UK spending round fails to provide certainty

The UK spending round has failed to provide the certainty needed to prepare for the future of the Scottish budget, according to Finance Secretary Derek Mackay.

Despite promising a three-year spending review, the UK Government has undertaken a one-year spending round which does not include the economic forecasts and tax decisions needed to set the context for the Scottish budget.

Mr Mackay said:

“Despite promises of additional funding from the UK Government, the fact remains this announcement gives us no greater certainty, does not undo the damage of austerity, fails to protect us from Brexit and simply gives just some of the money owed to Scotland.

“Scottish public services have been constrained by a decade of UK austerity during which we have lost out on over £12 billion of real-terms investment. Today’s announcements do little to address the damage caused by UK austerity or the multi-billion funding disputes we have outstanding with the Treasury.

“Until we have a full UK budget we will not have the certainty we need to prepare for the future of the Scottish budget. Without that clarity and with the ongoing risk of a ‘no deal’ Brexit scenario, it is clear that the current financial arrangements are not fit for purpose.

“With the Chancellor announcing a review into the UK Fiscal Framework, I expect the UK Government to review the arrangements between the Treasury and devolved administrations.

“We need a new agreement to ensure that the Scottish Government has the necessary powers to help mitigate, as best it can, the damage caused by the UK Government’s ‘no deal’ actions.

“The reality is that the money announced today will fail to mitigate the harm caused to Scotland’s economy and public services if we leave the EU without a deal on October 31st. Scotland’s economy is already being impacted by Brexit austerity.

“As a responsible government we are continuing to do all we can to prepare for a ‘no deal’ Brexit and provide as much certainty and stability as possible for Scotland’s economy and public finances.”

Background
The total budget for the Scottish Government is determined through a combination of block grant funding from HM Treasury, adjusted to reflect forecasts of receipts generated through taxes devolved to Scotland, and any planned use of available devolved borrowing powers.

Changes in the Scottish Government’s block grant continue to be determined by the Barnett formula and will be set out in today’s spending round. The block grant is then adjusted down to reflect the retention in Scotland of revenues from devolved and assigned taxes using the block grant adjustment (BGA).

The BGA depends on the UK Government’s tax choices and is determined by forecasts from the Office for Budget Responsibility (OBR) – neither of which will be known until the UK’s autumn budget later this year.

The Scottish Government then retains all devolved and assigned Scottish tax revenues. Updated forecasts of Scottish receipts will be presented by the independent Scottish Fiscal Commission (SFC) alongside the Scottish budget later this year.