Financial shortfall

MSPs criticise ministers over short-term thinking

Humza Yousaf
Humza Yousaf: has announced a council tax freeze with no details (pic: Terry Murden)

Scottish government policy is guilty of short-term thinking that does not place enough emphasis on affordability, according to a group of MSPs.

Reforms lack clarity and purpose and risk pushing an already eye-watering £1 billion spending gap even higher, says the parliament’s finance and public administration committee.

The seven-strong committee, which includes three SNP MSPs, including the convener Kenneth Gibson, warns that the funding shortfall could almost double to £1.9 billion by 2027-28.

The committee report on fiscal sustainability is being released before Finance Secretary Shona Robison announces the Holyrood budget on 19 December.

The MSPs say there is not enough long-term financial planning to ensure Scotland’s fiscal sustainability and there is an absence of “affordability” when announcing spending plans. The Scottish government has raised public sector wages this year to avert strikes without setting out how it will pay for them.

On longer-term reform plans aimed at reducing the cost of the public sector in Scotland, the MSPs say that 18 months into the programme “a lack of clarity remains in relation to the overall purpose, objectives, timetable, upfront costs required and anticipated savings and efficiencies to be delivered”.

Mr Gibson said: “As the budget approaches, we’ve seen little evidence to suggest a shift away from the Scottish government’s short-term approach towards financial planning, an approach hampered by reliance on one-year UK financial settlements.

“We are also concerned that the UK government’s decision not to inflation-proof capital funding available to Scottish ministers will mean a 16 per cent reduction in 2028-29 compared to this financial year, at a time when governments need to invest in infrastructure to stimulate economic growth.”

He added that the focus of the public sector reform programme had changed multiple times since May last year, as had timescales for publishing further details of what it would entail.

“Given the financial challenges facing the Scottish budget, this represents a missed opportunity to be further along the path to delivering more effective public services,” he said.

The committee has urged ministers to respond by setting out the actions it will take to address these challenges.

In its medium-term financial strategy, announced in May, the government acknowledged the need for “tough and decisive action”.

But in its report, the committee said: “We are concerned that affordability does not appear to be a key factor in Scottish government decision-making.”

Members warned that the government appeared to be “firefighting on a number of fronts” and they raised concerns that the government’s capital budget — which is used to fund long-term investment such as infrastructure, hospitals and research and development — would be 16% smaller in real terms in 2028-29 than it was in 2023-24.

The committee has demanded First Minister Humza Yousaf, sets out how he intends to a freeze on council tax bills across Scotland next year. The MSPs have called for a “more fundamental reform of council tax is now overdue”.

Liz Smith, finance spokeswoman for the Scottish Conservatives, said: “Short-term thinking has for years been a hallmark of this SNP government’s approach to public finances. It’s what has created the black hole in the budget, savage cuts to frontline services, and stagnant growth.”

A Scottish government spokesperson said: “The Scottish government fully recognises that we face one of the most challenging financial situations since devolution, with the Covid pandemic, the war in Ukraine and high inflation putting significant pressure on households, the economy and public finances.

“The Scottish government will carefully consider the finance and public administration committee’s report and provide a full response to the committee after the Scottish budget is published on 19 December.”

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