UK economic and fiscal outlook: summary
Summary of the UK economic and fiscal outlook ahead of the Scottish Budget 2024 to 2025.
UK fiscal outlook
At the Autumn Statement, the Chancellor inherited an improved fiscal position of £27 billion by 2027 to 2028 largely due to inflation leading to higher than expected tax receipts. He chose to spend virtually all of this (£22 billion) on National Insurance tax cuts and full capital expensing.
As a result, departmental spending is largely unchanged meaning that the real value of departmental spending is £19.1 billion lower by 2027 to 2028 than was forecast in March.
The Institute for Fiscal Studies has highlighted that many aspects of day-to-day public service spending will be cut.
Most departments have already seen a real terms cut in their budgets since 2022 to 2023. In particular, Health and Social Care has seen a £8.1 billion real terms reduction in its budget, whilst there have also been significant reductions in funding for Transport, the Home Office, and Levelling Up, Housing and Communities.
|
UK Departmental budgets in real terms (£ bn, 2024-25 prices)* |
|||
|---|---|---|---|
|
Department |
2022-23 |
2024-25 |
Change |
|
Health and Social Care |
185.3 |
177.2 |
-8.1 |
|
Home Office |
18.1 |
15.5 |
-2.6 |
|
Transport |
9.1 |
5.7 |
-3.4 |
|
Levelling Up, Housing & Communities |
4.3 |
2.2 |
-2.1 |
|
Environment, Food and Rural Affairs |
4.7 |
4.2 |
-0.5 |
|
Work and Pensions |
8.7 |
8.0 |
-0.7 |
|
Culture, Media and Sport |
1.9 |
1.4 |
-0.5 |
|
Energy Security and Net Zero |
1.7 |
1.5 |
-0.2 |
* - HM Treasury RDEL excluding depreciation and OBR GDP deflators.
Furthermore, there were no detailed spending plans for 2025 to 2026 onwards. The chart below shows that 4 out of the 5 years of the OBR forecast are not based on any detailed departmental plans from the UK Government.
The UK Autumn Statement and fiscal outlook have major implications for Scotland’s budget.
The Autumn Statement provided the Scottish Government with resource consequentials of £310 million in 2024 to 2025, largely from business rates policy. There was additional capital funding of £10 million in 2024 to 2025.
Of the resource, there was £10.8 million of additional funding for NHS in 2024 to 2025 - an increase of less than 0.06% to Scotland’s health budget in 2023 to 2024 of £19.138 billion.
The UK Government’s decision to freeze capital budgets in cash terms means that Scotland may see a 9.8% real terms cut in capital funding for infrastructure between 2023 to 2024 and 2027 to 2028.
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