Public sector pay: letter to Chancellor of the Exchequer

Rt Hon Nadhim Zahawi MP
Chancellor of the Exchequer
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ

31 July 2022

Dear Nadhim,

I write to notify you that I have taken on responsibility for the Finance and Economy portfolio whilst the Cabinet Secretary, Kate Forbes, is on maternity leave.

I look forward to working with you and, while I appreciate there may be some limitations on the business of the UK Government pending conclusion of the Conservative leadership process, I am open to engagement with you through this period.  I also appreciate the value of the on-going dialogue between our respective officials.

There is one urgent issue I would wish to take the opportunity to raise given its importance to the delivery of public services in Scotland.  Further to the joint letter from devolved administration finance ministers to you on 15 July, and in light of the UK Government’s subsequent announcements regarding public sector pay, I am concerned that no associated funding is being provided to meet these additional costs.

Last year’s UK Spending Review, which as you know determines the majority of the Scottish Budget, did not take account of the levels of pay uplift now proposed or indeed the wider effects of inflation.  The associated reduction in spending power across public-sector budgets is deeply worrying for our public services and our capacity to respond to the cost of living crisis, which will undoubtedly bring renewed challenges through the coming autumn and winter period. Given our fixed budgets, our restricted borrowing powers and the inability to change tax policy in year, the lack of additional funding for public sector pay deals via the Barnett Formula means the Scottish Government could only replicate these pay deals for public workers in Scotland with deep cuts to public services.

I would urge you to consider appropriate funding for public sector pay, and would welcome early discussions with you on this matter.

John Swinney