The Scottish government takes the scalpel in public services

The continued growth in staffing levels in the Scottish public sector is “unsustainable”, with cuts planned across various departments.

Yesterday’s resource spending review laid out indicative plans for the rest of this legislature, with Finance Secretary Kate Forbes saying there was a need to ‘reshape and refocus’ in the years ahead – although she made a point of emphasizing that this was not a declaration budget.

Examination of the 79-page document reveals that the budget for rural affairs, universities and the police will fall by 8%, equivalent to a reduction in real terms of £ 1.1 billion over the next four years .

The Scottish Government will also cut its budget for promoting business, trade and tourism by 16% in real terms.

The tourism budget will receive £39.7m over a total of five years. This year the sector was receiving $18.3m in funding, but following spending cuts it will only receive £5.3m in the remaining four years.

The company’s general budget will receive a total of £46.5 million over the five-year period, with funding increasing from £35.4 million this year to £200,000 over the four-year period.

The Scottish government has also set aside £20m to be spent on plans for a second independence referendum.

The documents also revealed plans to provide a further three years of funding to Ferguson Marine, with an investment of £89.3m.

Sticking to transport, over £5 billion has been earmarked for ScotRail services and infrastructure over the next five years.

Due to the pandemic, the public sector workforce has swelled to around 440,000 in the past two years – from around 410,000 in 2016-17 – which the review says cannot continue. However, the Scottish Government has proposed to cut staff using “effective management of vacancies and recruitment”.

He said: “We expect all public bodies to demonstrate that they remain relevant to the current and future needs of people, places and communities in Scotland.”

The Scottish Government will now consult with industry, unions and workers to “address the challenge of a post-Covid-19 pandemic reset”.

Scottish Trades Union Congress general secretary Roz Foyer said the review “sounded alarm bells for many public sector workers”.

The review outlines increased health spending, including the creation of the new National Care and Social Security Service, which will continue to be vested in the Scottish Parliament throughout this Parliament.

Health spending is expected to rise from £17.1bn to £19bn, while funding for benefits will rise from £3.9bn to £6.3bn in cash terms.

Local government funding will remain at £10.6bn for each year of this legislature before increasing by £100m in 2025-26.

The Scottish Government’s overall budget is set to rise from £41.8bn to £47.5bn.

The spending review will introduce “hidden tax increases compared to the rest of the UK” in addition to 8% cuts in many service areas, the Institute for Fiscal Studies (IFS) has responded.

The Scottish Tax Commission (SFC) assumes that the top rate tax threshold will be frozen for the next four years, rather than increased in line with inflation. This would mean the freeze is a year longer than the UK Government’s and is expected to bring in £503million a year by 2026-27.

Higher rate taxpayers are estimated to pay an additional £653 in income tax in 2023-24, rising to £1,317 in 2026-27.

The IFS noted: ‘If the Scottish Government instead chooses to increase the higher rate threshold, its funding will be lower than assumed in the spending review, potentially requiring further spending cuts.’

Income tax policies generated around £1bn to close the gap between spending pressures and funding identified by the Scottish Government in its December spending review framework report.

The SFC now forecasts the Scottish Government may have to repay £817million in 2024-25 due to forecast errors in Scottish income tax revenue and block grant adjustments over the course of the year. just ended, 2021-22.

It also forecasts a slowdown in job growth from 2023-24, as well as a decline in average real earnings of 2.7% in 2022-23.

David Phillips, associate director of the IFS, said: “The relative winners are health, some smaller service areas and especially social security spending – health spending is expected to rise by 2.6% in real terms in over the next four years, although this will almost certainly be slower than necessary to meet rising costs and demands.

“Beneath these tough decisions are UK government funding plans which look less generous than when they were set last autumn, due to higher inflation.

“But steep increases in social security spending and relatively poor income tax performance also make the challenges more difficult, and this despite the fact that the Scottish Government implicitly assumes a further increase in income tax. compared to the rest of the UK.”

The Fraser of Allander Institute said the Scottish government deserved “some credit for presenting its plans despite significant uncertainty in its outlook”, but added that the funding outlook was “extremely tight”.

Mairi Spowage, Director of the Institute, said: “From what has been published, it is difficult to understand how the government will achieve its transformational goals on social protection, child poverty and climate change, to name a few in this tight funding environment.

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