Budget clarity needed

Finance Secretary Derek Mackay has urged the UK Government to provide clarity on the timing of the UK Budget.

In a letter to Chancellor Sajid Javid, Mr Mackay highlighted the difficulties caused by the delay in planning the Scottish Budget 2020-21.

The text of the letter reads:

Dear Sajid

Following the outcome of last week’s General Election, I look forward to continuing to work with you to make progress on a number of matters.

I last wrote to you on 13 November 2019 to highlight the need for early clarity on the UK Budget. As you know, the Scottish Government faces significant uncertainty as it plans for the Scottish Budget 2020-21. As an initial step, it would be very helpful for you to confirm the timing of the UK Budget and I would welcome the opportunity to discuss this by phone ahead of Christmas.

The Scottish Government remains without clarity on the funding available for public services because of the impact on the operation of the fiscal framework. UK Government departments do not face the same issues, having gained certainty on their budgets for the year ahead through September’s Spending Round.

It is therefore vital not only to have early clarity about timing but also that the UK Budget is brought forward as quickly as possible. It is essential that the Scottish and UK Governments co-operate closely in order to enable a Scottish Budget to be in place by the beginning of the next fiscal year. It will be important that the UK Government takes a reasonable and flexible approach to the 2020-21 Budget, given the problems caused by the delays to the UK Budget. Given the tight timescales, it would be helpful for HM Treasury officials to engage with the Scottish Government to explore the options for early access to information on the content of your Budget to allow me to plan for a Scottish Budget. 

Furthermore, it is essential that the UK Government delivers on the Conservative party’s public commitments made during the general election campaign, resulting in additional Barnett consequentials for Scotland and an uplift in next year’s Scottish Budget of at least £466 million compared to the position at the UK Spending Round.  In the current uncertainty, we have no option but to use these commitments as the basis of our own budget planning. I also welcome your longer term commitment to additional funding for infrastructure, which aligns with the Scottish Government’s commitment last year to our National Infrastructure Mission to proportionately increase investment in infrastructure.

Turning to the fiscal framework, I am also concerned about a scenario where, if the Scottish Budget was published before the UK Budget, the use of provisional Block Grant Adjustments and economic forecasts that will subsequently be updated for the UK Budget lead to fewer resources being available in 2020-21 to fund public services than should be the case. Such an eventuality would be a result of factors outwith the Scottish Government’s control. Were such a situation to emerge, I would welcome a flexible approach to the operation of the fiscal framework, in recognition of the unique circumstances that we are working with this year.

More broadly, I have recently engaged with the Chief Secretary to the Treasury to outline the action I believe is needed in advance of the wider review of the framework, in particular, in relation to the Scottish Government’s borrowing and reserve limits, given the levels of volatility inherent in the framework. I would welcome an early response on this matter and a commitment to working with the Scottish Government to redouble our efforts to implement the framework and support further evolution of the fiscal devolution settlement. Doing so would represent a positive response to our experience so far of issues such as forecast error, and would help to mitigate against the volatility risks presented by EU Exit.

I am copying this letter to the First Minister, Chief Secretary to the Treasury, Secretary of State for Scotland and Cabinet Secretary for Government Business and Constitutional Relations.

DEREK MACKAY