Threat of more cuts

Mackay pressed on how to plug £200m hole in Scottish budget

Derek Mackay

Derek Mackay: blames austerity (pic: Terry Murden)

Finance Secretary Derek Mackay will be forced to explain to MSPs how the Scottish Government intends to meet a budget shortfall of £200 million.

Tax revenues came in £1 billion below forecast, partly offset by an increase in the block grant from Westminster, prompting Scottish Tories to again raise questions about the ability of an independent Scotland to finance itself.

The Tories said a dip in tax receipts is a result of Scotland’s economy performing worse than the rest of the UK, while the Scottish Government said it was because of continuing UK austerity, which has meant that over £12 billion less has been invested in Scottish public services over the last nine years.

Under a risk-sharing agreement, the UK Government will offset the shortfall by £737 million, meaning ministers in Holyrood still need to find more than £200 million to plug a hole in the Scottish budget.

Mr Mackay will be questioned on the likely options when he gives evidence to MSPs on Holyrood’s Finance Committee next Wednesday.

Scottish Conservative shadow finance secretary Murdo Fraser said: “It seems the more powers the SNP gets, the more of a mess it makes of Scotland’s affairs.

Public services may have to be slashed to the tune of £200 million

– Murdo Fraser

“This exposes the cost of having an under-performing SNP government which is overseeing sluggish growth and poor productivity.

“Thanks to that incompetence, public services may have to be slashed to the tune of £200 million, or Scottish taxpayers will face even more raids on their pay packets.

Scottish Labour warned that the shortfall must be urgently addressed to stop further cuts to public services.  Scottish Labour Finance spokesperson James Kelly said:  “A shortfall of hundreds of millions of pounds in the Scottish budget means more cuts to public services.  

“Derek Mackay needs to urgently spell out how he will use the powers of the Scottish Parliament to plug this gap. This worrying shortfall reveals why the Scottish economy needs investment and a plan for growth – not more of the uncertainty offered by the constitutional obsession of the Tories and the SNP.”

Pamela Nash, chief executive of Scotland in Union, said: “As part of the UK, we pool and share resources. That means when Scottish taxes bring in less revenue than expected, a catastrophic financial crisis in our schools or hospitals can be avoided as a result of increased funding from our UK Treasury.

“If Scotland left the UK we would be leaving this safety net, which is just one reason why we are stronger together as part of the UK. The SNP wants to recklessly gamble with people’s livelihoods, but these figures show why Nicola Sturgeon should drop the threat of a divisive second independence referendum and focus on using her existing powers to grow Scotland’s economy.”

Recession threat

The Office for Budget Responsibility (OBR) says that the UK economy could fall into recession next year if the country leaves the European Union without a deal.

In its Fiscal Risks Report, the OBR says that it conducted a stress test to see how the economy would react to a no-deal Brexit.

It says that under this scenario: “Heightened uncertainty and declining confidence deter investment, while higher trade barriers with the EU weigh on exports.

“Together, these push the economy into recession, with asset prices and the pound falling sharply.”

It says GDP could fall by 2% by the end 2020.

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