Financial strategy published

Economic growth, progressive taxation and spending plans that unapologetically target those in greatest need are at the heart of a financial strategy announced by Deputy First Minister Shona Robison.

The Medium-Term Financial Strategy outlines the approach to ensuring Scotland’s finances are on a sustainable footing and delivering high-quality public services in the face of high inflation. This includes:

• growing the economy, including by delivering on ambitious commitments on childcare, seizing opportunities in areas where Scotland has a competitive advantage and supporting entrepreneurs, start-ups and scale-ups
• taking tough decisions around spending, focusing on what is needed to achieve the missions of equality, opportunity and community
• updating the tax strategy, with a new advisory group to be established this summer and chaired by the Deputy First Minister

The strategy details the tough choices required in challenging financial circumstances. Scottish Government estimates indicate that due to inflation, pay increases and the lack of further funding from the UK Government, current resource spending requirements could exceed funding by £1 billion in the next financial year, and by £1.9 billion in 2027-28. The gap between capital spending commitments and funding could rise to 16% in 2025-26.

Ms Robison said:

“We are steadfast in our commitment to tackling poverty, building a fair, green and growing economy, and improving our public services to make them fit for the needs of future generations. But we must recognise that our current financial situation is among the most challenging since devolution, driven by the Covid pandemic, the war in Ukraine and the recent period of high inflation.

“Our funding remains largely based on decisions made by the UK Government, but they have failed to take the steps required to inflation-proof our budgets, and their decisions from Brexit to the disastrous mini-budget have made matters worse. This is creating substantial pressure on our public services, which we have no choice but to address.

“Today I have outlined our strategy for managing these challenges, doing all we can within our powers to ensure public finances are on a sustainable path. We will have a laser-like focus on spending, ensuring it targets equality, opportunity and community. We will generate economic growth, supporting businesses to invest and create new jobs while increasing tax revenues to invest in better public services. And we will continue to build the most progressive tax system in the UK, ensuring the burden of taxation is placed on those with the broadest shoulders.

“There can be no escaping the difficult choices ahead, but by following the plan outlined today we can provide a more prosperous and fairer future for the people of Scotland.”

Background

The Deputy First Minister's statement to the Scottish Parliament

The updated tax strategy will be published alongside the 2024 Medium-Term Financial Strategy.