The publication of the Scottish Government’s Resource Spending Review Framework in May set out possible spending of £11.6 billion on the justice sector over the next four financial years.
However, independent research by the Scottish Parliament Information Centre (SPICe) has suggested that if current inflationary pressures persist, this settlement would represent a significant reduction in spending across the justice sector.
Speaking as the call for views was launched, Criminal Justice Committee Convener Audrey Nicoll MSP, said: “There is no doubt the Scottish Government and public services will face cost pressures in the upcoming years and the ongoing cost of living crisis is creating a real sense of uncertainty over what is to come.
“However, if the current trend of rapidly increasing inflation continues then those in the justice sector will have some difficult decisions to make in order to balance budgets.
“We want to hear a range of views as part of our pre-budget scrutiny and are seeking views from those within the sector.
“But we also want to hear the views of ordinary people, any third sector organisations who may be impacted by these potential cuts in justice spending and groups who work to support those within the justice portfolio. This will help us to scrutinise the possible impact of cuts to key services such as the police, fire and rescue, courts and prosecution services and prisons.”
The call for views closes on Friday 21 October 2022.
Scottish Government identifies half a billion savings to tackle cost crisis
Around £500 million in savings have been found as resources are focused on tackling the “harsh reality” of the cost of living crisis, Deputy First Minister John Swinney said yesterday.
He updated the Scottish Parliament on steps being taken to meet the increased costs of public sector pay and to provide support to those who need it most, while balancing public finances.
Soaring inflation means the Scottish Government’s budget is now worth £1.7 billion less in real terms than it was last December. Since then inflation has risen from around 4% to more than 10% – with possible further increases when figures come out next week.
Mr Swinney set out to Parliament where savings have so far been made to help pay for initiatives such as fair public sector pay settlements and doubling the Fuel Insecurity Fund. He has also written to the Finance and Public Administration Committee outlining the details of reductions in planned spending made in recent weeks.
The Deputy First Minister has committed to setting out the Emergency Budget Review within two weeks of the UK Government budget update expected later this month. He warned further intervention will represent a significant challenge given the largely fixed Scottish Government budget and limited fiscal powers.
Mr Swinney said: “Our budget was based on a UK Spending Review that simply did not foresee the levels of inflation that are now a reality.
“That alone would require the budget to be revisited. But in times of crisis the job of the finance secretary is not simply to balance the books. It is to find the money to help families, to back business and to fund the priority projects that improve lives for the long term. And so, the Emergency Budget Review must both identify funding to cope with inflation-driven cost increases and aim to support those who most need our help during this crisis.
“This is the harsh reality of a fixed budget and limited powers. The Scottish Government simply does not have access to many of the levers which would provide the greatest support in this crisis. We will do everything we can. We will make the hard choices. But only the UK Government can act to end this crisis. They should do so – and I encourage them to do so now.”
SNP MSP Gordon Macdonald has welcomed nearly £4.7 billion of extra investment for Scotland’s Health and Social Care portfolio over the next 4 years.
The Resource Spending Review, outlined by Finance Secretary Kate Forbes this week, invests in frontline services and outlines over £70 billion of investment in the Health and Social Care budget between 2023/24 and 2026/27.
This investment will increase capacity in the health service, help establish the National Care Service, help deliver care in the community, and tackle health inequalities.
Gordon Macdonald MSP said: “The SNP Scottish Government has invested significantly in difficult financial times to ensure our NHS and social care sector are fit for the 21st Century.
“I’m delighted that this week’s Resource Spending Review will see significant investment in the Health and Social Care budget – which will help health services across Edinburgh as Scotland recovers from the pandemic, where there will undoubtedly be pressures on the healthcare sector.
“The SNP Government’s twin approach of delivering record investment and taking forward vital reforms will help ensure that the people of Scotland get the care they need in the right place at the right time.
“None of this would be possible to deliver without our hard-working NHS and social care staff working across Edinburgh. I’d like to extend my personal thanks for their tremendous efforts over a very difficult few years.”
Tomorrow (Tuesday 31 May) the Scottish government will publish a Spending Review and a Medium Term Financial Strategy. At the same time, the Scottish Fiscal Commission will publish updated economic and fiscal forecasts for the period to 2027.
This article by DAVID EISER at the FRASER of ALLANDER iNSTITUTE considers six key things to look out for:
How much detail will the government provide about its spending plans?
The government has said that its resource spending review will ‘outline resource spending plans to the end of this Parliament in 2026-27’. This will, it says, ‘give our public bodies and delivery partners greater financial certainty to help them rebuild from the pandemic and refocus their resources on our long-term priorities’.
What has remained unclear is the level of granularity at which the government intends to set its spending plans.
A spending review is not a multi-year budget, and we shouldn’t expect it to look like one. But we have no idea whether the government is going to set out spending plans at portfolio level, or in more detail than this. Portfolio-level plans would be useful, but some organisations would, justifiably, point out that Portfolio level plans provide them with little if any certainty about their own allocations.
There is a possibility too that the government does not in fact set-out portfolio level spending plans, but instead provides information about its spending plans for only a selective list of its policy ‘priorities’. This sort of approach would certainly represent a missed opportunity.
How will the government address uncertainty?
The UK government’s Spending Review in October set out spending allocations for the Scottish government for each year until 2024/25. These allocations aren’t necessarily set in stone, but whilst they might well increase a bit, they almost certainly won’t be reduced.
The Scottish government does not have confirmed allocations for 2025/26 and 2026/27 and there is significant uncertainty around what the government’s allocations will be in these years.
It will be interesting to see how the Scottish government addresses this uncertainty in the spending review. Will it set out plans for a single scenario only? Will it set out a central scenario, together with spending plans under alternative scenarios? Or will it provide broad ranges over which it expects spending on different public services to fall?
There is a reasonable case for the government to adopt a different approach for 2023/24 and 2024/25 than it does for 2025/26 and 2026/27. But it shouldn’t use the uncertainty in the last two years of the parliament as justification for providing less detailed information in the next two years.
What insights will we get into the government’s policy commitments… and the implications for non-prioritised areas of spending?
The Spending Review should give us some further clues about the government’s emerging plans in various areas. For example, the timescales for, and financial implications of, plans to establish a national care service may emerge more clearly.
What is less clear is how much the spending review will tell us – explicitly – about levels of spending for non priority areas.
The Scottish government’s MTFS in December pointed out that the difference between its spending aspirations and its likely budget was over £2bn in 2024/25 (see Figure 6). This is a substantial funding gap (although it is not clear what assumptions lie behind it).
The spending review framework notes that ‘With limited resources, increased investment in the Scottish Government’s priorities will require efficiencies and reductions in spending elsewhere: we need to review long-standing decisions and encourage reform to ensure that our available funding is delivering effectively for the people of Scotland.’
It will be interesting to see whether the spending review document itself is as candid about where spending reductions are taking place as the framework document implied it might be.
How significantly will the economic outlook deteriorate?
The last set of SFC forecasts were published in December 2021. A huge amount has changed in the five months since then.
The December 2021 forecasts described an economy that had recovered from the pandemic more strongly and smoothly than had been anticipated earlier that year. The economy was forecast to grow 2.2% this financial year and 1.2% next.
Unemployment was forecast to peak at 4.9% in 2022, down from an expected peak of over 7% in its previous forecast. Inflation was expected to increase in 2022 to around 4.4% – enough at the time to cause the SFC to forecast a fall in real earnings.
We live in a different world now. By March 2022, inflation was 7%, and by May the Bank of England was expecting inflation to peak at 10% this year. The rise in inflation, together with tax increases, leads the Bank to forecast that 2022 will see the second largest annual fall in disposable household incomes since the 1960s.
The SFC’s forecasts will inevitably paint a similarly gloomy picture for real household incomes in Scotland, which in turn will result in a contraction of its forecasts for economic growth, and probably a deterioration in its medium term outlook for the labour market. Exactly how the SFC sees the cost of living crisis play out will be interesting to see.
In May the Bank of England’s forecast implied prolonged stagnation in UK economic activity, although it did not (quite) forecast a recession in a technical sense. If the SFC does forecast a recession in Scotland, this will no doubt dominate headlines, but it will be important to look closely at how different the UK and Scottish economic forecasts are in a tangible sense.
What will be the implications of the fiscal forecasts for income tax and the Scottish budget?
The SFC’s economic forecasts will have implications for the Scottish budget, via the income tax forecasts in particular. These implications are not as immediate as you might think – Tuesday’s forecasts do not themselves have major significance for Scottish government spending this year, since the forecasts made at the time of the budget are what really matters until tax outturn data is available.
But Tuesday’s forecasts will give an indication of whether the outlook for the contribution of income tax to the budget has improved or deteriorated since the budget forecasts in December.
Its very difficult to predict the outcome. Its quite conceivable that the forecasts for Scottish income tax revenue will be revised up, if the SFC believes that higher inflation and recent further falls in unemployment will drive up earnings growth. But what ultimately matters is how the SFC’s judgements play out alongside the OBR’s equivalent judgements for the UK (since these are what determine value of the income tax block grant adjustment).
The December forecasts painted a gloomy picture. Scottish income tax in 2022/23 was forecast to raise £190m less than what was taken out of the block grant to account for tax devolution, and £257m less in 2023/24.
Kate Forbes will be hoping for any signs of an improvement in the outlook. But whatever the implication of Tuesday’s income tax forecasts, they will in reality need to be taken with a pinch of salt, given the differences in timing between the OBR and SFC forecasts.
The other really important element of the fiscal forecasts will be what they say about the outlook for devolved Scottish social security spending, relative to the related uplift in the block grant.
Spending will inevitably be substantially higher than the level of additional resources flowing through the block grant, as a result of policy divergence in Scotland (in relation to disability benefits, carer’s allowance, and the new Scottish Child Payment). But the extent of the gap will have implications for the resources available to the Scottish government in other areas of devolved spending.
What will the MTFS tell us about the government’s wider strategic ambitions?
The Medium Term Financial Strategy sets out risks to the devolved budget over a five year period. We can expect the MTFS to analyse issues including uncertainties relating to inflation and the implications for public sector pay.
But past MTFS documents have also given a steer about some of the government’s wider strategic fiscal objectives and asks. It will be worth looking at what this year’s MTFS says about these issues – which potentially include positioning statements in relation to further tax devolution, or extension of borrowing and budget management tools – particularly in the context of the upcoming review of the fiscal framework.
David Eiser is Senior Knowledge Exchange Fellow at the Fraser of Allander Institute
‘We face a very difficult financial position over the new few years’
Prioritising public spending is essential to grow a stronger economy as Scotland recovers from the pandemic and faces up to the cost of living crisis, Finance Secretary Kate Forbes has said.
Speaking ahead of the publication of the Resource Spending Review, Ms Forbes said more focused government and public sector funds would achieve ambitions to tackle child poverty, reach net zero and deliver sustainable services for the future.
The Spending Review will give broad parameters for spending for the next four years and set out a series of government reforms.
Finance Secretary Kate Forbes said: “These are challenging times, and we need to be canny with our spending, but I’m confident that if we work together we can get through this cost of living crisis and still achieve our ambitions.
“That means tackling child poverty, driving our economic recovery from COVID and achieving net zero, while building a stronger public sector that is sustainable for the future.
“We face a very difficult financial position over the next few years with funding increases below inflation levels and the challenge of recovering from the pandemic without the financial tools available to every other government in the world. That means while the spending review is not a budget, it will include difficult decisions, to ensure we can really focus on supporting households and services at this time.
“The Resource Spending Review will detail the funding available over the coming years to achieve these goals, and it will be published alongside the Medium-Term Financial Strategy (MTFS) which gives economic context to the challenges and opportunities which lie ahead.”
Ms Forbes will outline the Resource Spending Review to Parliament when it is published tomorrow (May 31).
The Scottish Government says it is doing ‘everything within its powers and fixed budgets to ensure people, communities and businesses are supported as far as possible’, including investing almost £770 million this year in cost of living support and doubling the Scottish Child Payment to £20 per week.
Earlier this year it increased eight Scottish benefits by 6%, the rate of inflation at the time, and introduced a range of benefits not available elsewhere in the UK.
Expanding free school meals and providing £150 council tax payments to low income families are included in further actions to put money back into people’s pockets at a time when they need it most.
