In a report that may sound like music to the ears of the “Yes” campaign, the Centre for Public Policy for Regions has said that the Scottish Government’s budget from now until 2017/18 will fall in both cash and real terms as a result of this year’s UK Spending Review. The centre, based at Glasgow University, prepared a briefing note on the implications. It warned that the Chancellor’s programme of budget cuts was far from over. Indeed, instead of five years of austerity, the country now faced as much as eight years of cuts, meaning that we’re not even half way through.
The study warned that the Scottish Government could face a real series of dilemmas if its oft-stated commitment to protect spending on the Health Service is maintained. It could mean that other services would have to be slashed – with cuts of as much as 25% cuts in real terms between 2009-10 and 2017-18. However, as the report’s authors acknowledge, much of the detail of what will happen in the latter years of the programme has yet to be announced. Much of it won’t be confirmed until after both the Independence Referendum and the next UK General Election. But the fear is that future cuts will greater than any experienced so far.
The report shows just how much of a juggling act Finance Secretary, John Swinney, will need to perform. It contrasts the fall in the Scottish Government’s day-to-day resource spending with the prospect of a rise in capital spending. This would only arise if the loan support programme for business were taken into account. The report explains that “such loan support is intended to engender more private sector activity. Including the loan support means government-related capital spend rises in both cash and real terms. However, removing it means there is a further cash and real-terms fall in investment spend for Scotland. Hence, it is possible to argue that the Scottish Budget has both fallen and risen in cash terms.”
However, the paper points out that a ‘yes’ vote in next year’s independence referendum could lead to the spending profile being changed. Until then, the Scottish Government’s budget has depended on a block grant worked out on the basis of a 35-year old formula – the Barnett spending formula. Instead, Holyrood would move to running its own tax system. But the report is blunt. It set a challenge to the Scottish Government to deliver much more clarity on its financial strategy if it secures independence.
Mr Swinney was quick to point out that “if decision-making powers remain at Westminster, CPPR suggest Scotland will continue to face a future of public sector cuts or UK tax rises and increasing restrictions on our ability to spend Scotland’s budget in the best way for Scotland. Scotland is now facing eight years of real-terms spending cuts, extending well beyond the referendum to 2018 or even longer.” He went on to say that “the Chancellor is restricting our ability to invest in the infrastructure that is essential to economic recovery and longer term growth.”
However, a spokesman for the UK Government insisted that Scotland would have “additional capital spending in 2015-16, which the Scottish government can use to fund shovel-ready projects as it wishes. Scotland has also received over £1.6bn in extra funding through the Barnett formula since the beginning of the Parliament and continues to benefit from substantially higher public spending per head than the UK average.”