SNP choices contributing to financial pressure – watchdog

The Scottish government’s own decisions are to blame for “much of the pressure” facing the country’s finances, a watchdog has said.

The Scottish Fiscal Commission (SFC) – the official independent economic forecaster – warned the SNP government would need to make “difficult decisions” to balance its budget.

It also highlighted “significant uncertainty” about UK government funding for Holyrood.

Finance Secretary Shona Robison has introduced emergency curbs on spending, describing them as “unavoidable”.

She has said cuts are required to fund public sector pay deals, while accusing the UK government of an “attack” on Holyrood’s finances.

Prime Minister Sir Keir Starmer has warned that October’s UK Budget would be “painful”, citing a a £22bn black hole in Treasury finances.

He said he had no other choice and those with the broadest shoulders “should bear the heavier burden”.

Ms Robison is due to set out in-year cuts in a statement to parliament next week. The Scottish government will announce more comprehensive spending plans for 2025-26 in its budget later this year.

As it released a report on the state of the country’s finances, the SFC said while decisions made by the UK government had contributed to pressure on the Scottish public purse, “much of the pressure comes from the Scottish government’s own decisions”.

It said a council tax freeze, more generous public sector pay deals than in other parts of the UK and social security reforms had all “added to the in-year pressures”.

SFC chairperson Prof Graeme Roy said: “The past choices of the Scottish government narrow its room for manoeuvre now and in the future.”

He added: “With pay making up more than half of the Scottish government’s day-to-day budget, we need more transparency and planning around pay awards at budget time to avoid disruptive spending controls being introduced part way through the year.”

The commission said the government had budgeted for a 3% limit to pay increases, but that this would be exceeded by agreements being struck, with more negotiations under way.

On devolved welfare benefits, it said ministers have chosen to spend £900m more than the Treasury allocated in a block grant, and that is on course to reach £1.5bn within five years.

Responding to the report, Ms Robison said: “The first minister and I have both made clear that, following the UK chancellor’s July statement, the Scottish government continues to face the most challenging financial situation since devolution.

“I will be providing an update to parliament on the urgent action being taken to address these profound financial pressures.”

Following the prime minister’s speech, she said the decisions made by the UK government would “fundamentally damage” the Scottish government’s ability to deliver public services.

She added: “The SNP government will do everything we can to protect the services and public from the Westminster attack on Scotland’s public spending.”

Scottish Labour leader Anas Sarwar said it was “absurd” and “laughable” for the Scottish government to suggest in-year spending cuts were a response to the statement made by Chancellor Rachel Reeves in July, when she announced some cuts to help plug a “black hole” in the public finances.

Mr Sarwar told BBC Scotland News: “This is an SNP government that is looking for somebody else to blame, not taking responsibility and after 17 years people are paying the price.

“The incompetence has to end, the economic carnage has to end and the waste has to end.”

To help pay for public sector pay deals and avoid strikes, Ms Robison has ordered a halt to all non-essential spending, as well as a recruitment freeze for all but the most pressured jobs in the NHS.

Ahead of the announcement next week, some spending decisions have already been announced – including introducing means tested winter fuel payments, the return of peak rail fares, scrapping free bus travel for people in the asylum system and delaying a digital devices programme.

Funding for other projects, including flood defences, nature restoration and the expansion of free school meals, will also be diverted to fund council wage settlements.

The Scottish government recently provided extra funding to help Cosla offer a pay increase of at least 3.6% to local authority workers.

Pay deals for doctors, nurses and teachers are yet to be agreed.

Ms Robison has said pay increases were not be fully funded and would require cuts from other areas.

She said ministers have had to deal with “huge fiscal headwinds” in recent years due to the Covid pandemic, the cost of living crisis and soaring inflation.

“All of these things impact on devolved administrations and the only lever we have, in-year, are spending controls,” the minister added.

She defended the SNP administration’s record since 2007 and said the country’s finances were being run “efficiently”.