Higher-than-expected public sector pay deals, social security reform and the SNP’s freeze on council tax have all contributed to putting pressure on the Scottish government’s budget, according to a new report from Scotland’s fiscal watchdog.
In a statement accompanying its latest fiscal report, the Scottish Fiscal Commission (SFC) seems keen to remind Scots that the Scottish government bears most of the responsibility for the budget challenges it now faces. ‘While UK government policies contribute to the pressures on the Scottish budget, much of the pressure comes from the Scottish government’s own decisions,’ says the SFC.
The SFC did not set out to put a spanner in the works of the SNP’s grievance machine but has found itself doing so by default
Though that statement is a simple expression of fact, from a Scottish perspective it reads as unusually bold. This is because the SNP has, with some degree of success, carefully crafted a narrative of powerlessness when it comes to budget difficulties. This is partly to deflect responsibility for tough decision-making to Westminster, but also to create a grievance narrative around fiscal powers and the constitution. The robust wording from the SFC effectively counters some of that populist sabre-rattling.
Public sector pay settlements have been higher in Scotland than in the rest of the UK, while the Holyrood government has been spending a rapidly increasing amount on social security following the devolution of new welfare powers in 2016. Devolved social security now makes up around 10 per cent of the Scottish budget, up from 7.5 per cent in 2017-18. Meanwhile, the Scottish government is committed to a freeze on council tax this year, which has led to claims the SNP is imposing austerity on local authorities while disproportionately benefitting the richest households.
‘The past choices of the Scottish government narrow its room for manoeuvre now and in the future. Previous pay settlements, the approach to social security payments, and the council tax freeze have all added to the in-year pressures that must be accommodated as it continues to negotiate pay with the public sector unions,’ says SFC chair Graeme Roy.
The Scottish government has estimated that in 2023-24 wages accounted for over £25 billion across the devolved public sector, including local government. ‘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 [Scottish] budget time to avoid disruptive spending controls being introduced part way through the year,’ says Roy.
In December the SFC reported that the Scottish government had not set a formal guideline for public sector pay for 2024-25 and that the average public sector pay award in 2023-24 was 6.5 per cent, three percentage points higher than the Scottish government had estimated last May. When a budget is based on faulty pay assumptions, it should come as no surprise that this then creates challenges for in-year budget management, and so cuts to spending on services.
The SFC is clear on where the responsibility lies. ‘The recent emergency spending controls the Scottish government has put in place for 2024-25 are the result of those challenges,’ its report states, referring to the Scottish government’s decision to follow the UK in no longer providing winter fuel payments to all pensioners, its scrapping of subsidised peak-time fares on Scotland’s nationalised railways, and other cuts.
The report and accompanying statement from the SFC flies in the face of Scottish government messaging. In announcing those recent spending curbs, Scotland’s finance minister Shona Robison described them as ‘unavoidable’, while Scottish government ministers often talk about Scotland’s hands being tied when it comes to its budget. It seems clear the SFC believes the Scottish government carries the weight of responsibility for Scotland’s budget outcomes. And that more careful management of the budget process would lower the chances of in-year budget crises materialising.
Is the SFC being political here? There is no evidence of that. The SFC has a statutory remit to objectively forecast and report on Scotland’s fiscal position. That its messaging directly contradicts the SNP Scottish government’s is merely a reflection of the skewed modus operandi of those in power. The SFC did not set out to put a spanner in the works of the SNP’s grievance machine but has found itself doing so by default.
In a Scotland where parts of the civil service have arguably become too close to the SNP, that is to be welcomed.
