Challenging UK austerity and uncertainty

Improving wellbeing, driving inclusive growth, tackling child poverty and combating climate change will be key Scottish Government spending priorities for the coming years.

Speaking as he published the Medium-Term Financial Strategy, which reflects the most recent forecasts from the Scottish Fiscal Commission (SFC) and sets out the economic and funding outlook for the next five years, Finance Secretary Derek Mackay outlined the impact that UK austerity is having on public finances.

Mr Mackay said:

“Austerity is a choice - and not one of Scotland’s making. Following a £2 billion reduction in Scotland’s block grant, the Scottish Government is doing all we can to stimulate the economy, protect public services and provide people and businesses with as much certainty as possible.

“Irrespective of the lack of clarity from the UK Government on its spending review, we value sustainable public finances and plan to undertake a review of resource spending beyond 2020-21. This will be driven by our commitment to improve national wellbeing, create a sustainable and inclusive economy, tackle child poverty and recognise our climate change priorities.

“While we recognise that we will not be able to do all that we want to do - or all that others will want us to do – this strategy sets out how we will prioritise future resource spending on areas that will have the biggest impact.

“In the absence of firm UK commitments, the Scottish Government cannot yet quantify levels of future funding and the impact this will have on the Scottish Budget.”

Commenting on the 2019-20 SFC forecasts, Mr Mackay said:

“Despite Scotland’s strong economy and labour market, the Scottish Fiscal Commission has reduced its growth forecasts for 2019 and 2020 as a direct result of continuing Brexit uncertainty.

“On top of this, Scotland faces a challenging future as a result of continuing UK austerity, which has meant that over £12 billion less has been invested in Scottish public services over the last nine years.

“In spite of this prolonged period of UK austerity and uncertainty, the Scottish Government is continuing to invest in our public services and the economy. We will continue to do all we call to support Scotland’s economy, including calling once again on the UK Government to provide guarantees for the potential loss of EU funding to Scotland – currently worth over £5 billion to support jobs, deliver infrastructure, sustain rural communities, and deliver research funding for universities.”

Background

Since December, the SFC’s forecasts of income tax revenues in 2019-20 have risen by £20 million due to Scotland’s strong labour market performance. However forecasts for the block grant adjustment, which is deducted from the budget each year, have gone up by even more.

To help deliver the infrastructure investment Scotland needs, the Scottish Government has accepted the recommendations of the Scottish Futures Trust to adopt the Mutual Investment Model. This model, alongside other financing approaches, will be used to increase annual infrastructure investment by £1.56 billion by 2025-26. The recommendations of the Infrastructure Commission, due for publication by December, will be used to inform the next Infrastructure Investment Plan and set capital spending budgets.

A full copy of Mr Mackay’s speech is available here. The Medium-Term Financial Strategy, incorporating the spending review framework, is available here.