Spending Review: public sector

Forbes risks staff backlash over public sector cuts

Councils are facing further cutbacks

Kate Forbes has set the government on a potential collision course with public sector workers after admitting that the sector has become bloated and needs to be ‘reset’.

The Finance Secretary’s spending plans imply a real term cut of roughly 7% in the local government budget over the next five years, affecting policing and justice, higher education and enterprise support.

The overall public sector pay bill will be frozen, with a managing down of numbers of public sector staff to pre-pandemic levels. Some publicly owned buildings may be closed to save money, and some may be sold.

Professor Mairi Spowage, director of the Fraser of Allander Institute, said: “Particularly challenging is the outlook for public sector pay policy – with the Government assuming they will be able to keep the public sector pay bill flat in cash terms over the next few years, by reducing the size of the public sector back to pre-Covid levels by 2026-27. “

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She added: “It seems likely that there will be huge pressure to ‘revisit’ the current public sector pay policy as a result of surging inflation.”

Ms Forbes said spending would be prioritised in areas such as health, education and tackling climate change.

Funding for health is due to rise from £17.1bn to £19bn over the next five years, while social security benefits will surge from £3.9bn to £6.3bn in cash terms.

Ms Forbes said the government would seek to ensure public sector workers were given “fair” pay increases, but warned that it was having to operate with a “severely limited budget”.

A fifth of the Scottish workforce is in public sector jobs with job number rising from about 410,000 to about 440,000 over the past five years.

David Phillips, associate director of the Institute for Fiscal Studies, said:  “On the plans set out today, the axe is set to fall on a wide range of public service areas. Budgets for local government, the police, justice, universities, rural affairs are due to fall by around 8% in real terms over the next four years.

“Spending on enterprise, tourism and trade promotion is set to fall even further – by 16% in real terms, over the same period.

“The relative winners are health, some smaller service areas, and above all social security spending.”

On the prospect of closing some offices, Andrew McRae, Scotland policy chairman for the Federation of Small Businesses, said: “Shutting down local public sector buildings might save money on paper, but it risks undermining collective efforts to turn town centres around.”

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