, green and growing economy, and improving our public services to make them fit for the needs of future generations.

“We still face a profoundly challenging situation and will need to make tough choices in the context of a poorly performing UK economy and the constraints of devolution, to ensure finances remain sustainable.”

This morning the UK and Scottish governments have published the long-awaited update to the Fiscal Framework, following the review that has been going on for the last couple of years (writes MAIRI SPOWAGE of the Fraser of Allander Institute).

Since this was due to happen in 2021, we have been waiting for the outcome of this review. For more background, see our blog from late 2021.

For those new to it, the Fiscal Framework sets out the rules for how devolution of tax and social security powers following the Scotland Act 2016 is supposed to work in terms of finances. It sets out the mechanisms by which the Scottish block grant is adjusted to reflect the fact that large amounts of tax and social security powers are now the responsibility of the Scottish Parliament.

It also sets out fiscal flexibilities that the Scottish Government can choose to use in managing these new powers, as new tax and social security powers also come with risks that require to be managed.

In this blog, we set out the main headlines and our initial reaction to the updates.

The mechanism for adjusting the Block Grant will remain permanently as the Index Per Capita (IPC) method.

This is one of the most complex areas of the fiscal framework but definitely one of the most significant.

For tax, it sets out the mechanism for working out how much the UK Government has “given up” by devolving a tax to Scotland, given that it is a significant loss in revenue. As, following devolution, there are different policies pursued in rest of UK and Scotland, this is not straightforward. Essentially though, the mechanism agreed in 2016 was to grow the tax at the point of devolution at the rate, per person, that it grows in the rest of the UK. This is known as the Index Per Capita (IPC) method.

So, the idea is that if taxes per head grow quicker in Scotland, the Scottish Budget will be better off – conversely, if taxes per head grow more slowly, the Scottish Budget will be worse off.

In 2016, when the fiscal framework was first agreed, the IPC method was the SG’s preference, whereas the UKG preferred the “Comparable Method” (which would generally be worse than the IPC method for the Scottish Budget). SO they agreed to use IPC for the first 5 years and review it in this review published today.

They have now agreed that the IPC method will remain on a permanent basis.

Interestingly, this means that on a permanent basis, the mechanisms for adjusting the block grants for Wales and Scotland will be different, given Wales’s Fiscal Framework uses the Comparable Method, albeit with additional provisions to keep a funding floor in place.

Borrowing Powers for managing forecast error have been increased significantly

Resource borrowing powers to manage forecast error associated with tax and social security powers have been increased from £300m to £600m. This is required because when budgets are set, the tax, social security and block grant adjustment estimates are set on the basis of forecasts from both the Scottish Fiscal Commission and the Office for Budget Responsibility. When the outturn data is available, if there is a discrepancy (which is very likely) then the Scottish Budget has to reconcile these differences.

This will be good news for the Deputy First Minister looking ahead to delivering her first budget in December, given that it was confirmed recently that there will be a large negative reconciliation to reflect income tax receipts in 2021-22 of £390m. As these changes are coming into effect for the 2024-25 budget year, this means she will have more flexibility to borrow to cover this.

All limits, such as resource and capital borrowing powers, will be uprated in line with inflation

When the Fiscal Framework was first agreed, the limits on borrowing for both resource and capital, and the limits for what could be put into the Scotland reserve, were set in cash terms and have been fixed ever since.

This agreement today sets out that the ones that remain will be uprated by inflation (although the exact inflation measure and timing is still to be confirmed), and that the limits on the additions and drawdowns on the Scotland Reserve will also be abolished.

The VAT Assignment can gets kicked down the road again

One thing that is a little disappointing is that there was no final decision on VAT Assignment. See our blog from 2019 to get the background in this.

VAT Assignment was included as part of the Smith Commission powers. The idea was that half of VAT raised in Scotland would be assigned to the Scottish Budget, which would mean, if the Scottish Economy was performing better than the UK as a whole, the budget would be better off, and conversely, if VAT was growing less quickly in Scotland, the budget would be worse off.

However, after almost 10 years, it has become clear that there is no way to estimate VAT in Scotland that is precise enough for this to have budgetary implications. It is a large amount of money (more than £5 billion) so even small fluctuations in how it is estimated can mean changes of hundreds of millions of pounds.

Today, the Governments have agreed to just keep discussing it. We think it is time that everyone admitted it is just not a sensible idea.

We’ll keep digging through the detail of everything published today and will provide more commentary through our weekly update on Friday.

Scottish Government ‘must improve it’s climate change set-up’

The Scottish Government needs to improve its set up to deliver the country’s climate change goals. says public spending watchdog Audit Scotland.

The government’s climate governance has improved since the former First Minister declared a climate emergency in 2019 – however, adapting to the impact of climate change has received less focus than reducing emissions and hitting net zero targets.

The government is not clear enough on how its internal groups co-ordinate their work. There are gaps in reporting, making it difficult to assess progress against climate policy.

And there has been no workforce plan for climate change since the Net Zero department was established in late 2021. However, one is expected in spring 2023.

Government risk management arrangements around climate change are underdeveloped. For example, the process to identify risks is not always clear. Actions to address risks are sometimes vague.

And there is not a systematic process in place for tracking actions in risk registers.

Stephen Boyle, Auditor General for Scotland, said: “The Scottish Government’s set up for responding to the climate crisis has constantly evolved since 2019. But the different parts of government could be better co-ordinated.

“The government’s risk management arrangements also need to improve, particularly the work needed to ensure Scotland adapts to the impact of climate change.

“Work is ongoing across the Scottish Government to tackle these organisational weaknesses, and it’s vital that happens quickly given the urgency of the climate situation.”

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